**EXHIBIT10.3****CONFIDENTIAL TREATMENT REQUESTED****DOCOSANOL LICENSE AGREEMENT**     THIS DOCOSANOL LICENSE AGREEMENT is made and entered into as of January 5, 2006, betweenAvanir Pharmaceuticals, a California corporation (“Avanir”) and Kobayashi PharmaceuticalCo., Ltd, a Japanese corporation (“Licensee”).**BACKGROUND**     A. Avanir is the owner of certain patent rights, know-how, trade secrets, confidentialinformation, inventions, technology, and other proprietary rights which Licensee does notpresently possess and that (i) pertain to a pharmaceutical grade chemical known as “docosanol,”(ii) relate to use of docosanol in the treatment of viral infections and inflammations of skinand mucous membranes in humans, and other medicinal uses and (iii) include certain medicinalformulations and manufacturing methods of docosanol.     B. The United States Food and Drug Administration (“FDA”) has approved Avanir’s NewDrug Application in the United States of America (“USA”) relating to productsincorporating docosanol for topical, human use for the treatment of herpes labialis.     C. Licensee is interested in obtaining from Avanir a license to Avanir’s proprietary rightsrelating to the use of docosanol and access to Avanir’s proprietary know-how in order toestablish OTC business in Japan, and Avanir is willing to grant such license and access on theterms and conditions of this Agreement.     NOW, THEREFORE, in consideration of the monetary consideration set forth in this Agreementand of the terms, conditions and agreements contained in this Agreement, and for other good andvaluable consideration, the receipt and adequacy of which are hereby acknowledged, Avanir andLicensee hereby agree as follows:     **1. DEFINITIONS**.     Words and phrases used in this Agreement which are not otherwise defined will be interpretedin accordance with the common usage for such term in English. Technical terms unless otherwisedefined will be interpreted consistent with their common usage in the relevant scientific field.Some terms are defined in this Agreement parenthetically, and such terms will have the meaningsapparent from the context in which such terms are parenthetically defined. When used in thisAgreement, each of the following defined terms will have the meanings set forth in this Section.CONFIDENTIAL
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     1.1 “Active Ingredient” means (a) docosanol ***, (b) any other*** or (c) such specification for docosanol as an active ingredient that iscurative of episodic outbreaks of herpes simplex or herpes labialis. Provided however, it alwaysmeans that the foregoing description of Active Ingredients must be approved by the Ministry ofHealth, Labor, and Welfare (“MHLW”) in Japan as an active ingredient that is curative of episodicoutbreaks of herpes simplex or herpes labialis (***).     1.2 “Additional Studies” means any additional pre-clinical, clinical or non-clinicalstudies required to be conducted solely to obtain or to maintain in effect TerritoryRegistrations of the Products in the Territory.     1.3 “Affiliate(s)” means, with respect to each party, any organization, corporation,company, firm, or other entity that controls, is controlled by, or is under common control withsuch party. A company will be deemed to have control of another if it owns directly or indirectlyat least fifty-percent (50%) of the voting shares of or is entitled directly or indirectly toappoint at least one half of the directors of the other company; provided however, Kobashou Co.,Ltd. does not fall within the scope of Affiliates in this Agreement.     1.4 “ Best Efforts ” means the taking of all prompt, substantial andpersistent efforts to effect a result as expeditiously as possible, but does not require taking anyextraordinary or unusual actions that would not be financially reasonable in the particularcircumstances.     1.5 “Bulk Docosanol” means a pharmaceutical grade bulk form of the ActiveIngredient.     1.6 “Competing Products” means other medicinal or therapeutic products that arecurative of episodic outbreaks of herpes simplex or herpes labialis (***) containingthe Active Ingredient.     1.7 “Confidential Information” means all information which is of a confidential andproprietary nature, including without limitation, trade secrets and unpatented Know-How andImprovements relating to the Active Ingredient or the Products and any and all formulationsthereof or manufacturing methods thereof, and any and all material information either of theparties to this Agreement may acquire concerning the financial, business and marketing goals andplans of the other, including the terms of this Agreement. Notwithstanding anything in thisAgreement to the contrary, the defined term “Confidential Information” and theobligations of nondisclosure, non-use and confidentiality relating thereto will, without grantingany right or license, not include any information or data which: (a) is or becomes known to thegeneral public through no action or fault of the receiving party; (b) was already known to thereceiving party prior to the date of disclosure pursuant to this Agreement, as evidenced by thewritten records of that party, without any obligation of confidentiality; (c) is or becomes knownto the receiving party without any obligation of confidentiality from a Third Party having theright to disclose the same, and not having a confidential relationship with the disclosing partywith respect thereto; or (d) is necessary for the receiving party or its Affiliates to discloseto a *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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governmental authority or any agency thereof on a non-confidential basis, in order to pursueTerritory Registration or other purposes.     1.8 “Cost” means all purchase, labor, material and overhead costs and expensesincurred in connection with the procurement, manufacture and testing of Products as determined inaccordance with generally accepted accounting principles.     1.9 “Field” means all non-ophthalmic, topical, medicinal, therapeutic applicationsof the Products to skin, mucous membranes, and surrounding tissue in humans sold for thetreatment of herpes simplex or herpes labialis via prescription (Rx), behind the counter or overthe counter (“OTC”).     1.10 **“**First Commercial Sale**”**means the first commercial sale in the Territoryfollowing Territory Registration, where sale means delivery, billing out or invoicing, whichevercomes first, of a Product by Licensee, its Affiliates or sublicensees to any person or entity otherthan Licensee, its Affiliates or sublicensees.     1.11 “Gross Sales” means the gross sales of the Products invoiced by Licensee, itsAffiliates or sublicensees to distributors, resellers or other Third Parties as expressed inJapanese Yen. For the sake of clarity, the Gross Sales does not include *** .(The currency conversion rate employed for calculation of Gross Sales will be that published inthe *Nihon Keizai Shinbun’s*“Foreign Currency Exchange Rates” on the last business day of thecalendar quarter.).     1.12 “Improvements” means any and all inventions, developments and improvements andany other new Know-How relating to the Active Ingredient or the Products, including, withoutlimitation, any new indications, compositions, concentrations, derivatives, formulations,preparations, processes, specifications, administrations, combinations or dosage strengths andsizes or applications thereof, which are developed by or for Avanir or Licensee during the termof this Agreement.     1.13 “Know-How” means any data, results, know-how, manufacturing methods and processesof the Bulk Docosanol to the extent available and information which Avanir owns, controls or has alicense (with a right to sublicense) and relating to the Active Ingredient or that is necessary oruseful to the manufacture, use or sale of Products, including, without limitation, data orinformation incorporated either in Avanir’s approved New Drug Application in the USA or inregulatory filing submitted to other regulatory authorities, if any.     1.14 “Licensed Patents” means all (a) the Territory patents and patent applicationslisted in Schedule 1.14 or covering any Avanir Owned Improvements, as long as Licenseeagrees; (b) any divisionals and patent applications; and (c) all patent term extensions of theforegoing patents.     1.15 “Post Marketing Surveillance Period” means a certain period of post-marketingsurveillance in the Territory, in other words, a certain period for surveillance, imposed by theMinistry of Health, Labor and Welfare in Japan upon marketing approval of the Product in theTerritory, with regard to quality, efficacy and safety for clinical usage of the Product. In the *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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event the Japanese government introduces a new proprietary, exclusivity period, the PMS Period willbe deemed to include the exclusivity period for the purpose of this Agreement.     1.16 “Products” means any finished or semi-finished medicinal product that iscurative of episodic outbreaks of herpes simplex or herpes labialis ( *** )that contains a therapeutic concentration of the Active Ingredient either as the sole ingredientor in combination with any other ingredient, substance or compound, in any and allconcentrations, formulations, preparations, administrations, combinations or dosage strengths.     1.17 “Reasonable Efforts” means efforts and resources commonly used in theresearch-based pharmaceutical industry for the research, development and commercialization of aproduct at a similar stage in its product life, a similar market potential and a similarprofitability ratio.     1.18 “Territory” means the territories and possessions of Japan.     1.19 “Territory Registration” means satisfaction of any related applicableregistration (including any duplicate marketing authorizations) and notification requirements andapprovals, licenses, registrations or authorizations of any federal, state or local regulatoryagency, department, bureau or other government entity, necessary for the manufacture, use,storage, import, transport or sale of Products or the equivalent from the appropriategovernmental agency in the Territory.     1.20 “Third Party” or “Third Parties” means any person, organization,corporation, company, firm, or other entity that is not a party hereto or an Affiliate of eitherparty.     1.21 “Trademark” means a trademark or trademarks for use in connection with the saleof the Products in the Territory, together with any registrations or pending registrationapplications filings therefore by Licensee at the Japan Patent Office. It is expresslyunderstood that the Trademark does not include the trademarks “Avanir” or “Abreva” or anyvariations thereof even if such trademarks are used in association or combination with theTrademark.     1.22 “Supply Agreement” means the separate agreement for the supply of BulkDocosanol to be entered into between Licensee and Avanir.     **2. LICENSES.**     2.1 Grant. Subject to all the terms and limitations of this Agreement, Avanir herebygrants to Licensee an exclusive license, possibly including a *Senyo Jisshiken*under Japanese PatentLaw, under its Licensed Patents and to the Know-How to make, have made, use, and offer to sell andto sell and import Products in the Territory and only in or for the Field. Licensee will registerthe aforesaid exclusive license as the exclusive license, with the cooperation of Avanir but atLicensee’s expense, possibly including *Senyo Jisshiken*of the Japanese Patent Law. Such licensedoes not include the right to manufacture Bulk Docosanol. For the avoidance of doubt, *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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the licenseto manufacture described in the foregoing sentence of this Section 2.1 is limited to rightsto manufacture for Licensee’s Products. Subject to price, terms and conditions yet to be mutuallyagreed in the Supply Agreement, Avanir will be fully obligated to supply Bulk Docosanol to Licenseeso long as this Agreement is effective or until such time as Licensee has notified Avanir thatLicensee has entered into a separate supply agreement for Bulk Docosanolwith a Third Party. Licensee will use all commercially reasonable efforts to obtain, as soonas practicable, either a direct source of supply of Bulk Docosanol from Avanir’s supplier or asecond source of supply of Bulk Docosanol. Upon Licensee’s request, Avanir will cooperate withLicensee to establish the manufacturing process of the Bulk Docosanol of Licensee and/or itsdesignee and to obtain the required permits from the MHLW regarding any change in suchmanufacturing process; provided, however, that Licensee and/or its designee will not proceed toproduce the Bulk Docosanol unless, within ***  months from Avanir’s receipt ofthe firm order for Bulk Docosanol from Licensee, Avanir nevertheless fails to fill such order asprovided by the Supply Agreement regarding the Bulk Docosanol. In case of the above mentioned BulkDocosanol production by Licensee and/or its designee(s), Licensee or its designee(s) will retainthe right to manufacture Bulk Docosanol without any limitation. In that case, Avanir will discloseto Licensee and/or its designee(s) any Know-How that Avanir owns or controls, conditioned uponpayment of a commercially reasonable fee by Licensee.     2.2 Restrictions on Licensee. To the extent not otherwise prohibited by law, Licenseewill not directly or indirectly for the term of this Agreement, (a) promote, market, distribute orsell the Products outside the Field; (b) actively or passively sell the Products outside theTerritory, (c) sell or distribute the Products to any Third Party whom Licensee has reasonablegrounds to believe is likely to sell outside the Field or export the Products outside theTerritory. If any person sells, markets or exports the Products sold to it by Licensee contraryto the above restrictions, Licensee will make Best Efforts to take actions within its legal rightsand powers to cause such persons to cease such sale, marketing or exportation. For purposes of theforegoing restrictions, (1) “actively sell” in a territory means engaging in advertising, marketingor promotion specifically aimed to such territory or establishing any branch or distributionoperations for the purpose of distributing Products in such territory and (2) “passively sell”means responding to unsolicited customer orders while not engaging in any advertising, marketing orpromotion.     2.3 Restrictions on Avanir. To the extent not otherwise prohibited by law, Avanirwill not sell the Products or Bulk Docosanol inside the Territory and inside the Field or to anyparty who Avanir has reasonable grounds to believe is likely to export the Products or BulkDocosanol into the Territory for sale in the Field. If any person sells or exports the Productsor Bulk Docosanol acquired from Avanir to customers inside the Territory for use in the Fieldwithout Avanir’s authorization, Avanir will make Best Efforts to start to take action within sixmonths from Avanir’s awareness of the above-mentioned situation, within its legal rights andpowers to cause such persons to cease such sale or exportation.     2.4 Sublicenses. Licensee may not sublicense its rights under this Agreement withoutAvanir’s prior written consent, which Avanir may grant or withhold in its sole discretion**.**For thesake of clarity, sublicenses do not include manufacturing of finished Product by a third party orsubcontracts for commercializing the Product by Licensee. Upon the prior written consent of *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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Avanir,Licensee will only have the right to grant sublicenses within the Territory and Field underSection 2.1 under the terms and conditions of this Agreement and only for the expresslylimited purpose of co-promotion and co-marketing Products where and when (i) Licensee is andremains the single registration holder for the Product; (ii) Licensee is and remains the singleperson responsible for the manufacture of Product and (iii) only the Trademark is used inconnection with the Product. In all cases (a) such sublicensees will be at least the equivalentof Licensee with respect to fitness to perform in accordance with the terms of this Agreement, (b)the prospective sublicensees may not distribute in the Territory a Competing Product**;**(c) suchsublicensees will have entered into a Sublicense Agreement; and (d) Licensee agrees in writing withAvanir to remain obligated in all respects to comply with the provisions of this Agreement and toindemnify Avanir for any costs, expenses or damages that may result from sublicensee’s breach ofany provision of the Sublicense Agreement**.**Upon request of Avanir, Licensee will make reasonableinquiries of any proposed sublicensee to determine whether such proposed sublicensee is developing,making, marketing or selling Competing Products. Except as specifically provided above, Licenseewill have no rights to sublicense all or any part of the license granted to Licensee pursuant tothis Agreement. Any transfer or extension of rights under the license granted under this Agreement,in whole or in part, by Licensee to any Third Party will be deemed and considered to be asublicense subject to the requirements of this Section, even if not so designated or described inthe relevant legal agreements, instruments or documents.     2.5 Improvements.     (a) Avanir Owned Improvements. Avanir will solely own any Improvements thatAvanir invents, develops, discovers or creates (“Avanir Owned Improvements”).Avanir retains the ownership of and sole right and discretion to file, prosecute andmaintain any Territory, U.S. or foreign patent applications covering any Avanir OwnedImprovements. Any Avanir Owned Improvements and related patents or patent applicationswill be included in the scope of the licenses granted under Section 2.1,as long as Licensee agrees.     (b) Licensee Owned Improvements. Licensee will solely own any Improvementsthat Licensee invents, develops, discovers or creates that are not Avanir OwnedImprovements (“Licensee Owned Improvements”). Licensee retains ownership of andsole right and discretion to file, prosecute and maintain any Territory, U.S. or foreignpatent applications covering any Licensee Owned Improvements.     2.6 Patent Prosecution and Maintenance.     (a) Consultations. Each party will promptly inform, consult with and assist theother, as to all matters that come to its attention that may affect the preparation, filing,prosecution, or maintenance of the patents relating to the Products that each such partyowns, including, without limitation, the discovery or invention of any Improvements thatsuch party owns and permit each other to provide comments and suggestions with respect tosuch activities, which comments and suggestions will be reasonably considered by the otherparty. If Avanir files a patent application(s) relating to Improvements, including withoutlimitation the anti-herpes compositions and therapy with the Japan Patent Office or obtainsa patent(s) relating to the same in the Territory, Avanir will promptly notify the Licenseeby priority, and provide exclusive license of the patent to the Licensee, as long asLicensee agrees**.**CONFIDENTIAL
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     (b) Assistance. Upon receipt of any Territory Registration, Licensee willprovide assistance to Avanir in obtaining patent extensions, supplementary protectioncertificates, and the like for the Licensed Patents to the extent the laws of the Territoryprovide it. If Licensee needs necessary cost for its reasonable personnel’s time andexpenses, Licensee will consult with and obtain an approval in advance from Avanir beforeLicensee charge that to Avanir.     (c) Abandonment of Licensed Patents. Avanir will make Best Efforts to maintainLicensed Patents in the Territory. However, if Avanir has irresistible reason to surrenderor abandon Licensed Patents, Avanir will provide Licensee with at least 60-days priorwritten notice before surrendering or abandoning any Licensed Patents. To the extent thatLicensee desires to continue maintenance and/or prosecution of such Licensed Patents in suchcountries which Avanir has elected to surrender rights, Avanir will assign such LicensedPatents to Licensee, cooperate fully with Licensee, its attorneys, and agents in assumingsuch responsibilities and provide Licensee with complete copies of any and all documents orother materials that Avanir deems necessary to undertake such responsibilities. Licenseewill assume responsibility for all costs associated with the Licensed Patents for which itelects to assume responsibility, including costs associated with transferring patentprosecution responsibilities to an attorney or agent of Licensee’s choice.     **3. REGULATORY MATTERS**.     3.1 Delivery of Know-How by Avanir.     (a) Data and Applications. In consideration for the fee to be paid byLicensee pursuant to Section 5.1, Avanir will provide, no later than 30 days afterthe date of this Agreement, all available data used in the USA, in Sweden and in othercountries’ regulatory submissions for 10% docosanol cream in the treatment of herpessimplex or herpes labialis and pre-clinical data and post marketing surveys (to the extentavailable and possible under existing confidentiality agreements), including, withoutlimitation, copies of all clinical data, documents, papers, protocols, results andanalyses as well as currently available information including that concerning adverseeffects and products complaints (to the extent the information is available to Avanir), ineach case that relates to or would be useful in connection with the import, marketing,manufacturing, and/or registration of the Products in the Field in the Territory.     (b) Access to Drug Master File. As soon as practicable after the date ofthis Agreement, (and supplemented as reasonably needed by Licensee as soon as reasonablypracticable thereafter during the term of this Agreement) Avanir will use its Best Effortsto make available to Licensee the drug master file for Bulk Docosanol on file at MHLW forthe purpose of Licensee’s Territory registration for the curative of episodic outbreaks ofherpes simplex or herpes labialis (subject to the confidentiality obligations ofArticle 8), if required by Licensee. In any such event, Licensee will reimburseAvanir’s reasonable out–of-pocket expenses incurred as a result of rendering such access.     3.2 Additional Studies.     (a) Licensee’s Responsibility. With respect to Additional Studies, Licenseewill be responsible for conducting any Additional Studies which LicenseeCONFIDENTIAL
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concludesLicensee’s needs to conduct and for all costs and expenses associated therewith.     (b) Conduct of Additional Studies. Such Additional Studies will be conductedby Licensee in accordance with applicable law and current Good Clinical Practices(“GCPs”). Licensee will provide Avanir with summaries of all protocols in respect ofAdditional Studies concerning the Products to be conducted by Licensee and informationindicating whether Licensee desires to publish the results of such Additional Studies.Licensee will provide such summaries to Avanir for Avanir’s review and comment within amonth before such Additional Studies are undertaken. Licensee will give such comments dueand careful consideration in the light of its obligations under this Agreement. However,it is not necessary for Licensee to produce any English translation of the Japaneseoriginal documents. During any time when Additional Studies are being conducted, Licenseewill also deliver to Avanir a status report every calendar quarter with respect to suchAdditional Studies.     (c) Third Party Collaborators. Avanir and Licensee each acknowledge and agreethat, with respect to any Additional Studies, (i) Licensee’s arrangements made with theThird Party providers of services will in all cases require that such Third Party providersgrant sole ownership of (and publication rights with respect to) the information, data,clinical trial results and other know-how resulting from such Additional Studies to Licenseeand (ii) as between Licensee and Avanir, such information, data, clinical trial results andother know-how resulting from such Additional Studies will belong solely to Licensee asLicensee Owned Improvements.     3.3 Territory Registrations.     (a) Licensee’s Responsibilities. Licensee will directly bear all costs andexpenses and use its Best Efforts to complete all necessary studies to obtain TerritoryRegistrations and will be solely responsible for and will prepare (using the data and filesprovided by Avanir pursuant to Section 3.1(a)) and submit an application for theTerritory Registration with the Territory health care authorities in the Territory as soonas possible but no later than ***  months after the date ofsatisfactory conclusion of clinical trials and other tests. Provided however, this timelimit of ***  months will not apply if the MHLW changes the procedure ofclinical trials and other tests, or a very special demand for information is made by theMinistry. In connection with the foregoing, Licensee may utilize other agents orconsultants to assist in obtaining Territory Registrations, but may not share Know-How withsuch agents or consultants without entering into an appropriate confidentiality agreement.Licensee will also be responsible for any other registration, regulatory and pricing mattersconcerning the Products in the Territory.     (b) Assistance. Avanir will assist Licensee in regulatory matters asappropriate and reasonably requested by Licensee. If Licensee requests assistance fromAvanir, Avanir will consult with and obtain approval in advance from Licensee if Avanirdesires to be reimbursed for its reasonable costs of personnel time and expenses plus*** %. *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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     (c) Ownership of Territory Registrations. Licensee will register and keep anysuch Territory Registrations in Licensee’s own name. Licensee may assignownership of the Territory Registrations to Avanir in exchange for reimbursement of itsappropriate amount, including but not limited to the costs of obtaining and maintaining theRegistrations, and clinical study costs, in the event of termination of this Agreement byAvanir prior to its expiration according to Section 7.6(c).     (d) Post Marketing Surveillance. Licensee will utilize its Best Efforts toobtain any and all advantage derived from the Post Marketing Surveillance in the Territory.     (e) Improvements of Bulk Docosanol. In the case where modification orimprovement of Bulk Docosanol is required for obtaining the Territory Registration and/orpromoting the sales of the Products in the Territory, the Licensee may request Avanir tomodify or improve the Bulk Docosanol. Avanir will use its Best Efforts to comply with anyrequests for improvements to Bulk Docosanol. In any such event, Licensee will reimburseAvanir’s reasonable out–of-pocket expenses incurred as a result of rendering such complianceor assistance.     3.4 Additional Indications. In the event that Avanir makes regulatory filings forthe marketing approval of other indications in the Field but outside the Territory during theterm of this Agreement, Avanir and Licensee will discuss the appropriate regulatory filingstrategy for such indications in the Territory, but any such filings will be solely Licensee’sresponsibility and expense.     3.5 Regulatory Developments and Communications. Each party will notify the otherimmediately by telephone (with prompt, written follow-up), facsimile or any other electricalmethod in writing of any inquiry, contact or communication received from any governmentalregulatory agency or other official body which adversely relates to or impacts upon the Productsor any component or ingredient thereof (including, without limitation, any issuance of anyTerritory Registration administrative decree relating to a recall of the Products or theimposition of any post marketing surveillance period), and will promptly furnish the other partywith copies of all written communications relating thereto sent to or received from suchregulatory agency. Licensee will report to Avanir of the status of the Territory Registrationefforts on a current basis every three months, and will furnish Avanir, upon Avanir’s reasonablerequest, copies of all of the documents, data and other information supplied to or received fromthe government in the Territory or other any approval authority in connection with the TerritoryRegistration without unreasonable delay. Avanir will have the right to be informed of, and uponLicensee’s request, participate in and attend discussions regarding the Territory Registration orany administrative decree. Upon receipt of the Territory Registrations, Licensee will promptlyfurnish Avanir copies or other satisfactory evidence thereof.     3.6 Other Governmental Filings or Notices. Licensee will be solely and exclusivelyresponsible for and bear all expenses associated with any permits, licenses or approvalsnecessary or advisable for the entry into force and performance in the Territory of thisAgreement and of the matters contemplated in this Agreement.     **4**. **MANUFACTURE AND COMMERCIALIZATION OF PRODUCTS**.CONFIDENTIAL
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     4.1 Manufacturing of Products. As between Avanir and Licensee, throughout the termof this Agreement, Licensee will be solely responsible for: (a) manufacturing or havingmanufactured the Products for distribution and sale in the Territory and any related packaging andbranding with Trademark, (b) acquiring or causing to be acquired all manufacturing equipment andlicenses, including, without limitation, plant, equipment and facilities licenses and approvals,necessary to enable the manufacture and testing of the Products, (c) obtaining any requiredimportation licenses or approvals for importation of Bulk Docosanol into the Territory, includingpayment of any related import charges or levies, (d) reporting of matters regarding the manufactureof Products to relevant regulatory authorities and handling and responding to any appropriategovernmental agency inspections with respect to manufacturing of Products, all in accordance withapplicable laws and regulations. Licensee will provide to Avanir any information requested by anygovernmental agency in connection with any governmental inspection related to Bulk Docosanol andwill notify Avanir of any such matter if significant or serious and promptly furnish completecopies of such reports to Avanir. Licensee also will advise Avanir of any occurrence orinformation which arises out of Licensee’s or its subcontractors’ manufacturing activities whichhas materially adverse regulatory compliance and/or reporting consequences concerning the Products.Licensee will use Reasonable Efforts to promptly advise Avanir of any requests by any governmentalagency for such inspections with respect to manufacturing of the Products.     4.2. Product Manufacturing Processes & Quality Control. Licensee will not, and willensure its manufacturing subcontractors do not, without the consent of Avanir (such consent not tobe unreasonably withheld) deviate from or modify the instructions and methods which have been givenby Avanir in writing and agreed to by Licensee for the manufacture of the Products as well as themethods supplied by Avanir and agreed to by Licensee for quality control of the Products, subjectto any applicable laws, regulations or requirements of any governmental agency in the Territory.For the avoidance of doubt, the deviations and modifications with respect to which Licensee mustobtain the consent of Avanir are ones that have a material impact on quality of the Product oraffect the obtaining or maintenance of any Territory Registration.     4.3 Adverse Event Data Exchange.     (a) In the event that either party, its Affiliates or sublicensees obtains, directly orindirectly, information, data, inquiries, complaints, or reports on any Adverse Events during thedevelopment, marketing and distribution of any of the Products, such party will disclose, as soonas reasonably practicable, such information and data to the other party and will collaborate withsuch other party to respond to or inform any applicable governmental authority. Such informationwill include an identifiable patient, a suspect medicinal product, an identifiable reporting sourceand an event or outcome. Follow-up information should be actively sought by the party andsubmitted within the same time-lines as an initial report. Each party will also send (by fax orelectronically) the other party written notice in English of fatal and life-threatening events,which are unexpected and considered possibly related to the Products, within 72 hours of receiptand of all other serious adverse events within ten business days. All other Adverse Eventsassociated with Products will be reported by either party to the other party in summary format atleast quarterly. For purposes of the foregoing, an “Adverse Event” means any untowardmedical occurrence in a patient or clinical investigation subject administered the Product andwhich does not necessarily have to have a causal relationship with the Products, including, withoutlimitation: (a) with respect to clinical trials, all noxious and unintended responses to theProduct and (b) after the First Commercial Sale, any response to the Product which is noxious andunintended and which occurs at doses normally used in man forCONFIDENTIAL
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prophylaxis, diagnosis or therapy ofdisease or for modification of physiological function. Theprovisions of this section will survive termination of this Agreement so long as either party ismarketing Products.     (b) Licensee will bear the expenses of any recall of a Product in the Territory; providedhowever, that Avanir will bear the expense of a recall to the extent that such recall directly andexclusively caused by Avanir’s breach of its obligations hereunder or Avanir’s negligence orwillful misconduct or intentional omission. Such expenses of recall will include expenses fornotification, destruction and return of the recalled Product and any refund to customers of amountspaid for the recalled Product.     4.4 Commercialization.     (a) Efforts. Licensee will (a) use its Best Efforts applying its marketingand sales expertise to maximize the sale and the profit from the Products consideringmarket situation in the Territory as soon as reasonably practical but no later than***  after the issuance of a Territory Registration; (b) have no rightto use the Avanir trade name and trademark, apart from the Products labeling requirementsof Section 4.6; and (c) subject to and to the extent permitted by applicable laws,not produce, sell or distribute any Competing Products within the Territory, directly orindirectly, throughout the term of this Agreement and for a period of ***after termination of the Agreement by Avanir. Maximizing sale of the Productsincludes, without limitation, a nation-wide scope test marketing in Japan. If the date ofthe First Commercial Sale of the Products in the Territory does not occur by the*** anniversary of the issuance of the first Territory Registrationsin the Territory, the exclusive license for the Territory may immediately convert to anon-exclusive license, but Licensee will have a *** -month option tomaintain its exclusive license by paying, in advance, due on the first day of the month, afee of $ *** per month until the Product is launched or the***  months have expired. For the sake of clarity, First CommercialSale includes those by the Licensee in maximizing of the sale of the Products.     (b)  Exclusivity. If Avanir considers that the Licensee produces, sells ordistributes any Competing Products in violation of the Agreement at any time during the termof this Agreement, Avanir may commence a proceeding under Section 13.5. If Avanirand the Licensee do not reach a settlement, the license granted by Avanir under Section2.1 will cease to be exclusive and, notwithstanding any other provision in thisAgreement, Avanir will have no obligation to continue to license Improvements to Licensee.Notwithstanding the foregoing, no such termination of exclusivity by Avanir will beeffective until completion of the dispute resolution procedures set forth in Section13.5.     4.5 Trademarks.     (a) Ownership and Registration. Licensee will develop a unique Trademark andwill own the Trademark and be solely responsible for its use and registration and all *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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related costs and expenses. Licensee will take all Reasonable Efforts to register andmaintain the Trademark in the Territory for use in association with the Products.Licensee will take due care not to do or cause to be done any action or omission whichadversely affects the validity of the Trademark or jeopardizes the maintenance thereof,either during the term of this Agreement.     (b) Trademarks owned by Avanir. Licensee will make Best Efforts to usethe Trademark for the Products. Licensee will not market, sell or distribute any Productsunder any brand or trademark that is the same as or confusingly similar to the trademarkand trade names owned by Avanir. Licensee acknowledges that Avanir has no rights in the“Abreva” trademark.     4.6 Marketing. Licensee will make Best Efforts to achieve the marketing at maximum.Licensee agrees that the word “patented” or its appropriate substitute under Japanese Patent Lawwill appear on the Product’s packaging, on an insert and in other measures of description on orrelated to the Products in a place determined by Licensee in its sole discretion and thatlabeling for Products will contain the statement:          “Distribution under license from Avanir Pharmaceuticals.”     4.7 Publicity. The parties to this Agreement understand that both Avanir andLicensee are public companies and agree that they may disclose certain matters pertaining to thisAgreement as to enable it to fully comply with USA or Territory securities laws or regulations,which disclosure may be in the form of public statements, whether oral or written, including, butnot limited to, shareholder reports, communications with stock market analysts, press releases orother communications with the media. Notwithstanding the foregoing, any press release or otherannouncement pertaining to this Agreement by either party will be provided to the other party inadvance for review and approval with such approval not to be unreasonably withheld.                    4.8 Publications. Neither Licensee nor its agents, collaborators andsubcontractors will publish the results of clinical or preclinical studies of the Products or anyActive Ingredient without the prior approval of Avanir, which approval of Avanir will not beunreasonably withheld.     **5. ROYALTIES, FEES AND MILESTONE PAYMENTS**.     5.1 Data Transfer Fee. In consideration for the transfer of data under Section3.1(a), Licensee will pay to Avanir the non-refundable sum of 100,000,000.00 Japanese Yen as aKnow-How and data transfer fee no later than 30 days after the date of this Agreement.     5.2 Royalties. In consideration for the licenses granted pursuant to Section2.1, for manufacture and sales of Products by Licensee or its Affiliates or sublicensees inthe Territory, for the Territory, Licensee will pay Avanir royalties as follows:     (a) Patent / PMS period Royalties. Licensee will pay Avanir***  % of aggregate Gross Sales in the Territory, (i) during the term ofany issued and valid Licensed *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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Patents or (ii) during the Post Marketing Surveillance Period which the MHLW has notapproved a generic product equivalent to any type of docosanol cream in the Territory.     (b) Know-How Royalties. Licensee will pay Avanir ***  % ofaggregate Gross Sales in the Territory, as a Know-How royalty (notwithstanding whetherAvanir has or will have any Licensed Patents or any other intellectual property in theTerritory) until the date that is 10 years from the First Commercial Sale in the Territory.     5.3 Milestone Payments. Licensee will pay the milestone payments set forth on thetable below within 30 days after the date of the described event:   **MILESTONE** **PAYMENT***** ***JP Yen*** ***JP Yen*** ***JP Yen*** ***JP Yen*** *** JP Yen**6. ACCOUNTING MATTERS**.     6.1 Payment of Royalties. Royalties will accrue upon the earlier of shipping orbilling of Products by Licensee or its Affiliates or sublicensees to a distributor, reseller orother Third Party and will be payable quarterly, 60 days after the end of each calendar quarter.Any royalties due but not received by Avanir will begin accruing interest on such overdue amountsat a rate of *** % as set be required by applicable law. Quarterly royaltypayments to Avanir will be accompanied by a detailed written report covering each calendar quartershowing (a) the Gross Sales of Products in aggregate in the Territory by Licensee or its Affiliatesor sublicensees, and (b) the royalty payments, which will have accrued in respect of such sales andthe basis for calculating those royalties, including gross invoiced sales of each Product and thedeductions, if any, taken to calculate Gross Sales. Each quarterly report will be due 30 daysfollowing the close of each calendar quarter. Unless otherwise expressly provided herein, allroyalty payments under this Agreement will be paid without notice or demand and without abatementor deduction of any amount unless other provisions of this Agreement admit exception.     6.2 Access to Records. Licensee will keep and will cause its Affiliates orsublicensees to keep records relating to the transactions covered by this Agreement throughout theterm of this Agreement and for a period of three years thereafter. Upon Avanir’s request (but nomore than once per year) and on reasonable notice, Licensee will and will cause its Affiliates andsublicensees to permit, at the expense of Avanir, an independent certified public accountantreasonably acceptable to both parties, to have access during reasonable business hours to suchrecords as may be necessary to determine, in respect of any quarterly period the correctness of anyroyalty statements and payments made under this Agreement; provided, however, that Licensee willbear any such audit expense if the review or audit shows an underpayment equal to *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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or greater than ***  % for the applicable period. The independent certifiedpublic accountant must sign confidential non-disclosure agreements prohibiting him from revealingto any Third Party any information and allowing him to disclose to Avanir only information relevantto royalty statements and payments.     6.3 Currency of Payment. Except as set forth below, any and all payments to be made toAvanir by Licensee under this Agreement will be made in Japanese Yen. The conversion rate employedfor calculation of royalties as provided in Section 6.1 will be that published in the *NihonKeizai Shimbun’s*“Foreign Currency Exchange Rates” on the last business day of the calendar quarterfor which the royalty statement is made.     6.4 Required Taxes and Withholdings.     (a) Avanir’s Taxes. If Licensee makes any payment to any governmental agency inthe Territory or is subject to any withholding requirements in the Territory on account oftaxes payable by Avanir, Licensee may deduct the amount of such tax payment actually paid tosuch governmental agency from Licensee’s royalties payable to Avanir under this Agreement.In order to obtain proper tax exemptions in international situation, the parties will takereasonable action to apply Article 12 of CONVENTION BETWEEN THE GOVERNMENT OF JAPAN AND THEGOVERNMENT OF THE UNITED STATES OF AMERICA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THEPREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME to Licensee’s royalties payableto Avanir under this Agreement.     (b) Licensee’s Taxes. If Licensee makes any payment to any governmental agencyin the Territory or is subject to any withholding requirements in the Territory on accountof taxes payable by Licensee, Licensee may not deduct the amount of such tax payment fromroyalties payable to Avanir under this Agreement, and Licensee’s payment to Avanir will bein full and free of all liability, deduction or set off for such tax or other deduction.     (c) Sublicensee’s Withholdings. If any of Licensee’s sublicensees makes anypayment to any governmental agency in the Territory or is subject to any withholdingrequirements in the Territory on account of taxes payable by Licensee, even though suchsublicensee deducts such payment or withholding from amounts payable by such sublicensee toLicensee, Licensee may not deduct the amount of such tax payment from royalties payable toAvanir under this Agreement and the Licensee’s payment to Avanir will be in full and free ofall liability, deduction or set off for such tax or other deduction.     6.5 Taxes. Licensee will pay and bear the expense of local and any government license,sales and use, property and *ad valorem*taxes including the consumption tax in Japan, and any customduties, fees or charges which may be imposed or assessed on it with respect to manufacture or salesof Products in the Territory under this Agreement. If a party receives a refund or rebate fortaxes it paid on behalf of the other party, the party receiving such refund or rebate will promptlyremit it to the other party. *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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     **7. TERM AND TERMINATION**.     7.1 Term. Unless otherwise terminated as set forth below, the term of this Agreementwill commence on the date of this Agreement and will continue until and automatically expire uponthe later to occur of (a) the 10th anniversary of the First Commercial Sale in the Territory or (b)the date the last claim of any patent of the Licensed Patents licensed under this Agreement thatcovers sales of Products in the Territory expires or is invalidated or (c) the last date of theexpiration of the Post Marketing Surveillance Period in the Territory. Upon expiration of the termof this Agreement in the Territory, Licensee will thereafter retain a fully paid-up perpetual,irrevocable, royalty-free non-exclusive license under the license rights granted under Section2.1.     7.2 Material Breach by Licensee. If Licensee materially breaches, materiallydefaults or otherwise materially fails to perform under the terms of this Agreement or any otheragreement between the parties to this Agreement, Avanir may terminate this Agreement by giving***  months advance written notice, unless Licensee will cure such breach,default or failure of performance within such ***  months period or unlesssuch breach, default or failure is subject to the *force majeure*provisions of Section13.4. For the avoidance of doubt (and as examples only), “materially breaches, materiallydefaults or otherwise materially fails” as used in this Section 7.2 means (a) failure toprepare and submit an application for the Territory Registrations with the Territory health careauthorities within ***  months from the conclusion of the clinical trials andother tests sufficient for registration, provided however, this time limit of***  months will not apply if the MHLW changes the procedure of clinicaltrials and other tests, or a very special demand for information is made by the MHLW; or (b) noFirst Commercial Sale in the Territory has occurred by the date required by Section4.4(a), entitling Avanir to terminate the Agreement under this Section, except for the eventthat (i) Territory Registration is not obtained for reasons that are not attributable toLicensee’s responsibility, or (ii) the cost of obtaining the Territory Registration, in relationto the aforesaid clinical trials and other tests, exceeds ***  Japanese Yen.Such other tests include without limitation, non-clinical trials such as animal tests.Notwithstanding the foregoing, no such termination by Avanir will be effective until completionof the dispute resolution procedures set forth in Section 13.5.     7.3 Material Breach by Avanir. If Avanir materially breaches, materially defaults,or otherwise materially fails to perform under the terms of this Agreement or the Supply Agreement,Licensee may, in its sole discretion either (a) retain the licenses granted under this Agreementand bring an action for damages against Avanir or (b) terminate this Agreement (and the licensesgranted hereunder) by giving ***  months advance written notice, unlessAvanir cures such breach, default or failure of performance within such *** months period or unless such breach, default or failure is subject to the *force majeure*provisionsof Section 13.4. For the sake of clarity, a “materially breaches, materially defaults, orotherwise materially fails”, as used in this Section means (a) intentional breach of obligations todeliver Know How, (b) any fraud or misrepresentation, or (c) a breach by Avanir of its obligationunder the Supply Agreement to provide Bulk Docosanol (each such event being a “Material Breach”hereafter). Notwithstanding the foregoing, no such termination by Licensee will be effective untilcompletion of the dispute resolution procedures set forth in Section 13.5. For theavoidance of doubt, Avanir has *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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obligations under this Agreement other than specified obligation onthe definition of Material Breach.     7.4 Continuing Obligations. Termination of this Agreement by either party for anyreason under the terms and conditions of this Agreement will not affect obligations of either partyincurred prior to termination or the right of either party to recover damages from any breachthereof or affect Licensee’s obligations to pay Avanir any fees, milestones, royalties or otherpayments that have accrued as of the date of such termination.     7.5 Remedies. Termination is not the sole remedy under this Agreement and, whetheror not termination is effected, all other remedies will remain available.     7.6 Consequences of Termination. Upon termination of this Agreement by either partyprior to the expiration of this Agreement set forth in Section 7.1, for any reason:     (a) Licenses. If termination of this Agreement is caused by material breachby Licensee, the licenses granted under Section 2.1 will terminate, and Licenseewill permanently discontinue all advertising with respect to Products, although Licenseemay, to the extent permitted by applicable law, continue to sell Products which it has ininventory at the time of termination; provided, however, that any such sale will (i) bemade at prices and under terms generally consistent with previous sales of the Products byLicensee and (ii) be conducted in a manner so as not to be harmful to Avanir or the marketfor the Products. Notwithstanding the above, Licensee may not sell the Products more than180 days after the effective date of termination. At Avanir’s option, remaining stocks ofProducts may be bought by Avanir at Licensee’s *** . Licensee willdeliver such stocks at Avanir’s direction and expense.     (b) Trademark***.*** Licensee will keep and own its registration of the Trademarkin the Territory even after any termination of this Agreement, as well as the expirationof the Agreement set forth in Section 7.1. Provided, however, that only if thisAgreement was terminated by material breach by Licensee, Licensee will assign ownership ofthe Trademark to Avanir in exchange for payment of an appropriate amount.     (c) Governmental Registrations***.***Within a reasonable period (as far as thelaws and regulations in the Territory permit deliverance and transfer) after the effectivedate of any pre-expiration termination due to any material breach of Licensee, Licenseewill, at Licensee’s expense, (i) deliver and transfer to Avanir the Territory Registrationand attachments and instruments directly relating thereto, any registration of anyexclusive patent license (*Senyo Jisshiken)*and any other import licenses and relatedlicenses and rights obtained by or on behalf of Licensee that are legally required for theimportation, use, distribution or sale of the Products by Avanir or such designated entityin the Territory in exchange for appropriate amount of payment; (ii) notify in writing anyapplicable government agencies of such transfer; and (iii) follow any necessary proceduresof any applicable government agencies. If such deliverance or transfer is not legallypermissible, or if such an attempted deliverance or transfer would be ineffective *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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or wouldadversely affect materially the rights of Avanir so that Avanir would not in fact receivesubstantially all such rights, Licensee will cooperate with Avanir, free of charge, in anyreasonable arrangement designed to provide Avanir the benefits underany such registrations, licenses and rights as far as the laws and regulations permitdeliverance and transfer thereto this Agreement or other actions by Licensee so as toenable Avanir to obtain the benefits under such licenses and rights. Licensee willcontinue to provide Avanir with assistance ensuring the orderly transition of the Productsand its corresponding regulatory approvals to Avanir.     (d) Confidential Information. If termination of this Agreement is caused bymaterial breach by Licensee, Licensee will return all copies of all Avanir’s ConfidentialInformation and any other Know-How relating to the Products, together with copies of anyregistrations and applications for registration of the Products. Licensee will discloseall manufacturing information solely related to the Products (in so far as suchinformation is within Licensee’s control and in so far as Licensee is legally able todisclose the information) to Avanir and Licensee will continue to manufacture Avanir’s orits licensees’ requirements of the Products until such time as a substitute manufacturingsource has been approved by the Territory Regulatory Agency, if applicable, and on suchterms as will be agreed by the parties negotiating in good faith.     8. **CONFIDENTIALITY**.     8.1 Confidential and Proprietary Information. Each party to this Agreementacknowledges that in order for Avanir and Licensee to carry out their respective obligationsunder this Agreement, it may be necessary for Avanir and Licensee to disclose to each othercertain Confidential Information. Each party to this Agreement agrees: (a) not to reveal or makeavailable any Confidential Information of the other to any Third Party, (except (i) to agents orconsultants engaged to obtain Territory Registrations in the Territory who have entered intoconfidentiality agreements in a form acceptable to Avanir or (ii) as such disclosure may bespecifically approved in writing by the party against whom such disclosure is sought and exceptas such disclosure may be required by the receiving party’s compliance with legal requirementsand in any such case such party will promptly notify the other party of any such legally requireddisclosure) and to ensure that it will treat such Confidential Information of the other party inthe same manner as it treats its own Confidential Information, such treatment to be at least thedegree that a reasonable person would perform under similar circumstances; (b) to ensure thatAffiliates, sublicensees, employees, agents, associates or other persons to whom such disclosuremay be made or who may otherwise have access to such Confidential Information of the other have,directly or indirectly, agreed in writing to safeguard and maintain such Confidential Informationof the other and not to disclose or use such Confidential Information of the other; (c) to ensurethat Confidential Information of the other is not used for the receiving party’s benefit exceptas such benefits are expressly contemplated in this Agreement; (d) to prohibit the ConfidentialInformation of the other from being duplicated in any manner; except as is reasonably necessaryto perform the tasks and obligations contemplated under this Agreement; (e) to prohibit theConfidential Information of the other from being published in any form without the expresswritten consent from the disclosing party, and (f) to ensure that each party of this Agreementwill not disclose any terms and condition of this Agreement in detail to a Third Party withoutprior written consent of the other party, except as provided in Section 47. and4.8.CONFIDENTIAL
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     8.2 Survival of Confidentiality. The obligations of this Article 8 withrespect to Confidential Information will continue during the term of this Agreement and for***  years thereafter.     8.3 Remedies. The receiving party acknowledges and agrees that due to the uniquenature of the disclosing party’s Confidential Information, there can be no adequate remedy at lawfor any breach of its obligations pursuant to this Agreement, that any such breach may allow thereceiving party or Third Parties to unfairly compete with the disclosing party resulting inirreparable harm to the disclosing party, and therefore, that upon any such breach or any threatthereof, the disclosing party will be entitled to immediate injunctive relief in addition todamages and expenses, including attorneys’ fees, in connection with any breach or enforcement ofthe receiving party’s obligations pursuant to this Agreement or the unauthorized use or releaseof any such Confidential Information. The receiving party will notify the disclosing party inwriting immediately upon the occurrence of any such unauthorized release or other breach. If anybreach of this Article 8 is seriously detrimental to relationship of trust betweenLicensee and Avanir, that breach will constitute a material breach of this Agreement.     9. **REPRESENTATIONS AND WARRANTIES OF AVANIR**.     9.1 Due Organization and Authority. Avanir represents and warrants: (a) that it isa corporation duly incorporated, validly existing and in good standing under the laws of theState of California and has the corporate power and authority to execute, deliver and carry outthe terms and provisions of this Agreement; (b) that the execution, delivery and performance ofthis Agreement by Avanir will not require the consent of any Third Party and will not cause abreach or violation under any fiduciary, contractual, statutory or judicial obligation orrestraint to which Avanir is subject or bound; and (c) that the person executing this Agreementon behalf of Avanir is duly authorized to do so to bind the corporation.     9.2 Safety and Stability. Avanir represents and warrants that it has not receivedany notification of, and has no current knowledge that there is now pending or that there havebeen any judicial or administrative orders to ban the development or use of the ActiveIngredient, and Avanir has no current knowledge of any adverse reactions or test resultsencountered or discovered regarding the use of the Active Ingredient which would render theActive Ingredient unsuitable or unsafe for the purpose contemplated by this Agreement, which havenot been disclosed to Licensee.     9.3 No Conflicts. Avanir represents and warrants that it has the right, without anyconflicts or restrictions, to enter into and perform in this Agreement.     9.4 NO OTHER WARRANTIES. EXCEPT AS MAY BE EXPRESSLY PROVIDED IN THIS AGREEMENT OR THESUPPLY AGREEMENT, AVANIR DISCLAIMS ANY WARRANTY WITH RESPECT TO (A) THE QUALITY, COMPLETENESS,EFFICACY OR EFFICIENCY OF THE BULK DOCOSANOL, PRODUCTS, KNOW-HOW OR ANY OTHER DATA OR OTHERINFORMATION TO BE DELIVERED UNDER THIS AGREEMENT; (B) MERCHANTABILITY, TITLE, OF ANY PRODUCTS ORKNOW-HOW, FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT *** Certain confidential portions of thisExhibit were omitted by means of blackout of the text (the “Mark”). ThisExhibit has been filed separately with the Secretary of the Commission withoutthe Mark pursuant to the Company’s Application Requesting ConfidentialTreatment under Rule 24b-2 under the 1934 Act.CONFIDENTIAL
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TO ANY AND ALL OF THE FOREGOING; AND (C) THE VALIDITY OF ANY PATENTS OR THE PATENTABILITY OF ANYPATENT APPLICATIONS.However, notwithstanding the foregoing, Avanir represents, warrants and covenants to Licensee that: a) As of the date hereof, Avanir is the sole and exclusive owner of the entire right,title and interest in the Licensed Patents listed in Schedule 1.14, and is entitledto grant the licenses specified herein. True, complete and correct copies of the completefile wrapper and other documents and materials relating to the prosecution, defense,maintenance, validity and enforceability of the Licensed Patents have been provided toLicensee prior to the date hereof or will be provided as soon as reasonably practicablefollowing patent grant, as the case may be. The Licensed Patents listed in Schedule 1.14constitute all of the relevant patents applicable to Active Ingredient, Bulk Docosanol andProduct as of the date hereof. During the term of this Agreement, Avanir will not take anyaction to encumber or diminish the rights granted to Licensee hereunder with respect to theLicensed Patents.  b) As of the date hereof, to the best of Avanir’s knowledge, the Licensed Patents arebeing diligently procured from the Japanese Patent Office in accordance with all applicablelaws and regulations. As of the date hereof, such Licensed Patents have been filed andmaintained properly and correctly and all applicable fees have been paid on or before thedue date for payment.  c) As of the date hereof, to the best of Avanir’s and its Affiliates’ knowledge, there isno actual infringement or threatened infringement of the Licensed Patents and Know-How byany Third Party.  d) As of the date hereof, to the best of Avanir’s and its Affiliates’ knowledge,Licensee’s exploitation of the Patents or the Know-How hereunder will not infringe anypatent or other intellectual property or proprietary right of any Third Party.  e) To the best of Avanir’s and its Affiliates’ knowledge, the Licensed Patents and theKnow-How existing as of the date hereof are subsisting and are not invalid orunenforceable, in whole or in part. As of the date hereof, no claim or litigation has beenbrought or threatened by any Third Party alleging, and Avanir is not aware of any possibleclaim, whether or not asserted, that the Licensed Patents or Know-How are invalid orunenforceable.  f) Avanir has not previously entered into any agreement with respect to the Territory,whether written or oral, with respect to, or otherwise assigned, transferred, licensed,conveyed or otherwise encumbered its right, title or interest in or to, the LicensedPatents or Know-How, the Bulk Docosanol or the Products (including by granting any covenantnot to sue with respect thereto) and it will not enter into any such agreements or grantany such right, title or interest to any Third Party that is inconsistent with the rightsand licenses granted to Licensee under this Agreement.  g) To the best of Avanir’s and its Affiliates’ knowledge, the Know-How has been keptconfidential or has been disclosed to Third Parties only under terms of confidentiality.CONFIDENTIAL
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     **10. REPRESENTATIONS AND WARRANTIES OF LICENSEE.**     10.1 Due Organization and Authority. Licensee represents and warrants that: (a) itand each of its Affiliates is a corporation duly incorporated, validly existing and in goodstanding under the laws of Japan and has the full power and authority to execute, deliver andcarry out the terms and provisions of this Agreement; (b) the execution, delivery and performanceof this Agreement by Licensee will not require the consent of any Third Party and will not causea breach or violation under any fiduciary, contractual, statutory or judicial obligation orrestraint to which Licensee is subject or bound; and (c) the person executing this Agreement onbehalf of Licensee is duly authorized to do so to bind Licensee.     10.2 No Pending Action against Licensee. Licensee represents and warrants that ithas not received any notification of and has no current knowledge of any action or proceedingpending or threatened against Licensee which might result in a material adverse change in thebusiness or financial condition of Licensee which could adversely affect the rights of Avanirunder this Agreement or the development of the Products.     10.3 Governmental Agencies. Licensee represents and warrants that it has disclosedand made available to Avanir all pertinent correspondence received from any governmental agencywhich relates to or impacts on its ability to develop the Products pursuant to this Agreement inthe Territory and will disclose all such further information to Avanir in the future.     10.4 No Conflicts. Licensee represents and warrants that it has the right, withoutany conflicts or restrictions, to enter into and perform in this Agreement.     **11. CLAIMS BY OR AGAINST THIRD PARTIES.**     11.1 Representations. Each party represents and warrants that it has not beennotified of any claims by any Third Parties related to the Active Ingredient or the Products thathave not been communicated to the other in writing before execution of this Agreement.     11.2 Notice of Reimbursed Claims. If during the term of this Agreement, eitherparty receives notice of or becomes aware of any Third Party claim against such party or itsAffiliates or sublicensees, which claim is subject to Reimbursement by the other party under thisArticle 11 (an “Reimbursed Claim”), such party seeking Reimbursement or its substitutesincluding appropriate damage compensation for any liability under applicable law will promptlyinform the other party of such claim and all relevant and applicable facts relating thereto inwriting.     11.3 Defense of Reimbursed Claims. Upon receiving a notification of a ReimbursedClaim, the Reimbursing party will have sole discretion with respect to and will solely control,at the Reimbursing party’s expense, the defense of any such Reimbursed Claim. The Reimbursingparty will keep the Reimbursed party fully informed regarding the status of any negotiations orsuits relating to such Reimbursed Claim. The Reimbursed party will cooperate fully with theReimbursing party and will offer such assistance to the Reimbursing party as the Reimbursingparty requests in connection with the defense of any such Reimbursed Claim at no charge to theReimbursing party, except for reimbursement of reasonable out-of-pocket expenses incurred inrendering such assistance. The Reimbursing party will have the right to join the Reimbursedparty as a party to any lawsuit relating to such Reimbursed Claim at the Reimbursing party’sexpense, if the action has already been commenced against Reimbursed party by the Third Party,and the Reimbursed party will have the right to be represented therein by legal counsel of itsown choice at the Reimbursed party’s expense, whereCONFIDENTIAL
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it is allowed under applicable law. The Reimbursing party will not settle any such suit if suchsettlement would have an affect on the rights of the Reimbursed party without obtaining the priorwritten consent of the Reimbursed party, which consent will not be unreasonably withheld. TheReimbursing party’s obligation to indemnify under this Article 11 will not apply to theextent that the party seeking Reimbursement (i) failed to comply with the obligations under thisSection 11.3 or (ii) contributed to such loss, damage, injury, liability or claim by anyact, or by an omission to perform some duty imposed by applicable law, this Agreement or othercontract between the parties, on the Reimbursed party. The Reimbursement rights of either partyunder this Article 11 will be the sole remedy for any claims for which either such partyseeks Reimbursement under this Article 11.     11.4 Reimbursement of Avanir by Licensee. Licensee will defend, indemnify and holdharmless Avanir, its successors, assigns, officers, directors, employees and agents from any andall claims, causes of action, losses, liabilities and expenses (including, but not limited to,reasonable attorneys’ fees) to Third Parties (including Avanir’ employees and any sublicensees)arising out of (a) any breach of this Agreement by Licensee or (b) any personal injury, death,environmental damage or property damage resulting from (i) any defects in design, materials orworkmanship of any kind or (ii) failure to comply with any applicable laws or misappropriation ofany Third Party rights, related to the manufacture, labeling, marketing, advertising,distribution, transportation, sale and use of the Products by Licensee or its Affiliates orsublicensees or by any Third Party acting under any contract with Licensee or with Licensee’sknowledge, consent or approval or (c) claims that the Trademark infringes any trademark rightsowned by a Third Party.     11.5 Reimbursement of Licensee by Avanir. Avanir will defend, indemnify and holdharmless Licensee, its successors, assigns, officers, directors, employees and agents from anyand all claims, causes of action, losses, liabilities and expenses (including, but not limitedto, reasonable attorneys’ fees) by Third Parties (including Licensees’ employees and anysublicensee) arising out of (a) any breach of this Agreement by Avanir; (b) any personal injury,death, environmental damage or property damage resulting from (i) any defects in design,materials or workmanship of any kind related to Bulk Docosanol that is supplied by Avanirpursuant to the Supply Agreement or (ii) failure to comply with any applicable laws related toBulk Docosanol that is supplied by Avanir pursuant to the Supply Agreement, or by any Third Partyacting under any contract with Avanir or with Avanir’s knowledge, consent or approval and relatedto Bulk Docosanol that is supplied by Avanir pursuant to the Supply Agreement; or (c) claims anddamages related to such claims, that Licensee’s approved use or sale of Products within the Fieldinfringes any patent owned by a Third Party in the Territory; provided, however, the amount ofReimbursement is subject to and to the extent permitted by any applicable law. The aboveprovision may not be construed or interpreted as to exceed the maximum limitation of liabilitypermitted by the law. If an action is commenced by a Third Party against Licensee seeking apreliminary or permanent injunction with respect to the manufacture and sales of the Products byLicensee and Avanir is unable to obtain a written opinion of patent counsel that it is notinfringing the third-party’s patent, or that such patent is invalid, then Licensee will cease anysuch alleged infringement or misappropriation. In the event of any such occurrence, Licensee andAvanir will promptly work together on a change of design which should not create any infringementor misappropriation under the Third Party’s patent.CONFIDENTIAL
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     11.6 Enforcement of Proprietary Rights against Third Parties. If Licensee becomesaware of any product or activity of any Third Party that is suspected of involving infringementor violation of any of Avanir’s proprietary rights, then Licensee will promptly notify Avanir inwriting of such infringement or violation. If Avanir becomes aware of any product or activity ofany Third Party that is suspected of involving infringement or violation of Avanir’s proprietaryrights and that affect Licensee’s license rights pursuant to this Agreement, then Avanir willpromptly notify Licensee in writing of such infringement or violation. Avanir may in its solediscretion take or not take whatever action it believes is appropriate in connection with anysuch infringement or violation, and will have the right to initiate an infringement or otherappropriate suit, including any defensive action in an invalidation trial at the Japan PatentOffice for any one of the Licensed Patents listed in the Schedule of 1.14, against anyThird Party who is suspected of infringing or misappropriating any Licensed Patents, invention ortechnology included in any Products or the Know-How in the Territory. If Avanir elects to takeaction, Licensee will fully cooperate therewith at Avanir’s expense. If Avanir initiates andprosecutes any such action under this Section 11.6, all legal expenses (including courtcosts and attorneys’ fees) will be for Avanir’s account but Licensee and Avanir will be entitledto the balance shared proportional to their damages or payments regarding losses (other than forreimbursement of costs or expenses, including attorney’s fees) awarded by way of judgment,settlement or compromise and received by Avanir from the Third Party(s). If necessary, Licenseemay be joined as a party to the suit and will cooperate fully with respect to such suit and willoffer such assistance to Avanir in connection therewith at no charge except for reimbursement ofreasonable out-of-pocket expenses (including attorneys’ fees) incurred in rendering suchassistance. In such situation, Licensee will have sole discretion in selecting its own counsel.If Avanir declines in any way whatsoever to enforce or initiate an infringement or otherappropriate suit against an infringing Third Party, Licensee will have the right to sue,selecting its counsel in its sole discretion, and, subject to the proviso below, will beentitled to receive all amounts awarded by way of judgment, settlement or compromise, if Licenseeregisters *Senyo Jisshiken*under the Japanese Patent Law and any other applicable precedents underJapanese Law in the subject case, provided, however, that Avanir will be entitled to aproportionate share of any damages or payments (other than for reimbursement of costs orexpenses, including attorneys’ fees) received by Licensee from such Third Party(s). Avanir willfully cooperate therewith at Avanir’s expense.     11.7 Reimbursement Payment Adjustments. Any Reimbursed amounts provided under thisArticle 11 will be reduced or refunded to take account of any net tax benefit or insuranceproceeds received and any other amount recovered, if any, by the Reimbursed party with respect toany Reimbursed amounts.     11.8 Insurance. To provide each Reimbursed party under this Agreement with adequateassurance of Reimbursement, for the term of this Agreement and for a period of five years after theexpiration of this Agreement or earlier termination, each party will obtain and/or maintain,respectively, at its sole cost and expense, product liability insurance in amounts, which arereasonable and customary in the local pharmaceutical industry considering the respective size andactivities of the two parties. Such product liability insurance will insure against all liability,including liability for personal injury, physical injury and property damage. Each party willprovide written proof of the existence of such insurance to the other party upon request.     **12. ASSIGNMENTS**.CONFIDENTIAL
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     12.1 No Right to Assign. Subject to Sections 12.2, and 12.3,neither party will have the right to assign or delegate this Agreement, or any of its rights orobligations under this Agreement (except for Avanir’s rights to payments of royalties pursuant tothis Agreement) without the other’s express written consent, and such assignment or delegationwithout such consent will be null and void for all purposes. In case for Avanir’s rights topayments of royalties pursuant to this Agreement, Avanir will provide Licensee with at least60-days prior written notice before the assignment of the right.     12.2 Sale of Business. Notwithstanding anything to the contrary in this Agreement,either Avanir or Licensee may assign its entire interest in this Agreement provided that suchassignment is part of the sale or transfer of substantially all of Avanir’s or Licensee’sbusiness, merger (“*Gappei*in Japanese Commercial Law), corporate division, corporate separationor demerger (“*Kaisya Bunkatsu*” in Japanese Commercial Law), as the case may be.     12.3 Assignment to Affiliates. Notwithstanding the provisions of Section12.1, this Agreement and the obligations pursuant to this Agreement will be assignable, inwhole or in part, by Avanir, without consent of Licensee, to one or more Affiliates who willaffirm to Licensee a complete assumption of the obligations assigned; provided that Avanir willguarantee the performance by such Affiliate(s) of such obligations. On the other hand,notwithstanding the provisions of Section 12.1, this Agreement and the obligationspursuant to this Agreement will be assignable, in whole or in part, by Licensee, without consentof Avanir, to one or more of Licensee’s Affiliates that are as able or more able to perform theobligations of Licensee under this Agreement and that will affirm to Avanir a complete assumptionof the obligations assigned; provided that Licensee will guarantee the performance by suchAffiliate(s) of such obligations. Licensee hereby guarantees the performance of its Affiliates,and further promises that such assignment will revert to the Licensee in the event that suchAffiliate subsequently ceases to be an Affiliate.     **13. MISCELLANEOUS**.     13.1 Notices/Reports. Any reports, notices or other communications required orpermitted to be given by either party to this Agreement will be given in writing by personaldelivery, overnight courier service or facsimile, or by registered or certified air mail, postageprepaid, return receipt requested, or electronic means including e-mail addressed to eachrespective party at the address shown below.If to Avanir:Avanir Pharmaceuticals, Inc.