Exhibit 10.1


 


	
  CONFIDENTIAL

  	
   

  	
  EXECUTION

  COPY

  



 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


 


LICENSE,
DEVELOPMENT AND COMMERCIALIZATION AGREEMENT


 


by
and between


 


THERAVANCE,
INC.


 


and


 


ASTELLAS
PHARMA INC.


 


 


Dated:  November 7, 2005


 

















 


TABLE
OF CONTENTS


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  DEFINITIONS

  	
   

  	
  1

  
	
  Section 1.01

  	
  “Adverse Drug Experience”

  	
   

  	
  1

  
	
  Section 1.02

  	
  “Affiliate”

  	
   

  	
  1

  
	
  Section 1.03

  	
  “Anti-Infective Franchise Plan”

  	
   

  	
  2

  
	
  Section 1.04

  	
  “API Compound”

  	
   

  	
  2

  
	
  Section 1.05

  	
  “ASTELLAS IP”

  	
   

  	
  2

  
	
  Section 1.06

  	
  “ASTELLAS Invention”

  	
   

  	
  2

  
	
  Section 1.07

  	
  “ASTELLAS Know-How”

  	
   

  	
  2

  
	
  Section 1.08

  	
  “ASTELLAS Patents”

  	
   

  	
  2

  
	
  Section 1.09

  	
  “ASTELLAS Product Trademark”

  	
   

  	
  3

  
	
  Section 1.10

  	
  “Basic Commercial Plan”

  	
   

  	
  3

  
	
  Section 1.11

  	
  “Basic Development Plan”

  	
   

  	
  3

  
	
  Section 1.12

  	
  “Breaching Party”

  	
   

  	
  3

  
	
  Section 1.13

  	
  “Business Day”

  	
   

  	
  3

  
	
  Section 1.14

  	
  “Calendar Quarter”

  	
   

  	
  3

  
	
  Section 1.15

  	
  “Calendar Month”

  	
   

  	
  3

  
	
  Section 1.16

  	
  “Calendar Year”

  	
   

  	
  3

  
	
  Section 1.17

  	
  “Claim”

  	
   

  	
  3

  
	
  Section 1.18

  	
  “Commercial Manufacture”

  	
   

  	
  3

  
	
  Section 1.19

  	
  “Commercialization”

  	
   

  	
  4

  
	
  Section 1.20

  	
  “Confidential Information”

  	
   

  	
  4

  
	
  Section 1.21

  	
  “Contracting Issues”

  	
   

  	
  5

  
	
  Section 1.22

  	
  “Control”

  	
   

  	
  5

  
	
  Section 1.23

  	
  “Cost Of Goods Sold”

  	
   

  	
  5

  
	
  Section 1.24

  	
  “Country”

  	
   

  	
  6

  
	
  Section 1.25

  	
  “cSSSI”

  	
   

  	
  6

  
	
  Section 1.26

  	
  “Deployment Issues”

  	
   

  	
  6

  
	
  Section 1.27

  	
  “Designated Foreign Filings”

  	
   

  	
  6

  
	
  Section 1.28

  	
  “Detailed Development Plan”

  	
   

  	
  6

  
	
  Section 1.29

  	
  “Development” or “Develop”

  	
   

  	
  6

  
	
  Section 1.30

  	
  “Diligent Efforts”

  	
   

  	
  7

  
	
  Section 1.31

  	
  “Disclosing Party”

  	
   

  	
  8

  
	
  Section 1.32

  	
  “Distribution Issues”

  	
   

  	
  8

  
	
  Section 1.33

  	
  “DMF”

  	
   

  	
  8

  
	
  Section 1.34

  	
  “Due Diligence Notice Date”

  	
   

  	
  8

  
	
  Section 1.35

  	
  “Economic Integration Period”

  	
   

  	
  8

  
	
  Section 1.36

  	
  “Effective Date”

  	
   

  	
  8

  
	
  Section 1.37

  	
  “FDA”

  	
   

  	
  8

  
	
  Section 1.38

  	
  “Field”

  	
   

  	
  8

  
	
  Section 1.39

  	
  “Filing”

  	
   

  	
  8

  
	
  Section 1.40

  	
  “First Commercial Sale”

  	
   

  	
  9

  
	
  Section 1.41

  	
  “First Commercial Sale Stock”

  	
   

  	
  9

  
					



 


1

















 


	
  Section 1.42

  	
  “Force Majeure Event”

  	
   

  	
  9

  
	
  Section 1.43

  	
  “Governmental Authority”

  	
   

  	
  9

  
	
  Section 1.44

  	
  “HAP”

  	
   

  	
  9

  
	
  Section 1.45

  	
  “Hatch-Waxman Certification”

  	
   

  	
  9

  
	
  Section 1.46

  	
  “Housemark”

  	
   

  	
  9

  
	
  Section 1.47

  	
  “Indemnified Party”

  	
   

  	
  9

  
	
  Section 1.48

  	
  “Indemnifying Party”

  	
   

  	
  9

  
	
  Section 1.49

  	
  “Initial Indications”

  	
   

  	
  9

  
	
  Section 1.50

  	
  “Invention”

  	
   

  	
  9

  
	
  Section 1.51

  	
  “Issue of Necessity”

  	
   

  	
  9

  
	
  Section 1.52

  	
  [*]

  	
   

  	
  10

  
	
  Section 1.53

  	
  [*]

  	
   

  	
  10

  
	
  Section 1.54

  	
  “Joint Invention”

  	
   

  	
  10

  
	
  Section 1.55

  	
  “JSC”

  	
   

  	
  10

  
	
  Section 1.56

  	
  “Know-How”

  	
   

  	
  10

  
	
  Section 1.57

  	
  “Know-How Royalty Term”

  	
   

  	
  10

  
	
  Section 1.58

  	
  “Last Patient, Last Visit”

  	
   

  	
  10

  
	
  Section 1.59

  	
  “Laws”

  	
   

  	
  10

  
	
  Section 1.60

  	
  “Licensed Product”

  	
   

  	
  10

  
	
  Section 1.61

  	
  “Litigation Condition”

  	
   

  	
  10

  
	
  Section 1.62

  	
  “Losses”

  	
   

  	
  10

  
	
  Section 1.63

  	
  “Major Market Country”

  	
   

  	
  11

  
	
  Section 1.64

  	
  “Marketing Authorization”

  	
   

  	
  11

  
	
  Section 1.65

  	
  “Medical Marketing Plan”

  	
   

  	
  11

  
	
  Section 1.66

  	
  “Milestone”

  	
   

  	
  11

  
	
  Section 1.67

  	
  “NDA”

  	
   

  	
  11

  
	
  Section 1.68

  	
  “NDA Approval”

  	
   

  	
  11

  
	
  Section 1.69

  	
  “NDA Filing”

  	
   

  	
  11

  
	
  Section 1.70

  	
  “NDA Holder”

  	
   

  	
  11

  
	
  Section 1.71

  	
  “Net Sales”

  	
   

  	
  11

  
	
  Section 1.72

  	
  “Net Sales Report”

  	
   

  	
  12

  
	
  Section 1.73

  	
  “Opt-In Right”

  	
   

  	
  12

  
	
  Section 1.74

  	
  “Other Indications”

  	
   

  	
  13

  
	
  Section 1.75

  	
  “OUS”

  	
   

  	
  13

  
	
  Section 1.76

  	
  “Patents”

  	
   

  	
  13

  
	
  Section 1.77

  	
  “Patent Infringement Claim”

  	
   

  	
  13

  
	
  Section 1.78

  	
  “Patent Infringement Notice”

  	
   

  	
  13

  
	
  Section 1.79

  	
  “Patent Resolution Issue”

  	
   

  	
  13

  
	
  Section 1.80

  	
  “Payment Period”

  	
   

  	
  13

  
	
  Section 1.81

  	
  “Person”

  	
   

  	
  13

  
	
  Section 1.82

  	
  “Phase 3a Studies”

  	
   

  	
  13

  
	
  Section 1.83

  	
  “Phase 3b Studies”

  	
   

  	
  13

  
	
  Section 1.84

  	
  “Phase 4 Studies”

  	
   

  	
  13

  
	
  Section 1.85

  	
  “POC Data”

  	
   

  	
  13

  
	
  Section 1.86

  	
  “Plan”

  	
   

  	
  14

  
	
  Section 1.87

  	
  “PRC”

  	
   

  	
  14

  



 


 






[*]=CERTAIN
INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


 


2

















 


	
  Section 1.88

  	
  “Product Supplier”

  	
   

  	
  14

  
	
  Section 1.89

  	
  “Promotional Materials”

  	
   

  	
  14

  
	
  Section 1.90

  	
  “Promotional/MedEd Issues”

  	
   

  	
  14

  
	
  Section 1.91

  	
  “Promotional/MedEd Spending”

  	
   

  	
  14

  
	
  Section 1.92

  	
  “Receiving Party”

  	
   

  	
  14

  
	
  Section 1.93

  	
  “Recording Party”

  	
   

  	
  14

  
	
  Section 1.94

  	
  “Registration Batches”

  	
   

  	
  14

  
	
  Section 1.95

  	
  “Registration Expenses”

  	
   

  	
  14

  
	
  Section 1.96

  	
  “Samples”

  	
   

  	
  14

  
	
  Section 1.97

  	
  [*]

  	
   

  	
  15

  
	
  Section 1.98

  	
  [*]

  	
   

  	
  15

  
	
  Section 1.99

  	
  “Signing Date”

  	
   

  	
  15

  
	
  Section 1.100

  	
  “Studies”

  	
   

  	
  15

  
	
  Section 1.101

  	
  “Supplied Licensed Product”

  	
   

  	
  15

  
	
  Section 1.102

  	
  [*]

  	
   

  	
  15

  
	
  Section 1.103

  	
  “Taxes”

  	
   

  	
  15

  
	
  Section 1.104

  	
  “TD-1792 Compound”

  	
   

  	
  15

  
	
  Section 1.105

  	
  “TD-1792 Phase 3 Study”

  	
   

  	
  15

  
	
  Section 1.106

  	
  “TELAVANCIN”

  	
   

  	
  15

  
	
  Section 1.107

  	
  “TELAVANCIN Product Management Team”

  	
   

  	
  15

  
	
  Section 1.108

  	
  “Term-Additional”

  	
   

  	
  15

  
	
  Section 1.109

  	
  “Term-Basic”

  	
   

  	
  16

  
	
  Section 1.110

  	
  “Term-Total”

  	
   

  	
  16

  
	
  Section 1.111

  	
  “Territory”

  	
   

  	
  16

  
	
  Section 1.112

  	
  “THERAVANCE Compound”

  	
   

  	
  16

  
	
  Section 1.113

  	
  “THERAVANCE IP”

  	
   

  	
  16

  
	
  Section 1.114

  	
  “THERAVANCE Invention”

  	
   

  	
  16

  
	
  Section 1.115

  	
  “THERAVANCE Know-How”

  	
   

  	
  17

  
	
  Section 1.116

  	
  “THERAVANCE Patents”

  	
   

  	
  17

  
	
  Section 1.117

  	
  “THERAVANCE Product Trademark”

  	
   

  	
  17

  
	
  Section 1.118

  	
  “Third Party”

  	
   

  	
  17

  
	
  Section 1.119

  	
  “Third Party Claim”

  	
   

  	
  17

  
	
  Section 1.120

  	
  “United States”

  	
   

  	
  17

  
	
  Section 1.121

  	
  “Valid Claim”

  	
   

  	
  17

  
	
  ARTICLE 2

  	
  LICENSE
  RIGHTS AND OBLIGATIONS

  	
   

  	
  18

  
	
  Section 2.01

  	
  License Grants From THERAVANCE to ASTELLAS

  	
   

  	
  18

  
	
  Section 2.02

  	
  TD-1792 Option Grant To ASTELLAS

  	
   

  	
  18

  
	
  Section 2.03

  	
  Further Commercialization In The Field

  	
   

  	
  19

  
	
  Section 2.04

  	
  Right To Sublicense

  	
   

  	
  19

  
	
  Section 2.05

  	
  Right To Appoint Distributors

  	
   

  	
  20

  
	
  Section 2.06

  	
  Duration Of License Grants

  	
   

  	
  20

  
	
  Section 2.07

  	
  Trademarks And Housemarks

  	
   

  	
  20

  
	
  Section 2.08

  	
  Further THERAVANCE Inventions, In-Licensing
  and Updates to Exhibit A; Covenants

  	
   

  	
  21

  
	
  ARTICLE 3

  	
  GOVERNANCE

  	
   

  	
  24

  
	
  Section 3.01

  	
  Overviews

  	
   

  	
  24

  
					



 


 






[*]=CERTAIN
INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


 


3

















 


	
  Section 3.02

  	
  Joint Steering Committee

  	
   

  	
  25

  
	
  Section 3.03

  	
  TELAVANCIN Product Management Team

  	
   

  	
  28

  
	
  Section 3.04

  	
  Budgeting

  	
   

  	
  30

  
	
  Section 3.05

  	
  Decision-Making

  	
   

  	
  30

  
	
  Section 3.06

  	
  Dispute Resolution

  	
   

  	
  32

  
	
  ARTICLE 4

  	
  DEVELOPMENT
  OF LICENSED PRODUCT

  	
   

  	
  33

  
	
  Section 4.01

  	
  Obligations For Development

  	
   

  	
  33

  
	
  Section 4.02

  	
  ASTELLAS Assistance

  	
   

  	
  35

  
	
  Section 4.03

  	
  Transfer Of THERAVANCE Know-How

  	
   

  	
  35

  
	
  Section 4.04

  	
  Certain Activities; Non-delegation

  	
   

  	
  36

  
	
  ARTICLE 5

  	
  COMMERCIALIZATION

  	
   

  	
  37

  
	
  Section 5.01

  	
  Medical Marketing Plans

  	
   

  	
  37

  
	
  Section 5.02

  	
  Obligations For Commercialization

  	
   

  	
  38

  
	
  Section 5.03

  	
  Commercialization

  	
   

  	
  38

  
	
  Section 5.04

  	
  Collaborative Working Meetings

  	
   

  	
  40

  
	
  Section 5.05

  	
  Compliance

  	
   

  	
  40

  
	
  Section 5.06

  	
  Respective Employees’ Status Not Changed

  	
   

  	
  40

  
	
  ARTICLE 6

  	
  FINANCIAL
  PROVISIONS

  	
   

  	
  41

  
	
  Section 6.01

  	
  Signing Payment

  	
   

  	
  41

  
	
  Section 6.02

  	
  Licensing Milestone Payments

  	
   

  	
  41

  
	
  AMOUNT

  	
   

  	
   

  	
  42

  
	
  Section 6.03

  	
  Payment Of Royalties On Net Sales Of
  Licensed Product

  	
   

  	
  43

  
	
  Section 6.04

  	
  Net Sales Report

  	
   

  	
  47

  
	
  Section 6.05

  	
  U.S. GAAP

  	
   

  	
  47

  
	
  Section 6.06

  	
  Currencies

  	
   

  	
  47

  
	
  Section 6.07

  	
  Manner Of Payments

  	
   

  	
  47

  
	
  Section 6.08

  	
  Interest On Late Payments

  	
   

  	
  47

  
	
  Section 6.09

  	
  Tax

  	
   

  	
  48

  
	
  Section 6.10

  	
  Financial Records; Audits

  	
   

  	
  48

  
	
  ARTICLE 7

  	
  PROMOTIONAL
  MATERIALS AND SAMPLES

  	
   

  	
  49

  
	
  Section 7.01

  	
  Review Of Promotional Materials

  	
   

  	
  49

  
	
  Section 7.02

  	
  Markings Of Packaging And Promotional
  Materials

  	
   

  	
  50

  
	
  Section 7.03

  	
  Statements Consistent With Labeling

  	
   

  	
  50

  
	
  ARTICLE 8

  	
  REGULATORY
  MATTERS

  	
   

  	
  50

  
	
  Section 8.01

  	
  OUS Governmental Authorities

  	
   

  	
  50

  
	
  Section 8.02

  	
  United States Governmental Authorities

  	
   

  	
  51

  
	
  Section 8.03

  	
  Recalls Or Other Corrective Action

  	
   

  	
  53

  
	
  Section 8.04

  	
  Rights Of Reference To DMFs

  	
   

  	
  53

  
	
  Section 8.05

  	
  Events Affecting Integrity Or Reputation

  	
   

  	
  54

  
	
  ARTICLE 9

  	
  ORDERS;
  SUPPLY AND RETURNS

  	
   

  	
  54

  
	
  Section 9.01

  	
  Orders And Terms Of Sale To Third Parties

  	
   

  	
  54

  
	
  Section 9.02

  	
  Supply Of API Compound And Formulated
  Licensed Product For Development

  	
   

  	
  54

  
	
  Section 9.03

  	
  Supply Of API Compound For Commercialization

  	
   

  	
  55

  
	
  Section 9.04

  	
  Supply Of Licensed Product For
  Commercialization

  	
   

  	
  55

  
					



 


4

















 


	
  Section 9.05

  	
  Inventories

  	
   

  	
  55

  
	
  Section 9.06

  	
  [*]

  	
   

  	
  55

  
	
  Section 9.07

  	
  Transition Assistance

  	
   

  	
  56

  
	
  ARTICLE 10

  	
  CONFIDENTIAL
  INFORMATION

  	
   

  	
  57

  
	
  Section 10.01

  	
  Confidential Information

  	
   

  	
  57

  
	
  Section 10.02

  	
  Permitted Disclosure And Use

  	
   

  	
  57

  
	
  Section 10.03

  	
  Publications

  	
   

  	
  58

  
	
  Section 10.04

  	
  Public Announcements

  	
   

  	
  58

  
	
  Section 10.05

  	
  Confidentiality Of This Agreement

  	
   

  	
  59

  
	
  Section 10.06

  	
  Termination Of Prior Confidentiality
  Agreements

  	
   

  	
  59

  
	
  Section 10.07

  	
  Survival

  	
   

  	
  59

  
	
  ARTICLE 11

  	
  REPRESENTATIONS
  AND WARRANTIES; COVENANTS

  	
   

  	
  59

  
	
  Section 11.01

  	
  Mutual Representations And Warranties

  	
   

  	
  59

  
	
  Section 11.02

  	
  Representations And Warranties Of
  THERAVANCE

  	
   

  	
  60

  
	
  Section 11.03

  	
  Acknowledgement Of ASTELLAS

  	
   

  	
  62

  
	
  Section 11.04

  	
  Limitations

  	
   

  	
  62

  
	
  Section 11.05

  	
  Covenants

  	
   

  	
  63

  
	
  ARTICLE 12

  	
  INDEMNIFICATION

  	
   

  	
  63

  
	
  Section 12.01

  	
  Indemnification By ASTELLAS

  	
   

  	
  63

  
	
  Section 12.02

  	
  Indemnification By THERAVANCE

  	
   

  	
  63

  
	
  Section 12.03

  	
  Procedure For Indemnification

  	
   

  	
  64

  
	
  Section 12.04

  	
  Assumption Of Defense

  	
   

  	
  65

  
	
  Section 12.05

  	
  Insurance

  	
   

  	
  65

  
	
  ARTICLE 13

  	
  PATENTS

  	
   

  	
  66

  
	
  Section 13.01

  	
  Prosecution And Maintenance Of Patents

  	
   

  	
  66

  
	
  Section 13.02

  	
  Patent Infringement

  	
   

  	
  70

  
	
  Section 13.03

  	
  Notice Of Certification

  	
   

  	
  71

  
	
  Section 13.04

  	
  Assistance

  	
   

  	
  72

  
	
  Section 13.05

  	
  Settlement

  	
   

  	
  72

  
	
  Section 13.06

  	
  Ownership Of Inventions

  	
   

  	
  72

  
	
  Section 13.07

  	
  Licensing Discussion Procedures

  	
   

  	
  73

  
	
  ARTICLE 14

  	
  TERM AND
  TERMINATION

  	
   

  	
  74

  
	
  Section 14.01

  	
  Term And Expiration Of Term

  	
   

  	
  74

  
	
  Section 14.02

  	
  Termination For Material Breach

  	
   

  	
  74

  
	
  Section 14.03

  	
  Terminations For Cause

  	
   

  	
  75

  
	
  Section 14.04

  	
  Contemporaneous Termination Of Opt-In Right

  	
   

  	
  76

  
	
  Section 14.05

  	
  Survival Of Obligations

  	
   

  	
  76

  
	
  Section 14.06

  	
  Survival of Provisions Upon Termination
  and/or Expiration

  	
   

  	
  76

  
	
  ARTICLE 15

  	
  CONSEQUENCES
  OF TERMINATION

  	
   

  	
  77

  
	
  Section 15.01

  	
  Termination And Handback Of License

  	
   

  	
  77

  
	
  Section 15.02

  	
  Termination Followed By Continued License

  	
   

  	
  79

  
	
  ARTICLE 16

  	
  MISCELLANEOUS

  	
   

  	
  80

  
	
  Section 16.01

  	
  Relationship Of The Parties

  	
   

  	
  80

  
	
  Section 16.02

  	
  Registration And Filing Of This Agreement

  	
   

  	
  80

  
	
  Section 16.03

  	
  Force Majeure

  	
   

  	
  81

  
					



 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


5

















 


	
  Section 16.04

  	
  Governing Law

  	
   

  	
  81

  
	
  Section 16.05

  	
  Attorneys’ Fees And Related Expenses

  	
   

  	
  81

  
	
  Section 16.06

  	
  Assignment

  	
   

  	
  81

  
	
  Section 16.07

  	
  Performance by Affiliates

  	
   

  	
  82

  
	
  Section 16.08

  	
  Notices

  	
   

  	
  82

  
	
  Section 16.09

  	
  Limitation on Liability

  	
   

  	
  83

  
	
  Section 16.10

  	
  Severability

  	
   

  	
  84

  
	
  Section 16.11

  	
  Headings; Interpretation

  	
   

  	
  84

  
	
  Section 16.12

  	
  Waiver

  	
   

  	
  84

  
	
  Section 16.13

  	
  Entire Agreement

  	
   

  	
  84

  
	
  Section 16.14

  	
  No License

  	
   

  	
  84

  
	
  Section 16.15

  	
  Third Party Beneficiaries

  	
   

  	
  85

  
	
  Section 16.16

  	
  Counterparts

  	
   

  	
  85

  
	
  Section 16.17

  	
  Single Closing Condition

  	
   

  	
  85

  



 


6

















 


AGREEMENT


 


This AGREEMENT (“Agreement”) dated November 7, 2005, is made by
and between THERAVANCE, Inc., a Delaware corporation, and having its
principal office at 901 Gateway Boulevard, South San Francisco, California
94080 (“THERAVANCE”), and ASTELLAS PHARMA INC., a Japanese corporation, and
having its principal office at 3-11, Nihonbashi-Honcho 2-chome, Chuo-ku, Tokyo
103-8411, Japan (“ASTELLAS”).  THERAVANCE
and ASTELLAS may be referred to as a “Party” or together, the “Parties”.


 


RECITALS


 


WHEREAS, THERAVANCE
has discovered and is currently developing the proprietary compound identified
as TELAVANCIN for use as a parenteral antibiotic;


 


WHEREAS, ASTELLAS
performs development of pharmaceutical compounds and marketing of
pharmaceutical products including in the anti-infective area; and


 


WHEREAS, ASTELLAS
desires to obtain a license and to undertake development and commercialization
activities with respect to TELAVANCIN, in collaboration with THERAVANCE, under
the terms and conditions of this Agreement.


 


NOW, THEREFORE, in
consideration of the foregoing premises and the representations, covenants and
agreements contained herein, THERAVANCE and ASTELLAS, intending to be legally
bound, hereby agree as follows:


 


ARTICLE 1


 


DEFINITIONS


 


For purposes of this Agreement, the following initially capitalized
terms, whether used in the singular or plural, shall have the following
meanings (with derivative forms of them being interpreted accordingly):


 


Section 1.01                                “Adverse Drug
Experience” means any of: an “adverse drug experience,” a “life-threatening
adverse drug experience,” a “serious adverse drug experience,” or an “unexpected
adverse drug experience,” as those terms are defined in either 21 C.F.R.§312.32
or 21 C.F.R.§314.80.


 


Section 1.02                                “Affiliate” of a
Party means any Person, whether de jure or de facto, that directly or
indirectly controls, is controlled by, or is under common control with such
Party for so long as such control exists, where “control” means the
decision-making authority as to such Person and, further, where such control
shall be presumed to exist where a Person owns more than fifty percent (50%) of
the equity (or such lesser percentage which is the maximum allowed to be owned
by a foreign corporation in a particular jurisdiction) having the power to vote
on or direct the affairs of or elect the management of the entity.


 


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Section 1.03                                “Anti-Infective Franchise
Plan” shall mean that certain annual plan developed by [*] describing at a
high level the basic principles for [*] to the extent [*] including the [*].


 


Section 1.04                                “API Compound”
means bulk quantities of THERAVANCE Compound as an active pharmaceutical
ingredient prior to the commencement of secondary manufacturing resulting in
the Licensed Product.


 


Section 1.05                                “ASTELLAS IP”
means ASTELLAS Know-How, ASTELLAS Patents, ASTELLAS Inventions, and any Patents
claiming same, ASTELLAS Product Trademark and ASTELLAS’ interest in the Joint
Inventions and any Patents claiming same.


 


Section 1.06                                “ASTELLAS Invention”
means an Invention that is invented (a) by any employee(s) or agent(s) of
ASTELLAS (and/or any of its Affiliates) whether solely, jointly among themselves,
or jointly with one or more Third Party(ies) (including without limitation via
the subcontractors and service providers of any of them performing Development
or Commercialization); or (b) by any Third Party with which ASTELLAS or
any of its Affiliates has contracted to perform Development and/or
Commercialization hereunder, in each case to the full extent Controlled by
ASTELLAS.


 


Section 1.07                                “ASTELLAS Know-How”
means all present and future Know-How relating to the THERAVANCE Compound,
Licensed Product or the ASTELLAS Inventions, including without limitation all
data, records and regulatory filings relating to the THERAVANCE Compound or
Licensed Product, that is necessary or useful for THERAVANCE to perform its
obligations or exercise it rights under this Agreement, and which during the
Term-Basic are in ASTELLAS’ or any of its Affiliates’ possession or control and
are or become owned by, or otherwise may be licensed to, ASTELLAS, in all cases
to the extent Controlled by ASTELLAS or any of its Affiliates.  ASTELLAS Know-How does not include ASTELLAS
Patents (other than the information contained in unpublished applications).
[*].


 


Section 1.08                                “ASTELLAS Patents”
means all present and future patents and patent applications including United
States provisional applications and any continuations, continuations-in-part,
divisionals, registrations, confirmations, revalidations, re-examinations,
renewals, reissues, Patent Cooperation Treaty applications, certificates of
addition, utility models, design patents and petty patents, including without
limitation extensions or restorations of terms thereof, pediatric use
extensions, supplementary protection certificates or any other such right (“Patents”)
that covers the making, having made, use, sale, offer for sale, or importation
of THERAVANCE Compound or Licensed Product that are or become during the
Term-Basic owned by ASTELLAS or ASTELLAS’ Affiliates, or as to which ASTELLAS
or ASTELLAS’ Affiliates otherwise are or become during the Term-Basic licensed,
now or in the future, in all cases solely to the extent ASTELLAS or any of its
Affiliates Controls such Patent.


 


Section 1.09                                “ASTELLAS Product
Trademark” means any and all trademarks and trade dress that ASTELLAS (or
its Affiliates) may file to register and/or register and Control for Licensed
Product in the Territory during the Term-Basic excluding any ASTELLAS
Housemark.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


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Section 1.10                                “Basic Commercial
Plan” means that certain plan for the pre-launch, achieving First
Commercial Sale and medical marketing and promotion (in the first three (3) years
after the first US Marketing Authorization is approved by the FDA) of
TELAVANCIN for the Initial Indications in the US agreed to by the Parties in
writing as of the Signing Date and containing a section on assumptions and
objectives, a section on commitments and an appendix with background
information.  The Basic Commercial Plan
assumes successful completion of the activities called for in the Basic
Development Plan.


 


Section 1.11                                “Basic Development
Plan” shall mean that certain Development plan for the clinical Development
of TELAVANCIN for the Initial Indications for the United States agreed to by
the Parties in writing as of the Signing Date and containing a section on
assumptions and objectives, a section on commitments and an appendix with
background information.


 


Section 1.12                                “Breaching Party”
shall have the meaning set forth in Section 14.02.


 


Section 1.13                                “Business Day”
means any day on which commercial banks in New York City, New York, United
States are open for business.


 


Section 1.14                                “Calendar Quarter”
means for each Calendar Year, each of the three-month periods beginning in
January, April, July and October.


 


Section 1.15                                “Calendar Month”
means for each Calendar Year, each of the one-month periods.


 


Section 1.16                                “Calendar Year”
means, for the first calendar year, the period commencing on the Effective Date
and ending on December 31 of the calendar year during which the Effective
Date occurs, and each successive period beginning on January 1 and ending
twelve (12) consecutive calendar months later on December 31.


 


Section 1.17                                “Claim” means
all charges, complaints, actions, suits, proceedings, hearings, investigations,
claims and demands.


 


Section 1.18                                “Commercial
Manufacture” means all activities relating to supply of Licensed Product
for Phase 3b Studies and Phase 4 Studies and for all commercial supply of API
Compound and Licensed Product after THERAVANCE’s delivery of the First
Commercial Sale Stock.  This includes
without limitation formulation, fill, finish, QA, QC, and all analytical
methods development.


 


Section 1.19                                “Commercialization”
means any and all activities directed to conducting Phase 3b Studies and Phase
4 Studies; marketing, promoting, distributing, offering for sale and selling
the Licensed Product; and importing the Licensed Product (to the extent
applicable).  Commercialization includes
(without limitation) Commercial Manufacture. 
When used as a verb, “Commercialize” means to engage in
Commercialization.


 


Section 1.20                                “Confidential
Information” means all secret, confidential or proprietary information,
data or other Know-How (including without limitation ASTELLAS Know-How and
THERAVANCE Know-How) whether provided in written, oral, graphic, video,


 


3

















 


computer or other form, provided by one Party or its Affiliates (the “Disclosing
Party”) to the other Party or its Affiliates (collectively the “Receiving Party”)
pursuant to this Agreement or generated pursuant to this Agreement (the Party
not generating the information shall be the Receiving Party with respect
thereto), including but not limited to information relating to the Disclosing
Party’s existing or proposed research, Development efforts, patent
applications, business or products, the terms of this Agreement and any other
materials that have not been made available by the Disclosing Party to the
general public.  Solely with respect to
information, data and other Know-How that regards manufacturing (including
without limitation information, data and Know-How as to the process to make and
formulate TELAVANCIN and Licensed Product in final finished form and that which
is covered by the [*] or the [*] Agreement), to qualify as Confidential
Information, the information, data or other Know-How must be (i) marked
confidential on initial disclosure, (ii) confirmed in writing to be
confidential within a reasonable time (not less than 30 days) after initial
disclosure, or (iii) of a nature or disclosed in a context within which
the Receiving Party should reasonably be expected to understand that it is
confidential. Confidential Information shall not include any information or
materials that the Receiving Party can document with competent written proof:


 


(a)                                  were already known to
the Receiving Party (other than under an obligation of confidentiality), at the
time of disclosure by the Disclosing Party;


 


(b)                                 were generally
available to the public or otherwise part of the public domain at the time of
its disclosure to the Receiving Party;


 


(c)                                  became generally
available to the public or otherwise part of the public domain after its
disclosure or development, as the case may be, and other than through any act
or omission of a Party in breach of such Party’s confidentiality obligations
under this Agreement;


 


(d)                                 were disclosed to a
Party, other than under an obligation of confidentiality, by a Third Party who
had no obligation to the Disclosing Party not to disclose such information to
others; or


 


(e)                                  were independently
discovered or developed by or on behalf of the Receiving Party without the use
of the Confidential Information belonging to the other Party.


 


Notwithstanding the foregoing, any combination of features or
disclosures of Confidential Information shall not be deemed to be within the
public domain or in the rightful possession of the Receiving Party merely
because individual features are published or available to the general public or
in the rightful possession of the Receiving Party unless the combination itself
and principle of operation (if applicable) are published or available to the general
public or in the rightful possession of the Receiving Party.  In addition, specific aspects or details of
Confidential Information shall not be deemed to be within the public domain or
in the rightful possession of the Receiving Party merely because they are
contained within more general public disclosures or more general information in
the rightful possession of the Receiving Party (as non-limiting
illustrations:  if a temperature range of
60 – 80 degrees were publicly disclosed, then the more specific termperature of
70 degrees as being preferred over


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


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all other temperatures in that range would not be considered publicly
known based on the more general public disclosure of the overall range; and a
specific compound within a chemical class that is patentably distinct over a
large genus of compounds would not be deemed to be in the public domain merely
because the large genus of compounds within which it falls is publicly known if
the specific compound has never been publicly disclosed individually).


 


Section 1.21                                “Contracting Issues”
means all issues and decisions regarding price and price terms [*] and other
contract terms respecting Licensed Product sales in the US.  This shall include without limitation all
issues and decisions with respect to contracting with managed care entities,
hospitals, GPOs, PBMs, and government, and specifically includes issues and
decisions about the offer of discounts or rebates for formulary placement for
Licensed Product.  Contracting Issues [*]
issues and decisions regarding [*] and all other [*].


 


Section 1.22                                “Control” with
respect to an item of intellectual property means ownership of or possession of
a license (or other similar right) under such item of intellectual property, in
each case with the right to grant a license or sublicense thereunder to the other
Party of the scope and content provided for in this Agreement without breaching
any written agreement with a Third Party (a) existing as of the Signing
Date or (b) by which such Party granting the license or sublicense
hereunder derives rights to such item of intellectual property after the
Signing Date.


 


Section 1.23                                “Cost Of Goods Sold”
means as applicable, either (a) the amounts paid to Third Party
manufacturers for the manufacture and supply of Licensed Product to be sold
hereunder or (b) the sum of the following costs to the extent directly
related to Licensed Product to be sold hereunder: the cost of direct materials,
direct labor, licensing costs (not including payments made pursuant to the [*])
and manufacturing overhead related to the facility in which the Products are
produced. The Cost of Goods Sold shall exclude the following: corporate
overhead and any allocable costs not generated in the manufacturing facility.
The Cost of Goods Sold shall be calculated in a manner consistent with United
States GAAP consistently applied and as generally used by the applicable Party.


 


Section 1.24                                “Country” means
any sovereign entity generally recognized internationally as a nation.  Country excludes the individual states within
the United States and other similar entities in other jurisdictions that are
not recognized internationally as nations, but includes the US as a whole.


 


Section 1.25                                “cSSSI” has the
meaning given such term in the definition of Initial Indications.


 


Section 1.26                                “Deployment Issues”
means all issues and decisions regarding the deployment of the sales force for
Licensed Product, including without limitation hiring, firing and compensation
of sales force personnel promoting Licensed Product, all other employment
matters relating to the personnel who form such sales force, the specific
allocation of sales representatives between and within customer accounts (both
existing and potential), account universe, physician call universe, the
geographic focus of sales efforts, the amount of time spent in presenting
Licensed


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


5

















 


Product within a sales call, and the order of presenting Licensed
Product relative to other promoted products in such sales call (sales
hierarchy).  Deployment Issues shall not
include Promotional/MedEd Issues, defined below.  As an illustration (but without limitation),
decisions about which [*] that a significant percentage [*] a specific type of
[*] that Licensed Product provides [*].


 


Section 1.27                                “Designated Foreign
Filings” shall have the meaning set forth in Section 13.01(b)(ii).


 


Section 1.28                                “Detailed
Development Plan” means the plan for the detailed implementation of the
Basic Development Plan, designed to achieve Development for the Licensed
Product for the Initial Indications for the US consistent with the Basic
Development Plan and this Agreement, including, without limitation, the nature,
number and schedule of Development activities as well as the estimated
resources necessary to implement such activities.  The Detailed Development Plan must at all
times be consistent with the Basic Development Plan and this Agreement.  The Detailed Development Plan is intended to
reflect the Parties’ plans for the detailed implementation of the Basic
Development Plan, but not to alter the Basic Development Plan in any way.


 


Section 1.29                                “Development” or
“Develop” means nonclinical and clinical drug development activities,
including, among other things (but in the case of manufacturing-related
activities, specifically excluding Commercial Manufacture as of the date that
THERAVANCE delivers the First Commercial Sale Stock): test method development
and stability testing, toxicology, formulation, process development,
manufacturing scale-up to commercial scale, development-stage manufacturing,
current Good Manufacturing Practices audits, current Good Clinical Practices
audits, current Good Laboratory Practices audits, analytical method validation,
manufacturing process validation, cleaning validation, scale-up, quality
assurance/quality control development, statistical analysis and report writing,
nonclinical and clinical studies, regulatory filing submission, and regulatory
affairs related to the foregoing. When used as a verb, “Develop” means to
engage in Development.


 


Section 1.30                                “Diligent Efforts”
means with respect to the efforts to be expended by a Party with respect to any
objective, the use of reasonable, diligent, good faith efforts to accomplish
such objective as such Party would normally use to accomplish a similar
objective under similar circumstances, it being understood and agreed that with
respect to the Development or Commercialization of the Licensed Product, such
efforts shall be commensurate with those efforts and resources commonly used by
a Party for a product owned by it or to which it has rights, which product is
at a similar stage in its development or product life and is of similar market
potential (in each case as compared to the Licensed Product) taking into
account efficacy, safety, Governmental Authority-approved labeling, the
competitiveness of alternative products in the marketplace, the patent and
other proprietary position of the product, the likelihood of regulatory
approval given the regulatory structure involved, the profitability of the
product taking into account the royalties payable to licensors of patent or
other intellectual property rights, alternative products, manufacturing costs
and all other relevant commercial factors. Diligent Efforts requires that:


 


(a)                                  each Party [*] for
such obligations [*] (which in the case of [*] includes the Party’s [*] as part
of such [*]);


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


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(b)                                 each Party [*] for
carrying out [*]; and


 


(c)                                  each Party [*]
designed to [*] with respect to such [*].


 


Diligent Efforts shall be [*] for the Licensed Product, and it is
anticipated that the [*] it is understood and agreed that this [*] will be
staged over [*]. Also, additional [*] under the [*] by the [*] and therefore
may [*].


 


It is understood and agreed that [*] among other things [*] as well as
[*].  Statements elsewhere in this
Agreement that [*] for those activities because they are called out separately.


 


A Party may satisfy its obligation to devote Diligent Efforts to
particular obligations in whole or in part through the efforts of a
sublicensee, a distributor or an outside service provider (engaged in a manner
that is otherwise in accordance with this Agreement, i.e., permitted or
approved sublicensees, distributors and service providers).


 


Section 1.31                                “Disclosing Party”
shall have the meaning set forth in the definition of Confidential Information
above.


 


Section 1.32                                “Distribution Issues”
means all issues and decisions regarding the distribution of Licensed Product
in the Territory, including without limitation decisions as to whether and with
which distributors to contract, and the terms of contracts with distributors
(subject to Section 2.05), and the other or more detailed matters set
forth in Section 5.03(a)(iii).


 


Section 1.33                                “DMF” shall mean
a drug master file submitted to the FDA.


 


Section 1.34                                “Due Diligence
Notice Date” shall have the meaning set forth in Section 2.02(a).


 


Section 1.35                                “Economic
Integration Period” means the time period from [*], until the [*].


 


Section 1.36                                “Effective Date”
means the date the Closing Condition described in Section 16.17 occurs.


 


Section 1.37                                “FDA” means the
United States Food and Drug Administration and any successor agency thereto.


 


Section 1.38                                “Field” means the
field of [*].  For example (but without
limitation), Field includes as of the Signing Date [*].  Field excludes as of the Signing Date
[*].  For example (but without
limitation), Field excludes [*]. 
Further, in any event, Field excludes [*].


 


Section 1.39                                “Filing” means (i) in
the case of the U.S., the NDA Filing; (ii) in the case of OUS, the date on
which the appropriate Regulatory Authority in any Country has accepted for
review a Marketing Authorization application according to applicable Laws in such
Country.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


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Section 1.40                                “First Commercial
Sale” means with respect to a particular Country and Licensed Product, the
first shipment of commercial quantities of any Licensed Product sold to a Third
Party by ASTELLAS, its Affiliates and/or their sublicensee and/or distributor
in such Country after receipt of Marketing Authorization for such Licensed
Product in such Country. Sales for test marketing, sampling and promotional
uses, clinical study purposes or compassionate or similar uses shall not be
considered to constitute a First Commercial Sale.


 


Section 1.41                                “First Commercial
Sale Stock” means the quantities of Licensed Product that will be sold in
the U.S. to achieve First Commercial Sale of Licensed Product in the US and
that are anticipated to be sold (or required to be on-hand for potential sales)
within six (6) months after such First Commercial Sale in the U.S.  The Parties will agree an appropriate time in
advance of anticipated First Commercial Sale as to such quantity.


 


Section 1.42                                “Force Majeure Event”
shall have the meaning set forth in Section 16.03.


 


Section 1.43                                “Governmental
Authority” means any court, tribunal, arbitrator, agency, legislative body,
commission, official or other instrumentality of (i) any government of any
Country, (ii) a federal, state, province, county, city or other political
subdivision thereof or (iii) any supranational body, including without
limitation the European Agency for the Evaluation of Medicinal Products.


 


Section 1.44                                “HAP” has the
meaning given such term in the definition of Initial Indications.


 


Section 1.45                                “Hatch-Waxman
Certification” shall have the meaning set forth in Section 13.03.


 


Section 1.46                                “Housemark”
means the name and logo of ASTELLAS or THERAVANCE or, as applicable, any of
their respective Affiliates, as identified by one Party to the other from time
to time.


 


Section 1.47                                “Indemnified Party”
shall have the meaning set forth in Section 12.03(a).


 


Section 1.48                                “Indemnifying Party”
shall have the meaning set forth in Section 12.03(a).


 


Section 1.49                                “Initial Indications”
means complicated skin and skin structure infections (herein, “cSSSI”) and
hospital-acquired pneumonia (herein, “HAP”).


 


Section 1.50                                “Invention”
means any invention or discovery (whether patentable or not) invented during
the Term-Basic (while it is in effect anywhere in the world with respect to the
Licensed Product) as a result of research, Development or Commercialization
activities related to the THERAVANCE Compound or Licensed Product hereunder
(including without limitation API Compound and Licensed Product manufacturing
of both Development and Commercialization supplies).


 


Section 1.51                                “Issue of Necessity”
shall have the meaning set forth in Section 6.03(c)(ii).


 


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Section 1.52                                [*] means all Patents
and Know-How licensed to THERAVANCE pursuant to and/or in accordance with the
[*].


 


Section 1.53                                [*] has the meaning
given in [*].


 


Section 1.54                                “Joint Invention”
means an Invention that is invented jointly by employee(s), contractors, and/or
agent(s) of each of THERAVANCE (or an Affiliate thereof) and ASTELLAS (or an
Affiliate thereof) hereunder.


 


Section 1.55                                “JSC” shall have
the meaning set forth in Section 3.02(a).


 


Section 1.56                                “Know-How” means
technical and other information, which is not subject to published patent rights
and which is not publicly known, including, but not limited to, information
comprising or relating to discoveries, data, formulae, inventions, methods,
models, assays, procedures, designs for experiments and tests and results of
experimentation and testing (including without limitation results of research
or development), processes (including without limitation manufacturing
processes), specifications and techniques, laboratory records, chemical,
pharmacological, toxicological, clinical, analytical and quality control data,
study data, clinical research plans, case report forms, data analyses, reports,
manufacturing data or summaries and information contained in submissions to and
information from ethical committees and regulatory authorities.


 


Section 1.57                                “Know-How Royalty
Term” has the meaning given such phrase in the definition of
Term-Basic.


 


Section 1.58                                “Last Patient, Last
Visit” means, with respect to a clinical study, the date of the “Test-of-Cure
Evaluation” (as defined in the applicable study protocol) for the last patient
enrolled in such clinical study.


 


Section 1.59                                “Laws” means all
laws, statutes, rules, regulations (including, without limitation, current Good
Manufacturing Practice Regulations as specified in 21 C.F.R. §§ 210 and
211; Investigational New Drug Application regulations in 21 C.F.R. § 312;
NDA regulations in 21 C.F.R. § 314; relevant provisions of the Federal
Food, Drug and Cosmetic Act; and other laws and regulations enforced by the
FDA), ordinances and other pronouncements having the binding effect of law of
any Governmental Authority.


 


Section 1.60                                “Licensed Product”
means any pharmaceutical composition or product containing the THERAVANCE
Compound as an active ingredient.


 


Section 1.61                                “Litigation
Condition” shall have the meaning set forth in Section 12.03(b).


 


Section 1.62                                “Losses” means,
with respect to a Claim by a Third Party, any and all damages (including
without limitation all incidental, consequential, statutory and treble
damages), awards, deficiencies, settlement amounts, defaults, assessments,
fines, dues, penalties, expenses, fees, liabilities, obligations, taxes, liens,
losses, lost profits and expenses (including without limitation court expenses,
interest and reasonable fees of attorneys, accountants and other experts)
incurred by or awarded to Third Parties and required to be paid to Third
Parties with respect to a Claim by reason of any judgment, order, decree,


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


9

















 


stipulation or injunction, or any settlement entered into in accordance
with the provisions of this Agreement, together with all documented
out-of-pocket expenses and expenses incurred in complying with any judgments,
orders, decrees, stipulations and injunctions that arise from or relate to that
Claim of a Third Party.


 


Section 1.63                                “Major Market
Country” means each of [*].


 


Section 1.64                                “Marketing
Authorization” means, with respect to a Country, the regulatory
authorization required to legally market and sell a Licensed Product in such
Country as granted by the relevant Governmental Authority, including (without
limitation) any applicable pricing, final labeling or reimbursement approvals.


 


Section 1.65                                “Medical Marketing
Plan” means, for the Licensed Product, the plan for implementation at a
detailed level of the Basic Commercial Plan, such plan for implementation at a
detailed level being prepared by the TELAVANCIN Product Management Team and
approved by the Joint Steering Committee. 
The Medical Marketing Plan must always be consistent with the Basic
Commercial Plan and Basic Development Plan (as, if and to the extent
applicable).  The Medical Marketing Plan
is intended to reflect the Parties’ plans for detailed implementation of the
Basic Commercial Plan, but not to alter the Basic Commercial Plan in any way.


 


Section 1.66                                “Milestone”
shall have the meaning set forth in Section 6.02(a).


 


Section 1.67                                “NDA” means a
new drug application or supplemental new drug application or any amendments
thereto submitted to the FDA in the United States.


 


Section 1.68                                “NDA Approval”
means the approval of an NDA by the FDA.


 


Section 1.69                                “NDA Filing”
means the written notification by the FDA that the NDA has met all the criteria
for filing acceptance pursuant to 21 C.F.R. §314.101.


 


Section 1.70                                “NDA Holder”
shall have the meaning set forth in Section 8.02(b).


 


Section 1.71                                “Net Sales”
means the gross invoice price of a Licensed Product sold by ASTELLAS, its
Affiliates or their sublicensees (or such sublicensees’ sublicensed affiliates)
to a Third Party (excluding sales to Affiliates and/or sublicensees for resale
or use in any Study), less the following to the full extent not already
excluded from the gross invoice price:


 


(a)                                  deduction of cash,
trade and quantity discounts specifically identified, actually paid or
incurred;


 


(b)                                 discounts, refunds,
rebates, chargebacks, retroactive price adjustments, and any other allowances
actually made which effectively reduce the net selling price, including without
limitation any institutional rebate or discount for government subsidy or
reimbursement programs such as Medicare or Medicaid provided in the United
States or any similar organization elsewhere in the world, and [*] or any
comparable [*];


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


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(c)                                  credits and
allowances for product returns actually made consistent with ASTELLAS’
then-current policy;


 


(d)                                 freight, packing and
handling [*]; and


 


(e)                                  taxes, including
without limitation value added taxes and sales taxes, but excluding taxes on
seller’s net income.


 


In any case, [*] agrees that the foregoing [*] in a manner [*].


 


Net Sales shall exclude the value of Samples distributed in the usual
course of business.


 


In the case of [*] as follows:


 


If ASTELLAS (or its Affiliate) [*] (see definition of this term below)
of [*] includes [*] then to the extent, if at all, ASTELLAS [*] included in the
[*] as set forth below, then [*].


 


	
  [*]

  	
  [*]

  	
  [*]

  



 


where [*] of the [*] equals the [*] as established by [*].


 


For purposes of this Section 1.72, a [*] for which ASTELLAS or its
Affiliate [*], such that the [*].


 


If THERAVANCE so requests in writing, then ASTELLAS shall provide
THERAVANCE with documentation [*] with respect to [*].


 


Section 1.72                                “Net Sales Report”
shall have the meaning set forth in Section 6.04.


 


Section 1.73                                “Opt-In Right”
shall have the meaning set forth in Section 2.02.


 


Section 1.74                                “Other Indications”
means any use of the Licensed Product for indications other than the Initial
Indications.


 


Section 1.75                                “OUS” means
outside the United States.


 


Section 1.76                                “Patents” shall
have the meaning given such term as set forth in the defintion of ASTELLAS
Patents in Section 1.08.


 


Section 1.77                                “Patent Infringement
Claim” shall have the meaning set forth in Section 13.02(a).


 


Section 1.78                                “Patent Infringement
Notice” shall have the meaning set forth in Section 13.02(b).


 


Section 1.79                                “Patent Resolution
Issue” shall have the meaning given in Section 13.01(c).


 


Section 1.80                                “Payment Period”
shall have the meaning set forth in Section 6.03(a).


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


11

















 


Section 1.81                                “Person” means
any natural person, corporation, general partnership, limited partnership,
limited liability company, joint venture, proprietorship, other business
organization or governmental entity.


 


Section 1.82                                “Phase 3a Studies”
means that portion of clinical development relating to the Initial Indications
of the Licensed Product which provides for large scale, pivotal, clinical
studies conducted in a sufficient number of patients and whose primary
objective is to obtain a definitive evaluation of the efficacy and safety of
the Licensed Product in patients that is needed to evaluate the overall
risk-benefit profile of the Licensed Product and to provide adequate basis for
obtaining requisite regulatory approval(s) and product labeling for Initial
Indications, as more fully defined in 21 C.F.R. § 312.21(c).


 


Section 1.83                                “Phase 3b Studies”
means that portion of clinical development relating to the Licensed Product
commenced before receipt of Regulatory Approval for the Initial Indications in
the jurisdiction where such trials are being conducted, but which are not
required for receipt of Marketing Authorization for the Initial Indications and
which are conducted primarily for the purpose of registering the Licensed
Product for Other Indications or for product support (i.e., providing
additional drug profile data).


 


Section 1.84                                “Phase 4 Studies”
means that portion of clinical development relating to the Licensed Product
that is initiated after receipt of a Marketing Authorization for the Licensed Product
and that is principally intended to support the medical marketing of such
Licensed Product, including without limitation investigator initiated trials,
clinical experience trials and studies conducted to fulfill local commitments
made as a condition of any Marketing Authorization.


 


Section 1.85                                “POC Data” means
the material, data and supporting documentation relating to achievement of
clinical proof of concept by the TD-1792 compound, prepared by THERAVANCE and
delivered to ASTELLAS in sufficient detail and intended to enable ASTELLAS to
determine whether or not to exercise its Opt-In Right in accordance with Section 2.02.  The POC Data shall include at least the
content described in Exhibit D.


 


Section 1.86                                “Plan” means the
Basic Development Plan or the Basic Commercial Plan.


 


Section 1.87                                “PRC” has the
meaning given in Section 7.01.


 


Section 1.88                                “Product Supplier”
means any manufacturer, packager or processor of THERAVANCE Compound, API
Compound or the Licensed Product for development, marketing and sale.


 


Section 1.89                                “Promotional
Materials” means the written, printed, video or graphic advertising,
promotional, educational and communication materials (other than Licensed
Product labeling) for marketing, advertising and promotion of the Licensed Product.


 


Section 1.90                                “Promotional/MedEd
Issues” means all issues and decisions regarding the following promotional
and medical education matters respecting Licensed Product: [*] activities [*]
(including without limitation [*].


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


12

















 


Section 1.91                                “Promotional/MedEd
Spending” means expenses incurred in implementing or effectuating
Promotional/MedEd Issues.


 


Section 1.92                                “Receiving Party”
shall have the meaning set forth in the definition of Confidential Information
above.


 


Section 1.93                                “Recording Party”
shall have the meaning set forth in Section 6.10.


 


Section 1.94                                “Registration
Batches” means those manufacturing batches of Licensed Product the
characterization of which is included in (or intended to be included in) the
application for US Marketing Authorization (NDA) for such Licensed Product.


 


Section 1.95                                “Registration
Expenses” means all documented, external out-of-pocket costs and expenses
directly related to Development of the Licensed Product for the Initial
Indications in the U.S., including but not limited to external out-of-pocket
registration expenses, as well as documented, external out-of-pocket costs and
expenses directly related to manufacture and supply of Registration Batches and
all other quantities of Licensed Product (except for Phase 3b and Phase 4
supplies) through THERAVANCE’s delivery of the First Commercial Sale
Stock.  No THERAVANCE nor THERAVANCE
Affiliate overhead shall be included in Registration Expenses.


 


Section 1.96                                “Samples” means
Licensed Product packaged and distributed as a complimentary trial for use in
the Territory.


 


Section 1.97                                “[*]” means [*].


 


Section 1.98                                “[*] Agreement”
means that certain [*] Agreement between THERAVANCE and [*] (as amended prior
to the Signing Date) and relating to [*].


 


Section 1.99                                “Signing Date”
means the date set forth on the first page of this Agreement.


 


Section 1.100                          “Studies” means
nonclinical studies and clinical trials.


 


Section 1.101                          “Supplied Licensed Product”
shall have the meaning set forth in Section 15.01(a)(viii).


 


Section 1.102                          “[*]” means, [*] with respect
to a particular time period [*] over such time period.


 


Section 1.103                          “Taxes” shall have the
meaning set forth in Section 6.09.


 


Section 1.104                          “TD-1792 Compound”
means: (a) the THERAVANCE compound known as TD-1792, the structure of
which has been disclosed in writing to ASTELLAS prior to the Signing Date; and (b) all
salts, esters, complexes, chelates, hydrates, isomers, stereoisomers,
crystalline and amorphous forms, prodrugs, solvates, metabolites and metabolic
precursors (whether active or inactive) and pegylated forms of the foregoing in
(a).


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


13

















 


Section 1.105                          “TD-1792 Phase 3 Study”
means that portion of clinical development relating to the TD-1792 Compound
which provides for pivotal clinical studies conducted in a sufficient number of
patients and whose primary objective is to obtain a definitive evaluation of
the compound’s therapeutic efficacy and safety in patients that is needed to
evaluate the overall risk-benefit profile and provide a basis for obtaining the
requisite regulatory approvals and product labeling.


 


Section 1.106                          “TELAVANCIN” means the
chemical compound known as TELAVANCIN, the structure of which is shown in Exhibit C.


 


Section 1.107                          “TELAVANCIN Product
Management Team” shall have the meaning set forth in Section 3.03(a).


 


Section 1.108                          “Term-Additional”
means, on a Country-by-Country basis, the period from the expiration of the
Term-Basic until the expiration of [*] or through an [*] or due to an [*] that
[*] for the [*] (for purposes of evaluating such [*] shall be deemed to be[*].  As with the Term-Basic, there is only one
Term-Additional per Country.


 


Section 1.109                          “Term-Basic” means, on
a Country-by-Country basis, the period from the Effective Date until the later
of (a) the expiration of the last Valid Claim of a THERAVANCE Patent
listed in Exhibit A (whether as of the Signing Date or through an update
pursuant to Section 2.08(b) or due to an ASTELLAS election pursuant
to Section 2.08(d)(iii)) in such Country that but for the licenses granted
ASTELLAS hereunder would be infringed by the manufacture, use, importation or
sale of the Licensed Product in such Country (for purposes of evaluating such
infringement, pending Valid Claims shall be deemed to be issued), and (b) [*]
after First Commercial Sale in such Country. 
If (b) occurs later than (a), then the period from (a) to (b) is
the “Know-How Royalty Term” with respect to such Country.  To avoid any doubt, there is only one
Term-Basic per Country, regardless of the number of forms (including without
limitation differing dosage forms and different versions of the Licensed
Product that include any of the variations on TELAVANCIN referred to in the
definition of THERAVANCE Compound) in which the Licensed Product is marketed in
the particular Country.  In particular,
this means that prong (b) does not recommence each time a new form of the
Licensed Product is introduced in the particular Country.


 


Section 1.110                          “Term-Total” means on
a Country-by-Country basis the period from the Effective Date until the
later-to-expire of the Term-Basic and the Term-Additional in such Country.  As with Term-Basic and Term-Additional, there
is only one Term-Total per Country.


 


Section 1.111                          “Territory” means
worldwide, excluding Japan.


 


Section 1.112                          “THERAVANCE Compound”
means TELAVANCIN and all salts, esters, complexes, chelates, hydrates, isomers,
stereoisomers, crystalline and amorphous forms, prodrugs, solvates, metabolites
and metabolic precursors (whether active or inactive) and pegylated forms of
TELAVANCIN.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


14

















 


Section 1.113                          “THERAVANCE IP” means
the THERAVANCE Patents (including without limitation any Patents claiming
THERAVANCE Inventions and THERAVANCE’s interest in any Patents claiming Joint
Inventions); the THERAVANCE Know-How; the THERAVANCE Inventions; THERAVANCE’S
interest in the Joint Inventions; and the THERAVANCE Product Trademarks.
THERAVANCE IP excludes [*].


 


Section 1.114                          “THERAVANCE Invention”
means an Invention that is invented (a) by any employee(s) or agent(s) of
THERAVANCE or any of its Affiliates whether solely, jointly among themselves or
jointly with one or more Third Party(ies) (including without limitation via
subcontractors and service providers of any of them performing Development or
Commercialization), or (b) by any Third Party with which THERAVANCE or any
of its Affiliates has contracted to perform THERAVANCE’S obligations hereunder
(without limiting the restrictions on THERAVANCE’S ability to subcontract or
delegate its duties hereunder as set forth in Section 4.04).


 


Section 1.115                          “THERAVANCE Know-How”
means all present and future Know-How relating to the THERAVANCE Compounds,
Licensed Product or the THERAVANCE Inventions that is necessary or useful for
ASTELLAS to perform its obligations or exercise its rights under this
Agreement, and which during the Term-Basic are in THERAVANCE’s or any of its
Affiliates’ possession or control and are or become owned by, or otherwise may
be licensed to any of them, in each case to the extent Controlled by THERAVANCE
or any THERAVANCE Affiliate.  THERAVANCE
Know-How does not include (i) any THERAVANCE Patents (other than
information contained in unpublished applications), or (ii) any [*].


 


Section 1.116                          “THERAVANCE Patents”
means all Patents that are or become owned by THERAVANCE or THERAVANCE’s
Affiliates, or as to which THERAVANCE or THERAVANCE’s Affiliates are or become
licensed, now or in the future, to the extent (a) Controlled by THERAVANCE
or any THERAVANCE Affiliate, and (b) covering the development, making,
having made, use, offer for sale, sale or importation of any THERAVANCE
Compound or Licensed Product (whether directly through their composition
(including without limitation their formulation) or indirectly through their
manufacture (including without limitation any article useful and/or
consumed in such manufacture) or use (including without limitation methods of
administration)).  The THERAVANCE Patents
include without limitation those Patents set forth in Exhibit A as of the
Signing Date (or through an update to Exhibit A under Section 2.08(b) or
due to an ASTELLAS election under Section 2.08(d)(iii)); all
continuations, continuations-in-part, divisionals, substitutions and other
patent applications claiming priority thereto; all patents issuing on any of
the foregoing; all renewals, extensions, reissues and re-examinations of any of
the foregoing; and all counterparts to any of the foregoing in other countries.  THERAVANCE Patents exclude the [*].


 


Section 1.117                          “THERAVANCE Product
Trademark” means any and all trademarks and (if any) trade dress that
THERAVANCE or any of its Affiliates has on or before the Signing Date filed to
register and/or registered for Licensed Product (or which are protected under
common law) in the Territory, excluding any THERAVANCE Housemark.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.


 


15












Section 1.118                          “Third Party” means a
Person who is not a Party or an Affiliate of a Party.


 


Section 1.119                          “Third Party Claim”
shall have the meaning set forth in Section 12.03(a).


 


Section 1.120                          “United States” means
the United States, its territories and possessions.  “US” and “U.S.” each also have the same
meaning.


 


Section 1.121                          “Valid Claim” means
any claim of a THERAVANCE Patent (other than a Patent claiming a Joint
Invention, subject to Section 2.08(d)(iii)) which claim(s) is pending in a
patent application [*] or is in an unexpired patent which has not been held
unenforceable, unpatentable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed
within the time allowed for appeal, and which has not has been admitted to be
invalid or unenforceable through reissue or disclaimer and has not lapsed or
gone abandoned.  If in any country there
should be two or more such decisions conflicting with respect to the validity
or unenforceability of the same claim, the decision of the higher or highest
tribunal shall thereafter control; however, should the tribunals be of equal
rank, then the decision or decisions upholding the claim shall prevail when the
decisions are equal in number, and the majority of decisions shall prevail when
the conflicting decisions are unequal in number.  [*] application that [*] because it [*] may
[*].


 


ARTICLE 2


 


LICENSE
RIGHTS AND OBLIGATIONS


 


Section 2.01                                License Grants From
THERAVANCE to ASTELLAS. Subject to the terms of this Agreement and subject
to THERAVANCE retaining such rights as it requires to perform its obligations
under this Agreement, THERAVANCE hereby grants to ASTELLAS (i) an
exclusive license during the Term-Basic in each Country under the THERAVANCE
IP, (ii) subject to Section 2.08(d) and during the
Term-Additional in each Country, a non-exclusive license under the THERAVANCE
Patents, (iii) an exclusive sublicense under [*] under the [*] during the
Term-Total in each Country (or if longer the life of the [*]), and (iv) a
non-exclusive license under the THERAVANCE Know-How during the Term-Additional
in each Country and thereafter, in each case:


 


(a)                                  to develop, have
developed, use, have used, make, have made, import, have imported, market, have
marketed, offer to sell, sell and have sold the Licensed Products for any and
all indications in the Territory; and


 


(b)                                 to develop, have
developed, make, have made, use, have used, import and have imported THERAVANCE
Compounds, API Compounds and Licensed Products anywhere in the world (i.e., in
Japan in addition to the Territory) for the sole purpose of: developing them
(and having them developed), selling them and having them sold, using them and
having them used, offering them and having them offered for sale, marketing
them and having them marketed, and supplying them and having them supplied,
for, in or to, in all of the foregoing cases, the Territory.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


16

















 


For the avoidance of doubt, THERAVANCE retains no right to sell (or
license another to sell) API Compound or THERAVANCE Compound in the Territory
to anyone other than ASTELLAS or an ASTELLAS Affiliate during the Term-Basic.


 


Section 2.02                                TD-1792 Option Grant
To ASTELLAS. ASTELLAS shall have the exclusive option (the “Opt-In Right”)
to Develop and commercialize the TD-1792 Compound pursuant to the terms and
conditions set forth below in this Section 2.02.  While ASTELLAS’ Opt-In Right is in effect
(i.e. from the Signing Date until it is exercised or expires unexercised),
THERAVANCE shall provide ASTELLAS with quarterly written and oral updates (at
the time of and through the JSC’s meetings) regarding TD-1792 Development, at a
reasonable level of detail that includes at a minimum all information generated
as of the date of the report that is or would be required to be included in the
POC Data, as well as plans and objectives for the next twelve (12) months.  Subject to the terms of this Agreement,
THERAVANCE hereby grants ASTELLAS an option to obtain an exclusive,
royalty-bearing license under all relevant Know-How and Patents Controlled by
THERAVANCE and/or its Affiliates during the term of this Agreement, to Develop
and commercialize the TD-1792 Compound worldwide as follows:


 


(a)                                  no later than [*]
prior to initiation of the first TD-1792 Phase 3 Study, THERAVANCE will deliver
to ASTELLAS (in a manner and format to be designated by ASTELLAS) the POC Data
(the date THERAVANCE provides the POC Data to ASTELLAS, the “Due Diligence
Notice Date”);


 


(b)                                 within [*] of the Due
Diligence Notice Date, ASTELLAS will notify THERAVANCE in writing as to whether
or not it is exercising its Opt-In Right;


 


(c)                                  if ASTELLAS exercises
its Opt-In Right, the Parties have a further [*] to negotiate and sign a
definitive license, Development and commercialization agreement on
substantially the same terms and conditions contained in this Agreement (it
being understood by the Parties that they intend to carry over substantially
the same economic terms, governance terms and allocation of responsibilities as
set forth in this Agreement [*] as regards any [*] prior to the [*]; and


 


(d)                                 if ASTELLAS does not
exercise its Opt-In Right within [*] of the Due Diligence Notice Date,
THERAVANCE will be entitled to pursue all Development and commercialization of
the TD-1792 Compound alone or in combination with a Third Party and ASTELLAS
will have no other legal or financial claim to the TD-1792 Compound.


 


Section 2.03                                Further
Commercialization In The Field. Subject to Section 16.06(b), other
than with respect to TD-1792 and the THERAVANCE Compound, each Party agrees
that it and its Affiliates will not commercialize (alone or with a Third Party)
any other compound in the Field in the Territory for a period of [*] from the
Effective Date.  Subject to Section 16.06(b),
if either Party acquires or is acquired by a Person who is either merged into
such Party or becomes an Affiliate of such Party, and such non-Party Person
commercializes a compound in the Field at the time of the relevant transaction
(the merger or acquisition transaction), then the Party and such Person will
have a period


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


17

















 


of [*] to effect a disposition of such other compound in the Field
(which may be an out-license to endure until the end of such [*] period, or may
be a more complete disposition) and no breach shall be deemed to have occured
hereunder prior to the end of such [*].


 


Section 2.04                                Right To Sublicense.
ASTELLAS shall have the right to grant sublicenses under the rights granted
under Section 2.01, through one (1) or more tiers or layers of
sublicensees without (except as provided below) consent, provided that ASTELLAS
shall notify THERAVANCE of each such sublicense without unreasonable delay
following any such grant of sublicense, [*] that any such [*]. ASTELLAS shall
contractually require all of its sublicensees to comply with all terms and
conditions of this Agreement applicable to sublicensees and ASTELLAS shall
remain fully responsible for the compliance by such sublicensees with the
applicable terms and conditions of this Agreement as if such sublicensees were
ASTELLAS hereunder.  ASTELLAS shall secure
all appropriate covenants, obligations and rights from any such sublicensee of
it under this Agreement, including, but not limited to, intellectual property
rights and confidentiality obligations in any such agreement or other
relationship, to ensure that such sublicensee complies with all of ASTELLAS’
covenants and obligations to THERAVANCE under this Agreement that are
applicable to sublicensees. ASTELLAS’ rights to sublicense its rights are
limited to those expressly set forth in this Section 2.04.


 


Section 2.05                                Right To Appoint
Distributors. ASTELLAS shall also have the right to appoint distributors in
the Territory for the sale of the Licensed Products without consent. ASTELLAS
shall at all times ensure that its distributors act fully in compliance with
the applicable terms and conditions of this Agreement and shall be fully
responsible for their compliance.


 


Section 2.06                                Duration Of License
Grants.


 


(a)                                  The exclusive license
set out in Section 2.01(i), and associated rights set out in Section 2.04
and Section 2.05, shall continue in accordance with what is stated therein
on a Country-by-Country basis until royalty payment under Section 6.03(a) (as
adjusted by Section 6.03(c) - Section 6.03(f)) is no longer due
in the Country concerned (i.e., until the Term-Basic has expired with respect
to such Country).


 


(b)                                 The non-exclusive
license set out in Section 2.01(ii), and associated rights set out in Section 2.04
and Section 2.05, shall, subject to Section 2.08(d), be in effect in
each Country during, [*] with respect to [*] the Term-Additional in such
Country.


 


(c)                                  The exclusive
sublicense set out in Section 2.01(iii), and associated rights set out in Section 2.04
and Section 2.05, shall be in effect during the Term-Total in each Country
or if longer the term of the [*] in the particular Country.


 


(d)                                 The non-exclusive
THERAVANCE Know-How license set out in Section 2.01(iv), and associated
rights set out in Section 2.04 and Section 2.05, shall be in effect
in each Country at all times after the end of the Term-Basic in such Country
and is perpetual and royalty-free.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


18

















 


Section 2.07                                Trademarks And
Housemarks. 


 


(a)                                  Trademarks.
The Licensed Product shall be Commercialized under trademarks and trade dress
[*].  Prior to any such proposed
trademark(s) and trade dress being [*], ASTELLAS shall be responsible for
undertaking their preliminary selection and shall be responsible for the
procurement, filing and maintenance of trademark registrations for such
trademarks and trade dress and all expenses related thereto.  All such trademarks and trade dress shall be
deemed to be ASTELLAS Product Trademarks. 
ASTELLAS (or an ASTELLAS Affiliate) shall exclusively own all ASTELLAS
Product Trademarks.  ASTELLAS (or an
ASTELLAS Affiliate) shall also exclusively own all trade dress and copyrights
associated with the Licensed Product and any Promotional Materials.


 


(b)                                 Housemarks.
Each Party acknowledges the goodwill and reputation that has been associated
with the other Party’s Housemarks over the years, and shall use such Housemarks
in a manner that maintains and promotes such goodwill and reputation and is
consistent with trademark guidelines. Each Party shall take all reasonable
precautions and actions to protect the goodwill and reputation that has inured
to the other Party’s Housemarks, shall refrain from doing any act that is
reasonably likely to impair the reputation of such Housemarks, and shall
cooperate fully to protect such Housemarks. 
To avoid any doubt, neither Party grants to the other any license,
express or implied, with respect to any Housemarks; provided, however, that THERAVANCE hereby grants ASTELLAS a
license (with rights to sublicense Affiliates, sublicenses and distributors of
Licensed Product) under the entire right, title and interest in and to the
THERAVANCE Housemarks and all intellectual property rights therein to use and
display the THERAVANCE Housemarks solely for the purpose of and to the extent
necessary or reasonably required to comply with ASTELLAS’ obligations under
this Agreement (for example, to identify THERAVANCE as the licensor of Licensed
Product in accordance with Section 7.02).


 


Section 2.08                                Further THERAVANCE
Inventions, In-Licensing and Updates to Exhibit A; Covenants.


 


(a)                                  Inventions. In
accordance with the definitions of ASTELLAS Inventions and THERAVANCE
Inventions, Inventions invented by their subcontractors and service providers
performing Development and/or Commercialization hereunder are included within
the ASTELLAS Inventions and THERAVANCE Inventions.  Each Party shall use Diligent Efforts to make
its contractual arrangements with such subcontractors and service providers
(including without limitation manufacturers or those performing process
development) such that the contracting Party shall own, or otherwise Control
within the scope of the licenses granted ASTELLAS under Section 2.01, any
such Inventions that regard THERAVANCE Compound or Licensed Product (or a
method of manufacture or use thereof). 
If THERAVANCE does not Control exclusive rights under the THERAVANCE
Patent corresponding to a particular such THERAVANCE Invention (to avoid any
doubt, we refer here to exclusive rights within the scope of the grants listed
out in Section 2.01(a) and Section 2.01(b), without regard to
whether the Patent has broader coverage nor whether THERAVANCE would Control
any rights outside the scope of the grants listed out in Section 2.01(a) and
Section 2.01(b)), then such THERAVANCE Patent’s claims shall not be deemed
to be Valid Claims of


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


19

















 


THERAVANCE Patents listed on Exhibit A at any time for purposes of
determinining the Term-Basic (and thus royalty payments hereunder) in each
Country in which THERAVANCE does not Control such exclusive rights (but shall
be considered to be Valid Claims of THERAVANCE Patents for the purpose of
determining any Term Additional should ASTELLAS elect to have a non-exclusive
license therein under Section 2.08(d)(ii)).


 


(b)                                 Exhibit A
Updates. Exhibit A shall be updated by the Parties at least quarterly
to reflect additional THERAVANCE Patents on THERAVANCE Inventions first filed
prior to [*] after the Signing Date (“Exhibit A Period”).  No
further updates will be made to Exhibit A after the Exhibit A Period, but
if the Parties make an error and fail to include such a Patent filed within the
Exhibit A Period on Exhibit A through the regular updates, and the
error is discovered after such time period, then ASTELLAS may at its option
include such Patent on Exhibit A by written notice to THERAVANCE.


 


(c)                                  Further
In-Licensing for the Licensed Product. With respect to all Patents and
Know-How that THERAVANCE or any of its Affiliates acquires, in-licenses or
otherwise obtains rights to Control after the Signing Date, to the extent
specific to Licensed Product or THERAVANCE Compound, such Patents and Know-How
will fall within the definition of THERAVANCE IP and be licensed to ASTELLAS
under this Agreement.  THERAVANCE and its
Affiliates shall not, however, during the term of this Agreement acquire,
in-license or otherwise obtain rights in the Territory to any Patents or
Know-How intended particularly for Licensed Product(s) or THERAVANCE
Compound(s) without first obtaining ASTELLAS’ written consent (and all
discussions seeking such consent shall be conducted in accordance with the
procedures set forth in Section 13.07). 
ASTELLAS is entitled to withhold such consent, and the expectation going
forward from the Effective Date is that to the extent additional Patents and
Know-How will be in-licensed particularly for the purpose of covering the
THERAVANCE Compound or Licensed Product, ASTELLAS will be the in-licensing
Party and have a direct relationship with the Third-Party licensor.


 


(d)                                 Election Regarding
Rights During Term-Additional.


 


(i)                                     No later than
eighteen (18) months prior to the
expiration of the Term-Basic in each Country, THERAVANCE shall notify ASTELLAS
in writing of which THERAVANCE Patents (including without limitation Patents
claiming Joint Inventions) THERAVANCE believes would cover the THERAVANCE
Compound or Licensed Product or the manufacture or use of either of them in
such Country as of the expiration of the Term-Basic in such Country.  If ASTELLAS wishes to maintain a license
beyond the end of the then-Term-Basic under any THERAVANCE Patents noticed by
THERAVANCE in such Country, then ASTELLAS shall within [*] after the deadline
for THERAVANCE’s notice (or if noticed late, [*] after THERAVANCE actually
provides such notice) notify THERAVANCE in writing of the license ASTELLAS
desires in such Country.  This license
may be exclusive or non-exclusive, and may be for some or all of the THERAVANCE
Patents of which THERAVANCE has notified ASTELLAS.  ASTELLAS shall specify these details in its
notice.


 


 






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(ii)                                  If ASTELLAS elects a
non-exclusive license in such Country for any THERAVANCE Patent(s) (other than
Patents claiming Joint Inventions) identified in THERAVANCE’s notice, then
ASTELLAS shall have a non-exclusive license under such THERAVANCE Patent(s) in
such Country, [*] in accordance with [*] with respect to [*].


 


(iii)                               If ASTELLAS elects an
exclusive license in such Country under any THERAVANCE Patent(s) identified in
THERAVANCE’s notice, then the THERAVANCE Patent(s) that ASTELLAS identifies in
its notice (“Exclusively Elected Patents”) shall be automatically deemed
included in Exhibit A with respect to such Country, thus extending the
Term-Basic in such Country (until the expiration of the last Valid Claim of the
Exclusively Elected Patents that supports the continued duration in such
Country of the Term-Basic in accordance with the definition of
Term-Basic).  Accordingly, Net Sales in
such Country shall continue to be royalty-bearing according to the rates of Section 6.03(a) (as
adjusted by Section 6.03(c) - Section 6.03(f)) until the
expiration of the thus-extended Term-Basic. 
To be clear, ASTELLAS may make its election for the exclusive license
for any THERAVANCE Patent, including without limitation any that is a Patent
claiming a Joint Invention, and if ASTELLAS elects to take an exclusive license
for a Patent claiming a Joint Invention, then such Patent’s claims shall be
entitled to qualify as Valid Claims and it shall be deemed to be listed on Exhibit A
(to the same effect as generally described in this subsection (iii) with
regard to the Term-Basic and royalties due on Net Sales in the relevant
Country).


 


(iv)


 


(A)                              For the avoidance of
doubt, ASTELLAS will have an exclusive license under THERAVANCE’s rights in any
Patents claiming Joint Inventions for so long as ASTELLAS pays a royalty
according to the rates of Section 6.03(a) (as adjusted by Section 6.03(c) -
Section 6.03(f)) with respect to Net Sales in each Country.  If all Valid Claims in THERAVANCE Patents
listed on Exhibit A (whether as of the Signing Date or thereafter through
an update under Section 2.08(b) or due to an ASTELLAS election under Section 2.08(d)(iii) with
respect to a THERAVANCE Patent that does not claim a Joint Invention) have
expired in a particular Country, and ASTELLAS does not desire to continue its
exclusive rights in Patents claiming Joint Inventions that have not yet expired
in such Country, ASTELLAS can choose to rely on its ownership rights in such
Patents claiming Joint Inventions and stop paying royalty to THERAVANCE
whereupon THERAVANCE shall be free to license its rights in any such Patents to
Third Parties, except not to the exclusion of ASTELLAS, in accordance with the
following:


 


(B)                                Other than as licensed
under Section 2.01, the Parties wish to achieve, to the maximum extent
permitted by Law in each OUS Country, the rights of joint owners of US patents
based on co-inventorship in the absence of a written agreement (i.e., that each
may practice and license the jointly owned Patent without a duty of accounting
to the other, again except to the extent otherwise licensed under Section 2.01).  Accordingly, each Party hereby grants all
permissions and consents and licenses, and hereby waives all of the other Party’s
duties of accounting (or other


 


 






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right of the waiving Party to payment (other than a royalty explicitly
agreed to under this Agreement) in respect of such practice or licensing), to
the full extent required to achieve such result in each OUS Country, and agrees
to execute and deliver all documents reasonably required to evidence, record or
effect such permissions, consents, licenses and waivers.  To be clear, the background rights of the
Parties as joint owners are further subject to the license grant of Section 2.01.  Also (but without limiting royalties that may
apply by application of Section 2.08(d)(iii)), any licenses granted under
this Section 2.08(d)(iv)(B) shall not be deemed licenses for purposes
of determining Patent coverage by reference to Patents that would be infringed
“but for” the licenses granted hereunder, in the definitions of Term-Basic and
Term-Additional (i.e., anything that is done to achieve the background rights
of the Parties as joint owners of Patent claiming Joint Inventions shall not be
considered to constitute a royalty-bearing license).


 


(v)                                 If ASTELLAS declines
to maintain a license under any THERAVANCE Patent(s) identified in THERAVANCE’s
notice (either non-exclusive under Section 2.08(d)(ii) or exclusive
under Section 2.08(d)(iii)), then those THERAVANCE Patent(s) for which
ASTELLAS declines to maintain a license shall be excluded from the THERAVANCE
Patents in such Country from the time that the Term-Basic expires in such
Country forward and forever.


 


(vi)                              Should THERAVANCE omit
any relevant THERAVANCE Patent from a notice under subsection (i), then
once THERAVANCE becomes aware of the error it shall promptly notify ASTELLAS in
writing, and ASTELLAS shall be entitled to make its licensing election (whether
to have a license at all, in which Country(ies), and whether any license shall
be exclusive or non-exclusive) with respect to the newly-noticed THERAVANCE
Patent within [*] days after receipt of this notice.


 


(vii)                           The elections of this Section 2.08(d) operate
on a Country-by-Country basis.  ASTELLAS
is not required to make worldwide elections, rather, it is entitled to make its
elections under this Section on a Country-by-Country basis.


 


(viii)                        The Parties may negotiate
different royalty rates and licenses than set forth above in this Section 2.08(d) for
the Patents referred to in this Section 2.08(d), however, for different
royalty rates or licenses to apply, an amendment under Section 16.13 would
be required.


 


ARTICLE 3


 


GOVERNANCE


Section 3.01                                Overviews.


 


(a)                                  Various Plans and
Their Relationships to Each Other and This Agreement. This Agreement
provides for four (4) different Licensed Product-related plans, three (3) covering
the Initial Indications in the US (namely, the Basic Development Plan, the
Basic Commercial Plan, and the Detailed Development Plan) and one covering
marketing activities worldwide (namely, the Medical Marketing Plan).  The Basic Development


 


 






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Plan and Basic Commercial Plan represent the Parties’ agreement as of
the Signing Date as to Development and Commercialization, respectively (until
[*] after the first US Marketing Authorization) of Licensed Product for the
Initial Indications for the US market. 
These Plans may only be changed by mutual agreement between the Parties
as set forth in Section 3.05(b). 
The Detailed Development Plan is intended to implement the Basic
Development Plan at a detailed level, consistent with the Basic Development
Plan and this Agreement.  The Medical
Marketing Plan is intended to implement the Basic Commercial Plan in the United
States at a detailed level (in a manner consistent with the Basic Commercial
Plan and this Agreement), as well as to describe ASTELLAS’ OUS
Commercialization.  The Medical Marketing
Plan and changes and updates thereto are to be established in accordance with Section 5.01.


 


(b)                                 Governance
Structures And Management. The Parties’ collaboration hereunder will be
managed at a high level by a Joint Steering Committee (the JSC, as defined in Section 3.02)
responsible for strategic decisions and high-level management of the
collaboration operating by consensus, as and within the limits further set
forth below.  At a more detailed level, a
TELAVANCIN Product Management Team will be responsible for making decisions
required to implement the plans approved by the Joint Steering Committee and
making tactical decisions consistent with the plans approved by the Joint Steering
Committee and implementing the plans.


 


(c)                                  General Guidelines
And Initial Coordination Efforts. In all matters related to the
collaboration established by this Agreement, the Parties shall strive to
balance as best they can the legitimate interests and concerns of the Parties
and [*] of the Licensed Product.  In all
matters relating to this Agreement, the Parties shall seek to comply with good
pharmaceutical and environmental practices. 
The Parties intend, following the Effective Date, to organize meetings
of applicable internal staff to communicate and explain the provisions of this
Agreement to ensure the efficient and timely Development and Commercialization
of the Licensed Product.


 


Section 3.02                                Joint Steering
Committee.


 


(a)                                  Purpose. The
purposes of the Joint Steering Committee (hereinafter the “JSC”) shall be to
provide a forum (i) to oversee the Development and Commercialization of
the Licensed Product and (ii) to resolve disputes concerning the
Development and Commercialization of the Licensed Product in accordance with Section 3.06(a).


 


(b)                                 Members. Within
ten (10) days after the Effective Date, the Parties shall establish the
JSC, and ASTELLAS and THERAVANCE shall each designate four (4) employees
as representatives.  Each of ASTELLAS and
THERAVANCE may replace any or all of its representatives on the JSC with
another (or other) employee(s) at any time upon written notice to the other
Party.  Such representatives shall
include individuals who have the relevant experience and expertise to oversee Development
and/or Commercialization of Licensed Product. Each Party shall at all times
have a JSC member who is at a level of Vice President or above.  A Party may designate a substitute to
temporarily attend and perform the functions of such Party’s designee at any
meeting of


 


 






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the JSC. ASTELLAS and THERAVANCE each may, on advance written notice to
the other Party, invite non-member representatives of such Party to attend
meetings of the JSC. The JSC shall be chaired on an alternating basis by a
representative from each Party for one-year terms.  The first year’s chairman shall be a
representative of THERAVANCE. The Party that has not selected the chairman for
that year shall select one of its representatives to be secretary for that
year.


 


(c)                                  Responsibilities.
The JSC shall perform the following functions:


 


(i)                                     Review and approve
Detailed Development Plans with respect to Licensed Product Development to
support Marketing Authorizations for the Initial Indications (such Detailed
Development Plans to be initially prepared by THERAVANCE within ninety (90)
days after the Effective Date and discussed initially at the TELAVANCIN Product
Management Team level);


 


(ii)                                  Review and approve
the Medical Marketing Plans prepared by the TELAVANCIN Product Management Team
and any material changes proposed by the TELAVANCIN Product Management Team
(but this approval extends only to aspects of the Medical Marketing Plan that
do not involve decisions reserved to ASTELLAS under Section 3.05(c));


 


(iii)                               Review and approve the
life cycle management of the Licensed Product;


 


(iv)                              Review, approve, and
monitor regulatory strategy and activities for the Licensed Product in
accordance with ARTICLE 8;


 


(v)                                 Discuss the state of
the markets for Licensed Product and opportunities and issues concerning the
Commercialization of Licensed Product, including consideration of marketing and
promotional strategy, market research plans, labeling, Licensed Product
platform positioning and Licensed Product profile issues;


 


(vi)                              At each meeting review
the Development and Commercialization activities for Licensed Product in the
Territory as reported by the responsible Party including reviewing and
approving any material changes proposed by THERAVANCE and/or ASTELLAS (to avoid
any doubt, this means changes to Development and Commercialization activities
themselves, not changes to the contractual terms (terms of this Agreement)
surrounding such activities, which contractual terms may only be amended by the
Parties in accordance with Section 16.13);


 


(vii)                           At each meeting, review the
status of all Studies conducted on Licensed Product and any results therefrom;


 


(viii)                        At each meeting, review Net
Sales for the year-to-date, as available;


 


(ix)                                In accordance with the
procedures established in Section 3.06, resolve disputes and disagreements
between the Parties; and


 


24

















 


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


 


(d)                                 Meetings. Until
[*] after the first Marketing Authorization in the US, the JSC shall have at
least quarterly meetings and more frequently as ASTELLAS and THERAVANCE
mutually agree.  Thereafter, the JSC
shall have semi-annual meetings for at least [*].  After that, the JSC will not have standing
meetings but either Party may call a special meeting, if required, for
consultation or discussions on an as-needed basis with respect to matters
within the JSC’s purview as set forth below (but not more frequently than
quarterly).  In the first year after the
Effective Date, all of the required JSC meetings shall be face-to-face, but
thereafter they may take place by video- or tele-conference; provided, however, that at least two (2) 
meetings per year until [*] after the first Marketing Authorization in the US
shall be face-to-face.  The location of
the meetings shall alternate between the offices of THERAVANCE and ASTELLAS, or
such other location as the Parties may mutually agree, with the first meeting
occurring at THERAVANCE’s facilities within twenty (20) days after the
establishment of the JSC.


 


(e)                                  Minutes Of
Committee Meetings. Definitive minutes of all JSC meetings shall be
finalized no later than thirty (30) Business Days after the meeting to which
the minutes pertain as follows:


 


(i)                                     Within ten (10) Business
Days after a JSC meeting, the secretary of the JSC shall prepare and distribute
to all members of the JSC draft minutes of the meeting. Such minutes shall
provide a list of any issues in dispute.


 


(ii)                                  The Party members of
the JSC shall have ten (10) Business Days after receiving such draft
minutes to collect comments thereon and provide them to the secretary of the
JSC.


 


(iii)                               Upon the expiration of
such second ten (10) Business Day period, the Parties shall have an additional
ten (10) Business Days to discuss each other’s comments and finalize the
minutes. The secretary and chairperson of the JSC shall each sign and date the
final minutes. The signature of such chairperson and secretary upon the final
minutes shall indicate each Party’s assent to the minutes.


 


(f)                                    Expenses.
Each Party shall be responsible for all travel and related expenses for its
members and other representatives to attend meetings of, and otherwise
participate on the JSC.


 


(g)                                 Limits of Authority.
The JSC shall have only those powers and that authority explicitly set forth in
this Agreement for it and is subject to the terms and conditions of this
Agreement.  The JSC shall be kept
apprised of, but shall have no decision-making or deliberative authority respecting
Contracting Issues, Deployment Issues and Distribution Issues, which are
ASTELLAS’ sole responsibility and right to decide in accordance with Section 3.05(c).
The JSC shall have no power or authority to


 


 






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amend or waive compliance with this Agreement, the Basic Development
Plan or the Basic Commercial Plan.


 


(h)                                 JSC Decision-Making.
The manner in which the JSC makes decisions is described in Section 3.05(a) with
any disputes among the JSC being resolved as per Section 3.06.


 


Section 3.03                                TELAVANCIN Product
Management Team.


 


(a)                                  Purpose.  It is the Parties’ intent that the relevant
employees from each Party work together in a [*] team (the “TELAVANCIN Product
Management Team”) to effectively Commercialize the Licensed Product.  The TELAVANCIN Product Management Team will
be responsible, in particular, for [*].  
The TELAVANCIN Product Management Team is expected to meet regularly and
have a close and ongoing day-to-day working relationship, each during the US
pre-launch period and through [*] after First Commercial Sale in the US.  Both Parties’ TELAVANCIN Product Management
Team members shall be responsible for implementing the [*], all as further
described in ARTICLE 5.  The
TELAVANCIN Product Management Team shall be led by THERAVANCE personnel with
respect to US Initial Indication Development activities and US Initial
Indication Promotional Med/Ed issues, and be led by ASTELLAS personnel with
respect to all other Development and Commercialization activities.  Such leadership, in each case, shall be
subject to consistency and compliance with the Plan(s), if any, applicable to
such activities, and the terms and conditions of the Agreement.  Leadership in this context means that the
lead Party will take responsibility to initiate and formulate plans covering
the applicable activities using the full resources of the TELAVANCIN Product
Management Team (including without limitation the input and participation of
non-lead members).


 


(b)                                 Composition.
The TELAVANCIN Product Management Team shall be composed of a maximum of [*]
THERAVANCE employees and as many ASTELLAS employees as ASTELLAS deems
necessary.  In any case, each Party shall
be entitled to have at least [*] TELAVANCIN Product Management Team members and
may designate and replace its own members by written notice to the other
Party.  During time periods with respect
to which the medical marketing services fee is due under Section 3.03(d),
THERAVANCE shall have at least [*] fully dedicated employees as TELAVANCIN
Product Management Team members.  The
TELAVANCIN Product Management Team will be composed of individuals having
appropriate experience in marketing, market analytics and forecasting,
pharmacoeconomics and clinical development.


 


(c)                                  Responsibilities.
The TELAVANCIN Product Management Team shall perform the following functions as
approved by the JSC:


 


(i)                                     Prepare the
Medical Marketing Plan for submission to and review and approval by the JSC,
[*] — in every case subject to consistency with the Basic Development Plan and
Basic Commercial Plan (and, consistent with Section 3.05(c), certain
decisions ASTELLAS is entitled to make) as further outlined in Section 5.01;


 


 






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(ii)                                  Prepare and present
to the JSC for approval [*], including but not limited to [*] (subject to
consistency with the Basic Commercial Plan);


 


(iii)                               On an annual rolling
basis beginning within six (6) months of the Effective Date, update and
amend the Medical Marketing Plan for the following Calendar Year so that it can
immediately thereafter submit to the JSC such proposed Medical Marketing Plan
for review and approval;


 


(iv)                              Recommend to the JSC any
material amendments or modifications to the Medical Marketing Plan during the
Calendar Year with respect to the US;


 


(v)                                 Provide reports to the
JSC regarding the state of the markets for Licensed Product and opportunities
and issues concerning the Commercialization of the Licensed Product, including
consideration of [*];


 


(vi)                              Review Net Sales for the
year-to-date, as available, and provide reports with assessments and
recommendations to the JSC;


 


(vii)                           Regularly review ASTELLAS’
progress to [*] in the United States that is consistent with the Medical
Marketing Plan.  Such [*] will be
undertaken by ASTELLAS; and


 


(viii)                        Have such other
responsibilities as may be assigned to the TELAVANCIN Product Management Team
pursuant to this Agreement or as may be mutually agreed upon by the Parties
through the JSC in final, undisputed written minutes from time to time.


 


(d)                                 Expenses. With
respect to TELAVANCIN Product Management Team members from THERAVANCE directed
at Commercialization, ASTELLAS will pay THERAVANCE an annual medical marketing
services fee equal to [*] in each year through [*] after the first Marketing
Authorization in the US — up to a maximum over the life of this Agreement of
[*] — but ASTELLAS shall not be responsible for any other Commercialization
expenses, internal or external, incurred by THERAVANCE without ASTELLAS’ prior
written agreement, except as provided in Section 5.03 with regard to
expenses that are below the threshold stated in such Section for written
approval to be required, provided that
such expenses below such threshold are within the budget and consistent with
the Medical Marketing Plan.  This annual
[*] medical marketing fee will be paid [*] commencing with 2006.  Further, after [*] from the year the first US
Marketing Authorization is obtained, the Parties do not intend for ASTELLAS to
further pay the medical marketing services fee described in this Section 3.03(d).


 


(e)                                  Decision-Making.
It is the Parties’ intent that disputes within the TELAVANCIN Product
Management Team be resolved within the team or through escalation to ASTELLAS’
Vice President, Marketing and Sales, Hospital Products (or successor position)
and the Senior Vice President, Commercial Development (or successor position)
at THERAVANCE.  In the failure of
agreement, either Party may escalate disputed issues within the TELAVANCIN
Product Management Team’s authority and responsibility, as provided herein, to
the JSC for resolution.  The Parties


 


 






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acknowledge escalation to the JSC is intended to be extraordinary, and
instead the TELAVANCIN Product Management Team is expected to have a close
working relationship and work out issues within their area of responsibility in
a manner acceptable to each Party and consistent with the Plans and this
Agreement.  The TELAVANCIN Product Management
Team shall not be empowered to make any decision inconsistent with any Plan and
shall not make any decision inconsistent with or that undermines any such
applicable Plan.


 


(f)                                    Limits of
Authority. The TELAVANCIN Product Management Team shall have only those
powers and that authority explicitly set forth in this Agreement for it and is
subject to the terms and conditions of this Agreement.  The TELAVANCIN Product Management Team shall
be kept apprised of, but shall have no decision-making or deliberative
authority respecting Contracting Issues, Deployment Issues and Distribution
Issues, which are ASTELLAS’ responsibility and right to decide in accordance
with Section 3.05(c).  The
TELAVANCIN Product Management Team shall have no power or authority to amend or
waive compliance with this Agreement, the Basic Development Plan, or the Basic
Commercial Plan.


 


Section 3.04                                Budgeting. The
Plans include maximum budgets that cannot be exceeded without ASTELLAS’ prior
written consent. Annually, the TELAVANCIN Product Management Team shall prepare
a detailed annual budget for the upcoming Calendar Year.  This process shall commence in June.  The annual budget shall be finalized by the
end of September annually and is subject ultimately to approval by
ASTELLAS, within the guidelines set forth in the Basic Commercial Plan.  In any case, ASTELLAS shall not be required
to approve any budget that exceeds the applicable limits set forth in the
Plans.


 


Section 3.05                                Decision-Making.


 


(a)                                  General. The
JSC may make decisions with respect to any subject matter that is subject to
the JSC’s decision-making authority and functions as set forth in Section 3.02(c).  All decisions of the Joint Steering Committee
shall be made by consensus, with the representatives from each Party presenting
a unified position on behalf of such Party. 
The JSC shall use Diligent Efforts to resolve the matters within its
authority.  The JSC’s decisions must be
consistent at all times with the Plans and this Agreement.


 


(b)                                 Plan Changes.
The Basic Development Plan and the Basic Commercial Plan each contain a section entitled
“Commitments”. Because changes to the “Commitments” section of the Basic
Development Plan and Basic Commercial Plan are fundamentally business
decisions, the Parties consider that any change to the “Commitments” sections
of such Plans (provided that such changes are not subject to decision-making
authority of ASTELLAS pursuant to Section 3.05(c)), should be decided by
the Parties and not by recourse to the dispute resolution provisions of Section 3.06
nor to any form of dispute resolution (including without limitation court and
arbitration), except to the extent of any Contract Compliance Dispute described
in Section 3.06(c).  Accordingly,
the Parties intend and agree that (i) any change to the “Commitments”
section(s) of either and/or both such Plan(s) shall only be made if the Parties
mutually in their sole discretions (subject to consistency with the exercise of
Diligent Efforts and this


 


28

















 


Agreement’s terms) agree to the change (in the manner provided in Section 16.13
with respect to all amendments); (ii) the JSC — while it may discuss any
such change proposed by a Party — shall have no authority to agree to any such
change; and (iii) the dispute resolution procedures set forth in Section 3.06(b) shall
not apply to any disagreement or failure of consensus regarding whether or how
to change the “Commitments” section of either and/or both such
Plan(s).  The Parties acknowledge that it
is their intent that any change to the “Commitments” section of either
and/or both such Plan(s) should only be supportable by material changes in the
underlying circumstances surrounding Licensed Products.


 


(c)                                  Contracting
Issues, Deployment Issues and Distribution Issues.


 


(i)                                     General.  Contracting Issues, Deployment Issues and
Distribution Issues shall be at the sole discretion of ASTELLAS. [*] right [*]
without [*] in accordance with [*].   
Provided that ASTELLAS exercises its right to make these decisions consistent
with the applicable Plans and any requirements that it apply Diligent Efforts
with respect to the subject matter of the decision, disputes regarding the
exercise of any decision by ASTELLAS with regard to a Contracting Issue,
Deployment Issue or Distribution Issue shall not be referable to dispute
resolution under Section 3.06(b).   
Moreover to avoid any doubt, ASTELLAS cannot deem an amendment to the
Net Sales definition herein to be a Contracting Issue within its sole
discretion and, absent a mutually agreed upon amendment, shall comply with the
Net Sales definition as written herein for purposes of calculating payments due
hereunder.


 


(ii)                                  Pricing.  Notwithstanding anything else express or
implied in this Agreement, ASTELLAS shall have the sole authority to make the
decision as to all Licensed Product pricing matters [*], and while ASTELLAS
will share information and THERAVANCE may express its ideas and concerns
through JSC and TELAVANCIN Product Management Team participation regarding [*]
pricing matters, none of THERAVANCE, the JSC nor the TELAVANCIN Product
Management Team shall have any decision-making authority with regard to [*]
pricing matters.


 


Section 3.06                                Dispute Resolution.


 


(a)                                  Work Towards
Consensus. With respect to any issue that the JSC is empowered to decide
that is in dispute, if the JSC cannot reach consensus within thirty (30)
Business Days after the issue has been brought to the attention of the full
JSC, then such issue shall be referred to the Chief Executive Officer of
THERAVANCE and the Chief Executive Officer of ASTELLAS US, LLC (collectively,
the “Officers”) for resolution.  The
Parties accept that the use of the Officers for resolution of any unresolved
issues will be on an exceptional basis. 
If any disputes arise between the Parties regarding this Agreement or
its interpretation that are not those Development and Commercialization matters
the JSC is empowered to decide, either Party may refer the matter directly to
the Officers for discussion (without first calling a JSC meeting and waiting an
additional thirty (30) Business Days as with issues that go first to JSC
discussions).


 


 






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WITH RESPECT TO THE OMITTED PORTIONS.


 


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(b)                                 Resolution by Third
Party. If the Officers are unable to reach consensus within thirty (30)
Business Days after the matter has been referred to them, except for Excluded
Issues under Section 3.06(c),   the
final decision will be made by a mutually acceptable Third Party
arbitrator.  Either Party can initiate
such arbitration on 30 days written notice to the other Party (given at any
time following the period of the Officers’ discussions).  The Parties will use best efforts to agree on
an arbitrator within such 30-day period. 
If the Parties do not agree on an arbitrator within such 30 days, then
the Parties’ proposed arbitrators (one proposed by each Party) shall within 15
additional days choose the arbitrator, who shall be unaffiliated with both
Parties and their respective Affiliates. 
If the Parties’ proposed arbitrators fail to timely select the
arbitrator, the Parties shall engage a single arbitrator (unaffiliated with
both Parties) from and selected by the organization JAMS (standing for
“Judicial Arbitration and Mediation Services”) (“JAMS”), to be appointed within
ten (10) additional Business Days. 
Such arbitration will occur as promptly as practicable, but in no event
later than 60 days following selection of the arbitrator and will be held in
New York City, New York.  The arbitration
shall be conducted in accordance with the JAMS rules.  The decision of the arbitrator will be final
and binding on the Parties; provided that either Party shall retain all rights
to bring an action against the other to enforce the arbitrator’s decision.


 


(c)                                  Excluded Issues.
Notwithstanding anything express or implied to the contrary in this Agreement,
decisions regarding changes to the “Commitments” sections of the Plans and
ASTELLAS’ exercise of its right to make the decisions regarding Deployment
Issues, Contracting Issues, and Distribution Issues shall not be referable to
dispute resolution under Section 3.06(b) nor to any other form of
dispute resolution (including without limitation court and, other than as
provided in this subsection 3.06(c) for Contract Compliance Disputes,
arbitration), except to the extent required to determine whether each Party has
acted in accordance with (i.e., has not breached) this Agreement (including
without limitation the obligations set forth in this Agreement that it devote
(and agree to devote) Diligent Efforts, and the obligations to act consistent
with the Basic Development Plan and/or the Basic Commercial Plan) (each a
“Contract Compliance Dispute”).  Contract
Compliance Disputes are referable for dispute resolution under Section 3.06(b).  In addition, notwithstanding anything express
or implied in this Agreement and absent fraud in connection with any dispute
resolution under Section 13.01(c), Patent Resolution Issues remaining
unresolved after initial dispute resolution under Section 3.06(a) shall
not be referable for dispute resolution under Section 3.06(b), but shall
instead be resolved as set forth in Section 13.01(c).


 


(d)                                 Exclusive Procedures.
The procedures set forth in this Section 3.06  (including without limitation by reference to
Section 13.01(c)) shall be the sole and exclusive procedures for resolving
disputes between the Parties in connection with this Agreement.  The only exceptions to this are that either
Party may (i) seek preliminary injunctive relief from a court having
jurisdiction over both Parties pending the outcome of a dispute resolution in
accordance with this Section 3.06,  (ii) seek
injunctive relief from a court having jurisdiction over both Parties for a
breach or a threatened breach of Article 10, or (iii) seek judicial
enforcement of the arbitrator’s decision.


 


30

















 


ARTICLE 4


 


DEVELOPMENT
OF LICENSED PRODUCT


 


Section 4.01                                Obligations For
Development. 


 


(a)                                  General.
THERAVANCE, acting through the TELAVANCIN Product Management Team, shall have
the overall responsibility for, and use Diligent Efforts in, assuring the
performance of all Development activities (x) 
for the Initial Indications to support an application for Marketing
Authorization in the US in accordance with the Detailed Development Plan and
Basic Development Plan, and in particular for the desired label identified in
the Basic Development Plan, and (y) delivery of the First Commercial Sale
Stock.  This shall include, where
applicable, preparing relevant US regulatory filings (as contemplated under ARTICLE 8)
for the Licensed Product for the Initial Indications.  ASTELLAS shall use Diligent Efforts to
advance such Licensed Product through regulatory filings outside the U.S. for
Initial Indications for the Major Market Countries and other Countries, and
through Development for Other Indications. THERAVANCE will maintain such
scientific support for the Licensed Product, including without limitation
microbiology, PK/ADME, and toxicology, as is deemed necessary by the JSC.


 


(b)                                 Development Funding
Responsibilities. THERAVANCE shall be responsible for and pay all
Registration Expenses for Initial Indications to support an NDA submission for
such indications in the US for the Target Label from [*] to the time of FDA
approval of the Initial Indications;  provided, however, that: (i) should
such costs and expenses exceed [*], then to the extent incurred in a manner
consistent with the Basic Development Plan and the Detailed Development Plan
(for post-Effective Date costs and expenses) ASTELLAS shall pay to THERAVANCE
an amount equal to [*];  provided, however, that ASTELLAS shall not
be obligated to pay THERAVANCE more than [*] pursuant to this clause (i) without
ASTELLAS’ prior written consent; and (ii) should such costs and expenses
(incurred in a manner consistent with the Basic Development Plan and Detailed
Development Plan, for post-Effective Date costs and expenses) be less than
[*].  THERAVANCE represents that
Registration Expenses from [*] total approximately [*].  Within thirty (30) days after the Effective
Date, THERAVANCE shall (in conjunction with and as part of providing the
Detailed Development Plan) provide for JSC review a budget for all remaining
Registration Expenses.  Thereafter,
quarterly, THERAVANCE shall provide actual-to-budget Registration Expense
expenditures for the past quarter as well as an updated budget for JSC
review.  All Registration Expenses shall
be reported to the JSC on a quarterly basis and the amounts owed by one Party
to the other, as applicable, determined by the JSC at the appropriate time (in
the case of (ii), no later than thirty (30) days after receipt of the US
Marketing Authorization for the Licensed Product for the Initial
Indications).  Any dispute regarding an
amount owed will be handled by the normal dispute mechanism (see Section 3.06).  Payments will be made within twenty (20)
Business Days of the determination by the JSC. 
ASTELLAS shall be responsible for and pay all costs and expenses for
Development activities beyond the scope of those activities covered by the
Registration Expenses.  To the extent
this would involve covering any costs or expenses incurred by or for THERAVANCE
or its Affiliate, such costs and expenses must be specifically


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


31

















 


budgeted for in advance in accordance with Section 3.04 (provided
that in no event shall ASTELLAS be obligated to cover or reimburse anything
other than external out-of-pocket expenses). 
In the event this Agreement terminates for any reason other than
material breach by THERAVANCE or a for-cause termination under Section 14.03,  in either case prior to the first NDA Filing
Milestone set forth in Section 6.02(b), ASTELLAS shall be responsible for
and pay (X) [*] through the date of termination (post-Effective Date, to the
extent incurred consistent with the Basic Development Plan and Detailed
Development Plan), less (Y) [*].


 


(c)                                  Development Cost
Sharing During the Economic Integration Period. Notwithstanding anything to
the contrary herein, during the Economic Integration Period, ASTELLAS shall be
responsible for and shall pay up to a total of [*] in Development expenses to
the extent actually incurred by THERAVANCE to develop Licensed Product for HAP.  ASTELLAS shall pay such amount promptly after
being invoiced in writing by THERAVANCE for such amount, and THERAVANCE shall
provide supporting documentation as to such costs actually incurred if
requested by ASTELLAS.  Amounts paid by
ASTELLAS pursuant to this Section are deemed included in Registration
Expenses for all purposes under this Agreement (excluding only the requirement
that ASTELLAS pay such amount, unlike all other Registration Expenses, which
are paid by THERAVANCE).


 


(d)                                 Reporting.
Quarterly, each Party shall keep the JSC fully and timely advised of ongoing
Development activities by providing the JSC with an update report that includes
information as to every (i) initiation (i.e., first person dosed) of any
study involving the Licensed Product, and (ii) the last person dosed/last
visit in any study relating to the Licensed Product, in each case in the
quarter leading up to the report.  This
report shall be in addition to quarterly reports to the JSC on other subject
matter in connection with its regular meetings.


 


(e)                                  Notification.
The Party responsible to conduct the activity shall immediately notify the
other Party and provide particulars of any halt or substantial delay in any
development program or clinical study, any obstacles in the Licensed Product
reaching the market and any substantial changes anticipated in the sales
potential of the Licensed Product. 
Details shall be provided to the members of the JSC.


 


(f)                                    Diligent Efforts.
THERAVANCE shall use Diligent Efforts for Development activities related to the
Initial Indications and in pursuing regulatory approvals for Initial
Indications in the U.S., in accordance with the terms of ARTICLE 8.  ASTELLAS shall use Diligent Efforts for
Development of Other Indications and in pursuing regulatory approvals for
Initial Indications and Other Indications outside the U.S. and Other
Indications in the U.S., all in accordance with the terms of ARTICLE 8 and
consistent with Section 4.01(a).


 


Section 4.02                                ASTELLAS Assistance.
ASTELLAS will endeavor to provide THERAVANCE, upon THERAVANCE’s request, and at
ASTELLAS’ sole discretion, such assistance as may be reasonably required by
THERAVANCE to achieve its


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


32

















 


Development obligations, which such assistance may be provided directly
or through ASTELLAS’ vendors or contractors.


 


Section 4.03                                Transfer Of
THERAVANCE Know-How. Without unreasonable delay following the Effective
Date (and in any event within ninety (90) days thereafter and with respect to
items not yet available to THERAVANCE as of the Effective Date as soon as
available to THERAVANCE), THERAVANCE shall make available and transfer to
ASTELLAS the following THERAVANCE Know-How and Know-How to which it derives
rights under the [*] or the [*] Agreement:


 


(a)                                  a detailed written
description of the process(es) used by THERAVANCE for the manufacture of the
Licensed Product intended for Phase 3 Studies and the full report of the
development of such process;


 


(b)                                 a detailed written
description of the analytical methods and validation reports for the starting
materials and intermediates to be used in the manufacture of the Licensed
Product;


 


(c)                                  the detailed written
description of the test methods used by THERAVANCE for validating the
commercial process for the API Compound and Licensed Product manufactured, and
the full report of the validation done thereon by THERAVANCE (and/or its
contractors);


 


(d)                                 to the extent
available to THERAVANCE at the Effective Date (and in any event promptly after
it is available to THERAVANCE), reference and analytical standard compounds to
be used as reference material in the conduct of comparative analyses in
relation to the manufacturing process with the API Compound. It is explicitly
understood that no such reference or analytical standard compound may be used
for any other purpose than the purpose now stated; and


 


(e)                                  a description of all
THERAVANCE Know-How relating to Studies conducted by THERAVANCE using the API
Compound and the Licensed Product prior to the Effective Date.


 


In addition, in the first [*] months after the Effective Date,
THERAVANCE shall provide the advice and assistance reasonably required to
expeditiously transfer the THERAVANCE Know-How (including without limitation
the ability for ASTELLAS to practice, itself or through an Affiliate or
Third-Party contractor), the then-current processes to make API Compound and
finished Licensed Product (i.e., the finished form that is in First Commercial
Sale Stock) to ASTELLAS, to include updating information described in
subsections (a) through (e) above as it becomes available, at no
charge to ASTELLAS.


 


Following the aforementioned [*]-month period, upon reasonable request
of ASTELLAS from time to time, THERAVANCE shall make appropriate personnel
(including without limitation from THERAVANCE’s contractors) available, for
consultation, updates and assistance regarding THERAVANCE Know-How.  [*] of their respective [*].


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


33

















 


THERAVANCE’s obligations under this Section 4.03 extend to
providing ASTELLAS with the full right to access (including without limitation
all reasonably required letters of access) THERAVANCE’s current (as of the
Signing Date) Licensed Product-related DMF and any and all updates thereto
during the term of this Agreement.


 


Section 4.04                                Certain Activities;
Non-delegation. After the Signing Date, with regard to new contracts with
Third Parties respecting manufacturing, supply, formulation and process
development and material changes to existing contracts with Third Parties
respecting manufacturing, supply, formulation and process development — in all
cases to the extent that it affects THERAVANCE Compound or Licensed Product —
THERAVANCE shall not execute such new contract or such material change to an
existing contract without ASTELLAS’ prior written consent, which will not be
withheld unreasonably.  THERAVANCE shall
provide ASTELLAS copies of all such proposed contracts and amendments for
advance review and approval prior to execution. THERAVANCE shall not
subcontract or otherwise delegate its duties or obligations with respect to
THERAVANCE Compound and Licensed Product manufacture, supply, formulation and
process development other than pursuant to a written contract.  THERAVANCE shall not subcontract or otherwise
delegate its duties or obligations (nor assign its rights) with respect to
TELAVANCIN Product Management Team activities (i.e., THERAVANCE’s members on
this team must be THERAVANCE employees).


 


ARTICLE 5


 


COMMERCIALIZATION


 


Section 5.01                                Medical Marketing
Plans.


 


(a)                                  General. The
TELAVANCIN Product Management Team shall be responsible for preparing and the
JSC shall be responsible for reviewing and approving a high-level
Territory-wide Medical Marketing Plan for the Licensed Product (“Medical
Marketing Plan”).  The Medical Marketing
Plan shall define the goals and objectives for Commercializing the Licensed
Product in the Territory in the pertinent Calendar Year consistent with the
Basic Development Plan and — with respect to the US — the Basic Commercial
Plan.  In addition, the Parties recognize
the value of coordinating Licensed Product promotion within the context of
ASTELLAS’ anti-infectives franchise (and that THERAVANCE has chosen ASTELLAS as
THERAVANCE’s commercial collaborator for Licensed Product in part based on the
value that ASTELLAS brings through its anti-infectives franchise leadership
position).  ASTELLAS is entitled to [*]
with THERAVANCE each year [*] for the year, on a timeline that is consistent
with ASTELLAS’ internal process for annual planning of this sort.  If THERAVANCE (or its Affiliate) has in
late-stage clinical development (phase 3a or beyond) or commercializes a
product that competes with any other products within ASTELLAS’ anti-infectives
franchise at any time, then ASTELLAS may choose not to provide THERAVANCE with
[*], and to avoid any doubt will not be required to provide THERAVANCE with
information regarding such other ASTELLAS product(s).


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


34

















 


(b)                                 Contents Of Each
Medical Marketing Plan. The initial Medical Marketing Plan for the Licensed
Product shall be prepared within six (6) months following the Effective
Date and shall be a rolling, three (3) year plan, updated annually, and
shall contain at a minimum and as appropriate to then-current knowledge:


 


(i)                                     Results of market
research and strategy, including market size, market dynamics, market growth,
customer segmentation, customer targeting, competitive analysis and global
Licensed Product platform positioning;


 


(ii)                                  [*]


 


(iii)                               ASTELLAS’ pricing
strategy for Licensed Product;


 


(iv)                              Annual sales forecasts
for Major Market Countries;


 


(v)                                 For each Major Market
Country (as available and to the extent applicable): sales plans which will
include the target number of sales representatives, detail strategy, target
number of details, and targeted physicians by tier;


 


(vi)                              Core, global advertising
and promotion programs and strategies, including but not limited to publication
plans, media plans, key opinion leader development, symposia and speaker
programs; and


 


(vii)                           [*] studies to be conducted.


 


Section 5.02                                Obligations For
Commercialization. Both Parties shall use Diligent Efforts to carry out the
responsibilities assigned to them hereunder to Commercialize the Licensed
Product.


 


Section 5.03                                Commercialization.


 


(a)                                  ASTELLAS Responsibility.
Subject to the Plans and the obligations and responsibilities of the TELAVANCIN
Product Management Team and the JSC specifically set forth in ARTICLE 3,
ASTELLAS shall have responsibility for Commercialization of Licensed
Product.  Other than as provided in Section 5.03(c),
ASTELLAS shall be responsible for and pay all expenses associated with the
Commercialization of Licensed Product for sale or distribution including
without limitation all financial and administrative support.  For the avoidance of doubt, ASTELLAS shall
have no obligation hereunder to pay for or reimburse any expenses incurred by
or for THERAVANCE or its Affiliates in conducting any Commercialization
activities unless approved by ASTELLAS in advance in writing under Section 5.03(c) (if
written approval is required under such subsection (c)), except for the
medical marketing services fee to the extent provided in Section 3.03(d),
and expenses under the written approval threshold to the extent provided to be
reimbursed under Section 5.03(c).


 


(i)                                     ASTELLAS shall
have the sole right and responsibility to distribute, sell, record sales and
collect payments for Licensed Product.


 


(ii)                                  ASTELLAS shall have
the sole right and responsibility for establishing and modifying the terms and
conditions with respect to the sale of Licensed


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


35

















 


Product, including without limitation the sole right and responsibility
for deciding all Contracting Issues.


 


(iii)                               ASTELLAS will be
responsible for supply, storage, order receipt, order fulfillment, shipping and
invoicing of Licensed Product, including without limitation the sole right and
responsibility for deciding all Distribution Issues.


 


(iv)                              Following Marketing
Authorization in each Country of the Territory ASTELLAS shall use Diligent
Efforts to launch the Licensed Product in such Country.


 


(v)                                 Regarding any Country
of the Territory where the Licensed Product is launched, ASTELLAS shall
promptly inform THERAVANCE in writing of the occurrence of such launch.


 


(vi)                              ASTELLAS shall, in each
Country of the Territory where the Licensed Product has been launched, at its
own expense, or the expense of its Affiliates, sublicensees or distributors,
use Diligent Efforts to Commercialize the Licensed Product.


 


(vii)                           In the United States,
ASTELLAS shall be responsible for hiring, organizing and maintaining a field
sales force of appropriate number and training to promote sales of the Licensed
Product consistent with Diligent Efforts and shall be responsible for deciding
all other Deployment Issues.


 


(viii)                        [*] that is consistent with the
[*].


 


(ix)                                [*] using the [*] that
are [*].


 


(x)                                   ASTELLAS shall be
responsible for all activities in connection with any line extensions of the
Licensed Product and Other Indications.


 


(b)                                 Semi-Annual Reports.
ASTELLAS shall provide the JSC reports semi-annually. Such reports shall set
forth in summary form the results of ASTELLAS’ Commercialization activities
performed during such semi-annual period in the Major Market Countries,
including to the extent Diligent Efforts so warrant, a proposed development
plan for Other Indications for review.


 


(c)                                  Commercialization
Expense Financial Controls. It is the Parties’ intent to incur and pay for
Commercialization expenses in a manner consistent with the Medical Marketing
Plan and the approved budget and consistent with ASTELLAS’ internal financial
controls.  THERAVANCE’s members of the
TELAVANCIN Product Management Team shall not be empowered to and shall not
commit to any individual Commercialization expense of more than [*] without the
prior written approval of ASTELLAS, shall only be empowered to commit (absent
ASTELLAS’ prior written approval) to expenses below such threshold to the
extent consistent with the annual budget and Medical Marketing Plan, and after
the time period with respect to which the medical marketing services fee is due
under Section 3.03(d) shall not be empowered to and shall not commit
to any Commercialization expenses.  If
the TELAVANCIN Product


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


36

















 


Management Team decides that a particular expense will be incurred,
then responsibility for paying for such expense shall rest with ASTELLAS
(subject to the limits imposed by the annual budgets).


 


Other than paying the annual medical marketing services fee through [*]
years after the first Marketing Authorization in the US as provided for in Section 3.03(d),
ASTELLAS will not be responsible to reimburse Commercialization expenses
incurred by THERAVANCE, without ASTELLAS’ prior written consent.


 


(d)                                 Marketing Cost
Sharing During the Economic Integration Period. During the Economic
Integration Period, THERAVANCE shall be responsible for and shall pay up to a total
of [*] in marketing expenses to the extent actually incurred by ASTELLAS to
market Licensed Product for its first approved indication (anticipated to be
cSSSI).  THERAVANCE shall pay such amount
promptly after being invoiced in writing by ASTELLAS for such amount, and
ASTELLAS shall provide supporting documentation as to such costs actually
incurred if requested by THERAVANCE.  To
avoid any doubt, examples of marketing expenses that count towards such [*]
include without limitation sales force salaries and Promotional/MedEd Spending.


 


Section 5.04                                Collaborative
Working Meetings. Except for information that ASTELLAS’ internal or
external counsel, HR department, or internal or external compliance or
regulatory advisors require be kept confidential within ASTELLAS and except to
the extent required by Law, planning information regarding [*] shall be shared
openly with the TELAVANCIN Product Management Team (subject to the protections
of ARTICLE 10 (Confidentiality)). 
TELAVANCIN Product Management Team meetings shall include discussions of
[*] (excluding, again to avoid doubt, matters required by internal or external
counsel, HR or internal or external compliance or regulatory advisors to be
kept confidential).


 


Section 5.05                                Compliance. Each
Party shall in its activities hereunder comply with all applicable Laws,
industry codes and industry guidelines. 
Each member of the TELAVANCIN Product Management Team shall be trained
on ASTELLAS’ compliance policies at least annually and shall comply with such
policies (including without limitation providing an annual certification as to
having been trained on such policies). 
Furthermore, nothing in this Agreement shall be deemed to require
ASTELLAS to act in a manner not in accordance with its own internal regulatory
compliance guidelines.  Nothing in this
Agreement shall be deemed to require THERAVANCE to act in a manner not in
accordance with its own internal regulatory compliance guidelines; provided, however, that to the extent
ASTELLAS’ compliance guidelines impose a higher or stricter standard, then in
its activities under this Agreement THERAVANCE must adhere to such higher or
stricter standard.


 


Section 5.06                                Respective Employees’
Status Not Changed. THERAVANCE’s employees performing hereunder shall not
obtain the status of or otherwise be considered ASTELLAS employees by virtue of
their activities under this Agreement or work in conjunction with
ASTELLAS.  They shall not hold themselves
out as, nor give any person any reason to believe that they are, employees of ASTELLAS.  They shall not be


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


37

















 


eligible for any ASTELLAS employee benefits (including without
limitation fringe benefits, equity compensation and retirement benefits).  All payroll and employment taxes, insurance,
worker’s compensation and benefits with respect to such persons shall be the
sole responsibility of THERAVANCE.  If
any THERAVANCE employee performing hereunder (or his or her heir or estate)
makes any Claim relating to an alleged employment relationship with ASTELLAS,
relating to ASTELLAS employee benefits, or in relation to or resulting from
such person’s involvement in activities covered by this Agreement (each a
“THERAVANCE Employee Claim”), then such THERAVANCE Employee Claim shall be
subject to THERAVANCE’s Indemnification obligation pursuant to Section 12.02.


 


Similarly, ASTELLAS’ employees performing hereunder shall not obtain
the status of or otherwise be considered THERAVANCE employees by virtue of
their activities under this Agreement or work in conjunction with
THERAVANCE.  They shall not hold
themselves out as, nor give any person any reason to believe that they are,
employees of THERAVANCE.  They shall not
be eligible for any THERAVANCE employee benefits (including without limitation
fringe benefits, equity compensation and retirement benefits).  All payroll and employment taxes, insurance,
worker’s compensation and benefits with respect to such persons shall be the
sole responsibility of ASTELLAS.  If any
ASTELLAS employee performing hereunder (or his or her heir or estate) makes any
Claim relating to an alleged employment relationship with THERAVANCE, relating
to THERAVANCE employee benefits, or in relation to or resulting from such
person’s involvement in activities covered by this Agreement (each an “ASTELLAS
Employee Claim”), then such ASTELLAS Employee Claim shall be subject to
ASTELLAS’ Indemnification obligation pursuant to Section 12.01.


 


ARTICLE 6


 


FINANCIAL
PROVISIONS


 


Section 6.01                                Signing Payment.
In partial consideration for the acquisition of the license rights in Section 2.01
under the THERAVANCE IP by ASTELLAS, ASTELLAS shall within three (3) Business
Days after the Effective Date, pay to THERAVANCE a non-creditable,
non-refundable amount of Sixty Million United States Dollars (U.S.
$60,000,000.00); and in consideration for the acquisition of the Opt-In Right
in Section 2.02 under this Agreement, ASTELLAS shall within three (3) Business
Days after the Effective Date, pay to THERAVANCE a non-creditable,
non-refundable amount of Five Million United States Dollars (U.S.
$5,000,000.00).


 


Section 6.02                                Licensing Milestone
Payments.


 


(a)                                  General. In
further consideration of the license rights granted herein and the covenants
and agreements contained herein, ASTELLAS shall also pay to THERAVANCE the
non-creditable (except as provided in the last sentence of Section 4.01(b)),
non-refundable payments set forth below for each such Milestone referred to
therein (each, a “Milestone”).


 


38












 


(b)                                 Licensing Milestone
Payments To THERAVANCE.  ASTELLAS
shall make the following one-time licensing Milestone payments to THERAVANCE
following the achievement of the indicated Milestone for the Licensed Product
(with payment due on the timing set forth in subsection (c)).


 


	
  Milestone

  	
   

  	
  Amount

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  Total possible Milestones

  	
   

  	
  U.S. $156
  Million

  



 


(c)                                  Notification And
Payment.  In the event a Party
achieves a Milestone, it shall promptly, but in no event more than ten (10) Business
Days after the achievement of each such Milestone, notify the other Party in
writing of the achievement of same. For all Milestones achieved, ASTELLAS shall
promptly (no more than thirty (30) days after notification of the achievement
of each such Milestone) remit payment to THERAVANCE for such Milestone.


 


(d)                                 One-Time-Only
Milestones.  Each Milestone shall be
payable hereunder a maximum of one (1) time under this Agreement,
regardless of how many times in addition to one (1) time the corresponding
milestone event is achieved with respect to one (1) or more Licensed
Products.


 


Section 6.03                                Payment Of Royalties
On Net Sales Of Licensed Product.


 


(a)                                  Royalty Rates.  Within thirty (30) days after the end of each
Calendar Quarter (the “Payment Period”), ASTELLAS shall pay THERAVANCE royalty


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


39

















 


payments based on Net Sales in the Territory in such Payment Period
during the Term-Basic as follows:


 


	
  On total
  Calendar Year-to-date Net Sales up to and including [*]

  	
   

  	
  [*]

  
	
  On total
  Calendar Year-to-date Net Sales greater than [*] and up to and including [*]

  	
   

  	
  [*]

  
	
  On total
  Calendar Year-to-date Net Sales greater than [*]

  	
   

  	
  [*]

  



 


For example, where total Calendar Year-to-date Net Sales in all
Countries in the Territory totals to [*] (for example, [*] in each of [*]
Countries), the royalties are calculated as follows:  The first [*] is subject to the [*] rate,
yielding [*] in royalties on that portion of the Calendar Year’s Net
Sales.  The next [*] is subject to the
[*] rate, yielding [*] in royalties on that portion of the Calendar Year’s Net
Sales.  The last [*] is subject to the
[*] rate, yielding [*] on that portion of the Calendar Year’s Net Sales.  The total royalty for the year calculated
under this Section 6.03(a) would be [*] plus [*] plus [*] for a grand
total for the year of [*].  (To avoid
doubt, depending upon the facts and circumstances, this total may be subject to
adjustment under Sections 6.03(c)-(f).)


 


The Parties agree that the [*] set forth in [*] under this Agreement.


 


(b)                                 Payment Calculation.  The royalties payable under this Section 6.03
shall be calculated on a Country-by-Country basis from the date of First
Commercial Sale of the Licensed Product in a particular Country until the end
of the Term-Total in that Country, with the rates of Section 6.03(a) (as
adjusted by Sections 6.03(c)-(f)) applying during the Term-Basic, and the rate
of Section 6.03(g) (as adjusted by Section 6.03(e) with
respect to Combination Products) applying during the Term-Additional.


 


(c)                                  Offsets.


 


(i)                                     Financials.  Subject to Section 6.03(c)(ii) and Section 6.03(c)(iii) below,
if ASTELLAS (or an Affiliate or sublicensee hereunder) pays any Third Party a
royalty on Licensed Products (however calculated) under an intellectual
property license that is necessary or reasonably required to avoid claims of
infringement or misappropriation that are reasonably likely to succeed (or
settlement of an intellectual property dispute under intellectual property that
is necessary or reasonably required on the foregoing standard), then ASTELLAS
shall be entitled to reduce the royalty to THERAVANCE hereunder by [*]; provided, however, that the royalty to
THERAVANCE hereunder shall not be reduced in any Payment Period by operation of
this offset to less than [*] for such Payment Period if such offset did not
apply.  ASTELLAS may carry forward any unused
offset (unused due to the [*]) to apply in future Payment Periods.  Notwithstanding the foregoing, payments to
[*] in accordance with Section 9.06 do not qualify for the offset of this Section 6.03(c)(i).  The offset provided for in Section 6.03(c) shall
operate on a Country-by-Country basis, and ASTELLAS shall be reasonable in its
allocation between Countries where judgment is required.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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(ii)                                  Discussions.  It is anticipated that the Parties will
discuss all potentially desirable intellectual property licenses through the
mechanism provided in Section 13.07. 
All intellectual property licenses that the Parties agree should be
taken through such discussions shall automatically qualify for the offset
provided for in Section 6.03(c)(i). 
With respect to all other intellectual property licenses from Third
Parties, if THERAVANCE disagrees whether the license is necessary or reasonably
required to avoid claims of infringement or misappropriation that are
reasonably likely to succeed (the “Issue of Necessity”) then THERAVANCE may
refer the Issue of Necessity for resolution under Section 13.01(c).  If the independent patent counsel under such Section determines
the Issue of Necessity in favor of the license, then royalties under such
license shall qualify for the offset of Section 6.03(c)(i).  If such patent counsel determines the Issue
of Necessity against taking the license, then while ASTELLAS may still take
(whether before or after the independent patent counsel’s decision) and
maintain the license at its sole expense, royalties under such license shall
not qualify for the offset of Section 6.03(c)(i).  Intellectual property settlements involving
an in-license over which the Parties disagree shall be handled in the same
manner as provided in this Section 6.03(c)(ii).


 


(iii)                               Exception.  The offset provided for in Section 6.03(c)(i) is
intended to ensure that if additional Third-Party intellectual property is
needed to permit ASTELLAS to enjoy its rights and benefits under this Agreement
to Develop and Commercialize the Licensed Product in the form in which it
receives NDA Approval using a manufacturing process delivered by THERAVANCE
that is consistent with that used for the Registration Batches and that
achieves the Target Cost of Goods (and any updates or modifications required to
respond to any legitimate safety issues or Regulatory Authority requirements
that may emerge, or required to achieve or maintain such Target Cost of Goods,
which such updates or modifications are referred to herein as “Required
Changes”), then THERAVANCE shares the costs of obtaining such Third-Party
intellectual property through the royalty offset and ASTELLAS is not subject to
royalty stacking.  As used herein,
“Target Cost of Goods” means a cost of goods sold for Licensed Product of [*],
based on a [*] patient receiving a [*]. 
However, the offset is not intended to cover the situation where
ASTELLAS unilaterally decides to in-license Third-Party intellectual property
that covers Licensed Product or activities hereunder only because of a change
ASTELLAS has alone (not through a JSC decision) decided to make in the Licensed
Product or manufacturing process that is not a Required Change (“Discretionary,
Third-Party IP”).  Accordingly, if
ASTELLAS without reaching consensus with THERAVANCE through the JSC decides to
in-license any Discretionary, Third Party IP, the royalty payable in respect of
the license under the Discretionary, Third-Party IP shall not qualify for the
offset of Section 6.03(c)(i).


 


(iv)                              The offset of Section 6.03(c)(i) shall
not be deemed or read to limit in any way THERAVANCE’s representations and
warranties in ARTICLE 11.


 


(d)                                 Generic Competition.  At any time during the Term-Basic, if a
competitive product is launched or sold by a Third Party that contains the
THERAVANCE Compound as its active ingredient in any Country where ASTELLAS
markets the Licensed Product, and if the Net Sales hereunder of the Licensed
Product in that Country


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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decline by [*] or more in such Country relative to the same time period
in the prior calendar year (e.g., with Q3 of year 2 being measured as against
Q3 of year 1), then the royalty rates set forth in Section 6.03(a) shall
be reduced by [*]; provided, however,
that (i) the total reduction in the royalty rate shall in no case be more
than [*]of the rate set forth in 6.03(a) and (ii) any subsequent
increase in Net Sales in such Country relative to the same time period in the
prior calendar year shall cause the royalty rates to be increased by a
percentage amount equal to [*] (the comparison here, too, being measured
relative to the corresponding period of the prior year, e.g. with Q3 of year 2
being measured as against Q3 of year 1), provided,
however, that the increase will [*].


 


Because the Net Sales tiers of Section 6.03(a) are based on
worldwide Net Sales, but the adjustment of this Section 6.03(d) applies
to Net Sales on a Country-by-Country basis, the following assumption will be
applied to allocate Net Sales in the individual Country(ies) with respect to
which ASTELLAS is entitled to a reduction under this Section 6.03(d) being
allocated between the sales tiers as follows: 
Net Sales in each Country in a given Calendar Year shall be apportioned
to the royalty tiers in Section 6.03(a) in the same proportion as
total Net Sales worldwide for the year fall into such royalty tiers, regardless
of in which Countries the earlier Net Sales in the Calendar Year were
made.  For example, on the facts recited
in the example set forth in Section 6.03(a), if ASTELLAS is entitled to a
generic competition royalty reduction for Net Sales in a particular Country,
Net Sales in that Country will be deemed to fall [*].


 


As an example of how to calculate the generic competition royalty
reduction, if in Q1 of 2011 in the US ASTELLAS had [*] in Net Sales, in Q4 of
2011 a generic THERAVANCE Compound product entered the US market, and in Q1 of
2012 ASTELLAS’ Net Sales in the US were [*], the reduction would be calculated
as follows:  [*], and [*] is [*] of
[*].  [*], therefore the generic
competition reduction of this subsection (d) is applicable.  [*]. 
For Net Sales in the US falling in the lowest royalty tier, a rate of
[*], applies; in the next royalty tier, a rate of [*], applies; and in the top
tier a rate of [*], applies.  Which tier
to assign the [*] in sales to shall be made in accordance with the paragraph
immediately preceding this one (on this example, the tier does not matter in
the sense that it does not affect the total royalty calculated on Net Sales in
the Country, however, in circumstances where the drop in Net Sales is greater
so that the [*] on the 6.03(a) rates applies, assignment to tiers could
make a difference in the royalty calculated).


 


(e)                                  Combination
Products.  If any Licensed Product
contains any active pharmaceutical ingredient (i.e., a chemical entity
performing an identifiable therapeutic or prophylactic function) in addition to
the THERAVANCE Compound active pharmaceutical ingredient (the THERAVANCE
Compound component the “Licensed Product Component,” and the combination, a
“Combination Product”), then the royalty applicable to sales of the Combination
Product during the applicable Term-Basic or Term-Additional shall be the
royalty calculated by multiplying the appropriate rate set forth in Section 6.03(a) by
a pro rata share of the Net Sales of the Combination Product determined on the
basis of the Licensed Product Component’s contribution to the fair market value
of the Combination Product.  Fair market
values of the components of a Combination Product shall be determined, to the
extent possible, by the list prices of the


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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active components when sold separately. 
For the avoidance of doubt, the Licensed Product in the form in which it
exists as of the Signing Date is not a Combination Product, and any other form
of it that incorporates a [*] shall not be considered a Combination Product
solely on the basis of incorporating a [*].


 


(f)                                    Know-How Royalty
Term Rates.  The rates set forth in Section 6.03(a) shall
be reduced to [*] of the level otherwise calculated in accordance with Section 6.03(a)-(d) with
respect to Net Sales during the Know-How Royalty Term in each Country.


 


(g)                                 Term-Additional [*].  If ASTELLAS has taken a non-exclusive license
under Section 2.08(d)(ii) to any THERAVANCE Patent, within thirty
(30) days after the end of each Payment Period during the Term-Additional,
ASTELLAS shall pay THERAVANCE [*].  Once
no further Valid Claim for a Patent not listed in Exhibit A (whether as of
the Signing Date or through an update pursuant to Section 2.08(d) or
due to an ASTELLAS election under Section 2.08(d)(iii)) is in force in the
particular Country (i.e., when the Term-Additional expires in the particular
Country), no [*] shall be due hereunder.


 


Section 6.04                                Net Sales Report.  Within thirty (30) Business Days after the
end of each Payment Period ASTELLAS shall submit to THERAVANCE a written report
setting forth Net Sales in the Territory on a Country-by-Country basis during
such Payment Period, total royalty payments due THERAVANCE, and relevant market
share data (each a “Net Sales Report”). 
With respect to Major Market Countries, the figure in this report shall
be actual Net Sales in such Countries. 
With respect to other Countries, the figure in this report may be an
estimate, and ASTELLAS shall provide a further Net Sales Report and true-up
payment (if any further payment is due) with respect to Net Sales in such
non-Major Market Countries within sixty (60) Business Days after the end of the
Payment Period (if on the other hand ASTELLAS has overpaid then it may credit
the amount of the overpayment against the next payment due hereunder or if no
further payments are due hereunder THERAVANCE shall promptly upon written invoice
from ASTELLAS refund the overpayment).


 


Section 6.05                                U.S. GAAP.  All defined and undefined financial terms and
standards used in this Agreement for sales or activities shall be governed by
and determined in accordance with United States generally accepted accounting
principles, consistently applied.


 


Section 6.06                                Currencies.  Monetary conversion from the currency of a
foreign country in which Licensed Product is sold into US Dollars shall be
calculated in accordance with either (a) the methodology referred to in
ASTELLAS’ then current corporate finance reporting policy (or its successor
policy that applies throughout the organization) or (b) as otherwise
mutually agreed by the Parties.


 


Section 6.07                                Manner Of Payments.  All sums due to THERAVANCE under this ARTICLE 6
shall be payable [*] in United States Dollars by bank wire transfer in
immediately available funds to such US bank account(s) as THERAVANCE shall


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


43

















 


designate.  Such payment shall
not withhold any tax, except as may be required by applicable law (in which
case the provisions of Section 6.09 shall apply).  [*] is required to [*] then the [*]shall be
[*].  ASTELLAS shall notify THERAVANCE as
to the date and amount of any such wire transfer to THERAVANCE at least five (5) Business
Days prior to such transfer.  ASTELLAS
shall always be entitled to make any and all payments due hereunder to a US
entity, regardless of any assignment of this Agreement by THERAVANCE to a
non-US entity or other circumstance.


 


Section 6.08                                Interest On Late
Payments.  If ASTELLAS shall fail to
make a timely payment pursuant to this ARTICLE 6, any such payment that is
not paid on or before the date such payment is due under this Agreement shall
bear interest, to the extent permitted by applicable law, at the average
one-month London Inter-Bank Offering Rate (LIBOR) plus [*] for the United
States Dollar as reported from time to time in The Wall Street Journal,
effective for the first date on which payment was delinquent and calculated on
the number of days such payment is overdue or, if such rate is not regularly
published, as published in such source as the JSC agrees.


 


Section 6.09                                Tax.  ASTELLAS shall be responsible for all taxes,
levies and other duties (“Taxes”) on Licensed Product manufacture or sale
arising out of this Agreement other than Taxes attributable to THERAVANCE
income.  If ASTELLAS is required by
applicable law (after giving effect to any applicable tax treaty) to deduct or
withhold any Taxes from or in respect of any amount payable to THERAVANCE under
this Agreement, [*] ASTELLAS shall make the necessary witholding or deduction
of applicable Taxes and pay the relevant taxation authority the minimum amount
necessary to comply with the applicable law, [*] the corresponding [*] so that
[*] by applicable law, to [*] as provided above, THERAVANCE shall [*] and, at
the time of such [*] hereunder whereby ASTELLAS [*] under this Agreement.  Both Parties [*] under applicable law [*]
hereunder. 


 


Section 6.10                                Financial Records;
Audits.  ASTELLAS shall keep, and
shall cause its Affiliates and sublicensees to keep, such accurate and complete
records of Net Sales as are necessary to determine the amounts due to
THERAVANCE under this Agreement and such records shall be retained by ASTELLAS
or any of its Affiliates or sublicensees (in such capacity, the “Recording
Party”) for at least the three Calendar Years after the period to which the Net
Sales relate. During normal business hours and with reasonable advance notice
to the Recording Party, such records shall be made available at a single
location for inspection, review and audit, at the request of THERAVANCE, by an
independent certified public accountant, or the local equivalent, appointed and
paid by THERAVANCE and reasonably acceptable to the Recording Party for the
sole purpose of verifying the accuracy of the Recording Party’s accounting
reports and payments made or to be made pursuant to this Agreement; provided,
however that such audits may not be performed by THERAVANCE more than once per
Calendar Year. Such accountants shall be instructed not to reveal to THERAVANCE
the details of its review, except for (i) such information as is required
to be disclosed under this Agreement and (ii) such information presented
in a summary fashion as is necessary to report the accountants’ conclusions to
THERAVANCE, and all such information shall be deemed Confidential Information
of the Recording Party; provided, however, that in any event such


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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information may be presented to THERAVANCE in a summary fashion as is
necessary to report the accountants’ conclusions. All external expenses
incurred in connection with performing any such audit shall be paid by
THERAVANCE unless the audit discloses at least a [*] shortfall, in which case
the Recording Party will bear the full expense of the audit for such Calendar
Year. THERAVANCE will be entitled to recover any shortfall in payments due to
it as determined by such audit, plus interest thereon calculated in accordance
with Section 6.08, or alternatively shall have the right to offset and
deduct any such shortfall in payments due to it against payments THERAVANCE is otherwise
required to make to the Reporting Party under this Agreement.  ASTELLAS may offset any overpayment against
any other payment(s) due THERAVANCE hereunder or require THERAVANCE to refund
the overpayment within 30 days.  The
documents from which were calculated the sums due under this ARTICLE 6
shall be retained by the relevant Party during the Term-Total plus [*].


 


The foregoing in this Section 6.10 shall apply mutatis mutandis regarding THERAVANCE’s
and its Affiliates’ recordkeeping and ASTELLAS’ right to review and audit
records of expenses for which THERAVANCE may seek reimbursement under this
Agreement, including without limitation Registration Expenses.


 


ARTICLE 7


 


PROMOTIONAL
MATERIALS AND SAMPLES


 


Section 7.01                                Review Of
Promotional Materials.  Subject to
applicable Law, the Parties, acting under the direction of the JSC, will
jointly, through consultation and with the assistance of each other, create a
mechanism (which must be consistent with the remainder of this Section 7.01)
to review and approve the core Promotional Materials.  The relevant legal, medical, marketing and
regulatory personnel of each Party shall have the opportunity to review and
comment on all such core Promotional Materials prior to use and such comments
shall be considered in the review and approval of such core Promotional
Materials.


 


The specific mechanism and procedure for review shall be as follows:


 


All proposed core Promotional Materials, academic, scientific and
medical publications and public presentations relating to a Licensed Product or
any research or Development activities under this Agreement will be submitted
to a Promotional Review Committee (hereinafter “PRC”), for review and approval
in connection with preservation of patentability and trade secrets and/or to
determine whether Confidential Information should be modified or deleted from
the proposed publication or public presentation. The PRC will operate in the
same manner and on the same timeframes as ASTELLAS’ PRCs for other products
within ASTELLAS’ portfolio.  [*] from
each of its [*] all materials [*] from one person [*].  The Parties will each comply with standard
academic practice regarding authorship of scientific publications and
recognition of contribution of other parties in any publications relating to
the Licensed Product or any Development activities under this Agreement.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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Section 7.02                                Markings Of
Packaging And Promotional Materials. 
Except where prohibited by applicable Law, all packaging, package
inserts and outserts, sample labels, labeling and Promotional Materials shall
each contain reference to THERAVANCE indicating the contribution of the license
from THERAVANCE for the Licensed Product (for example, by stating “Licensed
from THERAVANCE, Inc.”).  Subject to
the foregoing, and except where prohibited by applicable Law, the THERAVANCE
Housemark and the ASTELLAS Housemark shall both be given exposure and
prominence on the materials referred to in this Section 7.02.


 


Section 7.03                                Statements
Consistent With Labeling.  ASTELLAS
shall ensure that its sales representatives detail the Licensed Product in the
US in a manner consistent with the requirements of the Federal Food, Drug and
Cosmetic Act of the United States, as amended, including, but not limited to,
the regulations in 21 C.F.R. § 202 in the United States, and detail the
Licensed Product in OUS in a manner consistent with the requirements of other
similar Laws in each jurisdiction as applicable.


 


ARTICLE 8


 


REGULATORY
MATTERS


 


Section 8.01                                OUS Governmental
Authorities.  ASTELLAS shall be
primarily responsible for communicating with OUS Governmental Authorities but
will give THERAVANCE the opportunity to have a representative present at any
material meeting or material communication with an OUS Major Market
Governmental Authority (with no less than reasonable (under the circumstances)
advance notice of the meeting).  ASTELLAS
will keep THERAVANCE informed of any significant issue or issues with any OUS
Governmental Authority in a timely manner.


 


(a)                                  OUS Filings.  ASTELLAS shall be solely responsible for
filing Marketing Authorization applications for Licensed Product OUS and will
use Diligent Efforts in seeking appropriate approvals for Licensed Product in
those Countries, and shall be responsible for maintaining such Marketing
Authorization(s).  Such regulatory
documents for each filing shall be centralized and held at the offices of
ASTELLAS. THERAVANCE shall provide such reasonable assistance as may be
required by ASTELLAS where cooperation between the Parties is, or may be,
necessary to enable ASTELLAS to fulfill its responsibilities hereunder.  This assistance shall include (without
limitation):  providing ASTELLAS with
full access to all data from Licensed Product and THERAVANCE Compound Studies,
and full rights of reference and access to any and all Licensed Product and
THERAVANCE Compound regulatory filings held by THERAVANCE (and/or its
Affiliates).  ASTELLAS shall solicit
THERAVANCE’S advice and review of all material regulatory submissions, material
correspondence and material intended discussions with OUS Major Market Country
regulatory authorities, taking into account and incorporating THERAVANCE’S
reasonable comments and recommendations, and both Parties shall have the
opportunity to participate in correspondence and discussions with such
authorities regarding Licensed Products and THERAVANCE Compounds, including but
not limited to discussion regarding labeling. Copies of the submissions and
correspondence referred to in this Section 8.01(a) shall be


 


46

















 


made available to THERAVANCE upon its request.  ASTELLAS shall be fully responsible for
bearing all expenses associated with undertaking and completing said OUS
registration activities, including but not limited to the expenses of preparing
and prosecuting applications for such Marketing Authorizations and fees payable
to Governmental Authorities in obtaining and maintaining same.


 


(b)                                 Exchange Of Drug
Safety Information.  ASTELLAS shall
be responsible for receipt, recording, investigating, summarizing, notifying,
reporting and reviewing all OUS Adverse Drug Experiences in accordance with
applicable Laws and shall require that its Affiliates (i) adhere to all
requirements of applicable Laws which relate to the reporting and investigation
of OUS Adverse Drug Experiences, and (ii) keep THERAVANCE informed on a
timely basis respecting same.  ASTELLAS
shall also keep the JSC apprised on a regular basis of such drug safety
matters.


 


Section 8.02                                United States
Governmental Authorities.  Until the
Licensed Product NDA is transferred to ASTELLAS in accordance with Section 8.02(a),
THERAVANCE shall be primarily responsible for communicating with the FDA
regarding the Initial Indications but will give ASTELLAS the opportunity to
have a representative present at any meeting with or material conversation with
the FDA (with no less than reasonable (under the circumstances) advance notice
of the meeting and in any event no less than twenty-four (24) hours
notice).  THERAVANCE will keep ASTELLAS
informed of any significant issue or issues with the FDA in a timely
manner.  This introductory paragraph to Section 8.02
shall apply mutatis mutandis (i.e.
vice versa) to ASTELLAS once such
NDA is transferred to ASTELLAS.


 


(a)                                  Filings In The
United States.  In the United States,
THERAVANCE shall also be solely responsible for filing Marketing Authorization
applications for the Initial Indications for the Licensed Product and will use
Diligent Efforts in seeking appropriate Marketing Authorizations for the
Initial Indications for the Licensed Product in the United States, and, until
transfer of same to ASTELLAS, as described below, THERAVANCE shall be
responsible for maintaining such Marketing Authorizations. Promptly following
receipt of Marketing Authorization in the United States for an indication within
the second-to-be-approved of the Initial Indications, and in any event no later
than [*] after initial NDA Approval (even if earlier than such second
approval), THERAVANCE will transfer ownership of the Marketing Authorizations
(along with all INDs or other applications and registrations respecting
Licensed Products) in the United States to ASTELLAS, after which ASTELLAS will
solely own and maintain the United States Marketing Authorizations.  Such regulatory documents for each filing
shall be centralized and held at the offices of THERAVANCE prior to the
transfer of ownership to ASTELLAS and by ASTELLAS subsequent to such transfer
of ownership.  With respect to THERAVANCE’s
efforts to seek Marketing Authorizations for the Initial Indications for the
Licensed Product in the United States, THERAVANCE shall provide ASTELLAS (and
its representatives) with access to all clinical and manufacturing data,
including but not limited to source data, as well as the opportunity to audit
clinical and manufacturing sites. 
THERAVANCE may accomplish this by exercising THERAVANCE’S rights to
access such items in cooperation with ASTELLAS by permitting ASTELLAS to have
its representative(s) present when THERAVANCE


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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accesses such items.  THERAVANCE
shall take into account and incorporate ASTELLAS’ reasonable comments and
recommendations respecting same. 
THERAVANCE shall solicit ASTELLAS’ advice and review of all regulatory
submissions, correspondence and intended discussions with the FDA respecting
the Initial Indications, taking into account and incorporating ASTELLAS
reasonable comments and recommendations, and both Parties shall participate in
correspondence and discussions with the FDA regarding Licensed Products and
THERAVANCE Compounds, including but not limited to discussion regarding
labeling.  ASTELLAS shall also provide
such reasonable assistance as may be required by THERAVANCE where liaison
between the Parties is, or may be, necessary to enable THERAVANCE to fulfill
its responsibilities hereunder. In the United States, ASTELLAS shall be solely
responsible for filing all Marketing Authorization applications for Other
Indications for the Licensed Product and will use Diligent Efforts in seeking
appropriate Marketing Authorizations for the Other Indications for the Licensed
Product in the United States.  ASTELLAS
shall solicit THERAVANCE’s advice and review of all regulatory submissions,
correspondence and intended discussions with the FDA respecting Marketing
Authorization filings for Other Indications in the United States, taking into
account and incorporating THERAVANCE’s reasonable comments and recommendations,
and both Parties shall participate in correspondence and discussions with such
authorities regarding Licensed Products and THERAVANCE Compounds, including,
but not limited to, discussions regarding labeling for any such Other
Indications.  ASTELLAS shall be
responsible for maintaining the US Marketing Authorizations for such Other
Indications and shall solely own all such US Marketing Authorizations.


 


(b)                                 Exchange Of Drug
Safety Information.  During its
ownership, the Party owning the United States Marketing Authorization (herein,
the “NDA Holder”) shall be responsible for recording, investigating,
summarizing, notifying, reporting and reviewing all Adverse Drug Experiences
that occur in the United States in accordance with applicable Laws and shall
set up procedures and an organization to (i) adhere to all requirements of
applicable Laws which relate to the reporting and investigation of Adverse Drug
Experiences, and (ii) keep the other Party informed of same on a timely
basis.  Prior to THERAVANCE’s transfer of
the United States Marketing Authorizations to ASTELLAS (as described in Section 8.02(a)),
the Parties shall put in place a global data safety exchange agreement with
agreed-upon procedures and allocation of responsibilities between them for the
recording, investigating, summarizing, notifying, reporting and reviewing all
Adverse Drug Experiences, including but not limited to Adverse Drug Experience
reporting obligations under the [*].  The
NDA Holder shall also keep the JSC apprised on a regular basis of drug safety
matters.


 


(c)                                  CMC Obligations.  Recognizing that THERAVANCE shall be the NDA
Holder for a period after First Commercial Sale, until the time of NDA transfer
to ASTELLAS, THERAVANCE agrees to fulfill all responsibilites and obligations
of an NDA holder or to execute and file with FDA appropriate instuments
delegating some or all of such responsibitiles and obligations to
ASTELLAS.  THERAVANCE shall confer and
agree with ASTELLAS in advance with respect to the content of any such
instruments of delegation.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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Section 8.03                                Recalls Or Other
Corrective Action.  If, during its
ownership of the NDA, the NDA Holder (defined above in Section 8.02(b))
receives any information that would lead a Party to reasonably conclude that a
recall is required or warranted, the NDA Holder shall, within twenty-four (24)
hours, notify the other Party of that information in sufficient detail to allow
the Parties to comply with any and all applicable Laws. The NDA Holder shall
promptly notify the other Party of any material actions to be taken by the NDA
Holder with respect to any recall or market withdrawal or other corrective
action related to the Licensed Product and, where feasible given statutory or
regulatory timelines for taking such action, shall permit the other Party a
reasonable opportunity to consult with the NDA Holder with respect thereto
prior to such action.  Except to the
extent due to a THERAVANCE failure to supply Licensed Product conforming to applicable
specifications or Development action, all expenses with respect to a recall,
market withdrawal or other corrective action shall be borne by ASTELLAS.


 


Section 8.04                                Rights Of Reference
To DMFs.  THERAVANCE hereby grants
ASTELLAS the following rights of reference:


 


(a)                                  the right to reference
the Licensed Product DMF filed prior to the Effective Date by THERAVANCE
(including without limitation all updates thereto);


 


(b)                                 [*] the right to
reference the Licensed Product DMF filed prior to the Effective Date by [*]
(including without limitation all updates thereto);


 


(c)                                  the right to
reference the Licensed Product DMF filed by (or on behalf of) [*] (including
without limitation all updates thereto); and


 


(d)                                 the right to reference
any and all Licensed Product DMFs on file as of or after the Effective Date by
any of THERAVANCE, [*], or any other applicable DMF that THERAVANCE may have
the right to reference, together with all updates to each of the foregoing.


 


In addition THERAVANCE has granted to ASTELLAS the right of access to
THERAVANCE’s DMF that is set forth in Section 4.03, and shall extend to
ASTELLAS (through an outright grant or by exercising any right THERAVANCE may
have on ASTELLAS’ behalf) the benefit of any right of access that THERAVANCE
may have or obtain to any and all other DMFs referred to in this Section 8.04.  This includes without limitation any rights
to access the regulatory filings or other similar rights that may become
effective on a failure by the Third Party to fully supply.


 


Section 8.05                                Events Affecting
Integrity Or Reputation.  During the
Term-Basic, the Parties shall notify each other immediately of any
circumstances of which they are aware and which could impair the integrity and
reputation of the Licensed Product or if a Party or its Affiliate is threatened
by the unlawful activity of any Third Party in relation to the Licensed
Product, which circumstances shall include, by way of illustration, deliberate
tampering with or contamination of the Licensed Product by any Third Party as a
means of extorting payment from the Parties or another Third Party or
otherwise. In any such circumstances, the Parties shall use Diligent Efforts to
prevent any damage to the public,


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


49

















 


the Parties and/or to the Licensed Product.  Where practicable, the Parties shall promptly
call a JSC meeting to discuss and resolve such circumstances (but exigent
circumstances may require a response without a formal JSC meeting).


 


ARTICLE 9


 


ORDERS;
SUPPLY AND RETURNS


 


Section 9.01                                Orders And Terms Of
Sale To Third Parties.  [*]
(including without limitation with regard to [*], ASTELLAS shall have the sole
right to (i) receive, accept and fill orders for the Licensed Product, (ii) control
invoicing, order processing and collection of accounts receivable for the
Licensed Product sales, (iii) record the Licensed Product sales in its
books of account, and (iv) establish and modify the commercial terms and
conditions with respect to the sale and distribution of the Licensed Product,
including without limitation matters such as the local price at which the
Licensed Product will be sold and whether any discounts, rebates or other
deductions should be made, paid or allowed and in general to make decisions as
to these and other Contracting Issues.


 


Section 9.02                                Supply Of API
Compound And Formulated Licensed Product For Development.


 


(a)                                  Supply Of API Compound
For Development.  THERAVANCE shall be
responsible for supply of worldwide requirements of API Compound for Studies
supporting Initial Indications and the Registration Batches thereof as well as
all other supply for the Initial Indications in the US up through delivery of
the First Commercial Sale Stock.  Such
API Compound shall be manufactured and supplied in accordance with applicable
Laws and current Good Manufacturing Practices.


 


(b)                                 Supply Of Licensed
Product For Development and First Commercial Sale Stock.  THERAVANCE shall be responsible for supply
of  worldwide requirements of Licensed
Product for Studies supporting  Initial
Indications and the Registration Batches thereof as well as all other supply
for the Initial Indications in the US up through delivery of the First
Commercial Sale Stock.  Such Licensed
Product  shall be manufactured and
supplied in accordance with applicable Laws and current Good Manufacturing Practices
(and, with respect to Licensed Product in the First Commercial Sale Stock, in
accordance with agreed-upon specifications). 
Within a reasonable period of time following six (6) months after
First Commercial Sale in the U.S., the Parties will review the amount of
Licensed Product actually sold during such six (6) month period and, to
the extent less Licensed Product was sold in such period than was delivered by
THERAVANCE, ASTELLAS will pay THERAVANCE its Cost of Goods Sold associated with
manufacturing such excess amount of Licensed Product.


 


 


(c)                                  Supply To ASTELLAS.  At ASTELLAS’ request, THERAVANCE shall supply
ASTELLAS with its API Compound and Licensed Product requirements for
nonclinical studies, for Phase 3b and Phase 4 Studies and for Development of
the Licensed Product for Other Indications worldwide and for Initial Indications
for OUS, on


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


50

















 


the terms set forth in Exhibit B and in all cases only through
delivery of First Commercial Sale Stock.


 


Section 9.03                                Supply Of API
Compound For Commercialization. 
Subject to THERAVANCE providing to ASTELLAS a commercially validated
process for API Compound manufacture, ASTELLAS shall be responsible for supply
of API Compound for Commercial purposes following THERAVANCE’s delivery of
First Commercial Sale Stock, including API Compound for clinical trials of
Other Indications subject to the fulfillment of any orders that may be pending
at that time under Section 9.02(c). A non-binding forecast for API
Compound requirements for Commercialization of the Licensed Product shall be
prepared and periodically updated by ASTELLAS.


 


Section 9.04                                Supply Of Licensed
Product For Commercialization. 
Subject to THERAVANCE providing to ASTELLAS a commercially validated
process for finished Licensed Product manufacture, ASTELLAS shall obtain supply
of Licensed Product for Commercial purposes following Marketing Authorization,
including Licensed Product for clinical studies of Other Indications once the
Registration Batches of Licensed Product are complete and subject to the
fulfillment of any orders that may be pending at that time under Section 9.02(c).  Such packaged and labeled Licensed Product
shall be manufactured and supplied in accordance with all applicable Laws and
current Good Manufacturing Practices. ASTELLAS shall be solely responsible for
secondary manufacture, packaging and labeling of the Licensed Product.


 


Section 9.05                                Inventories.  THERAVANCE, ASTELLAS and their respective
Product Suppliers shall maintain an inventory of API Compound and Licensed
Product in accordance with their normal practices and so as to ensure
fulfillment of their respective supply obligations herein.


 


 


Section 9.06                                [*].  [*] ASTELLAS shall have sole responsibility
for THERAVANCE’s financial obligations arising after the Effective Date to pay
any milestones and/or royalties due under the [*] as a result of ASTELLAS’
exercise of its  sublicense thereunder.  This payment obligation applies only to the
[*] and not to any other THERAVANCE (or THERAVANCE Affiliate) in-licenses.  To avoid any doubt, this obligation
specifically excludes all payment obligations under the [*] arising on or
before the Effective Date or after the Effective Date where due to THERAVANCE
action or inaction independently of ASTELLAS, as well as all damages that may
now or at any time be due [*] as a result of or in connection with THERAVANCE’S
breach of the [*] on or before the Effective Date or after the Effective Date
where due to THERAVANCE action or inaction independently of ASTELLAS,
indemnification obligations thereunder for matters arising on or before the
Effective Date or after the Effective Date where due to THERAVANCE action or
inaction independently of ASTELLAS, and/or other payment obligations thereunder
for matters that occurred on or before the Effective Date or after the
Effective Date where due to THERAVANCE action or inaction independently of
ASTELLAS.  THERAVANCE covenants that it (a) shall
not amend or terminate the [*] or take any action with regard to the [*] after
the Effective Date without the prior consent of ASTELLAS, which consent shall
not be unreasonably withheld; and (b) shall, to the extent [*] will not
accept reports and payments directly from ASTELLAS


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


51

















 


and provided that ASTELLAS timely provides to THERAVANCE all
information required to be reported to [*] in relation to activities under this
Agreement and payments in respect of such activities (and provided that while
THERAVANCE is responsible for supply THERAVANCE shall be responsible for
information on such activities and to notify ASTELLAS sixty (60) days in
advance the amount of any payment that is coming due), timely make the required
payments and reports to [*] (which acts on THERAVANCE’s part are expressly
authorized by ASTELLAS).


 


Section 9.07                                Transition
Assistance.  The Parties recognize
and agree that subject to the terms and conditions herein, ASTELLAS will be
responsible for Commercial Manufacture of Licensed Product, itself or through
one or more Third Parties as of THERAVANCE’s delivery of the First Commercial
Sale Stock.  In furtherance of same, the
Parties contemplate that THERAVANCE and its Third Party suppliers will work
actively and collaboratively with ASTELLAS as of the Effective Date to assist
ASTELLAS in assuming such manufacturing responsibilities on a timely basis.
THERAVANCE shall provide ASTELLAS with all reasonable cooperation and
assistance to achieve technology transfer of the current processes for
THERAVANCE Compounds and Licensed Product (including without limitation the
following processes: manufacturing, analytical methods, release procedures and
all other relevant processes). 
THERAVANCE shall use Diligent Efforts as and to the extent reasonably
requested by ASTELLAS to assist ASTELLAS at its option to (a) take
assignment of THERAVANCE’S existing THERAVANCE Compound and Licensed Product
supply agreements, (b) negotiate new agreements with THERAVANCE’S existing
suppliers, and/or (c) enter into three-way agreements among THERAVANCE,
ASTELLAS, and such suppliers for the transitional period, if required.  THERAVANCE’S assistance under the foregoing
paragraph shall be at no additional charge to ASTELLAS.


 


ARTICLE 10


 


CONFIDENTIAL
INFORMATION


 


Section 10.01                          Confidential Information.  Each of ASTELLAS and THERAVANCE shall keep
all Confidential Information received from the other Party with the same degree
of care it maintains the confidentiality of its own Confidential Information.
Neither Party shall use such Confidential Information for any purpose other
than in performance of this Agreement or the exercise of its rights hereunder
or disclose the same to any other Person other than to such of its or its
Affiliates’ (and in the case of ASTELLAS, its and its Affiliates’ sublicensees’
and distributors’) employees, consultants, agents and sublicensees who have a
need to know such Confidential Information to implement the terms of this
Agreement or enforce or exercise the rights granted under this Agreement.  A Receiving Party (as defined in the
definition of Confidential Information) shall contractually obligate any such
recipient to obligations of confidentiality and non-use at least as restrictive
as those contained herein prior to any such disclosure.  Upon termination or expiration of this
Agreement in its entirety, the Receiving Party shall promptly upon the request
of the Disclosing Party return or destroy all documents, tapes or other media
containing Confidential Information of the Disclosing Party that remain in the
Receiving Party’s or its agents’ (including without limitation Affiliates’)
possession,


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


52

















 


except for any such Confidential Information to be used in connection
with any surviving rights or surviving obligations of such Receiving Party
hereunder and except that the Receiving Party may keep one copy of the
Confidential Information in the legal department files of the Receiving Party,
solely for archival purposes. Such archival copy and any such Confidential
Information retained for use in connection with any surviving rights or
surviving obligations of the Receiving Party shall be deemed to be the property
of the Disclosing Party, and shall continue to be subject to the provisions of
this ARTICLE 10. Notwithstanding anything to the contrary in this
Agreement, the Receiving Party shall have the right to disclose this Agreement
or Confidential Information provided hereunder if, in the reasonable opinion of
the Receiving Party’s legal counsel, such disclosure is necessary to comply
with the terms of this Agreement, or the requirements of any Law. Where possible,
the Receiving Party shall notify the Disclosing Party of the Receiving Party’s
intent to make such disclosure pursuant to the provision of the preceding
sentence sufficiently prior to making such disclosure so as to allow the
Disclosing Party adequate time to take whatever action the Disclosing Party may
deem to be appropriate to protect the confidentiality of the information.  The Receiving Party will cooperate reasonably
with the Disclosing Party’s efforts to protect the confidentiality of the information.  Each Party will be liable for breach of this ARTICLE 10
by any of its Affiliates, agents, or sublicensees.


 


Section 10.02                          Permitted Disclosure And
Use.  Notwithstanding Section 10.01,
a Party may disclose Confidential Information belonging to the other Party only
to the extent such disclosure is reasonably necessary to: (a) obtain
Marketing Authorization of a Licensed Product; (b) enforce the provisions
of this Agreement; or (c) comply with Laws. If a Party deems it necessary
to disclose Confidential Information of the other Party pursuant to this Section 10.02,
such Party shall give reasonable advance notice of such disclosure to the other
Party to permit such other Party sufficient opportunity to object to such
disclosure or to take measures to ensure confidential treatment of such
information. The Receiving Party will cooperate reasonably with the Disclosing
Party’s efforts to protect the confidentiality of the information.


 


Either Party may disclose Confidential Information of the other Party
as is reasonably necessary to effectuate the purposes of this Agreement
(including but not limited to entering into undertakings with Third Parties for
research, Development, manufacturing and Commercialization purposes), provided,
however, that whenever either Party (the “Further Disclosing Party”) intends to
disclose Confidential Information of the other Party to such Third Party
(“Permitted Recipient”), the Further Disclosing Party shall first obtain from
the Permitted Recipient a written nondisclosure and non-use agreement.  The Further Disclosing Party will secure the
Permitted Recipient’s agreement to nondisclosure and non-use terms that are
equivalent in scope to those imposed upon the Further Disclosing Party itself
under this Agreement and for as long a duration as is reasonably possible, up
to the duration of the Further Disclosing Party’s own nondisclosure and non-use
obligations hereunder, but in any case not less than five (5) years after
the termination of such agreement with the Permitted Recipient;  provided,
however, that if the Permitted Recipient is a formulation or
manufacturing entity, the Further Disclosing Party will obtain the prior
written consent of the Disclosing Party (not to be withheld unreasonably)
before agreeing to nondisclosure and nonuse terms that are


 


53

















 


not equivalent in scope to those imposed upon the Further Disclosing
Party.  The Further Disclosing Party
shall require the Permitted Recipient to likewise agree to the following
conditions: (1) all confidential data and materials disclosed to the
Permitted Recipient or generated by it in the course of the work to be
performed is proprietary to the Further Disclosing Party and Permitted
Recipient has no right to publish, sell, assign, or otherwise transfer same,
except that, in the case of Permitted Recipients who are performing clinical
development work on the THERAVANCE Compound and/or Licensed Product, Permitted
Recipient may publish the results of its work in a manner consistent with
Permitted Recipient’s institutional policies and in the interest of academic
and/or scientific advancement, and in accordance with the publication
provisions of Section 10.03 hereof; and (2) no confidential data or
materials may be retained by Permitted Recipient after conclusion of its work
for  the Further Disclosing Party except (i) to
the extent Permitted Recipient deems reasonably necessary to ensure its
compliance with its nondisclosure obligations to the Further Disclosing Party;
and (ii) as may be required by Law, regulation, or court order.


 


Section 10.03                          Publications.  All publications relating to the Licensed
Product must be approved via the procedure provided in Section 7.01.


 


Section 10.04                          Public Announcements.  Except as may be expressly permitted under Section 10.03
or required by applicable Laws and subject to the final sentence of this Section 10.04,
neither Party (nor its Affiliates) will make any public announcement of any
information regarding this Agreement (including without limitation its
execution and terms), the Licensed Product or Development or Commercialization
activities under this Agreement without the prior written approval of the other
Party, which approval shall not be withheld unreasonably.  The Parties have (prior to the Signing Date)
agreed to and exchanged the final text of a joint press release announcing the
execution of this Agreement, and the text of a press release announcing the
achievement of the Closing Condition described in Section 16.17. Once any
statement is approved for disclosure by the Parties or information is otherwise
made public in accordance with the preceding sentence, either Party may make a
subsequent public disclosure of the contents of such statement without further
approval of the other Party.  In its
press releases, investor presentations and other official public statements by
its officers or investor relations personnel in all cases that mention or are
regarding the Licensed Product or the collaboration under this Agreement,
ASTELLAS shall refer to the fact that it has licensed Licensed Product from
THERAVANCE.


 


Section 10.05                          Confidentiality Of This
Agreement.  The terms of this
Agreement shall be Confidential Information of each Party and, as such, shall
be subject to the provisions of this ARTICLE 10.  Either Party may disclose the terms of this
Agreement if, in the opinion of its counsel, such disclosure is required by
Law.  In such event, the disclosing Party
will seek appropriate confidentiality of those portions of the Agreement for
which confidential treatment is typically permitted by the relevant
Governmental Authority.  In any case, if
a Party is legally required to publicly file a copy of this Agreement, the
disclosing Party will provide the other Party with an advance draft of the redacted
form of the Agreement as the disclosing Party proposes to file it, with not
less than five (5) Business Days for review, and shall incorporate the
non-disclosing Party’s comments


 


54

















 


thereon, to the extent additional or other redactions requested by the
non-disclosing Party may reasonably be afforded confidential treatment under
applicable law and then-prevailing SEC practice.


 


Section 10.06                          Termination Of Prior
Confidentiality Agreements.  This
Agreement supersedes all existing Confidential Disclosure Agreements (“CDA”)
between the Parties relating to the Licensed Product and to TD-1792, including
the CDA dated December 1, 2004 and amended on October 17, 2005.  The information exchanged under such agreement
shall be deemed to have been exchanged under this Agreement.


 


Section 10.07                          Survival.  The obligations and prohibitions contained in
this ARTICLE 10 shall survive the expiration or termination of this
Agreement in its entirety for a period of ten (10) years.


 


ARTICLE 11


 


REPRESENTATIONS
AND WARRANTIES; COVENANTS


 


Section 11.01                          Mutual Representations And
Warranties.  THERAVANCE and ASTELLAS
each represents and warrants to the other as of the Signing Date that:


 


(a)                                  such Party (i) is
a company duly organized, validly existing, and in good standing under the Laws
of its jurisdiction of incorporation; (ii) is duly qualified as a
corporation and in good standing under the Laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, where the failure to be so qualified would have a material
adverse effect on its financial condition or its ability to perform its
obligations hereunder; (ii) has the requisite corporate power and
authority and the legal right to conduct its business as now conducted and
hereafter contemplated to be conducted; (iv) has or will obtain all
necessary licenses, permits, consents, or approvals from or by, and has made or
will make all necessary notices to, all Governmental Authorities having
jurisdiction over such Party, to the extent required for the ownership and
operation of its business, where the failure to obtain such licenses, permits,
consents or approvals, or to make such notices, would have a material adverse effect
on its financial condition or its ability to perform its obligations hereunder;
and (v) is in compliance with its charter documents;


 


(b)                                 the execution,
delivery and performance of this Agreement by such Party and all instruments
and documents to be delivered by such Party hereunder (i) are within the
corporate power of such Party; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) do not conflict with any
provision of the charter documents of such Party; (iv) will not, to the
best of such Party’s knowledge, violate any law or regulation or any order or
decree of any court of governmental instrumentality; (v) will not violate
or conflict with any terms of any indenture, mortgage, deed of trust, lease,
agreement, or other instrument to which such Party is a party, or by which such
Party or any of its property is bound, which violation would have a material
adverse effect on its financial condition or on its ability to perform its
obligations hereunder or the other Party’s enjoyment of its rights hereunder;


 


55

















 


(c)                                  this Agreement has
been duly executed and delivered by such Party and constitutes a legal, valid
and binding obligation of such Party, enforceable against such Party in
accordance with its terms, except as such enforceability may be limited by
applicable insolvency and other Laws affecting creditors’ rights generally, or
by the availability of equitable remedies; and


 


(d)                                 all of its employees,
officers, and consultants have executed agreements or have existing obligations
under law requiring assignment to such Party of all Inventions made by such
individuals during the course of and as the result of their association with
such Party, and obligating such individuals to maintain as confidential such
Party’s Confidential Information.


 


Section 11.02                          Representations And
Warranties Of THERAVANCE.  THERAVANCE
represents and warrants to ASTELLAS as follows:


 


(a)                                  Exhibit A is an
accurate and complete list as of the Signing Date of all THERAVANCE Patents;
and


 


(b)                                 as of the Signing Date
it is the sole and exclusive owner of the THERAVANCE Patents listed in Exhibit A,
all of which as well as the THERAVANCE Know-How are free and clear of any
liens, charges and encumbrances; and


 


(c)                                  as of the Signing
Date THERAVANCE and its Affiliates have not previously assigned, transferred,
licensed, conveyed or otherwise encumbered their right, title and interest in
the THERAVANCE IP and [*] in whole or in part; and


 


(d)                                 as of the Signing
Date, no Person other than THERAVANCE or any of its Affiliates, has any
ownership with respect to THERAVANCE IP nor has any Person made or threatened
any claim to such ownership nor to [*]; and


 


(e)                                  as of the Signing
Date and to THERAVANCE’S knowledge, the manufacture, use and sale of the
THERAVANCE Compound and the current (as of the Signing Date) form of the
Licensed Product do not infringe upon any intellectual property rights of any
Third Party; and


 


(f)                                    as of the Signing
Date there are no claims, judgments or settlements against or owed by
THERAVANCE relating to the THERAVANCE IP or pending or threatened claims or
litigation relating to the THERAVANCE IP nor relating to [*]; and


 


(g)                                 except as insofar [*]
and, as of the Signing Date there are no other Patents or Know-How other than
THERAVANCE Patents or THERAVANCE Know-How owned or licensed by THERAVANCE
required to develop and/or commercialize the THERAVANCE Compound; and


 


(h)                                 as of the Signing Date
there are no interferences — nor re-examination nor re-issue proceeding(s) —
pending, declared, or threatened involving THERAVANCE with the THERAVANCE
Patents, nor any re-examination or reissue proceeding concerning such
THERAVANCE Patents; and


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


56

















 


(i)                                     as of the Signing
Date THERAVANCE has no knowledge from which it can reasonably be inferred that
the granted THERAVANCE Patents are invalid or unenforceable or that the
applications for THERAVANCE Patents will not proceed to grant or yield valid
and enforceable issued Patents; and


 


(j)                                     the [*] is in full
force and effect as of the Signing Date; the copy of the [*] that THERAVANCE
has disclosed to ASTELLAS on or before the Signing Date is a true and accurate
copy of such agreement; as of the Signing Date, THERAVANCE has made all
payments and fulfilled all obligations due and/or owed under the [*] for which
the payment or other obligation arose on or before the Signing Date; and as of
the Signing Date, THERAVANCE is not in breach of the [*] and has received no
notice of breach thereunder; and


 


(k)                                  THERAVANCE has
disclosed in writing to ASTELLAS all currently effective agreements relating to
THERAVANCE Compound(s) and/or Licensed Product(s) to which THERAVANCE and/or
any of its Affiliates is a party as of the Signing Date (excluding clinical
site agreements, clinical investigator agreements and related documentation,
and excluding confidentiality or non-disclosure agreements with Third Parties);
and


 


(l)                                     as of the Signing
Date, THERAVANCE is not a Party to any in-effect agreement or obliged to any
surviving obligation under any expired agreement, in each case that would limit
THERAVANCE’s ability to grant ASTELLAS a license of the scope set forth in Section 2.01
(ignoring solely for purposes of evaluating this representation and warranty
any limitations that the definition of “Control” would place on the scope of Patents
and Know-How included in the license) under the THERAVANCE IP; and


 


(m)                               the safety- and
efficacy-related data and information (including without limitation nonclinical
and clinical data) regarding TELAVANCIN as of the Signing Date is true and
accurate in all material respects and THERAVANCE has not omitted to disclose to
ASTELLAS any data or information (including without limitation nonclinical and
clinical data) that is or reasonably could be expected to be material to
ASTELLAS’ (or any reasonable prospective licensee’s or collaborator’s) decision
to enter into the transaction contemplated in this Agreement as of the Signing
Date; and


 


(n)                                 as of the Signing
Date, the THERAVANCE IP and [*] are not subject to any license, option,
covenant not to sue or other similar interests that limit or restrict the
licenses granted to ASTELLAS hereunder; and


 


(o)                                 other than the
THERAVANCE Compound and the TD-1792 Compound, THERAVANCE and its Affiliates do
not as of the Signing Date have in nonclinical development, IND-enabling work
or clinical development any other compound in the Field, themselves or through
contract(s) with any Third Party(ies).


 


Section 11.03                          Acknowledgement Of
ASTELLAS.  ASTELLAS is aware that the
THERAVANCE Patents or the THERAVANCE Know-How may not sufficiently enable


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


57

















 


ASTELLAS to successfully implement modifications to the process
relating to the manufacture of the THERAVANCE Compound and/or API Compound or
preparation of the Licensed Product  that
THERAVANCE will provide to ASTELLAS hereunder, or to conduct any other
operational or manufacturing-related activities with respect to such
ASTELLAS-implemented process modifications. 
It is explicitly understood by ASTELLAS that ASTELLAS will have to
independently conduct any analysis, evaluation and investigation regarding what
intellectual property, techniques, routes, equipment or other help or
assistance that will be required for implementation of any such new
processes.  This acknowledgement, to
avoid any doubt, in no way alters and shall not be deemed to undermine,
interpret or lessen THERAVANCE’S representations and warranties set forth in Section 11.01
and Section 11.02 particularly (but without limitation) as they relate to
the manufacturing processes and THERAVANCE Know-How that THERAVANCE shall
deliver to ASTELLAS hereunder.


 


Section 11.04                          Limitations.  EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT EACH OF THERAVANCE AND ASTELLAS EXPRESSLY DISCLAIMS ANY AND ALL
IMPLIED OR EXPRESS WARRANTIES AND MAKE NO EXPRESS OR IMPLIED WARRANTY,
STATUTORY OR OTHERWISE, OF ANY KIND, INCLUDING ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE REGARDING THE THERAVANCE
COMPOUNDS, THERAVANCE CONFIDENTIAL INFORMATION, ASTELLAS CONFIDENTIAL
INFORMATION, THERAVANCE IP, ASTELLAS IP, [*] OR LICENSED PRODUCTS.


 


Section 11.05                          Covenants.  Each Party hereby covenants and agrees during
the Term-Basic that it shall carry out its obligations or activities hereunder
in accordance with (i) the terms of this Agreement and (ii) all
applicable Laws.


 


ARTICLE 12


 


INDEMNIFICATION


 


Section 12.01                          Indemnification By
ASTELLAS.  Subject to Section 12.04,
ASTELLAS shall defend, indemnify and hold harmless (collectively, “Indemnify”)
THERAVANCE and its Affiliates, sublicensees and distributors and all of the
foregoing entities’ officers, directors, shareholders, employees, agents,
successors and assigns from and against all Claims of Third Parties, and all
associated Losses, to the extent arising out of (a) ASTELLAS’ or its
Affiliates’ negligence or willful misconduct in performing any of their
obligations under this Agreement, (b) a breach by ASTELLAS (or its
Affiliates) of any of their representations, warranties, covenants or
agreements under this Agreement, or (c) the manufacture, use, handling,
storage, marketing, sale, distribution or other disposition of the API
Compound, the THERAVANCE Compound or Licensed Product by ASTELLAS, its
Affiliates, agents, sublicensees or distributors.  In addition, this Indemnification obligation
applies to ASTELLAS Employee Claims as provided for in Section 5.06.  The obligation to Indemnify under this Section 12.01
shall not apply to the extent of any Claims and associated Losses resulting
from a cause listed in Section 12.02(a)-(c) or in the second sentence
of Section 12.02.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


58

















 


Section 12.02                          Indemnification By
THERAVANCE.  Subject to Section 12.04,
THERAVANCE shall Indemnify ASTELLAS and its Affiliates, and their sublicensees
and distributors hereunder and all of the foregoing entities’ officers,
directors, shareholders, employees, agents, successors and assigns from and
against all Claims of Third Parties, and all associated Losses, to the extent
arising out of (a) THERAVANCE’S or its Affiliates’ negligence or willful
misconduct in performing any of their obligations under this Agreement, or (b) a
breach by THERAVANCE (or its Affiliates) of any of their representations,
warranties, covenants or agreements under this Agreement, or (c) the
manufacture, use, handling, storage, marketing or other disposition of the API
Compound, the THERAVANCE Compound or Licensed Product by THERAVANCE, its
Affiliates, agents, licensees (including without limitation  sublicensees), and distributors or the
failure of any Licensed Product supplied by THERAVANCE hereunder to conform to
the specifications therefor or any representations and warranties made with
respect thereto by THERAVANCE in accordance with Section 9.02 and Exhibit B.  In addition, this Indemnification obligation
applies to THERAVANCE Employee Claims as provided for in Section 5.06.  This obligation to Indemnify shall not apply
to the extent of any Claims and associated Losses resulting from a cause listed
in Section 12.01(a)-(c) or in the second sentence of  Section 12.01.


 


Section 12.03                          Procedure For
Indemnification.


 


(a)                                  Notice.  Each Party will notify promptly the other in
writing if it becomes aware of a Claim (actual or potential) by any Third Party
(a “Third Party Claim”) for which indemnification may be sought by that Party
and will give such information with respect thereto as the other Party shall
reasonably request. If any proceeding (including any governmental
investigation) is instituted involving any Party for which such Party may seek
an indemnity under Section 12.01 or Section 12.02, as the case may be
(the “Indemnified Party”), the Indemnified Party shall not make any admission
or statement concerning such Third Party Claim, but shall promptly notify the
other Party (the “Indemnifying Party”) orally and in writing and the
Indemnifying Party and Indemnified Party shall meet to discuss how to respond
to any Third Party Claims that are the subject matter of such proceeding. The
Indemnifying Party shall not be obligated to indemnify the Indemnified Party to
the extent any admission or statement made by the Indemnified Party or any
failure by such Party to notify the Indemnifying Party of the claim materially prejudices
the defense of such claim.


 


(b)                                 Defense Of Claim.  If the Indemnifying Party elects to defend
or, if local procedural rules or laws do not permit the same, elects to
control the defense of a Third Party Claim, it shall be entitled to do so provided
it gives notice to the Indemnified Party of its intention to do so within
forty-five (45) days after the receipt of the written notice from the
Indemnified Party of the potentially indemnifiable Third Party Claim (the
“Litigation Condition”). The Indemnifying Party expressly agrees that the
Indemnifying Party shall be responsible for satisfying and discharging any
award made to or settlement reached with the Third Party pursuant to the terms
of this Agreement without prejudice to any provision in this Agreement or
rights or remedies available at law which will allow the Indemnifying Party
subsequently to recover any amount from the Indemnified Party.


 


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Subject to compliance with the Litigation Condition, the Indemnifying
Party shall retain counsel reasonably acceptable to the Indemnified Party (such
acceptance not to be unreasonably withheld, refused, conditioned or delayed) to
represent the Indemnified Party and shall pay the fees and expenses of such counsel
related to such proceeding. In any such proceeding, the Indemnified Party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of the Indemnified Party. The Indemnified Party
shall not settle any claim for which it is seeking indemnification without the
prior written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld, refused, conditioned or delayed. The Indemnified Party
shall, if requested by the Indemnifying Party, cooperate in all reasonable
respects in the defense of such claim that is being managed and/or controlled
by the Indemnifying Party. The Indemnifying Party shall not, without the
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld, refused, conditioned or delayed), effect any settlement
of any pending or threatened proceeding in which the Indemnified Party is, or
based on the same set of facts could have been, a party and indemnity could
have been sought hereunder by the Indemnified Party, unless such settlement
includes an unconditional release of the Indemnified Party from all liability
to Third Parties on claims that are the subject matter of such proceeding and
provided such settlement does not limit or restrict the rights granted to the
Indemnified Party hereunder in any material respect or otherwise materially
adversely affect the ability of the Indemnified Party to enjoy the benefits of
this Agreement. If the Litigation Condition is not met, then neither Party
shall have the right to control the defense of such Third Party Claim and the
Parties shall cooperate in and be consulted on the material aspects of such
defense at each Party’s own expense; provided
that if the Indemnifying Party does not satisfy the Litigation Condition, the
Indemnifying Party may at any subsequent time during the pendency of the
relevant Third Party Claim irrevocably elect, if permitted by local procedural rules or
laws, to defend and/or to control the defense of the relevant Third Party Claim
so long as the Indemnifying Party also agrees to pay the reasonable fees and
expenses incurred by the Indemnified Party in relation to the defense of such
Third Party Claim from the inception of the Third Party Claim until the date
the Indemnifying Party assumes the defense or control thereof.


 


Notwithstanding the foregoing, if the Parties do not agree as to the
application of Section 12.01 and Section 12.02 to any particular
Claim (and associated Losses), then each may conduct its own defense of such
Claim and reserve the right to claim indemnification from the other Party upon
resolution of the underlying Claim.


 


Section 12.04                          Assumption Of Defense.  Notwithstanding anything to the contrary
contained herein, an Indemnified Party shall be entitled to assume the defense
of any Third Party Claim with respect to the Indemnified Party, upon written
notice to the Indemnifying Party pursuant to this Section 12.04, in which
case the Indemnifying Party shall be relieved of liability under Section 12.01
or Section 12.02, as applicable, solely for such Third Party Claim and
related Losses.


 


Section 12.05                          Insurance.  During [*], each Party shall obtain and/or
maintain at its sole expense, product liability insurance (including any
self-insured arrangements) in amounts which are reasonable and customary in the
U.S. pharmaceutical industry for companies of


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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comparable size and activities, in any event no less than [*] for
ASTELLAS and [*] for THERAVANCE.  The
Parties agree to revisit or consult via the JSC in the future respecting
[*].  Such product liability insurance or
self-insured arrangements shall insure against all reasonable and customary
liability typically covered by such insurance policies including without
limitation personal injury, physical injury, or property damage arising out of the
manufacture, sale, distribution, or marketing of the Licensed Product. Each
Party shall provide written proof of the existence of such insurance to the
other Party upon request.


 


ARTICLE 13


 


PATENTS


 


Section 13.01                          Prosecution And
Maintenance Of Patents.


 


(a)                                  Prosecution And
Maintenance Of THERAVANCE Patents. 


 


In this Section 13.01(a), references to “THERAVANCE Patents” are
intended only to apply to those THERAVANCE Patents that are not Patents on
Joint Inventions.  Patents on Joint
Inventions are handled separately in Section 13.01(b).


 


(i)                                     Responsibility.  THERAVANCE shall have the exclusive right and
the obligation to (subject to THERAVANCE’S election not to file, prosecute, or
maintain pursuant to Section 13.01(e)), or, if applicable, to cause its licensors
to, prepare, file, prosecute in a diligent manner (including without limitation
by conducting interferences, oppositions and reexaminations or other similar
proceedings), maintain (by timely paying all maintenance fees, renewal fees,
and other such fees and expenses required under applicable Laws) and extend all
THERAVANCE Patents and related applications, in accordance with input from
ASTELLAS as provided below.


 


(ii)                                  Abandonment.  THERAVANCE shall consult with ASTELLAS and
comply with Section 13.01(e) prior to abandoning any THERAVANCE
Patents.


 


(iii)                               Input.  THERAVANCE shall regularly advise ASTELLAS of
the status of all pending applications, including with respect to any hearings
or other proceedings before any Governmental Authority, and, at ASTELLAS’
request, shall provide ASTELLAS with copies of all documentation concerning
such applications, including all correspondence to and from any Governmental
Authority, including without limitation drafts of all filings and
correspondence with any Governmental Authority no later than [*] prior to the
date such filing will be made or correspondence sent unless (without fault of
THERAVANCE) deadlines will not permit such advance notice in which case a copy
of any such filing or correspondence will be promptly provided to ASTELLAS.
Other than as set forth in this Agreement regarding prosecution of Patents
claiming Joint Inventions, THERAVANCE shall solicit ASTELLAS’ advice regarding
prosecution of THERAVANCE Patents and THERAVANCE shall take into account ASTELLAS’
reasonable comments related thereto.  In
the event of a dispute between the Parties with respect to patent prosecution
and/or maintenance (including without


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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limitation substantive patent issues and decisions as to in which
Countries OUS any particular filing should be made or extended), THERAVANCE
shall make the final decision in a manner consistent with the Diligent Efforts
standard.  Within the priority period,
THERAVANCE shall agree with ASTELLAS regarding the Countries outside the United
States in which corresponding applications should be filed (“OUS Filings”). It
is presumed that a corresponding Patent Cooperation Treaty (“PCT”) application
will be filed unless otherwise agreed by the Parties.  THERAVANCE shall effect filing of all such
applications within the priority period. 
Extension of the PCT Filing into individual Countries shall be made on a
case-by-case basis consistent with the Diligent Efforts standard.


 


(iv)                              Expenses.  ASTELLAS shall be responsible for [*] percent
([*]%) [*] THERAVANCE’S external, properly documented, out-of-pocket expenses
incurred after the Effective Date to procure THERAVANCE Patents in the
Territory with respect to those patent families that include any members listed
in Exhibit A (whether as of the Signing Date or thereafter through an
update pursuant to Section 2.08(a) or due to an ASTELLAS election
under Section 2.08(d)(iii)) including without limitation PCT and
individual country filing fees, translations, maintenance, annuities, and
protest proceedings.  For all such
corresponding patent applications, THERAVANCE will invoice ASTELLAS on a
quarterly basis beginning the first Calendar Quarter following the Effective
Date, setting forth all such expenses incurred. 
Reimbursement will be made to THERAVANCE in United States Dollars within
thirty (30) days of receipt of the invoice by ASTELLAS.  ASTELLAS will within thirty (30) days
following the Effective Date identify the ASTELLAS representative that should
receive such invoices from THERAVANCE. 
THERAVANCE shall be responsible for all of its internal expenses
associated with prosecution and maintenance.  
ASTELLAS’ obligations hereunder are in addition to any obligations of
ASTELLAS under Section 13.01(b)(ii).


 


(v)                                 [*] Patents.  This Section 13.01(a) applies
equally to the Patents within the [*] to the extent THERAVANCE has rights to
prosecute under the [*] and owes prosecution costs thereunder.


 


(b)                                 Prosecution And
Maintenance Of Patents Covering Joint Inventions.


 


(i)                                     For Patents
covering Joint Inventions, the Parties shall agree, without prejudice to ownership,
which Party shall have the right to prepare and file a priority patent
application, and prosecute such application(s) and maintain any patents derived
therefrom, with [*] the reasonable out-of-pocket expenses for the preparation,
filing, prosecution and maintenance of such priority patent application.  The Parties will reasonably cooperate to
obtain any export licenses that might be required for such activities.  Should the agreed-upon Party elect not to
prepare and/or file any such priority patent application, it shall (x) provide
the other Party with written notice as soon as reasonably possible after making
such election but in any event no later than sixty (60) days before the other
Party would be faced with a possible loss of rights, (y) give the other Party
the right, at the other Party’s discretion and sole expense, to prepare and
file the priority application(s), and (z) offer reasonable assistance in
connection with such preparation and filing at no expense to the other Party
except for reimbursement of


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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reasonable out-of-pocket expenses incurred by the agreed upon Party in
rendering such assistance. The other Party, at its discretion and expense,
shall prosecute such application(s) and maintain sole ownership (and the
opting-out Party shall assign ownership to such other Party) of any patents
derived therefrom.


 


(ii)                                  Within nine (9) months
after the filing date of a priority application directed to a Joint Invention,
the Party filing the priority application shall request that the other Party
identify those non-priority, non-PCT (“foreign”) Countries in which the other
Party desires that the Party filing the priority application file corresponding
patent applications. Within thirty (30) days after receipt by the other Party
of such request from the Party filing the priority application, the other Party
shall provide to the Party filing the priority application a written list of
such foreign Countries in which the other Party wishes to effect corresponding
foreign patent applications filings. The Parties will then attempt to agree on
the particular Countries in which such applications will be filed, provided
that in the event agreement is not reached, the application will be filed in
the disputed as well as the non-disputed Countries (all such filings referred
to hereinafter as “Designated Foreign Filings”). Thereafter, within twelve (12)
months after the filing date of the priority application, the Party filing the
priority application shall effect all such Designated Foreign Filings.  It is presumed (unless otherwise agreed in writing
by the Parties) that a corresponding PCT application will be filed designating
all PCT member Countries. As to each Designated Foreign Filing and PCT
application, each Party shall bear [*] of the expenses for the filing and
prosecutions of such Designated Foreign Filing and PCT application (including
entering national phase in all agreed countries) unless ASTELLAS opts out as
provided herein. Should the Party filing the priority application not agree to
file or cause to be filed a Designated Foreign Filing, the other Party will
have the right to effect such Designated Foreign Filing in its name.


 


(iii)                               Should the filing Party
pursuant to Section 13.01(b)(i) or Section 13.01(b)(ii) no
longer wish to prosecute and/or maintain any patent application or patent
resulting from such application, the filing Party shall (x) provide the
non-filing Party with written notice of its wish no later than sixty (60) days
before the patent or patent applications would otherwise become abandoned, (y)
give the non-filing Party the right, at the non-filing Party’s election and
sole expense, to prosecute and/or maintain such patent or patent application,
and (z) offer reasonable assistance to the non-filing Party in connection with
such prosecution and/or maintenance at no expense to the non-filing Party
except for reimbursement of the filing Party’s reasonable out-of-pocket
expenses incurred by the filing Party in rendering such assistance.


 


(iv)                              Should the non-filing
Party pursuant to Section 13.01(b)(iii) not wish to incur its share
of preparation, filing, prosecution and/or maintenance expenses for a patent
application filed pursuant to Section 13.01(a)(i) or Section 13.01(b)(ii) or
patents derived therefrom, it shall (x) provide the filing Party with 30 days
advance written notice of its wish, (y) continue to offer reasonable assistance
to the filing Party in connection with such prosecution or maintenance and (z)
assign its entire right, title and interest therein to the filing Party in each
case at no expense to the filing Party except for reimbursement of the
non-filing Party’s reasonable external, out-of-pocket expenses incurred by the
non-filing Party in rendering such assistance.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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(v)                                 The Parties agree to
cooperate in the preparation and prosecution of all patent applications filed
under Section 13.01(b)(i) and Section 13.01(b)(ii), including
obtaining and executing necessary powers of attorney and assignments by the
named inventors, providing relevant technical reports to the filing Party
concerning the invention disclosed in such patent application, obtaining
execution of such other documents which shall be needed in the filing and
prosecution of such patent applications, and, as requested, updating each other
regarding the status of such patent applications.


 


(c)                                  Patent-Related
Dispute Resolution.  The Parties wish
to foster a truly collaborative and cooperative relationship between their
respective patent counsel.  The Parties
recognize that from time to time, despite such a positive relationship, their
respective patent counsel may disagree as to certain matters relating to
prosecution of Patents covering Joint Inventions, as well as the Issue of
Necessity referred to in Section 6.03(c)(ii) (each of the foregoing
issues regarding prosecution of Patents covering Joint Inventions, and each
Issue of Necessity, a “Patent Resolution Issue”).  In such event, instead of resorting to the
dispute resolution process as described in Section 3.06(b), the Parties
agree to seek guidance and resolution from an independent, mutually acceptable
patent attorney as further described below in this Section.  If the Parties reach an impasse (remaining
even after resort to the initial dispute resolution provided for in Section 3.06(a))
as to any Patent Resolution Issue, then they shall submit the Patent Resolution
Issue to an experienced patent attorney mutually acceptable to the Parties —
and who does not otherwise perform work for either Party or any of its
Affiliates — for resolution.  They shall
engage such attorney within thirty (30) days after either Party notifies the
other of a Patent Resolution Issue impasse remaining unresolved after resort to
Section 3.06(a).  If they cannot
agree as to who such attorney shall be within such time period, then the total
of two nominees of the Parties (one from each Party) shall select a third
patent attorney who shall be the attorney to resolve the dispute.  (Alternatively the Parties may choose to
designate the patent attorney who will resolve Patent Resolution Issues in
advance of any such issue arising.)  The
Parties shall share equally the expenses incurred for the services of such
patent attorney.  Within fifteen (15)
days after engaging the patent attorney, the Parties shall each submit up to
twenty (20) pages of documentation to the patent attorney.  Within five (5) Business Days thereafter,
the Parties shall convene a discussion with the patent attorney during which
each Party may orally present its position on the Patent Resolution Issue for
no more than one (1) hour.  The
Parties shall endeavor to cause the patent attorney to render his or her
guidance as to the Patent Resolution Issue within five (5) Business Days
after such discussion.  Neither Party
shall engage in any ex parte communications
with the patent attorney.  The Parties
shall accept and follow the guidance and resolution of the patent attorney
absent any fraud in the proceedings.


 


(d)                                 Prosecution And
Maintenance Of ASTELLAS Patents. Except as provided in Section 13.01(f) and
ARTICLE 15, ASTELLAS shall have the sole right to file, prosecute,
maintain and enforce the ASTELLAS Patents.


 


64

















 


(e)                                  ASTELLAS Step-In
Rights.


 


This Section 13.01(e), where it refers to “THERAVANCE Patents,” is
intended only to apply to those THERAVANCE Patents that are not Patents on
Joint Inventions.  Patents on Joint
Inventions are handled separately in Section 13.01(b).


 


If THERAVANCE elects not to file, prosecute or maintain the THERAVANCE
Patents or claims encompassed by such THERAVANCE Patents that cover any
THERAVANCE Compound or Licensed Product (whether directly through its
composition (including without limitation formulations) or indirectly through
its manufacture or use (including without limitation methods of
administration), THERAVANCE shall give ASTELLAS notice thereof within a reasonable
period prior to allowing such THERAVANCE Patents, or such claims encompassed by
such THERAVANCE Patents, to lapse or become abandoned or unenforceable (in any
event no less than 30 days written notice), and ASTELLAS shall thereafter have
the right, at its sole expense, to prepare, file, prosecute and maintain such
THERAVANCE Patents in such Country.


 


(f)                                    Execution Of
Documents By Agents. Each of the Parties shall execute or have executed by
its appropriate agents such documents as may be necessary to obtain, perfect or
maintain any Patents filed or to be filed pursuant to this Agreement, and shall
cooperate with the other Party so far as reasonably necessary with respect to
furnishing all information and data in its possession reasonably necessary to obtain
or maintain such Patent Rights.


 


(g)                                 Patent Term
Extensions Including Supplementary Protection Certificates (“SPCs”) and Any
Similar Rights. The Parties shall cooperate with each other in gaining
patent term extension or related extension of rights, including without
limitation SPCs and similar rights, 
where applicable to Licensed Product. 
The JSC shall discuss which patents the Parties shall endeavor to have
extended.  All filings for such extension
will be made by the Party to whom the patent is assigned after consultation
with the other Party.  If the JSC does
not agree, then:  first, a Party is
entitled to refuse to allow its own Patent to be extended; and second, normal
dispute resolution applies (Section 3.06 dispute resolution) to select
which Patent shall be extended in accordance with the principle of the next
sentence.  It is understood and agreed
that the purpose of any patent term extensions under this Section is to
extend the term of meaningful patent exclusivity for the Licensed Product, not
provide either (i) for a protracted royalty term for THERAVANCE hereunder
in situations where a THERAVANCE Patent extension will not extend the overall
life of meaningful patent exclusivity for the Licensed Product , or (ii) for
a decreased royalty term for ASTELLAS where the THERAVANCE Patent would provide
greater exclusivity than the ASTELLAS Patent.


 


Section 13.02                          Patent Infringement.


 


(a)                                  Infringement
Claims By Third Parties. With respect to any and all Claims instituted by
Third Parties against THERAVANCE or ASTELLAS or any of their respective
Affiliates for patent infringement involving the manufacture, use, license,
marketing, sale, offer for sale or importation of a Licensed Product in any
Country or Countries of the Territory during any Term-Basic in the applicable
Country(ies) (each, a “Patent Infringement Claim”) as applicable, THERAVANCE
and ASTELLAS will assist


 


65

















 


one another and cooperate in the defense and settlement of such Patent
Infringement Claims at the other Party’s request.  This shall not alter ARTICLE 12 as
regards Indemnification between the Parties, including without limitation with
respect to Claims arising out of a breach of a representation and warranty
hereunder, including without limitation THERAVANCE’s intellectual property
representations and warranties hereunder.


 


(b)                                 Infringement Of
THERAVANCE Patents. In the event that THERAVANCE or ASTELLAS becomes aware
of actual or threatened infringement of a THERAVANCE Patent during the
Term-Basic, that Party will promptly notify the other Party in writing (a
“Patent Infringement Notice”).   [*] will
have the first right but not the obligation to bring an infringement action
against any Third Party.  If [*] elects
to pursue such infringement action, [*] shall be solely responsible for the
expenses associated with such action with any recovery going first to pay for
all expenses incurred by [*] in connection with bringing and maintaining such
action (including without limitation via reimbursement of [*] expenses) and any
remaining amount being divided as follows: (i) [*] with [*] retaining the
[*] and (ii) any other portion of the award shall be retained by [*].  During the Term-Basic in the applicable
Country(ies) of infringement, in the event that [*] does not undertake such an
infringement action within ninety (90) days after the Patent Infringement
Notice between the Parties regarding the applicable infringement, [*] shall be
permitted to do so in [*] or the relevant [*] Affiliate’s name.  If a Party is authorized to bring an
infringement action under this section but such Party is not recognized by
the applicable court or other relevant body as having the requisite standing to
pursue such action, then the other Party shall join as a party-plaintiff.  If [*] elects to pursue such infringement
action, [*] may be represented in such action by attorneys of its own choice
and its own expense with [*] taking the lead in and controlling such action (and
this sentence applies mutatis mutandis or
vice versa with respect to suits
pursued instead by [*]).  Recoveries on
[*] suits under this Section 13.02(b) shall go first to reimburse [*]
litigation expenses, and the remaining recovery shall be treated as [*].


 


This Section 13.02(b) applies to those THERAVANCE Patents
that are not Patents on Joint Inventions, however, unlike with the other
THERAVANCE Patents, with respect to Patents on Joint Inventions, the Parties
must agree which Party will have the first right to enforce them, with the
other Party having a back-up right equivalent to the ASTELLAS’ back-up right
described above in this Section 13.02(b).


 


(c)                                  Infringement Of
ASTELLAS Patents. During the Term-Total, ASTELLAS shall have the sole and
exclusive right to pursue infringement of any ASTELLAS Patents in its sole
discretion, retaining all recoveries.


 


(d)                                 [*]. Section 13.02(b) applies
mutatis mutandis to the Patents
within the [*], subject only to the [*] therein.


 


Section 13.03                          Notice Of Certification.
ASTELLAS and THERAVANCE each shall promptly give notice to the other of any
certification filed under the “U.S. Drug Price Competition and Patent Term
Restoration Act of 1984” as amended or as it may be amended (or its foreign
equivalent) claiming that a THERAVANCE Patent is invalid or


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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that infringement will not arise from the manufacture, use or sale of
the Licensed Product by a Third Party (“Hatch-Waxman Certification”) with
cooperation between the Parties to start immediately upon either Party having
knowledge that a Hatch-Waxman Certification has been filed.  This Section is explicitly intended to
apply both to successor legislation in the US and counterpart or similar
legislation OUS.


 


(a)                                  Notice. If a
Party decides not to bring infringement proceedings against the entity making
such a certification, such Party shall give notice to the other Party of its
decision not to bring suit within twenty-one (21) days after receipt of notice
of such certification.


 


(b)                                 Option. Such
other Party then may, but is not required to, bring suit against the entity
that filed the certification.


 


(c)                                  Name Of Party.
Any suit by THERAVANCE or ASTELLAS shall either be in the name of THERAVANCE or
in the name of ASTELLAS, (or any Affiliate) or jointly in the name of
THERAVANCE and ASTELLAS (or any Affiliate), as may be required by law.


 


Outside the US or if the time period in the US is amended from that
operative as of the Effective Date, the time period for notice under Section 13.03(a) shall
be one-half the time before the deadline for response without loss of rights
under applicable Law.  This Section 13.03
only designates the notice time period that applies to infringement actions in
relation to Hatch-Waxman or similar actions, but otherwise the suits will be
handled is as set forth in Section 13.03.


 


Section 13.04                          Assistance. For
purposes of Section 13.02 and Section 13.03, each Party shall
execute such legal papers and provide such reasonable assistance and take such
further actions as is necessary for the prosecution of such suit as may be
reasonably requested by the other Party. 
This shall be at the expense of the Party bringing suit (on an
at-expense, pass-through basis).


 


Section 13.05                          Settlement. No
settlement or consent judgment or other voluntary final disposition of a suit
under this Article may be entered into without the joint written consent
of ASTELLAS and THERAVANCE (which consent will not be withheld unreasonably)
except as follows:  either Party may
settle an infringement claim against it by a Third Party for money damages that
such Party will pay and for which it will not seek reimbursement, offset or
expense-sharing from the other Party;  provided that ASTELLAS’ right to
sublicense shall not be limited by this Section 13.05.


 


In addition, THERAVANCE shall not settle any suit under Section 13.02
in a manner inconsistent with ASTELLAS’ exclusive license hereunder (this
means, without limitation, that THERAVANCE shall not grant in the context of a
settlement any license (whether or not exclusive), covenant not to sue,
non-suit or other with respect to THERAVANCE Compound(s) and/or Licensed
Products).


 


Section 13.06                          Ownership Of Inventions.
Each Party shall promptly disclose to the other Party all Inventions made by it
during the Term-Basic; provided that ASTELLAS will be


 


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allowed a reasonable time to file patent applications covering ASTELLAS
Inventions prior to disclosing the ASTELLAS Invention to THERAVANCE.  THERAVANCE will be allowed a reasonable time
to file patent applications covering THERAVANCE Inventions prior to disclosing
the THERAVANCE Invention to ASTELLAS; [*]. Such designated [*] have been [*]
regarding such [*] regarding the [*] prior to [*].  Any such draft patent application will be
considered THERAVANCE Confidential Information [*].  THERAVANCE shall own all THERAVANCE Inventions
and ASTELLAS shall own all ASTELLAS Inventions. 
All Joint Inventions shall be owned jointly by THERAVANCE and ASTELLAS,
and each Party hereby consents (without granting any license) to the exercise,
assignment or license or other disposition by the other Party of its joint
interest in Joint Inventions without accounting or the need to seek the consent
of the other Party to such assignment or license or other disposition; provided
that any such assignment, license or other disposition shall at all times be
subject to the grant of rights and accompanying conditions under Section 2.01,
Section 2.04 and ARTICLE 15. 
The determination of inventorship for Inventions shall be made in
accordance with the applicable Laws relating to inventorship set forth in the
patent Laws of the United States (Title 35, United States Code).


 


Section 13.07                          Licensing Discussion
Procedures. Until expiration of the last Term-Basic in all Countries in the
Territory, if either Party identifies any Third-Party Patents and/or Know-How
that it believes may be desirable to license to cover activities hereunder, it
shall request (in writing) a meeting between one JSC member from each Party and
internal or external counsel for each Party. 
Such meeting shall occur within thirty (30) days after requested.  If requested by counsel for either Party, the
Parties shall enter into an appropriate and customary joint defense/common
interest agreement to cover any and all such discussions and document the
parties’ common interest with respect to Licensed Product-related Third-Party
intellectual property.  In their meeting
and any follow-up meetings, the Parties shall seek to reach consensus as to the
relevance of such Third-Party intellectual property to Licensed Product, and
whether it is desirable to take a license under such Third-Party intellectual
property.  Any minutes of such meeting(s)
shall be prepared and kept only by counsel and shall be at an appropriate level
of detail and include only statements that are appropriate in view of the possibility
of litigation.


 


ARTICLE 14


 


TERM
AND TERMINATION


 


Section 14.01                          Term And Expiration Of
Term. Unless otherwise mutually agreed to by the Parties, this Agreement
shall commence on the Effective Date and shall end upon expiration of the last
Term-Total, unless terminated early as contemplated hereunder (and to avoid any
doubt, with royalty obligations separately earlier expiring on a
Country-by-Country basis on the expiration of the Term-Total in such
Country).  Unless terminated early under
this ARTICLE 14, the licenses granted by THERAVANCE to ASTELLAS shall
survive and shall be considered fully-paid and royalty-free, and non-exclusive
on a Country-by-Country basis at the times and as more particularly set forth
in Section 2.06.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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Section 14.02                          Termination For Material
Breach. Either Party may, without prejudice to any other remedies available
to it at law or in equity, terminate this Agreement subject to ARTICLE 15
in the event that the other Party (as used in this subsection, the “Breaching
Party”) shall have materially breached this Agreement or materially defaulted
in its performance of its obligations hereunder, and not corrected the
situation following notice and an opportunity to cure through performing an
appropriate remedy as provided below. 
The Breaching Party shall have [*] after written notice thereof (with
the written notice being required to specify that it is a notice of material
breach under this Section 14.02  and
describing the breach with reasonable specificity) was provided to the
Breaching Party by the non-breaching Party to remedy such default (or, if such
default cannot be cured within such [*] period, the Breaching Party must
commence actions to cure such default during such [*] period and thereafter
diligently continue such actions).  Any
such termination shall become effective at the end of such [*] period unless
the Breaching Party has cured any such breach or default prior to the
expiration of such [*] period (or, if such default is capable of being cured
but cannot be cured within such [*] period, the Breaching Party has commenced
and diligently continued actions to cure such default provided always that, in
such instance, such cure must have occurred within [*] after written notice
thereof was provided to the Breaching Party by the non-breaching Party to remedy
such default).  If the Breaching Party
disputes the existence of a material breach in good faith, or disputes the
appropriate remedy for such breach or whether any attempt to cure the breach
has been adequate or successful, this Agreement shall not be terminated unless
and until a final determination of uncured breach is made in accordance with Section 3.06.


 


Notwithstanding anything express or implied in the foregoing paragraph,
in recognition of the substantial investment ASTELLAS is making in the Licensed
Product (both through payments to THERAVANCE hereunder and otherwise), both
Parties expressly intend that termination of this Agreement shall be a remedy
of last and extraordinary resort, and preference shall in all cases (absent
proven fraud or extreme, overt and exceptional bad faith) be given to
fashioning a remedy or cure that leaves the licenses to ASTELLAS intact but
adequately addresses the breach.  Such
possible remedies and cures include, without limitation: an adjustment to the
royalties due hereunder, other money damages, the requirement that ASTELLAS
carry out additional Development and/or Commercialization (to an extent
consistent with Diligent Efforts) or conversion of the licenses to ASTELLAS to
no longer be exclusive with respect to THERAVANCE and its Affiliates.  In addition, to the extent the breach relates
primarily to a particular Country (for example in the case of a failure to
apply Diligent Efforts to Licensed Product Development or Commercialization
with respect to a particular Country), to the extent no remedy short of
termination can adequately address the breach, preference shall in all cases
(absent proven fraud or extreme, overt and exceptional bad faith) be given to
termination solely with respect to such Country.  Any arbitrator of a dispute arising in
connection with this Section 14.02 is hereby explicitly instructed to
fashion an appropriate remedy short of termination in all cases where any
remedy other than termination is reasonably adequate to cure the breach, and
where termination is the only remedy that can adequately address the breach to
limit termination to the Country with respect to which the breach occurred.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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Section 14.03                          Terminations For Cause.
ASTELLAS shall have the right to terminate this Agreement for cause, defined as
any (or any combination) of the following occurring:


 


(i)                                     If the results of
TELAVANCIN Studies do not support the submission of an NDA for the Licensed
Product, or do not support NDA Filing for the Licensed Product within [*] after
the Effective Date [*].


 


(ii)                                  If the FDA refuses to
file or declines to approve an NDA (once filed) for the Licensed Product within
[*].


 


(iii)                               If the labeling approved
by the FDA for the Licensed Product indicates that [*] population [*] defined
as those patients [*].


 


(iv)                              If the labeling approved
by the FDA for the Licensed Product indicates that [*] population [*] defined
as those patients [*].    [*].


 


(v)                                 If TELAVANCIN is not
approved by the FDA [*].


 


(vi)                              If serious safety
concerns arise with respect to the Licensed Product that result in its withdrawal
from the market in [*].


 


Section 14.04                          Contemporaneous
Termination Of Opt-In Right. The Opt-In Right shall terminate automatically
at the time of any early termination of this Agreement under this ARTICLE 14
with respect to any Major Market Country except a termination by ASTELLAS under
Section 14.02 for THERAVANCE’s material breach (i.e. the Opt-In Right
survives any such termination as per Section 15.02).


 


Section 14.05                          Survival Of Obligations.
Termination or expiration of this Agreement shall not relieve either Party from
any obligation accrued hereunder prior to the effective date of termination or
expiration.


 


Section 14.06                          Survival of Provisions
Upon Termination and/or Expiration. In addition to the survival of accrued
obligations under Section 14.05 (and the survival of any provisions to the
extent in accordance with the express terms thereof), the following Sections
and Articles shall survive any and all terminations and expirations of this
Agreement (on a Country-by-Country basis in the case of partial
terminations):  Articles 1 (to the extent
required to interpret surviving rights); 6 (solely (i) as regards
mechanics of payment to ensure payment of payment obligations that have accrued
prior to expiration or termination, and payment obligations to the extent
surviving under Section 15.02), and (ii) with respect to audits under
Section 6.10 for a period of [*] years after expiration or termination);
10 (with obligations thereunder expiring on the timetable set forth in such
Article); 11; 12; 14; 15; and 16; and the following Sections:  Section 2.01 to the extent provided in Section 2.06
(along with corresponding Section 2.04, Section 2.05, and Section 2.07
rights); Section 2.08 (but only the following pieces:  subsection (b), subsection (d)(iv)(B),
and subsection (d)(vi)); Section 3.06; Section 5.06; Section 8.01
and Section 8.02(a) (solely as regards ownership of the NDA and OUS
Regulatory Authorizations but not after terminations of this Agreement for
ASTELLAS’ material


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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breach); Section 8.04 (but not after terminations for ASTELLAS’
material breach); Section 9.06 (solely to the extent ASTELLAS wishes to
continue to exercise a sublicense thereunder, and not after terminations for
ASTELLAS’ material breach); Section 13.01(b); Section 13.02, Section 13.03,
Section 13.04 and Section 13.05 (for all of Sections 13.02, 13.03,
13.04 and 13.05, these survive with respect to infringement occurring during
the Term-Total in each Country, but do not survive termination for THERAVANCE’s
material breach, patent enforcement rights after which breach are governed by Section 15.02);
and Section 13.07 as regards any common interest or joint defense
agreements entered into prior to expiration or termination.


 


ARTICLE 15


 


CONSEQUENCES
OF TERMINATION


 


Section 15.01                          Termination And Handback
Of License. In addition to any remedy either Party may have in law, tort or
in contract, upon termination of the Agreement in a certain Country or in the
Territory as a whole, the following shall apply.


 


(a)                                  Termination Of
Licenses. Upon termination of this Agreement by THERAVANCE in a certain
Country or the Territory as a whole pursuant to Section 14.02  or by ASTELLAS in a certain Country or in the
Territory as a whole pursuant to Section 14.03  (in either case the “Date of
Termination”),  the licenses and rights
granted under Section 2.01, Section 2.04, Section 2.05, and Section 2.08
regarding the Country(ies) contemplated by the termination concerned shall
cease, and ASTELLAS shall, regarding the Territory or the Country concerned,
whichever is applicable:


 


(i)                                     in exchange for a
royalty on Net Sales of Licensed Products equal to [*] for the longer of the
life of the ASTELLAS Patents and [*] years after the Date of Termination
(subject to a [*] reduction on patent expiration in the applicable Country)
plus THERAVANCE paying [*] any royalties, milestones and other payments (x) due
Third-Party licensors of the ASTELLAS IP in respect of the rights ASTELLAS
grants under this Section 15.01 and (y) due Third-Party licensors of
reverted THERAVANCE IP and/or [*] previously sublicensed to ASTELLAS (including
without limitation to [*]), and committing to reasonable diligence obligations,
at the option of THERAVANCE, grant to THERAVANCE a non-exclusive,
Territory-wide or for the Country concerned, whichever is applicable,
sub-licensable, license under the ASTELLAS IP to develop, have developed, make,
have made, use, have used, import, have imported, market, have marketed, sell
and have sold the Licensed Product for any indications in the form(s) in which
it was in clinical development or on the market as of termination. ASTELLAS
shall do all such acts and things as may reasonably be necessary to fulfill
this obligation in a timely manner.


 


(ii)                                  return to THERAVANCE
all THERAVANCE Know-How and —subject to the financial terms required in subsection (i) —
deliver to THERAVANCE a copy of all ASTELLAS Know-How in written form;


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


71

















 


(iii)                               promptly after
THERAVANCE’S request, deliver to THERAVANCE at the location specified by
THERAVANCE any and all quantities of API Compound and Licensed Product in its
possession, power, custody or control subject always to ASTELLAS’ right to
dispose of Licensed Product which is the subject of pre-termination date
orders.  THERAVANCE shall pay for the
quantities thus transferred to it in an amount equal to ASTELLAS’ Cost of Goods
Sold for such quantities.  For the
avoidance of doubt, should this Section 15.01(a)(iii) become
applicable because of termination regarding a certain Country or Countries
pursuant to Section 14.02,   then
the quantities of Licensed Product referred to herein shall mean only those
quantities clearly designated, by marking, labeling or similar, for the Country
or Countries concerned and which could only be used for the Country or
Countries concerned;


 


(iv)                              for all ASTELLAS Patents
that ASTELLAS intends to prosecute and/or maintain and subject to Section 15.01(a)(i),
ASTELLAS shall effective on the Date of Termination grant THERAVANCE an
exclusive license to develop, have developed, use, have used, make, have made,
import, have imported, market, have marketed, sell, and have sold the
THERAVANCE Compound and Licensed Product for all indications and uses with the
right to sublicense.  For any ASTELLAS
Patents that ASTELLAS elects not to prosecute and/or maintain, ASTELLAS shall: (1) promptly
notify THERAVANCE with sufficient time for THERAVANCE to assume such
prosecution and/or maintenance; (2) fully cooperate with THERAVANCE and
ensure that its patent attorneys immediately transfer to THERAVANCE a copy of
the patent files relating to such ASTELLAS Patents; (3) effective on the
Date of Termination grant THERAVANCE an exclusive license under any such
ASTELLAS Patents to develop, have developed, make, have made, use, have used,
sell, offer to sell, market, have marketed, import or have imported the API and
Licensed Products for any and all indications in the Territory; and (4) take
any action and produce any documents so as to enable THERAVANCE to apply for
patent term extensions, including, but not limited to, supplementary protection
certificates (or any other procedure by which the effective term of the
ASTELLAS Patent is extended), relating to the ASTELLAS Patents in THERAVANCE’S
name;


 


(v)                                 subject to Section 15.01(a)(i),
commensurate with legislative and regulatory requirements, transfer to
THERAVANCE or its nominee all Marketing Authorizations and regulatory filings
for the Licensed Product including, without limitation, all information and
documentation used in the filings relating to the Licensed Product, subject to
THERAVANCE’S payment of the royalties provided for in subsection (i).  In the event that in any Country such a
transfer is not possible, ASTELLAS shall use reasonable efforts to ensure that
THERAVANCE has the benefit of the relevant Marketing Authorizations, and other
related regulatory filings and approvals and, to this end, consents to any
regulatory authority cross-referencing to the data and information on file with
any Governmental Authority as may be necessary to facilitate the granting of
second Marketing Authorizations to and permit filings of a Marketing Authorizations
application by THERAVANCE, and ASTELLAS agrees to complete whatever other
procedures that are reasonably necessary in relation to the same to enable
THERAVANCE (either itself or in conjunction with a Third Party) freely to


 


72

















 


develop and sell the Licensed Product in the Country concerned in
substitution for ASTELLAS;


 


(vi)                              subject to Section 15.01(a)(i),
if applicable, assign the ASTELLAS Product Trademark or grant a royalty-free
exclusive license to THERAVANCE to use the ASTELLAS Product Trademark as well
as trade dress and copyrights (to avoid any doubt, excluding any ASTELLAS
Housemarks) for the marketing, sales and distribution of the Licensed Product;


 


(vii)                           not after the date of
termination itself take any further action to Develop, manufacture, have
manufactured, use, market, distribute or sell the Licensed Product during the
life of the ASTELLAS Patents or the THERAVANCE Patents, whichever is the longer
but in any event only for so long as the licenses granted in 15.01(a)(i) and
15.01(a)(ii) are in effect, except that ASTELLAS has the right to dispose
of that part of its inventory of Licensed Product on hand as of the effective
Date of Termination which is the subject of orders for Licensed Product accepted
prior to the date of notice of termination for a period of six (6) months
after the effective Date of Termination, and, within thirty (30) days after
disposition of such inventory pursuant to the fulfillment of such orders,
ASTELLAS will forward to THERAVANCE a final report and pay all royalties due on
the Net Sales of Licensed Product during such period; and


 


(viii)                        for a period of [*] following
the effective Date of Termination manufacture or supply such API Compound and
Licensed Product if any, that is being manufactured by or for ASTELLAS prior to
such termination (“Supplied Licensed Product”) to THERAVANCE or to THERAVANCE’S
designee.  Such Supplied Licensed Product
shall be provided to THERAVANCE at ASTELLAS’ Cost Of Goods Sold plus any
amounts that may be due under the [*] in respect of such supply (to the extent
not already paid by THERAVANCE under subsection (i)).  During said [*] period, THERAVANCE shall
manufacture according to the requirements of the current updated forecast for
Licensed Product as of the date of termination. 
ASTELLAS shall also provide THERAVANCE, should THERAVANCE so require,
with reasonable assistance in relation to THERAVANCE’S appointment of a Third
Party manufacturer of Licensed Product and THERAVANCE shall have the right to
disclose ASTELLAS Confidential Information and ASTELLAS Know-How under
customary and reasonable legally binding obligations of confidentiality and
non-use, to any such potential Third Party manufacturer.


 


In the cases of part-world terminations, each of (i)-(viii) shall
only apply with respect to the terminated Country(ies) (and intellectual
property rights granted therein), and in particular (ii) shall only apply
with respect to Know-How that is specific to such Country(ies), and (iii) shall
only apply with respect to quantities that are labelled and can only legally be
used for sale in such Countries.


 


(b)                                 Disclosure Of
Confidential Information. Upon termination by THERAVANCE under Section 14.02  as stated in this ARTICLE 15, THERAVANCE
shall have the right to disclose Confidential Information, under customary and
reasonable legally binding obligations of confidentiality and non-use, to Third
Parties for the


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


73

















 


purpose only of, and only to the extent necessary for, enabling such
Third Party to evaluate the financial and scientific status of the Licensed
Product for the purpose of making a financial offer to THERAVANCE on the
licensing or acquisition of the rights returned to THERAVANCE and the rights
licensed to THERAVANCE under this ARTICLE 15, and, if such licensing or
acquisition occurs, as necessary to exploit or enforce such rights.


 


Section 15.02                          Termination Followed By
Continued License. Upon the termination of this Agreement by ASTELLAS
pursuant to Section 14.02, in addition to those Articles and Sections
explicitly surviving as per Section 14.06,   THERAVANCE’S licenses granted to ASTELLAS
under Section 2.01 (and ASTELLAS’ associated rights under Section 2.04
and Section 2.05 and Section 2.08) shall continue, provided that
ASTELLAS continues to make payments pursuant to ARTICLE 6 as if the
Agreement were still in effect and the following Sections shall additionally
survive:  Section 2.02, Section 2.03
(as applied to THERAVANCE only), Section 2.08, Section 4.03 (to the
extent not already completely performed), 9.02-9.04 (but only as regards
THERAVANCE’s obligations and solely to the extent ASTELLAS does not choose to
assume such obligations and THERAVANCE has not already completely performed
them), and Section 13.04.  To avoid
any doubt, ASTELLAS shall have no further diligence obligations to THERAVANCE
after such termination under Section 14.02 and no further obligation to
include THERAVANCE in the Development or Commercialization (including without
limitation any decisions with respect to such activities, which decisions shall
belong solely to ASTELLAS post-termination). 
ASTELLAS shall further under such circumstances be entitled to conduct
all enforcement against infringement within the scope of the licenses to
ASTELLAS hereunder (treating all recoveries over expenses as Net Sales, to the
full extent not representing treble or punitive damages).  In addition, if THERAVANCE elects not to
file, prosecute or maintain the THERAVANCE Patents or claims encompassed by
such THERAVANCE Patents after such termination, ASTELLAS shall have the same
“step-in rights” (and THERAVANCE shall have the same notification obligations)
as are provided in Section 13.01(e) (to avoid any doubt this specific
remedy is not to exclusion of any other remedy that may be available to
ASTELLAS).


 


ARTICLE 16


 


MISCELLANEOUS


 


Section 16.01                          Relationship Of The
Parties. Each Party shall bear its own expenses incurred in the performance
of its obligations hereunder without charge or expense to the other except as
expressly provided in this Agreement. 
Neither Party shall have any responsibility for the hiring,  termination or compensation of the other
Party’s employees or for any employee benefits of such employee.  No employee or representative of a Party
shall have any authority to bind or obligate the other Party to this Agreement
for any sum or in any manner whatsoever, or to create or impose any contractual
or other liability on the other Party without said Party’s prior written
approval.  For all purposes, and
notwithstanding any other provision of this Agreement to the contract, the
legal relationship between the Parties under this Agreement shall be that of
independent


 


74

















 


contractors.  This Agreement is
not a partnership agreement and nothing in this Agreement shall be construed to
establish a relationship of co-partners, partners or joint venturers between
the Parties nor to render one Party the agent of the other Party.


 


Section 16.02                          Registration And Filing Of
This Agreement. To the extent, if any, that either Party concludes in good
faith that it or the other Party is required to file or register this Agreement
or a notification thereof with any Governmental Authority, including without
limitation the U.S. Securities and Exchange Commission, the Competition Directorate
of the Commission of the European Communities or the U.S. Federal Trade
Commission, in accordance with Law, such Party shall inform the other Party
thereof. Should either of them be required (as determined by such Party in good
faith) to submit or obtain any such filing, registration or notification, the
Parties shall follow the procedures relating thereto set forth in Section 10.05,
and they shall cooperate, each at its own expense, in such filing, registration
or notification and shall execute all documents reasonably required in
connection therewith.  The Parties shall
promptly inform each other as to the activities or inquiries of any such
Governmental Authority relating to this Agreement, and shall reasonably cooperate
to respond to any request for further information there from on a timely basis.


 


Section 16.03                          Force Majeure. The
occurrence of an extraordinary event which materially interferes with the
ability of a Party to perform its obligations or duties hereunder which is not
within the reasonable control of the Party affected or any of its Affiliates,
not due to malfeasance by such Party or its Affiliates, and which could not
with the exercise of due diligence have been avoided (each, a “Force Majeure
Event”), including, but not limited to, an injunction, order or action by a
Governmental Authority, fire, accident, labor difficulty, strike, riot, civil
commotion, act of God, act of war, act of terrorism, inability to obtain raw
materials, delay or errors by shipping companies or change in law, shall not
excuse such Party from the performance of its obligations or duties under this
Agreement, but shall merely suspend such obligation or performance during the
continuation of the Force Majeure. The Party prevented from performing its
obligations or duties because of a Force Majeure Event shall promptly notify
the other Party of the occurrence and particulars of such Force Majeure and
shall provide the other Party, from time to time, with its best estimate of the
duration of such Force Majeure Event and with notice of the termination
thereof. The Party so affected shall use Diligent Efforts to avoid or remove
such causes of nonperformance as soon as is reasonably practicable. Upon
termination of the Force Majeure Event, the performance of any suspended obligation
or duty shall promptly recommence. The Party subject to the Force Majeure Event
shall not be liable to the other Party for any direct, indirect, consequential,
incidental, special, punitive, exemplary or other damages arising out of or
relating to the suspension or termination of any of its obligations or duties
under this Agreement by reason of the occurrence of a Force Majeure Event,
provided such Party complies in all material respects with its obligations
under this Section 16.03.


 


Section 16.04                          Governing Law. This
Agreement shall be construed, and the respective rights of the Parties
determined, according to the substantive law of the State of New York, United
States of America, notwithstanding the provisions governing conflict of laws
under such New York law to the contrary.


 


75

















 


Section 16.05                          Attorneys’ Fees And
Related Expenses. In the event that any legal proceeding is brought to
enforce or interpret any of the provisions of this Agreement, the prevailing
party shall be entitled to recover its reasonable attorneys’ fees, court
expenses and expenses of litigation whether or not the action or proceeding
proceeds to final judgment.


 


Section 16.06                          Assignment.


 


(a) This Agreement may not be assigned
by either Party without the prior written consent of the other Party; provided,
however that either Party may assign this Agreement, in whole or in part, to
any of its Affiliates if such Party guarantees the performance of this
Agreement by such Affiliate; and provided further that either Party may assign
this Agreement to a successor to all or substantially all of the assets of such
Party whether by merger, sale of stock, sale of assets or other similar
transaction. This Agreement shall be binding upon, and subject to the terms of
the foregoing sentence, inure to the benefit of the Parties hereto, their
permitted successors, legal representatives and assigns.  [*] (each of the foregoing referred to in
this sentence, [*].


 


(b) If (i) THERAVANCE assigns this
Agreement as permitted in the foregoing paragraph, and the assignee has in
clinical development or on the market in any Country in the Territory, or has
filed an application for Marketing Authorization (with such term for this
purpose being deemed to cover only applications that are for products other
than Licensed Product) in any Country in the Territory for, a product candidate
or product in the Field, or (ii) [*], then ASTELLAS shall be entitled to
terminate its diligence obligations and obligations to collaborate with
(including without limitation sharing information with, which includes without
limitation providing updates to the Medical Marketing Plan, and having the
TELAVANCIN Product Management Team meet at all, or the JSC meet at all) the
acquiror or perform ASTELLAS’ activities under this Agreement in accordance
with any previously exchanged information and plans, and ASTELLAS shall be
entitled to make all decisions previously reserved to the JSC and/or THERAVANCE
Product Management Team.  However, in the
case of (i) (but solely as relates to assignments not involving a [*]), if
the acquiror divests the competitive product within one hundred and eighty
(180) days after the assignment, then the foregoing sentence shall not apply to
such transaction.  The effect of such
termination of ASTELLAS’ obligations shall be as if ASTELLAS had terminated
pursuant to Section 14.02,  which
effect is as described in Section 15.02 (to the full extent not already
provided for above in this Section 16.06). 
Furthermore, the acquiror shall promptly return or destroy all
Confidential Information to ASTELLAS and certify within sixty (60) days after
the assignment in an officer’s certificate that all Confidential Information
has been so returned or destroyed.  In
the event that this subparagraph 16.06(b) applies (and there is no
divestiture of the applicable competitive product as provided above), then Section 2.03
shall not apply to either Party and both Parties shall be released from the
obligations thereunder.


 


Section 16.07                          Performance by Affiliates.
ASTELLAS may perform its obligations and exercise its rights hereunder by or
through one or more of its Affiliates, provided always


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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that ASTELLAS shall be responsible for the acts/omissions of any such
ASTELLAS Affiliate.


 


Section 16.08                          Notices. All demands, notices,
consents, approvals, reports, requests and other communications hereunder must
be in English and in writing and will be deemed to have been duly given only if
delivered personally, by facsimile with confirmation of receipt, by mail (first
class, postage prepaid), or by overnight delivery using a globally-recognized
carrier, to the Parties at the following addresses:


 


	
  THERAVANCE:

  	
   

  	
  THERAVANCE, Inc.

  
	
   

  	
   

  	
  901 Gateway Boulevard

  
	
   

  	
   

  	
  South San Francisco, CA 94080

  
	
   

  	
   

  	
  [*]

  
	
   

  	
   

  	
  Attn: Senior Vice President, Commercial
  Development

  
	
   

  	
   

  	
   

  
	
  With a required copy to:

  	
   

  	
  THERAVANCE, Inc.

  
	
   

  	
   

  	
  901 Gateway Boulevard

  
	
   

  	
   

  	
  South San Francisco, CA 94080

  
	
   

  	
   

  	
  [*]

  
	
   

  	
   

  	
  Attn: Senior Vice President and General
  Counsel

  
	
   

  	
   

  	
   

  
	
  ASTELLAS:

  	
   

  	
  ASTELLAS PHARMA INC

  
	
   

  	
   

  	
  3-11, Nihonbashi-Honcho

  
	
   

  	
   

  	
  2-chome Chuo-ku

  
	
   

  	
   

  	
  Tokyo

  
	
   

  	
   

  	
  103-8411

  
	
   

  	
   

  	
  Japan

  
	
   

  	
   

  	
  [*]

  
	
   

  	
   

  	
  Attn: Vice President, Legal Department

  
	
   

  	
   

  	
   

  
	
  With required copies to:

  	
   

  	
  ASTELLAS US LLC

  
	
   

  	
   

  	
  Three Parkway North

  
	
   

  	
   

  	
  Deerfield, IL 60015-2548

  
	
   

  	
   

  	
  [*]

  
	
   

  	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ASTELLAS US LLC

  
	
   

  	
   

  	
  Three Parkway North

  
	
   

  	
   

  	
  Deerfield, IL 60015-2548

  
	
   

  	
   

  	
  [*]

  
	
   

  	
   

  	
  Attn: Senior Vice President, Business
  Development

  



 


or to such other address as the addressee shall have last furnished in
writing in accord with this provision to the addressor. All notices shall be
deemed effective upon receipt by the addressee.


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


77

















 


Section 16.09                          Limitation on Liability.
EXCEPT FOR BREACH OF ARTICLE 10 (CONFIDENTIALITY) OR TO THE EXTENT A PARTY
MAY BE REQUIRED TO INDEMNIFY THE OTHER PURSUANT TO ARTICLE 12
(INDEMNIFICATION), IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
FOR ANY INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES OF
ANY KIND ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, HOWEVER CAUSED
AND ON ANY THEORY OF LIABILITY (WHETHER IN CONTRACT, TORT (INCLUDING
NEGLIGENCE), STRICT LIABILITY OR OTHERWISE).


 


Section 16.10                          Severability. In the
event of the invalidity of any provisions of this Agreement or if this
Agreement contains any gaps, the Parties agree that such invalidity or gap
shall not affect the validity of the remaining provisions of this Agreement.
The Parties will replace an invalid provision or fill any gap with valid
provisions which most closely approximate the purpose and economic effect of
the invalid provision or, in case of a gap, the Parties’ presumed intentions.
In the event that the terms and conditions of this Agreement are materially
altered as a result of the preceding sentences, the Parties shall renegotiate
the terms and conditions of this Agreement in order to resolve any inequities.
Nothing in this Agreement shall be interpreted so as to require either Party to
violate any applicable Laws, rules or regulations.


 


Section 16.11                          Headings; Interpretation.
The headings used in this Agreement have been inserted for convenience of
reference only and do not define or limit the provisions hereof.


 


Also in interpreting this Agreement, where examples are given or the
phrases “including,” “such as” or a like phrase is used, the intent is not to
be limiting but rather merely illustrative.


 


Section 16.12                          Waiver. Any term or
condition of this Agreement may be waived at any time by the Party that is
entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the Party
waiving such term or condition. No waiver by any Party of any term or condition
of this Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. Except as expressly set forth in this
Agreement, all rights and remedies available to a Party, whether under this
Agreement or afforded by law or otherwise, will be cumulative and not in the
alternative to any other rights or remedies that may be available to such
Party.


 


Section 16.13                          Entire Agreement. This
Agreement (including the exhibits and schedules hereto) constitutes the entire
agreement between the Parties hereto with respect to the subject matter of this
Agreement and supersedes all previous agreements and understandings between the
Parties, whether written or oral. This Agreement may be altered, amended or
changed only by a writing making specific reference to this Agreement, stating
that it amends this Agreement, and signed by duly authorized officers


 


78

















 


(at a seniority level within the relevant Party at least as high as the
original signatory from such Party having executed this Agreement) of
THERAVANCE and ASTELLAS.


 


Section 16.14                          No License. Nothing in
this Agreement shall be deemed to constitute the grant of any license or other
right in either Party, to or in respect of any, patent, trademark, Confidential
Information, trade secret, data or any other intellectual property of the other
Party, except as expressly set forth herein.


 


Section 16.15                          Third Party Beneficiaries.
None of the provisions of this Agreement shall be for the benefit of or
enforceable by any Third Party, including without limitation any creditor of
either Party hereto. No such Third Party shall obtain any right under any
provision of this Agreement or shall by reasons of any such provision make any
Claim in respect of any debt, liability or obligation (or otherwise) against
either Party hereto.


 


Section 16.16                          Counterparts. This
Agreement may be executed in any two counterparts, each of which, when
executed, shall be deemed to be an original and both of which together shall
constitute one and the same document.


 


Section 16.17                          Single Closing Condition.
The obligation of each Party to consummate the transaction contemplated hereby
is subject to the satisfaction of the following condition (the “Closing
Condition”):  All filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and any other similar
competition or merger control laws that are necessary in any jurisdiction with
respect to the transaction contemplated hereby shall have been made and any
required waiting period under such laws shall have expired or been terminated
and any Governmental Authority that has power under or authority to enforce such
laws shall have, if applicable, approved, cleared or decided neither to
initiate proceedings or otherwise intervene in respect of the transaction
contemplated hereby nor to refer the transaction to any other competent
Governmental Authority.  Each Party shall
use good faith efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other party in doing,
all things necessary, proper or advisable to consummate and make effective the
transaction contemplated by this Agreement, including, but not limited to
satisfaction of the Closing Condition and each Party shall keep the other Party
reasonably apprised of the status of matters relating to the completion of
same.  In connection with the foregoing,
the Parties hereby agree to negotiate in good faith to make as soon as
practicable any modification or amendment to this Agreement or any agreement
related hereto that is required by the United States Federal Trade Commission,
Department of Justice or equivalent Governmental Authority, provided that no
Party shall be required to agree to any modification or amendment that, in the
reasonable opinion of such Party’s external legal or financial counsel, would
be adverse to such Party.  This Agreement
may be terminated by either Party upon written notice any time after [*] of the
Signing Date if the transactions contemplated by this Agreement shall not have
been consummated due to failure to satisfy the Closing Condition; provided,
however, that the terminating Party shall not have breached in any material
respect its obligations under this Agreement in any manner that shall have been
the proximate cause of, or resulted in, the failure to satisfy the Closing
Condition or otherwise to consummate the transactions contemplated by this
Agreement by such date.  Prior to the
Closing Condition being


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


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[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]


 


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satisfied or this Agreement being terminated under this Section 16.17,  neither Party shall take any action that will
make any of its representations and warranties under ARTICLE 11 untrue as
of the Effective Date, it being understood that with respect to THERAVANCE’s
representations in Section 11.02, threats, claims, proceedings or actions
by Third Parties that may occur after the Signing Date do not in and of
themselves constitute “taking any action” by THERAVANCE for purposes of the
preceding sentence.


 


IN WITNESS WHEREOF,
the Parties have executed this Agreement by the hands of their duly authorized
officers as of the Effective Date.


 


	
  THERAVANCE, INC.

  	
  ASTELLAS PHARMA INC.

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
										



 


81

















 


LISTS
OF EXHIBITS


 


	
  Exhibit A -

  	
   

  	
  THERAVANCE Patents as of the Effective Date

  
	
   

  	
   

  	
   

  
	
  Exhibit B -

  	
   

  	
  Supply Terms

  
	
   

  	
   

  	
   

  
	
  Exhibit C -

  	
   

  	
  Chemical Structure of TELAVANCIN

  
	
   

  	
   

  	
   

  
	
  Exhibit D -

  	
   

  	
  POC Data Contents

  



 


1

















 


Exhibit A


 


THERAVANCE
Patents as of the Effective Date


 


[*]


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


1

















 


EXHIBIT B


 


Supply
Terms


 


As provided in Section 9.02(c) of this Agreement, this Exhibit B
sets forth the terms upon which THERAVANCE will supply ASTELLAS with quantities
of API Compound and Licensed Product.  If
the Parties choose to enter into a more detailed written agreement for this
supply, then this more detailed written agreement once executed by the Parties,
will supersede the terms of this Exhibit B.


 


	
  Requirements

  	
   

  	
  THERAVANCE shall supply ASTELLAS with API
  Compound and Licensed Product for ASTELLAS’ requirements under Section 9.02(c).

   

  
	
  Forecasts

  	
   

  	
  ASTELLAS would provide THERAVANCE with [*]
  forecasts for Licensed Product, covering a period of time beginning [*] after
  the date the forecast is provided, with the first [*], and the succeeding
  [*].

   

  
	
  Orders

  	
   

  	
  ASTELLAS would place quarterly purchase
  orders with THERAVANCE for Licensed Products, [*] in advance of the quarter
  in which delivery is requested. These orders cannot exceed by more than [*]
  the last forecast for the [*] of delivery.

   

  
	
  Order Cancellation

  	
   

  	
  ASTELLAS could cancel any order prior to it
  being delivered provided that it covered any cancellation expenses.

   

  
	
  Acceptance and Rejection

  	
   

  	
  ASTELLAS would have [*] to inspect each
  shipment to determine its conformance to the applicable specifications, and
  would be deemed to have accepted a shipment if it provided no notice of
  rejection within such time period after receiving such shipment. If ASTELLAS
  were to reject any quantity of Licensed Product, THERAVANCE could agree with
  the rejection or send the dispute to a Third-Party lab for determination whether
  the quantity rejected was in conformity with specifications.

   

  
	
  At-Cost Transfer Pricing

  	
   

  	
  THERAVANCE would supply ASTELLAS at cost on
  a pass-through basis based on the price THERAVANCE pays its Third-Party
  suppliers.

   

  
	
  Compliance with Laws

  	
   

  	
  THERAVANCE would comply with applicable
  laws in discharging the manufacture and supply obligation hereunder, and
  would contractually require the same of its suppliers.

  
	
   

  	
   

  	
   

  
	
  Conformance of

  	
   

  	
  THERAVANCE would deliver Licensed Product
  manufactured

  



 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


1

















 


	
  delivered quantities to cGMP and Regulatory
  Requirements

  	
   

  	
  in accordance with then-current cGMP, the
  applicable specifications and other applicable requirements of regulatory
  authorities.

  
	
   

  	
   

  	
   

  
	
  GMP Audits

  	
   

  	
  THERAVANCE would exercise its audit right
  of any Third-Party suppliers in accordance with ASTELLAS’ request and permit
  ASTELLAS and/or ASTELLAS representatives to accompany THERAVANCE on the
  audit.

   

  In addition, ASTELLAS (itself or by and
  through its representatives) would be entitled to audit THERAVANCE, to the
  full extent THERAVANCE is performing any release testing or other activities
  governed by cGMP.

   

  
	
  Risk Allocation

  	
   

  	
  THERAVANCE would indemnify ASTELLAS for
  Claims arising out of any failure of Licensed Product delivered to ASTELLAS
  hereunder to conform to applicable specifications or be manufactured in accordance
  with the standards set forth above.

  



 


2

















 


Exhibit C


 


Chemical
Structure of TELAVANCIN


 


[*]


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


3

















 


Exhibit D


POC
Data Contents


 


[*]


 


 






[*]=CERTAIN INFORMATION HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
WITH RESPECT TO THE OMITTED PORTIONS.


 


4