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                                                                   Exhibit 10.61

                            BIOSEARCH ITALIA, S.P.A.
                                       AND
                         GENOME THERAPEUTICS CORPORATION

                          LICENSE AND SUPPLY AGREEMENT

         THIS LICENSE AND SUPPLY AGREEMENT (the "Agreement") is made effective
as of the __/th/ day of October, 2001 (the "Effective Date") by and between
GENOME THERAPEUTICS CORPORATION a Massachussetts corporation having its
principal place of business at 100 Beaver Street, Waltham, MA 02453, USA
("GENE") and BIOSEARCH ITALIA, S.p.A. an Italian corporation with its principal
place of business at via R. Lepetit, 34, 21040 Gerenzano, Italy ("Biosearch").
GENE and Biosearch are sometimes referred to herein individually as a "Party"and
collectively as the "Parties."

                                    RECITALS

         A. Biosearch is a pharmaceutical company interested in the
identification and development of naturally produced compounds for the treatment
of infectious diseases, and the commercialization of products based upon such
compounds.

         B. Biosearch discovered and is developing a proprietary compound,
Ramoplanin, and is currently conducting clinical trials in the U.S. of an oral
formulation of Ramoplanin for the prevention of infectious diseases in patients
carrying Vancomycin-resistant Enterococci ("VRE") and at risk of infection
following chemotherapy or transplantation, with a view to registering a new
pharmaceutical product for worldwide marketing under its trademark(s) and trade
name(s).

         C. On May 8, 1998 Biosearch had entered into an agreement with
IntraBiotics Pharmaceuticals, Inc., to permit the latter to develop and
commercialize in the United States and Canada, formulations other than
parenteral formulations of Ramoplanin.

         D. Following a decision by IntraBiotics to discontinue the development
activities of Licensed Products (as defined herein), an amendment to the
agreement mentioned under C. above was entered into, effective June 1, 2001,
whereby Biosearch agreed to reacquire from IntraBiotics all rights in and to
licensed Ramoplanin formulations (other than, for a given period,*****), after a
Transition Period ending August 31, 2001. From this date until the Effective
Date, Biosearch has assumed responsibility for the development of Licensed
Products within the Territory.

         E. IntraBiotics subsequently gave notice of termination of the
agreements it had entered into with Clinical Research Organizations (CROs) and
Vendors engaged in the clinical trial activity and transferred to Biosearch the
IND application for Ramoplanin, effective July 22, 2001.

         F. Pursuant to the above mentioned amendment, all rights in and to the
***** of Ramoplanin shall revert to Biosearch effective April 1, 2002 if
IntraBiotics does not commence clinical development activity with respect to at
least one topical product by March 31, 2002.

         G. GENE is a biotechnology company interested in the development of
products useful for the treatment of infectious diseases or conditions, and is
interested in completing the development activities mentioned above and
commercializing oral formulations of Ramoplanin for the treatment or prevention
of infectious diseases and conditions in the United States and Canada (including
the territories and possessions of each such country).

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                                    ARTICLE 1

                                   DEFINITIONS

The following terms shall have the following meanings as used in this Agreement:

         1.1  "Affiliate" means an entity that, directly or indirectly, through
one or more intermediaries, controls, is controlled by or is under common
control with Biosearch or GENE.

         1.2  "Biosearch Know-how" means Information which (i) Biosearch is
required to disclose to GENE under this Agreement and (ii) is within the Control
of Biosearch. Notwithstanding anything herein to the contrary, Biosearch
Know-how shall exclude Biosearch Patents.

         1.3  "Biosearch Patent" means a Patent which covers, or is used or
useful in, the manufacture of Bulk Licensed Compound or the discovery,
evaluation, manufacture, use, sale, offer for sale and/or importation of
Licensed Products within the Field, which Patent is owned or Controlled by
Biosearch, including, without limitation, Biosearch's interest in any Joint
Patents.

         1.4  "Bulk Licensed Compound" means the bulk form of the Licensed
Compound meeting the Specifications and used to manufacture Licensed Products
under this Agreement.

         1.5  "Clinical Materials" shall mean supplies of Licensed Product as
well as supplies of placebo, packaged and labelled and in compliance with
regulatory requirements for purposes of completing clinical trials as part of
Development of the Licensed Product in the Territory.

         1.6  "Commercialization" shall mean all activities undertaken by GENE
relating to the manufacture and sale of Licensed Product in the Territory,
including advertising, education, marketing, distribution and post-approval
product support clinical studies conducted after Regulatory Approval of a
Licensed Product for a particular indication.

         1.7  "Convertible Note" means a convertible promissory note issued by
GENE in the form attached hereto as Exhibit I.

         1.8  "Control" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
or other arrangement with any Third Party.

         1.9  "Cost of Goods Sold" means the aggregate of the cost to Biosearch
of Bulk Licensed Compound, transportation of Bulk Licensed Compound between any
Biosearch supplier and Biosearch (including transit insurance), quality control
testing, material management, and storage and handling, including direct labor
(salaries, wages and employee benefits) and facilities expenses reasonably
incurred in connection with the above.

         1.10 "Development" means all activities relating to obtaining
Regulatory Approval of a Licensed Product, Licensed Product delivery systems and
new indications thereof and all activities relating to developing the ability to
manufacture the same.

         1.11 "Drug Approval Application" means an application for Regulatory
Approval required before commercial sale or use of a Licensed Product as a drug
in a regulatory jurisdiction.

         1.12 "Excluded Formulations" means, except as it may be included as a
formulation hereunder pursuant to Section 3.2 and 3.3 below, the formulations of
the Licensed Compound suitable solely for (i) ***** of the Licensed Compound,
and (ii) ***** use.

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         1.13 "Field" means the treatment or prevention of any human disease.

         1.14 "GENE Know-how" means Information which (i) GENE is required to
disclose to Biosearch under this Agreement and (ii) is within the Control of
GENE. Notwithstanding anything herein to the contrary, GENE Know-how shall
exclude GENE Patents.

         1.15 "GENE Patent" means a Patent which covers the manufacture, use,
sale, offer for sale and/or import of Licensed Products within the Field, which
Patent is owned or Controlled by GENE.

         1.16 "IND" (or "InvestigationaI New Drug Application") means an
application as defined in the United States Food, Drug and Cosmetic Act and
applicable regulations promulgated thereunder to the United States Food and Drug
Administration (the "FDA"), or the equivalent application to the equivalent
agency in jurisdictions outside the United States, the filing of which is
necessary to commence clinical testing of Licensed Products in humans.

         1.17 "Information" means (i) techniques and data within the Field
relating to Bulk Licensed Compound or Licensed Products, including inventions,
practices, methods, knowledge, know-how, skill, experience, test data including
pharmacological, toxicological and clinical test data, analytical. and quality
control data or descriptions and (ii) compounds, compositions of matter, assays
and biological materials within the Field.

         1.18 "Joint Patent" shall have the meaning set forth in Section 10.3.

         1.19 "Know-how" means Biosearch Know-how and/or GENE Know-how.

         1.20 "Licensed Compound" means the compound known as Ramoplanin, as
described in IND No. 56341.

         1.21 "Licensed Product" means any product including or incorporating
any formulation of the Licensed Compound, other than Excluded Formulations.

         1.22 "NDA" means an application as defined in the United States Food,
Drug and Cosmetic Act and applicable regulations promulgated thereunder to the
FDA, or the equivalent application to the equivalent agency in jurisdictions
outside the United States, the filing of which is necessary to commence the
commercial sale of Licensed Products.

         1.23 "Net Sales" means the amount (or net selling price) invoiced for
sales of a Licensed Product in final dosage form by GENE, its Affiliates or its
sublicensees to a Third Party end user, based upon the approval received from
the U.S. FDA, less (i) discounts, including cash discounts, and/or rebates
(including government-mandated rebates), retroactive price reductions or
allowances actually allowed or granted from the billed amount, (ii) credits or
allowances actually granted upon claims, rejections or returns of such Licensed
Products, including recalls, (iii) freight, postage, shipping and insurance
charges paid for delivery of Licensed Product, to the extent billed, and (iv)
taxes, duties or other governmental charges levied on or measured by the billing
amount when included in billing, as adjusted for rebates and refunds.

         In the event a Party is receiving royalties under this Agreement from
any Licensed Product sold in the form of a combination product containing one or
more active ingredients in addition to the Licensed Compound, Net Sales for such
combination product will be calculated by multiplying actual Net Sales by the
fraction A/(A+B) where A is the fair market value of the portion of the
combination product that contains the Licensed Compound and B is the fair market
value of the other active ingredients included in such combination product, as
determined by market prices of such portions if separately priced and sold, or
if not so priced and sold, as determined by mutual agreement of the parties. As
used herein, the term "active ingredient" does not include ingredients the

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primary effect of which is the enhancement of drug delivery, even if such
ingredients have pharmacological activity.

         1.24 "Other Licensee" means any Third Party to which Biosearch has
granted a license under the Biosearch Patents and Biosearch Know-how for the
development or commercialization of Licensed Products or other products
containing the Licensed Compound.

         1.25 "Patent" means (i) valid and enforceable patents, re-examinations,
reissues, renewals, extensions, term restorations and foreign counterparts
thereof, and (ii) pending (at any time during the term of this Agreement) patent
applications and foreign counterparts thereof.

         1.26 "Phase III Clinical Trials" means those trials on sufficient
numbers of patients that are designed to establish that a drug is safe and
efficacious for its intended use, and to define warnings, precautions and
adverse reactions that are associated with the drug in the to be prescribed
dosage range, and supporting Regulatory Approval of such drug.

         1.27 "Regulatory Approval" means any approvals (including pricing and
reimbursement approvals, if appropriate), product and/or establishment licenses,
registrations or authorizations of any federal, state or local regulatory
agency, department, bureau or other governmental entity, necessary for the
manufacture, use, storage, import, export or sale of Licensed Products in a
regulatory jurisdiction.

         1.28 "Specifications" shall have the meaning set forth in Section 7.4.

         1.29 "Supply Price" shall have the meaning set forth in Section 8.2.

         1.30 "Territory" means the United States and Canada and the territories
and possessions of each of the foregoing countries.

         1.31 "Third Party" means any entity other than Biosearch or GENE or
their Affiliates.

         1.32 "Transfer Price" shall have the meaning set forth in Section 7.9.

         1.33 "Valid Claim" means a claim of (a) an issued patent, which claim
has not lapsed, been cancelled, or become abandoned and which claim has not been
declared invalid or unenforceable by a court of competent jurisdiction in a
decision from which no appeal has or can be taken, or (b) a patent application,
so long as such application is being prosecuted and the claim in question has
not been abandoned by the owner of the application (with the period of presumed
validity of a pending application not to exceed five years in countries).

                                    ARTICLE 2

                                   DEVELOPMENT

         2.1  General. GENE shall be responsible for the completion of the
Development of Licensed Products in the Field and in the Territory, with support
from Biosearch as provided in this Agreement. Development of products including
the Licensed Compound (including without limitation Licensed Products) outside
of the Territory, development of products other than Licensed Products including
the Licensed Compound in the Field and in the Territory, subject to the
provisions of Section 5.6 herein, shall be conducted by Biosearch and/or the
Other Licensees, if any, outside the scope of this Agreement. In the event GENE
desires to develop the Licensed Products for the treatment of ***** and any
additional payment is required in order to obtain a license to patent rights
from a Third Party for the treatment of such additional disease, GENE will
contribute to the costs relating to such patent rights in an amount proportional
to its involvement and interest as defined in good faith between the

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Parties. However, in order to avoid the duplication of cost and effort, and to
optimize the results of worldwide Development of Licensed Products, the Parties
agree to exchange information regarding their respective activities related to
the Development of Licensed Products as provided in this Agreement. In
particular, the Parties intend to exchange information regarding the clinical
and non-clinical testing of products including the Licensed Compound (including
without limitation Licensed Products) for indications in the Field.

         2.2  Development of Licensed Products by GENE.

                  (a) GENE Commitment. GENE shall have the right to utilize all
relevant non-clinical and clinical data received from Biosearch prior to the
Effective Date and during the term of this Agreement pursuant to Sections 2.3
and 2.4 for the sole purposes of obtaining Regulatory Approval and
Commercialization of Licensed Products in the Field and in the Territory. GENE
hereby agrees, subject to the terms hereof, to conduct or have conducted, at its
sole expense or at the expense of any Affiliate or sublicensee as permitted
under this Agreement, subsequent to the Effectve Date all non-clinical and
clinical Development necessary to obtain Regulatory Approvals for Licensed
Products in the Field and in the Territory. GENE shall not have any obligation
to develop Licensed Products for any particular indication but may, at its
option, develop Licensed Products for any indication in the Field and shall, at
all times during the term of this Agreement, undertake Development of Licensed
Product for at least *****.

                  (b) Diligence and monitoring. GENE shall work *****, to
develop Licensed Products in the Field and in the Territory. The main parameters
for the evaluation of GENE's diligence shall be the *****. The progress of all
Development activities and GENE's diligence shall be monitored by the Joint
Management Committee referred to in Section 2.4 below on a continuing basis,
following a regular meeting schedule. Any matter that should involve an
assessment of GENE's lack of diligence in carrying out Development activities
shall be examined by the Chief Executive Officers of Biosearch and GENE, with a
view to finding the most appropriate solution without jeopardizing the progress
of clinical trials in the agreed time frame. If such matter cannot be resolved
within sixty (60) days, it shall be dealt with in accordance with the
proceedures in Section 14.2(b).

                  (c) Delivery of Information. GENE will provide to Biosearch
its Information regarding the Development of Licensed Products in the Field, as
set forth in Section 2.4, for use in development and commercialization of
products by Biosearch and, subject to Section 2.6, any Other Licensees outside
of the Territory. Biosearch and, subject to Section 2.6, any Other Licensees
shall be permitted to use and reference all such Information regarding
Development of Licensed Products in (i) any Drug Approval Application filed
outside the Territory and (ii) any Drug Approval Application filed within the
Territory with respect to products other than Licensed Products that contain the
Licensed Compound within the Field. Notwithstanding the foregoing, Biosearch
agrees that it shall treat, and shall use its best endeavors to cause the Other
Licensees to treat, all Information provided by GENE pursuant to this Section
2.2(c) as Confidential Information subject to the terms of Article 9.

                  (d) Regulatory Matters.

                         (i)  Compliance with Regulations. GENE shall conduct
its efforts hereunder in compliance with all applicable regulatory requirements.

                         (ii) Drug Approval Applications. GENE shall, at its own
expense, be responsible for preparing and filing Drug Approval Applications and
seeking Regulatory Approvals for Licensed Products in the Field and in the
Territory, including preparing all reports necessary for filing a Drug Approval
Application for Licensed Products in the Territory. GENE shall be responsible
for prosecuting all such Drug Approval Applications, and Biosearch and, subject
to Section 2.6, any Other Licensees shall have the right of cross reference with
respect thereto. In connection with all Drug Approval Applications being
prosecuted by GENE hereunder, GENE agrees to provide Biosearch with a copy of
all filings to regulatory agencies that it makes hereunder. GENE shall provide
to Biosearch reports regarding the status of each pending and proposed Drug

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Approval Application in the Territory within thirty (30) days after each June
30/th/ and December 31/st/ during the term of this Agreement, until such times
as no Drug Approval Applications are pending or unless otherwise agreed between
the parties. In the event that any regulatory agency threatens or initiates any
action to remove a Licensed Product from the market in the Territory, GENE shall
promptly notify Biosearch of such communication.

          (e) Human Use - GENE shall develop or commercialize Licensed Products
or Licensed Compound in the Territory only for use in the Field.

     2.3  Development Obligations of Biosearch.

          (a) Access to Biosearch and Other Licensee Information.

               (i)   Biosearch will, as soon as possible after the Effective
Date, provide GENE with copies of all regulatory filings and the results of all
clinical and non-clinical testing of Licensed Products under the Control of or
performed by Biosearch or IntraBiotics prior to the Effective Date, to the
extent that Biosearch is not restricted from providing any such information that
is owned or Controlled by IntraBiotics and to the extent that such filings or
information has not already been provided to GENE and will take all steps
necessary to allow GENE to use such filings or information.

               (ii)  During the term of this Agreement, Biosearch will provide
to GENE all Information in its possession regarding Licensed Compounds in the
Field (including Information it receives from any Other Licensees), as such
Information becomes available, for use in GENE's Development efforts. GENE shall
be permitted to use and reference all Biosearch and any Other Licensee reports
provided to GENE pursuant to this Agreement in any Drug Approval Application for
Licensed Products in the Territory. Notwithstanding the foregoing, GENE agrees
that it shall treat all Information provided by Biosearch or any Other Licensee
pursuant to this Section 2.3 as Confidential Information, subject to the terms
of Article 9.

               (iii) Following the transfer of development responsibilites from
IntraBiotics to Biosearch, but prior to the Effective Date, Biosearch entered
into a number of contractual relationships with previous employees of
IntraBiotics, as well as previous contractors of clinical development services
to IntraBiotics, including, but not limited to Contract Research Organizations,
Third-Party manufacturers, investigative sites, microbiology and clinical
laboratories. These relationships were established in order to continue the
development of Licensed Products within the Territory. Biosearch shall provide
copies of all contracts with these consultants and contractors to GENE within
five (5) days after the Effective Date. GENE will promptly evaluate such
contracts to determine, in its sole discretion, which of such contracts it
desires to have transferred or assigned to it. Biosearch will thereafter use
best efforts to work closely with GENE to transfer or assign those relationships
selected by GENE to GENE in an orderly fashion as soon as possible after the
Effective Date to permit a smooth transition. Prior to such transfer or
assignment, Biosearch will continue to fulfill all of its obligations (including
payment obligations) arising under these agreements; provided that, upon the
transfer or assignment of any such agreement, GENE will reimburse Biosearch for
that portion of all payments made under any such transfer or assigned agreement
by Biosearch from the Effective Date to the date of such transfer or assignement
that relate to work completed subsequent to the Effective Date.

          (b) Development and Regulatory Assistance. Biosearch shall (i)
cooperate with GENE and applicable regulatory authorities in obtaining and
maintaining Regulatory Approval for Biosearch's maufacturing process(es) and/or
facilities and any Third Party process(es) and/or facilities established by
Biosearch for the manufacture of Bulk Licensed Compound and (ii) provide
reasonable technical assistance to GENE for Development of Licensed Products

          (c) Supply of Clinical Materials. Biosearch shall use diligent efforts
to supply, or cause to be supplied at its expense, amounts of Bulk Licensed
Compound sufficient for GENE to obtain Regulatory Approval of Licensed Products
in the Field and in the Territory as set forth in Article 7.

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          (d) Manufacturing Process; Scale Up. The Parties acknowledge that it
is Biosearch's intention to establish, or howsoever have available through Third
Parties, a manufacturing facility for Bulk Licensed Compound. It is agreed
accordingly that Biosearch shall at all times manage the manufacturing processes
of the Licensed Compound, and manufacture, or have manufactured, all of GENE's
requirements for preclinical, clinical and commercial quantities, subject to the
provisions of Section 7. Biosearch shall use diligent efforts to scale up its
manufacturing process for Bulk Licensed Compound, at Biosearch's sole expense.

          (e) Human Use - Biosearch and any Other Licensees shall develop or
commercialize Licensed Products or Licensed Compound only for use in the Field.

     2.4 Reports; Joint Management Committee; Project Leaders.

          (a) Reports. Each Party shall provide to the other Party reports
summarizing such Party's development and commercialization of products
containing the Licensed Compound. Such reports will be provided by each Party
within thirty (30) days after the end of each calendar quarter and shall
summarize such Party's efforts during the previous quarter.

          (b) Joint Management Committee. Each Party shall, within thirty (30)
days after the Effective Date, appoint three (3) members from each Party to
serve on the Joint Management Committee. Each Party may send one or more
additional representatives to each such meeting. The role of the Joint
Management Committee shall include, without limitation, the overview of the
global development of the Licensed Compound, strategic decisions regarding,
among other things, maximizing the value of the Licensed Products through
seeking *****, protection of trade secrets and/or other means, and review of
global clinical, regulatory, and commercial activities, and management of the
relationship between the Parties. The Joint Management Committee shall meet at
least twice per calendar year, alternating between Biosearch's facilities in
Gerenzano Italy and GENE's facilities in Waltham, MA, USA, unless otherwise
agreed between the parties. Each Party shall bear all costs incurred by its
representatives with respect to their attendance of such meetings.

          (c) Project Leaders. Additionally, each Party shall, within thirty
(30) days after the Effective Date, appoint a project leader to facilitate
transfer of information regarding the Licensed Compound and Licensed Products to
the other Party. The project leaders shall meet on a regular basis, at least
quarterly. Each Party may send one or more additional representatives to each
such meeting. Each Party shall bear all costs incurred by its project leader and
other representative(s) with respect to their attendance of such meetings. The
site of the project leader meetings shall alternate between Biosearch's
facilities in Gerenzano Italy and GENE's facilities in Waltham, MA, USA, unless
otherwise agreed between the parties.

     2.5 Adverse Event Reporting. Each Party agrees to report to the other,
prior to or coincident to reporting to regulatory authorities, any serious
adverse event which is reported to occur in connection with the use of a
Licensed Product or the Licensed Compound. Each Party agrees to provide to the
other copies of all reports that are made to regulatory authorities concerning
material safety, efficacy or quality matters with respect to any Licensed
Product or the Licensed Compound. Prior to the first Regulatory Approval for a
product containing a Licensed Compound anywhere in the world, the Parties shall
agree on a formal adverse event reporting protocol to conform with the
respective regulatory obligations of GENE, Biosearch, and any Other Licensees
throughout the world.

     2.6 Other Licensees.

          (a) Biosearch agrees to use its best endeavors in order to obtain from
any Other Licensees permission for Biosearch to provide to GENE any information
that, if such information were owned or Controlled by Biosearch, would be
Information that Biosearch must provide to GENE pursuant to Section 2.3, and
shall obtain rights to Other Licensee technology relating to Licensed Products
as provided in Section 5.7. Biosearch will

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require the Other Licensees to provide to GENE, either directly or through
Biosearch, all information owned or Controlled by such Other Licensee that, if
such information were owned or Controlled by Biosearch, would be Information
that Biosearch must provide to GENE pursuant to Section 2.3. Biosearch may
provide any Information it receives from GENE pursuant to Section 2.5 to the
Other Licensees, if any, and may grant to Other Licensees a sublicense under the
license granted to Biosearch in Section 5.4 with respect to Information
Biosearch receives from GENE pursuant to Section 2.5.

          (b) Biosearch shall not provide any Information it receives from GENE
pursuant to this Article 2 (other than Information relating to adverse events
provided by GENE pursuant to Section 2.5) to any Other Licensee unless and until
such Other Licensee permits Biosearch to provide to GENE any and all information
owned or Controlled by such Other Licensee that, if such information were owned
or Controlled by Biosearch, would be Information that Biosearch must provide to
GENE pursuant to Section 2.3. Biosearch may not grant to any Other Licensee a
sublicense under the license granted to Biosearch in Section 5.4 with respect to
Information disclosed to it by GENE pursuant to this Article 2 (other than
Information relating to adverse events provided by GENE pursuant to Section 2.5)
to any Other Licensee that does not allow Biosearch to provide to GENE
information of such Other Licensee as provided in this Section 2.6, and any such
Other Licensee shall not have a right of reference as provided in 2.2.

                                    ARTICLE 3

                                   EXCLUSIVITY

     3.1 Development of Licensed Compounds By Biosearch. The Parties recognize
that the Licensed Compound may be useful for ***** in addition to oral forms. In
this regard, the Parties agree as follows:

          (a) Biosearch, its Affiliates and other sublicensees shall not develop
or commercialize the Licensed Compound in any ***** in the Territory for use in
the Field during the term of this Agreement.

          (b) Biosearch, its Affiliates and other sublicensees may develop and
commercialize the Licensed Compound in any formulation for any use in the Field
outside of the Territory, and in any Excluded Formulation for any use in the
Field and in the Territory during the term of this Agreement, subject to the
provisions of Sections 3.2, 3.3 and 3.4.

     3.2 ***** formulation. It is agreed and understood between the Parties that
in the event IntraBiotics does not commence clinical development activity with
respect to at least ***** Ramoplanin product by March 31, 2002, then Biosearch
shall notify GENE in writing and GENE shall have a ***** a license to Ramoplanin
for use as a ***** formulation for infection (prevention or treatment), once the
rights to such formulations will have finally reverted to Biosearch, pursuant to
Section 5.6.

     3.3 ***** formulation. In the event that Biosearch develops a
*****formulation containing Licensed Compound, then Biosearch shall notify GENE
in writing and GENE shall have a ***** a license to Ramoplanin for use as a
***** formulation for infection (prevention or treatment) in the Field, pursuant
to Section 5.6.

     3.4 Follow-up products. In the event that Biosearch discovers, develops,
licenses and/or acquires rights to any products for the same indications for
which the formulations of the Licensed Compound may be developed (other than
Excluded Formulations) ("Follow-up Products"), then Biosearch shall notify GENE
in writing and GENE shall have a ***** a license to such products in the
Territory, pursuant to Section 5.6.

                                    ARTICLE 4

                        LICENSING FEE; MILESTONE PAYMENTS

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     4.1 Licensing Fee. As partial payment for the patent licenses granted by
Biosearch pursuant to Article 5 of this Agreement, and the Development
Obligations of Biosearch pursuant to Article 2.3, GENE shall pay to Biosearch,
within ten (10) business days after the Effective Date, two million Dollars
(U.S.$2,000,0000), cash by wire transfer (same value date).

     4.2 Milestone Payments. GENE or its sublicensee shall make the following
milestone payments to Biosearch within ten (10) business days after the first
achievement of each of the following milestones with respect to Licensed
Products in the Field and in the Territory:

     (i)   ***** cash by wire transfer (same value date) when all of the
           following conditions are met:
                  1. Charter for the ***** has been approved by FDA.
                  2. Submission and acceptance by FDA of the *****.
                  3. ***** meeting at FDA has occurred and report submitted and
                  accepted by FDA.
                  4. Completion by ***** of the***** of the first ***** of
                  patients enrolled in the Ramoplanin Phase III Clinical Trial
                  (The "RAVE" Clinical Trial). The Parties agree that in the
                  event ***** of the number originally envisaged to be enrolled
                  in the RAVE clinical trial, as a result of the analysis, then
                  this ***** will be deferred until the date of the U.S. NDA
                  filing.

     (ii)  Two million Dollars (U.S.$2,000,000) payable by the issuance of a
           Convertible Note in such original principal amount to Bioseach
           effective on the same date of the U.S. NDA filing with FDA.

     (iii) Five million Dollars (U.S.$5,000,000) payable by the issuance of a
           Convertible Note in such original principal amount to Biosearch on
           the same date the U.S. NDA is approved by FDA.

     Any grant by GENE of a sublicense to a Third Party as permitted in Section
5.5 shall not affect Biosearch's right to receive milestone payments as provided
in this Section 4.2. GENE shall remain responsible for the payments due to
Biosearch pursuant to this Section 4.2 in the event it grants any such
sublicense. The payment amounts are nonrefundable and noncreditable.

                                    ARTICLE 5

                                    LICENSES

     5.1 Patent Licenses to GENE. Biosearch hereby grants to GENE an exclusive
(even as to Biosearch and subject to Section 6.3) license under the Biosearch
Patents to make, have made, use, import, offer, sell, offer for sale and have
sold Licensed Products in the Field and in the Territory. Such license shall
additionally include the right to make or have made Bulk Licensed Compound in
all instances hereunder, and to the extent that, GENE acquires the right to make
or have made Bulk Licensed Compound hereunder. Such license shall be subject to
the terms and conditions of this Agreement, including payment of the amounts set
forth in Articles 4, 7 and 8 hereof

     5.2 Patent Licenses to Biosearch. GENE hereby grants to Biosearch an
exclusive (even as to GENE), paid-up license under GENE Patents to make, have
made, use, import, offer, sell, offer for sale and have sold (i) inside the
Territory, products containing the Licensed Compound in any Excluded Formulation
for any and all uses within the Field, and (ii) outside of the Territory,
products containing the Licensed Compound (including without limitation Licensed
Products) for any and all uses within the Field.
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     5.3 Know-How License to GENE. Subject to Article 9, Biosearch grants to
GENE a paid-up, nonexclusive license to use Biosearch Know-how within the
Territory for any purpose consistent with the rights and obligations contained
in this Agreement.

     5.4 Know-How License to Biosearch. Subject to Article 9, GENE grants to
Biosearch a paid-up, nonexclusive worldwide license to use GENE Know-how for any
purpose consistent with the rights and obligations contained in this Agreement.

     5.5 Sublicensing. GENE may not, unless with the prior written consent of
Biosearch which consent shall not be unreasonably withheld, grant sublicenses
under this Article 5 to its Affiliates or to Third Party agents and
representatives to conduct development and commercialization of Licensed
Products until a first registration is obtained for a Licensed Product.
Thereafter, sublicenses may be granted for commercial purposes only: GENE shall
in any event give prior written notice to Biosearch of any intention to grant
any such sublicense and shall be responsible to Biosearch for compliance by the
sublicensee of GENE's obligations hereunder.

     5.6 Right of Negotiation for ***** Formulations of the Licensed Compound
and Follow-up Products. If Biosearch wishes to offer to any Third Party the
opportunity to participate in the research, development and commercialization of
(i) products including ***** formulation of the Licensed Compound for any
indication in the Field and in the Territory, and/or (ii) Follow-up Products
which are *****, but which are being developed for the same indications for
which the formulations (other than Excluded Formulations) of the Licensed
Compound may be developed, Biosearch shall, prior to the time it first makes any
such offer to a Third Party, notify GENE of its intention to enter into such
discussions. If GENE requests within the ***** period following its receipt of
such notice to discuss with Biosearch the terms upon which GENE may research,
develop and commercialize in the Territory the Licensed Compound in a *****
formulation or the Follow-up Products, (either solely or jointly with
Biosearch), then the Parties shall meet and negotiate in good faith the
potential terms of an agreement on such terms. If the Parties do not enter into
such an agreement within ***** after GENE so requests to negotiate such
opportunity with Biosearch, then Biosearch shall thereafter be free to offer
such opportunity to a Third Party with respect to such ***** formulation of the
Licensed Compound of Follow-up Products; provided, however, that Biosearch (i)
must provide to GENE any information that Biosearch provides to any Third Party
that materially differs from the information that Biosearch provided to GENE
with respect thereto, in which case GENE may again exercise ***** under this
Section 5.6. and (ii) shall not enter into any Agreement with any Third Party
with respect to such ***** formulation or Follow-up Product on terms that are
***** during ***** referred to above. However, Biosearch shall not be
obligated to negotiate or enter into any agreement, either with a Third Party or
with GENE, with respect to the research, development and commercialization of
any such products.

     5.7 Third Party Technology.

          (a) Biosearch represents to GENE that no Third Party technology is
included in the Biosearch Patents or in the Biosearch Know-how as of the
Effective Date.

          (b) Biosearch will assist GENE in obtaining access to, and licenses
under, technology relating to Licensed Products that is owned or Controlled by
any Other Licensee which is developing or commercializing products containing
the Licensed Compound (including without limitation Licensed Products) outside
of the Territory, or products containing the Licensed Compound (including
without limitation Licensed Products) within the Territory, in each case solely
to the extent such technology is necessary or useful for the Development or
Commercialization of Licensed Products in the Field.

                                    ARTICLE 6

                                COMMERCIALIZATION
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         6.1 General. The Commercialization of Licensed Products in the Field
and in the Territory shall be conducted independently by GENE, its Affiliates,
its Sublicensees and its Third Party agents and representatives.

         6.2 GENE Efforts. GENE will use diligent efforts to promote, sell and
distribute the Licensed Products in the Territory after it obtains Regulatory
Approval therefor, consistent with accepted business practices for products of
equivalent commercial value and opportunity, and in any event shall commence
efforts to promote Licensed Products within six (6) months after obtaining
Regulatory Approval therefor, subject to Force Majeure or reasons beyond GENE's
reasonable control.

         6.3 Commercial. Within twenty (20) days prior to the beginning of each
year starting from the the ***** following the ***** and until the *****
following *****, GENE shall provide an annual sale forecast for the following
year. If GENE's ***** should be below ***** in any year by ***** then GENE shall
have an option of paying a ***** on the portion of sales ***** of the ***** to
maintain its exclusive position. Should GENE elect not to *****, Biosearch shall
have the right, but not the obligation, to *****, unless such ***** is due to
Force Majeure conditions or reasons beyond GENE's reasonable control. If the
right is *****, then GENE shall be obligated to provide to ***** access to its
***** of ***** in the Territory and cooperate with Biosearch in order to enable
the obtainment of the necessary ***** for *****. Nothwithstanding the foregoing,
in the event that the *****, Biosearch will continue to supply Bulk Licensed
Compound as per Article 7.

         6.4 Formulation, Packaging and Labeling. GENE will be responsible for
formulating Bulk Licensed Compound into final dosage form and packaging the
Licensed Product for sale under this Agreement, including, without limitation,
designing and producing all packaging materials and product inserts, all in
forms consistent with the requirements of the regulatory authorities in the
Territory.

         6.5 Expenses. All expenses incurred by GENE in connection with its
obligations under this Article 6 will be borne solely by GENE. GENE will be
responsible for appointing its own employees, agents and representatives, who
will be compensated by GENE.

         6.6 Restrictions on Distributors and Dealers. Subject to mandatory
provisions of applicable laws, Biosearch shall not, and shall also ensure that
its distributors and dealers (including its Affiliates and non-Affiliates) to
whom Biosearch sells for resale products containing the Licensed Compound
(including without limitation Licensed Products) for resale do not, sell the
Licensed Product or any product containing Licensed Compound for any use to any
customer located in the Territory, other than such sales of or for Excluded
Formulations of the Licensed Compound, or products containing the Licensed
Compound, for use in the Field.

         6.7 Pricing. GENE shall determine, in its sole discretion, the pricing,
discounting policy and other commercial terms relating to Licensed Products in
the Field and in the Territory.

                                   ARTICLE 7

            MANUFACTURE AND SUPPLY; TRANSFER PRICE AND SUPPLY PRICE

         7.1 Manufacture and Supply of Bulk Licensed Compound by Biosearch.
Subject to the terms and conditions of this Article 7, Biosearch will
manufacture, or arrange for manufacture of, GENE's requirements of Bulk Licensed
Compounds for Development and Commercialization of Licensed Products in the
Field and in the Territory (unless GENE elects or is permitted also to
manufacture Bulk Licensed Compound as permitted under this Article 7), subject
to the payment of a Transfer Price for preclinical and clinical supply pursuant
to Section 7.9 and a Supply Price for commercial supply as provided in Section
8.2. GENE, at its sole expense, will be
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responsible for having the Bulk Licensed Compound that is manufactured by
Biosearch pursuant to this Article 7 processed into the final form.

         7.2 Biosearch's Inability to Supply. The Parties intend that Biosearch
shall supply to GENE and GENE shall purchase from Biosearch one hundred percent
(100%) of GENE's requirements of Bulk Licensed Compound. Notwithstanding the
foregoing, and in addition to the other provisions of this Agreement, GENE shall
have manufacturing rights as follows:

                  (i)   Biosearch shall provide prompt notice to GENE if
Biosearch anticipates that it will be unable to meet GENE's forecasted
requirements for Bulk Licensed Compound by ***** or more for a period
exceeding*****. In this event, or if Biosearch is actually unable to meet GENE's
forecasted requirements for Bulk Licensed Compound by ***** or more for a period
exceeding *****, GENE shall have the right to produce or have produced through a
Third Party its requirements of Bulk Licensed Compound for use in the Field and
in the Territory and Biosearch shall license on a fully-paid basis and provide
to GENE or such Third Party all existing biological material, including without
limitation the most productive seed strains, and manufacturing know-how for such
manufacture.

                  (ii)  If Biosearch intends, any time during the initial term
of this agreement or any renewal period, to cease manufacturing the Bulk
Licensed Compound, it shall provide GENE with ***** written notice. In this
event GENE shall have the right to produce or have produced through a Third
Party its requirements of Bulk Licensed Compound for use in the Field and in the
Territory and Biosearch shall license on a fully-paid basis and provide to GENE
or such Third Party all existing biological material, including without
limitation the most productive seed strains, and manufacturing know-how for such
manufacture.

                  (iii) Upon the occurence of the events described under clause
(i) or (ii) above, Biosearch shall promptly, and shall cause its manufacturing
contractors to, cooperate with GENE to transfer to GENE or its designee, and
fully enable GENE or its designee with the then most current version of all
biological materials, know-how, and expertise necessary to manufacture the Bulk
Licensed Compound, including all production and quality control specifications.
GENE may use such materials to manufacture Bulk Licensed Compounds only as
provided in this Agreement. In regard to the foregoing, the Parties agree to
cooperate to obtain all necessary assurances and cooperation from any of
Biosearch's Third Party contract manufacturers to enable GENE to manufacture
Bulk Licensed Compound. If GENE elects to manufacture Bulk Licensed compounds,
Biosearch shall promptly provide to GENE all process and manufacturing
technology, material and data and provide access to regulatory filings
sufficient to enable GENE to produce its requirements of such Bulk Licensed
Compound. In addition, Biosearch shall provide a right of reference and access
to appropriate regulatory filings for the manufacture of such Bulk Licensed
Compound to GENE. In all such events, GENE shall not be released of its
obligation to pay the Royalty provided for under Section 8.2(b) below. In
addition to the foregoing, Biosearch shall, as soon as practicable upon GENE's
request, deliver to GENE, in accordance with Section 7.6 and Section 7.7, the
Retained Amount of Bulk Licensed Compound retained by Biosearch pursuant to
Section 7.11.

         7.3 Process Development, Manufacturing Approvals. Biosearch will use
diligent efforts to develop a process for the manufacture of Bulk Licensed
Compounds according to the Specifications therefor and to scale up that process
to a scale sufficient to manufacture and supply GENE's anticipated requirements
for clinical and commercial supply of Licensed Products. Biosearch will use
diligent efforts to make necessary filings to obtain, or to cause a Third Party
manufacturer of Bulk Licensed Compounds to make necessary filings to obtain,
Regulatory Approval for the manufacture of Bulk Licensed Compounds as part of
the approval of a Drug Approval Application for each Licensed Product in the
Field and in the Territory. Should Biosearch be unable to obtain Regulatory
Approval for the manufacturing process and facility of Bulk Licensed Compound,
then GENE shall have the right to contract with a Third Party for the Regulatory
Approval of a manufacturing process and facility and manufacture and supply of
its requirements of Bulk Licensed Compound under the terms and conditions of
Section 7.2.
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         7.4 Specifications. The current specifications for Bulk Licensed
Compound are attached to this Agreement as Exhibit II (as such specifications
may be modified pursuant to this Section, the "Specifications"). Biosearch shall
***** during the term of this Agreement make changes to the Specifications for
Bulk Licensed Compound without good reason and the prior approval of GENE.
Biosearch may modify Specifications if regulatory authorities within the
Territory recommend or require changes thereto, or if GENE submits a proposal
for changing such Specifications. Notwithstanding the previous sentence, both
Parties shall use their ***** to implement changes in the Specifications which
are required by the regulatory authorities within the Territory unless both
Parties agree to the contrary in writing. At the request of GENE, Biosearch
shall arrange for GENE's designated representatives to inspect and visit from
time to time the facilities at which Bulk Licensed Compound is manufactured,
stored or tested for the purpose of determining that the manufacture of Bulk
Licensed Compound complies with the requirements of this Agreement. Such
inspections shall occur during regular business hours upon reasonable notice.

         7.5 Forecasting. ***** days before the end of each ***** following the
Effective Date, GENE will provide Biosearch with a firm order for Bulk Licensed
Compound for the subsequent ***** together with a rolling forecast covering the
***** following the one for which the firm order was issued. The order for the
first ***** following the Effective Date will be provided within ***** days of
the Effective Date, and shall be subject to Biosearch's acceptance, not to be
unreasonably withheld. In no event shall Biosearch be required to deliver more
Bulk Licensed Compound in any given ***** than the firm order that was submitted
by GENE for such *****in the last applicable forecast. Biosearch shall use
commercially reasonable efforts to supply any additional quantities requested by
GENE in excess of the amounts previously forecasted by GENE, it being recognized
that substantial increases in production levels may require significant advance
notice.

         7.6 Shipment of Bulk Licensed Compound. Biosearch shall deliver the
Bulk Licensed Compound it manufactures for GENE pursuant to this Article 7 to
location(s) designated by GENE by such method and carrier as GENE shall request.
Unless otherwise agreed by the Parties, all shipments of Bulk Licensed Compound
by Biosearch shall be ex-works Biosearch. Biosearch shall use best efforts to
deliver Bulk Licensed Compound on the dates specified by GENE. Biosearch will
bear all transportation expenses for the delivery of material to GENE, and shall
bear all risk of loss of any material following shipment from the place of
manufacture until delivered to GENE.

         7.7 Invoices. Biosearch will invoice GENE for each shipment of material
supplied to GENE under this Article 7. GENE shall pay the relevant invoices
within ninety (90) days after its receipt thereof.

         7.8 Acceptance. Prior to shipment of Bulk Licensed Compound, Biosearch
will ship representative samples of each batch to be shipped to GENE. Upon
receipt of such sample and upon receipt of a shipment of Bulk Licensed Compound,
GENE may determine whether the sample and such shipment, respectively, meet the
Specifications. GENE shall notify Biosearch in writing promptly if such sample
or shipment of Bulk Licensed Compound, as applicable, manufactured by Biosearch
fails to meet the Specifications, therefor. If Biosearch has not received such
written notice within thirty (30) days after such material has been received by
GENE, then such shall be deemed to have met the Specifications. Upon receipt of
any such written notice of non-conformance, Biosearch shall either acknowledge
that the subject Bulk Licensed Compound does not meet the Specifications, or
resample the sample, lot or batch in question and have said samples tested by an
independent laboratory of its choice, acceptable to GENE. If such independent
laboratory determines that such samples fail to meet the Specifications or
Biosearch acknowledges that Bulk Licensed Compound is non-conforming, then
Biosearch shall at GENE's option either replace the non-conforming Bulk Licensed
Compound at no additional cost as soon as reasonably possible or refund any
payments made by GENE for such non-conforming materials.

         7.9 Transfer Price for Clinical Supply and Validation Process. Prior to
receipt of Regulatory Approval of the Licensed Product in the Territory, and
subject to Biosearch's obligation under Section 2.3(c) herein, GENE will
purchase clinical supplies of Bulk Licensed Compound at a price (the "Transfer
Price") equal to ***** of Bulk Licensed Compound.
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         7.10 Manufacturing Reports. The reports that Biosearch shall provide
pursuant to Section 2.4(a) shall include details of Biosearch's efforts to scale
up the manufacturing process for Bulk Licensed Compound at alternate sites
pursuant to Section 2.3.

         7.11 Retention of Back-up Supply of Bulk Licensed Compound. To help
protect against interruptions in supply of Bulk Licensed Compounds pursuant to
this Article 7, Biosearch shall retain under appropriate conditions a supply of
Bulk Licensed Compound at all times after the parties commence production of
Licensed Products for commercial launch in an amount determined pursuant to this
Section. GENE shall notify Biosearch at least ninety (90) days prior to
commencement of commercial scale manufacture of Licensed Product of the amount
of Bulk Licensed Compound that constitutes a sufficient supply for the purpose
of this Section 7.11 (the "Retained Amount"). GENE may re-establish the Retained
Amount from time to time as necessary or desirable in view of its good faith
estimate of its requirements for Bulk Licensed Compounds during the remainder of
the term of this Agreement.

         7.12 Discussions Regarding Long Term Supply Capacity. The parties
acknowledge that GENE will gain knowledge regarding the potential market for
Licensed Products in the Field and in the Territory as the development of
Licensed Products progresses. Accordingly, it is possible that GENE's full
commercial requirements for Bulk Licensed Compounds either upon commercial
launch of Licensed Products or thereafter may exceed the capacity at Biosearch's
manufacturing facility therefor. If at any time GENE's good faith estimate of
the market for Licensed Products indicates that Biosearch's current
manufacturing facility may not have sufficient capacity for manufacturing GENE's
requirements for Bulk Licensed Compound over the term of this Agreement, then
GENE and Biosearch shall discuss in good faith acceptable mechanisms for any
such actual or potential inability of Biosearch to supply GENE' requirements,
which may include without limitation for the establishment of a second
manufacturing site by Biosearch. If the parties do not agree on such mechanisms
for assuring sufficient supply of Bulk Licensed Compound and appropriate
amendments to this Agreement implementing such mechanisms, then GENE may elect
to establish a second manufacturing site.

                                    ARTICLE 8

            SUPPLY PRICE AND ROYALTY; PAYMENT PROCEDURES AND RECORDS

         8.1  Supply Obligation; Duration. During the term of this Agreement,
GENE shall purchase all of its requirements for Bulk Licensed Compound from
Biosearch, subject to Section 7. The price for commercial supply to GENE of all
Bulk Licensed Compound manufactured by Biosearch shall be as provided in Section
8.2. Gene will be obligated to pay only for batches that meet all commercial and
regulatory specifications and are accepted pursuant to Section 7.8.

         8.2  Supply Price and Royalty.

                  (a) In consideration of the manufacture of Bulk Licensed
Compound and the grant of licenses hereunder, GENE will pay to Biosearch a
supply price (the "Supply Price") and a royalty (the "Royalty") as described in
the table set forth below. The Supply Price will be ***** of Bulk Licensed
Compound. Except as otherwise set forth in this Section 8.2, the Royalty on
GENE's Net Sales will be equal to the ***** indicated in the table set forth
below and the *****.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                              Total Payment Due
--------------------------------------------------------------------------------------------------------------------
                                                        Non-Exclusive;                  Non-Exclusive;
                           Exclusive                 TBP can be determined          TBP cannot be determined
--------------------------------------------------------------------------------------------------------------------
<S>                  <C>                         <C>                                <C>
*****              Greater of ***** of Net     Greater of ***** of Net Sales or   ***** of Net Sales, but not
--------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
     from               Sales or ***** per gram        ***** per gram of Bulk Licensed         more than ***** per gram
 Effective Date             of Bulk Licensed           Compound, but reduced to TBP if            of Bulk Licensed
                                Compound               TBP is less than ***** per gram               Compound

 ----------------------------------------------------------------------------------------------------------------------------
 <S>                  <C>                             <C>                                     <C>
       *****          Greater of ***** of Net            Greater of ***** of Net Sale or       ***** of Net Sales, but not
                      Sales or ***** per gram              ***** per gram, but reduced           more than ***** per gram
        from             of Bulk Licensed               to TBP if TBP is less than *****              of Bulk Licensed
     Effective               Compound                              per gram                               Compound
       Date
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

As used above, the following terms shall have the following meanings:

         "Exclusive" shall mean all times that Third Party marketer(s) of
Ramoplanin have not achieved, in the aggregate, sales equal to or greater than
***** of GENE's sales.

         "Non-Exclusive" shall mean all times that Third Party marketer(s) of
Ramoplanin have achieved, in the aggregate, sales equal to or greater than *****
of GENE's sales.

         "TBP" shall mean the price for bulk Ramoplanin (defined as any product
or intermediate from which aformulation of ramoplanin, other than an Excluded
Formulation could be manufactured), as quoted by or sold by a Third Party
manufacturer to distributor(s) and/or marketer(s) of Ramoplanin. TBP shall be
considered determinable if either Party can determine such price to the
reasonable satisfaction of the other Party.

         Notwithstanding the foregoing, the Parties agree to the desirability of
maintaining a competitive price and competitive supply arrangements for Licensed
Products in the face of increased competition. In the event that the adjustments
to the total payments described in the table above are not able or are
inadequate to meet GENE's needs to modify GENE's costs for Licensed Products as
reasonably determined by GENE, the Parties hereby agree to negotiate in good
faith to establish other mechanisms as may be deemed necessary to maintain
competitiveness in the marketplace.

                  (b)   The Royalty payable by GENE hereunder shall be subject
to adjustment as follows:

                           (i)  If, during the first ***** following the
Effective Date, Biosearch ceases to supply Bulk Licensed Compound to GENE
pursuant to Article 7, then, (x) if, at the time Biosearch ceases to supply Bulk
Licensed Compound, GENE's sale of Licensed Products is Exclusive, GENE shall pay
Biosearch a Royalty equal to ***** and (y) if, at the time Biosearch ceases to
supply Bulk Licensed Compound, GENE's sale of Licensed Products is
Non-Exclusive, no Royalty shall be due to Biosearch hereunder.

                           (ii) If, after ***** following the Effective Date,
Biosearch ceases to supply Bulk Licensed Compound to GENE pursuant to Section
7.2, then no Royalty shall be due to Biosearch hereunder.

         8.3  Third Party Royalties.

                  (a) Any royalties due to Third Parties with respect to the
manufacture, use, sale, offer for sale or import of Licensed Product in the
Field and in the Territory shall be borne by Biosearch.

                  (b) Biosearch has agreed to pay IntraBiotics a royalty on Net
Sales pursuant to the transfer of the rights for Ramoplanin. Nothwithstanding
the provisions of Section 8.3(a), GENE has agreed to pay ***** of any royalty
paid by Biosearch pursuant to the transfer of Ramoplanin from IntraBiotics up to
a maximum of *****of Net Sales. GENE's obligation to pay its share of the
IntraBiotics royalty will continue throughout the term of the contract for so
long as such an obligation exists. GENE agrees to the principle of cooperating
in obtaining a
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reduction of the royalty to be paid to IntraBiotics in concert with Biosearch,
and subject to its express consent, sharing in possible costs to obtain such
reduction.

         8.4 Sales by Sublicensees. If GENE grants a sublicense under the rights
granted to it pursuant to Article 5, then such sublicense shall include an
obligation for the sublicensee to account for and report its Net Sales of such
Licensed Products on the same basis as if such sales were Net Sales by GENE, and
GENE shall pay the Supply Price to Biosearch on such sales as if the Net Sales
of the sublicensee were Net Sales of GENE.

         8.5 Promotional and Marketing Contributions; Validation Material.

                  (a) Biosearch will provide to GENE, free of charge and royalty
free, promptly upon GENE's request, up to ***** of activity ***** of Bulk
Licensed Compound, in any event not less than ***** of activity***** per year
during the period from ***** pre-launch through ***** post launch to contribute
to support GENE's promotional and marketing efforts.

                  (b) Biosearch has an obligation to produce ***** of Bulk
Licensed Compound for validation of the Biosearch manufacturing process and
facility. GENE has agreed to accept a maximum of ***** of this material. GENE
will accept ***** of this material as a credit toward its entitlement to free
goods allowance described in Section 8.5(a). GENE will pay for ***** of the
material at a price of *****. Payment will be due one hundred twenty (120) days
post launch a Licensed Product in the U.S. This material will be stored at
Biosearch until Gene needs to "run" the finished product manufacturing campaign.
GENE shall notify Biosearch when this material must be manufactured and the
material must meet the Specifications. GENE shall use such material to validate
its formulation and finishing process pursuant to 2.2(a). In the event that all
of the material is not required for the validation of GENE's formulation and
finishing process and the remaining shelf life of the unused material does not
allow for its formulation and finishing, then GENE shall not be obligated to pay
for such unused material but shall return it to Biosearch. The material will be
manufactured at the time indicated by GENE. In the event that the Licensed
Product becomes non-exclusive in the territory, prior to the time at which
Biosearch has fulfilled its obligations under this clause, the price to be paid
for this material will be reduced to the TBP if the TBP is less than *****.

         8.6 Supply Price Payments, Royalty Payments and Sublicense Revenue
Payments.

                  (a) Biosearch shall deliver Bulk Licensed Product and shall
invoice GENE at the Supply Price. GENE shall notify Biosearch of its receipt
thereof and pay such invoices within ninety (90) days after receipt of such Bulk
Licensed Compound.

                  (b) GENE will deliver to Biosearch a report showing in detail
its calculation of the Net Sales and quantities of any Licensed Products sold
during a given ***** within thirty (30) days following the end of such ***** and
sixty (60) days following the end of each calendar year for which Royalty or
other royalty payments are due from GENE. GENE shall pay the Royalty or other
royalty due on Net Sales or quantity of Licensed Product sold during the *****
covered by a given report under this Section 8.6(b) within thirty (30) days
after GENE provides such report to Biosearch.

                  (c) GENE will deliver a report showing in detail its
calculation of the Net Sales and quantities of any Licensed Products sold by
GENE's sublicensees during a given ***** to Biosearch within thirty (30) days
following the end of each ***** and sixty (60) days following the end of each
calendar year for which payments are due from GENE to Biosearch thereon. GENE
shall pay the amounts due to Biosearch on Net Sales and quantities of Licensed
Product sold by GENE's sublicensees pursuant to Section 8.2 and 8.3 for a given
***** covered by such reports within thirty (30) days after GENE provides such
report to Biosearch.

         8.7 Exchange Rate; Manner and Place of Payment. All amounts paid to
Biosearch hereunder shall be paid in United States currency. Net Sales shall be
accounted for on a ***** basis in U.S. Dollars for each month
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on the last banking day of such ***** . All payments due to Biosearch under this
Agreement shall be made by wire transfer at a bank and to an account designated
by Biosearch, unless otherwise specified by Biosearch.

         8.8  Late Payments. In the event that any payment due hereunder is not
made when due, interest shall accrue on the late payment from the due date of
such payment at the ***** as then quoted in the Wall Street Journal. The payment
of such interest shall not limit any Party from exercising any other rights it
may have as a consequence of the lateness of the payment.

         8.9  Record Keeping. During the term of this Agreement, GENE shall keep
full and accurate books and records setting forth, for the Licensed Product on
which payments are due, including gross sales, all deductions allowed in
arriving at Net Sales and any other information necessary and in sufficient
detail to allow the calculation of payments to be paid by GENE. During the term
of this Agreement and for a period of ***** thereafter, GENE shall permit
Biosearch, at Biosearch's expense, by independent certified public accountants
employed by Biosearch and reasonably acceptable to GENE, to examine relevant
books and records at any reasonable time, not more often than once each calendar
year, within ***** of any such payment. If it is determined that there was an
underpayment due Biosearch of ***** or more, without prejudice to any other
rights Biosearch may have, GENE shall promptly pay to Biosearch the balance of
the amounts due and shall also reimburse Biosearch for the cost of such
verification examination.

         8.10 Tax and Withholdings. Any withholding taxes levied by tax
authorities in the Territory on the payments hereunder, to the extent due by
Biosearch and not transferable upon GENE, shall be borne by Biosearch and
deducted by GENE from the sums otherwise payable by it hereunder for payment to
the proper tax authorities on behalf of Biosearch. In such event, GENE shall
deliver to Biosearch evidence of the payment of such taxes. GENE agrees to
cooperate with Biosearch in the event Biosearch claims exemption from such
withholding or seeks deductions under any double taxation or other similar
treaty or agreement from time to time in force.

                                    ARTICLE 9

                                 CONFIDENTIALITY

         9.1  Confidentiality; Exceptions. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, the receiving Party shall keep confidential and shall not publish or
otherwise disclose or use for any purpose other than as provided for in this
Agreement any Information and other information and materials furnished to it by
the other Party pursuant to this Agreement, or any provisions of this Agreement
that are the subject of an effective order of the Securities Exchange Commission
granting confidential treatment pursuant to the Securities Act of 1934, as
amended (collectively, "Confidential Information"), except to the extent that it
can be established by the receiving Party that such Confidential Information:

              (a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;

              (b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;

              (c) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of this Agreement; or

              (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 to others.
----------
*Confidential Treatment has been requested for the marked portions.

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        9.2 Authorized Disclosure. Each Party may disclose Confidential
Information hereunder to the extent such disclosure is reasonably necessary in
filing or prosecuting patent applications, prosecuting or defending litigation,
complying with applicable governmental regulations or conducting preclinical or
clinical trials, provided that if a Party is required by law or regulation to
make any such disclosure of the other Party's Confidential Information it will,
except where impracticable for necessary disclosures (for example in the event
of medical emergency), give reasonable advance notice to the other Party of such
disclosure requirement and, except to the extent inappropriate in the case of
patent applications, will use its reasonable efforts to secure confidential
treatment of such Confidential Information required to be disclosed. In
addition, each Party shall be entitled to disclose, under a binder of
confidentiality containing provisions as protective as those of this Article 9,
Confidential Information to any Third Party for the purpose of carrying out
activities authorized under this Agreement, including disclosures to authorized
sublicensees, and subject to Sections 2.5 and 2.6 disclosures by Biosearch for
purposes of the development and commercialization of products other than
Licensed Products anywhere in the world outside of the Field, and of Licensed
Products either outside of the Field and within the Territory, or within the
Field and outside of the Territory. Nothing in this Article 9 shall restrict any
Party from using for any purpose any Information developed by it during the
course of the collaboration hereunder. Biosearch acknowledges that if GENE files
a required Securities Exchange Commission filing or registration statement
covering the sale of its securities in the United States, it will be required to
file a copy of this Agreement with its public disclosure statement. GENE agrees
to seek confidential treatment of at least the economic terms of this Agreement
with respect to any such filing.

        9.3  Publications. Except as required by law, each Party agrees that it
shall not publish or present Information relating to the Licensed Compound or to
products containing the Licensed Compound without providing to the other Party
the opportunity for prior review of such publication or presentation. The Party
desiring to publish or present such Information (the "Proposing Party") shall
provide to the other Party the opportunity to review such proposed publication
or presentation (including information to be presented verbally) as early as
reasonably practical, but not later than twenty (20) days prior to the
anticipated date of submission or disclosure to a Third Party. The Party
reviewing such publication or presentation shall respond to the Proposing Party
with comments thereon within ten (10) days of receiving such materials from the
Proposing Party. The Proposing Party agrees, upon written request from the other
Party, not to submit such abstract or manuscript for publication or to make such
presentation until the other Party consents, which agreement shall not be
unreasonably withheld.

        This Article 9 shall survive termination or expiration of this Agreement
for a period of five (5) years thereafter.

                                   ARTICLE 10

              OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS

        10.1 Ownership. Each Party shall solely own, and it alone shall have
the right to apply for, Patents within and outside of the Territory for any
inventions made solely by that Party's employees or consultants in the course of
performing work under this Agreement. Inventions made jointly by personnel of
Biosearch and GENE shall be jointly owned by the Parties ("Joint Patents"),
subject to the licenses granted to GENE pursuant to Article 5.

        10.2 Disclosure of Patentable Inventions. Each Party shall provide to
the other any patent application disclosing an invention or jointly conceived
invention relating to Licensed Products within the Field arising during the term
of this Agreement reasonably in advance of the intended date for submission of
any patent application to a governmental patent authority.

        10.3 Patent Filings.

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              (a) Biosearch Responsibilities. Biosearch shall prepare, file,
prosecute and maintain Patents to cover inventions relating to the discovery,
evaluation, manufacture, use or sale of Licensed Products that are made solely
by Biosearch personnel (all of which shall be included in the Biosearch Patents)
or that are made jointly by personnel of Biosearch and GENE in the course of the
collaboration ("Joint Patents", all of which shall be included in both the
Biosearch Patents and GENE Patents). Biosearch shall keep GENE informed of the
status of each such Biosearch Patent and Joint Patent and shall give reasonable
consideration to any suggestions or recommendations of GENE concerning the
preparation, filing, prosecution and maintenance thereof. The Parties shall
cooperate reasonably in the prosecution of all Biosearch Patents and Joint
Patents under this Section 10.3(a) and shall share all material Information
relating thereto promptly after receipt of such Information. If, during the term
of this Agreement, Biosearch intends to allow any issued Biosearch Patent or
Joint Patent to which GENE has a license under this Agreement to expire for
failure to make maintenance fee payments, Biosearch shall notify GENE of such
intention at least sixty (60) days prior to the date upon which such issued
Biosearch Patent or Joint Patent shall expire, and GENE shall thereupon have the
right, but not the obligation, to assume responsibility for the maintenance
thereof

              (b) GENE Responsibilities. GENE shall file, prosecute and maintain
Patents to cover inventions relating to the discovery, evaluation, manufacture,
use or sale of Licensed Products that are made solely by GENE personnel (all of
which shall be included in GENE Patents). GENE shall keep Biosearch informed of
the status of each GENE Patent and shall give reasonable consideration to any
suggestions or recommendations of Biosearch concerning the preparation, filing,
prosecution and maintenance thereof. The Parties shall cooperate reasonably in
the prosecution of all GENE Patents under this Section 10.3(b) and shall share
all material Information relating thereto promptly after receipt of such
Information. If, during the term of this Agreement, GENE intends to allow any
issued GENE Patent to which Biosearch has a license under this Agreement to
expire for failure to make maintenance fee payments, GENE shall notify Biosearch
of such intention at least sixty (60) days prior to the date upon which such
GENE Patent shall expire, and Biosearch shall thereupon have the right, but not
the obligation, to assume responsibility for the maintenance thereof.

         10.4 Third Party Patent Rights. No Party makes any warranty with
respect to the validity, perfection or dominance of any Patent or other
proprietary right or with respect to the absence of rights in Third Parties
which may be infringed by the manufacture or sale of the Licensed Product. Each
Party agrees to bring to the attention of the other Party any patent or patent
application it discovers, or has discovered, and which relates to the subject
matter of this Agreement.

         10.5 Enforcement Rights.

              (a) Infringement by Third Parties. If any Biosearch Patent or GENE
Patent is infringed by a Third Party in the Territory in connection with the
manufacture, import, use, sale or offer for sale of a product competitive with a
Licensed Product ("Competitive Product Infringement"), the Party to this
Agreement first having knowledge of such infringement shall promptly notify the
other in writing. The notice shall set forth the facts of that infringement in
reasonable detail. GENE shall have the primary right, but not the obligation, to
institute, prosecute or control any action or proceeding with respect to such
infringement of a Biosearch Patent or Joint Patent within the Field and within
the Territory, or of a GENE Patent anywhere in the world both within and outside
of the Field, by counsel of its own choice. Biosearch shall have the right to
participate in such action and to be represented by counsel of its own choice.
Biosearch shall have the primary right, but not the obligation, to institute,
prosecute, and control any action or proceeding with respect to such
infringement of Biosearch Patents or Joint Patent occurring within the Territory
that is outside of the Field, or occurring anywhere else in the world both
within and outside of the Field, by counsel of its own choice. Solely within the
Territory with respect to Biosearch Patents other than Joint Patents and
anywhere in the World with respect to Joint Patents, GENE shall have the right
to participate in such action brought by Biosearch pursuant to the foregoing
sentence and to be

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represented by counsel of its own choice therein. If the Party primarily
responsible for bringing suit under this Section 10.5(a) (the "Responsible
Party") fails to bring an action or proceeding within a period of ninety (90)
days after having knowledge of that infringement, then, solely with respect to
infringement occurring inside the Field and inside the Territory with respect to
infringement of patents, the other Party shall have the right to bring and
control any such action by counsel of its own choice, and the Responsible Party
shall have the right to participate in such action and be represented by counsel
of its own choice. If a Responsible Party brings any such action or proceeding
hereunder, the other Party agrees to be joined as a party plaintiff and to give
the Responsible Party reasonable assistance and authority to control, file and
prosecute the suit as necessary. The costs and expenses of the Party bringing
suit under this Section (including the internal costs and expenses specifically
attributable to said suit) shall be reimbursed first out of any damages or other
monetary awards recovered in favor of the Parties. Any remaining damages shall
be split in accordance with each Party's interest therein. No settlement or
consent judgment or other voluntary final disposition of a suit under this
Section 10.5(a) may be entered into without the joint consent of Biosearch and
GENE.

              (b) Defense and SettIement of Third Party Claims against Licensed
Products. If a Third Party asserts that a patent or other right owned by it is
infringed by the manufacture, import, use, sale or offer for sale of any
Licensed Product, the Party first obtaining knowledge of such a claim shall
immediately provide the other Party notice of such claim and the related facts
in reasonable detail. Defense of any such claim in the Field and in the
Territory shall be controlled by GENE; provided that Biosearch shall have the
right to participate in such defense and to be represented in any such action by
counsel of its selection at its sole discretion. GENE shall also have the right
to control settlement of such claim with respect to a Licensed Product in the
Field and in the Territory; provided, however, that no settlement shall be
entered into without the written consent of Biosearch, which consent shall not
be withheld unreasonably.

              (c) Allocation of Expenses Incurred Pursuant to Section 10.5(b).
The expenses of patent defense, settlement and judgments pursuant to Section
10.5(b) with respect to the Licensed Products shall be borne solely by GENE,
except as provided in Section 10.5(d).

              (d) Settlement of Third Party Claims for Infringement; Payment of
Third Party Royalties. If a Third Party asserts that a patent or other right
owned by it is infringed by the manufacture, use, sale, offer for sale or import
of any Licensed Product, and as a result of settlement procedures or litigation
under this Section 10.5, GENE is required to pay the Third Party a royalty or
make any payment of any kind for the right to sell a Licensed Product in a
particular country, such expense shall be borne by Biosearch as set forth in
Section 8.3.

              (e) Agreement of Primarily Responsible Party. Notwithstanding the
provisions of Section 10.5(a), neither Party shall file and prosecute an action
for infringement of a Patent for which the other Party has the primary
responsibility to file and prosecute such action, and pursuant to which that
other Party having primary responsibility has commenced and is prosecuting at
least one such action for infringement of said Patent, without the agreement of
that other Party, which agreement shall not be unreasonably withheld.

         10.6 Patent Marking. GENE shall mark Licensed Products with appropriate
patent numbers or indicia as necessary to maintain the enforceability of
Biosearch Patents, Joint Patents and GENE Patents.

         10.7 Trademarks and Trade Names.

              (a) Product Trademarks and Trade Names. The Parties agree to the
principle and desirability of identifying and registering with the appropriate
trademark authorities global trademark(s) ("Global Trademarks") and global trade
name(s) ("Global Trade Names") for Licensed Products and Bulk Licensed Compound.
Such Global Trademarks and Global Trade Names for Licensed Products and Licensed
Compound shall at all times be the exclusive property of Biosearch. Subject to
the following paragraph, Biosearch and GENE shall jointly select, prosecute
applications for, register, maintain and enforce the Global Trademarks and
Global Trade Names for Licensed Products in the Territory, at Biosearch's
expense. All uses of trademarks or trade

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names to identify a Licensed Product shall comply with all applicable laws and
regulations, including without limitation those laws and regulations
particularly applying to the proper use and designation of trademarks and trade
names.

       Should it be determined by GENE that a Global Trademark or Global Trade
Name is unavailable or becomes the subject of an opposition in the Territory, or
should the Parties be unable to reach agreement on such Global Trademark or
Global Trade Name, GENE shall have the right to select, prosecute applications
for, register, maintain and enforce trademarks and trade names for Licensed
Products in the Territory ("Territory Trademarks" and "Territory Trade Names",
respectively) at its own expense. Such Territory Trademarks and Territory Trade
Names shall at all times be the exclusive property of GENE.

       Notwithstanding the foregoing, without limitation all branding, logos,
indicia and trade dress, shall be developed by GENE in its sole discretion for
use in the Territory, whether for use with a Territory Trademark or Territory
Trade Name. Such branding, logos, indicia and trade dress, without limitation,
shall be the exclusive property of GENE and may be licensed to Biosearch, at
Biosearch's request, for the exclusive use with Licensed Products outside the
Territory on a royalty-free basis.

              (b) Infringement. Each Party shall notify the other Party promptly
upon learning of any actual, alleged or threatened infringement of the trademark
for Licensed Product in the Field and in the Territory or of any unfair trade
practices, trade dress imitation, passing off of counterfeit goods or like
offenses. The parties shall confer regarding the appropriate steps necessary or
useful to protect, enforce and maintain such trademark. GENE shall make the
final decision of whether and how to defend the trademark.

              (c) License. Biosearch hereby grants to GENE a fully paid license
to use all Global Trademarks and Global Trade Names and any other Trademarks and
Trade Names owned or Controlled by Biosearch under which Biosearch sells and
markets products containing the Bulk Licensed Compound solely in connection with
GENE's Development and Commercialization of Licensed Products in the Field and
in the Territory pursuant to this Agreement. GENE may sublicense any rights
under the Biosearch Global Trademarks and/or Global Trade Names persuant to
Section 5.5 of this Agreement. GENE hereby grants to Biosearch a fully paid
license to use any Territory Trademarks and Territory Trade Names solely in
connection with Biosearch's Development and Commercialization of products
containing Bulk Licensed Compound in the Field outside of the Territory.
Biosearch may not sublicense any right under the Territory Trademark or
Territory Trade Name with out the prior written consent of GENE.

       10.8 Trade Secrets. The parties each acknowledge that Biosearch maintains
certain technology useful for the manufacture of the Bulk Licensed Compound as a
trade secret and that accordingly Biosearch has chosen not to seek patent
protection on such technology. Biosearch hereby agrees that it shall use all
commercially reasonable efforts to maintain such technology as a trade secret
(unless and until Biosearch files a patent application claiming such
technology), including without limitation (i) disclosing such technology to
third parties only under an obligation of confidentiality and non-use with
respect thereto comparable in scope to the confidentiality and non-use
obligations set forth in Article 9 with respect to Confidential Information,
(ii) not disclosing any trade secrets in any public presentation or publication
and (iii) employing other mechanisms typically used in the pharmaceutical
industry to protect trade secrets of similar nature.

                                   ARTICLE 11

                              TERM AND TERMINATION

       11.1 Term. Except as otherwise provided herein, the term of this
Agreement shall commence on the Effective Date and, unless earlier terminated as
provided in this Agreement, shall expire ten (10) years after first commercial
sale of a Licensed Product by GENE in the Field and in the Territory. In the
event that at any time

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during the term of this Agreement, Biosearch is merged into or acquired by a
Third Party or sells to a Third Party all or substantially all of the assets to
which this Agreement relates, GENE shall have an option, exercisable at any time
prior to the expiration of the term, to extend the agreement for an additional
five (5) years up to a total of fifteen (15) years under the same terms and
conditions stated herein, and at no additional economic terms. Except as
provided under Section 8.5, the terms and conditions of this Agreement will
automatically renew for subsequent periods of two (2) years at the end of the
initial ten year term, subject to either party's right not to renew, to be
communicated in writing to the other party with at least one (1) year advance
notice; provided that Biosearch's right to not renew the term of this Agreement
shall, in any event, be subject to Biosearch's obligation to provide a minimum
of two (2) years notice to GENE if Biosearch should choose not to supply Bulk
Licensed Compound, pursuant to Section 7.2(ii). In this event, Biosearch will
supply GENE the manufacturing know-how and the most productive seed strain to
enable GENE to produce or have produced the Bulk Licensed Compound. Upon
termination of this Agreement pursuant to this Section 11.1, GENE's license
under Article 5 shall continue in full force and effect and GENE may thereafter
continue to sell Licensed Products in the Field and in the Territory on a
royalty free basis.

       11.2 Termination for Cause. Either Party may terminate this Agreement
upon sixty (60) days written notice upon or after the breach of any material
provision of this Agreement by the other Party if the breaching Party has not
cured such breach within the sixty (60) day period following written notice of
termination by the other Party.

       11.3 Other Termination.

              (a) By GENE. GENE shall have the right to terminate this Agreement
upon ninety (90) days prior written notice to Biosearch if the prospects for
achieving Regulatory Approval for a Licensed Product or commercially feasible
Development or Commercialization of a Licensed Product appear in GENE's
reasonable judgment not to justify further support of the Licensed Product.

              (b) By Biosearch. If the NDA for the US has not been filed by GENE
by *****, unless due to force majeure conditions or reasons beyond GENE's
reasonable control (with the agreement that this date and clause shall at all
times be kept confidential), Biosearch shall have the right to terminate this
Agreement, and will have the right to acquire or have returned, in any event at
no cost, all rights, authorizations, approvals, materials and information
concerning Ramoplanin developed by or licensed to GENE.

       11.4 Effect of Termination.

              (a) Upon termination of this Agreement by Biosearch for GENE's
material breach pursuant to Sections 11.2, or by GENE pursuant to Section 11.3,
all rights and licenses granted to GENE with respect to the Licensed Product
under Article 5 shall terminate. Furthermore, GENE shall pay all sums accrued
hereunder which are then due (except as expressly otherwise provided in this
Agreement), shall promptly assign to Biosearch all right, title and interest in
and to any regulatory filings in the Territory pertaining to Licensed Products
and shall deliver to Biosearch any GENE Information necessary to obtain the
Regulatory Approval of Licensed Products in the Territory which has not been
obtained as of the date of termination. If this Agreement is terminated by
Biosearch pursuant to Section 11.2 or 11.3(b), or by GENE pursuant to Section
11.3(a), GENE shall return to Biosearch, or at Biosearch's request destroy, all
Biosearch Information and any other Confidential Information relating to the
Licensed Compound or Licensed Products, and any Bulk Licensed Compound supplied
by Biosearch for clinical development or commercial distribution. Additionally,
if Biosearch terminates this Agreement pursuant to Section 11.2 or GENE
terminates this Agreement pursuant to Section 11.3, the license granted in
Section 5.2 shall automatically become, without any further action by GENE, an
exclusive, worldwide, royalty-free license under the GENE Patents to make, have
made, use, import, offer, sell, offer for sale and have sold the Licensed
Compound and pharmaceutical products containing the Licensed Compound (including
without limitation Licensed Products) for any and all uses.

-------------
*Confidential Treatment has been requested for the marked portions.

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              (b) Upon termination of this Agreement by GENE for Biosearch's
material breach pursuant to Section 11.2, all licenses granted to GENE shall
survive. If Biosearch is supplying Licensed Bulk Compound at the time of any
termination by GENE of this Agreement for Biosearch's material breach, Biosearch
shall continue to provide for supply of Bulk Licensed Compound to the extent
provided prior to notice of such termination until such time as GENE is able to
secure an equivalent alternative commercial supply source for the Territory, as
requested by GENE; and Biosearch shall take the actions described in and be
obligated under Section 7.2(iii); provided, however, that GENE shall pay to
Biosearch its Cost of Goods Sold for such Bulk Licensed Compound. Any additional
payments for such supply shall be negotiated between the Parties at such time of
termination.

        11.5  Accrued Rights, Surviving Obligations. Termination of this
Agreement shall not affect any accrued rights and remedies of either Party.
Additionally, the terms of Articles 7 (solely to the extent required to effect
the intent of Section 11.4, if applicable), 8 (solely to the extent required to
effect the intent of Section 11.4, if applicable), 9, 12, 13 and 14, as well as
Sections 10.2 through 10.8, 11.4, 11.5, of this Agreement shall survive any
termination or expiration of this Agreement.

                                   ARTICLE 12

                         REPRESENTATIONS AND WARRANTIES

        12.1  Mutual Representations and Warranties. Each Party hereby
represents and warrants:

              (a) Corporate Power. Such Party is duly organized and validly
existing under the laws of the state or country of its incorporation and has
full corporate power and authority to enter into this Agreement and to carry out
the provisions, hereof.

              (b) Due Authorization. Such Party is duly authorized to execute
and deliver this Agreement and to perform its obligations hereunder.

              (c) Binding Agreement. This Agreement is a legal and valid
obligation binding upon it and enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by such Party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a Party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it. Such Party has not, and during the term of the
Agreement will not, grant any right to any Third Party with respect to its
Patents or Know-how that would conflict with the rights granted to the other
Party hereunder.

        12.2  Representations by Biosearch Regarding Manufacture of Bulk
Licensed Compounds. Biosearch hereby warrants that the Bulk Licensed Compound
supplied hereunder will:

              (a) comply with the Specifications then in effect for Bulk
Licensed Compound;

              (b) be manufactured, stored and shipped in compliance with all
applicable regional, federal, state and local laws and governmental regulations,
including without limitation the applicable current Good Manufacturing Practices
regulations;

              (e) when shipped, will not be adulterated or misbranded within the
meaning of the Federal Food, Drug & Cosmetic Act and the regulations promulgated
thereunder; and

              (d) be manufactured in accordance with all applicable laws and
governmental rules and regulations.

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              (e) be manufactured in a manner that does not involve any
infringement or unauthorized use of any intellectual property rights of any
Third Party.

       12.3 Other Representations by Biosearch. Biosearch further represents and
warrants to GENE that:

              (a) to the best of Biosearch's knowledge on the Effective Date,
there are no interferences or oppositions pending before any court or
administrative office or agency relating the Biosearch Patents;

              (b) Biosearch has provided to GENE access to all clinical records
which describe all adverse event reports relating to Licensed Products; and

              (c) Biosearch owns all right, title and interest in and to IND No.
56341 and all subsequent filings thereunder, and Biosearch owns or controls all
rights necessary to grant the rights Biosearch purports to grant to GENE
pursuant to this Agreement; and

              (d) as of the Effective Date, Biosearch has not received any
notices of infringement or any written communications relating in any way to a
possible infringement with respect to the Licensed Compound or Licensed Products
in the Field, and is not aware that the practice of the Biosearch Patents and
Biosearch Know-how as contemplated by this Agreement will involve any
infringement or unauthorized use of any intellectual property nights of any
Third Party.

              (e) Biosearch has concluded an agreement with IntraBiotics (the
IntraBiotics Agreement) under which it is obligated to pay a royalty on sales of
Licensed Products in the Territory.

              (f) Biosearch has on-hand or will supply within sixty (60) days of
the Effective Date, such clinical supplies as are necessary to complete
Development of Licensed Product within the Territory.

              (g) Biosearch will be responsible in full for all costs of
Development prior to the Effective Date. Biosearch warrants that it has entered
into contractual relationships with previous employees of IntraBiotics, as well
as previous contractors of clinical development services to IntraBiotics,
including, but not limited to Contract Research Organizations, Third-Party
manufacturers, investigative sites, microbiology and clinical laboratories, in
order to continue the development of Licensed Products within the Territory.
Biosearch shall provide copies of all contracts with these consultants and
contractors to GENE, prior to the Effective Date and will make best efforts to
work closely with GENE to transfer or assign these relationships to GENE in an
orderly fashion to permit a smooth transition in accordance with Section
2.3(a)(iii).

       12.4 Disclaimer of Warranties. The Parties understand that the activities
to be undertaken pursuant to this Agreement will involve technologies and
products that have not been approved by any regulatory authority and that
neither Party guarantees the safety or usefulness of the Licensed Products.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY NATURE, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION ANY WARRANTY OF NONINFRINGEMENT, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.

                                   ARTICLE 13

                                 INDEMNIFICATION

       13.1 Indemnification by Biosearch. Biosearch hereby agrees to indemnify,
hold harmless and defend GENE against any and all expenses, costs of defense
(including without limitation attorneys' fees, witness fees, damages, judgments,
fines and amounts paid in settlement) and any amounts GENE becomes legally
obligated to

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pay because of any Third Party claim or claims against it to the extent that
such claim or claims result from (i) Biosearch's negligence, (ii) Biosearch's
breach or alleged breach of any representation or warranty by Biosearch or of
any other provision of this Agreement; (iii) any claims of breach of the
IntraBiotics Agreement which may be brought against GENE; (iv) any claims from
third parties, consultants, employees and contractors concerning Development
activities prior to the Effective Date, whether conducted on behalf of
Biosearch, IntraBiotics or any other Third Party; or the possession,
manufacture, use, handling, storage, sale or other disposition of Bulk Licensed
Compound or of products containing the Licensed Compound by Biosearch, its
agents or licensees or sublicensees (other than GENE), except to the extent such
claim or claims arise from the negligence, recklessness or willful misconduct of
GENE or any breach of any representation or warranty of GENE made pursuant to
Section 12; provided that GENE provides Biosearch with prompt notice of any such
claim and the exclusive ability to defend (with the reasonable cooperation of
GENE) and settle any such claim. Any liability of Biosearch shall in no event
extend to consequential damages.

       13.2 Indemnification by GENE. GENE hereby agrees to indemnify, hold
harmless and defend Biosearch against any and all expenses, costs of defense
(including without limitation attorneys' fees, witness fees, damages, judgments,
fines and amounts paid in settlement) and any amounts Biosearch becomes legally
obligated to pay because of any Third Party claim or claims against it to the
extent that such claim or claims arise out of (i) GENE's negligence,
recklessness or willful misconduct, (ii) GENE's breach or alleged breach of any
representation or warranty by GENE or of any other provision of this Agreement,
(iii) the possession, final manufacture, use, sale or administration of Licensed
Products by GENE or GENE's Affiliates, licensees or sublicensees, except to the
extent such claim or claims arise from the negligence, recklessness or willful
misconduct of Biosearch or any breach of any representation or warranty of
Biosearch made pursuant to Section 12; provided that Biosearch provides GENE
with prompt notice of any such claim and the exclusive ability to defend (with
the reasonable cooperation of Biosearch) or settle any such claim, and provided
further that such indemnities shall not apply to losses resulting from Biosearch
matters covered under Section 13.1 above.

       13.3 Mechanics. In the event that the parties cannot agree as to the
application of Sections 13.1 and 13.2 above to any particular loss or claim, the
parties may conduct separate defenses of such claim. Each Party further reserves
the right to claim indemnity from the other in accordance with Sections 13.1 and
13.2 above upon resolution of the underlying claim, notwithstanding the
provisions of Sections 13.1 and 13.2 above requiring the indemnified Party to
tender to the indemnifying Party the exclusive ability to defend such claim or
suit.

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                                   ARTICLE 14

                                  MISCELLANEOUS

       14.1 Assignment.

              (a) Either Party may assign any of its rights or obligations under
this Agreement to any Affiliates; provided, however, that such assignment shall
not relieve the assigning Party of its responsibilities for performance of its
obligations under this Agreement, and further provided that if a proposed
assignment would have an adverse financial impact upon the other Party (e.g., by
reason of changed tax treatment of payments due under this Agreement), such
assignment shall be subject to the other Party's prior written consent.

              (b) This Agreement shall survive any such merger or reorganization
of either Party with or into another party and no consent for such merger or
reorganization shall be required hereunder; provided, that in the event of such
merger or reorganization, no intellectual property rights of the acquiring
corporation shall be included in the technology licensed hereunder.

              (c) Except as set forth in subsections (a) and (b), this agreement
may not be assigned by either Party without the prior consent of the other
Party. This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the Parties. Any assignment not in
accordance with this Agreement shall be void.

       14.2 Dispute Resolution.

              (a) The Parties recognize that disputes as to certain matters may
from time to time arise during the term of this Agreement which relate to either
Party's rights and/or obligations hereunder or thereunder. It is the objective
of the Parties to establish procedures to facilitate the resolution of disputes
arising under this Agreement in an expedient manner by mutual cooperation. To
accomplish this objective, the Parties agree to follow the procedures set forth
in this Articie 14 if and when a dispute arises under this Agreement.

       Unless otherwise specifically recited in this Agreement, disputes among
the Parties will be resolved by reference first to their respective executive
officers designated below or their successors, for attempted resolution by good
faith negotiations within fourteen (14) days after such notice is received. Said
designated officers are as follows:

       For GENE:                     Chief Executive Officer

       For Biosearch:                Chairman of the Board / Managing Director

       In the event the designated executive officers are not able to resolve
such dispute, either Party may at anytime after the fourteen (14) day period
seek to resolve the dispute through the means provided in Section 14.2(b).

              (b) Any claim or controversy arising out of or related to this
Agreement or any breach hereof that is not resolved by the designated officers
as provided in this Agreement shall be resolved solely and exclusively by final
and binding arbitration (i) if started by Biosearch, in Boston, MA, USA by a
panel of three arbitrators appointed and acting according to the then existing
rules of the JAMS/Endispute; and (ii) if started by GENE, in Milan, Italy, by a
panel of three arbitrators appointed and acting according to the International
Rules then in force of the National and International Arbitration Chamber of
Milan. The arbitrator(s) selected shall have significant experience in the
biotechnology or pharmaceutical industry, and shall apply the rules of law. Any
arbitration proceeding conducted pursuant to this Section 14.2(b) shall be
conducted in the English language. Any award made by such arbitrator(s) shall be
final and binding upon the parties and a judgment of a court having jurisdiction

Page 26

<PAGE>

may be entered on such award. Notwithstanding the foregoing, disputes regarding
the validity, scope or enforceability of patents shall be submitted to a court
of competent jurisdiction in the country where such patent has issued.

       14.3 Force Majeure. Save as provided in Section 4.2 above, neither Party
shall lose any rights hereunder or be liable to the other Party for damages or
losses on account of failure of performance by the defaulting Party if the
fallure is occasioned by government action, war, fire, explosion, flood, strike,
lockout, earthquake, embargo, act of God, or any other similar cause beyond the
control of the defaulting Party, provided that the Party claiming force majeure
has exerted all reasonable efforts to avoid or remedy such Force Majeure.

       14.4 Compliance with Law. Each Party hereto shall comply with all
applicable laws, rules, ordinances, guidelines, consent decrees and regulations
of any applicable federal, state or other governmental authority.

       14.5 Export Law Compliance. GENE understands and recognizes that the
Licensed Product and other materials made available to it hereunder may be
subject to the export administration regulations of the United States Department
of Commerce and other United States government regulations related to the export
of chemical compounds and medical devices.

       14.6 Governing Law. This Agreement shall be governed by and construed
according to the laws of New York, NY, USA.

       14.7 Entire Agreement. This Agreement, including all Exhibits attached
hereto, and all documents delivered concurrently herewith, set forth all the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto and supersede and terminate all prior
agreements and understanding between the Parties. No subsequent alteration,
amendment, change or addition to this Agreement, shall be binding upon the
Parties hereto unless reduced to writing and signed by the respective authorized
officers of the Parties.

       14.8 Relationship of the Parties. Nothing hereunder shall be deemed to
authorize either Party to act for, represent or bind the other except as
expressly provided in this Agreement.

       14.9 Notices. All notices hereunder shall be in writing and shall be
deemed given if delivered personally or by facsimile transmission (receipt
verified), telexed, mailed by registered or certified mail (return receipt
requested), postage prepaid, or sent by express courier service, to the Parties
at the following addresses (or at such other address for a Party as shall be
specified by like notice; provided, that notices of a change of address shall be
effective only upon receipt thereof.

<TABLE>
       <S>                               <C>                                    <C>
       If to Biosearch,
       addressed to:                      BIOSEARCH ITALIA S.p.A.
                                          Via Lepetit, 34
                                          21040 Gerenzano, ltaly
                                          Attention:                            Chairman of the Board
                                          Telephone:                                 +39.02.96474.341
                                          Telecopy:                                  +39.02.96474.400
       If to GENE,
       addressed to:                      GENOME THERAPEUTICS CORPORATION
                                          100 Beaver Street
                                          Waltham, MA 02453-8443, USA
                                          Attention:                            Chief Executive Officer
                                          Telephone:                                    +1.781.398.2300
                                          Telecopy:                                     +1.781.398.8277
</TABLE>

Page 27

<PAGE>

       14.10 Waiver. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.

       14.11 Severability. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then (i) the remainder of this Agreement,
or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.

       14.12 Official Language. The official text of this Agreement and any
appendices, exhibits and schedules hereto, or any notice given or accounts or
statements required by this Agreement shall be in English. In the event of any
dispute concerning the construction or meaning of this Agreement, reference
shall be made only to this Agreement as written in English and not to any other
translation into any other language.

       14.13 Headings. The Section and paragraph headings contained herein are
for the purposes of convenience only and are not intended to define or limit the
contents of said sections or paragraphs.

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

       IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the Effective Date.

GENOME THERAPEUTICS CORPORATION               BIOSEARCH ITALIA, S.P.A.

By: ____________________________              By: ______________________________

Title: _________________________              Title: ___________________________

Page 28

<PAGE>
                                   EXHIBIT I

                                CONVERTIBLE NOTE

        THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
        AMENDED (THE "ACT") OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY
        NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
        OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY SUCH APPLICABLE STATE
        LAWS.

        GENOME THERAPEUTICS CORP.

        CONVERTIBLE NOTE DUE [INSERT DATE 60 MONTHS AFTER DATE OF ISSUE]

$[Amount]                                                       [Date of Issue]

FOR VALUE RECEIVED, the undersigned Genome Therapeutics Corp., a Massachusetts
corporation (the "Company"), hereby promises to pay to Biosearch Italia, S.p.A.,
or registered assigns, at the address specified in Section 14.9 of the License
and Supply Agreement (as defined below), or at such other place as the Holder of
this Note shall from time to time have designated to the Company in writing, on
[insert date 60 months after Date of Issue] (the "Stated Maturity Date"),
[AMOUNT IN WORDS ($[Amount in numbers]) (the "Principal Amount"), with interest
as provided in Section 1 hereof.

1. INTEREST. This Note shall accrue daily interest from the date hereof,
computed on the basis of a year of 365 or 366 (as applicable) days and actual
days elapsed, on the principal amount from time to time unpaid at a rate per
annum equal to five percent (5%) (the "Applicable Rate"), said interest being
payable in arrears on the last business day of the calendar month in which this
Note was issued in each year (each such day, and the day that is the Stated
Maturity Date, being a "Payment Date"), commencing on [insert date that is the
last business day of the month in which the Note is issued, one year following
the date of issue], and at the stated or any accelerated maturity hereof. All
interest shall be payable in cash in the lawful money of the United States.

2.   PAYMENT PROVISIONS. The Company covenants that so long as this Note is
outstanding:

        2.1. Payment at Maturity of Note. On the Stated Maturity Date, and on
any accelerated maturity of the Notes, the Company will pay the entire principal
amount of this Note then outstanding, together with all accrued and unpaid
interest thereon.

        2.2. Prepayments. Except as provided in Section 4.2 hereof, the Company
may not prepay all or any part of the principal amount of the Notes.

3.      CONVERSION OF NOTE.

        3.1. Conversion by Holder. Subject to Section 3.4, the Holder of this
Note may at any time convert the principal amount of this Note then outstanding
into a number of shares of Common Stock equal to (x) the aggregate amount of
principal of this Note divided by (y) the Conversion Price (as hereinafter
defined). As used herein, the "Conversion Price" shall initially be $15.00,
shall be adjusted and readjusted from time to time as provided in this Section 3
and, as so adjusted or readjusted, shall remain in effect until a further
adjustment or readjustment thereof is required by Section 3 of this Note. Such
conversion shall be effected by surrender of this Note to the Company at its
office specified in Section 14.9 of the License and Supply Agreement,
accompanied by a Conversion Notice in substantially the form attached to this
Note (or a reasonable facsimile thereof) executed by such Holder, and such
Holder shall thereupon be entitled to receive the number of shares of Common
Stock specified in the first sentence of this Section 3.1 or the shares or other
interests specified in Section 3.4 below. The conversion of this Note shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Note shall have been surrendered to the Company as
provided in the immediately preceding sentence, and at such time the Holder
shall be deemed to have become the holder of record of such shares of Common
Stock. As soon as practicable after conversion of the Note, and in any event
within five business days thereafter, the Company at its expense will cause to
be issued in the name of and delivered to the Holder of this Note a certificate
for the number of duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock to which such Holder shall be entitled upon such
conversion.

                                       1

<PAGE>

3.2. Automatic Conversion. In the event that the Common Stock trades at or in
excess of a price per share of $30.00 for a period of not less than twenty
consecutive Trading Days, this Note shall automatically be converted, without
any action on the part of the Holder or the Company, into a number of shares of
Common Stock equal to (x) the aggregate amount of principal of this Note then
outstanding divided by (y) the Conversion Price then in effect. If, pursuant to
Section 3.4 below, this Note becomes convertible into other shares or other
interests, this Note shall automatically be converted into such shares or other
interests if the quotient obtained by dividing the aggregate fair market value
of such shares or other interests (as determined in good faith by the Company
(or its successor)), by the number of shares of Common Stock into which this
Note was convertible immediately before the Subsequent Event (as defined below)
equals or exceeds $30.00 for a period of not less than twenty consecutive
Trading Days.

3.3. Adjustments of Conversion Price for Subdivisions, Stock Dividends,
Combinations or Consolidation of Common Stock. In the event the outstanding
shares of Common Stock shall be increased by way of stock issued as a dividend
for no consideration or subdivided (by stock split or otherwise) into a greater
number of shares of Common Stock, the Conversion Price then in effect shall,
concurrently with the effectiveness of such increase or subdivision, be
proportionately decreased. In the event the outstanding shares of Common Stock
shall be combined or consolidated, by reclassification or otherwise, into a
lesser number of shares of Common Stock, the Conversion Price then in effect
shall, concurrently with the effectiveness of such combination or consolidation,
be proportionately increased.

3.4. Subsequent Events. In the event of any recapitalization, consolidation,
merger or bankruptcy or declaration of insolvency of the Company or its
successor (each, a "Subsequent Event"), this Note shall thereafter be
convertible into the right to receive such shares or other interests (including,
without limitation, cash) as the Holder would have been entitled if this Note
had been converted immediately prior to such Subsequent Event.

3.5. No Impairment. The Company will not, by amendment of its charter or through
any reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in carrying out all such action as may be necessary or appropriate in
order to protect the conversion rights of the Holder of this Note.

3.6. Reservation of Shares. So long as any portion of this Note shall remain
outstanding, the Company shall at all times reserve and keep available, free
from preemptive rights, out of its authorized capital stock, for the purpose of
issuance upon conversion of this Note, the full number of shares of Common Stock
then issuable upon conversion of this Note. If the Company's Common Stock shall
be listed on any national stock exchange, the Company at its expense shall
include in its listing application all of the shares of Common Stock reserved
for issuance upon conversion of this Note (subject to issuance or notice of
issuance to the exchange) and will similarly procure the listing of any further
Common Stock reserved for issuance upon conversion of this Note at any
subsequent time as a result of adjustments in outstanding Common Stock or
otherwise.

3.7. Validity of Shares. The Company will from time to time take all such action
as may be reasonably required to assure that all shares of Common Stock which
may be issued upon conversion of this Note will, upon issuance, be legally and
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issuance thereof; and, without limiting the
generality of the foregoing, the Company agrees that it will from time to time
take all such action as may be reasonably required to assure that the par value
per share, if any, of the Common Stock is at all times equal to or less than the
lowest quotient obtained by dividing the then current principal amount of this
Note by the number of shares of Common Stock into which this Note can, from time
to time, be converted.

3.8. Representations of the Holder. The Holder represents and warrants to the
Company that the Holder is acquiring this Note and the shares of Common Stock
issuable upon conversion of this Note for the Holder's own account for
investment only and not with a view to distribution or resale of the Note or
shares of Common Stock issuable upon conversion of this Note. The Holder
represents that it is an "accredited investor" as such term is defined in Rule
501 under the Securities Act of 1933, as amended (the "Act"). The Holder
understands that this Note and the shares of Common Stock issuable upon
conversion of this Note are being issued to the Holder pursuant to an exemption
from the registration requirements of the Act and, accordingly, must be held
indefinitely by the Holder unless later transferred in transactions that are
either registered under the Act or exempt from registration. The Holder also
understands that the shares of Common Stock issuable upon conversion of this
Note will bear a legend similar to the legend set forth at the top of this Note.

                                       2

<PAGE>

4.       EVENTS OF DEFAULT.

         4.1.   Events of Default. Each of the following events is herein
referred to as an "Event of Default":

         4.1.1. Breach of Covenant. The Company shall fail to perform or observe

any other covenant, agreement or provision to be performed or observed by it
under this Note and such failure shall not be rectified or cured within 30 days
after actual knowledge of such failure by an executive officer of the Company.

         4.1.2. Bankruptcy, etc. The Company shall:

       (a) commence a voluntary case under Title 11 of the United States Code as
       from time to time in effect, or authorize, by appropriate proceedings of
       its board of directors or other governing body, the commencement of such
       a voluntary case;

       (b) have filed against it a petition commencing an involuntary case under
       such Title 11, which petition is not dismissed within 30 days after such
       filing;

       (c) seek relief as a debtor under any applicable law, other than such
       Title 11, of any jurisdiction relating to the liquidation or
       reorganization of debtors or to the modification or alteration of the
       rights of creditors, or consent to or acquiesce in such relief;

       (d) have entered against it any order by a court of competent
       jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering or
       approving its liquidation, reorganization or any modification or
       alteration of the rights of its creditors, or (iii) assuming custody of,
       or appointing a receiver or other custodian for, all or a substantial
       part of its property; or

       (e) make an assignment for the benefit of, or enter into a composition
       with, its creditors, or appoint or consent to the appointment of a
       receiver or other custodian for all or a substantial part of its
       property.

       4.2. Remedies. Upon the occurrence and during the continuance of any
       Event of Default, the Holder may accelerate the maturity of this Note
       upon notice to the Company (and upon the occurrence of an Event of
       Default under Section 4.1.3 above, such maturity shall be automatically
       accelerated) and may exercise any remedies at law or in equity.

       4.3. Annulment of Defaults. An Event of Default shall not be deemed to be
       in existence or to have occurred for any purpose of this Note until the
       expiration of all grace periods under this note or if the Holder shall
       have waived such event in writing or stated in writing that the same has
       been cured to its reasonable satisfaction. No waiver or statement of
       satisfactory cure pursuant to this Section 4.3 shall extend to or affect
       any subsequent or other Event of Default not specifically identified in
       such waiver or statement of satisfactory cure or impair any of the
       Holder's rights upon the occurrence thereof.

       4.4. Waivers. The Company hereby waives to the extent not prohibited by
       applicable law which cannot be waived (a) all presentments, demands for
       performance, notice of nonperformance (except to the extent specifically
       required by the provisions hereof), (b) any requirement of diligence or
       promptness on the part of the Holder in the enforcement of its rights
       under this Note, (c) except to the extent required by other provisions of
       this Note, any and all notices of every kind and description which may be
       required to be given by any statute or rule of law, and (d) any defense
       of any kind (other than indefeasible payment) which it may now or
       hereafter have with respect to its liability under this Note.

                                       3

<PAGE>

4.5. Course of Dealing. No course of dealing between the Company and its
affiliates on the one hand, and the Holder, on the other hand, shall operate as
a waiver of any of the Holder's rights under this Note. No delay or omission in
exercising any right under this Note shall operate as a waiver of such right or
any other right. A waiver on any one occasion shall not be construed as a bar to
or waiver of any right or remedy on any other occasion. No waiver or statement
of satisfactory cure or consent shall be binding upon the Holder unless it is in
writing and signed by the Holder.

5.  DEFINITIONS. As used in this Note, the following terms have the meanings set
forth below:

        5.1  "Common Stock" means the Company's Common Stock, $.10 par value per

share, any stock into which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common Stock.

5.2. "Company" has the meaning set forth in the first paragraph of this Note,
such term to include any entity which shall succeed to or assume the obligations
of the Company hereunder.

        5.3  "Holder" means each holder from time to time of this Note.

5.4. "License and Supply Agreement" means the License and Supply Agreement dated
as of September, 2001 by and between the Company and Biosearch Italia, S.p.A.,
as the same may be amended, restated, extended, renewed or otherwise modified
from time to time.

        5.5  "Trading Day" means a day on which trades may be effected through
the Nasdaq National Market or any successor thereto.

6. MISCELLANEOUS. This Note shall be governed by and construed in accordance
with the domestic substantive laws of The Commonwealth of Massachusetts without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction. This Note shall be binding on the Company and its successors and
assigns. The parties hereto, including the undersigned maker and all guarantors
and endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Note, except as specifically otherwise provided herein, and
assent to extensions of the time of payment, or forbearance or other indulgence,
without notice.

                     GENOME THERAPEUTICS CORP.

                     By:_____________________________ Title:

                                       4

<PAGE>

                            FORM OF CONVERSION NOTICE

To Genome Therapeutics Corp.,

The undersigned registered holder of the within Note hereby irrevocably converts
the unpaid principal- amount of this Note, and requests that the certificates
for such shares be issued in the name of, and delivered to, whose address is

Dated:

                   (Signature must conform in all respects to name of holder as
                   specified on the face of Note)

                                (Street Address)

                            (City) (State) (Zip Code)

                                        5

<PAGE>

                                   EXHIBIT II

Bulk Licensed Compound Specifications (forse sono da rivedere)

*****

--------------
* Confidential Treatment has been requested for the marked portions.

                                        6Letter to Calypso Management LLC

  
 Exhibit 10.1 
  
 [HARBOR GLOBAL COMPANY LETTERHEAD] 
  
 October
22, 2002 
  
 To:      Calypso Management LLC 
 From:  The Board of Directors of Harbor Global Company Ltd. 
  
 Gentlemen: 
  
 This is
to confirm that, in accordance with Section 8(a)(v) of the Administration and Liquidation Agreement dated as of August 7, 2000 between Calypso Management LLC (“Calypso”) and Harbor Global Company Ltd. (the “Company”), as amended
to date (the “Agreement”), Stephen G. Kasnet has committed to continue his employment with the Company pursuant to the Agreement and the Employment Agreement dated as of August 8, 2000 between Calypso and Mr. Kasnet for an additional
period of eighteen months, commencing on October 24, 2002. On or about October 24, 2003, there will be a review of the situation in order to make any adjustment to the term of Mr. Kasnet’s employment that the Board and he agree is necessary
based on the time required to wind up the Company’s affairs. The Company hereby acknowledges and agrees that it will not terminate the Agreement pursuant to Section 8(a)(v) thereof during the additional term of Mr. Kasnet’s employment with
the Company as described above. 
  
 
	 Very truly yours,
 
	 
	 /s/    JOHN H.
VALENTINE        
 

	 John H. Valentine
 Chairman of
the Board of Directors
 

 
  
 cc: Louis A. Goodman, Esq. 
      Hale Andrews, Esq.

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