Document:

Exhibit
10.3

 

SEPRACOR
INC.

 

Executive Retention Agreement

 

THIS EXECUTIVE RETENTION AGREEMENT by and between
Sepracor Inc., a Delaware corporation (the “Company”), and Mark Iwicki (the “Executive”)
is made as of October 15, 2007 (the “Effective Date”).

 

WHEREAS, the Company recognizes that, as is the case
with many publicly-held corporations, the possibility of a change in control of
the Company exists and that such possibility, and the uncertainty and questions
which it may raise among key personnel, may result in the departure or
distraction of key personnel to the detriment of the Company and its
stockholders, and

 

WHEREAS, the Board of Directors of the Company (the “Board”)
has determined that appropriate steps should be taken to reinforce and
encourage the continued employment and dedication of the Company’s key
personnel without distraction from the possibility of a change in control of
the Company and related events and circumstances.

 

NOW, THEREFORE, as an inducement for and in
consideration of the Executive remaining in its employ, the Company agrees that
the Executive shall receive the severance benefits set forth in this Agreement
(including a certain “gross up” payment originally authorized by the Board on
February 25, 1999 and set forth in Section 4.3 of this Agreement) in the event
the Executive’s employment with the Company is terminated under the
circumstances described below subsequent to a Change in Control (as defined in
Section 1.1).

 

1.             Key Definitions.

 

As used herein, the following terms shall have the
following respective meanings:

 

1.1           “Change
in Control” means an event or occurrence set forth in any one or more of
subsections (a) through (d) below (including an event or occurrence that
constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):

 

(a)           the
acquisition by an individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) (a “Person”) of beneficial ownership of any capital stock of the Company
if, after such acquisition, such Person beneficially owns (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) 30%  or
more of either (x) the then-outstanding shares of common stock of the Company
(the “Outstanding Company Common Stock”) or (y) the combined voting power of
the then-outstanding securities of the Company entitled to vote generally in
the election of directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this subsection (a), the following acquisitions
shall not constitute a Change in Control: (i) any acquisition directly from the
Company (excluding an acquisition pursuant to the exercise, conversion or
exchange of any security exercisable for, convertible into or exchangeable for
common stock or voting securities of the Company, unless the Person 

 

 

exercising,
converting or exchanging such security acquired such security directly from the
Company or an underwriter or agent of the Company), (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i) and (ii) of subsection (c) of this Section 1.1;
or

 

(b)           such
time as the Continuing Directors (as defined below) do not constitute a
majority of the Board (or, if applicable, the Board of Directors of a successor
corporation to the Company), where the term “Continuing Director” means at any
date a member of the Board (i) who was a member of the Board on the date of the
execution of this Agreement or (ii) who was nominated or elected subsequent to
such date by at least a majority of the directors who were Continuing Directors
at the time of such nomination or election or whose election to the Board was
recommended or endorsed by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election; provided,
however, that there shall be excluded from this clause (ii) any
individual whose initial assumption of office occurred as a result of an actual
or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or

 

(c)           the
consummation of a merger, consolidation, reorganization, recapitalization or
statutory share exchange involving the Company or a sale or other disposition
of all or substantially all of the assets of the Company in one or a series of
transactions (a “Business Combination”), unless, immediately following such
Business Combination, each of the following two conditions is satisfied: (i)
the beneficial owners of all or substantially all of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more than 50%
of the then-outstanding shares of common stock and the combined voting power of
the then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a corporation
which as a result of such transaction owns the Company or substantially all of
the Company’s assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the “Acquiring
Corporation”) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, respectively; and (ii)
no Person (excluding the Acquiring Corporation or any employee benefit plan (or
related trust) maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 30%  or
more of the then outstanding shares of common stock of the Acquiring
Corporation, or of the combined voting power of the then-outstanding securities
of such corporation entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to the Business
Combination); or

 

(d)           approval
by the stockholders of the Company of a complete liquidation or dissolution of
the Company.

 

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1.2           “Change
in Control Date” means the first date during the Term (as defined in
Section 2) on which a Change in Control occurs. Anything in this Agreement
to the contrary notwithstanding, if (a) a Change in Control occurs, (b) the
Executive’s employment with the Company is terminated prior to the date on
which the Change in Control occurs, and (c) either (i) such termination of
employment (x) was at the request of a third party who has taken steps
reasonably calculated to effect a Change in Control or (y) otherwise arose in
connection with or in anticipation of a Change in Control, or (ii) such
termination of employment occurs following the execution of a definitive
agreement for such Change in Control, then for all purposes of this Agreement
the “Change in Control Date” shall mean the date immediately prior to the date
of such termination of employment.

 

1.3           “Cause”
means:

 

(a)           the
Executive’s willful and continued failure to substantially perform his
reasonable assigned duties (other than any such failure resulting from
incapacity due to physical or mental illness or any failure after the Executive
gives notice of termination for Good Reason and Good Reason exists), which
failure is not cured within 30 days after a written demand for substantial
performance is received by the Executive from the Board of Directors of the Company
which specifically identifies the manner in which the Board of Directors
believes the Executive has not substantially performed the Executive’s duties;

 

(b)           the
Executive’s willful engagement in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company; or

 

(c)           a
material breach by the Executive of Section 6 or 7 of the Employment Agreement
between the Company and the Executive of even date herewith (the “Employment
Agreement”).

 

For purposes of this Section 1.3, no act or failure to
act by the Executive shall be considered “willful” unless it is done, or
omitted to be done, in bad faith and without reasonable belief that the
Executive’s action or omission was in the best interests of the Company.

 

1.4           “Good
Reason” means the occurrence, without the Executive’s written consent, of
any of the events or circumstances set forth in clauses (a) through (f) below. Notwithstanding
the occurrence of any such event or circumstance, such occurrence shall not be
deemed to constitute Good Reason if, prior to the Date of Termination specified
in the Notice of Termination (each as defined in Section 3.2(a)) given by
the Executive in respect thereof, such event or circumstance has been fully
corrected and the Executive has been reasonably compensated for any losses or
damages resulting therefrom (provided that such right of correction by the
Company shall only apply to the first Notice of Termination for Good Reason
given by the Executive).

 

(a)           the
assignment to the Executive of duties inconsistent in any material respect with
the Executive’s position (including status, offices, titles or reporting
requirements), authority or responsibilities in effect immediately prior to the
earliest to occur of (i) the Change in Control Date, (ii) the date of
the execution by the Company of the initial written agreement or instrument
providing for the Change in Control or (iii) the date of the 

 

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adoption by the
Board of Directors of a resolution providing for the Change in Control (with
the earliest to occur of such dates referred to herein as the “Measurement Date”),
or any other action or omission by the Company which results in a material
diminution in such position, authority or responsibilities;

 

(b)           a
reduction in the Executive’s annual base salary or bonus eligibility as in
effect on the Measurement Date or as the same was or may be increased
thereafter from time to time;

 

(c)           the
failure by the Company to (i) continue in effect any material compensation or
benefit plan or program (including without limitation any life insurance,
medical, health and accident or disability plan and any vacation or automobile
program or policy) (a “Benefit Plan”) in which the Executive participates or
which is applicable to the Executive immediately prior to the Measurement Date,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan or program, (ii)
continue the Executive’s participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, in terms of the
amount of benefits provided, than the basis existing immediately prior to the
Measurement Date or (iii) award cash bonuses to the Executive in amounts and in
a manner substantially consistent with past practice in light of the Company’s
financial performance;

 

(d)           a
change by the Company in the location at which the Executive performs his
principal duties for the Company to a new location that increases the Executive’s
daily commute by more than 40 miles (as measured immediately prior to the
Measurement Date); or a requirement by the Company that the Executive travel on
Company business to a substantially greater extent than required immediately
prior to the Measurement Date;

 

(e)           the
failure of the Company to obtain the agreement from any successor to the
Company to assume and agree to perform this Agreement, as required by Section
6.1; or

 

(f)            any
failure of the Company to pay or provide to the Executive any portion of the
Executive’s compensation or benefits due under any Benefit Plan within seven
days of the date such compensation or benefits are due, or any material breach
by the Company of this Agreement or any employment agreement with the Executive.

 

The Executive’s right to terminate his employment for
Good Reason shall not be affected by his incapacity due to physical or mental
illness.

 

1.5           “Disability”
means the Executive’s absence from the full-time performance of the Executive’s
duties with the Company for 180 consecutive calendar days as a result of
incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive’s legal representative.

 

2.             Term of Agreement. This Agreement, and all rights and obligations
of the parties hereunder, shall take effect upon the Effective Date and shall
expire upon the first to occur of (a) the expiration of the Term (as defined
below) if a Change in Control has not occurred during the 

 

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Term, (b) the termination of the Executive’s
employment with the Company prior to the Change in Control Date, (c) the
date 24 months after the Change in Control Date, if the Executive is still
employed by the Company as of such later date (unless the Company has provided
notice of termination of Executive’s employment within such 24 month period in
which case the Agreement shall expire on the termination of the Executive’s
employment with the Company), or (d) the fulfillment by the Company of all of
its obligations under Sections 4 and 5.2 and 5.3  if
the Executive’s employment with the Company terminates within 24 months (or
after 24 months if the Company provides notice to the Executive of termination
of his employment within such 24 month period) following the Change in Control
Date. “Term” shall mean the period commencing as of the Effective Date and
continuing in effect through October 15, 2012; provided, however, that
commencing on October 15, 2012 and each October 15th thereafter, the Term shall
be automatically extended for one additional year unless, not later than 90
days prior to the scheduled expiration of the Term (or any extension thereof),
the Company shall have given the Executive written notice that the Term will
not be extended.

 

3.             Employment Status; Termination Following Change in
Control.

 

3.1           Not
an Employment Contract. The Executive acknowledges that this Agreement does
not constitute a contract of employment or impose on the Company any obligation
to retain the Executive as an employee and that this Agreement does not prevent
the Executive from terminating employment at any time. If the Executive’s
employment with the Company terminates for any reason and subsequently a Change
in Control shall occur, the Executive shall not be entitled to any benefits
hereunder except as otherwise provided pursuant to Section 1.2.

 

3.2           Termination
of Employment.

 

(a)           If
the Change in Control Date occurs during the Term, any termination of the
Executive’s employment by the Company or by the Executive within 24 months
following the Change in Control Date (other than due to the death of the
Executive) shall be communicated by a written notice to the other party hereto
(the “Notice of Termination”), given in accordance with Section 7. Any
Notice of Termination shall: (i) indicate the specific termination provision
(if any) of this Agreement relied upon by the party giving such notice, (ii) to
the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated and (iii) specify the Date of
Termination (as defined below). The effective date of an employment termination
(the “Date of Termination”) shall be the close of business on the date
specified in the Notice of Termination (which date may not be less than 15 days
or more than 45 days after the date of delivery of such Notice of Termination),
in the case of a termination other than one due to the Executive’s death, or
the date of the Executive’s death, as the case may be. In the event the Company
fails to satisfy the requirements of Section 3.2(a) regarding a Notice of
Termination, the purported termination of the Executive’s employment pursuant
to such Notice of Termination shall not be effective for purposes of this
Agreement.

 

(b)           The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or 

 

5

 

preclude the
Executive or the Company, respectively, from asserting any such fact or
circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

(c)           Any
Notice of Termination for Cause given by the Company must be given within 90
days of the occurrence of the event(s) or circumstance(s) which constitute(s)
Cause. Prior to any Notice of Termination for Cause being given (and prior to
any termination for Cause being effective), the Executive shall be entitled to
a hearing before the Board of Directors of the Company at which he may, at his
election, be represented by counsel and at which he shall have a reasonable
opportunity to be heard. Such hearing shall be held on not less than 15 days
prior written notice to the Executive stating the Board of Directors’ intention
to terminate the Executive for Cause and stating in detail the particular
event(s) or circumstance(s) which the Board of Directors believes constitutes
Cause for termination.

 

(d)           Any
Notice of Termination for Good Reason given by the Executive must be given
within 90 days of the occurrence of the event(s) or circumstance(s) which
constitute(s) Good Reason.

 

4.             Benefits to Executive.

 

4.1           Stock
Acceleration. If the Change in Control Date occurs during the Term, then,
effective upon the Change in Control Date, (a) each outstanding option to
purchase shares of Common Stock of the Company held by the Executive shall vest
and become immediately exercisable in full and shares of Common Stock of the
Company received upon exercise of any options will no longer be subject to a
right of repurchase by the Company, (b) each outstanding restricted stock
award shall be deemed to be fully vested and will no longer be subject to a
right of repurchase by the Company and (c) if the Executive’s employment
is thereafter terminated for any reason (other than by the Company for Cause),
then each such option (or any option into which such option is converted,
exchanged or substituted in connection with the Change in Control) shall
continue to be exercisable by the Executive (to the extent such option was
exercisable on the Date of Termination) for a period of six months following
the Date of Termination, notwithstanding any provision in any applicable option
agreement to the contrary; provided however that if stock options held
generally by employees of the Company under the stock option or stock incentive
plan under which Executive’s stock option was granted terminate or expire if
not exercised upon, immediately prior to or otherwise in connection with the
Change in Control, such stock option held by Executive shall likewise terminate
or expire.

 

4.2           Compensation.
If the Change in Control Date occurs during the Term and the Executive’s
employment with the Company terminates within 24 months following the Change in
Control Date, the Executive shall be entitled to the following benefits:

 

(a)           Termination
Without Cause or for Good Reason. If the Executive’s employment with the
Company is terminated by the Company (other than for Cause, Disability or
Death) or by the Executive for Good Reason within 24 months following the Change
in Control Date, then the Executive shall be entitled to the following
benefits:

 

6

 

(i)            the
Company shall pay to the Executive in a lump sum in cash within 30 days after
the Date of Termination the aggregate of the following amounts:

 

(1)           the
sum of (A) the Executive’s base salary through the Date of Termination,
(B) the product of (x) the annual bonus paid or payable (including
any bonus or portion thereof which has been earned but deferred) for the most
recently completed fiscal year and (y) a fraction, the numerator of which
is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (C) the amount of any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to the
extent not previously paid (the sum of the amounts described in clauses (A),
(B), and (C) shall be hereinafter referred to as the “Accrued Obligations”);
and

 

(2)           the
amount equal to (A) two multiplied by (B) the sum of (x) the
Executive’s highest annual base salary during the five-year period prior to the
Change in Control Date and (y) the Executive’s highest annual bonus during
the five-year period prior to the Change in Control Date.

 

(ii)           for
24 months after the Date of Termination, or such longer period as may be
provided by the terms of the appropriate plan, program, practice or policy, the
Company shall continue to provide benefits to the Executive and the Executive’s
family at least equal to those which would have been provided to them if the
Executive’s employment had not been terminated, in accordance with the
applicable Benefit Plans in effect on the Measurement Date or, if more favorable
to the Executive and his family, in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies; provided, however, that if the Executive becomes reemployed
with another employer and is eligible to receive a particular type of benefits
(e.g., health insurance benefits) from such employer on terms at least as
favorable to the Executive and his family as those being provided by the
Company, then the Company shall no longer be required to provide those
particular benefits to the Executive and his family; and

 

(iii)          to the extent not previously paid or
provided, the Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the Executive is
eligible to receive following the Executive’s termination of employment under
any plan, program, policy, practice, contract or agreement of the Company and
its affiliated companies (such other amounts and benefits shall be hereinafter
referred to as the “Other Benefits”).

 

(b)           Resignation
without Good Reason; Termination for Death or Disability. If the Executive
voluntarily terminates his employment with the Company within 24 months
following the Change in Control Date, excluding a termination for Good Reason,
or if the Executive’s employment with the Company is terminated by reason of
the Executive’s death or Disability within 24 months following the Change in
Control Date, then the Company shall (i) pay the Executive (or his estate,
if applicable), in a lump sum in cash within 30 days after the Date of
Termination, the Accrued Obligations and (ii) timely pay or provide to the
Executive the Other Benefits.

 

7

 

(c)           Termination
for Cause. If the Company terminates the Executive’s employment with the
Company for Cause within 24 months following the Change in Control Date, then
the Company shall (i) pay the Executive, in a lump sum in cash within 30
days after the Date of Termination, the sum of (A) the Executive’s annual
base salary through the Date of Termination and (B) the amount of any
compensation previously deferred by the Executive, in each case to the extent
not previously paid, and (ii) timely pay or provide to the Executive the
Other Benefits.

 

4.3           Taxes.

 

(a)           In
the event that the Company undergoes a “Change in Ownership or Control” (as
defined below), the Company shall, within 30 days after each date on which the
Executive becomes entitled to receive (whether or not then due) a Contingent
Compensation Payment (as defined below) relating to such Change in Ownership or
Control, determine and notify the Executive (with reasonable detail regarding
the basis for its determinations) (i) which of the payments or benefits
due to the Executive (under this Agreement or otherwise) following such Change
in Ownership or Control constitute Contingent Compensation Payments, (ii) the
amount, if any, of the excise tax (the “Excise Tax”) payable pursuant to
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), by
the Executive with respect to such Contingent Compensation Payment and
(iii) the amount of the Gross-Up Payment (as defined below) due to the
Executive with respect to such Contingent Compensation Payment. Within 30 days
after delivery of such notice to the Executive, the Executive shall deliver a
response to the Company (the “Executive Response”) stating either (A) that he
agrees with the Company’s determination pursuant to the preceding sentence or
(B) that he disagrees with such determination, in which case he shall indicate
which payment and/or benefits should be characterized as a Contingent
Compensation Payment, the amount of the Excise Tax with respect to such
Contingent Compensation Payment and the amount of the Gross-Up Payment due to
the Executive with respect to such Contingent Compensation Payment. The amount
and characterization of any item in the Executive Response shall be final;
provided, however, that in the event that the Executive fails to deliver an
Executive Response on or before the required date, the Company’s initial
determination shall be final. Within 90 days after the due date of each
Contingent Compensation Payment to the Executive, the Company shall pay to the
Executive, in cash, the Gross-Up Payment with respect to such Contingent
Compensation Payment, in the amount determined pursuant to this
Section 4.3.

 

(b)           For
purposes of this Section 4.3, the following terms shall have the following
respective meanings:

 

(i)            “Change
in Ownership or Control” shall mean a change in the ownership or effective
control of the Company or in the ownership of a substantial portion of the
assets of the Company determined in accordance with Section 280G(b)(2) of the
Code.

 

(ii)           “Contingent
Compensation Payment” shall mean any payment (or benefit) in the nature of
compensation that is made or made available (under this Agreement or otherwise)
to a “disqualified individual” (as defined in Section 280G(c) of the Code) and
that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code)
on a Change in Ownership or Control of the Company.

 

8

 

(iii)          “Gross-Up Payment” shall mean an amount equal
to the sum of (i) the amount of the Excise Tax payable with respect to a
Contingent Compensation Payment and (ii) the amount necessary to pay all
additional taxes imposed on (or economically borne by) the Executive (including
the Excise Taxes, state and federal income taxes and all applicable employment
taxes) attributable to the receipt of such Gross-Up Payment. For purposes of
the preceding sentence, all taxes attributable to the receipt of the Gross-Up
Payment shall be computed assuming the application of the maximum tax rates
provided by law.

 

4.4           Mitigation.
The Executive shall not be required to mitigate the amount of any payment or
benefits provided for in this Section 4 by seeking other employment or
otherwise. Further, except as provided in Section 4.2(a)(ii), the amount of any
payment or benefits provided for in this Section 4 shall not be reduced by any
compensation earned by the Executive as a result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company or otherwise.

 

4.5           Outplacement
Services. In the event the Executive is terminated by the Company (other
than for Cause, Disability or Death), or the Executive terminates employment
for Good Reason, within 24 months following the Change in Control Date, the
Company shall provide outplacement services through one or more outside firms
of the Executive’s choosing up to an aggregate amount equal to 15 percent of
the Executive’s annual base salary, with such services to extend until the
earlier of (i) 12 months following the termination of Executive’s employment or
(ii) the date the Executive secures full time employment.

 

4.6           Six
Month Delay. If any payment, compensation or other benefit provided to the
Executive in connection with his employment termination is determined, in whole
or in part, to constitute “nonqualified deferred compensation” within the
meaning of Section 409A and the Executive is a specified employee as defined in
Section 409A(2)(B)(i), no part of such payments shall be paid before the day
that is six (6) months plus one (1) day after the date of his termination (the “New
Payment Date”). In the case of welfare benefit continuation, the Company shall
use its best efforts to enable Executive to obtain such benefits at Executive’s
expense prior to the New Payment Date. The aggregate of any payments that
otherwise would have been paid to the Executive (or on Executive’s behalf)
during the period between the date of his termination and the New Payment Date
shall be paid to the Executive in a lump sum on such New Payment Date. Thereafter,
any payments that remain outstanding as of the day immediately following the
New Payment Date shall be paid without delay over the time period originally
scheduled, in accordance with the terms of this Agreement.

 

5.             Disputes.

 

5.1           Settlement
of Disputes; Arbitration. All claims by the Executive for benefits under
this Agreement shall be directed to and determined by the Board of Directors of
the Company and shall be in writing. Any denial by the Board of Directors of a
claim for benefits under this Agreement shall be delivered to the Executive in
writing and shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Board of Directors shall
afford a reasonable opportunity to the Executive for a review of the decision
denying a claim. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Boston, Massachusetts, in 

 

9

 

accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator’s award in any court having jurisdiction.

 

5.2           Expenses.
The Company agrees to pay as incurred, to the full extent permitted by law, all
legal, accounting and other fees and expenses which the Executive may
reasonably incur as a result of any claim or contest by the Company or others,
or any bona fide claim or contest by the Executive, regarding the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive regarding the amount of any payment or benefits pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Code, provided that
the Executive shall reimburse any fees and expenses to the extent any such
claim or contest is not resolved in favor of the Executive, provided further
that notwithstanding the forgoing, the Executive shall not be required to
reimburse any fees and expenses if such claim or contest relates to termination
by the Executive for Good Reason

 

5.3           Compensation
During a Dispute. If the Change in Control Date occurs during the Term and
the Executive’s employment with the Company terminates within 24 months
following the Change in Control Date, and the right of the Executive to receive
benefits under Section 4 (or the amount or nature of the benefits to which
he is entitled to receive) are the subject of a dispute between the Company and
the Executive, the Company shall continue (a) to pay to the Executive his
base salary in effect as of the Measurement Date and (b) to provide
benefits to the Executive and the Executive’s family at least equal to those
which would have been provided to them, if the Executive’s employment had not
been terminated, in accordance with the applicable Benefit Plans in effect on
the Measurement Date, until such dispute is resolved either by mutual written
agreement of the parties or by an arbitrator’s award pursuant to
Section 5.1. Following the resolution of such dispute, the sum of the
payments made to the Executive under clause (a) of this Section 5.3 shall
be deducted from any cash payment which the Executive is entitled to receive
pursuant to Section 4; and if such sum exceeds the amount of the cash
payment which the Executive is entitled to receive pursuant to Section 4,
the excess of such sum over the amount of such payment shall be repaid (with
interest at the applicable Federal rate provided for in Section 7872(f)(2)(A)
of the Code) by the Executive to the Company within 60 days of the resolution
of such dispute.

 

6.             Successors.

 

6.1           Successor
to Company. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company expressly to assume
and agree to perform this Agreement to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain an assumption of this Agreement at or prior to the
effectiveness of any succession shall be a breach of this Agreement and shall
constitute Good Reason if the Executive elects to terminate employment, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used
in this Agreement, “Company” shall mean the Company as defined above and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement, by operation of law or otherwise.

 

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6.2           Successor
to Executive. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amount would still be payable to the Executive
or his family hereunder if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the executors, personal representatives or
administrators of the Executive’s estate.

 

7.             Notice. All notices, instructions and other communications given hereunder or in
connection herewith shall be in writing. Any such notice, instruction or
communication shall be sent either (i) by registered or certified mail, return
receipt requested, postage prepaid, or (ii) prepaid via a reputable nationwide
overnight courier service, in each case addressed to the Company, at 111 Locke
Drive, Marlborough, MA 01752, and to the Executive at the Executive’s address
indicated on the signature page of this Agreement (or to such other address as
either the Company or the Executive may have furnished to the other in writing
in accordance herewith). Any such notice, instruction or communication shall be
deemed to have been delivered five business days after it is sent by registered
or certified mail, return receipt requested, postage prepaid, or one business
day after it is sent via a reputable nationwide overnight courier service.
Either party may give any notice, instruction or other communication hereunder
using any other means, but no such notice, instruction or other communication
shall be deemed to have been duly delivered unless and until it actually is
received by the party for whom it is intended.

 

8.             Miscellaneous.

 

8.1           Employment
by Subsidiary. For purposes of this Agreement, the Executive’s employment
with the Company shall not be deemed to have terminated solely as a result of
the Executive continuing to be employed by a wholly-owned subsidiary of the
Company.

 

8.2           Severability.
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.

 

8.3           Injunctive
Relief. The Company and the Executive agree that any breach of this
Agreement by the Company is likely to cause the Executive substantial and
irrevocable damage and therefore, in the event of any such breach, in addition
to such other remedies which may be available, the Executive shall have the
right to specific performance and injunctive relief.

 

8.4           Governing
Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the internal laws of the Commonwealth of
Massachusetts, without regard to conflicts of law principles.

 

8.5           Waivers.
No waiver by the Executive at any time of any breach of, or compliance with,
any provision of this Agreement to be performed by the Company shall be deemed
a waiver of that or any other provision at any subsequent time.

 

11

 

8.6           Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed
to be an original but both of which together shall constitute one and the same
instrument.

 

8.7           Tax
Withholding. Any payments provided for hereunder shall be paid net of any
applicable tax withholding required under federal, state or local law.

 

8.8           Entire
Agreement. This Agreement, together with the Employment Agreement between
the Company and the Executive of even date herewith, sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of the
subject matter contained herein. For the avoidance of doubt, except as
specifically described herein in Section 4.1, the stock options and restricted
stock awards held by Executive shall continue to be governed by the applicable
stock option or stock incentive plan under which they were granted or issued
(or any successor plan thereto) and any related stock option or restricted
stock agreement, as the same may be amended or modified.

 

8.9           Amendments.
This Agreement may be amended or modified only by a written instrument executed
by both the Company and the Executive.

 

8.10         Executive’s
Acknowledgements. The Executive acknowledges that he: (a) has read this
Agreement; (b) has been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of the Executive’s own choice or
has voluntarily declined to seek such counsel; (c) understands the terms and
consequences of this Agreement; and (d) understands that the law firm of Wilmer
Cutler Pickering Hale and Dorr LLP is acting as counsel to the Company in
connection with the transactions contemplated by this Agreement, and is not
acting as counsel for the Executive.

 

 

[Remainder of Page Intentionally Left Blank]

 

12

 

IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first set forth above.

 

	
   

  	
  SEPRACOR INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Adrian Adams

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President &
  CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Mark Iwicki

  	
   

  
	
   

  	
  Mark Iwicki

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address: 

  	
   

  
	
   

  	
   

  	
  12 Bristol
  Terrace

  	
   

  
	
   

  	
   

  	
  Long Valley, NJ
  07853

  	
   

  
	
   

  	
   

  	
   

  
					

 

13Exhibit 10.4

 

Confidential Materials omitted
and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

 

CONFIDENTIAL

 

DEVELOPMENT, LICENSE AND
COMMERCIALIZATION AGREEMENT

 

This
DEVELOPMENT, LICENSE AND COMMERCIALIZATION AGREEMENT (“Agreement”) is
entered into between Sepracor Inc.,
a company organized under the laws of the State of Delaware, United States, and
having its principal place of business at 84 Waterford Drive, Marlborough,
MA 01752-7010, United States, and Glaxo Group Limited,
a company organized under the laws of England & Wales and having its
principal place of business at Glaxo Wellcome House, Berkeley Avenue,
Greenford, Middlesex, UB6 0NN, United Kingdom (“GSK”).

 

WHEREAS

 

A.            Sepracor has conducted non-clinical and clinical
trials, and has been granted Marketing Approval by the FDA to commercialize,
and is commercializing in the United States, the LUNESTA®
eszopiclone-based insomnia product; and

 

B.            Sepracor owns or controls certain patents,
know-how, trademarks and other intellectual property relating to the Product in
the GSK Territory; and

 

C.            GSK is experienced in developing, registering,
securing pricing approvals, marketing and distributing pharmaceutical products
in the GSK Territory; and

 

D.            On the terms and conditions set forth in this
Agreement:

 

1.             Sepracor and GSK wish to collaborate on the
potential for further development (if any), as well as the registration and
commercialization of the Product in the GSK Territory;

 

2.             Sepracor is willing to grant to GSK, and GSK
desires to obtain from Sepracor, certain exclusive rights and licenses with
respect to the potential development (if any), registration and
commercialization of the Product in the GSK Territory; and

 

3.             Sepracor is willing to supply GSK with Bulk
Tablets of the Product for packaging and commercial sale by GSK in the GSK
Territory.

 

NOW,
THEREFORE, in
consideration of the foregoing premises and the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Sepracor and GSK hereby agree as
follows:

 

 

CONFIDENTIAL

 

ARTICLE I.

DEFINITIONS

 

As used in this Agreement, the
following terms shall have the meanings set out in this Article 1 unless
the context clearly and unambiguously dictates otherwise.

 

1.1.          “Active Ingredient” shall mean the
chemical compound known as eszopiclone, also identified by the chemical name
(+) 6-(5-chloro-2-pyridinyl)-6,7-dihydro-7-oxo-5H-pyrrolo [3,4b]
pyrazin- 5-yl 4-methylpiperazine-1-carboxylate or (+) 6-(5-chloropyri-2-dyl)-5-(4-methyl
piperazin-1-yl) carbonyloxy-7-oxo-6,7-dihydro-5H-pyrrolo [3,4b]
pyrazine,  and all pharmaceutically active
derivatives thereof, such as, but not limited to, its metabolites, and all
esters, salts, hydrates, solvates, polymorphs and isomers of all the above.

 

1.2.          “Actual Cost” shall mean, the fully
loaded cost incurred by Sepracor to manufacture or have manufactured Bulk
Tablets, including for avoidance of doubt the overhead associated with
performing its obligations, as may be agreed by the parties, under the
Supply Agreement. The Actual Cost may be more specifically defined in the
Supply Agreement, consistent with Schedule 10.2
herein, and shall be documented by Sepracor to GSK to the reasonable satisfaction
of GSK.

 

1.3.          “Affiliate” of a Party shall mean any
person, corporation or other entity that, directly or indirectly, through one
or more intermediaries, controls, is controlled by, comes to control, or is
under common control with such Party, as the case may be. As used in this Section 1.3,
“control” shall mean:  (i) to
possess, directly or indirectly, the power to direct the management and
policies of such person, corporation or other entity, whether through ownership
of voting securities or by contract relating to voting rights or corporate
governance; or (ii) direct or indirect beneficial ownership of at least
fifty percent (50%) (or such lesser percentage which is the maximum allowed to
be owned by a foreign corporation in a particular jurisdiction) of the voting
share capital in such person, corporation or other entity.

 

1.4.          “Acquired Competing Product” shall mean
any product, in respect of which GSK or its Affiliates, during the Term,
acquires the rights (by license, purchase or otherwise) to promote, market or
sell in the GSK Territory, which at the time of acquisition: (i) [**]; (ii) [**];
or (iii) [**].

 

1.5.          “Acquisition Transaction” shall mean the
acquisition of the assets of a Third Party, whether through merger, purchase of
stock representing fifty percent (50%) or more of the outstanding voting stock,
purchase of all or substantially all of the assets of such entity or otherwise.

 

1.6.          “Blocking Patent” means any Patent issued
to a Third Party that would be infringed by the manufacture, use, sale, offer
for sale or importation of the Product in the GSK Territory.

 

 

CONFIDENTIAL

 

1.7.          “Bulk Tablets” shall mean finished
tablets containing the Active Ingredient which meets the relevant
specifications, to be defined more specifically in the Supply Agreement, and to
be shipped to GSK by Sepracor in
bulk in the manner set forth in the Supply Agreement, and then to be packaged
as the Product by or on behalf of GSK.

 

1.8.          “Business Day” shall mean a day other
than a (i) Saturday, (ii) Sunday or (iii) public holiday in the
United States or England. For the avoidance of doubt, references in this
Agreement to “days” shall mean calendar days.

 

1.9.          “Calendar Quarter” shall mean a period of
three (3) consecutive months during a Calendar Year beginning on and
including 1st January, 1st April, 1st July or
1st October.

 

1.10.        “Calendar Year” shall mean a period of
twelve (12) consecutive months beginning on and including 1st
January.

 

1.11.        “Clinical Supplies” shall mean those
quantities of Bulk Tablets and placebo to
be supplied by Sepracor to GSK in the manner to be set forth in the Supply
Agreement for use in the following scenarios where the Bulk Tablets are not to
be packaged and labeled for commercial sale: (i) any Developmental Study; (ii) validation
studies or any other studies to confirm packaging or formulation or other
manufacturing requirements; or (iii) for any other non-commercial uses
necessary for obtaining the Marketing Approval for the Product in any country
in the GSK Territory.

 

1.12.        “Commercialization Studies” shall mean
any clinical studies GSK wishes to be conducted by or on behalf of GSK in the GSK
Territory in support of GSK’s commercialization of the Product in the GSK
Territory and which will be initiated in a country after Marketing Approval of
the Product in such country. Such studies may include, but shall not be
limited to, “marketing studies” to support market uptake, acceptance and
differentiation of the Product, epidemiological studies, modeling and
pharmacoeconomic studies, and studies in support of modifications or additional
sleep disorder related indications. Commercialization Studies shall not include
studies designed to generate data in support of new indications unrelated to
sleep disorders, or studies investigating the safety or efficacy of the Product
in a modified release formulation or a combination product. For the avoidance of doubt, Commercialization
Studies shall not include Required Studies, Investigator Sponsored Clinical
Studies, Sepracor Studies, studies Sepracor initiated prior to the Effective
Date in support of the Product, any studies relating to the Product that
Sepracor may initiate in the Sepracor Territory or any other studies that
Sepracor may initiate anywhere in the world which do not relate to the
Product.

 

1.13.        “Commercially Reasonable Efforts” means
those diligent efforts and resources, with respect to a particular Party, at
the relevant point in time, that are comparable to those generally used by that
Party, in good faith, in the exercise of its reasonable and prudent scientific
and business judgment relating to other prescription pharmaceutical products
owned or licensed by it or to which it has exclusive rights, which have market
potential and are at a stage of development or product life similar to the
Product, taking into account measures of relative safety and efficacy, product
profile, the competitiveness of the marketplace, the proprietary

 

 

CONFIDENTIAL

 

position of the compound or product, the regulatory structure involved,
the relative profitability of the products, and other relevant factors,
including without limitation comparative technical, legal, scientific, and/or
medical factors. Such Commercially Reasonable Efforts shall include, without
limitation, comparable efforts with respect to (i) promptly assigning
responsibility for development and commercialization activities to specific
employees who are held accountable for progress and monitoring such progress on
an on-going basis, (ii) setting and consistently seeking to achieve
specific and meaningful objectives and timelines for carrying out such
development and commercialization activities, (iii) consistently making
and implementing decisions and allocating resources designed to advance
progress with respect to such objectives and timelines, and (iv) employing
compensation systems for its employees working with the Product that are
similar to the compensation systems the applicable Party applies with respect
to its other programs with products of similar potential.

 

1.14.        “Confidentiality Agreement” shall mean
that certain letter agreement dated January 11, 2005 entered into by and
between Sepracor and GlaxoSmithKline Research & Development Limited.

 

1.15.        “Control” (including any variations such
as “Controlled” and “Controlling”), in the context of
intellectual property rights and Know-How, shall mean rights to intellectual
property sufficient to grant the applicable license under this Agreement,
without violating the terms of an agreement with a Third Party.

 

1.16.        “Core Campaign Product Strategies” shall
mean those materials proposed by the GSK European marketing group which outline
the core marketing materials to be used in relation to the Product and to
specifically include trade dress, core claims and visuals.

 

1.17.        “Data” shall mean, subject to the
provisions of Section 5.10, any and all research data, pharmacology data,
preclinical data, clinical data, manufacturing data and/or all regulatory
documentation, information and submissions pertaining to, or made in
association with, an IND or a Marketing Authorization Application for the
Product, in each case which are Controlled by a Party as of the Effective Date
or during the Term of this Agreement, including but not limited to the
Development Data.

 

1.18.        “Developmental Studies” means any (i) Required
Studies or (ii) Commercialization
Studies, both as set forth in the Development Plan. For the avoidance of doubt, Developmental
Studies shall not include Investigator Sponsored Clinical Studies of the
Product in the GSK Territory.

 

1.19.        “Effective Date” shall mean the later of:
(i) the date on which an authorized representative of Sepracor executes
this Agreement, and (ii) the date on which an authorized representative of
GSK executes this Agreement.

 

1.20.        “EMEA” shall mean the European Medicines
Agency, or any other successor agency that is responsible for approving the
sale of pharmaceutical products across the European Union.

 

 

CONFIDENTIAL

 

1.21.        “European Union” shall mean the member
countries of the European Union at the relevant point in time.

 

1.22.        “FDA” shall mean the United States Food
and Drug Administration, or any successor entity thereto performing similar
functions.

 

1.23.        “GSK Competing Product” shall have the
meaning stated in Section 9.1(e) of this Agreement. For the avoidance
of doubt, GSK Competing Products may include, but shall not be limited to,
compounds, other than Acquired Competing Products, acquired by GSK (by licence,
purchase or otherwise) during the Term of this Agreement.

 

1.24.        “GSK Territory” shall mean all countries
and territories of the world excluding the Sepracor Territory.

 

1.25.        “Improvements” shall mean any new or
useful process, technique, formula, invention or know-how, formulation, or
composition of matter relating to or comprising the Product, or any Sepracor
Technology, whether patentable or unpatentable, or any improvement,
enhancement, modification or derivative work thereof, that is conceived or
first reduced to practice or first demonstrated to have utility during the Term
of this Agreement in connection with the Parties’ activities under this
Agreement.

 

1.26.        “IND” shall mean an Investigational New
Drug Application (including any amendments thereto) filed with the FDA pursuant
to 21 C.F.R. §312 before commencement of clinical trials of a pharmaceutical
product, or any comparable filings with any Regulatory Authority in any other
jurisdiction, including, but not limited to, clinical trial applications.

 

1.27.        “International Financial Reporting Standards”
shall mean the International Financial Reporting Standards and International
Accounting Standards issued by the International Accounting Standards Board (“IASB”)
and interpretations issued by the International Financial Reporting
Interpretations Committee of the IASB.

 

1.28.        “Major Market” shall mean each of the
U.K., Germany, Italy, France, Spain, China, Australia, Brazil and South Korea, provided, however, with respect to Sections 6.1, 6.3(l),
6.4(b), 14.4(c) and 16.2(e), Major Markets shall only include U.K.,
Germany, Italy, France and Spain. A country shall no longer be included in the
definition of Major Market for the purposes of Sections 2.1(b), 6.1, 6.3(l),
7.3(d) and 16.2(e) once a Generic Product has been launched in such
country.

 

1.29.        “Marketing Approval” shall mean all approvals,
licenses, registrations or authorizations of Regulatory Authorities in a
country necessary for the manufacture, use, storage, import, export,
distribution, promotion, marketing, offer for sale and sale of the Product in
such country. For countries where governmental approval is required for pricing
and/or reimbursement for the Product to be reimbursed by national health
insurance (or its local equivalent), “Marketing Approval” shall not be deemed
to occur until such pricing and/or reimbursement approval is obtained.

 

 

CONFIDENTIAL

 

1.30.        “Marketing Authorization Application” (or
“MAA”) shall mean a filing, comparable to a New Drug Application (as
defined in 21 C.F.R. § 314.50 et. seq.), for
Marketing Approval (not including pricing or reimbursement approval) for the
Product in a country within the GSK Territory.

 

1.31.        “Net Sales” shall mean the gross amounts
received for sales of the Product by or on behalf of GSK, its Affiliates and/or
Sublicensees (the “Selling Party”) to Third Parties, less deductions actually
allowed or specifically allocated to the Product by the Selling Party using
International Financial Reporting Standards for:

 

(a)        transportation charges to the extent that they
are included in the price or otherwise paid by the purchaser, including,
without limitation, insurance, for transporting Product and separately
identified on the invoice or in other documentation maintained in the ordinary
course of business; and;

 

(b)        trade, quantity and cash discounts, or
charge-backs, refunds or other rebates actually granted to the customer
(including, if applicable, hospitals or private or public health insurance
entities);

 

(c)        credits, rebates and allowances to the customer
on account of rejection or returns of the Product (including wholesaler and
retailer returns), or on account of non-discretionary retroactive price
reductions affecting such Product;

 

(d)        sales and excise taxes, other consumption taxes,
customs duties and customary compulsory payments to governmental authorities
and any other governmental charges imposed upon the production, importation,
use or sale of the Product actually paid and separately identified on the
invoice or in other documentation maintained in the ordinary course of
business; and

 

(e)        any other items actually deducted from gross
invoices sales amounts as reported by the Selling Party in its financial
statements in accordance with the International Financial Reporting Standards,
applied on a consistent basis

 

In no event will any particular amount, identified above, be deducted
more than once in calculating Net Sales (i.e., no “double counting” of
reductions). Sales of the Product between GSK and its Affiliates or
Sublicensees shall be excluded from the computation of Net Sales, but the
subsequent resale of such the Product to a Third Party shall be included within
the computation of Net Sales.

 

In the case of any sale or disposal for value, other than in an arms
length transaction exclusively for money, such as barter or counter trade, Net
Sales shall be calculated as above on the value of the consideration received
or the fair market value (if higher) of the Product in the country of sale or
disposal.

 

1.32.        “Non-Severable Improvements” shall mean
an Improvement to the Sepracor Technology which is incapable of exploitation
independently of the Sepracor Technology

 

 

CONFIDENTIAL

 

Controlled by Sepracor or its
Affiliates as of the Effective Date and during the Term of this Agreement.

 

1.33.        “Party” shall mean Sepracor or GSK
individually, and “Parties” shall mean Sepracor and GSK collectively.

 

1.34.        “Patent(s)” shall mean patents and patent
applications, together with all additions, divisions, continuations,
continuations-in-part, provisionals, substitutions, reissues, re-examinations,
extensions, registrations, patent term extensions, supplemental protection
certificates and renewals of a patent or patent application, and any
confirmation patent or registration patent or patent of addition based on any
such patent.

 

1.35.        “Person” shall mean any individual,
corporation, partnership, limited liability company, trust, governmental
entity, or other legal entity of any nature whatsoever.

 

1.36.        “Phase III Clinical Trial” shall mean a
human clinical trial, the principal purpose of which is to gather safety and
efficacy data for a Product Indication of one or more particular doses in
patients being studied that is needed to evaluate the overall benefit and risk
relationship of the product and to provide adequate basis for labeling, as
required in 21 C.F.R. §312(c), or such similar clinical study in a country
other than the United States of America.

 

1.37.        “Product” shall mean the Active
Ingredient, in the form and dosages approved as of the Effective Date by
the FDA as LUNESTA® (eszopiclone), for all indications which are or may be
approved by Regulatory Authorities in the GSK Territory for those forms and
dosages. The Product shall also include any additional immediate release forms
or dosages of LUNESTA® (eszopiclone) that may be developed by
Sepracor or GSK during the term of the Agreement.

 

For
the avoidance of doubt, Product shall not mean, inter alia: (i) any
product containing Active Ingredient in [**]; or (ii) any product with the
Active Ingredient used [**]. All such products to be referred to herein as “Excluded
Products”.

 

1.38.        “Product Indication” shall mean, on a
country-by-country basis, any indication for which the Product has Marketing
Approval in such country.

 

1.39.        “Product Trademarks” shall mean the
trademark(s) owned by Sepracor which are available for use with the Product, as
listed in Part A of Schedule 1.39.

 

1.40.        “Regulatory Authority” shall mean the
EMEA and any other national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental entity whose
review and/or approval is necessary for the manufacture, packaging, use,
storage, import, export, distribution, promotion, marketing, offer for sale and
sale of the Product in the GSK Territory. For countries where governmental
approval is required for pricing or reimbursement for the Product to be
reimbursed by national health insurance (or its local equivalent), “Regulatory
Authority” shall also include any national, regional, state or local

 

 

CONFIDENTIAL

 

regulatory agency, department, bureau, commission, council or other
governmental entity whose review and/or approval of pricing or reimbursement is
required.

 

1.41.        “Required Studies” shall mean any
pre-clinical or clinical studies (other than those initiated by Sepracor prior
to the Effective Date) that are required or requested in writing by any
Regulatory Authority as a condition of, or in connection with, obtaining
Marketing Approval for the Product in one of more countries in the GSK Territory.

 

1.42.        “Sepracor” shall mean Sepracor Inc. and
its Affiliates.

 

1.43.        “Sepracor Know-How” shall mean, subject
to Section 5.10 and the last sentence of Section 7.6, all present and
future scientific, medical, technical, manufacturing, regulatory and other
information relating to the Product (including results of any Developmental
Study and Data), which are owned or Controlled by Sepracor as of the Effective
Date or during the Term of this Agreement. Sepracor Know-How shall include all
such items that are generated by or under authority of Sepracor during the Term
of this Agreement.

 

1.44.        “Sepracor Patents” shall mean, subject to
Section 7.6, all present and future Patents owned or Controlled by
Sepracor, which generically or specifically claim Product, a composition
comprising Product, or a use of Product. The current list of Patents is set
forth in Schedule 1.44, and such
list shall be updated by Sepracor during the Term of the Agreement, at least on
a semi-annual basis.

 

1.45.        “Sepracor Studies” shall mean any
pre-clinical or clinical studies (other than those initiated by Sepracor prior
to the Effective Date) that Sepracor wishes to conduct or have conducted for it in the GSK
Territory related to: (i) the
Product; or (ii) the Excluded Products. For the avoidance of doubt, this
does not include any study Sepracor may conduct or have conducted for it
outside of the GSK Territory.

 

1.46.        “Sepracor Technology” shall mean, subject to Section 7.6, all
Sepracor Know-How, and Sepracor Patents, which are Controlled by Sepracor or
its Affiliates, prior to the Effective Date, and all Improvements Controlled by
Sepracor or its Affiliates during the Term of this Agreement, if any. Sepracor
Technology excludes Product Trademarks and Other Trademarks.

 

1.47.        “Sepracor Territory” shall mean Canada,
United States (and its incorporated and unincorporated territories), Mexico and
Japan.

 

1.48.        “Severable Improvements” shall mean an
Improvement to the Sepracor Technology which is capable of exploitation
independently of the Sepracor Technology Controlled by Sepracor or its
Affiliates as of the Effective Date and during the Term of this Agreement.

 

1.49.        “Sublicensee” shall mean a Third Party
approved by Sepracor, or a GSK Affiliate, to whom GSK, under the terms of this
Agreement, has granted a right to sell, market, distribute

 

 

CONFIDENTIAL

 

and/or promote the Product in the GSK Territory and “Sublicense”
shall mean an agreement or arrangement between GSK and a Sublicensee granting
such rights. As used in this Agreement, Sublicensee shall not include (i) a
wholesaler, distributor or reseller of the Product who does not market or
promote the Product, (ii) a contract manufacturer or packager or (iii) a
contract research organization.

 

1.50.        “Target Label” shall mean approved
labeling for the Product with: (i) an indication for the treatment of
insomnia; (ii) [**] which would [**], and (iii) [**] attached at Schedule 1.50. For the
avoidance of doubt, the label requirements at Section 1.50(ii), above,
shall not apply to [**].

 

1.51.        “Term” shall mean the period described in
Section 14.1 of this Agreement.

 

1.52.        “Third Party” shall mean any Person other
than Sepracor, GSK and their respective Affiliates.

 

1.53.        “Third Party Technology” means any
Patents, know-how, inventions, or other intellectual property owned or
controlled by a Third Party but not owned or Controlled by a Party or its
Affiliates.

 

1.54.        “Transition Period” shall mean the period
of time beginning on the Effective Date of the Agreement and ending on the
earlier of (i) the date of final approval of a MAA filed with the EMEA; or
(ii) a date indicated in a written agreement by Sepracor and GSK.

 

1.55.        “Valid Claim” shall mean a claim of any
issued, unexpired patent that has not been revoked or held unenforceable or
invalid by a decision of a court or governmental agency of competent
jurisdiction from which no appeal can be taken, or with respect to which an
appeal is not taken within the time allowed for appeal, and that has not been
disclaimed or admitted to be invalid or unenforceable through reissue,
disclaimer or otherwise.

 

1.56.        “VAT”
shall mean the tax imposed by Council Directive 2006/112/EC of the European
Community and any national legislation implementing that directive together
with legislation supplemental thereto and in particular, in relation to the
United Kingdom, the tax imposed by the Value Added Tax Act of 1994 or other tax
of a similar nature imposed elsewhere instead of or in addition to value added
tax.

 

1.57.        “Wind-down
Period” shall mean any period after the date of termination of this
Agreement, in its entirety or on a country-by-country basis, during which
pursuant to Sections 15.2(a) or 15.3(a), GSK is required to continue to
perform certain activities.

 

1.58.        Other
Definitions. Each of the following
defined terms shall have the meaning set forth in the indicated Section of
this Agreement: 

 

 

CONFIDENTIAL

 

	
  Defined Term

  	
   

  	
  Section

  
	
  Acquired Competing Product

  	
   

  	
  9.1(b)

  
	
  Agreement

  	
   

  	
  Introduction

  
	
  Commercialization Plan

  	
   

  	
  6.1

  
	
  Confidential Information

  	
   

  	
  11.1

  
	
  Commercialization Option

  	
   

  	
  9.1(e)

  
	
  Company RA Executives

  	
   

  	
  7.2(c)(i)

  
	
  Development Data

  	
   

  	
  11.2

  
	
  Development Plan

  	
   

  	
  5.6

  
	
  Disclosing Party

  	
   

  	
  11.1

  
	
  DMF

  	
   

  	
  5.10(a)

  
	
  Excluded Products

  	
   

  	
  1.37

  
	
  Fault of GSK

  	
   

  	
  17.4(b)(ii)

  
	
  Fault of Sepracor

  	
   

  	
  17.4(b)(i)

  
	
  Generic Product

  	
   

  	
  7.3(c)(ii)

  
	
  GSK Indemnities

  	
   

  	
  17.2

  
	
  Indemnitee

  	
   

  	
  17.3

  
	
  Indemnitor

  	
   

  	
  17.3

  
	
  Independent RA Expert

  	
   

  	
  7.2(c(i)

  
	
  Infringing Product

  	
   

  	
  12.3

  
	
  Infringing Trademark

  	
   

  	
  12.4

  
	
  Initial Commercialization
  Plan

  	
   

  	
  6.1

  
	
  Intervening Event

  	
   

  	
  19.1

  
	
  Investigator Sponsored
  Clinical Studies

  	
   

  	
  5.5

  
	
  JSC

  	
   

  	
  3.1

  
	
  Liabilities

  	
   

  	
  17.1

  
	
  Other Trademarks

  	
   

  	
  13.1

  
	
  Pharmacovigilance Agreement

  	
   

  	
  5.14(c)

  
	
  Product Liability Claim

  	
   

  	
  17.5(a)

  
	
  Quality Agreement

  	
   

  	
  10.2

  
	
  Recall Costs

  	
   

  	
  17.4(b)

  
	
  Receiving Party

  	
   

  	
  11.1

  
	
  Reconciliation Report

  	
   

  	
  7.3(e)(ii)

  
	
  Reconciliation Review Period

  	
   

  	
  7.3(e)(ii)

  
	
  SEC

  	
   

  	
  11.6

  
	
  Selling Party

  	
   

  	
  1.31

  
	
  Senior Executives

  	
   

  	
  3.4(b)

  
	
  Sepracor Development Plan

  	
   

  	
  5.8

  
	
  Sepracor Indemnitees

  	
   

  	
  17.1

  
	
  Subcommittee

  	
   

  	
  3.2

  
	
  Supply Agreement

  	
   

  	
  10.2

  
	
  Third Party Claim

  	
   

  	
  17.1

  
	
  Trademark Infringing Product

  	
   

  	
  12.4

  

 

 

CONFIDENTIAL

 

ARTICLE II.

GRANT OF LICENSE

 

2.1.          Licenses.

 

(a)           Sepracor hereby grants to GSK an exclusive (even
as to Sepracor), royalty-bearing license throughout the GSK Territory under the
Sepracor Technology to use, sell, have sold and import the Bulk Tablets and
Product. The license shall include, but not be limited to the rights to:  (i) purchase Clinical Supplies and the
Product in Bulk Tablets for use in the GSK Territory in accordance with this
Agreement and the Supply Agreement, (ii) package and/or have packaged the
Bulk Tablets, (iii) conduct the activities set forth in the
Commercialization Plan with respect to the Product, (iv) offer for sale,
sell and distribute the Product, and (v) market and promote the Product
under the Product Trademarks and Other Trademarks.

 

(b)           GSK has the right to grant sublicenses under
this Agreement to its Affiliates. Except as otherwise provided in Section 19.10,
GSK shall not have the right to sublicense, transfer or assign the rights
granted under this Agreement to a Third Party without Sepracor’s prior written
consent, which shall not be unreasonably withheld or delayed, provided that
prior written consent shall not be required in relation to any sublicense of
rights territorially limited to those countries in the GSK Territory other than
the Major Markets. Where a sublicense of any of the rights or obligations is
permitted hereunder, each Sublicensee must enter into a Sublicense Agreement,
which must be consistent with the terms and conditions of this Agreement. GSK
shall also enforce the performance by any Sublicensee of the terms of each such
Sublicense Agreement in order to ensure that any Sublicensee complies with the
applicable terms and conditions of this Agreement. The grant of any such
sublicense to an Affiliate or a Third Party will not relieve GSK of its
obligations under this Agreement, except to the extent they are satisfactorily
performed by such Sublicensee and GSK hereby guarantees the satisfactory
performance of GSK’s obligations hereunder where performed by its Affiliates.

 

(c)           Sepracor hereby grants to GSK, a non-exclusive
license throughout the GSK Territory under the Sepracor Technology to undertake
Developmental Studies and any other activities specified in the Development
Plan with respect to the Product and consistent with this Agreement.

 

(d)           Sepracor hereby grants to GSK an exclusive
license to use the Product Trademarks and Other Trademarks in the GSK Territory
on the terms of Section 13.4.

 

2.2.          Activities Outside the GSK
Territory.

 

(a)           GSK agrees that neither it, nor any of its
Affiliates or Sublicensees, will (i) export the Product outside of the GSK
Territory, or (ii) sell or provide the Product to any Third

 

 

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Party if GSK and/or its relevant Affiliate or Sublicensee believes, or
it would be reasonable to assume, that the Product sold or provided to such
Third Party will be exported for use outside the GSK Territory.

 

(b)           Sepracor agrees that neither it, nor any of its
Affiliates, will (i) export the Product within the GSK Territory (other
than to GSK, its Affiliates, or Sublicensees), or (ii) sell or provide the
Product to any Third Party if Sepracor or its relevant Affiliate or Third Party
sub-licensee believes, or it would be reasonable to assume, that the Product
sold or provided to such Third Party will be imported for use in the GSK
Territory.

 

2.3.                    No Other Rights. Except for the rights and licenses expressly
granted in this Agreement, Sepracor retains all rights under its intellectual
property and no additional rights shall be deemed granted to GSK by
implication, estoppel or otherwise. For the avoidance of doubt, Sepracor
specifically retains, without limitation, its rights to (i) develop,
manufacture, license, use, store, import, export, distribute, promote, market,
offer for sale and sell the Excluded Products in the GSK Territory, (ii) develop,
manufacture, license, use, store, import, export, distribute, promote, market,
offer for sale and sell within the GSK Territory products which are not
specifically covered under this Agreement; and (iii) manufacture or have
manufactured Product within the GSK Territory for use or sale outside of the
GSK Territory.

 

ARTICLE III.

GOVERNANCE

 

3.1.                    Steering Committee. The Parties shall establish a joint steering
committee (the “JSC”) consisting of an equal number of representatives
of senior management from each Party, each such representative having the
authority to act on behalf of the Party such individual represents, the exact
number of which shall be as the Parties may agree, from time to time. Initially,
the JSC shall consist of six (6) individuals; three (3) of whom shall
be nominated by Sepracor; and three (3) of whom shall be nominated by GSK.
Any member of the JSC may designate a substitute to attend and perform the
functions of that member at any meeting of the JSC. Each Party may, with the
consent of the other Party, such consent not to be unreasonably withheld or
delayed, invite non-member, non-voting representatives of such Party to attend
meetings of the JSC. Each Party shall on an alternate year basis designate the
chairperson and the other Party shall designate the secretary of the JSC. The
initial chairperson shall be designated by GSK; and the initial secretary shall
be designated by Sepracor. The JSC shall perform the following
responsibilities:

 

(a)           oversee the overall strategy for the development
(if any) and commercialization of the Product in the GSK Territory;

 

(b)           facilitate communication between the two Parties
and provide a forum to review any development, regulatory, manufacturing and
commercialization matters pertaining to the Product;

 

 

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(c)           provide a forum for communication of GSK’s
activities in the GSK Territory, and Sepracor’s and Third Party licensees’
activities in the Sepracor Territory, with respect to the Product;

 

(d)           review any Regulatory Authority requirements for
Required Studies;

 

(e)           undertake a bi-annual (two times per year)
review and comparison of the status of the Development Plan (if any) and
Commercialization Plan, including, without limitation the applicable timelines,
and provide direction to the conduct of the Development Plan and
Commercialization Plan, as necessary;

 

(f)            review and approve the proposed Development Plan
and any fundamental amendments or modifications thereto;

 

(g)           review any Sepracor Studies which are planned to
be conducted in the GSK Territory, provided that the extent of such review
shall be limited to a brief description of the Sepracor Study, including the
location(s) and primary purpose of such study, and shall not include a review
of the protocol or investigator brochure for such study;

 

(h)           review and approve the first proposed Core
Campaign Product Strategy and any subsequent versions which are a material
change of strategy or visuals, proposed by GSK for the GSK Territory and
discuss any potential benefits from synergies of such activities in the GSK
Territory with efforts in the Sepracor Territory;

 

(i)            review and approve any additional brand names
and Other Trademarks, subject to Article XIII;

 

(j)            coordinate, oversee and delegate the activities
of any Subcommittees established pursuant to Section 3.2 of this
Agreement;

 

(k)           in accordance with Section 3.2, resolve
disputes, disagreements and deadlocks unresolved by any Subcommittees
established pursuant to Section 3.2 of this Agreement; and

 

(l)            perform 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.

 

3.2.                    Subcommittees. From time to time, the JSC may establish subcommittees to oversee
particular projects or activities within the scope of authority of the JSC, as
it deems necessary or advisable (each, a “Subcommittee”). Each
Subcommittee shall consist of such number of representatives of each Party as
the JSC determines is appropriate from time to time. Each Subcommittee shall
meet with such frequency as the JSC shall determine. All decisions of each
Subcommittee shall be made by unanimous vote or written consent, with Sepracor
and GSK each having, collectively, one vote in all decisions. If, with respect
to a matter that is subject to a Subcommittee’s decision-making authority, the
Subcommittee cannot reach unanimity, the

 

 

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matter shall be referred to the JSC, which shall resolve such matter in
accordance with Section 3.4. The Parties envisage that the JSC will
establish Subcommittees shortly after the Effective Date to oversee each of the
following areas: (i) regulatory matters; (ii) manage transition
activities; (iii) advise on optimum commercial strategies; and (iv) supply
matters. If one Party expressly requires that a Subcommittee be appointed, then
it will be promptly established by the JSC.

 

3.3.                    Meetings. All JSC and Subcommittee meetings shall be as often as the members may determine,
but in any event JSC meetings shall occur not less than twice per calendar year.
Such meetings may be held in person, or any means of telecommunications or
video conference, as the members deem necessary or appropriate; provided, however, that at least one JSC meeting per year
shall be held in person and the location of such in person meeting shall
alternate between Sepracor’s and GSK’s offices. A quorum for JSC meetings shall
be four (4) members, with at least two (2) members from each Party.

 

3.4.                    Decision-making of Joint Steering Committee.

 

(a)           The JSC may make decisions with respect to
any subject matter that is subject to the JSC’s decision-making authority or
within the purview of any other Subcommittee organized as part of this
Agreement. Except as expressly provided in this Agreement, all decisions of the
JSC shall be made by unanimous vote or written consent, with Sepracor and GSK
each having, collectively, one vote in all decisions. The JSC shall use
reasonable efforts to resolve any disputes concerning the matters within its
roles and functions or otherwise referred to it.

 

(b)           If, with respect to a matter that is subject to
the JSC’s decision-making or oversight authority, the JSC cannot reach
consensus within fifteen (15) days after it has met and attempted to reach such
consensus or the Parties cannot reach consensus on whether the JSC has
decision-making authority regarding a matter within fifteen (15) days after
such matter was first raised by either Party, the dispute in question shall be
referred to the Chief Executive Officer of Sepracor and the President,
Pharmaceuticals Europe of GSK (collectively, the “Senior Executives”),
for resolution. The Senior Executives shall use reasonable efforts to resolve
the matter referred to them with fifteen (15) days of such referral.

 

(c)           If the Senior Executives cannot resolve the
matter in accordance with Section 3.4(b), matters in dispute shall be
finally determined as follows:

 

(i)            all regulatory matters shall be finally
determined by the President, Pharmaceuticals Europe of GSK, except as to matters
otherwise more specifically discussed in Sections 4.2(b) and (c), which
shall be finally determined by the Chief Executive Officer of Sepracor;

 

(ii)           all commercialization issues (except as to
matters otherwise more specifically discussed in Sections 5.7 and 6.2) shall be
finally determined by the President, Pharmaceuticals Europe of GSK;

 

 

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(iii)          all matters regarding the Developmental Studies
to be conducted by GSK (except as to matters otherwise more specifically
discussed in Section 5.7) shall be finally determined by the President,
Pharmaceuticals Europe of GSK; and

 

(iv)          all matters regarding Sepracor Studies shall be
finally determined by the Chief Executive Officer of Sepracor.

 

(d)           For all purposes under this Agreement, any
decision made pursuant to this Section 3.4 shall be deemed to be the
decision of the JSC.

 

(e)           Neither Party will exercise its right to finally
resolve a dispute in accordance with this Section 3.4 in a manner that
excuses such Party from any of its obligations specifically enumerated under
this Agreement.

 

(f)            Notwithstanding this Section 3.4, any
dispute regarding the interpretation of this Agreement or any alleged breach of
this Agreement will be resolved in accordance with the terms of Article 18.

 

3.5.                    Minutes. Minutes for each of the JSC meetings shall be drafted by the secretary
of the meeting and sent to the chairperson of the applicable committee for
comment promptly after each such meeting (but in no event more than thirty (30)
days). All actions noted in the minutes are to be reviewed and approved at
subsequent meetings of the JSC; provided, that
if the Parties cannot agree as to the content of the minutes, such minutes will
be finalized to reflect such disagreement.

 

3.6.                    Expenses. Each Party shall bear all its own costs, including expenses incurred
by the members nominated by it in connection with their activities as members
of the JSC.

 

3.7.                    Alliance Managers. Promptly after the Effective Date, each Party
shall appoint an individual to act as the alliance manager for such Party (the “Alliance
Manager”). Each Alliance Manager who is not otherwise a member of the JSC
shall thereafter be permitted to attend meetings of the JSC. The Alliance
Managers shall be the primary contact for the Parties regarding the activities
contemplated by this Agreement and shall facilitate all such activities
hereunder. Each Party may replace its Alliance Manager with an alternative
representative at any time with prior written notice to the other Party. The
Alliance Managers shall not, in any manner, take over the role of the JSC and
shall not have any rights, powers or discretion except as expressly granted to
the Alliance Managers hereunder. In no event shall the Alliance Managers have
any power to modify or amend this Agreement

 

 

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ARTICLE IV.

TRANSITION ACTIVITIES

 

4.1.                    Current Status; General. Prior to the Effective Date, Sepracor (alone
or with Third Parties) has conducted pre-clinical and clinical studies of the
Product, and on 23rd July 2007 submitted a MAA for the
Product to the EMEA for review under the centralized procedure.

 

4.2.                    Regulatory Matters.

 

(a)           During the Transition
Period, Sepracor shall retain all right, title and interest in and to all
Marketing Authorization Applications for the Product in the GSK Territory,
subject to the licenses granted to GSK pursuant to this Agreement.

 

(b)           During the Transition Period, Sepracor shall
support the MAA filed with the EMEA on 23rd July 2007 and use
its Commercially Reasonable Efforts to obtain approval for the MAA from the
EMEA for the Product with labeling consistent with, or less restrictive than,
the Target Label. Sepracor shall be responsible for liaising with and managing
all interactions with the EMEA in relation to the Product in connection with
such MAA. Sepracor shall provide GSK with reasonable advance notice of any
meetings with the EMEA (including any oral hearings), if practicable, and GSK
shall have the right, but not the obligation, to attend and participate in such
meetings where legally permissible. In addition, Sepracor shall promptly
provide GSK with copies of all material correspondence from the EMEA (including
any assessment reports) related to the Product in the GSK Territory, and shall
provide GSK with draft copies of all material correspondence intended for the
EMEA (including any response documents) for review and agrees to consider in
good faith any prompt comments GSK may have with respect to any such
regulatory filings or interactions.

 

(c)           During the Transition Period, Sepracor shall
remain responsible for liaising with and managing all interactions with other
Regulatory Authorities in relation to the Product in connection with a MAA for
any country in the GSK Territory, except for those countries where the Parties
have mutually agreed to earlier transfer responsibility to GSK. Sepracor shall
not however initiate the filing of any new MAA, or initiate any interaction,
with any Regulatory Authorities (other than the EMEA) within the GSK Territory
related to the Product without the prior approval of GSK. Sepracor shall
provide GSK with reasonable advance notice of any meetings with any such
Regulatory Authority (including any oral hearings) about the Product, if
practicable, and GSK shall have the right, but not the obligation, to attend
and participate in such meetings where legally permissible. In addition,
Sepracor shall promptly provide GSK with copies of all material correspondence
from any such Regulatory Authorities (including any assessment reports) related
to the Product in the GSK Territory, and shall provide GSK with draft copies of
all material correspondence intended for any such Regulatory Authorities
(including any response documents) for review and agrees to consider in good
faith any comments GSK may have with respect to any such regulatory
filings or interactions with respect to the Product. Where the Parties have
agreed to transfer responsibility

 

 

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to GSK for any country in the GSK Territory before the expiration or
termination of the Transition Period, Sections 4.2(d), 5.1 and 5.14 shall apply
mutatis mutandis.

 

(d)           Subject to obtaining all required consents or
approvals from all relevant Regulatory Authorities, as soon as reasonably
practicable following the expiration or termination of the Transition Period,
Sepracor shall transfer to GSK all Marketing Approvals and/or MAAs for the
Product in the GSK Territory (except for DMFs), with Sepracor to invoice GSK
for one-half of any out-of-pocket costs for so doing. In addition, Sepracor
agrees to promptly execute, acknowledge and deliver such further instruments,
and to do all such other reasonable acts, as may be necessary in order to
carry out the transfer of such Marketing Approvals and/or MAAs, as the case may be
related to the Product in the GSK Territory.

 

(e)           Within [**] following the Effective Date, GSK
and Sepracor shall provide for review by the JSC an outline showing in
reasonable detail GSK’s provisional plans for filing Marketing Authorization
Applications and obtaining Marketing Approvals in the GSK Territory, with a
particular focus on the overall strategy and timeline of material submissions
and filings (if any) during the Transition Period and how the various
regulatory interactions will be managed during the Transition Period.

 

4.3.                    Required Studies (EMEA). In the event that the EMEA requires or
requests in writing that Required Studies (other than those already initiated
by Sepracor as of the Effective Date) to be performed as a condition of, or in
connection with, granting Marketing Approval, GSK shall have the right, at its
absolute discretion, to perform or have performed such Required Studies at
GSK’s expense. If GSK decides to perform or have performed such Required
Studies, the JSC will review and discuss which of the Parties should undertake
such Required Studies. Sepracor will provide all reasonable incidental
assistance to GSK and/or its Affiliates if GSK wishes to undertake the Required
Studies itself, or via its Affiliates or any sub-contractor. Sepracor shall
provide such assistance free of charge, unless otherwise agreed in writing by
GSK. In the event that GSK notifies Sepracor that it does not desire to incur
such expense, at any time after such notification Sepracor may, but shall not
be obligated to, terminate the Agreement with respect to the European Union
(but not the rest of the GSK Territory) upon sixty (60) days written notice. For
the avoidance of doubt, a decision not to pursue such Marketing Approval by GSK
shall not be deemed a failure to exercise its Commercially Reasonable Efforts.

 

In
the event that Sepracor believes that the use of the results of any Required
Study could be of material benefit to Sepracor in the Sepracor Territory, for
example, if the Required Study were the development of a [**] of the Product,
the Parties shall [**], taking into account the costs of any assistance which may have
been provided by Sepracor under this Section.

 

4.4.                    Reporting: Adverse Drug Reactions. During the Transition Period, Sepracor shall,
in accordance with Section 5.14, be responsible for filing all reports
required to be filed in order to maintain any IND, MAA and/or any Marketing
Approvals filed or granted for the Product in the GSK Territory, including
reporting of adverse drug experiences.

 

 

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ARTICLE V.

REGULATORY MATTERS AND DEVELOPMENT ACTIVITIES

 

5.1.                 Regulatory Matters.

 

(a)           Following the Transition
Period and for the Term of this Agreement, GSK shall retain all right, title
and interest in and to all Marketing Authorization Applications and Marketing
Approvals for the Product in the GSK Territory, subject to the licenses granted
to Sepracor pursuant to Section 5.12 and the assignment and transfer of
such Marketing Authorization Applications and Marketing Approvals pursuant to Section 15.2(b).

 

(b)           Upon expiration or termination of the Transition
Period, GSK shall have sole responsibility for liaising with and managing all
interactions with Regulatory Authorities in relation to the Product in the GSK
Territory in connection with any and all regulatory filings. GSK shall provide
Sepracor with reasonable advance written notice of any meetings with the
Regulatory Authorities related to the Product in Major Markets of the GSK
Territory and Sepracor shall have the right, but not the obligation, to attend
and participate in such meetings in the Major Markets where legally permissible.
Notwithstanding the foregoing, GSK shall provide Sepracor with a copy of any
regulatory submission and other substantive written material to be sent to any
Regulatory Authority in the GSK Territory for review and agrees to consider in
good faith any prompt comments Sepracor may have with respect to any such
regulatory filings or interactions.

 

(c)           Sepracor shall provide GSK with all reasonable
assistance, in a timely manner, to support GSK’s activities in seeking and
maintaining Market Approval in the GSK Territory. Without limiting the above,
Sepracor accepts that such assistance may extend to obtaining Certificates
of Pharmaceutical Product on behalf of GSK.

 

(d)           Following the Transition Period GSK shall report to the JSC the overall strategy and timeline of all material submissions and filings with
any Regulatory Authority relating to the Product in the GSK Territory.

 

(e)           Each Party shall promptly notify the other Party
in writing of any material changes or
material issues that may arise in connection with any IND, MAA and/or any
Marketing Approvals in any country within their respective territories.

 

(f)            Sepracor acknowledges that in order for
Marketing Approval to be obtained in many countries within the GSK Territory
but outside of the European Union, it will be necessary for GSK to obtain a
Certificate of Pharmaceutical Product from a suitable reference country, either
in the GSK Territory or in the Sepracor Territory. Sepracor agrees to provide
GSK will all reasonable assistance in obtaining such Certificate of
Pharmaceutical Product, and without limiting the foregoing, agrees in
particular to:

 

 

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(i)            work with GSK to establish a supply route for
the Product which is capable of supporting the issue of a Certificate of
Pharmaceutical Product from a suitable reference country;

 

(ii)           generate, if not already available, at GSK’s
expense, 30/75 stability data for the Product using the supply route
established under Section 5.1(f)(i) above;

 

(iii)          generate sufficient number of Product samples,
at GSK’s expense, to support GSK’s activities in seeking and maintaining Market
Approval in the GSK Territory.

 

(g)                           Sepracor further acknowledges that until a
supply route has been established under Section 5.1(f)(i), GSK will be
unable to provide detailed regulatory or
commercialization plans, where required under this Agreement, in respect of
such countries where a Certificate
of Pharmaceutical Product is required.

 

5.2.                 Regulatory Plan. Within ninety (90) days following the expiry
or termination of the Transition Period, GSK shall provide for review by the
JSC an outline plan showing GSK’s plans for filing Marketing Authorization
Applications and obtaining Market Approval in the GSK Territory. The regulatory
plan shall include a description of material regulatory activities to be
undertaken during the following [**] years, including but not limited to,
planned tasks and timelines for the conduct of the regulatory activities with
respect to all matters necessary to obtain Marketing Approval for the Product
in each Major Market of the GSK Territory.

 

5.3.                 Required Studies (Non-EMEA). In the event that any Regulatory Authority in
the GSK Territory (other than the EMEA) requires or requests in writing that
Required Studies (other than those already initiated by Sepracor as of the
Effective Date) be performed as a condition of, or in connection with, granting
Marketing Approval, [**] whether or not to conduct such Required Studies and
continue to [**] in such country. If [**] shall undertake such Required Studies
[**]. In the event that [**] does not [**], in relation to countries other than
those within the European Union or for which a date for accession to the
European Union has been agreed, Sepracor may, but shall not be obligated to,
terminate the Agreement with respect to the particular country or countries
where such Regulatory Authority has required such clinical trials and [**], and
the Agreement shall remain in full force and effect in the rest of the GSK
Territory. For the avoidance of doubt, a [**] shall not be deemed a failure to
exercise its Commercially Reasonable Efforts.

 

In
the event that [**] to undertake such Required Study, and Sepracor believes
that the use of the results of any Required Study could be of material benefit
to Sepracor in the Sepracor Territory, for example, if the Required Study were
the development of a [**] of the Product, the Parties [**].

 

5.4.                 Additional Development Activities of GSK. In addition to the studies permitted in
Sections 4.3 and 5.3, and in accordance with the then applicable approved
Development Plan, GSK shall have the right, but not the obligation, to
undertake, at GSK’s sole

 

 

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expense, Commercialization Studies in the GSK Territory in support of GSK’s
commercialization of the Product. GSK shall inform Sepracor pursuant to Section 5.6
of its intention to pursue such Commercialization Studies prior to their
initiation.

 

5.5.                 Investigator Sponsored Clinical Study. For the avoidance of doubt, GSK shall be free,
at GSK’s sole expense, to provide financial or in-kind support to clinical
studies of the Product that are sponsored and conducted by a Third Party and
undertaken in the GSK Territory (“Investigator Sponsored Clinical Studies”). GSK shall inform Sepracor
pursuant to Section 5.6 of its intention to provide financial or in-kind support to such Investigator Sponsored Clinical Studies
prior to providing such support.

 

5.6.                 Development Plan. In the event that GSK plans during the Term of
this Agreement to undertake any Required Studies or Commercialization Studies,
or to support any Investigator Sponsored Clinical Studies in the GSK Territory,
GSK shall generate a Development Plan which shall be presented promptly to the
JSC for review to ensure that the Development Plan takes into account and is
consistent with the global branding strategy for the Product. The Development
Plan shall be supplemented, modified and updated regularly by GSK as and when
additional relevant data and information become available, but in any event not
less frequently than annually. Required Studies, Commercialization Studies and
support for Investigator Sponsored Clinical Studies shall not commence until
such studies have been presented to the JSC for review and written notice of
the studies sent to Sepracor. GSK shall keep the JSC advised on a timely basis
of the progress of each such study.

 

5.7.                 Sepracor’s Review and Final Approval. Notwithstanding anything to the contrary
contained in this Agreement, in the event that Sepracor in good faith believes
that any Development Studies GSK wishes to undertake or sponsor pursuant to
Sections 5.3 or 5.4, or any Investigator Sponsored Clinical Studies GSK wishes
to support pursuant to Section 5.5 has a [**], Sepracor may provide
written notice to GSK within [**] of such studies being presented to the JSC,
requesting that GSK shall not perform such Developmental Studies and/or
shall not support such Investigator Sponsored Clinical Studies.

 

(a)           If such notice is received by GSK within the
[**] period, GSK shall not commence such Developmental Study or support such
Investigator Sponsored Clinical Study until mutual agreement or resolution of
any dispute has been achieved in respect of the performance of such study.

 

(b)           If GSK disputes the assessment of the [**], GSK may refer
the
dispute to the Senior Executives. The Senior Executives shall negotiate in good
faith to resolve the dispute within [**], or such longer period as mutually
agreed. If the Senior Executives
are unable to resolve the dispute within such time period, [**].

 

(c)           For the avoidance of doubt, if Sepracor does not
provide such written notice with the above stated period, Sepracor’s approval
will be deemed to have been received.

 

 

CONFIDENTIAL

 

5.8.                 Development Activities of Sepracor in the GSK
Territory. Sepracor shall have
the right, but not the obligation, to undertake future development within the
GSK Territory in support of the commercialization of Product in the Sepracor
Territory and the right, but not the obligation, to undertake future
development within the GSK Territory of Excluded Products. However, with
respect to Sepracor Studies, Sepracor shall generate a Sepracor Development
Plan (the “Sepracor Development Plan”) which shall be presented promptly
to the JSC for review to ensure that the Sepracor Development Plan takes into
account, and is not inconsistent with, the branding strategy for the Product in
the GSK Territory. The Sepracor Development Plan shall include reasonably
detailed information regarding all such activities. It is acknowledged however
that in respect of Sepracor Studies not directly related to the Product, the
level of information that will be required to be disclosed to enable
appropriate review may be limited (except in respect of matters relating to
safety).

 

5.9.                 Conduct of Activities. The Parties shall carry out all pre-clinical
and clinical studies related to the Product that they respectively undertake in
the GSK Territory in compliance with all applicable laws, rules and regulations
and in accordance with good scientific and clinical practices, applicable under
the laws and regulations of the relevant country in the GSK Territory.

 

5.10.               Drug Master File.

 

(a)           Responsibility for Maintaining. Notwithstanding Section 5.1(a), Sepracor shall
be responsible for filing and maintaining Drug Master Files (“DMF”)
relating to the Product and Active Ingredient contained in the Product, where
such DMF is either required by a Regulatory Authority or it is determined by
the JSC that DMF submission is preferable to incorporation of the DMF
information in the applicable MAA. Sepracor shall file and maintain such DMFs
in its own name, and/or in the name of its relevant suppliers, and shall permit
GSK, its Affiliates and Sublicensees, to cross-reference such DMFs in their
regulatory filings for the Product in the GSK Territory.

 

(b)           Costs. Responsibility for the costs of filing and maintaining such DMFs shall
be Sepracor’s.

 

(c)           Closed Portions. Notwithstanding any other provisions of this
Agreement, the definitions of “Data” and “Sepracor Know-How”
shall not include the closed portions of any such DMF, nor any information
contained in any such portions of the DMF and thus, notwithstanding any other
provision of this Agreement, Sepracor shall have no obligation to disclose to
GSK or any of its Affiliates or Sublicensees the closed portions of such DMFs
or any information contained therein. For the avoidance of doubt, Regulatory
Authorities in the GSK Territory shall have the right to access the entire DMF,
including any closed portions.

 

5.11.               Exchange of Data and Know-How.

 

(a)           By Sepracor. Subject to the terms and conditions of this Agreement, Sepracor shall promptly make available to GSK all relevant Sepracor
Know-How relating to the

 

 

CONFIDENTIAL

 

Product, including all Data from any and all clinical trials and
preclinical studies for the Product that are Controlled by Sepracor as of the
Effective Date or that will be obtained by Sepracor thereafter, subject in each
case to Section 5.10. Sepracor shall also use its Commercially Reasonable
Efforts to provide to GSK any Third Party manufacturer’s know-how which is
necessary for GSK to obtain Marketing Approval in the GSK Territory,

 

(b)           New Data. Notwithstanding Sections 5.10, 5.11(a) and 5.12, in the event that GSK
requires information relating to the Bulk Tablets in addition to that provided
by or otherwise readily available to Sepracor to support GSK’s regulatory
filings for Product in the GSK Territory, Sepracor shall conduct, at GSK’s
expense, such work as is necessary to produce the necessary chemistry,
manufacturing and controls (“CMC”) information or other regulatory
documentation reasonably required to support such regulatory filings (provided
that GSK shall be responsible for, at its expense, any additional clinical
trial work required for such filings). The obligation of Sepracor to provide
such CMC data or other regulatory documentation reasonably required to support
such regulatory filings will include, without limitation, CMC information or
other regulatory documentation reasonably required to support such regulatory
filings beyond what was required for the U.S.A. regulatory approval, to support
initial as well as filed regulatory submissions for Product in the GSK
Territory, support on an ongoing basis to deal with regulatory questions,
provision of on-going stability data, batch analysis, etc. for license
renewals, CMC data for variations, any response to questions relating to
renewals and variations, as well as any other data required to meet any
regulatory inspection requirements. For the avoidance of doubt, Sepracor’s
obligations do not extend to questions regarding finishing operations performed
by GSK.

 

(c)           Provision of Data to JSC. Upon request by the JSC, GSK and Sepracor
shall promptly provide the JSC with summaries in reasonable detail of all Data
generated or obtained in the course of the performance of activities under the
Development Plan or the Sepracor Development Plan respectively. For the avoidance
of doubt, this obligation shall not extend to provision of data not related to
the Product and only relating to Excluded Products.

 

5.12.               Sharing of Regulatory Filings. Without limiting Section 5.11 above, and
without prejudice to the terms of the Supply Agreement, GSK and Sepracor shall
permit the other to access, and shall provide the other Party with sufficient
rights to reference and use in association with exercising its rights and
performing its obligations under this Agreement, all of such Party’s, its
Affiliates’ and Sublicensees’ Data, regulatory filings and material regulatory
communications associated with any submissions of INDs, MAAs, Marketing
Approvals or other approvals for the Product in the GSK Territory and in the
Sepracor Territory, respectively. It is understood that such rights and access
shall be limited respectively to Sepracor’s, its Affiliate’s and sublicensees’
commercialization of the Product in the Sepracor Territory and to GSK’s, its
Affiliate’s and Sublicensee’s commercialization of the Product in the GSK
Territory.

 

5.13.               Regulatory Co-operation. Without limiting Section 5.11 above, in the
event that either Party receives enquiries from a Regulatory Authority in their
respective territory, regarding filings or communications made, or activities
being undertaken in the other Party’s

 

 

CONFIDENTIAL

 

respective territory, the other Party shall
provide all reasonable co-operation to enable the original Party to respond to
the Regulatory Authority’s enquiries.

 

5.14.               Reporting: Adverse Drug Reactions.

 

(a)           Sepracor and GSK shall be responsible for filing all reports required to
be filed in order to maintain any IND, MAA and/or any Marketing Approvals
granted for the Product in the Sepracor Territory or the GSK Territory, respectively,
including reporting of adverse drug experiences; provided,
however, that during the Transition Period, Sepracor shall be
responsible for such filings in the GSK Territory.

 

(b)           The Parties shall be responsible to ensure that their respective Affiliates
and sublicensees comply with all such reporting obligations.

 

(c)           The Parties will exchange all pharmacovigilance relevant information
pursuant to a separate pharmacovigilance agreement to be executed within ninety
(90) days of the Effective Date (the “Pharmacovigilance Agreement”). The
standards set forth in the Pharmacovigilance Agreement shall be no less
stringent than those set forth in the ICH Guidelines and shall provide, among
other things, that:

 

(i)            The Parties will comply with regulatory requirements
for the reporting of safety data in accordance with standards stipulated in the
ICH Guidelines, and all applicable regulatory and legal requirements regarding
the management of safety data;

 

(ii)           The Parties will exchange relevant safety data
within appropriate timeframes and in an appropriate format to enable them to
meet both expedited and periodic local and international regulatory reporting
requirements and to facilitate appropriate safety reviews; and

 

(iii)          Sepracor shall be the holder of the world-wide
safety database for all adverse events.

 

(d)           Furthermore, Sepracor commits to the establishment of pharmacovigilance
systems in compliance with applicable regulatory requirements and to
demonstrate comprehensively those systems, particularly their system for
producing PSURs, to GSK prior to the end of the Transition Period. In the event
that GSK has any reasonable concerns after such demonstration, GSK and Sepracor
will co-operate in good faith to resolve such concerns.

 

(e)           Prior to the end of the Transition Period, Sepracor shall establish a
separate pharmacovigilance agreement with each Third Party to which Sepracor
has granted rights to promote, market and sell the Product in the Sepracor
Territory, or part thereof. In the event that after the Effective Date,
Sepracor grants to any Third Party rights to promote, market and sell the
Product in the Sepracor Territory, or any part thereof, Sepracor shall enter
into a separate pharmacovigilance agreement in connection with such grant. The
standards set forth in

 

 

CONFIDENTIAL

 

such pharmacovigilance agreement(s) shall be not less stringent than as
provided for under (c) above.

 

5.15             Marketing Approval Challenge. In the event that Sepracor or GSK becomes
aware of an actual or threatened challenge to the data exclusivity rights
relating to any Marketing Approval within the GSK Territory, that Party shall
promptly notify the other Party in writing. The Parties shall meet to discuss a
coordinated response to such challenge prior to any action being taken. Neither
Party shall be required by the other Party to take any action in relation to
such challenge, which in its absolute discretion it does not want to take. Each
Party shall be entitled, without obligation, to
independently initiate proceedings or take other appropriate action in relation
to such challenge at its own expense. The Party conducting such action shall
have full control over its conduct, including settlement thereof; provided, however, that the Party conducting such action may
not settle any such action, or make any admissions or assert any position in
such action, in a manner that would materially adversely affect the rights or
interests of the other Party whether within or outside the jurisdiction in
which the action is brought, without the prior written consent of the other
Party, which consent shall not be unreasonably withheld or delayed.

 

ARTICLE
VI.

COMMERCIALIZATION, MARKETING AND PROMOTION 

 

6.1.                 Commercialization Plan. The parties understand that the level of
specificity of the Commercialization Plan will vary according to the stage of
development of the Product relative to Marketing Approval and/or determination
of pricing in the Major Markets. However, the following shall apply to the
development, review and approval of such Commercialization Plan:

 

(a)           On an annual basis, GSK shall prepare and deliver to the JSC, for its
review, a proposed plan for the marketing, sale, advertising, and sales
activities (including pre-launch market development and market research) for
the Product in the GSK Territory. For the Major Markets, the plan will outline
in as much detail as practicable given the stage of commercialization of the
Product annual [**]. (The first such plan being the “Initial
Commercialization Plan” and such later plans, including any amendments to
the Initial Commercialization Plan, as amended from time to time, herein after
referred to as the “Commercialization Plan”). The Initial
Commercialization Plan shall be delivered on or before [**].

 

(b)           The Commercialization Plan shall be supplemented, modified and updated
regularly by GSK as and when additional relevant data and information become
available, but in any event not less frequently than annually. Any fundamental
modifications made to the Commercialization Plan shall be delivered to the JSC
for review promptly following such modifications, even when such may occur
between regularly scheduled meetings.

 

 

CONFIDENTIAL

 

6.2.                 Marketing and Advertising Campaign. GSK shall provide the JSC with a detailed overview of the first proposed Core
Campaign Product Strategy and any subsequent versions which are a material
change of strategy or visuals (and any local core marketing materials that fall
outside the Core Campaign Product Strategies) to be used in the GSK Territory,
which the JSC shall review to ensure that the Core Campaign Product Strategy shall be
consistent with the global branding strategy for the Product. Notwithstanding anything to the contrary
contained in this Agreement, in the event that Sepracor in good faith believes
that any part of the proposed Core Campaign Product Strategy has a reasonable
likelihood of materially adversely affecting the volume of net sales in the
Sepracor Territory, Sepracor may provide written notice to GSK within [**] of
such Core Campaign Product Strategy
being
presented to the JSC requesting that such part of the Core Campaign Product Strategy not be
implemented.

 

(a)           If such notice is received by GSK within the [**] period, GSK shall not
implement such part of the core marketing and advertising campaign until mutual
agreement or resolution of any dispute has been achieved in respect of the use
of the proposed core marketing and advertising campaign.

 

(b)           If GSK disputes the assessment of the reasonable likelihood of material
adverse effect, GSK may refer the dispute to the Senior Executives. The Senior
Executives shall negotiate in good faith to resolve the dispute within [**]. If the Senior Executives are unable to resolve
the dispute within such time period, Sepracor’s decision shall be binding.

 

(c)           For the avoidance of doubt, if Sepracor does not provide such written
notice with the above stated period, Sepracor’s approval will be deemed to have
been received.

 

6.3.                 Responsibilities of GSK under the
Commercialization Plan. Other
than manufacturing of the Product, GSK shall have the exclusive right to engage
in, and shall be solely responsible for, all activities set forth in the
Commercialization Plan and [**]. As part of the Commercialization Plan, GSK
shall:

 

(a)           use its Commercially Reasonable Efforts to commercialize the Product in
the GSK Territory, including seeking approval from relevant Regulatory
Authorities regarding price and reimbursement of the Product in the GSK
Territory;

 

(b)           use its Commercially Reasonable Efforts to perform pre-commercialization
analysis, planning, market preparation and related marketing activities in the
GSK Territory;

 

(c)           use its Commercially Reasonable Efforts to carry out the distribution,
marketing and sales of the Product in the GSK Territory;

 

(d)           incur at least an aggregate of [**] Dollars ($[**]) in support of
pre-launch marketing efforts allocated amongst all the countries in the GSK
Territory;

 

 

CONFIDENTIAL

 

(e)           conduct the Commercialization Plan in compliance with all applicable
laws;

 

(f)            provide suitable storage and handling in
accordance with the labeling and specifications for the Product and other
appropriate facilities and services as needed for the storage and continuous
sale and distribution of the Product throughout the GSK Territory;

 

(g)           provide all medical information services for the Product in the GSK
Territory, which may include, telephone hotlines, informational fax programs,
mail response programs;

 

(h)           administer and pay any chargebacks, rebates, administrative service fees
and other discounts and fees with respect to the Product in the GSK Territory
which from time to time GSK may agree to give or may be required under
applicable laws to give to payors or purchasers of the Product;

 

(i)            use its Commercially Reasonable Efforts to
adequately train sales representatives;

 

(j)            use its Commercial Reasonable Efforts to
undertake an analysis of the intellectual property position in any country of
the GSK Territory where a launch of the Product is anticipated, and where
deemed necessary by GSK, develop Other Trademarks for review and approval by
the JSC;

 

(k)           use Commercially Reasonable Efforts to conduct its commercialization of
the Product in accordance with the Commercialization Plan ; and

 

(l)            [**] after the end of each Calendar Year,
furnish Sepracor with reasonably detailed summary written reports on all
activities conducted by GSK under the Commercialization Plan during such
calendar year. Information shall be provided on a country by country basis for
the Major Markets.

 

6.4.                 Failure to Launch.

 

(a)           For the avoidance of doubt and subject to the other terms in this
Section 6.4, the Parties hereby accept that the failure to launch the Product
in any country or countries shall not, per se, be
deemed a breach of GSK’s obligations to use Commercially Reasonable Efforts to
commercialize the Product. Where GSK’s decision not to launch in any specific
country is founded on GSK’s good faith belief that the Product is not
commercially viable in such country, for example because of pricing and
reimbursement concerns or that the launch of the Product in such country would
adversely affect the amount of Net Sales that would be achieved in the GSK
Territory, GSK shall not be required to and Sepracor shall not have the right
to terminate this Agreement in such country, except as described in Section
6.4(b). However, for the avoidance of doubt: (i) GSK’s good faith belief must
be supported by actual interactions with Regulatory Authorities or other good
faith objective evidence which supports

 

 

CONFIDENTIAL

 

GSK’s conclusions; (ii) GSK must share its financial assessment, in
reasonable detail, setting forth why the Product is not in good faith deemed
commercially viable; and (iii) the JSC is to be notified and have the
opportunity to review any such decision not to launch the Product in a country.

 

(b)           Nothwithstanding anything else herein, where (i) the GSK decisions in
Section 6.4(a) at any time combine so that GSK has decided that it will not
launch in [**], or (ii) GSK has failed to launch in [**] following EMEA
approval, Sepracor has the right to terminate this Agreement, on a
country-by-country basis, in [**] by giving GSK sixty (60) days written notice
to that effect at any time thereafter, provided that GSK has not in the
interim, prior to receipt of notice of termination from Sepracor, notified
Sepracor that it plans to launch in [**].

 

6.5.              Price and Reimbursement. GSK shall be solely responsible for any
decisions and negotiations with relevant Regulatory Authorities regarding price
and reimbursement of the Product in the GSK Territory. Sepracor shall be fully
and contemporaneously updated of on all efforts by GSK with respect to pricing
and reimbursement matters provided that the disclosure of such information is
for information purposes only.

 

6.6.              Booking Sales. GSK will book all sales for the Product in the GSK Territory.

 

6.7.              Sepracor Support. Sepracor shall provide GSK with reasonable
assistance, in a timely manner, to support GSK’s activities in commercializing
the Product in the GSK Territory, including but not limited to provision of a
representative set of Sepracor Materials (as defined below). Sepracor Materials
shall mean copies of advertising, promotional, educational and communication
materials, produced by Sepracor for marketing, advertising and promotion of
Product for distribution to Third Parties (including medical professionals) and
to Sepracor’s sales forces in the United States, together with programs related
to patient education, physician education and disease management programs.

 

ARTICLE
VII.

PAYMENTS

 

7.1.                 Initial License Fee. In consideration for the licenses granted
hereunder under Sepracor Patents and Sepracor Know-How, GSK shall pay to
Sepracor an initial license fee in the amount of Twenty Million US Dollars ($20,000,000)
within five (5) Business Days following
GSK’s receipt of an invoice for such license fee in accordance with the payment
provisions of Article VIII. Sepracor intends to deliver to GSK within five (5)
Business Days of the Effective Date such invoice for the license fee. The
initial license fee set forth in this Section shall not be refundable or
creditable against any future milestone payments, royalties or other payments
by GSK to Sepracor under this Agreement.

 

 

CONFIDENTIAL

 

7.2.                 Milestone Payments.

 

(a)           Milestone Payments. In further consideration for the licenses
granted hereunder under Sepracor Patents and Sepracor Know-How, GSK shall pay
to Sepracor the milestone payments set out below following the first
achievement by GSK, or any of its Affiliates or Sublicensees, individually or
in the aggregate, of the corresponding milestone, in accordance with this
Section 7.2 and the payment provisions in Article VIII:

 

	
  Milestone
  Events

  	
   

  	
  Milestone

  Payments

  	
   

  
	
  Centralized
  EMEA approval with new active substance status and Target Label

  	
   

  	
  $

  	
  [**]

  	
   

  
	
  Positive
  [**]

  	
   

  	
  $

  	
  [**]

  	
   

  
	
  Approved
  reimbursement price of €[**] or more per [**]mg tablet in France

  	
   

  	
  $

  	
  [**]

  	
   

  
	
  Approved
  reimbursement price of €[**] or more per [**]mg tablet in Germany

  	
   

  	
  $

  	
  [**]

  	
   

  

 

	
  Sales
  Threshold Milestones

  	
   

  	
  Milestone

  Payments

  	
   

  
	
  First
  achievement of Calendar Year Net Sales of €[**] (2)

  	
   

  	
  $

  	
  [**]

  	
   

  
	
  First
  achievement of Calendar Year Net Sales of €[**]

  	
   

  	
  $

  	
  [**]

  	
   

  
	
  First
  achievement of Calendar Year Net Sales of €[**]

  	
   

  	
  $

  	
  [**]

  	
   

  

 

	
  Total Potential Milestones

  	
   

  	
  Total

  	
   

  
	
  Potential Milestone Events plus Potential Sales Threshold Milestones

  	
   

  	
  $

  	
  135,000,000

  	
   

  
					

 

[**]

 

(2)
For the avoidance of doubt, in the event that, for example, the first time Net
Sales of the Product in the GSK Territory in any Calendar Year reaches €[**],
is the same Calendar Year that Net Sales of the Product in the GSK Territory
reaches €[**] for the first time, Sepracor shall be entitled to a milestone
payment equal to $[**] for such Calendar Year (calculated by [**]).

 

(b)           Reports and Payments. GSK shall notify Sepracor in writing within
thirty (30) days after the achievement of each milestone set out in Section
7.2(a) by GSK, or any of its Affiliates or Sublicensees. GSK shall make
payments within thirty (30) days of receipt of invoice issued by Sepracor
following achievement of such milestone. Any milestone payable by GSK pursuant
to Section 7.2(a) shall be made no more than once with respect to the
achievement of each such milestone and no payment shall be due for a milestone
which is not achieved. The milestone payments set forth in Section 7.2(a) shall
not be refundable and shall not be creditable against future milestone
payments, royalties or other payments to Sepracor under this Agreement.

 

(c)           Target Label Dispute. Any dispute regarding the Target Label shall be
resolved in the following manner:

 

(i)            GSK and Sepracor shall each appoint a [**] (“Company RA Executives”) to meet to
discuss whether the Target Label has been met. If, after [**], the Company RA
Executives are unable to agree about whether the Target Label has been met,
they shall agree upon one additional independent party, unaffiliated with
either party, who is an acknowledged expert in product labeling within the EU
(“Independent RA Expert”). If the Parties are unable to agree on the
selection of an Independent RA Expert within a further [**],

 

 

CONFIDENTIAL

 

either Party may apply to the World Intellectual
Property Organization Arbitration and Mediation Center to seek their
appointment of an Independent RA Expert.

 

(ii)           The Independent RA Expert shall meet with the
Company RA Executives, alone, within [**] of his/her appointment and the group
shall work for up to [**] to agree unanimously upon a conclusion. If the group
is unable to make a unanimous decision in that period of time, then a majority
vote shall prevail.

 

(iii)          All costs of the above procedure to be borne by
the party incurring them, except that the costs related to the Independent RA
Expert are to be jointly and evenly shared.

 

7.3.              Royalty Payments.

 

(a)           Royalty Rate. Subject to the terms and conditions of this Agreement, in further
consideration of the rights granted to GSK under this Agreement, GSK shall pay
to Sepracor royalties at the rates set out below on Calendar Year Net Sales of
the Product in the GSK Territory;

 

	
  Calendar
  Year Net Sales  

  In GSK Territory

  	
   

  	
  Royalty Rate

  	
   

  
	
  On
  the first €[**] of Net Sales of Product in the GSK Territory in each Calendar
  Year

  	
   

  	
  [**]

  	
  %

  
	
  On
  additional Net Sales of Product in the GSK Territory in each Calendar Year
  > €[**] but < €[**]

  	
   

  	
  [**]

  	
  %

  
	
  On
  additional Net Sales of Product in the GSK Territory in each Calendar Year
  > €[**]

  	
   

  	
  [**]

  	
  %

  

 

(b)           Royalty Term. GSK’s obligation to make royalty payments pursuant to Section 7.3(a)
will commence upon the first commercial sale of the Product in the GSK
Territory by GSK, its Affiliates or Sublicensees and will continue on a
country-by-country basis for the Term.

 

(c)           Royalty Rate Reduction. On a country-by-country basis, GSK’s royalty
rate obligation set forth in Section 7(a) shall be reduced by [**]% upon the
earlier occurring of:

 

(i)            Upon the later of (I) the expiration of the last
Valid Claim within a Patent Controlled by Sepracor that would be infringed by
the licensed activities in such country

 

 

CONFIDENTIAL

 

in the absence of the licenses granted hereunder
to GSK, or (II) ten (10) years post first launch in the GSK Territory.

 

(ii)           Upon the total amount of Third Party sales of Generic Products in any
country in the GSK Territory first exceeding [**] percent ([**]%) of the total
sales by GSK, its Affiliates and Sublicensees of Product in such country in any
Calendar Quarter, measured on a unit basis. For the purposes of this Section
7.3(c)(ii), the amount of sales of Products shall be ascertained by reputable
published marketing data for such country (e.g. by reference to Standard Units data collected by IMS) or as otherwise mutually agreed. The term “Generic
Product” refers to a pharmaceutical product, which is marketed by an entity
other than GSK, its Affiliates or its Sublicensees, containing the Active
Ingredient as the single therapeutically active ingredient, in a form and
dosage capable of being prescribed as an alternative to the Product.

 

provided, however, such royalty reduction shall only be
implemented once per country of the GSK Territory.

 

(iii)          Net Sales in countries where a royalty rate reduction is applied
pursuant to Section 7.3(c)(i) or 7.3(c)(ii) shall not be included in the
calculation of Calendar Year Net Sales in GSK Territory for the purpose of
determining royalty rate thresholds pursuant to Section 7.3(a).

 

(iv)          A hypothetical example showing how royalties
would be calculated in a situation where royalties are payable in full in some
countries and at the reduced rate in others, is attached hereto as Schedule 7.3(c).

 

(d)           Reports and Royalty Payment. During the Term of this Agreement, following
the first commercial sale of the Product within the GSK Territory, within [**]
after the end of each Calendar Quarter, GSK shall deliver to Sepracor a report
setting out (on a country by country basis and in the aggregate) Net Sales in
the relevant Calendar Quarter and all exchange rate conversions in accordance
with Section 8.2(b). In addition, in such report GSK shall set out for [**]:

 

(i)            units of the Product sold during the relevant
Calendar Quarter;

 

(ii)           gross sales figure of the Product in the relevant
Calendar Quarter; and

 

(iii)          a summary of deductions made in accordance with
Sections 1.31 and 7.3(c).

 

All
payment amounts due under Section 7.3(a) for such Calendar Quarter shall
accompany such statement.

 

 

CONFIDENTIAL

 

(e)           Limitation on Royalties; Annual Royalty
Reconciliation.

 

(i)            Subject to Section 7.3(e)(ii), in any given
Calendar Year, the amount of the royalties paid hereunder plus the aggregate
price paid by GSK for Bulk Tablets for Product sold in such Calendar Year shall
not exceed [**]% of the aggregate Net Sales in such Calendar Year. On a dosage
form basis, the aggregate price paid by GSK for Bulk Tablets for Product sold
in such Calendar Year shall be determined by calculating the average price
invoiced during such Calendar Year for the volume of Bulk Tablets required on
average to make one unit of Product, and multiplying such average price by the
number of units of Product sold during such Calendar Year. A hypothetical
example showing how the above calculation would operate is attached hereto as Schedule 7.3(e).

 

(ii)           Within [**] following the end of each Calendar
Year, GSK shall provide Sepracor with a reconciliation of royalties due and
royalties paid during such Calendar Year (the “Reconciliation Report”),
including but not limited to the information required in Section 7.3(d) and a
statement regarding (i) the aggregate price paid by GSK for Bulk Tablets for
Product sold in such Calendar Year; (ii) 
the average price invoiced during such Calendar Year for the volume of
Bulk Tablets required on average to make one unit of Product; and (iii) the
number of units of Product sold during such Calendar Year. Copies of GSK’s
reports setting forth its computation of such amounts shall be submitted to
Sepracor with the Reconciliation Report. Unless Sepracor notifies GSK within
[**] (the “Reconciliation Review Period”) after its receipt of the
Reconciliation Report that it objects to the computation, the report shall be
binding and conclusive.

 

(iii)          During the Reconciliation Review Period, GSK shall
permit an independent certified public accounting firm of internationally
recognized standing selected by Sepracor and reasonably acceptable to GSK, at
Sepracor’s expense, to have access to the relevant books and records of GSK
(including, without limitation, records of barters and counter-trades) during
GSK’s normal business hours to verify the Reconciliation Report. Sepracor will
procure in such inspection to minimize disruption of the normal business
activities of GSK to the extent reasonably practicable. The accounting firm
shall disclose to Sepracor only whether the royalty reports are correct or
incorrect and the specific details concerning any discreprencies. In the event
that such independent accountant’s review of the Reconciliation Report determines
that there has been an underpayment by GSK of royalties and that such
underpayment exceeds five percent of the total amount owed for the Calendar
Year, GSK shall reimburse Sepracor the reasonable and necessary fees and
expensed of the independent accountant performing the audit.

 

(iv)          If the reconciliation determines that payment is
owed from one Party to the other, the Party owing payment shall pay the amount
owed within thirty (30) days of the Parties’ agreement on the Reconciliation
Report or the independent accountant’s determination of such amount.

 

7.4.                 Discounting. In the event that GSK or any of its Affiliates sell the Product to a
Third Party as part of a bundle of products or services being purchased from
GSK or its Affiliates, and GSK or its Affiliates discount the sales price of
the Product to a greater degree than GSK or its Affiliate discounts the price
of their other products or services to such customer then, in such case, the
Net Sales for the sale of the Product to such Third Party shall be deemed

 

 

CONFIDENTIAL

 

to equal the arm’s length price that Third
Parties would generally pay for the Product alone when not purchasing any other
product or service from GSK or its Affiliate.

 

7.5.                 Third Party Licenses

 

(a)           If either Party deems it necessary or advisable to obtain a license, or
other rights to any Patent which may be or have the potential of being a
Blocking Patent(s), such Party shall notify the other Party in writing. If the
other Party agrees, then the Parties shall discuss in good faith the procedure
by which the Parties will seek to obtain such license or other rights. The
costs paid to a Third Party (including royalties, upfront, initial, milestones
and periodic payments) associated with obtaining such license or other rights in
relation to the GSK Territory shall be shared equally by the Parties.

 

(b)           If the other Party disagrees with the initial assessment that it is
necessary or advisable to obtain such license or rights to any Patent referred
to in Section 7.5(a), the Party desiring the license shall obtain an opinion of
independent patent counsel approved by the other Party (such approval not to be
unreasonably withheld or delayed) to review infringement, validity and
enforceability of the Patent(s) and the conclusions contained in such opinion
shall be binding on both Parties. In the event that in the opinion of such
independent patent counsel the identified Patent(s) may reasonably be
expected to be held in subsequent legal proceedings to be infringed, valid and
enforceable by any one of the activities licensed hereunder to GSK, then the Parties shall immediately proceed in
the manner provided in Section 7.5(a) as if both Parties had initially agreed
to seek the license or other rights. The fees, costs and expenses of the above
independent patent counsel incurred in connection with this Section 7.5(b)
shall be [**].

 

7.6.                 Third Party Technology. If after the Effective Date Sepracor or any of
its Affiliates acquires an assignment of, or license under, Third Party
Technology (other than Patents licensed or otherwise acquired pursuant to
Section 7.5) for use in connection with the research, development,
commercialization or manufacture of the Product in or for the GSK Territory,
then Sepracor will promptly provide GSK with written notice of such acquisition
and any additional financial terms to which Sepracor would be subject if GSK
were to exploit a license under such Third Party Technology. If GSK desires to
obtain such license, the Parties will promptly amend this Agreement to reflect
such additional financial terms and to provide that the applicable Patents,
know-how, data, or filings will be included in the definition of Sepracor
Technology under this Agreement. For the avoidance of doubt, if GSK does not
desire to obtain such license, such Third Party Technology shall not be
included in the definition of Sepracor Technology under this Agreement.

 

7.7.                 Compulsory licenses. 

 

(a)           In the event that a governmental agency in any country in the GSK
Territory grants or compels Sepracor to grant a compulsory license to any Third
Party with respect to the Product, GSK shall have the benefit in such country
of the terms granted to such Third Party to the extent that such terms are more
favorable than those of this Agreement.

 

 

CONFIDENTIAL

 

(b)           If under applicable law in any country in the GSK Territory a
governmental agency in any country grants or compels GSK to grant a compulsory
license to any Third Party with respect to the Product, insofar as GSK is
compensated on a royalty basis (as a percentage of the Sublicensee’s Net Sales)
at a royalty rate lower than the royalty rate provided by Section 7.3, then the
royalty rate to be paid to Sepracor by GSK on Net Sales in that country under
Section 7.3 shall be reduced to the rate paid to GSK by the compulsory
licensee.

 

7.8.                 Other Provisions. All royalties are
subject to the following conditions:

 

(a)               only one royalty shall be due with respect to
the same unit of Product; and

 

(b)               no royalties shall accrue on the disposition, in
reasonable quantities, of Product by GSK, its Affiliate or Sublicensees as
samples (promotion or otherwise) or as donations (for example, to non-profit
institutions or government agencies for a non-commercial purpose) and without
direct or indirect consideration.

 

ARTICLE VIII.

 

PAYMENTS, BOOKS AND RECORDS

 

8.1.                 Payment Method. All payments under this Agreement shall be made by bank wire transfer
in immediately available funds to an account, capable of receiving United
States Dollars, designated in writing by Sepracor. Payments hereunder will be
considered to be made as of the day on which they are received by Sepracor’s
designated bank.

 

8.2.                 Payment Currency: Currency Conversion.

 

(a)           United States Dollars. Unless otherwise expressly stated in this
Agreement, all amounts specified to be payable under this Agreement are in
United States Dollars and shall be paid in United States Dollars.

 

(b)           Currency Conversion. Net Sales in countries invoiced in currency
other than United States Dollars or European Euros, as appropriate, shall be
translated to United States Dollars or European Euros, as necessary, using [**]
for the translation of foreign currency into United States Dollars or European
Euros, as appropriate, as employed on a consistent basis by [**] and published
accounts. GSK confirms that as of the Effective Date its current standard
exchange rate methodology sources exchange rates from Reuters.

 

8.3.                 Fees, Expenses and Taxes

 

(a)           Fees and Expenses. Each Party shall pay all fees and expenses
incurred by such Party in connection with this Agreement, except as otherwise
expressly provided herein.

 

 

CONFIDENTIAL

 

(b)           Withholding Taxes. If laws or regulations require withholding by
GSK of any taxes imposed upon Sepracor on account of any royalties or other
payments paid under this Agreement, such taxes shall be deducted by GSK as
required by law from such payment and shall be paid by GSK to the proper taxing
authorities. Official receipts of payment of any withholding tax shall promptly
be secured and promptly sent to Sepracor as evidence of such payment. The
Parties will cooperate and exercise their reasonable efforts to ensure that any
withholding taxes imposed are reduced as far as possible under the provisions
of any applicable tax treaty and shall cooperate in filing any forms required
for such reduction.

 

Sepracor warrants that Sepracor is resident for tax
purposes in the United States and that Sepracor is entitled to relief from
United Kingdom income tax under the terms of the double tax agreement between
the United Kingdom and the United States. Sepracor shall notify GSK promptly in
writing in the event that Sepracor ceases to be entitled to such relief.

 

Pending receipt of formal
certification from the United Kingdom Inland Revenue, GSK may pay royalty
income and any other payments under this Agreement to Sepracor by deducting tax
at a rate specified in the double tax treaty between the United Kingdom and the
United States. Sepracor agrees to indemnify and hold harmless GSK against any
loss, damage, expense or liability arising in any way from a breach of the
above warranties or any future claim by a United Kingdom tax authority or other
similar body alleging that GSK was not entitled to deduct withholding tax on
such payments at source at the treaty rate.

 

(c)           Sales Taxes. All amounts to be paid under this Agreement are stated exclusive of
any sales, use, value-added, goods and services or other applicable taxes,
which shall be invoiced separately. Where appropriate, Sepracor shall provide GSK
with a valid tax invoice. GSK shall upon receipt from Sepracor of a valid tax
invoice pay to Sepracor the amount of any such applicable tax. Should any
amounts of VAT paid by GSK to Sepracor be refunded subsequently by the fiscal
authorities to Sepracor, Sepracor will refund these monies to GSK within thirty
(30) days of receipt.

 

8.4.                 Records: GSK shall keep, and require its Affiliates and Sublicensees to keep,
complete, true and accurate books of accounts and records for the purpose of
determining the amounts payable to Sepracor pursuant to this Agreement. Such
books and records shall be kept for such period of time required by law, but no
less than at least [**] years following the end of the Calendar Quarter to
which they pertain. Such records shall be subject to inspection in accordance
with Section 7.3(e).

 

8.5.                 Late Payments. Any payments or portions thereof due under this Agreement that are not
paid by the date such payment is due shall bear interest at an annual rate
equal to the prime rate as published in the Wall Street Journal,
Eastern edition, plus two percent (2%) per year, calculated on the number of
days such payment is delinquent, compounded annually, and computed on the basis
of a three hundred sixty five (365) day year. The provisions of this Section
8.5 shall in no way limit any other remedies available to Sepracor. The Parties
agree that this provision, unless otherwise provided, will not apply to
payments that are the result of a subsequent adjustment of an estimated
payment, including rebates, adjustments, returns or

 

 

CONFIDENTIAL

 

reconciliations, nor to payments that are the
subject matter of a good faith dispute between the Parties.

 

ARTICLE IX.

EXCLUSIVITY OBLIGATIONS

 

9.1           GSK Commitments.

 

(a)           Subject to Section 9.1(b) below, on a country-by-country basis within
the GSK Territory, during the Term of the Agreement, neither GSK nor any of its
Affiliates shall promote, market or
sell any Acquired Competing Product for any Product Indication.

 

(b)           It shall not be a breach of Section 9.1(a) above for GSK or its
Affiliates to promote, market or sell an Acquired Competing Product to which
rights were acquired as part of an Acquisition Transaction until such time as
GSK or its Affiliate has divested such Acquired Competing Product in accordance
with Section 9.1(c) below.

 

(c)           On a country-by-country basis within the GSK Territory, during the Term
of the Agreement, in the event that GSK or its Affiliates acquire rights as
part of an Acquisition Transaction to develop, promote, market or sell in a
country in the GSK Territory any Acquired Competing Product, GSK or its
Affiliates shall give written notice to Sepracor within [**] and use its
reasonable endeavors to divest its rights to such Acquired Competing Product in
such country within [**] of acquiring the rights to such Acquired Competing
Product. If GSK or its Affiliates fail to divest such Acquired Competing
Product within [**] of acquiring the rights to such Acquired Competing Product,
and GSK or its Affiliates are actively promoting the Acquired Competing Product,
Sepracor shall have the right to give ninety (90) days written notice to GSK
terminating this Agreement on a country-by-country basis where the rights to
such Acquired Competing Product have not been divested, provided that such
termination shall not take effect in the event that during such notice period
GSK or its Affiliates have divested the rights to such Acquired Competing
Product.

 

(d)           On a country by country basis within the GSK Territory, during the Term
of this Agreement, neither GSK nor any of its Affiliates shall promote, market
or sell, or enter into any agreement to promote, market or sell for the
treatment of any Product Indication(s) any compound, other than the Product, which specifically and selectively
targets [**].

 

(e)           Subject to the above, GSK and its Affiliates retain the absolute freedom
without restriction or limitation to research, develop, manufacture and
commercialize products for Product Indication(s) which may compete with the
Product in the GSK Territory or any part thereof (“GSK Competing Products”). In
the event, however, that in any country in the GSK Territory during the Term
GSK or any of its Affiliates file a MAA in which approval is sought for the
marketing of a GSK Competing Product for a Product Indication, within [**] of
filing such MAA, GSK shall notify the JSC whether GSK has decided to exercise
its right to either: (i) terminate this Agreement in its entirety by providing
twelve months’ notice to Sepracor; or (ii) to

 

 

CONFIDENTIAL

 

continue the commercialization of the Product, based on GSK’s medical
and commercial assessment that the Product and the GSK Competing Product can
adequately be positioned in the marketplace (“Commercialization Option”). In
the event that the Commercialization Option is selected, GSK shall on a
country-by-country basis make minimum royalty payments under Section 7.3(a) for
each subsequent Calendar Year, or for part thereof, where GSK is simultaneously
commercializing in such country the Product and a GSK Competing Product for one
or more Product Indications, as stated below:

 

(I)            During the period from the date of [**] until
[**], the minimum annual royalty payment payable by GSK to Sepracor in relation
to [**] would be [**] percent ([**]%) of the royalties received by Sepracor
from GSK in respect of [**] during the full Calendar Year [**] in the [**].

 

(II)           During the period from [**] until [**], the
minimum annual royalty payment payable by GSK to Sepracor in relation to [**]
would be [**] percent ([**]%) of the royalties received by Sepracor from GSK in
respect of [**] during the full Calendar Year [**] in the [**].

 

(III)         During the period following [**] until [**], the
minimum annual royalty payment payable by GSK to Sepracor in relation to [**]
would be [**] percent ([**]%) of the royalties received by Sepracor from GSK in
respect of [**] during the full Calendar Year [**] in the [**].

 

For the avoidance of doubt, the
above minimum annual royalty payments will be prorated for any Calendar Year in
which GSK is simultaneously commercializing in a country the Product and a GSK
Competing Product for one or more Product Indications, for part but not the
whole Calendar Year.

 

(f)            Sections 9.1(a)-(e) shall cease to apply on a
country-by-country basis on the occurrence of any of the following:

 

(i)            Expiry or termination, for whatever reason, of
GSK’s rights under this Agreement to sell the Product in such country;

 

(ii)           Launch of a Generic Product in such country;

 

(iii)          The promotion, marketing or sale by Sepracor,
its Affiliates or its sublicensees of any product with the Active Ingredient
used in combination with another active ingredient for any Product
Indication(s);

 

(iv)          Any Regulatory Authority or court of competent
jurisdiction in such country issuing a directive, order or request that the
Product be withdrawn;

 

(v)           GSK electing
not to launch the Product pursuant
to Section 6.4.

 

 

CONFIDENTIAL

 

9.2.                 Sepracor’s Commitments. During the Term of the Agreement, neither
Sepracor nor any of its Affiliates shall promote, market or sell, or enter into
any agreement to promote, market or sell, in any country of the GSK Territory
where the Agreement has not been terminated, any product containing the Active
Ingredient as the sole therapeutic ingredient. However, this restriction shall
not apply to any Excluded Products. For the avoidance of doubt, and consistent
with the definition of Excluded Products, this provision is not intended to
permit the promotion, marketing or sale of a product in which the Active
Ingredient is simply co-packaged and/or co-administered with another product
containing a different therapeutically active substance.

 

9.3.                 Non-prescription products. Sections 9.1 shall not apply in relation to
products for promotion, marketing or sale without the legal requirement for a
prescription.

 

ARTICLE X.

MANUFACTURE AND SUPPLY

 

10.1.               General. During the Term of this Agreement, Sepracor shall at GSK’s request,
and in accordance with the Supply Agreement, supply all of GSK’s, its
Affiliates’ and its Sub-licensees’ requirements of Bulk Tablets, sufficient to
enable GSK, its Affiliates and its Sub-licensees to meet their respective needs
for Product for the GSK Territory.

 

10.2.               Supply Agreement and Quality Agreement. Promptly following the Effective Date and
within ninety (90) days thereof (or as otherwise agreed in writing by the
Parties), GSK and Sepracor (or their respective Affiliates) shall negotiate in
good faith and shall enter into a Supply Agreement (the “Supply Agreement”)
and a Quality Agreement (the “Quality Agreement”) for the supply of Bulk
Tablets by (or on behalf of) Sepracor for use in connection with Developmental
Studies and for commercialization (including physician samples) of the Product
in the GSK Territory, which shall reflect, among other things, the terms
outlined in Schedule 10.2.

 

10.3.               Supply Price.

 

(a)           Bulk Tablets for use in Clinical Supplies, physician samples, or to be
provided in support of Investigator Sponsored Clinical Studies shall be
provided at [**]. Placebo for use in Clinical Supplies or to be provided in
support of Investigator Sponsored Clinical Studies shall also be provided at
[**].

 

(b)           All other supplies of Bulk Tablets shall be provided at [**].

 

(c)           Appropriate terms will be included in the Supply Agreement for
calculation of [**] on an annual basis, using open book pricing.

 

 

CONFIDENTIAL

 

10.4.               Minimum Price. Subject to Section 10.3, notwithstanding any
provisions to the contrary in this Agreement, Sepracor shall not be required to
supply Bulk Tablets to GSK at a cost below [**].

 

10.5.               Pre-Supply Approval.  GSK will have
the right to conduct pre-supply approval audits of those manufacturing
facilities of Sepracor, and any appointed third party manufacturer(s), which
are used in the manufacture of Bulk Tablets for GSK, prior to taking supply.
Thereafter, Sepracor shall not appoint any other third party manufacturer nor
change the location of any part of the manufacturing process for the
manufacture of Bulk Tablets for GSK without GSK’s prior written consent, not to
be unreasonably withheld, and subject to the change control procedure set out
in the Quality Agreement.

 

ARTICLE
XI.

CONFIDENTIALITY

 

11.1.               Confidential Information. Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing, the Parties agree that the
receiving Party (the “Receiving Party”) shall keep confidential and
shall not publish or otherwise disclose or use for any purpose other than as
provided for in this Agreement any confidential or proprietary information and
materials, patentable or otherwise, in any form (written, oral, photographic,
electronic, magnetic, or otherwise) which is disclosed to it by the other Party
(the “Disclosing Party”) including, but not limited to, all information
concerning the Product, information disclosed by one Party to the other
pursuant to the Confidentiality Agreement, the contents of this Agreement and
any other technical or business information of whatever nature (collectively, “Confidential
Information”).

 

11.2.               Development Data. Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing, the Parties agree that they
shall keep confidential and shall not publish or otherwise disclose or use for
any purpose other than as provided for in this Agreement any Data, results,
reports or other know-how directly related to the Product which is generated in
the performance of the Developmental Studies (“Development Data”).

 

11.3.               Exceptions. Notwithstanding Sections 11.1 and 11.2, the obligations of
confidentiality shall not apply to Confidential Information or Development Data
that, in each case as demonstrated by competent evidence:

 

(a)           was already known to the Receiving Party or any Affiliate, other than
under an obligation of confidentiality, at the time of disclosure;

 

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

 

 

CONFIDENTIAL

 

(c)           became generally available to the public or otherwise part of the public
domain after its disclosure by the Disclosing Party and other than through any
act or omission of the Receiving Party or any Affiliate in breach of this
Agreement;

 

(d)           was subsequently lawfully disclosed to the Receiving Party or any
Affiliate by a Person other than the Disclosing Party, and who, to the best
knowledge of the Receiving Party, did not directly or indirectly receive such
information from the Disclosing Party under an obligation of confidence; or

 

(e)           is developed by the Receiving Party or its Affiliate without use of or
reference to any information or materials disclosed by the Disclosing Party.

 

11.4.               Permitted Disclosures. Notwithstanding the provisions of Section 11.1
above, and subject to Sections 11.5 and 11.6 below, each Party hereto may
disclose Confidential Information of the other Party and Development Data to
its Affiliates, permitted Sublicensees and any other Third Parties to the
extent such disclosure: (a) is for the purpose of exercising the rights granted
to it under this Agreement; (b) is reasonably necessary to prosecute or defend
litigation; (c) is reasonably necessary to comply with applicable governmental
laws or regulations; (d) is reasonably necessary to submit information to tax
or other governmental authorities; or (e) is reasonably necessary to
conduct clinical trials hereunder with respect to the Product. If a Party is
required by law or regulations to make any such disclosure of Confidential
Information of the other Party or Development Data, to the extent it may
legally do so, it will give reasonable advance notice to the other Party of
such disclosure and, save to the extent inappropriate in the case of patent
applications or otherwise, will use its good faith efforts to secure
confidential treatment of such Confidential Information or Development Data prior
to its disclosure (whether through protective orders or otherwise) and disclose
only the minimum amount of Confidential Information or Development Data
necessary to comply with the requirement. For all other disclosures of
Confidential Information of the other Party or Development Data permitted
pursuant to this Section 11.4, including to Affiliates, permitted Sublicensees
and other Third Parties, a Party shall ensure that the recipient thereof is
bound by a written confidentiality agreement as materially protective of such
Confidential Information or Development Data as this Article XI.

 

11.5.               Confidentiality of this Agreement and its Terms. Except as otherwise provided in Section 11.6,
each Party agrees not to disclose to any Third Party the existence of this
Agreement or the terms of this Agreement without the prior written consent of
the other Party hereto, except that each Party may disclose the terms of this
Agreement: (a) to advisors (including financial advisors, attorneys and
accountants) in each case under confidentiality obligations substantially
equivalent to those in this Agreement; or (b) actual or potential acquisition
or merger partners or Sublicensees on a need to know
basis, in each case under written confidentiality agreements substantially
equivalent to those in this Agreement.

 

 

CONFIDENTIAL

 

11.6.               Public
Announcements.

 

(a)           As soon as practicable following the date
hereof, the Parties will issue a joint press release announcing the existence
of this Agreement. Except as required by law (including, without
limitation, disclosure requirements of the U.S. Securities and Exchange
Commission (“SEC”), the London, New York and NASDAQ stock exchanges, or
any other stock exchange on which securities issued by a Party or its
Affiliates are traded), neither Party shall make any other public announcement
concerning this Agreement or the subject matter hereof without the prior
written consent of the other, which shall not be unreasonably withheld or
delayed; provided, that  it
shall not be unreasonable for a Party to withhold consent with respect to any
public announcement containing any financial terms or any of such Party’s
Confidential Information. In the event of a required public announcement, to
the extent practicable under the circumstances, the Party making such
announcement shall provide the other Party with a copy of the proposed text of
such announcement sufficiently in advance of the scheduled release to afford
such other Party a reasonable opportunity to review and comment upon the proposed
text.

 

(b)           The Parties will coordinate in advance with each
other in connection with the redaction of certain provisions of this Agreement
with respect to any filings with the SEC, the London, New York, and NASDAQ stock
exchanges or any other stock exchange
or governmental agency on which securities issued by a Party or its Affiliate
are traded, and each Party will use reasonable efforts to seek confidential
treatment for such terms; provided, that
each Party will ultimately retain control over what information to disclose to
the SEC, London, New York, and the NASDAQ stock exchange or any other stock exchange or governmental
agency, as the case may be, and provided  further that the Parties will use their reasonable efforts
to file redacted versions with any governing bodies which are consistent with
redacted versions previously filed with any other governing bodies. Other than
such obligation, neither Party (or its Affiliates) will be obligated to consult
with or obtain approval from the other Party with respect to any filings to the
SEC, the NASDAQ stock exchange or
any other stock exchange or governmental agency.

 

11.7.               Publication of the Product Information. At least thirty (30) days prior to publishing,
publicly presenting, and/or submitting for written or oral publication a
manuscript, abstract or the like that includes Development Data or other
information relating to the Product supplied or generated by GSK under this
Agreement that has not been previously published, GSK shall provide to Sepracor
a draft copy thereof for its review and approval (unless GSK is required by law
to publish such information sooner). In addition, GSK shall, at the request of
Sepracor, remove therefrom any Confidential Information of Sepracor (other than
Development Data), except GSK shall have the right to publicly disclose any
information, including Confidential Information, pertaining to safety of the
Product that GSK has been advised by its legal counsel to disclose. For the
avoidance of doubt, and without limiting in any way the above, GSK may post
summaries on the GSK Clinical Trial Register of the results of any clinical
trials conducted with respect to the Product pursuant to this Agreement without
further approval from Sepracor.

 

11.8.               Prior Non-Disclosure Agreements. As of the Effective Date of this Agreement,
the terms of this Article XI shall supersede any prior non-disclosure, secrecy
or confidentiality agreement between the Parties (or their Affiliates) dealing
with the subject of this

 

 

CONFIDENTIAL

 

Agreement, including without limitation the
Confidentiality Agreement. Any information disclosed under such prior
agreements shall be deemed disclosed under this Agreement.

 

ARTICLE
XII.

PATENT PROSECUTION AND ENFORCEMENT

 

12.1.               Ownership of Intellectual Property.

 

(a)           Subject to the licenses
granted to GSK pursuant to Section 2, Sepracor has, and shall retain all right,
title and interest in and to, the Sepracor Technology (including without
limitation the Sepracor Patents and Sepracor Know-How).

 

(b)           Subject to Section
12.1(c) below, each Party shall have and retain all right, title and interest
in all inventions, discoveries and know-how which are made, conceived, reduced
to practice or generated by its employees, agents or other persons acting under
its authority in the course of or as a result of this Agreement.

 

(c)           Sepracor shall solely
own all right, title and interest in and to any Non-Severable Improvements. GSK
shall promptly disclose to Sepracor any and all Non-Severable Improvements
conceived or reduced to practice by GSK, its Affiliates and Sublicensees, or
any of its or their officers, directors, employees, consultants or other
personnel in the performance of the Developmental Studies. All Non-Severable
Improvements shall be the exclusive property of Sepracor and GSK shall take,
and shall cause its Affiliates and Sublicensees to take, appropriate steps to
ensure that its, or their officers, directors, employees, consultants and all
other personnel are obligated to assign to Sepracor all right, title and interest
each may have in any such Non-Severable Improvement and will cooperate to
effect the foregoing. In consideration of this assignment, Sepracor agrees that
in the event that the last Valid
Claim within a Patent Controlled by Sepracor that would be infringed by the
licensed activities in such country in the absence of the licenses granted
under this Agreement covers a Non-Severable Improvement, then for the purposes
of Section 7.3(c)(i), it shall be deemed that such Valid Claim has expired.

 

(d)           GSK hereby grants
Sepracor a worldwide, non-exclusive, irrevocable and fully paid up license,
with right to sub-license, to use in relation to Sepracor’s, its Affiliate’s
and sublicensees’ commercialization of the Product in the Sepracor Territory
any Severable Improvements or Development Data which are made, conceived,
reduced to practice or generated by GSK, its Affiliates and Sublicensees, or
any of its or their officers, directors, employees, consultants or other
personnel in the performance of the Development Studies.

 

(e)           Joint Inventions. Subject to the rights granted under this
Agreement, each Party can use, and grant non-exclusive licenses to use, an
invention or discovery jointly owned by GSK and Sepracor pursuant to Section
12.1(b) without the other Party’s consent and has no duty to account to the
other Party for such use or license, and each Party hereby waives any right it
may have under the laws of any country to require any such consent or
accounting.

 

 

CONFIDENTIAL

 

(f)            Inventorship. For purposes of determining questions of inventorship for purposes of
Section 12.1(b) the Parties shall apply the law of the country in which the
patent applications directed to the relevant inventions are filed.

 

12.2.                  Prosecution and Maintenance of Sepracor Patents.

 

(a)           Prosecution. Sepracor shall, [**], be responsible for the filing, prosecution and
maintenance of all Sepracor Patents in the GSK Territory, [**]. GSK shall have
the right to review new or pending patent applications in the GSK Territory and
make recommendations to Sepracor concerning such patent applications. Sepracor
will consider in good faith all reasonable suggestions of GSK with respect
thereto, and agrees to keep GSK generally informed of the course of patent
prosecution or other proceedings with respect to the Sepracor Patents within
the GSK Territory, including without limitation providing confirmation that all
renewal and maintenance fees have been paid in a timely fashion. GSK shall
provide such patent consultation to Sepracor at no cost to Sepracor but shall
have no obligation to provide such. GSK shall hold all information disclosed to
it under this Section as Confidential Information. If Sepracor
elects not to undertake the filing, prosecution and/or maintenance of any
Sepracor Patents in the GSK Territory (or, after commencement of such filing,
prosecution and/or maintenance, desires to cease the prosecution or the
maintenance of any such Sepracor Patents in the GSK Territory), then Sepracor
will notify GSK of such election with at least thirty (30) days’ prior written
notice, identifying the specific Sepracor Patent(s) to which such election
pertains and GSK will be, at its own expense and discretion, entitled to file,
prosecute and/or maintain such Sepracor Patent(s) in the GSK Territory in the
name of Sepracor, GSK, or both GSK and Sepracor, as the case may be.

 

(b)           Patent Term Extensions. The Parties will discuss and recommend for which, if
any, of the Patents within the Sepracor Patents in the GSK Territory should
seek patent term extensions. Sepracor
shall have the final decision-making authority whether, at
its own expense, to file all applications and take actions necessary to obtain
patent term extensions with respect to the Product pursuant to statutes in the
GSK Territory, which extensions shall be owned by Sepracor. If Sepracor
declines to pursue such patent term extensions in the GSK Territory, then GSK
shall have the right at its own expense on behalf of Sepracor to file all such
applications and take all such actions necessary to obtain such patent term
extensions with respect to the Product. In each case, the Parties shall provide
reasonable cooperation to the other Party which is seeking to obtain such
extensions and additional protection. In the event that GSK has exercised the right
to file, prosecute and/or maintain any Sepracor Patents pursuant to Section
12.2(a) above, the decision as to whether to pursue patent term extensions on
such Sepracor Patents shall be at GSK’s sole discretion.

 

12.3.               Patent Enforcement. In the event that Sepracor or GSK becomes
aware of (i) an actual or threatened infringement or misappropriation of any
Sepracor Technology in the GSK Territory by the manufacture, sale, offer for
sale or use of any product (“Infringing Product”), or (ii) an actual or
threatened challenge to any Sepracor Patents within the GSK Territory, that
Party shall promptly notify the other Party in writing. Sepracor shall have the
first right, but not the obligation, to initiate proceedings or take other
appropriate action, at its own

 

 

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expense, against any Third Party taking or
threatening to take such action. If Sepracor does not initiate proceedings or take other appropriate action within
[**] of a request by GSK to initiate an enforcement proceeding or defense to a
challenge to the Sepracor Patents then GSK shall be entitled, without obligation, to initiate infringement proceedings or take
other appropriate action against an Infringing Product or Sepracor Patent
challenge at its own expense and to include Sepracor as a nominal party
plaintiff. The Party conducting such action shall have full control over its
conduct, including settlement thereof; provided,
however, that the Party conducting such action may not settle any such action,
or make any admissions or assert any position in such action, in a manner that
would materially adversely affect the rights or interests of the other Party
whether within or outside the jurisdiction in which the action is brought,
without the prior written consent of the other Party, which consent shall not
be unreasonably withheld or delayed. In any event, the Parties shall assist one
another and cooperate in any such litigation at the reasonable request of the
other Party.

 

12.4.               Trademark Enforcement and Protection. In the event that Sepracor or GSK becomes
aware of (i) actual or threatened infringement, passing off, misappropriation
or unfair advantage being taken of a Product Trademark or Other Trademark or
misappropriation of any Product Trademark or Other Trademark in the GSK Territory
by the manufacture, marketing, promotion, distribution, sale or use of any
product (“Trademark Infringing Product”) or trademark (“Infringing
Trademark”), or (ii) an actual or threatened challenge, such as an invalidity
or revocation action, to any Product Trademark or Other Trademark within the
GSK Territory, that Party shall promptly notify the other Party in writing. GSK
shall have the first right, but not the obligation, to initiate proceedings or
take other appropriate action, at its own expense, against any Third Party
taking or threatening to take such action. Sepracor shall also have the right,
but not the obligation, to participate in any legal proceedings in connection
with such action initiated by GSK at Sepracor’s own expense and to make recommendations
to GSK concerning such action; GSK shall consider in good faith all reasonable
suggestions of Sepracor with respect thereto. If the applicable law in a
country of the GSK Territory does not permit GSK, as an exclusive licensee, to
initiate such actions, GSK shall be entitled to require Sepracor to initiate
and diligently pursue such action on GSK’s behalf and at GSK’s expense. If GSK does not initiate proceedings or take other
appropriate action within [**] of a request by Sepracor to initiate an
enforcement proceeding or defense to a trademark challenge, then Sepracor shall
be entitled, without obligation, to
initiate infringement proceedings or take other appropriate action against a
Trademark Infringing Product, Infringing Trademark or trademark challenge at
its own expense and to include GSK as a nominal party plaintiff. The Party
conducting such action shall have full control over its conduct, including
settlement thereof; provided,
however, that the Party conducting such action may not settle any such action,
or make any admissions or assert any position in such action, in a manner that
would materially adversely affect the rights or interests of the other Party
whether within or outside the jurisdiction in which the action is brought, without
the prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed. In any event, the Parties shall assist one
another and cooperate in any such litigation at the reasonable request of the
other Party.

 

 

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12.5.               Recovery. With respect to any suit or action referred to
in Sections 12.3 and 12.4 any recovery obtained as a result of any such
proceedings, by settlement or otherwise, shall be applied in the following
order of priority:

 

(a)           First, [**];

 

(b)           Second, GSK shall recover [**], and Sepracor shall recover [**]; and

 

(c)           Third, [**].

 

12.6.               Cooperation. The Parties shall keep one another informed of the status of their
respective activities regarding any litigation or settlement thereof concerning
Sepracor Technology, Product Trademarks and Other Trademarks within the GSK
Territory and shall assist one another and cooperate in any such litigation at
the reasonable request of the other (including, without limitation, joining as a party plaintiff to the extent
necessary and requested in writing by the other Party).

 

12.7.               Infringement of Third Party Intellectual
Property. In the event any
action is taken by a Third Party against GSK or any Affiliate on the basis of
alleged infringement of a Patent of such Third Party or of misappropriation of
the know-how of a Third Party, or alleged infringement or passing off or
misappropriation of a Third Party trademark, pursuant to the exercise by GSK or
any Affiliate or Sublicensee of its rights hereunder, GSK shall promptly inform
Sepracor and GSK shall be entitled at GSK’s expense to take whatever reasonable
action it considers necessary or useful and Sepracor will provide any and all
reasonable assistance, free of charge, to GSK. Sepracor shall also have the right,
but not the obligation, to participate in any legal proceedings in connection
with such action at its own expense and make recommendations to GSK concerning such
action. GSK will consider in good faith all reasonable suggestions of Sepracor
with respect thereto, and agrees to keep Sepracor informed of the course such
action or legal proceedings with respect thereto. GSK shall
control the legal proceedings, including the right to enter into any
settlement, in order to be able to resume the exercise of the rights granted to
GSK under the terms if this Agreement; provided,
however, that GSK may not settle any such action, or make any admissions or
assert any position in such action, in a manner that would adversely affect the
rights or interests of Sepracor (whether within the GSK Territory or
otherwise), or make any financial payment without the prior written consent of
Sepracor, which consent shall not be unreasonably withheld or delayed. If as a
result of such action or settlement, GSK has to pay any amount to the Third
Party, including damages, license fees or royalties on sales of the Product,
any and all such amounts as well as the cost related to such action or settlement shall be borne
equally by Sepracor and GSK.

 

12.8.               Patent Marking. GSK agrees to mark, and have its Affiliates
and Sublicensees mark, all patented Products they sell or distribute pursuant
to this Agreement in accordance with the applicable patent statutes and
regulations in the country or countries of sale thereof.

 

 

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ARTICLE XIII.

TRADEMARKS

 

13.1.               Cooperation.
Through the JSC, the Parties will jointly determine whether the Product in each
of the countries of the GSK Territory will use the Product Trademarks listed in
Schedule 1.39, or other Product-specific
trademarks (“Other Trademarks”). Upon the determination of an Other
Trademark, or at the request of GSK any time thereafter, the Parties shall
promptly amend this Agreement to update Part B of Schedule
1.39, at which time the representations and warranties provided
by Sepracor under Section 16.2 shall be repeated in respect of such Other
Trademarks.

 

13.2.               Ownership. Sepracor
shall own, and is hereby assigned, all right, title and interest in and to all
trademarks used for the Product in the GSK Territory, including, the Product
Trademarks and Other Trademarks, and including any intellectual property rights
in the Product Trademarks and Other Trademarks, but not including any company
marks or logos of GSK or its Affiliates.

 

13.3.               Registration of
Trademarks of the Product in the GSK Territory. Sepracor shall, in a timely
manner, file, seek registration and maintain, for the Term of this Agreement
and for any time GSK continues to use the Product Trademarks and Other
Trademarks in accordance with the Wind-down Period in Section 15.2(a) and/or
Section 15.3(a), [**], appropriate registrations and prosecute and defend
oppositions to applications for such registrations for the Product Trademarks
and Other Trademarks in the GSK Territory. For the avoidance of doubt, Sepracor
shall perform such actions in all countries in the GSK Territory where the
Product Trademarks and Other Trademarks will be used in accordance with this
Agreement and shall file applications in time for relevant MAAs to be granted
and for launch of the Product to progress in accordance with the
Commercialization Plan. At GSK’s request, Sepracor will keep GSK informed of
the status of such applications, registrations, actions and relevant
proceedings.

 

13.4.               Grant of License.
Subject to the terms and conditions of this Agreement, Sepracor hereby grants
to GSK an exclusive license to use the Product Trademarks and Other Trademarks,
including as a domain name or part thereof, to package, market, promote,
distribute, import, offer for sale and sell the Product in the GSK Territory
during the Term and in accordance with this Agreement. Any use of the Product
Trademarks and Other Trademarks shall inure to the sole benefit of Sepracor.

 

13.5.               Trademark
Restrictions. During the Term of this Agreement, Sepracor may not use, or
authorize a Third Party not already authorized to use, the Product Trademarks
and Other Trademarks (or any marks which are confusingly similar to the Product
Trademarks and Other Trademarks taking into account the nature of the use,
including the similarity or dissimilarity of the relevant goods) in any country
of the GSK Territory or Sepracor Territory for the packaging, marketing,
promotion, distribution, importation, offering for sale and sale of the Product
or any other product. Sepracor also agrees not to use or authorize another to
use during the Term of this Agreement, the LUNESTA® trademark (or
any confusingly similar mark taking

 

 

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into account the nature of the use, including the similarity or
dissimilarity of the relevant goods) in any country of the GSK Territory for
the packaging, marketing, promotion, distribution, importation, offering for
sale and sale of any products within the GSK Territory. For the avoidance of
doubt, where this Agreement allows Sepracor or GSK to terminate the Agreement
in a particular country, then upon such termination and in conjunction with the
transfer obligations in Section 13.9 herein, Sepracor shall have the right to
use or allow the use of any Product Trademark, Other Trademark or the LUNESTA®
trademark in such country. Sepracor shall promptly notify GSK in the event that
Sepracor becomes aware that any Third Party to which Sepracor has, as of the
Effective Date, already authorized to use the Product Trademarks and/or Other
Trademarks in the Sepracor Territory is using or planning to use the Product
Trademarks and/or Other Trademarks for the packaging, marketing, promotion,
distribution, importation, offering for sale and sale of the Product or any
other product. In such event, Sepracor will cooperate in good faith and use its
reasonable endeavours to resolve with GSK and the Third Party any concerns that
GSK has regarding the use of the Product Trademarks and/or Other Trademarks by
such Third Party.

 

13.6.               Recordation of
Licenses. If a trademark license must be recorded in the GSK Territory, or if GSK wishes to record its interest as a
licensee on a trademarks register anywhere in the GSK Territory and a trademark
licence is required to do so, Sepracor will provide reasonable assistance to
allow GSK to become recorded as a licensee of the Product Trademarks and Other
Trademarks on any trademarks register in the GSK Territory, including, without
limitation, promptly providing to GSK, at GSK’s written request, a separate
trademark license for the Product Trademarks and/or Other Trademarks on terms
that are consistent with, and no broader or more onerous than, the terms of
this Agreement, and GSK will arrange for the prompt recordation of such
trademark license with the appropriate governmental agency, at GSK’s expense.
GSK shall cooperate in the preparation and execution of such documents. No such
recordation shall give GSK any ownership or claim to ownership of the Product
Trademarks or Other Trademarks.

 

13.7.               Display. All
packaging materials, labels and promotional materials for the Product in the
GSK Territory shall display the Product Trademarks and/or Other Trademarks
approved by the JSC and no other product-specific trademarks or branding. In
addition, such packaging materials, labels and promotional materials shall
display the trade name(s) of GSK, or its Affiliates or Sublicensees, in
reasonable size and prominence as allowed by applicable local regulations. The
trademarks of GSK, trade dress, style of packaging and the like with respect to
the Product in the GSK Territory may be determined by GSK in a manner that is
consistent with GSK’s standard trade dress and style. All packaging materials,
labels and promotional materials for the Product in the GSK Territory shall
display the following: “Manufactured and sold under license from Sepracor Inc.”
and “[the Product Trademark or Other Trademark] is a trademark of Sepracor Inc.”.
GSK shall make no other use of Sepracor’s name or logo on packaging materials.

 

13.8.               Approval of Packaging.
So that Sepracor can properly evaluate the protection of its trademarks and
other trade dress, GSK shall submit representative examples of packaging and
the Product displaying the Product Trademarks and/or Other Trademarks, to

 

 

CONFIDENTIAL

 

Sepracor for review and written approval at least [**] prior to the first use of such
packaging for or on the Product and [**] prior
to use of any subsequent packaging which are a material change to such
packaging. For the avoidance of doubt, such review does not extend to a right
to review and approve the trademarks, trade dress and style of packaging and
the like of GSK which may be determined by GSK in accordance with Section 13.7.
Sepracor shall not unreasonably withhold or delay approval, but in any event,
if Sepracor has not responded in writing within [**] after the submission to
Sepracor of such packaging for or on the Product, Sepracor’s approval will be
deemed to have been received.

 

13.9.               Termination of
Trademark License. GSK’s right to use the Product Trademarks and Other
Trademarks) shall terminate on a country-by-country basis when GSK’s rights to
the Product pursuant to this Agreement are terminated or expire in any country.
GSK shall take all such steps as Sepracor may reasonably request to give effect
to the termination of any license to the Product Trademarks and Other
Trademarks, and to record any documents that may be required to evidence the
termination of such licenses and transfer to Sepracor of all rights,
registrations, recordation and the like for such Product Trademarks and Other
Trademarks.

 

ARTICLE XIV.

 

TERM AND TERMINATION

 

14.1.               Term.         This Agreement shall
commence on the Effective Date and, unless earlier terminated pursuant to
Sections 14.2, 14.3 or 14.4, shall continue in each country of the GSK
Territory on a country by country basis until the later of (a) the tenth
anniversary of the Effective Date, and (b) the date on which GSK ceases to
continue to market, promote, distribute, import or sell the Product in any
country of the GSK Territory (the “Term”).

 

14.2.               Early
Termination. Each Party shall have the right to terminate this Agreement in
its entirety before the end of the Term;

 

(a)           by
mutual written agreement of the Parties;

 

(b)           upon
written notice by either Party if the other Party is in material breach of this
Agreement and has not cured such breach after notice from the terminating Party
requesting cure of the breach; provided, however, in the event of
a good faith dispute with respect to the existence of a material breach, the
cure period shall be tolled until such time as the dispute is resolved pursuant
to Section 18; and provided that the terminating Party has given the defaulting
Party the following opportunities to remedy any breach:

 

(i)            the written notice of
breach referenced above shall detail the specific obligation under this
Agreement which is alleged to have been breached; the manner of such alleged
breach; and the steps which must be taken in order to remedy such breach; and

 

 

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(ii)           the terminating Party
has provided the defaulting Party with a reasonable amount of time (but no more
than [**]) in which (x) to complete any steps which might be taken to remedy
the breach, as stated in the notification of breach, or (y) if completion of
those steps is not possible within a [**] period, to commence those steps
required as stated in the notification of breach, on the condition that the
defaulting Party continues to perform those steps with due diligence and the
breach can be cured within a mutually agreeable period of time; or

 

(c)           upon
the bankruptcy or insolvency, or the filing of an action to commence insolvency
proceedings against the other Party, or the making or seeking to make or
arrange an assignment for the benefit of creditors of the other Party, or the
initiation of proceedings in voluntary or involuntary bankruptcy, or the
appointment of a receiver or trustee of such Party’s property that is not
discharged within ninety (90) days.

 

14.3.               Other GSK
Termination Rights.

 

(a)           GSK
has the right to terminate this Agreement in its entirety at any time
prior to the earlier of (i) first launch of the Product in the GSK Territory or
(ii) the date six months after EMEA approval of the Product, by giving at least
sixty (60) days’ written notice to Sepracor.

 

(b)           On
a country-by-country basis, GSK has the right to terminate this Agreement in
respect of any country in the GSK Territory in which the Product has not been
launched at the time of providing notice of termination, by giving at least
sixty (60) days’ written notice to Sepracor.

 

(c)           On
a country-by-country basis, GSK has the right to terminate this Agreement in
respect of any country in the GSK Territory in which the Product has already
been launched at the time of providing notice of termination, by giving at
least one hundred and eighty (180) days’ written notice to Sepracor. For the
avoidance of doubt, in relation to any country in which the Commercialization
Option has been exercised, if GSK exercises its right to terminate under this
Section 14.3(c) during the twelve month period following GSK’s decision to
exercise the Commercialization Option pursuant to Section 9.1(e)(ii), the
termination under this Section 14.3(c) shall not take effect until the later
of: (i) expiry of the (180) days’ written notice provided hereunder and (ii)
expiry of the twelve month period following GSK’s decision to exercise the
Commercialization Option pursuant to Section 9.1(e)(ii).

 

(d)           GSK
has the right to terminate this Agreement, on a country-by-country basis, at
any time upon ten (10) days’ written notice to Sepracor, if the applicable
Regulatory Authority decides to withdraw the Product from such country in the
GSK Territory.

 

(e)           GSK
has the right to terminate this Agreement with immediate effect in its
entirety, or on a country-by-country basis, upon termination of the Supply
Agreement for any reason.

 

 

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(f)            Pursuant
to and on the terms of Section 9.1(e).

 

14.4.               Other Sepracor
Termination Rights.

 

(a)           Sepracor
may terminate this Agreement in its entirety upon thirty (30) days prior
written notice to GSK, if GSK or its Affiliates challenge any of the Product
Trademarks or Sepracor Technology that relates to the Product, including,
without limitation, the Sepracor Patents specified on Schedule
1.44 of this Agreement. Any such termination shall only become
effective if GSK and its Affiliates have not withdrawn such challenge before
the end of the above notice period.

 

(b)           Sepracor
may terminate this Agreement in its entirety upon sixty (60) days prior written
notice to GSK, if any of GSK’s Sublicensees challenge any of the Product
Trademarks or Sepracor Technology that relates to the Product, including,
without limitation, the Sepracor Patents specified on Schedule
1.44 of this Agreement. Any such termination shall only become
effective if GSK’s Sublicensee has not withdrawn such challenge before the end
of the above notice period.

 

(c)           Sepracor
may terminate this Agreement in its entirety upon sixty (60) days prior written
notice to GSK, if launch of the Product has not occurred in [**] within the
[**] period following EMEA approval. However, for the avoidance of doubt,
failure to [**] shall not be counted under this Section 14.4(c) if GSK has
given proper notice under Section 6.4(a) and complied with the terms of that
Section in respect of that country.

 

(d)           Pursuant
to and on the terms of Section 4.3, Sepracor may terminate this Agreement in
relation to the European Union in the event that GSK notifies Sepracor that it
does not wish to undertake the Required Studies.

 

(e)           Pursuant
to and on the terms of Section 5.3, Sepracor may terminate this Agreement on a
country-by-country basis in the event that GSK notifies Sepracor that it does
not wish to undertake the Required Studies in such country.

 

(f)            Pursuant
to and on the terms of Section 6.4(b).

 

(g)           Pursuant
to and on the terms of Section 9.1(c).

 

ARTICLE XV.

EFFECT OF TERMINATION

 

15.1.               Accrued
Obligations. The termination of this Agreement, in whole or part, for any
reason shall not release either Party from any liability which, at the time of
such termination, has already accrued to such Party or which is attributable to
a period prior to such termination, nor will any termination of this Agreement
preclude either Party from pursuing all

 

 

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rights and remedies it may have under this Agreement, at law or in
equity, with respect to breach of this Agreement.

 

15.2.               Rights on
Termination. This Section 15.2 shall apply upon the termination of GSK’s
rights under this Agreement if, and only if, such termination is made by
Sepracor pursuant to Sections 14.2(b), 14.4(a), 14.4(b), or 14.4(g) or is made
by GSK pursuant to Section 14.3(c):

 

(a)           Wind-down
Periods.

 

(i)            Development. In
the event there are any on-going Developmental Studies of the Product in the
GSK Territory (or, if the termination is limited to a specific country, within
such country), at Sepracor’s request in writing, GSK agrees:  (A) to complete, [**], any such
Developmental Studies, or (B) to the extent so requested by Sepracor, to promptly
transition, [**], to Sepracor or its designee such Developmental Studies or
portions thereof for Sepracor or its designee to complete [**]. If GSK shall
continue to conduct any such Developmental Studies, it shall do so in
accordance with the terms and conditions of this Agreement; provided, however,
that in no case shall GSK be obligated to pursue such activities for a period
exceeding [**] after the date of notice of such termination.

 

(ii)           Packaging. GSK
shall, at the written request of Sepracor, continue to package the Bulk Tablets
at costs to be negotiated in good faith at the time  until Sepracor notifies GSK in writing that
it has made other arrangements. GSK’s packaging obligations under this Section
15.2(a)(ii) shall not exceed [**] following the effective date of the
termination. Upon notification by Sepracor or the expiry of the [**], whichever
is sooner, GSK shall cease packaging of the Product unless the parties mutually
agree terms under which packaging may be continued.

 

(iii)          Commercialization.
GSK, its Affiliates and Sublicensees, shall continue, to the extent that GSK,
its Affiliates and Sublicensees continue to have stocks of usable Product, to
fulfill orders received from customers for the Product in the GSK Territory
(or, if the termination is limited to a specific country, within such country)
until up to [**] days after the later of (A) the date on which Sepracor
notifies GSK in writing that Sepracor has secured an alternative distributor or
licensee for the Product in the GSK Territory and (B) GSK has initiated
transition of the MAAs and Marketing Approvals for the Product in the GSK
Territory (or, if the termination is limited to a specific country, within such
country) to such distributor or licensee, but in no event for more for than
[**] after the date of notice of termination. For the Products sold by GSK
after the effective date of a termination (i.e., after the expiration of the
applicable termination notice period), GSK shall continue to pay royalties on
the amount of Net Sales from such sales pursuant to Section 7.3.
Notwithstanding the foregoing, GSK, its Affiliates and its Sublicensees shall
cease such activities in the GSK Territory (or, if termination is limited to a
specific country, within such country), as the case may be, upon [**] written
notice given by Sepracor at any time after the effective date of a termination
requesting that such activities (or portion thereof) cease. In the case of a
termination of this Agreement in its entirety, within [**] after Sepracor has given
notice to GSK requesting the cessation of activities pursuant to the

 

 

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provision of this Section, GSK shall notify Sepracor of an estimate of
the quantity of the Product and its shelf life remaining in GSK’s inventory and
Sepracor shall have the right to purchase any such quantities of the Product
from GSK for [**], being the amount [**]. To the extent Sepracor does not
purchase such quantities, GSK may sell such quantities in the GSK Territory
during the [**] after the effective date of such termination within the shelf
life remaining for the Product.

 

(b)           Assignment
of Filings and Marketing Approvals. As soon as practicable following the
effective date of termination, GSK shall assign or cause to be assigned to
Sepracor or its designee (or to the extent not so assignable, GSK shall take
all reasonable actions to make available to Sepracor or its designee the
benefits of) all regulatory filings and registrations (including INDs, MAAs and
Marketing Approvals) for the Product in the GSK Territory (or, if termination
is limited to a specific country, within such country), including any such
regulatory filings and registrations made or owned by its Affiliates and/or
Sublicensees. Sepracor shall notify GSK before the effective date of termination,
whether the regulatory filings and registrations should be assigned to Sepracor
or its designee, and if the latter, identify the designee, and provide GSK with
all necessary details to enable GSK to effect the assignment (or availability).
If Sepracor fail to provide such notification prior to the effective date of
termination, GSK shall assign the regulatory filings and registrations to
Sepracor.

 

(c)           Transition.
GSK shall use diligent efforts to cooperate with Sepracor and/or its designee
to effect a smooth and orderly transition in the development, sale and
marketing, promotion and commercialization of the Product in the GSK Territory
(or, if termination is limited to a specific country, within such country)
during the notice and the Wind-down Periods. Without limiting the foregoing,
GSK shall use diligent efforts to conduct, in an expeditious manner, any
activities to be conducted under this Section 15.2. Sepracor shall use diligent
efforts to identify and finalize an agreement or other arrangement with a Third
Party in relation to the Product and/or, to the extent Sepracor is able to take
over such activities under applicable law or regulations, take over, directly
or through an Affiliate, all activities related to the Product, and in
particular development activities on-going at the time of the effective date of
the termination and the transfer of the regulatory filings and registrations
(including INDs, MAAs and Marketing Approvals) into the name of Sepracor or
Sepracor’s designee so that the Wind-down Period be as limited as possible.

 

(d)           Rights
Become Non-Exclusive. Notwithstanding any other provision of this
Agreement, following the effective date of termination and during the Wind-down
Periods, GSK’s, its Affiliates’ and Sublicensees’, rights with respect to the
Product in the GSK Territory (or, if termination is limited to a specific
country, within such country) shall be non-exclusive, and, without limiting the
foregoing, Sepracor shall have the right to engage one or more other
distributors and/or licensees of the Product in all or part of the GSK
Territory.

 

(e)           Continuing
Payment Obligations. Any Product sold or disposed of by GSK, its Affiliates
or Sublicensees, in the GSK Territory in accordance with this Section 15.2
shall be subject to the applicable payment obligations under Article VII above.

 

 

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(f)            Licenses.
Sepracor hereby grants to GSK a limited, non-exclusive license under the
Sepracor Technology, the Product Trademarks and Other Trademarks, from the
effective date of any termination until the expiration of the applicable
Wind-down Period(s), solely for the purposes of permitting GSK to comply with
its obligations under this Section 15.2 and Section 15.3. Effective as the date
of transfer of any packaged Product from GSK to Sepracor pursuant to Section
15.2(a)(iii), GSK hereby grants to Sepracor a limited, non-exclusive license to
use any trade names, trademarks, or other identifying markings of GSK or its
Affiliates included in the packaging and labeling of such Product, solely for
the purposes of selling and distributing any Product, within the shelf life
remaining for the Product, which has already been packaged by GSK, its
Affiliates or Sublicensees to include such markings as at the date of transfer;  the “use” rights granted by GSK do not
include a right to print any GSK trade names, trademarks or other identifying
markings of GSK, its Affiliates or Sublicensees.

 

(g)           Sublicensees;
Third Party Agreements. Upon the completion of the obligations defined in
Sections 15.2 and 15.3, any contracts with Sublicensees of the Product in the
GSK Territory engaged by GSK shall terminate at the same time as the Agreement
with GSK. At the written request of Sepracor, GSK will assign any
Product-specific Third Party Agreements requested by Sepracor for assignment to
the furthest extent possible, provided that such assignment is permitted under
the Product-specific Third Party Agreement or accepted by the Third Party. In
the event such assignment is not requested by Sepracor or is not accepted by
such Third Party, then the rights of such Third Party with respect to the
Product shall terminate upon termination of GSK’s rights. GSK shall ensure that
its Affiliates, Sublicensees and such Third Party (if its contract is not
assigned to Sepracor pursuant to this Section 15.2(g)) shall transition any
remaining Product back to Sepracor in the manner set forth in this Section
15.2(a)(iii) as if such Affiliate or Third Party were named herein. GSK shall
include provisions requiring compliance with these provisions in the agreements
with Sublicensees and Third Parties.

 

15.3.               Rights on
Termination under Section 14.3(b). This Section 15.3 shall apply upon the
termination of GSK’s rights under this Agreement if, and only if, such
termination is made by GSK pursuant to Section 14.3(b):

 

(a)           Wind-down
Period for Development. In the event there are any on-going Developmental
Studies of the Product in the GSK Territory (or, if the termination is limited
to a specific country, within such country), at Sepracor’s request in writing,
GSK agrees:  (A) to complete, at GSK’s
expense, any such Developmental Studies, or (B) to the extent so requested by
Sepracor, to promptly transition, at GSK’s expense, to Sepracor or its designee
such Developmental Studies or portions thereof for Sepracor or its designee to
complete at their expense. If GSK shall continue to conduct any such
Developmental Studies, it shall do so in accordance with the terms and
conditions of this Agreement; provided, however, that in no case shall GSK be
obligated to pursue such activities for a period exceeding twelve (12) calendar
months after the date of notice of such termination.

 

15.4.               No Renewal,
Extension or Waiver. Acceptance of any order from, or sale or license of
any the Product to GSK after the notice or effective date of termination of
this

 

 

CONFIDENTIAL

 

Agreement shall not be construed as a renewal or extension hereof, or
as a waiver of termination of this Agreement.

 

15.5.               Survival. Upon
the termination of this Agreement, all rights and obligations of the Parties
under this Agreement shall terminate for the country(ies) effected by such
termination, except those described in the following Articles and Sections:
Articles I, VIII, XI, XIV, XV, XVI, XVII, XVIII, XIX and XX and Sections 5.14,
12.1 and 13.2. Termination shall not affect any rights to receive payments that
have accrued under Sections 7.2 and 7.3 at the time of termination. The
survival of rights and obligations under the Supply Agreement and Quality
Agreement shall be determined under the terms of such agreements.

 

ARTICLE XVI.

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

16.1.               General
Representations. Each Party hereby represents and warrants to the other
Party, as of the Effective Date, as follows:

 

(a)           Duly
Organized. Such Party is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification and failure to have such would prevent
such Party from performing its obligations under this Agreement.

 

(b)           Due
Execution Binding Agreement. This Agreement is a legal and valid obligation
binding on such Party and enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by such Party have been
duly authorized by all necessary corporate action and do not and will not: (i)
require any consent or approval of its stockholders; (ii) to such Party’s
knowledge and belief, violate any law, rule, regulation, order, writ, judgment,
decree, determination or award of any court, governmental body or
administrative or other agency having jurisdiction over such Party; nor (iii)
conflict with, or constitute a default under, any agreement, instrument or
understanding, oral or written, to which such Party is a party or by which it
is bound.

 

(c)           Consents.
Such Party has obtained, or is not required to obtain, the consent, approval,
order or authorization of any Third Party, or has completed, or is not required
to complete any registration, qualification, designation, declaration, or
filing with, any Regulatory Authority or governmental authority, in connection
with the execution and delivery of this Agreement and the performance by such
Party of its obligations under this Agreement.

 

(d)           Debarment.  Such Party is not debarred
under the United States Federal Food, Drug and Cosmetic Act and it does not, and
will not during the term of this Agreement, employ or use the services of any
Person who is debarred, in connection with the development, manufacture or
commercialization of the Product. In the event that either Party becomes aware
of the debarment or threatened debarment of any Person providing services to
such Party,

 

 

CONFIDENTIAL

 

including the
Party itself and its Affiliates or Sublicensees, which directly or indirectly
relate to activities under this Agreement, the other Party shall be immediately
notified in writing.

 

16.2.               Representations
and Warranties of Sepracor. Sepracor represents and warrants to GSK that,
as of the Effective Date:

 

(a)           it
has the full right and authority to grant the rights and licenses provided
herein;

 

(b)           Sepracor
is the exclusive owner of all right, title and interest in the Sepracor Patents
listed in Schedule 1.44. To the best of
Sepracor’s knowledge, the issued claims in the Sepracor Patents listed in Schedule 1.44 are valid and
enforceable, and the patent applications have been duly filed;

 

(c)           to
the best of Sepracor’s knowledge, neither the development, use, sale or import
of the Product in the GSK Territory, as currently being manufactured and
commercialized in the Sepracor Territory, infringes any Third Party’s valid
patents or constitutes a misappropriation of a Third Party’s trade secrets or
other intellectual property rights. For purposes of this Section 16.2(c) and
Section 16.2(d) below, the phrase “to the best of Sepracor’s knowledge” means
the actual knowledge of the attorneys in Sepracor’s legal department and the
members of Sepracor’s corporate senior management team;

 

(d)           to
the best of Sepracor’s knowledge, in the GSK Territory, there is no Third Party
infringing any of the Sepracor Patents or misappropriating Sepracor Know-How in
derogation of the rights granted to GSK in this Agreement with respect to the
Product;

 

(e)           Sepracor
is the exclusive owner of all right, title and interest in the Product
Trademarks. The Product Trademarks are available for valid registration, or
have been validly registered, by Sepracor in all the Major Markets except as
set forth on Schedule 16.2(g);

 

(f)            it
has not previously granted any right, license or interest in or to the Sepracor
Technology, or any portion thereof, or the Product Trademarks, or any confusing
similar trademarks, that is in conflict with the rights or licenses granted to
GSK under this Agreement;

 

(g)           except
as set forth on Schedule 16.2(g), there are
no actual or to the best of Sepracor’s knowledge, threatened, anticipated,
pending or alleged actions, suits, claims, interference proceedings or
governmental investigations in the GSK Territory involving the Product,
Sepracor Technology or the Product Trademarks by or against Sepracor, or any of
its Affiliates;

 

(h)           to
Sepracor’s knowledge, there is no actual, pending, alleged or threatened
product liability action nor intellectual property right litigation in relation
to the Product, all the foregoing being applicable for the GSK Territory;

 

 

CONFIDENTIAL

 

(i)            to
Sepracor’s knowledge, there is no actual, pending, alleged or threatened
infringement in the GSK Territory by a Third Party of any of the Sepracor
Technology or Product Trademarks
relating to the Product in the GSK Territory; and

 

(j)            Sepracor
has not failed to furnish GSK with any information requested by GSK, or
intentionally concealed from GSK, any information in its possession which
Sepracor reasonably believes would be material to GSK’s decision to enter into
this Agreement and undertake the commitments and obligations set forth herein

 

16.3.               Representations
and Warranties of GSK. GSK represents and warrants to Sepracor that, as of
the Effective Date it has the full right and authority to grant the rights
granted herein.

 

16.4.               DISCLAIMER. EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, OR ANY OTHER AGREEMENT CONTEMPLATED
HEREUNDER, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF
ANY KIND, EITHER EXPRESS OR IMPLIED, AND EACH PARTY EXPRESSLY DISCLAIMS ALL
IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE
OR USE, NON-INFRINGEMENT, VALIDITY AND ENFORCEABILITY OF PATENTS, OR THE
PROSPECTS OR LIKELIHOOD OF DEVELOPMENT OR COMMERCIAL SUCCESS OF THE PRODUCT. IN
NO EVENT WILL EITHER PARTY BE LIABLE FOR THE OTHER PARTY’S LOST PROFITS, LOSS
OF DATA, OR FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY AND WHETHER OR NOT SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING UNDER ANY
CAUSE OF ACTION AND ARISING IN ANY WAY OUT OF THIS AGREEMENT. THE FOREGOING
LIMITATIONS WILL NOT LIMIT EITHER PARTY’S OBLIGATIONS TO THE OTHER PARTY UNDER
SECTION XVII OF THIS AGREEMENT.

 

16.5.               Prior Knowledge.
No liability for any breach of any
representation or warranty given by a Party under this Section 16 shall arise
to the extent to which the other Party has knowledge at the Effective Date that
such representation or warranty is untrue or inaccurate.

 

ARTICLE XVII.

INDEMNIFICATION; RECALLS

 

17.1.               Indemnification
of Sepracor. GSK shall indemnify and hold harmless each of Sepracor, its
Affiliates and the directors, officers, shareholders and employees of such
entities and the successors and assigns of any of the foregoing (the “Sepracor
Indemnitees”), from and against any and all liabilities, damages,
penalties, fines, costs and expenses (including, reasonable attorneys’ fees and
other expenses of litigation) (“Liabilities”) from any claims,

 

 

CONFIDENTIAL

 

actions, suits or proceedings brought by a Third Party (a “Third
Party Claim”) incurred by any Sepracor Indemnitee, arising from, or
occurring as a result of: (a) packaging, use, marketing, distribution,
importation, offer for sale or sale of the Product by GSK, its Affiliates or
Sublicensees including, any Products Liability Claim (subject to and shared in
accordance with the mechanism set forth in Section 17.5, below); (b) the
performance of any Developmental Study regarding the Product commenced by GSK,
its Affiliates or Sublicensees and (c) any material breach of any
representations, warranties or covenants by GSK under this Agreement; except to
the extent such Third Party Claims fall within the scope of the indemnification
obligations of Sepracor set forth in Section 17.2, below, or result from the
gross negligence or willful misconduct of a Sepracor Indemnitee.

 

17.2.               Indemnification
of GSK. Sepracor shall indemnify and hold harmless each of GSK, its
Affiliates and Sublicensees, and the directors, officers and employees of GSK,
its Affiliates and Sublicensees, and the successors and assigns of any of the
foregoing (the “GSK Indemnitees”), from and against any and all
Liabilities from any Third Party Claims incurred by any GSK Indemnitee, arising
from, or occurring as a result of: (a) the manufacturing, use, marketing,
distribution, offer for sale or sale of the Product by Sepracor, an Affiliate
or its licensee, including any Products Liability Claim (subject to and shared
in accordance with the mechanism set forth in Section 17.5, below); (b) the
development of the Product by Sepracor (but only where not performed under GSK’s
direction); (c) the use of the Product Trademarks
by GSK in the GSK Territory in accordance with this Agreement, and (d) any material breach of any
representations, warranties or covenants by Sepracor under this Agreement,
except to the extent such Third Party Claims falls within the scope of the
indemnification obligations of GSK set forth in Section 17.1, above, or result
from the gross negligence or willful misconduct of an GSK Indemnitee.

 

17.3.               Procedure. Except
with respect to the Product Liability Claims subject to Section 17.5, below, a
Party that intends to claim indemnification under this Article XVII (the “Indemnitee”)
shall promptly notify the other Party (the “Indemnitor”) in writing of
any Third Party Claim, in respect of which the Indemnitee intends to claim such
indemnification, and the Indemnitor shall have sole control of the defense
and/or settlement thereof. The indemnity arrangement in this Section 17.1, 17.2 and 17.3 shall not apply to
amounts paid in settlement of any action with respect to a Third Party Claim,
if such settlement is effected without the consent of the Indemnitor, which
consent shall not be withheld or delayed unreasonably. The failure to deliver
written notice to the Indemnitor within a reasonable time after the
commencement of any action with respect to a Third Party Claim shall only
relieve the Indemnitor of its indemnification obligations under this Article XVII
if and to the extent the Indemnitor is actually prejudiced thereby. The
Indemnitee shall cooperate fully with the Indemnitor and its legal
representatives in the investigation of any action with respect to a Third
Party Claim covered by this indemnification.

 

17.4.               Recalls.

 

(a)           Voluntary
and Mandatory Recalls: Decision-Making. To the extent that: (i) any
Regulatory Authority in the GSK Territory issues a directive or order or
requests that the

 

 

CONFIDENTIAL

 

Product be
recalled or withdrawn; (ii) a court of competent jurisdiction orders a recall
or withdrawal of the Product in the GSK Territory or (iii) GSK, after
consultation with Sepracor, determines that an event, incident or circumstance
has occurred that means that the Product should be recalled or withdrawn
voluntarily in the GSK Territory, the Parties shall recall or withdraw the
Product as set forth in this Section 17.4. As between the Parties, GSK shall
control and coordinate all activities that GSK deems reasonably necessary in
connection with such recall or withdrawal of the Product in the GSK Territory,
including making all contact with relevant Regulatory Authorities; provided, however, that GSK shall not take any action with
respect to any such recall without first notifying Sepracor in writing, and to
the extent practical, consulting in good faith with Sepracor. GSK shall
consider in good faith any comments of Sepracor in connection with any aspect
of the management of any such recall. For clarity, all matters relating to a
withdrawal or recall of the Product in the Sepracor Territory shall be
determined, controlled and coordinated solely by Sepracor.

 

(b)           Costs
of Recall. All actual direct and documented out-of-pocket expenses for the
execution of any recall or withdrawal of the Product (including the cost of any
investigation leading to the decision to recall) (“Recall Costs”)
pursuant to Section 17.4(a), above, shall initially be shared equally between
the Parties; provided that, in each case,
responsibility for the Recall Costs shall be subject to the final allocation
between the Parties as set out in paragraphs (i) to (iii) below. For clarity,
Recall Costs do not include any lost or refunded sales. In the event that it is
finally determined, or agreed between the Parties, that such recall or
withdrawal is caused by:

 

(i)            breach of Sepracor’s
representations, warranties or covenants as set forth in this Agreement,
including failure to supply Bulk Tablets conforming to the standards set forth in the Supply Agreement or Quality Agreement,
or the gross negligence or willful misconduct of Sepracor or Sepracor’s failure
to comply with applicable laws and regulations including cGMP (to be defined in
the Quality Agreement) (collectively, the “Fault of Sepracor”), Sepracor
shall be responsible for all Recall Costs;

 

(ii)           failure of GSK, or its
Affiliates or Sublicensees, to handle, store, package, transport, distribute or
use the Bulk Tablets supplied by Sepracor or Product in accordance with
applicable laws and regulations or the terms of the applicable Marketing
Approval, the Supply Agreement, the Quality Agreement or the gross negligence
or willful misconduct of GSK, its Affiliates or Sublicensees, (collectively, “Fault
of GSK”), GSK shall be responsible for all Recall Costs; and

 

(iii)          in all other cases, the
Recall Costs shall be borne equally by Sepracor and GSK.

 

17.5.        Product Liability Claims.

 

(a)           Notification
to the Other. Each Party shall notify the other Party as promptly as
practicable if any Third Party Claim is commenced or threatened against such
Party alleging Product liability, Product defect, design, packaging or labeling
defect, failure to warn

 

 

CONFIDENTIAL

 

or any similar
action relating to the use or safety of the Product sold by or under authority
of GSK in the GSK Territory (the “Product Liability Claim”).

 

(b)           Cooperation,
Counsel and Control. Each Party shall cooperate with the other Party in
connection with any such Product Liability Claim that is commenced or
threatened against the other Party. If a Product Liability Claim is asserted
against both Parties, each Party will have the right to designate
counsel to defend itself in the Product Liability Claim. If a Product Liability
Claim is brought against one Party but not the other Party, the named Party
shall control the defense and/or settlement thereof at its own expense with
counsel of its choice, subject to this Section 17.5. In such case, the other
Party may participate in the defense and/or settlement thereof at its own
expense with counsel of its choice. In any event, the Party that is subject to
a Product Liability Claim (if not asserted against both Parties) agrees to keep
the other Party hereto informed of all material developments in connection with
any such Product Liability Claim.

 

(c)           Settlement,
Admissions and Asserting Positions. Neither Party shall settle any Product
Liability Claim, or make any admissions or assert any position in such Product
Liability Claim, in a manner that would adversely affect the other Party, the
Product or the development, manufacture, use or sale thereof without the prior
written consent of the other Party, which shall not be unreasonably withheld or
delayed.

 

(d)           Bearing
the Liabilities. To the extent a Product Liability Claim is caused by: (i)
the Fault of Sepracor, Sepracor shall bear all Liabilities from such Product
Liability Claim to the extent of its fault; (ii) the Fault of GSK, GSK shall
bear all Liabilities from such a Product Liability Claim to the extent of its
fault or (iii) circumstances other than those described in Sub-section (i) or
(ii), above, the Parties shall share equally the Liabilities from such Product
Liability Claim.

 

ARTICLE XVIII.

DISPUTE RESOLUTION

 

18.1.               Dispute
Resolution Process. The
Parties recognize that disputes as to certain matters may from time to time
arise during the Term of this Agreement that relate to a Party’s rights and/or
obligations hereunder. If the Parties cannot resolve any such dispute within
thirty (30) days after written notice of a dispute from one Party to another,
any Party may, by written notice to the other Party, have such dispute referred
to the Senior Executives. The Senior Executives shall negotiate in good faith
to resolve the dispute within thirty (30) days. During such period of
negotiations, any applicable time periods under this Agreement shall be tolled.
If the Senior Executives are unable to resolve the dispute within such time
period, either Party may pursue any remedy available to such Party at law or in
equity, subject to the terms and conditions of this Agreement and the other
agreements expressly contemplated hereunder.

 

18.2.               Governing Law;
Litigation; Exclusive Venue. This Agreement and all questions regarding its
existence, validity, interpretation, breach or performance of this

 

 

CONFIDENTIAL

 

Agreement, shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, United States, without
reference to its conflicts of law principles. If any dispute cannot be resolved
by, and subject to the exhaustion of the procedure set out in Section 18.1,
above, any dispute shall be finally settled by litigation brought solely in a
United States Federal Court of competent jurisdiction (or state court if no
Federal Court has jurisdiction) located in the State of New York, United
States, and the Parties hereby submit to the exclusive jurisdiction of such
courts.

 

ARTICLE XIX.

GENERAL PROVISIONS

 

19.1.               Intervening
Events. If the performance of any part of this Agreement by either Party is
prevented, restricted, interfered with or delayed by any reason or cause beyond
the reasonable control of such Party (including: fire, flood, embargo, power
shortage or failure, acts of war, insurrection, riot, terrorism, strike,
lockout or other labor disturbance, acts of God or any acts, omissions or
delays in acting of the other Party) (an “Intervening Event”), the Party
so affected shall, upon giving written notice to the other Party, be excused
from such performance to the extent of such Intervening Event, provided that
the affected Party shall use its substantial efforts to avoid or remove such
causes of non-performance and shall continue performance with the utmost
dispatch whenever such causes are removed.

 

(a)           Notification
of the Other. If either Party becomes aware that such an Intervening Event
has occurred, is imminent or likely, it will immediately notify the other;

 

(b)           Efforts
to Overcome. The Party which is subject to such Intervening Event shall
exert all reasonable efforts to overcome it;

 

(c)           Keeping
the Other Informed. Such Party will keep the other informed as to the
progress of overcoming it; and

 

19.2.               Waiver of Breach.
The failure of either Party at any time or times to require performance of any
provision of this Agreement shall in no manner affect its rights at a later
time to enforce such rights. No waiver by either Party of any condition or term
in any one or more instances shall be construed as a further or continuing
waiver of such condition or term or of another condition or term.

 

19.3.               Performance by
Affiliates. To the extent that this Agreement imposes obligations on
Affiliates of a Party, such Party agrees to cause its Affiliates to perform
such obligation. Either Party may use one or more of its Affiliates to perform
its obligation hereunder, provided that the Parties will remain liable
hereunder for the prompt payment and performance of all their respective
obligations hereunder.

 

19.4.               Performance by
Subcontractors. Either Party may perform any of its obligations or exercise
any of its rights under this Agreement through subcontractors. Such

 

 

CONFIDENTIAL

 

Party shall ensure that all of its subcontractors comply with, and
perform its obligations in accordance with, the terms of this Agreement;
provided, however, that the use of such subcontractors by such Party shall not
relieve such Party of its respective obligations under this Agreement.

 

19.5.               Modification.
No amendment or modification of any provision of this Agreement shall be
effective unless in a prior writing signed by both Parties hereto. No provision
of this Agreement shall be varied, contradicted or explained by any oral
agreement, course of dealing or performance or any other matter not set forth
in an agreement in writing and signed by both Parties hereto.

 

19.6.               Severability.
In the event any provision of this Agreement should be held invalid, illegal or
unenforceable in any jurisdiction, the Parties shall negotiate, in good faith
and enter into a valid, legal and enforceable substitute provision that most
nearly reflects the original intent of the Parties. All other provisions of
this Agreement shall remain in full force and effect in such jurisdiction. Such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction.

 

19.7.               Entire Agreement.
This Agreement (including the Exhibits and Schedules attached hereto) and the
Supply Agreement, Pharmacovigilance Agreement, and Quality Agreement
constitutes the entire agreement between the Parties relating to the subject
matter hereof and supersedes and cancels all previous express or implied
agreements and understandings, negotiations, writings and commitments, either
oral or written, in respect to the subject matter hereof. Each of the parties acknowledges and agrees that in
entering into this Agreement, and the documents referred to in it, it does not
rely on, and shall have no remedy in respect of, any statement, representation,
warranty or understanding (whether negligently or innocently made) of any
person (whether party to this Agreement or not) other than as expressly set out
in this Agreement. Nothing in this clause shall, however, operate to limit or
exclude any liability for fraud.

 

19.8.               Language.
The language of this Agreement and all activities to be pursued under this
Agreement is English. Any and all documents proffered by one Party to the other
in fulfillment of any provision of this Agreement shall only be in compliance
if in English. Any translation of this Agreement in another language shall be
deemed for convenience only and shall never prevail over the original English
version. This Agreement is established in the English language.

 

19.9.               Notices.
Unless otherwise agreed by the Parties in writing or specified in this
Agreement, all communications between the Parties relating to, and all written
documentation to be prepared and provided under, this Agreement shall be in the
English language. Any notice required or permitted under this Agreement shall
be in writing in the English language, delivered personally, sent by facsimile
(and promptly confirmed by personal delivery, registered or certified mail or
overnight courier), sent by internationally-recognized courier or sent by
registered or certified mail, postage prepaid to the following addresses of the

 

 

CONFIDENTIAL

 

Parties (or such other address for a Party as may be at any time
thereafter specified by like notice):

 

	
  To Sepracor:

  	
   

  	
  To GSK:

  
	
   

  	
   

  	
   

  
	
  Sepracor Inc.

  	
   

  	
  Glaxo Group Limited

  
	
  84 Waterford Drive

  	
   

  	
  Glaxo Wellcome House

  
	
  Marlborough, MA 01752-7010

  	
   

  	
  Berkeley Avenue

  
	
  USA

  	
   

  	
  Greenford

  
	
  Telephone:

  	
  + 1- 508-481- 6700

  	
   

  	
  Middlesex

  
	
  Facsimile:

  	
  + 1-508-357-7492

  	
   

  	
  UB6 0NN

  
	
  Attention:

  	
  Adrian Adams

  	
   

  	
  UK

  
	
   

  	
  President & CEO

  	
   

  	
  Facsimile: + 44-20-8047- 6905

  
	
   

  	
   

  	
  Attention: Company Secretary

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
  Sepracor Inc.

  	
   

  	
  GlaxoSmithKline

  
	
  84 Waterford Drive

  	
   

  	
  980 Great West Road

  
	
  Marlborough, MA 01752-7010

  	
   

  	
  Brentford

  
	
  USA

  	
   

  	
  Middlesex

  
	
  Telephone: + 1- 508-481- 6700

  	
   

  	
  TW8 9GS, UK.

  
	
  Facsimile: + 1-508-357- 7506

  	
   

  	
  Facsimile: + 44-20-8047- 6897

  
	
  Attention:       Andrew I.
  Koven

  	
   

  	
  Attention: Legal Operations,

  
	
  Executive Vice President, General

  	
   

  	
  Business Development

  
	
  Counsel and Corporate Secretary

  	
   

  	
  Transactions

  

 

Any such notice shall be
deemed to have been given: (a) when delivered if personally delivered; (b) on
the next Business Day after dispatch if sent by facsimile or by
internationally-recognized overnight courier; and/or (c) on the fifth (5th)
Business Day following the date of mailing if sent by mail or other
internationally-recognized courier. Notices hereunder will not be deemed
sufficient if provided only between or among each Party’s representatives on
the JSC.

 

19.10.             Assignment. This
Agreement shall not be assignable or otherwise transferred, nor may any right
or obligations hereunder be assigned or transferred, by either Party to any
Third Party without the prior written consent of the other Party; except either
Party may assign this Agreement without the consent of the other Party to an
entity that acquires all or a substantial part of the business or assets of the
assigning Party, whether by merger, acquisition or otherwise, provided that the
acquiring Party assumes this Agreement in writing or by operation of law. In
addition, either Party shall have the right to assign this Agreement to an
Affiliate upon written notice to the non-assigning Party; provided,
however, the assigning Party hereby guarantees the performance of this
Agreement by such Affiliate. Subject to the foregoing, this

 

 

CONFIDENTIAL

 

Agreement shall inure to the benefit of each Party, its successors and
permitted assigns. Any assignment of this Agreement in contravention of this
Section 19.10 shall be null and void.

 

19.11.             No Partnership or
Joint Venture. Nothing in this Agreement or any action which may be taken
pursuant to its terms is intended, or shall be deemed, to establish a joint
venture or partnership between GSK and Sepracor. Neither Party to this
Agreement shall have any express or implied right or authority to assume or
create any obligations on behalf of, or in the name of, the other Party, or to
bind the other Party to any contract, agreement or undertaking with any Third
Party.

 

19.12.             Interpretation.
The captions to the several Articles and Sections of this Agreement are not a
part of this Agreement but are included for convenience of reference and shall
not affect its meaning or interpretation. In this Agreement: (a) the word “including”
shall be deemed to be followed by the phrase “without limitation” or like
expression; (b) the singular shall include the plural and vice versa; and (c)
masculine, feminine and neuter pronouns and expressions shall be
interchangeable. Each accounting term used herein that is not specifically
defined herein shall have the meaning given to it under generally accepted
accounting principles in the International Financial Reporting Standards
consistently applied, but only to the extent consistent with its usage and the
other definitions in this Agreement.

 

19.13.             Counterparts.
This Agreement may be executed in any number of counterparts each of which
shall be deemed an original, and all of which together shall constitute one and
the same instrument.

 

ARTICLE XX.

COMPLIANCE WITH LAW

 

20.1.               Export Laws.
Notwithstanding anything to the contrary contained herein, all obligations of
Sepracor and GSK are subject to prior compliance with export and import
regulations and such other laws and regulations in effect in such jurisdictions
or any other relevant country as may be applicable, and to obtaining all
necessary approvals required by the applicable agencies of the governments of
any relevant countries. Sepracor and GSK shall cooperate with each other and
shall provide assistance to the other as reasonably necessary to obtain any
required approvals.

 

20.2.               Securities Laws.
Each of the Parties acknowledges that it is aware that the securities laws of
the United States and the securities laws of other countries prohibit any
person who has material non-public information about a publicly listed company
from purchasing or selling securities of such company or from communicating
such information to any person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities. Each
Party agrees to comply with such securities laws make its Affiliates, 

 

 

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Sublicensees, employees and agents aware of the existence of such
securities laws and their need to comply with such laws.

 

20.3.               Certain Payments.
Each of the Parties acknowledges that it is aware that the United States and
other countries have stringent laws which prohibit persons directly or
indirectly to make unlawful payments to, and for the benefit of, government
officials and related parties to secure approvals or permission for their
activities. Each Party agrees that it will make no such prohibited payments, it
will not indirectly make or have made such payments and it will make its
Affiliates, employees and agents aware of the existence of such laws and their
need to comply with such laws.

 

20.4.               Conduct of
Activities. As to all matters contained in this Agreement, each Party shall
conduct the activities allocated to it in compliance in all material respects
with all applicable laws, rules and regulations and in accordance with good
scientific, clinical and manufacturing practices, applicable under the laws and
regulations of the country in which such activities are conducted.

 

 

CONFIDENTIAL

 

IN WITNESS WHEREOF, Sepracor
Inc. and Glaxo Group Limited,
have executed this Development, License and Commercialization Agreement as of
the Effective Date.

 

Sepracor Inc.

 

	
   

  	
  BY:

  	
  /s/ Adrian Adams

  	
   

  	
  Date:

  	
  9/10/07

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NAME: Mr. Adrian Adams

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TITLE: President &
  CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Glaxo Group Limited

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/ Paul Williamson

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NAME: Paul Williamson
  on behalf of

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Edinburgh Pharmaceutical Industries Limited

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TITLE: Corporate
  Director

  	
   

  
								

 

 

CONFIDENTIAL

 

Schedules and Exhibits

 

	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1.39

  	
   

  	
  Trademarks

  
	
  Part A:

  	
  Product Trademarks

  
	
  Part B:

  	
  Other Trademarks

  
	
  Schedule 1.44

  	
   

  	
  Sepracor Patents

  
	
  Schedule 1.50

  	
   

  	
  FDA-approved label

  
	
  Schedule 7.3(c)

  	
   

  	
  Hypothetical Royalty
  Calculation

  
	
  Schedule 7.3(e)

  	
   

  	
  Hypothetical
  Calculation of Cost of Bulk Tablets and Net Sales

  
	
  Schedule 10.2

  	
   

  	
  Heads of Terms for
  Supply Agreement

  
	
  Schedule 16.2(g)

  	
   

  	
  Threatened and Pending
  Litigation in GSK Territory

  

 

 

CONFIDENTIAL

 

SCHEDULE 1.39

 

TRADEMARKS

 

Part A:
Product Trademarks

 

	
  Jurisdiction

  	
   

  	
  Trademark

  	
   

  	
  Status

  	
   

  	
  App. No.

  	
   

  	
  Filing
  Date

  	
   

  	
  Reg. No.

  	
   

  	
  Reg.
  Date

  
	
  Brazil

  	
   

  	
  LUNIVIA

  	
   

  	
  Published

  	
   

  	
  825757444

  	
   

  	
  11-Aug-2003

  	
   

  	
   

  	
   

  	
   

  
	
  Chile

  	
   

  	
  LUNIVIA

  	
   

  	
  Registered

  	
   

  	
  617060

  	
   

  	
  08-Aug-2003

  	
   

  	
  787236

  	
   

  	
  15-May-2007

  
	
  China

  	
   

  	
  LUNIVIA

  	
   

  	
  Registered

  	
   

  	
  3516600

  	
   

  	
  07-Apr-2003

  	
   

  	
  3516600

  	
   

  	
  07-Feb-2005

  
	
  Colombia

  	
   

  	
  LUNIVIA

  	
   

  	
  Registered

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  296477

  	
   

  	
  27-Apr-2004

  
	
  European Community

  	
   

  	
  LUNIVIA

  	
   

  	
  Registered

  	
   

  	
  3077088

  	
   

  	
  10-Mar-2003

  	
   

  	
  3077088

  	
   

  	
  23-Nov-2004

  
	
  Hong Kong

  	
   

  	
  LUNIVIA

  	
   

  	
  Registered

  	
   

  	
  300003040

  	
   

  	
  07-Apr-2003

  	
   

  	
  300003040

  	
   

  	
  06-Oct-2003

  
	
  Indonesia

  	
   

  	
  LUNIVIA

  	
   

  	
  Registered

  	
   

  	
   

  	
   

  	
  07-Apr-2003

  	
   

  	
  IDM000029089

  	
   

  	
  04-Feb-2005

  
	
  Peru

  	
   

  	
  LUNIVIA

  	
   

  	
  Registered

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  93025

  	
   

  	
  12-Nov-2003

  
	
  Belarus

  	
   

  	
  LUNIVIA

  	
   

  	
  Pending

  	
   

  	
  20070930

  	
   

  	
  16-Mar-2007

  	
   

  	
   

  	
   

  	
   

  
	
  United Kingdom

  	
   

  	
  LUNIVIA

  	
   

  	
  Published

  	
   

  	
  2449182

  	
   

  	
  12-Mar-2007

  	
   

  	
   

  	
   

  	
   

  
	
  Ireland

  	
   

  	
  LUNIVIA

  	
   

  	
  Published

  	
   

  	
  235997

  	
   

  	
  12-Mar-2007

  	
   

  	
   

  	
   

  	
   

  
	
  Russia

  	
   

  	
  LUNIVIA

  	
   

  	
  Pending

  	
   

  	
  708067

  	
   

  	
  14-Mar-2007

  	
   

  	
   

  	
   

  	
   

  
	
  Korea

  	
   

  	
  LUNIVIA

  	
   

  	
  Pending

  	
   

  	
  25997

  	
   

  	
  14-May-2007

  	
   

  	
   

  	
   

  	
   

  
	
  Venezuela

  	
   

  	
  LUNIVIA

  	
   

  	
  Registered

  	
   

  	
  11085

  	
   

  	
  11-Nov-2005

  	
   

  	
  P264537

  	
   

  	
  11-Nov-2005

  
	
  Switzerland

  	
   

  	
  LUNIVIA

  	
   

  	
  Registered

  	
   

  	
  01636

  	
   

  	
  18-Mar-2003

  	
   

  	
  510653

  	
   

  	
  22-May-2003

  
	
  Taiwan

  	
   

  	
  LUNIVIA

  	
   

  	
  Registered

  	
   

  	
  92017207

  	
   

  	
  10-Apr-2003

  	
   

  	
  1074103

  	
   

  	
  01-Nov-2003

  
	
  Thailand

  	
   

  	
  LUNIVIA

  	
   

  	
  Registered

  	
   

  	
  515824

  	
   

  	
  01-Aug-2002

  	
   

  	
  KOR2215802

  	
   

  	
  10-Apr-2003

  

 

 

CONFIDENTIAL

 

SCHEDULE 1.39

 

TRADEMARKS

 

Part B: Other Trademarks

 

None

 

 

CONFIDENTIAL

 

SCHEDULE
1.44

 

SEPRACOR  PATENTS

 

	
  COUNTRY

  	
   

  	
  PATENT
  NO.

  	
   

  	
  FILING
  DATE

  
	
  Argentina

  	
   

  	
  248024

  	
   

  	
  16 Jan. 1992

  
	
  Australia

  	
   

  	
  671797

  	
   

  	
  16 Jan. 1992

  
	
  Austria

  	
   

  	
  121089

  	
   

  	
  16 Jan. 1992

  
	
  Bangladesh

  	
   

  	
  1002434

  	
   

  	
  15 Jan. 1992

  
	
  Belarus

  	
   

  	
  1854

  	
   

  	
  16 Jan. 1992

  
	
  Belgium

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Czech Republic

  	
   

  	
  281011

  	
   

  	
  16 Jan. 1992

  
	
  Denmark

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Finland

  	
   

  	
  100331

  	
   

  	
  16 Jan. 1992

  
	
  France

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Germany

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Great Britain

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Greece

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Hungary

  	
   

  	
  218928

  	
   

  	
  16 Jan. 1992

  
	
  Ireland

  	
   

  	
  66110

  	
   

  	
  16 Jan. 1992

  
	
  Israel

  	
   

  	
  100677

  	
   

  	
  16 Jan. 1992

  
	
  Italy

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Luxembourg

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Morocco

  	
   

  	
  22392

  	
   

  	
  15 Jan. 1992

  
	
  Netherlands

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  New Zealand

  	
   

  	
  241313

  	
   

  	
  16 Jan. 1992

  
	
  Nigeria

  	
   

  	
  11252

  	
   

  	
  16 Jan. 1992

  
	
  Norway

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Pakistan

  	
   

  	
  132928

  	
   

  	
  16 Jan. 1992

  
	
  Philippines

  	
   

  	
  30982

  	
   

  	
  16 Jan. 1992

  
	
  Poland

  	
   

  	
  166976

  	
   

  	
  16 Jan. 1992

  
	
  Portugal

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Russia

  	
   

  	
  2110519

  	
   

  	
  16 Jan. 1992

  
	
  Serbia

  	
   

  	
  48878

  	
   

  	
  17 Jan. 1992

  
	
  Slovakia

  	
   

  	
  279060

  	
   

  	
  16 Jan. 1992

  
	
  South Africa

  	
   

  	
  92302

  	
   

  	
  15 Jan. 1992

  
	
  Spain

  	
   

  	
  2071486

  	
   

  	
  16 Jan. 1992

  
	
  Sweden

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Switzerland

  	
   

  	
  EP609210 B1

  	
   

  	
  16 Jan. 1992

  
	
  Tunisia

  	
   

  	
  16531

  	
   

  	
  17 Jan. 1992

  

 

 

CONFIDENTIAL

 

SCHEDULE 1.50

 

FDA-APPROVED LABEL

 

(Attached)

 

 

	
  Rx
  only

  	
   

  	
  C-IV

  

 

LUNESTA®
(eszopiclone) TABLETS

1 mg, 2
mg, 3 mg

 

PRESCRIBING INFORMATION

 

DESCRIPTION:

 

LUNESTA (eszopiclone)  is a nonbenzodiazepine hypnotic agent
that is a pyrrolopyrazine derivative of the cyclopyrrolone class. The chemical
name of eszopiclone is
(+)-(5S)-6-(5-chloropyridin-2-yl)-7-oxo-6,7-dihydro-5H-pyrrolo[3,4-b]
pyrazin-5-yl 4-methylpiperazine-1-carboxylate. Its molecular weight is 388.81,
and its empirical formula is C17H17ClN6O3.
Eszopiclone  has a single chiral
center with an (S)-configuration. It has the
following chemical structure:

 

 

Eszopiclone  is a white to light-yellow crystalline
solid. Eszopiclone  is very slightly
soluble in water, slightly soluble in ethanol, and soluble in phosphate buffer (pH 3.2).

 

Eszopiclone is formulated
as film-coated tablets for oral administration. LUNESTA tablets contain 1 mg, 2
mg, or 3 mg eszopiclone and the following inactive ingredients:  calcium phosphate, colloidal silicon dioxide,
croscarmellose sodium, hypromellose, lactose, magnesium stearate,
microcrystalline cellulose, polyethylene glycol, titanium dioxide, and
triacetin. In addition, both the 1 mg and 3 mg tablets contain FD&C Blue
#2.

 

CLINICAL PHARMACOLOGY:

 

Pharmacodynamics

 

The precise mechanism of action of eszopiclone as a
hypnotic is unknown, but its effect is believed to result from its interaction
with GABA-receptor complexes at binding domains located close to or
allosterically coupled to benzodiazepine receptors. Eszopiclone is a
nonbenzodiazepine hypnotic that is a pyrrolopyrazine derivative of the
cyclopyrrolone class with a chemical structure unrelated to
pyrazolopyrimidines, imidazopyridines, benzodiazepines, barbiturates, or other
drugs with known hypnotic properties. 

 

1

 

Pharmacokinetics

 

The
pharmacokinetics of eszopiclone have
been investigated in healthy subjects (adult and elderly) and in patients with
hepatic disease or renal disease. In healthy subjects, the pharmacokinetic
profile was examined after single doses of up to 7.5 mg and after once-daily
administration of 1, 3, and 6 mg for 7 days. Eszopiclone is rapidly absorbed, with a time to peak
concentration (tmax) of
approximately 1 hour and a terminal-phase elimination half-life (t1/2)
of approximately 6 hours. In healthy
adults, LUNESTA does not accumulate with once-daily administration, and its
exposure is dose-proportional over the range of 1 to 6 mg.

 

Absorption And Distribution

 

Eszopiclone  is rapidly absorbed following oral
administration. Peak plasma concentrations are achieved within approximately 1
hour after oral administration. Eszopiclone is weakly bound to plasma protein (52-59%). The large free fraction
suggests that eszopiclone
disposition should not be affected by drug-drug interactions caused by protein
binding. The blood-to-plasma ratio for eszopiclone is less than one, indicating no selective uptake
by red blood cells.

 

Metabolism

 

Following oral administration, eszopiclone is
extensively metabolized by oxidation and demethylation. The primary plasma metabolites
are (S)-zopiclone-N-oxide and (S)-N-desmethyl zopiclone; the latter
compound binds to GABA receptors with substantially lower potency than
eszopiclone, and the former compound shows no significant binding to this
receptor. In vitro studies have shown that CYP3A4
and CYP2E1 enzymes are involved in the metabolism of eszopiclone. Eszopiclone
did not show any inhibitory potential on CYP450 1A2, 2A6, 2C9, 2C19, 2D6, 2E1,
and 3A4 in cryopreserved human hepatocytes.

 

Elimination

 

After
oral administration, eszopiclone is
eliminated with a mean t1/2  of approximately 6 hours. Up to 75% of an oral dose of racemic zopiclone
is excreted in the urine, primarily as metabolites. A similar excretion profile
would be expected for eszopiclone, the S-isomer of racemic zopiclone. Less than
10% of the orally administered eszopiclone dose is excreted in the urine as
parent drug.

 

Effect
Of Food 

 

In healthy adults, administration of a 3 mg dose of eszopiclone  after a high-fat meal resulted in no
change in AUC, a reduction in mean Cmax of 21%, and delayed tmax
by approximately 1 hour. The half-life remained unchanged, approximately 6
hours. The effects of LUNESTA on sleep onset may be reduced if it
is taken with or immediately after a high-fat/heavy meal.

 

2

 

Special Populations

 

Age

 

Compared
with non-elderly adults, subjects 65 years and older had an increase of 41% in
total exposure (AUC) and a slightly prolonged elimination of eszopiclone (t1/2 approximately 9 hours). Cmax was unchanged. Therefore, in elderly patients
the starting dose of LUNESTA should
be decreased to 1 mg and the dose should not exceed 2 mg.

 

Gender 

 

The
pharmacokinetics of eszopiclone in
men and women are similar.

 

Race

 

In
an analysis of data on all subjects participating in Phase 1 studies of eszopiclone, the pharmacokinetics for all races studied
appeared similar.

 

Hepatic Impairment

 

Pharmacokinetics
of a 2 mg eszopiclone dose were assessed in 16 healthy volunteers and in
8 subjects with mild, moderate, and severe liver disease. Exposure was
increased 2-fold in severely impaired patients compared with the healthy
volunteers. Cmax and tmax
were unchanged. The dose of LUNESTA should
not be increased above 2 mg in patients with severe hepatic impairment. No dose
adjustment is necessary for patients with mild-to-moderate hepatic impairment. LUNESTA
should be used with caution in patients with hepatic impairment. (See Dosage AND Administration.)

 

Renal Impairment

 

The
pharmacokinetics of eszopiclone were
studied in 24 patients with mild, moderate, or severe renal impairment. AUC and
Cmax were similar in the
patients compared with demographically matched healthy control subjects. No
dose adjustment is necessary in patients with renal impairment, since less than
10% of the orally administered eszopiclone dose is excreted in the urine as
parent drug.

 

Drug Interactions

 

Eszopiclone is
metabolized by CYP3A4 and CYP2E1 via demethylation and oxidation. There were no pharmacokinetic or pharmacodynamic
interactions between eszopiclone and
paroxetine, digoxin, or warfarin. When eszopiclone was coadministered with
olanzapine, no pharmacokinetic interaction was detected in levels of
eszopiclone or olanzapine, but a pharmacodynamic interaction was seen on a
measure of psychomotor function. Eszopiclone and lorazepam decreased each
other’s Cmax by 22%. Coadministration of eszopiclone 3 mg to subjects receiving
ketoconazole 400 mg, a potent inhibitor of CYP3A4, resulted in a 2.2-fold

 

3

 

increase
in exposure to eszopiclone. LUNESTA would not be expected to alter the
clearance of drugs metabolized by common CYP450 enzymes. (See PRECAUTIONS.)

 

Clinical Trials:

 

The effect of LUNESTA on
reducing sleep latency and improving sleep maintenance was established in studies with 2100 subjects (ages 18-86) with chronic
and transient insomnia in six placebo-controlled trials of up to 6 months’
duration. Two of these trials were in elderly patients (n=523). Overall, at the
recommended adult dose (2-3 mg) and elderly dose (1-2 mg), LUNESTA significantly decreased sleep latency and
improved measures of sleep maintenance (objectively measured as wake time after
sleep onset [WASO] and subjectively measured as total sleep time).

 

Transient Insomnia

 

Healthy
adults were evaluated in a model of transient insomnia (n=436) in a sleep
laboratory in a double-blind, parallel-group, single-night trial comparing two
doses of eszopiclone and placebo. LUNESTA 3 mg was superior to placebo on measures of
sleep latency and sleep maintenance, including polysomnographic (PSG)
parameters of latency to persistent sleep (LPS) and WASO.

 

Chronic Insomnia (Adults And Elderly)

 

The effectiveness of
LUNESTA was established in five controlled
studies in chronic insomnia. Three controlled studies were in adult subjects,
and two controlled studies were in elderly subjects with chronic insomnia.

 

Adults

 

In the first study, adults with chronic insomnia (n=308) were
evaluated in a double-blind, parallel-group trial of 6 weeks’ duration
comparing LUNESTA 2 mg and 3 mg with
placebo. Objective endpoints were measured for 4 weeks. Both 2 mg and 3 mg were
superior to placebo on LPS at 4 weeks. The 3 mg dose was superior to placebo on
WASO.

 

In
the second study, adults with chronic insomnia (n=788) were evaluated using
subjective measures in a double-blind, parallel-group trial comparing the
safety and efficacy of LUNESTA 3 mg with placebo administered nightly for
6 months. LUNESTA was superior to placebo on subjective measures of sleep
latency, total sleep time, and WASO.

 

In
addition, a 6-period cross-over PSG study evaluating eszopiclone doses of 1 to
3 mg, each given over a 2-day period, demonstrated effectiveness of all doses
on LPS, and of 3 mg on WASO. In this trial, the response was dose-related.

 

4

 

Elderly

 

Elderly subjects (ages
65-86) with chronic insomnia were evaluated in two double-blind, parallel-group
trials of 2 weeks’ duration. One study (n=231) compared the effects of LUNESTA
with placebo on subjective outcome measures, and the other (n=292) on objective
and subjective outcome measures. The first study compared 1 mg and 2 mg of
LUNESTA with placebo, while the second study compared 2 mg of LUNESTA with
placebo. All doses were superior to placebo on measures of sleep latency. In
both studies, 2 mg of LUNESTA was superior to placebo on measures of sleep
maintenance.

 

Studies Pertinent To Safety Concerns For
Sedative/Hypnotic Drugs

 

Cognitive, Memory, Sedative, and Psychomotor
Effects

 

In two double-blind,
placebo-controlled, single-dose cross-over studies of 12 patients each (one
study in patients with insomnia; one in normal volunteers), the effects of
LUNESTA 2 and 3 mg were assessed on 20 measures of cognitive function and memory
at 9.5 and 12 hours after a nighttime dose. Although results suggested that
patients receiving LUNESTA 3 mg performed more poorly than patients receiving
placebo on a very small number of these measures at 9.5 hours post-dose, no
consistent pattern of abnormalities was seen.

 

In a 6-month
double-blind, placebo-controlled trial of nightly administered LUNESTA 3 mg,
8/593 subjects treated with LUNESTA 3 mg (1.3%) and 0/195 subjects treated with placebo (0%) spontaneously reported
memory impairment. The majority of
these events were mild in nature (5/8), and none were reported as severe. Four
of these events occurred within the first 7 days of treatment and did not recur.
The incidence of spontaneously reported confusion in this 6-month study was
0.5% in both treatment arms. In a 6-week adult study of nightly administered
LUNESTA 2 mg or 3 mg or placebo, the spontaneous reporting rates for confusion
were 0%, 3.0%, and 0%, respectively, and for memory impairment were 1%, 1%, and
0%, respectively.

 

In a 2-week study of 264
elderly insomniacs randomized to either nightly LUNESTA 2 mg or placebo,
spontaneous reporting rates of confusion and memory impairment were 0% vs. 0.8%
and 1.5% vs. 0%, respectively. In another 2-week study of 231 elderly
insomniacs, the spontaneous reporting rates for the 1 mg, 2 mg, and placebo
groups for confusion were 0%, 2.5%, and 0%, respectively, and for memory
impairment were 1.4%, 0%, and 0%, respectively. 

 

A study of normal
subjects exposed to single fixed doses of LUNESTA from 1 to 7.5 mg using the
DSST to assess sedation and psychomotor function at fixed times after dosing
(hourly up to 16 hours) found the expected sedation and reduction in
psychomotor function. This was maximal at 1 hour and present up to 4 hours, but
was no longer present by 5 hours.

 

In another study,
patients with insomnia were given 2 or 3 mg doses of LUNESTA nightly, with DSST
assessed on the mornings following days 1, 15, and 29 of treatment. While both
the placebo and LUNESTA 3 mg groups showed an improvement in DSST scores
relative to baseline the following morning (presumably due to a learning
effect), the improvement in the

 

5

 

placebo group was greater
and reached statistical significance on night 1, although not on nights 15 and
29. For the LUNESTA 2 mg group, DSST change scores were not significantly
different from placebo at any time point.

 

Withdrawal-Emergent Anxiety And Insomnia

 

During nightly use for an
extended period, pharmacodynamic tolerance or adaptation has been observed with
other hypnotics. If a drug has a short elimination half-life, it is possible
that a relative deficiency of the drug or its active metabolites (i.e., in
relationship to the receptor site) may occur at some point in the interval
between each night’s use. This is believed to be responsible for two clinical
findings reported to occur after several weeks of nightly use of other rapidly
eliminated hypnotics:  increased
wakefulness during the last quarter of the night and the appearance of
increased signs of daytime anxiety. 

 

In a 6-month
double-blind, placebo-controlled study of nightly administration of LUNESTA
3 mg, rates of anxiety reported as an adverse event were 2.1% in the
placebo arm and 3.7% in the LUNESTA arm. In a 6-week adult study of nightly
administration, anxiety was reported as an adverse event in 0%, 2.9%, and 1.0%
of the placebo, 2 mg, and 3 mg treatment arms, respectively. In this study,
single-blind placebo was administered on nights 45 and 46, the first and second
days of withdrawal from study drug. New adverse events were recorded during the
withdrawal period, beginning with day 45, up to 14 days after discontinuation. During
this withdrawal period, 105 subjects previously taking nightly LUNESTA 3 mg for
44 nights spontaneously reported anxiety (1%), abnormal dreams (1.9%),
hyperesthesia (1%), and neurosis (1%), while none of 99 subjects previously
taking placebo reported any of these adverse events during the withdrawal
period.

 

Rebound insomnia, defined
as a dose-dependent temporary worsening in sleep parameters (latency, sleep
efficiency, and number of awakenings) compared with baseline following
discontinuation of treatment, is observed with short- and intermediate-acting
hypnotics. Rebound insomnia following discontinuation of LUNESTA relative to
placebo and baseline was examined objectively in a 6-week adult study on the
first 2 nights of discontinuation (nights 45 and 46) following 44 nights of
active treatment with 2 mg or 3 mg. In the LUNESTA 2 mg group, compared with
baseline, there was a significant increase in WASO and a decrease in sleep
efficiency, both occurring only on the first night after discontinuation of
treatment. No changes from baseline were noted in the LUNESTA 3 mg group on the
first night after discontinuation, and there was a significant improvement in
LPS and sleep efficiency compared with baseline following the second night of
discontinuation. Comparisons of changes from baseline between LUNESTA and
placebo were also performed. On the first night after discontinuation of
LUNESTA 2 mg, LPS and WASO were significantly increased and sleep efficiency
was reduced; there were no significant differences on the second night. On the
first night following discontinuation of LUNESTA 3 mg, sleep efficiency was
significantly reduced. No other differences from placebo were noted in any
other sleep parameter on either the first or second night following
discontinuation. For both doses, the discontinuation-emergent effect was mild,
had the characteristics of the return of the symptoms of chronic insomnia, and
appeared to resolve by the second night after LUNESTA discontinuation.

 

6

 

INDICATIONS AND USAGE:

 

LUNESTA is indicated for
the treatment of insomnia. In controlled outpatient and sleep laboratory
studies, LUNESTA administered at bedtime decreased sleep latency and improved
sleep maintenance. 

 

The clinical trials
performed in support of efficacy were up to 6 months in duration. The final
formal assessments of sleep latency and maintenance were performed at 4 weeks
in the 6-week study, at the end of both 2-week studies and at the end of the
6-month study.

 

CONTRAINDICATIONS:

 

None known.

 

WARNINGS: 

 

Because sleep
disturbances may be the presenting manifestation of a physical and/or
psychiatric disorder, symptomatic treatment of insomnia should be initiated
only after a careful evaluation of the patient. The failure of insomnia to remit after 7 to 10 days of treatment may
indicate the presence of a primary psychiatric and/or medical illness that
should be evaluated. Worsening of insomnia or the emergence of new
thinking or behavior abnormalities may be the consequence of an unrecognized
psychiatric or physical disorder. Such findings have emerged during the course
of treatment with sedative/hypnotic drugs, including LUNESTA. Because some of
the important adverse effects of LUNESTA appear to be dose-related, it is
important to use the lowest possible effective dose, especially in the elderly
(see DOSAGE AND ADMINISTRATION).

 

A variety of abnormal
thinking and behavior changes have been reported to occur in association with
the use of sedative/hypnotics. Some of these changes may be characterized by
decreased inhibition (e.g., aggressiveness and extroversion that seem out of
character), similar to effects produced by alcohol and other CNS depressants. Other
reported behavioral changes have included bizarre behavior, agitation,
hallucinations, and depersonalization. Complex behaviors such as
“sleep-driving” (i.e., driving while not fully awake after ingestion of a
sedative-hypnotic, with amnesia for the event) have been reported. These events
can occur in sedative-hypnotic-naïve as well as in
sedative-hypnotic-experienced persons. Although behaviors such as sleep-driving
may occur with LUNESTA alone at therapeutic doses, the use of alcohol and other
CNS depressants with LUNESTA appears to increase the risk of such behaviors, as
does the use of LUNESTA at doses exceeding the maximum recommended dose. Due to
the risk to the patient and the community, discontinuation of LUNESTA should be
strongly considered for patients who report a “sleep-driving” episode. Other
complex behaviors (e.g., preparing and eating food, making phone calls, or
having sex) have been reported in patients who are not fully awake after taking
a sedative-hypnotic. As with sleep-driving, patients usually do not remember
these events. Amnesia and other neuropsychiatric symptoms may occur
unpredictably. In primarily

 

7

 

depressed patients,
worsening of depression, including suicidal thinking, has been reported in
association with the use of sedative/hypnotics. 

 

It can rarely be
determined with certainty whether a particular instance of the abnormal behaviors
listed above are drug-induced, spontaneous in origin, or a result of an
underlying psychiatric or physical disorder. Nonetheless, the emergence of any
new behavioral sign or symptom of concern requires careful and immediate
evaluation. 

 

Following rapid dose
decrease or abrupt discontinuation of the use of sedative/hypnotics, there have
been reports of signs and symptoms similar to those associated with withdrawal
from other CNS-depressant drugs (see Drug
Abuse and Dependence). 

 

LUNESTA, like other
hypnotics, has CNS-depressant effects. Because of the rapid onset of action,
LUNESTA should only be ingested immediately prior to going to bed or after the
patient has gone to bed and has experienced difficulty falling asleep. Patients
receiving LUNESTA should be cautioned against engaging in hazardous occupations
requiring complete mental alertness or motor coordination (e.g., operating
machinery or driving a motor vehicle) after ingesting the drug, and be
cautioned about potential impairment of the performance of such activities on
the day following ingestion of LUNESTA. LUNESTA, like other hypnotics, may
produce additive CNS-depressant effects when coadministered with other
psychotropic medications, anticonvulsants, antihistamines, ethanol, and other
drugs that themselves produce CNS depression. LUNESTA should not be taken with
alcohol. Dose adjustment may be necessary when LUNESTA is administered with
other CNS-depressant agents, because of the potentially additive effects.

 

Severe
anaphylactic and anaphylactoid reactions

 

Rare cases of angioedema
involving the tongue, glottis or larynx have been reported in patients after
taking the first or subsequent doses of sedative-hypnotics, including LUNESTA. Some
patients have had additional symptoms such as dyspnea, throat closing, or
nausea and vomiting that suggest anaphylaxis. Some patients have required
medical therapy in the emergency department. If angioedema involves the tongue,
glottis or larynx, airway obstruction may occur and be fatal. Patients who develop
angioedema after treatment with LUNESTA should not be rechallenged with the
drug.

 

PRECAUTIONS:

 

General

 

Timing Of Drug Administration

 

LUNESTA should be taken
immediately before bedtime. Taking a sedative/hypnotic while still up and about
may result in short-term memory impairment, hallucinations, impaired
coordination, dizziness, and lightheadedness.

 

8

 

Use In The Elderly And/Or Debilitated Patients

 

Impaired
motor and/or cognitive performance after repeated exposure or unusual
sensitivity to sedative/hypnotic drugs is a concern in the treatment of elderly
and/or debilitated patients. The recommended starting dose of LUNESTA for these
patients is 1 mg. (See DOSAGE AND ADMINISTRATION.)

 

Use In Patients With
Concomitant Illness

 

Clinical
experience with eszopiclone in patients with concomitant illness is limited. Eszopiclone
should be used with caution in patients with diseases or conditions that could
affect metabolism or hemodynamic responses.

 

A
study in healthy volunteers did not reveal respiratory-depressant effects at
doses 2.5-fold higher (7 mg) than the recommended dose of eszopiclone. Caution
is advised, however, if LUNESTA is prescribed to patients with compromised
respiratory function. 

 

The
dose of LUNESTA should be reduced to 1 mg in patients with severe hepatic
impairment, because systemic exposure is doubled in such subjects. No dose
adjustment appears necessary for subjects with mild or moderate hepatic
impairment. No dose adjustment appears necessary in subjects with any degree of
renal impairment, since less than 10% of eszopiclone is excreted unchanged in
the urine.

 

The
dose of LUNESTA should be reduced in patients who are administered potent
inhibitors of CYP3A4, such as ketoconazole, while taking LUNESTA. Downward dose
adjustment is also recommended when LUNESTA is administered with agents having
known CNS-depressant effects.

 

Use In Patients With
Depression

 

Sedative/hypnotic
drugs should be administered with caution to patients exhibiting signs and
symptoms of depression. Suicidal tendencies may be present in such patients,
and protective measures may be required. Intentional overdose is more common in
this group of patients; therefore, the least amount of drug that is feasible
should be prescribed for the patient at any one time.

 

Information For Patients

 

Patient
information is printed at the bottom of this insert. To assure safe and
effective use of LUNESTA, this information and the instructions provided in the
patient information section should be discussed with patients.

 

SPECIAL CONCERNS “Sleep-Driving” and other
complex behaviors

 

There have been reports
of people getting out of bed after taking a sedative-hypnotic and driving their
cars while not fully awake, often with no memory of the event. If a patient
experiences

 

9

 

such an episode, it
should be reported to his or her doctor immediately, since “sleep-driving” can
be dangerous. This behavior is more likely to occur when LUNESTA is taken with
alcohol or other central nervous system depressants (see WARNINGS). Other
complex behaviors (e.g., preparing and eating food, making phone calls, or
having sex) have been reported in patients who are not fully awake after taking
a sedative-hypnotic. As with sleep-driving, patients usually do not remember
these events.

 

Laboratory Tests

 

There are no specific
laboratory tests recommended.

 

Drug Interactions

 

CNS-Active Drugs

 

Ethanol:  An additive effect on psychomotor performance
was seen with coadministration of eszopiclone and ethanol 0.70 g/kg for up to 4
hours after ethanol administration.

 

Paroxetine:  Coadministration of single doses of
eszopiclone 3 mg and paroxetine 20 mg daily for 7 days produced no
pharmacokinetic or pharmacodynamic interaction.

 

Lorazepam:  Coadministration of single doses of
eszopiclone 3 mg and lorazepam 2 mg did not have clinically relevant effects on
the pharmacodynamics or pharmacokinetics of either drug.

 

Olanzapine:  Coadministration of eszopiclone 3 mg and olanzapine
10 mg produced a decrease in DSST scores. The interaction was pharmacodynamic;
there was no alteration in the pharmacokinetics of either drug.

 

Drugs That Inhibit CYP3A4 (Ketoconazole)

 

CYP3A4 is a major
metabolic pathway for elimination of eszopiclone. The AUC of eszopiclone was
increased 2.2-fold by coadministration of ketoconazole, a potent inhibitor of
CYP3A4, 400 mg daily for 5 days. Cmax and t1/2 were
increased 1.4-fold and 1.3-fold, respectively. Other strong inhibitors of
CYP3A4 (e.g., itraconazole, clarithromycin, nefazodone, troleandomycin,
ritonavir, nelfinavir) would be expected to behave similarly.

 

Drugs That Induce CYP3A4 (Rifampicin)

 

Racemic zopiclone exposure was decreased 80% by concomitant
use of rifampicin, a potent inducer of CYP3A4. A similar effect would be
expected with eszopiclone.

 

Drugs Highly Bound To Plasma Protein

 

Eszopiclone
is not highly bound to plasma proteins (52-59% bound); therefore, the
disposition of eszopiclone is not expected to be sensitive to alterations in
protein binding. Administration of

 

10

 

eszopiclone
3 mg to a patient taking another drug that is highly protein-bound would not be
expected to cause an alteration in the free concentration of either drug.

 

Drugs With A Narrow Therapeutic Index

 

Digoxin:  A single
dose of eszopiclone 3 mg did not affect the pharmacokinetics of digoxin
measured at steady state following dosing of 0.5 mg twice daily for one day and
0.25 mg daily for the next 6 days.

 

Warfarin:  Eszopiclone
3 mg administered daily for 5 days did not affect the pharmacokinetics of (R)- or (S)-warfarin,
nor were there any changes in the pharmacodynamic profile (prothrombin time)
following a single 25 mg oral dose of warfarin. 

 

Carcinogenesis, Mutagenesis, Impairment Of
Fertility 

 

Carcinogenesis

 

In a carcinogenicity
study in Sprague-Dawley rats in which eszopiclone was given by oral gavage, no
increases in tumors were seen; plasma levels (AUC) of eszopiclone at the
highest dose used in this study (16 mg/kg/day) are estimated to be 80 (females)
and 20 (males) times those in humans receiving the maximum recommended human
dose (MRHD). However, in a carcinogenicity study in Sprague-Dawley rats in
which racemic zopiclone was given in the diet, and in which plasma levels of
eszopiclone were reached that were greater than those reached in the above
study of eszopiclone, an increase in mammary gland adenocarcinomas in females
and an increase in thyroid gland follicular cell adenomas and carcinomas in
males were seen at the highest dose of 100 mg/kg/day. Plasma levels of
eszopiclone at this dose are estimated to be 150 (females) and 70 (males) times
those in humans receiving the MRHD. The mechanism for the increase in mammary
adenocarcinomas is unknown. The increase in thyroid tumors is thought to be due
to increased levels of TSH secondary to increased metabolism of circulating
thyroid hormones, a mechanism that is not considered to be relevant to humans.

 

In a carcinogenicity
study in B6C3F1 mice in which racemic zopiclone was given in the diet, an
increase in pulmonary carcinomas and carcinomas plus adenomas in females and an
increase in skin fibromas and sarcomas in males were seen at the highest dose
of 100 mg/kg/day. Plasma levels of eszopiclone at this dose are estimated to be
8 (females) and 20 (males) times those in humans receiving the MRHD. The skin
tumors were due to skin lesions induced by aggressive behavior, a mechanism
that is not relevant to humans. A carcinogenicity study was also performed in which
CD-1 mice were given eszopiclone at doses up to 100 mg/kg/day by oral gavage;
although this study did not reach a maximum tolerated dose, and was thus
inadequate for overall assessment of carcinogenic potential, no increases in
either pulmonary or skin tumors were seen at doses producing plasma levels of
eszopiclone estimated to be 90 times those in humans receiving the MRHD — i.e.,
12 times the exposure in the racemate study. 

 

Eszopiclone did not
increase tumors in a p53 transgenic mouse bioassay at oral doses up to
300 mg/kg/day.

 

11

 

Mutagenesis

 

Eszopiclone was positive
in the mouse lymphoma chromosomal aberration assay and produced an equivocal
response in the Chinese hamster ovary cell chromosomal aberration assay. It was
not mutagenic or clastogenic in the bacterial Ames gene mutation assay, in an
unscheduled DNA synthesis assay, or in an in vivo mouse
bone marrow micronucleus assay.

 

(S)-N-desmethyl zopiclone, a metabolite of
eszopiclone, was positive in the Chinese hamster ovary cell and human
lymphocyte chromosomal aberration assays. It was negative in the bacterial Ames
mutation assay, in an in vitro  32P-postlabeling
DNA adduct assay, and in an in vivo mouse
bone marrow chromosomal aberration and micronucleus assay.

 

Impairment Of Fertility

 

Eszopiclone was given by
oral gavage to male rats at doses up to 45 mg/kg/day from 4 weeks premating
through mating and to female rats at doses up to 180 mg/kg/day from 2 weeks
premating through day 7 of pregnancy. An additional study was performed in
which only females were treated, up to 180 mg/kg/day. Eszopiclone decreased
fertility, probably because of effects in both males and females, with no
females becoming pregnant when both males and females were treated with the
highest dose; the no-effect dose in both sexes was 5 mg/kg (16 times the MRHD
on a mg/m2 basis). Other effects included increased pre-implantation
loss (no-effect dose 25 mg/kg), abnormal estrus cycles (no-effect dose 25
mg/kg), and decreases in sperm number and motility and increases in
morphologically abnormal sperm (no-effect dose 5 mg/kg). 

 

Pregnancy

 

Pregnancy Category C 

 

Eszopiclone administered
by oral gavage to pregnant rats and rabbits during the period of organogenesis
showed no evidence of teratogenicity up to the highest doses tested (250 and 16
mg/kg/day in rats and rabbits, respectively; these doses are 800 and 100 times,
respectively, the maximum recommended human dose [MRHD] on a mg/m2
basis). In the rat, slight reductions in fetal weight and evidence of
developmental delay were seen at maternally toxic doses of 125 and 150
mg/kg/day, but not at 62.5 mg/kg/day (200 times the MRHD on a mg/m2
basis).

 

Eszopiclone was also
administered by oral gavage to pregnant rats throughout the pregnancy and
lactation periods at doses of up to 180 mg/kg/day. Increased post-implantation
loss, decreased postnatal pup weights and survival, and increased pup startle
response were seen at all doses; the lowest dose tested, 60 mg/kg/day, is 200
times the MRHD on a mg/m2 basis. These doses did not produce
significant maternal toxicity. Eszopiclone had no effects on other behavioral
measures or reproductive function in the offspring. 

 

There are no adequate and
well-controlled studies of eszopiclone in pregnant women. Eszopiclone should be
used during pregnancy only if the potential benefit justifies the potential
risk to the fetus.

 

12

 

Labor And Delivery

 

LUNESTA has no
established use in labor and delivery.

 

Nursing Mothers

 

It is not known whether
LUNESTA is excreted in human milk. Because many drugs are excreted in human
milk, caution should be exercised when LUNESTA is administered to a nursing
woman.

 

Pediatric Use

 

Safety and effectiveness
of eszopiclone in children below the age of 18 have not been established.

 

Geriatric Use

 

A total of 287 subjects
in double-blind, parallel-group, placebo-controlled clinical trials who
received eszopiclone were 65 to 86 years of age. The overall pattern of adverse
events for elderly subjects (median age = 71 years) in 2-week studies with
nighttime dosing of 2 mg eszopiclone was not different from that seen in
younger adults (see ADVERSE REACTIONS,
Table 2). LUNESTA 2 mg exhibited significant reduction in sleep latency and
improvement in sleep maintenance in the elderly population.

 

Adverse Reactions:

 

The premarketing
development program for LUNESTA included eszopiclone exposures in patients
and/or normal subjects from two different groups of studies:  approximately 400 normal subjects in clinical
pharmacology/pharmacokinetic studies, and approximately 1550 patients in
placebo-controlled clinical effectiveness studies, corresponding to
approximately 263 patient-exposure years. The conditions and duration of
treatment with LUNESTA varied greatly and included (in overlapping categories)
open-label and double-blind phases of studies, inpatients and outpatients, and
short-term and longer-term exposure. Adverse reactions were assessed by
collecting adverse events, results of physical examinations, vital signs,
weights, laboratory analyses, and ECGs.

 

Adverse events during
exposure were obtained primarily by general inquiry and recorded by clinical
investigators using terminology of their own choosing. Consequently, it is not
possible to provide a meaningful estimate of the proportion of individuals
experiencing adverse events without first grouping similar types of events into
a smaller number of standardized event categories. In the tables and
tabulations that follow, COSTART terminology has been used to classify reported
adverse events.

 

13

 

The stated frequencies of
adverse events represent the proportion of individuals who experienced, at
least once, a treatment-emergent adverse event of the type listed. An event was
considered treatment-emergent if it occurred for the first time or worsened
while the patient was receiving therapy following baseline evaluation.

 

Adverse Findings Observed In Placebo-Controlled
Trials

 

Adverse Events Resulting In Discontinuation Of
Treatment

 

In placebo-controlled,
parallel-group clinical trials in the elderly, 3.8% of 208 patients who
received placebo, 2.3% of 215 patients who received 2 mg LUNESTA, and 1.4%
of 72 patients who received 1 mg LUNESTA discontinued treatment due to an
adverse event. In the 6-week parallel-group study in adults, no patients in the
3 mg arm discontinued because of an adverse event. In the long-term
6-month study in adult insomnia patients, 7.2% of 195 patients who received
placebo and 12.8% of 593 patients who received 3 mg LUNESTA discontinued
due to an adverse event. No event that resulted in discontinuation occurred at
a rate of greater than 2%.

 

Adverse Events Observed At An Incidence Of >
2% In Controlled Trials

 

Table 1 shows the
incidence of treatment-emergent adverse events from a Phase 3
placebo-controlled study of LUNESTA at doses of 2 or 3 mg in non-elderly
adults. Treatment duration in this trial was 44 days. The table includes only
events that occurred in 2% or more of patients treated with LUNESTA 2 mg or 3
mg in which the incidence in patients treated with LUNESTA was greater than the
incidence in placebo-treated patients.

 

14

 

Table 1:         Incidence (%) of Treatment-Emergent
Adverse Events in a 6-Week 

Placebo-Controlled Study in Non-Elderly Adults with LUNESTA(1)

 

	
  Adverse Event

  	
   

  	
  Placebo

  (n=99)

  	
   

  	
  LUNESTA 2 mg

  (n=104)

  	
   

  	
  LUNESTA 3 mg

  (n=105)

  	
   

  
	
  Body as a Whole

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Headache

  	
   

  	
  13

  	
   

  	
  21

  	
   

  	
  17

  	
   

  
	
  Viral Infection

  	
   

  	
  1

  	
   

  	
  3

  	
   

  	
  3

  	
   

  
	
  Digestive System

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dry Mouth

  	
   

  	
  3

  	
   

  	
  5

  	
   

  	
  7

  	
   

  
	
  Dyspepsia

  	
   

  	
  4

  	
   

  	
  4

  	
   

  	
  5

  	
   

  
	
  Nausea

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  4

  	
   

  
	
  Vomiting

  	
   

  	
  1

  	
   

  	
  3

  	
   

  	
  0

  	
   

  
	
  Nervous System

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Anxiety

  	
   

  	
  0

  	
   

  	
  3

  	
   

  	
  1

  	
   

  
	
  Confusion

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  3

  	
   

  
	
  Depression

  	
   

  	
  0

  	
   

  	
  4

  	
   

  	
  1

  	
   

  
	
  Dizziness

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  7

  	
   

  
	
  Hallucinations

  	
   

  	
  0

  	
   

  	
  1

  	
   

  	
  3

  	
   

  
	
  Libido Decreased

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  3

  	
   

  
	
  Nervousness

  	
   

  	
  3

  	
   

  	
  5

  	
   

  	
  0

  	
   

  
	
  Somnolence

  	
   

  	
  3

  	
   

  	
  10

  	
   

  	
  8

  	
   

  
	
  Respiratory
  System

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Infection

  	
   

  	
  3

  	
   

  	
  5

  	
   

  	
  10

  	
   

  
	
  Skin and
  Appendages

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rash

  	
   

  	
  1

  	
   

  	
  3

  	
   

  	
  4

  	
   

  
	
  Special Senses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Unpleasant Taste

  	
   

  	
  3

  	
   

  	
  17

  	
   

  	
  34

  	
   

  
	
  Urogenital
  System

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dysmenorrhea *

  	
   

  	
  0

  	
   

  	
  3

  	
   

  	
  0

  	
   

  
	
  Gynecomastia **

  	
   

  	
  0

  	
   

  	
  3

  	
   

  	
  0

  	
   

  

 

(1)   Events for which the LUNESTA incidence was equal to or less
than placebo are not listed on the table, but included the following:  abnormal dreams, accidental injury, back
pain, diarrhea, flu syndrome, myalgia, pain, pharyngitis, and rhinitis.

*      Gender-specific adverse
event in females

**   Gender-specific adverse event
in males

 

Adverse events from Table
1 that suggest a dose-response relationship in adults include viral infection,
dry mouth, dizziness, hallucinations, infection, rash, and unpleasant taste,
with this relationship clearest for unpleasant taste.

 

Table 2 shows the
incidence of treatment-emergent adverse events from combined Phase 3 placebo-controlled
studies of LUNESTA at doses of 1 or
2 mg in elderly adults (ages 65-86). Treatment duration in these trials was 14
days. The table includes only events that occurred in 2% or more of patients
treated with LUNESTA 1 mg or 2 mg in
which the incidence in patients treated with LUNESTA was greater than the incidence in placebo-treated
patients.

 

15

 

Table 2:         Incidence (%) of Treatment-Emergent Adverse
Events in Elderly 

Adults (Ages 65-86) in 2-Week Placebo-Controlled Trials with LUNESTA(1)

 

	
  Adverse Event

  	
   

  	
  Placebo

  (n=208)

  	
   

  	
  LUNESTA 1 mg

  (n=72)

  	
   

  	
  LUNESTA 2 mg

  (n=215)

  	
   

  
	
  Body as a Whole

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accidental
  Injury

  	
   

  	
  1

  	
   

  	
  0

  	
   

  	
  3

  	
   

  
	
  Headache

  	
   

  	
  14

  	
   

  	
  15

  	
   

  	
  13

  	
   

  
	
  Pain

  	
   

  	
  2

  	
   

  	
  4

  	
   

  	
  5

  	
   

  
	
  Digestive System

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Diarrhea

  	
   

  	
  2

  	
   

  	
  4

  	
   

  	
  2

  	
   

  
	
  Dry Mouth

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  7

  	
   

  
	
  Dyspepsia

  	
   

  	
  2

  	
   

  	
  6

  	
   

  	
  2

  	
   

  
	
  Nervous System

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Abnormal Dreams

  	
   

  	
  0

  	
   

  	
  3

  	
   

  	
  1

  	
   

  
	
  Dizziness

  	
   

  	
  2

  	
   

  	
  1

  	
   

  	
  6

  	
   

  
	
  Nervousness

  	
   

  	
  1

  	
   

  	
  0

  	
   

  	
  2

  	
   

  
	
  Neuralgia

  	
   

  	
  0

  	
   

  	
  3

  	
   

  	
  0

  	
   

  
	
  Skin and
  Appendages

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pruritus

  	
   

  	
  1

  	
   

  	
  4

  	
   

  	
  1

  	
   

  
	
  Special Senses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Unpleasant Taste

  	
   

  	
  0

  	
   

  	
  8

  	
   

  	
  12

  	
   

  
	
  Urogenital
  System

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Urinary Tract
  Infection

  	
   

  	
  0

  	
   

  	
  3

  	
   

  	
  0

  	
   

  

 

(1)   Events for which the LUNESTA incidence was
equal to or less than placebo are not listed on the table, but included the
following:  abdominal pain, asthenia,
nausea, rash, and somnolence.

 

Adverse events from Table
2 that suggest a dose-response relationship in elderly adults include pain, dry
mouth, and unpleasant taste, with this relationship again clearest for
unpleasant taste.

 

These figures cannot be
used to predict the incidence of adverse events in the course of usual medical
practice because patient characteristics and other factors may differ from
those that prevailed in the clinical trials. Similarly, the cited frequencies
cannot be compared with figures obtained from other clinical investigations
involving different treatments, uses, and investigators. The cited figures,
however, do provide the prescribing physician with some basis for estimating
the relative contributions of drug and non-drug factors to the adverse event
incidence rate in the population studied.

 

Other Events Observed During The Premarketing
Evaluation Of LUNESTA 

 

Following is a list of
modified COSTART terms that reflect treatment-emergent adverse events as defined
in the introduction to the ADVERSE REACTIONS
section and reported by approximately 1550 subjects treated with LUNESTA at
doses in the range of 1 to 3.5 mg/day during Phase 2 and 3 clinical trials
throughout the United States and Canada. All reported events are included
except those already listed in Tables 1 and 2 or elsewhere in labeling, minor
events common in the general population, and events unlikely to be drug-related.
Although the events reported occurred during treatment with LUNESTA, they were
not necessarily caused by it. 

 

16

 

Events are further
categorized by body system and listed in order of decreasing frequency
according to the following definitions:  frequent adverse events are those that occurred on one or
more occasions in at least 1/100 patients; infrequent adverse
events are those that occurred in fewer than 1/100 patients but in at least
1/1,000 patients; rare adverse events are those that
occurred in fewer than 1/1,000 patients. Gender-specific events are categorized
based on their incidence for the appropriate gender.

 

Body as a Whole:  Frequent: chest pain; Infrequent: allergic reaction, cellulitis, face
edema, fever, halitosis, heat stroke, hernia, malaise, neck rigidity, photosensitivity.

 

Cardiovascular System:  Frequent:
migraine; Infrequent:
hypertension; Rare: thrombophlebitis.

 

Digestive System:  Infrequent: anorexia,  cholelithiasis,
increased appetite, melena, mouth ulceration, thirst, ulcerative stomatitis; Rare: colitis,
dysphagia, gastritis, hepatitis, hepatomegaly, liver damage, stomach ulcer,
stomatitis, tongue edema, rectal hemorrhage. 

 

Hemic and Lymphatic
System:  Infrequent: anemia,
lymphadenopathy.  

 

Metabolic and Nutritional:  Frequent: peripheral edema; Infrequent: hypercholesteremia, weight gain, weight loss; Rare: dehydration,
gout, hyperlipemia, hypokalemia.

 

Musculoskeletal System:  Infrequent: arthritis, bursitis, joint disorder
(mainly swelling, stiffness, and pain), leg cramps, myasthenia, twitching; Rare: arthrosis,
myopathy, ptosis. 

 

Nervous System:  Infrequent: agitation, apathy, ataxia, emotional
lability, hostility, hypertonia, hypesthesia, incoordination, insomnia, memory
impairment, neurosis, nystagmus, paresthesia, reflexes decreased, thinking abnormal
(mainly difficulty concentrating), vertigo; Rare: abnormal gait, euphoria,
hyperesthesia, hypokinesia, neuritis, neuropathy, stupor, tremor. 

 

Respiratory System:  Infrequent: asthma, bronchitis, dyspnea,
epistaxis, hiccup, laryngitis. 

 

Skin and Appendages:  Infrequent: acne, alopecia, contact dermatitis,
dry skin, eczema, skin discoloration, sweating, urticaria; Rare: erythema multiforme, furunculosis, herpes zoster, hirsutism,
maculopapular rash, vesiculobullous rash. 

 

Special Senses:  Infrequent:
conjunctivitis, dry eyes, ear pain, otitis externa, otitis media, tinnitus,
vestibular disorder; Rare: hyperacusis, iritis, mydriasis,
photophobia. 

 

Urogenital System:  Infrequent: amenorrhea,  breast
engorgement, breast enlargement, breast neoplasm, breast pain, cystitis,
dysuria, female lactation, hematuria, kidney calculus, kidney pain, mastitis,
menorrhagia, metrorrhagia, urinary frequency, urinary incontinence, uterine
hemorrhage, vaginal hemorrhage, vaginitis; Rare: oliguria,
pyelonephritis, urethritis.

 

17

 

DRUG ABUSE AND DEPENDENCE:

 

Controlled Substance Class 

 

LUNESTA is a Schedule IV
controlled substance under the Controlled Substances Act. Other substances
under the same
classification are benzodiazepines and the nonbenzodiazepine hypnotics zaleplon
and zolpidem. While eszopiclone is a hypnotic agent with a chemical structure
unrelated to benzodiazepines, it shares some of the pharmacologic properties of
the benzodiazepines.

 

Abuse, Dependence, And Tolerance

 

Abuse And Dependence

 

Abuse and addiction are separate and distinct from
physical dependence and tolerance. Abuse is characterized by misuse of the drug
for non-medical purposes, often in combination with other psychoactive
substances. Physical dependence is a state of adaptation that is manifested by
a specific withdrawal syndrome that can be produced by abrupt cessation, rapid
dose reduction, decreasing blood level of the drug and/or administration of an
antagonist. Tolerance is a state of adaptation in which exposure to a drug
induces changes that result in a diminution of one or more of the drug’s
effects over time. Tolerance may occur to both the desired and undesired
effects of drugs and may develop at different rates for different effects.

 

Addiction is a primary,
chronic, neurobiological disease with genetic, psychosocial, and environmental
factors influencing its development and manifestations. It is characterized by
behaviors that include one or more of the following:  impaired control over drug use, compulsive
use, continued use despite harm, and craving. Drug addiction is a treatable
disease, utilizing a multidisciplinary approach, but relapse is common.

 

In a study of abuse liability conducted in individuals
with known histories of benzodiazepine abuse, eszopiclone at doses of 6 and 12
mg produced euphoric effects similar to those of diazepam 20 mg. In this study,
at doses 2-fold or greater than the maximum recommended doses, a dose-related
increase in reports of amnesia and hallucinations was observed for both LUNESTA
and diazepam.

 

The clinical trial experience with LUNESTA revealed no
evidence of a serious withdrawal syndrome. Nevertheless, the following adverse
events included in DSM-IV criteria for uncomplicated sedative/hypnotic withdrawal
were reported during clinical trials following placebo substitution occurring
within 48 hours following the last LUNESTA treatment: anxiety, abnormal dreams,
nausea, and upset stomach. These reported adverse events occurred at an
incidence of 2% or less. Use of benzodiazepines and similar agents may lead to
physical and psychological dependence. The risk of abuse and dependence
increases with the dose and duration of treatment and concomitant use of other
psychoactive drugs. The risk is also greater for patients who have a history of
alcohol or drug abuse or history of psychiatric disorders. These patients
should be under careful surveillance when receiving LUNESTA or any other
hypnotic.

 

18

 

Tolerance

 

Some loss of efficacy to the hypnotic effect of
benzodiazepines and benzodiazepine-like agents may develop after repeated use
of these drugs for a few weeks.

 

No development of
tolerance to any parameter of sleep measurement was observed over six months. Tolerance
to the efficacy of LUNESTA 3 mg was assessed by 4-week objective and 6-week
subjective measurements of time to sleep onset and sleep maintenance for
LUNESTA in a placebo-controlled 44-day study, and by subjective assessments of
time to sleep onset and WASO in a placebo-controlled study for 6 months.

 

OVERDOSAGE:

 

There is limited
premarketing clinical experience with the effects of an overdosage of LUNESTA. In
clinical trials with eszopiclone, one case of overdose with up to 36 mg of
eszopiclone was reported in which the subject fully recovered. Individuals have
fully recovered from racemic zopiclone overdoses up to 340 mg (56 times the
maximum recommended dose of eszopiclone).

 

Signs And Symptoms

 

Signs and symptoms of
overdose effects of CNS depressants can be expected to present as exaggerations
of the pharmacological effects noted in preclinical testing. Impairment of
consciousness ranging from somnolence to coma has been described. Rare
individual instances of fatal outcomes following overdose with racemic
zopiclone have been reported in European postmarketing reports, most often
associated with overdose with other CNS-depressant agents.

 

Recommended Treatment

 

General symptomatic and
supportive measures should be used along with immediate gastric lavage where
appropriate. Intravenous fluids should be administered as needed. Flumazenil
may be useful. As in all cases of drug overdose, respiration, pulse, blood
pressure, and other appropriate signs should be monitored and general
supportive measures employed. Hypotension and CNS depression should be
monitored and treated by appropriate medical intervention. The value of
dialysis in the treatment of overdosage has not been determined.

 

Poison Control Center

 

As with the management of
all overdosage, the possibility of multiple drug ingestion should be considered.
The physician may wish to consider contacting a poison control center for
up-to-date information on the management of hypnotic drug product overdosage.

 

19

 

DOSAGE AND ADMINISTRATION:

 

The dose of LUNESTA
should be individualized. The recommended starting dose for LUNESTA for most
non-elderly adults is 2 mg
immediately before bedtime. Dosing can be initiated at or raised to 3 mg if
clinically indicated, since 3 mg is more effective for sleep maintenance (see Precautions).

 

The recommended starting
dose of LUNESTA for elderly patients whose primary complaint is difficulty
falling asleep is 1 mg immediately before bedtime. In these patients, the dose
may be increased to 2 mg if clinically indicated. For elderly patients whose
primary complaint is difficulty staying asleep, the recommended dose is 2 mg
immediately before bedtime (see Precautions).

 

Taking LUNESTA with or
immediately after a heavy, high-fat meal results in slower absorption and would
be expected to reduce the effect of LUNESTA on sleep latency (see Pharmacokinetics under Clinical Pharmacology).

 

Special Populations

 

Hepatic

 

The starting dose of
LUNESTA should be 1 mg in patients with severe hepatic impairment. LUNESTA
should be used with caution in these patients.

 

Coadministration With CYP3A4 Inhibitors

 

The starting dose of
LUNESTA should not exceed 1 mg in patients coadministered LUNESTA with potent
CYP3A4 inhibitors. If needed, the dose can be raised to 2 mg.

 

HOW SUPPLIED:

 

LUNESTA 3 mg tablets are
round, dark blue, film-coated, and identified with debossed markings of S193 on
one side, and are supplied as:

 

	
  NDC 63402-193-10

  	
   

  	
  bottle of 100 tablets

  
	
  NDC 63402-193-09

  	
   

  	
  carton of 90 tablets

  

 

LUNESTA 2 mg tablets are
round, white, film-coated, and identified with debossed markings of S191 on one
side, and are supplied as:

 

	
  NDC 63402-191-10

  	
   

  	
  bottle of 100 tablets

  
	
  NDC 63402-191-09

  	
   

  	
  carton of 90 tablets

  

 

LUNESTA 1 mg tablets are
round, light blue, film-coated, and identified with debossed markings of S190
on one side, and are supplied as:

 

20

 

	
  NDC 63402-190-10

  	
   

  	
  bottle of 100 tablets

  

 

Store at 25°C (77°F);
excursions permitted to 15°C to 30°C (59°F to 86°F) [see USP Controlled Room
Temperature].

 

21

 

 

Manufactured for: 

Sepracor Inc.

Marlborough, MA 
01752  USA

by Patheon Inc., Mississauga, Ontario  L5N 7K9 
Canada 

 

For customer service, call 1-888-394-7377.

To report adverse events, call 1-877-737-7226.

For medical information, call 1-800-739-0565.

 

April 2007

 

PHARMACIST — DETACH HERE AND GIVE INFORMATION
TO PATIENT.

 

	
  Rx only

  	
   

  	
  C-IV

  

 

LUNESTA®
(eszopiclone) TABLETS

1 mg, 2
mg, 3 mg

 

INFORMATION FOR PATIENTS TAKING LUNESTA

 

Your doctor has
prescribed LUNESTA to help you sleep. The following information is intended to
guide you in the safe use of this medicine. It is not meant to take the place
of your doctor’s instructions. If you have any questions about LUNESTA tablets,
be sure to ask your doctor or pharmacist. 

 

LUNESTA is used to treat
different types of sleep problems, such as difficulty in falling asleep,
difficulty in maintaining sleep during the night, and waking up too early in
the morning. Most people with insomnia have more than one of these problems. You
should take LUNESTA immediately before going to bed because of the risk of
falling.

 

LUNESTA belongs to a
group of medicines known as “hypnotics” or, simply, sleep medicines. There are
many different sleep medicines available to help people sleep better. Insomnia
is often transient and intermittent. It usually requires treatment for only a
short time, usually 7 to 10 days up to 2 weeks. Some people have chronic sleep
problems that may require more prolonged use of sleep medicine. However, you
should not use these medicines for long periods without talking with your
doctor about the risks and benefits of prolonged use.

 

22

 

Side Effects 

 

All medicines have side
effects. The most common side effects of sleep medicines are: 

 

·      Drowsiness 

·      Dizziness 

·      Lightheadedness 

·      Difficulty with coordination

 

Sleep medicines can make
you sleepy during the day. How drowsy you feel depends upon how your body
reacts to the medicine, which sleep medicine you are taking, and how large a dose
your doctor has prescribed. Daytime drowsiness is best avoided by taking the
lowest dose possible that will still help you sleep at night. Your doctor will
work with you to find the dose of LUNESTA that is best for you. Some patients
taking LUNESTA have reported next-day sleepiness.

 

To manage these side
effects while you are taking this medicine: 

 

·      When you first start taking
LUNESTA or any other sleep medicine, until you know whether the medicine will
still have some effect on you the next day, use extreme care while doing
anything that requires complete alertness, such as driving a car, operating
machinery, or piloting an aircraft. 

 

·      Do not drink alcohol when
you are taking LUNESTA or any sleep medicine. Alcohol can increase the side
effects of LUNESTA or any other sleep medicine. 

 

·      Do not take any other
medicines without asking your doctor first. This includes medicines you can buy
without a prescription. Some medicines can cause drowsiness and are best
avoided while taking LUNESTA. 

 

·      Always take the exact dose
of LUNESTA prescribed by your doctor. Never change your dose without talking to
your doctor first.

 

Special Concerns 

 

There are some special
problems that may occur while taking sleep medicines. 

 

Memory Problems

 

Sleep medicines may cause
a special type of memory loss or “amnesia.” 
When this occurs, a person may not remember what has happened for
several hours after taking the medicine. This is usually not a problem since
most people fall asleep after taking the medicine. Memory loss can be a
problem, however, when sleep medicines are taken while traveling, such as
during an airplane flight and the person wakes up before the effect of the
medicine is gone. This has been called “traveler’s amnesia.”  Memory problems have been reported rarely by
patients taking LUNESTA in clinical studies. In most cases, memory problems can
be avoided if you take 

 

23

 

LUNESTA only when you are
able to get a full night of sleep before you need to be active again. Be sure
to talk to your doctor if you think you are having memory problems.

 

Tolerance

 

When sleep medicines are
used every night for more than a few weeks, they may lose their effectiveness
in helping you sleep. This is known as “tolerance.”  Development of tolerance to LUNESTA was not
observed in a clinical study of 6 months’ duration. Insomnia is often transient
and intermittent, and prolonged use of sleep medicines is generally not
necessary. Some people, though, have chronic sleep problems that may require
more prolonged use of sleep medicine. If your sleep problems continue, consult
your doctor, who will determine whether other measures are needed to overcome
your sleep problems.

 

Dependence

 

Sleep medicines can cause
dependence in some people, especially when these medicines are used regularly
for longer than a few weeks or at high doses. Dependence is the need to
continue taking a medicine because stopping it is unpleasant.

 

When people develop
dependence, stopping the medicine suddenly may cause unpleasant symptoms (see Withdrawal below).
They may find they have to keep taking the medicine either at the prescribed
dose or at increasing doses just to avoid withdrawal symptoms. 

 

All people taking sleep
medicines have some risk of becoming dependent on the medicine. However, people
who have been dependent on alcohol or other drugs in the past may have a higher
chance of becoming addicted to sleep medicines. This possibility must be
considered before using these medicines for more than a few weeks. If you have
been addicted to alcohol or drugs in the past, it is important to tell your
doctor before starting LUNESTA or any sleep medicine. 

 

Withdrawal

 

Withdrawal symptoms may
occur when sleep medicines are stopped suddenly after being used daily for a
long time. In some cases, these symptoms can occur even if the medicine has
been used for only a week or two. In mild cases, withdrawal symptoms may
include unpleasant feelings. In more severe cases, abdominal and muscle cramps,
vomiting, sweating, shakiness, and, rarely, seizures may occur. These more
severe withdrawal symptoms are very uncommon. Although withdrawal symptoms have
not been observed in the relatively limited controlled trials experience with
LUNESTA, there is, nevertheless, the risk of such events in association with
the use of any sleep medicine.

 

Another problem that may
occur when sleep medicines are stopped is known as “rebound insomnia.”  This means that a person may have more
trouble sleeping the first few nights after the medicine is stopped than before
starting the medicine. If you should experience rebound insomnia, do not get
discouraged. This problem usually goes away on its own after 1 or 2 nights. 

 

24

 

If you have been taking
LUNESTA or any other sleep medicine for more than 1 or 2 weeks, do not stop
taking it on your own. Always follow your doctor’s directions.

 

Changes In Behavior And Thinking

 

Some people using sleep
medicines have experienced unusual changes in their thinking and/or behavior. These
effects are not common. However, they have included: 

 

·      More outgoing or aggressive
behavior than normal 

·      Confusion 

·      Strange behavior 

·      Agitation 

·      Hallucinations 

·      Worsening of depression 

·      Suicidal thoughts 

 

How often these effects
occur depends on several factors, such as a person’s general health, the use of
other medicines, and which sleep medicine is being used. Clinical experience
with LUNESTA suggests that it is rarely associated with these behavior changes.

 

It is also important to
realize that it is rarely clear whether these behavior changes are caused by
the medicine, are caused by an illness, or have occurred on their own. In fact,
sleep problems that do not improve may be due to illnesses that were present
before the medicine was used. If you or your family notice any changes in your
behavior, or if you have any unusual or disturbing thoughts, call your doctor
immediately.

 

Pregnancy And Breastfeeding

 

Sleep medicines may cause
sedation or other potential effects in the unborn baby when used during the
last weeks of pregnancy. Be sure to tell your doctor if you are pregnant, if
you are planning to become pregnant, or if you become pregnant while taking
LUNESTA. 

 

In addition, a very small
amount of LUNESTA may be present in breast milk after use of the medication. The
effects of very small amounts of LUNESTA on an infant are not known; therefore,
as with all other prescription sleep medicines, it is recommended that you not
take LUNESTA if you are breastfeeding a baby.

 

Safe Use Of Sleep Medicines

 

To ensure the safe and
effective use of LUNESTA or any other sleep medicine, you should observe the
following cautions: 

 

1.         LUNESTA is a prescription
medicine and should be used ONLY as directed by your doctor. Follow your
doctor’s instructions about how to take, when to take, and how long to take
LUNESTA. 

 

25

 

2.         Never use LUNESTA or any
other sleep medicine for longer than directed by your doctor. 

 

3.         If you notice any unusual
and/or disturbing thoughts or behavior during treatment with LUNESTA or any
other sleep medicine, contact your doctor. 

 

4.         Tell your doctor about
any medicines you may be taking, including medicines you may buy without a
prescription and herbal preparations. You should also tell your doctor if you
drink alcohol. DO NOT use alcohol while taking LUNESTA or any other sleep
medicine. 

 

5.         Do not take LUNESTA
unless you are able to get 8 or more hours of sleep before you must be active
again. 

 

6.         Do not increase the
prescribed dose of LUNESTA or any other sleep medicine unless instructed by
your doctor. 

 

7.         When you first start
taking LUNESTA or any other sleep medicine, until you know whether the medicine
will still have some effect on you the next day, use extreme care while doing
anything that requires complete alertness, such as driving a car, operating
machinery, or piloting an aircraft. 

 

8.         Be aware that you may
have more sleeping problems the first night or two after stopping any sleep
medicine. 

 

9.         Be sure to tell your
doctor if you are pregnant, if you are planning to become pregnant, if you
become pregnant, or if you are breastfeeding a baby while taking LUNESTA. 

 

10.       As with all prescription
medicines, never share LUNESTA or any other sleep medicine with anyone else. Always
store LUNESTA or any other sleep medicine in the original container and out of
reach of children.

 

11.       Be sure to tell your doctor
if you suffer from depression. 

 

12.       LUNESTA works very quickly.
You should only take LUNESTA immediately before going to bed.

 

13.       For LUNESTA to work best,
you should not take it with or immediately after a high-fat, heavy meal.

 

14.       Some people, such as older
adults (i.e., ages 65 and over) and people with liver disease, should start
with the lower dose (1 mg) of LUNESTA. Your doctor may choose to start therapy
at 2 mg. In general, adults under age 65 should be treated with 2 or 3 mg. 

 

15.       Each tablet is a single
dose; do not crush or break the tablet.

 

26

 

 

Manufactured for: 

Sepracor Inc.

Marlborough, MA 
01752  USA

by Patheon Inc., Mississauga, Ontario  L5N 7K9 
Canada 

 

For customer service, call 1-888-394-7377.

To report adverse events, call 1-877-737-7226.

For medical information, call 1-800-739-0565.

 

April 2007

 

27

 

CONFIDENTIAL

 

SCHEDULE 7.3(c)

 

Hypothetical Royalty Calculation

 

Hypothetical Scenario:  In the third Calendar Year following first
launch in the GSK Territory, the following Net Sales were achieved by GSK, its
Affiliates and Sublicensees:

 

•      Net Sales within countries
within the GSK Territory where in each country sales of Generic Products exceed
[**] percent ([**]%) of the total sales of Product by GSK, its Affiliates and
Sublicensees in such country (“Generic Countries”):

 

	
  Q1

  	
   

  	
  [**]

  	
   

  	
  Q2

  	
   

  	
  [**]

  	
   

  	
  Q3

  	
   

  	
  [**]

  	
   

  	
  Q4

  	
   

  	
  [**]

  

 

•      Net Sales within countries
within the GSK Territory where there are no Generic Products or sales of
Generic Products are less than [**] percent ([**]%) of the total sales of
Product by GSK, its Affiliates and Sublicensees in such country (“Non-Generic
Countries”):

 

	
  Q1

  	
   

  	
  [**]

  	
   

  	
  Q2

  	
   

  	
  [**]

  	
   

  	
  Q3

  	
   

  	
  [**]

  	
   

  	
  Q4

  	
   

  	
  [**]

  

 

•      Total Net Sales within the
GSK Territory:

 

	
  Q1

  	
   

  	
  [**]

  	
   

  	
  Q2

  	
   

  	
  [**]

  	
   

  	
  Q3

  	
   

  	
  [**]

  	
   

  	
  Q4

  	
   

  	
  [**]

  

 

Royalty calculation:

 

Q1           Total sales in Non-Generic Countries is
US$[**]. Royalty rate applicable in those countries during Q1 is therefore
[**]%.

 

Royalties payable in Q1 for Non-Generic Countries =
[**]

 

Total sales in Generic Countries is US$[**]. As cumulative year to date
sales in Non-Generic Countries is less than US$[**], royalty rate applicable in
Generic Countries during Q1 is [**]%.

 

Royalties payable in Q1 for Generic Countries
= [**]

 

Q2           Cumulative year to date sales in all
Non-Generic Countries is US$[**]. Of the US$[**] sales occurring in Q2, US$[**]
will attract the [**]% royalty rate and 
US$[**] will attract the [**]% royalty rate.

 

Royalties payable in Q2 for Non-Generic Countries
= [**].

 

Royalties
payable in Generic Countries will payable in same proportions, applied to the sales
occurring in Q2, 

i.e  [**]

 

Royalties payable in Q2 for Generic Countries
= [**]

 

 

CONFIDENTIAL

 

Q3           Cumulative year to date sales in all
Non-Generic Countries is US$[**]. Of the US$[**] sales occurring in Q3, US$[**]
will attract the [**]% royalty rate, and US$[**] will attract the [**]% royalty
rate.

 

Royalties payable in Q3 for Non-Generic Countries
= [**].

 

Royalties
payable in Generic Countries will payable in same proportions, applied to the
sales occurring in Q3,  i.e  [**]

 

Royalties payable in Q3 for Generic Countries
= [**]

 

Q4           Cumulative year to date sales in all
Non-Generic Countries is US$[**]. Of the US$[**] sales occurring in Q4, all of
the US$[**] will attract the [**]% royalty rate.

 

Royalties payable in Q4 for Non-Generic Countries
= [**].

 

Royalties payable in Generic Countries will payable in same proportions,
applied to sales occurring in Q4, i.e. [**]% will be payable at [**]%.

 

Royalties payable in Q4 for Generic Countries
= [**]

 

 

CONFIDENTIAL

 

SCHEDULE 7.3(e)

 

Hypothetical Calculation of Cost of Bulk
Tablets and Net Sales

 

In a hypothetical Calendar Year:

 

(A)          the
average price invoiced during such Calendar Year for the supply by Sepracor to
GSK of a [**]mg Bulk Tablets of Product was US$[**] and

 

(B)           the
number of [**]mg tablets of Product sold by GSK, its Affiliates or
Sub-licensees during such Calendar Year was [**].

 

The aggregate price paid by GSK for [**]mg Bulk
Tablets for Product sold in such Calendar Year is therefore A x B = US$[**]

 

A similar calculation for other dosage forms, meant
that in this hypothetical Calendar Year, the aggregate price paid by GSK for
Bulk Tablets in all forms for Product sold in such Calendar Year was, for the
sake of this example, US$[**].

 

If the Net Sales in that Calendar Year were US$[**],
and the royalties payable on such Net Sales were  US$[**], the calculation required under
Section 7.3(e) would be:          [**]

 

In this example, the [**]% cap would not be reached,
and there would be no adjustment made under Section 7.3(e).

 

If however, the aggregate price paid by GSK for Bulk
Tablets in all forms for Product sold in such Calendar Year had been, for the
sake of this example, US$[**], the calculation required under Section 7.3(e)
would be:       [**]

 

In this case, as [**]% of US$[**] is US$[**], an
adjustment of US$[**] would need to be made to the royalties paid for such
Calendar Year [**]

 

 

CONFIDENTIAL

 

SCHEDULE 10.2

 

TERM SHEET FOR MANUFACTURING AND SUPPLY

 

1.     Definitive Agreement. Following
execution of the Development, License and Commercialization Agreement between
Sepracor and GSK (“License Agreement”), Sepracor and GSK shall, in good
faith, negotiate and enter into a manufacturing and supply agreement that
incorporates, among other things, the terms and conditions set forth in this
term sheet (the “Supply Agreement”). Capitalized terms used but not
otherwise defined herein shall have the meaning ascribed to such terms in the
License Agreement.

 

2.     Supply of Products. Sepracor
shall manufacture or have manufactured exclusively for GSK’s use in the GSK
Territory Bulk Tablets for commercial sale (including physician samples) and
Clinical Supplies. Based on the Forecast as described herein, Sepracor shall
maintain at all times sufficient capacity to meet all GSK’s, GSK’s Affiliates’
and GSK’s Sublicensees’ requirements for Bulk Tablets to enable them to meet
their respective needs for Product for the GSK Territory.

 

3.     Product Requirements. All
Bulk Tablets supplied by Sepracor will be manufactured in accordance with the
relevant standards of cGMP and applicable laws and regulations (both at the
site of manufacture and where the Bulk Tablets are to be supplied) and will
comply with the relevant specifications, each Marketing Approval, and will be
fit for purpose. The parties recognize that they will need to agree upon
specifics of manufacturing requirements for individual countries or regulatory
areas either in advance of, or as part of, the Marketing Approval process.

 

4.     Price. The
purchase price of Bulk Tablets for commercial supplies shall be Sepracor’s
[**], and for Clinical Supplies and physician samples shall be [**]. For the
avoidance of doubt, in any country of the GSK Territory where market pricing
does not allow for GSK to profitably sell the Product with Bulk Tablets being
purchased at this rate, Sepracor is under no obligation to supply Product at a
purchase price lower than as stated above. Subject to GSK agreeing
confidentiality terms in the Supply Agreement, on terms no less onerous than
those contained in Section 11 of the License Agreement, the parties will
operate on [**] (with associated audit rights) and shall meet regularly (and no
less than once each calendar year) to agree the [**] to be invoiced to GSK as
well as the division between Clinical Supplies, physician samples and
commercial supplies. The Supply Agreement will also provide for initiatives to
manage costs and identify potential areas for cost reduction as part of a
continuous improvement programme.

 

5.     Forecasts and Firm Orders.
Upon the execution of the Supply Agreement and [**] thereafter, GSK shall
provide Sepracor with a rolling [**] forecast of its estimated quarterly
purchases of Bulk Tablets (the “Forecast”) for both commercial and
Clinical

 

 

CONFIDENTIAL

 

Supply needs. Except as set forth below, each Forecast will be
non-binding and will represent only GSK’s good faith estimate of expected
orders for the Bulk Tablets. However, for each such Forecast, the [**] will be
a firm order (purchase orders for such firm orders will also be provided in
accordance with Supply Agreement) and will represent GSK’s commitment to
Sepracor to purchase the amount of Bulk Tablets indicated in such portion of
the Forecast. For the [**] period of each such Forecast, the quantities of Bulk
Tablets actually purchased by GSK shall not be [**]. GSK shall also provide
Sepracor with non-binding mid-term and long-term forecasts on a yearly basis
(for years [**]), which shall not exceed [**] years.

 

6.     Shipping and Delivery. The delivery terms in the Supply
Agreement shall be Ex Works (Incoterms 2000). Risk of loss and title shall
transfer at the time of delivery of Bulk Tablets to the carrier. Each delivery
will be accompanied by the corresponding Certificate of Analysis and relevant
delivery documentation.

 

7.     Packaging and Labeling. GSK will package (including label) (or have packaged and labelled) the
Bulk Tablets for commercial sale (including physician samples) and
Clinical Supplies. Bulk
Tablets supplied to GSK will be appropriately packaged and labeled based upon
specifications agreed between the Parties and in accordance with all applicable
laws and regulations.

 

8.     Acceptance and Rejection. GSK
shall have [**] from its receipt of the Bulk Tablets at GSK’s designated facility to
notify Sepracor of its rejection of the Bulk Tablets for any defects which are
apparent from carrying out incoming inspection and control procedures (to be
further defined in the Quality Agreement). This shall be without prejudice to
rights and obligations of the Parties in respect of latent defects. The Supply
Agreement shall include provisions for the referral of disputes over alleged
defects in Bulk Tablets to an independent laboratory for resolution.

 

9.     Payment. Sepracor shall invoice GSK upon
shipment of each released batch of Bulk Tablets. Payment terms will be
thirty (30) days from date of receipt of the Bulk Tablets (with a paper copy of
the related invoice being sent electronically and by post). Any payments or
portions thereof due under this Agreement that are not paid by the date such
payment is due shall bear interest at the rate set forth in Section 8.5 of the
License Agreement.

 

10.   Term. The
Supply Agreement shall be coterminous with the License Agreement, on a
country-by-country basis.

 

11.   Inability to Supply. Sepracor
will maintain an inventory of API equivalent to [**] forward cover of Bulk
Tablets (or such other inventory as mutually agreed) (“Reserve Supply”), which
shall be used to meet any disruption or shortfall in supply that may occur for
any reason during the term of the Supply Agreement.

 

 

CONFIDENTIAL

 

In the event of any Inability to Supply, (or any anticipated Inability
to Supply) Sepracor shall notify GSK immediately and shall cooperate with GSK
in taking at Sepracor’s cost (except where the Inability to Supply is due to an
event of force majeure, in which case the parties will agree an equitable
allocation of the costs) all actions that are reasonably necessary in order to
remedy such Inability to Supply, including making up the shortfall from the
Reserve Supply.

 

An “Inability to Supply” shall mean Sepracor’s failure for any
reason, including without limitation force  majeure or otherwise,
to supply GSK with at least, in the aggregate, [**] percent ([**]%) of the
quantities of the Bulk Tablets Forms ordered by GSK for any [**] period.

 

In the event
of any Inability to Supply, the Parties will review through the JSC the amount
of Bulk Tablets available and if necessary will agree appropriate rationing of
available supply as between the Sepracor Territory and the GSK Territory to
ensure that supply to GSK is not disproportionately disadvantaged.

 

In the event of an Inability to Supply where Sepracor is unable to make
up the shortfall from the Reserve Supply or otherwise by way of product
rationing from the available supply, upon written request by GSK, Sepracor
shall provide GSK with such assistance (other than financial assistance) and
any know-how Controlled by Sepracor, as reasonably necessary for manufacturing
Bulk Tablets Forms including, without limitation, setting up a manufacturing
facility at GSK. In connection with the foregoing, GSK shall be permitted to
consult with Sepracor’s technical personnel, and such technical personnel will
provide such assistance as may be necessary to transfer the specified
manufacturing activities and relevant Sepracor Know-How to GSK (or its
nominated contract manufacturer) and Sepracor shall immediately grant GSK a
limited, non-exclusive royalty free license under the Sepracor Technology for
the sole purpose of manufacturing (or having manufactured) Bulk Tablets in or
outside the GSK Territory for packaging into Product for commercial sale
(including physician samples) and Clinical Supplies in the GSK Territory, and
with the agreement of GSK make any necessary consequential amendments to the
License Agreement. Sepracor shall be responsible for Sepracor’s actual costs
and expenses incurred in connection with such technology transfer.

 

The remedies set out in this paragraph 11 shall be without prejudice to
any other rights and remedies under the Supply Agreement for failure to meet
firm orders for Bulk Tablets.

 

12.   Quality Agreement and
Pharmacovigilance Agreement. In addition to the execution of the
Supply Agreement, the Parties will enter into a Quality Agreement and a
Pharmacovigilance Agreement incorporating terms required in the License
Agreement and such other terms appropriate for manufacture of Bulk Tablets for
commercial distribution (including physician samples) and Clinical Supplies.

 

 

CONFIDENTIAL

 

13.   Pre-Supply Approval. GSK
will have the right to conduct pre-supply approval audits of those
manufacturing facilities of Sepracor, and any appointed third party
manufacturer, which are used in the manufacture of Bulk Tablets for GSK, prior
to taking supply. Thereafter, Sepracor shall not appoint any other third party
manufacturer nor change the location of any part of the manufacturing process
for the manufacture of Bulk Tablets for GSK without GSK’s prior written
consent, not to be unreasonably withheld, and subject to the change control
procedure set out in the Quality Agreement.

 

14.   Audits & Inspections. GSK
shall have the right to carry out, not more than annually (except for “for
cause” audits), upon reasonable prior notice (or at any time for cause),
regular GMP, EHS and loss prevention audits of those parts of Sepracor’s
manufacturing site(s) used in the manufacture of Bulk Tablets for GSK. Sepracor
shall use Commercially Reasonable Efforts to procure the same rights for GSK at
the premises of its third party manufacturers. If Sepracor is unable to procure
such rights, Sepracor shall carry out such audits and inspections itself on
behalf of GSK and shall report the results to GSK. Where any audit identifies
work to be completed to ensure cGMP compliance or to meet the requirements of
the Supply Agreement or the Quality Agreement, the cost of such activity will be
borne by Sepracor.

 

15.   Other Standard Terms. The
Supply Agreement will also contain other provisions customary for agreements of
this nature addressing the effect of termination, regulatory inspections,
supply performance, quality assurance and assurance of supply, representations
and warranties, indemnification, insurance and confidentiality and such other
terms as may be necessary to reflect GSK or Sepracor corporate policies
(including GSK’s policy on Ethics & Human Rights).

 

 

CONFIDENTIAL

 

SCHEDULE 16.2(g)

 

THREATENED AND PENDING LITIGATION IN GSK TERRITORY

 

None

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