DEVELOPMENT, LICENSE AND COMMERCIALIZATION AGREEMENT

Exhibit 10.4

Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.

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DEVELOPMENT, LICENSE AND COMMERCIALIZATION AGREEMENT

This DEVELOPMENT, LICENSE AND COMMERCIALIZATION AGREEMENT (“ Agreement ”) is entered into between Sepracor Inc. , a company organized under the laws of the State of Delaware, United States, and having its principal place of business at 84 Waterford Drive, Marlborough, MA 01752-7010, United States, and Glaxo Group Limited , a company organized under the laws of England & Wales and having its principal place of business at Glaxo Wellcome House, Berkeley Avenue, Greenford, Middlesex, UB6 0NN, United Kingdom (“ GSK ”).

WHEREAS

A.             Sepracor has conducted non-clinical and clinical trials, and has been granted Marketing Approval by the FDA to commercialize, and is commercializing in the United States, the LUNESTA ^® eszopiclone-based insomnia product; and

B.             Sepracor owns or controls certain patents, know-how, trademarks and other intellectual property relating to the Product in the GSK Territory; and

C.             GSK is experienced in developing, registering, securing pricing approvals, marketing and distributing pharmaceutical products in the GSK Territory; and

D.             On the terms and conditions set forth in this Agreement:

1.              Sepracor and GSK wish to collaborate on the potential for further development (if any), as well as the registration and commercialization of the Product in the GSK Territory;

2.              Sepracor is willing to grant to GSK, and GSK desires to obtain from Sepracor, certain exclusive rights and licenses with respect to the potential development (if any), registration and commercialization of the Product in the GSK Territory; and

3.              Sepracor is willing to supply GSK with Bulk Tablets of the Product for packaging and commercial sale by GSK in the GSK Territory.

NOW, THEREFORE , in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sepracor and GSK hereby agree as follows:

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ARTICLE I.

DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set out in this Article 1 unless the context clearly and unambiguously dictates otherwise.

1.1.           “ Active Ingredient” shall mean the chemical compound known as eszopiclone, also identified by the chemical name (+) 6-(5-chloro-2-pyridinyl)-6,7-dihydro-7-oxo-5H-pyrrolo [3,4b] pyrazin- 5-yl 4-methylpiperazine-1-carboxylate or (+) 6-(5-chloropyri-2-dyl)-5-(4-methyl piperazin-1-yl) carbonyloxy-7-oxo-6,7-dihydro-5H-pyrrolo [3,4b] pyrazine, and all pharmaceutically active derivatives thereof, such as, but not limited to, its metabolites, and all esters, salts, hydrates, solvates, polymorphs and isomers of all the above.

1.2.           “ Actual Cost ” shall mean, the fully loaded cost incurred by Sepracor to manufacture or have manufactured Bulk Tablets, including for avoidance of doubt the overhead associated with performing its obligations, as may be agreed by the parties, under the Supply Agreement. The Actual Cost may be more specifically defined in the Supply Agreement, consistent with Schedule 10.2 herein, and shall be documented by Sepracor to GSK to the reasonable satisfaction of GSK.

1.3.           “ Affiliate ” of a Party shall mean any person, corporation or other entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, comes to control, or is under common control with such Party, as the case may be. As used in this Section 1.3, “control” shall mean:  (i) to possess, directly or indirectly, the power to direct the management and policies of such person, corporation or other entity, whether through ownership of voting securities or by contract relating to voting rights or corporate governance; or (ii) direct or indirect beneficial ownership of at least fifty percent (50%) (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) of the voting share capital in such person, corporation or other entity.

1.4.           “ Acquired Competing Product ” shall mean any product, in respect of which GSK or its Affiliates, during the Term, acquires the rights (by license, purchase or otherwise) to promote, market or sell in the GSK Territory, which at the time of acquisition: (i) [**]; (ii) [**]; or (iii) [**].

1.5.           “ Acquisition Transaction ” shall mean the acquisition of the assets of a Third Party, whether through merger, purchase of stock representing fifty percent (50%) or more of the outstanding voting stock, purchase of all or substantially all of the assets of such entity or otherwise.

1.6.           “ Blocking Patent ” means any Patent issued to a Third Party that would be infringed by the manufacture, use, sale, offer for sale or importation of the Product in the GSK Territory.

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1.7.           “ Bulk Tablets ” shall mean finished tablets containing the Active Ingredient which meets the relevant specifications, to be defined more specifically in the Supply Agreement, and to be shipped to GSK by Sepracor in bulk in the manner set forth in the Supply Agreement, and then to be packaged as the Product by or on behalf of GSK.

1.8.           “ Business Day ” shall mean a day other than a (i) Saturday, (ii) Sunday or (iii) public holiday in the United States or England. For the avoidance of doubt, references in this Agreement to “days” shall mean calendar days.

1.9.           “ Calendar Quarter ” shall mean a period of three (3) consecutive months during a Calendar Year beginning on and including 1 ^st January, 1 ^st April, 1 ^st July or 1 ^st October.

1.10.         “ Calendar Year ” shall mean a period of twelve (12) consecutive months beginning on and including 1 ^st January.

1.11.         “ Clinical Supplies ” shall mean those quantities of Bulk Tablets and placebo to be supplied by Sepracor to GSK in the manner to be set forth in the Supply Agreement for use in the following scenarios where the Bulk Tablets are not to be packaged and labeled for commercial sale: (i) any Developmental Study; (ii) validation studies or any other studies to confirm packaging or formulation or other manufacturing requirements; or (iii) for any other non-commercial uses necessary for obtaining the Marketing Approval for the Product in any country in the GSK Territory.

1.12.         “ Commercialization Studies ” shall mean any clinical studies GSK wishes to be conducted by or on behalf of GSK in the GSK Territory in support of GSK’s commercialization of the Product in the GSK Territory and which will be initiated in a country after Marketing Approval of the Product in such country. Such studies may include, but shall not be limited to, “marketing studies” to support market uptake, acceptance and differentiation of the Product, epidemiological studies, modeling and pharmacoeconomic studies, and studies in support of modifications or additional sleep disorder related indications. Commercialization Studies shall not include studies designed to generate data in support of new indications unrelated to sleep disorders, or studies investigating the safety or efficacy of the Product in a modified release formulation or a combination product. For the avoidance of doubt, Commercialization Studies shall not include Required Studies, Investigator Sponsored Clinical Studies, Sepracor Studies, studies Sepracor initiated prior to the Effective Date in support of the Product, any studies relating to the Product that Sepracor may initiate in the Sepracor Territory or any other studies that Sepracor may initiate anywhere in the world which do not relate to the Product.

1.13.         “ Commercially Reasonable Efforts ” means those diligent efforts and resources, with respect to a particular Party, at the relevant point in time, that are comparable to those generally used by that Party, in good faith, in the exercise of its reasonable and prudent scientific and business judgment relating to other prescription pharmaceutical products owned or licensed by it or to which it has exclusive rights, which have market potential and are at a stage of development or product life similar to the Product, taking into account measures of relative safety and efficacy, product profile, the competitiveness of the marketplace, the proprietary

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position of the compound or product, the regulatory structure involved, the relative profitability of the products, and other relevant factors, including without limitation comparative technical, legal, scientific, and/or medical factors. Such Commercially Reasonable Efforts shall include, without limitation, comparable efforts with respect to (i) promptly assigning responsibility for development and commercialization activities to specific employees who are held accountable for progress and monitoring such progress on an on-going basis, (ii) setting and consistently seeking to achieve specific and meaningful objectives and timelines for carrying out such development and commercialization activities, (iii) consistently making and implementing decisions and allocating resources designed to advance progress with respect to such objectives and timelines, and (iv) employing compensation systems for its employees working with the Product that are similar to the compensation systems the applicable Party applies with respect to its other programs with products of similar potential.

1.14.         “ Confidentiality Agreement ” shall mean that certain letter agreement dated January 11, 2005 entered into by and between Sepracor and GlaxoSmithKline Research & Development Limited.

1.15.         “ Control ” (including any variations such as “ Controlled ” and “ Controlling ”), in the context of intellectual property rights and Know-How, shall mean rights to intellectual property sufficient to grant the applicable license under this Agreement, without violating the terms of an agreement with a Third Party.

1.16.         “ Core Campaign Product Strategies ” shall mean those materials proposed by the GSK European marketing group which outline the core marketing materials to be used in relation to the Product and to specifically include trade dress, core claims and visuals.

1.17.         “ Data ” shall mean, subject to the provisions of Section 5.10, any and all research data, pharmacology data, preclinical data, clinical data, manufacturing data and/or all regulatory documentation, information and submissions pertaining to, or made in association with, an IND or a Marketing Authorization Application for the Product, in each case which are Controlled by a Party as of the Effective Date or during the Term of this Agreement, including but not limited to the Development Data.

1.18.         “ Developmental Studies ” means any (i) Required Studies or (ii) Commercialization Studies, both as set forth in the Development Plan. For the avoidance of doubt, Developmental Studies shall not include Investigator Sponsored Clinical Studies of the Product in the GSK Territory.

1.19.         “ Effective Date ” shall mean the later of: (i) the date on which an authorized representative of Sepracor executes this Agreement, and (ii) the date on which an authorized representative of GSK executes this Agreement.

1.20.         “ EMEA ” shall mean the European Medicines Agency, or any other successor agency that is responsible for approving the sale of pharmaceutical products across the European Union.

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1.21.         “ European Union ” shall mean the member countries of the European Union at the relevant point in time.

1.22.         “ FDA ” shall mean the United States Food and Drug Administration, or any successor entity thereto performing similar functions.

1.23.         “ GSK Competing Product ” shall have the meaning stated in Section 9.1(e) of this Agreement. For the avoidance of doubt, GSK Competing Products may include, but shall not be limited to, compounds, other than Acquired Competing Products, acquired by GSK (by licence, purchase or otherwise) during the Term of this Agreement.

1.24.         “ GSK Territory ” shall mean all countries and territories of the world excluding the Sepracor Territory.

1.25.         “ Improvements ” shall mean any new or useful process, technique, formula, invention or know-how, formulation, or composition of matter relating to or comprising the Product, or any Sepracor Technology, whether patentable or unpatentable, or any improvement, enhancement, modification or derivative work thereof, that is conceived or first reduced to practice or first demonstrated to have utility during the Term of this Agreement in connection with the Parties’ activities under this Agreement.

1.26.         “ IND ” shall mean an Investigational New Drug Application (including any amendments thereto) filed with the FDA pursuant to 21 C.F.R. §312 before commencement of clinical trials of a pharmaceutical product, or any comparable filings with any Regulatory Authority in any other jurisdiction, including, but not limited to, clinical trial applications.

1.27.         “ International Financial Reporting Standards ” shall mean the International Financial Reporting Standards and International Accounting Standards issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB.

1.28.         “ Major Market ” shall mean each of the U.K., Germany, Italy, France, Spain, China, Australia, Brazil and South Korea, provided , however, with respect to Sections 6.1, 6.3(l), 6.4(b), 14.4(c) and 16.2(e), Major Markets shall only include U.K., Germany, Italy, France and Spain. A country shall no longer be included in the definition of Major Market for the purposes of Sections 2.1(b), 6.1, 6.3(l), 7.3(d) and 16.2(e) once a Generic Product has been launched in such country.

1.29.         “ Marketing Approval ” shall mean all approvals, licenses, registrations or authorizations of Regulatory Authorities in a country necessary for the manufacture, use, storage, import, export, distribution, promotion, marketing, offer for sale and sale of the Product in such country. For countries where governmental approval is required for pricing and/or reimbursement for the Product to be reimbursed by national health insurance (or its local equivalent), “Marketing Approval” shall not be deemed to occur until such pricing and/or reimbursement approval is obtained.

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1.30.         “ Marketing Authorization Application ” (or “ MAA ”) shall mean a filing, comparable to a New Drug Application (as defined in 21 C.F.R. § 314.50 et. seq .), for Marketing Approval (not including pricing or reimbursement approval) for the Product in a country within the GSK Territory.

1.31.         “ Net Sales ” shall mean the gross amounts received for sales of the Product by or on behalf of GSK, its Affiliates and/or Sublicensees (the “Selling Party”) to Third Parties, less deductions actually allowed or specifically allocated to the Product by the Selling Party using International Financial Reporting Standards for:

(a)         transportation charges to the extent that they are included in the price or otherwise paid by the purchaser, including, without limitation, insurance, for transporting Product and separately identified on the invoice or in other documentation maintained in the ordinary course of business; and;

(b)         trade, quantity and cash discounts, or charge-backs, refunds or other rebates actually granted to the customer (including, if applicable, hospitals or private or public health insurance entities);

(c)         credits, rebates and allowances to the customer on account of rejection or returns of the Product (including wholesaler and retailer returns), or on account of non-discretionary retroactive price reductions affecting such Product;

(d)         sales and excise taxes, other consumption taxes, customs duties and customary compulsory payments to governmental authorities and any other governmental charges imposed upon the production, importation, use or sale of the Product actually paid and separately identified on the invoice or in other documentation maintained in the ordinary course of business; and

(e)         any other items actually deducted from gross invoices sales amounts as reported by the Selling Party in its financial statements in accordance with the International Financial Reporting Standards, applied on a consistent basis

In no event will any particular amount, identified above, be deducted more than once in calculating Net Sales (i.e., no “double counting” of reductions). Sales of the Product between GSK and its Affiliates or Sublicensees shall be excluded from the computation of Net Sales, but the subsequent resale of such the Product to a Third Party shall be included within the computation of Net Sales.

In the case of any sale or disposal for value, other than in an arms length transaction exclusively for money, such as barter or counter trade, Net Sales shall be calculated as above on the value of the consideration received or the fair market value (if higher) of the Product in the country of sale or disposal.

1.32.         “ Non-Severable Improvements ” shall mean an Improvement to the Sepracor Technology which is incapable of exploitation independently of the Sepracor Technology

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Controlled by Sepracor or its Affiliates as of the Effective Date and during the Term of this Agreement.

1.33.         “ Party ” shall mean Sepracor or GSK individually, and “ Parties ” shall mean Sepracor and GSK collectively.

1.34.         “ Patent(s) ” shall mean patents and patent applications, together with all additions, divisions, continuations, continuations-in-part, provisionals, substitutions, reissues, re-examinations, extensions, registrations, patent term extensions, supplemental protection certificates and renewals of a patent or patent application, and any confirmation patent or registration patent or patent of addition based on any such patent.

1.35.         “ Person ” shall mean any individual, corporation, partnership, limited liability company, trust, governmental entity, or other legal entity of any nature whatsoever.

1.36.         “ Phase III Clinical Trial ” shall mean a human clinical trial, the principal purpose of which is to gather safety and efficacy data for a Product Indication of one or more particular doses in patients being studied that is needed to evaluate the overall benefit and risk relationship of the product and to provide adequate basis for labeling, as required in 21 C.F.R. §312(c), or such similar clinical study in a country other than the United States of America.

1.37.         “ Product ” shall mean the Active Ingredient, in the form and dosages approved as of the Effective Date by the FDA as LUNESTA ^® (eszopiclone), for all indications which are or may be approved by Regulatory Authorities in the GSK Territory for those forms and dosages. The Product shall also include any additional immediate release forms or dosages of LUNESTA ^® (eszopiclone) that may be developed by Sepracor or GSK during the term of the Agreement.

For the avoidance of doubt, Product shall not mean, inter alia: (i) any product containing Active Ingredient in [**]; or (ii) any product with the Active Ingredient used [**]. All such products to be referred to herein as “ Excluded Products ”.

1.38.         “ Product Indication ” shall mean, on a country-by-country basis, any indication for which the Product has Marketing Approval in such country.

1.39.         “ Product Trademarks ” shall mean the trademark(s) owned by Sepracor which are available for use with the Product, as listed in Part A of Schedule 1.39.

1.40.         “ Regulatory Authority ” shall mean the EMEA and any other national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity whose review and/or approval is necessary for the manufacture, packaging, use, storage, import, export, distribution, promotion, marketing, offer for sale and sale of the Product in the GSK Territory. For countries where governmental approval is required for pricing or reimbursement for the Product to be reimbursed by national health insurance (or its local equivalent), “Regulatory Authority” shall also include any national, regional, state or local

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regulatory agency, department, bureau, commission, council or other governmental entity whose review and/or approval of pricing or reimbursement is required.

1.41.         “ Required Studies ” shall mean any pre-clinical or clinical studies (other than those initiated by Sepracor prior to the Effective Date) that are required or requested in writing by any Regulatory Authority as a condition of, or in connection with, obtaining Marketing Approval for the Product in one of more countries in the GSK Territory.

1.42.         “ Sepracor ” shall mean Sepracor Inc. and its Affiliates.

1.43.         “ Sepracor Know-How ” shall mean, subject to Section 5.10 and the last sentence of Section 7.6, all present and future scientific, medical, technical, manufacturing, regulatory and other information relating to the Product (including results of any Developmental Study and Data), which are owned or Controlled by Sepracor as of the Effective Date or during the Term of this Agreement. Sepracor Know-How shall include all such items that are generated by or under authority of Sepracor during the Term of this Agreement.

1.44.         “ Sepracor Patents ” shall mean, subject to Section 7.6, all present and future Patents owned or Controlled by Sepracor, which generically or specifically claim Product, a composition comprising Product, or a use of Product. The current list of Patents is set forth in Schedule 1.44 , and such list shall be updated by Sepracor during the Term of the Agreement, at least on a semi-annual basis .

1.45.         “ Sepracor Studies ” shall mean any pre-clinical or clinical studies (other than those initiated by Sepracor prior to the Effective Date) that Sepracor wishes to conduct or have conducted for it in the GSK Territory related to: (i) the Product; or (ii) the Excluded Products. For the avoidance of doubt, this does not include any study Sepracor may conduct or have conducted for it outside of the GSK Territory.

1.46.         “Sepracor Technology ” shall mean, subject to Section 7.6, all Sepracor Know-How, and Sepracor Patents, which are Controlled by Sepracor or its Affiliates, prior to the Effective Date, and all Improvements Controlled by Sepracor or its Affiliates during the Term of this Agreement, if any. Sepracor Technology excludes Product Trademarks and Other Trademarks.

1.47.         “ Sepracor Territory ” shall mean Canada, United States (and its incorporated and unincorporated territories), Mexico and Japan.

1.48.         “ Severable Improvements ” shall mean an Improvement to the Sepracor Technology which is capable of exploitation independently of the Sepracor Technology Controlled by Sepracor or its Affiliates as of the Effective Date and during the Term of this Agreement.

1.49.         “ Sublicensee ” shall mean a Third Party approved by Sepracor, or a GSK Affiliate, to whom GSK, under the terms of this Agreement, has granted a right to sell, market, distribute

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and/or promote the Product in the GSK Territory and “ Sublicense ” shall mean an agreement or arrangement between GSK and a Sublicensee granting such rights. As used in this Agreement, Sublicensee shall not include (i) a wholesaler, distributor or reseller of the Product who does not market or promote the Product , (ii) a contract manufacturer or packager or (iii) a contract research organization.

1.50.         “ Target Label ” shall mean approved labeling for the Product with: (i) an indication for the treatment of insomnia; (ii) [**] which would [**], and (iii) [**] attached at Schedule 1.50 . For the avoidance of doubt, the label requirements at Section 1.50(ii), above, shall not apply to [**].

1.51.         “ Term ” shall mean the period described in Section 14.1 of this Agreement.

1.52.         “ Third Party ” shall mean any Person other than Sepracor, GSK and their respective Affiliates.

1.53.         “ Third Party Technology ” means any Patents, know-how, inventions, or other intellectual property owned or controlled by a Third Party but not owned or Controlled by a Party or its Affiliates.

1.54.         “ Transition Period ” shall mean the period of time beginning on the Effective Date of the Agreement and ending on the earlier of (i) the date of final approval of a MAA filed with the EMEA; or (ii) a date indicated in a written agreement by Sepracor and GSK.

1.55.         “ Valid Claim ” shall mean a claim of any issued, unexpired patent that has not been revoked or held unenforceable or invalid by a decision of a court or governmental agency of competent jurisdiction from which no appeal can be taken, or with respect to which an appeal is not taken within the time allowed for appeal, and that has not been disclaimed or admitted to be invalid or unenforceable through reissue, disclaimer or otherwise.

1.56.         “ VAT ” shall mean the tax imposed by Council Directive 2006/112/EC of the European Community and any national legislation implementing that directive together with legislation supplemental thereto and in particular, in relation to the United Kingdom, the tax imposed by the Value Added Tax Act of 1994 or other tax of a similar nature imposed elsewhere instead of or in addition to value added tax.

1.57.         “ Wind-down Period ” shall mean any period after the date of termination of this Agreement, in its entirety or on a country-by-country basis, during which pursuant to Sections 15.2(a) or 15.3(a), GSK is required to continue to perform certain activities.

1.58.         Other Definitions. Each of the following defined terms shall have the meaning set forth in the indicated Section of this Agreement :

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ARTICLE II.

GRANT OF LICENSE

2.1.           Licenses .

(a)            Sepracor hereby grants to GSK an exclusive (even as to Sepracor), royalty-bearing license throughout the GSK Territory under the Sepracor Technology to use, sell, have sold and import the Bulk Tablets and Product. The license shall include, but not be limited to the rights to:  (i) purchase Clinical Supplies and the Product in Bulk Tablets for use in the GSK Territory in accordance with this Agreement and the Supply Agreement, (ii) package and/or have packaged the Bulk Tablets, (iii) conduct the activities set forth in the Commercialization Plan with respect to the Product, (iv) offer for sale, sell and distribute the Product, and (v) market and promote the Product under the Product Trademarks and Other Trademarks.

(b)            GSK has the right to grant sublicenses under this Agreement to its Affiliates. Except as otherwise provided in Section 19.10, GSK shall not have the right to sublicense, transfer or assign the rights granted under this Agreement to a Third Party without Sepracor’s prior written consent, which shall not be unreasonably withheld or delayed, provided that prior written consent shall not be required in relation to any sublicense of rights territorially limited to those countries in the GSK Territory other than the Major Markets. Where a sublicense of any of the rights or obligations is permitted hereunder, each Sublicensee must enter into a Sublicense Agreement, which must be consistent with the terms and conditions of this Agreement. GSK shall also enforce the performance by any Sublicensee of the terms of each such Sublicense Agreement in order to ensure that any Sublicensee complies with the applicable terms and conditions of this Agreement. The grant of any such sublicense to an Affiliate or a Third Party will not relieve GSK of its obligations under this Agreement, except to the extent they are satisfactorily performed by such Sublicensee and GSK hereby guarantees the satisfactory performance of GSK’s obligations hereunder where performed by its Affiliates.

(c)            Sepracor hereby grants to GSK, a non-exclusive license throughout the GSK Territory under the Sepracor Technology to undertake Developmental Studies and any other activities specified in the Development Plan with respect to the Product and consistent with this Agreement.

(d)            Sepracor hereby grants to GSK an exclusive license to use the Product Trademarks and Other Trademarks in the GSK Territory on the terms of Section 13.4.

2.2.           Activities Outside the GSK Territory .

(a)            GSK agrees that neither it, nor any of its Affiliates or Sublicensees, will (i) export the Product outside of the GSK Territory, or (ii) sell or provide the Product to any Third

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Party if GSK and/or its relevant Affiliate or Sublicensee believes, or it would be reasonable to assume, that the Product sold or provided to such Third Party will be exported for use outside the GSK Territory.

(b)            Sepracor agrees that neither it, nor any of its Affiliates, will (i) export the Product within the GSK Territory (other than to GSK, its Affiliates, or Sublicensees), or (ii) sell or provide the Product to any Third Party if Sepracor or its relevant Affiliate or Third Party sub-licensee believes, or it would be reasonable to assume, that the Product sold or provided to such Third Party will be imported for use in the GSK Territory.

2.3.                     No Other Rights . Except for the rights and licenses expressly granted in this Agreement, Sepracor retains all rights under its intellectual property and no additional rights shall be deemed granted to GSK by implication, estoppel or otherwise. For the avoidance of doubt, Sepracor specifically retains, without limitation, its rights to (i) develop, manufacture, license, use, store, import, export, distribute, promote, market, offer for sale and sell the Excluded Products in the GSK Territory, (ii) develop, manufacture, license, use, store, import, export, distribute, promote, market, offer for sale and sell within the GSK Territory products which are not specifically covered under this Agreement; and (iii) manufacture or have manufactured Product within the GSK Territory for use or sale outside of the GSK Territory.

ARTICLE III.

GOVERNANCE

3.1.                     Steering Committee . The Parties shall establish a joint steering committee (the “ JSC ”) consisting of an equal number of representatives of senior management from each Party, each such representative having the authority to act on behalf of the Party such individual represents, the exact number of which shall be as the Parties may agree, from time to time. Initially, the JSC shall consist of six (6) individuals; three (3) of whom shall be nominated by Sepracor; and three (3) of whom shall be nominated by GSK. Any member of the JSC may designate a substitute to attend and perform the functions of that member at any meeting of the JSC. Each Party may, with the consent of the other Party, such consent not to be unreasonably withheld or delayed, invite non-member, non-voting representatives of such Party to attend meetings of the JSC. Each Party shall on an alternate year basis designate the chairperson and the other Party shall designate the secretary of the JSC. The initial chairperson shall be designated by GSK; and the initial secretary shall be designated by Sepracor. The JSC shall perform the following responsibilities:

(a)            oversee the overall strategy for the development (if any) and commercialization of the Product in the GSK Territory;

(b)            facilitate communication between the two Parties and provide a forum to review any development, regulatory, manufacturing and commercialization matters pertaining to the Product;

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(c)            provide a forum for communication of GSK’s activities in the GSK Territory, and Sepracor’s and Third Party licensees’ activities in the Sepracor Territory, with respect to the Product;

(d)            review any Regulatory Authority requirements for Required Studies;

(e)            undertake a bi-annual (two times per year) review and comparison of the status of the Development Plan (if any) and Commercialization Plan, including, without limitation the applicable timelines, and provide direction to the conduct of the Development Plan and Commercialization Plan, as necessary;

(f)             review and approve the proposed Development Plan and any fundamental amendments or modifications thereto;

(g)            review any Sepracor Studies which are planned to be conducted in the GSK Territory, provided that the extent of such review shall be limited to a brief description of the Sepracor Study, including the location(s) and primary purpose of such study, and shall not include a review of the protocol or investigator brochure for such study;

(h)            review and approve the first proposed Core Campaign Product Strategy and any subsequent versions which are a material change of strategy or visuals, proposed by GSK for the GSK Territory and discuss any potential benefits from synergies of such activities in the GSK Territory with efforts in the Sepracor Territory;

(i)             review and approve any additional brand names and Other Trademarks, subject to Article XIII;

(j)             coordinate, oversee and delegate the activities of any Subcommittees established pursuant to Section 3.2 of this Agreement;

(k)            in accordance with Section 3.2, resolve disputes, disagreements and deadlocks unresolved by any Subcommittees established pursuant to Section 3.2 of this Agreement; and

(l)             perform such other responsibilities as may be assigned to the JSC pursuant to this Agreement or as may be mutually agreed upon by the Parties from time to time.

3.2.                     Subcommittees . From time to time, the JSC may establish subcommittees to oversee particular projects or activities within the scope of authority of the JSC, as it deems necessary or advisable (each, a “ Subcommittee ”). Each Subcommittee shall consist of such number of representatives of each Party as the JSC determines is appropriate from time to time. Each Subcommittee shall meet with such frequency as the JSC shall determine. All decisions of each Subcommittee shall be made by unanimous vote or written consent, with Sepracor and GSK each having, collectively, one vote in all decisions. If, with respect to a matter that is subject to a Subcommittee’s decision-making authority, the Subcommittee cannot reach unanimity, the

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matter shall be referred to the JSC, which shall resolve such matter in accordance with Section 3.4. The Parties envisage that the JSC will establish Subcommittees shortly after the Effective Date to oversee each of the following areas: (i) regulatory matters; (ii) manage transition activities; (iii) advise on optimum commercial strategies; and (iv) supply matters. If one Party expressly requires that a Subcommittee be appointed, then it will be promptly established by the JSC.

3.3.                     Meetings . All JSC and Subcommittee meetings shall be as often as the members may determine, but in any event JSC meetings shall occur not less than twice per calendar year. Such meetings may be held in person, or any means of telecommunications or video conference, as the members deem necessary or appropriate; provided , however, that at least one JSC meeting per year shall be held in person and the location of such in person meeting shall alternate between Sepracor’s and GSK’s offices. A quorum for JSC meetings shall be four (4) members, with at least two (2) members from each Party.

3.4.                     Decision-making of Joint Steering Committee .

(a)            The JSC may make decisions with respect to any subject matter that is subject to the JSC’s decision-making authority or within the purview of any other Subcommittee organized as part of this Agreement. Except as expressly provided in this Agreement, all decisions of the JSC shall be made by unanimous vote or written consent, with Sepracor and GSK each having, collectively, one vote in all decisions. The JSC shall use reasonable efforts to resolve any disputes concerning the matters within its roles and functions or otherwise referred to it.

(b)            If, with respect to a matter that is subject to the JSC’s decision-making or oversight authority, the JSC cannot reach consensus within fifteen (15) days after it has met and attempted to reach such consensus or the Parties cannot reach consensus on whether the JSC has decision-making authority regarding a matter within fifteen (15) days after such matter was first raised by either Party, the dispute in question shall be referred to the Chief Executive Officer of Sepracor and the President, Pharmaceuticals Europe of GSK (collectively, the “ Senior Executives ”), for resolution. The Senior Executives shall use reasonable efforts to resolve the matter referred to them with fifteen (15) days of such referral.

(c)            If the Senior Executives cannot resolve the matter in accordance with Section 3.4(b), matters in dispute shall be finally determined as follows:

(i)             all regulatory matters shall be finally determined by the President, Pharmaceuticals Europe of GSK, except as to matters otherwise more specifically discussed in Sections 4.2(b) and (c), which shall be finally determined by the Chief Executive Officer of Sepracor;

(ii)            all commercialization issues (except as to matters otherwise more specifically discussed in Sections 5.7 and 6.2) shall be finally determined by the President, Pharmaceuticals Europe of GSK;

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(iii)           all matters regarding the Developmental Studies to be conducted by GSK (except as to matters otherwise more specifically discussed in Section 5.7) shall be finally determined by the President, Pharmaceuticals Europe of GSK; and

(iv)           all matters regarding Sepracor Studies shall be finally determined by the Chief Executive Officer of Sepracor.

(d)            For all purposes under this Agreement, any decision made pursuant to this Section 3.4 shall be deemed to be the decision of the JSC.

(e)            Neither Party will exercise its right to finally resolve a dispute in accordance with this Section 3.4 in a manner that excuses such Party from any of its obligations specifically enumerated under this Agreement.

(f)             Notwithstanding this Section 3.4, any dispute regarding the interpretation of this Agreement or any alleged breach of this Agreement will be resolved in accordance with the terms of Article 18.

3.5.                     Minutes . Minutes for each of the JSC meetings shall be drafted by the secretary of the meeting and sent to the chairperson of the applicable committee for comment promptly after each such meeting (but in no event more than thirty (30) days). All actions noted in the minutes are to be reviewed and approved at subsequent meetings of the JSC; provided , that if the Parties cannot agree as to the content of the minutes, such minutes will be finalized to reflect such disagreement.

3.6.                     Expenses . Each Party shall bear all its own costs, including expenses incurred by the members nominated by it in connection with their activities as members of the JSC.

3.7.                     Alliance Managers . Promptly after the Effective Date, each Party shall appoint an individual to act as the alliance manager for such Party (the “ Alliance Manager ”). Each Alliance Manager who is not otherwise a member of the JSC shall thereafter be permitted to attend meetings of the JSC. The Alliance Managers shall be the primary contact for the Parties regarding the activities contemplated by this Agreement and shall facilitate all such activities hereunder. Each Party may replace its Alliance Manager with an alternative representative at any time with prior written notice to the other Party. The Alliance Managers shall not, in any manner, take over the role of the JSC and shall not have any rights, powers or discretion except as expressly granted to the Alliance Managers hereunder. In no event shall the Alliance Managers have any power to modify or amend this Agreement

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ARTICLE IV.

TRANSITION ACTIVITIES

4.1.                     Current Status; General . Prior to the Effective Date, Sepracor (alone or with Third Parties) has conducted pre-clinical and clinical studies of the Product, and on 23 ^rd July 2007 submitted a MAA for the Product to the EMEA for review under the centralized procedure.

4.2.                     Regulatory Matters .

(a)            During the Transition Period, Sepracor shall retain all right, title and interest in and to all Marketing Authorization Applications for the Product in the GSK Territory, subject to the licenses granted to GSK pursuant to this Agreement.

(b)            During the Transition Period, Sepracor shall support the MAA filed with the EMEA on 23 ^rd July 2007 and use its Commercially Reasonable Efforts to obtain approval for the MAA from the EMEA for the Product with labeling consistent with, or less restrictive than, the Target Label. Sepracor shall be responsible for liaising with and managing all interactions with the EMEA in relation to the Product in connection with such MAA. Sepracor shall provide GSK with reasonable advance notice of any meetings with the EMEA (including any oral hearings), if practicable, and GSK shall have the right, but not the obligation, to attend and participate in such meetings where legally permissible. In addition, Sepracor shall promptly provide GSK with copies of all material correspondence from the EMEA (including any assessment reports) related to the Product in the GSK Territory, and shall provide GSK with draft copies of all material correspondence intended for the EMEA (including any response documents) for review and agrees to consider in good faith any prompt comments GSK may have with respect to any such regulatory filings or interactions.

(c)            During the Transition Period, Sepracor shall remain responsible for liaising with and managing all interactions with other Regulatory Authorities in relation to the Product in connection with a MAA for any country in the GSK Territory, except for those countries where the Parties have mutually agreed to earlier transfer responsibility to GSK. Sepracor shall not however initiate the filing of any new MAA, or initiate any interaction, with any Regulatory Authorities (other than the EMEA) within the GSK Territory related to the Product without the prior approval of GSK. Sepracor shall provide GSK with reasonable advance notice of any meetings with any such Regulatory Authority (including any oral hearings) about the Product, if practicable, and GSK shall have the right, but not the obligation, to attend and participate in such meetings where legally permissible. In addition, Sepracor shall promptly provide GSK with copies of all material correspondence from any such Regulatory Authorities (including any assessment reports) related to the Product in the GSK Territory, and shall provide GSK with draft copies of all material correspondence intended for any such Regulatory Authorities (including any response documents) for review and agrees to consider in good faith any comments GSK may have with respect to any such regulatory filings or interactions with respect to the Product. Where the Parties have agreed to transfer responsibility

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to GSK for any country in the GSK Territory before the expiration or termination of the Transition Period, Sections 4.2(d), 5.1 and 5.14 shall apply mutatis mutandis .

(d)            Subject to obtaining all required consents or approvals from all relevant Regulatory Authorities, as soon as reasonably practicable following the expiration or termination of the Transition Period, Sepracor shall transfer to GSK all Marketing Approvals and/or MAAs for the Product in the GSK Territory (except for DMFs), with Sepracor to invoice GSK for one-half of any out-of-pocket costs for so doing. In addition, Sepracor agrees to promptly execute, acknowledge and deliver such further instruments, and to do all such other reasonable acts, as may be necessary in order to carry out the transfer of such Marketing Approvals and/or MAAs, as the case may be related to the Product in the GSK Territory.

(e)            Within [**] following the Effective Date, GSK and Sepracor shall provide for review by the JSC an outline showing in reasonable detail GSK’s provisional plans for filing Marketing Authorization Applications and obtaining Marketing Approvals in the GSK Territory, with a particular focus on the overall strategy and timeline of material submissions and filings (if any) during the Transition Period and how the various regulatory interactions will be managed during the Transition Period.

4.3.                     Required Studies (EMEA) . In the event that the EMEA requires or requests in writing that Required Studies (other than those already initiated by Sepracor as of the Effective Date) to be performed as a condition of, or in connection with, granting Marketing Approval, GSK shall have the right, at its absolute discretion, to perform or have performed such Required Studies at GSK’s expense. If GSK decides to perform or have performed such Required Studies, the JSC will review and discuss which of the Parties should undertake such Required Studies. Sepracor will provide all reasonable incidental assistance to GSK and/or its Affiliates if GSK wishes to undertake the Required Studies itself, or via its Affiliates or any sub-contractor. Sepracor shall provide such assistance free of charge, unless otherwise agreed in writing by GSK. In the event that GSK notifies Sepracor that it does not desire to incur such expense, at any time after such notification Sepracor may, but shall not be obligated to, terminate the Agreement with respect to the European Union (but not the rest of the GSK Territory) upon sixty (60) days written notice. For the avoidance of doubt, a decision not to pursue such Marketing Approval by GSK shall not be deemed a failure to exercise its Commercially Reasonable Efforts.

In the event that Sepracor believes that the use of the results of any Required Study could be of material benefit to Sepracor in the Sepracor Territory, for example, if the Required Study were the development of a [**] of the Product, the Parties shall [**], taking into account the costs of any assistance which may have been provided by Sepracor under this Section.

4.4.                     Reporting: Adverse Drug Reactions . During the Transition Period, Sepracor shall, in accordance with Section 5.14, be responsible for filing all reports required to be filed in order to maintain any IND, MAA and/or any Marketing Approvals filed or granted for the Product in the GSK Territory, including reporting of adverse drug experiences.

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ARTICLE V.

REGULATORY MATTERS AND DEVELOPMENT ACTIVITIES

5.1.                  Regulatory Matters .

(a)            Following the Transition Period and for the Term of this Agreement, GSK shall retain all right, title and interest in and to all Marketing Authorization Applications and Marketing Approvals for the Product in the GSK Territory, subject to the licenses granted to Sepracor pursuant to Section 5.12 and the assignment and transfer of such Marketing Authorization Applications and Marketing Approvals pursuant to Section 15.2(b).

(b)            Upon expiration or termination of the Transition Period, GSK shall have sole responsibility for liaising with and managing all interactions with Regulatory Authorities in relation to the Product in the GSK Territory in connection with any and all regulatory filings. GSK shall provide Sepracor with reasonable advance written notice of any meetings with the Regulatory Authorities related to the Product in Major Markets of the GSK Territory and Sepracor shall have the right, but not the obligation, to attend and participate in such meetings in the Major Markets where legally permissible. Notwithstanding the foregoing, GSK shall provide Sepracor with a copy of any regulatory submission and other substantive written material to be sent to any Regulatory Authority in the GSK Territory for review and agrees to consider in good faith any prompt comments Sepracor may have with respect to any such regulatory filings or interactions.

(c)            Sepracor shall provide GSK with all reasonable assistance, in a timely manner, to support GSK’s activities in seeking and maintaining Market Approval in the GSK Territory. Without limiting the above, Sepracor accepts that such assistance may extend to obtaining Certificates of Pharmaceutical Product on behalf of GSK.

(d)            Following the Transition Period GSK shall report to the JSC the overall strategy and timeline of all material submissions and filings with any Regulatory Authority relating to the Product in the GSK Territory.

(e)            Each Party shall promptly notify the other Party in writing of any material changes or material issues that may arise in connection with any IND, MAA and/or any Marketing Approvals in any country within their respective territories.

(f)             Sepracor acknowledges that in order for Marketing Approval to be obtained in many countries within the GSK Territory but outside of the European Union, it will be necessary for GSK to obtain a Certificate of Pharmaceutical Product from a suitable reference country, either in the GSK Territory or in the Sepracor Territory. Sepracor agrees to provide GSK will all reasonable assistance in obtaining such Certificate of Pharmaceutical Product, and without limiting the foregoing, agrees in particular to:

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(i)             work with GSK to establish a supply route for the Product which is capable of supporting the issue of a Certificate of Pharmaceutical Product from a suitable reference country;

(ii)            generate, if not already available, at GSK’s expense, 30/75 stability data for the Product using the supply route established under Section 5.1(f)(i) above;

(iii)           generate sufficient number of Product samples, at GSK’s expense, to support GSK’s activities in seeking and maintaining Market Approval in the GSK Territory.

(g)                            Sepracor further acknowledges that until a supply route has been established under Section 5.1(f)(i), GSK will be unable to provide detailed regulatory or commercialization plans, where required under this Agreement, in respect of such countries where a Certificate of Pharmaceutical Product is required.

5.2.                  Regulatory Plan . Within ninety (90) days following the expiry or termination of the Transition Period, GSK shall provide for review by the JSC an outline plan showing GSK’s plans for filing Marketing Authorization Applications and obtaining Market Approval in the GSK Territory. The regulatory plan shall include a description of material regulatory activities to be undertaken during the following [**] years, including but not limited to, planned tasks and timelines for the conduct of the regulatory activities with respect to all matters necessary to obtain Marketing Approval for the Product in each Major Market of the GSK Territory.

5.3.                  Required Studies (Non-EMEA) . In the event that any Regulatory Authority in the GSK Territory (other than the EMEA) requires or requests in writing that Required Studies (other than those already initiated by Sepracor as of the Effective Date) be performed as a condition of, or in connection with, granting Marketing Approval, [**] whether or not to conduct such Required Studies and continue to [**] in such country. If [**] shall undertake such Required Studies [**]. In the event that [**] does not [**], in relation to countries other than those within the European Union or for which a date for accession to the European Union has been agreed, Sepracor may, but shall not be obligated to, terminate the Agreement with respect to the particular country or countries where such Regulatory Authority has required such clinical trials and [**], and the Agreement shall remain in full force and effect in the rest of the GSK Territory. For the avoidance of doubt, a [**] shall not be deemed a failure to exercise its Commercially Reasonable Efforts.

In the event that [**] to undertake such Required Study, and Sepracor believes that the use of the results of any Required Study could be of material benefit to Sepracor in the Sepracor Territory, for example, if the Required Study were the development of a [**] of the Product, the Parties [**].

5.4.                  Additional Development Activities of GSK . In addition to the studies permitted in Sections 4.3 and 5.3, and in accordance with the then applicable approved Development Plan, GSK shall have the right, but not the obligation, to undertake, at GSK’s sole

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expense, Commercialization Studies in the GSK Territory in support of GSK’s commercialization of the Product. GSK shall inform Sepracor pursuant to Section 5.6 of its intention to pursue such Commercialization Studies prior to their initiation.

5.5.                  Investigator Sponsored Clinical Study . For the avoidance of doubt, GSK shall be free, at GSK’s sole expense, to provide financial or in-kind support to clinical studies of the Product that are sponsored and conducted by a Third Party and undertaken in the GSK Territory (“Investigator Sponsored Clinical Studies”). GSK shall inform Sepracor pursuant to Section 5.6 of its intention to provide financial or in-kind support to such Investigator Sponsored Clinical Studies prior to providing such support.

5.6.                  Development Plan . In the event that GSK plans during the Term of this Agreement to undertake any Required Studies or Commercialization Studies, or to support any Investigator Sponsored Clinical Studies in the GSK Territory, GSK shall generate a Development Plan which shall be presented promptly to the JSC for review to ensure that the Development Plan takes into account and is consistent with the global branding strategy for the Product. The Development Plan shall be supplemented, modified and updated regularly by GSK as and when additional relevant data and information become available, but in any event not less frequently than annually. Required Studies, Commercialization Studies and support for Investigator Sponsored Clinical Studies shall not commence until such studies have been presented to the JSC for review and written notice of the studies sent to Sepracor. GSK shall keep the JSC advised on a timely basis of the progress of each such study.

5.7.                  Sepracor’s Review and Final Approval . Notwithstanding anything to the contrary contained in this Agreement, in the event that Sepracor in good faith believes that any Development Studies GSK wishes to undertake or sponsor pursuant to Sections 5.3 or 5.4, or any Investigator Sponsored Clinical Studies GSK wishes to support pursuant to Section 5.5 has a [**], Sepracor may provide written notice to GSK within [**] of such studies being presented to the JSC, requesting that GSK shall not perform such Developmental Studies and/or shall not support such Investigator Sponsored Clinical Studies.

(a)            If such notice is received by GSK within the [**] period, GSK shall not commence such Developmental Study or support such Investigator Sponsored Clinical Study until mutual agreement or resolution of any dispute has been achieved in respect of the performance of such study.

(b)            If GSK disputes the assessment of the [**], GSK may refer the dispute to the Senior Executives. The Senior Executives shall negotiate in good faith to resolve the dispute within [**], or such longer period as mutually agreed. If the Senior Executives are unable to resolve the dispute within such time period, [**].

(c)            For the avoidance of doubt, if Sepracor does not provide such written notice with the above stated period, Sepracor’s approval will be deemed to have been received.

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5.8.                  Development Activities of Sepracor in the GSK Territory . Sepracor shall have the right, but not the obligation, to undertake future development within the GSK Territory in support of the commercialization of Product in the Sepracor Territory and the right, but not the obligation, to undertake future development within the GSK Territory of Excluded Products. However, with respect to Sepracor Studies, Sepracor shall generate a Sepracor Development Plan (the “ Sepracor Development Plan ”) which shall be presented promptly to the JSC for review to ensure that the Sepracor Development Plan takes into account, and is not inconsistent with, the branding strategy for the Product in the GSK Territory. The Sepracor Development Plan shall include reasonably detailed information regarding all such activities. It is acknowledged however that in respect of Sepracor Studies not directly related to the Product, the level of information that will be required to be disclosed to enable appropriate review may be limited (except in respect of matters relating to safety).

5.9.                  Conduct of Activities . The Parties shall carry out all pre-clinical and clinical studies related to the Product that they respectively undertake in the GSK Territory in compliance with all applicable laws, rules and regulations and in accordance with good scientific and clinical practices, applicable under the laws and regulations of the relevant country in the GSK Territory.

5.10.                Drug Master File .

(a)            Responsibility for Maintaining . Notwithstanding Section 5.1(a), Sepracor shall be responsible for filing and maintaining Drug Master Files (“ DMF ”) relating to the Product and Active Ingredient contained in the Product, where such DMF is either required by a Regulatory Authority or it is determined by the JSC that DMF submission is preferable to incorporation of the DMF information in the applicable MAA. Sepracor shall file and maintain such DMFs in its own name, and/or in the name of its relevant suppliers, and shall permit GSK, its Affiliates and Sublicensees, to cross-reference such DMFs in their regulatory filings for the Product in the GSK Territory.

(b)            Costs . Responsibility for the costs of filing and maintaining such DMFs shall be Sepracor’s.

(c)            Closed Portions . Notwithstanding any other provisions of this Agreement, the definitions of “ Data ” and “ Sepracor Know-How ” shall not include the closed portions of any such DMF, nor any information contained in any such portions of the DMF and thus, notwithstanding any other provision of this Agreement, Sepracor shall have no obligation to disclose to GSK or any of its Affiliates or Sublicensees the closed portions of such DMFs or any information contained therein. For the avoidance of doubt, Regulatory Authorities in the GSK Territory shall have the right to access the entire DMF, including any closed portions.

5.11.                Exchange of Data and Know-How .

(a)            By Sepracor . Subject to the terms and conditions of this Agreement, Sepracor shall promptly make available to GSK all relevant Sepracor Know-How relating to the

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Product, including all Data from any and all clinical trials and preclinical studies for the Product that are Controlled by Sepracor as of the Effective Date or that will be obtained by Sepracor thereafter, subject in each case to Section 5.10. Sepracor shall also use its Commercially Reasonable Efforts to provide to GSK any Third Party manufacturer’s know-how which is necessary for GSK to obtain Marketing Approval in the GSK Territory,

(b)            New Data . Notwithstanding Sections 5.10, 5.11(a) and 5.12, in the event that GSK requires information relating to the Bulk Tablets in addition to that provided by or otherwise readily available to Sepracor to support GSK’s regulatory filings for Product in the GSK Territory, Sepracor shall conduct, at GSK’s expense, such work as is necessary to produce the necessary chemistry, manufacturing and controls (“CMC”) information or other regulatory documentation reasonably required to support such regulatory filings (provided that GSK shall be responsible for, at its expense, any additional clinical trial work required for such filings). The obligation of Sepracor to provide such CMC data or other regulatory documentation reasonably required to support such regulatory filings will include, without limitation, CMC information or other regulatory documentation reasonably required to support such regulatory filings beyond what was required for the U.S.A. regulatory approval, to support initial as well as filed regulatory submissions for Product in the GSK Territory, support on an ongoing basis to deal with regulatory questions, provision of on-going stability data, batch analysis, etc. for license renewals, CMC data for variations, any response to questions relating to renewals and variations, as well as any other data required to meet any regulatory inspection requirements. For the avoidance of doubt, Sepracor’s obligations do not extend to questions regarding finishing operations performed by GSK.

(c)            Provision of Data to JSC . Upon request by the JSC, GSK and Sepracor shall promptly provide the JSC with summaries in reasonable detail of all Data generated or obtained in the course of the performance of activities under the Development Plan or the Sepracor Development Plan respectively. For the avoidance of doubt, this obligation shall not extend to provision of data not related to the Product and only relating to Excluded Products.

5.12.                Sharing of Regulatory Filings . Without limiting Section 5.11 above, and without prejudice to the terms of the Supply Agreement, GSK and Sepracor shall permit the other to access, and shall provide the other Party with sufficient rights to reference and use in association with exercising its rights and performing its obligations under this Agreement, all of such Party’s, its Affiliates’ and Sublicensees’ Data, regulatory filings and material regulatory communications associated with any submissions of INDs, MAAs, Marketing Approvals or other approvals for the Product in the GSK Territory and in the Sepracor Territory, respectively. It is understood that such rights and access shall be limited respectively to Sepracor’s, its Affiliate’s and sublicensees’ commercialization of the Product in the Sepracor Territory and to GSK’s, its Affiliate’s and Sublicensee’s commercialization of the Product in the GSK Territory.

5.13.                Regulatory Co-operation . Without limiting Section 5.11 above, in the event that either Party receives enquiries from a Regulatory Authority in their respective territory, regarding filings or communications made, or activities being undertaken in the other Party’s

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respective territory, the other Party shall provide all reasonable co-operation to enable the original Party to respond to the Regulatory Authority’s enquiries.

5.14.                Reporting: Adverse Drug Reactions .

(a)            Sepracor and GSK shall be responsible for filing all reports required to be filed in order to maintain any IND, MAA and/or any Marketing Approvals granted for the Product in the Sepracor Territory or the GSK Territory, respectively, including reporting of adverse drug experiences; provided, however , that during the Transition Period, Sepracor shall be responsible for such filings in the GSK Territory.

(b)            The Parties shall be responsible to ensure that their respective Affiliates and sublicensees comply with all such reporting obligations.

(c)            The Parties will exchange all pharmacovigilance relevant information pursuant to a separate pharmacovigilance agreement to be executed within ninety (90) days of the Effective Date (the “ Pharmacovigilance Agreement ”). The standards set forth in the Pharmacovigilance Agreement shall be no less stringent than those set forth in the ICH Guidelines and shall provide, among other things, that:

(i)             The Parties will comply with regulatory requirements for the reporting of safety data in accordance with standards stipulated in the ICH Guidelines, and all applicable regulatory and legal requirements regarding the management of safety data;

(ii)            The Parties will exchange relevant safety data within appropriate timeframes and in an appropriate format to enable them to meet both expedited and periodic local and international regulatory reporting requirements and to facilitate appropriate safety reviews; and

(iii)           Sepracor shall be the holder of the world-wide safety database for all adverse events.

(d)            Furthermore, Sepracor commits to the establishment of pharmacovigilance systems in compliance with applicable regulatory requirements and to demonstrate comprehensively those systems, particularly their system for producing PSURs, to GSK prior to the end of the Transition Period. In the event that GSK has any reasonable concerns after such demonstration, GSK and Sepracor will co-operate in good faith to resolve such concerns.

(e)            Prior to the end of the Transition Period, Sepracor shall establish a separate pharmacovigilance agreement with each Third Party to which Sepracor has granted rights to promote, market and sell the Product in the Sepracor Territory, or part thereof. In the event that after the Effective Date, Sepracor grants to any Third Party rights to promote, market and sell the Product in the Sepracor Territory, or any part thereof, Sepracor shall enter into a separate pharmacovigilance agreement in connection with such grant. The standards set forth in

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such pharmacovigilance agreement(s) shall be not less stringent than as provided for under (c) above.

5.15              Marketing Approval Challenge . In the event that Sepracor or GSK becomes aware of an actual or threatened challenge to the data exclusivity rights relating to any Marketing Approval within the GSK Territory, that Party shall promptly notify the other Party in writing. The Parties shall meet to discuss a coordinated response to such challenge prior to any action being taken. Neither Party shall be required by the other Party to take any action in relation to such challenge, which in its absolute discretion it does not want to take. Each Party shall be entitled, without obligation, to independently initiate proceedings or take other appropriate action in relation to such challenge at its own expense. The Party conducting such action shall have full control over its conduct, including settlement thereof; provided , however, that the Party conducting such action may not settle any such action, or make any admissions or assert any position in such action, in a manner that would materially adversely affect the rights or interests of the other Party whether within or outside the jurisdiction in which the action is brought, without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed.

ARTICLE VI.

COMMERCIALIZATION, MARKETING AND PROMOTION

6.1.                  Commercialization Plan . The parties understand that the level of specificity of the Commercialization Plan will vary according to the stage of development of the Product relative to Marketing Approval and/or determination of pricing in the Major Markets. However, the following shall apply to the development, review and approval of such Commercialization Plan:

(a)            On an annual basis, GSK shall prepare and deliver to the JSC, for its review, a proposed plan for the marketing, sale, advertising, and sales activities (including pre-launch market development and market research) for the Product in the GSK Territory. For the Major Markets, the plan will outline in as much detail as practicable given the stage of commercialization of the Product annual [**]. (The first such plan being the “ Initial Commercialization Plan ” and such later plans, including any amendments to the Initial Commercialization Plan, as amended from time to time, herein after referred to as the “ Commercialization Plan ”). The Initial Commercialization Plan shall be delivered on or before [**].

(b)            The Commercialization Plan shall be supplemented, modified and updated regularly by GSK as and when additional relevant data and information become available, but in any event not less frequently than annually. Any fundamental modifications made to the Commercialization Plan shall be delivered to the JSC for review promptly following such modifications, even when such may occur between regularly scheduled meetings.

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6.2.                  Marketing and Advertising Campaign . GSK shall provide the JSC with a detailed overview of the first proposed Core Campaign Product Strategy and any subsequent versions which are a material change of strategy or visuals (and any local core marketing materials that fall outside the Core Campaign Product Strategies) to be used in the GSK Territory, which the JSC shall review to ensure that the Core Campaign Product Strategy shall be consistent with the global branding strategy for the Product. Notwithstanding anything to the contrary contained in this Agreement, in the event that Sepracor in good faith believes that any part of the proposed Core Campaign Product Strategy has a reasonable likelihood of materially adversely affecting the volume of net sales in the Sepracor Territory, Sepracor may provide written notice to GSK within [**] of such Core Campaign Product Strategy being presented to the JSC requesting that such part of the Core Campaign Product Strategy not be implemented.

(a)            If such notice is received by GSK within the [**] period, GSK shall not implement such part of the core marketing and advertising campaign until mutual agreement or resolution of any dispute has been achieved in respect of the use of the proposed core marketing and advertising campaign.

(b)            If GSK disputes the assessment of the reasonable likelihood of material adverse effect, GSK may refer the dispute to the Senior Executives. The Senior Executives shall negotiate in good faith to resolve the dispute within [**]. If the Senior Executives are unable to resolve the dispute within such time period, Sepracor’s decision shall be binding.

(c)            For the avoidance of doubt, if Sepracor does not provide such written notice with the above stated period, Sepracor’s approval will be deemed to have been received.

6.3.                  Responsibilities of GSK under the Commercialization Plan . Other than manufacturing of the Product, GSK shall have the exclusive right to engage in, and shall be solely responsible for, all activities set forth in the Commercialization Plan and [**]. As part of the Commercialization Plan, GSK shall:

(a)            use its Commercially Reasonable Efforts to commercialize the Product in the GSK Territory, including seeking approval from relevant Regulatory Authorities regarding price and reimbursement of the Product in the GSK Territory;

(b)            use its Commercially Reasonable Efforts to perform pre-commercialization analysis, planning, market preparation and related marketing activities in the GSK Territory;

(c)            use its Commercially Reasonable Efforts to carry out the distribution, marketing and sales of the Product in the GSK Territory;

(d)            incur at least an aggregate of [**] Dollars ($[**]) in support of pre-launch marketing efforts allocated amongst all the countries in the GSK Territory;

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(e)            conduct the Commercialization Plan in compliance with all applicable laws;

(f)             provide suitable storage and handling in accordance with the labeling and specifications for the Product and other appropriate facilities and services as needed for the storage and continuous sale and distribution of the Product throughout the GSK Territory;

(g)            provide all medical information services for the Product in the GSK Territory, which may include, telephone hotlines, informational fax programs, mail response programs;

(h)            administer and pay any chargebacks, rebates, administrative service fees and other discounts and fees with respect to the Product in the GSK Territory which from time to time GSK may agree to give or may be required under applicable laws to give to payors or purchasers of the Product;

(i)             use its Commercially Reasonable Efforts to adequately train sales representatives;

(j)             use its Commercial Reasonable Efforts to undertake an analysis of the intellectual property position in any country of the GSK Territory where a launch of the Product is anticipated, and where deemed necessary by GSK, develop Other Trademarks for review and approval by the JSC;

(k)            use Commercially Reasonable Efforts to conduct its commercialization of the Product in accordance with the Commercialization Plan ; and

(l)             [**] after the end of each Calendar Year, furnish Sepracor with reasonably detailed summary written reports on all activities conducted by GSK under the Commercialization Plan during such calendar year. Information shall be provided on a country by country basis for the Major Markets.

6.4.                  Failure to Launch .

(a)            For the avoidance of doubt and subject to the other terms in this Section 6.4, the Parties hereby accept that the failure to launch the Product in any country or countries shall not, per se , be deemed a breach of GSK’s obligations to use Commercially Reasonable Efforts to commercialize the Product. Where GSK’s decision not to launch in any specific country is founded on GSK’s good faith belief that the Product is not commercially viable in such country, for example because of pricing and reimbursement concerns or that the launch of the Product in such country would adversely affect the amount of Net Sales that would be achieved in the GSK Territory, GSK shall not be required to and Sepracor shall not have the right to terminate this Agreement in such country, except as described in Section 6.4(b). However, for the avoidance of doubt: (i) GSK’s good faith belief must be supported by actual interactions with Regulatory Authorities or other good faith objective evidence which supports

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GSK’s conclusions; (ii) GSK must share its financial assessment, in reasonable detail, setting forth why the Product is not in good faith deemed commercially viable; and (iii) the JSC is to be notified and have the opportunity to review any such decision not to launch the Product in a country.

(b)            Nothwithstanding anything else herein, where (i) the GSK decisions in Section 6.4(a) at any time combine so that GSK has decided that it will not launch in [**], or (ii) GSK has failed to launch in [**] following EMEA approval, Sepracor has the right to terminate this Agreement, on a country-by-country basis, in [**] by giving GSK sixty (60) days written notice to that effect at any time thereafter, provided that GSK has not in the interim, prior to receipt of notice of termination from Sepracor, notified Sepracor that it plans to launch in [**].

6.5.               Price and Reimbursement . GSK shall be solely responsible for any decisions and negotiations with relevant Regulatory Authorities regarding price and reimbursement of the Product in the GSK Territory. Sepracor shall be fully and contemporaneously updated of on all efforts by GSK with respect to pricing and reimbursement matters provided that the disclosure of such information is for information purposes only.

6.6.               Booking Sales . GSK will book all sales for the Product in the GSK Territory.

6.7.               Sepracor Support . Sepracor shall provide GSK with reasonable assistance, in a timely manner, to support GSK’s activities in commercializing the Product in the GSK Territory, including but not limited to provision of a representative set of Sepracor Materials (as defined below). Sepracor Materials shall mean copies of advertising, promotional, educational and communication materials, produced by Sepracor for marketing, advertising and promotion of Product for distribution to Third Parties (including medical professionals) and to Sepracor’s sales forces in the United States, together with programs related to patient education, physician education and disease management programs.

ARTICLE VII.

PAYMENTS

7.1.                  Initial License Fee . In consideration for the licenses granted hereunder under Sepracor Patents and Sepracor Know-How, GSK shall pay to Sepracor an initial license fee in the amount of Twenty Million US Dollars ($20,000,000) within five (5) Business Days following GSK’s receipt of an invoice for such license fee in accordance with the payment provisions of Article VIII. Sepracor intends to deliver to GSK within five (5) Business Days of the Effective Date such invoice for the license fee. The initial license fee set forth in this Section shall not be refundable or creditable against any future milestone payments, royalties or other payments by GSK to Sepracor under this Agreement.

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7.2.                  Milestone Payments .

(a)            Milestone Payments . In further consideration for the licenses granted hereunder under Sepracor Patents and Sepracor Know-How, GSK shall pay to Sepracor the milestone payments set out below following the first achievement by GSK, or any of its Affiliates or Sublicensees, individually or in the aggregate, of the corresponding milestone, in accordance with this Section 7.2 and the payment provisions in Article VIII:

[**]

(2) For the avoidance of doubt, in the event that, for example, the first time Net Sales of the Product in the GSK Territory in any Calendar Year reaches €[**], is the same Calendar Year that Net Sales of the Product in the GSK Territory reaches €[**] for the first time, Sepracor shall be entitled to a milestone payment equal to $[**] for such Calendar Year (calculated by [**]).

(b)            Reports and Payments . GSK shall notify Sepracor in writing within thirty (30) days after the achievement of each milestone set out in Section 7.2(a) by GSK, or any of its Affiliates or Sublicensees. GSK shall make payments within thirty (30) days of receipt of invoice issued by Sepracor following achievement of such milestone. Any milestone payable by GSK pursuant to Section 7.2(a) shall be made no more than once with respect to the achievement of each such milestone and no payment shall be due for a milestone which is not achieved. The milestone payments set forth in Section 7.2(a) shall not be refundable and shall not be creditable against future milestone payments, royalties or other payments to Sepracor under this Agreement.

(c)            Target Label Dispute . Any dispute regarding the Target Label shall be resolved in the following manner:

(i)             GSK and Sepracor shall each appoint a [**] (“ Company RA Executives ”) to meet to discuss whether the Target Label has been met. If, after [**], the Company RA Executives are unable to agree about whether the Target Label has been met, they shall agree upon one additional independent party, unaffiliated with either party, who is an acknowledged expert in product labeling within the EU (“ Independent RA Expert ”). If the Parties are unable to agree on the selection of an Independent RA Expert within a further [**],

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either Party may apply to the World Intellectual Property Organization Arbitration and Mediation Center to seek their appointment of an Independent RA Expert.

(ii)            The Independent RA Expert shall meet with the Company RA Executives, alone, within [**] of his/her appointment and the group shall work for up to [**] to agree unanimously upon a conclusion. If the group is unable to make a unanimous decision in that period of time, then a majority vote shall prevail.

(iii)           All costs of the above procedure to be borne by the party incurring them, except that the costs related to the Independent RA Expert are to be jointly and evenly shared.

7.3.               Royalty Payments .

(a)            Royalty Rate . Subject to the terms and conditions of this Agreement, in further consideration of the rights granted to GSK under this Agreement, GSK shall pay to Sepracor royalties at the rates set out below on Calendar Year Net Sales of the Product in the GSK Territory;

(b)            Royalty Term . GSK’s obligation to make royalty payments pursuant to Section 7.3(a) will commence upon the first commercial sale of the Product in the GSK Territory by GSK, its Affiliates or Sublicensees and will continue on a country-by-country basis for the Term.

(c)            Royalty Rate Reduction . On a country-by-country basis, GSK’s royalty rate obligation set forth in Section 7(a) shall be reduced by [**]% upon the earlier occurring of:

(i)             Upon the later of (I) the expiration of the last Valid Claim within a Patent Controlled by Sepracor that would be infringed by the licensed activities in such country

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in the absence of the licenses granted hereunder to GSK, or (II) ten (10) years post first launch in the GSK Territory.

(ii)            Upon the total amount of Third Party sales of Generic Products in any country in the GSK Territory first exceeding [**] percent ([**]%) of the total sales by GSK, its Affiliates and Sublicensees of Product in such country in any Calendar Quarter, measured on a unit basis. For the purposes of this Section 7.3(c)(ii), the amount of sales of Products shall be ascertained by reputable published marketing data for such country (e.g. by reference to Standard Units data collected by IMS) or as otherwise mutually agreed. The term “ Generic Product ” refers to a pharmaceutical product, which is marketed by an entity other than GSK, its Affiliates or its Sublicensees, containing the Active Ingredient as the single therapeutically active ingredient, in a form and dosage capable of being prescribed as an alternative to the Product.

provided , however, such royalty reduction shall only be implemented once per country of the GSK Territory.

(iii)           Net Sales in countries where a royalty rate reduction is applied pursuant to Section 7.3(c)(i) or 7.3(c)(ii) shall not be included in the calculation of Calendar Year Net Sales in GSK Territory for the purpose of determining royalty rate thresholds pursuant to Section 7.3(a).

(iv)           A hypothetical example showing how royalties would be calculated in a situation where royalties are payable in full in some countries and at the reduced rate in others, is attached hereto as Schedule 7.3(c) .

(d)            Reports and Royalty Payment . During the Term of this Agreement, following the first commercial sale of the Product within the GSK Territory, within [**] after the end of each Calendar Quarter, GSK shall deliver to Sepracor a report setting out (on a country by country basis and in the aggregate) Net Sales in the relevant Calendar Quarter and all exchange rate conversions in accordance with Section 8.2(b). In addition, in such report GSK shall set out for [**]:

(i)             units of the Product sold during the relevant Calendar Quarter;

(ii)            gross sales figure of the Product in the relevant Calendar Quarter; and

(iii)           a summary of deductions made in accordance with Sections 1.31 and 7.3(c).

A ll payment amounts due under Section 7.3(a) for such Calendar Quarter shall accompany such statement.

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(e)            Limitation on Royalties; Annual Royalty Reconciliation .

(i)             Subject to Section 7.3(e)(ii), in any given Calendar Year, the amount of the royalties paid hereunder plus the aggregate price paid by GSK for Bulk Tablets for Product sold in such Calendar Year shall not exceed [**]% of the aggregate Net Sales in such Calendar Year. On a dosage form basis, the aggregate price paid by GSK for Bulk Tablets for Product sold in such Calendar Year shall be determined by calculating the average price invoiced during such Calendar Year for the volume of Bulk Tablets required on average to make one unit of Product, and multiplying such average price by the number of units of Product sold during such Calendar Year. A hypothetical example showing how the above calculation would operate is attached hereto as Schedule 7.3(e) .

(ii)            Within [**] following the end of each Calendar Year, GSK shall provide Sepracor with a reconciliation of royalties due and royalties paid during such Calendar Year (the “ Reconciliation Report ”), including but not limited to the information required in Section 7.3(d) and a statement regarding (i) the aggregate price paid by GSK for Bulk Tablets for Product sold in such Calendar Year; (ii)  the average price invoiced during such Calendar Year for the volume of Bulk Tablets required on average to make one unit of Product; and (iii) the number of units of Product sold during such Calendar Year. Copies of GSK’s reports setting forth its computation of such amounts shall be submitted to Sepracor with the Reconciliation Report. Unless Sepracor notifies GSK within [**] (the “ Reconciliation Review Period ”) after its receipt of the Reconciliation Report that it objects to the computation, the report shall be binding and conclusive.

(iii)           During the Reconciliation Review Period, GSK shall permit an independent certified public accounting firm of internationally recognized standing selected by Sepracor and reasonably acceptable to GSK, at Sepracor’s expense, to have access to the relevant books and records of GSK (including, without limitation, records of barters and counter-trades) during GSK’s normal business hours to verify the Reconciliation Report. Sepracor will procure in such inspection to minimize disruption of the normal business activities of GSK to the extent reasonably practicable. The accounting firm shall disclose to Sepracor only whether the royalty reports are correct or incorrect and the specific details concerning any discreprencies. In the event that such independent accountant’s review of the Reconciliation Report determines that there has been an underpayment by GSK of royalties and that such underpayment exceeds five percent of the total amount owed for the Calendar Year, GSK shall reimburse Sepracor the reasonable and necessary fees and expensed of the independent accountant performing the audit.

(iv)           If the reconciliation determines that payment is owed from one Party to the other, the Party owing payment shall pay the amount owed within thirty (30) days of the Parties’ agreement on the Reconciliation Report or the independent accountant’s determination of such amount.

7.4.                  Discounting . In the event that GSK or any of its Affiliates sell the Product to a Third Party as part of a bundle of products or services being purchased from GSK or its Affiliates, and GSK or its Affiliates discount the sales price of the Product to a greater degree than GSK or its Affiliate discounts the price of their other products or services to such customer then, in such case, the Net Sales for the sale of the Product to such Third Party shall be deemed

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to equal the arm’s length price that Third Parties would generally pay for the Product alone when not purchasing any other product or service from GSK or its Affiliate.

7.5.                  Third Party Licenses

(a)            If either Party deems it necessary or advisable to obtain a license, or other rights to any Patent which may be or have the potential of being a Blocking Patent(s), such Party shall notify the other Party in writing. If the other Party agrees, then the Parties shall discuss in good faith the procedure by which the Parties will seek to obtain such license or other rights. The costs paid to a Third Party (including royalties, upfront, initial, milestones and periodic payments) associated with obtaining such license or other rights in relation to the GSK Territory shall be shared equally by the Parties.

(b)            If the other Party disagrees with the initial assessment that it is necessary or advisable to obtain such license or rights to any Patent referred to in Section 7.5(a), the Party desiring the license shall obtain an opinion of independent patent counsel approved by the other Party (such approval not to be unreasonably withheld or delayed) to review infringement, validity and enforceability of the Patent(s) and the conclusions contained in such opinion shall be binding on both Parties. In the event that in the opinion of such independent patent counsel the identified Patent(s) may reasonably be expected to be held in subsequent legal proceedings to be infringed, valid and enforceable by any one of the activities licensed hereunder to GSK, then the Parties shall immediately proceed in the manner provided in Section 7.5(a) as if both Parties had initially agreed to seek the license or other rights. The fees, costs and expenses of the above independent patent counsel incurred in connection with this Section 7.5(b) shall be [**].

7.6.                  Third Party Technology . If after the Effective Date Sepracor or any of its Affiliates acquires an assignment of, or license under, Third Party Technology (other than Patents licensed or otherwise acquired pursuant to Section 7.5) for use in connection with the research, development, commercialization or manufacture of the Product in or for the GSK Territory, then Sepracor will promptly provide GSK with written notice of such acquisition and any additional financial terms to which Sepracor would be subject if GSK were to exploit a license under such Third Party Technology. If GSK desires to obtain such license, the Parties will promptly amend this Agreement to reflect such additional financial terms and to provide that the applicable Patents, know-how, data, or filings will be included in the definition of Sepracor Technology under this Agreement. For the avoidance of doubt, if GSK does not desire to obtain such license, such Third Party Technology shall not be included in the definition of Sepracor Technology under this Agreement.

7.7.                  Compulsory licenses.

(a)            In the event that a governmental agency in any country in the GSK Territory grants or compels Sepracor to grant a compulsory license to any Third Party with respect to the Product, GSK shall have the benefit in such country of the terms granted to such Third Party to the extent that such terms are more favorable than those of this Agreement.

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(b)            If under applicable law in any country in the GSK Territory a governmental agency in any country grants or compels GSK to grant a compulsory license to any Third Party with respect to the Product, insofar as GSK is compensated on a royalty basis (as a percentage of the Sublicensee’s Net Sales) at a royalty rate lower than the royalty rate provided by Section 7.3, then the royalty rate to be paid to Sepracor by GSK on Net Sales in that country under Section 7.3 shall be reduced to the rate paid to GSK by the compulsory licensee.

7.8.                  Other Provisions . All royalties are subject to the following conditions:

(a)                only one royalty shall be due with respect to the same unit of Product; and

(b)                no royalties shall accrue on the disposition, in reasonable quantities, of Product by GSK, its Affiliate or Sublicensees as samples (promotion or otherwise) or as donations (for example, to non-profit institutions or government agencies for a non-commercial purpose) and without direct or indirect consideration.

ARTICLE VIII.

PAYMENTS, BOOKS AND RECORDS

8.1.                  Payment Method . All payments under this Agreement shall be made by bank wire transfer in immediately available funds to an account, capable of receiving United States Dollars, designated in writing by Sepracor. Payments hereunder will be considered to be made as of the day on which they are received by Sepracor’s designated bank.

8.2.                  Payment Currency: Currency Conversion .

(a)            United States Dollars . Unless otherwise expressly stated in this Agreement, all amounts specified to be payable under this Agreement are in United States Dollars and shall be paid in United States Dollars.

(b)            Currency Conversion . Net Sales in countries invoiced in currency other than United States Dollars or European Euros, as appropriate, shall be translated to United States Dollars or European Euros, as necessary, using [**] for the translation of foreign currency into United States Dollars or European Euros, as appropriate, as employed on a consistent basis by [**] and published accounts. GSK confirms that as of the Effective Date its current standard exchange rate methodology sources exchange rates from Reuters.

8.3.                  Fees, Expenses and Taxes

(a)            Fees and Expenses . Each Party shall pay all fees and expenses incurred by such Party in connection with this Agreement, except as otherwise expressly provided herein.

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(b)            Withholding Taxes . If laws or regulations require withholding by GSK of any taxes imposed upon Sepracor on account of any royalties or other payments paid under this Agreement, such taxes shall be deducted by GSK as required by law from such payment and shall be paid by GSK to the proper taxing authorities. Official receipts of payment of any withholding tax shall promptly be secured and promptly sent to Sepracor as evidence of such payment. The Parties will cooperate and exercise their reasonable efforts to ensure that any withholding taxes imposed are reduced as far as possible under the provisions of any applicable tax treaty and shall cooperate in filing any forms required for such reduction.

Sepracor warrants that Sepracor is resident for tax purposes in the United States and that Sepracor is entitled to relief from United Kingdom income tax under the terms of the double tax agreement between the United Kingdom and the United States. Sepracor shall notify GSK promptly in writing in the event that Sepracor ceases to be entitled to such relief.

Pending receipt of formal certification from the United Kingdom Inland Revenue, GSK may pay royalty income and any other payments under this Agreement to Sepracor by deducting tax at a rate specified in the double tax treaty between the United Kingdom and the United States. Sepracor agrees to indemnify and hold harmless GSK against any loss, damage, expense or liability arising in any way from a breach of the above warranties or any future claim by a United Kingdom tax authority or other similar body alleging that GSK was not entitled to deduct withholding tax on such payments at source at the treaty rate.

(c)            Sales Taxes . All amounts to be paid under this Agreement are stated exclusive of any sales, use, value-added, goods and services or other applicable taxes, which shall be invoiced separately. Where appropriate, Sepracor shall provide GSK with a valid tax invoice. GSK shall upon receipt from Sepracor of a valid tax invoice pay to Sepracor the amount of any such applicable tax. Should any amounts of VAT paid by GSK to Sepracor be refunded subsequently by the fiscal authorities to Sepracor, Sepracor will refund these monies to GSK within thirty (30) days of receipt.

8.4.                  Records: GSK shall keep, and require its Affiliates and Sublicensees to keep, complete, true and accurate books of accounts and records for the purpose of determining the amounts payable to Sepracor pursuant to this Agreement. Such books and records shall be kept for such period of time required by law, but no less than at least [**] years following the end of the Calendar Quarter to which they pertain. Such records shall be subject to inspection in accordance with Section 7.3(e).

8.5.                  Late Payments . Any payments or portions thereof due under this Agreement that are not paid by the date such payment is due shall bear interest at an annual rate equal to the prime rate as published in the Wall Street Journal , Eastern edition, plus two percent (2%) per year, calculated on the number of days such payment is delinquent, compounded annually, and computed on the basis of a three hundred sixty five (365) day year. The provisions of this Section 8.5 shall in no way limit any other remedies available to Sepracor. The Parties agree that this provision, unless otherwise provided, will not apply to payments that are the result of a subsequent adjustment of an estimated payment, including rebates, adjustments, returns or

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reconciliations, nor to payments that are the subject matter of a good faith dispute between the Parties.

ARTICLE IX.

EXCLUSIVITY OBLIGATIONS

9.1            GSK Commitments .

(a)            Subject to Section 9.1(b) below, on a country-by-country basis within the GSK Territory, during the Term of the Agreement, neither GSK nor any of its Affiliates shall promote, market or sell any Acquired Competing Product for any Product Indication.

(b)            It shall not be a breach of Section 9.1(a) above for GSK or its Affiliates to promote, market or sell an Acquired Competing Product to which rights were acquired as part of an Acquisition Transaction until such time as GSK or its Affiliate has divested such Acquired Competing Product in accordance with Section 9.1(c) below.

(c)            On a country-by-country basis within the GSK Territory, during the Term of the Agreement, in the event that GSK or its Affiliates acquire rights as part of an Acquisition Transaction to develop, promote, market or sell in a country in the GSK Territory any Acquired Competing Product, GSK or its Affiliates shall give written notice to Sepracor within [**] and use its reasonable endeavors to divest its rights to such Acquired Competing Product in such country within [**] of acquiring the rights to such Acquired Competing Product. If GSK or its Affiliates fail to divest such Acquired Competing Product within [**] of acquiring the rights to such Acquired Competing Product, and GSK or its Affiliates are actively promoting the Acquired Competing Product, Sepracor shall have the right to give ninety (90) days written notice to GSK terminating this Agreement on a country-by-country basis where the rights to such Acquired Competing Product have not been divested, provided that such termination shall not take effect in the event that during such notice period GSK or its Affiliates have divested the rights to such Acquired Competing Product.

(d)            On a country by country basis within the GSK Territory, during the Term of this Agreement, neither GSK nor any of its Affiliates shall promote, market or sell, or enter into any agreement to promote, market or sell for the treatment of any Product Indication(s) any compound, other than the Product, which specifically and selectively targets [**].

(e)            Subject to the above, GSK and its Affiliates retain the absolute freedom without restriction or limitation to research, develop, manufacture and commercialize products for Product Indication(s) which may compete with the Product in the GSK Territory or any part thereof (“GSK Competing Products”). In the event, however, that in any country in the GSK Territory during the Term GSK or any of its Affiliates file a MAA in which approval is sought for the marketing of a GSK Competing Product for a Product Indication, within [**] of filing such MAA, GSK shall notify the JSC whether GSK has decided to exercise its right to either: (i) terminate this Agreement in its entirety by providing twelve months’ notice to Sepracor; or (ii) to

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continue the commercialization of the Product, based on GSK’s medical and commercial assessment that the Product and the GSK Competing Product can adequately be positioned in the marketplace (“Commercialization Option”). In the event that the Commercialization Option is selected, GSK shall on a country-by-country basis make minimum royalty payments under Section 7.3(a) for each subsequent Calendar Year, or for part thereof, where GSK is simultaneously commercializing in such country the Product and a GSK Competing Product for one or more Product Indications, as stated below:

(I)             During the period from the date of [**] until [**], the minimum annual royalty payment payable by GSK to Sepracor in relation to [**] would be [**] percent ([**]%) of the royalties received by Sepracor from GSK in respect of [**] during the full Calendar Year [**] in the [**].

(II)            During the period from [**] until [**], the minimum annual royalty payment payable by GSK to Sepracor in relation to [**] would be [**] percent ([**]%) of the royalties received by Sepracor from GSK in respect of [**] during the full Calendar Year [**] in the [**].

(III)          During the period following [**] until [**], the minimum annual royalty payment payable by GSK to Sepracor in relation to [**] would be [**] percent ([**]%) of the royalties received by Sepracor from GSK in respect of [**] during the full Calendar Year [**] in the [**].

For the avoidance of doubt, the above minimum annual royalty payments will be prorated for any Calendar Year in which GSK is