Exhibit 10.5
TERMINATION AGREEMENT,
LICENCE BACK AND OPTION
DATED: 21st DECEMBER 2001
BETWEEN:
(1) HYDRO MED SCIENCES, INC. ("HMS"), a subsidiary of GP Strategies Corporation
("GP"), a Delaware corporation with principal offices at 0 Xxxx Xxxxxx,
00xx Xxxxxx. Suite 4170, Xxx Xxxx, XX 00000, XXX; and
(2) Shire US INC., a New Jersey Corporation with principal offices at 0000
Xxxxxxx Xxxx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000, XXX ("Shire").
RECITALS:
A. Hydro Med Sciences, a division of GP (the "HMS Division"), and Shire
entered into a Licence Agreement dated 24 March 1998 whereby Shire agreed
to undertake the development of a pharmaceutical product containing
Histrelin as an active pharmaceutical ingredient for the treatment of human
prostatic carcinoma and was granted an exclusive licence to market such
product in certain territories (the "Licence Agreement").
B. The HMS Division and Shire entered into a manufacturing supply agreement
dated 24 March 1998 in which the HMS Division agreed to supply Shire with
research and commercial quantities of such product (as amended, the
"Manufacturing Agreement").
C. Shire and its Affiliates have undertaken certain development activities
pursuant to the Licence Agreement and are in possession of valuable
development data and know-how in relation to such product.
D. The HMS Division has assigned the Licence Agreement and the Manufacturing
Agreement to HMS.
E. HMS has agreed to use its reasonable endeavors to either (i) seek a third
party licensee to continue such development and to commercialise such
product or (ii) develop and commercialise such product itself, and Shire
and HMS have agreed to terminate the Licence Agreement and the
Manufacturing Agreement and Shire has agreed to licence such development
data to HMS for this purpose on the terms set out in this Agreement.
OPERATIVE PROVISIONS
1. INTERPRETATION
1.1 Terms used in this Agreement shall (unless the context otherwise
requires or unless specifically defined herein) have the same meanings
as set out in the Licence Agreement.
1.2 In this Agreement the following words shall have the following
meanings unless the context otherwise requires:
"Commercial Sale" means a sale to a third party (other than an
Affiliate or a Sub-Licensee) for commercial use
of any Licensed Product in any country within the
Territory to include for the avoidance of doubt a
sale by a co-marketing partner or through a
contract sales force on reasonably standard
terms;
"Development Data" means all data, know-how and other information
relating to the Licensed Product generated in
connection with the Development Program in the
possession or control of Shire as at the date of
this Agreement:
"Development Program" means the development program for the Licensed
Product previously agreed by the Parties;
"IND" means the Investigational New Drug authorisation
(No 40,772) given for the Licensed Product by the
Food and Drug Administration of the United States
of America;
"Net Sales" means "Net Sales" as defined in the License
Agreement with the additional deduction of the PC
Royalty and PROVIDED THAT sales by co-marketing
partners or through a contract sales force on
reasonably standard terms shall additionally
constitute Net Sales for the purposes of this
definition;
"PC Royalty" means any royalty payment properly paid by HMS to
the Population Council in respect of a sale of a
Licensed Product pursuant to the Termination of
Agreement
dated September 12, 1990, dated September 26 and
October 1,1997, as amended, entered into by GP
and the Population Council;
"Option" means the option granted by HMS to Shire to
market and distribute the Licensed Product in
each country of the Territory outside of the
United States of America as more particularly set
out in Clause 6 of this Agreement;
"Sub-Licensee" any person, firm or company (excluding
Affiliates, Shire pursuant to the exercise of the
Option and third parties who co-market the
Licensed Product in the Territory on reasonably
standard terms) licensed or appointed by HMS to
supply the Licensed Product in any country within
the Territory;
"Sub-Licence Agreement" means an agreement with a Sub-Licensee relating
to the development, use or sale of Licensed
Products;
"Royalty Income" all royalty or other Income received by HMS or an
Affiliate from any Sub-Licensee relating to the
sale or use of any part of the Development Data,
the Hydro Med Intellectual Property Rights and/or
the Licensed Product less the deduction of any PC
Royalty paid in respect of any sales of Licensed
Product by any such Sub-Licensee;
"Transfer Date" shall mean 23 April 2001.
1.3 Except where the context otherwise requires, words denoting the
singular include the plural and vice versa.
1.4 Unless otherwise stated, a reference to a Clause is a reference to a
Clause of this Agreement.
1.5 Clause headings are for ease of reference only and do not affect the
interpretation of this Agreement.
1.6 This Agreement includes the Recitals.
2. LICENCE GRANT
\ 2.1 Subject to the terms of the Option, Shire hereby grants to HMS with
deemed effect from the Transfer Date an exclusive licence in the
Territory (with the right to grant sub-licences) in the Field of Use
to the Development Data for the development, manufacture, use, supply
and sale of the Licensed Product.
2.2 HMS shall use its reasonable endeavours to secure a Sub-Licensee or
Sub-Licensees for the purposes of developing and commercialising the
Licensed Product: provided that, in the United States of America. HMS
may market the Licensed Product itself including by co-marketing or
contract force arrangements. Any Sub-Licence Agreement shall be with a
reputable pharmaceutical company on an arms-length basis and on
commercial terms as favourable to HMS as is reasonably achievable in
the circumstances. HMS shall notify Shire in advance of any
Sub-Licence Agreement being entered into and shall provide Shire with
a summary of relevant terms of such Sub-Licence Agreement, including
royalties, up front and milestone payments.
2.3 The term of the licence granted in Clause 2.1 shall continue for so
long as royalties are payable pursuant to Clause 4; thereafter HMS
shall have a fully paid up licence to the Development Data in the
Territory in the Field of Use.
2.4 In the event that HMS concludes a Sub-Licence Agreement outside of the
United States of America, then the Option shall lapse in respect of
the relevant territory or territories (a) set out in such Sub-Licence
and (b) where Shire has not previously exercised its rights under the
Option in such territory or territories.
3. TRANSFER OF DEVELOPMENT DATA
3.1 Shire shall with effect from the Transfer Date cease all on-going
activities under the Development Program and use all reasonable
efforts to effect an orderly transfer to HMS of such activities.
3.2 Each party agrees to act in good faith and to provide all reasonable
co-operation to the other in order to transfer the Development Data
and IND to HMS (or its Sub-Licensee) in a timely and efficient manner
pursuant to this Clause 3.
3.3 Shire shall grant HMS access to the pre-clinical data set out in
Shire'S NDA for Supprelin (NDA No 19836) as is reasonably necessary to
secure FDA approval for the Licensed Product as soon as is reasonably
practicable following written request being made by HMS to Shire.
3.4 HMS shall, for the avoidance of doubt, bear all costs incurred in
filing, prosecuting and maintaining all patents and patent
applications encompassed within the Hydro Med Intellectual Property
Rights and HMS shall use all its reasonable commercial efforts to
file, prosecute and maintain any such patents and patent applications
in a prudent and efficient manner.
3.5 In respect of the use or sale of the Licensed Product from the
Transfer Date HMS shall maintain comprehensive general liability
insurance, Including product liability insurance in such amount as is
reasonable in all the circumstances. HMS shall provide Shire with a
certificate from the insurance company verifying the above upon
request being made by Shire.
4. ROYALTIES
4.1 In consideration for the licence granted hereunder, and in further
consideration of the transfer of the IND HMS shall pay to Shire:
4.1.1 in the event of a Sub-Licensee being appointed, twenty per cent
(20%) of Royalty Income;
4.1.2 In the event of a Sub-Licensee being appointed, twenty per cent
(20%) of milestones received by HMS or an Affiliate relating to
the Licensed Product subject to a cap of US$ 5 million. PROVIDED
THAT such cap shall only apply where HMS is entitled to receive a
royalty on Net Sales of at least 10% pursuant to any Sub-Licence
Agreement; and
4.1.3 in the event of a Commercial Sale of Licensed Product by HMS or
its Affiliates including by co-marketing partners or through a
contract sales force, two per cent (2%) of Net Sales in the
Territory.
4.2 Royalties due to Shire pursuant to this Clause 4 shall be:
4.2.1 payable for the period in respect of which Royalty Income is
received by HMS or an Affiliate of HMS;
4.2.2 payable for a period of ten (10) years from the date of first
Commercial Sale where HMS or an Affiliate makes Commercial Sales
of Licensed Product;
4.2.3 payable on the later of the following (i)sixty (60) days of the
end of each calendar quarter in respect of sales of Licensed
Product made during such quarter or (ii) 30
days from receipt of payment by HMS;
4.2.4 exclusive of value added tax or other sales taxes or duties and
made in full without deduction of income or other taxes;
4.2.5 made in US dollars to the credit of a bank account to be
designated in writing by Shire to HMS; and
4.2.6 accompanied by a statement including a detailed calculation of
the payment due.
5. RECORDS AND REPORTS
5.1 HMS and its Affiliates shall, and HMS shall procure that its or its
Affiliate's Sub-Licencees shall, maintain accurate and up to date
records of Royalty Income received or Net Sales, as appropriate.
5.2 HMS and its Affiliates shall on reasonable notice from Shire make such
records available for inspection by Shire (or an independent
accountant appointed by Shire) for the purpose of verifying the
accuracy of any statement or report given by HMS to Shire and/or the
amount of royalties due thereunder. In the event an independent
accountant concludes that additional royalties are payable to Shire,
such additional sums shall be due and payable immediately and, In the
event that the inaccuracy is greater than 5% on any royalty statement,
HMS shall be liable for the reasonable fees of any such accountant so
appointed.
6. OPTION AGREEMENT
6.1 Subject to HMS's rights to enter into Sub-Licence Agreements, HMS
hereby grants to Shire an exclusive, irrevocable option, exercisable
at any time by notice in writing from Shire to HMS on a country by
country basis, to market and distribute the Licensed Product in each
country of the Territory outside of the United States of America in
accordance with a distribution agreement based upon the terms set out
in the Schedule to this Agreement.
6.2 The Option is granted with effect from the Transfer Date in
consideration of Shire entering into this Agreement and shall expire
on a country by country basis (where Shire has not previously
exercised an Option pursuant to Cause 6.1 of this Agreement), at the
earlier of:
6.2.1 HMS entering into Sub-Licence Agreement for any country or
countries within the Territory; or
6.2.2 180 days following the date of regulatory approval in each
country of the Territory for the Licensed Product.
6.3 HMS shall be at liberty to market the Licensed Product Itself
Including by co-marketing or contract force arrangements In the United
States of America or, after the Option has expired with respect to
such country, in any other country within the Territory.
6.4 Upon exercise of an Option the following milestone payments shall be
payable in respect of the relevant countries set out in the Shire
notice exercising the Option:
6.4.1 US$2 million in respect of the European Union:
6.4.2 US$0.5 million in respect of any other countries within the
Territory (to be reduced by US$0.25 million should HMS enter Into
a Sub-Licence Agreement within the European Union);
such milestones to be payable upon the date that a product approval
for marketing of the Licensed Product is given within the relevant
country or countries set out in the Shire Option notice.
7. RELEASE AND WAIVER
Each party and Its Affiliates hereby irrevocably releases, waives and
foregoes all claims, actions or demands that it may have against the other
party and/or its Affiliates In relation to the development of the Licensed
Product or under either the Licence Agreement or the Manufacturing
Agreement.
8. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
with respect to the transactions provided for herein and contains all of
the agreement between the parties hereto and there are no verbal agreements
or understandings between the parties to this Agreement that are not
reflected In this Agreement. Subject to Clause 9 below, this Agreement
supersedes the Heads of Agreement entered Into on 23 April 2001 by the
parties and both the Licence Agreement and the Manufacturing Agreement each
of which are hereby terminated with effect from the Transfer Date.
9. MISCELLANEOUS PROVISIONS
9.1 Notwithstanding Clause 8 above, Sections "10.01 Amendment", "10.03"
Severability". "10.04 Notices", "10.05 Governing Law", "10.06
Assignment", "10.07 Consents not to be Unreasonably
Withheld", "10.08 No Strict Construction" and "10.10 Force Majeure" of
the Licence Agreement shall be deemed to apply to this Agreement save
that references in these Sections to Xxxxxxx shall be deemed to be to
Shire and Shire's address for service of notices shall be:
Shire US Inc
C/o Shire Pharmaceuticals Group plc
Hampshire International Business Park
Chineham
BASINGSTOKE
Hampshire
RG24 BEP
United Kingdom
Attention: Ms Tatjana May, General Counsel and Company
Secretary
SIGNED for and on behalf of
HYDRO MED SCIENCES, INC.
/s/ X X Xxxxxxx
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Name: X X Xxxxxxx
Title: President and Chief
Executive Officer
SIGNED for and on behalf of
Shire US INC.
/s/ Xx X X Xxxxxx
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Name: Xx X X Xxxxxx
Title: Group Research & Development Director
The Schedule
Terms of Marketing/Distribution Agreement
1. Nature of Appointment - sole and exclusive (even as to HMS).
2. Territory/ies - countries as nominated by Shire pursuant to Option.
3. Products - any Licensed Product or Licensed Products nominated by Shire
pursuant to Option Notice.
4. Supply of the Licensed Products - HMS to supply Licensed Products to Shire
at a price representing HMS's costs of manufacture but not for the
avoidance of doubt to include any profit element to Shire's nominated
premises in the relevant country within the Territory for onward
distribution in a timely manner, In accordance with cGMP and with any
applicable technical specification relating to the Licensed Products.
5. Payment Terms - Shire to pay HMS 13.5% of Shire's Net Sales within 30 days
of the date of delivery by HMS to Shire.
6. Product Liability - HMS to indemnify and hold Shire and its Affiliates
harmless from and against all costs, expenses, claims and liabilities
arising from the supply or manufacture of the Licensed Products. Shire to
indemnify and hold HMS and its Affiliates harmless from and against all
costs, expenses, claims and liabilities arising from the marketing or
distribution of the Licensed Products.
7. Insurance and audit - HMS and Shire to carry adequate insurance to cover
potential liability under distribution agreement. HMS to have right to
inspect Shire's books and accounts relating to sales of the Licensed
Product on reasonable notice.
8. Term and Termination - Term -10 years fixed, termination - for material
breach or Insolvency.
9. Governing Law- the laws of New York, USA.
