EXHIBIT 10.3
CONFIDENTIAL TREATMENT REQUESTED
DOCOSANOL LICENSE AGREEMENT
     THIS DOCOSANOL LICENSE AGREEMENT is made and entered into as of January 5,
2006, between Avanir Pharmaceuticals, a California corporation (“Avanir”) and
Kobayashi Pharmaceutical Co., Ltd, a Japanese corporation (“Licensee”).
BACKGROUND
     A. Avanir is the owner of certain patent rights, know-how, trade secrets,
confidential information, inventions, technology, and other proprietary rights
which Licensee does not presently possess and that (i) pertain to a
pharmaceutical grade chemical known as “docosanol,” (ii) relate to use of
docosanol in the treatment of viral infections and inflammations of skin and
mucous membranes in humans, and other medicinal uses and (iii) include certain
medicinal formulations and manufacturing methods of docosanol.
     B. The United States Food and Drug Administration (“FDA”) has approved
Avanir’s New Drug Application in the United States of America (“USA”) relating
to products incorporating docosanol for topical, human use for the treatment of
herpes labialis.
     C. Licensee is interested in obtaining from Avanir a license to Avanir’s
proprietary rights relating to the use of docosanol and access to Avanir’s
proprietary know-how in order to establish OTC business in Japan, and Avanir is
willing to grant such license and access on the terms and conditions of this
Agreement.
     NOW, THEREFORE, in consideration of the monetary consideration set forth in
this Agreement and of the terms, conditions and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Avanir and Licensee hereby agree as
follows:
     1. DEFINITIONS.
     Words and phrases used in this Agreement which are not otherwise defined
will be interpreted in accordance with the common usage for such term in
English. Technical terms unless otherwise defined will be interpreted consistent
with their common usage in the relevant scientific field. Some terms are defined
in this Agreement parenthetically, and such terms will have the meanings
apparent from the context in which such terms are parenthetically defined. When
used in this Agreement, each of the following defined terms will have the
meanings set forth in this Section.
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     1.1 “Active Ingredient” means (a) docosanol ***, (b) any other *** or
(c) such specification for docosanol as an active ingredient that is curative of
episodic outbreaks of herpes simplex or herpes labialis. Provided however, it
always means that the foregoing description of Active Ingredients must be
approved by the Ministry of Health, Labor, and Welfare (“MHLW”) in Japan as an
active ingredient that is curative of episodic outbreaks of herpes simplex or
herpes labialis (***).
     1.2 “Additional Studies” means any additional pre-clinical, clinical or
non-clinical studies required to be conducted solely to obtain or to maintain in
effect Territory Registrations of the Products in the Territory.
     1.3 “Affiliate(s)” means, with respect to each party, any organization,
corporation, company, firm, or other entity that controls, is controlled by, or
is under common control with such party. A company will be deemed to have
control of another if it owns directly or indirectly at least fifty-percent
(50%) of the voting shares of or is entitled directly or indirectly to appoint
at least one half of the directors of the other company; provided however,
Kobashou Co., Ltd. does not fall within the scope of Affiliates in this
Agreement.
     1.4 “ Best Efforts ” means the taking of all prompt, substantial and
persistent efforts to effect a result as expeditiously as possible, but does not
require taking any extraordinary or unusual actions that would not be
financially reasonable in the particular circumstances.
     1.5 “Bulk Docosanol” means a pharmaceutical grade bulk form of the Active
Ingredient.
     1.6 “Competing Products” means other medicinal or therapeutic products that
are curative of episodic outbreaks of herpes simplex or herpes labialis (***)
containing the Active Ingredient.
     1.7 “Confidential Information” means all information which is of a
confidential and proprietary nature, including without limitation, trade secrets
and unpatented Know-How and Improvements relating to the Active Ingredient or
the Products and any and all formulations thereof or manufacturing methods
thereof, and any and all material information either of the parties to this
Agreement may acquire concerning the financial, business and marketing goals and
plans of the other, including the terms of this Agreement. Notwithstanding
anything in this Agreement to the contrary, the defined term “Confidential
Information” and the obligations of nondisclosure, non-use and confidentiality
relating thereto will, without granting any right or license, not include any
information or data which: (a) is or becomes known to the general public through
no action or fault of the receiving party; (b) was already known to the
receiving party prior to the date of disclosure pursuant to this Agreement, as
evidenced by the written records of that party, without any obligation of
confidentiality; (c) is or becomes known to the receiving party without any
obligation of confidentiality from a Third Party having the right to disclose
the same, and not having a confidential relationship with the disclosing party
with respect thereto; or (d) is necessary for the receiving party or its
Affiliates to disclose to a
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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governmental authority or any agency thereof on a non-confidential basis, in
order to pursue Territory Registration or other purposes.
     1.8 “Cost” means all purchase, labor, material and overhead costs and
expenses incurred in connection with the procurement, manufacture and testing of
Products as determined in accordance with generally accepted accounting
principles.
     1.9 “Field” means all non-ophthalmic, topical, medicinal, therapeutic
applications of the Products to skin, mucous membranes, and surrounding tissue
in humans sold for the treatment of herpes simplex or herpes labialis via
prescription (Rx), behind the counter or over the counter (“OTC”).
     1.10 “First Commercial Sale” means the first commercial sale in the
Territory following Territory Registration, where sale means delivery, billing
out or invoicing, whichever comes first, of a Product by Licensee, its
Affiliates or sublicensees to any person or entity other than Licensee, its
Affiliates or sublicensees.
     1.11 “Gross Sales” means the gross sales of the Products invoiced by
Licensee, its Affiliates or sublicensees to distributors, resellers or other
Third Parties as expressed in Japanese Yen. For the sake of clarity, the Gross
Sales does not include *** . (The currency conversion rate employed for
calculation of Gross Sales will be that published in the Nihon Keizai Shinbun’s
“Foreign Currency Exchange Rates” on the last business day of the calendar
quarter.).
     1.12 “Improvements” means any and all inventions, developments and
improvements and any other new Know-How relating to the Active Ingredient or the
Products, including, without limitation, any new indications, compositions,
concentrations, derivatives, formulations, preparations, processes,
specifications, administrations, combinations or dosage strengths and sizes or
applications thereof, which are developed by or for Avanir or Licensee during
the term of this Agreement.
     1.13 “Know-How” means any data, results, know-how, manufacturing methods
and processes of the Bulk Docosanol to the extent available and information
which Avanir owns, controls or has a license (with a right to sublicense) and
relating to the Active Ingredient or that is necessary or useful to the
manufacture, use or sale of Products, including, without limitation, data or
information incorporated either in Avanir’s approved New Drug Application in the
USA or in regulatory filing submitted to other regulatory authorities, if any.
     1.14 “Licensed Patents” means all (a) the Territory patents and patent
applications listed in Schedule 1.14 or covering any Avanir Owned Improvements,
as long as Licensee agrees; (b) any divisionals and patent applications; and
(c) all patent term extensions of the foregoing patents.
     1.15 “Post Marketing Surveillance Period” means a certain period of
post-marketing surveillance in the Territory, in other words, a certain period
for surveillance, imposed by the Ministry of Health, Labor and Welfare in Japan
upon marketing approval of the Product in the Territory, with regard to quality,
efficacy and safety for clinical usage of the Product. In the
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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event the Japanese government introduces a new proprietary, exclusivity period,
the PMS Period will be deemed to include the exclusivity period for the purpose
of this Agreement.
     1.16 “Products” means any finished or semi-finished medicinal product that
is curative of episodic outbreaks of herpes simplex or herpes labialis ( *** )
that contains a therapeutic concentration of the Active Ingredient either as the
sole ingredient or in combination with any other ingredient, substance or
compound, in any and all concentrations, formulations, preparations,
administrations, combinations or dosage strengths.
     1.17 “Reasonable Efforts” means efforts and resources commonly used in the
research-based pharmaceutical industry for the research, development and
commercialization of a product at a similar stage in its product life, a similar
market potential and a similar profitability ratio.
     1.18 “Territory” means the territories and possessions of Japan.
     1.19 “Territory Registration” means satisfaction of any related applicable
registration (including any duplicate marketing authorizations) and notification
requirements and approvals, licenses, registrations or authorizations of any
federal, state or local regulatory agency, department, bureau or other
government entity, necessary for the manufacture, use, storage, import,
transport or sale of Products or the equivalent from the appropriate
governmental agency in the Territory.
     1.20 “Third Party” or “Third Parties” means any person, organization,
corporation, company, firm, or other entity that is not a party hereto or an
Affiliate of either party.
     1.21 “Trademark” means a trademark or trademarks for use in connection with
the sale of the Products in the Territory, together with any registrations or
pending registration applications filings therefore by Licensee at the Japan
Patent Office. It is expressly understood that the Trademark does not include
the trademarks “Avanir” or “Abreva” or any variations thereof even if such
trademarks are used in association or combination with the Trademark.
     1.22 “Supply Agreement” means the separate agreement for the supply of Bulk
Docosanol to be entered into between Licensee and Avanir.
     2. LICENSES.
     2.1 Grant. Subject to all the terms and limitations of this Agreement,
Avanir hereby grants to Licensee an exclusive license, possibly including a
Senyo Jisshiken under Japanese Patent Law, under its Licensed Patents and to the
Know-How to make, have made, use, and offer to sell and to sell and import
Products in the Territory and only in or for the Field. Licensee will register
the aforesaid exclusive license as the exclusive license, with the cooperation
of Avanir but at Licensee’s expense, possibly including Senyo Jisshiken of the
Japanese Patent Law. Such license does not include the right to manufacture Bulk
Docosanol. For the avoidance of doubt,
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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the license to manufacture described in the foregoing sentence of this
Section 2.1 is limited to rights to manufacture for Licensee’s Products. Subject
to price, terms and conditions yet to be mutually agreed in the Supply
Agreement, Avanir will be fully obligated to supply Bulk Docosanol to Licensee
so long as this Agreement is effective or until such time as Licensee has
notified Avanir that Licensee has entered into a separate supply agreement for
Bulk Docosanol with a Third Party. Licensee will use all commercially reasonable
efforts to obtain, as soon as practicable, either a direct source of supply of
Bulk Docosanol from Avanir’s supplier or a second source of supply of Bulk
Docosanol. Upon Licensee’s request, Avanir will cooperate with Licensee to
establish the manufacturing process of the Bulk Docosanol of Licensee and/or its
designee and to obtain the required permits from the MHLW regarding any change
in such manufacturing process; provided, however, that Licensee and/or its
designee will not proceed to produce the Bulk Docosanol unless, within ***
months from Avanir’s receipt of the firm order for Bulk Docosanol from Licensee,
Avanir nevertheless fails to fill such order as provided by the Supply Agreement
regarding the Bulk Docosanol. In case of the above mentioned Bulk Docosanol
production by Licensee and/or its designee(s), Licensee or its designee(s) will
retain the right to manufacture Bulk Docosanol without any limitation. In that
case, Avanir will disclose to Licensee and/or its designee(s) any Know-How that
Avanir owns or controls, conditioned upon payment of a commercially reasonable
fee by Licensee.
     2.2 Restrictions on Licensee. To the extent not otherwise prohibited by
law, Licensee will not directly or indirectly for the term of this Agreement,
(a) promote, market, distribute or sell the Products outside the Field;
(b) actively or passively sell the Products outside the Territory, (c) sell or
distribute the Products to any Third Party whom Licensee has reasonable grounds
to believe is likely to sell outside the Field or export the Products outside
the Territory. If any person sells, markets or exports the Products sold to it
by Licensee contrary to the above restrictions, Licensee will make Best Efforts
to take actions within its legal rights and powers to cause such persons to
cease such sale, marketing or exportation. For purposes of the foregoing
restrictions, (1) “actively sell” in a territory means engaging in advertising,
marketing or promotion specifically aimed to such territory or establishing any
branch or distribution operations for the purpose of distributing Products in
such territory and (2) “passively sell” means responding to unsolicited customer
orders while not engaging in any advertising, marketing or promotion.
     2.3 Restrictions on Avanir. To the extent not otherwise prohibited by law,
Avanir will not sell the Products or Bulk Docosanol inside the Territory and
inside the Field or to any party who Avanir has reasonable grounds to believe is
likely to export the Products or Bulk Docosanol into the Territory for sale in
the Field. If any person sells or exports the Products or Bulk Docosanol
acquired from Avanir to customers inside the Territory for use in the Field
without Avanir’s authorization, Avanir will make Best Efforts to start to take
action within six months from Avanir’s awareness of the above-mentioned
situation, within its legal rights and powers to cause such persons to cease
such sale or exportation.
     2.4 Sublicenses. Licensee may not sublicense its rights under this
Agreement without Avanir’s prior written consent, which Avanir may grant or
withhold in its sole discretion. For the sake of clarity, sublicenses do not
include manufacturing of finished Product by a third party or subcontracts for
commercializing the Product by Licensee. Upon the prior written consent of
 

*** Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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Avanir, Licensee will only have the right to grant sublicenses within the
Territory and Field under Section 2.1 under the terms and conditions of this
Agreement and only for the expressly limited purpose of co-promotion and
co-marketing Products where and when (i) Licensee is and remains the single
registration holder for the Product; (ii) Licensee is and remains the single
person responsible for the manufacture of Product and (iii) only the Trademark
is used in connection with the Product. In all cases (a) such sublicensees will
be at least the equivalent of Licensee with respect to fitness to perform in
accordance with the terms of this Agreement, (b) the prospective sublicensees
may not distribute in the Territory a Competing Product; (c) such sublicensees
will have entered into a Sublicense Agreement; and (d) Licensee agrees in
writing with Avanir to remain obligated in all respects to comply with the
provisions of this Agreement and to indemnify Avanir for any costs, expenses or
damages that may result from sublicensee’s breach of any provision of the
Sublicense Agreement. Upon request of Avanir, Licensee will make reasonable
inquiries of any proposed sublicensee to determine whether such proposed
sublicensee is developing, making, marketing or selling Competing Products.
Except as specifically provided above, Licensee will have no rights to
sublicense all or any part of the license granted to Licensee pursuant to this
Agreement. Any transfer or extension of rights under the license granted under
this Agreement, in whole or in part, by Licensee to any Third Party will be
deemed and considered to be a sublicense subject to the requirements of this
Section, even if not so designated or described in the relevant legal
agreements, instruments or documents.
     2.5 Improvements.
     (a) Avanir Owned Improvements. Avanir will solely own any Improvements that
Avanir invents, develops, discovers or creates (“Avanir Owned Improvements”).
Avanir retains the ownership of and sole right and discretion to file, prosecute
and maintain any Territory, U.S. or foreign patent applications covering any
Avanir Owned Improvements. Any Avanir Owned Improvements and related patents or
patent applications will be included in the scope of the licenses granted under
Section 2.1, as long as Licensee agrees.
     (b) Licensee Owned Improvements. Licensee will solely own any Improvements
that Licensee invents, develops, discovers or creates that are not Avanir Owned
Improvements (“Licensee Owned Improvements”). Licensee retains ownership of and
sole right and discretion to file, prosecute and maintain any Territory, U.S. or
foreign patent applications covering any Licensee Owned Improvements.
     2.6 Patent Prosecution and Maintenance.
     (a) Consultations. Each party will promptly inform, consult with and assist
the other, as to all matters that come to its attention that may affect the
preparation, filing, prosecution, or maintenance of the patents relating to the
Products that each such party owns, including, without limitation, the discovery
or invention of any Improvements that such party owns and permit each other to
provide comments and suggestions with respect to such activities, which comments
and suggestions will be reasonably considered by the other party. If Avanir
files a patent application(s) relating to Improvements, including without
limitation the anti-herpes compositions and therapy with the Japan Patent Office
or obtains a patent(s) relating to the same in the Territory, Avanir will
promptly notify the Licensee by priority, and provide exclusive license of the
patent to the Licensee, as long as Licensee agrees.
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     (b) Assistance. Upon receipt of any Territory Registration, Licensee will
provide assistance to Avanir in obtaining patent extensions, supplementary
protection certificates, and the like for the Licensed Patents to the extent the
laws of the Territory provide it. If Licensee needs necessary cost for its
reasonable personnel’s time and expenses, Licensee will consult with and obtain
an approval in advance from Avanir before Licensee charge that to Avanir.
     (c) Abandonment of Licensed Patents. Avanir will make Best Efforts to
maintain Licensed Patents in the Territory. However, if Avanir has irresistible
reason to surrender or abandon Licensed Patents, Avanir will provide Licensee
with at least 60-days prior written notice before surrendering or abandoning any
Licensed Patents. To the extent that Licensee desires to continue maintenance
and/or prosecution of such Licensed Patents in such countries which Avanir has
elected to surrender rights, Avanir will assign such Licensed Patents to
Licensee, cooperate fully with Licensee, its attorneys, and agents in assuming
such responsibilities and provide Licensee with complete copies of any and all
documents or other materials that Avanir deems necessary to undertake such
responsibilities. Licensee will assume responsibility for all costs associated
with the Licensed Patents for which it elects to assume responsibility,
including costs associated with transferring patent prosecution responsibilities
to an attorney or agent of Licensee’s choice.
     3. REGULATORY MATTERS.
     3.1 Delivery of Know-How by Avanir.
     (a) Data and Applications. In consideration for the fee to be paid by
Licensee pursuant to Section 5.1, Avanir will provide, no later than 30 days
after the date of this Agreement, all available data used in the USA, in Sweden
and in other countries’ regulatory submissions for 10% docosanol cream in the
treatment of herpes simplex or herpes labialis and pre-clinical data and post
marketing surveys (to the extent available and possible under existing
confidentiality agreements), including, without limitation, copies of all
clinical data, documents, papers, protocols, results and analyses as well as
currently available information including that concerning adverse effects and
products complaints (to the extent the information is available to Avanir), in
each case that relates to or would be useful in connection with the import,
marketing, manufacturing, and/or registration of the Products in the Field in
the Territory.
     (b) Access to Drug Master File. As soon as practicable after the date of
this Agreement, (and supplemented as reasonably needed by Licensee as soon as
reasonably practicable thereafter during the term of this Agreement) Avanir will
use its Best Efforts to make available to Licensee the drug master file for Bulk
Docosanol on file at MHLW for the purpose of Licensee’s Territory registration
for the curative of episodic outbreaks of herpes simplex or herpes labialis
(subject to the confidentiality obligations of Article 8), if required by
Licensee. In any such event, Licensee will reimburse Avanir’s reasonable
out–of-pocket expenses incurred as a result of rendering such access.
     3.2 Additional Studies.
     (a) Licensee’s Responsibility. With respect to Additional Studies, Licensee
will be responsible for conducting any Additional Studies which Licensee
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concludes Licensee’s needs to conduct and for all costs and expenses associated
therewith.
     (b) Conduct of Additional Studies. Such Additional Studies will be
conducted by Licensee in accordance with applicable law and current Good
Clinical Practices (“GCPs”). Licensee will provide Avanir with summaries of all
protocols in respect of Additional Studies concerning the Products to be
conducted by Licensee and information indicating whether Licensee desires to
publish the results of such Additional Studies. Licensee will provide such
summaries to Avanir for Avanir’s review and comment within a month before such
Additional Studies are undertaken. Licensee will give such comments due and
careful consideration in the light of its obligations under this Agreement.
However, it is not necessary for Licensee to produce any English translation of
the Japanese original documents. During any time when Additional Studies are
being conducted, Licensee will also deliver to Avanir a status report every
calendar quarter with respect to such Additional Studies.
     (c) Third Party Collaborators. Avanir and Licensee each acknowledge and
agree that, with respect to any Additional Studies, (i) Licensee’s arrangements
made with the Third Party providers of services will in all cases require that
such Third Party providers grant sole ownership of (and publication rights with
respect to) the information, data, clinical trial results and other know-how
resulting from such Additional Studies to Licensee and (ii) as between Licensee
and Avanir, such information, data, clinical trial results and other know-how
resulting from such Additional Studies will belong solely to Licensee as
Licensee Owned Improvements.
     3.3 Territory Registrations.
     (a) Licensee’s Responsibilities. Licensee will directly bear all costs and
expenses and use its Best Efforts to complete all necessary studies to obtain
Territory Registrations and will be solely responsible for and will prepare
(using the data and files provided by Avanir pursuant to Section 3.1(a)) and
submit an application for the Territory Registration with the Territory health
care authorities in the Territory as soon as possible but no later than ***
months after the date of satisfactory conclusion of clinical trials and other
tests. Provided however, this time limit of *** months will not apply if the
MHLW changes the procedure of clinical trials and other tests, or a very special
demand for information is made by the Ministry. In connection with the
foregoing, Licensee may utilize other agents or consultants to assist in
obtaining Territory Registrations, but may not share Know-How with such agents
or consultants without entering into an appropriate confidentiality agreement.
Licensee will also be responsible for any other registration, regulatory and
pricing matters concerning the Products in the Territory.
     (b) Assistance. Avanir will assist Licensee in regulatory matters as
appropriate and reasonably requested by Licensee. If Licensee requests
assistance from Avanir, Avanir will consult with and obtain approval in advance
from Licensee if Avanir desires to be reimbursed for its reasonable costs of
personnel time and expenses plus *** %.
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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     (c) Ownership of Territory Registrations. Licensee will register and keep
any such Territory Registrations in Licensee’s own name. Licensee may assign
ownership of the Territory Registrations to Avanir in exchange for reimbursement
of its appropriate amount, including but not limited to the costs of obtaining
and maintaining the Registrations, and clinical study costs, in the event of
termination of this Agreement by Avanir prior to its expiration according to
Section 7.6(c).
     (d) Post Marketing Surveillance. Licensee will utilize its Best Efforts to
obtain any and all advantage derived from the Post Marketing Surveillance in the
Territory.
     (e) Improvements of Bulk Docosanol. In the case where modification or
improvement of Bulk Docosanol is required for obtaining the Territory
Registration and/or promoting the sales of the Products in the Territory, the
Licensee may request Avanir to modify or improve the Bulk Docosanol. Avanir will
use its Best Efforts to comply with any requests for improvements to Bulk
Docosanol. In any such event, Licensee will reimburse Avanir’s reasonable
out–of-pocket expenses incurred as a result of rendering such compliance or
assistance.
     3.4 Additional Indications. In the event that Avanir makes regulatory
filings for the marketing approval of other indications in the Field but outside
the Territory during the term of this Agreement, Avanir and Licensee will
discuss the appropriate regulatory filing strategy for such indications in the
Territory, but any such filings will be solely Licensee’s responsibility and
expense.
     3.5 Regulatory Developments and Communications. Each party will notify the
other immediately by telephone (with prompt, written follow-up), facsimile or
any other electrical method in writing of any inquiry, contact or communication
received from any governmental regulatory agency or other official body which
adversely relates to or impacts upon the Products or any component or ingredient
thereof (including, without limitation, any issuance of any Territory
Registration administrative decree relating to a recall of the Products or the
imposition of any post marketing surveillance period), and will promptly furnish
the other party with copies of all written communications relating thereto sent
to or received from such regulatory agency. Licensee will report to Avanir of
the status of the Territory Registration efforts on a current basis every three
months, and will furnish Avanir, upon Avanir’s reasonable request, copies of all
of the documents, data and other information supplied to or received from the
government in the Territory or other any approval authority in connection with
the Territory Registration without unreasonable delay. Avanir will have the
right to be informed of, and upon Licensee’s request, participate in and attend
discussions regarding the Territory Registration or any administrative decree.
Upon receipt of the Territory Registrations, Licensee will promptly furnish
Avanir copies or other satisfactory evidence thereof.
     3.6 Other Governmental Filings or Notices. Licensee will be solely and
exclusively responsible for and bear all expenses associated with any permits,
licenses or approvals necessary or advisable for the entry into force and
performance in the Territory of this Agreement and of the matters contemplated
in this Agreement.
     4. MANUFACTURE AND COMMERCIALIZATION OF PRODUCTS.
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     4.1 Manufacturing of Products. As between Avanir and Licensee, throughout
the term of this Agreement, Licensee will be solely responsible for:
(a) manufacturing or having manufactured the Products for distribution and sale
in the Territory and any related packaging and branding with Trademark,
(b) acquiring or causing to be acquired all manufacturing equipment and
licenses, including, without limitation, plant, equipment and facilities
licenses and approvals, necessary to enable the manufacture and testing of the
Products, (c) obtaining any required importation licenses or approvals for
importation of Bulk Docosanol into the Territory, including payment of any
related import charges or levies, (d) reporting of matters regarding the
manufacture of Products to relevant regulatory authorities and handling and
responding to any appropriate governmental agency inspections with respect to
manufacturing of Products, all in accordance with applicable laws and
regulations. Licensee will provide to Avanir any information requested by any
governmental agency in connection with any governmental inspection related to
Bulk Docosanol and will notify Avanir of any such matter if significant or
serious and promptly furnish complete copies of such reports to Avanir. Licensee
also will advise Avanir of any occurrence or information which arises out of
Licensee’s or its subcontractors’ manufacturing activities which has materially
adverse regulatory compliance and/or reporting consequences concerning the
Products. Licensee will use Reasonable Efforts to promptly advise Avanir of any
requests by any governmental agency for such inspections with respect to
manufacturing of the Products.
     4.2. Product Manufacturing Processes & Quality Control. Licensee will not,
and will ensure its manufacturing subcontractors do not, without the consent of
Avanir (such consent not to be unreasonably withheld) deviate from or modify the
instructions and methods which have been given by Avanir in writing and agreed
to by Licensee for the manufacture of the Products as well as the methods
supplied by Avanir and agreed to by Licensee for quality control of the
Products, subject to any applicable laws, regulations or requirements of any
governmental agency in the Territory. For the avoidance of doubt, the deviations
and modifications with respect to which Licensee must obtain the consent of
Avanir are ones that have a material impact on quality of the Product or affect
the obtaining or maintenance of any Territory Registration.
     4.3 Adverse Event Data Exchange.
     (a) In the event that either party, its Affiliates or sublicensees obtains,
directly or indirectly, information, data, inquiries, complaints, or reports on
any Adverse Events during the development, marketing and distribution of any of
the Products, such party will disclose, as soon as reasonably practicable, such
information and data to the other party and will collaborate with such other
party to respond to or inform any applicable governmental authority. Such
information will include an identifiable patient, a suspect medicinal product,
an identifiable reporting source and an event or outcome. Follow-up information
should be actively sought by the party and submitted within the same time-lines
as an initial report. Each party will also send (by fax or electronically) the
other party written notice in English of fatal and life-threatening events,
which are unexpected and considered possibly related to the Products, within 72
hours of receipt and of all other serious adverse events within ten business
days. All other Adverse Events associated with Products will be reported by
either party to the other party in summary format at least quarterly. For
purposes of the foregoing, an “Adverse Event” means any untoward medical
occurrence in a patient or clinical investigation subject administered the
Product and which does not necessarily have to have a causal relationship with
the Products, including, without limitation: (a) with respect to clinical
trials, all noxious and unintended responses to the Product and (b) after the
First Commercial Sale, any response to the Product which is noxious and
unintended and which occurs at doses normally used in man for
CONFIDENTIAL

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prophylaxis, diagnosis or therapy of disease or for modification of
physiological function. The provisions of this section will survive termination
of this Agreement so long as either party is marketing Products.
     (b) Licensee will bear the expenses of any recall of a Product in the
Territory; provided however, that Avanir will bear the expense of a recall to
the extent that such recall directly and exclusively caused by Avanir’s breach
of its obligations hereunder or Avanir’s negligence or willful misconduct or
intentional omission. Such expenses of recall will include expenses for
notification, destruction and return of the recalled Product and any refund to
customers of amounts paid for the recalled Product.
     4.4 Commercialization.
     (a) Efforts. Licensee will (a) use its Best Efforts applying its marketing
and sales expertise to maximize the sale and the profit from the Products
considering market situation in the Territory as soon as reasonably practical
but no later than *** after the issuance of a Territory Registration; (b) have
no right to use the Avanir trade name and trademark, apart from the Products
labeling requirements of Section 4.6; and (c) subject to and to the extent
permitted by applicable laws, not produce, sell or distribute any Competing
Products within the Territory, directly or indirectly, throughout the term of
this Agreement and for a period of *** after termination of the Agreement by
Avanir. Maximizing sale of the Products includes, without limitation, a
nation-wide scope test marketing in Japan. If the date of the First Commercial
Sale of the Products in the Territory does not occur by the *** anniversary of
the issuance of the first Territory Registrations in the Territory, the
exclusive license for the Territory may immediately convert to a non-exclusive
license, but Licensee will have a *** -month option to maintain its exclusive
license by paying, in advance, due on the first day of the month, a fee of $ ***
per month until the Product is launched or the *** months have expired. For the
sake of clarity, First Commercial Sale includes those by the Licensee in
maximizing of the sale of the Products.
     (b) Exclusivity. If Avanir considers that the Licensee produces, sells or
distributes any Competing Products in violation of the Agreement at any time
during the term of this Agreement, Avanir may commence a proceeding under
Section 13.5. If Avanir and the Licensee do not reach a settlement, the license
granted by Avanir under Section 2.1 will cease to be exclusive and,
notwithstanding any other provision in this Agreement, Avanir will have no
obligation to continue to license Improvements to Licensee. Notwithstanding the
foregoing, no such termination of exclusivity by Avanir will be effective until
completion of the dispute resolution procedures set forth in Section 13.5.
     4.5 Trademarks.
     (a) Ownership and Registration. Licensee will develop a unique Trademark
and will own the Trademark and be solely responsible for its use and
registration and all
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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related costs and expenses. Licensee will take all Reasonable Efforts to
register and maintain the Trademark in the Territory for use in association with
the Products. Licensee will take due care not to do or cause to be done any
action or omission which adversely affects the validity of the Trademark or
jeopardizes the maintenance thereof, either during the term of this Agreement.
     (b) Trademarks owned by Avanir. Licensee will make Best Efforts to use the
Trademark for the Products. Licensee will not market, sell or distribute any
Products under any brand or trademark that is the same as or confusingly similar
to the trademark and trade names owned by Avanir. Licensee acknowledges that
Avanir has no rights in the “Abreva” trademark.
     4.6 Marketing. Licensee will make Best Efforts to achieve the marketing at
maximum. Licensee agrees that the word “patented” or its appropriate substitute
under Japanese Patent Law will appear on the Product’s packaging, on an insert
and in other measures of description on or related to the Products in a place
determined by Licensee in its sole discretion and that labeling for Products
will contain the statement:
          “Distribution under license from Avanir Pharmaceuticals.”
     4.7 Publicity. The parties to this Agreement understand that both Avanir
and Licensee are public companies and agree that they may disclose certain
matters pertaining to this Agreement as to enable it to fully comply with USA or
Territory securities laws or regulations, which disclosure may be in the form of
public statements, whether oral or written, including, but not limited to,
shareholder reports, communications with stock market analysts, press releases
or other communications with the media. Notwithstanding the foregoing, any press
release or other announcement pertaining to this Agreement by either party will
be provided to the other party in advance for review and approval with such
approval not to be unreasonably withheld.
                    4.8 Publications. Neither Licensee nor its agents,
collaborators and subcontractors will publish the results of clinical or
preclinical studies of the Products or any Active Ingredient without the prior
approval of Avanir, which approval of Avanir will not be unreasonably withheld.
     5. ROYALTIES, FEES AND MILESTONE PAYMENTS.
     5.1 Data Transfer Fee. In consideration for the transfer of data under
Section 3.1(a), Licensee will pay to Avanir the non-refundable sum of
100,000,000.00 Japanese Yen as a Know-How and data transfer fee no later than
30 days after the date of this Agreement.
     5.2 Royalties. In consideration for the licenses granted pursuant to
Section 2.1, for manufacture and sales of Products by Licensee or its Affiliates
or sublicensees in the Territory, for the Territory, Licensee will pay Avanir
royalties as follows:
     (a) Patent / PMS period Royalties. Licensee will pay Avanir *** % of
aggregate Gross Sales in the Territory, (i) during the term of any issued and
valid Licensed
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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Patents or (ii) during the Post Marketing Surveillance Period which the MHLW has
not approved a generic product equivalent to any type of docosanol cream in the
Territory.
     (b) Know-How Royalties. Licensee will pay Avanir *** % of aggregate Gross
Sales in the Territory, as a Know-How royalty (notwithstanding whether Avanir
has or will have any Licensed Patents or any other intellectual property in the
Territory) until the date that is 10 years from the First Commercial Sale in the
Territory.
     5.3 Milestone Payments. Licensee will pay the milestone payments set forth
on the table below within 30 days after the date of the described event:

      MILESTONE   PAYMENT
***
  ***JP Yen
***
  ***JP Yen
***
  ***JP Yen
***
  ***JP Yen
***
  *** JP Yen

6. ACCOUNTING MATTERS.
     6.1 Payment of Royalties. Royalties will accrue upon the earlier of
shipping or billing of Products by Licensee or its Affiliates or sublicensees to
a distributor, reseller or other Third Party and will be payable quarterly,
60 days after the end of each calendar quarter. Any royalties due but not
received by Avanir will begin accruing interest on such overdue amounts at a
rate of *** % as set be required by applicable law. Quarterly royalty payments
to Avanir will be accompanied by a detailed written report covering each
calendar quarter showing (a) the Gross Sales of Products in aggregate in the
Territory by Licensee or its Affiliates or sublicensees, and (b) the royalty
payments, which will have accrued in respect of such sales and the basis for
calculating those royalties, including gross invoiced sales of each Product and
the deductions, if any, taken to calculate Gross Sales. Each quarterly report
will be due 30 days following the close of each calendar quarter. Unless
otherwise expressly provided herein, all royalty payments under this Agreement
will be paid without notice or demand and without abatement or deduction of any
amount unless other provisions of this Agreement admit exception.
     6.2 Access to Records. Licensee will keep and will cause its Affiliates or
sublicensees to keep records relating to the transactions covered by this
Agreement throughout the term of this Agreement and for a period of three years
thereafter. Upon Avanir’s request (but no more than once per year) and on
reasonable notice, Licensee will and will cause its Affiliates and sublicensees
to permit, at the expense of Avanir, an independent certified public accountant
reasonably acceptable to both parties, to have access during reasonable business
hours to such records as may be necessary to determine, in respect of any
quarterly period the correctness of any royalty statements and payments made
under this Agreement; provided, however, that Licensee will bear any such audit
expense if the review or audit shows an underpayment equal to
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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or greater than *** % for the applicable period. The independent certified
public accountant must sign confidential non-disclosure agreements prohibiting
him from revealing to any Third Party any information and allowing him to
disclose to Avanir only information relevant to royalty statements and payments.
     6.3 Currency of Payment. Except as set forth below, any and all payments to
be made to Avanir by Licensee under this Agreement will be made in Japanese Yen.
The conversion rate employed for calculation of royalties as provided in
Section 6.1 will be that published in the Nihon Keizai Shimbun’s “Foreign
Currency Exchange Rates” on the last business day of the calendar quarter for
which the royalty statement is made.
     6.4 Required Taxes and Withholdings.
     (a) Avanir’s Taxes. If Licensee makes any payment to any governmental
agency in the Territory or is subject to any withholding requirements in the
Territory on account of taxes payable by Avanir, Licensee may deduct the amount
of such tax payment actually paid to such governmental agency from Licensee’s
royalties payable to Avanir under this Agreement. In order to obtain proper tax
exemptions in international situation, the parties will take reasonable action
to apply Article 12 of CONVENTION BETWEEN THE GOVERNMENT OF JAPAN AND THE
GOVERNMENT OF THE UNITED STATES OF AMERICA FOR THE AVOIDANCE OF DOUBLE TAXATION
AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME to
Licensee’s royalties payable to Avanir under this Agreement.
     (b) Licensee’s Taxes. If Licensee makes any payment to any governmental
agency in the Territory or is subject to any withholding requirements in the
Territory on account of taxes payable by Licensee, Licensee may not deduct the
amount of such tax payment from royalties payable to Avanir under this
Agreement, and Licensee’s payment to Avanir will be in full and free of all
liability, deduction or set off for such tax or other deduction.
     (c) Sublicensee’s Withholdings. If any of Licensee’s sublicensees makes any
payment to any governmental agency in the Territory or is subject to any
withholding requirements in the Territory on account of taxes payable by
Licensee, even though such sublicensee deducts such payment or withholding from
amounts payable by such sublicensee to Licensee, Licensee may not deduct the
amount of such tax payment from royalties payable to Avanir under this Agreement
and the Licensee’s payment to Avanir will be in full and free of all liability,
deduction or set off for such tax or other deduction.
     6.5 Taxes. Licensee will pay and bear the expense of local and any
government license, sales and use, property and ad valorem taxes including the
consumption tax in Japan, and any custom duties, fees or charges which may be
imposed or assessed on it with respect to manufacture or sales of Products in
the Territory under this Agreement. If a party receives a refund or rebate for
taxes it paid on behalf of the other party, the party receiving such refund or
rebate will promptly remit it to the other party.
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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14

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     7. TERM AND TERMINATION.
     7.1 Term. Unless otherwise terminated as set forth below, the term of this
Agreement will commence on the date of this Agreement and will continue until
and automatically expire upon the later to occur of (a) the 10th anniversary of
the First Commercial Sale in the Territory or (b) the date the last claim of any
patent of the Licensed Patents licensed under this Agreement that covers sales
of Products in the Territory expires or is invalidated or (c) the last date of
the expiration of the Post Marketing Surveillance Period in the Territory. Upon
expiration of the term of this Agreement in the Territory, Licensee will
thereafter retain a fully paid-up perpetual, irrevocable, royalty-free
non-exclusive license under the license rights granted under Section 2.1.
     7.2 Material Breach by Licensee. If Licensee materially breaches,
materially defaults or otherwise materially fails to perform under the terms of
this Agreement or any other agreement between the parties to this Agreement,
Avanir may terminate this Agreement by giving *** months advance written notice,
unless Licensee will cure such breach, default or failure of performance within
such *** months period or unless such breach, default or failure is subject to
the force majeure provisions of Section 13.4. For the avoidance of doubt (and as
examples only), “materially breaches, materially defaults or otherwise
materially fails” as used in this Section 7.2 means (a) failure to prepare and
submit an application for the Territory Registrations with the Territory health
care authorities within *** months from the conclusion of the clinical trials
and other tests sufficient for registration, provided however, this time limit
of *** months will not apply if the MHLW changes the procedure of clinical
trials and other tests, or a very special demand for information is made by the
MHLW; or (b) no First Commercial Sale in the Territory has occurred by the date
required by Section 4.4(a), entitling Avanir to terminate the Agreement under
this Section, except for the event that (i) Territory Registration is not
obtained for reasons that are not attributable to Licensee’s responsibility, or
(ii) the cost of obtaining the Territory Registration, in relation to the
aforesaid clinical trials and other tests, exceeds *** Japanese Yen. Such other
tests include without limitation, non-clinical trials such as animal tests.
Notwithstanding the foregoing, no such termination by Avanir will be effective
until completion of the dispute resolution procedures set forth in Section 13.5.
     7.3 Material Breach by Avanir. If Avanir materially breaches, materially
defaults, or otherwise materially fails to perform under the terms of this
Agreement or the Supply Agreement, Licensee may, in its sole discretion either
(a) retain the licenses granted under this Agreement and bring an action for
damages against Avanir or (b) terminate this Agreement (and the licenses granted
hereunder) by giving *** months advance written notice, unless Avanir cures such
breach, default or failure of performance within such *** months period or
unless such breach, default or failure is subject to the force majeure
provisions of Section 13.4. For the sake of clarity, a “materially breaches,
materially defaults, or otherwise materially fails”, as used in this Section
means (a) intentional breach of obligations to deliver Know How, (b) any fraud
or misrepresentation, or (c) a breach by Avanir of its obligation under the
Supply Agreement to provide Bulk Docosanol (each such event being a “Material
Breach” hereafter). Notwithstanding the foregoing, no such termination by
Licensee will be effective until completion of the dispute resolution procedures
set forth in Section 13.5. For the avoidance of doubt, Avanir has
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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obligations under this Agreement other than specified obligation on the
definition of Material Breach.
     7.4 Continuing Obligations. Termination of this Agreement by either party
for any reason under the terms and conditions of this Agreement will not affect
obligations of either party incurred prior to termination or the right of either
party to recover damages from any breach thereof or affect Licensee’s
obligations to pay Avanir any fees, milestones, royalties or other payments that
have accrued as of the date of such termination.
     7.5 Remedies. Termination is not the sole remedy under this Agreement and,
whether or not termination is effected, all other remedies will remain
available.
     7.6 Consequences of Termination. Upon termination of this Agreement by
either party prior to the expiration of this Agreement set forth in Section 7.1,
for any reason:
     (a) Licenses. If termination of this Agreement is caused by material breach
by Licensee, the licenses granted under Section 2.1 will terminate, and Licensee
will permanently discontinue all advertising with respect to Products, although
Licensee may, to the extent permitted by applicable law, continue to sell
Products which it has in inventory at the time of termination; provided,
however, that any such sale will (i) be made at prices and under terms generally
consistent with previous sales of the Products by Licensee and (ii) be conducted
in a manner so as not to be harmful to Avanir or the market for the Products.
Notwithstanding the above, Licensee may not sell the Products more than 180 days
after the effective date of termination. At Avanir’s option, remaining stocks of
Products may be bought by Avanir at Licensee’s *** . Licensee will deliver such
stocks at Avanir’s direction and expense.
     (b) Trademark. Licensee will keep and own its registration of the Trademark
in the Territory even after any termination of this Agreement, as well as the
expiration of the Agreement set forth in Section 7.1. Provided, however, that
only if this Agreement was terminated by material breach by Licensee, Licensee
will assign ownership of the Trademark to Avanir in exchange for payment of an
appropriate amount.
     (c) Governmental Registrations. Within a reasonable period (as far as the
laws and regulations in the Territory permit deliverance and transfer) after the
effective date of any pre-expiration termination due to any material breach of
Licensee, Licensee will, at Licensee’s expense, (i) deliver and transfer to
Avanir the Territory Registration and attachments and instruments directly
relating thereto, any registration of any exclusive patent license (Senyo
Jisshiken) and any other import licenses and related licenses and rights
obtained by or on behalf of Licensee that are legally required for the
importation, use, distribution or sale of the Products by Avanir or such
designated entity in the Territory in exchange for appropriate amount of
payment; (ii) notify in writing any applicable government agencies of such
transfer; and (iii) follow any necessary procedures of any applicable government
agencies. If such deliverance or transfer is not legally permissible, or if such
an attempted deliverance or transfer would be ineffective
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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or would adversely affect materially the rights of Avanir so that Avanir would
not in fact receive substantially all such rights, Licensee will cooperate with
Avanir, free of charge, in any reasonable arrangement designed to provide Avanir
the benefits under any such registrations, licenses and rights as far as the
laws and regulations permit deliverance and transfer thereto this Agreement or
other actions by Licensee so as to enable Avanir to obtain the benefits under
such licenses and rights. Licensee will continue to provide Avanir with
assistance ensuring the orderly transition of the Products and its corresponding
regulatory approvals to Avanir.
     (d) Confidential Information. If termination of this Agreement is caused by
material breach by Licensee, Licensee will return all copies of all Avanir’s
Confidential Information and any other Know-How relating to the Products,
together with copies of any registrations and applications for registration of
the Products. Licensee will disclose all manufacturing information solely
related to the Products (in so far as such information is within Licensee’s
control and in so far as Licensee is legally able to disclose the information)
to Avanir and Licensee will continue to manufacture Avanir’s or its licensees’
requirements of the Products until such time as a substitute manufacturing
source has been approved by the Territory Regulatory Agency, if applicable, and
on such terms as will be agreed by the parties negotiating in good faith.
     8. CONFIDENTIALITY.
     8.1 Confidential and Proprietary Information. Each party to this Agreement
acknowledges that in order for Avanir and Licensee to carry out their respective
obligations under this Agreement, it may be necessary for Avanir and Licensee to
disclose to each other certain Confidential Information. Each party to this
Agreement agrees: (a) not to reveal or make available any Confidential
Information of the other to any Third Party, (except (i) to agents or
consultants engaged to obtain Territory Registrations in the Territory who have
entered into confidentiality agreements in a form acceptable to Avanir or
(ii) as such disclosure may be specifically approved in writing by the party
against whom such disclosure is sought and except as such disclosure may be
required by the receiving party’s compliance with legal requirements and in any
such case such party will promptly notify the other party of any such legally
required disclosure) and to ensure that it will treat such Confidential
Information of the other party in the same manner as it treats its own
Confidential Information, such treatment to be at least the degree that a
reasonable person would perform under similar circumstances; (b) to ensure that
Affiliates, sublicensees, employees, agents, associates or other persons to whom
such disclosure may be made or who may otherwise have access to such
Confidential Information of the other have, directly or indirectly, agreed in
writing to safeguard and maintain such Confidential Information of the other and
not to disclose or use such Confidential Information of the other; (c) to ensure
that Confidential Information of the other is not used for the receiving party’s
benefit except as such benefits are expressly contemplated in this Agreement;
(d) to prohibit the Confidential Information of the other from being duplicated
in any manner; except as is reasonably necessary to perform the tasks and
obligations contemplated under this Agreement; (e) to prohibit the Confidential
Information of the other from being published in any form without the express
written consent from the disclosing party, and (f) to ensure that each party of
this Agreement will not disclose any terms and condition of this Agreement in
detail to a Third Party without prior written consent of the other party, except
as provided in Section 47. and 4.8.
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     8.2 Survival of Confidentiality. The obligations of this Article 8 with
respect to Confidential Information will continue during the term of this
Agreement and for *** years thereafter.
     8.3 Remedies. The receiving party acknowledges and agrees that due to the
unique nature of the disclosing party’s Confidential Information, there can be
no adequate remedy at law for any breach of its obligations pursuant to this
Agreement, that any such breach may allow the receiving party or Third Parties
to unfairly compete with the disclosing party resulting in irreparable harm to
the disclosing party, and therefore, that upon any such breach or any threat
thereof, the disclosing party will be entitled to immediate injunctive relief in
addition to damages and expenses, including attorneys’ fees, in connection with
any breach or enforcement of the receiving party’s obligations pursuant to this
Agreement or the unauthorized use or release of any such Confidential
Information. The receiving party will notify the disclosing party in writing
immediately upon the occurrence of any such unauthorized release or other
breach. If any breach of this Article 8 is seriously detrimental to relationship
of trust between Licensee and Avanir, that breach will constitute a material
breach of this Agreement.
     9. REPRESENTATIONS AND WARRANTIES OF AVANIR.
     9.1 Due Organization and Authority. Avanir represents and warrants:
(a) that it is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of California and has the corporate power
and authority to execute, deliver and carry out the terms and provisions of this
Agreement; (b) that the execution, delivery and performance of this Agreement by
Avanir will not require the consent of any Third Party and will not cause a
breach or violation under any fiduciary, contractual, statutory or judicial
obligation or restraint to which Avanir is subject or bound; and (c) that the
person executing this Agreement on behalf of Avanir is duly authorized to do so
to bind the corporation.
     9.2 Safety and Stability. Avanir represents and warrants that it has not
received any notification of, and has no current knowledge that there is now
pending or that there have been any judicial or administrative orders to ban the
development or use of the Active Ingredient, and Avanir has no current knowledge
of any adverse reactions or test results encountered or discovered regarding the
use of the Active Ingredient which would render the Active Ingredient unsuitable
or unsafe for the purpose contemplated by this Agreement, which have not been
disclosed to Licensee.
     9.3 No Conflicts. Avanir represents and warrants that it has the right,
without any conflicts or restrictions, to enter into and perform in this
Agreement.
     9.4 NO OTHER WARRANTIES. EXCEPT AS MAY BE EXPRESSLY PROVIDED IN THIS
AGREEMENT OR THE SUPPLY AGREEMENT, AVANIR DISCLAIMS ANY WARRANTY WITH RESPECT TO
(A) THE QUALITY, COMPLETENESS, EFFICACY OR EFFICIENCY OF THE BULK DOCOSANOL,
PRODUCTS, KNOW-HOW OR ANY OTHER DATA OR OTHER INFORMATION TO BE DELIVERED UNDER
THIS AGREEMENT; (B) MERCHANTABILITY, TITLE, OF ANY PRODUCTS OR KNOW-HOW, FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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TO ANY AND ALL OF THE FOREGOING; AND (C) THE VALIDITY OF ANY PATENTS OR THE
PATENTABILITY OF ANY PATENT APPLICATIONS.
However, notwithstanding the foregoing, Avanir represents, warrants and
covenants to Licensee that:

  a)   As of the date hereof, Avanir is the sole and exclusive owner of the
entire right, title and interest in the Licensed Patents listed in
Schedule 1.14, and is entitled to grant the licenses specified herein. True,
complete and correct copies of the complete file wrapper and other documents and
materials relating to the prosecution, defense, maintenance, validity and
enforceability of the Licensed Patents have been provided to Licensee prior to
the date hereof or will be provided as soon as reasonably practicable following
patent grant, as the case may be. The Licensed Patents listed in Schedule 1.14
constitute all of the relevant patents applicable to Active Ingredient, Bulk
Docosanol and Product as of the date hereof. During the term of this Agreement,
Avanir will not take any action to encumber or diminish the rights granted to
Licensee hereunder with respect to the Licensed Patents.     b)   As of the date
hereof, to the best of Avanir’s knowledge, the Licensed Patents are being
diligently procured from the Japanese Patent Office in accordance with all
applicable laws and regulations. As of the date hereof, such Licensed Patents
have been filed and maintained properly and correctly and all applicable fees
have been paid on or before the due date for payment.     c)   As of the date
hereof, to the best of Avanir’s and its Affiliates’ knowledge, there is no
actual infringement or threatened infringement of the Licensed Patents and
Know-How by any Third Party.     d)   As of the date hereof, to the best of
Avanir’s and its Affiliates’ knowledge, Licensee’s exploitation of the Patents
or the Know-How hereunder will not infringe any patent or other intellectual
property or proprietary right of any Third Party.     e)   To the best of
Avanir’s and its Affiliates’ knowledge, the Licensed Patents and the Know-How
existing as of the date hereof are subsisting and are not invalid or
unenforceable, in whole or in part. As of the date hereof, no claim or
litigation has been brought or threatened by any Third Party alleging, and
Avanir is not aware of any possible claim, whether or not asserted, that the
Licensed Patents or Know-How are invalid or unenforceable.     f)   Avanir has
not previously entered into any agreement with respect to the Territory, whether
written or oral, with respect to, or otherwise assigned, transferred, licensed,
conveyed or otherwise encumbered its right, title or interest in or to, the
Licensed Patents or Know-How, the Bulk Docosanol or the Products (including by
granting any covenant not to sue with respect thereto) and it will not enter
into any such agreements or grant any such right, title or interest to any Third
Party that is inconsistent with the rights and licenses granted to Licensee
under this Agreement.     g)   To the best of Avanir’s and its Affiliates’
knowledge, the Know-How has been kept confidential or has been disclosed to
Third Parties only under terms of confidentiality.

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     10. REPRESENTATIONS AND WARRANTIES OF LICENSEE.
     10.1 Due Organization and Authority. Licensee represents and warrants that:
(a) it and each of its Affiliates is a corporation duly incorporated, validly
existing and in good standing under the laws of Japan and has the full power and
authority to execute, deliver and carry out the terms and provisions of this
Agreement; (b) the execution, delivery and performance of this Agreement by
Licensee will not require the consent of any Third Party and will not cause a
breach or violation under any fiduciary, contractual, statutory or judicial
obligation or restraint to which Licensee is subject or bound; and (c) the
person executing this Agreement on behalf of Licensee is duly authorized to do
so to bind Licensee.
     10.2 No Pending Action against Licensee. Licensee represents and warrants
that it has not received any notification of and has no current knowledge of any
action or proceeding pending or threatened against Licensee which might result
in a material adverse change in the business or financial condition of Licensee
which could adversely affect the rights of Avanir under this Agreement or the
development of the Products.
     10.3 Governmental Agencies. Licensee represents and warrants that it has
disclosed and made available to Avanir all pertinent correspondence received
from any governmental agency which relates to or impacts on its ability to
develop the Products pursuant to this Agreement in the Territory and will
disclose all such further information to Avanir in the future.
     10.4 No Conflicts. Licensee represents and warrants that it has the right,
without any conflicts or restrictions, to enter into and perform in this
Agreement.
     11. CLAIMS BY OR AGAINST THIRD PARTIES.
     11.1 Representations. Each party represents and warrants that it has not
been notified of any claims by any Third Parties related to the Active
Ingredient or the Products that have not been communicated to the other in
writing before execution of this Agreement.
     11.2 Notice of Reimbursed Claims. If during the term of this Agreement,
either party receives notice of or becomes aware of any Third Party claim
against such party or its Affiliates or sublicensees, which claim is subject to
Reimbursement by the other party under this Article 11 (an “Reimbursed Claim”),
such party seeking Reimbursement or its substitutes including appropriate damage
compensation for any liability under applicable law will promptly inform the
other party of such claim and all relevant and applicable facts relating thereto
in writing.
     11.3 Defense of Reimbursed Claims. Upon receiving a notification of a
Reimbursed Claim, the Reimbursing party will have sole discretion with respect
to and will solely control, at the Reimbursing party’s expense, the defense of
any such Reimbursed Claim. The Reimbursing party will keep the Reimbursed party
fully informed regarding the status of any negotiations or suits relating to
such Reimbursed Claim. The Reimbursed party will cooperate fully with the
Reimbursing party and will offer such assistance to the Reimbursing party as the
Reimbursing party requests in connection with the defense of any such Reimbursed
Claim at no charge to the Reimbursing party, except for reimbursement of
reasonable out-of-pocket expenses incurred in rendering such assistance. The
Reimbursing party will have the right to join the Reimbursed party as a party to
any lawsuit relating to such Reimbursed Claim at the Reimbursing party’s
expense, if the action has already been commenced against Reimbursed party by
the Third Party, and the Reimbursed party will have the right to be represented
therein by legal counsel of its own choice at the Reimbursed party’s expense,
where
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it is allowed under applicable law. The Reimbursing party will not settle any
such suit if such settlement would have an affect on the rights of the
Reimbursed party without obtaining the prior written consent of the Reimbursed
party, which consent will not be unreasonably withheld. The Reimbursing party’s
obligation to indemnify under this Article 11 will not apply to the extent that
the party seeking Reimbursement (i) failed to comply with the obligations under
this Section 11.3 or (ii) contributed to such loss, damage, injury, liability or
claim by any act, or by an omission to perform some duty imposed by applicable
law, this Agreement or other contract between the parties, on the Reimbursed
party. The Reimbursement rights of either party under this Article 11 will be
the sole remedy for any claims for which either such party seeks Reimbursement
under this Article 11.
     11.4 Reimbursement of Avanir by Licensee. Licensee will defend, indemnify
and hold harmless Avanir, its successors, assigns, officers, directors,
employees and agents from any and all claims, causes of action, losses,
liabilities and expenses (including, but not limited to, reasonable attorneys’
fees) to Third Parties (including Avanir’ employees and any sublicensees)
arising out of (a) any breach of this Agreement by Licensee or (b) any personal
injury, death, environmental damage or property damage resulting from (i) any
defects in design, materials or workmanship of any kind or (ii) failure to
comply with any applicable laws or misappropriation of any Third Party rights,
related to the manufacture, labeling, marketing, advertising, distribution,
transportation, sale and use of the Products by Licensee or its Affiliates or
sublicensees or by any Third Party acting under any contract with Licensee or
with Licensee’s knowledge, consent or approval or (c) claims that the Trademark
infringes any trademark rights owned by a Third Party.
     11.5 Reimbursement of Licensee by Avanir. Avanir will defend, indemnify and
hold harmless Licensee, its successors, assigns, officers, directors, employees
and agents from any and all claims, causes of action, losses, liabilities and
expenses (including, but not limited to, reasonable attorneys’ fees) by Third
Parties (including Licensees’ employees and any sublicensee) arising out of
(a) any breach of this Agreement by Avanir; (b) any personal injury, death,
environmental damage or property damage resulting from (i) any defects in
design, materials or workmanship of any kind related to Bulk Docosanol that is
supplied by Avanir pursuant to the Supply Agreement or (ii) failure to comply
with any applicable laws related to Bulk Docosanol that is supplied by Avanir
pursuant to the Supply Agreement, or by any Third Party acting under any
contract with Avanir or with Avanir’s knowledge, consent or approval and related
to Bulk Docosanol that is supplied by Avanir pursuant to the Supply Agreement;
or (c) claims and damages related to such claims, that Licensee’s approved use
or sale of Products within the Field infringes any patent owned by a Third Party
in the Territory; provided, however, the amount of Reimbursement is subject to
and to the extent permitted by any applicable law. The above provision may not
be construed or interpreted as to exceed the maximum limitation of liability
permitted by the law. If an action is commenced by a Third Party against
Licensee seeking a preliminary or permanent injunction with respect to the
manufacture and sales of the Products by Licensee and Avanir is unable to obtain
a written opinion of patent counsel that it is not infringing the third-party’s
patent, or that such patent is invalid, then Licensee will cease any such
alleged infringement or misappropriation. In the event of any such occurrence,
Licensee and Avanir will promptly work together on a change of design which
should not create any infringement or misappropriation under the Third Party’s
patent.
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     11.6 Enforcement of Proprietary Rights against Third Parties. If Licensee
becomes aware of any product or activity of any Third Party that is suspected of
involving infringement or violation of any of Avanir’s proprietary rights, then
Licensee will promptly notify Avanir in writing of such infringement or
violation. If Avanir becomes aware of any product or activity of any Third Party
that is suspected of involving infringement or violation of Avanir’s proprietary
rights and that affect Licensee’s license rights pursuant to this Agreement,
then Avanir will promptly notify Licensee in writing of such infringement or
violation. Avanir may in its sole discretion take or not take whatever action it
believes is appropriate in connection with any such infringement or violation,
and will have the right to initiate an infringement or other appropriate suit,
including any defensive action in an invalidation trial at the Japan Patent
Office for any one of the Licensed Patents listed in the Schedule of 1.14,
against any Third Party who is suspected of infringing or misappropriating any
Licensed Patents, invention or technology included in any Products or the
Know-How in the Territory. If Avanir elects to take action, Licensee will fully
cooperate therewith at Avanir’s expense. If Avanir initiates and prosecutes any
such action under this Section 11.6, all legal expenses (including court costs
and attorneys’ fees) will be for Avanir’s account but Licensee and Avanir will
be entitled to the balance shared proportional to their damages or payments
regarding losses (other than for reimbursement of costs or expenses, including
attorney’s fees) awarded by way of judgment, settlement or compromise and
received by Avanir from the Third Party(s). If necessary, Licensee may be joined
as a party to the suit and will cooperate fully with respect to such suit and
will offer such assistance to Avanir in connection therewith at no charge except
for reimbursement of reasonable out-of-pocket expenses (including attorneys’
fees) incurred in rendering such assistance. In such situation, Licensee will
have sole discretion in selecting its own counsel. If Avanir declines in any way
whatsoever to enforce or initiate an infringement or other appropriate suit
against an infringing Third Party, Licensee will have the right to sue,
selecting its counsel in its sole discretion, and, subject to the proviso below,
will be entitled to receive all amounts awarded by way of judgment, settlement
or compromise, if Licensee registers Senyo Jisshiken under the Japanese Patent
Law and any other applicable precedents under Japanese Law in the subject case,
provided, however, that Avanir will be entitled to a proportionate share of any
damages or payments (other than for reimbursement of costs or expenses,
including attorneys’ fees) received by Licensee from such Third Party(s). Avanir
will fully cooperate therewith at Avanir’s expense.
     11.7 Reimbursement Payment Adjustments. Any Reimbursed amounts provided
under this Article 11 will be reduced or refunded to take account of any net tax
benefit or insurance proceeds received and any other amount recovered, if any,
by the Reimbursed party with respect to any Reimbursed amounts.
     11.8 Insurance. To provide each Reimbursed party under this Agreement with
adequate assurance of Reimbursement, for the term of this Agreement and for a
period of five years after the expiration of this Agreement or earlier
termination, each party will obtain and/or maintain, respectively, at its sole
cost and expense, product liability insurance in amounts, which are reasonable
and customary in the local pharmaceutical industry considering the respective
size and activities of the two parties. Such product liability insurance will
insure against all liability, including liability for personal injury, physical
injury and property damage. Each party will provide written proof of the
existence of such insurance to the other party upon request.
     12. ASSIGNMENTS.
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     12.1 No Right to Assign. Subject to Sections 12.2, and 12.3, neither party
will have the right to assign or delegate this Agreement, or any of its rights
or obligations under this Agreement (except for Avanir’s rights to payments of
royalties pursuant to this Agreement) without the other’s express written
consent, and such assignment or delegation without such consent will be null and
void for all purposes. In case for Avanir’s rights to payments of royalties
pursuant to this Agreement, Avanir will provide Licensee with at least 60-days
prior written notice before the assignment of the right.
     12.2 Sale of Business. Notwithstanding anything to the contrary in this
Agreement, either Avanir or Licensee may assign its entire interest in this
Agreement provided that such assignment is part of the sale or transfer of
substantially all of Avanir’s or Licensee’s business, merger (“Gappei in
Japanese Commercial Law), corporate division, corporate separation or demerger
(“Kaisya Bunkatsu” in Japanese Commercial Law), as the case may be.
     12.3 Assignment to Affiliates. Notwithstanding the provisions of Section
12.1, this Agreement and the obligations pursuant to this Agreement will be
assignable, in whole or in part, by Avanir, without consent of Licensee, to one
or more Affiliates who will affirm to Licensee a complete assumption of the
obligations assigned; provided that Avanir will guarantee the performance by
such Affiliate(s) of such obligations. On the other hand, notwithstanding the
provisions of Section 12.1, this Agreement and the obligations pursuant to this
Agreement will be assignable, in whole or in part, by Licensee, without consent
of Avanir, to one or more of Licensee’s Affiliates that are as able or more able
to perform the obligations of Licensee under this Agreement and that will affirm
to Avanir a complete assumption of the obligations assigned; provided that
Licensee will guarantee the performance by such Affiliate(s) of such
obligations. Licensee hereby guarantees the performance of its Affiliates, and
further promises that such assignment will revert to the Licensee in the event
that such Affiliate subsequently ceases to be an Affiliate.
     13. MISCELLANEOUS.
     13.1 Notices/Reports. Any reports, notices or other communications required
or permitted to be given by either party to this Agreement will be given in
writing by personal delivery, overnight courier service or facsimile, or by
registered or certified air mail, postage prepaid, return receipt requested, or
electronic means including e-mail addressed to each respective party at the
address shown below.
If to Avanir:
Avanir Pharmaceuticals, Inc.
11388 Sorrento Valley Road, Suite 200
San Diego, California 92121
Attention: Vice President, Business Development
Facsimile No: ***
If to Licensee:
Kobayashi Pharmaceutical Co., Ltd.
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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30-3, 1-chome, Toyokawa
Ibaraki-shi
Osaka 567-0057, JAPAN
Attention: Chief of R&D Company
Facsimile No.: ***
or to such other address as either party may indicate by proper notice to the
other in the same manner as provided in this Agreement. All notices are deemed
effective on the date of receipt or, if delivery is not accepted, five days
after placement with the addressee, an overnight courier service or a post
office, as applicable.
     13.2 Severability. If any provision of this Agreement is determined to be
invalid, void, or unenforceable, then any such provision will be ineffective and
the remaining provisions of this Agreement will continue in full force and
effect without being impaired or invalidated in any way.
     13.3 Counterparts. This Agreement may be executed in several counterparts,
each of which will be an original, but all of which, when taken together, will
constitute one and the same instrument.
     13.4 Force Majeure. Except for the payment of money, no failure or omission
by the parties to this Agreement in the performance of any obligation of this
Agreement will be deemed a breach of this Agreement nor create any liability, if
the same arises as a result of force majeure, i.e., any cause or causes beyond
the control of the parties, including, but not limited to, the following, which,
for the purposes of this Agreement, will be regarded as beyond the control or
the party in question: acts of God; acts, omissions, rules, regulations,
decisions, denials or orders of any governmental authority or any officer,
department, agency or instrumentality thereof, fire, storm, flood, earthquake,
accident, acts of the public enemy; war; rebellion, insurrection, riot,
invasion, strikes, or lockouts. In the event of such cause intervening, such
excuse of performance will be only to the extent that such nonperformance is
beyond the reasonable control of the party bound by such covenant or obligation;
and the party so affected will use its Best Efforts to eliminate or cure or
overcome any of such causes and to resume performance of its covenants and
obligations with all possible speed.
     13.5 Dispute Resolution Process.
     (a) Scope. As a required precondition to terminating the Agreement or any
license granted pursuant to this Agreement or to initiating any legal action,
any dispute, controversy, or claim arising out of this Agreement or its
interpretation, performance, breach, enforcement or termination, or any other
claim arising out of the respective rights and duties of the parties
(hereinafter, a “Dispute”), will be settled by the procedures described in this
Section 13.5. For the avoidance of doubt, this Section does not apply to
disputes relating to patent validity which will be determined by a court and/or
a patent office of competent jurisdiction.
 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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     (b) Informal Efforts to Resolve Disputes. Before resorting to the
procedures set forth in subsections (c) through (g) below, the parties will
first use all Reasonable Efforts to resolve any Disputes through good faith
negotiations and friendly and informal discussions at a management level
appropriate to the circumstances. Should such informal efforts to resolve a
Dispute fail, before the Agreement may be terminated by either party or before
either party may initiate any legal action, the Dispute must be resolved
pursuant to the remaining provisions of this Section 13.5.
     (c) Notice of Breach or Dispute. If the informal efforts described in
subsection (b) above fail to resolve a Dispute, or if either party believes that
there has occurred any material breach of the Agreement or there exists any
Dispute relating to any material breach or any other Dispute has arisen, such
party will immediately deliver written notice (the “Dispute Notice”) to the
other party of the alleged material breach or Dispute. The Dispute Notice will
contain a detailed and explanatory description of the alleged event of default,
breach or Dispute, including the factual and legal or contractual basis for the
alleged event of default, breach or Dispute and the relief or remedy sought by
the party giving notice.
     (d) Conference. Within 30 days of the date of the Dispute Notice,
representatives of the parties having authority to settle the Dispute will
confer either by telephone or, if mutually agreed, in person in a good faith
effort to resolve the Dispute.
     (e) In Person Meeting. If a mutually acceptable resolution of the Dispute
is not achieved by the 30th day after the conference described in subsection (d)
above, the Dispute will be automatically referred to senior executives nominated
by each party and of comparable rank or position who will meet in person to
discuss and use all Reasonable Efforts in good faith to resolve the Dispute to
the mutual satisfaction of the parties within 30 days thereafter. In the event
that Licensee has delivered the Dispute Notice to Avanir, then such meeting will
take place in San Diego, California, and in the event that Avanir has delivered
the Dispute Notice to Licensee, then such meeting will take place in Osaka,
Japan. Each party will bear its own expenses relating to such meeting.
     (f) Binding Arbitration. If the personal meeting referred to in subsection
(e) cannot resolve the matter or dispute within the 30-day period scheduled for
its completion, the Dispute will be resolved, to the exclusion of a court of
law, by binding arbitration as follows:
(i) Arbitration Rules. Any formal arbitration commenced by either party will be
conducted in accordance with the Arbitration Rules of the Japan Commercial
Arbitration Association or the American Arbitration Association as follows the
location of arbitration as set forth in (v) of this Section 13.5(f), in effect
as of the date hereof.
(ii) Arbitrators. Unless the parties agree in writing on the appointment of a
single arbitrator, the matter will be referred to three arbitrators; one to be
appointed by each party, and the third, who will act as Chairman, being
nominated by the two so selected by the parties.
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(iii) Arbitration Decisions. The arbitration decision or award will be final and
binding on the parties, and the parties agree to be bound thereby and to act
accordingly. The arbitration award is to be given by a majority decision;
however, if there be no majority in favor of a single decision or award, the
award will be made by the Chairman alone. The arbitrators will be empowered to
award relief which is legal and/or equitable in nature, as appropriate.
(iv) Arbitration Expenses. The expenses of the proceeding will initially be
borne equally by the parties to the dispute, but the prevailing party in such
proceeding will be entitled to recover, in addition to reasonable attorneys’
fees and all other expenses, its contribution for the reasonable fees and
expenses of the arbitrator as an item of damage and/or recoverable expenses.
(v) Arbitration Location. The place of arbitration will be in the city of the
principal address of the respondent in any such proceeding.
(vi) Arbitration Language. The language of such arbitration will be English
(vii) Enforcement of Arbitration Decision. Judgment on the award rendered by the
arbitrators may be entered in any court of competent jurisdiction, or
application may be made to such court for judicial acceptance of the award
and/or an order of enforcement as the case may be.
(viii) Confidential Arbitration. The arbitration will be conducted
confidentially and any award may be made public only with the prior written
consent of the parties.
     (g) Effects of Pending Dispute. In the course of any negotiations,
consultations, meetings, discussions, whether formal or informal, and during any
mediation or arbitration proceedings to resolve any Dispute, both parties will
make an effort to continue to perform the Agreement in all respects and no
termination of the Agreement will be effective by either party until the final
resolution of the Dispute by the parties or by the arbitrators. Notwithstanding
anything to the contrary contained in this Agreement, in the event of a dispute
relating to or arising out of an alleged material breach by either party,
although the effective date of any termination of the Agreement will not be
until the completion of all the steps required by this Section 13.5, the
commencement of any Dispute resolution proceeding under this Section 13.5 will
not (i) extend any payment due dates or cure periods set forth in this Agreement
with respect to any determination as to whether a material breach has occurred
or (ii) relieve either party of any payment or other obligations that are
incurred during the pendency of the dispute resolution proceeding under this
Section 13.5. Provided, however, Licensee has an option to deposit any payment
to any governmental depository service offices or other escrow service agents
during the Dispute resolution proceeding.
     13.6 Governing Law. This Agreement will be construed in accordance with the
substantive laws of Japan, without giving any effect to the principles of
conflict of laws.
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     13.7 Entire Agreement. This Agreement (together with its Exhibits and
Schedules) contains the entire agreement of the parties regarding the subject
matter of this Agreement and supersedes all prior agreements, understandings and
negotiations regarding the same. This Agreement may not be changed, modified,
amended or supplemented except by a written instrument signed by both parties.
     13.8 Captions. The captions used in this Agreement are for purposes of
clarification only and are not meant to be construed as part of this Agreement.
     13.9 Limitation of Liability. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
NEITHER LICENSEE NOR AVANIR WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF
THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY
FOR COST OF PROCUREMENT OF SUBSTITUTE GOODS, SERVICES, TECHNOLOGY OR RIGHTS OR
FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES. SUBJECT TO AND TO THE EXTENT
PERMITTED BY APPLICABLE LAW, EXCEPT WITH RESPECT TO ITS REIMBURSEMENT
OBLIGATIONS UNDER THIS AGREEMENT, AVANIR WILL NOT BE LIABLE FOR ANY AMOUNTS
AGGREGATING IN EXCESS OF ONE HUNDRED PERCENT OF THE AMOUNTS PAID TO IT
HEREUNDER.
     13.10 Compliance with Export and Other Laws. Each party to this Agreement
hereby covenants to comply with, and the performance of the terms of this
Agreement will be subject to, all applicable treaties, laws, statutes, rules and
regulations of any federal, state or local governmental entity or
instrumentality, including without limitation, the provisions of the U.S. Export
Administration Act of 1969, as amended.
     13.10 English Language. All reports, data, information, notices, schedules,
plans, records and other information required to be provided pursuant to this
Agreement by either party to this Agreement will be in the English language
unless the original data and the source of description thereof are written only
in Japanese. If a translation is made of this Agreement, it will be made for the
convenience of Licensee and the English version of this Agreement, rather than
the translated version, will be deemed to be controlling. The parties have
negotiated this Agreement in the English language.
     13.11 Further Assurances. Each party to this Agreement 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.
     13.12 Waiver. The waiver by either party of a breach of any provisions
contained in this Agreement will be in writing and will in no way be construed
as a waiver of any succeeding breach of such provision of the waiver of the
provision itself.
     13.13 Relationship of the Parties. The relationship between Avanir and
Licensee under this Agreement is that of parties to an arms-length negotiated
contract. Nothing in this Agreement is intended or is to be construed so as to
create between Avanir and Licensee, respectively, the relationship of partners,
or joint ventures, or to establish either party to this Agreement as the
employee or agent of the other party to this Agreement. Neither party to this
Agreement has an express or implied right or authority under this Agreement to
make any statement or commitments of any kind or to assume or to create any
obligations on behalf of or
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in the name of the other party to this Agreement, or to bind the other party to
any contract, agreement or undertaking with any Third Party.
     13.14 Certain Construction Rules. The Article and Section headings used in
this Agreement are for convenience of reference only and in no way define,
limit, extend or describe the scope or intent of any provisions hereof. In
addition, as used in this Agreement, unless otherwise expressly stated to the
contrary, (a) all references to days, months or years are references to calendar
days, months or years and (b) any reference to a “Section,” “Article,”
“Exhibit,” or “Schedule” is a reference to a Section or Article of this
Agreement or an Exhibit or Schedule attached to this Agreement. Any reference to
a “person” means any individual, corporation, partnership, joint venture,
association, trust or any other entity or organization of any kind or character,
including a governmental agency.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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     IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the day and year first written above.

                      Kobayashi Pharmaceutical Co., Ltd.   AVANIR
PHARMACEUTICALS     (LICENSEE)
               
 
                   
By:
  /s/ Yutaka Kobayashi       By:   /s/ Gregory P. Hanson    
 
                    Name: Yutaka Kobayashi   Name: Gregory P. Hanson     Title:
President and Chief Operating Officer   Title: Vice President and CFO     Date:
January 5, 2006   Date: January 10, 2006    

[SIGNATURE PAGE TO DOCOSANOL LICENSE AGREEMENT]
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SCHEDULE 1.14
Licensed Patents (Japan)

                                      Patent / Application     Patent title  
Territory   Status   Filing date   Number   Issue date
***
  ***   ***   ***   ***   ***
***
  ***   ***   ***   ***   ***
***
  ***   ***   ***   ***    

 

***   Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the “Mark”). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company’s
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.

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