DEVELOPMENT, OPTION AND LICENSE AGREEMENT

Exhibit 10.1

 

DEVELOPMENT, OPTION AND LICENSE AGREEMENT

 

T HIS D EVELOPMENT , O PTION A ND L ICENSE A GREEMENT (the “Agreement” ) is entered into as of the 15th day of May, 2003 (the “Effective Date” ), by and between POZEN I NC . , a Delaware corporation, located at 1414 Raleigh Road, Suite 400, Chapel Hill, NC 27517 on behalf of itself and its Affiliates (collectively “POZEN” ), and N YCOMED D ANMARK A P S , a Danish corporation, located at Langebjerg 1, DK-4000 Roskilde, Denmark on behalf of itself and its Affiliates (collectively “Nycomed” ). POZEN and Nycomed are referred to in this Agreement individually as a “Party” and collectively as “Parties.”

 

RECITALS

 

A. Nycomed and POZEN are engaged in the development, production, and commercialization of pharmaceutical products and possess information and technology relating to the manufacture, use, and formulation of such products.

 

B. POZEN desires to obtain the right to perform research based upon certain proprietary information owned or controlled by Nycomed, and the option to license certain intellectual property and proprietary information of Nycomed for the development and commercialization of certain pharmaceutical products upon the terms and conditions set forth in this Agreement.

 

C. Nycomed desires to grant such research rights and option to POZEN upon the terms and conditions set forth in this Agreement.

 

D. The Parties desire to enter into an arrangement for the supply of active drug substance for use in the commercial manufacture of certain pharmaceutical products developed by POZEN pursuant to this Agreement.

 

AGREEMENT

 

In consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

 

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1. DEFINITIONS

 

The capitalized terms used in this Agreement will have the meanings given to them in this Section 1 and throughout this Agreement. Unless the context indicates otherwise, the singular will include the plural and the plural will include the singular.

 

1.1 “Affiliate” means a corporation or other business entity which, (i) directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with either POZEN INC. or Nycomed Danmark ApS, and (ii) from time to time either POZEN INC. or Nycomed Danmark ApS respectively desires to involve in the performance of this Agreement, and POZEN INC. will so involve any such corporation or other business entity, which has, either directly or indirectly, any requirements of LX Bulk Drug Substance or Lornoxicam (or any salts, solvates or polymorphs thereof) for the purposes provided for under Section 7.1 of this Agreement. Each of POZEN INC. and Nycomed Danmark ApS will notify the other in writing if and as soon as it desires to involve any such corporation or other business entity in the performance of this Agreement and Nycomed Danmark ApS hereby notifies POZEN INC. that it will so involve Nycomed Austria GmbH, St. Peter-Straße 25, A-4020 Linz, Austria. For purposes of this definition only, “control” and, with corresponding meanings, the terms “controlled by” and “under common control with” means: (a) the possession, directly or indirectly, of the power to direct the management or policies of a legal entity, whether through the ownership of voting securities or by contract relating to voting rights or corporate governance, or (b) the ownership, directly or indirectly, of more than 50% of the voting securities or other ownership interest of a legal entity.

 

1.2 “Buyer” means each of POZEN and Sublicensees.

 

1.3 “cGMP” means current good manufacturing practices for medicinal products established by regulations in the United States (including 21 CFR §§ 210 and 211, and, with respect to any Nycomed Product and placebo used in clinical trials, subject to the FDA’s March 1991 Guideline on the Preparation of Investigational New Drug Products, each as amended, and any successor regulations thereto), and the corresponding rules, regulations, or guidelines in the European Union and Canada.

 

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1.4 “Combination Product” means a pharmaceutical product containing Lornoxicam (or any salts, solvates or polymorphs thereof) as an active drug substance in combination with one or more additional active drug substances, and (a) developed or manufactured by or on behalf of POZEN or Sublicensees using or referencing the Licensed Technology or any part thereof, or (b) the use, manufacture or sale of which would, but for the licenses granted herein, infringe any Licensed Patents or intellectual property right other than Patents included in the Licensed Technology.

 

1.5 “Commercialization” means the marketing, promotion, advertising, selling or distribution for sale of a POZEN Product in a country after Marketing Approval has been obtained in such country. The term “Commercialize” has a corresponding meaning.

 

1.6 “ Commercially reasonable efforts ” means, with respect to a Party, those efforts, consistent with the exercise of prudent scientific and business judgment, to conduct a particular activity hereunder that would be applied to a similar activity conducted by other companies in the pharmaceutical industry, and, if related to the development or Commercialization of POZEN Products, those efforts, consistent with the exercise of prudent scientific and business judgement, to conduct a particular activity hereunder that would be applied to a similar activity conducted by other companies in the pharmaceutical industry with respect to other pharmaceutical products of similar economic potential, risk and market size.

 

1.7 “Control” means, with respect to an entity and any Know-How, Patent or intellectual property right other than Patents, that such entity owns a transferable interest in or has a license or sublicense (for so long as such license or sublicense is in effect) to practice such Patent, right or Know-How and has the ability to grant another entity access, a license, or a sublicense (as applicable) to practice such Patent, right or Know-How without breaching an agreement with any Third Party and without imposing on such entity an obligation to make any payments to a Third Party as a result of such grant of access, license or sublicense or the exercise thereof by such entity.

 

1.8 “Cost” means any direct and indirect costs incurred by Nycomed in connection with the manufacture, quality control or release of Nycomed Products or placebo, calculated in accordance with international generally accepted accounting principles, consistently applied.

 

 

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1.9 “DMF” means a drug master file filed in accordance with 21 CFR 314.420 and maintained with the FDA or the equivalent thereof, as applicable, in jurisdictions outside the United States.

 

1.10 “Exclusive Manufacturing Period” means, on a Buyer-by-Buyer basis: (a) with respect to the Exclusive Territory, the period commencing on the Option Exercise Date and continuing until the date five years after: either (i) the date of first commercial sale of the first POZEN Product sold in the United States by such Buyer, if such Buyer’s territory to Commercialize such POZEN Product includes both the United States and Canada, or (ii) otherwise, the date of first commercial sale of the first POZEN Product sold anywhere in the Exclusive Territory by such Buyer; and (b) with respect to the Limited Territory, the period commencing on the Option Exercise Date and continuing until the date five years after: either (i) the date of first commercial sale of the first Combination Product sold in the United Kingdom, France or Germany by such Buyer, if such Buyer’s territory to Commercialize such Combination Product includes one or more of those three countries; or (ii) otherwise, the date of first commercial sale of the first Combination Product sold anywhere in the Limited Territory by such Buyer.

 

1.11 “Exclusive Territory” means the United States (including the following territories and possessions: American Samoa, Commonwealth of Northern Marianas, Guam, Micronesia, Puerto Rico, U.S. Virgin Islands) and Canada.

 

1.12 “Existing Nycomed Products” means the pharmaceutical products which were developed by Nycomed and for which Nycomed filed for Marketing Approval prior to the Effective Date or which Nycomed commercialized prior to the Effective Date, containing Lornoxicam as the single active drug substance, a complete list of which is included as Exhibit A to this Agreement, attached hereto and hereby incorporated in this Agreement by reference, but excluding the products listed thereon as exceptions.

 

1.13 “Existing Nycomed Product Deliverables” means the materials listed in Exhibit B to this Agreement (attached hereto and hereby incorporated in this Agreement by reference) in such quantities as set forth in Exhibit B and conforming to the applicable Specifications.

 

 

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1.14 “FDA” means the United States Food and Drug Administration, or any successor agency.

 

1.15 “Field” means the diagnosis, treatment, and prevention of human diseases and conditions.

 

1.16 “IND” means an investigational new drug application filed with the FDA.

 

1.17 “IND Deliverables” means the materials listed in Exhibit C and Schedule C-1 to this Agreement (attached hereto and hereby incorporated in this Agreement by reference).

 

1.18 “Initial Development Program” has the meaning set forth in Section 2.2 of this Agreement.

 

1.19 “Invention” means any invention or discovery, whether or not patentable, conceived or reduced to practice by or on behalf of POZEN or Sublicensees in connection with this Agreement or a Sublicense Agreement.

 

1.20 “Isomer Product” means a pharmaceutical product containing an isomer of Lornoxicam as either the single active drug substance or as an active drug substance in combination with one or more other active drug substances, developed solely by Nycomed, and for which Nycomed files an IND or equivalent filing in the Exclusive Territory within ********* of the Effective Date.

 

1.21 “Know-How” means all non-public inventions, data, information, methods, procedures and processes relating to the manufacture, development, testing or use of a Nycomed Product or POZEN Product, including but not limited to, biological, chemical, biochemical, toxicological, pharmacological, metabolic, formulation, clinical, analytical and stability information and data (other than such Know-How which is or becomes the subject of a Patent).

 

1.22 “Latent Defect” means any failure of a shipment of Materials or portion thereof to conform at the date of delivery to the Product Warranty

 

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(as defined in Section 8.1) that would not be discoverable prior to the deadline for notice of rejection under Section 8.4.1(a) upon reasonable physical inspection or standard testing of such Materials in accordance with standards in the pharmaceutical industry, including in any event testing for purity and assay according to the methods included in the applicable Specifications.

 

1.23 “Licensed Patents” means the Patents listed on Exhibit G attached to this Agreement and hereby incorporated in this Agreement by reference.

 

1.24 “Licensed Technology” means any Know-How, Licensed Patents and intellectual property right other than Patents relating to the Nycomed Products and Controlled by Nycomed in the Exclusive Territory or the Limited Territory, as applicable, but excluding, in any event, (i) any Know-How, Patents, intellectual property right other than Patents Controlled by Nycomed that are related to the Process or to any other manufacturing process for LX Bulk Drug Substance or Lornoxicam (or any salts, solvates or polymorphs thereof), and (ii) any trademark, trade name and trade dress of Nycomed and any Nycomed-specific packaging.

 

1.25 “Limited Territory” means the following countries: all member states of the European Union as of the Effective Date (excluding Spain, Portugal, and Italy), Armenia, Azerbaijan, Belarus, Estonia, Georgia, Iceland, Kazakhstan, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Moldova, Norway, Russia, Switzerland, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.

 

1.26 “Lornoxicam” means the active drug substance known as lornoxicam, having the chemical structure set forth in Exhibit D to this Agreement (attached hereto and hereby incorporated in this Agreement by reference).

 

1.27 “LX Bulk Drug Substance” means Lornoxicam in bulk form, conforming to the applicable Specifications (as hereinafter defined).

 

1.28 “MAA” means any marketing authorization application submitted to the appropriate regulatory authorities to obtain approval for the marketing of a pharmaceutical product in any country of the European Union and any corresponding submissions in any other country of the Territory, except the United States.

 

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1.29 “Manufacturing Approval” means all filings, applications, licenses, permits, and other authorizations which are required for the manufacture of the Materials in compliance with applicable laws and regulations of the country of manufacture.

 

1.30 “Marketing Approval” means (i) approval of an NDA or the approval of an MAA; and (ii) any pricing and reimbursement approvals in any country of the Territory, to the extent the applicable regulatory authorities in such country require a pricing or reimbursement approval prior to commercialization of a pharmaceutical product in such country.

 

1.31 “Materials” means any Nycomed Product, placebo, or LX Bulk Drug Substance supplied by Nycomed to POZEN under this Agreement.

 

1.32 “NDA” means a new drug application submitted to the FDA to obtain FDA approval for the marketing of a pharmaceutical product in the United States.

 

1.33 “Net Sales” means with respect to any POZEN Product, the gross amount invoiced by POZEN or Sublicensees to Third Party customers for the sale of such POZEN Product, less: (i) ******** and ******** to such Third Party customers for ******** and ******** POZEN Products; (ii) the amounts of ******** and ******** on account of the purchase of POZEN Products; (iii) ******** and ******** or ******** in connection with the sales of a POZEN Product to any Third Party customer; (iv) ******** and ******** to Third Party customers, including, but not limited to, ******** or other Third Party customers who ******** for a POZEN Product; (v) any ******** made to ******** with respect to sales of POZEN Products in order to ********, and any ********* made by POZEN to any ********* for *********; (vi) *********, and ********* and other ********* charges ********* or ********* to the extent ********* as *********; and (vii) any amounts *********, in accordance with consistently applied accounting policies of POZEN; provided, however, that if the right to commercialize a POZEN Product is licensed to a Sublicensee, “Net Sales” as used herein with respect to such POZEN Product and such Sublicensee will have the meaning set forth in the applicable Sublicense Agreement with such Sublicensee, which definition will be substantially similar to the definition above. In any event, “Net Sales” excludes (a) *********, (b) *********, and (c) *********.

 

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1.34 “Nycomed Improvement Product” means any pharmaceutical product containing Lornoxicam (including salts, solvates and polymorphs thereof) as the single active drug substance, developed solely by Nycomed, and: (a) for which Nycomed Controls all Know-How, Patents, and intellectual property rights other than Patents claiming the composition of matter, use or formulation of such product, and (b) for which Nycomed files for Regulatory Approval after the Effective Date or which Nycomed first commercializes after the Effective Date, and (c) which is an improvement (including a new dosage strength, dosage form, or indication) of an Existing Nycomed Product.

 

1.35 “Nycomed Improvement Product Deliverables” means the materials listed in Exhibit E to this Agreement (attached hereto and hereby incorporated in this Agreement by reference) in such quantities as set forth in Exhibit E and conforming to the applicable Specifications.

 

1.36 “Nycomed IND” means the IND ********* filed with the FDA *********.

 

1.37 “Nycomed Product” means any Existing Nycomed Product or Nycomed Improvement Product.

 

1.38 “Nycomed Product Deliverables” means the Existing Nycomed Product Deliverables and the Nycomed Improvement Product Deliverables.

 

1.39 “Option” has the meaning set forth in Section 3.1 of this Agreement.

 

1.40 “Option Exercise Date” means the date upon which POZEN provides Nycomed with the written notice of exercise described in Section 3.1 of this Agreement.

 

1.41 “Option Period” has the meaning set forth in Section 3.2 of this Agreement.

 

1.42 “Patent” means (a) all patents and patent applications in any country or supranational jurisdiction and (b) any substitutions, divisions, continuations, continuations in part, reissues, renewals, registrations, confirmations, reexaminations, extensions, supplementary protection certificates and the like, and any provisional applications, of any such patents or patent applications.

 

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1.43 “POZEN Product” means any Combination Product or Single Entity Product.

 

1.44 “Process” means either the manufacturing process used by Nycomed as of the Effective Date for the manufacture of the LX Bulk Drug Substance or such process as changed by Nycomed from time to time in accordance with Section 9.6 of this Agreement.

 

1.45 “Regulatory Approval” means any approvals and any master files, establishment licenses, registrations or authorizations of any national, federal, state or local regulatory agency, department, bureau or other governmental entity necessary for the manufacture, use, storage, export, import, transport or sale of a pharmaceutical product in a country or other regulatory jurisdiction (including Marketing Approvals and the filing of an IND or a DMF).

 

1.46 “Single Entity Product” means a pharmaceutical product containing Lornoxicam (or any salts, solvates or polymorphs thereof) as the single active drug substance, and (a) developed or manufactured by or on behalf of POZEN or Sublicensees using or referencing the Licensed Technology or any part thereof, or (b) the use, manufacture or sale of which would, but for the licenses granted herein, infringe any Licensed Patents or intellectual property right other than Patents included in the Licensed Technology.

 

1.47 “Specifications” means, with respect to Materials either, the specific chemical and physical properties pertaining to such Materials set forth on Exhibit F (attached hereto and hereby incorporated in this Agreement by reference), or such properties changed by Nycomed from time to time in accordance with Section 9.6 of this Agreement.

 

1.48 “Sublicense Agreement” means any agreement in which a Third Party is granted a sublicense under the licenses granted by Nycomed to POZEN in this Agreement, whether by POZEN or its sublicensee.

 

1.49 “Sublicensee” means any entity other than POZEN that is a party to a Sublicense Agreement.

 

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1.50 “Sublicense Revenues” means any amount received by POZEN from a Sublicensee pursuant to a Sublicense Agreement as an upfront license fee or milestone payment.

 

1.51 “Term” has the meaning set forth in Section 16.1 of this Agreement.

 

1.52 “Territory” means the Exclusive Territory and the Limited Territory.

 

1.53 “Third Party” means any individual or entity other than POZEN INC., Nycomed Danmark ApS, and their respective Affiliates.

 

2. INITIAL DEVELOPMENT PROGRAM

 

2.1 ********* of ********* Data . Within 30 days after the Effective Date, Nycomed will deliver to POZEN copies of all raw data and study reports generated by or on behalf of Nycomed in connection with the ********* studies conducted with Lornoxicam ********* (collectively the “********* Data” ). Nycomed will ship such copies DDU (ICC Incoterms 2000) to a place of destination to be named by POZEN within 10 days after the Effective Date. POZEN and/or its consultants (for and on behalf of POZEN) will, at POZEN’s expense, commence with ********* the ********* Data promptly after delivery of the ********* Data to POZEN. POZEN will use commercially reasonable efforts to complete such ********* as soon as reasonably practicable. POZEN will provide the results of such ********* to Nycomed upon completion thereof *********. Nycomed may use such results for its internal research and development purposes and will otherwise treat such results as Confidential Information of POZEN subject to the terms and conditions set forth in Section 15 of this Agreement.

 

2.2 Scope of Initial Development Program . During the Option Period, POZEN will: (a) conduct development work for POZEN Products, including, by way of example, ********* studies and ********* studies for POZEN Products, (b) use reasonable efforts to prepare and file an IND for a POZEN Product ********* the delivery by Nycomed to POZEN of the IND Deliverables and the Existing Nycomed Product Deliverables (excluding any additional shipments thereof requested by POZEN pursuant to the delivery schedule set forth in Exhibit B ), and (c) after acceptance of the IND, use reasonable efforts to perform such clinical studies for the POZEN Products as POZEN deems appropriate to determine its interest in

 

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exercising the Option (the “Initial Development Program” ). POZEN will perform the Initial Development Program *********. Nycomed understands and agrees that POZEN will have the right to reference the Nycomed IND and to use the IND Deliverables for the preparation and filing of new INDs for POZEN Products and the performance of the Initial Development Program. POZEN understands and agrees that the Nycomed IND ********* and that Nycomed will ********* such Nycomed IND in the future. POZEN further agrees that it will provide Nycomed as soon as reasonably practicable with a copy of the table of contents of any IND filed during the Option Period by or on behalf of POZEN for any POZEN Product, which POZEN may redact to avoid disclosure of the identity of the specific POZEN Product to which the IND relates.

 

2.3 Nycomed Deliverables . Nycomed will deliver, or use commercially reasonable efforts to deliver (as provided for in the applicable Exhibit), to POZEN at no charge the following materials for use in the Initial Development Program: (a) the Existing Nycomed Product Deliverables, in accordance with the delivery schedule set forth in Exhibit B ; (b) the Nycomed Improvement Product Deliverables (if any), in accordance with the delivery schedule set forth in Exhibit E ; and (c) the IND Deliverables, in accordance with the delivery schedule set forth in Exhibit C ; provided, however, that in no event will Nycomed be obligated to supply POZEN with Nycomed Products or placebo for use in any Phase III or IV clinical trials. For the avoidance of doubt, nothing in this Section 2.3 will be construed as requiring Nycomed to generate new data, documentation or any translations that may be needed by POZEN. The supply of Materials included in the Nycomed Product Deliverables to POZEN by Nycomed pursuant to this Section 2.3 will be subject to the warranties, terms and conditions set forth in Section 8 of this Agreement.

 

2.4 Grant of Development License . Nycomed hereby grants to POZEN an exclusive (even as to Nycomed), fully paid, royalty-free license, in the Field in the Exclusive Territory to use the Nycomed Product Deliverables and IND Deliverables to make, have made under contract, use, develop and have developed under contract pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) as the single active drug substance and pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) as an active drug substance in combination with one or more other active drug substances, in each case during the Option Period solely in connection with the Initial

 

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Development Program. Nycomed hereby grants to POZEN an exclusive (except as to Nycomed or its licensees or sublicensees pursuant to subsections 4.2.4 and 4.2.5 of this Agreement), fully paid, royalty-free license, in the Field in the Limited Territory to use the Nycomed Product Deliverables and IND Deliverables to make, have made under contract, use, develop and have developed under contract pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) as an active drug substance in combination with one or more other active drug substances during the Option Period solely in connection with the Initial Development Program.

 

2.5 Use of Nycomed Product . POZEN will provide Nycomed with advance written notice of any clinical trials that POZEN intends to perform during the Initial Development Program to the extent that such trials would require the use or testing of Nycomed Products. POZEN will accompany each such notice with clinical trial protocols for the relevant studies. POZEN, at its sole discretion, may redact the protocols submitted to Nycomed to avoid disclosure of the identity of the specific POZEN Product to which such studies relate. POZEN will not initiate any clinical trial for which it has submitted protocols to Nycomed under this Section 2.5 prior to receipt of Nycomed’s approval; provided, however, that such approval will not be unreasonably withheld or delayed for more than 2 weeks following receipt of such protocols by Nycomed, and Nycomed’s failure to respond to such protocols within 2 weeks of receipt thereof shall be deemed to constitute Nycomed’s approval of such protocols.

 

3. GRANT OF OPTION

 

3.1 Option . Nycomed hereby grants POZEN an exclusive option (the “Option” ) during the Option Period to license the Licensed Technology for the research, development and Commercialization of POZEN Products on the terms set forth in this Agreement. POZEN may exercise the Option during the Option Period by providing Nycomed with written notice stating that POZEN exercises the Option. Upon exercise of the Option during the Option Period, POZEN will be entitled to fully use and exploit the license granted to POZEN in Section 4.1 of this Agreement.

 

3.2 Option Period . The Option may be exercised by POZEN during a period commencing on the Effective Date and ending on the earlier of: (a) the date 18 months following the date on which POZEN files

 

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the first IND for a POZEN Product, and (b) the date 24 months after delivery by Nycomed to POZEN of the Existing Nycomed Product Deliverables (excluding any additional shipments thereof requested by POZEN pursuant to the delivery schedule set forth in Exhibit B ) and IND Deliverables (the “Option Period” ).

 

3.3 Exclusivity . During the Option Period, Nycomed will not negotiate, offer, enter into, or otherwise discuss with any Third Party any agreement that would prevent Nycomed from granting the rights or performing the obligations set forth in this Agreement in case that POZEN exercises the Option during the Option Period.

 

4. LICENSES AND OTHER RIGHTS

 

4.1 License Grants to POZEN .

 

4.1.1 Subject to exercise of the Option by POZEN during the Option Period, and subject to the terms set forth in Section 4.2 below, Nycomed grants to POZEN, and POZEN accepts, an exclusive (even as to Nycomed), royalty-bearing license, with the right to grant sublicenses, under the Licensed Technology to develop, have developed under contract, use, offer to sell, sell, have sold, distribute and import pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) as the single active drug substance and pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) as an active drug substance in combination with one or more other active drug substances in the Exclusive Territory in the Field.

 

4.1.2 Subject to exercise of the Option by POZEN during the Option Period, and subject to the terms set forth in Section 4.2 below, Nycomed grants to POZEN, and POZEN accepts, an exclusive (except as to Nycomed or its licensees or sublicensees pursuant to subsections 4.2.4 and 4.2.5 of this Agreement), royalty-bearing license, with the right to grant sublicenses, under the Licensed Technology to develop, have developed under contract, use, offer to sell, sell, have sold, distribute and import pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) as an active drug substance in combination with one or more other active drug substances in the Limited Territory in the Field.

 

4.1.3 Subject to exercise of the Option by POZEN during the Option Period, and subject to the terms set forth in Section 4.2 below,

 

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Nycomed grants to POZEN, and POZEN accepts, an exclusive (even as to Nycomed), royalty-bearing license, with the right to grant sublicenses, under the Licensed Technology to make and have made under contract pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) as the single active drug substance and pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) as an active drug substance in combination with one or more other active drug substances for the Field in the Exclusive Territory.

 

4.1.4 Subject to exercise of the Option by POZEN during the Option Period, and subject to the terms set forth in Section 4.2 below, Nycomed grants to POZEN, and POZEN accepts, a non-exclusive, royalty-bearing license under the Licensed Technology, with the right to grant sublicenses, to make and have made under contract pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) as the single active drug substance and pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) as an active drug substance in combination with one or more other active drug substances for the Field outside the Exclusive Territory, excluding any country listed on Exhibit I . POZEN may request from Nycomed the expansion of the non-exclusive license granted in this Section 4.1.4 to any country listed on Exhibit I , and any such request will not be unreasonably refused by Nycomed.

 

4.2 Limitations; Exclusivity .

 

4.2.1 POZEN understands and agrees that the licenses granted in Section 4.1 of this Agreement are not granted and may not be used prior to the exercise of the Option by POZEN.

 

4.2.2 Notwithstanding the limited geographical scope of the license granted to POZEN in Section 4.1.1 of this Agreement with respect to Single Entity Products, POZEN will have: (a) the right to use Single Entity Products or Nycomed Products in clinical comparison studies with Combination Products in the Limited Territory in the Field if such studies are required by regulatory agencies to obtain Marketing Approval to Commercialize such Combination Product in one or more countries in the Limited Territory, and (b) the right to reference any MAA filed by Nycomed for Nycomed Products in the Field in the Limited Territory in a filing for Marketing Approval to Commercialize such Combination Product in one or more countries in the Territory.

 

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4.2.3 Nycomed will not itself or through any Third Party (whether through the grant of a license or otherwise): (a) conduct in the Field pre-clinical tests in animals or clinical trials in humans with, or commercialize pharmaceutical products containing Lornoxicam or any salts, solvates or polymorphs of Lornoxicam in the Exclusive Territory, regardless of whether Lornoxicam or such salt, solvate or polymorph is the sole active drug substance contained therein or is combined with one or more other active drug substances, or (b) develop or commercialize pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) in combination with other active drug substances in the Field in the Limited Territory, except as set forth in Sections 4.2.4 and 4.2.5 below.

 

4.2.4 Nycomed will retain the right to use the Licensed Technology to develop, have developed under contract by a contract research organization, make, have made under contract by a contract manufacturer, use, offer to sell, sell, have sold, import and distribute in the Field in the Limited Territory pharmaceutical products containing Lornoxicam (or any salts, solvates or polymorphs thereof) in combination with one or more additional active drug substances, and to license such products, including the Licensed Technology, to Third Parties in the Limited Territory; provided, however, that Nycomed will not license any such product to any Third Party prior to *********. The retention of rights set forth in this Section 4.2.4 is not, and will not be construed as, a grant by POZEN to Nycomed of any right or license with respect to Combination Products.

 

4.2.5 Nycomed will retain the right to license from one or more Third Parties the right to develop, have developed under contract by a contract research organization, make, have made under contract by a contract manufacturer, use, offer to sell, sell, have sold, import and distribute in the Limited Territory in the Field products containing Lornoxicam (or any salts, solvates or polymorphs thereof) in combination with one or more additional active drug substances, and to sublicense any such product, including the Licensed Technology, to Third Parties in the Limited Territory; provided, however, that Nycomed will not license any such product to any Third Party prior to *********.

 

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4.2.6 POZEN will have the right to sublicense any of the rights and licenses granted to POZEN pursuant to Sections 4.1 and 4.2.2 of this Agreement and its right to reference DMFs pursuant to Section 9.3 of this Agreement and to authorize POZEN’s Sublicensees to grant up to ********* of further sublicenses.

 

4.2.7 Promptly after execution of any Sublicense Agreement POZEN will communicate to Nycomed the name and address of the applicable Sublicensee and provide Nycomed with the term and territory of the Sublicense Agreement. POZEN will further promptly communicate to Nycomed any major amendments to any Sublicense Agreement, including any termination of any Sublicense Agreement prior to its expiration.

 

4.2.8 POZEN will ensure that no Sublicense Agreement or any term or condition thereof is inconsistent or conflicting with this Agreement or any term or condition thereof.

 

4.2.9 POZEN will ensure that all of its obligations under this Agreement reasonably related to the rights and licenses sublicensed under a Sublicense Agreement to a Sublicensee will be passed to such Sublicensee, and POZEN will be responsible and liable for any breach of these obligations by such Sublicensee. For purposes of clarification, POZEN will not be responsible or liable for any breach by a Sublicensee of a commercial supply agreement between Nycomed and such Sublicensee as set forth in Section 7.1 of this Agreement; provided, however, that POZEN shall use commercially reasonable efforts to cause each Sublicensee to comply with its obligation to purchase its entire requirements of LX Bulk Drug Substance or Lornoxicam (or any salts, solvates or polymorphs thereof) for use in the manufacture of POZEN Products from Nycomed during the applicable Exclusive Manufacturing Period in accordance with Section 7.1 of this Agreement.

 

4.3 Option Grant to Nycomed .

 

4.3.1 Subject to Section 4.3.2, POZEN hereby grants to Nycomed, and Nycomed hereby accepts, a right of first refusal (the “Nycomed Option” ) on the terms set forth in this Section 4.3 for an exclusive license, with the right to grant sublicenses, under any applicable Patent, Know-How or intellectual property other than Patents Controlled by POZEN relating to a Combination Product to develop, have developed

 

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under contract, make, have made under contract, use, offer to sell, sell, have sold, distribute and import any Combination Product in the Field within the following countries: Iceland, Denmark, Norway, Sweden, Finland, Lithuania, Latvia, Estonia, Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan and Ukraine (the “Nycomed Option Territory” ).

 

4.3.2 The Nycomed Option will not apply with respect to any Combination Product that is claimed by a Patent or intellectual property other than Patents, or that embodies Know-How, Controlled by a Third Party. With respect to each such Combination Product, POZEN will use good faith efforts to introduce Nycomed to such Third Parties from which POZEN has secured a license to such Patent or intellectual property other than Patents or Know-How for the purpose of enabling Nycomed to negotiate a license to such Patent or intellectual property other than Patents or Know-How in the Nycomed Option Territory. If Nycomed is successful in obtaining such a license, then the Nycomed Option will subsequently apply to each Combination Product for which a license was obtained.

 

4.3.3 With respect to each Combination Product, POZEN will notify Nycomed upon the earlier of: (a) *********, and (b) *********. Such notice shall identify the active drug substances contained in the applicable Combination Product and the presentation form(s) thereof. After sending each such notice, POZEN will provide Nycomed in a due diligence meeting with: (1) access at POZEN’s facilities to up-to-date pre-clinical and clinical data (including safety and stability data), the IND, reports available and other reasonably requested documentation relating to such Combination Product, and (2) a term sheet setting forth terms and conditions under which POZEN proposes to grant Nycomed an exclusive license to such Combination Product in the Nycomed Option Territory, which may include, without limitation, commercially reasonable upfront payments, milestone payments and royalties payable to POZEN for a license to the applicable Combination Product.

 

4.3.4 The period during which Nycomed may exercise the Nycomed Option will commence upon receipt by Nycomed of the notice described in Section 4.3.3 of this Agreement and terminate ********* after the due diligence meeting at POZEN’s facilities described in Section 4.3.3. The due diligence meeting at POZEN’s facilities described in Section 4.3.3 will take place within ********* after receipt by Nycomed of such notice.

 

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4.3.5 Nycomed may exercise the Nycomed Option with respect to a particular Combination Product by written notice to POZEN setting forth the countries within the Nycomed Option Territory for which Nycomed desires to negotiate a license. If POZEN does not receive a notice of exercise of the Nycomed Option for a particular country within the Nycomed Option Territory during the ********* exercise period described in Section 4.3.4 of this Agreement, then POZEN will have the right to enter into licensing arrangements of the applicable Combination Product with Third Party licensees, or itself commercialize such Combination Product, in each such country without further obligation to grant a license to Nycomed for such Combination Product in such countries.

 

4.3.6 Upon the exercise by Nycomed of the Nycomed Option with respect to a Combination Product in one or more countries within the Nycomed Option Territory, Nycomed and POZEN will meet within ********* to negotiate in good faith an appropriate license agreement for up to ********* after such exercise. If the Parties have not executed a license agreement with respect to a particular country within the Nycomed Option Territory as of the date ********* following Nycomed’s exercise of the Nycomed Option, then POZEN will have the right to enter into licensing arrangements of the applicable Combination Product with Third Party licensees, or itself commercialize such Combination Product, in each such country without further obligation to grant a license to Nycomed for such Combination Product in such countries.

 

4.3.7 For the avoidance of doubt, nothing in this Section 4.3 will be construed as a Party’s acceptance of any terms and conditions proposed by the other Party in a term sheet and none of such terms and conditions will be binding on such Party, and each Party will only be bound after full execution of an aforesaid license agreement.

 

4.3.8 If Nycomed participates in the due diligence meeting described in Section 4.3.3 above with respect to a Combination Product but does not enter into a license agreement with POZEN as set forth in Section 4.3.6 with respect to such Combination Product, then, during the Term, Nycomed will not commercialize any pharmaceutical product containing the same combination of active drug substances as the Combination Product for which Nycomed did not enter into such license agreement.

 

 

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4.4 Isomer Option.

 

4.4.1 Subject to Section 4.4.2, Nycomed hereby grants to POZEN, and POZEN hereby accepts, a right of first refusal (the “Isomer Option” ) on the terms set forth in this Section 4.4 for an exclusive license, with the right to grant sublicenses, under any applicable Patent, Know-How or intellectual property other than Patents, Controlled by Nycomed relating to any Isomer Product to develop, have developed under contract, make, have made under contract, use, offer to sell, sell, have sold, distribute and import such Isomer Product in the Field in the Exclusive Territory.

 

4.4.2 The Isomer Option will not apply with respect to any Isomer Product that is claimed by a Patent or intellectual property other than Patents, or that embodies Know-How, Controlled by a Third Party. With respect to each such Isomer Product that is claimed by a Patent or intellectual property other than Patents, or that embodies Know-How, Controlled by a Third Party, Nycomed will use good faith efforts to introduce POZEN to such Third Parties from which Nycomed has secured a license to such Patent or Know-How for the purpose of enabling POZEN to negotiate a license to such Patent or Know-How in the Exclusive Territory. If POZEN is successful in obtaining such a license, then the Isomer Option will subsequently apply to each Isomer Product claimed by a Patent or intellectual property other than Patents, or embodying Know-How, Controlled by a Third Party for which a license was obtained.

 

4.4.3 With respect to each Isomer Product, Nycomed will notify POZEN upon the earlier of: (a) *********, and (b) *********. Such notice shall identify the active drug substance(s) contained in the applicable Isomer Product and the presentation form(s) thereof. After sending each such notice, Nycomed will provide POZEN in a due diligence meeting with: (1) access at Nycomed’s facilities to up-to-date pre-clinical and clinical data (including safety and stability data), the IND or equivalent filing, reports available and other reasonably requested documentation relating to such Isomer Product, and (2) a term sheet setting forth terms and conditions under which Nycomed proposes to grant POZEN an exclusive license to such Isomer Product in the Field in the Exclusive Territory, which may include, without limitation, commercially reasonable upfront payments, milestone payments and royalties payable to Nycomed for a license to the applicable Isomer Product.

 

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4.4.4 The period during which POZEN may exercise the Isomer Option will commence upon receipt by POZEN of the notice described in Section 4.4.3 of this Agreement and terminate ********* after the due diligence meeting at Nycomed’s facilities described in Section 4.4.3. The due diligence meeting at Nycomed’s facilities described in Section 4.4.3 will take place within ********* after receipt by POZEN of such notice.

 

4.4.5 POZEN may exercise the Isomer Option with respect to a particular Isomer Product by written notice to Nycomed that POZEN desires to negotiate a license. If Nycomed does not receive a notice of exercise of the Isomer Option during the ********* exercise period described in Section 4.4.4 of this Agreement, then Nycomed will have the right to enter into licensing arrangements of the applicable Isomer Product with Third Party licensees, or itself commercialize such Isomer Product, in the Exclusive Territory without further obligation to grant a license to POZEN for such Isomer Product in the Exclusive Territory.

 

4.4.6 Upon the exercise by POZEN of the Isomer Option with respect to an Isomer Product in the Exclusive Territory, POZEN and Nycomed will meet within ********* to negotiate in good faith an appropriate license agreement for up to ********* after such exercise. If the Parties have not executed a license agreement with respect to such Isomer Product in the Exclusive Territory as of the date ********* following POZEN’s exercise of the Isomer Option, then Nycomed will have the right to enter into licensing arrangements of the applicable Isomer Product with Third Party licensees, or itself commercialize such Isomer Product, in the Exclusive Territory without further obligation to grant a license to POZEN for such Isomer Product in the Exclusive Territory.

 

4.4.7 For the avoidance of doubt, nothing in this Section 4.4 will be construed as a Party’s acceptance of any terms and conditions proposed by the other Party in a term sheet and none of such terms and conditions will be binding on such Party, and each Party will only be bound after full execution of an aforesaid license agreement.

 

4.4.8 If POZEN participates in the due diligence meeting described in Section 4.4.3 above with respect to an Isomer Product but

 

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does not enter into a license agreement with Nycomed as set forth in Section 4.4.6 with respect to such Isomer Product, then, during the Term, POZEN will not commercialize any pharmaceutical product containing the same combination of active drug substances as the Isomer Product for which POZEN did not enter into such license agreement.

 

4.5 Negative Covenants . POZEN hereby covenants and agrees not to: (a) use Materials supplied by Nycomed under this Agreement for any other purpose than expressly provided for under this Agreement, or (b) actively promote, market or sell Single Entity Products outside the Exclusive Territory, or (c) actively promote, market or sell Combination Products outside the Territory.

 

5. DEVELOPMENT PROGRAM

 

5.1 Development and Costs . POZEN will be responsible for the pre-clinical and clinical development of the POZEN Products, and will prepare and file all applications for Marketing Approval of POZEN Products, at POZEN’s expense. Nycomed will, throughout the Term, provide reasonable technical and scientific support to assist POZEN in obtaining and maintaining Marketing Approvals in the Territory. POZEN will reimburse Nycomed for any internal costs (at then-standard FTE rates, up to ********* and per Nycomed employee engaged), pro-rated for any partial day (based on an eight-hour day), and for reasonable and documented out-of-pocket expenses incurred by Nycomed in connection with such provision of support. Prior to initiating any particular technical and/or scientific support services requested by POZEN under this Section 5.1, Nycomed shall provide to POZEN for its approval a good faith written estimate of its anticipated internal costs (including FTE rate(s) of Nycomed personnel who would provide such services) and out-of-pocket expenses of providing such services, and if POZEN notifies Nycomed within ********* of receipt of such estimate that POZEN does not wish to incur such costs and expenses, Nycomed shall not provide such services unless otherwise agreed by the Parties.

 

5.2 Supply of Materials . After the Initial Development Program, Nycomed will use commercially reasonable efforts to deliver to POZEN, LX Bulk Drug Substance, which shall be provided at ********* for use in pre-clinical studies and clinical trials for POZEN Products in such quantities as may be reasonably requested by POZEN from time to time. In addition,

 

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during a period of up to ********* from the Option Exercise Date, Nycomed will use commercially reasonable efforts to deliver to POZEN Nycomed Products and placebo, which shall be provided *********, in such quantities as may be reasonably requested by POZEN from time to time; provided, however, that in no event will Nycomed be obligated to supply POZEN with Nycomed Products or placebo for use in any Phase III or IV clinical trials.

 

5.3 Order Process for Materials . To order Materials from Nycomed pursuant to Section 5.2 above, POZEN will submit a purchase order to Nycomed specifying the amount of such Materials and the delivery date. Unless otherwise agreed by the Parties, Nycomed will not be required to supply Materials ordered by POZEN if the delivery date set forth on the applicable purchase order for such Materials is less than ********* after the date of receipt of such purchase order by Nycomed.

 

5.4 Shipping . Nycomed will package and label the applicable Materials pursuant to Section 5.2 above for shipment in accordance with applicable law and in accordance with Nycomed’s standard practices. Nycomed will ship the Materials DDU (ICC Incoterms 2000) to a place of destination named by POZEN in the applicable purchase order. Each shipment will be made according to the schedule and in the amounts specified in the applicable purchase order and under the terms and conditions set forth in this Agreement. Should Nycomed at any time during the Term have reason to believe that it will be unable to meet a delivery date of a shipment, Nycomed will promptly notify POZEN of the cause for such delay and the steps undertaken by Nycomed to avoid or minimize such delay.

 

5.5 Invoices . Nycomed will send an invoice to POZEN via facsimile upon shipment of Materials under this Section 5 and will enclose such invoice with each shipment of Materials under this Section 5. Each such invoice will set forth a detailed account of the quantities and price of Materials included in such shipment. All invoices submitted to POZEN by Nycomed under this Section 5.5 will be payable within ********* of the invoice date.

 

5.6 Other Supply Provisions . The supply of Materials to POZEN by Nycomed pursuant to this Section 5 will be subject to the warranties, terms and conditions set forth in Section 8 of this Agreement.

 

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5.7 Use of Nycomed Product . POZEN will provide Nycomed with advance written notice of any clinical trials that POZEN intends to perform during the pre-clinical and clinical development of POZEN Products to the extent that such trials would require the use or testing of Nycomed Products. POZEN will accompany each such notice with clinical trial protocols for the relevant studies. POZEN, at its sole discretion, may redact the protocols submitted to Nycomed to avoid disclosure of the identity of the specific POZEN Product to which such studies relate. POZEN will not initiate any clinical trial for which it has submitted protocols to Nycomed under this Section 5.7 prior to receipt of Nycomed’s approval; provided, however, that such approval will not be unreasonably withheld or delayed, and Nycomed’s failure to respond to such protocols within ********* of receipt thereof shall be deemed to constitute Nycomed’s approval of such protocols.

 

5.8 Access to Know-How . During pre-clinical and clinical development of the POZEN Products, after the Initial Development Program, and upon ********* written notice by POZEN to Nycomed specifying the Know-How to which POZEN would like access, Nycomed will grant POZEN, at Nycomed’s facilities and during such number of days per calendar year as POZEN reasonably requests (not to exceed a total of *********), access to Nycomed’s Know-How that is available at Nycomed or its then-current contractors and included in the Licensed Technology. For the avoidance of doubt, nothing in this Section 5.8 will be construed as requiring Nycomed to generate new data, documentation or any translations.

 

6. COMMERCIALIZATION

 

6.1 Principles of Commercialization . POZEN will be responsible for Commercializing the POZEN Products in the Field in the Territory during the Term, *********. However, the Parties acknowledge and agree that POZEN may grant some of its responsibilities to Nycomed after execution of a license agreement contemplated in Section 4.3 of this Agreement.

 

6.2 Regulatory Obligations . POZEN will be responsible for all activities in connection with the Regulatory Approvals for a POZEN Product in the Territory (other than the Manufacturing Approvals necessary for Nycomed’s manufacture of LX Bulk Drug Substance), including communicating and preparing and filing all reports with the applicable

 

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regulatory authority. Nycomed will, throughout the Term, provide reasonable technical and scientific support to assist POZEN in preparing and filing such reports. POZEN will reimburse Nycomed for any internal costs (at then-standard FTE rates, up to ********* and per Nycomed employee engaged), pro-rated for any partial day (based on an eight-hour day), and for reasonable and documented out-of-pocket expenses incurred by Nycomed in connection with such provision of support. Prior to initiating any particular technical and/or scientific support services requested by POZEN under this Section 6.2, Nycomed shall provide to POZEN for its approval a good faith written estimate of its anticipated internal costs (including FTE rate(s) of Nycomed personnel who would provide such services) and out-of-pocket expenses of providing such services, and if POZEN notifies Nycomed within ********* of receipt of such estimate that POZEN does not wish to incur such costs and expenses, Nycomed shall not provide such services unless otherwise agreed by the Parties. POZEN will pay all fees associated with filing, obtaining and maintaining such Regulatory Approvals.

 

6.3 Diligence . POZEN will use commercially reasonable efforts to develop (including preparing and filing applications for and obtaining Regulatory Approvals) and to Commercialize at least one POZEN Product in the Field in ********* as soon as reasonably practicable, and to apply commercially reasonable efforts and resources to *********, and at least equal to the efforts and resources normally used by POZEN for another pharmaceutical product owned by it that has a similar market potential and is at a similar stage in its product life cycle as the applicable POZEN Product. If either (a) development of a POZEN Product ceases or (b) Regulatory Approval of a POZEN Product is granted in a particular country in the Territory but POZEN does not *********, POZEN shall provide Nycomed with a reasonable explanation for such decision; provided, however, that the foregoing obligation shall cease upon launch of the first POZEN Product in *********.

 

7. COMMERCIAL SUPPLY OF LX BULK DRUG SUBSTANCE

 

7.1 Exclusivity of Supply of LX Bulk Drug Substance . During the Exclusive Manufacturing Period(s) applicable to POZEN, POZEN will subject to Section 7.5 of this Agreement purchase from Nycomed and Nycomed will use commercially reasonable efforts to provide to POZEN, 100% of POZEN’s requirements of LX Bulk Drug Substance or Lornoxicam

 

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(or any salts, solvates or polymorphs thereof), to be provided by Nycomed in the form of LX Bulk Drug Substance, for use in the manufacture of any POZEN Product. For purposes of clarification, for any POZEN Product manufactured after the applicable Exclusive Manufacturing Period, POZEN will have the right to source LX Bulk Drug Substance or Lornoxicam (or any salt, solvate or polymorph thereof) from any entity. POZEN will ensure that either no Sublicense Agreement shall become effective unless and until the Sublicensee enters into a supply agreement with Nycomed in substantially the same form as the supply agreement attached to this Agreement as Exhibit J (attached to this Agreement and incorporated in this Agreement by reference) or, at POZEN’s election, POZEN undertakes to purchase 100% of such Sublicensee’s requirements of LX Bulk Drug Substance or Lornoxicam (or any salts, solvates or polymorphs thereof), to be provided by Nycomed in the form of LX Bulk Drug Substance, for use in the manufacture of any POZEN Product under the terms and conditions set forth in this Agreement for supply to POZEN. Nycomed will use commercially reasonable efforts to enter into such a supply agreement with each Sublicensee, and POZEN will use commercially reasonable efforts to cause each Sublicensee to enter into such a supply agreement, as promptly as practicable. In the event that a supply agreement between Nycomed and a Sublicensee is terminated for any reason other than ********* prior to the expiration of the applicable Exclusive Manufacturing Period(s), Nycomed shall provide POZEN with written notice of such termination, and POZEN shall *********. For purposes of clarification, if a Sublicensee has entered into a supply agreement with Nycomed, POZEN, in its discretion, may supply such Sublicensee with all or any portion of such Sublicensee’s requirements of LX Bulk Drug Substance, out of POZEN’s own stock of LX Bulk Drug Substance purchased from Nycomed.

 

7.2 Optional Extension . The Parties may extend the Exclusive Manufacturing Period(s) applicable to POZEN for successive ********* terms, upon terms to be agreed upon at such time by the Parties.

 

7.3 Optional Termination . On or after *********, either Party may provide the other Party with written notice of its intention to terminate the supply of LX Bulk Drug Substance to POZEN by Nycomed under this Agreement, in which case Nycomed’s obligation to supply POZEN with LX Bulk Drug Substance under this Section 7 will terminate on the date ********* after the date such notice is received by such other Party.

 

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7.4 Supply Diligence.

 

7.4.1 Nycomed will use commercially reasonable efforts to maintain a reasonable inventory of LX Bulk Drug Substance, at Nycomed’s expense, for use in filling orders of LX Bulk Drug Substance conforming to the Specifications and as forecasted in the binding portion of a forecast by POZEN in accordance with this Section 7, at Nycomed. Similarly, POZEN will use commercially reasonable efforts to maintain a reasonable inventory of LX Bulk Drug Substance supplied by Nycomed, at POZEN’s expense .

 

7.4.2 If Nycomed has reason to believe that it will be unable to manufacture and fill a particular order made in accordance with this Section 7 of LX Bulk Drug Substance conforming to the Specifications despite the safeguards described in Section 7.4.1 above, then Nycomed will promptly notify POZEN of the cause for such projected shortfall and POZEN will have the right pursuant to Section 7.5 of this Agreement to use an alternate source to supply the actual shortfall.

 

7.4.3 If Nycomed has reason to believe that it will be unable, on an ongoing basis, to manufacture and fill orders by POZEN of LX Bulk Drug Substance conforming to the Specifications forecasted in accordance with this Section 7, then Nycomed will notify POZEN of the cause for such projected shortfall, and use commercially reasonable efforts to establish a contract manufacturer to manufacture such shortfall for Nycomed for supply to POZEN. Nycomed will not retain any contract manufacturer of which Nycomed has reason to believe that it would be unable to manufacture LX Bulk Drug Substance in accordance with the Product Warranty (as defined in Section 8.1 of this Agreement). If Nycomed has reason to believe that it will be unable to establish, or establish in due time, such a contract manufacturer and to have manufactured such projected shortfall, then Nycomed will promptly notify POZEN thereof and POZEN will then have the right pursuant to Section 7.5 of this Agreement to use an alternate source to supply the greater of: (a) *********, and (b) *********, provided that POZEN shall use commercially reasonable efforts to *********.

 

7.5 Establishment of Alternate Source.

 

7.5.1 During the Exclusive Manufacturing Period(s) applicable to POZEN, POZEN will have the right to manufacture or have manufactured and supplied to it LX Bulk Drug Substance for further

 

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processing into a POZEN Product by an alternate source to the extent Nycomed fails to supply POZEN’s requirement of LX Bulk Drug Substance as described in Section 7.4; provided, however, that in no event will POZEN use any Patents Controlled by, or use or disclose Confidential Information of, Nycomed and related to the Process or to any other manufacturing process for LX Bulk Drug Substance or Lornoxicam (or any salts, solvates or polymorphs thereof).

 

7.5.2 If POZEN purchases from an alternate source a quantity of LX Bulk Drug Substance that Nycomed failed to supply as described above and if such failure is related to *********, then, if the price paid by POZEN to such alternate source for such quantity of LX Bulk Drug Substance is *********, Nycomed will ********* POZEN the ********* of the ********* the ********* ********* to the ********* and the *********, up to a ********* ********* to ********* of the *********.

 

7.6 Failure to Supply; End of Exclusive Manufacturing Periods . POZEN will have the right to terminate the Exclusive Manufacturing Period applicable to it:

 

(a) upon the failure of Nycomed to supply for any reason, excluding force majeure, at least ********* forecasted and ordered in accordance with this Section 7 for *********, or for *********, in each case, unless Nycomed remedies such shortfall either (i) within ********* of the scheduled delivery date in the case of failure to deliver at least ********* of ordered quantities of LX Bulk Drug Substance, or (ii) in accordance with Section 8.4 in the case of failure of at least ********* of such LX Bulk Drug Substance delivered to conform to the Specifications. The termination right set forth in this subsection (a) will expire with respect to a particular failure described above if not exercised within ********* of the expiration of Nycomed’s rights to remedy such failure; or

 

(b) upon the failure of Nycomed to supply for any reason, excluding force majeure, at least ********* forecasted and ordered in accordance with this Section 7 during any calendar year, unless Nycomed remedies such shortfall either (i) within ********* of the scheduled delivery date in the case of failure to deliver at least ********* of ordered quantities of LX Bulk Drug Substance, or (ii) in accordance with Section 8.4 in the case of failure of at least ********* of such LX Bulk Drug Substance delivered to conform to the Specifications. The termination right set forth in

 

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this subsection (b) will expire with respect to a particular failure described above if not exercised within ********* of the expiration of Nycomed’s rights to remedy such failure.

 

7.7 Supply Price . All supply of LX Bulk Drug Substance by Nycomed to POZEN for further processing into POZEN Products intended for commercial sale will be made at the prices set forth on the following table:

 

 

By way of example, if POZEN orders, in one or more orders during a calendar year, ********* of LX Bulk Drug Substance for delivery, the price for *********.

 

7.8 Price Increases . If any changes to cGMP or any changes to applicable laws or regulations are adopted after the Effective Date, and if Nycomed’s compliance with such changed cGMP, laws or regulations will result in an increase in the direct manufacturing costs of Nycomed for LX Bulk Drug Substance, then Nycomed will promptly inform POZEN and may reasonably increase the prices set forth in Section 7.6 of this Agreement; provided, however, if any such price increase would lead to an increase of the prices set forth in Section 7.6 of this Agreement of ********* then POZEN will have the right to terminate any Exclusive Manufacturing Period applicable to POZEN within ********* from receipt of Nycomed’s notification of such price increase. POZEN’s notice of termination shall become effective between ********* from receipt by Nycomed as specified in such termination notice (unless Nycomed reduces the price increase ********* and such price change and the effective date thereof are communicated to POZEN within ********* of receipt of POZEN’s notice), provided that POZEN will continue to purchase LX Bulk Drug Substance during such period at the increased price and such increased price will be subject to any further price increases that result from additional changes to cGMP, laws or regulations during such period.

 

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7.9 Forecasts . No later than ********* prior to the beginning of the calendar quarter in which POZEN desires the first delivery of LX Bulk Drug Substance from Nycomed under this Section 7 (the “Initial Quarter” ), POZEN will provide Nycomed with a forecast setting forth POZEN’s requirements of LX Bulk Drug Substance for ******************. Thereafter, on or before the ********* of each ********* fol