Document:

ex10-1

 

EXHIBIT 10.1

[*Confidential treatment has been requested as to certain portions of this
document. Each such portion, which has been omitted herein and replaced with
an asterisk [*], has been filed separately with the Securities and Exchange
Commission.]

COLLABORATION AND LICENSE AGREEMENT

By and Between

PHARMACIA & UPJOHN COMPANY

And

NASTECH PHARMACEUTICAL COMPANY, INC.

 

TABLE OF CONTENTS

	 	 	 	 	 	 
	ARTICLE 1 INTERPRETATION
	 	 	1	 
	 
	ARTICLE 2 SCOPE OF RELATIONSHIP AND GRANT OF RIGHTS
	 	 	10	 
	 	2.1) Scope of Relationship and Grant of Rights
	 	 	10	 
	 	2.2) Sublicense Rights
	 	 	10	 
	 	2.3) Nastech Reserved Rights
	 	 	10	 
	 	2.6) Certain Covenants of Nastech
	 	 	12	 
	 	2.7) Certain Covenants of Pharmacia
	 	 	13	 
	 	2.8) Section 365(n) of the Bankruptcy Code
	 	 	13	 
	 	2.9) Nastech’s Right to Use Certain Pharmacia Data Outside the Field
	 	 	13	 
	 	2.10) Pharmacia’s Right to Use Certain Nastech Data in the Field
	 	 	13	 
	 
	ARTICLE 3 DEVELOPMENT OVERSIGHT COMMITTEE
	 	 	14	 
	 	3.1) Development Oversight Committee
	 	 	14	 
	 	3.2) Development Oversight Committee Responsibilities
	 	 	14	 
	 	3.3) Decision Making; Administrative Matters
	 	 	14	 
	 
	ARTICLE 4 DEVELOPMENT OF LICENSED PRODUCTS
	 	 	15	 
	 	4.1) Cooperation Regarding Development
	 	 	15	 
	 	4.2) Development Responsibilities
	 	 	16	 
	 	4.3) Global Development Plan
	 	 	16	 
	 	4.4) Development Activities
	 	 	16	 
	 
	ARTICLE 5 COMMERCIALIZATION OF LICENSED PRODUCTS
	 	 	17	 
	 	5.1) Responsibility for Commercialization of Collaboration Product
	 	 	17	 
	 	5.2) Commercialization Committee
	 	 	18	 
	 	5.3) Commercialization Committee Responsibilities
	 	 	18	 
	 	5.4) Decision Making
	 	 	18	 
	 	5.5) Dispute Resolution
	 	 	18	 
	 	5.6) Global Commercialization Plan
	 	 	18	 
	 	5.7) Detailing
	 	 	19	 
	 	5.8) Promotional Expenditures
	 	 	19	 
	 	5.9) Orders; Recognizing Sales
	 	 	19	 
	 
	ARTICLE 6 MANUFACTURE AND SUPPLY
	 	 	20	 
	 	6.1) Responsibility for Development Supply
	 	 	20	 
	 	6.2) Responsibility for Commercial Supply of API
	 	 	20	 
	 	6.3) Responsibility for Commercial Supply of Finished Product
	 	 	20	 
	 
	ARTICLE 7 REGULATORY MATTERS
	 	 	22	 
	 	7.1) Ownership
	 	 	22	 
	 	7.2) Regulatory Coordination
	 	 	22	 
	 	7.3) Pharmacovigilance
	 	 	23	 

 

 

	 	 	 	 	 	 
	ARTICLE 8 LICENSE FEES AND MILESTONES
	 	 	24	 
	 	8.1) Upfront License Fees
	 	 	24	 
	 	8.2) Equity Purchase
	 	 	24	 
	 	8.3) Development Milestone Payments
	 	 	25	 
	 	8.4) Sales Milestone Payments
	 	 	26	 
	 
	ARTICLE 9 SALES-BASED COMPENSATION
	 	 	26	 
	 	9.1) Royalties
	 	 	26	 
	 	9.2) Duration of Obligation to Pay Sales-Based Compensation
	 	 	27	 
	 	9.3) Minimum Sales
	 	 	28	 
	 	9.4) Royalty Reports; Payments
	 	 	29	 
	 	9.5) Interest on Late Payments
	 	 	29	 
	 	9.6) Taxes
	 	 	29	 
	 	9.7) Records; Audits
	 	 	29	 
	 	9.8) Currency of Payment
	 	 	30	 
	 	9.9) Third Party Licenses
	 	 	30	 
	 	9.10) Compulsory License
	 	 	30	 
	 	9.11) Royalty Credit for Sample Costs
	 	 	31	 
	 
	ARTICLE 10 INTELLECTUAL PROPERTY RIGHTS
	 	 	31	 
	 	10.1) Disclosure of Program Inventions
	 	 	31	 
	 	10.2) Ownership of Program Inventions
	 	 	31	 
	 	10.3) Ownership of Trademarks
	 	 	32	 
	 	10.4) Assignment of Program Inventions
	 	 	32	 
	 	10.5) Prosecution Patent Rights
	 	 	32	 
	 	10.6) Prosecution Costs
	 	 	33	 
	 	10.7) Cooperation
	 	 	34	 
	 	10.8) Notice of Issuance
	 	 	34	 
	 	10.9) No Implied Rights
	 	 	34	 
	 	10.10) Assertion of Patent Infringement
	 	 	34	 
	 	10.11) Third Party Infringement Suit
	 	 	36	 
	 	10.12) Cooperation
	 	 	36	 
	 	10.13) No Obligation to Prosecute
	 	 	36	 
	 
	ARTICLE 11 CONFIDENTIALITY
	 	 	36	 
	 	11.1) Confidential Information
	 	 	36	 
	 	11.2) Disclosure
	 	 	37	 
	 	11.3) Exceptions
	 	 	37	 
	 	11.4) Terms of Agreement
	 	 	38	 
	 	11.5) Publications
	 	 	38	 
	 	11.6) Delay
	 	 	38	 
	 	11.7) Press Releases
	 	 	38	 
	 	11.8) Termination of Prior Agreement
	 	 	39	 

 

 

	 	 	 	 	 	 
	ARTICLE 12 TERM AND TERMINATION
	 	 	39	 
	 	12.1) Term
	 	 	39	 
	 	12.2) Pharmacia’s Unilateral Termination Right
	 	 	40	 
	 	12.3) Termination For Material Breach
	 	 	40	 
	 	12.4) Termination Upon Bankruptcy
	 	 	40	 
	 	12.5) Termination Relating to Competitive Product
	 	 	41	 
	 	12.6) Rights of Pharmacia Upon Regularly Scheduled Termination
	 	 	42	 
	 	12.7) Grant Backs to Nastech
	 	 	42	 
	 	12.8) Other Residual Rights
	 	 	45	 
	 	12.9) Certain Consequences of Termination
	 	 	46	 
	 	12.10) Disposal of Inventory
	 	 	47	 
	 	12.11) Preservation of Rights upon Termination
	 	 	47	 
	 
	ARTICLE 13 DISPUTE RESOLUTION
	 	 	47	 
	 	13.1) Non-Binding Mediation
	 	 	47	 
	 
	ARTICLE 14 REPRESENTATIONS, WARRANTIES AND COVENANTS
	 	 	48	 
	 	14.1) Representation of Authority; Consents
	 	 	48	 
	 	14.2) No Conflict
	 	 	48	 
	 	14.3) Knowledge of Pending or Threatened Litigation
	 	 	48	 
	 	14.4) Additional Representations and Warranties of Nastech
	 	 	48	 
	 	14.5) Additional Warranty by Pharmacia
	 	 	49	 
	 	14.6) Disclaimer of Warranty
	 	 	50	 
	 	14.7) Notwithstanding 
	 	 	50	 
	 
	ARTICLE 15 INDEMNIFICATION
	 	 	50	 
	 	15.1) Indemnification
	 	 	50	 
	 	15.2) Indemnification Procedures
	 	 	51	 
	 
	ARTICLE 16 CONDITIONS
	 	 	51	 
	 	16.1) HSR Filing
	 	 	51	 
	 	16.2) HSR-Related Definitions
	 	 	52	 
	 
	ARTICLE 17 MISCELLANEOUS
	 	 	52	 
	 	17.1) Entire Agreement; Amendments
	 	 	52	 
	 	17.2) Notices
	 	 	52	 
	 	17.3) Force Majeure
	 	 	53	 
	 	17.4) Compliance with Export Regulations
	 	 	53	 
	 	17.5) Choice of Law: Jurisdiction
	 	 	53	 
	 	17.6) Assignment
	 	 	54	 
	 	17.7) Consequences of a Triggering Event
	 	 	54	 
	 	17.8) Non-Solicitation
	 	 	55	 
	 	17.9) Joint Committees
	 	 	55	 

 

 

	 	 	 	 	 	 
	 	17.10) No Strict Construction
	 	 	55	 
	 	17.11) Headings
	 	 	55	 
	 	17.12) Severability
	 	 	55	 
	 	17.13) No Consequential Damages
	 	 	55	 
	 	17.14) General Provisions
	 	 	56	 
	 	[17.15) Employees and Agents
	 	 	56	 
	 	17.16) Patent Markings on Collaboration Product
	 	 	56	 
	 	17.17) Whole Agreement
	 	 	57	 

SCHEDULE A

SCHEDULE B

SCHEDULE 2.4

SCHEDULE 4.3

SCHEDULE 4.5

SCHEDULE 9.1

SCHEDULE 12.5

 

 

COLLABORATION AND LICENSE AGREEMENT

     This Collaboration and License Agreement dated the 1st day of February,
2002 (the “Execution Date”) is by and between Pharmacia & Upjohn Company, a
corporation organized and existing under the laws of the State of Delaware and
having a place of business at 100 Route 206 North, Peapack, New Jersey 07977
(“Pharmacia”), and Nastech Pharmaceutical Company, Inc., a corporation
organized and existing under the laws of the State of Delaware and having its
principal office at 45 Adams Avenue, Hauppauge, New York 11788 (“Nastech”).

RECITALS

     WHEREAS, Nastech is currently developing a product containing the Compound
(as defined below) for the treatment of sexual dysfunction;

     WHEREAS, Pharmacia and/or its Affiliates are engaged in the research,
development, production and sale of a wide range of pharmaceutical products;

     WHEREAS, Nastech and Pharmacia wish to enter into a licensing and
collaboration arrangement regarding the development and commercialization of
the Collaboration Product in the Field (as defined below), all on the terms and
conditions set forth herein.

     NOW, THEREFORE, Nastech and Pharmacia, intending to be legally bound,
hereby agree as follows:

ARTICLE 1

INTERPRETATION

When used in this Agreement, each of the following terms shall have the
meanings set forth in this Article I:

“Affiliate” means any corporation, company, partnership, joint venture and/or
firm which controls, is controlled by, or is under common control with a
specified person or entity. For purposes of this definition, “control” shall
be presumed to exist if one of the following conditions is met: (a) in the
case of corporate entities, direct or indirect ownership of at least fifty
percent (50%) of the stock or shares having the right to vote for the election
of directors, and (b) in the case of non-corporate entities, direct or indirect
ownership of at least fifty percent (50%) of the equity interest with the power
to direct the management and policies of such non-corporate entities.

“Business Day” means a day on which banking institutions in New York, New York
are open for business.

1

 

“Change of Control” means (a) a merger or consolidation of a Party which
results in the voting securities of such Party outstanding immediately prior
thereto ceasing to represent at least fifty percent (50%) of the combined
voting power of the surviving entity immediately after such merger or
consolidation, (b) a Third Party becoming, directly or indirectly, the
beneficial owner of fifty percent (50%) or more of the combined voting power of
the outstanding securities of a Party or otherwise designating more than fifty
percent (50%) of a Party’s board of directors, or (c) the sale or other
transfer of all or substantially all of a Party’s assets which relate to this
Agreement to a Third Party.

“Collaboration Product” means a Licensed Product that is Developed and/or
Commercialized in the Field pursuant to the terms of this Agreement.

“Commercialization” or “Commercialize” means any and all activities directed to
marketing, promoting, distributing, offering for sale and selling a product,
importing a product for sale, conducting Phase IIIB Studies and Phase IV
Studies, manufacturing for commercial sale, and interacting with Regulatory
Authorities regarding the foregoing. When used as a verb, “Commercialize”
means to engage in Commercialization.

“Commercialization Committee” means the committee formed pursuant to Section
5.2.

“Commercially Reasonable and Diligent Efforts” means (a) such diligent and
conscientious endeavors as, consistent with standards of good faith and
reasonableness under the attendant circumstances, are appropriate to attempt to
accomplish the stated result and (b) with respect to the research, development,
manufacture, regulatory approval, commercialization and other exploitation of
the Collaboration Product, such efforts and resources as are commonly used in
the pharmaceutical industry for an ethical drug of similar commercial potential
at a similar stage in its lifecycle, taking into consideration its safety and
efficacy, its cost to develop, the competitiveness of alternative products, its
proprietary position, the likelihood of regulatory approval, its profitability
and all other relevant factors. Commercially Reasonable and Diligent Efforts
shall be determined on a market-by-market basis for each Collaborative Product,
as applicable.

“Competitive Product” means any prescription pharmaceutical product, other than
a Collaboration Product, which is delivered intranasally and is being Developed
or Commercialized at any time following the Effective Date for the treatment of
male erectile dysfunction (or if a Collaboration Product receives Regulatory
Approval for the treatment of female sexual dysfunction, then for the treatment
of female sexual dysfunction).

“Competitive PDE V Product” means any prescription pharmaceutical product that
is determined to be an inhibitor of the human PDE-V enzyme subtype [*] compared
to any other human receptor, enzyme or ion channel subtype. The Parties shall
mutually agree upon the

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.	 	 

2

 

appropriate assay protocols for purposes of determining whether a
particular compound is a Competitive PDE V Product.

“Compound” means apomorphine, including, without limitation, its salts, esters,
metabolites, derivatives, isomers, hydrates, solvates, polymorphs and prodrugs
thereof.

“Compulsory License” means a compulsory license under Nastech Technology
obtained by a Third Party through the order, decree, or grant of a competent
governmental authority or court, authorizing such Third Party to develop, make,
have made, use, sell, offer to sell or import Collaboration Product in the
Territory or in any portion thereof.

“Confidential Information” means all proprietary materials, know-how or other
information (whether or not patentable) regarding a Party’s technology,
products, business information or objectives relating to Licensed Product.
Disclosures of Confidential Information may be made by written, graphic, oral,
electronic or in any other form. The terms of this Agreement shall be
considered Confidential Information of each Party.

“Control” or “Controlled” means with respect to any (a) material, item of
information, method, data or other know-how, or (b) intellectual property
right, in each case the possession (whether by ownership or license, other than
pursuant to this Agreement) by a Party or its Affiliates of the ability to
grant to the other Party access and/or a license as provided herein under such
item or right without violating the terms of any agreement or other arrangement
with any Third Party existing before or after the Execution Date.

“Development” or “Develop” means, preclinical and clinical drug development
activities, including, among other things: test method development and
stability testing, toxicology, formulation, process development, manufacturing
scale-up, development-stage manufacturing, quality assurance/quality control
development, statistical analysis and report writing, conducting clinical
trials for the purpose of obtaining Regulatory Approval, product approval and
registration, and regulatory affairs related to the foregoing. When used as a
verb, “Develop” means to engage in Development. For clarity, Development does
not include Phase IIIB Studies or Phase IV Studies.

“Development Oversight Committee” means the committee formed pursuant to
Section 3.1.

“Development Cost” means all costs and expenses incurred in connection with all
studies or activities performed following the Effective Date in accordance with
the Global Development Plan for the Development of a Collaboration Product in
the Field, including without limitation the cost of Collaboration Product for
use in pre-clinical and clinical studies.

“Effective Date” means the HSR Clearance Date (as defined in Article 16) or, if
the Parties mutually agree that an HSR Filing is not required, the date of such
mutual written agreement.

“Execution Date” shall have the meaning set forth in the introduction paragraph
of this Agreement.

3

 

“FDA” means the United States Food and Drug Administration, or a successor
agency thereto.

“Field” means the prevention, treatment, diagnosis or control of sexual
dysfunction in humans, including, but not limited to, male erectile dysfunction
and female sexual dysfunction.

“First Commercial Sale” means the first shipment of commercial quantities
of the first Collaboration Product sold on arm’s length terms to a Third Party
by Pharmacia or its Sublicensees in any country in the Territory after
Regulatory Approval has been obtained for such Collaboration Product in such
country. Sales for test marketing, sampling and promotional uses, clinical
trial purposes or compassionate or similar use shall not be considered to
constitute a First Commercial Sale.

“Fully Allocated Manufacturing Cost” or “FAMC” shall have the meaning provided
such term in the Supply Agreement.

“GAAP” means the then current United States generally accepted accounting
principles, consistently applied. All financial determinations made under this
Agreement shall be made in accordance with GAAP.

“Global Commercialization Plan” means the plan and budget for the
Commercialization of the Collaboration Product in the Field to be prepared
pursuant to Section 5.6.

“Global Development Plan” means the plan for the Development of Collaboration
Product to be prepared pursuant to Section 4.3.

“IND” means (a) (i) an Investigational New Drug Application, as defined in
the U.S. Federal Food, Drug, and Cosmetic Act, as amended from time to time,
and the regulations promulgated thereunder, that is required to be filed with
the FDA before beginning clinical testing of a Collaboration Product in human
subjects, or any successor application or procedure and (ii) any counterpart of
a U.S. Investigational New Drug Application in any other country in the
Territory, and (b) all supplements and amendments that may be filed with
respect to the foregoing.

“Joint Know-How” means confidential information and materials, including, but
not limited to, (i) pharmaceutical and chemical products, (ii) technical and
non-technical data, and information relating to the results of tests, assays,
methods and/or processes, and (iii) drawings, plans, diagrams, specifications
and/or other documents containing said information and data, in each case which
is made jointly by employees, consultants or agents of Nastech or its
Affiliates and by employees, consultants or agents of Pharmacia or its
Affiliates following the Execution Date and in the course of Development or
Commercialization of Collaboration Product, but excluding the Joint Patents.

“Joint Patents” means all Patent Rights that claim Program Inventions and name
as inventors one or more employees, consultants or agents of Nastech or its
Affiliates together with one or more employees, consultants or agents of
Pharmacia or its Affiliates.

“Joint Technology” means Joint Know-How and Joint Patents.

4

 

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

“Licensed Product” means any product that contains the Compound delivered
intranasally.

“Licenses” has the meaning provided such term in Section 2.1 hereof.

“Nastech Development Activities” means all of Nastech’s Development activities
required to manufacture Collaboration Product, including without limitation
test method development and stability testing, formulation, process
development, manufacturing scale-up, development stage manufacturing, and
quality assurance/quality control development, in each case in accordance with
the Global Development Plan.

“Nastech Know-How” means confidential information and materials, which is
Controlled by Nastech or its Affiliates, whether as of or after the Execution
Date, to the extent such is useful or necessary for the manufacture, testing,
use or sale in the Field of a Licensed Product or any component thereof,
including, but not limited to, (i) pharmaceutical or chemical products, (ii)
technical and non-technical data, and information relating to the results of
tests, assays, methods and/or processes, and (iii) drawings, plans, diagrams,
specifications and/or other documents containing said information and data. The
Nastech Know-How shall include the Joint Know-How to the extent Controlled by
Nastech.

“Nastech Owned Patents” means all Patent Rights, which are Controlled by
Nastech or its Affiliates, whether as of or after the Execution Date, and which
contain claims which would be infringed by the manufacture, use or sale of
Licensed Product, or any component thereof, in the Field, in the absence of
this Agreement. The Nastech Owned Patents as of the Execution Date are listed
in Schedule A.

“Nastech Patents” means the Nastech Owned Patents and the Joint Patents to the
extent Controlled by Nastech.

“Nastech Technology” means all Nastech Patents and Nastech Know-How.

“NDA” means (a) the single application or set of applications for approval
and/or pre-market approval to make and sell commercially a pharmaceutical
therapeutic product or delivery systems or device filed with the FDA, including
all information included in drug master files related to such application(s),
and any related registrations with or notifications to the FDA, and (b) any
counterparts to such applications filed with any other national or
supranational Regulatory Authority in the Territory.

“Net Sales” means, with respect to any Collaboration Product, the gross
invoiced sales in the Territory of such Collaboration Product by Pharmacia and
its Sublicensees beginning on the First Commercial Sale of such Collaboration
Product, less the following deductions to the extent included in the gross
invoiced sales or otherwise paid or incurred by Pharmacia or its Sublicensees:

5

 

	 	 	 
	(a)	 	
discounts, retroactive price reductions, credits, rebates,
allowances, and adjustments;

	 	 	 
	(b)	 	
amounts repaid or credited to customers by reason of rejections or
returns of Collaboration Product;

	 	 	 
	(c)	 	
trade, quantity, or cash discounts or rebates allowed, given or
accrued (including but not limited to cash, governmental and managed
care rebates, and hospital and other buying group chargebacks);

	 	 	 
	(d)	 	
sales, excise, turnover, inventory, value-added and similar taxes
payable on the sale of such Collaboration Product, and import and
customs duties;

	 	 	 
	(e)	 	
transportation, importation, insurance and other handling expense
allowance equal to [*] of gross invoiced sales; and

	 	 	 
	(f)	 	
the portion of any management fees paid during the relevant time
period to group purchasing organizations that relate specifically to
the sale of the Collaboration Product to such organizations.

Use of Collaboration Product for promotional or sampling purposes and in
clinical trials contemplated under this Agreement shall not be considered in
determining Net Sales.

“Party” means Pharmacia or Nastech; “Parties” means Pharmacia and Nastech.

“Patent Rights” means all existing patents and patent applications and all
patent applications hereafter filed, including any continuations,
continuations-in-part, divisions, provisionals or any substitute applications,
any patent issued with respect to any such patent applications, any reissue,
reexamination, renewal or extension (including any supplementary protection
certificate) of any such patent, and any confirmation patent or registration
patent or patent of addition based on any such patent, and all foreign
counterparts of any of the foregoing.

“Pharmacia Know-How” means confidential information and materials, which is
Controlled by Pharmacia or its Affiliates, whether as of or after the Execution
Date, to the extent such is useful or necessary for the manufacture, testing,
use or sale of a Collaboration Product in the Field, or any component thereof,
including but not limited to (i) pharmaceutical or chemical products, (ii)
technical and non-technical data, and information relating to the results of
tests, assays, methods and/or processes, and (iii) drawings, plans, diagrams,
specifications and/or other documents containing said information and data. The Pharmacia Know-How shall include the Joint Know-How
to the extent Controlled by Pharmacia.

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.
	 	 

6

 

“Pharmacia Patents” means all Patent Rights which are Controlled by Pharmacia
or its Affiliates as of or after the Execution Date and which contain claims
which would be infringed by the manufacture, use or sale of Collaboration
Product, or any component thereof, in the Field in the absence of this
Agreement. Unless the context otherwise requires, Pharmacia Patents shall
include the Joint Patents to the extent Controlled by Pharmacia.

“Pharmacia Technology” means the Pharmacia Know-How and the Pharmacia Patents.

“Phase IIIB Study” means a clinical trial intended to enhance the commercial
profile of a product for a non-approved indication and not required or pivotal
for Regulatory Approval for the initial indication.

“Phase IV Study” means clinical, preclinical, epidemiological modeling, and
pharmacoeconomic studies that are designed to support marketing, publications,
or future labeling changes within an approved indication.

“Program Invention” means all patentable inventions and discoveries that are
conceived or reduced to practice by one or more employees, agents or
consultants of Nastech and/or one or more employees, agents or consultants of
Pharmacia under this Agreement in the course of performing the Development of
a Collaboration Product.

“Promotional Expenditures” means all direct promotion and sales force costs and
expenses incurred by Pharmacia in the Commercialization of Collaboration
Product in the Territory. Promotional Expenditures include, without
limitation, all costs related to (a) advertising, promotion, medical education
and Collaboration Product publicity, (b) dissemination of scientific
information to the healthcare community, (c) professional education services,
(d) samples and field aids used in connection with Collaboration Product
marketing and promotion, (e) clinical experience programs and market research
activities, such as economic modeling, focus groups, studies and monitoring of
market penetration and market share, (f) the costs of any Pharmacia sales
forces utilized in the marketing and promotion of a Collaboration Product, as
such costs are determined based on methodologies utilized by Pharmacia across
all of its other products, (g) payments made to any Third Party for any Third
Party sales forces utilized in the marketing and promotion of a Collaboration
Product, (h) direct consumer advertising, (i) clinical trials conducted outside
of the registration program for a particular indication (e.g., Phase IIIb and
Phase IV clinical trials), and (j) training materials.

“Regulatory Approval” means any and all approvals, licenses, registrations, or
authorizations of any federal, national, multinational, state, provincial or
local regulatory agency, department, bureau or other governmental entity
necessary for the manufacture, use, storage, import, export, transport,
promotion, marketing and sale of a product in a country, together with any
governmental price or reimbursement approvals.

“Regulatory Authority” means any governmental regulatory authority involved in
granting Regulatory Approvals of any Collaboration Product, including, without
limitation, the FDA and the European Commission.

7

 

“Stock Exchange” means the New York Stock Exchange or any similar exchange upon
which the securities of a Party or any of its Affiliates are traded.

“Sublicensee” means a Third Party, which has been granted sublicense rights
pursuant to this Agreement, which rights include at least the rights to make
and sell Collaboration Product. Third Parties that are permitted only to
distribute and resell Finished Product or that manufacture or finish
Collaboration Product for supply to Pharmacia or its Affiliates are not
“Sublicensees.”

“Supply Agreement shall have the meaning provided such term in Section 6.5
hereof.

“Territory” means all the countries of the world.

“Third Party” means any person or entity other than a Party or any of its
Affiliates.

“Third Party License Agreement” means any license or sublicense agreement
between Nastech or its Affiliates and a Third Party relating to Nastech
Technology existing before or after the Execution Date.

“TPP” means the target product profile of the Collaboration Product for the
male erectile dysfunction indication as set forth in Schedule B hereto, as it
may be amended from time to time by written agreement of the Parties.

“Triggering Event” means a Change in Control with respect to Pharmacia
involving a Third Party which is actively Developing or Commercializing a
Triggering Product as of the effective date of such Change in Control;
provided, however, that in the case of a Triggering Product that is a
Competitive PDE V Product and which is not yet being Commercialized as of the
effective date of such Change in Control, such product is then at a more
advanced stage of Development than the first Collaboration Product being
Developed pursuant to this Agreement.

“Triggering Product” means (i) any Competitive Product, or any (ii) Competitive
PDE V Product that is being Developed or Commercialized for the treatment of
male erectile dysfunction (or if a Collaboration Product receives Regulatory
Approval for the treatment of female sexual dysfunction, then for the treatment
of female sexual dysfunction).“Unit” shall have the meaning provided such term
in the Supply Agreement.

“Unit” shall have the meaning provided such term in the Supply Agreement.

“Valid Claim” means a claim of any issued, unexpired Patent Right which 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 which has not been
disclaimed, denied or admitted to be invalid or unenforceable through reissue,
disclaimer or otherwise.

Additional Definitions. Each of the following definitions is set forth in the
section of this Agreement indicated below:

8

 

Additional Definitions. Each of the following definitions is set forth in the
section of this Agreement indicated below:

	 	 	 	 	 
	Definition	 	 	Section
	
	 	 	

	Licenses
	 	 	2.1	 
	First Offer
	 	 	2.5 	(a)
	Supply Agreement
	 	 	6.5	 
	Recall
	 	 	7.4 	(a)
	Milestone Event
	 	 	8.3 	(b)
	Third Party Patent Licenses
	 	 	9.9	 
	Product Marks
	 	 	10.3	 
	Prosecuting Party
	 	 	10.5 	(c)
	Non-Prosecuting Party
	 	 	10.5 	(c)
	Publishing Party
	 	 	11.5	 
	Reviewing Party
	 	 	11.5	 
	Other Agreements
	 	 	11.7	 
	Term
	 	 	12.1	 
	Breaching Party
	 	 	12.3 	(a)
	Non-Breaching Party
	 	 	12.3 	(a)
	Breach Notice
	 	 	12.3 	(a)
	Termination Notice Date
	 	 	12.7 	(b) (v)
	Nastech Indemnified Parties
	 	 	15.1 	(a)
	Pharmacia Indemnified Parties
	 	 	15.1 	(b)
	Indemnified Party
	 	 	15.2	 
	Indemnifying Party
	 	 	15.2	 
	DOJ
	 	 	16.2 	(a)
	FTC
	 	 	16.2 	(b)
	HSR Act
	 	 	16.2 	(c)
	HSR Clearance Date
	 	 	16.2 	(d)
	HSR Filing
	 	 	16.2 	(e)
	Purchase Intention Notice
	 	 	17.7 	(a)
	Triggering Event Payment
Guarantee
	 	 	17.7 	(d)
	Qualified Guarantor
	 	 	17.7 	(d)
	Triggering Event Payment
	 	 	17.7 	(e)
	PHA Interest
	 	 	17.7 	(e)

9

 

ARTICLE 2

SCOPE OF RELATIONSHIP AND GRANT OF RIGHTS

     2.1) Scope of Relationship and Grant of Rights. Nastech hereby grants to
Pharmacia an exclusive right and license under the Nastech Technology to
Develop, make, have made, use, offer for sale, sell and import Licensed Product
for use in the Field in the Territory, subject to the terms and conditions in
this Agreement(the “Licenses”). The Licenses shall be effective as of the
Effective Date and shall remain in effect on a country-by-country basis during
the Term applicable thereto, as set forth in Section 12.1 hereof.

     2.2) Sublicense Rights. Pharmacia may grant sublicenses to its Affiliates
and Third Parties under the Licenses; provided, however, Pharmacia may not
grant any sublicense to a Third Party with respect to the United States, Japan,
Germany, France, United Kingdom, Spain or Italy without the prior written
consent of Nastech, such consent not to be unreasonably withheld or delayed.

     2.3) Nastech Reserved Rights. Notwithstanding the rights granted under
Section 2.1, and in furtherance and not limitation of the provisions of Section
10.9, Nastech reserves the rights under the Nastech Technology (a) to make,
have made, use, import and sell to Pharmacia active pharmaceutical ingredient
of Collaboration Product and the Finished Products as set forth in this
Agreement, (b) subject to Section 2.4, to research and Develop, make, have
made, use, offer for sale, sell and import Licensed Product solely for use
outside the Field, and (c) subject to Sections 2.4 and 2.5, to grant licenses
to Third Parties under Sections 2.3(a) and 2.3(b).

     2.4) Development and Commercialization Outside the Field.

	 	 	 
	(a)	 	
Nastech agrees that during the Term neither it
nor any of its Affiliates shall conduct, or authorize any of
their licensees or any Third Parties to conduct, any clinical
trials of a Licensed Product for use outside the Field, in
each case without first providing Pharmacia with a copy of
the proposed protocol for the trial and obtaining Pharmacia’s
prior written consent, such consent not to be unreasonably
delayed or withheld. Pharmacia shall provide such consent
unless Pharmacia can reasonably demonstrate that there is
a reasonable potential that the Licensed Product to be
Developed by Nastech for use outside the Field would be
used in the Field or substituted by prescribers, dispensers
and/or Third Party payers for any Collaboration Product
being Developed or Commercialized in the Field, or if there
is a reasonable potential that the Development or

10

 

	 	 	 
		 	
Commercialization of the Licensed Product for use outside
the Field could adversely impact the Development or
Commercialization of a Collaboration Product in the Field.
Once Pharmacia’s consent has been obtained regarding a
particular clinical trial of a Licensed Product for use
outside the Field, then Nastech shall be free to conduct
the trial provided the same is conducted in adherence to
the protocol so approved by Pharmacia.

	 	 	 
	(b)	 	
Nastech agrees that during the Term neither it
nor any of its Affiliates or licensees shall Commercialize a
Licensed Product for use outside the Field if Pharmacia can
reasonably demonstrate that there is a reasonable potential
that such Licensed Product would be used in the Field or
substituted by prescribers, dispensers and/or Third Party
payers for any Collaboration Product being Developed or
Commercialized in the Field, or if there is a reasonable
potential that the Commercialization of such Licensed Product
for use outside the Field could adversely impact the
Development or Commercialization of a Collaboration Product
in the Field.

	 	 	 
	(c)	 	
The Parties acknowledge that the foregoing
restrictions are necessary and reasonable in scope in order to
protect the substantial investment that Pharmacia will make in
the Development and Commercialization of Collaboration Product
in the Field.

	 	 	 
	(d)	 	
Pharmacia hereby agrees that Nastech may
conduct the pre-clinical and clinical studies set forth in
Schedule 2.4. Nastech agrees to provide Pharmacia with all
data and other results from such studies promptly after the
same is available.

     2.5) ROFN Outside Field. If Nastech intends to grant any rights or
licenses to one or more Third Parties during the Term for the Development or
Commercialization of any Licensed Product for an indication outside the Field,
then the following provisions shall apply.

	 	 	 
	a)	 	
Nastech shall offer such rights to Pharmacia on such financial and
other terms and conditions as Nastech shall present in the form of a
definitive written agreement proposal (“First Offer”). As part of the
First Offer, Nastech shall include: (i) the specific indication(s)
outside the Field for which Nastech wishes to Develop and Commercialize
the Licensed Product, (ii) all information possessed and disclosable by
Nastech that supports the Development of such Licensed Product for such
indication(s) and is reasonably necessary for Pharmacia to assess the
commercial potential of such Licensed Product for such indication(s), and
(iii) a good faith proposal regarding the financial and other principal
commercial terms of a Development and Commercialization
collaboration between the Parties regarding such Licensed Product in such
indication. Each First Offer shall be

11

 

	 	 	 
		 	
made no earlier than achievement
of proof of principle data in humans for the applicable indication and no
later than initiation of the first Phase IIIA trial for such Licensed
Product in the applicable indication. Upon receipt of the First Offer,
Pharmacia may accept it as such, or request negotiations based thereon.

	 	 	 
	b)	 	
The parties agree to negotiate in good faith and on an exclusive basis
with the objective of executing a mutually acceptable definitive written
agreement for such Licensed Product and indication offered; provided,
however, that in the event the Parties fail within [*] of Nastech’s First
Offer, or any separately agreed written extension of such period, to
execute a mutually acceptable definitive agreement, then Nastech shall be
free to negotiate with Third Parties with respect to such Licensed
Product and indication; provided, further, Nastech shall not enter into
definitive agreements with any Third Party on terms which, taken as a
whole, are more favorable to the Third Party licensee when compared to
the terms proposed in Pharmacia’s last offer. In the event Nastech is
willing to enter into definitive written agreements with any Third Party
on terms which, taken as a whole, are more favorable to the Third Party
licensee when compared to the terms proposed in Pharmacia’s last offer,
then Nastech shall provide such Third Party licensee’s terms to
Pharmacia. Pharmacia shall have [*] after the receipt of such terms to
accept or reject such terms. If Pharmacia accepts such terms, the Parties
shall enter into definitive written agreements based on such terms. If
Pharmacia rejects such terms, Nastech shall be free to enter into
definitive agreements with the Third Party licensee based on such terms,
subject to the provisions of Section 2.4.

     2.6) Certain Covenants of Nastech. Nastech covenants to Pharmacia that
commencing on the Effective Date and until the expiration of the Term neither
it nor any of its Affiliates or licensees will (A) conduct, cause any Third
Party to conduct, or permit any licensee of Nastech to conduct, a human
clinical trial within the Field with respect to any Licensed Product, (B)
publish or permit any licensee to publish any data from any human clinical
trial which would promote a Licensed Product for use in the Field or otherwise
promote a Licensed Product for use in the Field through publications, symposia,
advertising or the like, or (C) knowingly furnish a Licensed Product or
Compound to any Third Party for any such purpose. As of the Execution Date,
Nastech represents that neither it nor any of its Affiliates has authorized any
licensees to conduct any of the aforementioned activities. Nastech covenants
that following the Effective Date, Nastech and its Affiliates will include a
covenant regarding all of the foregoing in any agreement with any Third Party
licensing any of Nastech’s or its Affiliates’ rights to a Licensed Product or
the use of any Nastech Technology outside the Field, and such
license agreement shall expressly provide that Pharmacia shall be a third
party beneficiary of such covenant.

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.	 	 

12

 

     2.7) Certain Covenants of Pharmacia. Pharmacia covenants to Nastech that
commencing on the Effective Date and until the expiration of the Term that
neither it nor any of its Affiliates or Sublicensees (A) will Develop, market,
promote or sell a Licensed Product in the Field in the Territory except as a
Collaboration Product pursuant to this Agreement, (B) conduct, cause any Third
Party to conduct, or permit any Sublicensee to conduct, a human clinical trial
outside the Field with respect to any Licensed Product, (C) publish or permit
any Sublicensee to publish any data from any human clinical trial which would
promote a Licensed Product for use outside the Field or otherwise promote a
Licensed Product for use outside the Field through publications, symposia,
advertising or the like, or (D) knowingly furnish a Licensed Product or
Compound to any Third Party for any such purpose. Pharmacia covenants that
following the Effective Date and until the expiration of the Term, Pharmacia
will include a covenant regarding all of the foregoing in any license agreement
with any Third Party regarding a Licensed Product or the use of any Nastech
Technology in the Field, and such agreement shall expressly provide that
Nastech shall be a third party beneficiary of such covenant.

     2.8) Section 365(n) of the Bankruptcy Code. All rights and licenses
granted under or pursuant to any section of this Agreement are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy
Code, licenses of rights to “intellectual property” as defined under Section
101(35A) of the Bankruptcy Code. Each Party shall retain and may fully
exercise all of its rights and elections under the Bankruptcy Code or
equivalent legislation in any other jurisdiction. Upon the bankruptcy of
either Party, the other Party shall further be entitled to a complete duplicate
of (or complete access to, as appropriate) any such intellectual property, and
such, if not already in its possession, shall be promptly delivered to such
other Party, unless the Party in bankruptcy elects to continue, and continues,
to perform all of its obligations under this Agreement.

     2.9) Nastech’s Right to Use Certain Pharmacia Data Outside the Field.
Subject to the provisions of Sections 2.4, 2.5 and 2.6, Pharmacia grants
Nastech the right to utilize any data developed by Pharmacia in the course of
the Development of a Collaboration Product for the sole purpose of enabling
Nastech to Develop Licensed Product for use outside the Field.

     2.10) Pharmacia’s Right to Use Certain Nastech Data in the Field. Subject
to the provisions of Section 2.7, Nastech grants Pharmacia the right to utilize
any data developed by Nastech in the course of the Development of a Licensed
Product outside the Field for the sole purpose of enabling Pharmacia to Develop
Collaboration Product for use in the Field.

13

 

ARTICLE 3

DEVELOPMENT OVERSIGHT COMMITTEE

     3.1) Development Oversight Committee.

	 	 	 
	a)	 	
Formation. As soon as practicable following
the Effective Date, the Parties shall establish a Development
Oversight Committee to oversee the Development of all
Collaboration Product. The Development Oversight Committee
shall be comprised of an equal number (not more than four) of
Nastech and Pharmacia representatives and shall include
representatives from the commercial, clinical development,
regulatory and manufacturing groups of each Party, with each
Party having one vote.

	 	 	 
	b)	 	
Subteams. From time to time, the Development
Oversight Committee may appoint such working groups or
sub-teams as it may deem appropriate to establish to resolve
specific issues. Any such working groups or sub-team shall
be constituted and shall have such responsibilities as the
Development Oversight Committee shall deem appropriate.

     3.2) Development Oversight Committee Responsibilities. The Development
Oversight Committee shall be responsible for:

	 	 	 
	a)	 	
determining which Licensed Product will be
Developed and Commercialized as Collaboration Product;

	 	 	 
	b)	 	
overseeing the Development of all Collaboration
Product to ensure their marketability and approvability;

	 	 	 
	c)	 	
approving target product profiles for
Collaboration Product (including indications within the Field
for which the Collaboration Product will be Developed and
Commercialized, key labeling claims required for commercial
success of the Collaboration Product given the competitive
environment, and any other key product features and benefits
which will be used to develop or support a promotional
message for the Collaboration Product);

	 	 	 
	d)	 	
reviewing and approving the Global Development
Plan for each Collaboration Product, and any updates thereto;

	 	 	 
	e)	 	
reviewing and approving the budgets for costs
to be incurred by Nastech in the performance of Nastech
Development Activities for each calendar year in accordance
with the Global Development Plan; and

	 	 	 
	f)	 	
facilitating the exchange of all data,
information, material or results relating to the Development
of Collaboration Product.

     3.3) Decision Making; Administrative Matters.

	 	 	 
	a)	 	
Decision Making. All decisions of the
Development Oversight Committee shall be made by the
unanimous decision of Nastech and Pharmacia (subject to
Section 3.3(b)), with the representatives of each Party who
are members of

14

 

	 	 	 
		 	
the Development Oversight Committee
collectively having one vote in any matter requiring the
approval of the Development Oversight Committee.

	 	 	 
	b)	 	
Dispute Resolution. If the Development
Oversight Committee is unable to reach unanimous agreement on
any issue within its purview relating to Development of
Collaboration Product, such issue shall be determined by
Pharmacia.

	 	 	 
	c)	 	
Administrative Matters. Pharmacia shall
appoint a chairperson of the Development Oversight Committee
from among its members. The chairperson shall be responsible
for calling meetings of the Development Oversight Committee
and for leading the meetings. The secretary of the meeting,
as designated by the chairperson, shall prepare and
distribute to all members of the Development Oversight
Committee minutes of the meeting within 10 Business Days
following each meeting. Such minutes shall provide a
description in reasonable detail of the discussions had at
the meeting and a list of any actions, decisions or
determinations approved by the Development Oversight
Committee. Minutes of each Development Oversight Committee
meeting shall be approved or disapproved, and revised as
necessary, at the next meeting. Final minutes of each
meeting shall be distributed to the members of the
Development Oversight Committee by the chairperson.

	 	 	 
	d)	 	
Meetings. The Development Oversight Committee
shall meet at least four times per calendar year. Such
meetings shall be held at Pharmacia’s offices and at such
times as are mutually agreed upon by the Development
Oversight Committee and may be conducted in person or by
means of conference telephone or similar communications
equipment so that all persons participating in the meeting
can hear each other.

	 	 	 
	e)	 	
Attendance at Meetings. If a Party’s
representative is unable to attend a meeting, such Party
shall designate an alternate representative to attend such
meeting in place of the absent representative. In addition,
each Party may, at its discretion, invite additional
employees, and, with the consent of the other Party,
consultants or scientific advisors, to attend the meetings of
the Development Oversight Committee.

ARTICLE 4

DEVELOPMENT OF LICENSED PRODUCTS

     4.1) Cooperation Regarding Development. Each Party shall reasonably
cooperate with the other in order to enable the other Party to discharge its
obligations and exercise its rights under this Agreement. Nastech shall use
Commercially Reasonable and Diligent Efforts to complete its obligations under
this Agreement, including without limitation provision of Nastech

15

 

Know-How to
Pharmacia, and its manufacture and supply of Collaboration Product. Pharmacia
shall use Commercially Reasonable and Diligent Efforts to complete the
Development of Collaboration Product, and file for and obtain Regulatory
Approvals for and bring to market Collaboration Product for use in the Field in
the US, Japan and major EU markets, all in accordance with its responsibilities
as set out in the Global Development Plan adopted pursuant to Section 4.3.

     4.2) Development Responsibilities. Subject to the general oversight of
the Development Oversight Committee and the provisions of Section 4.5,
Pharmacia shall be responsible for performing all Development of Collaboration
Product following the Effective Date that is required in order to obtain
Regulatory Approval for Collaboration Product in the Field, except Nastech
shall be responsible for the Nastech Development Activities. Pharmacia shall
perform all of its Development activities in accordance with the INDs for the
Collaboration Product and the Global Development Plan. Without limiting the
generality of the foregoing, Pharmacia shall be responsible for:

	 	 	 
	a)	 	
proposing the Development strategy for the
indications in the Field for review and approval of the
Development Oversight Committee;

	 	 	 
	b)	 	
developing protocols for clinical studies in
the indications in the Field and submitting the same to the
Development Oversight Committee for review and comments; and

	 	 	 
	c)	 	
conducting any pre-clinical and clinical
studies included in the Global Development Plan for the
indications in the Field.

     4.3) Global Development Plan. All Development of Collaboration Product
shall be conducted by Pharmacia in accordance with the Global Development Plan,
as it may be amended by the Development Oversight Committee from time to time.
Attached hereto as Schedule 4.3 is a preliminary outline of the initial Global
Development Plan, which provides a non-binding outline of the major Development
activities currently expected to be undertaken until filing of the NDA. It is
understood that such outline is preliminary in nature and subject to additional
Pharmacia review and management approval. The Global Development Plan shall be
updated on a regular basis, no less often than annually.

     4.4) Development Activities.

	 	 	 
	a)	 	
Each Party shall conduct Development activities
under this Agreement in compliance with all Laws that are
applicable to the particular stage of Development of the
Collaboration Product, including without limitation, GLPs,
GCPs and GMPs.

	 	 	 
	b)	 	
Pharmacia shall own all data generated pursuant
to the Global Development Plan, including all data
accumulated from all clinical trials, for each Collaboration
Product, except Nastech shall own all data generated pursuant
to its performance of Nastech Development Activities. Each
Party shall

16

 

	 	 	 
		 	
disclose to the other Party all material
information relating to any Collaboration Product promptly
after it is learned or its materiality is appreciated.
Pharmacia shall maintain the database of clinical trial data
accumulated from clinical trials of all Collaboration
Product, all safety data, and of adverse reaction information
for all Collaboration Product during Development.

	 	 	 
	c)	 	
As soon as practicable following the Execution
Date, the Development Oversight Committee shall meet to
develop a detailed plan regarding the transition of ongoing
pre-clinical and clinical studies set forth in Schedule 4.5
from Nastech to Pharmacia. As soon as practicable following
the Effective Date, the Parties shall use all reasonable and
diligent efforts to cooperate with each other to ensure a
smooth transition of such responsibilities from Nastech to
Pharmacia, including without limitation meetings between
appropriate personnel of the Parties, and Nastech’s personnel
continuing to be involved in such ongoing studies in the
capacity as reasonably requested by Pharmacia.

     4.5) Development Costs. Commencing on the Effective Data, Pharmacia shall
be responsible for all Development Costs in the Field; provided, however,
Nastech shall be responsible for all Development Costs incurred prior to the
Execution Date. For any pre-clinical or clinical study initiated prior to the
Execution Date and set forth on Schedule 4.5, (a) all costs of such study
incurred after the Effective Date shall be paid by Pharmacia, and (b) within
thirty days following the Effective Date, Pharmacia shall reimburse Nastech for
any Development Costs incurred with respect to such study following the
Execution Date and prior to the Effective Date to the extent such costs are set
forth on Schedule 4.5.

     4.6) Reimbursement of Development Costs. After the Development Oversight
Committee has approved a budget for Nastech Development Activities and such
budget is set forth in a Global Development Plan, Nastech may incur costs in
connection with its performance of such budgeted Nastech Development
Activities. Within forty-five (45) days after each calendar quarter, Nastech
shall submit to Pharmacia a written report setting forth in reasonable detail
its costs incurred in the performance of Nastech Development Activities in such
calendar quarter. Pharmacia shall reimburse Nastech for such costs within
forty five (45) days after its receipt of the written report; provided,
however, Pharmacia shall have no obligation to reimburse costs
with respect to a particular Nastech Development Activity to the extent
the actual costs exceeded the budgeted costs.

ARTICLE 5

COMMERCIALIZATION OF LICENSED PRODUCTS

     5.1) Responsibility for Commercialization of Collaboration Product.
Pharmacia will be solely responsible for all Commercialization of Collaboration
Product in the Territory,

17

 

subject to the oversight of the Commercialization
Committee. Pharmacia shall use Commercially Reasonable and Diligent Efforts to
Commercialize at least one Collaboration Product in the US, Japan and major EU
markets.

     5.2) Commercialization Committee.

	 	 	 
	a)	 	
Formation. No later than 18 months prior to
the filing of the first NDA for a Collaboration Product, the
Parties shall establish a Commercialization Committee to
oversee the Commercialization of Collaboration Product on a
global basis. The Commercialization Committee shall be
comprised of an equal number of Nastech and Pharmacia
representatives (not to exceed four), with each Party having
one vote. Pharmacia shall appoint a chairperson for the
Commercialization Committee. The Commercialization Committee
shall follow the organizational and meeting procedures set
forth in Article 3 with respect to the Development Oversight
Committee.

	 	 	 
	b)	 	
Subteams. From time to time, the
Commercialization Committee may appoint such working groups
or subteams as it may deem appropriate to establish. Any
such working groups or subteams shall have such
responsibility and be structured and operated in such manner
as the Commercialization Committee deems appropriate.

     5.3) Commercialization Committee Responsibilities. To the extent
permitted by applicable Law, the Commercialization Committee will facilitate
the Commercialization of Collaboration Product on a global basis, including,
among other things:

	 	 	 
	a)	 	
oversight of the Collaboration Product launch
process, including pricing; and

	 	 	 
	b)	 	
addressing strategic and tactical issues (e.g.,
branding, product positioning, etc.)

     5.4) Decision Making. All decisions of the Commercialization Committee
shall be made by the unanimous decision of Nastech and Pharmacia (subject to
Section

     5.5) Dispute Resolution. If the Commercialization Committee is unable to
reach unanimous agreement on any issue within its purview relating to the
Commercialization of Collaboration Product, such issue shall be determined by
Pharmacia.

     5.6) Global Commercialization Plan. On an annual basis, the Commercialization
Committee shall approve a Global Commercialization Plan, which outlines the
overall strategy and plan for the Commercialization of each Collaboration
Product. Pharmacia shall prepare and submit to the Commercialization Committee
for its review and approval each such Global Commercialization Plan. The
Global Commercialization Plan shall be updated as deemed necessary but at least
annually by Pharmacia.

18

 

     5.7) Detailing.

	 	 	 
	a)	 	
Pharmacia shall diligently work to fulfill all
responsibilities assigned to it under this Agreement and the
Global Commercialization Plan and shall comply with all
applicable Laws in the Territory. If the Parties agree that
additional detailing or other internal resources are necessary
beyond those provided in this Agreement, the Parties shall
confer in good faith to determine and agree to the terms of
such required additional efforts.

	 	 	 
	b)	 	
Upon written notice to Nastech, Pharmacia and its
Sublicensees shall have the right to use the services of a
contract sales force (i.e., a Third Party whose primary
business is devoted to detailing other persons’ products) to
assist Pharmacia in satisfying its obligations hereunder in
the Territory; provided, however, that (i) with respect to the
US only, during the [*] after the First Commercial Sale in the
US, Pharmacia shall detail Collaboration Product solely
through its sales forces and will not rely upon contract sales
forces, and during [*], Pharmacia will not rely upon contract
sales forces to provide more than [*] of the details in the US
for such period, and (ii) Pharmacia shall be responsible for
all acts, omissions and performance of all such third party
contractors hereunder; provided, further, that Pharmacia’s
restrictions on its ability to use contract sales forces shall
not apply if the Regulatory Approval of the Collaboration
Product is not consistent with the TPP in all material
respects.

     5.8) Promotional Expenditures. Pharmacia shall be responsible for all
expenses related to Commercialization of Collaboration Product in the Field in
the Territory. During the period [*], Pharmacia shall incur Promotional
Expenditures of at least [*]. During the [*], Pharmacia shall incur
Promotional Expenditures of [*] of the corresponding year’s projected annual
Net Sales based on forecasts contained in the Global Commercialization Plan for
Collaboration Product. During the [*], Pharmacia shall incur Promotional
Expenditures of [*] of the corresponding year’s projected annual Net Sales
based on forecasts contained in the Global Commercialization Plan for
Collaboration Product.

     5.9) Orders; Recognizing Sales. Pharmacia shall be responsible for
distributing Collaboration Product, accepting and fulfilling sales orders for
Collaboration Product and recognizing sales of Collaboration Product. Nastech
is not authorized to accept sales orders for Collaboration Product. If, for
any reason, Nastech should receive sales orders for a Collaboration Product,
Nastech shall forward such orders to Pharmacia as soon as practicable.

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

19

 

ARTICLE 6

MANUFACTURE AND SUPPLY

     6.1) Responsibility for Development Supply. During the term of the Supply
Agreement, Nastech shall be responsible for manufacturing all quantities of
Collaboration Product and Placebo (as such term is defined in the Supply
Agreement) necessary for Development throughout the Territory. Following the
expiration of the term of the Supply Agreement, Pharmacia shall be responsible
for manufacturing all quantities of Collaboration Product and Placebo (as such term is
defined in the Supply Agreement) necessary for Development throughout the Territory.
As part of Nastech’s responsibilities pursuant to this Section 6.1, it shall be
responsible for all aspects of its supply chain (including both active pharmaceutical ingredient
and Collaboration Product), quality control, quality assurance, release
testing, and packaging. Nastech shall supply the required quantities of
Collaboration Product and Placebo for the Development of such Collaboration
Product to Pharmacia at the prices and the other terms set forth in the Supply
Agreement.

     6.2) Responsibility for Commercial Supply of API. If requested by
Pharmacia, Nastech shall use Commercially Reasonable and Diligent Efforts to
(i) assist Pharmacia in securing a qualified Third Party manufacturing source
for the active pharmaceutical ingredient of Collaboration Product, and (ii)
following the expiration or termination of the Supply Agreement (including any
extension of the term thereof), assign to Pharmacia any of its then existing
supply agreements with Third Party manufacturers of the active pharmaceutical
ingredient of Collaboration Product.

     6.3) Responsibility for Commercial Supply of Finished Product. The
Parties acknowledge that the annual manufacturing capacity of Nastech’s
facility is [*] and, in order to secure the supply of the first Collaboration
Product for Commercialization, Pharmacia shall, prior to the First Commercial
Sale, qualify its or a Third Party’s manufacturing facility for the manufacture
of the first Collaboration Product for Commercialization. Thereafter,
Pharmacia shall also qualify its or a Third Party’s manufacturing facility for
the manufacture of any additional Collaboration Products. During the period
between the Effective Date and the fifth (5th) anniversary of the First
Commercial Sale, and subject to the provisions of Section 6.4 and the Supply
Agreement, Nastech shall be responsible for manufacturing in each calendar year
of the lesser of (i) all quantities of Collaboration Product necessary for
Commercialization throughout the Territory, and (ii) [*], all in accordance
with the terms of the Supply Agreement. During such period, Pharmacia shall be
responsible for manufacturing any quantities of Collaboration Product necessary
for Commercialization of Collaboration Product throughout the Territory in
excess of the quantities for which Nastech is responsible pursuant to the
immediately preceding sentence. In addition, the Parties shall be jointly
responsible for, and shall collaborate

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

20

 

with each other regarding, process
development and scale up of the manufacturing process of any Collaboration
Product that Nastech will supply to Pharmacia pursuant to the Supply Agreement,
with each Party bearing all of the costs incurred by it in performing such
activities. In the event Nastech is unable to supply the required quantities
of Collaboration Product set forth in this Section 6.3, Pharmacia may
manufacture that amount of Collaboration Product required for Commercialization
but Nastech is unable to supply. Following the expiration or termination of
the Supply Agreement (including any extension of the term thereof), Pharmacia
shall be responsible for manufacturing all quantities of Collaboration Product
necessary for Commercialization throughout the Territory; provided, however, if
the term of the Supply Agreement is extended, Nastech shall be responsible for
manufacturing, and Pharmacia shall be responsible for purchasing from Nastech, Collaboration
Product during the period of such extension in accordance with the terms of the Supply Agreement.

     6.4) Pharmacia’s Right to Manufacture Finished Product. During the first
five (5) years after the First Commercial Sale, Pharmacia may elect, in its
sole discretion, to manufacture or have manufactured up to [*] of the active
pharmaceutical ingredient and Collaboration Product required for
Commercialization in the Territory by providing a written notice to Nastech no
later than one hundred eighty (180) days prior to the commencement of such
manufacturing by Pharmacia. In the event Pharmacia elects to so manufacture,
in addition to the sales based compensation under Article 9, Pharmacia shall
pay to Nastech a royalty equal to [*] of Net Sales on the quantities of
Collaboration Product manufactured and sold by Pharmacia during the first five
(5) years after the First Commercial Sale; provided, however, such royalties
shall not be due with respect to any quantities of Collaboration Product
manufactured by Pharmacia (i) as a result of Nastech’s failure to supply
pursuant to the Supply Agreement (unless such failure is caused primarily by
any act or omission of Pharmacia or its Sublicensees in breach hereof or of the
Supply Agreement) or (ii) which are in excess of [*] per calendar year. For
avoidance of doubt, no royalties shall be due to Nastech under this Section 6.4
with respect to Pharmacia’s manufacture of Collaboration Product following the
first five (5) years after the First Commercial Sale (whether or not the term
of the Supply Agreement is extended by the Parties).

     6.5) Manufacturing Terms. Subject to Pharmacia’s reimbursement of costs
incurred for Nastech Development Activities under Section 4.6, each Party shall
incur all costs to establish such Party or a Third Party acting on its behalf
as a manufacturer of the active pharmaceutical ingredient and Collaboration
Product. Contemporaneously with the execution of this Agreement, Nastech and
Pharmacia are entering into a supply agreement, effective as of the Effective
Date, setting forth the terms under which Nastech will supply Collaboration
Product, and any Collaboration Product for use as samples to Pharmacia (the
“Supply Agreement”). Subject to the provisions of Section 9.11, Nastech shall
deliver the Collaboration Product and samples to Pharmacia at the prices set
forth in the Supply Agreement. If there is any inconsistency with the terms of
this Article 6 and the terms of the Supply Agreement, the terms of the Supply
Agreement shall govern.

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

21

 

ARTICLE 7

REGULATORY MATTERS

     7.1) Ownership. Following the Effective Date, Nastech shall transfer to
Pharmacia all existing INDs regarding Collaboration Product. All further
submissions under such INDs, and any additional INDs regarding Collaboration
Product for use in the Field, shall be filed in the name of and owned by
Pharmacia. Pharmacia shall hold all Regulatory Approvals for Collaboration Product throughout
the Territory. Pharmacia shall allow Nastech to reference relevant portions of
the INDs and NDAs for Collaboration Product to the extent allowed under applicable
Laws and necessary to enable Nastech to file and pursue Licensed Product for use
solely outside the Field, and subject to the provisions of Section 2.4.
Nastech shall allow Pharmacia to reference relevant portions of Nastech’s INDs
and NDAs for Licensed Product being developed for use outside the Field to the
extent allowed under applicable Laws and necessary to enable Pharmacia to file
and pursue Collaboration Product for use solely in the Field, and subject to the
provisions of Section 2.7.

     7.2) Regulatory Coordination.

	 	 	 
	a)	 	
Regulatory Submissions. Pharmacia shall oversee,
monitor and coordinate all regulatory actions, communications
and filings with and submissions, including filings and
submissions of supplements and amendments thereto, to the FDA
or other Regulatory Authorities in the Territory with respect
to all Collaboration Product.

	 	 	 
	b)	 	
Regulatory Meetings and Correspondence.
Pharmacia shall be responsible for interfacing, corresponding
and meeting with the FDA and other Regulatory Authorities
throughout the Territory with respect to Collaboration
Product.

	 	 	 
	c)	 	
Notices to Nastech. Pharmacia shall promptly (i)
upon receipt of any material FDA or other Regulatory Authority
correspondence with respect to Japan and major EU countries
relating to the Collaboration Product, forward a copy or
detailed and complete description of the same to Nastech and
respond to all reasonable inquiries by Nastech with respect
thereto; (ii) advise Nastech of any contemplated or required
material communication with the FDA or any other Regulatory
Authority in Japan and major EU countries regarding the
Development of a Collaboration Product and, unless prohibited
by applicable Law, provide Nastech in advance with a copy of
such proposed written communication; (iii) inform Nastech of
all meetings with representatives of the FDA or other
Regulatory Authority in Japan and major EU countries
concerning the Development of any Collaboration Product; (iv)
if Nastech so requests and to the extent practicable, arrange
for one representative of Nastech to attend any meetings
related to the Development of a Collaboration Product solely
as an observer; provided, however, that the

22

 

	 	 	 
	 	 	
exercise of such
right shall not require Pharmacia to make any changes to the
meeting schedule or location in order to accommodate
participation by the Nastech representative; and (v) if a
Nastech representative does not attend such meeting, forward
to Nastech summaries of such meetings and copies of other
significant communications with representatives of the FDA or
other Regulatory Authority in Japan and major EU countries
concerning the Collaboration Product.

     7.3) Pharmacovigilance. In the event that Nastech initiates
clinical Development of a Licensed Product for use outside the Field
in accordance with terms of this
Agreement, then the pharmacovigilance departments of both Parties
shall meet and determine the approach to be taken for the
collection, review, assessment, tracking and filing of information
related to adverse events associated with Licensed Product.

     7.4) Recalls.

	 	 	 
	(a)	 	
Each Party shall promptly notify the other Party
in writing if it determines that any event, incident or
circumstance has occurred which may result in the need for a
“recall” or “market withdrawal” (as such terms are defined in
21 CFR 7.3 or other similar national, state or local law or
regulation) (hereinafter referred to as a “Recall”) of a
Collaboration Product or any lot(s) thereof in the Territory.

	 	 	 
	(b)	 	
Pharmacia shall be responsible for determining
whether and upon what terms and conditions Collaboration
Product shall be Recalled or otherwise withdrawn from sale to
Third Parties within any country in the Territory. Pharmacia
shall be responsible for discussions with Regulatory
Authorities within the applicable country regarding all
aspects of the Recall decision and the execution thereof. Upon
the request of Pharmacia, Nastech shall reasonably cooperate
in all Recall efforts.

	 	 	 
	(c)	 	
If at any time in respect of the Territory

	 	 	 
	(i)	 	
any governmental or Regulatory
Authority in the Territory issues a request, directive
or order for a Recall of a Collaboration Product in the
Territory; or

	 	 	 
	(ii)	 	
a court of competent jurisdiction
orders a Recall of a Collaboration Product in the
Territory;

	 
	then Pharmacia shall be responsible for implementing such
Recall with the expenses arising from such Recall to be
allocated as set forth in Section 7.4(d) below

23

 

	 	 	 
	(d)	 	
All costs and expenses associated with
implementing a Recall of a Collaboration Product in the
Territory shall be allocated between the Parties as follows:

	 	 	 
	(i)	 	
In the event, and to the extent, that
the Recall arises out of (x) the negligence or willful
wrongdoing of Nastech or its Affiliates, (y) a material
breach of this Agreement or the Supply Agreement by
Nastech or its Affiliate(s), or (z) the inaccuracy of
any representation or warranty of Nastech or its
Affiliate(s) hereunder or under the Supply Agreement,
Nastech shall bear the costs and expenses for the Recall
(including any out-of-pocket expenses reasonably
incurred by Pharmacia in conducting such Recall) up to one-hundred
percent (100%) thereof.

	 	 	 
	(ii)	 	
In the event, and to the extent, that
the Recall does not arise out of any of the events set
forth in Section 7.4(d)(i), Pharmacia shall bear the
costs and expenses associated with the Recall (including
any out-of-pocket expenses reasonably incurred by
Nastech in assisting Pharmacia in conducting such
Recall) up to one-hundred percent (100%) thereof.

ARTICLE 8

LICENSE FEES AND MILESTONES

     8.1) Upfront License Fees. In consideration of the rights granted under
this Agreement, Pharmacia shall pay Nastech a non-refundable, non-creditable
license fee of Three Million Dollars ($3,000,000) within ten (10) days after
the Execution Date

     8.2) Equity Purchase. Simultaneously with the execution of this
Agreement, the Parties are entering into (i) an investment agreement, pursuant
to which, and subject to the terms and conditions contained therein, Pharmacia
shall, within ten (10) days after the Execution Date, purchase two hundred
fifty thousand shares of common stock of Nastech at Twenty Dollars ($20.00) per
share, which represents a premium of 43.37% to the volume weighted average
market price of Nastech common stock during the month of December 2001, and
(ii) a registration rights agreement, pursuant to which, and subject to the
terms and conditions contained therein, Nastech shall register the common stock
purchased by Pharmacia with the US Securities and Exchange Commission, at
Nastech’s expense. The parties shall enter into further agreements, and
execute and deliver documents as may be necessary or desirable to effectuate
the provisions in this Section.

24

 

     8.3) Development Milestone Payments.

	 
	(a) As further consideration for the rights granted under this
Agreement, Pharmacia shall pay Nastech a non-refundable,
non-creditable fee of [*] within ten (10) days after Pharmacia’s
receipt of written notice from Nastech certifying that (i) Nastech
has submitted to Regulatory Authorities after the Effective Date
the required documents to transfer all existing INDs relating to
Collaboration Product that are Controlled by Nastech or its
Affiliates to Pharmacia, and (ii) copies of all regulatory
documents with respect to Licensed Product in Nastech’s possession
or Control (including without limitation copies of all regulatory
correspondence with Regulatory Authorities) have been delivered to
Pharmacia; and

	 
	(b) As further consideration for the rights granted under this
Agreement, Pharmacia shall make non-creditable payments to Nastech
within thirty (30) days after the occurrence of each of the events
listed below ( each such event, together with the events listed in
8.3(c) and 8.4 being referred to herein as a “Milestone Event”), in
the amount provided. Each such payment shall be non-refundable and
shall not be credited against any royalty, fee (including fees for
any other Milestone Events) or other amount required to be paid to
Nastech

	 	 	 
	Milestone Event	 	Payment Amount
	
	 	

	[*]	 	
[*]
	[*]	 	
[*]
	[*]	 	
[*]
	[*]	 	
[*]
	[*]	 	
[*]
	[*]	 	
[*]
	[*]	 	
[*]
	[*]	 	
[*]
	[*]	 	
[*]
	[*]	 	
[*]

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.
	 
	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

25

 

	 	 	 
	c)	 	
As further consideration for the rights granted
under this Agreement, Pharmacia shall make non-refundable,
non-creditable payments to Nastech for the following Milestone
Events:

	 	 	 
	i)	 	
The sum of [*]

	 	 	 
	ii)	 	
The sum of [*]

     For clarity, each Milestone Event shall be payable only once during the
Term. As used in this Section 8.3, “Initiation” means when the first patient
has been enrolled in the trial.

     8.4) Sales Milestone Payments. As further consideration for the rights
granted under this Agreement, Pharmacia shall pay Nastech each of the
non-refundable, non-creditable amounts specified below within forty-five (45)
days after the end of the calendar quarter in which any of the following
worldwide thresholds are achieved, the achievement of each of which shall be a
Milestone Event:

	 	 	 	 	 	 	 	 	 
	 	 	Thresholds	 	 	Bonus Payment	 
	 	 	
	 	 	
	 
	(a)
	 	[*]	 	 	 	[*]	 
	(b)
	 	[*]	 	 	 	[*]	 

     For clarity, the payments set forth in this Section 8.4 are payable only
once, but are cumulative (e.g., [*]).

ARTICLE 9

SALES-BASED COMPENSATION

     9.1) Royalties. Pharmacia shall pay to Nastech, as further consideration
for the rights granted under this Agreement, royalties based on Net Sales of
Collaboration Product in the Territory as follows:

	 	 	 
	a)	 	
The following incremental royalties; provided the
sale of the Collaboration Product would, but for the Licenses
hereunder, infringe a Valid Claim of a

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

26

 

	 	 	 
	 	 	Nastech Patent claiming
the composition of a Compound or a pharmaceutical preparation
containing the same, or the use of the Compound or such
preparation in the Field:

	 	 	 
	[*]	 	
[*]
	[*]	 	
[*]
	[*]	 	
[*]

	 	 	 
	b)	 	
[*] of all Net Sales of Collaboration Product
sold by Pharmacia or its Sublicensees in the Territory other
than those covered by Section 9.1(a) above;
provided, however, Net Sales under this Section 9.1(b) shall be
taken into account in determining the incremental royalties
under Section 9.1(a)

	 	 	 
	c)	 	
For clarity, set forth in Schedule 9.1 is an
example illustrating the calculation of royalties hereunder.

     9.2) Duration of Obligation to Pay Sales-Based Compensation.

	 	 	 
	a)	 	
In the case of sales of Collaboration Product
under Section 9.1(a), Pharmacia’s obligations to pay royalties
will be effective as of the date of First Commercial Sale and
shall terminate, on a country-by-country basis, upon the
expiration of the last to expire Nastech Patent which contains
at least one Valid Claim which claims the composition of the
Compound or a pharmaceutical preparation containing the same,
or the use of the Compound or such preparation in the Field.

	 	 	 
	b)	 	
In the case of sales under Section 9.1(b),
Pharmacia’s obligations to pay royalties will be effective as
of the date of First Commercial Sale and shall terminate in
European Union countries, on a country-by-country basis, upon
the earlier of (i) [*] from the first commercial sale of such
Collaboration Product in any country in the European Union, or
(ii) sale by a Third Party who is not a Sublicensee of
Licensed Product in an amount equal to or greater than 15% of
unit sales (calculated on a relevant per day or per treatment
basis) of Collaboration Product sold in such country.

	 	 	 
	c)	 	
In the case of sales under Section 9.1(b),
Pharmacia’s obligations to pay royalties will be effective as
of the date of First Commercial Sale and shall terminate in
countries outside of the European Union, on a
country-by-country basis, upon the earlier of (i) [*] from
First Commercial Sale of such Collaboration Product in such
country, or (ii) sale by a Third Party who is not a
Sublicensee of Licensed Product in an amount equal to or
greater than 15% of unit sales (calculated on a relevant per
day or per treatment basis) of Collaboration Product sold in
such country.

27

 

     9.3) Minimum Sales.

	 	 	 
	a)	 	
If the first Regulatory Approval of the
Collaboration Product in the United States does not
significantly differ from the TPP, Pharmacia guarantees that
Pharmacia and its Sublicensees will achieve Net Sales of [*]
per calendar year during the second through tenth full
calendar years after the First Commercial Sale; provided that
if this Agreement shall terminate or expire prior to the end
of any such full calendar year, Pharmacia guarantees, with
respect to such less than full calendar year, that Pharmacia
and its Sublicensees will achieve Net Sales of such pro rata
portion of [*] as corresponds to the percentage of such
calendar year comprised by the period therein ending upon the
effective date of such termination or expiration. Beginning
with the third full calendar year after the First Commercial
Sale, such minimum Net Sales amount shall be adjusted annually
based on the changes in the Producer Price Index for
Pharmaceutical Preparations. Notwithstanding the foregoing,
such minimum Net Sales obligations will not be applicable
where (i) Nastech fails to supply sufficient quantities of
Collaboration Product in accordance with the Supply Agreement
(unless such failure is caused primarily by any act or
omission of Pharmacia or its Sublicensees in breach hereof or
of the Supply Agreement) or (ii) the Collaboration Product is
withdrawn from the market because continued sale of such
Collaboration Product would be in violation of applicable Law
or Pharmacia determines that the continued sale of such
Collaboration Product would be unethical. In the event
Pharmacia and its Sublicensees fail to achieve the applicable
minimum Net Sales, Pharmacia shall (x) pay royalties to
Nastech as if such minimum Net Sales had been achieved, and
(y) grant rights to Nastech to permit Nastech’s sales
representatives to detail Collaboration Product, at Nastech’s
cost, in the US, Japan and major EU markets, to the extent
permitted under applicable Laws and in accordance with the
Global Commercialization Plan.

	 	 	 
	b)	 	
In the event of a dispute between the Parties as
to whether the Collaboration Product conforms to the TPP in
accordance with Sections 5.7(b) or 9.3(a), the matter shall be
submitted for decision to a neutral Third Party of sufficient
knowledge and experience with the disputed subject matter who
shall have been approved by Nastech and Pharmacia. In
determining the conformity of the Collaboration Product to the
TPP, the dispositive issue shall be whether the Collaboration
Product exhibits any deviance or deviances from the TPP that
is or are likely to have a material adverse impact upon the
Collaboration Product’s marketability. The decision of such
neutral shall be in writing, and shall be binding upon the
Parties.

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

28

 

     9.4) Royalty Reports; Payments. Royalties payable hereunder will be paid
to Nastech not later than forty-five (45) calendar days following the end of
each calendar quarter after the First Commercial Sale and each such payment
shall be accompanied by a report in writing showing the period to which such
payment applies, the amount billed to Third Parties for Collaboration Product
during such calendar quarter, the deductions from the amount billed to arrive
at Net Sales, the total Net Sales for the period, the royalties due on such Net
Sales, and any credits taken by Pharmacia against such royalties pursuant to
Sections 9.9 or 9.11 hereof. Each such report shall separately state the Net
Sales of Pharmacia and each of its Sublicensees during the reporting period on
a country-by-country basis, and shall include all such information as may
reasonably be required to determine fully and accurately the royalties due
Nastech for such period.

     9.5) Interest on Late Payments. If Pharmacia fails to pay in full on or
before the date the amount is due any royalty, fee or other amount that
Pharmacia is required to pay under this Agreement, Pharmacia shall pay to
Nastech (or its designee), on demand, interest at a per annum rate equal to [*]
to be assessed from the first day after payment of the amount in question first
became due, and thereafter calculated and payable monthly on the last day of
each month, not in advance.

     9.6) Taxes. Nastech shall be solely responsible for any and all taxes due
or payable on any sums paid to Nastech under this Agreement. Pharmacia shall
withhold, or cause to be withheld, and timely pay, or cause to be paid, over to
the appropriate tax authorities all taxes (other than taxes imposed on or
measured by net income) which Pharmacia is required to withhold under the
applicable Law of any country for the account of Nastech. Insofar as
practicable, Pharmacia shall advise Nastech in advance of such deduction or
withholding and shall furnish Nastech with receipts and with other information
reasonably requested by Nastech evidencing such deductions and withholding.
Nastech shall have the right to contest any such withholding in its own name.
Proof of payment of such taxes shall be provided to Nastech within thirty (30)
days after payment. Pharmacia will reasonably cooperate with Nastech to obtain
the benefit of any applicable tax Law or treaty, including the pursuit of any
refund or credit of such tax to Nastech.

     9.7) Records; Audits. Pharmacia and its Affiliates shall keep and
maintain complete and accurate records and books of account documenting all
revenues, expenses and all other data necessary for the calculation of
royalties. Pharmacia and its Affiliates shall permit nationally recognized
independent accountants retained by Nastech, to whom Pharmacia shall have no
reasonable objection, upon reasonable prior written notice, to have access to
its and its Affiliates’ records and books and premises for the sole purpose of
determining the appropriateness of calculation of royalties due under this
Agreement for any calendar year ending no more than three (3) years prior to
the date of such request. Such examination shall be conducted during regular
business hours and no more than once in each calendar year during the term of
this Agreement and once during the calendar year following the expiration or
termination of this Agreement.

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

29

 

     Such audit shall be at Nastech’s cost and expense; provided that, in the
event any such audit reveals that Pharmacia has underpaid Nastech by an amount
greater than five percent (5%) of the amounts due to Nastech in the period
being audited, Pharmacia shall also reimburse Nastech for the reasonable
out-of-pocket cost and expense of conducting the audit. If any audit reveals
an overpayment by Pharmacia, Nastech shall (i) credit the amount of such
overpayment to Pharmacia against the payment of royalties due for the next
calendar quarter, with any amount of such overpayment in excess of such
royalties carried over as a credit against the payment of royalties due for the
succeeding calendar quarter until full credit of such overpayment is given; or
(ii) in the event that such overpayment is discovered after termination or
expiration of the Term, Nastech shall promptly refund such overpayment to
Pharmacia.

     9.8) Currency of Payment. All references to “Dollars” or “$” herein are
to United States Dollars. All payments to be made by Pharmacia to Nastech
hereunder shall be made in United States Dollars. Where Collaboration Product
are sold in a currency other than United States Dollars, conversion of sales
recorded in local currencies to United States Dollars will be performed in a
manner consistent with Pharmacia’s normal practices used to prepare its audited
financial statements for internal and external reporting purposes.

     9.9) Third Party Licenses. In the event one or more patent licenses from
Third Parties are required by Pharmacia or its Sublicensees in order to
Develop, make, have made, use or sell a Collaboration Product in a country
(“Third Party Patent Licenses”), [*] of any consideration actually paid under
such Third Party Patent Licenses by Pharmacia or its Sublicensees shall be
fully creditable against royalties payable to Nastech with respect to sale of
such Collaboration Product; provided, however, in no event shall such credit
cause the royalties paid to Nastech for any particular calendar quarter to be
reduced to less than fifty percent (50%) of the amount that would otherwise be
payable to Nastech for such calendar quarter pursuant to the provisions of
Section 9.1 hereof; provided, further that any unused credits shall be carried
over to future calendar quarters throughout the Term. Upon the expiration or
termination of this Agreement, Nastech shall have no obligation to make any
payment in respect of any balance that might otherwise be due with respect to
its share of the consideration paid by Pharmacia or its Sublicensees under the
Third Party Patent Licenses and which remains after the foregoing credits
against royalties have been taken by Pharmacia.

     9.10) Compulsory License. Pharmacia and Nastech shall use Commercially
Reasonable and Diligent Efforts to prevent or avoid any Third Party from
obtaining or being granted a Compulsory License, and to the extent that a Third
Party does obtain or is granted a Compulsory License, Pharmacia and Nastech
will use Commercially Reasonable and Diligent

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

30

 

Efforts to limit or reduce the
scope or applicability of such Compulsory License. If, notwithstanding
Pharmacia’s and Nastech’s use of Commercially Reasonable and Diligent Efforts,
any Third Party obtains a Compulsory License in any country, then Nastech or
Pharmacia (whoever has first notice) shall promptly notify the other Party. If
the royalty rate payable by the grantee of the Compulsory License is less than
the above royalty rates, the above royalty rates shall be reduced to such lower
rate enjoyed by such Third Party grantee in the subject country, for so long as
sales are made pursuant to the Compulsory License.

     9.11) Royalty Credit for Sample Costs. [*] of all payments made by
Pharmacia to Nastech under the Supply Agreement with respect to the purchase of
samples of Collaboration Product for promotional purposes shall be fully
creditable against royalties payable to Nastech with respect to sale of such
Collaboration Product; provided, however, in no event shall such credit cause
the royalties paid to Nastech for any particular calendar quarter to be reduced
to less than [*] of the amount that would otherwise be payable to Nastech for
such calendar quarter pursuant to the provisions of Section 9.1; provided,
further that any unused credits shall be carried over to future calendar quarters throughout the Term until
realized in full by Pharmacia. Upon the expiration or termination of this
Agreement for any reason, Nastech shall promptly pay to Pharmacia the balance
of any credit due Pharmacia pursuant to this Section 9.11 which has not yet
been taken by Pharmacia.

ARTICLE 10

INTELLECTUAL PROPERTY RIGHTS

     10.1) Disclosure of Program Inventions. Each Party shall promptly
disclose to the other Party the conception or reduction to practice of Program
Inventions by employees or others acting on behalf of such Party. All
disclosures under this Section 10.1 shall be made at least sixty (60) days
prior to any public disclosure of such Program Invention or any required
submission to government agencies in compliance with the requirements of
government supported research.

     10.2) Ownership of Program Inventions. All right, title and interest in
all Program Inventions shall be owned as follows:

	 	 	 
	a)	 	
Nastech shall own all Program Inventions that are
conceived or reduced to practice solely by one or more
employees, agents or consultants of Nastech;

	 	 	 
	b)	 	
Pharmacia shall own all Program Inventions that
are conceived or reduced to practice solely by one or more
employees, agents or consultants of Pharmacia; and

31

 

	 	 	 
	c)	 	
Nastech and Pharmacia shall jointly own all
Program Inventions that are conceived or reduced to practice
by one or more of its employees, agents or consultants,
together with one or more employees, agents or consultants of
the other Party.

	 
	In the event of a dispute regarding inventorship, the
Development Oversight Committee shall establish a procedure to
resolve such dispute, which may include engaging a Third Party
patent attorney jointly selected by the Parties to resolve such
dispute, and the Development Oversight Committee shall not have
the authority to resolve any dispute regarding inventorship.
The Parties acknowledge that the ownership rights set out in
this Section 10.2 are subject to the Licenses granted pursuant
to this Agreement. Subject to the provisions of Sections 2.4,
2.5 and 2.7, each Party shall be free to use and exploit (which
shall include the right to grant licenses under) the Joint
Technology, without any duty of accounting to the other Party,
for any purpose other than to Develop, make, have made, use,
offer for sale, sell, or import Collaboration
Product for use in the Field, which use of the Joint Technology
in connection with Collaboration Product in the Field shall be
in accordance with the royalty and other provisions of this
Agreement

     10.3) Ownership of Trademarks. Pharmacia shall select and own all
trademarks and service marks associated with Collaboration Product in the
Territory (collectively, “Product Marks”). Pharmacia shall also own any domain
names associated with Collaboration Product in the Territory, including any
domain names which contain Product Marks. Nastech hereby agrees that at no
time during the Term will it or any of its Affiliates attempt to use or
register any trademarks, marks or trade names confusingly similar to such
Product Marks or take any other action with a view to damaging the rights or
goodwill in any of the Product Marks in any country.

     10.4) Assignment of Program Inventions. Each Party agrees that all
employees acting on its behalf in performing its obligations under this
Agreement shall be obligated to assign to such Party, or as such Party shall
direct, all Program Inventions conceived or reduced to practice by such
employee as part of the activities conducted under this Agreement. In the case
of non-employees working on behalf of a Party, that Party shall endeavor to
obtain either an assignment or license establishing its Control of all Program
Inventions conceived or reduced to practice by such non-employees.

     10.5) Prosecution Patent Rights.

	 	 	 
	a)	 	
Subject to the provisions of Section 10.6, each
of Nastech and Pharmacia shall be responsible for the filing,
prosecution and maintenance of all Patent Rights within the
Nastech Patents and Pharmacia Patents, respectively.

	 	 	 
	b)	 	
Each Party shall have the right to select patent
counsel, subject to the other Party’s written approval (not to
be unreasonably withheld or delayed) of such

32

 

	 
	patent counsel, to prepare, file and/or prosecute patent applications for the
Joint Patents for which it is the Prosecuting Party pursuant
to paragraph (c)). Nastech and Pharmacia shall confer with
respect to the best procedure to handle the preparation,
filing, prosecution and maintenance of such application(s)

	 	 	 
	c)	 	
With respect to the Joint Patents, the
Development Oversight Committee shall determine which of the
Parties shall be responsible for preparing, filing and/or
prosecuting patent applications for Joint Patents and
maintaining any patents issued thereon (the “Prosecuting
Party”). The other Party (the “Non-Prosecuting Party”) shall
have full rights of consultation with the Prosecuting Party
and the patent counsel selected by the Prosecuting Party in
all matters related to Joint Patents. The Prosecuting Party
shall use reasonable diligent efforts to implement all
reasonable requests made by the Non-Prosecuting Party with
regard to the preparation, filing, prosecution and/or
maintenance of the patent applications and/or patents related
to Joint Patents.

	 	 	 
	d)	 	
If the Prosecuting Party elects not to pursue the
initial filing of a potential Joint Patents or support the
continued prosecution or international protection of Joint
Patents, the Prosecuting Party shall notify the
Non-Prosecuting Party promptly in writing and, for Joint
Patents scheduled for international filing, prior to sixty
(60) days before the date required for the convention year
filing of such Joint Patents application or any other deadline
date by which an action must be taken to establish or preserve
a Joint Patent right. The Non-Prosecuting Party shall then
have the right, but not the obligation, to pursue the filing
or support the continued prosecution or international
protection of such Joint Patents. If the Non-Prosecuting
Party elects to pursue such filing or continue such support,
then it shall notify the Prosecuting Party of such election,
and the Prosecuting Party shall promptly assign to the
Non-Prosecuting Party, without consideration, all of its
right, title and interest in such Joint Patent.

     10.6) Prosecution Costs. Pharmacia shall be responsible for any
out-of-pocket costs or expenses reasonably incurred by Nastech and approved by
Pharmacia (such approval not to be unreasonably withheld or delayed), after the
Effective Date of this Agreement, in the course of filing, prosecuting and
maintaining any Nastech Owned Patents related to the Collaboration Product
(excluding any Joint Patents) up to a total cost of [*]. So long as Pharmacia
is required to pay for the filing, prosecuting and maintaining Nastech Owned
Patents under this Section, Pharmacia shall have full rights of consultation
with Nastech and patent counsel selected by Nastech, that Pharmacia has no
reasonable objections to, in all matters related to Nastech Owned

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

33

 

Patents.
Nastech shall use reasonable diligent efforts to implement all reasonable
requests made by Pharmacia with regard to preparation, filing, prosecution
and/or maintenance of the patent applications and patents related to Nastech
Owned Patents. Nastech shall be responsible for any costs or expenses incurred
by it in the course of filing, prosecuting and maintaining the Nastech Owned
Patents (excluding any Joint Patents) in excess of [*]. Pharmacia shall be
responsible for any costs or expenses incurred by it in the course of filing,
prosecuting and maintaining the Pharmacia Patents (excluding any Joint
Patents). The Development Oversight Committee shall determine which of the
Parties shall be responsible for the reasonable out of pocket costs and
expenses incurred by the Parties in filing, prosecuting and maintaining any
Joint Patents; provided, however, that in the event the Development Oversight
Committee is unable to agree upon an appropriate allocation between the
Parties, the Parties shall share such costs and expenses equally on an ongoing
basis.

     10.7) Cooperation. Each of Nastech and Pharmacia shall make available to
the other Party (or to the other Party’s authorized attorneys, agents or
representatives) its employees, agents or consultants to the extent necessary
or reasonable to enable the appropriate Party to file, prosecute and maintain
patent applications and resulting patents with respect to inventions owned by a
Party and relating to Collaboration Product for use in the Field, and for
periods of time sufficient for such Party to obtain the necessary assistance from such
personnel. Where appropriate, each of the Party shall sign or cause to have
signed all documents necessary for the same.

     10.8) Notice of Issuance. Nastech shall keep Pharmacia informed with
regard to the status of the Nastech Owned Patents and the Joint Patents for
which it is the Prosecuting Party, and Pharmacia shall keep Nastech informed
with regard to the status of Pharmacia Patents and any Joint Patents for which
it is the Prosecuting Party. Nastech shall promptly deliver or have delivered
to Pharmacia copies of all patent applications, amendments, related
correspondence, and documents concerning the Nastech Owned Patents and Joint
Patents for which it is the Prosecuting Party, and Pharmacia shall promptly
deliver or have delivered to Nastech copies of all patent applications,
amendments, related correspondence, and documents concerning the Pharmacia
Patents and any Joint Patents for which it is the Prosecuting Party. Each
Party shall notify the other Party of the issuance of each patent included
within the Patent Rights for which the notifying Party is responsible pursuant
to Section 10.5 above, giving the date of issue and patent number for each such
patent.

     10.9) No Implied Rights. Except as otherwise expressly provided in this
Agreement, under no circumstances shall a Party, as a result of this Agreement,
obtain any ownership interest or other right, title or interest in or to the
Patent Rights or other intellectual property or Confidential Information of the
other Party, including items Controlled or developed by the other Party, or
delivered by the other Party to said Party, at any time pursuant to this
Agreement.

     10.10) Assertion of Patent Infringement. Nastech and Pharmacia shall each
promptly notify the other in writing of any alleged or threatened infringement
of any patents which adversely affects the Development or Commercialization of
Collaboration Product in the Field, or if either Party, or any of their
respective Affiliates, shall be individually named as a defendant

34

 

in a legal proceeding by a Third Party for infringement of a patent because of the
manufacture, use or sale of a Collaboration Product in the Field or because of
attempts to invalidate Pharmacia Patents or Nastech Owned Patents or Joint
Patents in relation any Collaboration Product in the Field.

	 	 	 
	a)	 	
In the event of any challenge to (including any
interference or opposition or similar proceedings) or any
alleged or threatened infringement of the Nastech Owned
Patents, Pharmacia Patents or Joint Patents relating to
Collaboration Product in the Field, the Parties shall consult
to determine the course of action to be taken, including, but
not limited to, the commencement of any suit (including any
action or other proceeding) to enjoin, prohibit or otherwise
secure the cessation of such infringement. If both Parties
agree to proceed with any such suit, they shall (i) jointly
select and instruct patent counsel and confer with respect to
such suit acting on the advice of such patent counsel and in
the best interests of the Collaboration Product (provided that
if the Patent Rights subject to such infringement are those of
only one Party, such Party shall have the exclusive right to
select patent counsel with the advice and consent of the other
Party, which consent shall not unreasonably be delayed,
conditioned or withheld), (ii) each be
responsible for fifty percent (50%) of all costs and expenses,
including reasonable attorneys’ and experts’ fees, incurred in
commencing and maintaining such suit, and (iii) each have the
right to receive payment of fifty percent (50%) of such
balance of any settlement amount, damages or other monetary
awards recovered in connection with such suit as remains after
reimbursement of their respective actual out-of-pocket costs
and expenses (including reasonable attorneys’ and experts’
fees) incurred in connection with such suit, provided that if
the amounts recovered do not fully reimburse the costs,
expenses and losses described in this Section 10.10(a), such
amounts shall be paid to the Parties pro-rata to the costs and
expenses incurred, and loss suffered by, the Parties.

	 	 	 
	b)	 	
If one of the Parties shall elect not to proceed
with the commencement of such infringement suit, the other
Party shall have the right, but not the obligation, to
commence and maintain such suit at its own cost and expense
and, in the event that it shall elect to proceed with such
suit, it retains further exclusive rights (i) to select and
retain patent counsel with the advice and consent of the Party
that has elected not to so proceed, which consent shall not
unreasonably be delayed, conditioned or withheld, and (ii) to
direct and control such suit and to receive and retain all
settlement amounts, damages and other monetary awards
recovered in connection therewith.

	 	 	 
	c)	 	
Each Party agrees to cooperate with the other at
the request of the other, including giving testimony and
producing documents lawfully requested in the course of a suit
prosecuted by such Party pursuant to this Section 10.10, and
shall endeavor to cause its and its Affiliates employees to
cooperate with the other Party.

35

 

     10.11) Third Party Infringement Suit. In the event that a Third Party
sues Pharmacia or Nastech or their respective Affiliates alleging that the
making, using, marketing, importing, exporting, selling or offering to sell
Collaboration Product infringes or will infringe claims in said Third Party’s
Patent Rights, then the Party so sued may elect to defend such suit, but shall
fully consult with the other Party. Neither Party may settle any such action
on terms that adversely affect the other Party without the express written
consent of the other Party, such consent not to be unreasonably withheld or
delayed. If, as a result of a judgment in the litigation or settlement with
the Third Party, Pharmacia is required to pay royalties or other monies to such
Third Parties, such payments may be treated as royalties under a Third Party
Patent Licenses under Section 9.9.

     10.12) Cooperation. If either Party shall become engaged in or
participate in any suit described in Section 10.10 or 10.11, or any
investigation, claim, interference or other proceeding with any Third Party
(including any proceeding before a relevant Regulatory Authority) relating in
any way to the Collaboration Product or to any Pharmacia Technology, Nastech
Technology, or Joint Technology affecting any of Collaboration Product, the
other Party shall cooperate, and shall endeavor to cause its and its Affiliates
and Sublicensees’ employees to cooperate, with such Party in all reasonable
respects in connection therewith, including, without limitation, giving testimony and producing documents lawfully requested, and using its
Commercially Reasonable and Diligent Efforts to make available to the other
Party, at no cost to the other Party (other than reimbursement of actually
incurred, reasonable out-of-pocket expenses), such employees who may be
helpful, with respect to such suit, investigation, claim, interference or other
proceeding.

     10.13) No Obligation to Prosecute. Notwithstanding any other provision of
this Article, neither Party shall have an obligation to prosecute or maintain,
or take or defend any action in respect of any Patent Right which is owned by a
Third Party.

ARTICLE 11

CONFIDENTIALITY

     11.1) Confidential Information. Except as otherwise provided in this
Article 11 and Section 12.7(b)(v), from the Execution Date until the fifth
anniversary of the expiration of or termination of this Agreement, or for a
period of ten (10) years from the Execution Date, whichever is the longer, the
Parties shall, and shall procure that their Sublicensees and consultants,
contractors and clinical investigators shall, maintain in confidence and use
only for purposes specifically authorized under this Agreement any Confidential
Information furnished to it by the other Party pursuant to this Agreement.

36

 

     11.2) Disclosure. To the extent it is reasonably necessary or appropriate
to fulfill its obligations or exercise its rights under this Agreement, a Party
may disclose Confidential Information of the other Party it is otherwise
obliged under this Article not to disclose:

	 	 	 
	a)	 	
to its Affiliates, Sublicensees, consultants,
outside contractors and clinical investigators, on a
need-to-know basis and on the condition that such entities or
persons agree, in a binding written agreement, to keep the
Confidential Information confidential to substantially the
same extent as such Party is required to keep such
Confidential Information confidential; and

	 	 	 
	b)	 	
to Regulatory Authorities and other Third Parties
to the extent that such disclosure is reasonably necessary to
obtain authorizations to conduct clinical trials or to file
and maintain Regulatory Approvals and to Commercialize the
Collaboration Product.

     11.3) Exceptions. The obligation not to disclose Confidential Information
shall not apply to any part of such Confidential Information that:

	 	 	 
	a)	 	
is or becomes published or otherwise becomes
publicly known other than by acts of the Party obligated not
to disclose such Confidential Information or its Sublicensees,
consultants, contractors or clinical investigators in breach
of this Agreement;

	 	 	 
	b)	 	
was disclosed to the receiving Party or its
Affiliates or Sublicensees by a Third Party, provided that
such Confidential Information was not obtained by such Third
Party from the disclosing Party under an obligation of
confidentiality;

	 	 	 
	c)	 	
prior to disclosure under this Agreement, was
already in the possession of the receiving Party or its
Affiliates or Sublicensees, provided that such Confidential
Information was not obtained from the disclosing Party under
an obligation of confidentiality;

	 	 	 
	d)	 	
can be shown by written documents to have been
independently developed by the receiving Party or its
Affiliates without breach of any of the provisions of this
Agreement or access to any Confidential Information provided
by the disclosing Party; or

	 	 	 
	e)	 	
is required to be disclosed by the receiving
Party to comply with applicable Laws, or with a court or
administrative order or the rules of any relevant Stock
Exchange, provided, however, that this Section 11.3(e) shall
not permit a Party to disclose the other Party’s confidential
know-how for the purpose of obtaining Patents Rights.

     In the case of a disclosure permitted by Section 11.3(e), the receiving
Party shall, if practicable, notify the disclosing Party in writing prior to
any such disclosure and use

37

 

Commercially Reasonable and Diligent Efforts to
secure confidential treatment thereof prior to its disclosure (whether by
protective order or otherwise).

     11.4) Terms of Agreement. Notwithstanding the provisions of Sections 11.1
through 11.3, each Party shall be entitled to disclose the terms of this
Agreement to its advisors and potential investors or other financing sources,
without the consent of the other Party, on the condition that such entities or
persons agree to keep such terms confidential for the same time periods and to
the same extent as such Party is required to keep such terms confidential.
Each party shall give the other Party a reasonable opportunity to review all
filings with the United States Securities and Exchange Commission or any Stock
Exchange describing the terms of this Agreement prior to submission of such
filings, and shall give due consideration to any reasonable comments by the
non-filing Party relating to such filing, including without limitation the
provisions of this Agreement for which confidential treatment should be sought.

     11.5) Publications. Each Party recognizes the mutual interest in
obtaining valid patent protection. Consequently, any Party or its
Sublicensees, its employees or consultants wishing to make a publication
(including any oral disclosure made without obligation of confidentiality)
relating to work performed by or on behalf of such Party as part of the Global
Development Plan or, in the case of Nastech’s activities relating to
Collaboration Product, prior to the Execution Date (the “Publishing Party”)
shall transmit to the other Party (the “Reviewing Party”) a copy of the
proposed written publication at least sixty (60) days prior to submission for
publication, or an abstract of such oral disclosure at least thirty (30) days
prior to submission of the abstract or the oral disclosure, whichever is
earlier. The Reviewing Party shall have the right to (a) request a delay in
publication or presentation in order to protect patentable information, (b)
propose modifications to the publication for patent reasons or (c) request that
the information be maintained as a trade secret. With respect to publications
or disclosures by investigators or other Third Parties, such publications and
disclosures shall be subject to review by the Reviewing Party under this
Section 11.5 only to the extent that the Publishing Party has the right to do
so.

     11.6) Delay. If the Reviewing Party requests a delay as described in
Section 11.5 above, the Publishing Party shall delay submission or presentation
of the publication for a period of sixty (60) days from the date of such
request to enable patent applications protecting each Party’s rights in such
information to be filed. Upon the expiration of sixty (60) days, in the case
of proposed written disclosures, or thirty (30) days, in the case of an
abstract of proposed oral disclosures, from transmission of such proposed
disclosures to the Reviewing Party, the Publishing Party shall be free to
proceed with the written publication or the oral presentation, respectively,
unless the Reviewing Party has requested the delay described above. To the
extent practicable in the reasonable exercise of its discretion, the Publishing
Party shall incorporate all modifications proposed under this Section. If a
trade secret that is the subject of a request made under this Section cannot be
otherwise protected without unreasonable expense to the Reviewing Party, such
information shall be omitted from the publication.

     11.7) Press Releases. Following the Execution Date, the Parties shall
issue one or more press releases regarding this Agreement, the Supply Agreement
and the investment agreement and registration rights agreement contemplated by
Section 8.2 (the Supply

38

 

Agreement, investment agreement and registration rights
agreement being referred to herein as the “Other Agreements”), the timing and
content of which shall be mutually agreed. Except to the extent required by
Law or the rules of a relevant Stock Exchange or as otherwise permitted in
accordance with this Section 11.7, neither Party shall make any further public
announcements concerning this Agreement, the Other Agreements or the subject
matter hereof or thereof without the prior written consent of the other, which
shall not be unreasonably withheld. Notwithstanding the foregoing, the Parties
agree that each Party may desire or be required to issue press releases
relating to the Agreement, the Other Agreements or activities hereunder or
thereunder, and the Parties agree to consult with each reasonably and in good
faith with respect to the text and timing of such press releases prior to the
issuance thereof, provided that a Party may not unreasonably withhold consent
to such releases, and that either Party may issue such press releases as it
determines, based on advice of counsel, are reasonably necessary to comply with
Law or for appropriate market disclosure. The principles to be observed by
Pharmacia and Nastech in public disclosures with respect to this Agreement or
the Other Agreements shall be: accuracy, compliance with applicable legal
requirements, the requirements of confidentiality under Sections 11.1 through
and including 11.5 and this Section 11.7 and normal business practice in the
pharmaceutical and biotechnology industries for disclosures by companies
comparable to Pharmacia and Nastech. In the event of a public announcement,
the Party making such public announcement shall provide the other Party with a
reasonable opportunity, judged in the light of the circumstances, and the right
to approve the content of such announcement prior to its being made, which
approval shall not be delayed or unreasonably withheld. The contents of any
such announcement or similar publicity which has been reviewed and approved by
the reviewing Party can be re-released by either Party without a requirement
for re-approval.

     11.8) Termination of Prior Agreement. The Parties agree that as of the
Effective Date the Confidentiality Agreement dated as of [*], between Pharmacia
and Nastech is hereby terminated and superseded by the provisions of this
Agreement, and any disclosures made under the terms of that Confidentiality
Agreement shall be deemed to have been made under the terms of this Agreement.

ARTICLE 12

TERM AND TERMINATION

     12.1) Term. This Agreement becomes effective as of the Effective Date and
shall terminate on a country-by-country basis on expiry of all of Pharmacia’s
payment obligations in respect of sales of Collaboration Product in such
country unless terminated earlier as set forth in this Article 12 (the “Term”).

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

39

 

     12.2) Pharmacia’s Unilateral Termination Right. Pharmacia shall have the
right to terminate this Agreement, at any time and for any reason, upon [*]
days’ prior written notice to Nastech.

     12.3) Termination For Material Breach.

	 	 	 
	a)	 	
Termination Rights. Upon a material breach of
this Agreement by Pharmacia or Nastech (in such capacity, the
“Breaching Party”), the other Party (in such capacity, the
“Non-Breaching Party”) may provide written notice (a “Breach
Notice”) to the Breaching Party specifying the material
breach. If (i) the Breaching Party fails to cure such
material breach during the [*] day period following the date
on which the Breach Notice is provided (or, if such material
breach, by its nature, is a curable breach that is not curable
within the [*] day period, such longer period as would be
reasonably necessary for a diligent party to cure such
material breach), or (ii) such material breach, by its nature,
is incurable, then the Agreement shall terminate.

	 	 	 
	b)	 	
Material Breach Relating to the Development or
Commercialization of a Collaboration Product. Notwithstanding
the provisions of Section 12.3(a), in the event a material
breach which does not relate to payment is limited to a
particular Collaboration Product, then the Non Breaching Party
shall be entitled to terminate this Agreement only with
respect to such Collaboration Product. Furthermore, in the
event a material breach relating to a particular Collaboration
Product is limited to a particular country or particular
countries, then the Non Breaching Party shall be entitled to
terminate this Agreement only with respect to the particular
Collaboration Product and only with respect to the particular
country or particular countries.

	 	 	 
	c)	 	
Dispute Resolution. Termination under this
Section 12.3 for whatever reason will be automatically stayed
for the duration of any dispute resolution proceedings
initiated under Article 13 regarding the dispute forming the
basis for the proposed termination.

     12.4) Termination Upon Bankruptcy. This Agreement may be terminated by a
Party upon written notice to the other in the event that (i) the other Party
shall make an assignment for the benefit of its creditors, file a petition in
bankruptcy, petition or apply to any tribunal for the appointment of custodian,
receiver or any trustee for it or a substantial part of its assets, or shall
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (ii) if there shall have
been filed against the other Party any such bona fide petition or application,
or any such proceeding shall have been commenced against it, in which an order
for relief is entered or which remains undismissed for a period of [*]; or (iii) if the other Party by

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

40

 

any act or omission shall indicate its consent to,
approval of or acquiescence in any such petition, application or proceeding or
order for relief or the appointment of a custodian, receiver or trustee for it
or any substantial part of its assets, or shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of [*]; or
(iv) anything analogous to any of the foregoing occurs in any applicable
jurisdiction. Termination shall be effective upon the date specified in such
notice.

     12.5) Termination Relating to Competitive Product.

	 	 	 
	a)	 	
Nastech shall have the right to terminate this
Agreement in its entirety in the event Pharmacia or its
Affiliates initiates [*] with respect to a Competitive
Product, or markets and sells any Competitive Product, and
Pharmacia fails to file the first NDA with the FDA for the
first Collaboration Product within [*]; provided, however,
that (i) the foregoing shall not apply in the event there
shall be any changes to the assumptions set forth in Schedule
12.5, (ii) the foregoing shall not apply unless Pharmacia is
developing or marketing and selling the Competitive Product at
the expiration of the [*] period, and (iii) Nastech must
exercise its right to terminate under this Section 12.5(a)
within [*] after the expiration of such [*] period.

	 	 	 
	b)	 	
Nastech shall have the right to terminate this
Agreement only with respect to the Licenses granted hereunder
in the European Union in the event Pharmacia or its Affiliates
initiates [*] with respect to a Competitive Product, or
markets and sells a Competitive Product, and Pharmacia fails
to file the first NDA for the first Collaboration Product in the
European Union either through the Central Procedure for Medicinal
Products or the Mutual Recognition Process with a reference member
state within [*]; provided, however, that (i) the foregoing shall
not apply in the event there shall been any changes to the assumptions
set forth in Schedule 12.5, (ii) the foregoing shall not apply
unless Pharmacia is developing or marketing and selling the
Competitive Product in the European Union at the expiration of
the [*] period, and (iii) Nastech must exercise its right to
terminate under this Section 12.5(b) within [*] after the
expiration of such [*] period

	 	 	 
	c)	 	
In the event that Nastech fails to supply
Pharmacia on a timely basis with any quantities of the first
Collaboration Product that are ordered under the Supply
Agreement for use in conducting Development of such
Collaboration Product, then the [*] periods set forth in
Sections 12.5(a) and 12.5(b), respectively, shall
automatically be extended by a period equal to the

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

41

 

	 
	duration of
any delay realized by Pharmacia in obtaining such
Collaboration Product and Nastech’s notice obligation under
those Sections shall commence upon the expiration of such
extended period

	 	 	 
	d)	 	
Notwithstanding the provisions of Sections
12.5(a)(i) and 12.5(b)(i), with respect to any change in the
formulation for the Collaboration Product which is made by
Pharmacia during the [*] period set forth in Section 12.5(a)
[*] set forth in Section 12.5(b), in the event that Nastech
reasonably believes that the primary purpose for such change
is to enable Pharmacia to avoid the [*] deadlines set forth
in such Sections and not for the purpose of addressing any
legitimate Development or Commercialization risks or issues
regarding the Collaboration Product (e.g., to address concerns
expressed by Regulatory Authorities with respect to the
previous formulation or to improve the marketability of the
Collaboration Product), Nastech shall notify Pharmacia and the
Parties shall promptly meet to discuss the basis for Nastech’s
belief. If after good faith discussions the Parties are
unable to resolve such issue to Nastech’s reasonable
satisfaction, the matter shall be submitted for decision to a
neutral Third Party of sufficient knowledge and experience in
the Development and Commercialization of pharmaceutical
products who is acceptable to both Parties. Such neutral
Third Party shall only decide whether Pharmacia’s decision to
change the formulation of the first Collaboration Product
during the [*] set forth in Section 12.5(a) or the [*] set
forth in Section 12.5(b) was primarily motivated by a desire to
avoid the [*] deadlines set forth in such Sections and not for
the purpose of addressing any legitimate Development or
Commercialization risks or issues regarding the Collaboration
Product (e.g. to address concerns expressed by Regulatory
Authorities with respect to the previous formulation or to
improve the marketability of the Collaboration Product). The
decision of such neutral Third Party shall be in writing and
shall be binding upon the Parties. The costs and expenses of
engaging such neutral Third Party shall be borne by the
non-prevailing Party in such proceeding.

     12.6) Rights of Pharmacia Upon Regularly Scheduled Termination. Upon the
expiration of all of Pharmacia’s payment obligations under this Agreement with
respect to a particular country, Pharmacia shall have a fully paid-up,
non-exclusive license under the Nastech Technology to make, have made, sell,
offer for sale, use and import Licensed Products in the Field in such country.

     12.7) Grant Backs to Nastech. In the event Pharmacia terminates this
Agreement pursuant to Section 12.2 or Nastech terminates this Agreement
pursuant to Section 12.3 or 12.4,

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

42

 

then Pharmacia’s rights under the Licenses
(and any ancillary rights derived therefrom) shall terminate and

	 	 	 
	a)	 	
At Nastech’s request, Pharmacia shall promptly
collect and return, and cause its Affiliates and Sublicensees
to collect and return, to Nastech or, at Nastech’s request,
destroy, all documents provided by Nastech and containing
Nastech Confidential Information (provided that one copy may
be retained in its confidential legal files for the sole
purpose of determining its continuing obligations under
Section 11 hereof), and shall immediately cease, and cause its
Affiliates and Sublicensees to cease, all further use of the
Nastech Confidential Information;

	 	 	 
	b)	 	
Pharmacia shall use Commercially Reasonable and
Diligent Efforts to provide, at Nastech’s expense, all
cooperation and assistance reasonably requested by Nastech to
enable Nastech (or its nominee) to assume with as little
disruption as reasonably possible, the Development and/or
Commercialization of all Collaboration Product then being
Commercialized or in clinical Development. Such cooperation
and assistance shall be provided in a timely manner (having
regard to the nature of the cooperation or assistance
requested) and shall include without limitation:

	 	 	 
	(i)	 	
Nastech shall have an exclusive license (which shall include the
right to grant sublicenses) from Pharmacia under Pharmacia
Technology existing at the time of termination and reasonably
necessary to Develop, make, have made, use, import, offer to
sell and sell in the Field the specific Collaboration Product
then being Commercialized or in clinical Development.

	 	 	 
	(ii)	 	
Pharmacia shall transfer to Nastech (or its
nominee) all Regulatory Approvals and regulatory filings
(including applications for Regulatory Approvals) made or
obtained by Pharmacia or its Affiliates or any of its
Sublicensees to the extent relating to Collaboration Product
then being Commercialized or in clinical Development.

	 	 	 
	(iii)	 	
Pharmacia shall grant an exclusive license
(which shall include the right to grant sublicenses) to
Nastech to use Product Marks, and any domain names containing
Product Marks, solely in connection with the manufacture,
importation, use, offer for sale or sale of Collaboration
Product for use in the Field. Following such grant, Pharmacia
shall not, and shall not grant any rights to any Third Party
to, use the Product Mark.

	 	 	 
	(iv)	 	
Pharmacia shall transfer to Nastech (or its
nominee) a copy of all information in its possession or under
its control relating to any Collaboration Product then being
Commercialized or in clinical Development and reasonably
necessary or desirable for its continued Development and/or
Commercialization including without limitation all information
contained in the regulatory and/or safety databases, all in
the format then currently maintained by Pharmacia; provided,

43

 

	 	 	 
	 	 	
however, nothing in this Section 12.7(b)(iv) shall be deemed
to expand the scope of the license granted to Nastech pursuant
to Section 12.7(b)(i)

	 	 	 
	(v)	 	
Pharmacia shall transfer to Nastech the Pharmacia
Know-How that is reasonably necessary to enable Nastech (or
its nominee) to manufacture the Collaboration Product
following termination of this Agreement in the manner in which
such products are being manufactured as of the date of
termination, but only to the extent Pharmacia Controls such
Pharmacia Know-How. In the event that the Collaboration
Product is being manufactured by a Third Party as of the time
notice of termination is delivered (the “Termination Notice
Date”), such transfer may be by assignment to Nastech of
Pharmacia’s rights under its agreement with the Third Party
manufacturer, if permitted under the applicable agreement and
Pharmacia shall exercise Commercially Reasonable and Diligent
Efforts to secure the right to effect such assignment by the
express terms of such agreement. Any technology transfer
activities pursuant to this Section 12.7 shall be at Nastech’s
expense. Any Pharmacia Know-How transferred pursuant to this
Section 12.7(b)(v) shall, for the avoidance of doubt, remain
part of Pharmacia’s Confidential Information. Nastech agrees
to use such Pharmacia Know-How solely for the purposes of
manufacturing the specific Collaboration Product then being
Commercialized or in clinical Development.

	 	 	 
	(vi)	 	
Pharmacia shall use Commercially Reasonable and
Diligent Efforts to assign to Nastech such sublicenses related
to Collaboration Product and/or subcontracts relating to
significant services to be performed by Third Parties related
to Development or Commercialization of Collaboration Product,
as reasonably requested by Nastech and to secure the right to
effect such assignment by the express terms of such
sublicenses and subcontracts.

	 	 	 
	(vii)	 	
In the event that Pharmacia or any of its Affiliates is
responsible for manufacturing Collaboration Product as of the
Termination Notice Date, Pharmacia will, for a period not to
exceed two (2) years following such date supply Nastech with
sufficient quantities of the Collaboration Product to enable
Nastech to continue the Commercialization of the Collaboration
Product in accordance with the scope of the Global
Commercialization Plan as it existed as of the Termination
Notice Date; provided, however, nothing contained in this
Section shall require Pharmacia to increase its scale of
manufacturing beyond the scale envisaged by such Global
Commercialization Plan as of the Termination Notice Date.
Pharmacia shall supply the Collaboration Product at a price
equal to Pharmacia’s FAMC, and upon other reasonable and customary terms as to forecasting,
shipment, delivery and similar matters as may be agreed. It is
understood that any capital expenditures required to be made by
Pharmacia in order to enable Pharmacia to supply Collaboration
Product in the quantities contemplated by the forecasts to be
provided by Nastech shall be included in Pharmacia’s FAMC

44

 

	 	 	 
	 	 	
and fully amortized over the period in which Pharmacia supplies
Collaboration Product to Nastech.

The Parties shall use Commercially Reasonable and Diligent Efforts to complete
the transition of the Development and Commercialization of the Collaboration
Product from Pharmacia to Nastech pursuant to this Section 12.7 as soon as is
reasonably possible.

For the avoidance of doubt, Nastech shall not be required to provide Pharmacia
any consideration in exchange for the licenses or other rights to be granted to
it pursuant to this Section 12.7; provided, however, (i) Nastech shall be
solely responsible for paying any royalties, fees or other consideration that
Pharmacia may be obligated to pay to a Third Party in respect of any such
transfer or sublicense to Nastech of such licenses or other rights, (ii) for
the avoidance of doubt, nothing in this paragraph shall limit Nastech’s
obligation to reimburse Pharmacia for any costs reasonably incurred in
performing any of its obligations pursuant to Section 12.7(b), and (iii)
Nastech shall be responsible for paying Pharmacia certain royalties based on
its sales of Collaboration Product in accordance with and subject to the
provisions of Section 12.9(b).

     12.8) Other Residual Rights. Upon termination of this Agreement, except
as specifically provided herein to the contrary, all rights and obligations of
the Parties under this Agreement shall cease, except as otherwise provided in
this Article 12 and as follows:

	 	 	 
	a)	 	
Obligations to pay amounts accruing hereunder up
to the date of termination or thereafter, including royalties
on all Collaboration Product manufactured up to the date of
termination;

	 	 	 
	b)	 	
The obligations regarding confidentiality as set
forth in Article 11;

	 	 	 
	c)	 	
All obligations for record keeping and accounting
reports;

	 	 	 
	d)	 	
The Parties’ right to inspect books and records
of each other as set forth in herein;

	 	 	 
	e)	 	
The Parties’ rights with respect to the ownership
of intellectual property as set forth in Sections 10.2 and
10.3;

	 	 	 
	f)	 	
Obligations of defense and indemnity, which
obligations shall continue in full force and effect for an
unlimited period, subject to Section 17.13;

	 	 	 
	g)	 	
The Parties’ rights and obligations (including
with respect to any representations or warranties herein made)
arising prior to the effective date of such termination, or as a result of such termination, or which
may thereafter come into being as the result of the breach of
any of the terms or conditions of this Agreement that survive
the termination of this Agreement pursuant to this Section 12.8;

45

 

	 	 	 
	h)	 	
The Parties’ rights and immunities pursuant to
the disclaimers set forth in this Agreement, including under
Section 14.6 hereof;

	 	 	 
	i)	 	
The Parties’ rights and immunities pursuant to
the limitations of liability set forth in this Agreement,
including under Section 17.13 hereof.

     12.9) Certain Consequences of Termination.

	 	 	 
	(a)	 	
In the event Pharmacia terminates this Agreement
pursuant to Sections 12.3 or 12.4, then (i) Pharmacia’s rights
under the Licenses (and any ancillary rights derived
therefrom) shall survive termination (provided that such
license shall be fully sublicensable), and (ii) Pharmacia
shall pay Nastech royalties on Net Sales of Collaboration
Product following the effective date of such termination at a
rate which is [*] of the rate that would otherwise be payable
pursuant to Article 9 if this Agreement had not been
terminated.

	 	 	 
	(b)	 	
In the event that Nastech terminates this
Agreement pursuant to Sections 12.3 or 12.4, in consideration
of and subject to Pharmacia’s performance of its obligations
under Section 12.7, Nastech shall pay Pharmacia a royalty
equal to [*] of net sales of Collaboration Product following
the effective date of termination (with such net sales being
determined by applying the definition of Net Sales mutatis
mutandis to any sales of Collaboration Product by Nastech, its
Affiliates or any of their licensees); provided, however, that
in the event that Nastech terminates this Agreement pursuant
to Section 12.3 prior to the First Commercial Sale, such
royalty shall terminate when the aggregate of all royalty
payments made by Nastech to Pharmacia pursuant to this Section
12.9 (b) equals [*] of the sum of (i) all payments made by
Pharmacia pursuant to Sections 8.1 and 8.3, and (ii) all
Development Costs incurred by Pharmacia pursuant to this
Agreement.

	 	 	 
	(c)	 	
Any royalty payments payable pursuant to Sections
12.9(a) or 12.9(b) shall terminate, on a country-by-country
basis, upon the later of (i) last to expire Nastech Patent
which contains at least one Valid Claim which claims the
composition of the Compound or a pharmaceutical preparation
containing the same, or the use of the Compound or such
preparation in the Field, and (ii) the earlier of (x) [*] from
First Commercial Sale of such Collaboration Product in such
country (or, in the case of countries in the European Union, [*]
from first

	 	 	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.
	 
	 	 	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

	 

46

 

	 	 	 
	 	 	commercial sale of such Collaboration Product in any
country in the European Union) , and (y) sale by a Third Party
who is not a Sublicensee of Licensed Product or a licensee of
Nastech in an amount equal to or greater than 15% of unit sales
(calculated on a relevant per day or per treatment basis) of
Collaboration Product sold in such country

     12.10) Disposal of Inventory. Upon termination of this Agreement for any
reason Pharmacia shall be free to sell its remaining and then existing
inventory of Collaboration Product, together with any additional quantities of
Collaboration Product which Pharmacia is obligated to purchase from Nastech
under the Supply Agreement; provided, however, that Pharmacia shall be
obligated to pay Nastech the royalties applicable to said subsequent sales in
accordance with the terms and conditions set forth in this Agreement.

     12.11) Preservation of Rights upon Termination. The rights set out in
this Article 12 are without prejudice to any other rights a Party may have in
respect of any such termination.

ARTICLE 13

DISPUTE RESOLUTION

     13.1) Non-Binding Mediation. In the event of any controversy or claim
arising out of relating to or in connection with any provision of this
Agreement, or the rights or obligations of the Parties hereunder (other than
those to be resolved pursuant to Sections 3.3(b) and 5.5), the Parties shall
try to settle their differences amicably between themselves. Either Party may
initiate such informal dispute resolution by sending written notice of the
dispute to the other Party, and within ten (10) Business Days after such notice
appropriate representatives of the Parties shall meet for attempted resolution
by good faith negotiations. If such representatives are unable to resolve
promptly such disputed matter within the said ten (10) Business Days, either
Party may refer the matter by written notice to the other to the President,
Global Prescription Business of Pharmacia or his designee and the Chief
Executive Officer of Nastech or his designee for discussion and resolution. If
such individuals or their designees are unable to resolve such dispute within
thirty (30) days of such written notice, the Parties shall refer the dispute to
mediation in New York, New York before resorting to litigation. Such mediation
shall be conducted pursuant to the commercial mediation rules of the American
Arbitration Association. If any unresolved matter is not resolved within 30
days following referral to non-binding mediation pursuant to this Section 13.1,
either Party may, subject to Sections 17.5 and 17.13, seek any remedy, at law
or in equity that may be available.

47

 

ARTICLE 14

REPRESENTATIONS, WARRANTIES AND COVENANTS

     14.1) Representation of Authority; Consents. Nastech and Pharmacia each
represent and warrant to the other Party that as of the Execution Date (a) it
has full right, power and authority to enter into this Agreement, (b) this
Agreement has been duly executed by such Party, (c) so far as it is aware (not
having taken legal advice in jurisdictions other than the USA) (i) this
Agreement constitutes a legal, valid and binding obligation of such Party,
enforceable in accordance with its terms, subject to all limitations of
bankruptcy, liquidation, reorganization, insolvency, moratorium and enforcement
of creditors’ rights generally, general principles of equity (including without
limitation those relating to specific performance, injunctions and other
remedies) and public policy constraints (including those pertaining to
limitations and/or exclusions of liability, competition law, penalties and
jurisdictional issues including conflicts of laws), and (ii) all necessary
consents, approvals and authorizations of all government authorities and other
persons and entities required to be obtained by such Party in connection with
the execution, delivery and performance of this Agreement have been and shall
be obtained.

     14.2) No Conflict. Each Party represents to the other Party that as of
the Execution Date notwithstanding anything to the contrary in this Agreement,
the execution and delivery of this Agreement and the performance of such
Party’s obligations hereunder (a) do not conflict with or violate such Party’s
corporate charter and bylaws or any requirement of applicable laws or
regulations and (b) do not and shall not conflict with, violate or breach or
constitute a default or require any consent under, any contractual obligation
of such Party.

     14.3) Knowledge of Pending or Threatened Litigation. Each Party
represents and warrants to the other Party that as of the Execution Date there
is no claim, investigation, suit, action or proceeding pending against it and
of which it has received written notice or, to the knowledge of such Party,
threatened against it before or by any governmental entity or arbitrator that,
individually or in the aggregate, could reasonably be expected to materially
impair the ability of such Party to perform any obligation under this
Agreement; provided that the foregoing representation and warranty does not
apply to interference proceedings before the United States Patent and Trademark
Office, opposition proceedings before the European Patent Office or any similar
or analogous proceeding before any similar competent authority responsible for
issuing patents (and including appeals from the same).

     14.4) Additional Representations and Warranties of Nastech. Nastech
further represents and warrants to Pharmacia, as of the Execution Date, as
follows:

	 	 	 
	a)	 	
Nastech is the exclusive owner of the Patent
Rights listed on Schedule A.

	 	 	 
	b)	 	
Nastech has not entered into any Third Party
License Agreements prior to the Execution Date.

48

 

	 	 	 
	c)	 	
To the best of Nastech’s knowledge, the
inception, development and reduction to practice of the
Nastech Owned Patents and Nastech Know-How has not
constituted or involved the misappropriation of trade secrets of
any Third Party.

	 	 	 
	d)	 	
To the best of Nastech’s knowledge, the
importation, manufacture, use and sale of the initial
Collaboration Product in the Field does not and will not
infringe the Patent Rights or other intellectual property
rights of any Third Party.

	 	 	 
	e)	 	
To the best of Nastech’s knowledge, none of the
Nastech Owned Patents is invalid or unenforceable. No claim
has been made against Nastech in writing asserting the
invalidity, misuse, unregisterability, unenforceability or
non-infringement of any of the Nastech Owned Patents or
challenging its right to use or ownership of any of the
Nastech Owned Patents or making any adverse claim of ownership
thereof.

	 	 	 
	f)	 	
Nastech has disclosed to Pharmacia all material
information in Nastech’s Control or otherwise known to Nastech
or its Affiliates with respect to the safety or efficacy of
Licensed Product in the Field, or any human risk factors
related thereto, as well as all pre-clinical and clinical data
related to Licensed Product for use in the Field, and no such
information and data has been falsified as to which Nastech is
aware or after a reasonable investigation should have been
aware.

	 	 	 
	g)	 	
Nastech has not granted, and during the period
between the Execution Date and the Effective Date will not
grant, any license to any Third Party relating to Nastech
Technology or Licensed Product for use in the Field.

     14.5) Additional Warranty by Pharmacia. Pharmacia represents and warrants
to Nastech, as of the Execution Date, that:

	 	 	 
	a)	 	
Pharmacia has, prior to the Execution Date,
provided Nastech with a complete and accurate copy of all
estimated and non-binding sales, marketing and distribution
plans, five- (5-) year sales forecasts, and regulatory rollout
plans prepared by Pharmacia in good faith and existing as of
the Execution Date with respect to Collaboration Product. It
is understood that such information has been provided to
Nastech solely for informational purposes and expressly
subject to the provisions of Section 14.6.

	 	 	 
	b)	 	
Pharmacia will not cause the Licenses to be
encumbered by any liens, security interests, or other rights
or claims of any Third Party.

49

 

     14.6) Disclaimer of Warranty. Except as expressly set forth in this
Article 14, neither Party has made, and nothing in this Agreement shall be
construed as, a warranty or representation (i) that any Collaboration Product
made, used, sold or otherwise disposed of under the Licenses is or will be free
from infringement of patents, copyrights, trade-marks, industrial design or
other intellectual property rights of any Third Party or (ii) regarding the
effectiveness, value, prospects for success (whether financial, regulatory or
otherwise), safety, non toxicity, patentability, or non-infringement of any
patent technology, Licensed Product, Collaboration Product or any information
or results provided by either Party pursuant to this Agreement. Each Party
explicitly accepts all of the same as experimental and for development
purposes, and without any express or implied warranty from the other Party.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE OTHER AGREEMENTS (as
such term is defined in Section 11.7 hereof), EACH PARTY EXPRESSLY DISCLAIMS,
WAIVES, RELEASES, AND RENOUNCES ANY REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS OR IMPLIED EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR
OTHERWISE, WHETHER WRITTEN OR ORAL, OR ARISING FROM COURSE OF PERFORMANCE,
COURSE OF DEALING OR USAGE OF TRADE, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO NONINFRINGEMENT, VALUE, ADEQUACY,
FREEDOM FROM FAULT, QUALITY, EFFICIENCY, SUITABILITY, CHARACTERISTICS OR
USEFULNESS, OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

     14.7) Notwithstanding Sections 14.6 or 17.13, nothing in this Agreement
limits or excludes any Party’s liability for fraud or for death or personal
injury caused by that Party’s own negligence.

ARTICLE 15

INDEMNIFICATION

     15.1) Indemnification.

	 	 	 
	a)	 	
Pharmacia. Pharmacia agrees to defend Nastech
and its Affiliates, at Pharmacia’s cost and expense, and will
indemnify and hold Nastech and its Affiliates and their
respective directors, officers, employees and agents (the
“Nastech Indemnified Parties”) harmless from and against any
losses, costs, damages, fees or expenses (including without
limitation reasonable attorneys’ fees) arising out of any
Third Party claim (i) relating to any breach by Pharmacia of
any of its representations, warranties or obligations pursuant
to this Agreement, (ii) relating to the gross negligence or
willful misconduct of Pharmacia, or (iii) for personal injury
or death caused by Pharmacia’s or its Sublicensees’
manufacture, marketing, use or sale of Collaboration Product,
except in each case to the extent such claims are attributable
to matters that are

	 

50

 

	 	 	 
	 	 	
indemnified by Nastech under Section
15.1(b) hereof or the Supply Agreement

	 	 	 
	b)	 	
Nastech. Nastech agrees to defend Pharmacia and
its Affiliates, at Nastech’s cost and expense, and will
indemnify and hold Pharmacia and its Affiliates and their
respective directors, officers, employees and agents (the“Pharmacia Indemnified Parties”) harmless from and against any losses, costs, damages, fees or expenses (including without
limitation reasonable attorneys’ fees) arising out of any
Third Party claim (i) relating to any breach by Nastech of any
of its representations, warranties or obligations pursuant to
this Agreement, (ii) relating to the gross negligence or
willful misconduct of Nastech, or (iii) for personal injury or
death caused by Nastech’s or its licensees’ manufacture,
marketing, use or sale of Licensed Product outside the Field,
except in each case to the extent such claims are attributable
to matters that are indemnifiable by Pharmacia under Section
15.1(a) hereof

     15.2)Indemnification Procedures.The Party seeking indemnification pursuant to this Article 15 (the “Indemnified Party”) shall inform the other
Party promptly of any claim for which it intends to seek indemnification and, at the other Party’s request, cooperate fully with the other Party in defending such claim. The Indemnified Party, at its expense, shall have the right to
participate in any related suit or proceeding, subject to the ultimate control of the other Party (“Indemnifying Party”). The Indemnifying Party shall have full control over the suit or proceedings, including the right to settle, through counsel of its choice who is reasonably acceptable to the Indemnified Party; provided, however, the Indemnifying Party will not, absent the consent
of the Indemnified Party (which consent will not be unreasonably withheld), consent to the entry of any judgment or enter into any settlement that (1) provides for any relief other than the payment of monetary damages for which the Indemnifying Party shall be solely liable and (2) where the claimant or plaintiff does not release the Indemnified Party from all liability in respect
thereof. In no event shall a Party be liable pursuant to this Article 15 for any claims that are compromised or settled without its prior written consent.

ARTICLE 16

CONDITIONS

		
	 	16.1) HSR Filing. To the extent necessary, each of Nastech and Pharmacia
shall, within thirty (30) Business Days after the Execution Date, file
with the Federal Trade Commission and the Antitrust Division of the U.S.
Department of Justice, any notification and report form required of it in
the reasonable opinion of both Parties under the HSR Act with respect to
the transactions contemplated hereby. The Parties shall cooperate with
one another to the extent necessary in the preparation of any
notification and report form required to be filed under the HSR Act.
Each Party shall be responsible for its own costs, expenses, and filing
fees associated with any filing under the HSR Act.

51

 

		
	 	16.2) HSR-Related Definitions. As used in Section 16.1, the following
terms have the following meanings:

	 	 	 
	a)	 	
“DOJ” means the United States Department of
Justice.

	 	 	 
	b)	 	
“FTC” means the United States Federal Trade
Commission.

	 	 	 
	c)	 	
“HSR Act” means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (15 U.S.C. Sec. 18a), and
the rules and regulations promulgated thereunder.

	 	 	 
	d)	 	
“HSR Clearance Date” means the earlier of (i) the
date on which the FTC shall notify Nastech and Pharmacia of
early termination of the applicable waiting period under the
HSR Act or (ii) the day after the date on which the applicable
waiting period under the HSR Act expires.

	 	 	 
	e)	 	
“HSR Filing” means filings by Pharmacia and
Nastech with the FTC and the Antitrust Division of the DOJ of
a Notification and Report Form for Certain Mergers and
Acquisitions (as that term is defined in the HSR Act) with
respect to the matters set forth in this Agreement, together
with all required documentary attachments thereto.

ARTICLE 17

MISCELLANEOUS

     17.1) Entire Agreement; Amendments. This Agreement, the Other Agreements,
and the Exhibits and Schedules referred to each such agreement, constitute the
entire agreement between the Parties with respect to the subject matter hereof,
and supersede all previous understandings, arrangements and agreements with
respect to the subject matter hereof, whether written or oral. The Parties
acknowledge that the Exhibits and Schedules referred to in this Agreement and
the Other Agreements are being simultaneously delivered by the Parties on or
before the Execution Date and are incorporated herein by reference. Any
amendment or modification to this Agreement shall be made in writing signed by
both Parties.

     17.2) Notices. Any consent or notice required or permitted to be given or
made under this Agreement by one of the Parties to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery or courier), by a next Business Day delivery service of a
nationally recognized overnight courier service or by courier, postage prepaid
(where applicable), addressed to such other Party at its address or facsimile
number indicated below, or to such other address or facsimile number as the
addressee shall have last furnished in writing to the addressor in accordance
with this Section 17.2 and shall be effective upon receipt by the addressee.

52

 

	 	 	 
	If to Nastech:	 	
Nastech Pharmaceutical Company, Inc.

45 Adams Avenue

Hauppauge, New York 11788

Attention: Office of the President

Facsimile No.: (631)-273-0252

	 	 	 
	If to Pharmacia:	 	
Pharmacia & Upjohn Company

100 Route 206 North

Peapack, New Jersey 07977

Attention: Vice President and Associate General Counsel

Facsimile No.: (908) 901-1862

	 	 	 
	with a copy to:	 	
Pharmacia & Upjohn Company

100 Route 206 North

Peapack, New Jersey 07977

Attention: Senior Vice President — Global Licensing

Facsimile: (908) 901-1813

     17.3) Force Majeure. Neither Party shall be held liable or responsible to
the other Party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term of this
Agreement to the extent such failure or delay is caused by or results from
causes beyond the reasonable control of the affected Party, provided, however,
that the Party so affected shall use Commercially Reasonable and Diligent
efforts to avoid or remove or mitigate such causes of non-performance, and
shall continue performance with reasonable dispatch whenever such causes are
removed. Each Party shall provide the other Parties with prompt written notice
of any delay or failure to perform that occurs by reason of force majeure. The
Parties shall mutually seek a resolution of the delay or the failure to perform
in good faith.

     17.4) Compliance with Export Regulations. Neither Party shall export any
technology licensed to it by the other Party under this Agreement except in
compliance with applicable export Laws.

     17.5) Choice of Law; Jurisdiction. This Agreement shall be governed and
interpreted in all respects under the laws of the State of New York, without
regard to principles of conflict of laws, except matters of intellectual
property law, which shall be determined in accordance with the intellectual
property laws relevant to the intellectual property in question. The
provisions of the United Nations Convention on Contracts for the International
Sale of Goods shall not apply to this Agreement or the Supply Agreement or any
subject matter hereof or thereof. Except as expressly provided in this Section
17.5 with respect to interim equitable relief, and subject to the provisions of
Article 13, any action or proceeding arising out of or relating to this
Agreement, or any of the transactions contemplated hereby, shall be brought
exclusively in the courts of the State of New York, or the United States
District Court for the Southern District of New York, located in the Borough of
Manhattan, City of New York, and the respective appellate courts with respect
thereto, and the Parties hereby irrevocably consent to the personal
jurisdiction and venue of the foregoing courts with respect to all such actions
and proceedings and waive all defenses

53

 

inconsistent with the terms of this
Section 17.5. Each Party hereby further irrevocably waives, to the fullest
extent permitted by applicable Law, all rights to trial by jury in any such
action or proceeding, whether based upon contract, statute, tort or otherwise.
The Parties hereby acknowledge that a breach of its obligations may cause
irreparable harm and that damages as a remedy for any such breach may be
inadequate. The Parties hereby agree that, in the event of any such breach, in
addition to all other available remedies under this Agreement (which, except as
and to the extent otherwise expressly herein provided shall be cumulative and
not exclusive of any rights or other remedies in equity or in law), the
non-breaching Party shall have the right to seek interim equitable relief in an
appropriate forum to enforce such obligations.

     17.6) Assignment. This Agreement may not be assigned or otherwise
transferred by any Party without the consent of the other Party, such consent
not to be unreasonably withheld, conditioned or delayed; provided, however,
that either Nastech or Pharmacia may, without such consent, assign its rights
and obligations under this Agreement (a) to any Affiliate, provided such
interest shall be retransferred to the relevant Party if such entity ceases to
be an Affiliate of such Party, and provided further that the assigning Party
shall guarantee the performance of such Affiliate, (b) in connection with a
merger, consolidation or sale of substantially all of such Party’s assets to a
Third Party of good financial standing; provided, however, that such Party’s
rights and obligations under this Agreement shall be assumed by its successor
in interest in any such transaction and shall not be transferred separate from
all or substantially all of its other business assets, including without
limitation those business assets that are the subject of this Agreement or (c)
if a Party or its Affiliates divests a Collaboration Product in order to comply
with the Law or the requirements of any governmental agency or authority as a
result of merger or acquisition, provided,that (i) the assignee shall be of
good financial standing, and (ii) [*]. In cases where Pharmacia is
required to obtain Nastech’s consent to a proposed assignment or other transfer
pursuant to the provisions of this Section 17.6, it shall not be unreasonable
for Nastech to withhold such consent if the proposed Third Party assignee is
engaged in the development, marketing, sales, or other commercialization of [*]
in the Field. Any permitted successor, assignee or other transferee hereunder
shall assume all rights and obligations of its predecessor, assignor or other
transferor under this Agreement; accordingly, all references to the
predecessor, assigning or transferring Party shall be deemed references to the
successor, assignee or transferee to whom the Agreement is so transferred or
assigned. Any purported assignment or other transfer not in compliance with
this Section 17.6 will be null and void.

     17.7) Consequences of a Triggering Event.

	 	 	 
	a)	 	
If a Triggering Event occurs at any time during
the period from the Execution Date until [*], Pharmacia shall
promptly notify Nastech in writing. Upon the

	 	 	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

54

 

	 	 	 
	 	 	written request
of Nastech delivered to Pharmacia [*], the Parties shall
promptly meet to discuss in good faith [**]

     17.8) Non-Solicitation. After the Execution Date and until the expiration
or termination of this Agreement, neither Party or its Affiliates shall solicit
any employee of the other Party or its Affiliates with whom it has come in
contact or interacted for the purposes of the performance of this Agreement to leave the employment of the other Party
and accept employment with the first Party.

     17.9) Joint Committees. Members of the Development Oversight Committee,
the Commercialization Committee and any subcommittees thereof shall be, and
shall remain, employees of Nastech or Pharmacia, as the case may be.

     17.10) No Strict Construction. This Agreement has been prepared jointly
and shall not be strictly construed against either Party.

     17.11) Headings. The captions or headings of the sections or other
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.

     17.12) Severability. If any provision hereof should be held invalid,
illegal or unenforceable in any respect in any jurisdiction, the invalid,
illegal or unenforceable of one or several provisions of this Agreement shall
not affect the validity of this Agreement as a whole. The Parties shall make a
good faith effort to replace the invalid or unenforceable provision with a
valid one which in its economic effect is most consistent with the invalid or
unenforceable one. If the invalid, illegal or unenforceable provisions are of
such essential importance to this Agreement that it is to be reasonably assumed
that the Parties would not have entered into this Agreement without the
invalid, illegal or unenforceable provisions, the Parties shall negotiate in
good faith an orderly termination of this Agreement consistent with the
principles set out in Article 12.

     17.13) No Consequential Damages. UNLESS RESULTING FROM A PARTY’S WILLFUL
MISCONDUCT, NEITHER PARTY HERETO WILL BE LIABLE FOR SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT OR THE EXERCISE OF ITS
RIGHTS OR PERFORMANCE OF ITS OBLIGATIONS HEREUNDER, INCLUDING WITHOUT
LIMITATION LOST PROFITS, ANTICIPATED PROFITS, LOST GOODWILL, LOST REVENUE, LOST
PRODUCTION, LOST CONTRACTS AND LOST OPPORTUNITY, ARISING FROM OR RELATING TO
ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES.
NOTHING IN THIS SECTION 17.13 IS INTENDED TO LIMIT OR RESTRICT ANY PAYMENT
OBLIGATION OR THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY.

	 	 	[**] Information contained on approximately three pages has been omitted and
filed separately with the Securities and Exchange Commission. Confidential
Treatment with respect to such information has been requested.

55

 

     17.14) General Provisions.

	 	 	 
	a)	 	
Any amendment or waiver of this Agreement shall
not be binding on the Parties unless set out in writing,
expressly to amend or waive this Agreement, and signed by each
of the Parties.

	 	 	 
	b)	 	
No person or entity other than Nastech, Pharmacia
or their respective Affiliates, Sublicensees and permitted
assignees hereunder shall be deemed an
intended beneficiary hereunder or have any right to enforce any
obligation of this Agreement.

	 	 	 
	c)	 	
A waiver (whether express or implied) by one of
the Parties of any of the provisions of this Agreement or of
any breach of or default by the other Party in performing any
of those provisions shall not constitute a continuing waiver
and that waiver shall not prevent the waiving Party from
subsequently enforcing any of the provisions of this Agreement
not waived or from acting on any subsequent breach of or
default by the other Party under any of the provisions of this
Agreement.

	 	 	 
	d)	 	
Each Party undertakes, at the request and cost of
the other, to execute all documents and to do all other acts,
which may be reasonably necessary to give full effect to this
Agreement.

	 	 	 
	e)	 	
Each Party shall pay its costs and expenses
incurred by it in connection with the entering into and
completion of this Agreement.

	 	 	 
	f)	 	
It is expressly agreed that for tax, legal or
other purposes (i) this Agreement or any portion of this
Agreement shall not be considered to be a partnership
agreement, and (ii) the relationship between the two Parties
shall not constitute a partnership, joint venture or agency.
Neither Nastech nor Pharmacia shall have the authority to make
any statements, representations or commitments of any kind, or
to take any action, which shall be binding on the other,
without the prior consent of the other Party to do so.

	 	 	 
	g)	 	
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.

     [17.15) Employees and Agents. Each Party shall be responsible for all
acts, errors and omissions of its Affiliates, and in the case of Pharmacia its
Sublicensees, as well as such Party’s and its Affiliates’ employees acting
within the scope of their employment, in each case which relate to this
Agreement and which would constitute a breach of this Agreement if done
directly by such Party..

     17.16) Patent Markings on Collaboration Product. All Units of
Collaboration Product offered for sale by Pharmacia or any of its Sublicensees,
and all packaging materials

56

 

used in connection therewith, shall feature a clear
and conspicuous display of all patent and other restrictive and proprietary
notices and legends applicable to the Nastech Technology in conformity with
customary industry practice and applicable Law. All such notices shall include
the number of any applicable Patents and identify Nastech (or where a Joint
Patent, Nastech and Pharmacia) or its designee as the Patent owner.

     17.17) Whole Agreement. Each Party acknowledges that in entering into
this Agreement it has not relied on any representation, warranty, collateral
contract or other assurance
(except those expressly set out in this Agreement or the Other Agreements
together with the Exhibits and Schedules) made by or on behalf of any other
Party before the signature of this Agreement. Each Party waives all rights and
remedies which, but for this Section, might otherwise be available to it in
respect of any such representation, warranty, collateral contract or other
assurance..

57

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the date first set forth above.

	 
	PHARMACIA & UPJOHN COMPANY
	 
	By: 
                                                               
                   
	       Christopher Coughlin

       Executive Vice President and
       Chief Financial Officer
	 
	NASTECH PHARMACEUTICAL COMPANY, INC
	 
	
By:                            
                                
                      
	 
	Name:                                             
                                
	 
	Title:
                                                                              
	 
	 

58

 

SCHEDULE A

NASTECH OWNED PATENTS

     Intranasally Delivered Apomorphine Technology & Patents and/or Applications
Technology

Patent Portfolio of Nastech

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Title
	 	Inventor(s)	 	Application No	 	Filing Date	 	Priority
	 	[*]
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	 	[*]
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	 	[*]
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	 	[*]
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	 	[*]
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	 	[*]
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	 	[*]
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 
	 	[*]
	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 	 	 	[*]	 

	 	 	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

 

 

SCHEDULE B

TARGET PRODUCT PROFILE

[*]

	 	 	[*] Information contained on approximately one and one-quarter pages
(beginning on this page) has been omitted and filed separately with the
Securities and Exchange Commission. Confidential Treatment with respect to
such information has been requested.

 

 

SCHEDULE 2.4

[*]

	 	 	[*] Information contained on approximately two pages (beginning on this page)
has been omitted and filed separately with the Securities and Exchange
Commission. Confidential Treatment with respect to such information has been
requested.

 

 

SCHEDULE 4.3

[*]

	 	 	[*] Information contained on approximately two pages (beginning on this page)
has been omitted and filed separately with the Securities and Exchange
Commission. Confidential Treatment with respect to such information has been
requested.

 

 

SCHEDULE 4.5

ONGOING PRE-CLINICAL AND CLINICAL STUDIES]

[*]

	 	 	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

 

 

SCHEDULE 9.1

EXAMPLE OF ROYALTY CALCULATION

[*]

	 	 	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

 

 

SCHEDULE 12.5

Assumptions:

	 	 	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.ex10-2

 

EXHIBIT 10.2

[*Confidential treatment has been requested as to certain portions of this
document. Each such portion, which has been omitted herein and replaced with
an asterisk [*], has been filed separately with the Securities and Exchange
Commission.]

SUPPLY AGREEMENT

This Supply Agreement is made effective as of this 1st day of February, 2002
and between Pharmacia & Upjohn Company, a corporation organized under the laws
of the State of Delaware and having a place of business at 100 Route 206 North,
Peapack, New Jersey 07977 (“Pharmacia”) and Nastech Pharmaceutical Company,
Inc., a corporation organized under the laws of the State of Delaware and
having a place of business at 45Adams Avenue, Hauppauge, New York 11788
(“Nastech”) (each individually a “Party” and collectively the “Parties”).

WITNESSETH:

WHEREAS, Pharmacia is engaged and has experience in the Development and
Commercialization of pharmaceutical products and wishes to Develop and
Commercialize Product (as hereinafter defined) pursuant to the License
Agreement; and

WHEREAS, Pharmacia wishes to purchase Product from Nastech; and

WHEREAS, Nastech has the technical and scientific experience and expertise
necessary to perform manufacturing, packaging, analytical testing and/or
quality assurance services for the manufacturing and packaging of such Product,
and handle materials associated with manufacture of such Product in a safe and
environmentally sound manner; and

WHEREAS, Pharmacia desires Nastech to perform such services as set forth herein
and manufacture such Product for Pharmacia, and Nastech desires to perform such
services and manufacture such Product for sale to Pharmacia, all on the terms
and conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth
herein, the parties agree as follows:

1.     Definitions

Capitalized terms used in this Agreement but not defined below will have the
meanings for such capitalized terms set forth in the License Agreement. The
following terms, whether used in the singular or plural, shall have the
meanings assigned to them below for purposes of this Agreement:

“Act” shall mean the United States Federal Food, Drug and Cosmetics Act, as
amended.

“Affiliate” shall mean any corporation, company, partnership, joint venture
and/or firm which controls, is controlled by, or is under common control with a
specified person or entity. For purposes of this definition, “control” shall
be presumed to exist if one of the following conditions is

 

 

met: (a) in the case of corporate entities, direct or indirect ownership of at
least fifty percent (50%) of the stock or shares having the right to vote for
the election of directors, and (b) in the case of non-corporate entities,
direct or indirect ownership of at least fifty percent (50%) of the equity
interest with the power to direct the management and policies of such
non-corporate entities.

“Agreement” shall mean this Supply Agreement and any Schedules appended hereto,
as may be amended in writing from time to time.

“API” shall mean the active pharmaceutical ingredient contained in the Product.

“cGMP” shall mean all laws, guidelines and regulations applicable to the
Manufacture of Product including the current Good Manufacturing Practice
regulations as promulgated under the Act at 21 CFR (chapters 210, 211, 600 and 610), as the same may be amended or re-enacted
from time to time.

“COA” shall mean Certificate of Analysis to be delivered by Nastech with each
lot of Product.

“Delivery” shall have the meaning set forth in Section 5.1 hereof.

“Effective Date” shall mean the Effective Date of the License Agreement.

“Facility” shall mean Nastech’s facility in Hauppauge, New York, or such other
facility as may be agreed to in writing by the Parties, used in the Manufacture
of the Product.

“FAMC” shall mean the fully allocated manufacturing cost to Manufacture Product
determined in accordance with Schedule 1 hereto.

“FDA” shall mean the United States Food and Drug Administration or any
successor entity thereof.

“Firm Order” shall mean a binding commitment in writing made by Pharmacia to
purchase Product in accordance with Article 6.

“License Agreement” shall mean the Collaboration and License Agreement, dated
as of the date hereof, by and between the Parties.

“Manufacture” shall mean all operations of Nastech in the formulation, filling,
packaging, warehousing, quality control testing (including in-process,
in-process release and stability testing), and releasing of Product. For
avoidance of doubt, the term “Manufacture” shall not include labeling, shipping
and distribution of Product, which shall be the responsibilities of Pharmacia.

“Non-Process Related Impurities” shall mean any substance that would not be
present as a result of the process used to Manufacture Product in compliance
with cGMP.

“Placebo” shall mean the Product without its API or any other active
pharmaceutical ingredient to be used in clinical trials in connection with the
Development of the Product.

“Price” shall have the meaning set forth in Section 4.1 hereof.

“Product” shall mean the pharmaceutical product in its finished packaged form
as described in Schedule 2 attached hereto and Section 2.2 hereof with respect
to labeling, and as may be amended

Page 2

 

by the Development Oversight Committee in accordance with the License
Agreement.

“Quality Agreement” shall mean the quality agreement governing each Party’s
responsibilities in connection with the Manufacture, labeling and shipping of
the Product, as shall be entered into by and between the Parties promptly after
the Execution Date and as may be amended by the requirements of cGMP or by
mutual written agreement of the Parties.

“Quarter” shall mean the period of three consecutive calendar months ending
March 31, June 30, September 30 and December 31.

“Specifications” shall mean the specifications and quality assurance and other
testing for the Product which will be initially agreed to by the Parties and
attached hereto as Schedule 4, and made a part hereof, as determined in
accordance with the analytical methodology set forth therein. The
Specifications may be amended in writing from time to time by the Development
Oversight Committee in accordance with the License Agreement.

“Term” shall have the meaning set forth in Section 3.1 hereof.

“Unit” shall mean the unit of finished packaged form of the Product as
determined by the Development Oversight Committee in accordance with the
License Agreement.

2        Supply of Product and Placebo

2.1     During the Term, Nastech shall Manufacture and supply Product to Pharmacia
for purposes of the Development and Commercialization of the Product, including
samples of the Product for promotional purposes, and Pharmacia shall purchase
Product and samples from Nastech, subject to the terms and conditions set forth
herein and in the License Agreement. During the Term, Nastech shall
Manufacture and supply Placebo to Pharmacia for purposes of Development of the
Product, and Pharmacia shall purchase Placebo from Nastech, subject to the
terms and conditions set forth herein and in the License Agreement. The
Parties acknowledge that the capacity of the Facility to Manufacture Product
and Placebo is [*] Units in any calendar year. Accordingly, Nastech shall not
be required to Manufacture and supply an aggregate amount of Products and
Placebo greater than: (a) such capacity during any calendar year, or (b) [*]
Units in any Quarter.

2.2     For the Products to be Commercialized, Nastech shall supply unlabelled
Products and Pharmacia shall be responsible for the labeling of such Products.
For the Products and Placebos to be used in the Development, Nastech shall be
responsible for the labeling of such Products and Placebos if Pharmacia so
requests in writing.

2.3     Nastech shall not subcontract any of the manufacturing, packaging, testing,
or release of Product unless prior written authorization is obtained from
Pharmacia, which authorization shall not unreasonably be delayed, conditioned
or withheld; provided, however, Nastech may purchase its

[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

Page 3

 

requirements of API from a Third Party without the prior authorization of
Pharmacia. In the event the Commercialization Committee determines that
efficiencies may be gained by (i) changing any of the suppliers of API or any
other raw material used in the Manufacture of the Product or (ii)
Pharmacia’s purchasing all of Nastech’s requirements of API or other raw
materials used in the Manufacture of the Product and providing such API or raw
materials to Nastech free of charge, Nastech and Pharmacia shall comply with
the determination of the Commercial Committee as soon as practicable. In the
event the Commercialization Committee determines to have Pharmacia provide API
or other raw materials used in the Manufacture of Product to Nastech free of
charge, the Parties shall amend this Agreement to include usual and customary
provisions of a toll manufacturing agreement, including without limitation
Nastech’s responsibilities for loss of API or other raw materials in excess of
the standard yield to be agreed by the Parties.

3        Term and Termination

3.1     Unless terminated sooner pursuant to the terms hereof, the term of this
Agreement shall commence on the Effective Date and shall continue until the
fifth anniversary of the First Commercial Sale (“Term”). If Pharmacia requests
in writing that Nastech continue to Manufacture and supply Product (such
written notice to be delivered not less than twelve (12) months prior to the
expiration of the initial Term or any extended term of this Agreement), Nastech
shall provide to Pharmacia its proposed Price to Manufacture and supply Product
within thirty (30) days after Nastech’s receipt of such written notice. If the
Parties agree in writing on the Price, Nastech shall continue to Manufacture
and supply Product to Pharmacia, and Pharmacia shall continue to purchase
Product from Nastech at such Price, for a twelve (12) month period after the
expiration of the initial Term or any extended term of this Agreement subject
to the terms and conditions of this Agreement. If the Parties do not agree on
Price, Nastech shall have no further obligation to Manufacture and supply
Product, in which event Pharmacia will become solely responsible for the
Manufacture (and to have Manufactured) and supply of Collaboration Product.

3.2     This Agreement may be terminated at any time upon mutual written agreement
between the Parties.

3.3     This Agreement shall automatically terminate effective upon the effective
date of the termination of the License Agreement for any reason.

3.4     This Agreement may be terminated by either Party in the event of the
material breach or default by the other Party of the terms and conditions
hereof; provided however, the non-defaulting Party shall first give to the
defaulting Party written notice of the proposed termination of this Agreement,
specifying the grounds therefor. Upon receipt of such notice, the defaulting
Party shall have [*] to respond by curing such material breach or default. If
the defaulting Party fully cures such stated material breach or default within
the [*] period, this Agreement shall continue in full force and effect. If the
defaulting Party fails to fully cure such stated material breach or default
within the [*] period, the non-defaulting Party may terminate this Agreement
effective upon delivery of a written notice to the defaulting Party at any time
before the breach or default is cured. Notwithstanding the foregoing, Nastech
may not terminate this Agreement for Pharmacia’s failure to

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

Page 4

 

comply with the warranties set forth in Section 7.2 hereof, provided that this
restriction shall not affect any other rights or remedies which are available
to Nastech under this Agreement.

3.5     This Agreement may be terminated by a Party upon written notice to the
other in the event that (i) the other Party shall make an assignment for the
benefit of its creditors, file a petition in bankruptcy, petition or apply to
any tribunal for the appointment of custodian, receiver or any trustee for it
or a substantial part of its assets, or shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (ii) if there shall have been filed against the other Party any such
bona fide petition or application, or any such proceeding shall have been
commenced against it, in which an order for relief is entered or which remains
undismissed for a period of [*] ; or (iii) if the other Party by any act or
omission shall indicate its consent to, approval of or acquiescence in any such
petition, application or proceeding or order for relief or the appointment of a
custodian, receiver or trustee for it or any substantial part of its assets, or
shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of [*]; or (iv) anything analogous to any of the
foregoing occurs under any Law respecting the liquidation, relief or
rehabilitation of debtors in any applicable jurisdiction. Termination shall be
effective upon the date specified in such notice.

3.6     Termination of this Agreement pursuant to this Article 3 shall not affect
any other rights or remedies which may be available to the non-defaulting
Party. Termination of this Agreement for any reason shall not relieve the
other Party of any liability or from any obligations which accrued under this
Agreement prior to such termination. In addition, termination of this Agreement
shall not affect the terms and conditions of the License Agreement, except
those terms and conditions contained in Article 6 of the License Agreement
relating to Nastech’s Manufacture of the Product.

3.7     The following provisions shall survive termination of this Agreement:
Section 3.6, and Articles 7, 8, 9, 10 and 12.

4        Price and Payment

4.1     The price for Product Manufactured and supplied hereunder shall be
determined in accordance with Schedule 4.1 (the “Price”).

4.2     Pharmacia shall, within thirty (30) days after its receipt of invoice from
Nastech, pay the applicable Price for each delivery of Product; provided,
however, Nastech shall not deliver the invoice prior to the date of Delivery.
With each Delivery, Nastech shall provide Pharmacia with a complete and
accurate COA and any other process records required to be delivered to
Pharmacia pursuant to the Quality Agreement, and Pharmacia shall have the right
to review and approve such COA and other process records, and to inspect and
accept (or to reject based upon any failure by Nastech to meet any of the
warranties specified in Section 7.1).

4.3     Except as provided in Sections 7.4 and 7.5, if Pharmacia disagrees for any
reason with the amount of any invoice submitted by Nastech, Pharmacia shall
notify Nastech in writing of such

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

Page 5

 

disagreement within thirty (30) days after receipt of such invoice, and the
Parties shall promptly attempt in good faith to amicably resolve such
disagreement. If the Parties have not resolved their disagreement within
thirty (30) days, the disagreement shall be resolved in accordance with the
provision of Section 12.3 of this Agreement.

4.4     In the event Pharmacia rejects a Delivery of Product after payment of such
Product, Pharmacia shall have the right to setoff the applicable amount against
any amount due to Nastech when and if it is determined pursuant to Section 7.4
or 7.5 that rejection of such Delivery is appropriate.

4.5     Pharmacia shall be responsible for any and all taxes due or payable on any
sums paid to Nastech under this Agreement other than taxes on Nastech’s net
income.

4.6     If Pharmacia fails to pay in full on or before the date the amount is due
any Price or other amount that Pharmacia is required to pay under this
Agreement, Pharmacia shall pay to Nastech (or its designee), on demand,
interest at a per annum rate equal to [*] to be assessed from the first day
after payment of the amount in question first became due, and thereafter
calculated and payable monthly on the last day of each month, not in advance.

5        Delivery, Title, Risk of Loss

5.1     The terms of delivery for the Product shall be F.C.A. (Incoterms 2000) the
Facility (the “Delivery”).

5.2     Title and risk of loss to the Product sold hereunder shall pass to
Pharmacia upon Delivery in accordance with Section 5.1.

5.3     Delivery of at least ninety percent (90%) and no more than one hundred ten
percent (110%) of the quantities of Products specified in a Firm Order on or
prior to the date specified in such Firm Order shall be deemed satisfactory
fulfillment of such Firm Order. Pharmacia shall have no obligation to accept
Delivery of that quantity of Products which is in excess of one hundred ten
percent (110%) of the quantities of Product specified in a Firm Order.

6        Forecasts and Firm Orders

6.1     Development Stage. During the Development of the Product, Pharmacia (i)
shall not be required to submit any forecasts of its required quantities of the
Product to be used in such Development and (ii) shall submit Firm Orders no
less than sixty (60) days prior to its requested date of Delivery.

6.2     Commercial Forecasts. (a) In order to assist Nastech in its production
planning, in the period prior to the First Commercial Sale, Pharmacia shall, as
soon as estimated requirements of Units of Products for Commercialization
becomes available but in any event no later than six (6) months

	[*] Certain portions of this page have been omitted and filed separately with
the Securities and Exchange Commission. Confidential Treatment with respect to
such omitted portions has been requested.

Page 6

 

prior to the first requested delivery of Products for Commercialization, submit
to Nastech such estimated requirements (the “Prelaunch Forecast”). The
Prelaunch Forecast shall provide monthly estimated requirements of Units of
Products for Commercialization for a period of twelve (12) calendar months
commencing with the calendar month in which the first Delivery of Products for
Commercialization is requested.

         (b)  In order to assist Nastech in its production planning, no later than
fifteen (15) days prior to the commencement of the calendar month in which the
first Delivery of Products for Commercialization is requested, Pharmacia shall
update the Prelaunch Forecast (the “Forecast”). For example, if Pharmacia
submits its Prelaunch Forecast in January for delivery in July, Pharmacia shall
be required to submit its next estimated requirements no later than June 15.
The Forecast shall provide monthly estimated requirements of Units of Products
for Commercialization for a period of eighteen (18) calendar months commencing
on the calendar month immediately following the submission of the Forecast.
Pharmacia shall submit to Nastech the updated Forecast no later than the
fifteenth (15th) of each calendar month thereafter during the Term.

6.3     Commercial Firm Orders. Pharmacia shall purchase (i) all of the quantities
of Product set forth in the first three (3) calendar months of the Prelaunch
Forecast and each succeeding Forecast and (ii) at least fifty percent (50%) and
not more than one hundred fifty percent (150%) of the quantities of Product set
forth in the next three (3) calendar months of the Prelaunch Forecast and each
succeeding Forecast. Nastech shall use Commercially Reasonable and Diligent
Efforts to comply with unplanned changes in Firm Orders. For Deliveries of
Products for Commercialization, Pharmacia shall submit Firm Orders in
quantities of Product equivalent to a Manufacturing lot or multiples thereof.
In the event Pharmacia fails to submit a Firm Order for a calendar month during
the Term, Nastech shall Deliver to Pharmacia the quantities of Product set
forth in the most recent Forecast for such calendar month.

6.4     Timing of Delivery; Inability to Supply. Nastech shall satisfy each Firm
Order on or before the date specified in such Firm Order by Pharmacia;
provided, however, no deliveries of Product shall be made more than five (5)
Business Days in advance of the date specified therefor in a Firm Order without
Pharmacia’s approval. In the event Nastech anticipates that it will not be
able to deliver the quantities of Product set forth in a Firm Order (whether
during Development or Commercialization) on or before the requested Delivery
date, Nastech shall promptly notify Pharmacia. Such notice shall describe in
reasonable detail the reasons for the inability to supply, the proposed
remedial measures and the date such inability is expected to end.

6.5     Form of Firm Order. A Firm Order will be made in the form of a purchase
order generally used by Pharmacia; provided that such purchase order shall at a
minimum specify the requested Delivery date, the quantities of Product ordered
and any required shipping terms; provided further that the terms and conditions
of this Agreement shall be controlling over any terms and conditions included
in any purchase order used in ordering Product, sales acknowledgement, or any
invoice used for billing purposes. Any term or condition of such purchase order
or sales acknowledgement or invoice which is different from or contrary to the
terms and conditions of this Agreement shall be void.

7        Warranties

7.1     Nastech warrants to Pharmacia that all Product Delivered to Pharmacia will,
as of the date of Delivery: (i) meet the Specifications, (ii) shall have been
Manufactured in conformity with all

Page 7

 

applicable cGMP requirements and with the Specifications, and applicable rules
and regulations relating to the environment and health and safety, (iii) shall
have been Manufactured in the Facility, (iv) shall not be adulterated within
the meaning of the Act or any similar law of any other jurisdiction, (v) shall
not be an article which may not, under the provisions of Section 404 and 505 of
the Act, or similar law of any jurisdiction, be introduced into interstate
commerce, and (vi) shall be free from Non-Process Related Impurities.

7.2     Pharmacia warrants to Nastech that all Product Delivered to Pharmacia
shall, beginning with the date of Delivery, (i) be transported, stored and
distributed in conformity with all applicable cGMP requirements and with the
Specifications, including storage conditions and applicable rules and
regulations relating to the environment and health and safety, (ii) shall not
be misbranded within the meaning of the Act or any similar law of any other
jurisdiction, and (iii) shall not be an article which may not, under the
provisions of Section 404 and 505 of the Act, or similar law of any
jurisdiction, be introduced into interstate commerce.

7.3     In the event that any Product does not meet any of the warranties set forth
in Section 7.1, Nastech shall, at Pharmacia’s election, either (i) promptly
replace the non-conforming Product at Nastech’s expense, (ii) if the Parties
agree, make such modification as may be effective to render the Product in
conformity with such warranties, or (iii) shall promptly refund the payments by
Pharmacia for such non-conforming Product. In the event that any Product does
not meet any of the warranties set forth in Section 7.2, Pharmacia shall be
responsible for all costs and expenses in connection with the replacement of
such non-conforming Product.

7.4     If Pharmacia claims that any Product did not at the time of Delivery meet
the warranty specified in Section 7.1(i), Pharmacia shall notify Nastech within
sixty (60) days after receipt of such Delivery. Upon Nastech’s receipt of such
notice, the Parties shall commence an investigation to amicably resolve the
issue. If Pharmacia and Nastech are unable to agree as to whether Product met
the warranty set forth in Section 7.1(i) within thirty (30) days after the
commencement of such investigation, the Parties shall cooperate to have a
sample of the Product in dispute retained by Nastech and a sample of the
Product received by Pharmacia analyzed by an independent testing laboratory of
recognized repute selected by Pharmacia and approved by Nastech. Such
independent laboratory shall conduct its testing in accordance with the methods
set forth in Schedule 4 or such other tests as the Parties agree are
appropriate. The results of such laboratory testing shall be final and binding
on the Parties on the issue of compliance of the Product with such warranty. If
the Product as Delivered by Nastech is determined to meet such warranty, then
Pharmacia shall bear the cost of the independent laboratory testing and make
payment to Nastech of any amounts that remain payable for the Product in
accordance with this Agreement. If the Product as Delivered by Nastech is
determined not to have met such warranty, then Nastech shall bear the cost of
laboratory testing, and Nastech shall comply with Section 7.3. Failure by
Pharmacia to notify Nastech within sixty (60) days after its receipt of
Delivery of Product which does not meet the warranty specified in Section
7.1(i) shall be a waiver of the rights or remedies available to Pharmacia under
this Section 7.4 but shall not affect any other rights or remedies available to
Pharmacia under this Agreement.

7.5     If Pharmacia claims that any Product did not at the time of Delivery meet
the warranties specified in Sections 7.1(ii) through (vi), Pharmacia shall
notify Nastech as soon as practicable after its discovery of such
nonconformity. If Pharmacia and Nastech are unable to agree as to whether or
not such Product met such warranties, the dispute shall be settled in
accordance with Section 12.3 hereof. If the Product is determined not to have
met any such warranties, Nastech shall comply with

Page 8

 

Section 7.3 hereof in addition to any other remedies available to Pharmacia.
7.6 Nastech covenants that the Facility will be approved by the Regulatory
Authorities for the Manufacture of the Product provided that Pharmacia executes
all documents and instruments, and performs all other acts, reasonably
requested by Nastech and required to obtain such approval. Nastech further
represents that it does not, and covenants that it will not, knowingly use in
any capacity the services of any person, or organization that employs any
person, that has been debarred under section 306 of the Act in connection with
the Manufacture of the Product.

7.6     Any Product which is determined not to have met the warranties under
Section 7.1 and which is in Pharmacia’s control shall, at Nastech’s option and
subject to the provisions of Section 7.3, either be returned to Nastech at
Nastech’s expense, or shall be destroyed pursuant to Nastech’s instructions and
with Pharmacia’s approval, which approval shall not be unreasonably withheld,
at Nastech’s expense.

8        [INTENTIONALLY OMITTED]

9        Confidentiality

Page 9

 

9.1     Each Party shall comply with the provisions set forth in Section 11 of the
License Agreement with respect to Confidential Information disclosed by or on
behalf of a Party in the performance of this Agreement.

10        Indemnification

10.1     Each Party (the “Indemnifying Party”) agrees to defend the other Party and
its Affiliates, at the Indemnifying Party’s cost and expense, and will
indemnify and hold such other Party and its Affiliates and their respective
directors, officers, employees and agents (the “Indemnified Parties”) harmless
from and against any losses, costs, damages, fees or expenses (including
without limitation reasonable attorneys’ fees) arising out of any Third Party
claim (i) relating to any breach by the Indemnifying Party of any of its
representations, warranties or obligations pursuant to this Agreement, or (ii)
relating to the gross negligence or willful misconduct of the Indemnifying
Party in the performance of its obligations under this Agreement, except in
each case to the extent such claims are attributable to matters that are
indemnified by an Indemnified Party under this Section 10.1.

10.2     If an Indemnified Party seeks indemnification pursuant to this Article 10,
it shall inform the Indemnifying Party promptly of any claim for which it
intends to seek indemnification and, at the Indemnifying Party’s request,
cooperate fully with the Indemnifying Party in defending such claim. The
Indemnified Party, at its expense, shall have the right to participate in any
related suit or proceeding, subject to the ultimate control of the
Indemnifying Party. The Indemnifying Party shall have full control over the
suit or proceedings, including the right to settle, through counsel of its
choice who is reasonably acceptable to the Indemnified Party; provided,
however, the Indemnifying Party will not, absent the consent of the Indemnified
Party (which consent will not be unreasonably withheld or delayed), consent to
the entry of any judgment or enter into any settlement that (1) provides for
any relief other than the payment of monetary damages for which the
Indemnifying Party shall be solely liable and (2) where the claimant or
plaintiff does not release the Indemnified Party from all liability in respect
thereof. In no event shall an Indemnified Party be liable pursuant to this
Article 10 for any claims that are compromised or settled without its prior
written consent.

11        Force Majeure

11.1     Except for the failure to fulfill or perform any payment obligation
hereunder, neither Party shall be held liable or responsible to the other Party
nor be deemed to have defaulted under or breached this Agreement for failure or
delay in fulfilling or performing any term of this Agreement to the extent such
failure or delay is caused by or results from causes beyond the reasonable
control of the affected Party, provided, however, that the Party so affected
shall use commercially reasonable and diligent efforts to avoid or remove or
mitigate such causes of non-performance, and shall continue performance with
reasonable dispatch wherever such causes are removed. Each Party shall provide
the other Parties with prompt written notice of any delay or failure to perform
that occurs by reason of force majeure. The Parties shall mutually seek a
resolution of the delay or the failure to perform in good faith. The length of
time during which a force majeure condition or event continues shall be added
to any period within which performance by the Party affected by such force
majeure is otherwise required to be rendered hereunder.

11.2     If the period of non-performance because of force majeure conditions, plus
the anticipated future period of non-performance because of such conditions,
will exceed an aggregate of three (3)

Page 10

 

months, the Party that is to have received such performance may terminate this
Agreement by prior written notice.

12         Miscellaneous

12.1     Entire Agreement; Amendments. This Agreement and the License Agreement,
and the Exhibits and Schedules referred to each such agreement, constitute the
entire agreement between the Parties with respect to the subject matter hereof,
and supersede all previous understandings, arrangements and agreements with
respect to the subject matter hereof, whether written or oral. The Parties
acknowledge that the Exhibits and Schedules referred to in this Agreement and
the License Agreement are being simultaneously delivered by the Parties on or
before the Execution Date and are incorporated herein by reference. Any
amendment or modification to this Agreement shall be made in writing signed by
both Parties

12.2     Notices. Any consent or notice required or permitted to be given or made
under this Agreement by one of the Parties to the other shall be in writing,
delivered personally or by facsimile (and promptly confirmed by personal
delivery or courier), by a next business day delivery service of a nationally
recognized overnight courier service or by courier, postage prepaid (where
applicable), addressed to such other Party at its address indicated below, or
to such other address or facsimile number as the addressee shall have last
furnished in writing to the addressor in accordance with this Section 12.2 and
shall be effective upon receipt by the addressee.

	 	 	 
	If to Nastech:	 	
Nastech Pharmaceutical Company, Inc.
	 	 	
45 Adams Avenue
	 	 	
Hauppauge, New York 11788
	 	 	
Attention: Office of the President
	 	 	
Facsimile No.: 631-273-0252
	 	 	 
	If to Pharmacia:	 	
Pharmacia & Upjohn Company
	 	 	
100 Route 206 North
	 	 	
Peapack, New Jersey 07977
	 	 	
Attention: Vice President and Associate General Counsel
	 	 	
Facsimile No.: (908) 901-1862
	 	 	 
	with a copy to:	 	
Pharmacia & Upjohn Company
	 	 	
100 Route 206 North
	 	 	
Peapack, New Jersey 07977
	 	 	
Attention: Senior Vice President — Global Licensing
	 	 	
Facsimile: (908) 901-1813

12.3     Choice of Law; Jurisdiction. This Agreement shall be governed and
interpreted in all respects under the laws of the State of New York, without
regard to principles of conflict of laws, except matters of intellectual
property law, which shall be determined in accordance with the intellectual
property laws relevant to the intellectual property in question. The
provisions of the United Nations Convention on Contracts for the International
Sale of Goods shall not apply to this Agreement or the License Agreement or any
subject matter hereof or thereof. Except as expressly provided below with
respect to interim equitable relief or in Section 7.4 hereof, any action or
proceeding arising out of or relating to this Agreement, or any of the
transactions contemplated

Page 11

 

hereby, shall be brought exclusively in the courts of the State of New York, or
the United States District Court for the Southern District of New York, located
in the Borough of Manhattan, City of New York, and the respective appellate
courts with respect thereto, and the Parties hereby irrevocably consent to the
personal jurisdiction and venue of the foregoing courts with respect to all
such actions and proceedings and waive all defenses inconsistent with the terms
of this Section 12.3. Each Party hereby further irrevocably waives, to the
fullest extent permitted by applicable Law, all rights to trial by jury in any
such action or proceeding, whether based upon contract, statute, tort or
otherwise. The Parties hereby acknowledge that a breach of its obligations may
cause irreparable harm and that damages as a remedy for any such breach may be
inadequate. The Parties hereby agree that, in the event of any such breach, in
addition to all other available remedies under this Agreement (which, except as
and to the extent otherwise expressly herein provided, shall be cumulative and
not exclusive of any rights or other remedies in equity or in law), the
non-breaching Party shall have the right to seek interim equitable relief in an
appropriate forum to enforce such obligations.

12.4     Assignment. This Agreement may not be assigned or otherwise transferred
by any Party without the consent of the other Party, such consent not to be
unreasonably withheld, conditioned or delayed; provided, however, that in the
event either Party assigns or otherwise transfers the License Agreement in
compliance with Section 17.6 thereof such Party shall have the right to assign
or otherwise transfer this Agreement to the assignee or transferee of the
License Agreement without the consent of the other Party. Notwithstanding the
foregoing sentence, either Party may assign or otherwise transfer this
Agreement to any Affiliate, provided this Agreement shall be retransferred to
the relevant Party if such entity ceases to be an Affiliate of such Party, and
provided further that the assigning Party shall guarantee the performance of
such Affiliate. Any purported assignment or other transfer not in compliance
with this Section 12.4 shall be null and void.

12.5     No Strict Construction. This Agreement has been prepared jointly and
shall not be strictly construed against either Party.

12.6     Headings. The captions or headings of the sections or other subdivisions
hereof are inserted only as a matter of convenience or for reference and shall
have no effect on the meaning of the provisions hereof.

12.7     Severability. If any provision hereof should be held invalid, illegal or
unenforceable in any respect in any jurisdiction, the invalid, illegal or
unenforceable of one or several provisions of this Agreement shall not affect
the validity of this Agreement as a whole. The Parties shall make a good faith
effort to replace the invalid or unenforceable provision with a valid one which
in its economic effect is most consistent with the invalid or unenforceable
one. If the invalid, illegal or unenforceable provisions are of such essential
importance to this Agreement that it is to be reasonably assumed that the
Parties would not have entered into this Agreement without the invalid, illegal
or unenforceable provisions, the Parties shall negotiate in good faith an
orderly termination of this Agreement.

12.8     No Consequential Damages. UNLESS RESULTING FROM A PARTY’S WILLFUL
MISCONDUCT, NEITHER PARTY HERETO WILL BE LIABLE FOR SPECIAL, INCIDENTAL,
INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES ARISING OUT OF THIS
AGREEMENT OR THE EXERCISE OF ITS RIGHTS OR PERFORMANCE OF ITS OBLIGATIONS
HEREUNDER, INCLUDING WITHOUT LIMITATION LOST PROFITS,

Page 12

 

ANTICIPATED PROFITS, LOST GOODWILL, LOST REVENUE, LOST PRODUCTION, LOST
CONTRACTS, AND LOST OPPORTUNITY ARISING FROM OR RELATING TO ANY BREACH OF THIS
AGREEMENT, REGARDLESS OF THE CAUSE(S) OF ACTION OR THEORY(IES) OF LIABILITY
ALLEGED OR ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 12.8 IS
INTENDED TO LIMIT OR RESTRICT ANY PAYMENT OBLIGATION OR THE INDEMNIFICATION
RIGHTS OR OBLIGATIONS OF EITHER PARTY.

12.9     General Provisions.

(a)       Any amendment or waiver of this Agreement shall not be binding on the
Parties unless set out in a writing expressly undertaking to amend or waive
this Agreement and signed by of each of the Parties.

(b)       No person or entity other than Nastech, Pharmacia or their respective
Affiliates, Sublicensees and permitted assignees hereunder shall be deemed an
intended beneficiary hereunder or have any right to enforce any obligation of
this Agreement.

(c)       A waiver (whether express or implied) by one of the Parties of any of the
provisions of this Agreement or of any breach of or default by the other Party
in performing any of those provisions shall not constitute a continuing waiver
and that waiver shall not prevent the waiving Party from subsequently enforcing
any of the provisions of this Agreement not waived or from acting on any
subsequent breach of or default by the other Party under any of the provisions
of this Agreement.

(d)       Each Party undertakes, at the request and cost of the other, to execute all
documents and to do all other acts, which may be reasonably necessary to give
full effect to this Agreement.

(e)       Each Party shall pay its costs and expenses incurred by it in connection
with the entering into and completion of this Agreement.

(f)       It is expressly agreed that for tax, legal or other purposes (i) this
Agreement or any portion of this Agreement shall not be considered to be a
partnership agreement, and (ii) the relationship between the two Parties shall
not constitute an employment, partnership, joint venture or agency. Neither
Nastech nor Pharmacia shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior consent of the other Party to do so.

(g)       This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument

12.10     Whole Agreement. Each Party acknowledges that in entering into this
Agreement it has not relied on any representation, warranty, collateral
contract or other assurance (except those expressly set out in this Agreement
or the License Agreement together with their respective Exhibits and Schedules)
made by or on behalf of any other Party before the signature of this Agreement.
Each Party waives all rights and remedies which, but for this Section, might
otherwise be available to it in respect of any such representation, warranty,
collateral contract or other assurance.

Page 13

 

     IN WITNESS WHEREOF, the Parties, by their duly authorized representatives,
have executed this Agreement as of the date first set forth above.

	 	 	 	 
	 	PHARMACIA &
UPJOHN
COMPANY
	 	 	 	 
	 	By:	

	 	 	
Christopher Coughlin
	 	 	
Executive Vice President and Chief Financial Officer
	 	 	 	 
	 	NASTECH
PHARMACEUTICAL
COMPANY, INC
	 	 	 	 
	 	By	

	 	Name:	

	 	Title:	

Page 14

 

SCHEDULE 1

Fully Allocated Manufacturing Cost

[*]

	[*] Information contained on approximately two and one-quarter pages
(beginning on this page) has been omitted and filed separately with the
Securities and Exchange Commission. Confidential Treatment with respect to
such information has been requested.

 

 

SCHEDULE 2

PRODUCT

[*]

[*] Information on this page has been omitted and filed separately with the
Securities and Exchange Commission. Confidential Treatment with respect to
such omitted information has been requested.

Page 16

 

SCHEDULE 3

Quality Agreement

Page 17

 

SCHEDULE 4

SPECIFICATIONS

[*]

	[*] Information on this page has been omitted and filed separately with the
Securities and Exchange Commission. Confidential Treatment with respect to
such omitted information has been requested.

Page 18

 

SCHEDULE 4.1

The Price

[*]

	[*] Information contained on approximately one and one-half pages (beginning
on this page) has been omitted and filed separately with the Securities and
Exchange Commission. Confidential Treatment with respect to such information
has been requested.

Page 19

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00034-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00034-of-00352.parquet"}]]