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EXHIBIT 10.18
AGREEMENT
ON MANUFACTURING, SALES AND DISTRIBUTION
LICENSE FOR HMRLIGNAN(TM)
made this 8th day of April 2005
(hereinafter referred to as the "Agreement")
By and between
LINNEA S.A. ("LINNEA")
Via Cantonale, 6595 Riazzino (Locarno)
Switzerland
and
HORMOS MEDICAL CORPORATION ("HORMOS")
Company ID: FI 1085385-9
Itainen Pitkakatu
4
FIN-20520 Turku, Finland
LINNEA and HORMOS are hereinafter referred to
individually as a "Party" or collectively as "Parties"
Whereas,
HORMOS has proprietary rights, experience and expertise related
to research and development of compounds extracted from nature
for nutraceutical use, especially a lignan called
********** (HMR). Furthermore, HORMOS has submitted a
notification with the US Food and Drug Administration to market
HMR as a new dietary ingredient.
Whereas,
LINNEA has special experience and expertise on development,
extraction, production and commercialisation of natural
compounds for dietary and nutraceutical use.
Whereas,
The Parties are willing to cooperate to further commercialise
HMRlignan(TM).
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NOW,
therefore the Parties have agreed as follows:
1.
DEFINITIONS
For the
purpose of this Agreement:
"Affiliates" shall mean:
a) any
organisation or business entity of which fifty percent
(50%) or more of the voting stock is controlled or owned
directly or indirectly by a Party;
b) any
organisation or business entity which directly or
indirectly owns or controls fifty percent (50%) or more of the
voting stock of the Party;
c) any
organisation or business entity, the majority ownership of
which is directly or indirectly common to, or commonly owned
or controlled by the majority ownership of the Party.
"Bulk
Market Price" shall mean fair market price for HMR Bulk
Ingredient
sold at the time in the same or comparable market, if
available.
"Confidential Information" shall mean information in any tangible
form,
data and experience clearly identified as confidential, not
available to the general public, and disclosed to the other
Party,
whether (by way of example) scientific, technical, engineering,
operational or economic by nature.
"Dietary
Supplement Product(s)" shall mean any dietary ingredient
product,
as defined in the US "Dietary Supplement and Health Education
Act,
in any galenic formulation intended for consumer use which do
not
require GRAS, Novel Food or Pharmaceutical regulatory
clearance,
containing HMR Bulk Ingredient. "Functional Food" shall mean
food
products containing HMR Bulk Ingredient intended for consumer
use
and require GRAS and/or Novel Food approval in order to be
marketed.
"GRAS"
shall mean "Generally Recognized As Safe" regulatory clearance
by
US Food and Drug Administration.
"HMRlignan(TM)" shall mean HORMOS' ******** (HMR, *****)
platform consisting of the Patents, technology, Know-How and
documentation related to said concept;
"HMR Bulk
Ingredient" shall mean the bulk ingredient containing HMR as
its sole active ingredient which development, manufacture
and/or
commercialisation would infringe Hormos' Patents and Know-How
regarding the bulk ingredient should this Agreement be absent.
"Know-How"
shall mean information, results and documentation related to
HMRlignan(TM) and owned or controlled by Hormos. Know-How is
exclusively detailed in section 5.3.
"Material
Breach" shall mean a breach of any of the sections 6.1, 6.2,
6.4, 7, 7.1, 7.1.1, 7.1.2, 8, 9.1 or 9.2 provided that such
breach
is related
to material obligations set forth in said section and
causing damages or loss to the other Party or having a negative
effect on the position of the other Party.
"Net
Sales" shall mean gross amount invoiced by LINNEA or its
Affiliates
on account of sales of HMR Bulk Ingredients to customers, less
the
following deductions to the extent
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actually allowed or specifically allocated to HMR Bulk
Ingredient
using generally accepted accounting standards:
(i) value added
taxes, sales and excise taxes and duties paid or
allowed by the selling party and any other governmental
charges imposed upon
the importation or sale of HMR Bulk
Ingredient;
(ii) customary and
reasonable trade, quantity and cash discounts
actually allowed with respect to the sale HMR Bulk Ingredient;
(iii)
customary and reasonable allowances or credits to customers on
account of rejection, withdrawal, recall or return of sold
goods;
(iv) customary and
reasonable freight and insurance costs, if they
are included in the selling price invoiced to customers or
otherwise paid by customers, provided always that such
deduction shall not be greater than the balance between the
selling price actually invoiced to the customer and the
standard selling price which would have been charged to such
customer for such Products exclusive of freight and insurance
costs
"Novel
Food" shall mean the criteria stated in the European Union
regulatory authority regulation 257/97.
"Patent(s)" shall mean any patent or patent application granted or
pending
in any country of the world relevant or necessary for
manufacturing,
developing and/or marketing of HMRlignan(TM), and owned or
controlled at the Date of the Agreement or in the future by
Hormos,
including those detailed in Section 5 and Schedule 1 attached
hereto, and including all reissues, extensions, substitutions,
confirmations, registrations, revalidations, additions,
continuations in part, refilings and divisions thereof and any
supplemental protection certificates;
"Patent
Protection Territory" shall mean any country in the world where
a
patent based on the US patent ***** "**************************
******************************************************************
********************************************************************
********************************************************
(application No. US *********) is granted or pending at the Date
of
the Agreement.
"Prescription Pharmaceutical Product" shall mean any
pharmaceutical
product with regulatory approval for any indication and in any
galenic formulation that requires doctor's prescription in order
to
be sold to the consumers according to the national laws. For
avoidance of doubt, OTC products are not Prescription
Pharmaceutical
Products.
"Scope of
the Agreement" shall mean HORMOS' rights to be licensed or
materials to be transferred, as the case may be, related to
HMRlignan(TM) as defined in this Agreement but consisting
exhaustively of
1. Patents
as described in section 5.1.
2.
Know-how & Documentation as described in section 5.2.
3.
Trademarks as described in section 5.3
4.
Regulatory notifications as described in section 5.4
5. Raw
Material as described in section 5.5.
"Term"
shall mean the period of time commencing on the Date of the
Agreement and
ending at the expiry of US patent ****** including
any extension possibly granted to it.
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"Trademarks" shall mean Hormos proprietary trademarks set forth
Section 5
and in
Schedule 1;
2. GRANT
OF LICENSE
2.1. HORMOS hereby
grants LINNEA for the Patents, Trademarks and Know-How &
Documentation an exclusive world-wide license right to develop,
manufacture, market and distribute HMR Bulk Ingredient for the
purpose of
developing, manufacturing, selling and marketing Dietary
Supplement
Products,
including the right to grant sublicenses to third parties to
develop,
manufacture, sell and market Dietary Supplement Products,
subject
to the
terms and conditions of this Agreement. HORMOS shall not grant
the
same right
to any third party nor exercise the rights itself save for that
HORMOS
shall retain the nonexclusive right to market HMRlignan(TM) in
finished
forms as further defined in in sections 2.3 and 3.3 of this
Agreement.
2.2. Exclusion of
granted licenses. For avoidance of doubt, nothing in this
agreement
shall be construed as a grant of license by HORMOS to LINNEA
(i)
to develop,
manufacture, market and distribute HMRlignan(TM) in
Functional Foods for any purpose or indication,
(ii)
to develop,
manufacture, market and distribute HMRlignan(TM) in
applications where GRAS and/or Novel Food regulatory clearance is
a
prerequisite for a marketing license
(iii) to
market or sell bulk ingredient containing HMRlignan(TM) for
Prescription Pharma formulation, unless otherwise agreed in
this
Agreement.
2.3. Non-exclusive
rights retained by HORMOS. HORMOS shall retain the right to
manufacture or have manufactured the products containing
HMRlignan(TM),
develop,
import, market and distribute Dietary Supplement Products in
the
USA. When
producing such Dietary Supplement Products for the US market,
Hormos
shall purchase HMR Bulk Ingredient from LINNEA under reasonable
commercial
terms, including that LINNEA shall not charge more than HMR
Bulk
Market Price. In the event a controlling interest in HORMOS is
acquired
by a company operationally active in the nutraceutical and/or
food
industry the transfer of these rights shall be subject to
LINNEA's
approval,
which shall not be unreasonably withheld.
2.4. When granting
sublicenses or any other right to use the Scope of the
Agreement,
LINNEA shall not grant rights exceeding or more than the rights
granted to
LINNEA with respect to Scope of the Agreement and shall cause
the
sublicense to comply with the obligations of this Agreement.
3. OPTION
RIGHTS
3.1. LINNEA will have
an exclusive option to obtain an exclusive license under
HORMOS'
Patents, Trademarks and Know-How & Documentation to the
GRAS
and/or
Novel Food status including the right to market and sell
HMRlignan(TM) in functional food applications and the right to
market and
sell the
Dietary Ingredient Product where GRAS and/or Novel Food
regulatory
clearance is a prerequisite for a marketing authorisation.
3.2. Option mechanism.
LINNEA'S option right to GRAS and Novel Food status will
expire on
December 31 2007 for GRAS and December 31 2007 for Novel Food.
If LINNEA
chooses not
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to
exercise these option rights, HORMOS is free to license
HMRlignan(TM)
to third
parties for Functional Food applications. HORMOS shall cause
the
licensees
to consider LINNEA as their supplier of HMR Bulk Ingredient in
priority
to any other manufacturers at commercially reasonable terms.
3.3. HORMOS shall
retain the non-exclusive right to manufacture or have
manufactured the products containing HMRlignan(TM), to develop,
import,
market and
distribute HMRlignan(TM) in finished forms in Functional Food
applications and to market and sell the HMRlignan(TM) containing
products
under GRAS
status on the US market. When producing such Functional Food
products
for the US market, Hormos shall purchase HMR Bulk Ingredient
from
LINNEA
under reasonable commercial terms, including that LINNEA shall
not
charge
more than HMR Bulk Market Price. In the event a controlling
interest
in HORMOS is acquired by a company operationally active in the
nutraceutical and/or food industry the transfer of these rights
shall be
subject to
LINNEA's approval, which shall not be unreasonably withheld.
4.
PRESCRIPTION PHARMA APPLICATIONS
HORMOS
shall retain itself all rights to develop, manufacture, market
and
distribute
HMRlignan(TM) for Prescription Pharmaceutical Applications and
the right
to license said rights to third party(ies). However, unless
agreed in
writing otherwise, HORMOS shall not establish any licensing
agreement
to use HMRlignan(TM) for Prescription Pharmaceutical
Applications before January 1 2010. LINNEA shall be preferred
supplier of
HMR Bulk
Ingredient to licensees or sublicensees for Prescription
Pharmaceutical Applications subject to LINNEA meeting necessary
regulatory
requirements.
5. SCOPE
OF THE AGREEMENT
5.1. Subject to the
terms and conditions of this Agreement, the rights and
material
to be licensed or transferred in this Agreement are detailed as
follows
and in schedules attached hereto:
5.2. Patents. HORMOS
shall grant a license to LINNEA to the Patents, including
following
patents and patent applications
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*****************************************************************
************************************************************
********************************************************************
******************* (USP ******, application No.No. US *****)
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********************************************************************
******************* (USP ******, application No. US *****)
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********************************************************** US
patent
application ***** (1st priority No. *****)
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******************************************************************
************* (application No. US ******)
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*********************************** PCT/************ (1st
priority
No. *********)
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Lignan complexes PCT/****** (1st priority No. ******)
-
Lignan derivatives PCT/****** (1st priority No. ******)
-
Lignan formulations PCT/****** (1st priority No. ******)
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**************** PCT/****** (1st priority No. FI ******)
-
**************** PCT/******(1st priority No. ******)
-
**************** PCT/******(1st priority No. ******)
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**************** FI patent ******.
-
**************** US patent application ******.
-
**************** FI
******.
The status
of patent prosecution at the time of the execution of this
Agreement
is set out in Schedule 1.
5.3. Know-how. HORMOS
shall grant LINNEA access to the following know-how
and
documentation:
5.3.1. studies
sponsored by HORMOS in the following areas:
-
General Pharmacodynamics,
-
Toxicity
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Single Dose Toxicity
-
Repeated Dose Toxicity
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Mutagenic Potential
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Pharmacokinetics
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Clinical Single and Repeated Dose Trials
The
Studies are detailed in Schedule 2: HMRlignan(TM) Study
Archive.
5.3.2.
Written information of the manufacture of HMRlignan(TM) and its
physicochemical properties,
5.4. Trademarks.
Subject to the terms and conditions of this Agreement, HORMOS
grants a
license to LINNEA to the following trademarks and goodwill and
know-how
associated therewith:
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HMRlignan(TM)
The status
of Trademark registration is set forth in Schedule 1.
5.5. Regulatory
Notification. HORMOS has obtained from the US FDA a New Dietary
Ingredient
Notification acknowledgement for HMRlignan(TM), which LINNEA
has
familiarized itself with.
5.6. Products &
Raw Material.
5.6.1. HORMOS
shall transfer ownership to LINNEA on execution of this
Agreement,
the following:
a) approximately 10 kg of *********** complex
b) approximately 3,000 kg chips of Norway spruce as a raw
material
for the extraction of
***********
5.6.2. As
instructed by LINNEA, HORMOS shall clearly label as belonging
to
LINNEA and
store said raw material at HORMOS' premises and at HORMOS' cost
until
LINNEA requests that said raw material will be submitted by
HORMOS
to the
address or place appointed by
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LINNEA and
at LINNEA's cost. However, if LINNEA has not transferred said
raw
material within six months from the Date of the Agreement, HORMOS
is
entitled
to destroy the raw material.
5.6.3. The
liability of the risk for the raw material passes from HORMOS
to LINNEA
upon execution of this Agreement regardless of who is managing
the
storage of the raw material.
6.
REMUNERATION
6.1. In further
consideration for the license granted, LINNEA agrees to pay
HORMOS:
(i)
Signing fee of
400.000 EUR within 30 days of the latest signing of
this Agreement.
(ii)
Running royalty of
****** (**) per cent of all Net Sales of HMR Bulk
Ingredient produced by LINNEA or any Affiliate of LINNEA to
unaffiliated customers or purchasers in the Patent Protection
Territory and to whom LINNEA has granted a right to produce and
market Dietary Supplement Product. The same royalty is payable
for
the HMR Bulk Ingredient consumed in the production of Dietary
Supplement Products at the Bulk Market Price, if LINNEA itself
or
any
of its Affiliates directly markets Dietary Supplement Products.
The royalty is payable as from April 1, 2007 till the end of
the
Term. For avoidance of doubt, the period from the Date of this
Agreement till March 31, 2007 is royalty free.
(iii)
Running royalty of ****** (**) per cent of all Net Sales of HMR
Bulk
ingredient produced by LINNEA or any Affiliate of LINNEA to
unaffiliated customers or purchasers outside the Patent
Protection
Territory and in countries where a patent application based on
US
patent ***** has been rejected. In case the patent protection
regarding any Patent or Patent application based on US patent
*****
will be restored due to appeal or other measures available, the
royalty of fifteen (15) per cent will be paid prior and after
the
date the patent protection has been gained in that country.
The royalty is payable as from April 1, 2007 till the end of
the
Term. For avoidance of doubt, the period from the Date of this
Agreement till March 31, 2006 is royalty free.
(iv)
A royalty of ******
(**) per cent for any other income LINNEA
receives from unaffiliated customers or sublicensees of LINNEA
to
which LINNEA has sublicensed its rights to HORMOS'
HMRlignan(TM)
IPR, including but not limited to, exclusivity fees, licensing
fees,
milestone payment and royalties for the sales of Dietary
Supplement
Products, etc.
(v)
In the event
that a license from a third party is necessary to
develop, manufacture or market HMRlignan(TM) in a certain country
or
territory due to third party dominating proprietary
intellectual
property rights, LINNEA may offset against royalties payable to
HORMOS any payments made due to such third party intellectual
property rights, provided that HORMOS has given its prior
written
consent, which consent shall not be
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unreasonably withheld and that in no event shall the royalty due
to
HORMOS be reduced more than down to ****** (**) per cent.
(vi)
For the avoidance of
doubt, for each Product the Net Sales shall be
calculated only once for the first sale of such Product by
either
LINNEA or its Affiliate to a customer.
(vii) In
consideration of expenses incurred by LINNEA during the startup
period, HORMOS will credit LINNEA against first due royalty
payments
sum of EUR ****** of the first payable royalty payments.
6.2. Any royalty
payable hereunder shall be due and paid yearly within 60 days
after the
end of each 6-months period commencing the effective date of
this
agreement. Together with the royalty payments, LINNEA shall
provide
HORMOS
with calculation and specification for accrued royalties and
yearly
volume of
sales of HMR Bulk Ingredient.
LINNEA
shall keep and require its Affiliated Companies and sublicensees
to
keep and
maintain complete and accurate records and books of account in
sufficient
detail and form so as to enable verification of royalties paid
or payable
hereunder. Not more often than once a year LINNEA shall allow
and
arrange HORMOS to audit its own or its Affiliated Company's
and/or
sublicensees' records and books of account for correctness of
royalty
payments
and Net Sales, if requested and at the auditing party's
expense.
All
payments, once made, shall be non-refundable.
6.3. Prior to LINNEA
or any of its sublicensees start to commercially exploit
the
Patents, LINNEA undertakes to inform HORMOS in writing which are
the
Patents to
be exploited, and if requested by HORMOS, how the Patents are
exploited.
6.4. Remuneration for
option rights. In case LINNEA decides to exercise its
exclusive
option to sell Products under GRAS or Novel Food status, LINNEA
agrees to
pay HORMOS:
(i)
***** USD for
GRAS status, and
(ii)
***** USD for Novel
Food status
If LINNEA
decides to exercise its option rights, ** % of the applicable
fee in
both cases (i) and (ii) will be payable at filing of GRAS/Novel
Food
application and ** % on approval.
7.
PERFORMANCE MILESTONES
7.1. If LINNEA do not
achieve either or both of the following yearly minimum
volumes
with regard to the sales of HMR Bulk Ingredient for year 2006
or
any year
onwards, then the Parties shall discuss in good faith necessary
measures
to improve the volume of sales. If the result of discussions do
not
satisfy HORMOS, and failure to meet yearly minimum volumes is not
a
direct
result of act or negligence of HORMOS, then HORMOS shall have
the
right to
unilaterally terminate the excl
