Confidential and Subject to Contract Draft
Non-binding term sheet for agreement relating to
the[research and development and distribution] of [•] products in China
DRAFT
This Term Sheet sets out the principal terms and conditions on and subject to which [name of UK Company]and [name of Chinese Company] are willing to enter a research and development and subsequent distribution arrangement for [name of products] in China. It is not exhaustive and neither Party will be bound legally by the terms of this Term Sheet, save to the extent expressly stated at section24below. For the avoidance of doubt, the terms of this term sheet shall not affect any binding obligations of the Parties in any subsequent agreement.
1Parties / (1) [ ] whose registered office is at [ ](“UK Company”);(2) [ ] (“Chinese Company”)
(together, the “Parties”).
2Background / [Activities of UK Company]
[Activities of Chinese Company]
[Outline of R&D activities at Lancaster University (“Project”)]
[Outline of further R&D between the Parties]
[Outline of commercialization activities in China]
3Purpose of the Agreement / [Complete](the “Agreement”)
4Intellectual Property Rights (IPR) / Intellectual property rights (IPR) includes patents, designs, copyright, [trade marks] confidential information, know-how and data, including the reports and results of clinical trials, owned by, or licensed to, the relevant Party.
5Products / [Complete]
6UK Company IPR / [Set out what will be licensed]
7Chinese Company IPR / [Set out what will be licensed]
8Licence grant / Licence for purpose of Collaboration
[Complete]
Licence to exploit
[Complete]
[Chinese Company will share in the cost of bringing proceedings against infringers of the Product IPR and of defending any infringement proceedings brought by a third party in relation to third party IPR.]
9R&D Activities / [Complete]
10Research Funding / [Complete; to include who paying what, in advance/arrears, on achievement of milestones, cap, can cap be increased, who will be responsible for the costs of payment cost and formalities if the payment is made from China to overseas bank account.]
11Governance / Study Governance
The Parties will form a Joint Research Committee (JRC) to manage the ProjectEach Party willdesignate a Project Leader to monitor and manage the Project. The JRC will strive to reach agreement through consensus, but in the event that the Parties cannot agree then either Party may refer such dispute to a meeting of executive officers of the Parties. If the executive officers are unable to reach agreement, then the resolution would be determined by UK Company for any matter pertaining solely and specifically to[•] and Chinese Company for any matter pertaining solely and specifically to [•].
Commercialisation Governance
The Parties will form a joint commercialisation committee (JCC), meeting face-to-face at least [once] a year (alternating between the UK and China) and by teleconference on at least [one] further occasion each year. During the first year of the term, either Party may request additional teleconference meetings once a month. The purpose of the JCC will be for the Parties to collaborate on matters such as:
(i)discussing, sharing and updating each other on the commercialisation of the Products;
(ii)discussing competitor activities, market changes and regulatory or statutory changes;
(iii)discussing and reviewing trials and studies conducted in connection with the product registration, promotional materials and Clinical Statements;
(iv)discussing new Products and Product Lines;
(v)coordinating key opinion leader (KOL) development in China; and
(vi)discussing and implementing conference/congress activities and publications and communications strategies.
12[Licence terms] / [Note: to be included if UK Company licenses its IPR to the Chinese company and Chinese Company manufactures the products.]
Consideration:
Initial fee
Milestones [On achievement of certain events, or certain sales revenue]
Royalties: rate (tiers), on Net Sales or amount per product, dependant on registered IPR protection, term, royalty stacking
[Minimum royalties]
13[Products, Packaging and Supply ] / [Note: to be included if UK Company manufactures products and supplies to Chinese Company to distribute in China]
Supply:UK Company,its group companiesand/or sub-contractors shall manufacture and supply to Chinese Company such Products as Chinese Company may order from time to time in accordance with a defined specification to be set out in the Agreement (such specification may be varied from time to time by agreement or as required to satisfy regulatory or statutory requirements) (“Specification”). UK Companymay make minor alterations (for instance to raw materials, processes, production methods and storage conditions) provided that the Products continue to meet the Specification.
Packaging: UK Companywill package the Products ordered in accordance with the Specification, with [UK Company] branding, text, colouring and layout and a statement that the Products are distributed by Chinese Company. Chinese Companyshallprovide UK Company with any additional information, text, symbols, imagery etc that are required to be applied to the Products or Product packaging to ensure compliance with relevant regulatory or statutory requirements. Chinese company will be responsible for all the relevant fees and formalities in relation to the importation of the Products.
Exclusivity: UK Company will grant Chinese Company an [exclusive][non-exclusive] right to sell, market, promote and distribute the Products in China, subject to the limitations below.
[The Products purchased by Chinese Company will be purchased for the Chinese market and may not be sold or allowed to be sold in any other jurisdiction.]
Lead Time:Orders will bedelivered [Ex Works] within [60]business days from the date the order is received.
Delivery: Productorders shall be delivered [Ex Works]UK Company’s manufacturing facility, as notified to Chinese Company on an order-by-order basis and may be delivered in installments. Risk in the Products shall pass on delivery [Ex Works] and title shall pass on receipt of payment in full.
Chinese Company may request that UK Company arrange shipping to a specified port in China, in which case UK Company shall act as Chinese Company’s designee and shall invoice Chinese Company for the costs associated with shipping.
Pricing and payment:
[Prices]
The pricesare inclusive of all raw materials, manufacturing costs, packaging and instructions for use (if required), boxes, shipper cartons and pallets. The prices are exclusive of VAT (or equivalent), customsand excise charges and holding, handling and delayed shipment fees imposed by customs (or equivalent bodies) and other applicable taxes, duties or levies which must be paid by Chinese Company in addition to the price.
Invoices will be payable in GBP into UK Company’s UK bank accountand payment for deliveries of the Products must be made by Chinese Company in cleared funds in advance of delivery.
Price change: The pricing will be subject to an annual price change procedure to accommodate changes in the prices of raw materials, manufacture, finishing, packaging, regulatory or statutory requirements, improvements and inflation.
Order volumes:
[Batch sizes]
[Minimum order volumes]
Order forecast:
[Complete]
Performance requirements and cooperation:
[Chinese Company will use commercially reasonable endeavours to maximise the commercial value of the Products during the term]
[allocate an agreed number of salespersons to promoting the Products]
[allocate an agreed spend on the promotion of the Products in each year of the Agreement]
[provide an annual commercialisation plan for UK Company’s approval]
Costs: UK Company shall be responsible for the costs associated with changes to the Products or packaging mandated by regulatory bodies or legislation. Where a change in the packaging is requested by Chinese Company or wasted packaging costs arise from Chinese Company’s action or inaction, UK Company may invoice Chinese Company for the cost of such changes/wastage.
14Marketing / Subject to the above terms and MarketingObligations listed below, Chinese Company will be responsible for day-to-day commercial activities in China in connection with the Products (at its sole expense).
(i)Chinese Company shall be responsible for maintaining adequate stocks of the Products in China to ensure their proper distribution, storing them under conditions that will reduce deterioration (as advised by UK Company and in accordance with applicable statutory and regulatory requirements); selling them in proper rotation prior to their expiry dates; and destroying stock which has passed its expiry date safely, and in accordance with local legislation.
(ii)Where Chinese Company produces and distributes (directly or indirectly) materials or documents containing data, statements or observations (“Statements”) relating to the Products or uses UK Company’s branding (including its name, trading name, logo and product names), those materials and documentsmust have been provided to Chinese Company by UK Company or approved by UK Company in writing.Chinese Company shall ensure that any Clinical Statements used (whether in materials, documents, sales pitches or advice)relate to applications in the instructions for use and within the relevant product registration.
(iii)Chinese Company shall obtain UK Company’s written approval before commencing (directly or indirectly) any studies or trials relating to Products.
(iv)Chinese Company shall keep UK Company informed of all significant invitations to tender, enquiries relating to the supply or export of Products outside of China, changes to market conditions, competing products, products which may infringe UK Company’s IPR and regulations and developments likely to affect the sale of the Products in China.
(v)Chinese Company shall ensure that supply arrangements with Chinese Company’s customers in respect of the Products are fully transferable to UK Company or its replacement distributors in the event of termination of the Agreement. Accordingly, Chinese Company shall not bid for a tender which may require Products to be supplied after the termination of the Agreement unless it obtains UK Company’s prior written approval, or the terms of the tender agreement allow UK Company or its replacement distributors to supply the Products (on the same terms).
15Product registrations / [Complete if relevant]
16Term and termination / The Agreement will last for [•] years from its commencement, unless terminated by:Chinese Company for UK Company’s failure to obtain product registrations within [•] years of commencement or if UK Company fails to supply Products for more than [•] months after the due date for supply; UK Company for Chinese Company’s material breach, failure to place an order within [•]months of product registrations being obtained, [failure to order the minimum order volume, failure to order [•]% of an order forecast]; or either party for change of control or insolvency events or if the Parties agree to terminate before the end of the term. The Agreement will automatically renew each year after the [•] year term unless notice to the contrary is served.
On termination, Chinese Company shall supply to UK Company its list of customers of the Products and assign all supply agreements with such customers. Further practicalities on termination to be agreed in the Agreement.
17Product Improvement / [Who owns: determined by inventor, closeness to background, all to one company]
[Licence of improvements to non-owning party]
18Obligations and Liability / Both parties shall maintain comprehensive liability insurance, including product liability insurance, with an insured sum of at least GBP [•] million, during and for [•] years after the end of the Agreement.
[UK Company][Neither Party] shall [not] be liable for any lost profit, revenue, business or business opportunity arising in connection with the Agreement. The Agreement will set out the procedure for dealing with Products that do not conform to the Specification.
[UK Company shall have no liability whatsoever where the Products are used for applications other than those in the relevant product registration.]
Chinese Company shall indemnify UK Company against losses or penalties arising from Chinese Company’s or its customers’ use, handling, storage, import, offer for sale, sale or other disposal of Products.
[For UK Company Supply] [UK Company shall ensure the Products and their manufacture comply with the Specification. UK Company will be responsible for Product recalls and Chinese Company shall provide all reasonable assistance to UK Company in conducting Product recalls in China (at UK Company’s cost).] In the event a Product recall is caused by any action or inaction of Chinese Company, Chinese Company shall indemnify UK Company for the costs associated with the recall.In the event of any non-conformance due to faulty manufacture of the relevant batch(es) of the Products, Chinese Company’s sole remedy shall be either replacement of the rejected batches of the Products (at no cost to Chinese Company), or provision of a credit to Chinese Company of the price paid for the non-conforming Products.]
19Assignment and subcontracting / Except as expressly stated, the Parties may not assign their obligations under the Agreement, without the express written consent of the other, which may be withheld in its sole discretion.
20Confidentiality / The Agreement will include usual terms with regards confidentiality and limitations on a party using the confidential information of the other.
21Law, Jurisdiction and Dispute Resolution / The Agreement will be governed by the laws of the People's Republic of China and any disputes in connection with it shall be subject to arbitration in accordance with the rules of [to be agreed], provided that UK Company may bring court proceedings for interim relief. The United Nations’ Convention on Contracts for the International Sale of Goods will be excluded.
22Other terms / TheAgreement will include other usual terms includingfurther assurance, interest on late payments, force majeureand other boilerplate provisions.
23Time limits / The Parties agree to negotiate in good faith with a view to executing the Agreement on or before [•].
The following section24is legally binding.
24Legally binding provisions of this Term Sheet / A Party may terminate negotiations in relation to the proposed Agreementwithout incurring any liability to any other Party in relation to such termination except as stated below.
This Term Sheet is confidential to the Parties and their advisers. The Parties undertake that they shall not disclose to any person any confidential information disclosed to one another in connection with this Term Sheet, the Products or any other UK Company products or future products, or the Agreement,or which otherwise concerns the business, affairs, suppliers, customers or clients of the other Party, except to its representatives or advisers who need to know such information for the purposes of negotiating and formalising the Agreement, or as may be required by law, a court of competent jurisdiction or a governmental or regulatory authority.
Neither Party shall use the other’s confidential information for any purpose other than the evaluation of the deal, the negotiation of the Agreement and UK Company’s seeking of regulatory approval in respect of the Products.
The Parties shall pay their own costs in connection with the negotiation, preparation, execution and performance of the Agreement.
On signing this Term Sheet, the Parties indicate their good faith intention to negotiate in respect of the possible Agreement.
No one other than a Party to this Term Sheet, their successors and permitted assignees, shall have any right to enforce any of its terms. This Term Sheet and any dispute or claim arising out of or in connection with its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the laws of the People's Republic of China and subject to arbitration in accordance with the rules of [to be agreed].
______(Print name)
______(Title)
______Signed for and on behalf of UK Company Limited
______(Date)
______(Print name)
______(Title)
______Signed for and on behalf of Chinese Company
______(Date)
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