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Confidential Materials omitted and filed separately with
the Distribution and Development Agreement By and between
Nycomed GmbH and Sepracor Inc.
Table of Contents
This Distribution and Development Agreement relating to the pharmaceutical compound ciclesonide, dated this January 25 th , 2008 is being entered into by and between Nycomed GmbH (formerly known as ALTANA Pharma AG), a corporation organized and existing under the laws of Germany and having its principal office at Byk-Gulden-Strasse 2, 78467 Konstanz, Federal Republic of Germany ( "Nycomed" ), and Sepracor Inc., a corporation organized and existing under the laws of the state of Delaware and having its principal office at 84 Waterford Drive, Marlborough, MA 01752, USA ( "Sepracor" ). Each or both of Nycomed and Sepracor are hereinafter referred to as "Party" or "Parties" , as intended in the given context. WITNESSETH WHEREAS, Nycomed and its Affiliates Control certain Nycomed Technology relating to its proprietary Compound (INN) and certain products incorporating such Compound including, without limitation, the Alvesco® MDI Product, an innovative inhaled corticosteroid (ICS) providing asthma control in all patient groups regardless of asthma severity, and the Omnaris® AQ Product, an innovative intranasal steroid formulation exhibiting significant therapeutic effects in seasonal as well as perennial allergic rhinitis (SAR/PAR); WHEREAS, Sepracor and its Affiliates have material capabilities, resources and experience in the development and commercialization of pharmaceutical products in the Territory including, without limitation, the facilities, personnel and expertise to Distribute, Commercialize and Develop Products incorporating the Compound in the Territory and in the Field; WHEREAS, Nycomed wishes to grant Sepracor Exclusive rights under the Nycomed Technology and the Nycomed Trademarks to Distribute, Commercialize and Develop Products incorporating the Compound in the Territory and in the Field in accordance with all terms and conditions of this Agreement; WHEREAS, Nycomed wishes to exclusively supply Sepracor with its requirements of the Original Products and Compound, as may be applicable, subject to the terms and conditions of this Agreement and, subject to further agreement, when appropriate, Sepracor's requirements of Additional Products; WHEREAS, Sepracor wishes to accept such rights, and to exclusively purchase its requirements of the Original Products or Compound, as the case may be, and, subject to further agreement, when appropriate, Sepracor's requirements of Additional Products, from Nycomed or its appointee for such purpose, in accordance with all terms and conditions of this Agreement; NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth, the sufficiency of which is hereby acknowledged, and intending to be legally bound, the Parties to this Agreement mutually agree as follows: Article 1 For the purposes of this Agreement, the following terms, whether used in the singular or plural, shall be ascribed the following meaning: "Act" means the Federal Food, Drug and Cosmetic Act of the United States, and all regulations promulgated thereunder, each as amended from time to time. "Actual Manufacturing Costs" shall have the meaning set forth in Section 11.1.1.2. "Actual Supply Price of Clinical Samples" shall have the meaning set forth in Section 11.1.4.3. "Actual Supply Price of Commercial Product" shall have the meaning set forth in Section 11.1.2.3. "Actual Supply Price of Compound" shall have the meaning set forth in Section 11.1.5.3. 3
"Actual Supply Price of Promotional Samples" shall have the meaning set forth in Section 11.1.3.3. "Additional Product" means any Line Extensions of any of the Original Products or any Improved Product, collectively. "Additional Product Agreement" shall have the meaning set forth in Section 6.2.1.3. "Additional Product Supply Agreement" shall have the meaning set forth in Section 6.2.1.4. " ADR " or "Adverse Drug Reaction" shall have the meaning set forth in Section 2.2.2 of Schedule 12.4 . " AE " or "Adverse Event" shall have the meaning set forth in Section 2.2.1 of Schedule 12.4 . "Affiliate" of either Party means any corporation, firm, partnership, organization or entity, whether de jure or de facto, which such Party directly or indirectly controls, is controlled by or is under common control with. For the purpose of this definition, the term "control" means (i) direct or indirect ownership of fifty percent (50%) or more of the outstanding equity voting stock (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) of a Party or other entity or (ii) the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Party or other entity, whether through the ownership of voting securities, by contract, or otherwise. "Agreement" means this distribution and development agreement including all schedules thereto. "Alliance Manager" shall have the meaning set forth in Section 4.8. "Altana" means Altana Pharma AG, Byk-Gulden-Strasse 2, D-78467 Konstanz, Germany and the company name under which Nycomed has been trading prior to the name change from "Altana" to "Nycomed". "Alvesco® MDI Product" means the Product in its presentation form as Alvesco® HFA metered dose inhaler incorporating the Compound as sole active ingredient, as finished product in its presentation form as of the Effective Date ready for sale to the customer, as further described in Schedule 1.7 in the Respiratory Field, subject to Section 2.1.1.5. "ANDA" means an abbreviated new drug application filed pursuant to 21 U.S.C. §355 by a Third Party for a generic equivalent of Product under the Waxman Hatch Act (codified as amended 21 U.S.C. §§ 301 et seq.) as amended. "A&P Expenses" means (a) all out-of-pocket costs and expenses incurred ( i. e ., paid to Third Parties or accrued therefor) by Sepracor in connection with the advertising (including, without limitation, direct-to-consumer advertising), marketing and promotion of the Products in the Territory pursuant to a Marketing Plan and in accordance with Legal Requirements, including out-of-pocket costs incurred for: (i) marketing publications and the planning and development thereof, and market research, (ii) non-personal promotion and advertising (including costs of journal advertising, promotional materials, direct mail, reminder promotions, and web-based promotions); (iii) public relations; (iv) professional relations and medical education programs (including speakers' programs, symposia and conference presentations); (v) advisory boards; and (vi) promotional meetings, including meeting and facilities rental and administration costs; (vii) distribution and stocking allowances and service fees paid to wholesalers, distributors, and retail accounts, (viii) as well as all rebates paid to managed care, and (ix) all rebates or comparable compensation paid to patients, whether directly or indirectly, on account of crediting patients any self-retained costs of medical treatment not covered by medical insurance; (b) the supply price paid by Sepracor to Nycomed for Promotional Samples pursuant to Section 11.1.3; (c) always (i) only to the extent directly directed at the sales promotion of Products and (ii) only to the extent conforming with applicable US codes of ethics and all other 4
applicable Legal Requirements; and (d) (i) to the express exclusion, however, of the costs and expenses incurred by Sepracor (w) related to any public relations or general promotional activities that are not predominantly related to Product and (x) generic investment in the Field that is not predominantly linked to the Product; and (ii) to the express exclusion of overheads. "Assumptions" shall have the meaning set forth in Section 9.6.3.1. "Audited Party" shall have the meaning set forth in Section 15.3.2. "Auditing Party" shall have the meaning set forth in Section 15.3.2. "Auditor" shall have the meaning set forth in Section 15.3.2. "Aventis" means Aventis Pharmaceuticals Inc., a corporation organized and existing under the laws of Delaware and having its principal office at 300 Somerset Corporate Boulevard, Bridgewater, New Jersey 08807-0800, USA. "Base Manufacturing Costs" shall have the meaning set forth in Section 11.1.1.1. "Base Supply Price of Clinical Samples" shall have the meaning set forth in Section 11.1.4.2. "Base Supply Price of Commercial Product" shall have the meaning set forth in Section 11.1.2.2. "Base Supply Price of Compound" shall have the meaning set forth in Section 11.1.5.2. "Base Supply Price of Promotional Samples" shall have the meaning set forth in Section 11.1.3.2. "Breach" shall have the meaning set forth in Section 18.2.1. "Business Day" means any day on which banking institutions in the Commonwealth of Massachusetts, United States and Constance, Germany are open for business. "Call" means a personal visit by a Sales Representative to a person legally permitted to prescribe prescription drugs in the Territory during which such Sales Representative Details no more than three (3) products as a Primary, Secondary and Tertiary Detail, one of them being the Product as Primary, Secondary or Tertiary Detail. "Canister" shall have the meaning set forth in Section 6.1.2.2. "cGCP" means the then current Good Clinical Practices required for the Clinical Development of Product as promulgated by the FDA under the Act, and the foreign equivalents in countries in which a Party is actively performing Clinical Development. "cGMP" means the then current Good Manufacturing Practices (i) in the country where such manufacture occurs and (ii) in the Territory where Sepracor is actively Commercializing Product, as promulgated by the FDA under the Act, and the foreign equivalents, as applicable. "Change of Control" with respect to Sepracor means (i) the acquisition (directly or indirectly, whether by merger, consolidation, purchase and sale, share exchange or otherwise) by any Third Party (other than an Affiliate or any trust or fund created under a profit-sharing or other benefit plan for employees of Sepracor) of a beneficial interest in the securities of Sepracor representing more than fifty percent (50%) of the combined voting power of Sepracor's then outstanding securities; or (ii) the transfer, sale or assignment of more than fifty percent (50%) of the assets of Sepracor to a Third Party other than an Affiliate of Sepracor; or (iii) any other transfer to a Third Party of the power to control Sepracor. "Ciclesonide" means the name of the Compound specified in the International Nonproprietary Name system for pharmaceutical substances maintained by the World Health Organization. "Claims" shall have the meaning set forth in Section 14.1.1. 5
"Clinical Development" means, with respect to a Product, the performance pursuant to a Clinical Development Plan of all pre-clinical, clinical and regulatory activities required to obtain Regulatory Approvals of such Product in the Territory in the Field (including, but not limited to, Phase IIIa clinical trials), as well as the performance of any Phase IIIb Studies, all in accordance with the applicable Clinical Development Plan. For clarity, Clinical Development shall not include Phase IV studies or related activities. "Clinical Development Plan" means the plan designed to achieve the Clinical Development of a specific Product or of a specific Improvement, as may be applicable, including, without limitation, (i) the budget and nature, number and schedule of Clinical Development activities, (ii) the Clinical Development responsibilities to be undertaken by each Party, (iii) a time schedule for the implementation of the Clinical Development activities concerned, (iv) the financial responsibilities to be assumed by each Party in relation to the Clinical Development activities assigned to it, (v) all such other issues as may reasonably have to be addressed under such Clinical Development Plan, as it may be agreed and amended by the Parties from time to time in accordance with this Agreement. "Clinical Development Costs" means for all studies or activities performed in accordance with a Clinical Development Plan for any Product in the Territory, the following: (a) All out-of-pocket costs and expenses incurred ( i. e., paid to Third Parties or accrued therefor) by the applicable Party or Parties or any of their permitted designees including, without limitation, the costs of clinical trial insurance, (b) the costs of internal personnel engaged in the performance of such studies or activities, which costs shall be determined based on FTE costing or such other basis as may be agreed by the Parties, if relevant, and (c) the costs of Clinical Supplies for such studies or activities, which costs shall include (i) the Clinical Supply Price, (ii) out-of-pocket costs and expenses incurred in purchasing comparator drug and in packaging comparator drug and/or such Product, as applicable, shipping Clinical Supplies to centers, or disposal of Clinical Supplies, and (iii) actual costs of packaging Clinical Samples and comparator drug, as applicable, if done by a Party. Notwithstanding the foregoing, Clinical Development Costs shall not include any costs or expenses incurred in connection with manufacturing process development and validation, manufacturing scale-up, stability testing, or quality assurance/quality control development. "Clinical Development Data" means all information and data resulting from Clinical Development activities, and specifically the results of related clinical studies. "Clinical Samples" means Product to be supplied by Nycomed in accordance with the terms of this Agreement for purposes of (i) Phase IV Studies pursuant to a Phase IV Development Plan or (ii) the Clinical Development pursuant to a Clinical Development Plan, as applicable, (iii) in both cases referred to in (i) and (ii) including placebo. "Clinical Supplies" means (a) Clinical Samples and (b) comparator drug, both for purposes of (i) Phase IV Studies pursuant to a Phase IV Development Plan or (ii) the Clinical Development pursuant to a Clinical Development Plan, as applicable, (iii) in both cases referred to in (i) and (ii) including placebo. "Clinical Supply Price" means (i) the supply price of Clinical Samples, as determined in accordance with Section 11.1.4, and (ii) the out- of-pocket costs of a Party of comparator drug. "Combination Product" means any product incorporating the Compound and one or more other compounds as active ingredients for use in the Field, whether Inhaled Combination Products or Nasal Combination Products. "Commercialization" means any and all activities directed to importing, marketing, promoting, advertising, distributing, storing, offering for sale, using and selling Product, including, without limitation, the distribution of Promotional Samples to targeted prescribers (to the extent applicable), in 6
the Territory and in the Field, and conducting Phase IV Studies of Product. When used as a verb, "Commercialize" means to engage in Commercialization. "Commercially Reasonable Efforts" mean efforts and resources used for a product of a market potential similar to the market potential of the applicable Product at a similar stage of its product life, taking into account the establishment of the product in the marketplace, the competitiveness of the marketplace, the proprietary position of the product, the regulatory status involved, the profitability of the product, in the case of each such factor as in existence and as reasonably projected to be in existence during the Term, as well as other relevant factors, and corresponding at least to the same type (quality and quantity) of channels, methods, investments and staff (including, without limitation, sales force), which are used by reputable pharmaceutical companies of similar size and scope as the Parties that are engaged in the pharmaceutical business in the marketing of their own products with a similar potential in the Territory. "Competing Product" shall have the meaning set forth in Section 17.2.1. "Compound" means the compound ciclesonide, including all its current and future formulations and delivery modes, dosages, isomers, titrates, hydrates, metabolites, polymorphs, prodrugs, epimers and salts. "Compound Specifications" means the specifications of Compound attached hereto as Schedule 1.1 . "Confidential Information" shall have the meaning set forth bin Section 16.1. "Confidentiality Agreement " means the confidentiality agreement entered by and between the Parties dated September 28, 2007. "Control" or "Controlled" means that a right is owned or possessed by a Party with the right to license or sublicense. "Contract Year" means (a) with respect to the first Contract Year, the period beginning on the Effective Date and ending on December 31, 2008 (the "First Contract Year" ), (b) with respect to each subsequent Contract Year other than the last Contract Year, the one (1) year period beginning on the day following the end of the First Contract Year and each succeeding one (1) year period thereafter, and (c) with respect to the last Contract Year, the period beginning on January 1 of such last Contract Year and ending on the date as of which this Agreement expires or is terminated (the "Last Contract Year" ). Each Contract Year (other than the First Contract Year or the Last Contract Year) shall be divided into four (4) "Contract Quarters" comprised of successive three (3) month periods. In the First Contract Year, the first Contract Quarter shall end on the first day following the Effective Date that is the last day of a Contract Quarter, and in the Last Contract Year, the last Contract Quarter shall end upon expiration or termination of the Agreement. "Core Nycomed Promotional Materials" shall have the meaning set forth in Section 9.2.1.1. "Core Sepracor Promotional Materials" shall have the meaning set forth in Section 9.2.1.1. "Costs of Nationalization" means, with respect to the importation of Product, Clinical Samples and Promotional Samples in the Territory, governmental duties and levies and non-governmental fees and charges accruing in the course of such importation including, without limitation, customs duties, costs of customs clearance, value added tax on importation of goods and handling charges. "Defect" means, with respect to Products, Clinical Samples or Promotional Samples and, if applicable, Compound, supplied by Nycomed or its appointee to Sepracor, the failure of the Product, Clinical Samples or Promotional Samples and, if applicable, Compound, as the case may be, to comply with the related Product Specifications and, if relevant, Compound Specifications, in all cases at the time of dispatch by Nycomed or its appointee, and in all cases as determined on the basis of the pertaining Methods of Analysis. 7
"Deficiency" shall have the meaning set forth in Section 10.4.1(v). "Deficient" shall have the meaning set forth in Section 10.4.1(v). "Deficient Product" shall have the meaning set forth in Section 10.4.1(v). "Detail" means that part of an in person, face-to-face sales Call during which a Sales Representative, who is trained and knowledgeable with respect to the applicable Product, including its label and package insert, and the use of the applicable promotional materials, makes a presentation of such Product to a medical professional with prescribing authority. Any activities performed by medical information scientists, market development specialists, managed care account directors and other personnel who are not conducting face-to-face sales Calls as provided in the preceding sentence shall not constitute a "Detail" . Further, E-details and presentations made at conventions or similar gatherings shall not constitute a "Detail" . Sample drops and reminder details shall not constitute a Detail. When used as a verb, "Detail" means to engage in Detailing activities. "Detail Cost" means the cost of each position of Detail for a Product for each Call, set each Contract Year by the Parties in accordance with the principles outlined in Schedule 1.2 . "Detailing Expenses" means, with respect to the relevant period, the Detail Cost spent by Sepracor for the aggregate Details for Product performed by Sepracor in such relevant period for Product that may be accounted for pursuant to Schedule 9.6.1.1 . "Development" means the scientific, medical, technical, and clinical, regulatory and other activities necessary to obtain Regulatory Approval to Commercialize a Product in the Territory and in the Field, including, without limitation, Technical Development, Clinical Development and the preparation, filing, prosecution and administration of INDs and NDAs, in accordance with a Development Plan that has been agreed pursuant to the terms and conditions of this Agreement. When used as a verb, "Develop" means to engage in Development. "Development Costs" means (i) Technical Development Costs and (ii) Clinical Development Costs, collectively. "Development Milestone" shall have the meaning set forth in Section 3.3.1. "Development Milestone Fee" shall have the meaning set forth in Section 3.3.1. "Development Plan" means, for a specific Product, the Technical Development Plan and the Clinical Development Plan, as required, and as coordinated in accordance with Article 4. "Device" means with respect to any Product the device used for administering the Compound to a patient. "Dispute" shall have the meaning set forth in Section 20.2. "Disputed Patent" means a Third Party Patent with respect to which an assertion is made by a Third Party, including its licensee, that the manufacture, use, offer to sell, sale in the Territory, or importation into the Territory, of Compound, of an Original Product or of an Additional Product, in each case in the Field, or the manufacturing of Compound or a Product at a manufacturing site within the European Union or any other agreed manufacturing site outside the European Union for Sepracor, infringes, induces the infringement of or contributorily infringes such Third Party's Patent. "Distributor" means a person engaging in the Commercialization of Product. "DOJ" shall have the meaning set forth in Section 22.1.2. "EC" or "EEC" means the European Community. "Effective Date" means the date of the execution of this Agreement by both Parties. 8
"EONIA" shall have the meaning set forth in Section 3.5.2. "EU" means the European Union. "Excess Increased Capacity" shall have the meaning set forth in Section 10.2.1.3. "Exclusive" shall mean that a right that is granted to or entered into with Sepracor with respect to the Territory hereunder must not be granted to, entered into with, or executed by any other Person (for clarity, including Nycomed or Affiliates of Nycomed). "Execution Payment" shall have the meaning set forth in Section 3.2. "Existing Regulatory Approvals" shall mean all Regulatory Approvals held or Controlled by Nycomed for the Original Products in the Territory as at the Effective Date, including all relevant approvals regarding price and reimbursement, if applicable. "Expert" shall have the meaning set forth in Section 20.4. "FDA" means the U.S. Food and Drug Administration and any successor agency thereto. "Field" means all prophylactic and therapeutic uses in humans in any formulation or dosage form for any and all indications including, without limitation, the Nasal Field and the Respiratory Field, subject to Section 2.1.1.5. "First Commercial Sale" shall mean the first sale or other disposition for value of a Product, in a final dosage form packaged for the ultimate consumer, to an independent Third Party following applicable Regulatory Approval, by Sepracor, its Affiliates or permitted sublicensees. "Force Majeure Event" shall have the meaning set forth in Section 21.4. "Formoterol Combination Product" means an inhaled Combination Product incorporating the Compound and the proprietary Sepracor compound R'R'-formoterol (INN), whether or not in combination with one or several other additional active ingredients, as active ingredients for use in the Field, Developed by Sepracor in accordance with the terms of this Agreement. "FTC" shall have the meaning set forth in Section 22.1.2. "FTE" means a full time equivalent person year, based upon a total of forty-seven weeks or 1,750 hours per year of scientific, technical or managerial work, on or directly related to Technical Development or Clinical Development. "FTE Cost" means the product of (i) the number of FTEs, which are documented using a reasonably reliable tracking system, actually used by Nycomed or Sepracor in performing activities in accordance with this Agreement and (ii) an FTE rate to be agreed by and between the Parties, if and when relevant. "Further Clinical Trials" shall have the meaning set forth in Section 19.1.3. "GAAP" means the "United States Generally Accepted Accounting Principles" as determined by the US Financial Accounting Standards Board (FASB). "Gross Sales" means, with respect to any applicable period and any Product, the gross amounts invoiced by Sepracor to unrelated Third Parties for sales of such Product. "HSR Act" shall have the meaning set forth in Section 22.1.1. "ICC" shall have the meaning set forth in Section 20.4.1. "Improved Product" means any Product in the Field, other than the Original Products and other than any Line Extension thereof, that incorporates an Improvement. 9
"Improvement" means any Know-How, including, without limitation, findings, discoveries, inventions, additions, modifications, formulations or changes, whether patentable or not, made and/or Controlled by either Party during the Term insofar as such Improvement relates to the Compound or the Products including, without limitation, Line Extensions, provided, however, "Improvement" shall not include findings, discoveries, inventions, etc. which are not derived from or based on the Compound or the Product. "Improvement Technology" means all Know-How that is developed and all inventions that are conceived and reduced to practice by one or more employees, agents or consultants of Nycomed and/or one or more employees, agents or consultants of Sepracor during the Term and in connection with the performance of the Technical Development, Clinical Development and the Commercialization of Product and Improvements thereof, together with any Patents that claim any such Know-How and/or inventions. "Increased Capacity" shall have the meaning set forth in Section 10.2.1.3. "IND" means an investigational new drug application submitted to the FDA in respect of a new drug. "Indemnified Party" shall have the meaning set forth in Section 14.1.3. "Indemnifying Party" shall have the meaning set forth in Section 14.1.3. "Infringement Claim" shall have the meaning set forth in Section 7.3.1. "Infringement Date" shall have the meaning set forth in Section 7.2.5.5.2. "Initiating Party" shall have the meaning set forth in Section 7.2.4.1. "Insolvency Event" shall have the meaning set forth in Section 18.2.2. "Installment" shall have the meaning set forth in Section 3.1. "Jointly-Owned Improvement Technology" shall have the meaning set forth in Section 7.1.1.1. "Jointly-Owned Patents" shall have the meaning set forth in Section 7.2.3. "Know-How" means all scientific, medical, technical, clinical, regulatory, marketing and other information relating to the Compound and/or the Product that is Controlled by a Party hereto, and that is in existence as of the Effective Date or coming into existence during the Term. "Latent Deficiency" means a Deficiency of Product that is not readily discoverable upon reasonable visual inspection of a shipment of Product. "Launch Date" means, with respect to the first presentation form of the Product, the date of the first commercial sale of such Product in the Territory. "Launch Period" shall have the meaning set forth in Section 10.3.2. "Launch Period Net Requirements Plan" shall have the meaning set forth in Section 10.3.2. "Launch Quantities" shall have the meaning set forth in Section 10.3.2. "Legal Requirements" means any and all acts of the US legislative bodies, and any and all regulations, instruments, rules, orders, codes of practice and guidance made under such acts having legal force in the Territory without further enactment and in each case being specifically applicable to or having specific application to the Products including, without limitation, the manner in which Nycomed manufactures and supplies Products, and in which Sepracor Develops and Commercializes Products. "Line Extensions" means [**]. 10
"Logistically Available Overall Capacities" shall have the meaning set forth in Section 10.2.1.2. "Logistically Available Sepracor Capacities" shall have the meaning set forth in Section 10.2.1.2. "Losses" shall have the meaning set forth in Section 14.1.1. "Major Market Country" means any of the countries France, Germany, Italy, Spain, the UK and Japan. "Manufacturing Cost" means the Manufacturing Cost as set forth in Schedule 1.4 . "Marketing Expenses" means, with respect to the relevant period, the A&P Expenses and the Detailing Expenses spent by Sepracor, collectively. "Marketing Plan" shall have the meaning set forth in Section 9.5.2.1. "MDI Product" means the metered dose inhaler product formerly clinically co-developed by Aventis and Nycomed pursuant to the terms and conditions of MDI Collaboration and Development Agreement by and between Aventis and Nycomed that has been terminated by Aventis effective October 17, 2007. "MDPI Product" means the metered dose dry powder inhaler combination product incorporating the Compound and formoterol formerly co-developed by Aventis and Nycomed pursuant to the terms and conditions of the MDPI Collaboration and Development Agreement by and between Aventis and Nycomed that has been terminated with effect from December 31, 2007 pursuant to a related MDPI Termination Agreement. "Methods of Analysis" shall mean the methods of analysis on the basis of which the compliance of Products, Clinical Samples, Promotional Samples and, if relevant, Compound with the related Product Specifications or, if relevant, Compound Specifications is determined and that shall form part of the Product Specifications and Compound Specifications. "Milestone Fees" mean Development Milestone Fees and Sales Milestone Fees, collectively. "Minimum Obligations" shall have the meaning set forth in Section 9.6. "Minimum Marketing Investment Obligations" shall have the meaning set forth in Section 9.6.1.1. "Minimum Sales Obligations" shall have the meaning the minimum sales obligations of Sepracor pursuant to Section 9.6.2.1. "Minutes" shall have the meaning set forth in Section 4.6.1. "Monthly Detailing Report" shall have the meaning set forth in Section 15.1.2. "Monthly Sales Report" shall have the meaning set forth in Section 15.1.3. "Nasal Combination Product" means any nasal combination product incorporating the Compound and one or more other compounds as active ingredients for use in the Nasal Field. "Nasal Field" means the indications of seasonal and perennial rhinitis, subject to Section 2.1.1.5. "NDA" means (a) a New Drug Application submitted to the FDA pursuant to 21 U.S.C. Section 355(b)(1), and/or Section 355(b)(2) or any successor application or procedure and (b) all supplements and amendments, including supplemental New Drug Applications that may be filed with respect to the foregoing (each, a " SNDA "). "Nebules Product" means a Product incorporating the Compound in the presentation form of an inhalation solution for use with nebulization in the Respiratory Field Developed by Sepracor in accordance with the terms of this Agreement. 11
"Net Profits" shall have the meaning set forth in Section 7.2.5.5.2. " Net Sales " means, with respect to any period, the Gross Sales of the Product, less the following deductions to the extent included in the gross invoiced sales price for the Product or otherwise directly paid or incurred by Sepracor, its permitted Affiliates and its permitted sublicensees with respect to the sale of the Product and not otherwise recoverable by the paying party: (a) trade, quantity, or cash discounts, chargebacks, returns, allowances or rebates to the extent (i) customary to the industry in the Territory or applied by Sepracor to its own proprietary products of a similar market potential and stage of lifecycle and (ii) actually allowed, given or accrued in the ordinary course of trading (including, but not limited to, cash, governmental and managed care rebates, hospital or other buying group chargebacks); (b) adjustments, rejections, recalls and returns to the extent made in the ordinary course of trading, to the extent the customer has been credited the original sales price or a portion thereof; (c) sales, excise, turnover, inventory, value-added, customs duties and similar taxes and governmental charges assessed on the sale of the Product; (d) the portion of any management fees paid during the relevant time period to group purchasing organizations that relate specifically to the sale of such Product to such organizations, (e) service fees paid or allowances conceded to wholesalers pursuant to Distribution Services Agreements or similar contracts by and between Sepracor and wholesalers for logistic and other services such as, without limitation, stock-keeping; (f) [**]; (g) [**]; (h) always provided that any deductions made outside the orderly course of business such as, without limitation, rebates granted by means of product bundling and selling Products in combination with other products of Sepracor (so-called package deals), shall not be considered; and (i) always provided that the items referred to in (a) to (e) above shall be determined pursuant to GAAP. Sales, transfers or dispositions of Product for charitable, promotional (including samples), pre-clinical, clinical, or regulatory purposes shall be excluded from Net Sales, as shall sales or transfers of Product among a Party and its Affiliates. Upon any sale or other disposal of any Product for any consideration other than an exclusively monetary consideration on bona fide arm's length terms then, for the purposes of calculating the Net Sales under this Agreement, such Product shall be deemed to be sold exclusively for money at the fair market price generally achieved for such Product in the Territory. Any discounts or allowances made by Sepracor outside the ordinary course of trading shall not be accounted for in determining Sepracor's Net Sales. For clarity and without limitation, this shall apply to direct and indirect discounts and allowances to customers regarding Product associated with product bundling and selling the Product in combination with other Sepracor products (so called "package deals"). Upon any sale or other disposal of any Product for any consideration outside the ordinary course of trading, for the purposes of calculating the Net Sales under this Agreement, Product shall be deemed to be sold exclusively for money at the fair market price generally achieved in bona fide arm's length trading for such Product in the Territory when such Product is sold alone, and not with or in combination with products other than Product. "Non-Exclusive" means that a right which is granted by a Party hereto (the " Licensor ") to the other Party (the " Licensee ") under this Agreement may, in addition to Licensor and any of its present and future licensees and their sub-licensees, which may be Affiliates of the Licensor or Third Parties, be granted to, entered into with, and exercised by Licensee and, to the extent that sub-licenses are permitted, its sub-licensees. "Non-Initiating Party" shall have the meaning set forth in Section 7.2.4.1. "Non-Owning Party" shall have the meaning set forth in Section 7.2.3. "Nycomed Additional Patents" means (i) the Patents listed as number 2.1 to 2.8 in Schedule 1.6 and (ii) any Patent Controlled by Nycomed at any time during the Term in the Territory and in the Field with a claim relating to the Compound and/or the Products or a component of either of them, or 12
a method of manufacture of any of the foregoing, or a method of treatment using any of the foregoing that is not determined by Nycomed to be a Nycomed Core Patent and that is not determined by the SC to be a Nycomed Ancillary Patent. "Nycomed Ancillary Patents" means (i) the Patents listed as number 3.1 to 3.10 in Schedule 1.6 and (ii) any Patent Controlled by Nycomed at any time during the Term in the Territory and in the Field with a claim relating to the Compound and/or the Products or a component of either of them, or a method of manufacture of any of the foregoing, or a method of treatment using any of the foregoing that is not a Nycomed Core Patent or a Nycomed Additional Patent. "Nycomed Company Trademark" means "Nycomed", used as a trademark, service mark, trade name or domain name and/or any accompanying design or logo of Nycomed or its Affiliates, which may or may not be registered or pending in the Territory. "Nycomed Core Patents" means (i) the Patents listed as number 1.1 to 1.8 in Schedule 1.6 and (ii) any Patent Controlled by Nycomed at any time during the Term in the Territory and in the Field with a claim relating to the Compound and/or the Products or a component of either of them, or a method of manufacture of any of the foregoing, or a method of treatment using any of the foregoing that Nycomed designates as a Nycomed Core Patent. "Nycomed DMF" or "Nycomed Drug Master File" means the drug master file for the Compound specifying at least the items set forth in Schedule 1.3 . "Nycomed Improvement Technology" means the Nycomed Know-How and the Nycomed Patents forming part of (i) Nycomed's Solely Owned Improvement Technology, (ii) Nycomed's rights and interest in any Jointly Owned Improvement Technology, and (iii) the Improvement Technology owned by Nycomed pursuant to Section 7.1.1.2. "Nycomed Indemnified Persons" shall have the meaning set forth in Section 14.1.2. "Nycomed Know-How" means the Know-How Controlled by Nycomed that Sepracor reasonably requires for the Development and Commercialization of the Products, in the Territory and in the Field. For clarity, (i) Nycomed Know-How shall not include any Know-How relating directly and specifically to the manufacture of the Compound or Product, unless and to the extent specifically permitted pursuant to this Agreement for the purposes of obtaining and maintaining Regulatory Approvals for Product in the Territory or manufacturing Compound and/or Product, as applicable, and ( ii ) Nycomed Know-How shall not include any 3M Know-How and Teijin Know-How that is not Controlled by Nycomed. "Nycomed Material Adverse Impact" shall have the meaning set forth in Section 18.3.2.2. "Nycomed Patents" means (i) the Nycomed Core Patents, (ii) the Nycomed Additional Patents and (iii) the Nycomed Ancillary Patents. For clarity, Nycomed Patents shall not include any Third Party Patents, whether or not listed in Schedule 1.6 , to the extent not Controlled by Nycomed. "Nycomed's Solely-Owned Improvement Technology" shall have the meaning set forth in Section 7.1.1.1. "Nycomed Technology" means the Nycomed Know-How and the Nycomed Patents and Nycomed Improvement Technology, collectively. "Officers" shall have the meaning set forth in Section 20.2. "Omnaris® AQ Product" means the Product in its presentation form as Omnaris® AQ nasal spray incorporating the Compound as sole active ingredient, as finished product in its presentation form as of the Effective Date ready for sale to the customer, as further described in Schedule 1.7 in the Nasal Field, subject to Section 2.1.1.5. 13
"Omnaris® HFA Product" means the Product in its presentation form as Omnaris® HFA nasal spray incorporating the Compound as sole active ingredient, as finished product in its presentation form as of the Effective Date ready for sale to the customer, as further described in Schedule 1.7 in the Nasal Field, subject to Section 2.1.1.5. "Original Products" means (i) the Omnaris® AQ Product, (ii) the Omnaris® HFA Product, (iii) the Alvesco® MDI Product, and (iv) subject to Sections 6.1, 6.2 and 6.3, any Line Extension thereof, and subject to Section 2.1.1.5. "Original Trademarks" means the trademark Omnaris® under which Sepracor has been granted a license to Commercialize the Omnaris® AQ Product and the Omnaris® HFA Product in the Territory as further described Schedule 1.8 , and the trademark Alvesco® under which Sepracor has been granted a license to Commercialize the Alvesco® MDI Product in the Territory as further described Schedule 1.8 . "Ownership Rights" shall mean any and all right, title and interest under patent, copyright, trade secret and trademark law, or any other intellectual property or other law, in and to any Know-How or Patent. "Owning Party" shall have the meaning set forth in Section 7.2.2. "Party" or "Parties" shall mean either Party as the context requires, or both Nycomed and Sepracor. "Patent Challenge Notice" shall have the meaning ser forth in Section 7.2.5.1. "Patent Deficiency" means a Deficiency of Product that may be readily discovered upon reasonable visual inspection of a shipment of Product. "Patents" shall mean all existing patents and patent applications and all patent applications hereafter filed, including, without limitation, any continuations, continuations-in-part, divisions, utility models, provisionals or substitute applications, any patent issued with respect to any such patent applications, any reissue, reexamination, renewal, amendment or extension (including any supplementary protection certificate and any patent term extension) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent, and all foreign counterparts of any of the foregoing. "Patent Right(s)" means any right, title or interest in a Patent. "PDE" or "Primary Detail Equivalent" means (i) one Primary Detail or (ii) two Secondary Details, or (iii) three Tertiary Details. "PDE Requirement" shall have the meaning set forth in Schedule 9.6.1.1. "Person" means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization or government or political subdivision thereof. "Phase IV Development" shall have the meaning set forth in Section 9.5.3.1. "Phase-Out Period" shall have the meaning set forth in Section 18.3.2.3. "Primary Detail" means a Detail that is in the first position and receives the most emphasis or focus during a Call ( i. e. , no other product receives more emphasis or focus during the Call). "Primary Detail Equivalent" or "PDE" means (i) one Primary Detail or (ii) two Secondary Details, or (iii) three Tertiary Details. "Product(s)" means (i) the Original Products and (ii) any Additional Products, collectively, (iii) in each case in the applicable Field and subject to Section 2.1.1.5. 14
"Product Specifications" means, as of the Effective Date, the Specifications of the Original Products as described in Schedule 1.7 and, after the Effective Date, as amended by mutual agreement of the Parties from time to time subject to the provisions hereof, together with the specifications of any Additional Products agreed to by the Parties, if and when relevant and as attached to the applicable Additional Product Supply Agreement. "Product Year" shall have the meaning set forth in Section 9.6.1.1. "Profit Multiplier" shall have the meaning set forth in Section 7.2.5.5.2. "Promotional Samples" means Product for distribution as samples in the Territory. "Proposal" shall have the meaning set forth in Section 20.4.2. "Quality Agreement" means the agreement on the pharmaceutical responsibilities of the Parties attached to this Agreement as Schedule 10.2.4 and any Supply Agreement, in each case in its respective current version as amended by mutual agreement of the Parties. "Quarterly A&P Expense Report" shall have the meaning set forth in Section 15.1.1. "Quarterly Payment Report" shall have the meaning set forth in Section 15.1.4. "Recall" means a recall of Product pursuant to Sections 12.6.1, 12.6.2 or 12.6.3. "Recall Expenses" means all out-of pocket costs and expenses associated with a Recall, including, without limitation, out-of-pocket costs of Third Parties, the out-of-pocket costs of notifying customers, the out-of-pocket costs of examining and re-packaging Product, if applicable, and the out-of-pocket costs associated with shipment of such recalled Product and the costs and expenses of the necessary replacement and destruction of such Product which are removed from the market. "Regulatory Agent" shall have the meaning set forth in Section 5.1.2.2. "Regulatory Approval" means approval and authorization granted by the FDA in the Territory for a specific disease indication or method of treatment with respect to the Products upon a relating IND, NDA or SNDA in order to enable the Development and Commercialization of Product in the Territory including, without limitation, any price and reimbursement and advertising approvals for Product and the Existing Regulatory Approvals. "Regulatory Authority" means, with respect to the Territory, the FDA or any equivalent or additional governmental or regulatory agencies in the Territory, and with respect to countries other than the Territory, the foreign equivalents of such governmental or regulatory agencies. "Regulatory Rights" shall have the meaning set forth in Section 19.1.2. "Rejection Notice" shall have the meaning set forth in Section 18.2.1.4. "Representatives" shall have the meaning set forth bin Section 16.2. "Remedy Period" shall have the meaning set forth in Section 18.2.1.2. "Remedy Plan" shall have the meaning set forth in Section 18.2.1.2. "Respiratory Combination Product" means any respiratory combination product incorporating the Compound and one or more other compounds as active ingredients for use in the Respiratory Field. "Respiratory Field" means the prevention, control and/or treatment of human respiratory diseases including, without limitation, asthma, and chronic obstructive pulmonary disease (COPD) and specifically excluding the Nasal Field and subject to Section 2.1.1.5. "Responsible Regulatory Party" shall have the meaning set forth in Section 5.1.1. 15
"Launch Period" shall have the meaning set forth in Section 10.3.2. "Rolling Monthly Net Requirements Plan" or "NRP" shall have the meaning set forth in Section 10.3.2. "Rough Cut Capacity Planning" shall have the meaning set forth in Section 10.3.1. "ROW" means all countries and territories outside the Territory. "Royalty" shall have the meaning set forth in Section 11.2.1. "Royalty Payment" shall have the meaning set forth in Section 11.2.1. "Sales Representative" means an appropriately trained individual who engages in Detailing and other promotional efforts with respect to the Products and who has been trained by a trainer of Sepracor. "Sales Force" means the Sales Representatives Detailing product in the Territory, collectively. "Sales Milestone(s)" shall have the meaning set forth in Section 3.4.1. "Sales Milestone Fee(s)" shall have the meaning set forth in Section 3.4.1. "SC" or "Steering Committee" means the committee established and conducted in accordance with the procedures set forth in Section 4.2. "SC Improved Product Resolution" shall have the meaning set forth in Section 6.2.1.3. "Secondary Detail" means a Detail that is in the second position and receives the second most emphasis or focus during a Call ( i.e. , only the Product or, if a Primary Detail is performed for a product other than the Product, such other product receives more emphasis or focus during the Call). "Sepracor Acquisition" shall have the meaning set forth in Section 18.3.2.1. "Sepracor Competing Product" shall have the meaning set forth in Section 17.2.2. "Sepracor Indemnified Persons" shall have the meaning set forth in Section 14.1.1. "Sepracor Know-How" means the Know-How Controlled by Sepracor related to the Compound and/or the Products including, without limitation, their formulation and their use. "Sepracor Merger Notice" shall have the meaning set forth in Section 18.3.2.3. "Sepracor Patent(s)" shall mean any and all Patents Controlled by Sepracor at any time during the Term which contain a claim relating to the Compound and/or the Products or a component of either of them, or a method of manufacture of any of the foregoing, or a method of treatment using any of the foregoing. The Sepracor Patents existing on the Effective Date in the Territory are identified on Schedule 1.5 , as it may be amended from time to time. For the avoidance of doubt, an inclusion with respect to any Sepracor Patent coming into existence after the Effective Date shall occur automatically upon the first filing of a provisional or non-provisional application in respect of such Sepracor Patent, and the subsequent amendment of Schedule 1.5 shall only serve declaratory purposes. "Sepracor's Solely-Owned Improvement Technology" shall have the meaning set forth in Section 7.1.1.1. "Sepracor Supply Agreement" shall have the meaning set forth in Section 6.2.1.4. "Sepracor Technology" means the Sepracor Know-How and the Sepracor Patents, collectively. "Shortfall Amount" shall have the meaning set forth in Section 9.6.1.2. "Shortfall Amount Payment Period" shall have the meaning set forth in Section 9.6.1.2. 16
"sNDA" means a supplemental NDA. "SOP" means at any time during the Term a Nycomed standard operating procedure in its then current version. "Special Stability Testing" shall have the meaning set forth in Section 10.3.6. "Special Stability Testing Report" shall have the meaning set forth in Section 10.3.6. "Stability Testing" shall have the meaning set forth in Section 10.3.6. "Subcommittee" shall have the meaning set forth in Section 4.2.3. "Substance Patent" means US Patent 5,482,934 listed as number 1.1 in Schedule 1.6 . "Supply Agreement" means any supply agreement to be entered pursuant to Article 10 and any future Additional Product Supply Agreement by and between Nycomed and Sepracor covering the supply by Nycomed or its permitted appointee to Sepracor of any Product (whether semi-finished or finished) or components thereof regarding Product other than the Original Products and the Alvesco® MDI Product, to be attached hereto in accordance with Article 6 and Article 10, in each case in its respective current version as amended by mutual agreement of the Parties. "Supply Price" shall have the meaning set forth in Section 11.1. "Technical Development" means the process development activities, other than clinical studies, which directly relate to (i) the technical development of the Omnaris® HFA Product and the Alvesco® MDI Product, (ii) the technical development of any Line Extension of an Original Product, (iii) the technical development of any Improved Product including, without limitation, development of new formulations, modifications to any Device and any modifications required for obtaining and maintaining Regulatory Approvals for such Product, and in all cases referred to in (i) to (iii) expressly excluding the technical development of a technology incorporated in the Omnaris® HFA Product, the Alvesco® MDI Product, any Line Extension or Improved Product that is Controlled by a Third Party, without such Third Party's express written consent. "Technical Development Costs" means, for any Technical Development of a Product, the documented out-of-pocket costs and expenses incurred pursuant to a Development Plan and actually paid to Third Parties and/or the Cost of FTEs to the extent dedicated to such Technical Development. For the purposes of clarity, Technical Development Costs do not include capital expenditures. "Technical Development Plan" means a plan designed to achieve the Technical Development of a specific Product, including, without limitation, (i) the budget and nature, number and schedule of Technical Development activities, (ii) the Technical Development responsibilities to be undertaken by the relevant Party, (iii) a time schedule for the implementation of the Technical Development activities concerned, (iv) the financial responsibilities to be assumed by the relevant Party or Parties in relation to the Technical Development activities as may be assigned to a Party, (v) all such other issues as may reasonably have to be addressed under such Technical Development Plan, as it may be agreed and amended by mutual agreement of the Parties from time to time in accordance with this Agreement. "Teijin" means Teijin Limited, 6-7 Minami-hommachi 1-chome, Chuo-Ku, Osaka 541-8587, Japan. "Teijin Know-How" means the Know-How owned by Teijin relating to the Development of the Omnaris® AQ Product. "Teijin Patents" mean the Patents referred to as number 1.3 and number 1.4 in Schedule 1.6 . "Term" shall have the meaning set forth in Section 18.1. "Territory" or "US" means the United States of America, its territories and possessions, including, without limitation, the Commonwealth of Puerto Rico. 17
"Tertiary Detail" means a Detail that is in the third position and receives the third most emphasis or focus during a Call. "Third Party" shall mean any Person other than the Parties and their Affiliates. "Third Party Patent Counsel" shall have the meaning set forth in Section 7.2.5.5.1(i). "Third Party Supply Agreement" shall have the meaning set forth in Section 6.2.1.4. "Third Party Technology" means the patents and know-how controlled by a Third Party regarding a technology that may be required for the Development and Commercialization of an Additional Product in accordance with this Agreement. "3M" means 3M Health Care Limited, a British company, having an address of 1 Morley Street, Loughborough, Leicestershire, LE11 1EP, England. "3M Development Agreement" means the development agreement directed to the development of the MDI Product entered into by and between 3M and Nycomed on [**], attached hereto as Schedule 1.9 (in redacted form). "3M Drug Master Files" shall have the meaning set forth in Section 5.2.2.2. [**] "3M Know-How" means the Know-How owned by 3M relating to the Development of the Alvesco® MDI Product and of the Omnaris® HFA Product. "3M Patents" mean the Ownership Rights of 3M (jointly with Nycomed) in the Patents referred to as number 1.7 and number 1.8 in Schedule 1.6 . "3M Supply Agreement" means the purchase agreement entered into by and between Nycomed and 3M on [**] attached hereto as Schedule 1.10 (in redacted form). "3M Technology" means the 3M Know-How and the 3M Patents, collectively. "To the best of Nycomed's knowledge" shall have the meaning set forth in Section 13.1.1. "To the best of Sepracor's knowledge" shall have the meaning set forth in Section 13.2.6. "Trademark" shall mean (i) the Original Trademarks, (ii) any additional trademark owned by Nycomed and selected and assigned pursuant to Section 8.3.2 to an Additional Product, and (iii) any substitute Trademark selected for any of the foregoing pursuant to Section 8.8.4(c), collectively. "Ultrahaler™ Technology" means Aventis' proprietary dry powder inhaler technology incorporated in the MDPI Product. "Unit" shall mean, for each presentation form, dosage and package size of Product in the Territory (including Promotional Samples), one (1) package of the finished Product for resale to the customer or, in case of Promotional Samples, for distribution as sample, and, in case of Clinical Supplies, for each presentation form, dosage and package size of Product, placebo or comparator drug, one (1) package of the finished Product, placebo or comparator drug for use in clinical trials. "Valois" means Valois SAS, a corporation organized under the laws of France, having its principal place of business at Le Prieuré, 27110, Le Neubourg, France. "Valois Actuator" shall have the meaning set forth in Section 6.1.2.2. "Valois Dose Counter" shall have the meaning set forth in Section 6.1.2.2. "Valois Development and Pilot Scale Supply Agreement" shall have the meaning set forth in Section 6.1.2.2. 18
"Valid Claim" means a claim of an issued Patent which claim has not been held invalid or unenforceable by final decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which is not admitted to be invalid or unenforceable through reissue, disclaimer or otherwise. "Withdrawal Notice" shall have the meaning set forth in Section 12.7.1. Article 2 2.1 Grant of Rights. 2.1.1 Grant of Rights by Nycomed to Sepracor. Subject to all terms and conditions of this Agreement, Nycomed hereby grants to Sepracor, and Sepracor accepts, for the Term, the following rights in the Territory and in the applicable Field: 2.1.1.1 Appointment as Exclusive Distributor for Original Products. Nycomed hereby appoints Sepracor, and Sepracor hereby accepts such appointment, as the Exclusive Distributor of the Original Products in the Territory, with the sole and exclusive right, exclusive even as to Nycomed, to Commercialize these Products in the Territory, with the limited right pursuant to Section 2.2 to sublicense and subcontract; 2.1.1.2 Grant of Rights under Nycomed Technology to Develop and Commercialize Products. An Exclusive right under the Nycomed Technology in the Territory to Develop and Commercialize Products in the Field; and 2.1.1.2.1 Grant of Rights under the Teijin Patents to Develop and Commercialize Products. Subject to the payments to be made pursuant to this Agreement, a right and irrevocable during the Term, fully paid up sublicense under the Teijin Patents to Develop and Commercialize Products in the Field. 2.1.1.2.2 Grant of Rights under the 3M Patents to Develop and Commercialize Products. A right and irrevocable during the Term, fully paid up non-exclusive license under the 3M Patents to Develop and Commercialize Products in the Field. 2.1.1.3 Grant of Rights under Nycomed Trademarks to Commercialize Product. Subject to Article 8, Sections 9.2 and 9.3, an Exclusive right and license under the Nycomed Trademarks, to Commercialize Products in the Territory and in the Field exclusively under such Trademarks, as assigned by Nycomed through the SC to each Product pursuant to Section 8.1 and Section 8.2 (and not as non-branded generic), with the limited right pursuant to Section 2.2, to sublicense and subcontract. 2.1.1.4 Commercialization of Non-Branded Rx Generic. The Parties agree that reasonably prior to the earlier to occur of (a) [**], (b) [**], and (c) [**] they shall, in good faith, [**] Commercialization of a non-branded prescription generic version of the affected Product, such that a non-branded prescription genericversion of the applicable Product [**] (i) always provided, however, that each Party may, [**], and (ii) always [**] notwithstanding. 2.1.1.5 Commercialization of OTC Products. The Parties agree that reasonably prior to [**], they shall, in good faith [**] Commercialization of an OTC version of the relevant Product or Products. Only if considered [**] by both Parties, shall they agree in good faith on the terms and conditions for the [**], subject to [**]. 2.1.1.6 Third Party Technologies. 2.1.1.6.1 Teijin Technology and 3M Technology. Sepracor acknowledges that Sepracor's rights to any 3M Technology and Teijin Technology forming part of the Nycomed Technology are only provided to the extent Controlled by Nycomed. 19
2.1.1.6.2 Aventis Ultrahaler™ Technology. Sepracor acknowledges that Nycomed has no access rights to and does not Control Aventis' proprietary Ultrahaler™ Technology incorporated in the MDPI Product formerly co-developed by Aventis and Nycomed pursuant to the terms and conditions of the MDPI Collaboration and Development Agreement by and between Aventis and Nycomed, but may, until December 31, 2009, request Aventis to negotiate in good faith a license to such Ultrahaler™ Technology. 2.1.1.7 Access Rights of Sepracor to Nycomed Improvement Technology Covering Additional Products. 2.1.1.7.1 Access Rights. Subject to all terms and conditions of this Agreement, without limitation, Sepracor's rights pursuant to Section 7.1.1.2, Nycomed hereby grants to Sepracor, and Sepracor accepts, for the Term an Exclusive right to practice the Nycomed Improvement Technology that is incorporated in any Additional Products in the Territory to Develop and Commercialize Products in the Field. 2.1.1.7.2 Consideration for License Grant in Case of Improvements Not Co-Developed by Sepracor. If Sepracor should Develop or Commercialize in the Territory an Additional Product incorporating any Nycomed Improvement Technology without Sepracor having co-financed the related Technical or Clinical Development Costs in accordance with an agreed Development Plan, then Section 2.1.1.7.1 shall apply subject to the provisos: [**] shall compensate [**] for a reasonable part of [**] related technical and clinical development costs. The basis of such allocation shall be a good faith estimation of [**], in each case within the Field. However and as a general principle, (i) all [**] shall be borne by [**], (ii) [**] shall bear [**] and (iii) there shall be a reasonable adjustment of such [**] if there should be any change regarding the [**], such adjustment to be made [**]. In the event that the Parties should be [**], such adjustment shall be finally determined by means of [**]. 2.1.2 Grant of Rights by Sepracor to Nycomed. Subject to all terms and conditions of this Agreement, Sepracor hereby grants to Nycomed, and Nycomed accepts, for the Term, the following rights and licenses: 2.1.2.1 Grant of Rights under Sepracor Technology to Develop Product. A Non-Exclusive, non-royalty bearing right and license under the Sepracor Technology to perform Product Development in the Field in the ROW only; 2.1.2.2 Grant of Rights under Sepracor Technology to Manufacture and Import Product into the Territory. An Exclusive, non-royalty bearing right and license under the applicable Sepracor Technology, to manufacture and import into the Territory Sepracor's requirements of Product. 2.2 Appointment of Sublicensees and Subcontractors. 2.2.1 Sublicensing and Subcontracting by Sepracor. 2.2.1.1 Sublicensing. Subject to Section 2.2.1.2, Sepracor shall not sublicense its rights and obligations under this Agreement, whether in whole or in part, to a Third Party, without the prior written consent of Nycomed, such consent to be given or withheld within Nycomed's sole discretion. 2.2.1.2 Permitted Subcontracting by Sepracor. Sepracor may subcontract activities to be performed by Sepracor according to this Agreement as follows: Sepracor may subcontract regulatory, Development and Commercialization work relating to the Products, however, in all cases: (i) Sepracor shall maintain close oversight of and direct responsibility for such work; (ii) Sepracor shall consider any reasonable suggestions from the SC with regard to 20
vendor selection and (iii) Sepracor shall, if requested in writing by Nycomed, inform Nycomed of any such subcontractors and the activities that have been subcontracted. 2.2.2 Sublicensing and Subcontracting by Nycomed. 2.2.2.1 General Principle. Except as expressly restricted hereinafter, Nycomed may sublicense or subcontract its rights and obligations under this Agreement, whether to an Affiliate of Nycomed or to a Third Party, without the prior written consent of Sepracor. Notwithstanding the foregoing, Nycomed may sublicense or subcontract any of its rights and obligations under this Agreement that relate to (i) Sepracor Technology or (ii) Know-How owned or developed by Sepracor not relating to the Compound or a Product, in each case whether to an Affiliate of Nycomed or to a Third Party, only with the prior written consent to Sepracor, such consent not to be unreasonably withheld or delayed (for example, due to a legal obligation relating to Sepracor Technology). 2.2.2.2 Appointment of Subcontractors for Product Manufacturing. Nycomed may subcontract the manufacturing of the Original Products and, to the extent applicable, Products other than the Original Products and Compound or components thereof to Affiliates or Third Parties. Any change of the initial manufacturers or subcontractors appointed for the manufacturing of Product shall be subject to the change control provisions of the applicable Quality Agreement. Until such Quality Agreement or Supply Agreements and such change control procedures are agreed, Nycomed may only appoint subcontractors for the manufacturing of Product with the prior written consent of Sepracor, such consent not to be unreasonably withheld or delayed. 2.2.3 Vicarious Liability. Unless provided otherwise herein, a Party sublicensing, subcontracting or designating Development, manufacturing or Commercialization activities to an Affiliate, Third Party or permitted designee in accordance with the provisions of this Article 2 shall be liable for the performance of any responsibilities so delegated as if they had been performed by the delegating Party. 2.3 Access Rights of Nycomed to Sepracor Technology. 2.3.1 License Grant. Nycomed's rights pursuant to Sections 2.3.4 (Supply of Product), Section 5.7 (Right to Access and Reference Use of Regulatory Approvals) and 7.1.1.2 (Ownership to Certain Sepracor Improvements) notwithstanding, during the Term, Sepracor grants Nycomed a world-wide, unrestricted (except, during the Term, in the Field and in the Territory, restricted by and subject to the terms of this Agreement), perpetual, Non-Exclusive and irrevocable license (including the right to sub-license) to practice the Sepracor Technology for the purposes of developing, having developed, making, having made, using and selling Original Products and Additional Products, whether alone or in combination with one or several other active ingredients. Such license shall be subject to (i) a reasonable compensation of Development Costs incurred by Sepracor pursuant to Section 2.3.2, and (ii) royalties pursuant to Section 2.3.3. 2.3.2 Development Cost Sharing. If Nycomed exercises its access rights pursuant to Section 2.3.1, the Parties shall agree in good faith on a reasonable compensation of Sepracor for the technical and clinical development costs incurred by Sepracor for the relevant Additional Product always provided, however, that Nycomed shall not owe Sepracor any such contribution for technical and clinical development costs incurred by Sepracor for the [**]. The basis of such determination of the share of Sepracor's technical and clinical development costs to be borne by [**] shall be a good faith estimation of [**], in relation to [**]. There shall be a reasonable adjustment of such development cost compensation payment if there should be any change regarding the relevant countries of the ROW in which Nycomed commercializes the applicable Additional Product and the related sales potential, compared with the sales potential of the relevant Additional Product in the Territory, such adjustment to be made [**]. In the event that the Parties should be unable to determine any such development cost compensation payment or permitted adjustment thereof within a period of three (3) months from the date of receipt by a Party of the 21
written request of the other Party to make any such adjustment, such adjustment shall be finally determined by means of Third Party Expert Determination in accordance with Section 20.4. 2.3.3 Royalties. 2.3.3.1 Formoterol Combination Product. In the event that Sepracor should Develop a Formoterol Combination Product incorporating Sepracor's proprietary Compound RR-Formoterol covered by any Patent Controlled by Sepracor, then Nycomed shall make payment to Sepracor, for the duration of such Sepracor Patent in the relevant countries, of a royalty on its Net Sales of such Formoterol Combination Product, which corresponds in respect of the amount and the applicable thresholds to the royalty rates specified in Article 11.2 hereof as of the Effective Date. 2.3.3.2 Other Additional Products Incorporating Sepracor Technology. Section 2.3.3.1 shall apply accordingly to any other Additional Product, other than the Nebules Product, Developed by Sepracor that incorporates any Patent Controlled by Sepracor always provided, however, that the Parties shall negotiate the applicable royalty rate at an appropriate time in consideration of all relevant factors including, without limitation, the contribution of the relevant Sepracor Patents to the overall commercial value of any such Additional Product, and always further provided that Nycomed shall owe no royalties for any Original Product or the Nebules Product. 2.3.4 Supply of Product by Sepracor or its Appointee. In the event that Nycomed should elect to avail itself of its rights pursuant to Section 2.3.1 with regard to any Additional Product and the Parties have agreed pursuant to Section 6.2.1.4 that any such Additional Product shall be manufactured by Sepracor or its appointee, then, with respect to the financial and other terms and conditions of any such supplies of any such Additional or Original Product, as the case may be, Section 10.1.3 shall apply. 2.3.5 Exercise of Rights. Nycomed may elect to exercise its rights pursuant to this Section 2.3 during the Term by giving Sepracor related written notice. 2.4 Generic Competition. In the event that there is a generic version of any Product that is sold in the Territory, (i) the Parties, acting through the SC, shall agree on reasonable amendments to the terms under which the Products affected by the generic competition will be sold, including all changes of assumptions under which the Parties will operate during the remaining term of the Agreement, (ii) the Royalties will be discussed by the Parties acting through the SC, (iii) clause (g) of the definition of Net Sales shall be disregarded and no longer applicable, and (iv) the Parties shall agree on all other aspects relating to the sale of such Product and the continued viability of the Agreement with respect to such Product in light of the generic competition. Article 3 3.1 Consideration for Grant of Rights. As part of the consideration for the grant of rights by Nycomed to Sepracor under this Agreement, Sepracor agrees to make payment to Nycomed of an Execution Payment, Development Milestone Fee, and Sales Milestone Fees (individually, each an " Installment " and collectively, the " Installments "), in accordance with this Article 3. 3.2 Execution Payment. 3.2.1 General. Sepracor agrees to make payment to Nycomed of an execution payment totaling US dollars 150 million ($150,000,000) (the "Execution Payment" ). This Execution Payment is considered to be a lump sum reimbursement of Nycomed's development costs attributable to the development of the Omnaris® AQ Product and the Alvesco® MDI Product for the Territory that has been accomplished by Nycomed prior to the Effective Date. 22
3.2.2 Due Date of Execution Payment. The Execution Payment shall be due upon the Effective Date, and Sepracor shall make payment of such Execution Payment in accordance with Section 3.5 no later than thirty (30) days after the Effective Date. 3.3 Development Milestone Fee. 3.3.1 General. Further, upon the achievement of the milestone referred to in Section 3.3.2, Sepracor agrees to make payment to Nycomed of the following related milestone fee (a " Development Milestone " and a pertaining " Development Milestone Fee "): 3.3.2 Development Milestone and Fee. 3.3.2.1 Alvesco® MDI Product Development Milestone Fee. Upon the [**] which contains a [**], Sepracor shall make payment to Nycomed of a one-time Development Milestone Fee of US dollars [**] ($[**]). 3.3.3 Due Date of Development Milestone Fee. The Development Milestone Fee referred to in Sections 3.3.1 and 3.3.2 above shall become due upon the date as of which the Development Milestone has been accomplished, and Sepracor shall make payment of the Development Milestone Fee in accordance with Section 3.5 within 10 Business Days from the date as of which the Development Milestone has been so accomplished. 3.4 Sales Milestone Fees. 3.4.1 General. Further, upon the achievement of the milestones referred to in Sections 3.4.2 to 3.4.6, Sepracor agrees to make payment to Nycomed of the related milestone fees set out below (each, a " Sales Milestone " and a pertaining " Sales Milestone Fee "). Thereby and for the avoidance of doubt, it is understood that any Sales Milestone that has been achieved and triggered a Sales Milestone Fee in any given Contract Year shall not trigger another corresponding Sales Milestone Fee if such Sales Milestone is again achieved in any following Contract Year. Also and for clarity, if Sepracor should achieve, in any Contract Year and in each case for the first time, more than one Sales Milestone, all related Milestone Fees shall become due and payable. 3.4.2 First Sales Threshold. Upon the first time the Net Sales of the Products in the Territory equal or exceed, in any calendar year, [**] US Dollars (US$[**]) , Sepracor shall make payment to Nycomed of a Sales Milestone Fee of US dollars [**] ($[**]). 3.4.3 Second Sales Threshold. Upon the first time the Net Sales of the Products in the Territory equal or exceed, in any calendar year, [**] US Dollars (US$[**]) , Sepracor shall make payment to Nycomed of a Sales Milestone Fee of US dollars [**] ($[**]). 3.4.4 Third Sales Threshold. Upon the first time the Net Sales of the Products in the Territory equal or exceed, in any calendar year, [**] US Dollars (US$[**]) , Sepracor shall make payment to Nycomed of a Sales Milestone Fee of US dollars [**] ($[**]). 3.4.5 Fourth Sales Threshold. Upon the first time the Net Sales of the Products in the Territory equal or exceed, in any calendar year, [**] US Dollars (US$[**]) , Sepracor shall make payment to Nycomed of a Sales Milestone Fee of US dollars [**] ($[**]). 23
3.4.6 Fifth Sales Threshold. Upon the first time the Net Sales of the Products in the Territory equal or exceed, in any calendar year, [**] US Dollars (US$[**]) , Sepracor shall make payment to Nycomed of a Sales Milestone Fee of US dollars [**] ($[**]). 3.4.7 Due Date of Sales Milestone Fees. The Sales Milestone Fees referred to in Sections 3.4.1 to .4.6 above shall become due upon the end of the Contract Quarter within which the applicable Sales Milestone has been reached, and Sepracor shall make payment of any such Sales Milestone Fee in accordance with Section 3.5 within two (2) weeks from the end of the relevant Contract Quarter. 3.5 Payment of Execution Payment, Development Milestone Fees and Sales Milestone Fees. 3.5.1 Period of Payment. Payment of the Execution Payment, the Development Milestone Fee, and each Sales Milestone Fee shall be made within the periods referred to in Sections 3.2.2, 3..3.3 and 3.4.7. 3.5.2 Payment. Sepracor shall make payment of each Installment by means of bank wire transfer in immediately available funds to the following bank account of Nycomed, whereby each Party shall bear bank charges arising on its side associated with any such transfer: Credit Institute: [**] In the event that Sepracor should fail to make timely payment of any Installment pursuant to this Agreement, interest shall accrue at a rate of interest of [**] percent ([**]%) above the monthly average rate(s) of the Euro OverNight Index Average ( "EONIA" ) applying to the specific days of each of the months during which a default of payment occurs, as calculated by the European Central Bank and as quoted in the website of the Deutsche Bundesbank currently located at http://www.bundesbank.de/ sub " Monatsbericht " (or such other source as may be mutually agreed by the Parties) from time to time, effective for the applicable days of the period of default. 3.6 No Refund of Development of Execution Payment Milestone Fees, Development Milestone Fee, and Sales Milestone Fees. It is expressly understood that the Execution Payment, the Development Milestone Fee and each Sales Milestone Fee paid by Sepracor shall neither be refundable nor refunded for any reason whatsoever. Article 4 4.1 General. During the Term, the Development and Commercialization of the Product in the Territory shall be managed, coordinated and overseen by a committee and in the manner described below. All decisions of the Parties shall be made on the basis of the best interest of the Development and Commercialization of the Product in the Territory and in the Field, thereby reasonably considering the effects in the ROW, and Sepracor shall be obligated to use Commercially Reasonable Efforts to maximize profits and optimize sales of the Product in the Territory during the Term. The Parties anticipate that the committee shall perform the functions described below; however, the functions and operations of the committee may be altered from time to time during the Term by the mutual agreement of the Parties. 24
4.2 Establishment and Responsibilities of Steering Committee and Subcommittees. 4.2.1 Establishment. Promptly following the Effective Date, the Parties shall establish a Steering Committee (the " SC ") that shall consist 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. Initially, the SC shall consist of six (6) individuals; three (3) of whom shall be nominated by Sepracor; and three (3) of whom shall be nominated by Nycomed. Any member of the SC may designate a substitute to attend and perform the functions of that member at any meeting of the SC. 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 SC. Each Party shall, on an alternate Contract Yearly basis designate the chairperson, and the other Party shall designate the secretary of the SC. The initial chairperson shall be designated by Sepracor; and the initial secretary shall be designated by Nycomed. 4.2.2 Responsibilities of SC. The SC shall perform the following responsibilities always provided, however, that the SC or any Subcommittee shall in no event have any power to modify or amend this Agreement:
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4.2.3 Subcommittees. From time to time, the JSC may establish one or more Subcommittees to oversee particular projects or activities within the scope of authority of the SC, as it deems necessary or advisable (each, a "Subcommittee" ). Each Subcommittee shall consist of such equal number of representatives of each Party as the SC determines is appropriate from time to time. Each Subcommittee shall meet with such frequency as the SC shall determine. All decisions of each Subcommittee shall be made by unanimous vote or written consent, with the representatives of each Sepracor and Nycomed, in each case collectively, having 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 matter shall be referred to the SC, which shall resolve such matter in accordance with Section 4.3. The Parties envisage that the SC will establish Subcommittees shortly after the Effective Date to oversee each of the following areas: (i) regulatory matters; (ii) transition activities; (iii) 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 SC. Each Party shall, on an alternate Contract Yearly basis designate the chairperson of each relevant Subcommittee, and the other Party shall designate the secretary of each relevant Subcommittee. The initial chairperson of each relevant Subcommittee shall be designated by Sepracor; and the initial secretary shall be designated by Nycomed. 4.3 General Principles Applying to the SC and Subcommittees. 4.3.1 Meetings. All SC and Subcommittee meetings shall be as often as the members may determine, but in any event SC 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 SC meeting per year shall be held in person and the location of such in person meeting shall alternate between Sepracor's and Nycomed's offices. Either Party may convene a special meeting of the SC by providing good reason and at least ten (10) Business Days written notice to the other Party specifying the date, time, place and proposed agenda. 4.3.2 Quorum. A quorum for SC or Subcommittee meetings shall be four (4) members, with at least two (2) members from each Party. Any decision made by the SC or a Subcommittee without a 26
quorum shall be null and void, unless subsequently ratified by all of the members of the SC or Subcommittee concerned. 4.3.3 Decision-Making. Each Party shall have one vote on the SC and each Subcommittee on all matters that are within the responsibility of the SC and the applicable Subcommittee. Section 4.3.2 notwithstanding, both Parties must vote in the affirmative to allow the SC or a Subcommittee to take any action that requires the vote of the SC or the relevant Subcommittee. The members of the SC and each Subcommittee shall be obliged to use Commercially Reasonable Efforts to reach consensus on any disputes concerning the matters within their roles and functions. Resolutions of the SC and each Subcommittee shall be in accordance with this Agreement. Neither the SC nor any Subcommittee shall not have the authority to alter or amend the terms of this Agreement. 4.4 Right to Make Final Determination 4.4.1 Either Party's Right to Make Final Determination in Certain Cases. If any matter in dispute is not resolved within sixty (60) days by the SC, then such matters in dispute shall, (i) always subject to Section 4.4.2 and (ii) always provided that the decision is made in good faith, that there is a reasonable basis for the decision, that the decision is not inconsistent with the Regulatory Approvals for the Product (if applicable), and that the decision is otherwise consistent with the terms of this Agreement, be finally determined as follows: 4.4.1.1 Right of Sepracor to Make Final Determination. Sepracor may, always subject to Sections 4.4.1 and 4.4.2, and always subject to Nycomed's rights pursuant to Section 4.4.1.2(iv), make the final determination in the following matters:
4.4.1.2 Right of Nycomed to Make Final Determination. Nycomed may, always subject to Sections 4.4.1 and 4.4.2, and always subject to Sepracor's rights pursuant to Section 4.4.1.1, make the final determination in the following matters:
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4.4.2 Joint Approval Required. Neither Party may determine any of the following matters that shall always require the approval of both Parties: 4.4.2.1 General Matters. The following general matters shall always require the approval of both Parties:
4.4.2.2 Specific Matters. The following specific matters shall, if and to the extent not set out in this Agreement, always require the approval of both Parties:
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4.4.2.3 Disputes Regarding Interpretation or Alleged Breach. Notwithstanding this Section 4.4.2, any dispute regarding the interpretation of this Agreement or any alleged breach of this Agreement will be resolved in accordance with the terms of Section 20.2 and 20.3, and without limiting either Party's rights pursuant to Section 20.5. 4.4.3 Decision Deemed to be Made by SC. For all purposes under this Agreement, any decision made pursuant to Section 4.4 shall be deemed to be the decision of the SC. 4.5 Dispute Resolution. 4.5.1 General Principle. In case the SC is unable to come to a decision within sixty (60) days of an issue being presented to it and neither Party is entitled to make the final determination pursuant to Section 4.4.1, the matter shall be referred to further dispute resolution pursuant to Section 20.2. 4.5.2 Treatment of Disputed Matter Pending Dispute Resolution. Pending dispute resolution pursuant to Sections 20.2 and 20.3, the relevant matter shall be tabled, and, subject to Section 20.5, no action regarding the relevant matter shall be taken. 4.6 Minutes. 4.6.1 Minutes of Meetings of SC. The SC shall summarize its discussions and resolutions in minutes that shall be signed by duly authorized representatives of each Party (in each case and collectively, the " Minutes " of SC discussions and resolutions). Such Minutes for each of the SC meetings shall provide a description in reasonable detail of the discussions had at the meeting and a list of any actions, decisions or determinations approved by the SC, and 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 SC; provided , that if the Parties cannot agree as to the content of the Minutes, such Minutes will be finalized to reflect such disagreement. Final minutes of each meeting shall be distributed to the members of the SC by the chairperson. All minutes of meetings shall be kept in the English language. 4.6.2 Minutes of Meetings of Subcommittees. Each relevant Subcommittee shall summarize its discussions and resolutions in Minutes, whereby Section 4.6.1 shall apply accordingly. 4.7 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 SC or any Subcommittee. 4.8 Alliance Managers. Promptly after the Effective Date, each Party shall appoint an individual to act as the alliance manager for such Party (each an " Alliance Manager " of a Party). Each Alliance Manager who is not otherwise a member of the SC shall thereafter be permitted to attend meetings of 29
the SC. 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 SC 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. Article 5 5.1 Responsibility for Regulatory Issues. 5.1.1 General. The Parties shall designate a Party that shall, always subject to Section 5.2.2, Section 12.4, Schedule 12.4 and Section 4.4, be exclusively responsible for managing, overseeing, monitoring and coordinating all regulatory actions with respect to the Original Product and/or Additional Products in the Territory, including, without limitation, for obtaining and maintaining Regulatory Approvals for the Products in the Territory (the " Responsible Regulatory Party "). 5.1.2 Responsible Regulatory Party for Original Products. 5.1.2.1 General Principle. Unless otherwise agreed or required by the Legal Requirements, Nycomed shall serve as the Responsible Regulatory Party for the Original Products. 5.1.2.2 Sepracor's Role as Regulatory Agent. Nycomed exclusively appoints Sepracor to be its agent for purposes of effectuating its role as the Responsible Regulatory Party (Sepracor being the " Regulatory Agent "). Sepracor shall (i) use Commercially Reasonable Efforts to obtain and maintain all Regulatory Approvals for and on behalf of Nycomed, shall (ii) be the sole authorized interface with the FDA in regards to the Products in the Territory, shall (iii) exclusively handle all regulatory interactions with the FDA, including maintaining existing Regulatory Approvals as well as filing for any additional Regulatory Approvals, and shall (iii) act as recipient of complaints raised by Customers or Third Parties regarding Products in the Territory, all (iv) unless otherwise required or permitted under Legal Requirements and this Agreement. 5.1.2.3 Specific Coordination Requirements. When acting as Nycomed's Regulatory Agent, Sepracor shall timely coordinate with Nycomed at SC level any regulatory action or any decision to omit any regulatory action, that may adversely affect Nycomed's interests related to the Products and the Compound in the Territory or in the ROW. 5.1.3 Regulatory Responsibility and Action Regarding DMF of Compound, Alvesco® MDI Product and Omnaris® HFA Product. Further to its role as Responsible Regulatory Party for the Original Products, Nycomed, at its own cost, shall be responsible for (i) the DMF relating to the manufacture of the Compound in accordance with Section 5.2.2.1, (ii) the DMF regarding the Alvesco® MDI Product in accordance with Section 5.2.2.2 and (iii) the DMF regarding the Omnaris® HFA Product, in accordance with Section 5.2.2.2. 5.1.4 Costs Related to Regulatory Activities. The costs associated with Sepracor's actions taken as Regulatory Agent shall be borne by [**], and those associated with being the Responsible Regulatory Party, including all FDA fees, shall be paid by [**] and shall be reimbursed to [**] by [**] against appropriate documentation, subject to Section 5.1.3. 5.1.5 Additional Regulatory Approvals. The parties shall cooperate on any and all Regulatory Activities for Additional Products as set forth herein. 30
5.2 Title to and Ownership of Regulatory Approvals. 5.2.1 General Principle. Nycomed or its designee shall be the owner of Regulatory Approvals for the Original Products in the Territory. If and to the extent that Nycomed determines not to own the Regulatory Approvals for, and serve as the Responsible Regulatory Party with respect to, any Additional Product, the Parties agree that Sepracor may elect to exclusively own such Regulatory Approvals for such Additional Product in the Territory and exclusively act as Responsible Regulatory Party with respect to such Additional Product. For clarity, neither Party shall be obliged to act as Responsible Regulatory Party for an Additional Product. 5.2.2 Restricted Access Regarding Drug Master Files. 5.2.2.1 Nycomed Drug Master File. Always subject to Sepracor's obligations of confidentiality and non-use pursuant to Article 16 of this Agreement, the Parties agree that the access of Sepracor to Nycomed's Drug Master File (the " Nycomed DMF ") shall be restricted as follows: 5.2.2.1.1 General. The Nycomed DMF contains an unrestricted part and a restricted part. It is agreed that Sepracor shall have no access rights to the restricted part of the Nycomed DMF, and that Nycomed shall not be obliged to disclose to Sepracor the restricted part of the Nycomed DMF or any part thereof, except to the extent that such direct access and disclosure is necessary for Sepracor to carry out its obligations under this Agreement to Develop and Commercialize Products, and always subject to Sepracor's obligations of confidentiality and non-use pursuant to Article 16 of this Agreement. 5.2.2.1.2 Filing of Nycomed DMF. The filing of the Nycomed DMF with the responsible Regulatory Authorities in the Territory shall be performed by Nycomed, the costs of such filing to be borne by [**]. 5.2.2.1.3 Right of Sepracor to Reference Nycomed DMF. In the event and to the extent required under applicable laws and regulations of the Territory, Nycomed shall provide Sepracor with a letter of authorization pursuant to which Sepracor shall have the right to reference the Nycomed DMF for purposes of obtaining the Regulatory Approval in the Territory always provided, however, that such letter of authorization shall not entitle Sepracor to access the restricted part of such Nycomed DMF, except to the extent that such direct access is necessary for Sepracor to carry out its obligations under this Agreement to Develop and Commercialize Product. 5.2.2.1.4 Answering of Deficiency Letters Related to the Compound or Nycomed DMF. In the event of any deficiency letters in relation to Compound and/or the Nycomed DMF issued by a Regulatory Authority of the Territory, Nycomed shall assist Sepracor in amending applications for Regulatory Approval and answering such deficiency letters, and Sepracor shall closely coordinate with Nycomed the answers to any such deficiency letters. Sepracor shall have direct access to the Nycomed DMF to the extent it is necessary for Sepracor to carry out its obligations under this Agreement to Develop and Commercialize Products. 5.2.2.2 3M Drug Master Files. Sepracor acknowledges that Nycomed [**]. 5.3 Regulatory Interface. Always subject to Section 5.2.2 [**], the Parties agree to cooperate in good faith as follows in regulatory issues: 5.3.1 Coordination. The Parties shall establish procedures to ensure that the Parties exchange on a timely basis all necessary information to enable Sepracor as the Distributor of Product in the Territory and, where applicable, as Regulatory Agent or Responsible Regulatory Party, and Nycomed as the Responsible Regulatory Party, and Nycomed as the Party commercializing Compound and products incorporating the Compound in the ROW, to comply with all regulatory obligations relating to Compound, Products and products incorporating the Compound on a global basis, including without limitation filing updates, pharmacovigilance filings and investigator notifications. 31
5.3.2 Regulatory Meetings and Correspondence. The Regulatory Agent and, where Sepracor is not acting as Regulatory Agent, the Responsible Regulatory Party, shall, always subject to Section 5.2.2, be responsible for interfacing, corresponding and meeting with the applicable Regulatory Authority with respect to the Product in the Field, within the Territory. Sepracor as Regulatory Agent shall timely inform Nycomed of, and, where Sepracor is not acting as Regulatory Agent, the Responsible Regulatory Party shall timely inform the other Party of, and representatives of Nycomed or such other Party may participate, in all meetings between representatives of Sepracor or the Responsible Regulatory Party, as the case may be, and the Regulatory Authority with respect to the Product in the Territory and in the Field unless such other party is prohibited by operation of law or regulation from doing so. For the purposes of clarity and further to Section 5.2.2, Sepracor and its representatives shall not be privy to, and shall not be permitted to participate in, those parts of any such meetings, discussions and correspondence that relates to the [**] or restricted part of the Nycomed DMF, except with the prior written consent of Nycomed. Nycomed shall be exclusively entitled to interface, correspond and meet with the applicable Regulatory Authorities outside the Territory with respect to the Product in the Field outside the Territory, as Nycomed deems appropriate within its sole discretion. To the extent reasonably practicable and subject to any Third Party confidentiality obligations, the Responsible Regulatory Party and, where relevant, Sepracor as Regulatory Agent, shall provide the other Party with drafts of any material documents or correspondence pertaining to the Product and prepared for submission to the FDA sufficiently in advance of submission so that the other Party may review and comment on the substance of such material documents or correspondence. The Responsible Regulatory Party and, where relevant, Sepracor as Regulatory Agent, shall promptly provide the other Party with copies of any material documents or other correspondence received from the FDA pertaining to the Product (including without limitation any meeting minutes). If the other Party has not commented on such material documents or correspondence within five (5) Business Days of provision of such material documents or correspondence to such other Party, then such other Party shall be deemed to have no comments on such material documents or correspondence. 5.4 Mutual Duties to Assist. Further to Section 5.3, each Party shall support the other, as may be reasonably necessary, including providing necessary documents or other materials reasonably required, to maintain and obtain Regulatory Approvals for the Product. 5.5 Patent Notice. Each Party shall provide the other Party (i) notice of any Patent relevant to any NDA relevant to any Product, Compound or a use thereof, prior to the time the NDA is filed in the Territory, and (ii) immediate notice of the issuance in the Territory of any Patent that may be a Patent relevant to any Product, Compound or a use thereof, giving the date of issue and Patent number for each such Patent, and the Parties will jointly decide within thirty (30) days of the Patent issuance if the Patent is to be listed in the Orange Book pursuant to any NDA submitted for such Product, or the Compound. Similarly, each Party shall provide the other Party immediate notice of any approved NDA and any Patent term extension in the Territory of any such relevant Patent. The Parties will cooperate with each other in the preparation and filing of Patent listings for the Orange Book and Patent term extensions, whereby Nycomed will proceed in filing of appropriate listing and Patent term extension documents. Each Party will provide prompt notice to the other Party of any inquiries as to any relevant patent, which has claims to manufacturing processes, which inquiries are provided pursuant to 35 U.S.C. §287, and will cooperate with respect to responses thereto. In all circumstances, the Party owning the NDA shall be solely responsible for filing the necessary documentation with the FDA to list an issued Patent in the Orange Book and confirming that the issued Patent was duly and properly listed. 32
5.6 Information and Data. 5.6.1 Transfer of Nycomed Know-How. As soon as reasonably practicable after the Effective Date, Nycomed, as coordinated by the SC, shall disclose to Sepracor all then existing Nycomed Know-How. Thereafter, during the Term, Nycomed will promptly disclose to Sepracor any additional Nycomed Know-How. Sepracor will be entitled to (i) receive, keep and use for regulatory purposes all clinical protocols, registration applications and other substantive regulatory documents including, but not limited to, all toxicological and clinical data, and (ii) access and reference all regulatory dossiers and filings, produced by Nycomed, its Affiliates and sublicensees and contractors pertaining to the Compound or the Product to the extent Controlled by Nycomed and as is reasonably necessary for Sepracor to exercise its rights and fulfill its obligations under this Agreement. 5.6.2 Transfer of Sepracor Know-How. During the Term, Sepracor, as coordinated by the SC, shall promptly disclose to Nycomed all Sepracor Know-How as further provided hereinafter. Nycomed will be entitled to (i) receive, keep and use for regulatory purposes all clinical protocols, registration applications and other substantive regulatory documents including, but not limited to, all toxicological and clinical data, and (ii) access and reference all regulatory dossiers and filings, produced by Sepracor, its Affiliates and sublicensees and contractors pertaining to Sepracor Technology to the extent Controlled by Sepracor and as is reasonably necessary for Nycomed to exercise its rights and fulfill its obligations under this Agreement. 5.6.3 Know-How Controlled by Third Party. To the extent that any Know-How related to a Product is Controlled by a Third Party, each Party agrees to use its reasonable efforts to arrange direct access to the portions of such Know-How that is relevant to the activities of a Party regarding a Product always provided, however, that neither Party will be obliged to provide such Know-How to the other Party if the Third Party is unwilling to provide the applicable Party access to the relevant Know-How Controlled by such Third Party. 5.7 Right to Access and Reference Use of Regulatory Approvals. Nycomed and its designees shall have the unrestricted (except, during the Term, in the Field and in the Territory, restricted by and subject to the terms of this Agreement) right and license, free of charge (except for Nycomed's obligations pursuant to Section 2.3), to access, use and reference Regulatory Approvals applied for or granted for Product in the Territory and held by Sepracor as Responsible Regulatory Party, and to access, use and reference the pertaining regulatory documentation, for the purposes of developing, obtaining regulatory approval for and Commercializing pharmaceutical products, whether within or outside the Territory, and whether within or outside the Field (except, during the Term, in the Field and in the Territory, restricted by and subject to the terms of this Agreement). Article 6 6.1 Development of Original Products. 6.1.1 Clinical Development of Alvesco® MDI Product. Sepracor shall use Commercially Reasonable Efforts to perform, subject to coordination by the SC pursuant to Article 4 [**], the further Clinical Development of the Alvesco® MDI Product for such indications as Sepracor, within its reasonably exercised discretion, deems appropriate. For such purpose, Sepracor shall set up a pertaining Clinical Development Plan that shall be coordinated at SC level in accordance with Article 4. Sepracor acknowledges that Nycomed has informed Sepracor that, as of the Effective Date, there are no substantial ongoing Clinical Development activities by or for Nycomed regarding the Alvesco® MDI Product. For the avoidance of doubt, Nycomed shall have access rights to the Sepracor Technology resulting from Sepracor's Clinical Development of the Alvesco® MDI Product in accordance with Section 2.3. 33
6.1.2 Development of Omnaris® HFA Product. 6.1.2.1 Responsibility for Development of Omnaris® HFA Product. Sepracor shall use Commercially Reasonable Efforts to perform, subject to coordination by the SC pursuant to Article 4 [**], the Technical and Clinical Development of the Omnaris® HFA Product under its exclusive responsibility always subject to Sections 6.1.2.2 and 6.1.2.3. For such purpose, Sepracor shall set up a pertaining Technical and Clinical Development Plan that shall be coordinated at SC level in accordance with Article 4. 6.1.2.2 Cooperation Partners of Nycomed in Development, Manufacturing and Supply of Omnaris® HFA Product. Sepracor acknowledges that [**] is Nycomed's supplier of the pressurized aerosol canister including a metered dose valve (the " Canister ") that forms the core element of the Omnaris® HFA Product. Sepracor also acknowledges that Nycomed is, as of the Effective Date, [**] Sepracor further acknowledges that Nycomed is [**]. As a consequence, Sepracor agrees to reasonably coordinate its Development activities regarding the Omnaris® HFA Product with the purview of possibly continuing Nycomed's development efforts, and to timely inform Nycomed if Sepracor should wish to [**]. Upon either Party's reasonable request, the Parties shall lay down their related understandings in a pertaining amendment to this Agreement. 6.1.2.3 Costs of Development of Omnaris® HFA Product. 6.1.2.3.1 General Principle. From the Effective Date, the costs and expenses of the Technical and Clinical Development of the Omnaris® HFA Product shall be borne [**]. 6.1.2.3.2 Omnaris® HFA Product Technical Development Activities Conducted for Nycomed as of Effective Date. [**], shall be determined by [**] in good faith, and [**] shall make according payment to [**] in accordance with the terms and conditions of [**] by and between the Parties in good faith [**]. 6.1.2.3.3 Omnaris® HFA Product Clinical Development Activities. Sepracor acknowledges that, as of the Effective Date, [**] regarding the Omnaris® HFA Product. From the Effective Date, the costs and expenses of the Clinical Development of the Omnaris® HFA Product shall be borne [**]. 6.1.2.3.4 Omnaris® HFA Product Development Plan. Sepracor shall set up a Technical and Clinical Development Plan for the further Development of the Omnaris® HFA Product that shall be coordinated at SC level in accordance with Article 4. 6.1.2.3.5 Access Rights of Nycomed. For the avoidance of doubt, Nycomed shall have access rights to the Sepracor Technology resulting from Sepracor's Development of the Omnaris® HFA Product in accordance with Section 2.3. 6.2 Development of Additional Products. 6.2.1 Development of Additional Products. 6.2.1.1 General; Proposal for Commercialization. Sepracor's rights and license pursuant to Section 2.1.1.2 notwithstanding, the Parties shall discuss the Development and Commercialization of Additional Products at SC level. If a Party believes that any Additional Product, whether Controlled by such Party or by the other Party, is suitable for Commercialization in the Territory and therefore wishes to have such Additional Product Developed for Commercialization in the Territory, such Party shall give the other Party notice in writing, thereby submitting to the other Party, subject to its obligations of confidentiality and non-use pursuant to Article 16 of this Agreement, reasonably detailed information on the applicable Additional Product. The matter shall then be discussed and coordinated by the SC in accordance with the principles set out in Article 4. 34
6.2.1.2 Line Extensions. Sepracor may Develop and Commercialize Line Extensions without the prior consent of Nycomed, but subject to coordination by the SC in accordance with Article 4. Whenever reasonably required under the circumstances, the SC shall prepare a resolution for the inclusion of the relevant Line Extension addressing the issues referred to in the second sub-paragraph of Section 6.2.1.3 to the extent relevant. Without limitation, the Parties shall reasonably coordinate at SC level reasonable periods as Nycomed may require to modify or set up, as the case may be, at Nycomed or its suppliers, manufacturing facilities regarding the applicable Line Extension in accordance with Section 10.1.2. 6.2.1.3 SC Inclusion of Improved Products; Improved Product Resolution. Sepracor may Develop and Commercialize any Improved Products subject to the consent of Nycomed, which consent shall not be unreasonably withheld or delayed after consideration at SC level in accordance with the following principles: Within a reasonable period of receipt of any request pursuant to Section 6.2.1.1, the SC (or a Subcommittee appointed by the SC) shall have evaluated the proposed Improved Product and shall submit to each Party a reasonable resolution (subject to Sepracor's right to Develop and Commercialize Line Extensions in accordance with Section 6.2.1.2) regarding the Development and Commercialization of the relevant Improved Product in the Territory. To the extent relevant under the circumstances, such resolution shall appropriately address, among other relevant issues and with respect to the applicable Improved Product, [**] (each, an " SC Improved Product Resolution "). Whenever reasonably required under the circumstances, any additional covenants made between the Parties regarding an Improved Product following any such SC Improved Product Resolution shall be set forth in an " Additional Product Agreement ". 6.2.1.4 Supply of Additional Product. If an Additional Product is intended to be supplied by Nycomed to Sepracor, the Parties shall enter into an " Additional Product Supply Agreement ", and, if such Additional Product is to be manufactured by Sepracor or a Third Party and Nycomed wishes to Commercialize such Additional Product in the ROW, the Parties shall enter into a " Sepracor Supply Agreement " or a " Third Party Supply Agreement ". 6.2.1.5 Development Plan. If the SC determines that the applicable Additional Product should be Developed, then Sepracor shall set up a Development Plan for review and coordination by the SC in accordance with the principles set out in Article 4 that shall be attached to the relevant Additional Product Agreement. 6.2.1.6 Formoterol Combination Product. Sections 6.2.1.1 to 6.2.1.5 notwithstanding, Sepracor agrees to use its Commercially Reasonable Efforts to Develop and Commercialize an Additional Product in form of the Formoterol Combination Product based on a delivery technology yet to be determined in accordance with Article 4. 6.2.1.7 Nebules Product. Sections 6.2.1.1 to 6.2.1.5 notwithstanding, Sepracor agrees to use its Commercially Reasonable Efforts to Develop and Commercialize the Nebules Product in accordance with Article 4. For the avoidance of doubt, Nycomed shall have access rights to the Sepracor Technology resulting from Sepracor's technical and clinical development of the Nebules Product in accordance with Section 2.3. 6.2.2 Costs of Development of Additional Products and Co-Development. 6.2.2.1 General Principle. Subject to Section 6.2.2.2, the costs of the Technical and Clinical Development of any Additional Product for ultimate sale in the Territory only shall be borne by [**]. 6.2.2.2 Development Cost Sharing. In the event that Nycomed should wish to Commercialize an Additional Product in the ROW and exercise its respective access right, then except for the costs of the further technical and clinical development of the Original Products and the Nebules Product, Nycomed 35
agrees to co-finance the related Development Costs, and the Parties will, at SC level, in the course of determining the applicable Development Plan, negotiate an appropriate allocation of the applicable Development Costs in accordance with Section 2.3. 6.2.2.3 Co-Development. If and to the extent that Nycomed should wish to participate in such Development by rendering certain Development work, the Parties will, at SC level, agree on the Development work to be performed by Nycomed. 6.2.2.4 Financial Reconciliation. If and when relevant, Development Costs subject to Development Cost sharing shall only be submitted in accordance with Section 11.3.4 to the extent made or incurred in conjunction with an approved budget line item in an Development Plan as approved and revised from time to time by the SC in accordance with Article 4. 6.2.3 Standard of Care. Sepracor and, if and to the extent relevant pursuant to Section 6.2.2.3, Nycomed, shall use Commercially Reasonable Efforts to perform, subject to coordination by the SC pursuant to Article 4, the Development of any Additional Product. 6.2.4 Disputed Patents and In-Licensing of Third Party Technology. 6.2.4.1 Disputed Patents Regarding Additional Products. In the event that an Infringement Claim pursuant to Section 7.3.1 that relates to an Additional Product is brought against one Party or its Affiliates only in the Territory, Section 7.3 shall apply always provided, however, that the costs of defending infringements claims pursuant to Section 7.3.4.3 and Third Party royalties pursuant to Section 7.3.4.4 shall be borne [**] to the extent that the alleged infringement relates only to Sepracor Technology incorporated in the relevant Additional Product, otherwise, the Third Party royalties shall be borne by the Parties as provided in Section 7.3. 6.2.4.2 In-Licensing of Third Party Technology Regarding Line Extensions and Additional Products. If a Party can establish to the reasonable satisfaction of the other Party pursuant to Section 7.4 that license(s) under any Third Party Disputed Patent or a Third Party Patent are necessary or advisable in relation to any Third Party Patent conflict related solely to Sepracor Technology incorporated in any Additional Product, then any related Third Party Patent royalties and other consideration for the use of such Disputed Patent so as to render (i) the manufacture (if relevant), use, offer to sell or sale in the Territory, or importation into the Territory, of the relevant Additional Product in the Field by Sepracor, or (ii) the manufacturing of the relevant Additional Product outside the Territory solely for exportation into the Territory for sale by Sepracor, non-infringing, shall be [**]. 6.2.5 Use of Clinical Data Generated by or for Sepracor in the Course of Clinical Development of Additional Products. For clarity, Nycomed, its Affiliates and its Third Party licensees and sub-distributors shall have access rights to Clinical Development Data pertaining to Additional Products generated by or for Sepracor in accordance with Section 6.3.5. 6.2.6 Access Rights of Nycomed. For the avoidance of doubt, Nycomed shall have access rights to the Sepracor Technology resulting from Sepracor's Development of any Additional Product in accordance with Section 2.3. 6.3 Principles Applying to all Products. Unless expressly contracted out in any additional covenant as may be agreed by and between the Parties, the following principles shall apply to all Products: 6.3.1 Development. The Development of Product shall be overseen and coordinated by the SC in accordance with Article 4 and all applicable terms and conditions of this Agreement, including, without limitation, this Article 6. 36
6.3.2 Commercialization. The Commercialization of Product shall be overseen and coordinated by the SC in accordance with Article 4 and all applicable terms and conditions of this Agreement, including, without limitation, Articles 9 and 11. 6.3.3 Supply of Products and Compound. The Original Products, any Additional Products and Compound, if and when relevant, shall be supplied to Sepracor in accordance with and all applicable terms and conditions of this Agreement, including, without limitation, Articles 10 and 11 and, whenever applicable, the relevant Supply Agreements. 6.3.4 Change Control and Related Regulatory Issues. When negotiating manufacturing and supply issues regarding the relevant Additional Product pursuant to Section 10.1.2 or when negotiating applicable change control issues related to an Original Product, the Parties shall appropriately consider related change control and regulatory issues in accordance with the change control procedures and the applicable notification and consent requirements as set forth in the applicable Quality Agreement. Where applicable, until such Quality Agreement and such change control procedures are agreed, the Specifications of Compound or any relevant Product may be changed with the written consent of both Parties (not to be unreasonably withheld or delayed), or as required by Regulatory Authorities. 6.3.5 Use of Clinical Data Generated by or for Sepracor in the Course of Clinical Development of Additional Products. Nycomed, its Affiliates and its permitted Third Party licensees and sub-distributors shall have the right and license to use, free of charge (except for Nycomed's share of the Clinical Development Costs, to the extent agreed and relevant), all Clinical Development Data (including those generated by or for Sepracor) (i) during and following the Term, outside of the Territory, (ii) during the Term, within the Territory and outside the Field, (iii) following the Term, within the Territory inside and outside the Field and (iv) during the Term, within the Territory and in the Field; provided that, in all cases, the exercise of such right shall be restricted by the terms and conditions of this Agreement. 6.3.6 Dispute Resolution. Disputes regarding the Development and Commercialization of Products shall be settled in accordance with Article 4, and Sections 20.2 and 20.3. Pending dispute resolution pursuant to Sections 4.5, 20.2 and 20.3, the relevant matter shall be tabled, and, except for dispute resolution and each Party's rights pursuant to Section 20.5, no action regarding the relevant matter shall be taken. Article 7 7.1 Ownership, Assignment, Prosecution and Maintenance of Ownership Rights. 7.1.1 Ownership and Assignment of Ownership Rights. 7.1.1.1 Ownership in General. Except as provided in Section 7.1.1.2 and subject to the licenses and rights granted pursuant to this Agreement, (i) Nycomed shall own the Nycomed Technology and all Ownership Rights therein, (ii) Sepracor shall own the Sepracor Technology and all Ownership Rights therein; (iii) each Party shall solely own all Improvement Technology that is conceived and reduced to practice exclusively by such Party (" Nycomed's Solely-Owned Improvement Technology " or " Sepracor's Solely-Owned Improvement Technology ", as the case may be) and all Ownership Rights therein, and (iv) the Parties shall jointly own all Improvement Technology that is conceived or reduced to practice jointly by the Parties (" Jointly-Owned Improvement Technology ") and all Ownership Rights therein in equal shares. 7.1.1.2 Ownership to Certain Improvement Technology. Any and all Improvement Technology of Sepracor (whether or not jointly owned with Nycomed) that relates exclusively and directly to the Compound and/or any Original Product shall be the sole and exclusive property of Nycomed and shall form part of the Nycomed Improvement Technology. Sepracor shall receive reasonable compensation 37
from Nycomed with respect to the use of any such Improvement Technology outside the Field. Sepracor shall assign all of its rights, title and interest in and to any such Improvement Technology to Nycomed. Upon Nycomed's request and sole expense, Sepracor shall deliver to Nycomed all instruments and other documents and shall take such other actions as may be necessary or reasonably requested by Nycomed, so that Nycomed may protect and defend its rights in and to such Improvement Technology which relates exclusively and directly to the Compound and/or the Product. For the use of any such Improvement Technology of Sepracor that relates exclusively and directly to the Compound and/or the Product, Ownership Rights to which have been transferred to Nycomed and which shall be included in the license grant by Nycomed to Sepracor pursuant to Section 2.1.1, Sepracor shall not owe any additional royalty or other payments to Nycomed and Sepracor shall have an unrestricted, perpetual, Non-Exclusive, royalty-free and irrevocable right (including the right to sub-license) to practice such Improvement Technology of Sepracor. 7.1.1.3 Responsibility for Compensation Related to Improvement Technology. Each Party shall be exclusively responsible for any compensation payable to any of its employees, subcontractors and sublicensees in respect of any Improvement Technology. 7.1.1.4 Practice of Jointly-Owned Improvement Technology. For clarity, each of the Parties shall have a world-wide, unrestricted (except, during the Term, in the Field and in the Territory, restricted by and subject to the terms of this Agreement), perpetual, Non-Exclusive, royalty-free and irrevocable right (including the right to sub-license) to practice the Jointly-Owned Improvement Technology independently of the other Party. The costs of acquiring any Third-Party technology necessary to exploit such Jointly-Owned Improvement Technology shall be born by the party seeking to exploit it. 7.1.2 Prosecution and Maintenance of Patents. In relation to the prosecution and maintenance of Patents, the Parties agree as follows: 7.1.2.1 Responsibility of Nycomed in Relation to the Nycomed Technology and Nycomed's Solely-Owned Improvement Technology. Nycomed shall, in its sole discretion, prepare, file, prosecute and maintain all Patents covering the Nycomed Technology and Nycomed's Solely-Owned Improvement Technology always provided, however, that Nycomed shall maintain the Nycomed Core Patents. Should Nycomed elect not to prepare, file, prosecute or maintain any Nycomed Additional Patent, then Nycomed shall, always provided that Nycomed is not subject to existing and future bona fide obligations towards [**] that prevent Nycomed from doing so, (i) provide Sepracor with written notice in sufficient time before any statutory bar date to permit Sepracor to prepare, file, prosecute and maintain such Patent, (ii) give Sepracor the right, at its election and sole expense, to prepare, file, prosecute or maintain such Patent in Sepracor's name, (iii) offer reasonable assistance to Sepracor in connection with such preparation, filing, prosecution or maintenance at no charge to Sepracor except for reimbursement of reasonable out-of-pocket expenses incurred in rendering such assistance, and (iv) assign to Sepracor at Sepracor's cost any such Patent that Sepracor elects to prepare, file, prosecute or maintain in its name pursuant to this Section 7.1.2.1 and use all reasonable efforts to co-operate with Sepracor in any such transfer. If Nycomed has an existing obligation to [**] that prevents it from carrying out its obligations pursuant (i)—(iv) above, Nycomed shall use its reasonable efforts to obtain [**] consent to disclose information to Sepracor. 7.1.2.2 Responsibility of Sepracor in Relation to Sepracor Technology and Sepracor's Solely-Owned Improvement Technology. Always subject to Section 7.1.1.2, Sepracor shall, in its sole discretion, prepare, file, prosecute and maintain all Patents covering the Sepracor Technology and Sepracor's Solely-Owned Improvement Technology. Should Sepracor elect not to prepare, file, prosecute or maintain any Patent covering the Sepracor Technology including, without limitation, Sepracor's Solely-Owned Improvement Technology, then Sepracor shall (i) provide Nycomed with written notice in sufficient time before any statutory bar date to permit Nycomed to prepare, file, prosecute and maintain such Patent, (ii) give Nycomed the right, at its election and sole expense, to 38
prepare, file, prosecute or maintain such Patent in Nycomed's name, (iii) offer reasonable assistance to Nycomed in connection with such preparation, filing, prosecution or maintenance at no charge to Nycomed except for reimbursement of reasonable out-of-pocket expenses incurred in rendering such assistance, and (iv) assign to Nycomed at Nycomed's cost any such Patent that Nycomed elects to prepare, file, prosecute or maintain in its name pursuant to this Section 7.1.2.2 and use all reasonable efforts to co-operate with Nycomed in any such transfer. 7.1.2.3 Responsibility in Relation to Jointly-Owned Improvement Technology. Always subject to Section 7.1.1.2, Nycomed shall be responsible for the preparation, filing, prosecution and maintenance of all Patents covering Jointly-Owned Improvement Technology. Nycomed shall be deemed to be the Owning Party of such Patent for the purposes of this Section 7.1.2.3, Section 7.1.2.4 and Section 7.2. Should Nycomed elect not to prepare, file, prosecute or maintain any Patent covering Jointly-Owned Improvement Technology, then Nycomed shall (i) provide Sepracor with written notice in sufficient time to permit Sepracor to prepare, file, prosecute and maintain such Patent, (ii) give Sepracor the right, at its election, to prepare, file, prosecute or maintain such Patent, and (iii) offer reasonable assistance to Sepracor in connection with such preparation, filing, prosecution or maintenance at no charge to Sepracor. All costs incurred by Nycomed or Sepracor, as the case may be, in carrying out the foregoing responsibilities shall be borne [**], unless otherwise agreed in writing. 7.1.2.4 Coordination of Patent Prosecution and Maintenance. The Non-Owning Party shall have full rights of consultation with the Owning Party and the patent counsel selected by the Owning Party in all matters related to the Nycomed Core Patents and the Nycomed Additional Patents in the Territory, the Sepracor Patents and the Jointly Owned Patents. The Owning Party shall use reasonable efforts to implement all reasonable requests made by the Non-Owning Party with regard to the preparation, filing, prosecution, maintenance and/or defense of the Nycomed Core Patents in the Territory, the Sepracor Patents and the Jointly-Owned Patents. Nycomed will use its Commercially Reasonable Efforts to notify Sepracor if it intends to abandon any of the Nycomed Additional Patents. 39
7.1.2.5 Rights in Assigned Patents. In case the Owning Party elects not to prepare, file, prosecute and maintain Patents and such Patents are being assigned to the Non-Owning Party in accordance with the provisions of Section 7.1.2, the Party assigning its rights in such Patents shall retain a world-wide, Non-Exclusive, perpetual, unrestricted, fully-paid up and irrevocable right and license (with the right to sub-license) to practice such assigned Patents. 7.2 Enforcement of Ownership Rights. The Parties agree as follows on the enforcement of Ownership Rights regarding Nycomed Technology in the Territory, Sepracor Technology or any Improvement Technology: 7.2.1 Reports of Infringement. Each Party shall promptly report in writing to the other Party during the term of this Agreement any (i) known infringement or suspected infringement of any Nycomed Core Patents and the Nycomed Additional Patents or Sepracor Patents or of the Jointly-Owned Patents by the development or commercialization of a Third Party product in the Field, or (ii) unauthorized use or misappropriation in the Field of any Nycomed Technology, any Sepracor Technology or any Jointly-Owned Improvement Technology by a Third Party of which it becomes aware, and shall provide the other Party with all available evidence in its possession supporting said claim of infringement, suspected infringement or unauthorized use or misappropriation. 7.2.2 Right to Institute Suit. Subject to Section 7.2.5 and except as provided in Section 7.2.3, the Party owning or Controlling the relevant Patents or Nycomed or Sepracor Technology (the " Owning Party ") shall have the first right to initiate an infringement or other appropriate suit against any Third Party which at any time has infringed or is suspected of infringing, any Nycomed Patents or, Sepracor Patents as the case may be, or is using without proper authorization or misappropriating all or any portion of the Nycomed Technology, Sepracor Technology or Jointly-Owned Improvement Technology, as the case may be. 7.2.3 Right of the Non-Owning Party to Institute Suit. The Owning Party shall promptly advise the other Party (the " Non-Owning Party ") of its intent not to initiate an infringement or other appropriate suit related to the enforcement of the Nycomed Core Patents in the Territory or the Sepracor Patents or any Patents claiming Jointly-Owned Improvement Technology (" Jointly-Owned Patents "), as the case may be, pursuant to Section 7.2.2. In the event that the Owning Party, and in case of Nycomed as the Owning Party, any contractual partner of Nycomed permitted to do so, does not initiate an infringement or other appropriate suit related to the enforcement of the Nycomed Core Patents and the Nycomed Additional Patents in the Territory or the Sepracor Patents or any Jointly-Owned Patents, as the case may be, pursuant to Section 7.2.2 within a reasonable period of time not exceeding ninety (90) days of becoming aware of a known or suspected infringement or unauthorized use or misappropriation of the Owning Party's Patents in the Field, then (i) the Non-Owning Party may, always subject to Section 7.2.5, take such action as is reasonably appropriate to enforce the Owning Party's Patents (in the case of the Nycomed Core Patents or the Sepracor Patents) or to enforce the Jointly-Owned Patents; provided, however, that Sepracor shall not initiate an infringement or any other suit regarding the [**] without the prior written consent of Nycomed, such consent not to be unreasonably withheld or delayed, and (ii) the Parties shall follow the procedures set forth in Section 7.2.4. Sepracor acknowledges that [**] to enforce the [**] Patents, unless otherwise agreed between [**] and Nycomed, and that [**] to enforce the [**] Patents, and that Nycomed may enforce the [**] Patents only if [**] should fail to do so within a certain period. 7.2.4 Conduct of Suit. 7.2.4.1 Conduct of Suit in General. Subject to Section 7.2.5, a Party who initiates an infringement or other appropriate suit pursuant to Section 7.2.2 or Section 7.2.3 (the " Initiating Party ") shall have the sole and exclusive right to select counsel for any such suit. The Initiating Party shall, except as provided in Section 7.2.4.1 and 7.2.4.2, below, pay all expenses of the suit, including, without limitation, attorney's fees and court costs, and keep all damages, settlement fees or other 40
consideration for past infringement received as a result of such suit. In all cases, (i) the Initiating Party shall keep the other Party (the " Non-Initiating Party ") promptly informed of the status of such suit on an ongoing basis and shall provide the Non-Initiating Party with copies of all documents filed in, and all written communications relating to, such suit; (ii) the Non-Initiating Party shall offer reasonable assistance to the Initiating Party in connection with such suit at no charge to the Initiating Party except for reimbursement of reasonable expenses incurred in rendering such assistance; (iii) if necessary, the Non-Initiating Party shall join as a party to the suit but shall be under no obligation to participate except to the extent that such participation is legally required and except as provided below, and (iv) the Non-Initiating Party shall have the right to join such suit, to the extent permitted by law, and be represented in any such suit by its own counsel at its own expense. 7.2.4.2 Cost Sharing by Non-Initiating Party. In case of a suit relating to (a) the Improvement Technology or (b) any Nycomed Patents or Sepracor Patents, the infringement or misappropriation of which by a Third Party would result in damage to the Non-Initiating Party, the Non-Initiating Party may, within sixty (60) days after its receipt of written notice from the Initiating Party of the commencement of such suit, elect to contribute up to an amount not to exceed [**] percent ([**]%) of the costs of such suit, and any damages, settlement fees or other consideration for past infringement received as a result of such suit shall be shared by the Initiating Party and Non-Initiating Party pro-rata based on their respective sharing of the costs of such suit. The Initiating Party shall not settle any such action or otherwise consent to an adverse judgment in any such action that adversely affects the rights or interests of the Non-Initiating Party or imposes additional obligations on the Non-Initiating Party without the prior written consent of the Non-Initiating Party, such consent not to be unreasonably withheld or delayed. 7.2.5 ANDA Litigation. 7.2.5.1 Notice of Certification. With respect to the United States, Nycomed and Sepracor each shall immediately give written notice to the other of its receipt or knowledge of any certification filed under the "U.S. Drug Price Competition and Patent Term Restoration Act of 1984" claiming that a Nycomed Patent, a Sepracor Patent or a Jointly-Owned Patent is invalid, unenforceable and/ or that infringement will not arise from the manufacture, use, offer to sell or sale of Product by a Third Party (a "Patent Challenge Notice" ). 7.2.5.2 Exclusive Right to Conduct ANDA-Related Patent Litigation. Subject to the provisions of Section 7.2.5.5, in the event of the filing of an ANDA by a Person seeking approval to begin commercialization of a generic version of the Product in the Territory, Nycomed, [**], respectively, as pioneer Patent owners, shall have the sole right to bring patent infringement suit. Subject to the provisions of Section 7.2.5.5 and subject to Sepracor's rights under Section 7.2.3, the decision of whether or not to file suit in response to a Patent Challenge Notice shall be within Nycomed's, [**] sole discretion as further set forth hereinafter. If any such ANDA related patent infringement suit pertains to the Omnaris® AQ Product, Nycomed [**], as owners of the patents listed in the Orange Book, shall have the sole right to bring patent infringement suit. Subject to the provisions of Section 7.2.5.5 and subject to Sepracor's rights under Section 7.2.3, the decision of whether or not to file suit shall be within Nycomed's and [**] sole discretion. If any such ANDA-related patent infringement suit pertains to the |
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