**[ * ] =Certain information on this page has been redacted and filed separately with the Securitiesand Exchange Commission. Confidential treatment has been requested with respect to the omittedportions.****EXHIBIT 10.61****LICENSE AGREEMENT**     THIS LICENSE AGREEMENT is made and entered into as of August 24, 2004 (the “Effective Date”)by and between InterMune, Inc., a Delaware corporation having its principal place of business at3280 Bayshore Blvd., Brisbane, California 94005 (“Licensee”), and Chiron Corporation, a Delawarecorporation having its principal place of business at 4560 Horton Street, Emeryville, California94608 (“Chiron”).**BACKGROUND**     WHEREAS, Chiron has developed certain intellectual property rights with respect to Hepatitis CVirus (“HCV” as hereinafter defined) which relate to the HCV genome and encoded proteins;     WHEREAS, Licensee desires to be engaged in the research and development of small moleculeinhibitors of the HCV genome and encoded proteins and related therapeutics for the treatment of HCVinfection, which activities fall within the scope of the Chiron Patent Rights (as hereinafterdefined);     WHEREAS, Licensee wishes to obtain a license under the Chiron Patent Rights for such purposes;and     WHEREAS, Chiron is willing to grant, and has offered to grant Licensee a license under theChiron Patent Rights for a negotiable fully paid-up, one-time fee; and     WHEREAS, as an alternative to the arrangement whereby Licensee would secure a license underthe Chiron Patent Rights for a fully paid up one time fee, Licensee wishes to enter into anarrangement pursuant to which Licensee shall provide consideration for the license under ChironPatent Rights by paying to Chiron up-front fees, [ * ], milestone and royalty payments, whichpayments represent Chiron’s interest in the value contributed by the licensure of Chiron PatentRights to Licensee’s program(s) for the research, development and commercialization of IdentifiedProducts, as hereinafter defined.     NOW, THEREFORE, in consideration of the above premises and the mutual covenants containedherein, the parties hereto agree as follows:**1.****DEFINITIONS**     For the purposes of this Agreement, the following definitions shall apply, and the termsdefined herein in plural shall include the singular and vice-versa:     **1.1. “****Affiliate****”**means, with respect to a party hereto, any corporation, partnership, jointventure or other business arrangement which is controlled by, controlling or under common controlwith such party, and shall include without limitation any direct or indirect
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beneficial ownershipof more than fifty percent (50%) of the voting stock or participating profit interest of suchcorporation or other business entity. Without limiting the generality of the foregoing, theAffiliates of Chiron expressly exclude Novartis A.G, a Swiss corporation, and any Affiliate thereofnot otherwise an Affiliate of Chiron (collectively, “Novartis”) unless and until such time asNovartis exercises its rights to control Chiron in accordance with the terms and conditions of theNovember 20, 1994 Governance Agreement between Chiron and Novartis’ predecessor in interest,Ciba-Geigy Limited.     **1.2. “****Chiron Patent Rights****”**means the patents or patent applications owned by Chironlisted in Exhibit A attached hereto and incorporated herein, together with all patents issuingthereon, including any divisionals, continuations, continuations-in-part, reissues, reexaminationsand extensions thereof, and foreign counterparts.     **1.3. “****FDA****”**means the United States Food and Drug Administration and any successor drugregulatory entity thereto.     **1.4. “****HCV****”**means the Hepatitis C virus, including any isolates, strains or mutationsthereof.     **1.5. “****Identified Products****”**means compounds that act on, whether by modulation,stimulation, inhibition, or otherwise:     **1.5.1.**the HCV [  *  ] with respect to which Licensed Processeswere employed at any time during the course of the research, development orcommercialization of such compounds; or     **1.5.2.**[  *  ], with respect to which Licensed Processeswere employed at any time during the course of the research, development orcommercialization of such compounds; or     **1.5.3.**HCV  which    [  *  ]  compounds (a) [  *  ] compounds defined by 1.5.1or 1.5.2 above [  *  ]  Licensed Processes were utilized at any time duringthe course of the research, development or commercialization of such compounds; [  *  ]  (b)[  *  ]  activitythat would infringe the Chiron Patent Rights but for the rights granted hereunder.     **1.6. “****IND****”**means a “Notice of Claimed Investigational Exemption for a New Drug” filedwith the FDA, as defined in 21 C.F.R. Part 312, or foreign equivalent thereof.     **1.7.**“**Licensee Confidential Information**” means Licensee’s confidential and/orproprietary information relating to any Identified Product, including but not limited to Licensee’sknow-how, invention disclosures, technology, libraries, targets, compounds, patents, proprietary**[ * ] = Certain information on this page has been redacted and filed separately with the Securitiesand Exchange Commission. Confidential treatment has been requested with respect to the omittedportions.**
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materials and/or technologies, economic information, business or research strategies, trade secretsand material embodiments thereof.     **1.8. “****Licensee Facility****”**means and is limited to the facilities of Licensee and itsAffiliates located at the locations specified in Exhibit B attached hereto and incorporated hereinand such other locations as Licensee may designate in writing from time to time to Chiron.Licensee may add additional locations to this list with Chiron’s prior written consent, whichconsent shall not be unreasonably withheld and, upon such consent, such additional locations shallbe a Licensee Facility for purposes of this Agreement.     **1.9. “****Licensed Composition****”**means any composition, the making, using, selling,keeping, offering for sale, importing or exporting thereof would, but for the license grantedherein, infringe any Valid Claim within Chiron Patent Rights, if practiced in a Reference Country.     **1.10. “****Licensed Method****”**means any method or process, the practice of which would, butfor the license granted herein, infringe a Valid Claim of the Chiron Patent Rights, (including,without limitation, the manufacture, use, sale, keeping, offer for sale, importation or exportationof a product which would infringe any such Valid Claim), if practiced in a Reference Country.     **1.11. “****Licensed Processes****”**means any process that involves the use, practice ormanufacture of a Licensed Composition and/or Licensed Method, including without limitation:[ * ].     **1.12. “****Licensed Territory****”**means (a) for purposes of use of the Licensed Processes,any country in the world where Licensee has a Licensee Facility; and (b) for purposes ofdevelopment and commercialization of Identified Products means worldwide.     **1.13. “****NDA****”**means an application submitted to the FDA or foreign equivalent thereof,which contains the details of the manufacture and testing of a new drug for purposes of obtainingregulatory approval to market such new drug.     **1.14. “****Net Sales"** shall be calculated in accordance with U.S. generally acceptedaccounting principles and means the gross amount billed or invoiced for sales or other dispositionsof all Identified Products hereunder (other than sales or other dispositions to Affiliates unlesssuch Affiliate is the end user), less the following deductions actually paid orincurred (to the extent they are not already reflected in the amount invoiced and to theextent they are not otherwise covered or reimbursed): (a) discounts, returns, allowances, Medicaidrebates, and wholesaler chargebacks allowed and taken in amounts customary in the trade; (b)import, export, excise, sales or use taxes, value added taxes, and other taxes, tariffs or dutiesdirectly imposed and properly allocable to Identified Product sales, but not taxes assessed onincome derived from Identified Product sales; (c) separately itemized shipping, freight charges orinsurance paid; and (d) amounts allowed or credited for retroactive price reductions or rebates.**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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Where Identified Product is sold in the form of a combination product containing one or more activeingredients in addition to an Identified Product, Net Sales for such combination product will becalculated by multiplying actual Net Sales of such Combination Product by the fraction A/(A+B)where A is the invoice price of the Identified Product if sold separately, and B is the totalinvoice price of any other active component or components, or devices, in the combination, if soldseparately. If, on a country-by-country basis, the other active component or components in thecombination are not sold separately in said country, Net Sales for the purpose of determiningroyalties of the combination product shall be calculated by multiplying actual Net Sales of suchcombination product by the fraction A/C where A is the invoice price of the Identified Product, ifsold separately, and C is the invoice price of the combination product. If, on acountry-by-country basis, neither the Identified Product nor the other active component orcomponents of the combination product is sold separately in said country, Net Sales for thepurposes of determining royalties of the combination product shall be determined by the parties bymutual agreement.If Licensee receives any consideration for the sale or other disposal of any Identified Productor for the use of any Identified Product other than monetary consideration under bona fidearm’s length terms, then for the purposes of calculating the royalty payable under thisAgreement, such Identified Products shall be deemed to be sold exclusively for money at thefair market price generally achieved for such Identified Products in the country in which suchsale or other disposal or use occurred when such Identified Products are sold alone and notwith other products.     **1.15. “****Payment Term****”**shall have the meaning set forth in Section 8.2.     **1.16. “****Phase I Clinical Trial****”**shall mean first human dosing, such as pursuant to aclinical trial, conducted in accordance with 21 C.F.R. 312.21(a) or other applicable regulatoryrequirements outside the United States, designed to establish the safety, and preliminary evidenceof effectiveness, of a pharmaceutical product for human use.     **1.17. “****Phase II Clinical Trial****”**shall mean first human dosing pursuant to a clinicaltrial, conducted in accordance with 21 C.F.R. 312.21(b) or other applicable regulatory requirementsoutside the United States, of appropriate size and designed to evaluate the effectiveness of apharmaceutical product in patients with the disease for its intended use and in the dosage range tobe prescribed by identifying the proportion of patients within the trial who respond to thepharmaceutical product.     **1.18. “****Phase III Clinical Trial****”**shall mean first human dosing pursuant to a clinicaltrial, conducted in accordance with 21 C.F.R. 312.21(c) or other applicable regulatoryrequirements outside the United States, that is conducted after preliminary evidencesuggesting effectiveness has been obtained, that is of appropriate size and design to establishthat a pharmaceutical product is safe and effective for its intended use, to define warnings,precautions and adverse reactions that are associated with the pharmaceutical product in the dosagerange to be prescribed, and to support regulatory approval of such pharmaceutical product or labelexpansion of such pharmaceutical product.**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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     **1.19.“****Reference Countries****”**means theUnited States of America for any activities thatare conducted in the United States of America, and[ * ] for any activities that areconducted outside the United States of America.     **1.20. “****Research and Development Field****”**means the research and development ofIdentified Products. The Research and Development Field is limited to the research and developmentof [ * ] HCV [ * ], and expressly excludes research and developmentrelated to[ * ]. Also excluded from theResearch and Development Field are the research and development of (i) [ * ] and (ii) [ * ].     **1.21. “****Research and Development Term****”**shall have the meaning set forth inSection 8.1.     **1.22. “[ * ]”**means [ * ].     **1.23. “****Valid Claim****”**means any claim of an issued (or granted) and unexpired patentwhich has not been held unenforceable, unpatentable or invalid by a decision of a court orgovernmental agency of competent jurisdiction, which decision is unappealable or unappealed withinthe time allowed for an appeal, and which has not been admitted by Chiron to be invalid orunenforceable generally through reissue or disclaimer.**2. LICENSE**     **2.1.****Research and Development License Grant**. Subject to all of the terms andconditions in this Agreement, Chiron hereby grants to Licensee and to its wholly owned subsidiariesand to those of its Affiliates conducting research and development activities at the LicenseeFacilities and to other of its Affiliates approved in writing by Chiron, which approval shall notbe unreasonably withheld (collectively with Licensee, the “Licensed Entities”), a non-transferable,non-exclusive license, without the right to sublicense (unless Chiron has consented to suchsublicense under Section 2.1(c) below), under the Chiron Patent Rights, to use LicensedCompositions and Licensed Methods in the Research and Development Field at a designated LicenseeFacility in the Licensed Territory during the Research and Development Term and to make, have made,use, have used, sell, have sold, import, and export Identified Products during the term of thisAgreement (the “License”). The License shall be solely for the benefit of:          (a) Licensed Entities; or          (b) Licensee and a bona fide third party collaborator of Licensee to whom Chiron has granted alicense under Chiron Patent Rights to practice Licensed Processes in the Research and DevelopmentField, as confirmed by Chiron’s prior written acknowledgement; or**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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          (c) Licensee and any other third party bona fide research collaborator, provided (i) Licenseehas provided Chiron with prior written notice identifying such third party collaborator and thescope of the collaboration and (ii) Chiron has provided prior written consent to Licensee providingsuch third party the benefit of the License, such consent not to be unreasonably withheld ordelayed. For purposes of this provision, consent shall be favorably considered if, for example,the third party collaborator is granted such benefit for research purposes only, is exclusive toLicensee with regard to the benefit, retains no development or commercial rights to IdentifiedProducts and ceases all such activities upon the termination of its relationship with Licensee.Notwithstanding the foregoing, Chiron hereby acknowledges and consents to [ * ], provided that [ *], further provided that [ * ], and still further provided that [ * ].     **2.2.****Additional Licenses**. For the avoidance of doubt, nothing in the foregoing shallbe construed as a restriction on any licensing, or otherwise granting or authorizing, by Licenseeof marketing, manufacturing, importing, exporting, distribution, development, selling or othercommercialization rights to any Identified Product to a third party, and any third party solicensed shall be free to exercise any such rights without any further obligation to Chiron,provided that the sale of such Identified Product (including an Identified Product in development)by or through such third party remains subject to the payment, reporting and indemnity provisionsof this Agreement. Nothing in this paragraph is intended to grant to Licensee the right tosublicense Chiron Patent Rights, Licensed Compositions or Licensed Methods to third parties.     **2.3.****Prior Activity**. For the avoidance of doubt, the foregoing and all subsequentterms of this Agreement shall be construed to embrace and apply to any activity carried out byLicensee, [ * ], prior to the Effective Date within theResearch and Development Field, which activity may fall within the scope of the Chiron PatentRights, provided however, that Licensee shall pay to Chiron within ten (10) days of the EffectiveDate any and all payments, if any, which would have been due under Sections 3.1.3, 3.1.4 and 3.1.5had the License been granted prior to the Effective Date. Any Identified Products subject to suchpayment(s), including latest stage of clinical achievement for each such Identified Product, arelisted in Exhibit C attached hereto and incorporated herein. In the event that no such paymentsare due and owing to Chiron pursuant to the prior sentence, Licensee hereby represents that it doesnot have any products in development which, as of the Effective Date, would have triggered anypayments due under Sections 3.1.3, 3.1.4 and 3.1.5. Notwithstanding the foregoing, any rightsgranted to Licensee pursuant to this Section 2.3 shall terminate as of the Effective Date in theevent of a termination of this Agreement by Chiron pursuant to Section 8.3.1(b) below.     **2.4.****Use Limitations**. Licensee shall not have any rights under the Chiron PatentRights other than those specified in Sections 2.1 and 2.2, all other rights being retained byChiron. Without limiting the foregoing, Licensee shall not use Licensed Processes outside theResearch and Development Field or for the benefit of any third party not permitted by Section 2.1.In the event that [ * ], such Identified Products shall be subject to the milestone and royaltyprovisions herein and Licensee shall [ * ]. Without limiting the foregoing, Chiron grants Licenseeno rights under the Chiron Patent Rights to make, have made, use, sell or otherwise**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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[ * ]. Notwithstanding any other provision in this Section 2.4,[ * ] shall have the right to[ * ] in the Research and DevelopmentField.     **2.5.****Marketing Arrangements**. In connection with arrangements with third partieswhereby such third parties would distribute or market Identified Products, Licensee agrees tocomply and to cause such third parties to comply with all terms and conditions of this Agreement.For the avoidance of doubt, neither Licensee nor any such third party that develops, distributes ormarkets Identified Products shall be required to make duplicate payments for any one IdentifiedProduct for which payment has been received by Chiron.**3.****PAYMENTS**     **3.1.****Payments**. In consideration of Chiron’s grant of the License to Licensee,Licensee shall, in addition to the other Licensee obligations referenced herein, make to Chiron thepayments referenced in this Section 3.1.          **3.1.1****License Issuance Fee**. Within thirty (30) days following the Effective Date,Licensee shall pay to Chiron a non-refundable license issuance fee (the “Issuance Fee”) of ThreeHundred Seventy Five Thousand U.S. Dollars ($375,000).          **3.1.2 [ * ]**. On [ * ] of the Effective Date during the Research & Development Term, [ * ], Licensee shall pay to Chiron[ * ] (the “[ * ]”) in the amount of [ * ] U.S. Dollars ($[ * ]). The [ * ] shall be creditableagainst royalty payments referenced in Sections 3.1.4 and 3.1.5, if any, for [ * ]. Royaltypayments payable in excess of the [ * ] shall not be creditable against any [ * ].          **3.1.3****Milestone Payments**. With respect to each and every Identified Product developedby (i) Licensed Entities; or [ * ] which reaches the milestone events referenced in this Section3.1.3, Licensee shall pay to Chiron the following milestone payments:               (a) Upon filing of an IND or commencement of Phase I Clinical Trials (or foreign equivalent),whichever occurs first: $500,000; and               (b) [ * ]; and               (c) [ * ]; and               (d) [ * ]; and               (e) [ * ].**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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          For the avoidance of doubt, each payment pursuant to clause (a), (b), (c), (d) or (e) aboveshall be non-refundable, non-creditable, non-cancelable and payable once (and only once) withrespect to each Identified Product regardless of the number of countries in which clinical trialsare conducted or NDA or equivalent product registrations are filed or approved, and regardless ofhow many NDA or equivalent product registrations are filed or approved in any country with respectto such Identified Product. For the further avoidance of doubt, “commencement of Clinical Trial”shall mean the date of first such dosing of Identified Product in humans as part of such trial.          **3.1.4****Royalty Payments for [ * ] Identified Product  [ * ]**. Licensee shall,until the expiration of the Payment Term, pay to Chiron, within [ * ] days after the end of eachcalendar [ * ], an earned royalty equal to [ * ] percent ([ * ]%) of Net Sales of each IdentifiedProduct that [ * ].          **3.1.5.****Royalty Payments for [ * ] Identified Products**. Licensee shall, until theexpiration of the Payment term, pay to Chiron, within [ * ] days after the end of each calendar [ *], an earned royalty equal to [ * ] percent ([ * ]%) of Net Sales of each Identified Product that [* ].     **3.2.****Manner of Payment**. All payments hereunder shall be in United States dollars inimmediately available funds and shall be made by wire transfer to such bank account as may bedesignated from time to time by Chiron.          **3.2.1****Exchange Rate**. In the event that Identified Products are sold in currenciesother than United States dollars, Net Sales shall be calculated by Licensee in accordance withgenerally accepted accounting principles. Net Sales in such other currencies shall be convertedinto U.S. dollars at the end of each royalty reporting period using an exchange rate equal to thesimple average of the daily “U.S. dollar noon buying rates” on each business day of the applicableroyalty reporting period, as published at 12:00pm daily New York time by the Federal Reserve Bankof New York (available on Bloomberg & Reuters). Royalty payments due to Chiron pursuant toSections 3.1.4 and 3.1.5 shall be calculated based on the Net Sales in United States dollars ascalculated above.          **3.2.2****Blocked Currency**. In the event that restrictions or prohibitions imposed by anational or international government authority preclude conversion of a national or internationalcurrency into United States dollars, Licensee and Chiron shall consult to find a prompt andacceptable solution and, prior to Licensee and Chiron determining such an acceptable solution,Licensee shall handle all money received by Licensee from the sale or other distribution ofIdentified Products as Chiron may lawfully direct. The cost and expense incurred as a consequenceof any such handling shall be borne equally by Licensee and Chiron. Notwithstanding the foregoing,if any national or international currency cannot be converted intoUnited States dollars when payment to Chiron is due and payable under Section 3.1 above,Licensee shall deposit the local currency equivalent of the United States dollar payment amount dueand payable to Chiron in an interest-bearing account in the name of Chiron. In the event thatconversion into United States dollars of any payment amount due and payable to Chiron deposited inan interest-bearing account pursuant to the previous sentence becomes possible,**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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Licensee shalldeliver such payment amount to Chiron promptly, however, if conversion of any such amount is notpossible within twelve (12) months after the date payment was due and payment to Chiron, Licenseeshall transfer to Chiron the amount deposited in the name of Chiron, together with all interestaccrued on the amount deposited after the date of deposit.          **3.2.3****Late Payment**. Any payment, including, without limitation, royalty payments,made by Licensee hereunder after the date such payment is due, shall bear interest at the lesserof: (a) [ * ] basis points above the three (3) month United States Dollar LIBOR as published in theWall Street Journal on the day which is two business days prior to the date the payment is due, or(b) the maximum rate permitted by applicable law (the “Interest Rate”). The Interest Rate shall becalculated from the date payment was due until actually received by Chiron (the “Interest Period”)based on actual number of days lapsed and a 360-day year. If the Interest Period extends beyondthree (3) months, at the beginning of each three (3) month interval, the Interest Rate will berecalculated using the current three (3) month LIBOR, as described above, until the payment isreceived.          **3.2.4****Underpayment****.**If an Inspection (as defined in Section 4.3 hereafter) reveals anunderpayment, then Licensee shall promptly make up such underpayment with interest at the InterestRate.     **3.3.****Withholding Taxes**. To the extent a statutory tax withholding obligation isimposed by a governmental authority upon any payment due and payable hereunder, Licensee shall beentitled to withhold from such payment to Chiron the amount, if any, of any tax assessed againstLicensee and actually withheld, provided that such tax is only for the account of Licensee andevidence of the payment of such tax is promptly provided to Chiron. Licensee shall pay the amountof such tax to the proper taxing authority and shall be entitled to deduct the amount of such taxfrom the payment to be made by Licensee to Chiron. Licensee shall advise Chiron of any tax paymentmade for the benefit of Chiron pursuant to this Section 3.3 and provide Chiron copies of taxreceipts for all taxes paid and deducted from the payment due and payable to Chiron, together withcopies of all pertinent communications from or with governmental authorities with respect thereto.At Chiron’s reasonable request and at Chiron’s reasonable expense, Licensee shall reasonably assistChiron in any effort by Chiron in claiming any exemption from such deductions or withholdings underany double taxation or similar agreement or treaty from time to time in force, and in minimizingthe amount required to be so withheld or deducted.**4.****STATEMENTS, RECORDS AND INSPECTION**     **4.1.****Statements**. All milestone and royalty payments made to Chiron hereunder shall beaccompanied by a written statement setting forth in reasonable detail the calculation thereof,including, for example, in the case of royalty payments, the gross amount billed or invoiced by theLicensee or an affiliate or commercial collaborators or any other third party for the sale ordistribution for the Identified Product, itemized deductions against such gross amount, andNet Sales on a country-by country basis. Such statement shall contain reference to Net Sales byterritory in United States Dollars, as calculated by the method in Section 3.2.**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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     **4.2.****Record Keeping**. Licensee shall keep and maintain, and shall cause its Affiliates[ * ] to keep and maintain, complete and accurate books of account andadequate records of all sales of Identified Products in sufficient detail to permit Chiron toconfirm the accuracy of reported royalties hereunder, including without limitation, generalaccounting ledgers, invoice/sale registers, original invoices and shipping documents, tax returns,inventory and manufacturing records, sublicense and distributor agreements and price lists, productcatalogs and other marketing materials, and shall retain such books and records for a period ofthree years from the last day of the calendar quarter in which such sales were made.     **4.3.****Inspection**. Chiron may from time to time and at any reasonable time, notexceeding once every twelve (12) months, use a Chiron auditor (or such firm of certified publicaccountants (“auditor”) as Chiron may select), to inspect the books and records of the Licensee,Licensee’s Affiliates [ * ], as the case may be, and records and books ofsublicensees, to the extent necessary in order to verify the accuracy of any report or payment madeunder this agreement, or in the case of Licensee’s failure to make reports or pay royalties, toobtain information as to the royalty payable for any such period, by Licensee to Chiron (within thethree (3) full-year period immediately preceding such audit) (the “Inspection”). Books and recordsshall include but not be limited to: (a) Accounting General Ledgers (electronically if available);(b) Invoice/Sales Registers; (c) Original Invoice and Shipping Documents; (d) Federal and StateBusiness Tax Returns; (e) Company Financial Statements; (f) Sales Analysis Reports; (g) Inventoryand or Manufacturing Records; (h) Sub-License and Distributor Agreements; and (i) Price Lists,Product Catalogs and Other Marketing Materials. Licensee agrees to maintain such books and recordsfor a period of not less than [ * ] years from the date each royalty report is submitted toChiron. Such Inspection shall be at Chiron’s expense unless a royalty payment deficiency isdetermined and such deficiency is [ * ] percent ([ *]%) or greater, for any royalty reporting periodincluded in the examination. In such case the Licensee shall be responsible for reimbursing Chironfor the examination fee and expenses charged by the auditor. Any underpayment as determined by theauditor shall be paid promptly to Chiron and will bear interest in accordance with Section 3.2.3.Licensee agrees to pay past due royalties for any royalty deficiency error as determined by theauditor, which affects periods prior to the period under audit. Chiron and the auditor shallmaintain in confidence such Inspection and its resulting report. The auditor may from time to timeconsult with Chiron and any of its employees or third party counsel on questions as they relate tothe licensed technology. The auditor may not disclose financial or proprietary information exceptas required by the license agreement or if it already exists in the public domain.**5.****REPRESENTATIONS AND WARRANTIES; DISCLAIMER**     **5.1.****Mutual Warranties**. Each party represents and warrants to the other party that(a) it has all requisite corporate power and authority to enter into this Agreement, to grant thelicenses granted by it hereunder, and to perform its other obligations under this Agreement, (b)execution of this Agreement and the performance by the warranting party of its obligationshereunder, including, without limitation, the licenses granted by that party hereunder, have beenduly authorized, and (c) this Agreement is fully binding and enforceable in accordance with itsterms.**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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     **5.2.****Licensee Warranties and Covenants**. Licensee warrants, represents and covenantsthat:          **5.2.1.**all of Licensed Entities’ activities related to its use of the Chiron Patent Rightspursuant to this Agreement shall comply in all material respects with all applicable legal andregulatory requirements, including, without limitation, all applicable regulatory requirements; and          **5.2.2.**no Licensed Entity shall engage in any activities that would infringe the Chiron PatentRights and are outside the scope of the Research and Development License to be granted hereunder(e.g., without limitation, use of the Licensed Processes outside the Licensee Facility or after thetermination of the Research and Development Term); and          **5.2.3.**it shall obtain from any [ * ] a written undertaking requiring such [ * ] to performthe payment obligations referenced in Article 3 herein; and          **5.2.4**that it shall promptly provide Chiron with a copy of such written undertaking describedin Section 5.2.3 above.     **5.3.****Chiron Warranties**. Chiron represents and warrants to Licensee that, as of theEffective Date, the [ * ] for all Identified Products [ * ] and [ * ] for[ * ] Identified Products[ * ] are [ * ] for certain of the Chiron Patent Rights.     **5.4.****DISCLAIMER**. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, CHIRON MAKES NOREPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANYEXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECTTO THE CHIRON PATENT RIGHTS OR ANY LICENSE GRANTED BY CHIRON HEREUNDER, OR WITH RESPECT TO ANYPRODUCTS OR SERVICES OF LICENSEE. FURTHERMORE, NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS AWARRANTY THAT ANY PATENT OR OTHER PROPRIETARY RIGHTS INCLUDED IN THE CHIRON PATENT RIGHTS ARE VALIDOR ENFORCEABLE OR THAT LICENSED ENTITIES’ USE OF THE CHIRON PATENT RIGHTS CONTEMPLATED HEREUNDERDOES NOT INFRINGE ANY PATENT RIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY.     **5.5.****Patent Matters**. Chiron shall have the exclusive right to take action against anyinfringement of any of the Chiron Patent Rights, in its sole discretion. Licensee shall cooperatereasonably in any action Chiron may take against any such infringement, upon Chiron’s request andat Chiron’s expense.**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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**6.****LIMITATION OF LIABILITY**NOTWITHSTANDING ANYTHING IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY SHALL BE LIABLE TO THE OTHERWITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICTLIABILITY, OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY INCIDENTAL, INDIRECT OR CONSEQUENTIALDAMAGES.**7. INDEMNITY**     **7.1.****Licensee Indemnity**. Subject to Section 7.2, Licensee shall indemnify, defend andhold harmless Chiron and its Affiliates and the officers, directors, employees, agents andrepresentatives of Chiron and its Affiliates from and against any and all claims, threatenedclaims, damages, losses, suits, proceedings or liabilities of any kind (“Claims”) arising out of orrelating to Licensed Entities’ manufacture, use, sale, offering for sale, importation orexportation of Identified Products or to its use otherwise of the Chiron Patent Rights, includingwithout limitation, Claims based on product liability or infringement of third party patent orintellectual property rights, except to the extent any such Claim arises from the negligence orwillful misconduct or material breach of this Agreement by Chiron.     **7.2.****Indemnification Procedures**. Chiron shall notify Licensee in writing promptlyupon becoming aware of any Claim to which such indemnification may apply. Licensee shall berelieved of its obligation of indemnification to the extent, and only to the extent, Licensee isprejudiced by any failure of Chiron to provide Licensee with the foregoing notice of any such Claimwithin a reasonable period of time. Licensee shall have the right to assume and control thedefense of the Claim at its own expense. If the right to assume and have sole control of thedefense is exercised by Licensee, Chiron shall have the right to participate in, but not control,such defense at its own expense and Licensee’s indemnity obligations shall be deemed not to includeattorneys’ fees and litigation expenses incurred by Chiron after the assumption of the defense byLicensee. If Licensee does not assume the defense of the Claim, Chiron may defend the Claim atChiron’s expense but shall have no obligation to do so. Chiron will not settle or compromise theClaim without the prior written consent of Licensee, and Licensee will not settle or compromise theClaim in any manner which would have an adverse effect on Chiron without the consent of Chiron,which consent, in each case, will not be unreasonably withheld. Chiron shall reasonably cooperatewith Licensee and will make available to Licensee all pertinent information under the control ofChiron.     **7.3.****Presumptions and Burden of Proof Regarding Claims of Exempt Product Status**. Theparties agree that there shall be a presumption that inhibitorcompounds of (i) the HCV [ * ] or[ * ] HCV [ * ], or (iii) HCV,which [ * ] HCV [ * ] arising prior to the expiration of Chiron Patent Rights in the relevant ReferenceCountry from Licensee’s program for research, development and commercialization of HCV[ * ] products (a “Product in Question”) are Identified**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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Products, and aresubject to the obligations governing Identified Products provided herein. In the event thatLicensee contends that a Product In Question is not an Identified Product (an “Exempt Product”)Licensee shall have the burden of proving such contention by a  [ * ], andthe provisions of Section 7.4 shall apply.     **7.4.****Exempt Product Notification**. In the event that Licensee or any LicenseeAffiliate makes an IND submission (or foreign equivalent) for any Product in Question after theEffective Date which Licensee contends to be an Exempt Product, Licensee shall provide Chiron awritten notice providing particular and sufficient facts which are the basis for such contention(the “Exempt Product Notification”). Licensee shall provide Chiron with the Exempt ProductNotification within thirty (30) days following IND (or foreign equivalent) filing of any allegedExempt Product by Licensee (the “Exempt Product Notification Period”).In the event that Licensee submits to Chiron an Exempt Product Notification, Chiron shall have theright to [ * ]. In the event that Chiron disputesLicensee’s claim that the Product in Question is an Exempt Product [ * ], thedispute shall be governed by the dispute resolution provisions provided herein, provided that the[ * ] and burden of proof provisions referenced in Section 7.3 shall apply to such disputeresolution.In the event that Licensee fails to provide Chiron with an Exempt Product Notification within theExempt Product Notification Period,[ * ].In the event that a Product In Question is determined by action under this Section 7.4 to qualifyas an Identified Product (provided that such determination is either accepted or no longer subjectto challenge by Licensee under the dispute resolution provisions herein) at a time after theachievement of a corresponding milestone event for the Product In Question, and in the event themilestone payment relating to the same was not paid when it was due, any such unpaid milestonepayment shall become immediately due and bear interest for the period of non-payment as provided inSection 3.2.3 above.**8.****TERM AND TERMINATION**     **8.1.****Research and Development Term**. The “Research and Development Term” shall be theperiod commencing from the Effective Date and ending on the earlier of (a) the date as of whichChiron receives Licensee’s notification that Licensee no longer desires to exercise the researchand development License (granted under Section 2.1) and has permanently ceased all use of LicensedProcesses or other activities which fall within the scope of the Chiron Patent Rights, or (b) thelast to expire patent containing a Valid Claim within the Chiron Patent Rightsin the relevant Reference Country in which Licensee or a Licensee Affiliate is conductingresearch activities.     **8.2.****Payment Term; Expiration**. Licensee’s obligation to make milestone payments asspecified in Section 3.1.3, and royalty payments on Net Sales of Identified Products pursuant**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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toSections 3.1.4 and 3.1.5, shall terminate upon [ * ] (the “Payment Term”). In acknowledgement ofLicensee’s agreement to enter into a deferred payment arrangement instead of paying a fullynegotiable up-front fee for the license to the Chiron Patent Rights referenced herein, Licenseeagrees that Licensee’s obligation to pay milestone and royalty payments as referenced herein shallbe unconditional and irrevocable during the Payment Term, notwithstanding [ * ]. This Agreementshall expire upon the expiration of the Payment Term. Upon expiration of the Payment Term, allrights of Licensee hereunder shall automatically become fully paid-up, royalty-free, irrevocable,fully sublicenseable and perpetual.     **8.3.****Termination**.          **8.3.1.**Chiron shall have the right to terminate this Agreement, at Chiron’s sole discretion,upon delivery of written notice to Licensee, upon the occurrence of any of the following:          (a) In the event of any material breach by Licensee of any terms and conditions of thisAgreement, provided that such breach has not been cured within sixty (60) days after written noticethereof is given by Chiron to Licensee; or          (b) In the event that Licensee or any [ * ] challenges or knowingly supports (other thanpursuant to a subpoena or other court order) a challenge to the validity of any of the ChironPatent Rights. Chiron’s termination rights under this Section 8.3.1(b) may be exercised by Chironat any time subsequent to Licensee’s (or any [ * ]) challenge to the validity of the Chiron PatentRights.          **8.3.2.**Either party shall have the right to terminate this Agreement, upon the filing by theother party in any court or agency pursuant to any statute or regulation of the United States orany state a petition in bankruptcy or insolvency or for reorganization or similar arrangement orfor the appointment of a receiver or trustee of such party or its assets, upon the proposal of awritten agreement of composition or extension of its debts, or if such party is served with aninvoluntary petition against it in any insolvency proceeding, upon the ninety-first (91st) dayafter such service if such involuntary petition has not previously been stayed or dismissed, orupon the making by such party of an assignment for the benefit of its creditors.     **8.4.****Effect of Termination or Expiration**.          **8.4.1.****In General**. Upon termination of this Agreement for any reason:               (a) All rights and licenses to use Licensed Compositions and Licensed Methods granted toLicensee in Article 2 shall terminate, and Licensee shall cease all use of Chiron Patent Rights,provided, however, that Licensee retains all rights and licenses to research,develop, make, have made, use, have used, sell, have sold, import and export IdentifiedProducts granted to Licensee in Article 2 to the extent that the exercise of such rights does notinfringe any Chiron Patent Rights, subject to Licensee’s obligations under Articles 3, 4 and 7;**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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               (b) Chiron shall have the right to obtain specific performance of Licensee’s paymentobligations referenced in Section 3.1, including, without limitation, Licensee’s royalty andmilestone obligations referenced therein;               (c) Chiron shall have the right to retain all amounts previously paid to Chiron by Licensee;and               (d) Neither party shall be relieved of any obligation which accrued prior to the effectivedate of such expiration or early termination; in particular, without limitation, Licensee shallremain obligated to pay to Chiron all amounts which have accrued hereunder as of such date, all inaccordance with Section 3.          **8.4.2.****Survival**. Except as expressly provided herein, the following provisions shall surviveexpiration or termination of this Agreement: Article 1, Article 2 (to the extent provided inSection 8.4.1 above), Article 3, Article 4, Article 5, Article 6, Article 7, Section 8.2, Article9, Article 10 and any other provisions which by their nature are intended to survive termination.**9.****CONFIDENTIAL INFORMATION**     **9.1****Confidentiality**. Except to the extent expressly authorized by this Agreement orotherwise agreed in writing, the parties agree that, for the term of this Agreement and for ten(10) years thereafter, Chiron (the “Receiving Party”) agrees that with respect to whatever LicenseeConfidential Information it receives from Licensee (the “Disclosing Party”) hereunder, theReceiving Party shall keep such Licensee Confidential Information confidential and shall notpublish or otherwise disclose or use such Licensee Confidential Information for any purpose otherthan as provided for by in this Agreement except for Licensee Confidential Information that theReceiving Party can establish:          (a) was already known to the Receiving Party (other than under an obligation ofconfidentiality), at the time of disclosure by the Disclosing Party and such Receiving Party hasdocumentary evidence to that effect;          (b) was generally available to the public or otherwise part of the public domain at the timeof its disclosure to the Receiving Party;          (c) became generally available to the public or otherwise part of the public domain after itsdisclosure or development, as the case may be, and other than through any act or omission of theReceiving Party in breach of this confidentiality obligation;          (d) was disclosed to the Receiving Party, other than under an obligation of confidentiality,by a third party who had no obligation to the Disclosing Party not to disclose such information toothers; or**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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          (e) was independently discovered or developed by or on behalf of the Receiving Party withoutthe use of the Licensee Confidential Information and the Receiving Party has documentary evidenceto that effect.     **9.2****Authorized Disclosure and Use**. Notwithstanding the foregoing Section 9.1, Chironmay disclose Licensee Confidential Information to the extent such disclosure is required to complywith a court order or applicable governmental law or regulation, including, without limitation, lawand regulations of the United States Securities and Exchange Commission, the National Associationof Securities Dealers or any national stock exchange regulation, and except as expressly providedherein. In addition, either party may disclose the terms of this Agreement to its accountants orattorneys or its potential or actual partners or collaborators under an obligation ofconfidentiality no less stringent than that provided in Section 9.1 above. In the event Chiron isrequired by court order to disclose Licensee Confidential Information, Chiron shall providesufficient notice to Licensee and such reasonable cooperation and assistance to enable Licensee toseek a protective order or otherwise prevent or limit disclosure or use of such LicenseeConfidential Information.     **9.3****Publicity****.**Neither Licensee nor Chiron shall make any public announcementconcerning the economic terms of this Agreement without the prior written consent of the otherparty. Notwithstanding the foregoing, the parties agree that either party shall have the right toissue a public announcement regarding the execution of this Agreement following such execution.The party making such public announcement shall submit the proposed form of such publicannouncement to the other party and shall incorporate the other party’s reasonable comments andsuggestions prior to issuance of such public announcement.**10.****GENERAL**     **10.1.****Provisions Contrary to Law**. In performing this Agreement, the parties shallcomply with all applicable laws. Wherever there is any conflict between any provision of thisAgreement and any law, the law shall prevail, but in such event the affected provision of thisAgreement shall be limited or eliminated only to the extent necessary, and the remainder of thisAgreement shall remain in full force and effect. In the event the terms of this Agreement arematerially altered as a result of the foregoing, the parties shall renegotiate in good faith theterms of this Agreement to resolve any inequities.     **10.2.****Notices**. Any notice required or permitted to be given by this Agreement shall be inwriting and shall be delivered by hand or overnight courier with tracking capabilities or mailedpostage prepaid by first class, registered or certified mail addressed as set forth below unlesschanged by notice so given:**[ * ] = Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.**
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If to Chiron:Chiron Corporation