**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 ofDecember 13, 2006

----

 

 

**TABLEOF 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 ANDRESTATED DEVELOPMENT AND LICENSE AGREEMENT

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

**Recitals**

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

B.                Metabasis has acquired or possessesthe right to license worldwide proprietary rights to certain HepDirectCompounds for the treatment of Hepatitis B.

C.                Metabasis and ValeantPharmaceuticals 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 Scheringhave executed an Assignment Agreement effective as of the Amended Closing Datepursuant to which Metabasis and Valeant have consented to the assignment byValeant to Schering of Valeant’s rights and obligations under the OriginalAgreement.

E.                Schering has expertise inresearching, developing, manufacturing and marketing pharmaceutical productsfor the treatment of human diseases and wishes to develop, manufacture, andmarket Products based on the Licensed Compound in accordance with thisAgreement.

F.                Metabasis wishes to grant anexclusive license to Schering and Schering wishes to acquire an exclusivelicense with respect to, and to develop, manufacture, and market Products, inaccordance with this Agreement.

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

**Agreement**

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

4

----

 

 

# **ARTICLE I**

# **DEFINITIONSAND 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.

*AccountingPeriod* means a calendar quarter commencing on the first dayof an Accounting Period (and for the first Accounting Period, commencing on theAmended 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 Periodrespectively on March 31, June 30, September 30 and December 31, eachbeing the last day.

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

*Affiliate*of a Party means any corporation or other business entity that controls, iscontrolled by, or is under common control with a Party, where control meansdirect or indirect ownership of more than fifty percent (50%) of the votinginterest in a corporation or entity, or such other relationship as, in fact,constitutes actual control of management or the ability to cause the directionof the management or policies of a corporation or other entity.  In the case of entities organized under thelaws of certain countries, the maximum percentage ownership permitted by lawfor a foreign investor may be less than fifty percent (50%), and in such casesuch lower percentage shall be substituted in the preceding sentence, providedthat such foreign investor has the power to direct the management and policiesof such entity.

*Agreement*has the meaning set forth in the preamble.

*AmendedClosing Date* has the meaning set forth in Section 15.17.

*ApprovalAuthority* means a governmental authority or agency whoseapproval is required in a country for any Regulatory Approval, including theFDA, EMEA and any national or regional regulatory authorities.

*AssignmentAgreement* means the assignment agreement entered into amongMetabasis, Schering and Valeant relating to the assignment by Valeant toSchering of Valeant’s rights and obligations under the Original Agreement.

*BankruptcyCode* means Title 11, U.S. Code.

*BreachingParty* has the meaning set forth in Section 12.3.

5

----

 

 

*BusinessDay* 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.

*CombinedProduct* means any pharmaceutical product with two or moreactive pharmaceutical ingredients (in any formulation and including acombination of separate dosage forms in a single package), one of which is aLicensed Compound and one or more of which is not, sold as a single item forone price.

*CommerciallyReasonable Efforts* means with respect to the development,manufacture, Regulatory Approval, and commercialization of Licensed Compoundand Product, application of efforts and resources at all times that areconsistent with what Schering applies for similar pharmaceutical products ofsimilar market potential at similar stages of development.

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

*CompassionateSales* means, with respect to a Product in any country in theTerritory, any sale of the Product by Schering or any of its Affiliates orSublicensees that is required by a governmental authority to be made to certainpersons or classes of persons in such country, before or after the Product hasbeen approved for use in such country by the Approval Authority, but before theprice of the Product (or reimbursement for the Product) has been determined bythe applicable governmental authority in such country.

*ConfidentialInformation* means all know-how and other proprietaryinformation and data of a financial, commercial or technical nature which thedisclosing Party or any of its Affiliates has supplied or otherwise madeavailable to the other Party, whether made available orally, in writing or inelectronic form, including information comprising or relating to concepts,discoveries, inventions, data, designs or formulae in relation to thisAgreement.

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

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

*DevelopmentSteering Committee* has the meaning set forth in Section 5.1.

*Dollars*or *$*means the lawful currency of theUnited 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, rightof pre-emption, right of first refusal or security interest of any kind.

*EUMajor Market* means any [***] of the following countries:  [***]

*EURegulatory Approval* means (a) marketing authorizationapproval from the EMEA and pricing approval and reimbursement in the EU MajorMarket or (b) marketing authorization approval and pricing approval andreimbursement in the EU Major Market.

*EuropeanUnion* means the amalgamation of European member statescreated 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 entitythereto.

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

*FirstCommercial Sale* means, with respect to a Product in anycountry in the Territory, the first arms-length sale to a Third Party purchaserin such country of a Product by Schering or any of its Affiliates orSublicensees, after Regulatory Approval in such country, which transfersphysical possession and title to the Product, provided, however, that anyCompassionate Sales or sales for pre-marketing, testing, or sampling will notbe a First Commercial Sale.

*FullyBurdened Manufacturing Cost* shall have the meaning set forthin Exhibit C.

*GenericAffiliate* means anyAffiliate of a Party whose principal business activity is thedevelopment, manufacture, commercialization or distribution of genericpharmaceutical products.

*GenericEquivalent* means, as to any specific Product at issue whichhas received Regulatory Approval in the country at issue, a pharmaceuticalproduct with the same active ingredient and administrative route as the Productand which has (i) in the United States, received Regulatory Approval from theFDA (x) under an abbreviated NDA in accordance with 21 C.F.R. 314.94(a) whichrefers to the specific Product at issue as the Reference Listed Drug (asdefined 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 theNDA filed for the specific Product at issue but as to which the applicant inthe NDA for such potential Generic Equivalent does not have a right ofreference or (z) by any means by which the potential Generic Equivalent canobtain Regulatory Approval based, in part, on information contained in the NDAfiled for the specific Product at issue but as to which the applicant in theapplication for Regulatory Approval for such potential Generic Equivalent doesnot 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 referencesthe 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 theNDA filed for the specific Product at issue (or the comparable application filedin the country at issue) but as to which the applicant in the application forsuch potential Generic Equivalent does not have a right of reference or (z) byany means by which the potential Generic Equivalent can obtain RegulatoryApproval based, in part, on information contained in the NDA filed for thespecific Product at issue (or the comparable application filed in the countryat issue) but as to which the applicant in the application for RegulatoryApproval for such potential Generic Equivalent does not have a right ofreference.

*Handle*has the meaning set forth in Section 8.1.

*HepDirectCompounds* means all compounds that fall within the scope ofthe HepDirect Technology which are Controlled by Metabasis.

*HepDirectTechnology* means compositions and methods of making and usingthe same, of any and all [***], including all proprietary and technicalinformation related thereto, and all patentable and non-patentable inventions,discoveries, experience, disclosure claims, formulas, processes, procedures, compositionsof matter, specifications, methods, techniques, trade secrets, technologies,data, know-how, instructions, processes, formulae, materials and resultsrelated thereto which are Controlled by Metabasis and include those PatentRights set forth in Schedule A.

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

*IndemnifiedParty* has the meaning set forth in Section 10.3.

*IndemnifyingParty* 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 andprocedures, pharmacological, toxicological and clinical test data and resultsand regulatory information.

*LicensedCompound* means all forms of MB6866 as identified atExhibit 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 Compoundsubstituted in accordance with Article III, and its various forms includingsalts and prodrugs.

***Confidential Treatment Requested

8

----

 

 

*LicensedPatents* means any and all Patent Rights which MetabasisControls in any country of the Territory, having one or more Valid ClaimsCovering the Licensed Compound or Product in the Field and which are reasonablynecessary 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 orProduct in the Field in the Territory. Licensed Patents includes the Patent Rights set forth onSchedule A.

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

*MAA*means an application for authorization to market the Productin any country or group of countries outside the United States, as defined inthe applicable laws and regulations and filed with the Approval Authority of agiven country or group of countries.

*MajorHealth Care Company* shall mean a Third Party pharmaceuticalor biotechnology company (including a “group” within the meaning of Section13(d)(3) of the Securities Exchange Act of 1934) [***].

*MajorMarket Country* means each of the following countries and itsterritories and possessions: [***]

*Metabasis*has the meaning set forth in the preamble.

*MetabasisChange of Control* means any transaction or series of relatedtransactions in which a Major Health Care Company acquires or becomes thebeneficial owner of (i) more than fifty percent (50%) of the outstanding votingsecurities of Metabasis or the surviving entity, whether by merger,consolidation, reorganization, tender offer or similar means, or (ii) all orsubstantially all of the assets of Metabasis, howsoever caused, including bysale or lease.

*MetabasisInsolvency Event*means, in relation to Metabasis, any one of the following: (a) thatMetabasis is the subject of voluntary or involuntary bankruptcy proceedingsinstituted on behalf of or against Metabasis (except for involuntary bankruptcyproceedings which are dismissed within sixty (60) days); (b) anadministrative 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 purposeof passing a resolution to wind up Metabasis, or such a resolution shall havebeen passed other than a resolution for the solvent reconstruction orreorganization of Metabasis; (d) a resolution shall have been passed byMetabasis or Metabasis’ directors to make an application for an administrationorder or to appoint an administrator; or (e) that Metabasis makes anygeneral assignment, composition or

***Confidential Treatment Requested

9

----

 

 

arrangement with or forthe benefit of Metabasis’ creditors or suspends making payments to all orsubstantially all of Metabasis’ creditors.

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

*MilestonePayment*means any of the payments required underSection 4.2.

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

*NetSales*means grossamounts invoiced by or on behalf of Schering and any of its Affiliates orSublicensees for the Product sold to Third Parties who are not Affiliates orSublicensees of Schering, unless such Affiliate or Sublicensee is the end userof such Product, in which case the amount billed therefor shall be deemed to bethe amount that would be billed to a Third Party end user in bona fide,arms-length transactions, less the following deductions, as determined inaccordance with Schering’s usual and customary accounting methods, which are inaccordance with its Accounting Standards as consistently applied at Schering,to the extent included in the gross invoiced sales price of any Product orotherwise directly paid or incurred by Schering, its Affiliates or sublicenseeswith respect to the sale of such Product: normal and customary trade and quantity discounts actually allowed andproperly taken directly with respect to sales of the Product; amounts repaid orcredited 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; amountspayable resulting from governmental, regulatory or agency mandated rebateprograms; tariffs, duties, excise, sales, value-added and other taxes (otherthan taxes based on income); retroactive price reductions that are actuallyallowed or granted; cash discounts actually granted for timely payment;discounts actually granted pursuant to indigent patient programs and patientdiscount programs, including, without limitation, coupon discounts; a deductionof [***] for distribution andwarehouse expenses; amounts repaid or credited for uncollectible amounts onpreviously sold products; and any other specifically identifiable amountsincluded in gross amounts invoiced for Products to the extent such amounts arecustomary exclusions from net sales calculations in the pharmaceutical industryfor reasons substantially equivalent to those listed above and are reasonablein amount relative to similar deductions taken by Schering in calculating netsales of its other products*.*  Each of the deductions set forth above shallbe determined on an accrual basis in accordance with GAAP.

### In the event the Product is sold as a Combined Product, the Net Salesof the Product, for the purposes of determining royalty payments, shall bedetermined by multiplying the Net Sales of the Combined Product by thefraction, A/(A+B) where A is the weighted (by sales volume) average sale pricein a particular country of the Product when sold separately in finished formand B is the weighted (by sales volume) average sale price in that country ofthe other product(s) sold separately in finished form.  In the event that such average sale pricecannot be determined for both the Product and the other product(s) in combination,Net Sales for purposes of

***Confidential TreatmentRequested

10

----

 

 

### determiningroyalty payments shall be agreed by the Parties based on the relative valuecontributed by each component, such agreement not to be unreasonably withheld.

*OriginalAgreement* has the meaning set forth in the Preamble.

*OriginalClosing Date* means October 1, 2001.

*PatentRights* means all patents, including all divisionals,continuations, substitutions, continuations-in-part, re-examinations, reissues,additions, renewals, extensions, registrations, and supplemental protectioncertificates and the like of any of the foregoing as well as applications ofany of the foregoing.  Patent Rightsshall include regulatory-based extensions to patent terms, including pediatricexclusivity periods in the United States.

*PhaseI Clinical Trial* means the initial introduction of aninvestigational new drug into humans primarily designed to determine themetabolism and pharmacologic actions of the drug in humans, the side effectsassociated with increasing doses, and, if possible, to gain early evidence oneffectiveness, and also may include studies of drug metabolism,structure-activity relationships, and mechanism of action in humans, as well asstudies in which investigational drugs are used as research tools to explorebiological phenomena or disease processes.

*PhaseII Clinical Trial* means a controlled clinical study conductedprimarily to evaluate the effectiveness of a drug for a particular indicationor indications in patients with the disease or condition under study and todetermine the common short-term side effects and risks associated with thedrug.

*PhaseIII Clinical Trial* means a pivotal clinical study of aProduct in patients the protocol of which is designed to establish efficacy andsafety of such Product for the purpose of preparing and submitting a filing forNDA approval in the US or EU Regulatory Approval.

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

*Prodrugof PMEA*means any compound which, as a result of in vivometabolism after administration, releases PMEA as the active ingredient.

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

*ProgramImprovement* means Know-How and all Patent Rights related tosuch 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 connectionwith the development, manufacture, marketing, importing, use, or sale ofLicensed Compound or Products.

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

11

----

 

 

*ProgramTransfer Provisions* has the meaning set forth in Section12.5.4.

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

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

*RegulatoryApproval* means with respect to a particular country allgovernment approvals required by any government or regulatory authority topermit the sale of Products in such country, including any necessary pricing orpricing reimbursement approvals.

*RoyaltyObligation Period* has the meaning set forth in Section 4.4.

*RoyaltyPayments* means the royalty due by Schering to MV on Net Salesas set out in Clause 4.3(a)(i).

*Sales& Royalty Report* means a written report or reportsshowing each of: (a) the Net Sales of each Product in each country in theworld during the reporting period by Schering and each Affiliate andSublicensee; and (b) the Royalty Payments, in United States Dollars, whichshall have accrued in respect of such sales and the basis of calculating theRoyalty Payments, including for each country where applicable, any royaltyreductions 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.

*SubstituteCompound* means a HepDirect Compound provided to Scheringpursuant 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.

*ThirdParty* means any person other than: Metabasis, Schering, orany of their Affiliates.

*UnitedStates* means the United States of America and its territoriesand possessions.

*ValeantLicense Agreement* means the license agreement entered intobetween Schering and Valeant effective as of the Amended Closing Date relatingto the license of certain Valeant intellectual property relating to theLicensed Compounds and Product.

*Valid* means with respect to an NDA or an MAA orother filing for Regulatory Approval with the relevant Approval Authority thatthe relevant Approval Authority has determined that such NDA or MAA or otherfiling for Regulatory Approval has successfully completed its validationprocedure.

12

----

 

 

*ValidClaim* means any claim of an issued and unexpired Patent Rightwhich has neither been revoked, held unenforceable, unpatentable nor invalid bya final decision of a court or a governmental agency of competent jurisdiction(including any competent patent office), and any patent application within theLicensed Patents which is being Handled by Metabasis which has been pending forless 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), oneor more rejections of the pending claims of such patent application are underappeal to a board of appeals, court, or other authority with jurisdiction overappeals of such rejections.

## **1.2             Interpretation**

In this Agreement,unless the context requires otherwise

### (a)              thesingular includes the plural and vice versa;

### (b)              wordsdenoting persons include corporations, partnerships and other legal persons;

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

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

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

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

## **1.3             ConditionsPrecedent; Agreement Supersedes and Replaces the Original Agreement**

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

***Confidential Treatment Requested

13

----

 

 

# **ARTICLE II**

# **LICENSE**

## **2.1             License**

Subject to theterms and conditions of this Agreement, Metabasis grants to Schering, andSchering accepts, the exclusive right and exclusive license under the LicensedPatents and the Licensed Technology within the Field throughout the Territory(with the right to grant sublicenses in accordance with Section 2.2), toresearch, develop, manufacture, have manufactured, market, export, haveexported, 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 toMetabasis) with respect to the Licensed Patents and with respect to theLicensed Technology.  This Section 2.1does not prevent Metabasis from granting licenses to Third Parties with respectto compounds or products that do not fall within the definition herein ofLicensed Compounds or Products.

## **2.2             Sublicense**

### (a)              Subjectto Sections 2.2(b) and 6.1, Schering has the sole and exclusive right tosublicense the rights granted to it by Metabasis under the Licensed Patents andthe Licensed Technology, in each case within the Field throughout theTerritory, 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 theperformance of particular tasks and obligations with respect to the developmentand commercialization of the Product as Schering deems appropriate.

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

***Confidential TreatmentRequested

14

----

 

 

### [***] inaccordance with this Agreement.  Inaddition, Metabasis will not [***].  Anyfailure to respond within such [***] time period [***] by Metabasis.  In the case of sublicenses outside of MajorMarket Countries Schering shall use reasonable commercial efforts to givenotice promptly to Metabasis of any sublicense to a Third Party where suchThird Party assumes a substantial portion of the responsibilities of Scheringunder this Agreement, provided that Schering shall have no liability for anyinadvertent failure to do so.

### (c)              Scheringshall remain responsible for ensuring compliance with the terms of thisAgreement by Sublicensees.  Scheringshall also pay to Metabasis royalties on Net Sales by Third Party Sublicenseespursuant to Section 4.3 of this Agreement and Schering will pay such royaltiesirrespective of whether Schering receives payments or other consideration duefrom such Third Party Sublicensees.

### (d)              Anysublicense granted by Schering other than in conformity with the provisions ofthis Section 2.2 shall be null and void.

## **2.3             Exclusivity**

### (a)              Exceptas provided in Section 2.1 and as permitted by Sections 6.1, 12.3, and12.4, during the Term, Metabasis will not license or otherwise grant to anyThird Party any rights under the Licensed Patents or the Licensed Technology toresearch, develop, manufacture, have manufactured, market, export, haveexported, import, use, offer to sell, or sell, have sold, distribute, promote,detail or otherwise commercialize Licensed Compounds or Products in theTerritory within the Field.

## **2.4             Provisionof Information**

### (a)              Within[***] following the Amended Closing Date, Metabasis will disclose and provideall information in its possession or control relating to the Licensed Patentsand the Licensed Technology to Schering or its designated Affiliate to theextent necessary or useful to enable Schering to perform its obligations underthis Agreement to develop, manufacture, register, use or market the LicensedCompound and/or Product and practice the licenses granted hereunder efficientlyincluding, to the extent reasonably available to Metabasis, any clinical data,study reports, any information relating to manufacturing, any agreements inrespect of the Licensed Compound, and any related correspondence and filingswith any Approval Authority (including notes or minutes of any meeting with anyApproval Authority).  As part of suchdisclosure, as soon as reasonably practicable, Metabasis will disclose toSchering all Licensed Technology, including to the extent reasonably availableto Metabasis pre-formulation reports, clinical manufacturing batch records,development reports, IND documentation, analytical results, analytical methodvalidation report, raw material and excipient sourcing information, qualityaudit findings, stability reports and any other relevant technical information.  Such information is subject to theconfidentiality provisions of Article XI hereof.

***Confidential TreatmentRequested

15

----

 

 

### (b)              Metabasisshall have a continuing obligation to disclose and provide to Schering suchadditional Licensed Technology as is developed or obtained by Metabasis or itsAffiliates during the term of this Agreement which Metabasis has the legalright to disclose to Schering.  Inaddition, Metabasis will, [***], provide reasonable assistance to Schering inconnection with understanding and using the Licensed Technology, including byproviding information to assist Schering in developing the Licensed Compoundsor Products and its related activities.

## **2.5             Limitson the Use of Licensed Compound by Metabasis**

From the AmendedClosing 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 otherwisecommercialize the Licensed Compound.  Therights granted under this Agreement are to the exclusion of Metabasis, exceptas otherwise set forth in this Agreement.

## **2.6             Optimizationof Licensed Compound**

[Intentionallyomitted]

## **2.7             NonCompetition**

### (a)              Metabasisagrees 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, ThirdParties to engage in any of such activities, in such country, provided, however,that Metabasis and its Affiliates shall be permitted to commercialize aCompetitive Product in a country with respect to which Schering’s rights haveterminated pursuant to a termination by Metabasis under Section 6.1 or12.3 or a termination by Schering under Section 12.5 of this Agreement.

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

### (c)              Notwithstandinganything in the Agreement to the contrary, in the event that Metabasis breachesthe non competition provisions contained herein, Schering shall have the

***Confidential TreatmentRequested

16

----

 

 

### right tooffset 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**

# **SUBSTITUTECOMPOUND**

If Schering, afterconsultation with the Development Steering Committee, reasonably determinesthat the further development of the Licensed Compound is not desirable becauseit will not be successful, will violate any Third Party patent, or for acomparable reason decides not to pursue such development, Schering will providewritten notice of such determination to Metabasis.  Metabasis will then promptly and in goodfaith provide to Schering a complete list of all [***] which Metabasis has theright to license and all other [***] which, based on the information availableto Metabasis at the time such list is prepared, a reasonable person wouldexpect to have potential for use in the treatment of Hepatitis B in humans, onwhich list Metabasis will identify those compounds determined by Metabasis tohave the greatest likelihood of success for use in the treatment ofHepatitis B in humans.  Scheringwill have a period of [***] from the date it receives the list from Metabasisto evaluate the [***], and to select one of them for development by writtennotice to Metabasis (the Substitute Compound) and Metabasis will provide accessto all information and data in its possession or control that Scheringreasonably requests in order to perform such evaluation.  Any additional research and development costsrequired to provide the Substitute Compound will be paid by Schering.  From the date when the selection of the SubstituteCompound is made by Schering, the Substitute Compound will be deemed to be theLicensed Compound for the purposes of this Agreement, the compound it replaceswill cease to be the Licensed Compound and Metabasis will recover the rights tothe compound it replaces, provided, however, that Schering will own all rightsin and to any Schering Inventions.  Thesubstitution rights of Schering under this Article III shall continue duringthe time in which a Product is in the development stage and may be exercisedmore than once until the First Commercial Sale of a Product.  It is understood and agreed that themilestone payments provided for in Section 4.2 will not be paid more than onceunder this Agreement regardless of the substitution of a compound or compoundsfor the original Licensed Compound hereunder.

# **ARTICLE IV**

# **COMPENSATION**

## **4.1             UpfrontFee**

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

***Confidential Treatment Requested

17

----

 

 

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

## **4.2             MilestonePayments**

### (a)              Inconsideration of the licenses and rights granted by Metabasis to Scheringhereunder Schering will pay to Metabasis the following non-refundable,non-creditable Milestone Payments provided that the amounts below, together with the milestone paymentsdue Valeant under Section 4.2 of the Valeant License Agreement, constitute thefull amount of the milestones due Metabasis and Valeant pursuant to the termsof both this Agreement and the Valeant License Agreement:

#### (i)         [Intentionallyomitted]

#### (ii)        [***]

#### (iii)       [***]

#### (iv)      [***]

#### (v)       [***]

#### (vi)      [***]

#### (vii)     [***]

***Confidential TreatmentRequested

18

----

 

 

### (b)              EachMilestone Payment due under Section 4.2(a) will be due only once for the firstProduct in respect of which the indicated Milestone occurs, regardless of thesubstitution for the Licensed Compound of a Substitute Compound pursuant toArticle III.  Schering will notifyMetabasis in writing within [***] of the occurrence of each Milestone and willmake all Milestone Payments within [***] after receipt of an invoice fromMetabasis for payment of the Milestone substantially in the form ofExhibit B.  For the avoidance ofdoubt 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 anyadditional obligation of Schering to make a Milestone Payment with respect tosuch subsequent event.

## **4.3             Royalties**

### (a)              In addition to the amounts payable underSection 4.2, Schering will collectively pay Metabasis and Valeant (collectivelyreferred to as “MV”), in any calendar year during the Royalty ObligationPeriod, royalties in the aggregate amounts as follows on a Product-by-Productand country-by-country basis and provided that the amounts below constitute thefull amount of the royalties due MV pursuant to the terms of both thisAgreement and the Valeant License Agreement:

#### (i)         (i)in any country in which there is a Valid Claim of a Licensed Patent, a royaltyon 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 anycountry in which there is no Valid Claim of a Licensed Patent, [***].

### (b)              Royalties on NetSales will be calculated every Accounting Period. Within [***] after the last day of each such AccountingPeriod during the term of this Agreement following the First Commercial Sale ofa Product, Schering will provide to MV the Sales & Royalty Report. If MVhas no comments on such report, Metabasis and Valeant shall each submit aninvoice to Schering substantially in the form of Exhibit B with respect to theRoyalty Payment, each of which shall be signed by both Metabasis and Valeantand shall indicate the proportion of the Royalty Payments that shall be made toeach of (i) Metabasis and (ii) Valeant, provided, however, thatthe sum of the payments to be made to each of Metabasis and Valeant may notexceed 100% of the actual Royalty Payments calculated as due based on the

***Confidential TreatmentRequested

19

----

 

 

### Royalty Report (the “TotalRoyalties Due”).  In the event that thereare invoicing discrepancies (such that, for example, the total of the RoyaltyPayments based on the invoices received from each of Metabasis and Valeantexceeds the Total Royalties Due) , Schering may, in it sole discretion, makepayment to each of Metabasis and Valeant as it determines is appropriate andshall have no liability to Metabasis or Valeant with regard to any disagreementwith respect to such allocation so long as the total of such payments is equalto the Total Royalties Due. Schering shall pay the Royalty Payment within [***] after receipt of the invoices.  All such Royalty Payments constitute the fullamount of the Royalty Payments due MV pursuant to the terms of both thisAgreement and the Valeant License Agreement.

### (c)              Schering may obtain a license under anyissued patent from one or more Third Parties which patent, but for suchlicense, would be infringed by the exercise of the rights granted to Scheringhereunder. For any such Third-Party licenses, Schering may reduce the royaltiesotherwise due to MV hereunder by an amount [***] paid by Schering to such Third Party or Third Parties to the extentattributable to such license, including any [***]; provided, however, that the total such reduction for all suchSublicenses shall not cause the royalties due to MV in any calendar year tofall below [***] of theroyalties which would otherwise be due (i.e. without reference to the reductiondue to Sublicense royalties) to MV in such year. Any portion of such reductionwhich is unused in any year because of the foregoing proviso [***]; and further provided that no reduction inroyalties 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 inroyalties will result from a license to a Third Party patent where such licensecovers a Combined Product and where no actual or alleged infringement by theclaims of such patent would result from activities relating to a Product whoseonly active pharmaceutical ingredient is a Licensed Compound, [***]. Metabasis shall remain responsible for thepayment of royalty obligations, if any, due to Third Parties under any LicensedPatents or Licensed Technology which has been licensed to Metabasis and issublicensed to Schering under this Agreement. All such payments shall be madepromptly by Metabasis in accordance with the terms of its license agreement.

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

### (e)              If any ApprovalAuthority imposes a price limitation for specific indications or patients, and[***] claims that suchlimitation [***]

***Confidential TreatmentRequested

20

----

 

 

### [***] for a Product in such country, and [***] will apply for so long as such pricelimitation continues to have such effect. If the Parties fail to promptly agreeto [***], the matter will bereferred to arbitration pursuant to Article XIV and the [***]. Schering will, to the extent permitted bylaw, use reasonable commercial efforts to resist the imposition or continuationof any such price limitation.

## **4.4             Durationof Royalty Obligations**

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

### (a)              theexpiration or invalidation in such country of the last to expire or beinvalidated Licensed Patent which but for this Agreement would be infringed bythe 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             PaymentTerms**

### (a)              Scheringwill make all payments required to be made to Metabasis under this Agreement inDollars to Metabasis by wire transfer of immediately available funds to a bankaccount of Metabasis designated by Metabasis from time to time in accordancewith this Agreement.  Schering shall haveno obligation to pay any proportion of a Royalty Payment to Metabasis orValeant, as the case may be, until and unless a valid invoice indicating theappropriate proportion of the Royalty Payment to make to such party has beenproperly submitted.

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

## **4.6             Taxes**

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

***Confidential Treatment Requested

21

----

 

 

taxes) will be promptlypaid by Schering for and on behalf of Metabasis to the appropriate governmentalauthority, and Schering will furnish Metabasis with reasonable proof of paymentof such tax.  All such tax actually paidon Metabasis’ behalf will be deducted from royalty payments due Metabasis orpromptly reimbursed to Schering if no further payments are due Metabasis.  Schering will reasonably assist Metabasis inminimizing the withholding taxes applicable to any payment made by Schering andin claiming tax refund at Metabasis’ request. Each Party agrees to reasonably assist the other Party in claimingexemption from such withholding of taxes of any type under double taxation orsimilar agreement or treaty from time to time in force and in minimizing theamount required to be so withheld or deducted.

## **4.7            ****Allocation of RoyaltyPayment**

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

## **4.8             Records**

Schering and itsAffiliates will keep, and will require its Sublicensees to keep, full, true andaccurate books of account containing all particulars that may be necessary forthe purpose of calculating all royalties and Milestone Payments payable toMetabasis with accounting principles consistently applied from period toperiod, in accordance with the applicable Accounting Standards.  Such books of account will be kept, as thecase may be, at Schering’s or its Affiliate’s or Sublicensee’s principal placeof business for [***] following the Accounting Period to which theypertain.  From time to time in accordancewith this Agreement, an  internationallyrecognized independent public accounting firm retained by Metabasis may performan audit of such books and records of Schering, its Affiliates and Sublicenseesfor the period or periods reasonably requested by Metabasis solely for thepurpose of ensuring compliance with the terms of this Agreement by Schering,its Affiliates and Sublicensees with respect to all Milestone Payments, royaltiesand other amounts payable to Metabasis under this Agreement, including thecorrectness of any report or payments made under this Agreement.  Upon timely request of at least [***] priorwritten notice from Metabasis, such audit will be conducted during regularbusiness hours in such a manner as to not unnecessarily interfere with Schering’snormal business activities or those of its Affiliates or Sublicensees, and willbe limited to [***] prior to delivery of such written notice.  Such audit will not be performed morefrequently than once per calendar year nor more frequently than once withrespect to any Accounting Period.  Allinformation, data documents and abstracts examined in the audit will be usedonly for the purpose of verifying royalty statements or compliance with thisAgreement, will be treated by Metabasis as Schering Confidential Informationsubject to the obligations of Article 11 of this Agreement and may not beretained more than [***]  Audit workpapers

***Confidential Treatment Requested

22

----

 

 

and results will beshared by Metabasis to Schering.  If theaudit reveals an underpayment, Schering will promptly make up suchunderpayment.  The failure of Metabasisto request verification of any royalty calculation within the period duringwhich corresponding records must be maintained will be deemed to be acceptanceof the royalty reporting.  The feescharged by such accountant will be paid by Metabasis unless the audit disclosesthat any Milestone Payment payable to Metabasis was not paid in accordance withthis Agreement or the royalties payable to Metabasis by Schering or itsAffiliates or Sublicensees for the audited period are [***] of the royaltiesactually paid to Metabasis for such period, in which case Schering will pay thefees and expenses charged by the accountant. Schering will require each of its Affiliates and Sublicensees to makereports to Schering to the same extent as is required of Schering to Metabasispursuant to this Agreement and to keep and maintain records of Net Sales madepursuant to such sublicense and to grant access to such records to Metabasis’independent accountant to the same extent required of Schering under thisAgreement.  Any disagreement betweenMetabasis and Schering concerning alleged overpayments or underpayments orother disputes arising from such audits will be resolved by the disputeresolution procedure set forth in Article XIV.

## **4.9             Salesin Foreign Currencies**

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

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

# **ARTICLE V**

# **DEVELOPMENTSTEERING COMMITTEE**

## **5.1             Appointmentand Administration of the Development Steering Committee**

### (a)              Assoon as practicable after the execution of this Agreement and in no event laterthan thirty (30) days after the Amended Closing Date, the Parties willestablish a [***] steering committee to review the development of Products,which will include [***] of Metabasis and Schering (the Development SteeringCommittee) and will be chaired by one of the representatives of Schering.  One such representative from each Party shallbe 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 developmentand commercialization issues to act as its alliance manager under this Agreement(Alliance Manager).  The AllianceManagers will serve as the contact point between the Parties for the purpose ofproviding Metabasis with information on the progress of Schering’s

***Confidential TreatmentRequested

23

----

 

 

### developmentand commercialization of the Product and will be primarily responsible forfacilitating the flow of information and otherwise promoting communicationwithin and among the Parties.  Each Partymay replace its Alliance Manager on written notice to the other Party.  Each Party, at its sole discretion, may atany time during the Term of this Agreement replace a member it has the right todesignate and will provide written notice to the other Party.  The Alliance Managers shall arrange (viaperson or teleconference) all meetings of the Development Steering Committeeand each Party will use reasonable efforts to cause its respectiverepresentatives to attend all meetings of the Development SteeringCommittee.  Each Party will bear thetravel and out-of-pocket expenses incurred by its members or representatives inconnection with the Development Steering Committee’s meetings.

### (b)              TheDevelopment Steering Committee will meet at least every six (6) months untilthe period described in (d) below, or more or less frequently as the Partiesmutually deem appropriate.  The firstsuch meeting in any calendar year shall be held in California, USA, with thesecond meeting held in New Jersey, USA, unless the Parties mutually agree tomeet at another location or by telephone or video conference.  The Development Steering Committee may alsoconvene or be polled or consulted from time to time by means oftelecommunications, video conferences or correspondence, as deemed by theParties to be necessary or appropriate.

### (c)              Anydisagreement within the Development Steering Committee shall be resolved by theSchering chair, in its sole discretion.

### (d)              TheDevelopment Steering Committee will exist until [***], unless otherwise agreedby the Parties.

## **5.2             Responsibilityand Authority of the Development Steering Committee**

### (a)              Subjectto the other terms of this Agreement, the Development Steering Committee willreview [***].  Schering will give goodfaith consideration to all reasonable suggestions made by Metabasis concerningdevelopment of the Licensed Compound, however development shall be in Schering’ssole discretion and expense.

### (b)              TheDevelopment Steering Committee will review and discuss the activities of theparties with respect to [***].

***Confidential TreatmentRequested

24

----

 

 

## **5.3             Reporting obligations in respect ofCommercialization**

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

## **5.4             Regulatory Activities**

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

### (b)              Schering will be responsible for obtaining RegulatoryApprovals for development, use and commercialization of each Product from theApproval Authorities in the Territory and will use Commercially ReasonableEfforts to seek such approvals in the Major Market Countries at its sole cost.

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

 

***Confidential TreatmentRequested

25

----

 

 

# **ARTICLE VI**

# **DEVELOPMENTAND MARKETING OBLIGATIONS**

## **6.1             Commercial Development Obligation**

### (a)              Subject to Section 6.1(b), Schering will at its soleexpense use Commercially Reasonable Efforts to develop and commercialize aProduct in each Major Market Country in the Field as well as generallyelsewhere in the Territory, except where such development and commercializationis not commercially reasonable for such Product and provided that it isrecognized and acknowledged by Metabasis that such obligation to useCommercially Reasonable Efforts shall not require Schering to develop andcommercialize the Product in every country in the Territory.  Subject to compliance with the foregoing, themanner of the development, commercialization, and marketing of the Productsshall be in Schering’s sole discretion.

### (b)              If Metabasis determines in good faith that Schering isnot using Commercially Reasonable Efforts to develop and commercialize aProduct in one or more Major Market Countries, Metabasis may provide writtennotice to Schering of such determination, which notice will provide reasonabledetails regarding the facts and circumstances leading up to such determinationand the steps which Metabasis reasonably considers Schering should take toresume Commercially Reasonable Efforts relating to such development andcommercialization.

### (c)              If within [***] after written notice under Section6.1(b) Metabasis reasonably and in good faith determines that Schering has notresumed using Commercially Reasonable Efforts to develop and commercialize aProduct in one or more Major Market Countries, either Party may refer suchdispute to arbitration pursuant to Article XIV. Pending the final decision of the arbitrators, all Schering rights underthis Agreement shall continue in full force and effect.  In the event that the arbitrator determinesthat Schering has failed to use Commercially Reasonable Efforts to develop andcommercialize a Product in one or more Major Market Countries, then in respectof those countries where the arbitrator has determined that Schering has failedto use Commercially Reasonable Efforts, all licenses granted to Scheringpursuant to Section 2 with respect to such countries or region will terminateand the Program Transfer Provisions as delineated in Section 12.5.4 will applywith respect to those countries only, provided that in the event that thearbitrator determines that Schering has failed to use Commercially ReasonableEfforts to develop and commercialize a Product in [***], then Metabasis may inits sole discretion elect to immediately terminate this Agreement for cause andSchering’s rights under this Agreement will terminate pursuant toSection 12.5.3 and the Program Transfer Provisions delineated inSection 12.5.4 will apply.

### (d)              Notwithstanding the provisions of (a) to (c) inclusiveabove, the manufacture and supply of the Licensed Compound and/or Product underthis Agreement shall be in the sole discretion of Schering.

 

***Confidential TreatmentRequested

 

26

----

 

 

## **6.2             Use of Name**

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

 

# **ARTICLE VII**

# **[Intentionallyleft blank]**

# **ARTICLE VIII**

# **INTELLECTUALPROPERTY**

 

## **8.1             Patent Prosecution and Maintenance**

### (a)              Patents Covering Inventions Owned By Metabasis.

#### (i)         For Licensed Patents to inventions owned by Metabasis otherthan those Covering the HepDirect Technology, Schering will be responsible, atits own expense for preparing, filing, prosecuting and maintaining(collectively, Handling) such Licensed Patents. Metabasis shall provide such assistance as Schering reasonably requiresin relation to the Handling of all such Licensed Patents.  Schering will consult with Metabasis as to theHandling of such Licensed Patents and will furnish to Metabasis copies of allmaterial documents relevant to any such Handling.  Schering will furnish such documents andconsult with Metabasis in sufficient time (at least [***] prior to any firstdeadline for taking any actions) before any action by Metabasis is due to allowMetabasis to provide comments thereon, which comments Schering mustconsider.  At Schering’s expense andreasonable request, Metabasis shall provide reasonable assistance in connectionwith the Handling of all Licensed Patents. Should Schering decide that it does not desire to Handle a Patent Rightwithin such Licensed Patents in a country in the Territory, it will notifyMetabasis thereof in writing with sufficient time for Metabasis to take anyappropriate actions.  In suchcircumstances, Metabasis may, but is not obligated to, Handle the same atMetabasis’ own cost, to the extent that Metabasis desires to do so, andSchering’s rights under this Agreement to any such patents in such country soHandled 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 ofpatent prosecution and maintenance files and powers of attorney for

 

***Confidential TreatmentRequested

 

27

----

 

 

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

#### (ii)        Metabasis will, at its own expense, (A) Handle all LicensedPatents that Cover the HepDirect Technology (such Licensed Patents beinghereinafter collectively referred to as Metabasis Patents and includes thePatent Rights set forth on Schedule B), (B) consult with Schering asto the Handling of such Metabasis Patents, and (iii) furnish to Schering copiesof all documents relevant to any such Handling. Metabasis will furnish such documents and consult with Schering insufficient time [***] prior to any first deadline for taking any actions otherthan paying a maintenance fee) before any action by Metabasis is due to allowSchering to provide comments thereon, which comments Metabasis mustconsider.  At Metabasis’ expense andreasonable request, Schering shall provide reasonable assistance in connectionwith the Handling of all Metabasis Patents. Should Metabasis decide that it does not desire to Handle a patent orpatent application within the Metabasis Patents in a country in the Territory,as it relates to Licensed Compounds or Products, it will promptly notifySchering 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 ownexpense, Handling all Patent Rights owned by Schering Covering the LicensedCompound and/or Product (the Schering Patents).

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

#### (i)         executing all papers and instruments, or requiring itsemployees or agents to execute all such papers and instruments to enable theother party to apply for and to prosecute patent applications in any country;and

#### (ii)        promptly informing the other Party of any matters coming tosuch 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 learnsof infringement or threatened infringement or misappropriation by a Third Partyof any Licensed Patent, Licensed Technology, or Schering Patent relating to theLicensed Compounds and/or Products within the Territory, it will promptlynotify the other Party and will include in such notice a description of thebasis for the alleged infringement or misappropriation.

## **8.3             Patent Enforcement**

(a)               Subject to the terms of Section8.3(b), Schering shall have the first right to bring and control any action orproceeding with respect to infringement of any patent claiming or otherwiserelated to the Licensed Patents and/or Licensed Technology at its own expenseand by

 

***Confidential TreatmentRequested

 

28

----

 

 

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

(b)              If Schering determines that in anaction 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 eitherconsent to Schering assertion of such patent or patents or take control of suchaction at Metabasis’ own expense and by counsel of its own choice, in whichcase Schering shall have the right, at its own expense, to be represented insuch action by counsel of its own choice. Metabasis shall choose to consent or control such action as soon asreasonably practicable, and no later than [***] before any time limit forbringing such action where the request for such consent is made within [***] ofsuch time limit.

 (c)              IfSchering fails to bring an action or proceeding within (a) [***] following thenotice of alleged infringement or (b) [***] before the time limit, if any,set forth in the appropriate laws and regulations for the filing of suchactions, whichever comes first, Metabasis shall have the right to bring andcontrol 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 anysuch action by counsel of its own choice.

(d)              In the event a Party brings aninfringement action, the other Party shall cooperate fully, including if requiredto bring such action, the furnishing of a power of attorney.  Any settlement or other action by a Partywhich requires payment or other action by the other Party, subjects the otherParty to liability or otherwise materially adversely affects the other Party(including in the case of Metabasis a material adverse effect on the HepDirectTechnology) will require the other Party’s prior written consent, which willnot be unreasonably withheld or delayed.

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

## **8.4             Ownership and License-Back**

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

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

 

***Confidential TreatmentRequested

 

29

----

 

 

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

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

### (d)              License-Back.

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

### (e)              Joint Inventions shall be included in the LicensedTechnology.

## **8.5             Trademarks**

Schering will havethe sole right to obtain and own all trademarks associated with or used inconnection with the manufacture, marketing and sale of any Products, togetherwith associated goodwill, excluding the mark “HepDirect” and any variantsthereof and any goodwill associated therewith which shall be owned by Metabasis.  Such Schering trademarks may vary by countryor within a country.  Schering will beresponsible for obtaining, maintaining and protecting all applicable trademarksin connection with the manufacture, marketing and sale of any Products as itdetermines reasonably necessary.

## **8.6             Defense of Infringement andInvalidity Actions**

### (a)              Each Party shall promptly notify the other in writingof any allegation by a Third Party that the activity of either of the Partiespursuant to this Agreement infringes or may infringe the intellectual propertyrights of such Third Party.

### (b)              Schering, at its sole expense, will have the firstright and, if exercised, will have primary responsibility for and control overthe 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 isrelated to alleged infringement of a Third Party Patent Right or Third Partyknow-how, related to the Licensed Compound or Products.

### (c)              If a Third Party brings a legal action relating to theLicensed Compound or Products and asserts in such action that any LicensedPatent 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

 

 

30

----

 

 

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

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

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

### (f)               Schering and Metabasis will each use commerciallyreasonable efforts to cooperate with the other in defending actions under thisSection 8.6, including but not limited to giving their consent to being joinedin an action to which they are a necessary party.  The defending Party will at all times keepthe other Party reasonably informed as to the status of any action under thisSection 8.6.  Any settlement or otheraction by a Party which requires payment or other action by the other Party orsubjects the other Party to liability will require the other Party’s priorwritten consent, which will not be unreasonably withheld or delayed.

### (g)              The allocation and reimbursement of costs in connectionwith the defense, settlement, and/or damage awards under this Section 8.6supersedes and replaces any indemnification that may otherwise have beenavailable 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 aspermitted under the Drug Price Competition and Patent Term Restoration Act),supplemental protection certificates or their equivalents, and patent termextensions with respect to the Licensed Patents in any country and/or regionwhere 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 nameof 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 toextend.

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

31

----

 

 

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

### (d)              If requested, Metabasis shall provide reasonableassistance to Schering, including by executing documents and providing anyrelevant information to Schering, at Schering’s expense.

 

# **ARTICLE IX**

# **REPRESENTATIONS,WARRANTIES AND LIMITATION OF LIABILITY**

## **9.1             Representations of Metabasis**

Except asotherwise disclosed on Metabasis’ Schedule of Exceptions attached to and made apart of this Agreement, Metabasis represents and warrants to Schering asfollows:

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

### (b)              All action on the part of Metabasis necessary for theexecution 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 ofMetabasis have all necessary corporate powers and have been duly authorized byMetabasis to execute, and deliver this Agreement on its behalf.

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

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

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

### (g)              To the knowledge of Metabasis, Metabasis owns allright, title and interest in and to the Licensed Patents and LicensedTechnology, in each case free and clear of all

32

----

 

 

### Encumbrances.  Metabasis islisted in the records of the appropriate governmental agencies as the sole andexclusive owner of record for each registration, grant and application includedin the Licensed Patents.

### (h)              The Licensed Patents and Licensed Technology are notsubject to any Third Party royalty or other payment obligations.

### (i)               There are no adverse actions, suits or claims pendingor to the knowledge of Metabasis threatened against Metabasis in any court orby or before any governmental body or agency with respect to the LicensedPatents or the Licensed Technology.  Tothe actual knowledge of Metabasis, not having made any inquiry, there are noThird Party Patent Rights which would reasonably be expected to give rise tosuch actions, suits, or claims.

### (j)               To the actual knowledge of Metabasis, Metabasis hasnot committed any act or omitted to take any act that is reasonably likely tocause the Licensed Patents to expire prematurely or be declared invalid orunenforceable.

### (k)              All application, registration, maintenance and renewalfees in respect of the Licensed Patents and Licensed Technology as of theAmended Closing Date have been paid and all necessary documents andcertificates have been filed with the relevant Approval Authorities for thepurpose of maintaining the Licensed Patents and Licensed Technology.

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

### (m)             Metabasis has obtained from its employees and to itsknowledge all other individuals who participated in any respect in theinvention or authorship of any Licensed Patents or Licensed Technologyeffective assignments of all ownership rights of such individuals in suchLicensed Patents and Licensed Technology, either pursuant to written agreementor by operation of law.

### (n)              Metabasis has not granted a license to any Third Partyor Affiliate Covering any [***] that would prevent Schering from exercising therights granted under this Agreement.

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

 

***Confidential TreatmentRequested

 

33

----

 

 

## **9.2             Representations of Schering**

Scheringrepresents and warrants to Metabasis as follows.

### (a)              Schering is a corporation duly organized under the lawsof the State of New Jersey.  Schering hasall requisite legal and corporate power and authority to carry on its businessand perform its obligations under this Agreement.

### (b)              All action on the part of Schering necessary for theexecution and delivery of this Agreement and the performance of Schering’sobligations under this Agreement has been taken.

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

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

### (e)              Except as have been or will be obtained by Schering andexcept for Regulatory Approval, no permit, consent, approval or authorizationof, or declaration to or filing with, any person, party or governmentalauthority is required in connection with the delivery, consummation orperformance by Schering of this Agreement.

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

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

## **9.3             Covenants of Metabasis.**  Metabasis covenants and agrees that it willnot grant any interest in the Licensed Patents or Licensed Technology which isinconsistent with the terms and conditions of this Agreement.

## **9.4             Disclaimer of Warranties**

EXCEPT ASEXPRESSLY PROVIDED IN THIS AGREEMENT, THE LICENSED COMPOUND, THE LICENSEDTECHNOLOGY AND PRODUCTS LICENSED BY METABASIS TO SCHERING UNDER THIS AGREEMENTARE PROVIDED “AS IS,” AND METABASIS EXPRESSLY DISCLAIMS ANY AND ALL OTHERWARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THEWARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ANDNONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.  Without limiting the generality of theforegoing, Metabasis expressly disclaims any warranty of (a) the success of anystudy or test commenced pursuant to this

34

----

 

 

Agreement, or (b) thesafety or usefulness for any purpose of the Licensed Compound, the LicensedTechnology or Products.

 

# **ARTICLE X**

# **INDEMNIFICATIONAND LIMITATION OF LIABILITY**

## **10.1           Indemnification by Schering**

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

### (a)              to any Third Party Claim indemnifiable by Metabasisunder Section 10.2; or

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

## **10.2           Indemnification by Metabasis**

Metabasis will atall times, during and after the Term, indemnify, defend and hold harmlessSchering, its Affiliates, and its Sublicensees and their respective directors,officers, employees and agents (collectively, Schering Indemnitees) against anyand all Third Party Claims arising out of or relating to (i) any breach ofany representation, warranty or covenant of Metabasis under this Agreement or(ii) the negligence or willful misconduct of Metabasis or itsAffiliates.  This indemnity obligation willnot 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 orwillful misconduct of any Schering Indemnitee.

## **10.3           Obligations of the Party Seeking toBe Indemnified**

If any partyentitled to indemnity under this Article X (in each case, an Indemnified Party)desires to seek indemnity under this Agreement from Metabasis or Schering, asthe case may be (in each case, an Indemnifying Party), the Indemnified Partywill as soon as reasonably practicable give notice to the Indemnifying Party,including full particulars of any Third Party Claim to the extent known to theIndemnified Party.  Failure to givetimely notice to the

35

----

 

 

Indemnifying Party will notrelease the Indemnifying Party from any liability to the Indemnified Partyexcept 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 matterat the cost of the Indemnifying Party. For the avoidance of doubt, all indemnification claims in respect of aSchering Indemnitee or Metabasis Indemnitee shall be made solely by Schering orMetabasis, respectively.

## **10.4           Indemnification Procedure**

### (a)              Upon assumption of the defense of a Third Party Claimby the Indemnifying Party: (i) the Indemnifying Party shall have the rightto and shall assume sole control and responsibility for dealing with the ThirdParty Claim; (ii) the Indemnifying Party may, at its own cost, appoint ascounsel in connection with conducting the defense and handling of such ThirdParty Claim any law firm or counsel reasonably selected by the IndemnifyingParty (in the event that it is ultimately decided by a court of law that theIndemnifying Party is not obligated to indemnify, defend or hold harmless anIndemnitee from and against the Third Party Claim, the Indemnified Party shallreimburse the Indemnifying Party for any and all costs and expenses (includingattorneys’ fees and costs of suit) and any Losses incurred by the IndemnifyingParty in its defense of the Third Party Claim); (iii) the IndemnifyingParty shall keep the Indemnified Party informed of the status of such ThirdParty Claim; and (iv) the Indemnifying Party shall have the right tosettle the Third Party Claim on any terms the Indemnifying Party chooses;provided, however, that it shall not, without the prior written consent of theIndemnified Party, agree to a settlement of any Third Party Claim which couldlead to liability or create any financial or other obligation on the part ofthe Indemnified Party for which the Indemnified Party is not entitled toindemnification hereunder or which admits any wrongdoing or responsibility forthe claim on behalf of the Indemnified Party.

### (b)              The Indemnified Party shall cooperate with theIndemnifying 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 ownexpense.  In particular, the IndemnifiedParty shall furnish such records, information and testimony, provide witnessesand attend such conferences, discovery proceedings, hearings, trials andappeals as may be reasonably requested in connection therewith.  Such cooperation shall include access duringnormal business hours by the Indemnifying Party to, and reasonable retention bythe Indemnified Party of, records and information that are reasonably relevantto such Third Party Claim, and making the Indemnified Party, the Indemniteesand its and their employees and agents available on a mutually convenient basisto provide additional information and explanation of any records or informationprovided, and the Indemnifying Party shall reimburse the Indemnified Party forall its related reasonable out-of-pocket expenses.

### (c)              If the Indemnifying Party does not defend the ThirdParty Claim, the Indemnified Party shall retain control of the defensethereof.  The Indemnified Party mayappoint as counsel in connection with conducting the defense and handling ofsuch Third Party Claim any law firm or counsel reasonably selected by theIndemnified Party.  The Indemnified Partymay defend such Third Party Claim in such manner as it may deem appropriate;provided, however, that the Indemnified Party shall keep the Indemnifying Partyinformed of the status of such Third Party

36

----

 

 

### Claim and shall not settle such Third Party Claim without the priorwritten consent of the Indemnifying Party, which consent shall not beunreasonably withheld.  If the IndemnifiedParty defends or handles such Third Party Claim, the Indemnifying Party shallcooperate with the Indemnified Party and shall be entitled to participate inthe defense and handling of such Third Party Claim with its own counsel and atits own expense.  In addition, thereasonable and verifiable costs and expenses, including attorneys’ fees anddisbursements, incurred by the Indemnified Party shall be reimbursed on aquarterly basis by the Indemnifying Party, without prejudice to theIndemnifying Party’s right to contest the Indemnified Party’s right toindemnification and subject to refund in the event the Indemnifying Party isultimately held not to be obligated to indemnify the Indemnified Party.

## **10.5           Mitigation of Loss**

Each IndemnifiedParty will take and will procure that its Affiliates take all such reasonablesteps and action as are necessary or as the Indemnifying Party may reasonablyrequire in order to mitigate any losses under this Article.  Nothing in this Agreement shall or shall bedeemed to relieve any Party of any common law or other duty to mitigate anylosses incurred by it.

## **10.6           Special, Indirect and Other Losses**

EXCEPT FOR THIRD PARTY CLAIMS INDEMNIFIED UNDERSECTION 10.1 AND 10.2, NEITHER PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLEIN CONTRACT, TORT, NEGLIGENCE, BREACH OF STATUTORY DUTY OR OTHERWISE FOR ANYSPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OR FOR ANYECONOMIC LOSS OR LOSS OF PROFITS SUFFERED BY THE OTHER PARTY.

## **10.7           No Exclusion**

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

 

# **ARTICLE XI**

# **CONFIDENTIALITYAND PUBLICATION**

## **11.1           Confidentiality**

Subject to Section11.2, during the Term and for [***] after the Term, each Party will maintain inconfidence all Confidential Information disclosed by the other Party pursuantto this Agreement, including any Confidential Information contained in LicensedPatents and Licensed Technology, and will not use such Confidential Informationfor any purpose except as permitted by this Agreement.  Neither Party will disclose such informationand materials to

 

***Confidential TreatmentRequested

 

37

----

 

 

anyone other than thoseof its Sublicensees, Affiliates, potential Sublicensees, employees, consultants,agents or subcontractors as are necessary in connection with such Party’sactivities pursuant to this Agreement and each Party hereby agrees to protectsuch Confidential Information with the same degree of care with which suchParty maintains its own proprietary information, but in no event less thanreasonable care.  Each Party will obtaina written agreement from its Sublicensees, potential Sublicensees, consultants,agents and subcontractors (if any), prior to disclosure, to hold in confidenceand not make use of such trade secrets or other proprietary information for anypurpose other than as permitted by this Agreement.

## **11.2           Disclosure**

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

### (a)              either Party or their Affiliates (as such, theRecipient) are required to disclose Confidential Information by order orregulation of a governmental agency or a court of competent jurisdiction, orunder the securities laws of any jurisdiction or in connection with any filingof information with the U.S. Securities and Exchange Commission or any stockexchange upon which its securities are listed, except that the Recipient willnot make any such disclosure (other than as required under the securities lawsof any jurisdiction or in connection with any filing of information with theU.S. Securities and Exchange Commission or any stock exchange upon which itssecurities are listed) without first notifying the other Party and allowingsuch other Party a reasonable opportunity to seek injunctive relief from (orprotective order with respect to) the obligation to make such disclosure;

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

### (c)              with respect to a disclosure by Schering, disclosure ismade to a government regulatory agency as part of such agency’s product licenseapproval process for the Product, provided, however, that the Recipient willnotify the other Party, limit the disclosure to the extent possible and, whereappropriate, seek confidential treatment to the extent available; or

### (d)              disclosure is necessary to obtain or secure patentprotection of any Licensed Patents or Licensed Technology, provided, however,that the Recipient will notify the other Party, limit the disclosure to theextent possible and, where appropriate, seek confidential treatment to theextent available.

38

----

 

 

### In addition to disclosures described above,each Party may disclose Confidential Information belonging to the other Partyonly 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 todevelop hereunder; and (iii) prosecuting or defending litigation aspermitted by this Agreement.

## **11.3           Publicity**

### (a)              Metabasis, Valeant and Schering shall agree on theform, content and timing of any initial press releases concerning thisAgreement and the Valeant License Agreement which shall be issued promptlyafter the date of execution of this Agreement. Following the date of execution of this Agreement, Metabasis may notoriginate any publication, news release or other public announcement, writtenor oral, whether in the public press, stockholders’ reports or otherwise,relating to the terms and conditions of this Agreement or to any sublicenseunder this Agreement, or to the performance under this Agreement or under anysublicense under this Agreement, without the prior written approval ofSchering, unless such releases are limited substantially to Schering’s publicannouncements, which approval will not be unreasonably withheld ordelayed.  Metabasis may use the substanceof the initial press releases, Schering’s public announcements, and any othermaterials approved by Schering, in Metabasis’ investor relations and publicrelations activities.  Metabasis shallmake no public announcement, either written, oral or in any medium relating tothe safety or efficacy of or clinical data pertaining to Licensed Compound,except for statements in official correspondence with government patentauthorities in support of Patent Rights, without the prior written approval ofSchering, which approval will not be unreasonably withheld or delayed.  Nothing in the foregoing, however, shallprohibit Metabasis from making disclosures to the extent deemed necessary orappropriate under applicable federal or state securities laws or any rule orregulation of any nationally recognized securities exchange, provided same isaccurate and complete.  In such event,however, Metabasis shall where applicable, request confidential treatment tothe extent available, and where practical shall provide copies of the proposeddisclosure reasonably in advance of such filing or other disclosure forSchering’s prior review and comment and shall give due consideration to anyreasonable comments by Schering relating to such filing, including withoutlimitation the provisions of this Agreement for which confidential treatmentshould be sought, provided that Schering responds with such comments within[***] of receiving such copy and provided that such right of review and commentshall only apply for the first time that specific information is to bedisclosed, and shall not apply to the subsequent disclosure of substantiallysimilar information that has previously been disclosed.  For purposes of clarity, the term “businessday” as used herein does not include a day on which the U.S. offices ofSchering are closed, such as on weekends, national holidays and for the lastweek of December.

### (b)              To the extent Schering originates any writtenpublication, news release or other public announcement relating to thisAgreement, Schering shall provide Metabasis with a copy of its proposed releaseor public disclosure for review and comment, provided that such right of reviewand comment shall only apply for the first time that specific information is tobe disclosed, and shall not apply to the subsequent disclosure of substantiallysimilar information that has previously been disclosed.  Schering shall give due consideration to anycomments by Metabasis 

 

***Confidential TreatmentRequested

 

39

----

 

 

### relating to such proposed press release orother public disclosure provided that Metabasis responds with such commentswithin [***] of receiving such copy.

### (c)              Notwithstanding the foregoing, Schering shall beentitled to (i) issue press releases and other public statements to the extentnecessary or useful in connection with the development or commercialization ofthe Product, including in connection with sublicensing and subcontractingtransactions; and (ii) publish or have published information aboutclinical trials related to the Product, including the results of such clinicaltrials on the clinicaltrials.gov website.

## **11.4           Scientific Publications**

Schering shall befree to publish scientific articles about the Licensed Compound or Products inscientific publications but Metabasis may only do so with the prior writtenconsent of Schering.  Schering will firstprovide Metabasis with a copy of the proposed publication for review andcomment.  Schering shall give dueconsideration to any reasonable comments by Metabasis relating to such proposedpress release or other public disclosure. Notwithstanding the foregoing, Metabasis shall be free to publishscientific articles concerning the HepDirect Technology generally andconcerning a compound which may become a Substituted Compound but only prior toits becoming a Substituted Compound, provided, however, that Schering is giventhirty (30) days advanced written notice by Metabasis of any such proposedpublication concerning the HepDirect Technology generally or concerning acompound which may become a Substituted Compound and provided further that (a)Schering may delay such publication for a reasonable period of time, not toexceed three (3) months, to allow for any Patent Rights to be filed; and (b)Schering may request that any Schering Confidential Information containedwithin such draft publication is removed.

 

# **ARTICLE XII**

# **TERM ANDTERMINATION**

## **12.1           Term**

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

#### (i)         the expiration or invalidation of the last to expire or beinvalidated of the Licensed Patents which but for this Agreement would beinfringed by the sale of such Product using such Licensed Patents in suchcountry,

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

 

***Confidential TreatmentRequested

 

40

----

 

 

### (b)              Upon expiration of the Term in a country with respectto any Product, Schering will have a perpetual, fully paid-up, fully and freelysub-licensable, royalty free, exclusive license within the Field in suchcountry to exercise the rights granted in Article II relating to the LicensedCompound and/or Product.

## **12.2           [Intentionally omitted]**

## **12.3           Termination For Cause**

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

#### (i)         the other Party (as such, the Breaching Party) has notcomplied with any of its material obligations under this Agreement; and

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

#### (iii)       the default is not cured within [***] after the receipt ofsuch written notice (or, in the event that cure cannot be effected within such[***] period, reasonable efforts by the Breaching Party are not commenced andcontinuing 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 thisSection 12.3 may elect to terminate with respect to a particular country orcountries in the Territory rather than the entire Territory by giving writtennotice of such election in the notice of intent to terminate the license.  If a Party elects to terminate with respectto a particular country, the licenses and other rights granted to Schering pursuantto Article II with respect to that particular country will terminate.

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

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

 

***Confidential TreatmentRequested

 

41

----

 

 

## **12.4           Rights and Obligations UponTermination for Cause**

### (a)              Upon any termination by Metabasis underSection 6.1 or Section 12.3 with respect to a particular country orcountries, all licenses and other rights granted to Schering pursuant toArticle II will terminate pursuant to Section 12.5.3 with respect to suchcountry or countries.  Upon suchtermination, the Program Transfer Provisions will apply with respect to suchcountry 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 electto either (A) terminate this Agreement in its entirety in which case alllicenses granted hereunder shall cease with immediate effect; or (B) continueto exercise the licenses granted to Schering in which case the following termsshall apply:

#### (i)         any licenses granted by Schering to Metabasis (other thanthose set forth in Section 8.4(d), which licenses shall continue in fullforce and effect) will terminate and revert to Schering;

#### (ii)        the licenses granted by Metabasis to Schering under ArticleII will remain in effect in accordance with their respective terms, includingSchering’s obligation to pay Metabasis the royalties as set forth in Section4.3 and the Milestone Payments as set forth in Section 4.2, provided that suchlicense shall henceforth be freely sub-licensable and the restrictions onsub-licensing in Section 2.2 shall no longer apply and provided further thatSchering shall have the right to offset the full amount of damages it hassuffered as a result of Metabasis’ breach against any royalties or Milestone paymentsthat would otherwise be payable in accordance with Section 4.3 or 4.2;

#### (iii)       the provisions of Section 2.7 (Non-Competition) shall continueto apply;

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

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

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

#### (vii)     Except as amended as described above, the rights and obligationsof Schering and Metabasis under this Agreement shall continue in full force andeffect.

42

----

 

 

## **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 entiretyor in one or more countries other than a Major Market Country.

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

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

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

### (a)              Schering will promptly provide to Metabasis allpreclinical and clinical data and all regulatory data, in each case relating tothe Licensed Compound or any Product and generated by or on behalf of Scheringand Schering will grant to Metabasis an irrevocable, exclusive license (withthe 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, thatsuch license grant shall not apply to data that relates to an activepharmaceutical ingredient other than the Licensed Compound in a CombinationProduct.

### (b)              Schering will promptly provide to Metabasis reasonablydetailed disclosure of all Program Improvements, Program Patents and any otherknow-how or information Controlled by Schering or its Affiliates to the extentnecessary to, used with respect to, or in Schering’s reasonable estimationmaterial to the continued development or commercialization of, any Product, andSchering will grant to Metabasis an irrevocable, exclusive license (with theright to sublicense) for the use of all such Program Improvements, ProgramPatents, know-how and information solely to develop, make, have made, use,import, export, have imported, have exported, offer to sell, sell, and havesold Licensed Compound and Products.

### (c)              Schering will transfer to Metabasis the ownership ofall regulatory submissions and filings related to the Product, including allINDs, NDAs and other Regulatory Approvals

 

***Confidential TreatmentRequested

 

43

----

 

 

### applicable to the Licensed Compound and the Product in the terminatedcountry or countries only.

### (d)              Schering shall be entitled, during the [***] followingtermination of the Agreement to finish any work-in-progress and to sell anyinventory of the Product that remains on hand as of the date of thetermination, provided that Schering continue to pay Metabasis the royaltiesapplicable to such subsequent sales in accordance with the term and conditionsof this Agreement.

### (e)              Where the termination relates to all countries in theTerritory, Metabasis shall have the option, exercisable within [***] followingthe 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 Scheringor any Schering Affiliate but excluding any Generic Affiliate, for the purposesof developing, making, having made, using, importing and selling LicensedCompound and any Products.  Such LicensedCompound and Product shall be supplied out of existing Schering inventory atSchering’s Fully Burdened Manufacturing Costs. Notwithstanding the foregoing, if any Product is being marketed andSchering (or any of its Affiliates excluding any Generic Affiliates) is thensupplying such Product, Schering will (or will cause its Affiliates butexcluding any Generic Affiliates ) continue to supply such Product, at a costof (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 FullyBurdened Manufacturing Costs of Schering (or its Affiliates but excluding anyGeneric Affiliates), for a reasonable period of time to allow Metabasis toobtain an alternate source of supply, but for no longer than (i) the Term, ifsuch Termination is only with regard to one or more countries, or (ii) [***]following the effective date of such termination if such Termination is for theentire Agreement.  If a Third Party isthen supplying Licensed Compound or any Product, Schering will notify suchThird Party supplier of the transfer of rights to the Licensed Compound andProduct pursuant to this Agreement and acknowledges that such Third Partysupplier may but is under no obligation to continue to supply Metabasis.

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

### (g)              As to any Product which is being marketed under atrademark Controlled by Schering or its Affiliates but excluding any GenericAffiliates and used exclusively with Products, Schering will assign all suchtrademarks to Metabasis.

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

 

***Confidential TreatmentRequested

 

44

----

 

 

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

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

#### (ii)        Pre-Launch.  If thetermination 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 orsublicensee for the Product(s), where net sales and payment terms shall have anequivalent meaning to the definition of Net Sales and payment terms in thisAgreement in relation to Schering.

#### (iii)       Post-Launch.  If thetermination 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 orsublicensee for the Product(s), where net sales and payment terms shall have anequivalent meaning to the definition of Net Sales and payment terms in thisAgreement in relation to Schering.

## **12.6           Metabasis Change of Control andInsolvency Event**

Within [***] daysafter any Metabasis Change of Control and/or any Metabasis Insolvency Event,Schering may upon written notice to Metabasis (or its successor) immediatelyterminate the Development Steering Committee and any obligations upon Scheringto provide Metabasis with reports or updates relating to the development and/orcommercialization of the Licensed Compound and/or Product(s) shall immediatelycease.  From and after any suchtermination, Schering will have no further obligation to disclose any ConfidentialInformation to Metabasis or its successor and Schering may request theimmediate return or destruction of any Confidential Information alreadydisclosed to Metabasis.  Except asterminated as described above, the rights and obligations of Schering and theMetabasis successor under this Agreement shall continue in full force andeffect.

## **12.7          ****Surviving Provisions**

The Parties’rights and obligations under Sections 4.8, 6.2, 8.4, 11.1, 11.2, 11.3 andArticles X, XII, XIII, XIV, and XV will survive any termination andexpiration of this Agreement. Termination or expiration of this Agreement for any reason will bewithout prejudice to any rights accrued to the benefit of either Party prior totermination or expiration and will not relieve either Party from obligationsexpressly indicated to survive termination or

 

***Confidential TreatmentRequested

 

45

----

 

 

expiration of thisAgreement.  Termination or expiration ofthis Agreement will not terminate Schering’s obligation to pay all royaltiesaccrued prior to the effective date of termination or expiry.  Any other provisions of this Agreementrequired to interpret and enforce the Parties’ rights and obligations underthis Agreement will also survive to the extent required for the fullobservation 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 norany interest under this Agreement may be assigned by Schering to a Third Partywithout the prior written consent of Metabasis, except that Schering may assignthis Agreement to the acquirer of its entire hepatitis business unit, whichacquirer agrees in writing to assume all of the obligations of Schering underthis Agreement.  Metabasis will notunreasonably withhold or delay such consent and will inform Schering of itsdecision in writing within [***] of receipt of such written notice.  The Parties hereby agree that it will bedeemed reasonable for Metabasis to withhold such consent if there is areasonable likelihood that it will suffer a material financial harm as a resultof such assignment or if such Third Party assignee does not have thedevelopment and commercial capabilities and resources, as appropriate,available to support and exploit the Licensed Compound and Product throughoutthe Territory in accordance with this Agreement.

### (b)              Subject to Section 13.1(d) and to the Metabasis Changeof Control provisions described elsewhere in this Agreement, neither thisAgreement nor any interest under this Agreement may be assigned by Metabasiswithout the prior written consent of Schering, except that Metabasis may assignthis Agreement to the acquirer of its along, with its Affiliates’, entirebusiness and assets which acquirer agrees in writing to assume all of theobligations of Metabasis under this Agreement.

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

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

### (e)              Any assignment not made in accordance with this Section13.1 will be void.

 

***Confidential TreatmentRequested

 

46

----

**13.2           Binding Upon Successors and Assigns**

 

Subject to thelimitations on assignment under Section 13.1, this Agreement binds allsuccessors in interest and assigns of Metabasis and Schering.  Any successor or assignee of Schering’s orMetabasis’ interest will expressly assume in writing the performance of all theterms and conditions of this Agreement and the Other Agreements to be performedby Schering or Metabasis, as the case may be.

## **13.3           PartiesResponsible for Performance of Affiliates**

Each Party shall remainresponsible for the performance of this Agreement by its Affiliates to whichthis Agreement has been assigned, and shall cause such Affiliates to complywith the provisions of this Agreement in connection with such performance.  Each Party hereby expressly waives anyrequirement that the other Party exhaust any right, power or remedy, or proceedagainst an Affiliate, for any obligation or performance hereunder prior toproceeding directly against such Party.

# **ARTICLE XIVDISPUTE RESOLUTION**

## **14.1           Arbitration**

Subject to Section14.2, any dispute, controversy or claim arising under, out of or in connectionwith this Agreement, or the breach thereof, including any subsequentamendments, may be referred to and finally settled by arbitration in accordancewith the commercial rules of the [***] in force on the date of commencement ofthe arbitration.  The arbitration will befinal and binding, and judgment upon the award rendered by the arbitrators maybe entered in any court having jurisdiction thereof.  There will be three arbitrators, onearbitrator selected by Metabasis and one arbitrator selected by Schering, whicharbitrators will then jointly select the third arbitrator.  If either party fails to nominate an arbitratorwithin [***] from the date of notification made to it of the other Party’srequest for arbitration, then the third arbitrator will be appointed inaccordance with [***] rules.  The placeof the arbitration will be New York, USA and the laws of the State of New Yorkwill be applied.  Each of the arbitratorswill have at least 10 years experience in commercial transactions.  The arbitration will commence within [***]after appointment of the arbitrators and will continue uninterrupted, unlessotherwise suspended by the arbitrators for good cause, for not longer than[***] (including without limitation any discovery permitted by thearbitrators).  The arbitrators will,within such [***] period, render a written decision with findings of fact andconclusions 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 suchaward is expressly prohibited.  Thedecision of the arbitrators will be final and non-

 

***Confidential Treatment Requested

47

----

appealable and bindingupon the Parties, and may be entered and enforced in any court havingjurisdiction.  The Parties shall sharethe costs of the arbitration equally.

## **14.2           Pre-ArbitrationDispute Resolution**

No dispute underthis Agreement will be referred to arbitration under Section 14.1 until thefollowing procedures have been satisfied. [***] and, depending on whether the dispute is one which relates to apre-approval or post-approval matter, the [***] (or designees with similarauthority to resolve such dispute) will meet to review any dispute with respectto the interpretation of any provision of this Agreement or with respect to theperformance of either Party under this Agreement.  Such review will be initiated by one Partysending written notice of the dispute to the other Party, and as soon aspracticable, but in any event within [***] of such notice, the designatedrepresentatives of the Parties will meet for attempted resolution by good faithnegotiations.  If such representativesare unable to resolve such dispute within [***] after a meeting to discuss thedispute, either Party may at any time provide written notice to the other Partyspecifying the terms of the dispute in reasonable detail and notifying theother Party of its decision to institute arbitration proceedings under Section14.1.

## **14.3           ProvisionalRemedy**

Nothing in thisAgreement limits the right of either Party to seek to obtain in any court ofcompetent jurisdiction any interim relief or provisional remedy, includinginjunctive relief. Seeking or obtaining any interim relief or provisionalremedy in a court will not be deemed a breach or waiver of this agreement toarbitrate.

## **14.4           Confidentiality**

Subject to Article11 or as otherwise required by law, the existence of the dispute, anysettlement negotiations, the arbitration hearing, any submissions (includingexhibits, testimony, proposed ruling, and briefs), and the rulings of thearbitrators will be deemed Confidential Information.  The arbitrators will have the authority toimpose sanctions for unauthorized disclosure of Confidential Information.

# **ARTICLE XVGENERAL PROVISIONS**

## **15.1           Relationshipof the Parties**

For purposes ofthis Agreement, the relationship of Metabasis to Schering is that of anindependent contractor.  Metabasis andSchering are not joint venturers, partners, principal and agent, master andservant or employer and employee.  Withrespect to the subject matter of this

 

***Confidential Treatment Requested

48

----

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

## **15.2           ExcusableDelay**

The failure oromission by a Party in the performance of any obligation under this Agreementwill not be deemed a breach of this Agreement or create any liability if itarises from any cause or causes beyond the control of the Party, such asstrikes, riots, war, acts of God, invasion, fire, explosion, floods, pandemic,delay of carrier, shortage or failure in the supply of materials, energyshortage and acts of government or governmental agencies orinstrumentalities.  If due to such anevent either Party is delayed or hindered in or prevented from the performanceof its duties or doing acts required under the terms of this Agreement, theperformance of such act will be excused for the period of the delay not toexceed [***].  A Party subject to such anexcusable delay will use commercially reasonable efforts to resolve anycondition forming the basis of the delay.

## **15.3           Notices**

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

### (a)              mustbe in writing, signed by an authorized officer of the sender , and sent bypersonal delivery, fax (with confirmation copy), internationally recognizedcourier, or certified or registered mail, postage prepaid (airmail whereapplicable);

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

### (c)              mustbe sent to the receiving Party at the address or fax number, as applicable, setforth below, or any replacement address or fax number notified to the sender bynotice 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                  |

***ConfidentialTreatment Requested

49

----

 
| 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 asexpressly provided otherwise in this Agreement, all legal and other costs andexpenses incurred in connection with the negotiation and entering into of thisAgreement and the transactions contemplated by this Agreement will be paid bythe Party incurring such costs or expenses.

## **15.5           FurtherAssurances**

Except asexpressly provided elsewhere in this Agreement, each Party will at its expensepromptly execute and deliver any further instruments and documents and take anyfurther action as the other Party may reasonably request in order to giveeffect to the transactions contemplated by this Agreement.

## **15.6           Amendment**

This Agreement maynot be altered or otherwise amended except by an instrument in writing signedby each of the Parties.

## **15.7           Waiver**

A Party may, bywritten instrument executed by such Party, extend the time for the performanceof any obligations of the other Party, waive any inaccuracies andrepresentations by the other Party in this Agreement or in any documentdelivered pursuant to this Agreement or waive compliance by the other Partywith any of the covenants, conditions or performance of any of its obligationsunder this Agreement.  Any such waiver orfailure to insist upon strict compliance with such covenant, condition orobligation will not operate as a waiver of, or estoppel with respect to, anysubsequent or other failure.

50

----

**15.8           NoThird Party Beneficiaries**

This Agreementdoes not confer any rights, remedies, agreements, undertakings, obligations orliabilities on any person other than Valeant and the successors-in-interest andpermitted assigns of each Party.

## **15.9           EntireAgreement**

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

## **15.10        Construction**

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

## **15.11        Incorporationof Exhibits**

All Exhibitsidentified in this Agreement are incorporated by reference and made a part ofthis Agreement.

## **15.12        Counterparts**

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

## **15.13        Severability**

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

51

----

**15.14         Bankruptcy**

All rights andlicenses granted under or pursuant to this Agreement by Metabasis to Scheringare, and will otherwise be deemed to be, for purposes of Section 365(n) of theBankruptcy Code, licenses of rights to “intellectual property” as defined underSection 101(35A) of the Bankruptcy Code. Schering, as a licensee of such rights under this Agreement, will retainand may fully exercise all of its rights and elections under the BankruptcyCode.

## **15.15        RemediesCumulative**

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

## **15.16        GoverningLaw**

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

## **15.17        AntitrustFilings**

Each of Scheringand Metabasis agrees to prepare and make appropriate filings under theHart-Scott Rodino (HSR) Act and other antitrust requirements relating to thisAgreement and the transactions contemplated hereby as soon as reasonablypracticable, but in any event within ten (10) days after the Execution Date(the “Antitrust Filing Date”).  TheParties agree to cooperate in the antitrust clearance process and to furnishpromptly to the FTC, the Antitrust Division of the Department of Justice andany other applicable agency or authority, any information reasonably requestedby them in connection with such filings. Other than the provisions of Articles XIV and XV (including thisSection 15.17) and Sections 11.1, 11.2, 11.3, and 12.1(a), the rightsand obligations of the Parties under this Agreement shall not become effectiveuntil the waiting period provided by the HSR Act shall have terminated orexpired without any action by any government agency or challenge to thetransaction 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 occurrenceof the Amended Closing Date, all provisions of this Agreement shall becomeeffective automatically without the need for further action by theParties.  In the event that antitrustclearance from the FTC, Antitrust Division of the Department of Justice or anyother required agency or authority is not obtained within ninety (90) daysafter the Antitrust Filing Date, or such other date as the Parties may mutuallyagree, this Agreement may be terminated by either Party on written notice tothe other.  In the event a provision ofthis Agreement needs to be deleted or substantially revised in order to obtainregulatory clearance of this transaction, the parties will negotiate in goodfaith in accordance with Section 15.13.

52

----

IN WITNESSWHEREOF, the Parties have executed this Agreement by their duly authorizedrepresentatives 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 |   |
|        |                              |  |  |  |

53

----

**SCHEDULEA**

**CONFIDENTIAL**

[***]

 

***ConfidentialTreatment Requested

54

----

[***]

 

***ConfidentialTreatment Requested

55

----

[***]

 

***ConfidentialTreatment Requested

56

----

[***]

 

***ConfidentialTreatment Requested

57

----

[***]

 

***ConfidentialTreatment Requested

 

58

----

 

 

[***]

***ConfidentialTreatment Requested

59

----

 

 

[***]

***ConfidentialTreatment Requested

60

----

 

 

[***]

***Confidential TreatmentRequested

61

----

 

 

**SCHEDULEB**

[***]

***Confidential TreatmentRequested

62

----

 

 

[***]

***ConfidentialTreatment Requested

63

----

 

 

[***]

***ConfidentialTreatment Requested

64

----

 

 

[***]

***ConfidentialTreatment Requested

65

----

 

 

[***]

 

***ConfidentialTreatment Requested

66

----

 

 

 

[***]

 

***ConfidentialTreatment Requested

67

----

 

 

**EXHIBITA**

**LICENSED COMPOUND**

[***]

***ConfidentialTreatment Requested

68

----

 

 

[***]

 

***ConfidentialTreatment Requested

69

----

 

 

**EXHIBITB**

**SAMPLEINVOICE**

[***]

 

***ConfidentialTreatment Requested

** **

70

----

 

 

[***]

 

***ConfidentialTreatment Requested

71

----

 

 

**EXHIBITC**

**FULLYBURDENED MANUFACTURING COST**

[***]

***ConfidentialTreatment Requested

72

----

 

 

[***]

** **

***ConfidentialTreatment Requested

73

----

 

 

**METABASISSCHEDULE OF EXCEPTIONS**

[***]

***ConfidentialTreatment Requested

 

74

----