Execution Copy

Exhibit 10.17

 

[***] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

 

 

January 12, 2017

Novan, Inc

(as Licensor)

 

 

and

 

 

Sato Pharmaceutical Co., Ltd

(as Licensee)

LICENSE AGREEMENT

 

 

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CONTENTS

 

Clause

Page

1.

Definitions

1

2.

Grant of License; Right of First Negotiation

10

3.

Diligence

14

4.

DEVELOPMENT and COMMERCIALIZATION OF LICENSED PRODUCT

15

5.

Manufacturing & Supply

17

6.

Exchange of Scientific Information

18

7.

Inventions; Access to Improvements; Patents

19

8.

Trademarks

25

9.

Serious Adverse Event Reporting

27

10.

Representations and Warranties

28

11.

Confidentiality ObligationS of Sato

31

12.

Confidentiality ObligationS of Novan

32

13.

Press Releases

33

14.

Payment

34

15.

Royalty Payment; Audits

35

16.

Indemnification

37

17.

Limitation of Liability; Exclusion of Damages; Disclaimer

40

18.

Term

40

19.

Early Termination

41

20.

Obligations upon Early Termination

42

21.

Force Majeure

43

22.

General Provisions

44

23.

Governing Law

46

24.

Dispute Resolution; Jurisdiction

46

 

 

ii

 

[***] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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LICENSE AGREEMENT

This License Agreement is entered into by and between Novan, Inc., a Delaware
corporation having an address at 4105 Hopson Road, Morrisville, North Carolina
27560, USA (“Novan”) and Sato Pharmaceutical Co., Ltd, a Japanese corporation
having an address at 1-5-27, Moto-Akasaka, Minato-ku, Tokyo 107-0051, Japan
(“Sato”).  Novan and Sato are also referred to individually as a “Party” and
together as the “Parties”.

WITNESSETH THAT:

WHEREAS, Novan is developing a pharmaceutical product in the United States known
as SB204 for the treatment of acne vulgaris, and owns or controls certain
proprietary technology, know-how and information relating to such product; and

WHEREAS, Sato desires to obtain from Novan a license to develop and
commercialize such product in Japan, and Novan desires to grant such license and
option to Sato.

NOW, THEREFORE, it is agreed between the Parties as follows:

1.Definitions

The following terms as used in this Agreement (as hereinafter defined) shall
have the meanings set forth in this Section (which meanings shall be applicable
both to the singular and the plural forms of such terms):

1.1“Accountant” has the meaning set forth in Section 15.8.

1.2“Additional License Agreement” has the meaning set forth in Section 2.10(ii).

1.3“Additional Licensed Territories” shall mean China (including Hong Kong),
South Korea, Taiwan, Singapore, Indonesia, Thailand, Philippines, Vietnam,
Malaysia, Cambodia, Brunei, Myanmar, or Laos.  

1.4“Affiliate” means with respect to each Party, any Person that directly or
indirectly is controlled by, controls or is under common control with a
Party.  For the purposes of this definition only, the term “control” (including,
with correlative meanings, the terms “controlled by” and “under common control
with”) as used with respect to a Person means (a) in the case of a corporate
entity, direct or indirect ownership of voting securities entitled to cast at
least fifty percent (50%) of the votes in the election of directors or (b) in
the case of a non-corporate entity, direct or indirect ownership of at least
fifty percent (50%) of the equity interests with the power to direct the
management and policies of such entity; provided that, if local Laws restrict
foreign ownership, control shall be established by direct or indirect ownership
of the maximum ownership percentage that may, under such local Laws, be owned by
foreign interests, but only if such lower percentage provides such Person with
the power to direct the management and policies of such entity.

1

 

[***] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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1.5“Agreement” means this License Agreement, including all of its Annexes.

1.6“[***]” means the [***], and shall include [***]. Such [***] shall be in
accordance with U.S. GAAP, consistently applied.  [***] shall not include [***].

1.7“Approved Label” means the label included in the Marketing Approval for the
Licensed Product in the Licensed Field in the Licensed Territory.

1.8“Bankruptcy Laws” has the meaning set forth in Section 20.3.

1.9“Base Price” has the meaning set forth in Section 5.4.

1.10“Business Day” means a day other than Saturday, Sunday or any day on which
commercial banks located in the State of North Carolina, U.S., or in Tokyo,
Japan are authorized or obligated by Laws to close.

1.11“CEO” has the meaning set forth in Section 24.1.

1.12“Commercial Supply Agreement” has the meaning set forth in Section 5.4.

1.13“Commercially Reasonable Efforts” means, with respect to a Party’s
obligation under this Agreement to develop, manufacture, commercialize or seek
intellectual property protection for the Licensed Product, the level of efforts
required to carry out such obligation in a sustained manner consistent with the
efforts that a similarly situated company devotes to a product of similar market
potential, profit potential, or strategic value at a similar stage in its
development or product life within its portfolio.  For purposes of illustration,
Commercially Reasonable Efforts requires, with respect to such an obligation,
that a Party reasonably and in good faith:  (a) promptly assign responsibility
for such obligation to specific employee(s) who are held accountable for
progress and monitor such progress on an on-going basis, (b) set and seek to
achieve reasonable objectives for carrying out such obligation, and
(c) reasonably make and implement decisions and allocate resources designed to
advance progress with respect to such objectives, all taking into account issues
of available intellectual property coverage, safety and efficacy information,
targeted product profile, the competitiveness of the marketplace, other
technical, legal, scientific and/or medical factors and the pricing and
reimbursement status for the relevant product.  In evaluating whether a Party
has used Commercially Reasonable Efforts, due consideration will be given to any
delays by the other Party in performing its obligations under this Agreement
that adversely impact the first Party’s ability to perform its obligations under
this Agreement.

1.14“Competing Product” means [***] product for [***].

1.15“Compound” means the substance known as NVN1000, which is the subject of
Investigational New Drug Application [***].

1.16“Confidentiality Agreement” means that certain confidentiality agreement
between Sato and Novan dated [***].

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with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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1.17“Control” means possession of the ability to grant a license, sublicense or
access as provided for under this Agreement without (a) violating the terms of
any agreement or other arrangement with any Third Party or (b) increasing at any
time the amount of any payments required under any such agreement or arrangement
that is entered into after the Effective Date, provided that this subsection (b)
shall not apply if the other Party elects in writing to be responsible for all
such increased payments as provided in Section 2.9.

1.18“Conversion Rate” means the average conversion rate from JPY to USD during
the [***] prior to the Effective Date, as published in The Wall Street Journal.

1.19“Cover”, “Covered” or “Covering” means, with reference to a Patent and a
product, composition, article of manufacture, or method, that the manufacture,
practice, use, offer for sale, sale or importation of the product, composition,
article of manufacture, or method, would infringe a Valid Claim of such Patent
in the country in which such activity occurs without a license thereto (or
ownership thereof).

1.20“Damages” has the meaning set forth in Section 16.1.

1.21“Development Plan” has the meaning set forth in Section 4.2.

1.22“Dispute” has the meaning set forth in Section 24.1.

1.23“Drug Approval Application” means an application for Marketing Approval
required before commercial sale or use of the Licensed Product as a drug in a
regulatory jurisdiction or country.

1.24“Effective Date” means January 12, 2017.

1.25“[***]” has the meaning set forth in Section 2.3(v).

1.26“Election Time Period” has the meaning set forth in Section 16.3(i).

1.27“FCPA” has the meaning set forth in Section 10.3(iii).

1.28“First Commercial Sale” means the first arm’s length commercial sale of a
Licensed Product by Sato or an Affiliate of Sato to a Third Party (including
without limitation any final sale to a distributor or wholesaler under any
non-conditional sale arrangement) in a country where Marketing Approval of such
Licensed Product has been obtained by Sato or an Affiliate of Sato.

1.29“Force Majeure” has the meaning set forth in Section 21.1.

1.30“Fully Burdened Manufacturing Cost” means, as applicable to Study Materials
manufactured by Novan or its Third Party supplier, Novan’s or its Affiliate’s
cost of manufacturing such Study Material, which is equal to (a) [***] for the
Study Material (or components thereof) made by Novan, [***], in each case for
the manufacture of the Study Material, (b) [***], and (c) for Study Materials
(or components thereof) made by Novan’s Third

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with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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Party supplier, [***] to the extent such costs in (a) and (c) are [***]. Fully
Burdened Manufacturing Cost shall be calculated in a manner consistent with U.S.
GAAP, consistently applied.

1.31“Goods” means the Compound, Study Materials and/or the Licensed Product.

1.32“Government or Public Official” has the meaning set forth in
Section 10.3(iii).

1.33“ICDR” has the meaning set forth in Section 24.1.

1.34“Improvement” means any [***].

1.35“Information” means all data, materials and documents necessary for the
development or commercialization of the Licensed Product within the Licensed
Field, including without limitation those relating to or comprising inventions;
practices; methods; knowledge; know-how; skill; experience; compositions of
matter; assays; medical, toxicological, pharmacological, pre-clinical, clinical
and chemical data; specifications; medical uses; adverse reactions;
formulations; bioanalytical metrics; analytical and quality control data and
methods; and all proprietary information submitted to relevant Regulatory
Authorities to support a Drug Approval Application for and Marketing Approval of
the Licensed Product in the Licensed Field.

1.36“Indemnification Claim Notice” has the meaning set forth in Section 16.3(i).

1.37“Indemnified Party” has the meaning set forth in Section 16.3(i).

1.38“Indemnifying Party” has the meaning set forth in Section 16.3(i).

1.39“Invention” means any and all discoveries, developments, improvements,
modifications, formulations, materials, compositions of matter, cell lines,
processes, machines, manufactures and other inventions (whether patentable or
not patentable) made in the course of activities performed under this Agreement
by or on behalf of either Party or both Parties.

1.40“JNDA” has the meaning set forth in Section 3.1(i).

1.41“Joint Committee” or “JC” has the meaning set forth in Section 2.4(i).

1.42“Joint Inventions” has the meaning set forth in Section 7.2.

1.43“Joint Patent” has the meaning set forth in Section 7.4(iii).

1.44“JPY” means a Japanese yen.

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with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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1.45“Law” means all applicable laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of any federal, national,
multinational, state, provincial, county, city or other political subdivision,
domestic or foreign.

1.46“Licensed Field” means the treatment of acne vulgaris in humans.

1.47“Licensed Product” means any topical finished dosage form that (i) contains
the Compound and (ii) meets the Specifications or, subject to Section 4.3, the
Modified Specifications.

1.48“Licensed Rights” means the rights granted by Novan to Sato pursuant to
Section 2.1.

1.49“Licensed Territory” means Japan.

1.50“Licensee Efficacy Data” means Licensee Scientific Information relating to
the efficacy of the Licensed Product, including, without limitation, [***] and
[***].  For clarity, Licensee Efficacy Data excludes [***], including, without
limitation, [***].

1.51“Licensee Scientific Information” means the Scientific Information [***]
that is [***], that is [***].

1.52“Litigation Conditions” has the meaning set forth in Section 16.3(i).

1.53“Marketing Approval” means, with respect to a particular country or
regulatory jurisdiction, all necessary authorizations and approvals by the
Regulatory Authorities required to manufacture, use, import, market, distribute
and promote the Licensed Product in the Licensed Field in such country or
regulatory jurisdiction, including, but not limited to, any importation or
manufacturing licenses, marketing authorization (health registration), labeling
approval, and NHI Price and reimbursement approval, if applicable.

1.54“Marketing Exclusivity” means, with respect to the Licensed Territory, the
period of data exclusivity as provided under local Laws during which Third
Parties do not have the right, in connection with seeking or obtaining Marketing
Approval of a pharmaceutical product that contains the same or substantially
similar active ingredient(s) or the same active moiety(ies) as a Licensed
Product, (i) to reference the Licensed Product’s clinical dossier without an
express right of reference from the dossier holder, or (ii) to rely on previous
Regulatory Authority determinations of safety and effectiveness with respect to
the Licensed Product to support the submission, review or approval of a Drug
Approval Application or similar regulatory submission filed with the applicable
Regulatory Authority for such pharmaceutical product, as well as any other
exclusivity periods available under local Laws (e.g. with respect to orphan
drugs, new chemical entity exclusivity and pediatric exclusivity) during which
Third Parties are prevented from filing or having accepted by Regulatory
Authorities a Drug Approval Application for, or obtaining Marketing Approval of,
a pharmaceutical product that contains the same or substantially similar active
ingredient(s) or the same active moiety(ies) as a Licensed Product in the
Licensed Field in the Licensed Territory.

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with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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1.55“Modified Specifications” has the meaning set forth in Section 4.3.

1.56“Net Sales” means the gross amounts invoiced or otherwise billed by Sato or
its Affiliates on account of sales or any other commercial disposition of the
Licensed Product to Third Parties, including without limitation wholesalers,
hospitals, distributors and/or other intermediate Third Parties, in the Licensed
Territory (hereinafter the “Gross Sales”), less the following to the extent
specifically related to the Licensed Product and actually allowed, incurred or
paid during such period according to Japanese GAAP:  

(i)[***] and [***], [***] and other [***] directly related to the sale to the
extent applicable and not reimbursable, but [***];

(ii)amounts [***] or [***] (including without limitation [***] and [***]),
[***], [***] or [***] with respect to the Licensed Product;

(iii)[***], [***], [***], [***] or [***] and [***] to the [***];

(iv)charges incurred in connection with the [***] or [***] of the Licensed
Product, to the extent not deducted pursuant to subsection (i) or subsection
(iii) above;

(v)[***] in connection with the Licensed Product (it being understood that “Net
Sales” will include all amounts received for any [***]); and

(vi)[***] and [***] on account of the sale of the Licensed Product to the extent
actually allowed and common within the pharmaceutical industry in the Licensed
Territory;

provided that all of the foregoing deductions are incurred in the ordinary
course and calculated in accordance with Japanese GAAP, consistently applied,
during the applicable calculation period throughout the selling party’s
organization.

All such discounts, allowances, credits, rebates, and other deductions granted
for a range of products shall be fairly and equitably allocated to the Licensed
Product and other products of Sato and its Affiliates such that the Licensed
Product does not bear a disproportionate portion of such deductions.

1.57“[***]” means the [***] for [***] as approved by relevant Regulatory
Authorities.

1.58“Novan Confidential Information” has the meaning set forth in
Section 11.1(i).

1.59“Novan Indemnitees” has the meaning set forth in Section 16.2.

1.60“Novan Know-How” means Information that (i) is necessary for the
development, manufacture, use, sale, offer for sale and/or importation of
Licensed Product in the Licensed Field, and (ii) is within the Control of Novan
during the Term of this Agreement.  

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with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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Notwithstanding anything herein to the contrary, Novan Know-How shall exclude
Novan Patents, but shall include the Novan Scientific Information.

1.61“Novan License” has the meaning set forth in Section 2.3.

1.62“Novan Licensee” means any Third Party to which Novan has granted a
sublicense or other rights under the Novan Patents or Novan Know-How for
development or commercialization of the Licensed Product in the Licensed Field
outside of the Licensed Territory.

1.63“Novan Patent” means a Patent which claims inventions necessary for the
development, manufacture, use, sale, offer for sale and/or importation of
Licensed Products within the Licensed Field, and that is Controlled by Novan
during the Term of this Agreement, including without limitation Novan’s interest
in any Joint Patents.  Novan Patents include without limitation the patents
listed in Annex 2.

1.64“Novan Scientific Information” means such Scientific Information generated
and/or compiled by or on behalf of Novan as of the Effective Date and listed in
Annex 1 as well as Scientific Information generated and/or compiled by or on
behalf of Novan that is Controlled by Novan during the Term of this Agreement,
and that is necessary for the development, manufacture, use, sale, offer for
sale and/or importation of Licensed Product in the Licensed Field.

1.65 “Novan Trademarks” means the trademarks set forth on Annex 4, as updated
from time to time to reflect trademarks obtained by Novan for use with Licensed
Products in the Licensed Field (excluding for clarity trademarks generally used
by Novan in its business or for use with products that are not Licensed
Products).

1.66“Option” has the meaning set forth in Section 2.10(i).

1.67“Option Exercise Fee” means [***].

1.68“Option Period” means the period starting on the date that is [***] and
ending [***].

1.69“Patent” means (a) letters patent (or other equivalent legal instrument),
including without limitation utility and design patents, and including without
limitation any extension, substitution, registration, confirmation, reissue,
re-examination or renewal thereof, (b) applications for letters patent,
including without limitation a provisional application, non-provisional
application, reissue application, a re-examination application, a continuation
application, a continued prosecution application, a continuation-in-part
application, a divisional application or any equivalent of the foregoing
applications that is pending at any time during the Term of this Agreement
before a government patent authority and (c) all foreign or international
equivalents of any of the foregoing in any country.

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with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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1.70“Patent Family” means any and all nonprovisionals, continuations,
continuations-in-part, divisions, substitutions, extensions, reissues,
reexaminations, and/or foreign counterparts of a Patent, all of which claim
priority from a common Patent.

1.71“Patent Term Extensions” has the meaning set forth in Section 7.8.

1.72“Paying Party” has the meaning set forth in Section 15.6.

1.73“Person” means any individual, firm, corporation, partnership, limited
liability company, trust, business trust, joint venture, governmental authority,
association or other entity.

1.74“PMDA” means Japan’s Pharmaceuticals and Medical Devices Agency.

1.75“Product Infringement” has the meaning set forth in Section 7.5(ii)(a).

1.76“Prosecuting Party” has the meaning set forth in Section 7.4(iii).

1.77“Publications” has the meaning set forth in Section 11.3.

1.78“Recipient Party” has the meaning set forth in Section 15.6.

1.79“Regulatory Authority” means any national or supranational governmental
authority, including without limitation the MHLW (i.e., the Japanese Ministry of
Health, Labour and Welfare, or any successor agency thereto), or other
governmental body that has responsibility in a given country or jurisdiction
over the development, manufacture and/or commercialization of the Licensed
Product.

1.80“Remaining Novan Patent” means [***].

1.81“Repeat Studies” has the meaning set forth in Section 4.4.

1.82“Rules” has the meaning set forth in Section 24.1.

1.83“Sales Report” means with respect to each calendar quarter a report
detailing:

(i)the number and description of Licensed Products sold or otherwise disposed
of;

(ii)the relevant Gross Sales in the Licensed Territory invoiced by Sato or its
Affiliates to Third Parties, including wholesalers, hospitals or other
intermediate Third Parties, indicating the breakdown of sales by each type of
the Licensed Product;

(iii)the deductions from Gross Sales used to calculate Net Sales;

(iv)the Net Sales in the Licensed Territory;

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with the Securities and Exchange Commission. Confidential treatment has been
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(v)the currency exchange rate used, if applicable; and

(vi)the sum of royalties due pursuant to Section 15.1.

1.84“Sato Confidential Information” has the meaning set forth in
Section 12.1(i).

1.85“Sato Efficacy Data” means Sato Scientific Information relating to the
efficacy of the Licensed Product, including, without limitation, all efficacy
data and information included in all draft and final reports of any test, study
or trial of Licensed Product.  For clarity, Sato Efficacy Data excludes Sato
Scientific Information relating to the safety of the Licensed Product,
including, without limitation, the safety data and information included in all
draft and final reports of any test, study or trial of Licensed Product.

1.86“Sato Improvements” has the meaning set forth in Section 7.1.

1.87“Sato Indemnitees” has the meaning set forth in Section 16.1.

1.88“Sato Scientific Information” means the Scientific Information generated
and/or compiled by or on behalf of Sato that is Controlled by Sato during the
Term of this Agreement, that is necessary for the development, manufacture, use,
sale, offer for sale and/or importation of Licensed Product in the Licensed
Field.

1.89“Sato Know-How” means Information that (i) is necessary for the development,
manufacture, use, sale, offer for sale and/or importation of Licensed Product in
the Licensed Field, and (ii) is within the Control of Sato during the Term of
this Agreement or thereafter (if Section 20.1 applies).  Notwithstanding
anything herein to the contrary, Sato Know-How shall exclude Sato Patents, but
shall include Sato Scientific Information.

1.90“Sato Patent” means a Patent that claims inventions necessary for the
development, manufacture, use, sale, offer for sale and/or importation of
Licensed Product within the Licensed Field, and that is Controlled by Sato
during the Term of this Agreement or thereafter (if Section 20.1 applies),
including without limitation Sato’s interest in any Joint Patents.

1.91“Sato Trademarks” has the meaning set forth in Section 8.1.

1.92“Scientific Information” means all Information relating to or comprising
medical, toxicological, pharmacological, pre-clinical, clinical and chemical
data; specifications; medical uses; adverse reactions; formulations;
bioanalytical metrics; analytical and quality control data and methods; and all
proprietary information submitted to relevant Regulatory Authorities to support
a Drug Approval Application for and Marketing Approval of the Licensed Product
in the Licensed Field in any country of the world.  

1.93“Sole Inventions” has the meaning set forth in Section 7.2.

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requested with respect to the omitted portions.

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1.94“Specifications” means the specifications set forth in Annex 3 or, if
applicable, the Modified Specifications.

1.95“Study Materials” means any supplies of Licensed Product as well as placebos
for use in developing the Licensed Product in the Licensed Field.

1.96“Term” shall have the meaning set forth in Section 18.1.

1.97“Third Party” means any person or corporation or unincorporated body other
than Novan and Sato and their respective Affiliates, including, without being
limited to, governmental bodies and authorities.

1.98“Third-Party Licensee” has the meaning set forth in Section 2.10(i).

1.99“Third-Party Territory” has the meaning set forth in Section 2.10(i).

1.100“Trademark Infringement” has the meaning set forth in Section 8.2(v).

1.101“UNC” means The University of North Carolina at Chapel Hill.

1.102“UNC IP” has the meaning set forth in Section 2.7.

1.103“UNC License Agreement” means that certain Amended, Restated and
Consolidated License Agreement between Novan and UNC with an effective date of
June 27, 2012 and as amended on November 30, 2012 and April 12, 2016, and as may
be further amended from time to time.

1.104“USD” means a United States Dollar.

1.105“U.S.” means the United States of America, its territories and possessions.

1.106“Valid Claim” means, for a country, a claim of an issued and unexpired
Patent, or a Patent application filed in good faith, in each case, that is
within the Novan Patents (including the Joint Patents), and that has not been
held unpatentable, invalid, or unenforceable by a final unappealable decision of
a court or other government agency of competent jurisdiction, in an unappealed
or unappealable decision, admitted to be invalid or unenforceable through
reissue, re-examination, disclaimer, or otherwise.

1.107“Withholding Taxes” has the meaning set forth in Section 15.6.

2.Grant of License; Right of First Negotiation

2.1License Grant to Sato.  Subject to the terms and conditions of this
Agreement, Novan hereby grants to Sato, and Sato accepts, an exclusive,
royalty-bearing, non-transferable (except pursuant to Section 22.1) right and
license under Novan Know-How and Novan Patents, with the right to grant
sublicenses solely with Novan’s prior written consent (not to be unreasonably
withheld, delayed or conditioned), to develop, manufacture (but excluding

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the manufacture of Compound as set forth in Section 5.4), use, sell, offer for
sale, import, market, distribute and promote the Licensed Product in the
Licensed Field and in the Licensed Territory.  For clarity, the license granted
under this Section 2.1 does not grant Sato any right to manufacture or have
manufactured the Compound, or any right to use, sell, offer for sale or import
the Compound except in connection with the development, manufacture or
commercialization of Licensed Product in the Licensed Field in the Licensed
Territory.

2.2No Practice of Novan Patents and Novan Know-How Outside Scope of
License.  Sato shall not, directly or through its Affiliates or sublicensees,
practice the Novan Patents and Novan Know-How outside the scope of the license
granted to it in Section 2.1.  

2.3License Grant to Novan.  Subject to the terms and conditions of this
Agreement, Sato hereby grants to Novan and Novan accepts, an exclusive, fully
paid-up, royalty-free, non-transferable (except pursuant to Section 22.1) right
and license under Sato Know-How and Sato Patents, with the right to, subject to
Sections 2.3(i) through 2.3(vii), grant sublicenses through multiple tiers of
sublicensees, develop, manufacture, use, sell, offer for sale, import, market,
distribute and promote the Licensed Product in the Licensed Field outside the
Licensed Territory and within the Licensed Territory to manufacture Goods for
sale outside the Licensed Territory (the “Novan License”).

Each agreement between Novan and a sublicensee, or between Novan’s sublicensees
and their further sublicensees, granting a sublicense under the Novan License:

(i)shall be in writing and subject and subordinate to, and consistent with, the
terms and conditions of this Agreement;

(ii)shall not diminish, reduce or eliminate any of Novan’s obligations under
this Agreement;

(iii)shall require the sublicensee(s) to comply with all applicable terms of
this Agreement;

(iv)shall require further sublicensing to be done only on terms consistent with
this Section 2.3, with Novan being responsible for the performance of each such
sublicensee and ensuring that each sublicensee complies with all relevant
provisions of this Agreement;

(v)for any sublicense to a Third Party, shall provide that such sublicense
[***], including, without limitation, the [***] unless and until either (a)
[***], or (b) [***];

(vi)for any sublicense to a Third Party, shall provide that [***], provided that
the Novan Know-How shall include all Information [***] with respect to the
Licensed Product; and

(vii)if Novan grants to any Third Party a sublicense under the license granted
to Novan in this Section 2.3 or in Section 7.4(iii), other than with respect to
[***] or with

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respect to safety data (which is to be made available as set forth in Section
2.3(vi)), [***] based on (a) [***], (b) [***], and (c) [***].

2.4Joint Committee.

(i)Membership.  Within [***] after the Effective Date, each Party shall appoint
three (3) of its senior employees with appropriate expertise related to the
then-ongoing activities in connection with Licensed Product in the Licensed
Field to serve on the Joint Committee (“JC”).  Each Party may replace its JC
representatives by written notice to the other Party.  For the first [***]
following the Effective Date, a JC member appointed by Novan shall serve as
chairperson of the JC.  In each subsequent year commencing upon an anniversary
of the Effective Date, the chairperson shall be appointed by the Party that did
not appoint the chairperson for the immediately preceding year.

(ii)Responsibilities.  The JC shall oversee the research, development, and
commercialization of the Licensed Products in the Licensed Territory.  In
particular, the JC shall:

(a)coordinate the Parties’ communications and exchange of Scientific Information
and data regarding development and marketing activities pursuant to the
Agreement as further specified in Articles 3, 4, 6, 7 and 9;

(b)review and serve as a forum for discussing the Development Plan and review
and approve amendments thereto;

(c)review and approve any proposed changes to the Specifications for Licensed
Products in the Licensed Territory in the Licensed Field; and

(d)perform such other functions as are set forth herein or as the Parties may
mutually agree in writing, except where in conflict with any provision of this
Agreement.

(iii)JC Meetings.  The JC shall meet at least once every [***] prior to the
First Commercial Sale of the Licensed Product in the Licensed Field in the
Licensed Territory and at least [***] every year thereafter, in each case at
times mutually agreed upon by the Parties.  At least [***] of such meetings per
calendar year shall be held in person, and all other such meetings may be held
by teleconference or videoconference.  The location of the meetings of the JC to
be held in person shall be agreed upon by the Parties.  Each Party shall bear
all the expenses of its representatives on the JC.

(iv)JC Decision-Making.  The JC shall operate by unanimous consent of its
members.  Any disagreement between the representatives of the Parties on the JC
as to matters within the JC’s jurisdiction that remain unresolved for [***]
shall, at the election of either Party’s JC members, be submitted to the
Parties’ designated officers for resolution in accordance with Section
24.1.  The JC shall not have the power to amend or waive compliance with this
Agreement.

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(v)JC Meeting Agendas.  The JC chairperson shall be responsible for preparing
and circulating an agenda in advance of each meeting of the JC, and preparing
and issuing minutes of each meeting within [***] thereafter.  Such minutes will
not be finalized until both Parties’ representatives on the JC review and
confirm the accuracy of such minutes in writing.  Sato shall provide a summary
of its technical and other efforts made towards the First Commercial Sale of the
Licensed Product in the Licensed Field in the Licensed Territory at each meeting
of the JC and shall provide the JC with any updates that have occurred since the
last meeting.  Each Party will disclose to the other Party any other proposed
agenda items along with appropriate information at least [***] in advance of
each meeting of the JC; provided that, under exigent circumstances requiring the
JC’s input, a Party may provide its agenda items to the other Party within a
lesser period of time in advance of the meeting so long as such other Party
consents to such later addition of such agenda items for such JC meeting.  

(vi)Disbandment.  The JC shall continue to exist until the first to occur of (1)
the Parties mutually agreeing in writing to disband the JC or (2) the expiration
or termination of this Agreement.

2.5No Other Licenses.  Neither Party grants to the other Party any rights,
licenses or covenants in or to any intellectual property, whether by
implication, estoppel, or otherwise, other than the license rights that are
expressly granted under this Agreement.

2.6Retained Rights.  Novan will at all times retain the exclusive and absolute
right to practice and license the Novan Know-How and Novan Patents for any and
all uses outside of the Licensed Field in the Licensed Territory, and for all
uses outside the Licensed Territory.

2.7Upstream Agreement.  Sato hereby acknowledges and agrees that all licenses
granted by Novan under this Article 2, to the extent they constitute sublicenses
under intellectual property rights owned or controlled by UNC and licensed to
Novan under the UNC License Agreement (the “UNC IP”), are subject to the
limitations set forth in, and other relevant terms and conditions of, the UNC
License Agreement.  

2.8Non-Compete.  During the Term of this Agreement, Sato and its Affiliates
shall not, directly or indirectly (by itself or with or through any Third
Party), conduct outside the scope of this Agreement any commercialization of any
Competing Product in the Licensed Territory.

2.9Third-Party Information, Scientific Information or Patents.  If, after the
Effective Date, either Party enters into an agreement or other arrangement to
obtain a license or other rights to or under Information or Patents that are
owned or controlled by a Third Party and that would, solely but for the
operation of Section 1.17, in the case of Novan be included in the Novan
Know-How or Novan Patents or, in the case of Sato, be Sato Know-How or Sato
Patents, then the Party obtaining such license or rights shall promptly notify
the other Party and shall specify in such notice the type and amount of payments
that would be due to such Third Party by reason of the practice or use of, or
access to, such Information or Patents by the other Party pursuant to the
license set forth in Section 2.1 or 2.3, as applicable (but not by reason of the

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practice or use of, or access to, such Information or Patents outside the scope
of such license).  The Party receiving such notice may elect in writing to bear
the responsibility for such additional payments, and upon such receiving Party’s
written election to bear such responsibility, the Information, Scientific
Information, or Patents as applicable, shall thereafter be deemed “Controlled”
by the Party originally obtaining such license or rights (notwithstanding
Section 1.17), and shall be subject to the license under Section 2.1 or 2.3, as
applicable.

2.10Exclusivity Period; Exclusive Option for Negotiation of Additional Licensed
Territories.

(i)Option.  Subject to the terms and conditions of this Agreement, Novan hereby
grants to Sato the exclusive option to elect by written notice to Novan during
the Option Period to negotiate to acquire an exclusive license under Novan
Know-How and Novan Patents, with the right to grant sublicenses solely with
Novan’s prior written consent (not to be unreasonably withheld, delayed or
conditioned), to develop (including to obtain relevant Marketing Approvals),
manufacture, use, sell, offer for sale, import, market, distribute and promote
the Licensed Product in the Licensed Field in one or more countries in the
Additional Licensed Territories (the “Option”).  In consideration for the grant
of the Option, Sato shall pay to Novan the Option Exercise Fee within [***]
after [***].  For clarity, prior to the Option Period, Novan shall retain the
right to license the Novan Know-How and Novan Patents to a Third Party (a
“Third-Party Licensee”) to develop, manufacture, use, sell, offer for sale,
import, market, distribute and promote the Licensed Product in the Licensed
Field in one or more countries in the Additional Licensed Territories (the
“Third-Party Territory”).  In the event Novan enters into such an agreement with
a Third-Party Licensee, Sato’s Option hereunder shall not be exercisable with
respect to that Third-Party Territory.

(ii)Exercise of Option.  Subject to Section 2.10(i), Sato may, in its sole
discretion, exercise the Option at any time during the Option Period by written
notice of such exercise to Novan prior to the expiration of the Option
Period.  If Sato so exercises the Option, the Parties shall negotiate in good
faith until the expiration of the Option Period or until the Parties enter into
the Additional License Agreement, whichever is earlier, the terms pursuant to
which Sato would obtain an exclusive license to develop and commercialize the
Licensed Product in the Licensed Field in the Additional Licensed Territories
(excluding the Third-Party Territory) (such license, the “Additional License
Agreement”).  If the Parties do not enter into an Additional License Agreement
within the Option Period, then Novan shall be free to grant such rights to one
or more Third Parties with no further obligation to Sato.

3.Diligence

3.1Diligence of Sato.  Sato shall (a) use Commercially Reasonable Efforts to
develop the Licensed Product in the Licensed Field in the Licensed Territory in
accordance with the Development Plan, and (b) shall develop the Licensed Product
in the Licensed Field in the Licensed Territory in accordance with the
requirements of this Agreement and in conformity with all applicable
Laws.  Sato’s obligations under this Section 3.1 shall include, but not be
limited to, the following:

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(i)using Commercially Reasonable Efforts to submit a New Drug Application for
the Licensed Product in the Licensed Field with the PMDA (a “JNDA”) as soon as
reasonably practical after the Effective Date; and

(ii)using Commercially Reasonable Efforts to obtain, and once obtained, to
maintain, Marketing Approval for the Licensed Product in the Licensed Field in
the Licensed Territory.

3.2Diligence of Novan. Novan shall use Commercially Reasonable Efforts to obtain
Marketing Approval for the Licensed Product in the Licensed Field in the U.S.
Novan shall also use Commercially Reasonable Efforts to provide Sato, at Sato’s
request, with reasonable assistance, [***], relating to Sato’s development of
the Licensed Product and obtainment of Marketing Approvals for the Licensed
Product in the Licensed Field in the Licensed Territory; provided that if the
assistance required by Sato pursuant to the immediately preceding sentence
requires [***], then Novan shall be obligated to [***].

4.DEVELOPMENT and COMMERCIALIZATION OF LICENSED PRODUCT

4.1PMDA Consultation.  Within [***] after Sato’s receipt of Novan Scientific
Information pursuant to Section 6.1, Sato shall use Commercially Reasonable
Efforts to visit and start consultation with PMDA with respect to development of
and obtainment of the Marketing Approval for the Licensed Product in the
Licensed Field in the Licensed Territory.  Novan shall, at Sato’s request,
reasonably cooperate with Sato in such PMDA consultation (including but not
limited to by attending such PMDA consultation) at Novan’s expense.  

4.2Development Plan.  Within [***] after the completion of the PMDA consultation
described in Section 4.1, Sato shall submit a development plan (“Development
Plan”) to the JC for review and approval.  The Development Plan shall, at all
times, contain (a) detailed plans of Sato’s studies to support obtaining or
maintaining Marketing Approval of the Licensed Product in the Licensed Field in
the Licensed Territory, including study designs, CMC/process development
protocols, summaries of nonclinical study protocols, and summaries of clinical
study protocols, summaries of post-approval study protocols; and (b) a detailed
timeline for achieving each key milestone in the development of the Licensed
Product in the Licensed Field in the Licensed Territory and target dates for
regulatory submissions to a Regulatory Authority with respect to the Licensed
Product in the Licensed Field.  The Development Plan shall be reviewed [***]
after the first submission by Sato to Novan, and any material amendment to the
Development Plan shall be subject to the JC’s prior written approval, which
approval shall not be unreasonably withheld.

4.3Modified Specifications.  Sato may propose modifications to the
Specifications for the Licensed Product in the Licensed Field.  The JC shall
discuss any such proposed modifications and the bases therefor.  If the JC
approves such modification, then the Specifications shall be updated as approved
by the JC (“Modified Specifications”).  For clarity, Novan shall have no
obligation to modify the specifications for Licensed Product in the Licensed

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Field outside the Licensed Territory if any Modified Specifications are adopted
for the Licensed Product in the Licensed Field in the Licensed Territory.

4.4JNDA.  During the Term, Sato will be responsible for conducting all
activities necessary to support the submission of the JNDA.  Sato will submit
the JNDA utilizing pre-clinical information included in the Novan Scientific
Information.  In the event that the PMDA determines, as documented in official,
written correspondence with Sato,  that the applicable Pre-Clinical Studies are
not sufficient for approval of the JNDA, then the JC shall decide whether the
applicable Pre-Clinical Studies should be repeated.  If the JC determines that
such Pre-Clinical Studies should be repeated (such repeated Pre-Clinical
Studies, the “Repeat Studies”), Novan shall perform such Repeat Studies at
Novan’s expense, provided that in no event shall Novan be required to spend more
than one million ($1,000,000) USD with regard to all Repeat Studies in the
aggregate.  Sato agrees that Novan owns the data and results of any such Repeat
Study.  Other studies for Licensed Product in the Licensed Field, including the
implementation of, cost sharing for, and ownership of data resulting from such
studies, shall be discussed by the JC.  Novan may, at its discretion, elect to
participate in the funding and conduct of any such studies.

4.5Costs.  Sato shall have full responsibility for all development and
commercialization activities for the Licensed Product in the Licensed Field in
the Licensed Territory, including, without limitation, all activities in
Sections 4.4 and 4.7, at Sato’s expense (unless otherwise provided in this
Agreement) and risk and in accordance with the terms of this Agreement and in
conformity with all applicable Laws.

4.6Marketing.  Sato shall commence the marketing of the Licensed Product in the
Licensed Field under either the Novan Trademark or another trademark selected
and owned or Controlled by Sato, as Sato in its sole discretion shall decide and
as set forth in Article 8, in the Licensed Territory within [***] after the
first [***] of the Licensed Product in the Licensed Field is listed.  Sato shall
notify Novan promptly of the date of First Commercial Sale of the Licensed
Product in the Licensed Field in the Licensed Territory.  

4.7Launch.  After receiving Marketing Approval of the Licensed Product in the
Licensed Field in the Licensed Territory, Sato shall use Commercially Reasonable
Efforts to market, sell and promote the Licensed Product in the Licensed Field
in the Licensed Territory.

Specifically, and without limiting any of Sato’s obligations under Sections 4.6
or 4.7, Sato shall (a) launch commercially a Licensed Product in the Licensed
Field in the Licensed Territory no later than [***] after receipt of Marketing
Approval for such Licensed Product in the Licensed Field in the Licensed
Territory, and (b) not withdraw a Licensed Product from sale or abandon for more
than [***] the sale of a Licensed Product, provided that Sato shall not be in
breach of the foregoing obligations to the extent that Sato’s failure to launch
or abandonment of the Licensed Product as described above results from a [***],
as applicable, including without limitation if [***], and further provided that
to the extent that Section 21.1 applies to prevent Sato from complying with its
obligations under this Section 4.7, then Sato shall not be deemed in breach of
this Section 4.7 and the Parties shall have the rights and obligations set forth
in Section 21.1.

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4.8Communications.  The JC will coordinate communications regarding certain
aspects of the Parties’ marketing efforts for Licensed Product in the Licensed
Field as follows.  Through the JC:

(i)Novan shall share with Sato [***] any and all of the marketing information in
the Control of Novan with respect to the Licensed Product in the Licensed Field,
including without limitation, complete promotion plans and strategies, as well
as all promotional and sales materials used for the launch and marketing of the
Licensed Product in the Licensed Field outside the Licensed Territory.

(ii)Sato shall share with Novan [***] any and all of marketing information in
the Control of Sato with respect to Licensed Product in the Licensed Field,
including without limitation, complete promotion plans and strategies, as well
as all promotional and sales activities and materials used for the launch and
marketing of the Licensed Product in the Licensed Field in the Licensed
Territory.

4.9Approvals.  Sato shall (i) use Commercially Reasonable Efforts not to abandon
or allow to lapse any Drug Approval Application for a Licensed Product in the
Licensed Field in the Licensed Territory, and (ii) not abandon or allow to lapse
any Marketing Approval for the Licensed Product in the Licensed Field in the
Licensed Territory.

5.Manufacturing & Supply

5.1Development Supply.  Novan shall, by itself or through its Third Party
contract manufacturer, supply to Sato, and Sato shall purchase from Novan, all
quantities of Study Materials required by Sato to develop the Licensed Product
in the Licensed Field in the Licensed Territory.  

5.2Pricing.  Sato will purchase the Study Materials at a price equal to the
Fully Burdened Manufacturing Cost thereof.  The other terms concerning sales and
purchase of the Study Material shall be separately determined after the
completion of the PMDA consultation pursuant to Section 4.1 and set forth in a
clinical supply agreement between the Parties.

5.3Payment.  Novan will invoice Sato for each delivery of Study
Materials.  Payment is due [***] after the date of receipt of invoice by
Sato.  All payments under this Section 5.3 shall be made in USD.

5.4Commercial Supply.  Within [***] after the conclusion of the PMDA
consultation described in Section 4.1, the Parties shall commence negotiations
of a commercial supply agreement that shall govern Novan’s supply of Compound to
Sato for Sato’s manufacture of the Licensed Product (the “Commercial Supply
Agreement”).  The Parties shall use Commercially Reasonable Efforts to conclude
negotiations of such Commercial Supply Agreement within [***] after they
commence such negotiations.  Both Parties understand that the Commercial Supply
Agreement shall be modified, if necessary,  consistent with the conditions of
the Marketing Approval in the Licensed Territory. Pursuant to the Commercial
Supply Agreement, Novan shall be obligated, by itself or through its Third Party
contract

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manufacturer, to supply to Sato, and Sato shall be required to purchase Compound
at a price [***] equal to [***] of Licensed Product in the Licensed Territory,
provided that such price per gram shall not be less than an amount equal to the
Base Price (as defined below).  The “Base Price” shall mean the USD value of
[***] of Compound supplied, calculated using the Conversion Rate.  For example,
if [***] of Licensed Product in the Licensed Territory is [***], then Sato shall
be required to purchase Compound at a price [***] of [***], provided that such
price [***] is not less than an amount equal to the Base Price at the time such
payment is due.  All payments under the Commercial Supply Agreement shall be
made in JPY.

5.5Negotiations for Supply of Licensed Products.  At any time, Sato may propose
in writing to negotiate the terms and conditions pursuant to which it would
purchase from Novan necessary volumes of the finished Licensed Products to be
sold in the Licensed Field in the Licensed Territory, and the Parties shall
negotiate in good faith such terms and conditions; provided that no such terms
and conditions shall become effective without the mutual written consent of the
Parties (the agreement with such effective terms and conditions, the “Product
Supply Agreement”).

5.6Appointment of Distributors; No Delivery or Sale for Use Outside Licensed
Territory.  Sato may at its discretion appoint distributors or wholesalers for
the Licensed Product in the Licensed Field in the Licensed
Territory.  Throughout the Term, Sato shall not, and shall use Commercially
Reasonable Efforts (consistent with any applicable Law) to obligate its
distributors or wholesalers to not, deliver or cause to be delivered, including
via the Internet or mail order, Licensed Product either outside the Licensed
Field in the Licensed Territory, or outside the Licensed Territory, and to not
sell any Licensed Product to a purchaser if in either case Sato, its approved
distributors or wholesalers knows, or has reason to believe, that such purchaser
intends to sell such Licensed Product outside the Licensed Field in the Licensed
Territory or to remove such Licensed Product from the Licensed Territory for the
purpose of sales or use by patients of the Licensed Product outside the Licensed
Territory.

6.Exchange of Scientific Information

6.1Technology Transfer.  Within [***] after the Effective Date, Novan shall
deliver to Sato a copy of all Novan Scientific Information listed in Annex 1
that is available in tangible form as of the Effective Date.  Novan shall
deliver to Sato copies of Novan Scientific Information that is necessary for the
development, manufacture or commercialization of the Licensed Product in the
Licensed Field in the Licensed Territory becomes available in tangible or
written form after the Effective Date, as may be mutually agreed upon by the
Parties.

6.2Communication by Novan Relating to Material Events.  Whenever any material
event occurs in the course of the development of the Licensed Product in the
Licensed Field by Novan or Novan Licensees of which Novan becomes aware, but in
no event less than [***] until such time as Sato receives Marketing Approval for
the Licensed Product in the Licensed Field in the Licensed Territory, Novan
shall disclose to Sato all Novan Scientific Information resulting from all
development activities with respect to the Licensed Product in the Licensed
Field conducted by Novan or its Affiliates as may be necessary or useful for

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development of the Licensed Product in the Licensed Field in the Licensed
Territory, and a description of the status of such development efforts.

6.3Communication by Sato Relating to Material Events.  Whenever any material
event occurs in the course of the development of the Licensed Product by Sato,
but in no event less than [***] during the Term of this Agreement, Sato shall
disclose to Novan all Sato Scientific Information resulting from all development
activities with respect to the Licensed Product in the Licensed Field conducted
by Sato or its Affiliates, and a description of the status of such development
efforts.

6.4Use of Scientific Information. Each Party shall have the right, at no
additional expense, to use all Scientific Information disclosed to it pursuant
to Section 6.2 or Section 6.3, as applicable, for the development and
commercialization of the Licensed Product pursuant to the license granted to it
in Sections 2.1 and 2.3.

6.5Right of Cross-Reference.  Novan, its Affiliates and Novan Licensees shall
have the right to cross-reference, for purposes of developing Licensed Products
outside of the Licensed Territory or in the Licensed Territory outside the
Licensed Field, all Drug Approval Applications and other filings with Regulatory
Authorities made by Sato for Licensed Products, subject to Section 2.3 (for
clarity, for [***], this Section 6.5 applies, as to [***]).  Sato shall have the
right to cross-reference, for purposes of developing Licensed Products in the
Licensed Field in the Licensed Territory all Drug Approval Applications and
other filings with Regulatory Authorities made by Novan or, to the extent
Controlled by Novan and as long as Novan would not incur costs to grant such a
right to cross-reference to Sato, the Novan Licensees.

6.6Communication Through Joint Committee.  The JC shall coordinate the Parties’
sharing of Scientific Information as required under this Agreement.  Through the
JC:

(i)Novan shall share with Sato, [***], any and all Novan Scientific Information
generated or compiled during the Term of this Agreement for use in development
and commercialization of the Licensed Product in the Licensed Field in the
Licensed Territory.

(ii)Sato shall share with Novan, [***], any and all Sato Scientific Information
generated or compiled during the Term of this Agreement for use in development
and commercialization of the Licensed Product outside of the Licensed Territory
or within the Licensed Territory outside the Licensed Field.

6.7Ownership of Novan Scientific Information. Sato agrees that all Novan
Scientific Information delivered by Novan or any of its Affiliates or Novan
Licensees hereunder shall, as between the Parties, at all times be and remain
sole and exclusive property of Novan, or its Affiliates or Novan Licensees,
respectively.

6.8Ownership of Sato Scientific Information.  Novan agrees that all Sato
Scientific Information delivered by Sato or any of its Affiliates hereunder
shall, as between the Parties, at all times be and remain sole and exclusive
property of Sato or its Affiliates, respectively.

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7.Inventions; Access to Improvements; Patents

7.1Improvements.  Novan shall have the right to grant sublicenses under Section
2.3 according to the terms therein with respect to Sato Know-How and Sato
Patents that constitute Improvements (“Sato Improvements”).  

7.2Ownership of Inventions.  Inventorship shall be determined in accordance with
U.S. patent laws.  Any Invention made solely by employees, agents, or
independent contractors of a Party in the course of performing activities under
this Agreement, together with all intellectual property rights therein (“Sole
Inventions”) shall be owned by such Party.  Any Invention made jointly by
employees, agents, or independent contractors of each Party, together with all
intellectual property rights therein (“Joint Inventions”) shall be owned jointly
by the Parties in accordance with joint ownership interests of co-inventors
under U.S. patent laws, with each joint Party having, unless otherwise set forth
in this Agreement, the unrestricted right to license and grant rights to
sublicense any such Joint Invention without any duty of accounting to the other
Party.

7.3Disclosure of Inventions.  Each Party shall promptly disclose to the other
Party in writing any Invention disclosures, or other similar documents,
submitted to it by its employees, agents, or independent contractors describing
each and every Invention that may be either a Sole Invention or a Joint
Invention, and all Information relating to such Invention.

7.4Prosecution of Patents.

(i)Novan Patents Other than Joint Patents.  Novan shall have the sole right and
authority to file, prosecute, and maintain Novan Patents other than Joint
Patents on a worldwide basis at its sole discretion and at its own cost.  Novan
shall provide Sato with a copy of material communications from patent
authorities in the Licensed Territory regarding the Novan Patents, and shall
provide drafts of any material filings or responses to be made to such Patent
authorities in a timely manner. Novan may [***] a Novan Patent in the Licensed
Territory [***].  For any Novan Patent that Novan is filing, prosecuting or
maintaining, Novan shall do so at its own cost.

(ii)Sato Patents Other than Joint Patents.  Sato shall have the first right and
authority to file, prosecute, and maintain Sato Patents other than Joint Patents
on a worldwide basis at its sole discretion and at its own cost.  Sato shall
provide Novan with a copy of material communications from patent authorities in
the Licensed Territory regarding the Sato Patents, and shall provide drafts of
any material filings or responses to be made to such Patent authorities in a
timely manner.  Notwithstanding the foregoing, if Sato determines in its sole
discretion to abandon or not maintain a Sato Patent other than a Joint Patent,
Sato shall provide Novan with [***] prior written notice of such determination
and, if Novan so requests, shall provide Novan with the opportunity to prosecute
and maintain such Sato Patent in the name of Sato.  Thereafter, Novan shall bear
all expenses of filing, prosecuting and maintaining such Sato Patent.

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(iii)Joint Patents.  Subject to this Section 7.4(iii) and  (a) unless otherwise
agreed by the Parties Sato will prosecute and maintain any Patent applications
Covering a Joint Invention (any such Patent application and any Patents issuing
therefrom, a “Joint Patent”) in the Licensed Territory and (b) Novan shall have
the first right to prosecute and maintain the Joint Patents outside the Licensed
Territory, with Sato having a backup right to do so if Novan elects to cease
such prosecution and maintenance on [***] prior written notice to Sato.  The
Parties shall coordinate their efforts as appropriate to make such prosecution
activities as efficient, convenient, and harmonious as possible.  The Parties
shall share equally all expenses of filing, prosecuting and maintaining such
Joint Patents in the Licensed Territory.  [***] of filing, prosecuting and
maintaining such Joint Patents outside the Licensed Territory.  [***] of filing,
prosecuting and maintaining the Joint Patents outside the Licensed Territory
pursuant to this Section 7.4(iii), Sato hereby grants Novan an exclusive, fully
paid-up, royalty-free, non-transferable (except pursuant to Section 22.1)
license, with the right to grant sublicenses through multiple tiers of
sublicensees, under Sato’s interest in the Joint Patents for all purposes
outside of those within the scope of the rights granted to Novan under Section
2.3, subject to the last sentence of this Section 7.4(iii).  The Party that
prosecutes a Joint Patent (the “Prosecuting Party”) in the Licensed Territory
shall provide the other Party the opportunity to review and comment on any and
all such prosecution efforts regarding the applicable Joint Patent in the
Licensed Territory, provided that the Prosecuting Party shall have final control
over such prosecution efforts after reasonably considering the other Party’s
comments, if any.  The Prosecuting Party for a Joint Patent in any jurisdiction
shall provide the other Party with a copy of all material communications from
any Patent authority in the applicable jurisdictions regarding the Joint Patent
being prosecuted by such Party, and shall provide drafts of any material filings
or responses to be made to such patent authorities a reasonable amount of time
in advance of submitting such filings or responses.  In particular, each Party
agrees to provide the other Party with all information necessary or desirable to
enable the other Party to comply with any duty of candor and/or duty of
disclosure requirements of any Patent authority.  Notwithstanding anything to
the contrary, the Prosecuting Party shall not take any action while prosecuting
or maintaining the applicable Joint Patent that could reasonably be expected to
have a materially detrimental effect on the other Party’s interest in such Joint
Patent or any Novan Patent.  Except to the extent a Party is restricted by the
licenses granted by such Party to the other Party under the terms of this
Agreement, and/or the other covenants contained in this Agreement, each Party
shall be entitled to practice, and grant licenses to Third Parties and
Affiliates of such Third Parties to practice, the Joint Patents and all Joint
Inventions without restriction or an obligation to account to the other Party,
and the other Party shall consent and hereby consents, without additional
consideration, to any and all such licenses.  Notwithstanding the foregoing, if
Novan grants a sublicense under the license granted to Novan pursuant to this
Section 7.4(iii), then Section 2.3(vii) will apply.

(iv)Cooperation in Prosecution.  Each Party shall provide the other Party all
reasonable assistance and cooperation in the Patent prosecution efforts
described above in this Section 7.4, including without limitation providing any
necessary power of attorney and executing any other required documents or
instruments for such prosecution.

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7.5Infringement of Patents by Third Parties.  

(i)Notification.  Each Party shall promptly notify the other Party in writing of
any existing or threatened infringement of the Novan Patents (including Joint
Patents) of which it becomes aware in the Licensed Territory, and shall provide
to the other Party any and all evidence and information available to such Party
regarding such alleged infringement.

(ii)Product Infringement of Novan Patents (Including Joint Patents) in the
Licensed Field in the Licensed Territory.

(a)If a Party becomes aware of any actual or alleged existing or threatened
infringement by a Third Party of any Novan Patent, including any Joint Patent,
by making, using, importing, offering for sale, or selling the Licensed Product
in the Licensed Field (such activities, “Product Infringement”) in the Licensed
Territory, such Party shall notify the other Party as provided in Section
7.5(i).

(b)With respect to Product Infringement of Novan Patents excluding Joint
Patents, subject to Section 7.11, [***] an appropriate suit or other action
against any Person engaged in such Product Infringement in the Licensed
Territory, subject to Section 7.5(ii)(d); provided that if [***], it shall
[***].  [***] shall provide to [***] reasonable assistance in any such
enforcement, including without limitation joining an action as a party plaintiff
if so required by Laws to pursue such action.  [***] shall keep [***] regularly
informed of the status and progress of such enforcement efforts, and shall
reasonably consider [***]’s comments on any such efforts.  [***] shall [***] in
connection with each Party’s activities under this Section 7.5(ii)(b), provided
that [***] pursuant to this Agreement, [***], [***] and [***] shall
[***].  [***] may [***] under this Section 7.5(ii)(b) [***], provided that [***]
pursuant to this Agreement.

(c)With respect to Product Infringement of Joint Patents, Sato shall have a
period of [***] (or any such shorter period described in Section 7.5(ii)(b))
after the notification to or by Sato pursuant to Section 7.5(ii)(a), to elect to
so enforce such Joint Patent in the Licensed Territory, subject to Section
7.5(ii)(d).  If Sato does not so elect, Sato shall so notify Novan in writing
during such [***] period, but in no event later than [***] prior to any deadline
relating to loss of any rights with respect to the Product Infringement,
whichever is earlier, in which case Novan shall have the right, but not the
obligation, to commence a suit or take action to enforce such Joint Patent
against the Third Party(ies) allegedly perpetrating such Product
Infringement.  Each Party shall provide to the Party enforcing any such rights
under this Section 7.5(ii)(c) reasonable assistance in such enforcement,
including without limitation joining an action as a party plaintiff if so
required by Laws to pursue such action.  The enforcing Party shall keep the
other Party regularly informed of the status and progress of such enforcement
efforts, and shall reasonably consider the other Party’s comments on any such
efforts.  The Parties shall equally bear and be responsible for all costs
incurred in connection with enforcing the Joint Patents under this Section
7.5(ii)(c).

(d)The Party not bringing an action with respect to Product Infringement under
this Section 7.5 shall be entitled to separate representation in such matter by

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counsel of its own choice and at its own expense, but such Party shall at all
times cooperate fully with the Party bringing such action.  Additionally, the
Party not bringing an action under this Section 7.5 may have an opportunity to
participate in such action to the extent that the Parties may mutually agree at
the time the other Party elects to bring an action hereunder.

(iii)Other Infringement of Novan Patents (Including Joint Patents) Outside the
Licensed Field in the Licensed Territory and Outside the Territory.

(a)For any and all infringement of Novan Patents other than Joint Patents
anywhere outside the Licensed Territory, and for any and all infringement other
than Product Infringement of the Novan Patents (other than Joint Patents) in the
Licensed Territory, Novan shall have the sole and exclusive right, but not the
obligation, to bring an appropriate suit or other action against any person or
entity engaged in such infringement of such Patents, in its sole discretion, and
as between the Parties Novan shall bear all related expenses and retain all
related recoveries.  If Novan brings a suit or other action against such
infringement, Novan shall periodically make a report to Sato about the state of
the progress of the suit or action.

(b)If a Third Party infringes a Joint Patent outside the Licensed Territory,
Novan shall have the sole and exclusive right, but not the obligation, to bring
an appropriate suit or other action against any person or entity engaged in such
infringement of such Joint Patent, in its sole discretion, and as between the
Parties Novan shall bear all related expenses and retain all related
recoveries.  Sato shall provide to Novan reasonable assistance in such
enforcement, at Novan’s request and expense, including without limitation
joining such action as a party plaintiff if so required by Laws to pursue such
action.

(iv)  Settlement.  Subject to Section 7.11, Sato shall not settle any claim,
suit, or action that it brings under this Section 7.5 involving Novan Patents
(excluding Joint Patents) in any manner that would negatively impact Novan,
including settlements involving the ownership, validity or enforceability of any
of the Novan Patents, or that do not include a full and unconditional release
from all liability of Novan, without the prior written consent of Novan, which
shall not be unreasonably withheld, delayed or conditioned.  Novan shall not
settle any claim, suit, or action that it brings under this Section 7.5
involving Novan Patents (excluding Joint Patents) in the Licensed Territory in
any manner that would negatively impact Sato, or that do not include a full and
unconditional release from all liability of Sato, without the prior written
consent of Sato, which shall not be unreasonably withheld, delayed or
conditioned.  Moreover, any settlement by Sato involving Novan Patents
(excluding Joint Patents), or by Novan involving Novan Patents (excluding Joint
Patents) in the Licensed Territory, that (i) results in cross-licensing or (ii)
results in sublicenses to Third Parties, shall require the other Party’s written
consent, which shall not be unreasonably withheld, delayed or
conditioned.  Neither Party shall settle any claim, suit, or action that it
brings under this Section 7.5 involving Joint Patents in any manner that would
negatively impact the other Party, including settlements on the ownership,
validity or enforceability of any of the Joint Patents, or if the settlement
does not include a full and unconditional release from all liability of the
other Party, without the prior written consent of such other Party.

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(v)Allocation of Proceeds.  Except as otherwise provided herein, if either Party
recovers monetary damages from any Third Party in a suit or action brought under
this Section 7.5, whether such damages result from the infringement of Sato
Patents or Novan Patents, such recovery shall be [***] in such litigation
(excluding expenses of internal counsel), and any [***].

7.6Infringement of Third Party Rights in the Licensed Territory.

(i)Notice.  If the development, manufacture, use, sale, offer for sale, import
or export of the Licensed Product in the Licensed Field and in the Licensed
Territory results in a claim for Patent infringement by a Third Party, the Party
first having notice of such claim shall promptly notify the other Party in
writing of such a claim.  Following such notice, the Parties agree to enter into
either a joint defense or common interest agreement, under which agreement the
Parties can share the known facts of such infringement in reasonable detail, if
they are advised to do so by counsel.

(ii)Third Party Claims.  Sato shall assume control of the defense of any claims
brought by Third Parties alleging infringement of Third Party intellectual
property rights in connection with the development, manufacture, use, sale,
offer for sale, import or export of the Licensed Product in the Licensed Field
in the Licensed Territory, represented by its own counsel.  If requested by
Sato, Novan agrees to cooperate reasonably with Sato with respect to such
litigation, at Sato’s expense.  Sato shall have the exclusive right to settle
any such claim without the consent of Novan, unless such settlement could
negatively impact Novan, including without limitation settlements on the
ownership, validity or enforceability of any Novan Patents (for which Novan’s
consent shall be required).  Any expenses incurred in defending any such claims
and any damages awarded to or settlement agreed with such Third Parties shall be
[***], provided that [***], provided that [***].  

7.7Patent Oppositions and Other Proceedings.

(i)By the Parties.  If either Party desires to bring an opposition, action for
declaratory judgment, nullity action, interference, declaration for
non-infringement, reexamination, or other attack upon the validity, title, or
enforceability of a Patent owned or controlled by a Third Party that Covers, in
the Licensed Territory, the Licensed Product in the Licensed Field, or the
manufacture, use, sale, offer for sale, or importation of the Licensed Product
in the Licensed Field (except insofar as such action is a counterclaim to or
defense of, or accompanies a defense of, a Third Party’s claim or assertion of
infringement under Section 7.6, in which case the provisions of Section 7.6
shall govern), such Party shall so notify the other Party, and the Parties shall
promptly confer to determine whether to bring such action or the manner in which
to settle such action.  [***] shall have the first right, but not the
obligation, to bring in its sole control and at its sole expense such action in
the Licensed Territory.  If [***] does not bring such action within [***] of
notification thereof pursuant to this Section 7.7 (or earlier, if required by
the nature of the proceeding), then [***] shall have the right, but not the
obligation, to bring, in [***] sole control and at its sole expense, such
action.  The Party not bringing an action under this Section 7.7 shall join the
action as a joint party plaintiff if required to enable the other Party to bring
such action, at the other Party’s expense.  Additionally, if

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appropriate, the Party not bringing an action under this Section 7.7 shall be
entitled to separate representation, at its sole expense, in such proceeding by
counsel of its own choice, and shall cooperate fully with the Party bringing
such action.  Any awards or amounts received in bringing any such action shall
[***], and any [***].

(ii)By Third Parties.  

(a)If a Novan Patent (excluding a Joint Patent) becomes the subject of any
proceeding commenced by a Third Party in the Licensed Territory in connection
with an opposition, reexamination request, action for declaratory judgment,
nullity action, interference, or other attack upon the validity, title or
enforceability thereof (except insofar as such action is a counterclaim to or
defense of, or accompanies a defense of, an action for infringement against a
Third Party under Section 7.5, in which case the provisions of Section 7.5 shall
govern), then [***] shall control such defense at its sole cost.  Upon [***]
request, [***] shall reasonably cooperate with [***] in such defense at [***]
cost.  Subject to Section 7.11, [***] shall permit [***] to participate in the
proceeding to the extent permissible under Laws, and to be represented by its
own counsel in such proceeding, at [***] sole expense.    

(b)If a Joint Patent becomes the subject of any proceeding commenced by a Third
Party in the Licensed Territory in connection with an opposition, reexamination
request, action for declaratory judgment, nullity action, interference, or other
attack upon the validity, title or enforceability thereof (except insofar as
such action is a counterclaim to or defense of, or accompanies a defense of, an
action for infringement against a Third Party under Section 7.5, in which case
the provisions of Section 7.5 shall govern), then [***] shall control such
defense at its sole cost.  Upon [***] request, [***] shall reasonably cooperate
with [***] in such defense at [***] cost.  Subject to Section 7.11, [***] shall
permit [***] to participate in the proceeding to the extent permissible under
Laws, and to be represented by its own counsel in such proceeding, at [***] sole
expense.    

(c)Except as set forth in Sections 7.7(ii)(a) or 7.7(ii)(b) above, all expenses
incurred by the Parties in an applicable action under Sections 7.7(ii)(a) or
7.7(ii)(b) shall [***].  Any awards or amounts received in defending any such
Third Party action, if any, shall [***], as if the [***].

7.8Patent Term Extensions in the Territory.  The patent counsel of each Party
shall discuss and recommend for which, if any, of the Novan Patents in the
Licensed Territory the Parties should seek any term extensions, supplementary
protection certificates, and equivalents thereof offering Patent protection
beyond the initial term with respect to any issued Patents (“Patent Term
Extensions”) in the Licensed Territory.  Subject to Section 7.11, Sato shall
have the final decision-making authority with respect to applying for any such
Patent Term Extensions in the Licensed Territory, provided that Sato shall not
unreasonably fail or refuse to do so, and shall have the sole right to apply for
any such Patent Term Extensions Sato decides to seek, at its expense.  Novan
shall cooperate fully with Sato, at Sato’s expense, in making such filings or
taking any related actions, for example and without limitation, making available
all required regulatory data and information and executing any required
authorizations to apply for such Patent Term Extension.

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7.9Orange Book Equivalent.  Upon request of Sato and at Sato’s expense, to the
extent that Sato shall not have the right to itself do so, Novan shall file
appropriate information with Regulatory Authorities in the Licensed Territory
listing any Novan Patents with such Regulatory Authorities in the equivalent of
the U.S. Orange Book, if any, as a Patent related to the Licensed
Product.  Novan shall use Commercially Reasonable Efforts to maintain such
listing, at Sato’s expense.

7.10Patent Marking.  Sato agrees to mark or have marked with the Novan Patents
to the extent consistent with applicable Laws any Licensed Product sold by Sato
in accordance with the statutes of the Licensed Territory relating to the
marketing of patented articles.

7.11Rights and Obligations Under UNC License Agreement.  Notwithstanding
anything to the contrary in this Article 7, to the extent the provisions of this
Article 7 conflict with Novan’s rights and obligations under the UNC License
Agreement with respect to UNC IP, the terms and conditions of the UNC License
Agreement shall prevail. In such case, the Parties shall discuss in good faith
to determine a reasonable solution that may best reflect the Parties original
intentions under Article 7.

8.Trademarks

8.1General.  Sato shall be responsible for the selection, registration and
maintenance of all trademarks which it employs in connection with the
commercialization of any Licensed Product in the Licensed Field in the Licensed
Territory under this Agreement, other than the Novan Trademarks (the “Sato
Trademarks”).  Sato shall solely own the Sato Trademarks and pay all relevant
costs thereof.  Sato shall not select, register or otherwise use any trademark
that is the same as or confusingly similar to, misleading or deceptive with
respect to or that dilutes any of the Novan Trademarks.  Novan shall not use any
trademark that is the same as or confusingly similar to, misleading or deceptive
with respect to or that dilutes any of the Sato Trademarks.  Sato shall have the
sole right to initiate at its own discretion legal proceedings against any
infringement or threatened infringement of any Sato Trademark.

8.2Election to Use Novan Trademarks.  Sato shall inform Novan in writing if Sato
elects to use the Novan Trademarks, or equivalent thereof, in the Licensed
Territory, in connection with the commercialization of the Licensed Product in
the Licensed Field in the Licensed Territory, and Novan shall have the right to
approve, at its sole discretion, such use of the Novan Trademarks, including
approval of the size, position, and location thereof on the Licensed Product or
its components.  If Novan so provides its approval, the Parties shall enter into
an agreement setting forth the terms and conditions of Sato’s use of such Novan
Trademarks, subject to Section 8.1, which agreement shall include the following:

(i)Novan shall and hereby does grant to Sato an exclusive, royalty-free license
to use the Novan Trademarks on or in connection with the commercialization of
the Licensed Product in the Licensed Territory in the Licensed Field.  Novan
shall not grant to any Third Party a license to use the Novan Trademarks on or
in connection with the commercialization of any products outside the Licensed
Field in the Licensed Territory.

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(ii)Sato shall not use any trademark that is confusingly similar to, misleading
or deceptive with respect to or that dilutes any of the Novan Trademarks.

(iii)Sato shall properly designate the Novan Trademarks on the packaging of the
final Licensed Product, to the extent required or permissible by the applicable
Marketing Approvals and Sato agrees that all Licensed Products with which the
Novan Trademarks are used shall conform to all requirements of any applicable
Laws and any Regulatory Authorities in the Licensed Territory and shall be of a
level of quality commensurate to Novan’s Licensed Products outside of the
Territory, but in no event less than a reasonable level of quality.

(iv)Except as otherwise provided in this Section 8.2, if Sato elects to use the
Novan Trademarks, Novan shall have an obligation to register and maintain the
Novan Trademarks in the Licensed Territory (subject to this Section 8.2(iv)) at
Sato’s expense.  Novan shall provide Sato reasonable opportunity to review and
comment on such registration efforts regarding the Novan Trademarks.  Novan
shall provide Sato with a copy of material communications from any governmental
authority in the Licensed Territory regarding the Novan Trademark, and shall
provide drafts of any material filings or responses to be made to such
authorities in a timely manner.  Notwithstanding the foregoing, if Novan
determines in its sole discretion to abandon or not maintain any Novan Trademark
in the Licensed Territory, Novan shall provide Sato with [***] prior written
notice of such determination and, if Sato so requests, shall transfer to Sato
such Novan Trademark in the Licensed Territory.  Sato shall bear all costs of
such transfer and maintenance of such Novan Trademark in the Licensed Territory.

(v)If a Party becomes aware of any actual or alleged threatened or existing
infringement of any Novan Trademark or of any unfair trade practices, trade
dress imitation, passing off of counterfeit goods, or like offenses, against
such Novan Trademark by a Third Party in the Licensed Territory (such
activities, “Trademark Infringement”), such Party shall notify the other Party,
and shall provide to the other Party any and all evidence and information
available to such Party regarding such alleged infringement.  Sato shall have
the first right, but not the obligation, to bring an appropriate suit or other
action against any person or entity engaged in such Trademark Infringement, at
its sole expense, subject to this Section 8.2(v).  Sato shall have a period of
[***] after such notification to or by Sato, to elect to so enforce such Novan
Trademark.  If Sato does not so elect, Sato shall so notify Novan in writing
during such [***] period, or [***] prior to any deadline relating to loss of any
rights with respect to the Trademark Infringement, whichever is earlier, and
Novan shall have the right, but not the obligation, to commence a suit or take
action to enforce such Novan Trademark against such Third Party, at its sole
expense.  Each Party shall provide to the Party enforcing any such rights under
this Section 8.2(v) reasonable assistance in such enforcement, at such enforcing
Party’s request and expense, including without limitation joining an action as a
party plaintiff if so required by Laws to pursue such action.  The enforcing
Party shall keep the other Party regularly informed of the status and progress
of such enforcement efforts, and shall reasonably consider the other Party’s
comments on any such efforts.

(vi)The Party not bringing an action with respect to Trademark Infringement
under this Section 8.2 shall be entitled to separate representation in such
matter by

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counsel of its own choice and at its expense, but such Party shall at all times
cooperate fully with the Party bringing such action.  Additionally, the Party
not bringing an action under this Section 8.2 may have an opportunity to
participate in such action to the extent that the Parties may mutually agree at
the time the other Party elects to bring an action hereunder.

8.3Infringement of Sato Trademarks by Third Parties.  With respect to any Sato
Trademarks associated with Licensed Products in the Licensed Territory, each
Party shall notify the other Party promptly upon learning of any actual or
alleged threatened or existing infringement of any trademark or of any unfair
trade practices, trade dress imitation, passing off of counterfeit goods, or
like offenses, against such trademark.  Sato shall have the sole right, in its
own discretion and at its own expense, to bring an action to address such
infringement.

9.Serious Adverse Event Reporting

9.1Serious Adverse Event Reporting by the Parties.  Each Party shall (i) notify
the other Party within [***] (or any such shorter period required by applicable
Law) of its becoming aware of any information relating to the occurrence of any
serious adverse event in connection with the Licensed Product or concerning any
and all charges, complaints or claims reportable to any Regulatory Authority
relating to the Licensed Product and (ii) promptly provide to the other Party
all such information.

9.2Recall or Market Withdrawal of Licensed Product; “Dear Doctor” Letters.  In
the event that:  (i) Sato determines that an event, incident, or circumstance
has occurred which may result in the need for a recall, market withdrawal or
other removal of the Licensed Product or any lot or lots thereof from the market
in the Licensed Territory, or Novan determines that an event, incident, or
circumstance that could reasonably adversely affect the Licensed Product in the
Licensed Territory has occurred which is reasonably likely to result in the need
for a recall, market withdrawal or other removal of the Licensed Product, or any
lot or lots thereof from the market; (ii) either Party becomes aware that a
Regulatory Authority is threatening or has initiated an action to remove the
Licensed Product from the market in the Licensed Territory or, if such event
could reasonably adversely affect the Licensed Product in the Licensed
Territory, any Regulatory Authority is threatening or has initiated an action to
remove the Licensed Product from the market; or (iii) either Party is required
by any Regulatory Authority to distribute a “Dear Doctor” letter or its
equivalent regarding use of the Licensed Product in the Licensed Territory or,
if such event could reasonably adversely affect Licensed Product in the Licensed
Territory, any Regulatory Authority has required distribution of a “Dear Doctor”
letter or its equivalent regarding use of the Licensed Product, it shall
promptly advise the other Party in writing with respect thereto, and shall
provide to the other Party copies of all relevant correspondence, notices, and
the like in the possession or Control of such Party.  In such event, Sato shall
have the sole authority to determine if a recall or other removal of the
Licensed Product is required in the Licensed Territory, and shall be responsible
for conducting any such recall or other removal of the Licensed Product in the
Licensed Territory, whether voluntary or involuntary, or taking such other
remedial action required by applicable Laws in the Licensed Territory.  At
Sato’s request, Novan shall assist Sato, at Sato’s expense, with respect to any
such recall or remedial action, and shall provide Sato with all information that
Sato may request in connection with its dealings with a Regulatory Authority in
connection with such recall or

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remedial action.  Expenses incurred in connection with such recall or remedial
action shall be [***] except to the extent (i) [***], or (ii) such recall or
remedial action is [***].  For avoidance of doubt, Novan shall have the sole
authority to determine if a recall or other removal of the Licensed Product is
required outside of the Licensed Territory.  

9.3Pharmacovigilance.  At least [***] before the First Commercial Sale of the
Licensed Product in the Licensed Territory, the Parties shall enter into a
pharmacovigilance agreement to specify in detail each Party’s respective
obligations with respect to adverse event reporting, monitoring, maintenance of
safety databases and related submissions to Regulatory Authorities and other
similar obligations with respect to the commercialized Licensed Product in the
Licensed Field in the Licensed Territory, which shall be consistent with this
Article 9. Both Parties understand that the pharmacovigilance agreement shall be
modified, if necessary, consistent with the conditions of the Marketing Approval
in the Licensed Territory.

10.Representations and Warranties

10.1The Parties’ Representations and Warranties.  Each Party hereby represents
and warrants to the other Party, as of the Effective Date, as set forth below.

(i)Such Party (a) is a corporation duly organized and subsisting under the
applicable Laws of its jurisdiction of organization, and (b) has full power and
authority and the legal right to own and operate its property and assets and to
carry on its business as it is now being conducted and as it is contemplated to
be conducted by this Agreement.

(ii)Such Party has the power, authority and legal right, and is free to enter
into this Agreement and, in so doing, will not violate any other agreement to
which such Party is a party as of the Effective Date.

(iii)This Agreement has been duly executed and delivered on behalf of such Party
and constitutes a legal, valid, and binding obligation of such Party and is
enforceable against it in accordance with its terms, subject to the effects of
bankruptcy, insolvency, or other applicable Laws of general application
affecting the enforcement of creditor rights and judicial principles affecting
the availability of specific performance and general principles of equity.

(iv)Such Party has taken all corporate action necessary to authorize the
execution and delivery of this Agreement.

(v)Except with respect to Marketing Approvals for the Licensed Product or as
otherwise described in this Agreement, such Party has obtained all necessary
consents, approvals, and authorizations of all Regulatory Authorities and other
Third Parties required to be obtained by such Party in connection with the
execution and delivery of this Agreement and the performance of its obligations
hereunder.

(vi)The execution and delivery of this Agreement and the performance of such
Party’s obligations hereunder (i) do not conflict with or violate any
requirement of applicable Laws or any provision of the articles of
incorporation, bylaws, limited partnership agreement, or any similar instrument
of such Party, as applicable, in any material way, and

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(ii) do not conflict with, violate, or breach or constitute a default or require
any consent under, any applicable Laws or any contractual obligation or court or
administrative order by which such Party is bound.

(vii)All of such Party’s employees, officers, independent contractors,
consultants, and agents have executed agreements requiring assignment to such
Party of all Inventions made during the course of and as a result of their
association with such Party and obligating the individual to maintain as
confidential the confidential information of such Party.

(viii)Neither such Party, nor any of such Party’s employees, independent
contractors, consultants, agents or officers: (i) has ever been debarred or is
subject to debarment or, to such Party’s knowledge, convicted of a crime for
which a Person could be debarred before a Regulatory Authority under applicable
Laws, or (ii) to such Party’s knowledge, has ever been under indictment for a
crime for which a Person could be debarred under such Laws.

(ix)All documents, information and know-how furnished or transferred by such
Party to the other Party under this Agreement shall be, to its knowledge, free
of errors in any material respect.

10.2Novan’s Representations and Warranties.  Novan hereby represents and
warrants to Sato, as of the Effective Date, as set forth below:

(i)Novan has sufficient legal and/or beneficial title under its intellectual
property rights necessary to grant the licenses contained in this Agreement.

(ii)Novan has the right to transfer to Sato a copy of the Novan Know-How set
forth in Annex 1 in accordance with this Agreement.

(iii)There is no pending or, to Novan’s knowledge, threatened claim, litigation
or any other proceeding brought by a Third Party against Novan challenging the
validity of the Novan Patent Rights in the Licensed Territory, or claiming that
the development, manufacture or commercialization of the Licensed Product in the
Licensed Field in the Licensed Territory constitutes or would constitute
infringement of such Third Party’s intellectual property right(s).

(iv)Novan has not received any written communications alleging that it has
violated or that it would violate, in any material manner, through the
manufacture, use, import, export, sale, and/or offer for sale of the Licensed
Product in the Licensed Field and in the Licensed Territory, any intellectual
property rights of any Third Party.

(v)Novan has (1) the sole and exclusive ownership of or (2) a license (with the
right to grant sublicenses thereunder) to the Novan Patents, Novan Trademarks
(if used with the Licensed Product), Novan Study Materials and Novan Scientific
Information.

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10.3The Parties’ Covenants.  Each Party hereby covenants throughout the Term of
this Agreement as set forth below:

(i)Such Party shall not enter into any agreement with a Third Party that will
conflict with the rights granted to the other Party under this Agreement.

(ii)If during the Term of this Agreement, a Party has reason to believe that it
or any of its employees, officers, independent contractors, consultants, or
agents rendering services relating to the Licensed Product:  (x) is or will be
debarred or convicted of a crime for which such Person could be debarred before
a Regulatory Authority under applicable Laws, or (y) is or will be under
indictment under such Laws, then such Party promptly shall notify the other
Party of the same in writing.

(iii)In connection with this Agreement, and without limiting anything in this
Article 10, each Party represents, warrants and covenants that it has not given
or promised to give, and will not make, offer, agree to make or authorize any
payment or transfer anything of value, directly or indirectly, to (i) any
Government or Public Official (as defined below); (ii) any political party,
party official or candidate for public or political office; (iii) any person
while knowing or having reason to know that all or a portion of the value will
be offered, given, or promised, directly or indirectly, to anyone described in
items (i) or (ii) above; or (iv) any owner, director, employee, representative
or agent of any actual or potential customer of such Party (if any such transfer
of value would be a violation of any applicable Laws).  Each Party agrees to
comply with all applicable anti-bribery laws in the countries where the Parties
have their principal places of business and where they conduct activities under
this Agreement.  Additionally, each Party represents, warrants and covenants
that such Party shall comply with the U.S. Foreign Corrupt Practices Act
(“FCPA”) and the UK Anti-Bribery Act, both as revised from time to time, as well
as similar applicable Laws of the country where a Party has its principal place
of business and where such Party conducts activities under this Agreement, and
to take no action that would reasonably be deemed to cause the other Party to be
in violation of the FCPA, the UK Anti-Bribery Act or similar applicable Laws of
the country where a Party has its principal place of business and where it
conducts activities under this Agreement.  Additionally, each Party will make
reasonable efforts to comply with requests for information, including answering
questionnaires and narrowly tailored audit inquiries, to enable the other Party
to ensure compliance with applicable anti-bribery Laws.  For purposes of this
Agreement, “Government or Public Official” means any officer or employee or
anyone acting in an official capacity on behalf of: a government or any
department or agency thereof; a public international organization (such as the
United Nations, the International Monetary Fund, the International Red Cross,
and the World Health Organization), or any department, agency or institution
thereof; or a government-owned or controlled company, institution, or other
entity, including a government-owned hospital or university.

10.4No Off-Label Uses.  Sato hereby covenants throughout the Term that it shall
not (by itself or with or through a Third Party) develop, sell, offer for sale,
import, market, distribute or promote the Licensed Product in the Licensed Field
in the Licensed Territory for uses or indications outside of the scope of the
Approved Label. If Sato becomes aware of any

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activities in contravention of the immediately preceding sentence Sato shall
immediately notify Novan and provide to Novan relevant information.

11.Confidentiality ObligationS of Sato

11.1Confidentiality Obligations.  During the Term of this Agreement and for a
period of [***] thereafter, or [***] from the Effective Date, whichever is
longer, Sato:

(i)shall hold in strict confidence any and all information disclosed to it by
Novan, including, without limitation Novan Scientific Information, (collectively
“Novan Confidential Information”) and shall not use, nor disclose or supply to
any Third Party, nor permit any Third Party, to have access to the Novan
Confidential Information, without first obtaining the written consent of Novan,
except as expressly permitted in this Agreement;

(ii)shall take all reasonable precautions necessary or prudent to prevent
material in its possession or control that contains or refers to Novan
Confidential Information from being destroyed or lost, or discovered, received,
used, intercepted or copied by any Third Party; and

(iii)may disclose the Novan Confidential Information only to its employees,
consultants, independent contractors, agents, Affiliates, and actual or
potential acquirers, provided that such employees, consultants, independent
contractors, agents, Affiliates, and actual or potential acquirers are bound by
terms and conditions of confidentiality no less protective than the terms and
conditions that bind Sato hereunder.

For the avoidance of doubt, it is understood that Sato shall be liable for any
breach of the confidentiality obligation under this Section 11.1 by any Person
to whom the Novan Confidential Information is disclosed by Sato.

11.2Exceptions.  Sato’s obligations of confidentiality and non-use under Section
11.1 shall not apply and Sato shall have no further obligations with respect to
any of the Novan Confidential Information, to the extent Sato can establish by
competent proof that such Novan Confidential Information:

(i)is or becomes part of the public domain without breach by Sato of this
Agreement;

(ii)was in Sato’s possession before disclosure by Novan and was not acquired
directly or indirectly from Novan;

(iii)is obtained from a Third Party with no obligation of confidentiality to
Novan, who has a right to disclose it to Sato;

(iv)is developed by Sato without using any Novan Confidential Information; or  

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(v)is required to be revealed in response to a court decision or administrative
order, or to comply with applicable Laws, in which case Sato shall inform Novan
immediately by written notice and cooperate with Novan using Commercially
Reasonable Efforts either to enable Novan to seek protective measures for such
Novan Confidential Information, or to seek confidential treatment of such Novan
Confidential Information, and in such case Sato shall disclose only such portion
of the Novan Confidential Information which is so required to be disclosed.

11.3Disclosure for Marketing Approvals; Publications.  Nothing herein shall
prevent Sato from disclosing any Novan Confidential Information to the extent
that such Novan Confidential Information is required to be used or disclosed for
the purposes of seeking or obtaining Marketing Approvals of Licensed Products in
the Licensed Field in the Licensed Territory or seeking patent protection for
Inventions it owns or has responsibility for prosecuting under Article 7.  Sato
shall further have the right to present Novan Scientific Information at
conferences or to publish Novan Scientific Information in journals (collectively
“Publications”), provided such Publication is subject to Novan’s prior written
consent, not to be unreasonably withheld, delayed or conditioned.

12.Confidentiality ObligationS of Novan

12.1Confidentiality Obligations.  During the Term of this Agreement and for a
period of [***] thereafter, or [***] from the Effective Date, whichever is
longer, Novan:

(i)shall hold in strict confidence any and all information disclosed to it by
Sato, including without limitation the Sato Scientific Information,
(collectively “Sato Confidential Information”) and shall not use, nor disclose
or supply to any Third Party nor permit any Third Party to have access to the
Sato Confidential Information, without first obtaining the written consent of
Sato, except as expressly permitted in this Agreement;

(ii)shall take all reasonable precautions necessary or prudent to prevent
material in its possession or control that contains or refers to Sato
Confidential Information from being destroyed or lost, or discovered, received,
used, intercepted or copied by any Third Party; and

(iii)may disclose the Sato Confidential Information only to its employees,
consultants, independent contractors, agents, Affiliates, actual and potential
Novan Licensees and actual and potential acquirers, provided that such
employees, consultants, independent contractors, agents, Affiliates, actual and
potential Novan Licensees and actual and potential acquirers are bound by terms
and conditions of confidentiality no less protective than the terms and
conditions that bind Novan hereunder.

For the avoidance of doubt, it is understood that Novan shall be liable for any
breach of the confidentiality obligation under this Section 12.1 by any person
or corporation to whom the Sato Confidential Information is disclosed by Novan.

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12.2Exceptions.  Novan’s obligations of confidentiality and non-use under
Section 12.1 shall not apply and Novan shall have no further obligations with
respect to any of the Sato Confidential Information as far as Novan can
establish by competent proof that such Sato Confidential Information:

(i)is or becomes part of the public domain without breach by Novan of this
Agreement;

(ii)was in Novan’s possession before disclosure by Sato to Novan and was not
acquired directly or indirectly from Sato;

(iii)is obtained from a Third Party with no obligation of confidentiality to
Sato, who has a right to disclose it to Novan;

(iv)is developed by Novan without using any Sato Confidential Information; or

(v)is required to be revealed in response to a court decision or administrative
order, or to comply with applicable Laws of a governmental authority or rules of
a securities exchange, in which case Novan shall inform Sato immediately by
written notice and cooperate with Sato using Commercially Reasonable Efforts
either to enable Sato to seek protective measures for such Sato Confidential
Information, or to seek confidential treatment of such Sato Confidential
Information, and in such case Novan shall disclose only such portion of the Sato
Confidential Information which is so required to be disclosed.

12.3Disclosure for Marketing Approvals; Publications.  Nothing herein shall
prevent Novan from disclosing any Sato Confidential Information to the extent
that such Sato Confidential Information is required to be used or disclosed for
the purposes of seeking or obtaining Marketing Approvals of Licensed Products
outside the Licensed Territory, obtaining Marketing Approvals of Licensed
Products in the Licensed Territory outside the Licensed Field, or seeking patent
protection for Inventions it owns or has responsibility for prosecuting under
Article 7.  Novan, its Affiliates and Novan Licensees shall further have the
right to disclose any Sato Scientific Information in a Publication, provided
that if the Sato Scientific Information concerned has not been previously
published, such Publication is subject to Sato’s prior written consent, not to
be unreasonably withheld, delayed or conditioned.

13.Press Releases

13.1Press Releases.  Subject to Articles 11 or 12 as applicable, either Party
may issue a press release or public announcement concerning any aspect of the
development or commercialization of the Licensed Product in the Licensed Field
in the Licensed Territory, provided that it provides to the other Party a copy
of such press release or public announcement at least [***] in advance of its
intended publication or release thereof and obtains the written consent, not to
be unreasonably withheld, delayed or conditioned, of such other Party to such
publication or release.  Notwithstanding the foregoing, subject to Sections
11.2(v) or 12.2(v) as applicable, either Party may issue any public announcement
that it is advised by legal counsel is

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required under applicable Laws or rules of a securities exchange, provided that
such Party provides to the other Party a copy of such press release or public
announcement promptly after its release thereof.

13.2No Disclosure of Terms and Conditions.  No press release or public
announcement shall be made by either Party concerning the execution of this
Agreement or the terms and conditions hereof, without the prior written consent
of the other Party which shall not be unreasonably withheld, delayed or
conditioned.  Notwithstanding the foregoing, either Party may disclose the
existence of this Agreement and the terms and conditions hereof without the
prior written consent of the other pursuant to Section 11.2(v) or Section
12.2(v), as applicable, or in connection with a due diligence process associated
with any future financing by either Party or the negotiation or exploration of a
possible strategic transaction involving such Party, provided that such
disclosure is made in the course of such diligence, negotiation or exploration
pursuant to confidentiality obligations consistent with those set forth in this
Agreement.

14.Payment  

14.1Payments.  In consideration of the licenses and other rights granted to Sato
herein, Sato shall pay to Novan a total of 4.00 billion JPY, payable in equal
annual installments over fifteen (15) years after the Effective Date of this
Agreement; provided that such payment condition (for clarity, the amount of
payment is not included) may be changed under the mutual consent of the
Parties.  In addition to such payment, Sato shall pay to Novan the following
sales milestone payments.

 

SALES MILESTONE PAYMENTS

One-time sales milestone payments shall be made by Sato to Novan upon the first
achievement of each of the following annual Net Sales milestones:

 

Annual Net Sales of [***]

[***]

 

Annual Net Sales of [***]

[***]

 

Annual Net Sales of [***]

[***]

 

14.2Currency.  All payments under Section 14.1 shall be made in JPY.

14.3Notification.  Sato shall notify Novan of the achievement of each of the
sales milestones set forth in Section 14.1 within [***] after Sato closes its
books for the relevant annual period in which such sales milestone payment
becomes due.  All payments under Section 14.1 shall be made within [***] after
Sato receives the relevant invoice from Novan.  All payments under Section 14.1
shall be made without setoff or deduction of any kind, other than pursuant to
Sections [***].

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14.4Account.  All payments to be made to Novan under this Agreement shall be
made by wire transfer to the following account:

For all wire payments denominated in JPY

Payments should be remitted to [***]

 

 

Any such payments to [***] should be remitted [***]

 

For all other wire payments

Recipient US Bank: [***]

 

 

or such other account as may be specified by Novan in writing to Sato.

15.Royalty Payment; Audits

15.1Royalty.  In consideration of the rights granted to Sato herein, Sato shall
pay to Novan a royalty of [***] of annual Net Sales in the Licensed Territory
during the Term, subject to Section 15.2.

15.2Royalty Term; Reduction.  Royalties shall be payable in the Licensed
Territory, on a product-by-product basis, for the duration of the Term.  If, on
a product-by-product basis, during the Term (i) no Valid Claim exists in the
Licensed Territory Covering the Licensed Product or its manufacture, use or
sale, or (ii) the Marketing Exclusivity with respect to such Licensed Product in
the Licensed Territory has expired, then the royalty rate shall be reduced to
[***] of annual Net Sales for the remainder of the Term in the Licensed
Territory for such Licensed Product.

15.3Significant Value of Novan Know-How.  The Parties acknowledge that the Novan
Know-How is of significant value for the development and commercialization of
Licensed Product in the Licensed Field in the Licensed Territory, and have
determined the royalty rate and royalty term set forth herein on the basis of
this assumption.

15.4Payment.  Sato shall provide to Novan a good faith estimate of the royalties
payable to Novan under Section 15.1 within [***] after the end of the calendar
quarter in which such royalties are due, and shall pay to Novan all royalties
payable to Novan under Section 15.1 within [***] after the end of the applicable
calendar quarter.  Payment of royalties under Section 15.1 shall be made in
JPY.  All payments under Section 15.1 shall be made without setoff or deduction
of any kind, other than pursuant to Sections [***].  Royalties payable under
Section 15.1 shall be payable only once with respect to a particular unit of
Licensed Product and shall be paid only once regardless of the number of Patents
applicable to such Licensed Product.

15.5Maintenance of Records.  Sato shall keep true, correct and complete records
of all royalties and other amounts payable to Novan under Section 15.1 hereof,
including without limitation all financial information needed to calculate Net
Sales for such periods of time as are required under applicable Law, provided
that in no event shall Sato retain such books and

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records for less than [***] after the date of relevant payment made to
Novan.  Sato shall deliver to Novan a preliminary Sales Report [***] after the
end of each calendar quarter and a final Sales Report [***] after the end of
each calendar quarter.  All financial terms and standards (including any
calculation of Net Sales and financial payments due under this Agreement) shall
be governed by and determined in accordance with Japanese GAAP and shall be
consistent with Sato’s audited consolidated financial statements.

15.6Taxes.  All payments under this Agreement shall be made without any
deduction or withholding for or on account of any tax, except as set forth in
this Section 15.6.  The Parties agree to cooperate with one another and use
reasonable efforts to minimize obligations for any and all income or other taxes
required by Law to be withheld or deducted from any of the royalty and other
payments made by or on behalf of a Party hereunder (“Withholding Taxes”).  The
applicable paying Party under this Agreement (the “Paying Party”) shall, if
required by Law, deduct from any amounts that it is required to pay to the
recipient Party hereunder (the “Recipient Party”) an amount equal to such
Withholding Taxes, provided that the Paying Party shall give the Recipient Party
reasonable notice prior to paying any such Withholding Taxes.  Such Withholding
Taxes shall be paid to the proper taxing authority for the Recipient Party’s
account and, if available, evidence of such payment shall be secured and sent to
recipient within [***] of such payment.  The Paying Party shall, at the
Recipient Party’s cost and expense, do all such lawful acts and things and sign
all such lawful deeds and documents as the Recipient Party may reasonably
request to enable the Paying Party to avail itself of any applicable legal
provision or any double taxation treaties with the goal of paying the sums due
to the Recipient Party hereunder without deducting any Withholding Taxes.

15.7[***].  All payments due from Sato to Novan under Section 15.1 [***],
provided that [***].

15.8Audits.  Novan shall have the right, no more than [***] during each calendar
year during the Term of this Agreement and for [***] after its termination, to
have an independent certified public accountant (“Accountant”) of its own
selection (subject to Sato’s acceptance of such Accountant, such acceptance not
to be unreasonably withheld, delayed or conditioned) and at its own expense
audit the relevant books and records of account of Sato in connection with the
payment of royalties and any other amounts under this Agreement during normal
business hours, and upon reasonable prior notice, to determine whether
appropriate accounting has been performed and payments have been made to Novan
hereunder; provided that such Accountant shall be bound to treat all information
reviewed during such audit as confidential, and does not disclose to Novan any
information other than information which shall have previously been given to
Novan pursuant to any provision of this Agreement or information regarding the
payments due to or by Novan as a result of such audit.  Notwithstanding the
foregoing, such Accountant may support its audit conclusions with underlying
Sato Confidential Information if challenged by Sato, provided that all such
disclosures shall be maintained as confidential by such Accountant and Novan
with respect to Third Parties, except that Novan may disclose such Sato
Confidential Information to UNC as part of Novan’s reporting obligations under
the UNC License Agreement.

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If the Accountant determines that the Sales Report has not been true or
accurate, then Sato shall refund Novan for the costs of the Accountant if Sato
has underpaid such royalties by more than [***], and the royalties shall be
re-calculated on the basis of the Accountant’s findings.  Such Accountant’s
findings shall be binding for both Parties absent manifest error.

15.9Late Payments.  If Novan does not receive payment of any sum due to it under
Section 14.1 or Section 15.1 on or before the due date, simple interest shall
thereafter accrue on the sum due to Novan from the due date until the date of
payment at the USD LIBOR plus [***] or the maximum rate allowable by applicable
Law, whichever is less.

16.Indemnification

16.1By Novan.  Novan shall defend, indemnify and hold harmless Sato and its
Affiliates and their respective directors, officers, agents, successors,
assignees and employees (the “Sato Indemnitees”) from and against any and all
claims, liabilities, losses, costs, actions, suits, damages and expenses,
including reasonable attorneys’ fees (collectively “Damages”) to the extent
arising from any claim, action or proceeding made or brought against Sato
Indemnitees by a Third Party in connection with (i) the gross negligence,
recklessness, or intentional wrongful acts or omissions of Novan, its
Affiliates, and/or Novan Licensees and its or their respective employees,
officers, independent contractors, consultants, or agents, in connection with
the performance by or on behalf of Novan of Novan’s obligations or exercise of
its rights under this Agreement; (ii) any breach by Novan, or its Affiliates,
Novan Licensees or independent contractors of any representation, warranty,
covenant, or obligation of Novan set forth in this Agreement, and (iii) the
development, manufacture, use, handling, storage, commercialization, transfer,
importation, exportation or labeling, of the Licensed Product by or for Novan,
its Affiliates or Novan Licensees either prior to the Effective Date anywhere in
the world, or on or after the Effective Date outside the Licensed Territory or
outside the Licensed Field in the Licensed Territory; except in any such case to
the extent such Damages are reasonably attributable to any negligence, willful
misconduct, or breach of this Agreement by Sato or a Sato Indemnitee.

16.2By Sato.  Sato shall defend, indemnify and hold harmless Novan and its
Affiliates, directors, officers, agents, successors, assignees and employees
(the “Novan Indemnitees”) from and against any and all Damages to the extent
arising from any claim, action or proceeding made or brought against Novan
Indemnitees by a Third Party in connection with (i) the gross negligence,
recklessness, or intentional wrongful acts or omissions of Sato, its Affiliates,
and its or their respective employees, officers, independent contractors,
consultants, or agents, in connection with the performance by or on behalf of
Sato of Sato’s obligations or exercise of its rights under this Agreement; (ii)
any breach by Sato, or its Affiliates or independent contractors of any
representation, warranty, covenant, or obligation of Sato set forth in this
Agreement; and (iii) the development, manufacture (other than by Novan or its
contract manufacturers), use, handling, storage, commercialization, transfer,
importation, exportation or labeling of the Licensed Product by or for Sato or
any of its Affiliates, agents, and independent contractors; except in any such
case to the extent such Damages are reasonably attributable to any negligence,
willful misconduct, or breach of this Agreement by Novan or an Novan Indemnitee.

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16.3Indemnification Procedure.

(i)Each Party shall notify the other in the event it becomes aware of a claim
for which indemnification may be sought pursuant to this Article 16.  In case
any proceeding (including any governmental investigation) shall be instituted
involving any Party in respect of which indemnity may be sought pursuant to this
Article 16, such Party (the “Indemnified Party”) shall promptly notify the other
Party (the “Indemnifying Party”) in writing (an “Indemnification Claim
Notice”).  The Indemnifying Party and Indemnified Party shall promptly meet to
discuss how to respond to any claims that are the subject matter of such
proceeding.  At its option, the Indemnifying Party may assume the defense of any
Third Party claim subject to indemnification as provided for in this Section
16.3 by giving written notice to the Indemnified Party within [***] (or until
such time provided in any applicable extension to appropriately answer any
complaint, if any, but no longer than [***] (the “Election Time Period”); with
the Indemnified Party being obligated to make all reasonable efforts to obtain
any such extension) after the Indemnifying Party’s receipt of an Indemnification
Claim Notice, solely for claims, (i) that solely seek monetary damages and (ii)
as to which the Indemnifying Party expressly agrees in writing that, as between
the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall
be solely obligated to satisfy and discharge the claim in full (the matters
described in (i) and (ii), the “Litigation Conditions”).  The Indemnified Party
may assume responsibility for such defense if the Litigation Conditions are not
satisfied, by written notice to the Indemnifying Party within the Election Time
Period.  If the Indemnified Party fails to promptly provide an Indemnification
Claim Notice, and such failure materially prejudices the defense of such claim,
then the Indemnifying Party shall be relieved of its responsibility to indemnify
the Indemnified Party.

(ii)Upon assuming the defense of a Third Party claim in accordance with this
Section 16.3, the Indemnifying Party shall be entitled to appoint lead and any
local counsel in the defense of the Third Party claim.  Should the Indemnifying
Party assume and continue the defense of a Third Party claim, except as
otherwise set forth in this Section 16.3, the Indemnifying Party will not be
liable to the Indemnified Party for any legal expenses subsequently incurred by
such Indemnified Party after the date of assumption of defense in connection
with the analysis, defense, countersuit or settlement of the Third Party
claim.  Without limiting this Section 16.3, any Indemnified Party will be
entitled to participate in, but not control, the defense of a Third Party claim
for which it has sought indemnification hereunder and to engage counsel of its
choice for such purpose; provided, however, that such engagement will be at the
Indemnified Party’s own expense unless (a) the engagement thereof has been
specifically requested by the Indemnifying Party in writing, or (b) the
Indemnifying Party has failed to assume and actively further the defense and
engage counsel in accordance with this Section 16.3 (in which case the
Indemnified Party will control the defense), or (c) the Indemnifying Party no
longer satisfies the Litigation Conditions.

(iii)Subject to the Litigation Conditions being satisfied, the Indemnifying
Party will have the sole right to consent to the entry of any judgment, enter
into any settlement or otherwise dispose of such Damages, on such terms as the
Indemnifying Party, in its reasonable discretion, will deem appropriate
(provided, however that such terms shall include a complete and unconditional
release of the Indemnified Party from all liability with

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respect thereto), and will transfer to the Indemnified Party all amounts which
such Indemnified Party will be liable to pay pursuant to such settlement or
disposal of such claim prior to the time such payments become due by the
Indemnified Party.  With respect to all other Damages in connection with Third
Party claims, where the Indemnifying Party has assumed the defense of the Third
Party claim in accordance with this Section 16.3, the Indemnifying Party will
have authority to consent to the entry of any judgment, enter into any
settlement or otherwise dispose of such Damages, provided it obtains the prior
written consent of the Indemnified Party, not to be unreasonably withheld,
delayed or conditioned.

(iv)The Indemnifying Party that has assumed the defense of the Third Party claim
in accordance with this Section 16.3 will not be liable for any settlement or
other disposition of any Damages by an Indemnified Party that is reached without
the written consent of such Indemnifying Party.  The Indemnified Party will not
admit any liability with respect to, or settle, compromise or discharge, any
Third Party claim without first offering to the Indemnifying Party the
opportunity to assume the defense of the Third Party claim in accordance with
this Section 16.3.  If the Indemnifying Party chooses to defend or prosecute any
Third Party claim, the Indemnified Party will cooperate in the defense or
prosecution thereof and will furnish such records, information and testimony,
provide such witnesses including to the extent possible, former employees and
attend such conferences, discovery proceedings, hearings, trials and appeals as
may be reasonably requested in connection with such Third Party claim.  Such
cooperation will include access during normal business hours afforded to the
Indemnifying Party to, and reasonable retention by the Indemnified Party of,
records and information that are reasonably relevant to such Third Party claim,
and making employees and agents available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.  The Indemnifying Party will reimburse the Indemnified Party for all
its reasonable out-of-pocket expenses incurred in connection with such
cooperation.

16.4Insurance.  During the Term of this Agreement and for [***] thereafter,
Novan shall keep and maintain the following insurance with a reputable carrier
[***] reasonably acceptable to Sato: comprehensive public liability, including
products liability coverage and clinical trial coverage, with limits of (a)
before receipt of Marketing Approval for any Licensed Product, not less than
[***] USD per event and (b) after receipt of Marketing Approval for any Licensed
Product, not less than [***] USD per event or any such greater mutually agreed
amount and type of insurance determined by the board of directors of the each
Party, naming Sato as an additional insured from the Effective Date forward with
respect to Novan’s performance hereof. Sato shall keep and maintain the
following insurance with a reputable carrier [***] reasonably acceptable to
Novan, naming Novan as an additional insured with respect to Sato’s performance
hereof: (i) from no later than the start of a clinical study of the Licensed
Product in the Licensed Territory until [***] after the expiration or
termination of this Agreement, comprehensive public liability including clinical
trial coverage, with limits of not less than [***] USD per event, and (ii) from
no later than the first commercial sale of the Licensed Product in the Licensed
Territory until [***] after the expiration or termination of this Agreement,
comprehensive public liability including products liability coverage, with
limits of not less than [***] USD per event. The type and amount of insurance
maintained by the Parties pursuant to this Section 16.4 may be modified upon
mutual written agreement of the Parties. Both Parties agree to provide the other
Party certificate evidencing such coverage within [***] after the date on which
such Party purchases

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the relevant insurance pursuant to the terms and conditions of this Section 16.4
and at least annually thereafter.  If such insurance is canceled or materially
altered, the each Party shall provide prompt written notice to the other Party.

16.5Except as expressly provided in this Article 16, neither Party shall have
any liability to indemnify the other Party against any Third Party claims.

17.Limitation of Liability; Exclusion of Damages; Disclaimer

17.1EXCEPT IN THE CASE OF A BREACH OF ARTICLES 11 OR 12, AND WITHOUT LIMITING
THE PARTIES’ OBLIGATIONS UNDER ARTICLE 16 OR LIABILITY OF A PARTY FOR
INFRINGEMENT OR MISAPPROPRIATION OF THE INTELLECTUAL PROPERTY RIGHTS OF THE
OTHER PARTY OR FOR FRAUD OR WILLFUL MISCONDUCT, NEITHER PARTY SHALL BE LIABLE TO
THE OTHER PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL
DAMAGES (INCLUDING WITHOUT LIMITATION DAMAGES RESULTING FROM LOSS OF USE, LOSS
OF PROFITS, INTERRUPTION OR LOSS OF BUSINESS, OR OTHER ECONOMIC LOSS) ARISING
OUT OF THIS AGREEMENT OR WITH RESPECT TO A PARTY’S PERFORMANCE OR
NON-PERFORMANCE HEREUNDER.

17.2EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY PROVIDES ANY
WARRANTIES, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, REGARDING THE LICENSED
PRODUCT AND EACH PARTY HEREBY DISCLAIMS ALL OTHER WARRANTIES, WHETHER WRITTEN OR
ORAL, EXPRESS AND IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND FREEDOM FROM
INFRINGEMENT OF THIRD PARTY RIGHTS.

18.Term

18.1Term.  The term of this Agreement shall commence as of the Effective Date
and, unless sooner terminated as specifically provided in this Agreement, shall
continue in effect until the tenth (10th) anniversary of the First Commercial
Sale of the Licensed Product in the Licensed Field in the Licensed Territory
(the “Term”), unless terminated earlier pursuant to Section 19.  This Agreement
may be renewed by mutual written agreement of the Parties for additional two (2)
year periods following expiration of the Term.

18.2Effect of Expiration.  Upon expiration of this Agreement in accordance with
Section 18.1:

(i)the Licensed Rights shall continue in full force and effect and be considered
to be fully paid-up;

(ii)subject to Section 18.2(i) hereof, Sato’s confidentiality obligation under
Section 11 shall continue to be in full force and effect for a period of [***]
following expiration of this Agreement;

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(iii)Novan shall have the right to freely use and license all Novan Scientific
Information and all Sato Scientific Information disclosed by Sato to Novan
hereunder;

(iv)The licenses granted by Sato to Novan pursuant to Section 2.3 and other
provisions of this Agreement shall continue in effect in addition to those
sections that also survive pursuant to Section 18.3 and shall be expanded to
include the Licensed Field in the Licensed Territory;

(v)Sato shall transfer and assign to Novan all of Sato’s right, title and
interest in and to all Drug Approval Applications, Marketing Approvals, and
regulatory dossiers with respect to any and all Licensed Products in the
Licensed Field in the Licensed Territory; and

(vi)subject to Sections 18.2(iii) and 18.2(iv) hereof, Novan’s confidentiality
obligation under Section 12 shall continue to be in full force and effect for a
period of [***] following expiration of this Agreement.

18.3Survival.  For the avoidance of doubt, it is understood that provisions
under Sections 6.7 (Ownership of Novan Scientific Information), 6.8 (Ownership
of Sato Scientific Information), 7.1 (Improvements), 7.2 (Ownership of
Inventions), 8.1 (Trademarks), 9 (Serious Adverse Event Reporting), 11
(Confidentiality Obligations of Sato), 12 (Confidentiality Obligations of
Novan), 15.5 (Maintenance of Records), 15.6 (Taxes), 15.8 (Audits), 16
(Indemnification), 17 (Limitation of Liability; Exclusion of Damages;
Disclaimer), 18.2 (Effect of Expiration) 18.3 (Survival), 20 (Obligations Upon
Early Termination), 22 (General Provisions), 23 (Governing Law) and 24 (Dispute
Resolution; Jurisdiction) shall survive the expiration of this Agreement.  

18.4Other Remedies.  Termination or expiration of this Agreement for any reason
shall not release any Party from any liability or obligation that has accrued
prior to such expiration or termination, nor affect the survival of any
provision hereof to the extent it is expressly stated to survive
termination.  Termination or expiration of this Agreement for any reason shall
not constitute a waiver or release of, or otherwise be deemed to prejudice or
adversely affect, any rights, remedies, or claims, whether for damages or
otherwise, that a Party may have hereunder or that may arise out of or in
connection with such termination or expiration.

19.Early Termination

19.1At Sato’s Convenience.  Sato may terminate this Agreement at-will on one
hundred twenty (120) calendar days’ written notice to Novan.

19.2Material Breach.  Without prejudice and in addition to any other contractual
remedy the non-defaulting Party may have under this Agreement, either Party may
terminate this Agreement in writing, if the other Party commits a material
breach of any provision of this Agreement and such breach is not cured within
sixty (60) calendar days after written notice of the breach is received by the
other Party.

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19.3Force Majeure.  The Agreement may be terminated by either Party in the event
of a Force Majeure (as hereinafter defined) pursuant to Section 21.2.

19.4Insolvency.  Either Party may terminate this Agreement upon written notice
if the other Party is dissolved or liquidated, files or has filed against it a
petition under any bankruptcy or insolvency law that is not dismissed within
sixty (60) calendar days, makes an assignment for the benefit of its creditors
or has a receiver or trustee appointed for all or substantially all of its
property.

19.5Patent Challenge.  In the event that Sato or any of its Affiliates commences
or otherwise, directly or indirectly, pursues (or, other than as required by Law
or legal process, voluntarily assists any Third Party to pursue in any material
respect where Sato has knowledge that its assistance will be used by the Third
Party to pursue) any proceeding seeking to have any of the Novan Patents revoked
or declared invalid, unpatentable, or unenforceable, Novan may declare a
material breach hereunder, terminate this Agreement on written notice to Sato
and shall then have the right to exercise the remedies available under Section
20.1 with immediate effect.

20.Obligations upon Early Termination

20.1Early Termination by Novan; Termination for Convenience by Sato.  In the
event of termination of this Agreement by Novan in accordance with Sections
19.2, 19.3, 19.4 or 19.5 or by Sato under Section 19.1:

(i)all Licensed Rights shall revert to Novan without any compensation to be paid
by Novan;

(ii)Sato shall return to Novan any and all Novan Scientific Information;

(iii)Sato shall transfer to Novan or its nominee any and all Marketing Approvals
and all other filings and submissions with and to Regulatory Authorities with
respect to the Licensed Product.  To this end Sato shall make Commercially
Reasonable Efforts to file for transfer with the relevant Regulatory Authorities
and to give all other notifications and approvals necessary under law for the
transfer of Marketing Approvals and such other filings and submissions;

(iv)Sato shall grant to Novan a worldwide, fully-paid, royalty-free license,
with the right to sublicense, to use the Sato Trademarks (including, without
limitation, the goodwill symbolized by such Sato Trademarks) used to brand the
Licensed Product, and a license to reproduce, distribute, perform, display and
prepare derivative works of Sato’s copyrights used to brand or promote the
Licensed Product, in each case solely to the extent necessary or useful for
commercializing the Licensed Product;

(v)The licenses granted by Sato to Novan pursuant to Section 2.3 and other
provisions of this Agreement shall continue in effect in addition to those
sections that also

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survive pursuant to Section 18.3 and shall be expanded to include the Licensed
Field in the Licensed Territory;

(vi)Sato shall furnish Novan with reasonable cooperation, at Sato’s expense, to
assure a smooth transition of any clinical or other studies in progress related
to the Licensed Products which Novan determines to continue in compliance with
applicable Laws and ethical guidelines applicable to the transfer or termination
of any such studies.  In the event that Novan informs Sato that it does not
intend to continue specific development activities then in progress, costs
incurred in closing out such activities shall be borne by Sato; and

(vii)Sato shall not withdraw or cancel any Marketing Approval or Drug Approval
Application, unless expressly instructed so by Novan in writing.

20.2Early Termination by Sato.  In the event of termination of this Agreement by
Sato in accordance with Sections 19.2, 19.3 or 19.4:

(i)If such termination is pursuant to Section 19.2 or 19.4 for Novan’s material
breach or Novan’s insolvency that in either case does not result in Novan’s
material failure to supply Compound or Licensed Product pursuant to
then-existing obligations under the Commercial Supply Agreement or any Product
Supply Agreement, Sato may elect by written notice to Novan provided
concurrently with the relevant termination notice to have the Licensed Rights
survive for the remainder of the Term (such Term determined as if the early
termination had not occurred) subject to payment by Sato to Novan of (a) [***]
and (b) all [***]; provided that [***];

(ii)If such termination is pursuant to Section 19.2 or 19.4 for Novan’s material
breach or Novan’s insolvency that in either case results in Novan’s material
failure to supply Compound or Licensed Product pursuant to then-existing
obligations under the Commercial Supply Agreement or any Product Supply
Agreement, or if Sato does not elect for the Licensed Rights to survive as
provided in Section 20.2(i) concurrently with the relevant termination notice,
the Licensed Rights shall terminate upon the effective date of termination, and
Sato may pursue all rights and remedies it may have at law or in equity with
respect to the early termination of this Agreement; and

(iii)Novan’s obligations and Sato’s rights under Articles 5, 6, 7, and 8 shall
continue in addition to those sections that also survive pursuant to Section
18.3, including without limitation Sato’s obligation to indemnify Novan pursuant
to Section 16.2.

20.3Bankruptcy Laws.  All rights and licenses granted under or pursuant to this
Agreement by Novan or Sato are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of the United States Bankruptcy Code and of any
similar provisions of applicable Laws under any other jurisdiction
(collectively, the “Bankruptcy Laws”), licenses of right to “intellectual
property” as defined under the Bankruptcy Laws.  Each Party agrees that the
other Party, as a licensee of rights under this Agreement, shall retain and may
fully exercise all of its rights and elections under the Bankruptcy Laws.

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21.Force Majeure

21.1Force Majeure.  No failure or delay by either Party in the performance of
any obligation hereunder shall be deemed a breach of this Agreement nor create
any liability for any damages, increased cost or losses which the other Party
may sustain by reason of such failure or delay of performance, if the same shall
arise from any cause or causes beyond the control of that Party, such as
earthquake, storm, flood, fire, other acts of nature, epidemic, war, riot,
hostility, public disturbance, cessation of transport, act of public enemies,
prohibition or act by a government or public agency, strike or other labor
dispute or work stoppage (collectively “Force Majeure”); provided, however, that
the Party so prevented shall continue to take all commercially reasonable
actions within its power to comply with its obligations hereunder as fully as
possible and to mitigate possible damages.

The Party so prevented shall without undue delay notify the other Party in
writing thereof.

21.2Continued Force Majeure.  Should the event of Force Majeure continue for
more than [***], the Parties shall promptly discuss their further performance
under this Agreement and whether to modify or terminate this Agreement in view
of the effect of the event of Force Majeure.  If no agreement can be reached
within [***] after expiration of such [***], either Party may terminate this
Agreement effective immediately upon written notice to the other Party.

22.General Provisions

22.1Assignment.  This Agreement is binding upon and will inure to the benefit of
the Parties and their respective permitted assignees or successors in interest,
including without limitation those that may succeed by assignment, transfer or
otherwise to the ownership of either of the Parties or of the assets necessary
to the conduct of the business to which this Agreement relates.  This Agreement
may not be assigned or otherwise transferred by either Party without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld, delayed or conditioned; provided, however, that either Party may,
without such consent, assign this Agreement together with all of its rights and
obligations hereunder to its Affiliates, or to a successor in interest in
connection with the transfer or sale of all or substantially all of its business
to which this Agreement relates, or in the event of its merger or consolidation
or similar transaction, subject to the assignee agreeing to be bound by the
terms of this Agreement.  Any purported assignment in violation of the preceding
sentences shall be void.  Any permitted successor shall assume and be bound by
all obligations of its assignor or predecessor under this Agreement.

22.2Headings.  Headings are inserted for convenience and shall not affect the
meaning or interpretation of this Agreement.

22.3Waiver.  No waiver of any default hereunder by either Party or any failure
to enforce any rights hereunder shall be deemed to constitute a waiver of any
subsequent default with respect to the same or any other provision hereof.

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22.4Notices.  Any and all notices given by one Party to the other Party under
this Agreement must be in writing and shall be deemed effectively given (i) upon
personal delivery to the Party to be notified, (ii) when sent by confirmed email
or facsimile if sent during normal business hours of the recipient, if not, then
on the next Business Day, (iii) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt, or (iv) on the second Business Day after the date
deposited if mailed by certified mail, return receipt requested, postage
prepaid.  All notices shall be sent to the other Party’s address as set out at
the beginning of this Agreement or to the latest address of such Party as shall
have been communicated to the other Party.

Notices sent to Novan shall be directed to:

Novan, Inc.

4105 Hopson Road

Morrisville, North Carolina 27560

USA

Attn: [***]

Notices sent to Sato shall be directed to:

Sato Pharmaceutical Co. Ltd.

AHC Building 1-5-27

Moto-Akasaka, Minato-ku, Tokyo 107-0051

Japan

Attn: [***]

22.5Severability.  Should any part of this Agreement be held unenforceable or in
conflict with the applicable Laws of any jurisdiction, the invalid or
unenforceable part or provision shall be replaced with a provision which
accomplishes, to the extent possible, the original business purpose of such part
or provision in a valid and enforceable manner, and the remainder of this
Agreement shall remain binding upon the Parties hereto.

22.6Entire Agreement.  This Agreement, together with all Annexes attached
hereto, constitute the whole agreement between the Parties and shall cancel and
supersede any and all prior and contemporaneous negotiations, correspondence,
understandings and agreements, whether oral or written, between the Parties
respecting the subject matter hereof, including without limitation the
Confidentiality Agreement, provided, however, that all Confidential Information
(as defined therein) exchanged between the Parties under the Confidentiality
Agreement shall be deemed Confidential Information under this Agreement and
shall be governed by the terms of this Agreement.

22.7Amendment.  Any amendment or modification to this Agreement shall only be
made in writing and shall only be valid when signed by the due representatives
of the Parties.

22.8Counterparts.  This Agreement may be executed in more than one (1)
counterpart, each of which shall be deemed an original, but all of such
counterparts taken together shall constitute one (1) and the same agreement.

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22.9Agency.  Neither Party is, nor shall be deemed to be, an employee, agent,
co-venturer, or legal representative of the other Party for any
purpose.  Neither Party shall be entitled to enter into any contracts in the
name of, or on behalf of the other Party, nor shall either Party be entitled to
pledge the credit of the other Party in any way or hold itself out as having the
authority to do so.

22.10Further Actions.  Each Party agrees to execute, acknowledge, and deliver
such further instruments, and to do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.

22.11Compliance with Laws.  Each Party will comply with all Laws in performing
its obligations and exercising its rights hereunder, including without
limitation all Laws relating to the export, re-export or other transfer of any
Information transferred pursuant to this Agreement or the Licensed Product.

22.12Performance by Affiliates.  Sato may perform some or all of its obligations
under this Agreement through Affiliates, provided, however, that Sato shall
remain responsible for the performance by its Affiliates and shall use
Commercially Reasonable Efforts to cause its Affiliates to comply with the
provisions of this Agreement in connection with such performance.  

23.Governing Law

23.1Governing Law.  The construction, validity and performance of this Agreement
shall be governed in all respects by the laws of the state of Delaware,
excluding its provisions regarding conflicts of law, except that Article 24 and
any arbitration thereunder shall be governed by the Federal Arbitration Act,
Chapters 1 and 2. The United Nations Convention on the International Sale of
Goods shall not apply.  This Agreement shall be written and executed in, and all
other communications under or in connection with this Agreement shall be in, the
English language.  Any translation into any other language shall not be an
official version thereof, and in the event of any conflict in interpretation
between the English version and such translation, the English version shall
control.

24.Dispute Resolution; Jurisdiction

24.1Resolution by CEOs.  In the event of any dispute, claim, question, or
disagreement arising from or relating to this Agreement or the breach thereof
(“Dispute”), the Chief Executive Officers of each Party (“CEOs”) shall attempt
to reach a solution satisfactory to both Parties.  If the CEOs do not reach such
solution within a period of [***] or such longer period as the Parties may
mutually agree upon, then, upon notice by either Party to the other, all
Disputes shall be finally settled by arbitration administered by the
International Centre for Dispute Resolution (“ICDR”) in accordance with the
International Arbitration Rules (“Rules”).

24.2Arbitration.  The arbitration shall be held in London, United Kingdom.  The
language of the arbitration shall be English.  The arbitration shall be
conducted by three (3) arbitrators; provided, however, that the arbitration may
be conducted by only one arbitrator if the

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Parties so agree in advance of the arbitration and are able to agree upon a
single, mutually acceptable individual who is knowledgeable in the subject
matter at issue in the dispute.  If the arbitration is to be conducted by three
(3) arbitrators, within [***] after the commencement of arbitration, each Party
shall appoint one (1) arbitrator, and within [***] of their appointment, the two
appointed arbitrators shall select a third arbitrator who shall act as the chair
of the tribunal.   If any of the arbitrators are not appointed within the
deadline, the ICDR shall appoint the arbitrator.

24.3Award.  The award shall be made within [***] of the filing of the notice of
arbitration, and the arbitrator(s) shall agree to comply with this schedule
before accepting appointment. However, this time limit may be extended by
agreement of the Parties or by the arbitrator(s) if necessary.  Judgment on the
award rendered by the arbitrator(s) may be enforced in any court having
competent jurisdiction thereof.

24.4Attorneys’ Fees and Costs.  The arbitrator(s) shall award to the prevailing
Party, if any, as determined by the arbitrators, all of its attorneys’ fees and
costs.

24.5Confidentiality.  The Parties undertake to keep confidential all awards in
their arbitration, together with all materials in the proceedings created for
the purpose of the arbitration and all other documents produced by another Party
in the proceedings not otherwise in the public domain, save and to the extent
that disclosure may be required of a Party by legal duty, to protect or pursue a
legal right or to enforce or challenge an award in legal proceedings before a
court or other judicial authority.

24.6Disputes Relating to Patent Rights.  Notwithstanding the provisions of this
Section 24, disputes relating to the inventorship, enforceability, validity or
scope of patent rights shall be submitted for resolution to a court of competent
jurisdiction.

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
in duplicate by their respective duly authorized officers or representatives.

Novan, Inc.

 

Sato Pharmaceutical Co., Ltd.

/s/ Nathan Stasko

 

/s/ Seiichi Sato

By:   Nathan Stasko, President and CEO

Date: January 12, 2017

 

By:    Seiichi Sato, President and CEO

Date: January 12, 2017

 

Overview of Annexes (to be attached):

Annex 1:  Novan Scientific Information

Annex 2:  Patent List

Annex 3:  Specifications

Annex 4:  Novan Trademarks

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Annex 1:  Novan Scientific Information (CTD)

 

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Annex 2:  Patent List

Application No.

Title

Filing Date; Licensed Territory Numbers

Countries where Application was Filed & Status

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

[***]

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[***]

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Annex 3:  Specifications

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Annex 4:  Novan Trademarks

 

[***] Certain information in this document has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.