Exhibit 10.19


 


Execution Copy


 


***Text Omitted and Filed Separately


with the Securities and Exchange Commission.


Confidential Treatment Requested


Under 17 C.F.R. Sections 200.80(b)(4)


and 240.24b-2.


 


 


 


Amended and Restated Development and License Agreement


between


Metabasis Therapeutics, Inc.


and


Schering Corporation


 


 


 


 


 


 


 


Dated as of
December 13, 2006










  
  



TABLE
OF CONTENTS


	
  ARTICLE I DEFINITIONS AND INTERPRETATION

  	
   

  	
  5

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II LICENSE

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III SUBSTITUTE COMPOUND

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV COMPENSATION

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V DEVELOPMENT STEERING COMMITTEE

  	
   

  	
  23

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI DEVELOPMENT AND MARKETING OBLIGATIONS

  	
   

  	
  26

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII [Intentionally left blank]

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII INTELLECTUAL PROPERTY

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX REPRESENTATIONS, WARRANTIES AND LIMITATION OF LIABILITY

  	
   

  	
  32

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X INDEMNIFICATION AND LIMITATION OF LIABILITY

  	
   

  	
  35

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI CONFIDENTIALITY AND PUBLICATION

  	
   

  	
  37

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII TERM AND TERMINATION

  	
   

  	
  40

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII ASSIGNMENT; SUCCESSORS

  	
   

  	
  46

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV DISPUTE RESOLUTION

  	
   

  	
  47

  	
   

  



 



 2
 






  
  



 


	
  ARTICLE XV GENERAL PROVISIONS

  	
   

  	
  48

  	
   

  




 3
 






  
  



 


AMENDED AND
RESTATED DEVELOPMENT AND LICENSE AGREEMENT


This Amended and
Restated Development and License Agreement (this Agreement) is made as of
December 12, 2006 and is effective as of the Amended Closing Date by and
between Metabasis Therapeutics, Inc., a corporation organized and existing
under the laws of Delaware (Metabasis) and Schering Corporation, a corporation
organized and existing under the laws of New Jersey (Schering) (each a “Party”
and collectively the “Parties”).


Recitals


A.               Metabasis is engaged in the
research and development of therapeutic products and technologies.


B.                Metabasis has acquired or possesses
the right to license worldwide proprietary rights to certain HepDirect
Compounds for the treatment of Hepatitis B.


C.                Metabasis and Valeant
Pharmaceuticals International (Valeant), then known as ICN Pharmaceuticals,
Inc., previously entered into a Development and License Agreement of October 1,
2001 relating to the Licensed Compound (the Original Agreement).


D.               Metabasis, Valeant and Schering
have executed an Assignment Agreement effective as of the Amended Closing Date
pursuant to which Metabasis and Valeant have consented to the assignment by
Valeant to Schering of Valeant’s rights and obligations under the Original
Agreement.


E.                Schering has expertise in
researching, developing, manufacturing and marketing pharmaceutical products
for the treatment of human diseases and wishes to develop, manufacture, and
market Products based on the Licensed Compound in accordance with this
Agreement.


F.                Metabasis wishes to grant an
exclusive license to Schering and Schering wishes to acquire an exclusive
license with respect to, and to develop, manufacture, and market Products, in
accordance with this Agreement.


G.                Metabasis and Schering now wish
to amend and restate the Original Agreement on the terms of this Agreement.


Agreement


In consideration
of the above and the mutual covenants set forth in this Agreement and other
valuable consideration received by the Parties, the Parties agree as follows.



 4
 






  
  



ARTICLE I


DEFINITIONS
AND INTERPRETATION


1.1              Definitions


In this Agreement,
capitalized terms have the respective meanings set forth below.


Act
means the Federal Food, Drug and Cosmetic Act (21 U.S.C. §301, et seq.),
including any amendments or supplements.


Accounting
Period means a calendar quarter commencing on the first day
of an Accounting Period (and for the first Accounting Period, commencing on the
Amended Closing Date), respectively January 1, April 1, July 1, and October 1,
each being the first day, and finishing the last day of an Accounting Period
respectively on March 31, June 30, September 30 and December 31, each
being the last day.


Accounting
Standards means with respect to both Metabasis and Schering,
GAAP (United States Generally Accepted Accounting Principles), in each case as
generally and consistently applied throughout the Party’s organization.


Affiliate
of a Party means any corporation or other business entity that controls, is
controlled by, or is under common control with a Party, where control means
direct or indirect ownership of more than fifty percent (50%) of the voting
interest in a corporation or entity, or such other relationship as, in fact,
constitutes actual control of management or the ability to cause the direction
of the management or policies of a corporation or other entity.  In the case of entities organized under the
laws of certain countries, the maximum percentage ownership permitted by law
for a foreign investor may be less than fifty percent (50%), and in such case
such lower percentage shall be substituted in the preceding sentence, provided
that such foreign investor has the power to direct the management and policies
of such entity.


Agreement
has the meaning set forth in the preamble.


Amended
Closing Date has the meaning set forth in Section 15.17.


Approval
Authority means a governmental authority or agency whose
approval is required in a country for any Regulatory Approval, including the
FDA, EMEA and any national or regional regulatory authorities.


Assignment
Agreement means the assignment agreement entered into among
Metabasis, Schering and Valeant relating to the assignment by Valeant to
Schering of Valeant’s rights and obligations under the Original Agreement.


Bankruptcy
Code means Title 11, U.S. Code.


Breaching
Party has the meaning set forth in Section 12.3.



 5
 






  
  



Business
Day means a day when banks are open for business in Los Angeles,
California, and New York, New York.


Claims
has the meaning set forth in Section 10.1.


Combined
Product means any pharmaceutical product with two or more
active pharmaceutical ingredients (in any formulation and including a
combination of separate dosage forms in a single package), one of which is a
Licensed Compound and one or more of which is not, sold as a single item for
one price.


Commercially
Reasonable Efforts means with respect to the development,
manufacture, Regulatory Approval, and commercialization of Licensed Compound
and Product, application of efforts and resources at all times that are
consistent with what Schering applies for similar pharmaceutical products of
similar market potential at similar stages of development.


Competitive
Product means any pharmaceutical product in final form which
[***] and such product is not a Product being commercialized by Schering or a
Sublicensee of Schering pursuant to this Agreement.


Compassionate
Sales means, with respect to a Product in any country in the
Territory, any sale of the Product by Schering or any of its Affiliates or
Sublicensees that is required by a governmental authority to be made to certain
persons or classes of persons in such country, before or after the Product has
been approved for use in such country by the Approval Authority, but before the
price of the Product (or reimbursement for the Product) has been determined by
the applicable governmental authority in such country.


Confidential
Information means all know-how and other proprietary
information and data of a financial, commercial or technical nature which the
disclosing Party or any of its Affiliates has supplied or otherwise made
available to the other Party, whether made available orally, in writing or in
electronic form, including information comprising or relating to concepts,
discoveries, inventions, data, designs or formulae in relation to this
Agreement.


Control
or Controlled means, with respect to any compound, material,
information or intellectual property right, that the party owns or has a
license and has the ability to grant to the other party a license or a
sublicense (as applicable) as provided for herein without violating
(i) the terms of any agreement with any Third Party or (ii) any law or
governmental regulation applicable to such license or sublicense.


Cover,
Covering or Covered means that, with respect to a Patent
Right, a compound, product, practice or the like which would infringe a Valid
Claim of such Patent Right in the absence of a license.


Development
Steering Committee has the meaning set forth in Section 5.1.


Dollars
or $ means the lawful currency of the
United States.


***Confidential Treatment Requested



 6
 






  
  



EMEA
means the European Medicines Agency, or any successor entity thereto.


Encumbrance
means any claim, charge, equitable interest, hypothecation, lien, mortgage,
pledge, option, license, assignment, power of sale, retention of title, right
of pre-emption, right of first refusal or security interest of any kind.


EU
Major Market means any [***] of the following countries:  [***]


EU
Regulatory Approval means (a) marketing authorization
approval from the EMEA and pricing approval and reimbursement in the EU Major
Market or (b) marketing authorization approval and pricing approval and
reimbursement in the EU Major Market.


European
Union means the amalgamation of European member states
created by the Treaty on European Union (commonly called the Maastricht Treaty)
effective January 1, 1993 as expanded since such date.


FDA
means the United States Food and Drug Administration, or any successor entity
thereto.


Field
means all human and animal pharmaceutical and diagnostic applications in all
indications, including for prevention or treatment of all diseases.


First
Commercial Sale means, with respect to a Product in any
country in the Territory, the first arms-length sale to a Third Party purchaser
in such country of a Product by Schering or any of its Affiliates or
Sublicensees, after Regulatory Approval in such country, which transfers
physical possession and title to the Product, provided, however, that any
Compassionate Sales or sales for pre-marketing, testing, or sampling will not
be a First Commercial Sale.


Fully
Burdened Manufacturing Cost shall have the meaning set forth
in Exhibit C.


Generic
Affiliate means any
Affiliate of a Party whose principal business activity is the
development, manufacture, commercialization or distribution of generic
pharmaceutical products.


Generic
Equivalent means, as to any specific Product at issue which
has received Regulatory Approval in the country at issue, a pharmaceutical
product with the same active ingredient and administrative route as the Product
and which has (i) in the United States, received Regulatory Approval from the
FDA (x) under an abbreviated NDA in accordance with 21 C.F.R. 314.94(a) which
refers to the specific Product at issue as the Reference Listed Drug (as
defined in 21 C.F.R. 314.3(b)), (y) under an NDA described in Section 505(b)(2)
of the Act as to which information necessary for approval is contained in the
NDA filed for the specific Product at issue but as to which the applicant in
the NDA for such potential Generic Equivalent does not have a right of
reference or (z) by any means by which the potential Generic Equivalent can
obtain Regulatory Approval based, in part, on information contained in the NDA
filed for the specific Product at issue but as to which the applicant in the
application for Regulatory Approval for such potential Generic Equivalent does
not have a right of reference; and (ii) in any other


***Confidential Treatment Requested



 7
 






  
  



country in the Territory,
from the Regulatory Authority having jurisdiction in such country
(x) under an application similar to an abbreviated NDA which references
the specific Product at issue in a manner similar to a Reference Listed Drug,
(y) under an application similar to an NDA described in Section 505(b)(2)
of the Act as to which information necessary for approval is contained in the
NDA filed for the specific Product at issue (or the comparable application filed
in the country at issue) but as to which the applicant in the application for
such potential Generic Equivalent does not have a right of reference or (z) by
any means by which the potential Generic Equivalent can obtain Regulatory
Approval based, in part, on information contained in the NDA filed for the
specific Product at issue (or the comparable application filed in the country
at issue) but as to which the applicant in the application for Regulatory
Approval for such potential Generic Equivalent does not have a right of
reference.


Handle
has the meaning set forth in Section 8.1.


HepDirect
Compounds means all compounds that fall within the scope of
the HepDirect Technology which are Controlled by Metabasis.


HepDirect
Technology means compositions and methods of making and using
the same, of any and all [***], including all proprietary and technical
information related thereto, and all patentable and non-patentable inventions,
discoveries, experience, disclosure claims, formulas, processes, procedures, compositions
of matter, specifications, methods, techniques, trade secrets, technologies,
data, know-how, instructions, processes, formulae, materials and results
related thereto which are Controlled by Metabasis and include those Patent
Rights set forth in Schedule A.


IND
means an Investigational New Drug application in the US filed with the FDA or
the corresponding application for the investigation of the Product in any other
country or group of countries, as defined in the applicable laws and
regulations and filed with the Approval Authority of a given country or group
of countries.


Indemnified
Party has the meaning set forth in Section 10.3.


Indemnifying
Party has the meaning set forth in Section 10.3.


Know-How
means any and all inventions, developments, results, and other information,
including clinical, technical, scientific and medical information, know-how,
methods, practices and trade secrets, quality control information and
procedures, pharmacological, toxicological and clinical test data and results
and regulatory information.


Licensed
Compound means all forms of MB6866 as identified at
Exhibit A (at times known as remofovir and now known as pradefovir)
including any complexes, chelates, clathrates, acids, bases, esters, salts,
isomers, stereoisomers, enantiomers, pro-drug form, metabolite, hydrate,
solvate, polymorph, and crystalline forms thereof, or any Substitute Compound
substituted in accordance with Article III, and its various forms including
salts and prodrugs.


***Confidential Treatment Requested



 8
 






  
  



Licensed
Patents means any and all Patent Rights which Metabasis
Controls in any country of the Territory, having one or more Valid Claims
Covering the Licensed Compound or Product in the Field and which are reasonably
necessary or useful to research, develop, prepare, make, have made, market,
export, have exported, import, use, offer for sale, sell, have sold,
distribute, promote, detail or otherwise commercialize a Licensed Compound or
Product in the Field in the Territory. 
Licensed Patents includes the Patent Rights set forth on
Schedule A.


Licensed
Technology means all HepDirect Technology on the Closing Date
or during the Term, which are necessary or useful to research, develop,
prepare, make, have made, market, export, have exported, import, use, offer for
sale, sell, have sold, distribute, promote, detail or otherwise commercialize a
Licensed Compound or Product in the Field in the Territory.  By way of clarification, Licensed Technology
includes all such HepDirect Technology conceived or acquired in whole or in
part by Metabasis on or after the Closing Date including the items set forth in
Section 8.4 (a) below.


MAA
means an application for authorization to market the Product
in any country or group of countries outside the United States, as defined in
the applicable laws and regulations and filed with the Approval Authority of a
given country or group of countries.


Major
Health Care Company shall mean a Third Party pharmaceutical
or biotechnology company (including a “group” within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934) [***].


Major
Market Country means each of the following countries and its
territories and possessions: [***]


Metabasis
has the meaning set forth in the preamble.


Metabasis
Change of Control means any transaction or series of related
transactions in which a Major Health Care Company acquires or becomes the
beneficial owner of (i) more than fifty percent (50%) of the outstanding voting
securities of Metabasis or the surviving entity, whether by merger,
consolidation, reorganization, tender offer or similar means, or (ii) all or
substantially all of the assets of Metabasis, howsoever caused, including by
sale or lease.


Metabasis
Insolvency Event
means, in relation to Metabasis, any one of the following: (a) that
Metabasis is the subject of voluntary or involuntary bankruptcy proceedings
instituted on behalf of or against Metabasis (except for involuntary bankruptcy
proceedings which are dismissed within sixty (60) days); (b) an
administrative receiver, receiver and manager, interim receiver, custodian,
sequestrator or similar officer is appointed in respect of Metabasis;
(c) a notice shall have been issued to convene a meeting for the purpose
of passing a resolution to wind up Metabasis, or such a resolution shall have
been passed other than a resolution for the solvent reconstruction or
reorganization of Metabasis; (d) a resolution shall have been passed by
Metabasis or Metabasis’ directors to make an application for an administration
order or to appoint an administrator; or (e) that Metabasis makes any
general assignment, composition or


***Confidential Treatment Requested



 9
 






  
  



arrangement with or for
the benefit of Metabasis’ creditors or suspends making payments to all or
substantially all of Metabasis’ creditors.


Milestone
means any event relating to the development and commercialization of Products
set forth in Section 4.2.


Milestone
Payment means any of the payments required under
Section 4.2.


NDA
means a New Drug Application filed with the FDA for marketing approval for a
drug pursuant to the Act and the Regulations.


Net
Sales means gross
amounts invoiced by or on behalf of Schering and any of its Affiliates or
Sublicensees for the Product sold to Third Parties who are not Affiliates or
Sublicensees of Schering, unless such Affiliate or Sublicensee is the end user
of such Product, in which case the amount billed therefor shall be deemed to be
the amount that would be billed to a Third Party end user in bona fide,
arms-length transactions, less the following deductions, as determined in
accordance with Schering’s usual and customary accounting methods, which are in
accordance with its Accounting Standards as consistently applied at Schering,
to the extent included in the gross invoiced sales price of any Product or
otherwise directly paid or incurred by Schering, its Affiliates or sublicensees
with respect to the sale of such Product: 
normal and customary trade and quantity discounts actually allowed and
properly taken directly with respect to sales of the Product; amounts repaid or
credited by reasons of defects, rejection, recalls, returns, field destroys,
rebates and allowances of goods specifically identifiable to the Product;
chargebacks and other amounts paid on sale or dispensing of such Product; amounts
payable resulting from governmental, regulatory or agency mandated rebate
programs; tariffs, duties, excise, sales, value-added and other taxes (other
than taxes based on income); retroactive price reductions that are actually
allowed or granted; cash discounts actually granted for timely payment;
discounts actually granted pursuant to indigent patient programs and patient
discount programs, including, without limitation, coupon discounts; a deduction
of [***] for distribution and
warehouse expenses; amounts repaid or credited for uncollectible amounts on
previously sold products; and any other specifically identifiable amounts
included in gross amounts invoiced for Products to the extent such amounts are
customary exclusions from net sales calculations in the pharmaceutical industry
for reasons substantially equivalent to those listed above and are reasonable
in amount relative to similar deductions taken by Schering in calculating net
sales of its other products.  Each of the deductions set forth above shall
be determined on an accrual basis in accordance with GAAP.


In the event the Product is sold as a Combined Product, the Net Sales
of the Product, for the purposes of determining royalty payments, shall be
determined by multiplying the Net Sales of the Combined Product by the
fraction, A/(A+B) where A is the weighted (by sales volume) average sale price
in a particular country of the Product when sold separately in finished form
and B is the weighted (by sales volume) average sale price in that country of
the other product(s) sold separately in finished form.  In the event that such average sale price
cannot be determined for both the Product and the other product(s) in combination,
Net Sales for purposes of


***Confidential Treatment
Requested



 10
 






  
  



determining
royalty payments shall be agreed by the Parties based on the relative value
contributed by each component, such agreement not to be unreasonably withheld.


Original
Agreement has the meaning set forth in the Preamble.


Original
Closing Date means October 1, 2001.


Patent
Rights means all patents, including all divisionals,
continuations, substitutions, continuations-in-part, re-examinations, reissues,
additions, renewals, extensions, registrations, and supplemental protection
certificates and the like of any of the foregoing as well as applications of
any of the foregoing.  Patent Rights
shall include regulatory-based extensions to patent terms, including pediatric
exclusivity periods in the United States.


Phase
I Clinical Trial means the initial introduction of an
investigational new drug into humans primarily designed to determine the
metabolism and pharmacologic actions of the drug in humans, the side effects
associated with increasing doses, and, if possible, to gain early evidence on
effectiveness, and also may include studies of drug metabolism,
structure-activity relationships, and mechanism of action in humans, as well as
studies in which investigational drugs are used as research tools to explore
biological phenomena or disease processes.


Phase
II Clinical Trial means a controlled clinical study conducted
primarily to evaluate the effectiveness of a drug for a particular indication
or indications in patients with the disease or condition under study and to
determine the common short-term side effects and risks associated with the
drug.


Phase
III Clinical Trial means a pivotal clinical study of a
Product in patients the protocol of which is designed to establish efficacy and
safety of such Product for the purpose of preparing and submitting a filing for
NDA approval in the US or EU Regulatory Approval.


PMEA
means 9-2-(phosphonomethoxy)ethyl adenine.


Prodrug
of PMEA means any compound which, as a result of in vivo
metabolism after administration, releases PMEA as the active ingredient.


Product
means any human pharmaceutical product in finished pharmaceutical form
containing, in whole or as a component, the Licensed Compound.


Program
Improvement means Know-How and all Patent Rights related to
such Know-How that is developed by or on behalf of Schering (or its Affiliates)
or jointly by Schering and Metabasis or any of their Affiliates, in connection
with the development, manufacture, marketing, importing, use, or sale of
Licensed Compound or Products.


Program
Patent means any Patent Right claiming a Program Improvement,
granted or filed in the Territory on or after the Amended Closing Date, and
Controlled by Schering or its Affiliates but excluding any Generic Affiliates.



 11
 






  
  



Program
Transfer Provisions has the meaning set forth in Section
12.5.4.


Recipient
has the meaning set forth in Section 11.2(a).


Regulations
means the regulations made under the Act, as amended or supplemented.


Regulatory
Approval means with respect to a particular country all
government approvals required by any government or regulatory authority to
permit the sale of Products in such country, including any necessary pricing or
pricing reimbursement approvals.


Royalty
Obligation Period has the meaning set forth in Section 4.4.


Royalty
Payments means the royalty due by Schering to MV on Net Sales
as set out in Clause 4.3(a)(i).


Sales
& Royalty Report means a written report or reports
showing each of: (a) the Net Sales of each Product in each country in the
world during the reporting period by Schering and each Affiliate and
Sublicensee; and (b) the Royalty Payments, in United States Dollars, which
shall have accrued in respect of such sales and the basis of calculating the
Royalty Payments, including for each country where applicable, any royalty
reductions made under Sections 4.3 (a)(ii), (c), (d) and (e).


Schering
has the meaning set forth in the preamble.


Sublicensee
means each person to whom Schering has granted a sublicense under Section 2.2.


Substitute
Compound means a HepDirect Compound provided to Schering
pursuant to Article III.


Term
means the term of this Agreement, as set forth in Section 12.1.5.


Territory
means all the countries of the world and their territories and possessions.


Third
Party means any person other than: Metabasis, Schering, or
any of their Affiliates.


United
States means the United States of America and its territories
and possessions.


Valeant
License Agreement means the license agreement entered into
between Schering and Valeant effective as of the Amended Closing Date relating
to the license of certain Valeant intellectual property relating to the
Licensed Compounds and Product.


Valid means with respect to an NDA or an MAA or
other filing for Regulatory Approval with the relevant Approval Authority that
the relevant Approval Authority has determined that such NDA or MAA or other
filing for Regulatory Approval has successfully completed its validation
procedure.



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Valid
Claim means any claim of an issued and unexpired Patent Right
which has neither been revoked, held unenforceable, unpatentable nor invalid by
a final decision of a court or a governmental agency of competent jurisdiction
(including any competent patent office), and any patent application within the
Licensed Patents which is being Handled by Metabasis which has been pending for
less than (i) [***] for patent applications in the United States, or
(ii) [***] for non-U.S. patent applications from the date of filing,
unless on the date of expiration of the applicable foregoing (i) or (ii), one
or more rejections of the pending claims of such patent application are under
appeal to a board of appeals, court, or other authority with jurisdiction over
appeals of such rejections.


1.2             Interpretation


In this Agreement,
unless the context requires otherwise


(a)              the
singular includes the plural and vice versa;


(b)              words
denoting persons include corporations, partnerships and other legal persons;


(c)              a
reference to a specified section, paragraph or schedule is a reference to that
specified section, paragraph or schedule of this Agreement;


(d)              the
article and section headings and the Table of Contents are for convenience only
and do not affect the interpretation of this Agreement;


(e)              “includes”
and “including” means including without limitation; and


(f)               a
reference to a Party includes its successors and permitted assigns.


1.3             Conditions
Precedent; Agreement Supersedes and Replaces the Original Agreement


This Agreement
will become effective only upon the execution by all parties thereto of both
(i) the Assignment Agreement; (ii) the Valeant License Agreement; and (iii) the
expiration or termination of the applicable waiting period under the HSR Act as
specified in Section 15.17.  Metabasis
and Schering acknowledge that the complete execution of the agreements
identified in the foregoing (i) and (ii) (the Other Agreements) is a condition
precedent to the effectiveness of this Agreement and that failure of either or
both of those separate agreements to be fully executed will render this
Agreement null and void.  The Original
Agreement shall remain in full force and effect until the Amended Closing Date.


***Confidential Treatment Requested



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ARTICLE II


LICENSE


2.1             License


Subject to the
terms and conditions of this Agreement, Metabasis grants to Schering, and
Schering accepts, the exclusive right and exclusive license under the Licensed
Patents and the Licensed Technology within the Field throughout the Territory
(with the right to grant sublicenses in accordance with Section 2.2), to
research, develop, manufacture, have manufactured, market, export, have
exported, import, use, offer for sale, sell, have sold, distribute, promote,
detail, and otherwise commercialize the Licensed Compound or Products.  The license is exclusive (even as to
Metabasis) with respect to the Licensed Patents and with respect to the
Licensed Technology.  This Section 2.1
does not prevent Metabasis from granting licenses to Third Parties with respect
to compounds or products that do not fall within the definition herein of
Licensed Compounds or Products.


2.2             Sublicense


(a)              Subject
to Sections 2.2(b) and 6.1, Schering has the sole and exclusive right to
sublicense the rights granted to it by Metabasis under the Licensed Patents and
the Licensed Technology, in each case within the Field throughout the
Territory, to any Affiliate or Third Party at any time at its sole discretion
(as such, a Sublicensee).  In addition,
subject to Section 2.2(b), Schering may subcontract to Third Parties the
performance of particular tasks and obligations with respect to the development
and commercialization of the Product as Schering deems appropriate.


(b)              In
the case where Schering wishes to sub-license all or substantially all of its
rights under this Agreement in any Major Market Country or Major Market
Countries to a Third Party (Effective Out-License), [***].  For the avoidance of doubt, any co-promotion
or co-marketing arrangement in such Major Market Country with a Third Party
shall not constitute an Effective Out-License.  [***], Schering will [***] by written notice
to Metabasis disclosing the identity of the proposed Third Party Sublicensee and
the proposed scope and other material commercial (but not financial) terms of
the sublicense.  Metabasis will not [***]
within [***] of receipt of such written notice.  The Parties hereby agree [***]


***Confidential Treatment
Requested



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[***] in
accordance with this Agreement.  In
addition, Metabasis will not [***].  Any
failure to respond within such [***] time period [***] by Metabasis.  In the case of sublicenses outside of Major
Market Countries Schering shall use reasonable commercial efforts to give
notice promptly to Metabasis of any sublicense to a Third Party where such
Third Party assumes a substantial portion of the responsibilities of Schering
under this Agreement, provided that Schering shall have no liability for any
inadvertent failure to do so.


(c)              Schering
shall remain responsible for ensuring compliance with the terms of this
Agreement by Sublicensees.  Schering
shall also pay to Metabasis royalties on Net Sales by Third Party Sublicensees
pursuant to Section 4.3 of this Agreement and Schering will pay such royalties
irrespective of whether Schering receives payments or other consideration due
from such Third Party Sublicensees.


(d)              Any
sublicense granted by Schering other than in conformity with the provisions of
this Section 2.2 shall be null and void.


2.3             Exclusivity


(a)              Except
as provided in Section 2.1 and as permitted by Sections 6.1, 12.3, and
12.4, during the Term, Metabasis will not license or otherwise grant to any
Third Party any rights under the Licensed Patents or the Licensed Technology to
research, develop, manufacture, have manufactured, market, export, have
exported, import, use, offer to sell, or sell, have sold, distribute, promote,
detail or otherwise commercialize Licensed Compounds or Products in the
Territory within the Field.


2.4             Provision
of Information


(a)              Within
[***] following the Amended Closing Date, Metabasis will disclose and provide
all information in its possession or control relating to the Licensed Patents
and the Licensed Technology to Schering or its designated Affiliate to the
extent necessary or useful to enable Schering to perform its obligations under
this Agreement to develop, manufacture, register, use or market the Licensed
Compound and/or Product and practice the licenses granted hereunder efficiently
including, to the extent reasonably available to Metabasis, any clinical data,
study reports, any information relating to manufacturing, any agreements in
respect of the Licensed Compound, and any related correspondence and filings
with any Approval Authority (including notes or minutes of any meeting with any
Approval Authority).  As part of such
disclosure, as soon as reasonably practicable, Metabasis will disclose to
Schering all Licensed Technology, including to the extent reasonably available
to Metabasis pre-formulation reports, clinical manufacturing batch records,
development reports, IND documentation, analytical results, analytical method
validation report, raw material and excipient sourcing information, quality
audit findings, stability reports and any other relevant technical information.  Such information is subject to the
confidentiality provisions of Article XI hereof.


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(b)              Metabasis
shall have a continuing obligation to disclose and provide to Schering such
additional Licensed Technology as is developed or obtained by Metabasis or its
Affiliates during the term of this Agreement which Metabasis has the legal
right to disclose to Schering.  In
addition, Metabasis will, [***], provide reasonable assistance to Schering in
connection with understanding and using the Licensed Technology, including by
providing information to assist Schering in developing the Licensed Compounds
or Products and its related activities.


2.5             Limits
on the Use of Licensed Compound by Metabasis


From the Amended
Closing Date, Metabasis and its Affiliates will not research, develop,
manufacture, have manufactured, market, export, have exported, import, use,
offer for sale, or sell, have sold, distribute, promote, detail or otherwise
commercialize the Licensed Compound.  The
rights granted under this Agreement are to the exclusion of Metabasis, except
as otherwise set forth in this Agreement.


2.6             Optimization
of Licensed Compound


[Intentionally
omitted]


2.7             Non
Competition


(a)              Metabasis
agrees that for a period of [***], Metabasis and its Affiliates will not,
directly or indirectly, promote the sale of, sell, or otherwise commercialize,
any Competitive Product, or license, assign, permit or otherwise assist, Third
Parties to engage in any of such activities, in such country, provided, however,
that Metabasis and its Affiliates shall be permitted to commercialize a
Competitive Product in a country with respect to which Schering’s rights have
terminated pursuant to a termination by Metabasis under Section 6.1 or
12.3 or a termination by Schering under Section 12.5 of this Agreement.


(b)              Schering
and its Affiliates (other than any Generic Affiliates) may not for [***],
directly or indirectly, promote the sale of, sell, or otherwise commercialize a
Competitive Product in such country.  For
the avoidance of doubt, if Schering acquires or becomes the beneficial owner of
a Third Party and as a result of such acquisition acquires full
commercialization rights to any Competitive Product, Schering shall [***]


(c)              Notwithstanding
anything in the Agreement to the contrary, in the event that Metabasis breaches
the non competition provisions contained herein, Schering shall have the


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right to
offset the full amount of damages it has suffered as a result of Metabasis’
breach against any payments to Metabasis pursuant to Article 4 hereof.


ARTICLE III


SUBSTITUTE
COMPOUND


If Schering, after
consultation with the Development Steering Committee, reasonably determines
that the further development of the Licensed Compound is not desirable because
it will not be successful, will violate any Third Party patent, or for a
comparable reason decides not to pursue such development, Schering will provide
written notice of such determination to Metabasis.  Metabasis will then promptly and in good
faith provide to Schering a complete list of all [***] which Metabasis has the
right to license and all other [***] which, based on the information available
to Metabasis at the time such list is prepared, a reasonable person would
expect to have potential for use in the treatment of Hepatitis B in humans, on
which list Metabasis will identify those compounds determined by Metabasis to
have the greatest likelihood of success for use in the treatment of
Hepatitis B in humans.  Schering
will have a period of [***] from the date it receives the list from Metabasis
to evaluate the [***], and to select one of them for development by written
notice to Metabasis (the Substitute Compound) and Metabasis will provide access
to all information and data in its possession or control that Schering
reasonably requests in order to perform such evaluation.  Any additional research and development costs
required to provide the Substitute Compound will be paid by Schering.  From the date when the selection of the Substitute
Compound is made by Schering, the Substitute Compound will be deemed to be the
Licensed Compound for the purposes of this Agreement, the compound it replaces
will cease to be the Licensed Compound and Metabasis will recover the rights to
the compound it replaces, provided, however, that Schering will own all rights
in and to any Schering Inventions.  The
substitution rights of Schering under this Article III shall continue during
the time in which a Product is in the development stage and may be exercised
more than once until the First Commercial Sale of a Product.  It is understood and agreed that the
milestone payments provided for in Section 4.2 will not be paid more than once
under this Agreement regardless of the substitution of a compound or compounds
for the original Licensed Compound hereunder.


ARTICLE IV


COMPENSATION


4.1             Upfront
Fee


Within five (5)
business days following the Amended Closing Date, Schering will make a
one-time, non-refundable, non-creditable payment to Metabasis in the amount of
one million


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eight hundred thousand
Dollars ($1,800,000) (the “Metabasis Upfront Fee”), which together with the
Valeant License Fee set forth in Section 4.1 of the Valeant License Agreement
comprise a total upfront payment in the amount of twenty one million Dollars
($21,000,000) (the “Total Upfront Fee”).


4.2             Milestone
Payments


(a)              In
consideration of the licenses and rights granted by Metabasis to Schering
hereunder Schering will pay to Metabasis the following non-refundable,
non-creditable Milestone Payments provided that the amounts below, together with the milestone payments
due Valeant under Section 4.2 of the Valeant License Agreement, constitute the
full amount of the milestones due Metabasis and Valeant pursuant to the terms
of both this Agreement and the Valeant License Agreement:


(i)         [Intentionally
omitted]


(ii)        [***]


(iii)       [***]


(iv)      [***]


(v)       [***]


(vi)      [***]


(vii)     [***]


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(b)              Each
Milestone Payment due under Section 4.2(a) will be due only once for the first
Product in respect of which the indicated Milestone occurs, regardless of the
substitution for the Licensed Compound of a Substitute Compound pursuant to
Article III.  Schering will notify
Metabasis in writing within [***] of the occurrence of each Milestone and will
make all Milestone Payments within [***] after receipt of an invoice from
Metabasis for payment of the Milestone substantially in the form of
Exhibit B.  For the avoidance of
doubt the subsequent occurrence of any similar event in respect of any Product,
including in respect of any additional indication(s), will not give rise to any
additional obligation of Schering to make a Milestone Payment with respect to
such subsequent event.


4.3             Royalties


(a)              In addition to the amounts payable under
Section 4.2, Schering will collectively pay Metabasis and Valeant (collectively
referred to as “MV”), in any calendar year during the Royalty Obligation
Period, royalties in the aggregate amounts as follows on a Product-by-Product
and country-by-country basis and provided that the amounts below constitute the
full amount of the royalties due MV pursuant to the terms of both this
Agreement and the Valeant License Agreement:


(i)         (i)
in any country in which there is a Valid Claim of a Licensed Patent, a royalty
on Net Sales in such country as provided below:


(A)          on Net Sales of Products [***];


(B)           on Net Sales of Products [***].


(ii)        on Net Sales of each Product in any
country in which there is no Valid Claim of a Licensed Patent, [***].


(b)              Royalties on Net
Sales will be calculated every Accounting Period. Within [***] after the last day of each such Accounting
Period during the term of this Agreement following the First Commercial Sale of
a Product, Schering will provide to MV the Sales & Royalty Report. If MV
has no comments on such report, Metabasis and Valeant shall each submit an
invoice to Schering substantially in the form of Exhibit B with respect to the
Royalty Payment, each of which shall be signed by both Metabasis and Valeant
and shall indicate the proportion of the Royalty Payments that shall be made to
each of (i) Metabasis and (ii) Valeant, provided, however, that
the sum of the payments to be made to each of Metabasis and Valeant may not
exceed 100% of the actual Royalty Payments calculated as due based on the


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Royalty Report (the “Total
Royalties Due”).  In the event that there
are invoicing discrepancies (such that, for example, the total of the Royalty
Payments based on the invoices received from each of Metabasis and Valeant
exceeds the Total Royalties Due) , Schering may, in it sole discretion, make
payment to each of Metabasis and Valeant as it determines is appropriate and
shall have no liability to Metabasis or Valeant with regard to any disagreement
with respect to such allocation so long as the total of such payments is equal
to the Total Royalties Due. Schering shall pay the Royalty Payment within [***] after receipt of the invoices.  All such Royalty Payments constitute the full
amount of the Royalty Payments due MV pursuant to the terms of both this
Agreement and the Valeant License Agreement.


(c)              Schering may obtain a license under any
issued patent from one or more Third Parties which patent, but for such
license, would be infringed by the exercise of the rights granted to Schering
hereunder. For any such Third-Party licenses, Schering may reduce the royalties
otherwise due to MV hereunder by an amount [***] paid by Schering to such Third Party or Third Parties to the extent
attributable to such license, including any [***]; provided, however, that the total such reduction for all such
Sublicenses shall not cause the royalties due to MV in any calendar year to
fall below [***] of the
royalties which would otherwise be due (i.e. without reference to the reduction
due to Sublicense royalties) to MV in such year. Any portion of such reduction
which is unused in any year because of the foregoing proviso [***]; and further provided that no reduction in
royalties will result from a license to a Third Party patent that claims [***] that are not necessary in order to develop,
manufacture or commercialize the Licensed Compound, [***]; and further provided that no reduction in
royalties will result from a license to a Third Party patent where such license
covers a Combined Product and where no actual or alleged infringement by the
claims of such patent would result from activities relating to a Product whose
only active pharmaceutical ingredient is a Licensed Compound, [***]. Metabasis shall remain responsible for the
payment of royalty obligations, if any, due to Third Parties under any Licensed
Patents or Licensed Technology which has been licensed to Metabasis and is
sublicensed to Schering under this Agreement. All such payments shall be made
promptly by Metabasis in accordance with the terms of its license agreement.


(d)              If a Third Party sells a product which is a
Generic Equivalent to a Product in any country in which Schering, an Affiliate
or Sublicensee is selling such Product, the royalty payable by Schering to MV
under this Agreement with respect to such Product in each such country will be
[***] for the time period during
which such Generic Equivalent is sold by or on behalf of such Third Party in
such country.


(e)              If any Approval
Authority imposes a price limitation for specific indications or patients, and
[***] claims that such
limitation [***]


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[***] for a Product in such country, and [***] will apply for so long as such price
limitation continues to have such effect. If the Parties fail to promptly agree
to [***], the matter will be
referred to arbitration pursuant to Article XIV and the [***]. Schering will, to the extent permitted by
law, use reasonable commercial efforts to resist the imposition or continuation
of any such price limitation.


4.4             Duration
of Royalty Obligations


The period during
which Schering is required to pay the royalty under Section 4.3 with respect to
each Product (the Royalty Obligation Period) will terminate in each country in
the Territory upon the occurrence of the later of:


(a)              the
expiration or invalidation in such country of the last to expire or be
invalidated Licensed Patent which but for this Agreement would be infringed by
the manufacture, use or sale of such Product in such country; and


(b)              [***]
after the First Commercial Sale in such country of such Product.


4.5             Payment
Terms


(a)              Schering
will make all payments required to be made to Metabasis under this Agreement in
Dollars to Metabasis by wire transfer of immediately available funds to a bank
account of Metabasis designated by Metabasis from time to time in accordance
with this Agreement.  Schering shall have
no obligation to pay any proportion of a Royalty Payment to Metabasis or
Valeant, as the case may be, until and unless a valid invoice indicating the
appropriate proportion of the Royalty Payment to make to such party has been
properly submitted.


(b)              In
the event that any payment due to Metabasis hereunder, including any upfront
payment, royalty payment and milestone payment, is not made when due, the
payment shall accrue interest from the date due at the [***], provided,
however, that in no event shall such rate exceed the maximum legal annual
interest rate.  The payment of such
interest shall not limit a party from exercising any other rights it may have
as a consequence of the lateness of any payment.


4.6             Taxes


All amounts owed
under this Agreement will be reduced and paid after deduction as required by
law for all applicable taxes, fees, and other charges on such amounts except
taxes imposed with respect to or based on a Party’s net income.  In particular, any tax required to be
withheld by Schering under the laws of any country for the account of Metabasis
(withholding


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taxes) will be promptly
paid by Schering for and on behalf of Metabasis to the appropriate governmental
authority, and Schering will furnish Metabasis with reasonable proof of payment
of such tax.  All such tax actually paid
on Metabasis’ behalf will be deducted from royalty payments due Metabasis or
promptly reimbursed to Schering if no further payments are due Metabasis.  Schering will reasonably assist Metabasis in
minimizing the withholding taxes applicable to any payment made by Schering and
in claiming tax refund at Metabasis’ request. 
Each Party agrees to reasonably assist the other Party in claiming
exemption from such withholding of taxes of any type under double taxation or
similar agreement or treaty from time to time in force and in minimizing the
amount required to be so withheld or deducted.


4.7             Allocation of Royalty
Payment


Provided that
Schering shall make the Royalty Payments in the aggregate amount specified in
Section 4.3 and as specified in the Invoices submitted by Metabasis and Valeant
in accordance with Section 4.3(b), Schering shall have no liability to
Metabasis or Valeant with regard to any disagreement with respect to the
allocation of the Royalty Payment between Metabasis and Valeant.


4.8             Records


Schering and its
Affiliates will keep, and will require its Sublicensees to keep, full, true and
accurate books of account containing all particulars that may be necessary for
the purpose of calculating all royalties and Milestone Payments payable to
Metabasis with accounting principles consistently applied from period to
period, in accordance with the applicable Accounting Standards.  Such books of account will be kept, as the
case may be, at Schering’s or its Affiliate’s or Sublicensee’s principal place
of business for [***] following the Accounting Period to which they
pertain.  From time to time in accordance
with this Agreement, an  internationally
recognized independent public accounting firm retained by Metabasis may perform
an audit of such books and records of Schering, its Affiliates and Sublicensees
for the period or periods reasonably requested by Metabasis solely for the
purpose of ensuring compliance with the terms of this Agreement by Schering,
its Affiliates and Sublicensees with respect to all Milestone Payments, royalties
and other amounts payable to Metabasis under this Agreement, including the
correctness of any report or payments made under this Agreement.  Upon timely request of at least [***] prior
written notice from Metabasis, such audit will be conducted during regular
business hours in such a manner as to not unnecessarily interfere with Schering’s
normal business activities or those of its Affiliates or Sublicensees, and will
be limited to [***] prior to delivery of such written notice.  Such audit will not be performed more
frequently than once per calendar year nor more frequently than once with
respect to any Accounting Period.  All
information, data documents and abstracts examined in the audit will be used
only for the purpose of verifying royalty statements or compliance with this
Agreement, will be treated by Metabasis as Schering Confidential Information
subject to the obligations of Article 11 of this Agreement and may not be
retained more than [***]  Audit work
papers


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and results will be
shared by Metabasis to Schering.  If the
audit reveals an underpayment, Schering will promptly make up such
underpayment.  The failure of Metabasis
to request verification of any royalty calculation within the period during
which corresponding records must be maintained will be deemed to be acceptance
of the royalty reporting.  The fees
charged by such accountant will be paid by Metabasis unless the audit discloses
that any Milestone Payment payable to Metabasis was not paid in accordance with
this Agreement or the royalties payable to Metabasis by Schering or its
Affiliates or Sublicensees for the audited period are [***] of the royalties
actually paid to Metabasis for such period, in which case Schering will pay the
fees and expenses charged by the accountant. 
Schering will require each of its Affiliates and Sublicensees to make
reports to Schering to the same extent as is required of Schering to Metabasis
pursuant to this Agreement and to keep and maintain records of Net Sales made
pursuant to such sublicense and to grant access to such records to Metabasis’
independent accountant to the same extent required of Schering under this
Agreement.  Any disagreement between
Metabasis and Schering concerning alleged overpayments or underpayments or
other disputes arising from such audits will be resolved by the dispute
resolution procedure set forth in Article XIV.


4.9             Sales
in Foreign Currencies


Whenever for the
purpose of calculating royalties, conversion from any foreign currency is required,
such conversion will be made as follows:


(a)              for
Schering and its Affiliates, when calculating the Net Sales, the amount of such
sales in foreign currencies will be converted from any foreign currency into
Dollars using Schering’s then-current standard exchange rate methodology as
applied in its external reporting (which is ultimately based on official rates
such as Reuters and European Central Bank) for conversion of foreign currency
sales into Dollars.


ARTICLE V


DEVELOPMENT
STEERING COMMITTEE


5.1             Appointment
and Administration of the Development Steering Committee


(a)              As
soon as practicable after the execution of this Agreement and in no event later
than thirty (30) days after the Amended Closing Date, the Parties will
establish a [***] steering committee to review the development of Products,
which will include [***] of Metabasis and Schering (the Development Steering
Committee) and will be chaired by one of the representatives of Schering.  One such representative from each Party shall
be the Alliance Manager as defined below. 
Each Party shall appoint (and notify the other Party of the identity of)
a representative having a general understanding of pharmaceutical development
and commercialization issues to act as its alliance manager under this Agreement
(Alliance Manager).  The Alliance
Managers will serve as the contact point between the Parties for the purpose of
providing Metabasis with information on the progress of Schering’s


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development
and commercialization of the Product and will be primarily responsible for
facilitating the flow of information and otherwise promoting communication
within and among the Parties.  Each Party
may replace its Alliance Manager on written notice to the other Party.  Each Party, at its sole discretion, may at
any time during the Term of this Agreement replace a member it has the right to
designate and will provide written notice to the other Party.  The Alliance Managers shall arrange (via
person or teleconference) all meetings of the Development Steering Committee
and each Party will use reasonable efforts to cause its respective
representatives to attend all meetings of the Development Steering
Committee.  Each Party will bear the
travel and out-of-pocket expenses incurred by its members or representatives in
connection with the Development Steering Committee’s meetings.


(b)              The
Development Steering Committee will meet at least every six (6) months until
the period described in (d) below, or more or less frequently as the Parties
mutually deem appropriate.  The first
such meeting in any calendar year shall be held in California, USA, with the
second meeting held in New Jersey, USA, unless the Parties mutually agree to
meet at another location or by telephone or video conference.  The Development Steering Committee may also
convene or be polled or consulted from time to time by means of
telecommunications, video conferences or correspondence, as deemed by the
Parties to be necessary or appropriate.


(c)              Any
disagreement within the Development Steering Committee shall be resolved by the
Schering chair, in its sole discretion.


(d)              The
Development Steering Committee will exist until [***], unless otherwise agreed
by the Parties.


5.2             Responsibility
and Authority of the Development Steering Committee


(a)              Subject
to the other terms of this Agreement, the Development Steering Committee will
review [***].  Schering will give good
faith consideration to all reasonable suggestions made by Metabasis concerning
development of the Licensed Compound, however development shall be in Schering’s
sole discretion and expense.


(b)              The
Development Steering Committee will review and discuss the activities of the
parties with respect to [***].


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5.3             Reporting obligations in respect of
Commercialization


Until [***],
Schering will keep Metabasis reasonably informed of all commercialization
efforts undertaken by Schering, its Affiliates and Sublicensees, as applicable,
with respect to the Licensed Compound and Products, [***].  Until [***], Metabasis may request, no more
often than [***], a meeting at which Metabasis may meet with Schering as
reasonably practicable.  At such meeting
Schering will discuss Schering’s commercialization efforts for Products,
including answering Metabasis’ questions regarding such efforts.  Schering may satisfy its obligation to meet
with Metabasis under this Section 5.3(a) through meetings of the
Development Steering Committee.  Each
Party shall be responsible for its own costs and expenses relating to any such
meeting.


5.4             Regulatory Activities


(a)              Schering (or its designated Affiliate) will determine
the regulatory plans and strategies for the Licensed Compound and/or Product
and will hold all IND’s, NDA’s and MAA’s for the Licensed Compound and
Product(s) and all other regulatory filings in the Territory.  Schering (or its designated Affiliate) will
determine and be responsible for interactions with Regulatory Authorities in
the Territory and will bear related expenses. 
Within thirty (30) days of the Amended Closing Date, and throughout the
Term, Metabasis will provide Schering with all relevant information and data
available and known to Metabasis concerning the Licensed Compound for the
regulatory filings in the form reasonably requested by Schering and will
provide such additional assistance in connection with filings to any Approval
Authority as Schering reasonably requires at Schering’s expense, including by
executing any required documents, providing access to personnel and providing
Schering with copies of all reasonably required documentation.  To the extent required and Metabasis
reasonably has access thereto, Metabasis shall grant or cause to be granted to
Schering and its Affiliates or Sublicensees cross-reference rights to any
relevant drug master files and other filings submitted by Licensor or its
Affiliates with any Approval Authority at no additional charge to Schering.


(b)              Schering will be responsible for obtaining Regulatory
Approvals for development, use and commercialization of each Product from the
Approval Authorities in the Territory and will use Commercially Reasonable
Efforts to seek such approvals in the Major Market Countries at its sole cost.


(c)              Each Party agrees that in performing its obligations
under this Agreement (a) it shall comply with all applicable current
international regulatory standards, including cGMP, cGLP, cGCP and other rules,
regulations and requirements and (b) it will not employ or use any person
that has been debarred under Section 306(a) or 306(b) of the U.S. Federal Food,
Drug and Cosmetic Act.


 


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ARTICLE VI


DEVELOPMENT
AND MARKETING OBLIGATIONS


6.1             Commercial Development Obligation


(a)              Subject to Section 6.1(b), Schering will at its sole
expense use Commercially Reasonable Efforts to develop and commercialize a
Product in each Major Market Country in the Field as well as generally
elsewhere in the Territory, except where such development and commercialization
is not commercially reasonable for such Product and provided that it is
recognized and acknowledged by Metabasis that such obligation to use
Commercially Reasonable Efforts shall not require Schering to develop and
commercialize the Product in every country in the Territory.  Subject to compliance with the foregoing, the
manner of the development, commercialization, and marketing of the Products
shall be in Schering’s sole discretion.


(b)              If Metabasis determines in good faith that Schering is
not using Commercially Reasonable Efforts to develop and commercialize a
Product in one or more Major Market Countries, Metabasis may provide written
notice to Schering of such determination, which notice will provide reasonable
details regarding the facts and circumstances leading up to such determination
and the steps which Metabasis reasonably considers Schering should take to
resume Commercially Reasonable Efforts relating to such development and
commercialization.


(c)              If within [***] after written notice under Section
6.1(b) Metabasis reasonably and in good faith determines that Schering has not
resumed using Commercially Reasonable Efforts to develop and commercialize a
Product in one or more Major Market Countries, either Party may refer such
dispute to arbitration pursuant to Article XIV. 
Pending the final decision of the arbitrators, all Schering rights under
this Agreement shall continue in full force and effect.  In the event that the arbitrator determines
that Schering has failed to use Commercially Reasonable Efforts to develop and
commercialize a Product in one or more Major Market Countries, then in respect
of those countries where the arbitrator has determined that Schering has failed
to use Commercially Reasonable Efforts, all licenses granted to Schering
pursuant to Section 2 with respect to such countries or region will terminate
and the Program Transfer Provisions as delineated in Section 12.5.4 will apply
with respect to those countries only, provided that in the event that the
arbitrator determines that Schering has failed to use Commercially Reasonable
Efforts to develop and commercialize a Product in [***], then Metabasis may in
its sole discretion elect to immediately terminate this Agreement for cause and
Schering’s rights under this Agreement will terminate pursuant to
Section 12.5.3 and the Program Transfer Provisions delineated in
Section 12.5.4 will apply.


(d)              Notwithstanding the provisions of (a) to (c) inclusive
above, the manufacture and supply of the Licensed Compound and/or Product under
this Agreement shall be in the sole discretion of Schering.


 


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6.2             Use of Name


Metabasis may not
use the name of Schering or any of its Affiliates or any variant thereof, and
Schering may not use the name of Metabasis or any variant thereof, in each case
in connection with the advertising or sale of any Product, without the prior
written consent of the other, except as required by any Approval Authority,
including in relation to any Product labeling or packaging.


 


ARTICLE VII


[Intentionally
left blank]


ARTICLE VIII


INTELLECTUAL
PROPERTY


 


8.1             Patent Prosecution and Maintenance


(a)              Patents Covering Inventions Owned By Metabasis.


(i)         For Licensed Patents to inventions owned by Metabasis other
than those Covering the HepDirect Technology, Schering will be responsible, at
its own expense for preparing, filing, prosecuting and maintaining
(collectively, Handling) such Licensed Patents. 
Metabasis shall provide such assistance as Schering reasonably requires
in relation to the Handling of all such Licensed Patents.  Schering will consult with Metabasis as to the
Handling of such Licensed Patents and will furnish to Metabasis copies of all
material documents relevant to any such Handling.  Schering will furnish such documents and
consult with Metabasis in sufficient time (at least [***] prior to any first
deadline for taking any actions) before any action by Metabasis is due to allow
Metabasis to provide comments thereon, which comments Schering must
consider.  At Schering’s expense and
reasonable request, Metabasis shall provide reasonable assistance in connection
with the Handling of all Licensed Patents. 
Should Schering decide that it does not desire to Handle a Patent Right
within such Licensed Patents in a country in the Territory, it will notify
Metabasis thereof in writing with sufficient time for Metabasis to take any
appropriate actions.  In such
circumstances, Metabasis may, but is not obligated to, Handle the same at
Metabasis’ own cost, to the extent that Metabasis desires to do so, and
Schering’s rights under this Agreement to any such patents in such country so
Handled by Metabasis shall terminate immediately upon such notification.  As soon as practicable and within thirty (30)
days after the Amended Closing Date, Metabasis will provide to Schering copies of
patent prosecution and maintenance files and powers of attorney for


 


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attorneys and agents designated by Schering and on forms provided by
Schering, in each case sufficient to permit Schering to Handle such Licensed Patents.


(ii)        Metabasis will, at its own expense, (A) Handle all Licensed
Patents that Cover the HepDirect Technology (such Licensed Patents being
hereinafter collectively referred to as Metabasis Patents and includes the
Patent Rights set forth on Schedule B), (B) consult with Schering as
to the Handling of such Metabasis Patents, and (iii) furnish to Schering copies
of all documents relevant to any such Handling. 
Metabasis will furnish such documents and consult with Schering in
sufficient time [***] prior to any first deadline for taking any actions other
than paying a maintenance fee) before any action by Metabasis is due to allow
Schering to provide comments thereon, which comments Metabasis must
consider.  At Metabasis’ expense and
reasonable request, Schering shall provide reasonable assistance in connection
with the Handling of all Metabasis Patents. 
Should Metabasis decide that it does not desire to Handle a patent or
patent application within the Metabasis Patents in a country in the Territory,
as it relates to Licensed Compounds or Products, it will promptly notify
Schering thereof.  In such circumstances,
Schering may, but is not obligated to, Handle the same at Schering’s own cost,
to the extent that Schering desires to do so.


(b)              Patents Covering Inventions Owned By Schering.  Schering will be responsible for, at its own
expense, Handling all Patent Rights owned by Schering Covering the Licensed
Compound and/or Product (the Schering Patents).


(c)              Cooperation of the Parties.  Each Party agrees to cooperate fully in the
Handling of any Patent Rights owned by the other Party under this
Agreement.  Such cooperation includes:


(i)         executing all papers and instruments, or requiring its
employees or agents to execute all such papers and instruments to enable the
other party to apply for and to prosecute patent applications in any country;
and


(ii)        promptly informing the other Party of any matters coming to
such Party’s attention that may materially affect the preparation, filing,
prosecution or maintenance of any such Patent Rights.


8.2             Notification of Infringement


If a Party learns
of infringement or threatened infringement or misappropriation by a Third Party
of any Licensed Patent, Licensed Technology, or Schering Patent relating to the
Licensed Compounds and/or Products within the Territory, it will promptly
notify the other Party and will include in such notice a description of the
basis for the alleged infringement or misappropriation.


8.3             Patent Enforcement


(a)               Subject to the terms of Section
8.3(b), Schering shall have the first right to bring and control any action or
proceeding with respect to infringement of any patent claiming or otherwise
related to the Licensed Patents and/or Licensed Technology at its own expense
and by


 


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counsel of its own
choice, and Metabasis shall have the right, at its own expense, to be
represented in any such action by counsel of its own choice.


(b)              If Schering determines that in an
action under 8.3(a) it may be required to assert one or more Metabasis Patents,
it will request Metabasis’ consent to assert such patent or patents.  Metabasis, in its sole discretion, may either
consent to Schering assertion of such patent or patents or take control of such
action at Metabasis’ own expense and by counsel of its own choice, in which
case Schering shall have the right, at its own expense, to be represented in
such action by counsel of its own choice. 
Metabasis shall choose to consent or control such action as soon as
reasonably practicable, and no later than [***] before any time limit for
bringing such action where the request for such consent is made within [***] of
such time limit.


 (c)              If
Schering fails to bring an action or proceeding within (a) [***] following the
notice of alleged infringement or (b) [***] before the time limit, if any,
set forth in the appropriate laws and regulations for the filing of such
actions, whichever comes first, Metabasis shall have the right to bring and
control any such action at its own expense and by counsel of its own choice,
and Schering shall have the right, at its own expense, to be represented in any
such action by counsel of its own choice.


(d)              In the event a Party brings an
infringement action, the other Party shall cooperate fully, including if required
to bring such action, the furnishing of a power of attorney.  Any settlement or other action by a Party
which requires payment or other action by the other Party, subjects the other
Party to liability or otherwise materially adversely affects the other Party
(including in the case of Metabasis a material adverse effect on the HepDirect
Technology) will require the other Party’s prior written consent, which will
not be unreasonably withheld or delayed.


(e)               The Party which actually brings
the action shall be entitled to any damage award and other recoveries resulting
therefrom, provided that to the extent that any such damage award or other
recovery realized by Schering constitutes compensation for lost sales, [***].


8.4             Ownership and License-Back


(a)              Metabasis Owned Inventions.  As between Metabasis and Schering, Metabasis
shall own all rights in and to any and all inventions and know-how, including
any Patent Rights (collectively referred to as “Inventions”) made solely by or
on behalf of Metabasis during the Term of this Agreement.


(b)              Schering Owned Inventions.  As between Metabasis and Schering, Schering
shall own all rights in and to any and all Inventions made solely by or on
behalf of Schering during the


 


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Term of this Agreement in connection with the development and
commercialization of the Product hereunder (“Schering Inventions”).


(c)              Joint Inventions. 
All Inventions made jointly by employees or consultants of both Parties
during the Term of this Agreement in connection with the development and
commercialization of the Product hereunder (“Joint Inventions”) shall be
jointly owned by the Parties in equal shares.


(d)              License-Back.


(i)         In respect of any Schering Invention that is an improvement
to the HepDirect Technology or that is necessary for Metabasis to practice its
rights to the HepDirect Technology, Schering will grant to Metabasis a fully
paid up, irrevocable, non-exclusive, world-wide license with the right to
sublicense under any such Inventions for all purposes in connection with the
use of the HepDirect Technology by Metabasis, its Affiliates or Third Parties.


(e)              Joint Inventions shall be included in the Licensed
Technology.


8.5             Trademarks


Schering will have
the sole right to obtain and own all trademarks associated with or used in
connection with the manufacture, marketing and sale of any Products, together
with associated goodwill, excluding the mark “HepDirect” and any variants
thereof and any goodwill associated therewith which shall be owned by Metabasis.  Such Schering trademarks may vary by country
or within a country.  Schering will be
responsible for obtaining, maintaining and protecting all applicable trademarks
in connection with the manufacture, marketing and sale of any Products as it
determines reasonably necessary.


8.6             Defense of Infringement and
Invalidity Actions


(a)              Each Party shall promptly notify the other in writing
of any allegation by a Third Party that the activity of either of the Parties
pursuant to this Agreement infringes or may infringe the intellectual property
rights of such Third Party.


(b)              Schering, at its sole expense, will have the first
right and, if exercised, will have primary responsibility for and control over
the defense of any legal action brought by any Third Party in which Schering,
any of its Affiliates or Sublicensees is or becomes a defendant and which is
related to alleged infringement of a Third Party Patent Right or Third Party
know-how, related to the Licensed Compound or Products.


(c)              If a Third Party brings a legal action relating to the
Licensed Compound or Products and asserts in such action that any Licensed
Patent or Program Patent is invalid or not infringed by such Third Party,
subject to the terms of 8.6(d), Schering, at its sole expense, will


 


 



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have the first right and, if exercised, will have primary
responsibility for and control over the defense of such action.


(d)              If the defense of any claim by Schering against a Third
Party may include a counterclaim to assert the invalidity or unenforceability
of one or more Metabasis Patents, or if a Third Party brings an action
asserting invalidity or non-infringement of one or more Metabasis Patents, the
terms of Section 8.3(b) shall apply to the assertion of such counterclaim and
defense of such action.


(e)              In the event a Party defends such Third Party
infringement action, the other Party shall cooperate fully, including if
required to bring such action, the furnishing of a power of attorney.  Any settlement or other action by a Party
which requires payment or other action by the other Party, or subjects the
other party to liability or otherwise materially adversely affects the other
Party (including in the case of Metabasis a material adverse effect on the
HepDirect Technology) will require the other Party’s prior written consent,
which will not be unreasonably withheld or delayed.  The Party which actually defends the action
shall be entitled to any damage award and other recoveries resulting therefrom.


(f)               Schering and Metabasis will each use commercially
reasonable efforts to cooperate with the other in defending actions under this
Section 8.6, including but not limited to giving their consent to being joined
in an action to which they are a necessary party.  The defending Party will at all times keep
the other Party reasonably informed as to the status of any action under this
Section 8.6.  Any settlement or other
action by a Party which requires payment or other action by the other Party or
subjects the other Party to liability will require the other Party’s prior
written consent, which will not be unreasonably withheld or delayed.


(g)              The allocation and reimbursement of costs in connection
with the defense, settlement, and/or damage awards under this Section 8.6
supersedes and replaces any indemnification that may otherwise have been
available under Article X of this Agreement.


8.7             Patent Extensions


(a)              If requested by Schering, except as set forth below,
Metabasis shall cooperate in obtaining patent term restoration (including as
permitted under the Drug Price Competition and Patent Term Restoration Act),
supplemental protection certificates or their equivalents, and patent term
extensions with respect to the Licensed Patents in any country and/or region
where applicable, at Schering’s expense. 
Metabasis shall provide all reasonable assistance requested by Schering,
including permitting Schering to proceed with applications for such in the name
of Metabasis, if deemed appropriate by Schering, at Schering’s expense.


(b)              Schering shall in its sole discretion determine which,
if any, Licensed Patents, other than Metabasis Patents, it will apply to
extend.


(c)              Metabasis shall cooperate with Schering in determining
which, if any, Metabasis Patents a party may apply to extend.  In the event one or more claims of such
Metabasis Patent



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shall cover a potential product (other than the Product) in clinical
development by Metabasis, its Affiliates or Sublicensees, Metabasis will make
the final determination as to whether such Metabasis Patent shall be extended.


(d)              If requested, Metabasis shall provide reasonable
assistance to Schering, including by executing documents and providing any
relevant information to Schering, at Schering’s expense.


 


ARTICLE IX


REPRESENTATIONS,
WARRANTIES AND LIMITATION OF LIABILITY


9.1             Representations of Metabasis


Except as
otherwise disclosed on Metabasis’ Schedule of Exceptions attached to and made a
part of this Agreement, Metabasis represents and warrants to Schering as
follows:


(a)              Metabasis is a corporation duly organized under the
laws of the State of Delaware, and has all requisite legal and corporate power
and authority to carry on its business and to perform its obligations under
this Agreement.


(b)              All action on the part of Metabasis necessary for the
execution and delivery of this Agreement and the performance of Metabasis’
obligations under this Agreement has been taken.


(c)              The person(s) executing this Agreement on behalf of
Metabasis have all necessary corporate powers and have been duly authorized by
Metabasis to execute, and deliver this Agreement on its behalf.


(d)              This Agreement constitutes a valid and binding
obligation of Metabasis, enforceable in accordance with its terms.


(e)              Except as have been or will be obtained by Metabasis
and except for Regulatory Approval, no permit, consent, approval or
authorization of, or declaration to or filing with, any person, party or
governmental authority is required in connection with the delivery,
consummation, or performance by Metabasis of this Agreement.


(f)               The execution, delivery and performance of this
Agreement by Metabasis will not, with or without notice or the passage of time
or both, result in any violation of, be in conflict with or constitute a
default under any material contract, obligation or commitment to which
Metabasis is a Party or by which it is bound, or, to the best knowledge of
Metabasis, any statute, rule or governmental regulation applicable to
Metabasis.


(g)              To the knowledge of Metabasis, Metabasis owns all
right, title and interest in and to the Licensed Patents and Licensed
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Encumbrances.  Metabasis is
listed in the records of the appropriate governmental agencies as the sole and
exclusive owner of record for each registration, grant and application included
in the Licensed Patents.


(h)              The Licensed Patents and Licensed Technology are not
subject to any Third Party royalty or other payment obligations.


(i)               There are no adverse actions, suits or claims pending
or to the knowledge of Metabasis threatened against Metabasis in any court or
by or before any governmental body or agency with respect to the Licensed
Patents or the Licensed Technology.  To
the actual knowledge of Metabasis, not having made any inquiry, there are no
Third Party Patent Rights which would reasonably be expected to give rise to
such actions, suits, or claims.


(j)               To the actual knowledge of Metabasis, Metabasis has
not committed any act or omitted to take any act that is reasonably likely to
cause the Licensed Patents to expire prematurely or be declared invalid or
unenforceable.


(k)              All application, registration, maintenance and renewal
fees in respect of the Licensed Patents and Licensed Technology as of the
Amended Closing Date have been paid and all necessary documents and
certificates have been filed with the relevant Approval Authorities for the
purpose of maintaining the Licensed Patents and Licensed Technology.


(l)               Metabasis has not initiated or been involved in any
proceedings or claims in which it alleges that any Third Party is or was
infringing or misappropriating any Licensed Patents and/or Licensed Technology,
nor have any proceedings been threatened by Metabasis, nor to the knowledge of
Metabasis is there a valid basis for any such proceeding.


(m)             Metabasis has obtained from its employees and to its
knowledge all other individuals who participated in any respect in the
invention or authorship of any Licensed Patents or Licensed Technology
effective assignments of all ownership rights of such individuals in such
Licensed Patents and Licensed Technology, either pursuant to written agreement
or by operation of law.


(n)              Metabasis has not granted a license to any Third Party
or Affiliate Covering any [***] that would prevent Schering from exercising the
rights granted under this Agreement.


(o)              Metabasis has not worked on any compositions for
treatment of Hepatitis B since the Original Filing Date.


 


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9.2             Representations of Schering


Schering
represents and warrants to Metabasis as follows.


(a)              Schering is a corporation duly organized under the laws
of the State of New Jersey.  Schering has
all requisite legal and corporate power and authority to carry on its business
and perform its obligations under this Agreement.


(b)              All action on the part of Schering necessary for the
execution and delivery of this Agreement and the performance of Schering’s
obligations under this Agreement has been taken.


(c)              The person(s) executing this Agreement on behalf of
Schering have all necessary corporate powers and have been duly authorized by
Schering to execute this Agreement on its behalf.


(d)              This Agreement constitutes a valid and binding
obligation of Schering, enforceable in accordance with its terms.


(e)              Except as have been or will be obtained by Schering and
except for Regulatory Approval, no permit, consent, approval or authorization
of, or declaration to or filing with, any person, party or governmental
authority is required in connection with the delivery, consummation or
performance by Schering of this Agreement.


(f)               The execution, delivery and performance of this
Agreement by Schering will not, with or without notice or the passage of time
or both, result in any violation of, be in conflict with or constitute a
default under any material contract, obligation or commitment to which Schering
is a party or by which it is bound, or, to the best knowledge of Schering, any
statute, rule or governmental regulation applicable to Schering.


(g)              To the knowledge of Schering, after having made
reasonable inquiry, Schering is not performing research or development
activities with respect to any compound which may become a Competitive Product.


9.3             Covenants of Metabasis.  Metabasis covenants and agrees that it will
not grant any interest in the Licensed Patents or Licensed Technology which is
inconsistent with the terms and conditions of this Agreement.


9.4             Disclaimer of Warranties


EXCEPT AS
EXPRESSLY PROVIDED IN THIS AGREEMENT, THE LICENSED COMPOUND, THE LICENSED
TECHNOLOGY AND PRODUCTS LICENSED BY METABASIS TO SCHERING UNDER THIS AGREEMENT
ARE PROVIDED “AS IS,” AND METABASIS EXPRESSLY DISCLAIMS ANY AND ALL OTHER
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE
WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.  Without limiting the generality of the
foregoing, Metabasis expressly disclaims any warranty of (a) the success of any
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Agreement, or (b) the
safety or usefulness for any purpose of the Licensed Compound, the Licensed
Technology or Products.


 


ARTICLE X


INDEMNIFICATION
AND LIMITATION OF LIABILITY


10.1           Indemnification by Schering


Schering will at
all times, during and after the Term, indemnify, defend and hold harmless
Metabasis, its Affiliates, and their respective directors, officers, employees,
and agents (collectively, Metabasis Indemnitees) against any and all Third
Party claims, demands, actions and liabilities, including reasonable attorneys’
fees and costs (collectively, Third Party Claims), arising out of or relating
to (i) any breach of any representation, warranty or covenant of Schering
under this Agreement; or (ii) the actions of Schering or its Affiliates in
connection with the development or commercialization of the Products, or
(iii) the negligence or willful misconduct of Schering or its
Affiliates.  This indemnity obligation
will not apply:


(a)              to any Third Party Claim indemnifiable by Metabasis
under Section 10.2; or


(b)              to the extent that any claim, loss, damage, liability
or Third Party Claim or suit is the result of any negligence or willful
misconduct of any Metabasis Indemnitee.


10.2           Indemnification by Metabasis


Metabasis will at
all times, during and after the Term, indemnify, defend and hold harmless
Schering, its Affiliates, and its Sublicensees and their respective directors,
officers, employees and agents (collectively, Schering Indemnitees) against any
and all Third Party Claims arising out of or relating to (i) any breach of
any representation, warranty or covenant of Metabasis under this Agreement or
(ii) the negligence or willful misconduct of Metabasis or its
Affiliates.  This indemnity obligation will
not apply with respect to:


(a)              any Claim indemnifiable by Schering under Section 10.1;
or


(b)              to the extent that any Third Party Claim, loss, damage,
liability or Third Party Claim or suit is the result of any negligence or
willful misconduct of any Schering Indemnitee.


10.3           Obligations of the Party Seeking to
Be Indemnified


If any party
entitled to indemnity under this Article X (in each case, an Indemnified Party)
desires to seek indemnity under this Agreement from Metabasis or Schering, as
the case may be (in each case, an Indemnifying Party), the Indemnified Party
will as soon as reasonably practicable give notice to the Indemnifying Party,
including full particulars of any Third Party Claim to the extent known to the
Indemnified Party.  Failure to give
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Indemnifying Party will not
release the Indemnifying Party from any liability to the Indemnified Party
except to the extent that the Indemnifying Party is injured by such delay.  The Indemnifying Party will have the right,
by prompt notice to the Indemnified Party, to assume the defense of the matter
at the cost of the Indemnifying Party. 
For the avoidance of doubt, all indemnification claims in respect of a
Schering Indemnitee or Metabasis Indemnitee shall be made solely by Schering or
Metabasis, respectively.


10.4           Indemnification Procedure


(a)              Upon assumption of the defense of a Third Party Claim
by the Indemnifying Party: (i) the Indemnifying Party shall have the right
to and shall assume sole control and responsibility for dealing with the Third
Party Claim; (ii) the Indemnifying Party may, at its own cost, appoint as
counsel in connection with conducting the defense and handling of such Third
Party Claim any law firm or counsel reasonably selected by the Indemnifying
Party (in the event that it is ultimately decided by a court of law that the
Indemnifying Party is not obligated to indemnify, defend or hold harmless an
Indemnitee from and against the Third Party Claim, the Indemnified Party shall
reimburse the Indemnifying Party for any and all costs and expenses (including
attorneys’ fees and costs of suit) and any Losses incurred by the Indemnifying
Party in its defense of the Third Party Claim); (iii) the Indemnifying
Party shall keep the Indemnified Party informed of the status of such Third
Party Claim; and (iv) the Indemnifying Party shall have the right to
settle the Third Party Claim on any terms the Indemnifying Party chooses;
provided, however, that it shall not, without the prior written consent of the
Indemnified Party, agree to a settlement of any Third Party Claim which could
lead to liability or create any financial or other obligation on the part of
the Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder or which admits any wrongdoing or responsibility for
the claim on behalf of the Indemnified Party.


(b)              The Indemnified Party shall cooperate with the
Indemnifying Party and shall be entitled to participate in, but not control,
the defense of such Third Party Claim with its own counsel and at its own
expense.  In particular, the Indemnified
Party shall furnish such records, information and testimony, provide witnesses
and attend such conferences, discovery proceedings, hearings, trials and
appeals as may be reasonably requested in connection therewith.  Such cooperation shall include access during
normal business hours by the Indemnifying Party to, and reasonable retention by
the Indemnified Party of, records and information that are reasonably relevant
to such Third Party Claim, and making the Indemnified Party, the Indemnitees
and its and their employees and agents available on a mutually convenient basis
to provide additional information and explanation of any records or information
provided, and the Indemnifying Party shall reimburse the Indemnified Party for
all its related reasonable out-of-pocket expenses.


(c)              If the Indemnifying Party does not defend the Third
Party Claim, the Indemnified Party shall retain control of the defense
thereof.  The Indemnified Party may
appoint as counsel in connection with conducting the defense and handling of
such Third Party Claim any law firm or counsel reasonably selected by the
Indemnified Party.  The Indemnified Party
may defend such Third Party Claim in such manner as it may deem appropriate;
provided, however, that the Indemnified Party shall keep the Indemnifying Party
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Claim and shall not settle such Third Party Claim without the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.  If the Indemnified
Party defends or handles such Third Party Claim, the Indemnifying Party shall
cooperate with the Indemnified Party and shall be entitled to participate in
the defense and handling of such Third Party Claim with its own counsel and at
its own expense.  In addition, the
reasonable and verifiable costs and expenses, including attorneys’ fees and
disbursements, incurred by the Indemnified Party shall be reimbursed on a
quarterly basis by the Indemnifying Party, without prejudice to the
Indemnifying Party’s right to contest the Indemnified Party’s right to
indemnification and subject to refund in the event the Indemnifying Party is
ultimately held not to be obligated to indemnify the Indemnified Party.


10.5           Mitigation of Loss


Each Indemnified
Party will take and will procure that its Affiliates take all such reasonable
steps and action as are necessary or as the Indemnifying Party may reasonably
require in order to mitigate any losses under this Article.  Nothing in this Agreement shall or shall be
deemed to relieve any Party of any common law or other duty to mitigate any
losses incurred by it.


10.6           Special, Indirect and Other Losses


EXCEPT FOR THIRD PARTY CLAIMS INDEMNIFIED UNDER
SECTION 10.1 AND 10.2, NEITHER PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE
IN CONTRACT, TORT, NEGLIGENCE, BREACH OF STATUTORY DUTY OR OTHERWISE FOR ANY
SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OR FOR ANY
ECONOMIC LOSS OR LOSS OF PROFITS SUFFERED BY THE OTHER PARTY.


10.7           No Exclusion


No Party excludes
any liability for death or personal injury caused by its negligence or that of
its employees, agents or sub-contractors.


 


ARTICLE XI


CONFIDENTIALITY
AND PUBLICATION


11.1           Confidentiality


Subject to Section
11.2, during the Term and for [***] after the Term, each Party will maintain in
confidence all Confidential Information disclosed by the other Party pursuant
to this Agreement, including any Confidential Information contained in Licensed
Patents and Licensed Technology, and will not use such Confidential Information
for any purpose except as permitted by this Agreement.  Neither Party will disclose such information
and materials to


 


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anyone other than those
of its Sublicensees, Affiliates, potential Sublicensees, employees, consultants,
agents or subcontractors as are necessary in connection with such Party’s
activities pursuant to this Agreement and each Party hereby agrees to protect
such Confidential Information with the same degree of care with which such
Party maintains its own proprietary information, but in no event less than
reasonable care.  Each Party will obtain
a written agreement from its Sublicensees, potential Sublicensees, consultants,
agents and subcontractors (if any), prior to disclosure, to hold in confidence
and not make use of such trade secrets or other proprietary information for any
purpose other than as permitted by this Agreement.


11.2           Disclosure


The obligation of
confidentiality in this Agreement does not apply to the extent that


(a)              either Party or their Affiliates (as such, the
Recipient) are required to disclose Confidential Information by order or
regulation of a governmental agency or a court of competent jurisdiction, or
under the securities laws of any jurisdiction or in connection with any filing
of information with the U.S. Securities and Exchange Commission or any stock
exchange upon which its securities are listed, except that the Recipient will
not make any such disclosure (other than as required under the securities laws
of any jurisdiction or in connection with any filing of information with the
U.S. Securities and Exchange Commission or any stock exchange upon which its
securities are listed) without first notifying the other Party and allowing
such other Party a reasonable opportunity to seek injunctive relief from (or
protective order with respect to) the obligation to make such disclosure;


(b)              the Recipient can demonstrate that (i) the disclosed
Confidential Information was at the time of such disclosure to the Recipient
already in (or later enters) the public domain other than as a result of
actions of the Recipient, Recipient’s Affiliates, employees, Sublicensees,
agents or subcontractors in violation of this Agreement; (ii) the disclosed
Confidential Information was rightfully known by the Recipient or its
Affiliates (as shown by its written records) prior to the date of disclosure to
the Recipient in connection with the negotiation, execution or performance of
this Agreement or independently generated by the Recipient or its Affiliates at
any time; or (iii) the disclosed Confidential Information was received by the
Recipient or its Affiliates on an unrestricted basis from a source unrelated to
either Party to this Agreement and not under a duty of confidentiality to the
other Party;


(c)              with respect to a disclosure by Schering, disclosure is
made to a government regulatory agency as part of such agency’s product license
approval process for the Product, provided, however, that the Recipient will
notify the other Party, limit the disclosure to the extent possible and, where
appropriate, seek confidential treatment to the extent available; or


(d)              disclosure is necessary to obtain or secure patent
protection of any Licensed Patents or Licensed Technology, provided, however,
that the Recipient will notify the other Party, limit the disclosure to the
extent possible and, where appropriate, seek confidential treatment to the
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In addition to disclosures described above,
each Party may disclose Confidential Information belonging to the other Party
only to the extent such disclosure is necessary in the following instances:
(i) filing or prosecuting Patent Rights as permitted by this Agreement;
(ii) regulatory filings for Products such Party has a license or right to
develop hereunder; and (iii) prosecuting or defending litigation as
permitted by this Agreement.


11.3           Publicity


(a)              Metabasis, Valeant and Schering shall agree on the
form, content and timing of any initial press releases concerning this
Agreement and the Valeant License Agreement which shall be issued promptly
after the date of execution of this Agreement. 
Following the date of execution of this Agreement, Metabasis may not
originate any publication, news release or other public announcement, written
or oral, whether in the public press, stockholders’ reports or otherwise,
relating to the terms and conditions of this Agreement or to any sublicense
under this Agreement, or to the performance under this Agreement or under any
sublicense under this Agreement, without the prior written approval of
Schering, unless such releases are limited substantially to Schering’s public
announcements, which approval will not be unreasonably withheld or
delayed.  Metabasis may use the substance
of the initial press releases, Schering’s public announcements, and any other
materials approved by Schering, in Metabasis’ investor relations and public
relations activities.  Metabasis shall
make no public announcement, either written, oral or in any medium relating to
the safety or efficacy of or clinical data pertaining to Licensed Compound,
except for statements in official correspondence with government patent
authorities in support of Patent Rights, without the prior written approval of
Schering, which approval will not be unreasonably withheld or delayed.  Nothing in the foregoing, however, shall
prohibit Metabasis from making disclosures to the extent deemed necessary or
appropriate under applicable federal or state securities laws or any rule or
regulation of any nationally recognized securities exchange, provided same is
accurate and complete.  In such event,
however, Metabasis shall where applicable, request confidential treatment to
the extent available, and where practical shall provide copies of the proposed
disclosure reasonably in advance of such filing or other disclosure for
Schering’s prior review and comment and shall give due consideration to any
reasonable comments by Schering relating to such filing, including without
limitation the provisions of this Agreement for which confidential treatment
should be sought, provided that Schering responds with such comments within
[***] of receiving such copy and provided that such right of review and comment
shall only apply for the first time that specific information is to be
disclosed, and shall not apply to the subsequent disclosure of substantially
similar information that has previously been disclosed.  For purposes of clarity, the term “business
day” as used herein does not include a day on which the U.S. offices of
Schering are closed, such as on weekends, national holidays and for the last
week of December.


(b)              To the extent Schering originates any written
publication, news release or other public announcement relating to this
Agreement, Schering shall provide Metabasis with a copy of its proposed release
or public disclosure for review and comment, provided that such right of review
and comment shall only apply for the first time that specific information is to
be disclosed, and shall not apply to the subsequent disclosure of substantially
similar information that has previously been disclosed.  Schering shall give due consideration to any
comments by Metabasis 


 


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relating to such proposed press release or
other public disclosure provided that Metabasis responds with such comments
within [***] of receiving such copy.


(c)              Notwithstanding the foregoing, Schering shall be
entitled to (i) issue press releases and other public statements to the extent
necessary or useful in connection with the development or commercialization of
the Product, including in connection with sublicensing and subcontracting
transactions; and (ii) publish or have published information about
clinical trials related to the Product, including the results of such clinical
trials on the clinicaltrials.gov website.


11.4           Scientific Publications


Schering shall be
free to publish scientific articles about the Licensed Compound or Products in
scientific publications but Metabasis may only do so with the prior written
consent of Schering.  Schering will first
provide Metabasis with a copy of the proposed publication for review and
comment.  Schering shall give due
consideration to any reasonable comments by Metabasis relating to such proposed
press release or other public disclosure. 
Notwithstanding the foregoing, Metabasis shall be free to publish
scientific articles concerning the HepDirect Technology generally and
concerning a compound which may become a Substituted Compound but only prior to
its becoming a Substituted Compound, provided, however, that Schering is given
thirty (30) days advanced written notice by Metabasis of any such proposed
publication concerning the HepDirect Technology generally or concerning a
compound which may become a Substituted Compound and provided further that (a)
Schering may delay such publication for a reasonable period of time, not to
exceed three (3) months, to allow for any Patent Rights to be filed; and (b)
Schering may request that any Schering Confidential Information contained
within such draft publication is removed.


 


ARTICLE XII


TERM AND
TERMINATION


12.1           Term


(a)              The Term of this Agreement (the Term) commences as of
the Amended Closing Date and, unless sooner terminated in accordance with this
Agreement, will expire in each country in the Territory with respect to a
Product upon the occurrence of the later of


(i)         the expiration or invalidation of the last to expire or be
invalidated of the Licensed Patents which but for this Agreement would be
infringed by the sale of such Product using such Licensed Patents in such
country,


(ii)        [***] after the First Commercial Sale in such country of such
Product.


 


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(b)              Upon expiration of the Term in a country with respect
to any Product, Schering will have a perpetual, fully paid-up, fully and freely
sub-licensable, royalty free, exclusive license within the Field in such
country to exercise the rights granted in Article II relating to the Licensed
Compound and/or Product.


12.2           [Intentionally omitted]


12.3           Termination For Cause


(a)              Either Party (as such, the Non-Breaching Party) may
terminate this Agreement upon written notice with immediate effect if:


(i)         the other Party (as such, the Breaching Party) has not
complied with any of its material obligations under this Agreement; and


(ii)        the Non-Breaching Party gives written notice to the Breaching
Party specifying the nature of the default, requiring the Breaching Party to
cure the default, and referring to the Non-Breaching Party’s right to terminate
this Agreement pursuant to this Section 12.3; and


(iii)       the default is not cured within [***] after the receipt of
such written notice (or, in the event that cure cannot be effected within such
[***] period, reasonable efforts by the Breaching Party are not commenced and
continuing throughout such period and the default is not finally cured within
[***] after the receipt of such notice).


(b)              A Party entitled to terminate this Agreement under this
Section 12.3 may elect to terminate with respect to a particular country or
countries in the Territory rather than the entire Territory by giving written
notice of such election in the notice of intent to terminate the license.  If a Party elects to terminate with respect
to a particular country, the licenses and other rights granted to Schering pursuant
to Article II with respect to that particular country will terminate.


(c)              Notwithstanding Section 12.3(a), if the default of the
Breaching Party giving rise to the Non-Breaching Party’s right of termination
is of a non-financial nature and is limited to a particular country or
countries, other than a Major Market Country, and the results of that default
extend only within that country or countries, the Non-Breaching Party may
terminate the license only with respect to the country or countries where such
default has occurred.  Nothing in this
Section 12.3 shall limit any remedies otherwise available to either Party.


(d)              Waiver by either Party of any event or succession of
events giving rise to the right of termination will not deprive the waiving
Party of the right to terminate this Agreement under this Section 12.3 on the
basis of any subsequent event giving rise to such right.


 


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12.4           Rights and Obligations Upon
Termination for Cause


(a)              Upon any termination by Metabasis under
Section 6.1 or Section 12.3 with respect to a particular country or
countries, all licenses and other rights granted to Schering pursuant to
Article II will terminate pursuant to Section 12.5.3 with respect to such
country or countries.  Upon such
termination, the Program Transfer Provisions will apply with respect to such
country or countries only.


(b)              Upon any termination by Schering under Section 12.3,
Schering in its sole option and discretion may in such termination notice elect
to either (A) terminate this Agreement in its entirety in which case all
licenses granted hereunder shall cease with immediate effect; or (B) continue
to exercise the licenses granted to Schering in which case the following terms
shall apply:


(i)         any licenses granted by Schering to Metabasis (other than
those set forth in Section 8.4(d), which licenses shall continue in full
force and effect) will terminate and revert to Schering;


(ii)        the licenses granted by Metabasis to Schering under Article
II will remain in effect in accordance with their respective terms, including
Schering’s obligation to pay Metabasis the royalties as set forth in Section
4.3 and the Milestone Payments as set forth in Section 4.2, provided that such
license shall henceforth be freely sub-licensable and the restrictions on
sub-licensing in Section 2.2 shall no longer apply and provided further that
Schering shall have the right to offset the full amount of damages it has
suffered as a result of Metabasis’ breach against any royalties or Milestone payments
that would otherwise be payable in accordance with Section 4.3 or 4.2;


(iii)       the provisions of Section 2.7 (Non-Competition) shall continue
to apply;


(iv)      Schering shall continue to have the right to Handle and defend
the Licensed Patents and Schering Patents as specified in Article VIII;


(v)       Schering will have no further obligation to disclose any
Confidential Information to Metabasis and Schering may request the immediate
return or destruction of any Confidential Information already disclosed to Metabasis;
and


(vi)      Schering shall have no further obligations and Metabasis will
have no further rights under Section 5.1, 5.2, and 5.3; and


(vii)     Except as amended as described above, the rights and obligations
of Schering and Metabasis under this Agreement shall continue in full force and
effect.



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12.5           Schering Termination Without Cause


12.5.1         Upon [***] written notice to Metabasis,
Schering may in its sole discretion terminate this Agreement, in its entirety
or in one or more countries other than a Major Market Country.


12.5.2         If Schering terminates this Agreement
pursuant to Section 12.5.1 the Program Transfer Provisions will apply.


12.5.3         Upon Schering’s termination of this
Agreement pursuant to Section 12.5.1 or Metabasis’ termination of this Agreement
with respect to one or more countries pursuant to Section 6.1(c), Schering’s
rights with respect to those countries included in the licenses and any other
rights granted by Metabasis hereunder respecting those countries, will
automatically terminate and will immediately and automatically revert to
Metabasis; provided, however, that Schering will have [***] from Schering’s
termination of the Agreement to complete the sale of any Product then in
inventory, subject to payment of royalties and milestone payments pursuant to
Article V.


12.5.4         If Schering terminates this Agreement
pursuant to Section 12.5.1 or Metabasis terminates this Agreement pursuant to
Sections 6.1(c) or 12.3, then the following obligations will apply (the Program
Transfer Provisions).  Where termination
is by Metabasis pursuant to Sections 6.1 (c) or 12.3 and relates to a
particular country or countries, the Program Transfer Provisions, including any
license granted by Schering as described below, shall apply only in the country
or countries where Schering’s license rights have been terminated.


(a)              Schering will promptly provide to Metabasis all
preclinical and clinical data and all regulatory data, in each case relating to
the Licensed Compound or any Product and generated by or on behalf of Schering
and Schering will grant to Metabasis an irrevocable, exclusive license (with
the right to sublicense) for the use of all such data solely to develop, make,
have made, use, import, export, have imported, have exported, offer to sell,
sell, and have sold the Licensed Compound and Products, provided, however, that
such license grant shall not apply to data that relates to an active
pharmaceutical ingredient other than the Licensed Compound in a Combination
Product.


(b)              Schering will promptly provide to Metabasis reasonably
detailed disclosure of all Program Improvements, Program Patents and any other
know-how or information Controlled by Schering or its Affiliates to the extent
necessary to, used with respect to, or in Schering’s reasonable estimation
material to the continued development or commercialization of, any Product, and
Schering will grant to Metabasis an irrevocable, exclusive license (with the
right to sublicense) for the use of all such Program Improvements, Program
Patents, know-how and information solely to develop, make, have made, use,
import, export, have imported, have exported, offer to sell, sell, and have
sold Licensed Compound and Products.


(c)              Schering will transfer to Metabasis the ownership of
all regulatory submissions and filings related to the Product, including all
INDs, NDAs and other Regulatory Approvals


 


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applicable to the Licensed Compound and the Product in the terminated
country or countries only.


(d)              Schering shall be entitled, during the [***] following
termination of the Agreement to finish any work-in-progress and to sell any
inventory of the Product that remains on hand as of the date of the
termination, provided that Schering continue to pay Metabasis the royalties
applicable to such subsequent sales in accordance with the term and conditions
of this Agreement.


(e)              Where the termination relates to all countries in the
Territory, Metabasis shall have the option, exercisable within [***] following
the effective date of such termination and subject to Section 12.5.4(d) above,
to purchase any supplies of Licensed Compound and Product obtained by Schering
or any Schering Affiliate but excluding any Generic Affiliate, for the purposes
of developing, making, having made, using, importing and selling Licensed
Compound and any Products.  Such Licensed
Compound and Product shall be supplied out of existing Schering inventory at
Schering’s Fully Burdened Manufacturing Costs. 
Notwithstanding the foregoing, if any Product is being marketed and
Schering (or any of its Affiliates excluding any Generic Affiliates) is then
supplying such Product, Schering will (or will cause its Affiliates but
excluding any Generic Affiliates ) continue to supply such Product, at a cost
of (i) [***] if such Termination is only with regard to one or more countries,
or (ii) [***] if such Termination is for the entire Agreement, of the Fully
Burdened Manufacturing Costs of Schering (or its Affiliates but excluding any
Generic Affiliates), for a reasonable period of time to allow Metabasis to
obtain an alternate source of supply, but for no longer than (i) the Term, if
such Termination is only with regard to one or more countries, or (ii) [***]
following the effective date of such termination if such Termination is for the
entire Agreement.  If a Third Party is
then supplying Licensed Compound or any Product, Schering will notify such
Third Party supplier of the transfer of rights to the Licensed Compound and
Product pursuant to this Agreement and acknowledges that such Third Party
supplier may but is under no obligation to continue to supply Metabasis.


(f)               Where the termination relates to all countries in the
Territory, Schering will make a reasonable number of appropriate personnel
available to Metabasis to assist in effecting an orderly transition to
Metabasis of the information and rights contemplated above in this Section 12.5
for a period of up to [***] following the effective date of termination.  Thereafter, Schering will give good faith
consideration to providing such additional personnel as Metabasis reasonably
requires in relation to such transition, such personnel to be provided at
Metabasis’ cost and expense.


(g)              As to any Product which is being marketed under a
trademark Controlled by Schering or its Affiliates but excluding any Generic
Affiliates and used exclusively with Products, Schering will assign all such
trademarks to Metabasis.


(h)              In consideration for the license by Schering to
Metabasis as described in 12.5.4(a) and (b) above, in the event Metabasis shall
utilize the data, Program Improvements, Program Patents or know how specified
in 12.5.4(a) or (b) Metabasis shall pay Schering a royalty as


 


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follows, provided that no such royalty shall be payable in the event Schering
shall terminate the Agreement with regard to one or more countries as set forth
in Section 12.1:


(i)         Pre-Completion.  If
the termination applicable to this Section 12.5.4 shall be effective
[***], Metabasis shall pay Schering a royalty of [***] on net sales of
Product(s) invoiced by or on behalf of Metabasis and any Metabasis Affiliate,
licensee or sublicensee for the Product(s), where net sales and payment terms
shall have an equivalent meaning to the definition of Net Sales and payment
terms in this Agreement in relation to Schering.


(ii)        Pre-Launch.  If the
termination applicable to this Section 12.5.4 shall be effective [***],
Metabasis shall pay Schering a royalty [***] on net sales of Product(s)
invoiced by or on behalf of Metabasis and any Metabasis Affiliate, licensee or
sublicensee for the Product(s), where net sales and payment terms shall have an
equivalent meaning to the definition of Net Sales and payment terms in this
Agreement in relation to Schering.


(iii)       Post-Launch.  If the
termination applicable to this Section 12.5.4 shall be effective [***],
Metabasis shall pay Schering a royalty of [***] on net sales of Product(s)
invoiced by or on behalf of Metabasis and any Metabasis Affiliate, licensee or
sublicensee for the Product(s), where net sales and payment terms shall have an
equivalent meaning to the definition of Net Sales and payment terms in this
Agreement in relation to Schering.


12.6           Metabasis Change of Control and
Insolvency Event


Within [***] days
after any Metabasis Change of Control and/or any Metabasis Insolvency Event,
Schering may upon written notice to Metabasis (or its successor) immediately
terminate the Development Steering Committee and any obligations upon Schering
to provide Metabasis with reports or updates relating to the development and/or
commercialization of the Licensed Compound and/or Product(s) shall immediately
cease.  From and after any such
termination, Schering will have no further obligation to disclose any Confidential
Information to Metabasis or its successor and Schering may request the
immediate return or destruction of any Confidential Information already
disclosed to Metabasis.  Except as
terminated as described above, the rights and obligations of Schering and the
Metabasis successor under this Agreement shall continue in full force and
effect.


12.7           Surviving Provisions


The Parties’
rights and obligations under Sections 4.8, 6.2, 8.4, 11.1, 11.2, 11.3 and
Articles X, XII, XIII, XIV, and XV will survive any termination and
expiration of this Agreement. 
Termination or expiration of this Agreement for any reason will be
without prejudice to any rights accrued to the benefit of either Party prior to
termination or expiration and will not relieve either Party from obligations
expressly indicated to survive termination or


 


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expiration of this
Agreement.  Termination or expiration of
this Agreement will not terminate Schering’s obligation to pay all royalties
accrued prior to the effective date of termination or expiry.  Any other provisions of this Agreement
required to interpret and enforce the Parties’ rights and obligations under
this Agreement will also survive to the extent required for the full
observation and performance of this Agreement by the Parties.


 


ARTICLE XIII


ASSIGNMENT;
SUCCESSORS


13.1           Assignment


(a)              Subject to Section 13.1(d), neither this Agreement nor
any interest under this Agreement may be assigned by Schering to a Third Party
without the prior written consent of Metabasis, except that Schering may assign
this Agreement to the acquirer of its entire hepatitis business unit, which
acquirer agrees in writing to assume all of the obligations of Schering under
this Agreement.  Metabasis will not
unreasonably withhold or delay such consent and will inform Schering of its
decision in writing within [***] of receipt of such written notice.  The Parties hereby agree that it will be
deemed reasonable for Metabasis to withhold such consent if there is a
reasonable likelihood that it will suffer a material financial harm as a result
of such assignment or if such Third Party assignee does not have the
development and commercial capabilities and resources, as appropriate,
available to support and exploit the Licensed Compound and Product throughout
the Territory in accordance with this Agreement.


(b)              Subject to Section 13.1(d) and to the Metabasis Change
of Control provisions described elsewhere in this Agreement, neither this
Agreement nor any interest under this Agreement may be assigned by Metabasis
without the prior written consent of Schering, except that Metabasis may assign
this Agreement to the acquirer of its along, with its Affiliates’, entire
business and assets which acquirer agrees in writing to assume all of the
obligations of Metabasis under this Agreement.


(c)              No assignment or sublicense will release either Party
from any liability under this Agreement.


(d)              Each of Schering and Metabasis may assign this
Agreement or any rights or performance obligations under this Agreement to any
Affiliate or to any successor by merger, consolidation, sale or acquisition of
all or substantially all of the assets used in the business which is the
subject of this Agreement.


(e)              Any assignment not made in accordance with this Section
13.1 will be void.


 


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13.2           Binding Upon Successors and Assigns


 


Subject to the
limitations on assignment under Section 13.1, this Agreement binds all
successors in interest and assigns of Metabasis and Schering.  Any successor or assignee of Schering’s or
Metabasis’ interest will expressly assume in writing the performance of all the
terms and conditions of this Agreement and the Other Agreements to be performed
by Schering or Metabasis, as the case may be.


13.3           Parties
Responsible for Performance of Affiliates


Each Party shall remain
responsible for the performance of this Agreement by its Affiliates to which
this Agreement has been assigned, and shall cause such Affiliates to comply
with the provisions of this Agreement in connection with such performance.  Each Party hereby expressly waives any
requirement that the other Party exhaust any right, power or remedy, or proceed
against an Affiliate, for any obligation or performance hereunder prior to
proceeding directly against such Party.


ARTICLE XIV



DISPUTE RESOLUTION


14.1           Arbitration


Subject to Section
14.2, any dispute, controversy or claim arising under, out of or in connection
with this Agreement, or the breach thereof, including any subsequent
amendments, may be referred to and finally settled by arbitration in accordance
with the commercial rules of the [***] in force on the date of commencement of
the arbitration.  The arbitration will be
final and binding, and judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof.  There will be three arbitrators, one
arbitrator selected by Metabasis and one arbitrator selected by Schering, which
arbitrators will then jointly select the third arbitrator.  If either party fails to nominate an arbitrator
within [***] from the date of notification made to it of the other Party’s
request for arbitration, then the third arbitrator will be appointed in
accordance with [***] rules.  The place
of the arbitration will be New York, USA and the laws of the State of New York
will be applied.  Each of the arbitrators
will have at least 10 years experience in commercial transactions.  The arbitration will commence within [***]
after appointment of the arbitrators and will continue uninterrupted, unless
otherwise suspended by the arbitrators for good cause, for not longer than
[***] (including without limitation any discovery permitted by the
arbitrators).  The arbitrators will,
within such [***] period, render a written decision with findings of fact and
conclusions of law and deliver such decision to the Parties.  No arbitrator (nor the panel of arbitrators)
shall have the power to award punitive damages under this Agreement and such
award is expressly prohibited.  The
decision of the arbitrators will be final and non-


 


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appealable and binding
upon the Parties, and may be entered and enforced in any court having
jurisdiction.  The Parties shall share
the costs of the arbitration equally.


14.2           Pre-Arbitration
Dispute Resolution


No dispute under
this Agreement will be referred to arbitration under Section 14.1 until the
following procedures have been satisfied. 
[***] and, depending on whether the dispute is one which relates to a
pre-approval or post-approval matter, the [***] (or designees with similar
authority to resolve such dispute) will meet to review any dispute with respect
to the interpretation of any provision of this Agreement or with respect to the
performance of either Party under this Agreement.  Such review will be initiated by one Party
sending written notice of the dispute to the other Party, and as soon as
practicable, but in any event within [***] of such notice, the designated
representatives of the Parties will meet for attempted resolution by good faith
negotiations.  If such representatives
are unable to resolve such dispute within [***] after a meeting to discuss the
dispute, either Party may at any time provide written notice to the other Party
specifying the terms of the dispute in reasonable detail and notifying the
other Party of its decision to institute arbitration proceedings under Section
14.1.


14.3           Provisional
Remedy


Nothing in this
Agreement limits the right of either Party to seek to obtain in any court of
competent jurisdiction any interim relief or provisional remedy, including
injunctive relief. Seeking or obtaining any interim relief or provisional
remedy in a court will not be deemed a breach or waiver of this agreement to
arbitrate.


14.4           Confidentiality


Subject to Article
11 or as otherwise required by law, the existence of the dispute, any
settlement negotiations, the arbitration hearing, any submissions (including
exhibits, testimony, proposed ruling, and briefs), and the rulings of the
arbitrators will be deemed Confidential Information.  The arbitrators will have the authority to
impose sanctions for unauthorized disclosure of Confidential Information.


ARTICLE XV



GENERAL PROVISIONS


15.1           Relationship
of the Parties


For purposes of
this Agreement, the relationship of Metabasis to Schering is that of an
independent contractor.  Metabasis and
Schering are not joint venturers, partners, principal and agent, master and
servant or employer and employee.  With
respect to the subject matter of this


 


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Agreement, Metabasis and
Schering have no power to bind or obligate each other in any manner, other than
as expressly set forth in this Agreement. 
A change of this relationship is not excluded by this Agreement.


15.2           Excusable
Delay


The failure or
omission by a Party in the performance of any obligation under this Agreement
will not be deemed a breach of this Agreement or create any liability if it
arises from any cause or causes beyond the control of the Party, such as
strikes, riots, war, acts of God, invasion, fire, explosion, floods, pandemic,
delay of carrier, shortage or failure in the supply of materials, energy
shortage and acts of government or governmental agencies or
instrumentalities.  If due to such an
event either Party is delayed or hindered in or prevented from the performance
of its duties or doing acts required under the terms of this Agreement, the
performance of such act will be excused for the period of the delay not to
exceed [***].  A Party subject to such an
excusable delay will use commercially reasonable efforts to resolve any
condition forming the basis of the delay.


15.3           Notices


All notices,
consents, requests, waivers and other communications required or permitted
under this Agreement:


(a)              must
be in writing, signed by an authorized officer of the sender , and sent by
personal delivery, fax (with confirmation copy), internationally recognized
courier, or certified or registered mail, postage prepaid (airmail where
applicable);


(b)              will
be deemed to be given when actually received; and


(c)              must
be sent to the receiving Party at the address or fax number, as applicable, set
forth below, or any replacement address or fax number notified to the sender by
notice actually received by the sender:


	
   

  	
  if to Metabasis, to:

  
	
   

  	
   

  
	
   

  	
  Metabasis
  Therapeutics, Inc.

  
	
   

  	
  9390 Towne
  Centre Drive

  
	
   

  	
  San Diego,
  California 92122

  
	
   

  	
  Attention: Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Michael J.
  O’Donnell

  
	
   

  	
  Wilson Sonsini
  Goodrich & Rosati P.C.

  
	
   

  	
  650 Page Mill
  Road

  
	
   

  	
  Palo Alto, CA
  94304-1050

  



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  if to Schering, to:

  
	
   

  	
   

  
	
   

  	
  Schering
  Corporation

  
	
   

  	
  2000 Galloping
  Hill Road

  
	
   

  	
  Kenilworth, NJ
  07033-0530

  
	
   

  	
  Attention: Vice
  President, Global Licensing and Strategic Alliances

  
	
   

  	
  Fax No.:
  908-298-7366

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Senior Legal
  Director, Licensing

  
	
   

  	
  Fax No.:
  908-298-2739

  



 


15.4           Expenses


Except as
expressly provided otherwise in this Agreement, all legal and other costs and
expenses incurred in connection with the negotiation and entering into of this
Agreement and the transactions contemplated by this Agreement will be paid by
the Party incurring such costs or expenses.


15.5           Further
Assurances


Except as
expressly provided elsewhere in this Agreement, each Party will at its expense
promptly execute and deliver any further instruments and documents and take any
further action as the other Party may reasonably request in order to give
effect to the transactions contemplated by this Agreement.


15.6           Amendment


This Agreement may
not be altered or otherwise amended except by an instrument in writing signed
by each of the Parties.


15.7           Waiver


A Party may, by
written instrument executed by such Party, extend the time for the performance
of any obligations of the other Party, waive any inaccuracies and
representations by the other Party in this Agreement or in any document
delivered pursuant to this Agreement or waive compliance by the other Party
with any of the covenants, conditions or performance of any of its obligations
under this Agreement.  Any such waiver or
failure to insist upon strict compliance with such covenant, condition or
obligation will not operate as a waiver of, or estoppel with respect to, any
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15.8           No
Third Party Beneficiaries


This Agreement
does not confer any rights, remedies, agreements, undertakings, obligations or
liabilities on any person other than Valeant and the successors-in-interest and
permitted assigns of each Party.


15.9           Entire
Agreement


This Agreement,
together with the Assignment Agreement, constitute the entire agreement between
the Parties with respect to its subject matter and, upon the Amended Closing
Date, supersedes all prior discussions, negotiations, correspondence,
agreements, and understandings, both oral and written, between the Parties with
respect to its subject matter, including without limitation the Original
Agreement.


15.10        Construction


The Parties have
participated jointly in the negotiation and drafting of this Agreement.  If a question of intent or interpretation
arises, this Agreement will be construed as if drafted jointly by the Parties
and no presumption or burden of proof will arise favoring or disfavoring a
party because of the authorship of any provision of this Agreement.


15.11        Incorporation
of Exhibits


All Exhibits
identified in this Agreement are incorporated by reference and made a part of
this Agreement.


15.12        Counterparts


This Agreement may
be executed in any number of counterparts and by facsimile, each of which will
be deemed to be an original and all of which together will constitute one and
the same agreement.


15.13        Severability


If any provision
of this Agreement is finally determined to be invalid, unlawful or incapable of
being enforced in a jurisdiction, (i) it will be deemed to be severed from this
Agreement in such jurisdiction, (ii) every other provision of this Agreement
will remain in full force and effect in such jurisdiction, (iii) the Parties
will negotiate in good faith to modify this Agreement so as to achieve the
original intent of the Parties as closely as possible in an acceptable manner with
respect to such jurisdiction and (iv) such invalidity, unlawfulness or
unenforceability will not affect the interpretation or enforcement of this
Agreement in any other jurisdiction.



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15.14         Bankruptcy


All rights and
licenses granted under or pursuant to this Agreement by Metabasis to Schering
are, and will 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. 
Schering, as a licensee of such rights under this Agreement, will retain
and may fully exercise all of its rights and elections under the Bankruptcy
Code.


15.15        Remedies
Cumulative


The rights and
remedies of the Parties under this Agreement are in addition to any other
rights available to them at law or in equity. 
The use of any right or remedy by a Party does not preclude or waive the
right to use any other remedies.  This
Section 15.15 does not limit the obligations of the Parties under Section 14.1
and Section 14.2.


15.16        Governing
Law


This Agreement
will be governed by and construed in accordance with the laws of the State of
New York, USA, without regard to its principles regarding conflicts of law.


15.17        Antitrust
Filings


Each of Schering
and Metabasis agrees to prepare and make appropriate filings under the
Hart-Scott Rodino (HSR) Act and other antitrust requirements relating to this
Agreement and the transactions contemplated hereby as soon as reasonably
practicable, but in any event within ten (10) days after the Execution Date
(the “Antitrust Filing Date”).  The
Parties agree to cooperate in the antitrust clearance process and to furnish
promptly to the FTC, the Antitrust Division of the Department of Justice and
any other applicable agency or authority, any information reasonably requested
by them in connection with such filings. 
Other than the provisions of Articles XIV and XV (including this
Section 15.17) and Sections 11.1, 11.2, 11.3, and 12.1(a), the rights
and obligations of the Parties under this Agreement shall not become effective
until the waiting period provided by the HSR Act shall have terminated or
expired without any action by any government agency or challenge to the
transaction or any other timeline required by another relevant agency or authority
(the date of such termination or expiration shall be the “Amended Closing Date”
of this Agreement).  Upon the occurrence
of the Amended Closing Date, all provisions of this Agreement shall become
effective automatically without the need for further action by the
Parties.  In the event that antitrust
clearance from the FTC, Antitrust Division of the Department of Justice or any
other required agency or authority is not obtained within ninety (90) days
after the Antitrust Filing Date, or such other date as the Parties may mutually
agree, this Agreement may be terminated by either Party on written notice to
the other.  In the event a provision of
this Agreement needs to be deleted or substantially revised in order to obtain
regulatory clearance of this transaction, the parties will negotiate in good
faith in accordance with Section 15.13.



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


	
   

  	
  METABASIS THERAPEUTICS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul Laikind

  	
   

  
	
   

  	
  Name

  	
  Paul Laikind

  	
   

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHERING CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Michael J Dubois

  	
   

  
	
   

  	
  Name:

  	
  Michael J. Dubois

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
					




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SCHEDULE
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SCHEDULE
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Requested



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LICENSED COMPOUND


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SAMPLE
INVOICE


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EXHIBIT
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METABASIS
SCHEDULE OF EXCEPTIONS


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