Document:

Exhibit 10.19

 

Execution Copy

 

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

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

and 240.24b-2.

 

 

 

Amended and Restated Development and License Agreement

between

Metabasis Therapeutics, Inc.

and

Schering Corporation

 

 

 

 

 

 

 

Dated as of
December 13, 2006

  
  

TABLE
OF CONTENTS

	
  ARTICLE I DEFINITIONS AND INTERPRETATION

  	
   

  	
  5

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II LICENSE

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III SUBSTITUTE COMPOUND

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV COMPENSATION

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V DEVELOPMENT STEERING COMMITTEE

  	
   

  	
  23

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI DEVELOPMENT AND MARKETING OBLIGATIONS

  	
   

  	
  26

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII [Intentionally left blank]

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII INTELLECTUAL PROPERTY

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX REPRESENTATIONS, WARRANTIES AND LIMITATION OF LIABILITY

  	
   

  	
  32

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X INDEMNIFICATION AND LIMITATION OF LIABILITY

  	
   

  	
  35

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI CONFIDENTIALITY AND PUBLICATION

  	
   

  	
  37

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII TERM AND TERMINATION

  	
   

  	
  40

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII ASSIGNMENT; SUCCESSORS

  	
   

  	
  46

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV DISPUTE RESOLUTION

  	
   

  	
  47

  	
   

  

 

 2
 

  
  

 

	
  ARTICLE XV GENERAL PROVISIONS

  	
   

  	
  48

  	
   

  

 3
 

  
  

 

AMENDED AND
RESTATED DEVELOPMENT AND LICENSE AGREEMENT

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

Recitals

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

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

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

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

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

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

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

Agreement

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

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ARTICLE I

DEFINITIONS
AND INTERPRETATION

1.1              Definitions

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

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

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

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

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

Agreement
has the meaning set forth in the preamble.

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

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

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

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

Breaching
Party has the meaning set forth in Section 12.3.

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

Claims
has the meaning set forth in Section 10.1.

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

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

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

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

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

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

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

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

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

***Confidential Treatment Requested

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

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

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

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

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

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

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

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

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

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

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

***Confidential Treatment Requested

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

Handle
has the meaning set forth in Section 8.1.

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

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

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

Indemnified
Party has the meaning set forth in Section 10.3.

Indemnifying
Party has the meaning set forth in Section 10.3.

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

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

***Confidential Treatment Requested

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

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

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

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

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

Metabasis
has the meaning set forth in the preamble.

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

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

***Confidential Treatment Requested

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

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

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

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

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

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

***Confidential Treatment
Requested

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

Original
Agreement has the meaning set forth in the Preamble.

Original
Closing Date means October 1, 2001.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Schering
has the meaning set forth in the preamble.

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

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

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

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

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

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

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

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

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

1.2             Interpretation

In this Agreement,
unless the context requires otherwise

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

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

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

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

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

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

1.3             Conditions
Precedent; Agreement Supersedes and Replaces the Original Agreement

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

***Confidential Treatment Requested

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ARTICLE II

LICENSE

2.1             License

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

2.2             Sublicense

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

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

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

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

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

2.3             Exclusivity

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

2.4             Provision
of Information

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

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

2.5             Limits
on the Use of Licensed Compound by Metabasis

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

2.6             Optimization
of Licensed Compound

[Intentionally
omitted]

2.7             Non
Competition

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

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

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

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

ARTICLE III

SUBSTITUTE
COMPOUND

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

ARTICLE IV

COMPENSATION

4.1             Upfront
Fee

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

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

4.2             Milestone
Payments

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

(i)         [Intentionally
omitted]

(ii)        [***]

(iii)       [***]

(iv)      [***]

(v)       [***]

(vi)      [***]

(vii)     [***]

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

4.3             Royalties

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

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

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

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

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

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

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

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

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

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

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

4.4             Duration
of Royalty Obligations

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

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

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

4.5             Payment
Terms

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

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

4.6             Taxes

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

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

4.7             Allocation of Royalty
Payment

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

4.8             Records

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

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

4.9             Sales
in Foreign Currencies

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

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

ARTICLE V

DEVELOPMENT
STEERING COMMITTEE

5.1             Appointment
and Administration of the Development Steering Committee

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

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

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

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

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

5.2             Responsibility
and Authority of the Development Steering Committee

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

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

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5.3             Reporting obligations in respect of
Commercialization

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

5.4             Regulatory Activities

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

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

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

 

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ARTICLE VI

DEVELOPMENT
AND MARKETING OBLIGATIONS

6.1             Commercial Development Obligation

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

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

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

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

 

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6.2             Use of Name

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

 

ARTICLE VII

[Intentionally
left blank]

ARTICLE VIII

INTELLECTUAL
PROPERTY

 

8.1             Patent Prosecution and Maintenance

(a)              Patents Covering Inventions Owned By Metabasis.

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

 

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

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

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

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

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

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

8.2             Notification of Infringement

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

8.3             Patent Enforcement

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

 

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

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

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

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

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

8.4             Ownership and License-Back

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

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

 

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

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

(d)              License-Back.

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

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

8.5             Trademarks

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

8.6             Defense of Infringement and
Invalidity Actions

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

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

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

 

 

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

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

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

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

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

8.7             Patent Extensions

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

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

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

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

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

 

ARTICLE IX

REPRESENTATIONS,
WARRANTIES AND LIMITATION OF LIABILITY

9.1             Representations of Metabasis

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

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

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

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

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

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

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

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

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Encumbrances.  Metabasis is
listed in the records of the appropriate governmental agencies as the sole and
exclusive owner of record for each registration, grant and application included
in the Licensed Patents.

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

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

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

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

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

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

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

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

 

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9.2             Representations of Schering

Schering
represents and warrants to Metabasis as follows.

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

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

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

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

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

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

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

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

9.4             Disclaimer of Warranties

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

 

ARTICLE X

INDEMNIFICATION
AND LIMITATION OF LIABILITY

10.1           Indemnification by Schering

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

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

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

10.2           Indemnification by Metabasis

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

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

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

10.3           Obligations of the Party Seeking to
Be Indemnified

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

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Indemnifying Party will not
release the Indemnifying Party from any liability to the Indemnified Party
except to the extent that the Indemnifying Party is injured by such delay.  The Indemnifying Party will have the right,
by prompt notice to the Indemnified Party, to assume the defense of the matter
at the cost of the Indemnifying Party. 
For the avoidance of doubt, all indemnification claims in respect of a
Schering Indemnitee or Metabasis Indemnitee shall be made solely by Schering or
Metabasis, respectively.

10.4           Indemnification Procedure

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

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

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

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Claim and shall not settle such Third Party Claim without the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.  If the Indemnified
Party defends or handles such Third Party Claim, the Indemnifying Party shall
cooperate with the Indemnified Party and shall be entitled to participate in
the defense and handling of such Third Party Claim with its own counsel and at
its own expense.  In addition, the
reasonable and verifiable costs and expenses, including attorneys’ fees and
disbursements, incurred by the Indemnified Party shall be reimbursed on a
quarterly basis by the Indemnifying Party, without prejudice to the
Indemnifying Party’s right to contest the Indemnified Party’s right to
indemnification and subject to refund in the event the Indemnifying Party is
ultimately held not to be obligated to indemnify the Indemnified Party.

10.5           Mitigation of Loss

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

10.6           Special, Indirect and Other Losses

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

10.7           No Exclusion

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

 

ARTICLE XI

CONFIDENTIALITY
AND PUBLICATION

11.1           Confidentiality

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

 

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

11.2           Disclosure

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

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

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

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

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

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In addition to disclosures described above,
each Party may disclose Confidential Information belonging to the other Party
only to the extent such disclosure is necessary in the following instances:
(i) filing or prosecuting Patent Rights as permitted by this Agreement;
(ii) regulatory filings for Products such Party has a license or right to
develop hereunder; and (iii) prosecuting or defending litigation as
permitted by this Agreement.

11.3           Publicity

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

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

 

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

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

11.4           Scientific Publications

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

 

ARTICLE XII

TERM AND
TERMINATION

12.1           Term

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

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

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

 

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

12.2           [Intentionally omitted]

12.3           Termination For Cause

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

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

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

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

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

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

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

 

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12.4           Rights and Obligations Upon
Termination for Cause

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

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

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

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

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

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

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

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

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

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12.5           Schering Termination Without Cause

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

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

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

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

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

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

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

 

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

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

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

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

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

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

 

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

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

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

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

12.6           Metabasis Change of Control and
Insolvency Event

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

12.7           Surviving Provisions

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

 

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

 

ARTICLE XIII

ASSIGNMENT;
SUCCESSORS

13.1           Assignment

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

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

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

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

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

 

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13.2           Binding Upon Successors and Assigns

 

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

13.3           Parties
Responsible for Performance of Affiliates

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

ARTICLE XIV

DISPUTE RESOLUTION

14.1           Arbitration

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

 

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

14.2           Pre-Arbitration
Dispute Resolution

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

14.3           Provisional
Remedy

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

14.4           Confidentiality

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

ARTICLE XV

GENERAL PROVISIONS

15.1           Relationship
of the Parties

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

 

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

15.2           Excusable
Delay

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

15.3           Notices

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

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

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

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

	
   

  	
  if to Metabasis, to:

  
	
   

  	
   

  
	
   

  	
  Metabasis
  Therapeutics, Inc.

  
	
   

  	
  9390 Towne
  Centre Drive

  
	
   

  	
  San Diego,
  California 92122

  
	
   

  	
  Attention: Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Michael J.
  O’Donnell

  
	
   

  	
  Wilson Sonsini
  Goodrich & Rosati P.C.

  
	
   

  	
  650 Page Mill
  Road

  
	
   

  	
  Palo Alto, CA
  94304-1050

  

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  if to Schering, to:

  
	
   

  	
   

  
	
   

  	
  Schering
  Corporation

  
	
   

  	
  2000 Galloping
  Hill Road

  
	
   

  	
  Kenilworth, NJ
  07033-0530

  
	
   

  	
  Attention: Vice
  President, Global Licensing and Strategic Alliances

  
	
   

  	
  Fax No.:
  908-298-7366

  
	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  
	
   

  	
  Senior Legal
  Director, Licensing

  
	
   

  	
  Fax No.:
  908-298-2739

  

 

15.4           Expenses

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

15.5           Further
Assurances

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

15.6           Amendment

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

15.7           Waiver

A Party may, by
written instrument executed by such Party, extend the time for the performance
of any obligations of the other Party, waive any inaccuracies and
representations by the other Party in this Agreement or in any document
delivered pursuant to this Agreement or waive compliance by the other Party
with any of the covenants, conditions or performance of any of its obligations
under this Agreement.  Any such waiver or
failure to insist upon strict compliance with such covenant, condition or
obligation will not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.

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15.8           No
Third Party Beneficiaries

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

15.9           Entire
Agreement

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

15.10        Construction

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

15.11        Incorporation
of Exhibits

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

15.12        Counterparts

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

15.13        Severability

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

 51
 

15.14         Bankruptcy

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

15.15        Remedies
Cumulative

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

15.16        Governing
Law

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

15.17        Antitrust
Filings

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

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

	
   

  	
  METABASIS THERAPEUTICS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul Laikind

  	
   

  
	
   

  	
  Name

  	
  Paul Laikind

  	
   

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHERING CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Michael J Dubois

  	
   

  
	
   

  	
  Name:

  	
  Michael J. Dubois

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
					

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SCHEDULE
A

CONFIDENTIAL

[***]

 

***Confidential
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[***]

 

***Confidential
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[***]

 

***Confidential
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[***]

 

***Confidential
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[***]

 

***Confidential
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[***]

***Confidential
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[***]

***Confidential
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[***]

***Confidential Treatment
Requested

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SCHEDULE
B

[***]

***Confidential Treatment
Requested

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[***]

***Confidential
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[***]

***Confidential
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[***]

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[***]

 

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[***]

 

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EXHIBIT
A

LICENSED COMPOUND

[***]

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[***]

 

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EXHIBIT
B

SAMPLE
INVOICE

[***]

 

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[***]

 

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EXHIBIT
C

FULLY
BURDENED MANUFACTURING COST

[***]

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[***]

 

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METABASIS
SCHEDULE OF EXCEPTIONS

[***]

***Confidential
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 74Exhibit 10.32

Execution Copy

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

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

and
240.24b-2.

EXCLUSIVE LICENSE AND RESEARCH COLLABORATION AGREEMENT

between

IDENIX PHARMACEUTICALS, INC.

and

METABASIS THERAPEUTICS, INC.

EXCLUSIVE
LICENSE AND RESEARCH COLLABORATION AGREEMENT

THIS EXCLUSIVE LICENSE AND
RESEARCH COLLABORATION AGREEMENT  (the
“Agreement”)
is entered into as of October 24, 2006 (the “Effective Date”) by and between IDENIX PHARMACEUTICALS, INC.,
a Delaware corporation (“Idenix”),
having an address of 60 Hampshire Street, Cambridge, Massachusetts 02139,
and METABASIS
THERAPEUTICS, INC., a
Delaware corporation (“Metabasis”),
having an address of 11119 North Torrey Pines Road, La Jolla, California
92037.  In this Agreement, Idenix and
Metabasis are each referred to individually as a “Party”  and collectively as the  “Parties.”

RECITALS

WHEREAS, Metabasis has developed Metabasis
Technology (as hereinafter defined) for the discovery and optimization of liver
targeted compounds and Idenix owns Idenix Nucleosides (as hereinafter defined);

WHEREAS, Idenix and Metabasis desire to enter into a
business relationship to identify and develop the Collaboration Compounds (as
hereinafter defined) and sell Products upon the terms and conditions set forth
herein; and

WHEREAS, Idenix desires to obtain licenses under
Metabasis Technology and Metabasis’ interest in Collaboration Technology and
Joint Technology (as each such term is hereinafter defined) to develop and
commercialize Products in the Field (as hereinafter defined), and Metabasis
desires to grant such licenses, in each case upon the terms and conditions set
forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants herein contained, the Parties hereby agree as follows:

1.                                      DEFINITIONS

Unless specifically set forth to the contrary
herein, the following terms, whether used in the singular or plural, shall have
the respective meanings set forth below. References to “Articles”, “Sections”
and “subsections” in this Agreement shall be to Articles, Sections and
subsections respectively, of this Agreement unless otherwise specifically
provided:

1.1          [***] shall have the meaning provided in
Section 12.6(a).

1.2          “Affiliate” shall mean any company or entity
controlled by, controlling, or under common control with a Party.  For the purposes of this definition, the term
“control” (including, with correlative meanings, the terms “controlled by” and “under
common control with”) as used with respect to a Party means (a) in the case of
a corporate entity, direct or indirect ownership of voting securities entitled
to cast more than fifty percent (50%) of the votes in the election of directors
or (ii) in the case of a non-corporate entity, direct or indirect ownership of
more than fifty percent (50%) of the voting securities with the power to direct
the management and policies of such entity.

***Confidential
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1.3          “Collaboration Compound” shall mean a chemical entity that is
synthesized solely by a Party or jointly by the Parties (or on behalf of a
Party or the Parties) in the course of the Research Program during the Research
Term that [***].

1.4          “Collaboration Know-How” shall mean any Information or Invention,
to the extent directed  to a
Collaboration Compound or a method of making or using a Collaboration Compound,
generated or conceived solely by a Party (or on its behalf) or jointly by the
Parties (or on their behalf) in the course of the Research Program during the
Research Term.

1.5          “Collaboration Patents” shall mean Patents first filed after the
Effective Date with claims or portions thereof, to the extent that they
describe or claim a Collaboration Compound or a method of making or using a
Collaboration Compound, where such Invention is conceived solely by a Party (or
on its behalf) or jointly by the Parties (or on their behalf) in the course of
the Research Program during the Research Term; provided that any Patent with
the same disclosure as an Idenix Patent described in Section 1.22(a) or a
Metabasis Patent described in Section 1.38(a), such as a renewal, division,
continuation (in whole), or request for continued examination (RCE), reissue,
reexamination or the like, will be included in Section 1.22(a) or Section
1.38(a), as applicable, rather than this Section 1.5.

1.6          “Collaboration Technology” shall mean Collaboration Know-How and
Collaboration Patents.

1.7          “Combination Therapy” shall mean a fixed dose product
containing more than one (1) active pharmaceutical ingredient.  [***]

1.8          “Committee” shall mean the joint research committee
established to facilitate the Research Program as more fully described in
Section 2.1.

1.9          “Confidential Information” shall have the meaning given such term
in Section 7.1.

1.10        “Confidentiality Agreement” shall mean the confidentiality
agreement, dated March 29, 2006, by and between the Parties.

1.11        “Control” shall mean, with respect to any
Information, Patent or other intellectual property right, possession by a Party
of the ability (whether by ownership, license or otherwise) to grant access, a
license or a sublicense to such Information or intellectual property right
without violating the terms of any agreement or other arrangement with any
Third Party (before taking into account the effect of any licenses granted by
such Party to the other Party under this Agreement but after taking into
account the effect of Section 9.1(a)). 
For the avoidance of doubt, any Information, Patent or other
intellectual property right that a Party licenses under this Agreement to the
other Party shall not be deemed to be under the “Control” of such other Party.

1.12        “Development Candidate” shall have the meaning provided in
Section 4.1.

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1.13        “Failed Development Candidate” shall have the meaning provided in
Section 5.4.

1.14        “Field” shall mean the treatment of chronic
hepatitis C viral infections in humans.

1.15        “First Commercial Sale” shall mean, with respect to any Product,
the first sale in a country after the governing health regulatory authority of
such country has granted Regulatory Approval. 
For purposes of clarification, the first sale for end use or consumption
of a Product in a country after conditional approval has been granted will
constitute a First Commercial Sale for purposes of this Agreement.

1.16        “FTE” shall mean the equivalent of a full-time scientist’s
work time over a [***] (including normal vacations, sick days and holidays).

1.17        “HepDirect Technology” shall mean (a) (i) any and all [***]
and/or (ii) any method of making or using any of the foregoing (this clause
(a), “HepDirect Base Technology”); which (b) [***].

1.18        “Idenix Core Patent” shall mean any Patent listed in Exhibit A.

1.19        “Idenix Indemnitee” shall have the meaning provided in
Section 11.2.

1.20        “Idenix Know-How” shall mean any (a) Information or
Invention, to the extent directed to any Idenix Nucleoside or Collaboration
Compound or a method of making or using an Idenix Nucleoside or Collaboration
Compound, that is Controlled by Idenix as of the Effective Date,
(b) Information or Invention, to the extent directed to any Idenix
Nucleoside or a method of making or using an Idenix Nucleoside, that first
becomes Controlled by Idenix during the Research Term, and (c) Information or
Invention, to the extent directed to a Collaboration Compound or a method of
making or using a Collaboration Compound, that first becomes Controlled by
Idenix after the Research Term but prior to the First Commercial Sale of any
Product that contains such Collaboration Compound.  Notwithstanding the foregoing,
subsection (b) does not include any Information or Invention to the extent
directed to a Collaboration Compound or a method of making or using a
Collaboration Compound.  For purposes of
clarity, Idenix Know-How does not include Metabasis Know-How.

1.21        “Idenix Nucleoside” shall mean either of the [***]
nucleosides, the [***] is specifically identified on Schedule I to
the Research Plan as of the Effective Date and [***] shall be specified by
Idenix in writing to Metabasis within [***] after the Effective Date, subject
to written approval by Metabasis, not to be unreasonably withheld or delayed,
and Schedule I
to the Research Plan shall be automatically amended to include [***].

1.22        “Idenix Patents” shall mean (a) Patents with claims or
portions thereof, to the extent directed to any Invention that is an Idenix
Nucleoside or Collaboration Compound or a

***Confidential
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method of making or using an Idenix Nucleoside or Collaboration
Compound, where such Patents are Controlled by Idenix as of the Effective Date,
(b) Patents with claims or portions thereof, to the extent directed to any
Invention that is an Idenix Nucleoside or a method of making or using an Idenix
Nucleoside, where such Invention first becomes Controlled by Idenix during the
Research Term (provided that any such Patent with the same disclosure as a
Patent described in subsection (a), such as a renewal, division, continuation
(in whole), or request for continued examination (RCE), reissue, reexamination
or the like, will be included in subsection (a) rather than
subsection (b)) and (c) Patents with claims or portions thereof, to the
extent directed to any Invention that is a Collaboration Compound or a method
of making or using a Collaboration Compound, where such Invention first becomes
Controlled by Idenix after the Research Term but prior to the First Commercial
Sale of any Product that contains such Collaboration Compound.  Notwithstanding the foregoing,
subsection (b), does not include any claims of such Patents or portions
thereof to the extent directed to any such Invention that is a Collaboration
Compound or a method of making or using a Collaboration Compound.  For purposes of clarity, Idenix Patents do
not include Metabasis Patents.  The
Idenix Patents existing on the Effective Date are listed on Exhibit C.

1.23        “Idenix Technology” shall mean the Idenix Know-How and
Idenix Patents.

1.24        “IND” shall mean an Investigational New Drug application,
Clinical Study Application, Clinical Trial Exemption, or similar application or
submission for approval to conduct human clinical investigations filed with or
submitted to a Regulatory Authority in conformance with the requirements of
such Regulatory Authority.

1.25        “Information” shall mean all tangible and intangible
(a) techniques, technology, practices, trade secrets, inventions (whether
patentable or not), methods, processes of manufacture, intermediates, dosing
regimens, formulations, knowledge, know-how, skill, experience, test data and
results (including pharmacological, toxicological and preclinical and clinical
test data and results), analytical and quality control data, results or
descriptions, software and algorithms and (b) compositions of matter, cells,
cell lines, assays, animal models and physical, biological or chemical
material.

1.26        “Invention” shall mean any invention, conception,
actual reduction to practice, constructive reduction to practice, process,
method, use, composition of matter, article of manufacture, discovery or
finding, whether or not patentable.

1.27        “Joint Invention” shall mean any Invention conceived
jointly by the Parties (or on their behalf) in the course of the Research
Program during the Research Term; but excluding, in each case, Collaboration
Technology, Idenix Technology and Metabasis Technology.

1.28        “Joint Patents” shall mean Patents claiming any Joint
Invention.

1.29        “Joint Patent Counsel” shall have the meaning provided in
Section 9.2(d)(i).

1.30        “Joint Technology” shall mean Joint Inventions and Joint
Patents.

1.31        “Losses” shall have the meaning provided in
Section 11.1.

 4
 

1.32        “Major European Market” shall mean: (a) any [***] of the
following countries: [***]; or (b) [***].

1.33        “Major Market” shall mean the [***].

1.34        “Materials” shall have the meaning provided in
Section 3.8.

1.35        “Metabasis Core Patents” shall mean any Patent listed in Exhibit B.

1.36        “Metabasis Indemnitee” shall have the meaning provided in
Section 11.1.

1.37        “Metabasis Know-How” shall mean any (a) Information or
Invention, to the extent directed to HepDirect Technology or Collaboration
Compound or a method of making or using HepDirect Technology or a Collaboration
Compound, that is Controlled by Metabasis as of the Effective Date and
(b) Information or Invention, to the extent directed to HepDirect
Technology or a method of making or using HepDirect Technology, that first
becomes Controlled by Metabasis during the Research Term.  Notwithstanding the foregoing,
subsection (b) does not include any Information or Invention to the extent
directed to a Collaboration Compound or a method of making or using a
Collaboration Compound.  For purposes of
clarity, Metabasis Know-How does not include Idenix Know-How.

1.38        “Metabasis Patents” shall mean (a) Patents with claims or
portions thereof, to the extent directed to any Invention that is HepDirect
Technology or Collaboration Compound or a method of making or using HepDirect
Technology or a Collaboration Compound, where such Patents are Controlled by
Metabasis as of the Effective Date, and (b) Patents with claims or portions
thereof, to the extent directed to any Invention that is HepDirect Technology
or a method of making or using HepDirect Technology, where such Invention first
becomes Controlled by Metabasis during the Research Term (provided that any
such Patent with the same disclosure as a Patent described in
subsection (a), such as a renewal, division, continuation (in whole), or
request for continued examination (RCE), reissue, reexamination or the like,
will be included in subsection (a) rather than subsection (b)).  Notwithstanding the foregoing,
subsection (b) does not include any claims of such Patents or portions
thereof to the extent directed to any such Invention that is a Collaboration
Compound or a method of making or using a Collaboration Compound.  For purposes of clarity, Metabasis Patents do
not include Idenix Patents.  The
Metabasis Patents existing on the Effective Date are listed on Exhibit D.

1.39        “Metabasis Technology” shall mean the Metabasis Know-How and
Metabasis Patents.

1.40        “NDA” shall mean a New Drug Application (as more fully
defined in 21 C.F.R. 314.5 et seq.)
and all amendments and supplements thereto filed with the FDA, or the
equivalent application filed with any equivalent agency or governmental
authority outside the United States of America (including any supra-national
agency such as in the European Union), including all documents, data, and other
information concerning a pharmaceutical product which are necessary for gaining
Regulatory Approval to market and sell such pharmaceutical product.

***Confidential
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1.41        “Net Sales” shall mean, with respect to any Product,
the gross invoiced sales price of such Product by Idenix and Sublicensees to
Third Parties which are not Sublicensees (provided that, if any Sublicensee is
the end user of such Product, the amount included in Net Sales shall be deemed
to be the amount that would be billed to a Third Party end user in an arm’s
length transaction), less the following deductions to the extent included in
the gross invoiced sales price for such Product or otherwise directly paid or
incurred by Idenix or Sublicensees with respect to the sale of such Product:

(a)           normal and customary trade and quantity discounts, credits and
allowances actually allowed and properly taken directly with respect to sales
of such Product;

(b)           amounts repaid or credited by reason of rejections, recalls, returns,
rebates, government mandated rebates, and allowances;

(c)           chargebacks and other amounts paid on sale or dispensing of such
Product;

(d)           retroactive price reductions that are actually allowed or granted;

(e)           tariffs, duties, excise, sales, value-added or other taxes (other than
taxes based on income);

(f)            cash discounts for timely payment;

(g)           delayed ship order credits;

(h)           discounts pursuant to patient discount programs; and

(i)            freight, shipping and insurance charges.

In
the event a Product (for purposes of this paragraph, the “relevant Product”)
comprises a Development Candidate and an additional active pharmaceutical
ingredient sold in a country in combination for use as a fixed-dose Product as
a Combination Therapy, and both a Product comprising the Development Candidate
as the sole active ingredient and a pharmaceutical product containing such
additional active pharmaceutical ingredient as the sole active ingredient are
sold separately in such country, the Net Sales for the relevant Product in such
country shall be calculated by multiplying Net Sales in such country (as would
otherwise be determined in accordance with this definition of “Net Sales”
(i.e., without giving effect to this paragraph or the immediately following
paragraph)) by the fraction A/(A+B), where A is the gross invoiced sales price
in such country of the Product comprising the Development Candidate as the sole
active ingredient (when sold separately from the Combination Therapy), and B is
the gross invoiced sales price in such country of the pharmaceutical product
comprising the additional active pharmaceutical ingredient as the sole active
ingredient (when sold separately from the Combination Therapy). Notwithstanding
the foregoing, the fractional adjustment set forth in this paragraph shall not
apply (and the fractional adjustment and procedures in the immediately
following paragraph shall apply instead) in the event actual sales of the
separate pharmaceutical product comprising the additional active pharmaceutical
ingredient as the sole active ingredient are not more than incidental in such
country.

 6
 

In
the event a Product (for purposes of this paragraph, the “relevant Product”)
comprises a Development Candidate and an additional active pharmaceutical
ingredient sold in a country in combination for use as a fixed-dose Product as
a Combination Therapy, and either a Product comprising the Development
Candidate as the sole active ingredient or the pharmaceutical product
comprising the additional active pharmaceutical ingredient as the sole active
ingredient is not sold separately in such country, the Net Sales for the
relevant Product in such country shall be calculated by multiplying Net Sales
in such country (as would otherwise be determined in accordance with this
definition of “Net Sales” (i.e., without giving effect to this paragraph or the
immediately preceding paragraph)) by the fraction A/(A+B), where A is the fair
market value in such country of the Product comprising the Development
Candidate as the sole active ingredient (when or if it were (as applicable)
sold separately from the Combination Therapy), and B is the fair market value
in such country of the pharmaceutical product comprising the additional active
pharmaceutical ingredient as the sole active ingredient (when or if it were (as
applicable) sold separately from the Combination Therapy). For purposes of
calculating the fraction specified in the immediately preceding sentence,
Idenix shall make a written proposal to Metabasis, for its review and approval,
of the fair market value of each component of such fraction, reasonably supported
by written documentation. If the Parties are unable to reach agreement on such
matters, the provisions of Section 12.6 shall apply.

For
clarification purposes, there shall be no fractional adjustment in the
calculation of Net Sales (i.e., no effect shall be given to the immediately
preceding two paragraphs) with respect to any Product comprising a Development
Candidate that is sold together or promoted as a combination with a separate
pharmaceutical product (including any interferon) for co-administration.

1.42        “Notice Date” shall have the meaning provided in
Section 12.6(b).

1.43        “Patents” shall mean (a) all patents,
certificates of invention, applications for certificates of invention, priority
patent filings and patent applications, including without limitation patent
applications under the Patent Cooperation and the European Patent Convention,
together with (b) any renewal, division, continuation (in whole or in
part), or request for continued examination (RCE) of any of such patents, certificates
of invention and patent applications, and any and all patents or certificates
of invention issuing thereon, and any and all reissues, reexaminations,
extensions, divisions, renewals, substitutions, confirmations, registrations,
revalidations, revisions, and additions of or to any of the foregoing, and any
foreign counterparts of any of the foregoing and any other patents and patent
applications claiming priority back to any of the foregoing.

1.44        “Phase 1 Clinical Trial” shall mean a human clinical trial in any
country that is carried out to obtain data that can be submitted to the FDA in
satisfaction of the requirements of 21 CFR 312.21(a).

1.45        “Phase 2 Clinical Trial” shall mean a human clinical trial in any
country that is carried out to: (i) determine efficacy and dose range; and (ii)
obtain data that can be submitted to the FDA in satisfaction of the
requirements of 21 CFR 312.21(b). 
Notwithstanding the foregoing, Phase 2 Clinical Trial shall not include
a phase 1b/2a clinical trial that includes a treatment period less than twelve
(12) weeks in length.

 7
 

1.46        “Phase 3 Clinical Trial” shall mean a pivotal human clinical
trial in any country that is carried out to obtain data that can be submitted
to the FDA in satisfaction of the requirements of 21 CFR 312.21(c).

1.47        “Process Chemistry Know-How” shall mean any Information or Invention,
to the extent directed to a process chemistry improvement to HepDirect
Technology, that first becomes Controlled by Idenix following receipt of the
information with respect to a Development Candidate pursuant to Section 3.4 but
prior to the First Commercial Sale of any Product that contains such
Development Candidate.

1.48        “Process Chemistry Patents” shall mean Patents with claims or
portions thereof, to the extent directed to any Invention that is a process
chemistry improvement to HepDirect Technology, that first becomes Controlled by
Idenix following receipt of the information with respect to a Development
Candidate pursuant to Section 3.4 but prior to the First Commercial Sale of any
Product that contains such Development Candidate.

1.49        “Process Chemistry Technology” shall mean Process Chemistry Know-How and
Process Chemistry Patents.

1.50        “Product” shall mean any preparation in final form
containing a Development Candidate for sale by prescription, over-the-counter
or any other method.

1.51        “Project Leader” shall have the meaning provided in
Section 2.5.

1.52        “Proof of Concept” shall have the meaning provided in Schedule II to
the Research Plan.

1.53        “Proposed Resolution Deadline” shall have the meaning provided in
Section 12.6(c).

1.54        “Regulatory Approval” shall mean any and all approvals
(including price and reimbursement approvals, if required), licenses,
registrations, or authorizations of any Regulatory Authority in a particular
jurisdiction that are necessary for the manufacture, use, storage, import,
transport and/or sale of a Product in such jurisdiction in accordance with
applicable laws.

1.55        “Regulatory Authority” shall mean any national or supranational
governmental authority, including, without limitation, the FDA and the EMEA,
that has responsibility in any country or other regulatory jurisdiction over
the development and/or commercialization of Products.  For purposes of this Agreement, “FDA” shall
mean the U.S. Food and Drug Administration or any successor agency, and “EMEA”
shall mean the European Medicines Agency or any successor agency.

1.56        “Research Plan” means the plan (the initial form of which
has been agreed upon in writing by the Parties as set forth in the letter
agreement dated as of the Effective Date) that sets out the research work to be
performed by Metabasis and Idenix in conducting the Research Program, as such
plan may be amended or modified by the Committee or by mutual written agreement
of the Parties as contemplated under this Agreement.

 8
 

1.57        “Research Program” shall mean the research activities
undertaken by either or both of the Parties 
as set forth in Article 3 and the Research Plan.

1.58        “Research Term” shall mean the duration of the Research
Program, and “Initial Research Term”
and “Extended Research Term” shall
have the respective meanings given such terms in Section 3.6(a).

1.59        “Royalty-Extending Patent” shall mean any Specific Claim if a
license to such Specific Claim granted pursuant to Section 4.2(a)(iii) provides
Idenix or its Sublicensee with market exclusivity for the applicable
Development Candidate or Product and such market exclusivity is due solely to
the license granted to such Specific Claim.

1.60        “Royalty Term” shall mean, in the case of any Product in
any country, the period of time commencing on the First Commercial Sale of such
Product in such country and ending upon the later of (a) [***] after the date
of First Commercial Sale of such Product in such country, and (b) the
expiration of the last to expire of (i) the Metabasis Patents, Idenix Patents,
Collaboration Patents, or Joint Patents containing a Valid Claim that would,
absent ownership of or a license to such Patent, be infringed by the use or
sale of such Product or the Development Candidate therein or by the manufacture
of such Product or the Development Candidate therein (if ownership of or a
license to such a Patent containing a Valid Claim of method of manufacturing
such Development Candidate or Product would provide market exclusivity for the
applicable Product) or (ii) any Royalty-Extending Patents.

1.61        “Specific Claims” shall have the meaning provided in
Section 4.2(a)(iii).

1.62        “Sublicensee” shall mean an Affiliate or Third Party
to which Idenix has (a) sublicensed some or all of Metabasis Technology or
Collaboration Technology or any Royalty-Extending Patent,  or (b) licensed some or all of Idenix
Technology or Joint Technology to develop, make, have made, use, sell, have
sold, offer for sale or import Development Candidates and Products in the Field
during the Term.

1.63        “Term” shall have the meaning provided in
Section 10.1.

1.64        “Territory” shall mean worldwide.

1.65        “Third Party” shall mean an entity other than Idenix
and its Affiliates, and Metabasis and its Affiliates.

1.66        “Third Party Patent” shall have the meaning provided in
Section 5.5(b)(iii).

1.67        “Title 11” shall have the meaning provided in
Section 10.7.

1.68        “Valid Claim” shall mean a claim of (a) an issued and
unexpired patent or a supplementary protection certificate, which claim has not
been held invalid or unenforceable by a court or other government agency of
competent jurisdiction from which no appeal can be or has been taken and has
not been held or admitted to be invalid or unenforceable through re-examination
or disclaimer, opposition procedure, nullity suit or otherwise, or (b) a
pending patent application; provided,
however, that if a claim of a pending patent application shall not

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have issued within [***] (or in Japan, [***] after the
earliest filing date from which such claim takes priority, such claim shall not
constitute a Valid Claim for the purposes of this Agreement unless and until a
patent issues with such claim.

2.                                      RESEARCH
PROGRAM GOVERNANCE

2.1          Joint Research Committee. 
Promptly after the Effective Date, the Parties will form a Joint
Research Committee (the “Committee”)
composed of an equal number of representatives of each of Idenix and
Metabasis.  One member of the Committee
shall be selected to act as the chairperson of the Committee, with each
chairperson acting for a term of twelve (12) months.  The chairperson shall be selected alternately
by Metabasis and Idenix, and [***] shall designate the first chairperson.  The purpose of the Committee is to ensure
that the goals and purpose of this Agreement are being carried out in a timely
and effective manner.

2.2          Meetings.  The Committee shall meet at least [***] times
per year during the Research Term or at such greater frequency as the Committee
agrees.  Such meetings may be conducted
by videoconference, teleconference or in person, as agreed by the Parties, and
the Parties shall agree upon the time of meetings.  In-person meetings shall alternate between
the facilities of Idenix in Cambridge, Massachusetts, and the facilities of
Metabasis in La Jolla, California.  No Committee meeting may be conducted unless at
least one representative of each Party is participating.  Each Party shall bear its own expenses
related to the attendance of such meetings by its representatives.  A reasonable number of additional
representatives of a Party may attend meetings of the Committee in a non-voting
capacity.

2.3          Minutes.  The hosting Party shall have responsibility for
preparing definitive minutes of each Committee meeting, a draft of which shall
be circulated for comment to all members of the Committee within ten
(10) business days after the relevant meeting.  Such minutes shall provide a description, in
reasonable detail, of the Research Program progress to date, and of the
discussions at the meeting, a list of any actions or determination approved by
the Committee and any disagreements not resolved by the Committee.  The Project Leaders shall discuss any comments
on such minutes and finalize the minutes by no later than 30 business days
after the meeting.  Any disagreement on
the minutes shall be resolved in accordance with Section 2.4.

2.4          Committee Decision-Making. 
All decisions of the Committee shall be unanimous, with the
representatives of each Party collectively having one (1) vote.  If the Committee is unable to decide or
resolve unanimously any matter properly presented to it for action, then at the
written request of either Party, the issue shall be referred to Metabasis’
Executive Vice President of Research and Development and Idenix’s Senior Vice
President, Biology, who shall attempt in good faith to resolve such issue as
promptly as practicable.  If such
officers are unable to resolve such issue within [***], then at the written
request of either Party, the issue shall be referred to the Chief Executive
Officer of Metabasis and the Chief Executive Officer of Idenix for
resolution.  Such officers of the Parties
will meet promptly thereafter in order to resolve such issue as promptly as practicable.

2.5          Project Leaders. 
Idenix and Metabasis each shall appoint a person (a “Project Leader”)
from the Committee to coordinate its part of the Research Program.  The Project

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Leaders shall be the primary contact between the
Parties with respect to the Research Program. 
Each Party shall notify the other Party as soon as practicable upon
changing this appointment.

3.                                      RESEARCH
PROGRAM

3.1          General.  Metabasis and Idenix shall engage in the Research
Program upon the terms and conditions set forth in this Agreement.  The activities to be undertaken in the course
of Research Program are set forth in the Research Plan which may be amended
from time to time upon the mutual written agreement of authorized
representatives of the Parties.

3.2          Conduct of Research.  Subject to the terms and conditions of this Agreement,
each Party shall be responsible for managing and controlling its respective
research obligations under the Research Plan. 
Each Party shall conduct the Research Program in good scientific manner,
and in compliance in all material respects with all requirements of applicable
laws, rules and regulations.  Each Party
hereby certifies that it will not and has not employed or otherwise used in any
capacity the services of any person debarred under Section 21 USC 335a in
performing any services hereunder.  Each
Party shall proceed diligently and in a timely manner with the work set out in
the Research Program by using commercially reasonable efforts to carry out the
activities assigned to such Party under the Research Program with sufficient
skills and experience as are required to accomplish the Research Program in
accordance with the terms of this Agreement and Research Plan.

3.3          Research Commitment; Metabasis FTEs.  During
the Research Term, each Party shall use its commercially reasonable efforts to
carry out the activities assigned to such Party under the Research Program in
accordance with such plan and the terms and conditions of this Agreement.  Without limiting the generality of the
foregoing, Metabasis shall devote to the performance of its responsibilities
under the Research Plan [***] FTEs per year during the Research Term, all of
whom shall be funded by Idenix in accordance with Section 5.2.  For purposes of clarification, in no event
shall Metabasis be obligated to devote to the Research Program more than the
number of FTEs being funded by Idenix under this Agreement.

3.4          Exchange of Information.  Upon execution of this Agreement, and from time to
time as necessary during the Research Term, Metabasis shall disclose to Idenix
all Collaboration Know-How not previously disclosed and such Metabasis Know-How
as is reasonably necessary, in Metabasis’ reasonable judgment, for the
performance by Idenix of its responsibilities under the Research Program.  Following designation of a Development
Candidate pursuant to Section 4.1, Metabasis shall disclose to Idenix all
Collaboration Know-How regarding such Development Candidate not previously
disclosed and such Metabasis Know-How as is reasonably necessary for the
manufacture, use (including use for development) or sale of Development
Candidates and Products in the Field. 
Upon execution of this Agreement, and from time to time as necessary
during the Research Term, Idenix shall disclose to Metabasis all Collaboration
Know-How not previously disclosed and such Idenix Know-How as is reasonably
necessary for the performance by Metabasis of its responsibilities under the
Research Program.  Nothing herein shall
require either Party to disclose information that is subject to bona fide confidentiality obligations to a
Third Party.

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3.5          Records and Reports.  Metabasis and Idenix shall each maintain records, in
sufficient detail and in good scientific manner appropriate for patent and
regulatory purposes, which shall fully and properly reflect all work done and
results achieved in the performance of the Research Program by such Party.  Within [***] during the Research Term, each
Party shall provide to the other Party a written progress report which shall
summarize (a) with respect to reports provided by Metabasis, data and results
regarding the Collaboration Compound with respect to each Idenix Nucleoside
that Metabasis identifies as most likely to meet the Proof of Concept or
Development Candidate criteria and (b) with respect to reports provided by
Idenix, test data and results regarding Collaboration Compounds tested by
Idenix to determine whether or not such Collaboration Compounds meet the Proof
of Concept or Development Candidate criteria. 
Without limiting the generality of the foregoing, each such progress
report will disclose any Collaboration Technology that such Party works on
during such calendar quarter.

3.6          Research Term.

(a)           Research Term. 
Except as otherwise provided in Article 10, the Research Term shall
commence on the Effective Date  and
continue for a period of two (2) years (the “Initial Research Term”).  Thereafter, the Parties may extend the
Research Term by mutual written agreement of the authorized representative of
the Parties, and shall, in such case, amend the Research Plan as applicable.  Any such extension of the Research Term shall
be referred to herein as an “Extended Research Term.”

(b)           Early Termination. 
Notwithstanding anything to the contrary in this Section 3.6,
Idenix may, with or without cause and in its sole discretion, terminate the
Research Term:

(i)            effective as of the first anniversary of the Effective
Date upon written notice to Metabasis given no later than [***] prior to the
first anniversary of the Effective Date; or

(ii)           at any time after designation of the first Development
Candidate in accordance with Section 4.1 and payment of the corresponding
milestone payment specified in Section 5.4, by providing Metabasis with
[***] written notice to such effect.

3.7          Use of Subcontractors.  Each Party shall be entitled to utilize the service of
Third Parties to perform their respective Research Program activities only upon
the prior written consent of the other Party (not to be unreasonably withheld)
or as specifically set forth in the Research Plan.  Notwithstanding any such consent, each Party
shall remain at all times responsible for the performance of its respective
responsibilities under the Research Program and shall obtain the written
agreement of each such Third Party, prior to the time such Third Party
initiates work, to assign ownership of Inventions made in the course of
Research Program activities to such Party, and such Party will make such
further assignment of such Inventions as provided under Article 9 hereof.

3.8          Materials.  In order to facilitate the Research Program, either
Party may provide to the other Party certain biological materials or chemical
compounds Controlled by the

 

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supplying Party, including, but not limited to,
Collaboration Compounds (collectively, “Materials”) for use by the other Party in
furtherance of the Research Program. 
Except as otherwise provided under this Agreement, all such Materials
delivered to the other Party will remain the sole property of the supplying
Party, will be used only in furtherance of the conduct of the Research Program
and, if applicable, the development, manufacture or commercialization of
Products in accordance with this Agreement, will not be used or delivered to or
for the benefit of any Third Party without the prior written consent of the
supplying Party, and will be used in compliance with all applicable laws, rules
and regulations.  The Materials supplied
under this Agreement must be used with prudence and appropriate caution in any
experimental work because not all of their characteristics may be known.  Except as expressly set forth herein, THE
MATERIALS ARE PROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT
THE USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER
PROPRIETARY RIGHTS OF ANY THIRD PARTY.

4.                                      DESIGNATION
OF DEVELOPMENT CANDIDATES; LICENSE GRANTS; DEVELOPMENT AND COMMERCIALIZATION

4.1          Designation of Development Candidate.
 At any time during the Research Term or within
[***] after its expiration, Idenix may, by written notice to Metabasis,
designate one (1) or more Collaboration Compounds that possess the properties
specified in Schedule III
to the Research Plan as “Development
Candidates” for purposes of this Agreement.

4.2          License Grants.

(a)           By Metabasis.

(i)            Collaboration Technology and Joint
Technology.  Subject to the terms and conditions of this
Agreement, Metabasis hereby grants to Idenix an exclusive (even as to
Metabasis), royalty-bearing license in the Territory, with the right to
sublicense through multiple tiers of sublicense, under Metabasis’ interest in
Collaboration Technology and Joint Technology, solely (A) to perform
Idenix’s obligations under the Research Program during the Research Term and
(B) to develop, make, have made, use, sell, have sold, offer for sale and
import Development Candidates and Products in the Field during the Term; provided, however, that Metabasis retains
such rights under Metabasis’ interest in Collaboration Technology and Joint
Technology solely as are necessary to perform its obligations under the
Research Program.

(ii)           Metabasis Technology. 
Subject to the terms and conditions of this Agreement,
(A) Metabasis hereby grants to Idenix a non-exclusive,
royalty-bearing license in the Territory, without the right to sublicense
(except that Idenix may subcontract), under Metabasis Technology Controlled by
Metabasis solely to perform Idenix’s obligations under the Research Program during
the Research Term, and (B) Metabasis hereby grants to Idenix a non-exclusive,
royalty-bearing license in the Territory, with the right to sublicense as
described below through multiple tiers of sublicense, under Metabasis
Technology Controlled by

 

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Metabasis solely to develop, make, have made, use,
sell, have sold, offer for sale and import Development Candidates and Products
in the Field during the Term.  Idenix
shall have the right to sublicense its rights under Section 4.2(a)(ii)(B)
only in conjunction with a sublicense of its rights under
Section 4.2(a)(i), and each such sublicense under
Section 4.2(a)(ii)(B) shall have the same scope as the sublicense granted
to the same Sublicensee under Section 4.2(a)(i) (provided, however, that,
if the sublicense granted to the same Sublicensee under Section 4.2(a)(i)
were to expire solely due to expiration of the Collaboration Technology and
Joint Technology with respect to the relevant Product and relevant country
prior to the expiration of the Metabasis Technology with respect to such
Product and country, the sublicense under Section 4.2(a)(ii)(B) shall continue
for the remainder of the Royalty Term with respect to such Product and
country).

(iii)         Limited License Grant. 
With respect to each Development Candidate, in the event that the
development, making, having made, use or import of such Development Candidate
or the development, making, having made, use, offer for sale, sale, having sold
or import by Idenix or Sublicensees of such Development Candidate would
infringe during the Term a Valid Claim of any issued Patent with claims or
portions thereof to the extent directed to any Invention that is HepDirect Base
Technology, where such Invention first becomes Controlled by Metabasis after
the Research Term but prior to the First Commercial Sale of such Development
Candidate (provided that any such Patent with the same disclosure as a Patent
included in Metabasis Patents, Collaboration Patents or Joint Patents, such as
a renewal, division, continuation (in whole), or request for continued
examination (RCE), reissue, reexamination or the like, will be included in
Metabasis Patents, Collaboration Patents or Joint Patents, and not subject to
this Section 4.2(a)(iii)) (the “Specific Claims”), which Patent is not a
Metabasis Patent, Collaboration Patent or Joint Patent, then,  subject to the terms and conditions of this
Agreement, Metabasis hereby grants to Idenix, a non-exclusive, royalty-bearing
(included within the royalties as set forth in Section 5.5) license in the
Territory, including the right to sublicense as described below through
multiple tiers of sublicense, under such Specific Claims solely to develop,
make, have made, use, sell, offer for sale, have sold or import such Development
Candidate in the Field during the Term. 
Idenix shall have the right to sublicense its rights under this Section
4.2(a)(iii) only in conjunction with a sublicense of its rights under Section
4.2(a)(i), and each sublicense under this Section 4.2(a)(iii) shall have the
same scope as the sublicense granted to the same Sublicensee under Section
4.2(a)(i) (provided, however, that, if the sublicense granted to the same
Sublicensee under Section 4.2(a)(i) were to expire solely due to
expiration of the Collaboration Technology and Joint Technology with respect to
the relevant Development Candidate and relevant country prior to the expiration
of the Specific Claims with respect to such Development Candidate and country,
the sublicense under this Section 4.2(a)(iii) shall continue for the remainder
of the Royalty Term with respect to such Development Candidate and
country).  Following designation by
Idenix of each Development Candidate and continuing until First Commercial Sale
of such Development Candidate, Metabasis shall not grant to any Affiliate or
Third Party any right or license under any applicable Specific Claim such that
Metabasis would no longer Control the Specific Claim.

(b)           By Idenix. Subject to the terms and conditions of
this Agreement, Idenix hereby grants to Metabasis (i) a non-exclusive,
royalty-free license in the Territory, without the right to sublicense, under
Idenix Technology solely to perform Metabasis’ obligations under the Research
Program during the Research Term, and (ii) a non-exclusive, royalty-free,
perpetual license, with the right to sublicense through multiple tiers of
sublicense, under Process

 14
 

Chemistry Technology to develop, make, have made, use, sell, have sold,
offer for sale and import products other than Collaboration Compounds,
Development Candidates and Product.

4.3          Development and Commercialization.  Subject to the terms and conditions of this
Agreement, Idenix shall control, and be solely responsible for the costs
associated with, the worldwide preclinical and clinical development,
registration and commercialization of Development Candidates and Products.  Without limiting the generality of the
foregoing, Idenix shall be responsible for the worldwide supply of all
Development Candidates and Products necessary for the foregoing activities.

4.4          Diligence Obligations.  Idenix agrees to use commercially
reasonable efforts (directly and/or through one or more Sublicensees) to
develop for sale in the Major Markets and commercialize in each of the Major
Markets at least [***] Development Candidate or Product in the Field.

(a)           In the event that Idenix: (i) is not developing
for sale in the Major Markets or commercializing in a particular Major Market
at least [***] Development Candidate or Product in the Field, or
(ii) decides that it will not develop for sale in the Major Markets or
commercialize in a particular Major Market at least [***] Development Candidate
or Product in the Field, then Idenix shall provide Metabasis with prompt
written notice thereof.

(b)           In addition, if Metabasis in good faith believes that
Idenix is not using its commercially reasonable efforts to develop for sale in
the Major Markets or commercialize in a particular Major Market at least [***]
Development Candidate or Product in the Field, Metabasis may provide Idenix
with written notice thereof, in which event Idenix will have [***] after the
date of such notice in which to reasonably demonstrate to Metabasis that Idenix
is meeting such diligence obligation.

(c)           If Idenix provides notice to Metabasis pursuant to
Section 4.4(a) that it is not and will not meet its diligence obligation with
respect to one or more Major Markets, or fails to reasonably demonstrate to
Metabasis pursuant to Section 4.4(b) that it is meeting its diligence
obligation with respect to [***] or more Major Markets within [***] after
notice from Metabasis of failure to meet such diligence obligation, then (i)
this Agreement shall terminate with respect to such Major Market(s) in which
Idenix is not using its commercially reasonable efforts to develop or
commercialize at least [***] Development Candidate or Product in the Field, and
(ii) “Territory”
shall be redefined to be [***].  With
respect to Section 4.4(a), Idenix shall not be in breach of this Agreement
under Section 10.2(b) unless it provides notice to Metabasis pursuant to
Section 4.4(a) that it is not and will not conduct development and
commercialization of at least [***] Development Candidate or Product in the
Field in at least one Major Market.  With
respect to Section 4.4(b), Idenix shall not be in breach of this Agreement
under Section 10.2(b) unless Metabasis in good faith believes that Idenix is
not using its commercially reasonable efforts to develop or commercialize at
least [***] Development Candidate or Product in the Field in at least [***]
Major Market, Metabasis provides Idenix with written notice thereof, and Idenix
fails to reasonably demonstrate to Metabasis within [***] after the date of
such notice that Idenix is meeting such diligence obligation in at least [***]
of the Major Markets.

 

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4.5          Disclosure Regarding Idenix Efforts. 
Idenix will keep Metabasis appropriately informed about Idenix’s
research, development, clinical trial progress and commercialization efforts
with respect to Development Candidates and Products.  Without limiting the generality of the
foregoing, Idenix shall provide Metabasis with prompt written notice of the
following:

(a)           filing of any IND for a Development Candidate or Product;

(b)           initiation of a Phase 1 Clinical Trial, Phase 2 Clinical
Trial or Phase 3 Clinical Trial of a Development Candidate or Product;

(c)           filing of any application for Regulatory Approval with respect to any
Product;

(d)           receipt of Regulatory Approval for any Product; and

(e)           any other significant development or commercialization plans,
activities or results with respect to Development Candidates or Products.

In addition, Idenix shall
provide Metabasis with [***] written reports summarizing Idenix’s development
and commercialization efforts with respect to Development Candidates and
Products during the applicable [***] period. 
The provisions of this
Section 4.5 shall survive expiration or termination of the Research Term
for so long as any license granted to Idenix under Section 4.2(a) remains
in effect.

4.6          Negative Covenants; No
Implied Licenses.

(a)           Idenix hereby covenants that it will not, directly or
indirectly (including through any Sublicensee), conduct clinical development or
commercialization activities pursuant to this Agreement with respect to any
Collaboration Compound that has not been designated or deemed a Development
Candidate pursuant to this Agreement during the Term and Idenix further
acknowledges and agrees that it has no right or license under Metabasis
Technology, Collaboration Technology or Joint Technology to do any of the
foregoing and will not practice any Idenix Technology Controlled by Idenix,
which is directed to any Collaboration Compound, the method of manufacture of
any Collaboration Compound or method of use of any Collaboration Compound, to
do any of the foregoing.  In addition,
during the Term Idenix shall not use or practice any Metabasis Technology or
Specific Claims except as expressly permitted under this Article 4.  In no event shall Idenix (i) create or
synthesize, or attempt to create or synthesize (either itself or through an
Affiliate or Third Party), outside of the Research Program during the Research
Term, any chemical entity that [***]; or (ii) create or synthesize, or attempt
to create or synthesize (either itself or through an Affiliate or Third Party),
after expiration or termination of the Research Term, any chemical entity that
[***]; provided, however, that
the restrictions set forth in Section 4.6(a)(i) and (ii) shall not apply to the
synthesis of Development Candidates or Products for so long as any license
granted to Idenix under Section 4.2(a) remains in effect.  If Idenix creates or synthesizes (either
itself or through an Affiliate or Third Party) any chemical entity that

 

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[***] in breach of this Section 4.6(a), such chemical entity shall
automatically be deemed to be a Collaboration Compound and Development
Candidate subject to the terms of this Agreement.

(b)           Metabasis and its Affiliates shall not, and shall not
grant to any Third Party any rights to, use or practice Metabasis Technology or
Metabasis’ interest in Collaboration Technology or Joint Technology with
respect to the Idenix Nucleosides, the Collaboration Compounds, Development
Candidates or Products during the Term, other than solely as necessary to
fulfill Metabasis’ obligations under the Research Plan during the Research
Term.  Notwithstanding any other
provision of this Agreement to the contrary, but subject to the licenses
granted by Metabasis to Idenix under Section 4.2(a), Metabasis at all times
reserves the exclusive and unrestricted right to use or practice, and to grant
its Affiliates and Third Parties the right to use or practice, Metabasis
Technology for any purpose other than the development, manufacture or
commercialization of the Idenix Nucleosides, the Collaboration Compounds,
Development Candidates or Products.  In
addition, during the Term Metabasis shall not use or practice any Idenix
Technology except as expressly permitted under this Article 4.  In no event shall Metabasis create or
synthesize, or attempt to create or synthesize (either itself or through an
Affiliate or Third Party), outside of the Research Program during the Research
Term, any chemical entity that [***]; or (ii) create or synthesize, or attempt
to create or synthesize (either itself or through an Affiliate or Third Party),
after expiration or termination of the Research Term, any chemical entity that
[***].

(c)           No right or license under any Patents or Information
of either Party is granted or shall be granted by implication.  All such rights or licenses are or shall be
granted only as expressly provided in the terms of this Agreement.

5.                                      PAYMENTS

5.1          Upfront Fee. 
Idenix shall make a one-time, non-refundable, non-creditable
payment to Metabasis of $2,000,000 within fifteen (15) days after the
Effective Date.

5.2          Research Program FTE Funding. 
In consideration for Metabasis’ performance of its obligations under the
Research Program, upon the terms and conditions contained herein, Idenix shall
fund each FTE provided by Metabasis pursuant to Section 3.3 at the rate of
[***], which shall be subject to adjustment on an annual basis as of January 1
of each year, beginning in 2007, by a factor which reflects any increase in the
Consumer Price Index for San Diego County, California as reported as of January
1 in each applicable year thereafter when compared to the comparable statistic
for January 1 of the preceding year. 
During the Research Period, the first payment under this Section 5.2
shall be made within [***] after the receipt by Idenix of an invoice from
Metabasis for payment of FTE funding for the period from the Effective Date to
December 31, 2006, and each subsequent payment shall be made on a quarterly basis
within a period of [***] after the receipt by Idenix of an invoice from
Metabasis for payment of FTE funding for that quarterly

 

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period.  Each
invoice shall set forth information regarding FTEs used by Metabasis on the
Research Program during the applicable quarter.

5.3          Proof of Concept Milestone.  Within [***] after written notice by Metabasis to
Idenix of the achievement of the first Proof of Concept, Idenix shall pay to
Metabasis a one-time milestone payment of [***].  This one-time milestone payment shall be paid
only once regardless of the number of times that Proof of Concept is achieved
by one or more Collaboration Compounds.

5.4          Milestone Payments.  Idenix shall pay to Metabasis each of the milestone
payments set forth below (whether such milestone is achieved by Idenix or a
Sublicensee): 

	
  Milestone
  Event

  	
   

  	
  Milestone

  Payment

  
	
  [***]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

*              [***]

Each of
the milestone payments described in this Section 5.4 shall be payable only
[***] for each Idenix Nucleoside, [***] which are developed or the number of
indications for which Development Candidates or Products based on such Idenix
Nucleoside are developed or commercialized. 
Additionally, to the extent that any milestone payment has been made with
respect to a Development Candidate or Product based on a particular Idenix
Nucleoside that is subsequently deemed a Failed Development Candidate, [***] in
connection with the development or regulatory approval of a substitute or
replacement Development Candidate or Product based on such Idenix
Nucleoside.  A “Failed Development Candidate”
is deemed to mean a Development Candidate or Product based on a particular
Idenix Nucleoside that either: (i) fails to meet regulatory criteria for
further development or does not obtain approval for commercialization; or (ii)
the Parties mutually agree does not meet commercial criteria for further
development.

 

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Idenix shall notify Metabasis in writing within [***] after the achievement
of each milestone, and shall make the appropriate milestone payment to
Metabasis within such [***] period.  If,
for any reason, a Development Candidate or Product based on a particular Idenix
Nucleoside reaches a particular milestone specified above without having
achieved [***] preceding milestones from among the [***] milestones listed
above, then upon the achievement of such milestone, both the milestone payment
applicable to such milestone and the milestone payment(s) applicable to such
preceding unachieved milestone(s) shall be due and payable within [***] after
the achievement of such milestone.

5.5          Royalties.

(a)           Idenix shall pay to Metabasis royalties on worldwide
annual Net Sales of Products by Idenix and Sublicensees at the following rates:

	
  Annual Net
  Sales

  	
   

  	
  Royalty Rate

  
	
  Portion of
  annual Net Sales <[***]

  	
   

  	
  [***]

  
	
  Portion of
  annual Net Sales ≥[***]

  	
   

  	
  [***]

  
	
  Portion of
  annual Net Sales ≥[***]

  	
   

  	
  [***]

  
	
  Portion of
  annual Net Sales ≥[***]

  	
   

  	
  [***]

  

Royalties under this
Section 5.5 shall be payable on a Product-by-Product and
country-by-country basis for a period equal to the Royalty Term for such
Product in such country.

(b)           Reductions.

(i)            Compulsory Licenses. 
If any compulsory license is granted by Idenix or its Sublicensee to a
Third Party with respect to a Product in any country through the order, decree
or grant of a Regulatory Authority in such country, authorizing such Third
Party to manufacture, use, sell, offer for sale or import such Product in such
country, which compulsory license provides for a royalty rate lower than the
applicable royalty rate(s) set forth in Section 5.5(a), as adjusted pursuant to
Sections 5.5(b)(ii) and (iii), then the royalty rate to be paid by Idenix to
Metabasis on Net Sales in that country for such Product pursuant to Section
5.5(a) shall be reduced to that compulsory license rate for the period during
which such compulsory license is in effect. 
Idenix shall use commercially reasonable efforts to oppose the granting
of any such compulsory license, and, if any such compulsory license is granted,
to limit such compulsory license to the extent possible. Further, no royalty
shall be paid on (i) Product that Idenix provides at or below cost to a
government or institution to address a health crisis or emergency, or (ii) Product
that Idenix provides at cost or below on a humanitarian or charitable basis.

(ii)           Expiration of Valid Claims. 
On a Product-by-Product and country-by-country basis, royalty amounts
otherwise payable by Idenix to Metabasis pursuant to Section 5.5(a), as may be
adjusted pursuant to Section 5.5(b)(iii), on Net Sales of any Product during
any portion of the Royalty Term remaining after the expiration of the last to
expire of the applicable (A) Metabasis Patents, Idenix Patents, Collaboration
Patents, Joint Patents and containing a Valid Claim that would, absent
ownership of or a license to such Patent, be infringed by the use or sale of
such Product or the Development Candidate therein or by the 

 

***Confidential
Treatment Requested

 19
 

manufacture of such Product
or the Development Candidate therein (if ownership of or a license to such a
Patent containing a Valid Claim of method of manufacturing such Development
Candidate or Product provides market exclusivity for the applicable Product)
and (B) any Royalty-Extending Patents, shall be reduced by [***]; provided, however, that in no event shall
any royalty payment for any Product in any country in any calendar quarter be
reduced to less than [***] of the royalty payment otherwise payable by Idenix
to Metabasis pursuant to Section 5.5(a) (without taking into account any
adjustment pursuant to Sections 5.5(b)) as a result of the credits under
this Section 5.5(b)(ii) and Section 5.5(b)(iii).

(iii)         Credit for Payment of Royalties for
Necessary Third Party Issued Patents.  On a
Product-by-Product and country-by-country basis, if Idenix or its Sublicensee
determines that a license to any issued Patent of a Third Party (that is not a
Sublicensee of Idenix with respect to such Product in such country) (a “Third Party Patent”)
is necessary to allow Idenix and Sublicensees to practice Metabasis Technology
pursuant to the licenses granted to Idenix under Section 4.2(a)(ii) of
this Agreement, then Idenix may elect, after consultation with its  outside
Patent counsel and Metabasis, to obtain a license to such Third Party Patent at
its own expense.  If Idenix obtains such
a license, Idenix shall be entitled to credit [***] of the royalties paid to
such Third Party for the license to such Third Party Patent from the royalty
payment otherwise payable by Idenix to Metabasis pursuant to Section 5.5(a), as
may be adjusted pursuant to Section 5.5(b)(ii); provided, however, that in no event shall any royalty
payment for any Product in any country in any calendar quarter be reduced to less
than [***] of the royalty payment otherwise payable by Idenix to Metabasis
pursuant to Section 5.5(a) (without taking into account any adjustment
pursuant to Sections 5.5(b)) as a result of the credits under Section
5.5(b)(ii) and this Section 5.5(b)(iii). 
For clarification, Idenix or its Sublicensee is responsible, at its own
expense, for all other payments to Third Parties in connection with obtaining
rights to intellectual property rights necessary or desirable for the
development, manufacture or commercialization of any Development Candidate or
Product by Idenix or Sublicensees.

6.                                      PAYMENT;
RECORDS; AUDITS

6.1          Payment; Reports.  Royalties shall be calculated and reported for each
calendar quarter.  All payments due to
Metabasis under this Agreement shall be paid within [***] after the end of each
calendar quarter, unless otherwise specifically provided herein.  Each payment shall be accompanied by a report
of Net Sales of Products by Idenix and Sublicensees in sufficient detail to
permit confirmation of the accuracy of the payment made, including, without
limitation and on a country-by-country basis, the number of Products sold, the
gross sales and Net Sales of such Products, the royalties payable, the method
used to calculate the royalties, and the exchange rates used.

6.2          Exchange Rate; Manner and Place of
Payment.  All payments hereunder shall be payable in U.S.
dollars.  When conversion of payments
from any foreign currency is required, such conversion shall be at the average
of the rates of exchange reported in The
Wall Street Journal, Eastern U.S. Edition, for each business day of
the applicable calendar quarter.  All
payments owed under this Agreement shall be made by wire transfer in
immediately available funds to a bank and account designated in writing by
Metabasis, unless otherwise specified in writing by Metabasis.

 

***Confidential
Treatment Requested

 20
 

6.3          Income Tax Withholding.  Metabasis will pay any and all taxes levied on account
of any payments made to it under this Agreement.  If any taxes are required to be withheld by
Idenix, Idenix will (a) deduct such taxes from the payment made to
Metabasis, (b) timely pay the taxes to the proper taxing authority, and
(c) send proof of payment to Metabasis and certify its receipt by the
taxing authority within [***] following such payment.

6.4          Audits.  During the Term and for a period of [***] thereafter,
Idenix shall keep complete and accurate records pertaining to the sale or other
disposition of Products in sufficient detail to permit Metabasis to confirm the
accuracy of all royalties due hereunder and Idenix shall require its
Sublicensees to provide such records to Idenix. 
Metabasis shall have the right not more than once a year to cause an
independent, certified public accountant reasonably acceptable to Idenix to
audit such records to confirm Net Sales, royalties and other payments for a
period covering not more than the preceding [***].  Such audits may be exercised during normal
business hours upon reasonable prior written notice to Idenix.  Prompt adjustments shall be made by the
Parties to reflect the results of such audit. 
Metabasis shall bear the full cost of such audit unless such audit
discloses an underpayment by Idenix of more than [***] of the amount of
royalties or other payments due under this Agreement, in which case, Idenix
shall [***] of such audit and shall promptly remit to Metabasis the amount of
any underpayment.

6.5          Late Payments. 
In the event that any payment due under this Agreement is not made when
due, the payment shall accrue interest from the date due at the rate of [***]; provided, however, that in no event shall
such rate exceed the maximum legal annual interest rate.  The payment of such interest shall not limit
Metabasis from exercising any other rights it may have as a consequence of the
lateness of any payment.

7.                                      CONFIDENTIALITY
AND PUBLICATION

7.1          Confidential Information.  Except to the extent expressly authorized by this
Agreement or otherwise agreed in writing by the Parties, the Parties agree
that, during the Term and for [***] thereafter, the receiving Party shall keep
confidential and shall not publish or otherwise disclose and shall not use for
any purpose other than as expressly provided for in this Agreement any
Information furnished to it by the other Party pursuant to this Agreement, or
as provided below, owned by the other Party, and any Proprietary Information
(as defined in the Confidentiality Agreement) furnished to it by the other
party pursuant to the Confidentiality Agreement (collectively, “Confidential Information”).  For the avoidance of doubt, and without
limiting the generality of the foregoing, Idenix Know-How is Confidential
Information of Idenix, Metabasis Know-How is Confidential Information of
Metabasis, and Collaboration Technology and Joint Technology shall be deemed
Confidential Information of both Parties. 
Each Party may use Confidential Information of the other Party only as
permitted by this Agreement.  Each Party
will use at least the same standard of care, and in no event less than a
reasonable standard of care, as it uses to protect proprietary or confidential
information of its own to ensure that its employees, agents, consultants and
other representatives do not disclose or make any unauthorized use of the
Confidential Information.  Each Party
will promptly notify the other upon discovery of any unauthorized use or
disclosure of the Confidential Information.

 

***Confidential
Treatment Requested

 21

7.2          Exceptions.  Confidential Information shall not include any
information which the receiving Party can prove by competent evidence:
(a) is now, or hereafter becomes, through no act or failure to act on the
part of the receiving Party, generally known or available; (b) is known by
the receiving Party at the time of receiving such information, as evidenced by
written documents or records; (c) is hereafter furnished to the receiving
Party by a Third Party, as a matter of right and without restriction on disclosure;
(d) is independently discovered or developed by the receiving Party
without the use of Confidential Information belonging to the disclosing Party;
or (e) is the subject of a written permission to disclose provided to the
receiving Party by the disclosing Party.

7.3          Authorized Disclosure.  Each Party may disclose Confidential Information
belonging to the other Party as expressly permitted by this Agreement or if and
to the extent such disclosure is reasonably necessary in the following
instances:

(a)           filing or prosecuting Patents as permitted by this Agreement (only with
written permission of the other Party);

(b)           regulatory filings for Products such Party has a license or right to
develop hereunder;

(c)           prosecuting or defending litigation as permitted by this Agreement;

(d)           complying with applicable court orders or governmental regulations;

(e)           in the case of Idenix, conducting development and/or commercialization
activities in accordance with a license granted under Section 4.2(a);

(f)            disclosure to Affiliates, licensees, sublicensees, employees,
consultants or agents of the receiving Party who have a need to know such
information in order for the receiving Party to exercise its rights or fulfill
its obligations under this Agreement, provided, in each case, that any such
Affiliate, licensee, sublicensee, employee, consultant or agent agrees to be
bound by similar terms of confidentiality and non-use comparable in scope to
those set forth in this Article 7; and

(g)           disclosure to Third Parties in connection with due diligence or similar
investigations by such Third Parties, and disclosure to potential Third Party
investors in confidential financing documents, provided, in each case, that any
such Third Party agrees to be bound by similar terms of confidentiality and
non-use comparable in scope to those set forth in this Article 7; and
provided further that Metabasis may not, without Idenix’ prior written consent
(such consent not to be unreasonably withheld), disclose to any Third Party
pharmaceutical or biotechnology company that is a competitor of Idenix in the
Field any data provided to Metabasis by Idenix with respect to the
Collaboration Compounds, Development Candidates or Products.

Notwithstanding the foregoing, in the event a Party is
required to make a disclosure of the other Party’s Confidential Information
pursuant to Section 7.3(b) through (d), it will, except where
impracticable, give reasonable advance notice to the other Party of such
disclosure and use efforts to secure confidential treatment of such information
at least as diligent as such Party

 22
 

would use to protect its own confidential information,
but in no event less than reasonable efforts. 
In any event, each Party agrees to take all reasonable action to avoid
disclosure of the other Party’s Confidential Information hereunder.  The Parties will consult with each other on
the provisions of this Agreement to be redacted in any filings made by the
Parties with the Securities and Exchange Commission or as otherwise required by
law.

7.4          Publication.  The Parties acknowledge their mutual interest in
publishing the results of Product development efforts in order to obtain
recognition within the scientific and investment communities and agree that
clinical trial results regarding Products may be published via press release
and at investor conferences and presented at appropriate scientific conferences
in a timely fashion.  Each Party also
recognizes the mutual interest in obtaining valid patent protection and in
protecting business interests and trade secret information and, in particular,
it is the intent of each Party to maintain the confidentiality of the other
Party’s Confidential Information included in any patent application until such
time as such patent application has been published.  Accordingly, a Party shall have the right to
review and comment on any material proposed for disclosure or publication by
the other Party, such as by oral presentation, manuscript or abstract, which
utilizes data generated from the development, manufacture or commercialization
of Development Candidates or Products and/or includes Confidential Information
of the other Party.  Before any such
material is submitted for publication, the Party proposing publication shall
deliver a complete copy to the other Party at least [***] prior to submitting
the material to a publisher or initiating any other disclosure.  Such other Party shall review any such
material and give its comments to the Party proposing publication within [***]
after the delivery of such material to such other Party.  With respect to oral presentation materials
and abstracts, such other Party shall make reasonable efforts to expedite
review of such materials and abstracts, and shall return such items as soon as practicable
to the Party proposing publication with appropriate comments, if any, but in no
event later than [***] from the date of delivery to the non-publishing
Party.  The publishing Party shall comply
with the other Party’s request to delete references to the other Party’s
Confidential Information in any such material and agrees to delay any
submission for publication or other public disclosure for a period of up to an
additional [***] for the purpose of preparing and filing appropriate patent
applications.

7.5          Publicity.  Each Party acknowledges and agrees that the other
Party intends, and shall be entitled, to  issue
a press release announcing that the Parties have entered into this Agreement
on, or as soon as practicable following, the Effective Date.  It is understood that each Party may desire
or be required to issue subsequent press releases or make disclosures (pursuant
to filings with the Securities and Exchange Commission or otherwise) relating
to the Agreement or activities thereunder. 
The Parties agree to consult with each other reasonably and in good
faith with respect to the text and timing of all such press releases or other
disclosures prior to the issuance thereof, provided that a Party may not
unreasonably withhold consent to such releases or disclosures, and that either
Party may issue such press releases or make such disclosures as it determines,
based on advice of counsel, are reasonably necessary to comply with laws or
regulations or for appropriate market disclosure.  In addition, following the initial press
releases announcing this Agreement, either Party shall be free to disclose,
without the other Party’s prior written consent, the existence of this
Agreement, the identity of the other Party and those terms of the Agreement
which have already been publicly disclosed in accordance herewith.

 

***Confidential
Treatment Requested

 23
 

8.                                      REPRESENTATIONS
AND WARRANTIES; LIMITATIONS OF LIABILITY

8.1          Mutual Representations and
Warranties.  Each Party represents and warrants to the
other that: (a) it is duly organized and validly existing under the laws
of its jurisdiction of incorporation and has full corporate or other power and
authority to enter into this Agreement and to carry out the provisions hereof;
(b) it is duly authorized to execute and deliver this Agreement and to perform
its obligations hereunder, and the person or persons executing this Agreement
on its behalf has been duly authorized to do so by all requisite corporate
action; (c) this Agreement is legally binding upon it, enforceable in
accordance with its terms, except as enforcement may be limited by (i)
applicable bankruptcy or other laws affecting creditors generally or (ii)
equitable principles including the availability of specific performance or
injunctive relief; and (d) this Agreement, and such Party’s performance of its
obligations hereunder, does not conflict with any material 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.

8.2          Metabasis Representations, Warranties
and Covenants.  Metabasis represents, warrants and covenants
to Idenix that:

(a)           as of the Effective Date, Metabasis Controls the Metabasis Core
Patents;

(b)           as of the Effective Date, there are no pending legal actions of which
Metabasis has received written notice with respect to Metabasis Technology, and
Metabasis has not received written notice of any pending or threatened claims
or litigation seeking to invalidate any Metabasis Patents or claiming that the
practice of Metabasis Technology infringes the intellectual property rights of
any Third Party;

(c)           to Metabasis’ knowledge, as of the Effective Date, the use of Metabasis
Technology does not infringe any valid Third Party Patent rights;

(d)           Metabasis will not knowingly use any know-how that is not Controlled by
Metabasis, other than Idenix Know-How, in the Research Program, and, to
Metabasis’ knowledge, no use of any know-how that is not Controlled by
Metabasis, other than Idenix Know-How, is necessary for the conduct of
the Research Program;

(e)           as of the Effective Date, to Metabasis’ knowledge, the issued U.S.
claims of Metabasis Patents covering the use of HepDirect Technology are valid
and enforceable; and

(f)            as of the Effective Date, Metabasis is not aware (without any specific
investigation) of any issued Patents (other than those rights licensed or to be
licensed to Idenix pursuant to Section 4.2(a)) to which Idenix would require a
license in order to practice the Metabasis Technology to develop, make, have
made, use, sell, have sold, offer for sale and import Development Candidates
and Products in the Field.

8.3          Idenix Representations and
Warranties.  Idenix represents and warrants to Metabasis
that:

(a)           as of the Effective Date, Idenix Controls the Idenix Nucleosides;

 24
 

(b)           as of the Effective Date, there are no pending legal actions of which
Idenix has received written notice with respect to Idenix Technology, and
Idenix has not received written notice of any pending or threatened claims or
litigation seeking to invalidate any Idenix Patents or claiming that the
practice of Idenix Technology infringes the intellectual property rights of any
Third Party;

(c)           to Idenix’s knowledge, as of the Effective Date, the use of Idenix
Technology does not infringe any valid Third Party Patent rights;

(d)           as of the Effective Date, to Idenix’s knowledge, issued U.S. claims of
Idenix Patents covering the use of Idenix Nucleosides are valid and
enforceable; and

(e)           as of the Effective Date, Idenix is not aware (without any specific
investigation) of any issued Patents (other than those rights licensed or to be
licensed to Idenix pursuant to Section 4.2(a)) to which Idenix would require a
license in order to practice the Idenix Technology to develop, make, have made,
use, sell, have sold, offer for sale and import Development Candidates and
Products in the Field.

8.4          Disclaimer.  Except as expressly set forth herein, THE TECHNOLOGY
AND INTELLECTUAL PROPERTY RIGHTS PROVIDED BY EACH PARTY HEREUNDER ARE PROVIDED “AS
IS” AND EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR ARISING FROM A COURSE OF
DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO.  Without limiting the generality of the
foregoing, each Party expressly does not warrant (a) the success of any
study or test commenced under the Research Program or (b) the safety or
usefulness for any purpose of the technology it provides hereunder.

8.5          Limitation of Liability.  EXCEPT FOR LIABILITY FOR BREACH OF ARTICLE 7,
NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT
OR ANY LICENSE GRANTED HEREUNDER; provided,
however, that this Section 8.5 shall not be construed to limit
either Party’s indemnification obligations under Article 11.

9.                                      INTELLECTUAL
PROPERTY

9.1          Ownership.

(a)           Inventions.  Inventorship
of Inventions made pursuant to this Agreement shall be determined in accordance
with the rules of inventorship under United States patent laws.  Except as expressly set forth below, a Party
shall own all such Inventions invented solely by one (1) or more employees or
contractors of such Party, and the Parties shall jointly own all Joint
Technology.  Notwithstanding the
foregoing:

 25
 

(i)            All right, title and interest in and to any Invention
conceived solely by a Party (or on its behalf) or jointly by the Parties (or on
their behalf) after the Effective Date that is Collaboration Technology shall
be jointly owned by Idenix and Metabasis. 
Each Party hereby assigns to the other a joint ownership interest in and
to its interest in Collaboration Technology.

(ii)           Each Party agrees to fully cooperate with the other
Party in protecting, maintaining and defending Collaboration Patents and Joint
Patents.

Inventions assigned under
this Sections 9.1(a) are assigned only to the extent that such Inventions are
directed and specific to such Invention of the applicable section.

(b)           Disclosure.  Each Party
shall promptly disclose to the other inventions within Collaboration Technology
or Joint Technology made in connection with this Agreement.  Each Party shall promptly execute all papers
and instruments, and/or require its employees or contractors to execute such
papers and instruments, as applicable, so as to effectuate the ownership of
technology set forth in Section 9.1(a)(i) and to enable the other Party to
apply for and to prosecute Patents as contemplated by Section 9.2. Idenix
shall promptly disclose any Process Chemistry Technology to Metabasis.

(c)           Limitations.  Subject to the terms of this Agreement,
including, without limitation, the license grants set forth in Section 4.2 and
the negative covenants set forth in Section 4.6 and subject to the provisions
of Section 12.2 regarding assignment, each Party shall have (1) the right
to practice under, and sell, license or otherwise transfer to its Affiliates or
any Third Party, its right in Collaboration Technology only with the prior
written consent of the other Party, and (2) the right to practice under, and
sell, license or otherwise transfer to its Affiliates or any Third Party, its
right in Joint Technology without the consent of, and without duty to account
to, the other Party.

9.2          Patent Prosecution.

(a)           Idenix Patents. Idenix shall have the sole right to control the
preparation, filing, prosecution and maintenance of Idenix Patents and
other patents that cover technology and inventions owned solely by Idenix.

(b)           Metabasis Patents. Metabasis shall have the sole right to control the
preparation, filing, prosecution and maintenance of Metabasis Patents and
other patents that cover technology and inventions owned solely Metabasis.

(c)           Joint Patents.

(i)            Primary
Responsibility.  Idenix shall be
primarily responsible for the preparation, filing, prosecution and maintenance
of Joint Patents, using patent counsel reasonably acceptable to Metabasis.  Idenix shall consult with Metabasis as to the
preparation, filing, prosecution and maintenance of each Joint Patent
reasonably prior to any deadline or action with the U.S. Patent & Trademark
Office or any foreign patent office, and shall furnish to Metabasis copies of
all relevant documents reasonably in advance of such consultation; provided, however, that any patent
submission (including the filing of patent applications) with

 26
 

respect to any Joint Patent, to the
extent that it either distinguishes or could reasonably be expected to
disparage any claimed subject matter of a Metabasis Core Patent, shall require
Metabasis’ prior written consent (such consent not to be unreasonably withheld
and such consent to be negotiated in good faith with all due consideration to
any deadlines) except as required by law. 
The Parties shall mutually agree which jurisdictions to make Joint
Patent filings in, how to prosecute Joint Patents in such jurisdictions, and
how to proceed in response to any request for, or filing or declaration of, any
interference, opposition or reexamination relating to any Joint Patent.

(ii)           Metabasis Option to
Prosecute and Maintain Joint Patents.  Idenix shall give timely notice to Metabasis of any
decision not to file applications for, or to cease prosecution and/or
maintenance of, or not to continue to pay the expenses of prosecution and/or
maintenance of, any Joint Patents on a country-by-country and patent-by-patent basis
and, in such case, shall permit Metabasis, at its sole discretion and expense,
to file or to continue prosecution or maintenance of such Joint Patents, in
which event Idenix shall execute such documents and perform such acts at its
expense as may be reasonably necessary to effect an assignment of such Joint
Patents to Metabasis  in a timely
manner.  Notwithstanding the foregoing,
any patent submission with respect to any Joint Patent, to the extent that it
could reasonably be expected to either distinguish or disparage any claimed
subject matter of an Idenix Core Patent, shall require Idenix’ prior written
consent (such consent not to be unreasonably withheld and such consent to be
negotiated in good faith with all due consideration to any deadlines) except as
required by law.

(iii)         Limitation. 
Neither Party shall file any Joint Patent that claims Idenix Know-How or
Metabasis Know-How, except upon the other Party’s prior written consent.

(d)           Collaboration Patents.  All
preparation, filing, prosecution and maintenance of Collaboration Patents shall
be governed by this Section 9.2(d).

(i)            Joint Patent Counsel. 
Idenix and Metabasis will select patent counsel mutually agreeable to
both Parties (“Joint
Patent Counsel”) to prepare, file, prosecute, and maintain the
Collaboration Patents.  Idenix will have
the first right to control the preparation, prosecution and maintenance of the
Collaboration Patents, with Metabasis having the right to review and comment on
drafts of patent submissions.  Idenix shall give full consideration to Metabasis’
position on prosecution and will work closely with Metabasis counsel to achieve
the best Patent coverage on Collaboration Technology without adversely
affecting either Party’s interests; provided,
however, that any patent submission (including the filing of patent
applications) with respect to any Collaboration Patent, to the extent that it
either distinguishes or could reasonably be expected to disparage any claimed
subject matter of a Metabasis Core Patent, shall require Metabasis’ prior
written consent (such consent not to be unreasonably withheld and such consent
to be negotiated in good faith with all due consideration to any deadlines)
except as required by law. As used herein, “prosecution” shall include
interferences, reexaminations, reissues, oppositions, and the like.

(ii)           Option to Prosecute and Maintain
Collaboration Patents.  Idenix shall give timely notice
to Metabasis of any decision not to file applications for, or to cease
prosecution and/or maintenance of, or not to continue to pay the expenses of
prosecution

 27
 

and/or maintenance of, any Collaboration Patents on a
country-by-country and Patent-by-Patent basis and, in such case, shall permit
Metabasis, at its sole discretion and expense, to file or to continue prosecution
or maintenance of such Collaboration Patents, in which event Idenix shall
execute such documents and perform such acts at its expense as may be
reasonably necessary to effect an assignment of such Collaboration Patents to
Metabasis in a timely manner. 
Notwithstanding the foregoing, any patent submission (including the filing of patent applications)
with respect to any Collaboration Patent, to the extent that it could
reasonably be expected to either distinguish or disparage any claimed subject matter of an Idenix Core Patent,
shall require Idenix’ prior written consent (such consent not to be
unreasonably withheld and such consent to be negotiated in good faith with all
due consideration to any deadlines) except as required by law. Any patents or
patent applications so assigned shall not be considered part of Collaboration
Technology and the claims of such Patents shall not be subject to the license
provisions of Section 4.2.

(iii)         Interference, Opposition,
Reexamination and Reissue.  Idenix and Metabasis
shall inform the other of any request for, or filing or declaration of, any
interference, opposition, or reexamination relating to the Collaboration
Patents within [***] after learning of such event.  Idenix shall be the lead Party in any such interference,
opposition, or reexamination relating to the Collaboration Patents, subject to
the provisions of this Section 9.2(d)(iii).  Metabasis shall have the right to review and
consult with Idenix regarding any submission to be made in connection with such
proceeding.  Notwithstanding the
foregoing or any other provision of this Agreement to the contrary:

(1)           In any interference, opposition, or reexamination
relating to any Collaboration Patent, Idenix shall not (and it will direct
Joint Patent Counsel and its witnesses and experts not to) distinguish or
disparage any  claimed subject matter of a
Metabasis Core Patent, without Metabasis’ prior written consent (such consent
not to be unreasonably withheld and such consent to be negotiated in good faith
with all due consideration to any deadlines) except as required by law;

(2)           Idenix shall give Metabasis timely notice of any
proposed settlement of an interference relating to a Collaboration Patent and
shall not enter into such settlement without Metabasis’ prior written consent
(such consent not to be unreasonably withheld);

(3)           Idenix shall give Metabasis timely notice of any
decision not to initiate or continue an interference relating to a
Collaboration Patent, and in such case, so long as such interference does not
involve a Collaboration Patent that claims the composition or method of
manufacture or use of a Development Candidate or Product then under development
or commercialization by Idenix, shall permit Metabasis, at its sole discretion
and expense, to initiate or continue such interference in Metabasis’ name; in
any interference, opposition, or reexamination relating to any Collaboration
Patent, Metabasis shall not (and it will direct Joint Patent Counsel and its
witnesses and experts not to) distinguish or disparage any claimed subject
matter of an Idenix Core Patent without Idenix’ prior written consent (such
consent not to be unreasonably withheld and such consent to be negotiated in
good faith with all due consideration to any deadlines) except as required by
law; and

 

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(4)           In connection with any interference, opposition,
reissue or reexamination proceeding relating to the Collaboration Patents,
Idenix and Metabasis will cooperate fully and will provide each other with any
information or assistance that either reasonably requests.  Each Party shall keep the other informed of
developments in any such action or proceeding, including, to the extent
permissible by law, consultation and approval of any settlement.

(iv)          Limitation. 
Notwithstanding the foregoing provisions of this Section 9.2(d),
neither Party shall file any Collaboration Patent that claims Idenix Know-How
or Metabasis Know-How, except upon the other Party’s prior written consent.

(e)           Patent Fees.

(i)            All costs associated with filing, prosecuting, issuing
and maintaining Idenix Patents and other Patents described in
Section 9.2(a), including interference, opposition, reexamination and
reissue actions, shall be borne by Idenix.

(ii)           All costs associated with filing, prosecuting, issuing
and maintaining Metabasis Patents and other Patents described in
Section 9.2(b), including interference, opposition, reexamination and
reissue actions, shall be borne by Metabasis.

(iii)         All costs associated with filing, prosecuting, issuing
and maintaining Joint Patents, including interference, opposition,
reexamination and reissue actions, shall be [***].

(iv)          All costs associated with filing, prosecuting, issuing
and maintaining Collaboration Patents, including interference, opposition,
reexamination and reissue actions within, [***].

(f)            Cooperation Regarding Patents Claiming Different
Inventions.  The Parties understand that certain Patents
filed by the Parties after the Effective Date may claim different types of
Inventions made pursuant to this Agreement, and this Section 9.2(f)
describes how the Parties will address that situation.

(i)            In the event that a particular Patent filed after the
Effective Date (provided that it is not the same disclosure of a Patent filed
prior to the Effective Date, such as a renewal, division, continuation (in
whole), or request for continued examination (RCE), reissue, reexamination and
the like, which will remain subject to Section 9.2(a) or (b), as
applicable) includes both claims directed to Collaboration Know-How and claims
directed to Idenix Know-How, a Joint Invention, Metabasis Know-How and/or other
Invention described in Section 9.2(a) or (b), the Parties will, if
requested by either Party, work in good faith to separate such claims into
separate Patent filings if feasible.  If
the Parties are legally unable to separate, or agree not to separate, such
claims, then the applicable Patent shall be treated as a Collaboration Patent
for purposes of this Section 9.2. 
Each Party will promptly provide to the other Party information
reasonably requested by other Party that is necessary for the prosecution
activities pursuant to this Section 9.2 with respect to such Patent.

 

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(ii)           In the event that a particular Patent filed after the
Effective Date (provided that it is not the same disclosure of a Patent filed
prior to the Effective Date, such as a renewal, division, continuation (in
whole), or request for continued examination (RCE), reissue, reexamination and
the like, which will remain subject to Section 9.2(a) or (b), as
applicable) includes both claims directed to a Joint Invention and claims
directed to Idenix Know-How, Metabasis Know-How and/or other Invention
described in Section 9.2(a) or (b), the Parties will, if requested by
either Party, work in good faith to separate such claims into separate Patent
filings if feasible.  If the Parties are
legally unable to separate, or agree not to separate, such claims, then the
applicable Patent shall be treated as (A) a Patent Controlled by Metabasis
under Section 9.2(b) if it includes both claims directed to a Joint
Invention and claims directed to Metabasis Know-How and/or other
Invention described in Section 9.2(b), or (B) Controlled by Idenix
under Section 9.2(a) if it includes both claims directed to a Joint
Invention and claims directed to Idenix Know-How and/or other Invention
described in Section 9.2(a), for purposes of this Article 9.  If the applicable Patent is treated as a
Patent Controlled by Metabasis under Section 9.2(b), and Metabasis
determines to cease prosecution and or maintenance of, or not to continue to
pay the expenses of prosecution and/or maintenance of, such Patent on a country-by-country
basis, Idenix may, at its sole discretion,
continue prosecution or maintenance of such Patent to the extent directed  to Joint Inventions claimed therein and such
Patent shall then be treated as a Joint Patent. 
If the applicable Patent is treated as a Patent Controlled by
Idenix under Section 9.2(a), and Idenix determines to cease prosecution
and or maintenance of, or not to continue to pay the expenses of prosecution
and/or maintenance of, such Patent on a country-by-country basis, Metabasis may, at its sole discretion, continue
prosecution or maintenance of such Patent to the extent directed  to Joint Inventions claimed therein and such
Patent shall then be treated as a Joint Patent. 
Each Party will promptly provide to the other Party information
reasonably requested by other Party that is necessary for the prosecution
activities pursuant to this Section 9.2 with respect to such Patent.

(iii)         In the event that a particular Patent filed after the
Effective Date (provided that it is not the same disclosure of a Patent filed
prior to the Effective Date, such as a renewal, division, continuation (in
whole), or request for continued examination (RCE), reissue, reexamination and
the like, which will remain subject to Section 9.2(a) or (b), as
applicable) includes both claims directed to Metabasis Know-How and/or
other Invention described in Section 9.2(b) and claims directed to Idenix
Know-How and/or other Invention described in Section 9.2(a), the Parties
will, if requested by either Party, work in good faith to separate such claims
into separate Patent filings if feasible. 
If the Parties are legally unable to separate, or agree not to separate,
such claims, then the applicable Patent shall be treated as a Patent Controlled
by Idenix under Section 9.2(a) for purposes of this Article 9.  Each Party will promptly provide to the other
Party information reasonably requested by other Party that is necessary for the
prosecution activities pursuant to this Section 9.2 with respect to such
Patent

(iv)          The provisions for handling of patent applications in
this Section 9.2(f) do not affect ownership of claims, which is governed by
Section 9.1.

9.3          Enforcement and Defense.

(a)           If either Party learns of any infringement of Idenix Patents or other
Patents described in Section 9.2(a), Metabasis Patents or other Patents
described in Section 9.2(b), or

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Joint Patents, or
any misappropriation or misuse of Idenix Know-How, Metabasis Know-How or Joint
Inventions, such Party shall promptly notify the other Party of such
infringement, misappropriation or misuse. 
Idenix shall have the sole right to initiate and prosecute any legal
action to enforce Idenix Technology and other Patents described in
Section 9.2(a), at its own expense and in the name of Idenix, to retain
any recovery obtained by it as a result of such legal action or settlement
thereof, and to control the defense of any declaratory judgment or comparable
action relating to Idenix Technology or Patents described in
Section 9.2(a) and to retain any recovery obtained by it as a result of
such action or settlement thereof.  Metabasis
shall have the sole right to initiate and prosecute any legal action to enforce
Metabasis Technology and other Patents described in Section 9.2(b), at its
own expense and in the name of Metabasis, to retain any recovery obtained by it
as a result of such legal action or settlement thereof, and to control the
defense of any declaratory judgment or comparable action relating to Metabasis
Technology or Patents described in Section 9.2(b) and to retain any
recovery obtained by it as a result of such action or settlement thereof.  Except as otherwise mutually agreed by the
Parties on a case-by-case basis, Idenix shall
have the first right to initiate and prosecute any legal action to enforce
Joint Technology, at its own expense and in the name of Idenix, and, if
necessary, Metabasis, or to control the defense of any declaratory
judgment or comparable action relating to Joint
Technology. If, within [***] following a request by Metabasis to Idenix to
initiate and prosecute such legal action or [***] before the time limit, if
any, set forth in the appropriate laws and regulations for the filing of such
actions, whichever comes first, Idenix fails to take such action, or if Idenix
informs Metabasis that it elects not to exercise such first right, Metabasis
(or its designee) thereafter shall have the right either to initiate and
prosecute such action or to control the defense of such declaratory
judgment or comparable action in the name of
Metabasis and, if necessary, Idenix, at Metabasis’ expense.  Except as otherwise agreed by the
Parties as part of a cost-sharing arrangement, any recovery obtained by either
or both Idenix and Metabasis in connection with or as a result of any action to
enforce Joint Technology, whether by settlement or otherwise, shall first be applied
to reimburse the costs and expenses of the Party that brought and controlled
such action and then to reimburse the costs and expenses of the other Party in
connection with such action, and any amounts remaining after such reimbursement
shall be [***].  Neither Party shall
settle any action regarding Joint Technology without the prior written consent
of the other Party (which shall not be unreasonably withheld).

(b)           If either Party learns of any infringement of Collaboration Patents, or
any misappropriation or misuse of Collaboration Know-How, such Party shall
promptly notify the other Party of such infringement, misappropriation or
misuse.  Idenix and Metabasis thereafter
shall promptly consult and cooperate fully to determine a course of action, including,
without limitation, the commencement of legal action by either or both of
Metabasis and Idenix, to terminate any infringement of such Collaboration
Patent or any misappropriation or misuse of Collaboration Know-How.  Idenix shall have the first right to initiate
and prosecute such legal action at its own expense and in the name of Idenix
and, if necessary, Metabasis, or to control the defense of any declaratory
judgment or comparable action relating to Collaboration Patents or
Collaboration Know-How. Metabasis’ shall pay its own attorneys fees and costs
associated with such action.  If, within
[***] following a written request by Metabasis to Idenix to initiate and
prosecute such legal action or [***] before
the time limit, if any, set forth in the appropriate laws and regulations for
the filing of such actions, whichever comes first, Idenix fails to take
such action, or if Idenix informs Metabasis that it elects not to exercise such
first

 

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right, Metabasis
(or its designee) thereafter shall have the right either to initiate and
prosecute such action or to control the defense of such  action in the name of Metabasis and, if
necessary, Idenix. If Idenix elects not to initiate and prosecute an
infringement action as provided in this Section 9.3(b), and Metabasis
elects to do so, the costs incurred by Metabasis in such course of action,
including the costs of any legal action commenced or the defense of any  judgment, shall be borne solely by Metabasis.

(c)           In any infringement action relating to any Collaboration Patent or
Joint Patent, Idenix shall not (and it will direct its attorneys, witnesses and
experts not to) distinguish or disparage any claimed subject matter of a
Metabasis Core Patent, without Metabasis’ prior written consent (such consent
not to be unreasonably withheld and such consent to be negotiated in good faith
with all due consideration to any deadlines), except as required by law.

(d)           In any infringement action relating to any Collaboration Patent or Joint
Patent, Metabasis shall not (and it will direct its attorneys, witnesses and
experts not to) distinguish or disparage any claimed subject matter of an
Idenix Core Patent without Idenix’ prior written consent (such consent not to
be unreasonably withheld and such consent to be negotiated in good faith with
all due consideration to any deadlines), except as required by law.

(e)           For any action to terminate any infringement of Collaboration or Joint
Patents or any misappropriation or misuse of Collaboration or Joint Know-How,
if either Party is unable to initiate or prosecute such action solely in its
own name, the other Party shall join such action voluntarily and shall execute
all documents necessary to initiate litigation to prosecute and maintain such action.  In connection with any such action, Idenix
and Metabasis shall cooperate fully and will provide each other with any
information or assistance that either reasonably requests.  Each Party shall keep the other informed of
developments in any such action or proceeding, including, to the extent
permissible by law, the consultation and approval of any offer related thereto.

(f)            Except as otherwise agreed by the Parties as part of a cost-sharing
arrangement, any recovery obtained by either or both Idenix and Metabasis in
connection with or as a result of any action contemplated by
Sections 9.3(b) through 9.3(e), whether by settlement or otherwise, shall
be shared in order as follows:

(i)            The Party which initiated and prosecuted the action
shall recoup all of its costs and expenses incurred in connection with the
action;

(ii)           The other Party shall then, to the extent possible,
recover its costs and expenses incurred in connection with the action;

(iii)         Any remaining amounts after such reimbursement of the
Parties costs and expenses shall be retained by the Party that initiated and
prosecuted the action; [***].

(g)           Each Party shall inform the other Party of any certification regarding
any Collaboration Patents or Joint Patents it has received pursuant to either
21 U.S.C. §§ 355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or its successor
provisions, or Canada’s Patented

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Medicines (Notice
of Compliance) Regulations Article 5, or any similar provisions in a
country other than the United States and Canada, and shall provide the other
Party with a copy of such certification within [***] of receipt by such
Party.  Metabasis’ and Idenix’s rights
with respect to the initiation and prosecution of any legal action as a result
of such certification or any recovery obtained as a result of such legal action
shall be as defined in Sections 9.3(b) through 9.3(f).

(h)           For any action under Section 9.3(b) through (e), the Party that is
controlling such action shall continue to consult with the other Party on all
major strategy decisions.

(i)            For any action under Section 9.3(b) through (e), the Party that is
controlling such action shall give the other Party timely written notice of the
proposed settlement of any such action, shall take full consideration of its
views and shall not enter into any such settlement without the prior written
consent of such other Party, not to be unreasonably withheld.

9.4          Limitation of Obligation.  For the sake of clarity, neither Party shall
have any limitation with regard to preparation, filing, prosecution,
maintenance, interference, opposition, reexamination or infringement action of
any Patent controlled by such Party, except as expressly provided in this
Article 9.

9.5          Patent Term Restoration. 
The Parties shall cooperate in obtaining patent term restoration or
supplemental protection certificates or their equivalents in any country where
applicable to Collaboration Patents.  If
elections with respect to obtaining such patent term restoration for a
Collaboration Patent are to be made, Idenix shall have the right to make the
election to seek patent term restoration or supplemental protection and
Metabasis shall abide by such election. 
For the purposes of clarity, the decision of whether to seek patent term
restoration or supplemental protection for any Metabasis Patent, regardless of
whether the claims cover a Collaboration Compound, shall be made solely by
Metabasis at Metabasis’ sole discretion. 
For the purposes of clarity, the decision of whether to seek patent term
restoration or supplemental protection for any Idenix Patent, regardless of
whether the claims cover a Collaboration Compound, shall be made solely by
Idenix at Idenix’ sole discretion.

9.6          Infringement of Third Party
Rights.  Each Party shall promptly notify the other in writing
of any allegation by a Third Party that the activity of either of the Parties
pursuant to this Agreement infringes or may infringe the intellectual property
rights of such Third Party.  Idenix shall
have the sole right to control any defense of any such claim involving alleged
infringement of Third Party rights by Idenix’s activities at its own expense
and by counsel of its own choice, and Metabasis shall have the right, at its
own expense, to be represented in any such action by counsel of its own
choice.  Metabasis shall have the sole
right to control any defense of any such claim involving alleged infringement
of Third Party rights by Metabasis’ activities at its own expense and by
counsel of its own choice, and Idenix shall have the right, at its own expense,
to be represented in any such action by counsel of its own choice.

 

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10.                               TERM;
TERMINATION

10.1        Term.  The term of the Research Program shall commence on the
Effective Date and continue until expiration of the Research Term, unless this
Agreement is earlier terminated pursuant to Section 10.2 or 10.3.  The term of this Agreement (the “Term”) shall
commence on the Effective Date and continue until the expiration of the last
Royalty Term for any Product with respect to which Idenix has a license under
this Agreement, unless earlier terminated pursuant to Section 10.2 or
10.3; provided, however, that
[***], then this Agreement shall expire at such time.  Upon expiration (but not early termination)
of the Royalty Term, on a Product-by-Product and country-by-country basis, the
licenses granted by Metabasis to Idenix under Section 4.2(a) with respect to
such Product and country shall remain in effect on a perpetual, non-exclusive,
sublicenseable and royalty-free basis; provided,
however, that if Idenix does not make any payment owed pursuant to
Section 5 with respect to such Product and country within the time relevant
timeframe for such payment, then such license shall lapse until such payment is
made.

10.2        Termination for Cause.  Each Party shall have the right to terminate the
Research Program and/or this Agreement upon [***] prior written notice to the
other upon the occurrence of any of the following:

(a)           Upon or after the bankruptcy, insolvency, dissolution or winding up of
the other Party (other than a dissolution or winding up for the purpose of
reconstruction or amalgamation); or

(b)           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
[***] following written notice of termination by the non-breaching Party.

10.3        Termination by Idenix. 
Idenix shall have the right to terminate this Agreement for any reason
or for no reason at any time after the expiration of the Research Term, or
after termination of the Research Term pursuant to Section 3.6(b), upon [***]
prior written notice to Metabasis.

10.4        Effect
of Termination or Expiration; Surviving Obligations.

(a)           Upon termination of this Agreement by Idenix pursuant to
Section 10.2:

(i)            the license granted under Sections 4.2(b)(i), if
then in effect, shall automatically terminate and revert to Idenix; and

(ii)           the licenses granted by Metabasis to Idenix under
Section 4.2(a) shall remain in effect in accordance with their respective
terms, subject to compliance by Idenix with all applicable provisions of this
Agreement, including, without limitation, Sections 4.1, 4.3, 4.4, 4.5,
4.6, 5.4, 5.5 and 6.

(b)           Upon termination of this Agreement (i) by Idenix pursuant to
Section 10.3, (ii) termination of this Agreement by Metabasis pursuant to
Section 10.2 or (iii) pursuant to Section 4.4(c) with respect to one or
more but not all Major Markets, the licenses

 

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granted under
Sections 4.2(a) and (b)(i), if then in effect, shall automatically
terminate and revert to the granting Party; which termination shall be worldwide,
with respect to terminations described in clause (i) or (ii), and in the
relevant Major Market(s), with respect to a termination described in clause
(iii).

(c)           Effective upon termination of this Agreement (i) by Idenix pursuant to
Section 10.3 for any reason [***], (ii) by Metabasis pursuant to
Section 10.2 or (iii) pursuant to Section 4.4(c) with respect to one or
more but not all Major Markets, [***], Idenix shall, and it hereby does, grant
to Metabasis an [***], to develop, make, have made, use, sell, offer for sale,
have sold and import [***], and Idenix shall assign to Metabasis all of its
right, title and interest in and to all clinical, technical and other relevant
reports, records, data, information and materials, regulatory filings and
Regulatory Approvals with respect to the Development Candidates and Products in
the Field with respect to the relevant countries and Idenix shall deliver to
Metabasis [***] of each physical embodiment of the aforementioned items within
[***] after such termination and sell to Metabasis any then existing inventory
of Development Candidates and Products at Idenix’ cost.

(d)           Expiration or termination of this Agreement shall not relieve the
Parties of any obligation accruing prior to such expiration or
termination.  Except as set forth below
or elsewhere in this Agreement, the obligations and rights of the Parties under
the following provisions of this Agreement shall survive expiration or
termination of this Agreement:

Section 3.8 —
Materials Transfer (last sentence only)

Section 4.2(b)(ii).

Section 4.6 — Negative
Covenants; No Implied Licenses

Section 6.4 — Audits

Section 6.5 — Late
Payments

Section 7.1 —
Confidential Information

 

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Section 7.2 —
Exceptions

Section 7.3 —
Authorized Disclosure

Section 7.4 —
Publications

Section 8.4 —
Disclaimer

Section 8.5 —
Limitation of Liability

Section 9.1 —
Ownership

Section 9.2 — Patent
Prosecution (for so long as (a) Idenix retains a license from Metabasis or (b)
if applicable, Metabasis retains a license from Idenix, as contemplated by
Section 10.4, with the rights and obligations of the Parties with respect
to the prosecution of the Collaboration Patents and Joint Patents switched)

Section 9.3 —
Enforcement and Defense (for so long as (a) Idenix retains a license from
Metabasis or (b) if applicable, Metabasis retains a license from Idenix, as
contemplated by Section 10.4, with the rights and obligations of the
Parties with respect to the enforcement and defense of the Collaboration
Patents and Joint Patents switched)

Section 9.4 —Limitation
of Obligation

Section 9.5 — Patent
Term Restoration (for so long as Idenix retains a license from Metabasis or, if
applicable, Metabasis retains a license from Idenix, as contemplated by
Section 10.4)

Section 9.6 —
Infringement of Third Party Rights (for so long as (a) Idenix retains a license
from Metabasis or (b) if applicable, Metabasis retains a license from Idenix,
as contemplated by Section 10.4, with the rights and obligations of the
Parties switched)

Section 10.4 —
Effect of Termination or Expiration; Surviving Obligations

Section 10.5 —
Exercise of Right to Terminate

Section 10.6 —
Damages; Relief

Section 10.7 —
Rights in Bankruptcy (for so long as (a) Idenix retains a license from
Metabasis or (b) if applicable, Metabasis retains a license from Idenix, as
contemplated by Section 10.4)

Article 11 —
Indemnification

Article 12 —
Miscellaneous

(e)           Within [***] following the expiration or termination of this Agreement,
except to the extent and for so long as a Party retains license rights under
Sections 10.4(a) or (c), each Party shall deliver to the other Party any
and all Confidential Information of the other Party in its possession.

10.5        Exercise of Right to Terminate.  The exercise by either Party of a termination right
provided for under this Agreement shall not give rise to the payment of damages
or any other form of compensation or relief to the other Party with respect
thereto, unless the termination itself is a breach of contract.

10.6        Damages; Relief.  Subject to Section 10.5 above, termination of
this Agreement shall not preclude either Party from claiming any other damages,
compensation or relief that it may be entitled to upon such termination.

10.7        Rights in Bankruptcy.  The Parties agree that in the event a Party becomes a
debtor under Title 11 of the U.S. Code (“Title 11”), this Agreement shall be deemed
to be, for purposes of Section 365(n) of Title 11, a license to rights to “intellectual
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therein.  Each Party as a
licensee hereunder shall have the rights and elections as specified in
Title 11.  Any agreements
supplemental hereto shall be deemed to be “agreements supplementary to” this
Agreement for purposes of Section 365(n) of Title 11.

11.                               INDEMNIFICATION

11.1        Indemnification by Idenix.  Idenix hereby agrees to save, defend and hold
Metabasis and its Affiliates and their respective directors, officers,
employees and agents (each, a “Metabasis Indemnitee”) harmless from and against any
and all claims, suits, actions, demands, liabilities, expenses and/or loss,
including reasonable legal expense and attorneys’ fees (collectively, “Losses”), to which
any Metabasis Indemnitee may become subject as a result of any claim, demand,
action or other proceeding by any person or entity other than a Party or its
Affiliates to the extent such Losses arise directly or indirectly out of:
(i) the practice by Idenix or any Sublicensee of any license granted to it
hereunder, (ii) the manufacture, use, handling, storage, sale or other
disposition of any Development Candidate or Product by Idenix or any
Sublicensee, or (iii) the breach by Idenix of any warranty,
representation, covenant or agreement made by Idenix in this Agreement; except,
in each case, to the extent such Losses result from the negligence or willful
misconduct of any Metabasis Indemnitee or the breach by Metabasis of any
warranty, representation, covenant or agreement made by Metabasis in this
Agreement.

11.2        Indemnification by Metabasis.  Metabasis hereby agrees to save, defend and hold
Idenix and its Affiliates and their respective directors, officers, employees
and agents (each, an “Idenix
Indemnitee”) harmless from and against any and all Losses to
which any Idenix Indemnitee may become subject as a result of any claim,
demand, action or other proceeding by any person or entity other than a Party
or its Affiliates to the extent such Losses arise directly or indirectly out
of: (i) the practice by Metabasis, its Affiliates or sublicensees (excluding
Idenix and Sublicensees) of any license granted to it hereunder, (ii) the
manufacture, use, handling, storage, sale or other disposition of any product
by Metabasis, its Affiliates or sublicensees (excluding Idenix and
Sublicensees) pursuant to rights granted under this Agreement, or
(iii) the breach by Metabasis of any warranty, representation, covenant or
agreement made by Metabasis in this Agreement; except, in each case, to the
extent such Losses result from the negligence or willful misconduct of any
Idenix Indemnitee or the breach by Idenix of any warranty, representation,
covenant or agreement made by Idenix in this Agreement.

11.3        Control of Defense. 
Any entity entitled to indemnification under this Article 11 shall
give notice to the indemnifying Party of any Losses that may be subject to
indemnification, promptly after learning of such Losses, and the indemnifying
Party shall assume the defense of such Losses with counsel reasonably
satisfactory to the indemnified Party. 
The failure of the indemnified Party to promptly give notice to the
indemnifying Party shall, to the extent the indemnifying Party is actually and
materially prejudiced by such delay, relieve the indemnifying Party of its
obligations to the extent of the harm suffered by such delay.  If such defense is assumed by the
indemnifying Party with counsel so selected, the indemnifying Party will not be
subject to any liability for any settlement of such Losses made by the
indemnified Party without the indemnifying Party’s prior consent (but such
consent will not be unreasonably withheld or delayed), and will not be
obligated to pay the fees and expenses of any separate counsel retained by the
indemnified Party with respect to such Losses. 
The indemnified Party shall provide the indemnifying Party with all
information in its possession and all assistance reasonably necessary

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to enable the indemnifying Party to carry on the
defense of any such Losses.  Without the
prior written consent of the other Party, neither the indemnified Party nor the
indemnifying Party shall agree to any settlement that does not include a
complete release of such other Party from all liability with respect thereto or
that imposes any liability, obligation or restriction on such other Party.

11.4        Insurance.  At their own expense, each Party shall maintain
product liability insurance (or self-insure) in an amount consistent with
industry standards during the Term.

12.                               MISCELLANEOUS

12.1        Force Majeure.  Neither Party shall be held liable to the other Party
nor be deemed to have defaulted under or breached this Agreement for failure or
delay in performing any obligation under this Agreement (other than failure to
make payment when due) when such failure or delay is caused by or results from
causes beyond the reasonable control of the affected Party including, but not
limited to, embargoes, war, acts of war (whether war be declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, fire, floods, or other acts of God, or acts, omissions or delays
in acting by any governmental authority or the other Party.  The affected Party shall notify the other
Party of such force majeure circumstances as soon as reasonably practical, and
shall promptly undertake all reasonable efforts necessary to cure such force
majeure circumstances.  Such excuse from
liability shall be effective only to the extent and duration of the event(s)
causing the failure or delay in performance and provided that the Party has not
caused such event(s) to occur.

12.2        Assignment.  Except as expressly provided hereunder, neither this
Agreement nor any rights or obligations hereunder may be assigned or otherwise
transferred by either Party without the prior written consent of the other
Party (which consent shall not be unreasonably withheld); provided, however, that either Party may
assign this Agreement and its rights and obligations hereunder without the
other Party’s consent: (a) in connection with the transfer or sale of all
or substantially all of the business of such Party to which this Agreement
relates to a Third Party, whether by merger, sale of stock, sale of assets or
otherwise, provided that in the event of a transaction (whether this Agreement
is actually assigned or is assumed by the acquiring Party by operation of law (e.g., in the context of a reverse
triangular merger)), intellectual property rights of the acquiring Party to
such transaction (if other than one of the Parties to this Agreement) shall not
be included in the technology licensed hereunder; or (b) to an Affiliate,
provided that (x) the assigning Party shall remain liable and responsible to
the non-assigning Party  for the
performance and observance of all such duties and obligations by such Affiliate
and (y) the assignee shall assume the rights and obligations of the assigning
Party under this Agreement in a signed, written document.  The rights and obligations of the Parties
under 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.

12.3        Severability  If any one or more of the provisions contained in this
Agreement is held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, unless the absence
of the invalidated provision(s) adversely affects the substantive rights of the

 38
 

Parties.  The Parties shall in
such an instance use their best efforts to replace the invalid, illegal or
unenforceable provision(s) with valid, legal and enforceable provision(s)
which, insofar as practical, implement the purposes of this Agreement.

12.4        Notices.  All notices which are required or permitted hereunder
shall be in writing and sufficient if delivered personally, sent by facsimile
(and promptly confirmed by personal delivery, registered or certified mail or
overnight courier), sent by nationally-recognized overnight courier or sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:

	
  

  	
  if to Metabasis, to:

  	
  Metabasis Therapeutics, Inc.

  11119 North Torrey Pines Road

  La Jolla, CA 92037

  Attention: Chief Executive Officer

  Facsimile No.: (858) 587-2770

  	
   

  
	
   

  	
   

  
	
   

  	
  if to Idenix, to:

  	
  Idenix Pharmaceuticals, Inc.

  60 Hampshire Street

  Cambridge, MA 02139

  Attention: Chief Executive Officer

  Facsimile No.: (617) 995-9801

  	
   

  
	
   

  	
   

  
					

or
to such other address as the Party to whom notice is to be given may have furnished
to the other Party in writing in accordance herewith.  Any such notice shall be deemed to have been
given: (a) when delivered if personally delivered or sent by facsimile on a
business day; (b) on the business day after dispatch if sent by nationally-recognized
overnight courier; and/or (c) on the fifth business day following the date of
mailing if sent by mail.

12.5        Applicable Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, and the patent laws of the
United States without reference to any rules of conflict of laws.  The United Nations Convention on the Sale of
Goods shall not apply.

12.6        Dispute Resolution.

(a)           The Parties shall negotiate in good faith and use reasonable efforts to
settle any dispute, controversy or claim arising from or related to this
Agreement or the breach thereof.  If the
Parties cannot resolve the dispute, controversy or claim (other than any such
matter to be resolved by the Committee, which shall not be subject to this
Section 12.6 but shall be resolved solely pursuant to the procedures set
forth in Section 2.4) within [***] after a written request by either Party
to the other Party, the Parties agree to hold a meeting, attended by the Chief
Executive Officer of Metabasis and the Chief Executive Officer of Idenix (or
their equivalents), as appropriate in light of the subject matter of the
dispute, to attempt in good faith to negotiate a resolution of the dispute
prior to pursuing other available remedies. 
If, within [***] after such written request, the Parties have not
succeeded in negotiating a resolution of the dispute, and a Party wishes to
pursue the matter, each such dispute, controversy

 

***Confidential
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 39
 

or claim that is
not an Excluded Claim shall be resolved by binding arbitration in accordance
with the [***] as then in effect, and judgment on the arbitration award may be
entered in any court having jurisdiction thereof.  The decision rendered in any such arbitration
will be final and not appealable.  If
either Party intends to commence binding arbitration of such dispute,
controversy or claim, such Party will provide written notice to the other Party
informing the other Party of such intention and the issues to be resolved.  Within [***] after the receipt of such
notice, the other Party may by written notice to the Party initiating binding
arbitration, add additional issues to be resolved.

(b)           The arbitration shall be conducted by a panel of three (3) persons
experienced in the pharmaceutical business, none of whom shall be a current or
former employee or director, or a then-current stockholder, of either Party,
their respective Affiliates or any sublicensee of a Party.  Within [***] after receipt of the original
notice of binding arbitration (the “Notice Date”), each Party shall select one
(1) person to act as arbitrator and the two (2) Party-selected arbitrators
shall select a third arbitrator within [***] of their appointment.  If the arbitrators selected by the Parties
are unable or fail to agree upon the third arbitrator, the third arbitrator
shall be appointed by the [***].  The
place of arbitration shall be [***] and all proceedings and communications
shall be in English.

(c)           Within [***] after the designation of the arbitrators pursuant to
Section 12.6(b) (the “Proposed
Resolution Deadline”), each Party shall submit to the
arbitrators and to the other Party a statement of all disputed issues and a
proposed ruling on the merits of each such issue together with a brief or other
written memorandum supporting the merits of its resolution.

(d)           The arbitrators and the Parties shall then meet within [***] after the
Proposed Resolution Deadline, at which time each Party shall have [***] to
argue in support of its proposed resolution. 
The Parties shall not call any witnesses in support of their
arguments.  The Parties shall have the
right to be represented by counsel.

(e)           The arbitrators shall use their best efforts to rule on the dispute
within [***] thereafter.  The arbitrators
shall resolve the dispute by a vote of the majority of the arbitrators
selecting one of the two (2) proposed resolutions in its entirety, without
substitution, deletion, addition or amendment. 
Such selected resolution shall be binding and conclusive upon the
Parties.  All rulings of the arbitrators
shall be in writing and shall be delivered to the Parties.

(f)            The arbitrators will, in rendering their decision, apply the
substantive law of the State of New York, without giving effect to its
principles of conflicts of law, and without giving effect to any rules or laws
relating to arbitration.

(g)           The arbitrators, in rendering their decision, shall not modify or amend
the terms and conditions of this Agreement or determine any issue in a manner
that would conflict with the express terms and conditions of this Agreement.

 

***Confidential
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 40
 

(h)           Either Party may apply to the arbitrators for interim injunctive relief
until the arbitration award is rendered or the controversy is otherwise
resolved.  Either Party also may, without
waiving any remedy under this Agreement, seek from any court having
jurisdiction any injunctive or provisional relief necessary to protect the
rights or property of that Party pending the arbitration award.  The arbitrators shall have no authority to
award punitive or any other non-compensatory damages, except as may be provided
in Section 8.5.  The Party whose
proposed resolution was not selected by the majority vote of the arbitrators
shall pay the full costs of the arbitration and the reasonable costs and
expenses of the prevailing Party, including, without limitation, reasonable
attorneys’ fees and travel and lodging costs.

(i)            Except to the extent necessary to confirm or enforce an award or as may
be required by law, neither a Party nor an arbitrator may disclose the
existence, content, or results of an arbitration without the prior written
consent of both Parties.  In no event
shall an arbitration be initiated after the date when commencement of a legal
or equitable proceeding based on the dispute, controversy or claim would be
barred by the applicable New York statute of limitations.

(j)            As used in this Section, the term “Excluded Claim” shall mean a dispute,
controversy or claim that concerns (i) the validity, enforceability or infringement
of a patent, trademark or copyright; or (ii) any antitrust, anti-monopoly or
competition law or regulation, whether or not statutory.

(k)           In no event shall an arbitration be initiated after the date when
commencement of a legal or equitable proceeding based on the dispute,
controversy or claim would be barred by the applicable New York statute of
limitations.

12.7        Entire Agreement; Amendments.  This Agreement, together with the letter agreement
between the Parties dated as of the Effective Date regarding the Research Plan,
contains the entire understanding of the Parties with respect to the subject
matter hereof and thereof and supersedes and cancels all previous express or
implied agreements and understandings, negotiations, writings and commitments,
either oral or written, in respect to the subject matter hereof and thereof,
including, without limitation, the Confidentiality Agreement.  This Agreement and the Research Plan may be
amended, or any term hereof modified, only by a written instrument duly
executed by authorized representatives of both Parties.

12.8        Headings.  The captions to the several Articles and Sections
hereof are not a part of this Agreement, but are merely for convenience to
assist in locating and reading the several Articles and Sections hereof.

12.9        Independent Contractors.  It is expressly agreed that Metabasis and Idenix shall
be independent contractors and that the relationship between the two Parties
shall not constitute a partnership, joint venture or agency.  Neither Metabasis nor Idenix shall have the
authority to make any statements, representations or commitments of any kind,
or to take any action, which shall be binding on the other Party, without the
prior written consent of the other Party.

12.10      Waiver.  The waiver by either Party of any right hereunder, or
the failure of the other Party to perform, or a breach by the other Party,
shall not be deemed a waiver of any other

 41
 

right hereunder or of any other breach or failure by
such other Party whether of a similar nature or otherwise.

12.11      Cumulative Remedies.  No remedy referred to in this Agreement is intended to
be exclusive, but each shall be cumulative and in addition to any other remedy
referred to in this Agreement or otherwise available under law.

12.12      Waiver of Rule of Construction.  Each Party has had the opportunity to consult with
counsel in connection with the review, drafting and negotiation of this
Agreement.  Accordingly, the rule of
construction that any ambiguity in this Agreement shall be construed against
the drafting Party shall not apply.

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

 42
 

IN WITNESS WHEREOF, the
Parties  have duly executed this EXCLUSIVE LICENSE AND RESEARCH
COLLABORATION AGREEMENT as of the Effective Date.

	
  IDENIX PHARMACEUTICALS, INC.

  	
   

  	
  METABASIS THERAPEUTICS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jean-Pierre Somadossi

  	
   

  	
  By:

  	
  /s / Paul Laikind

  
	
  Name:

  	
  Dr. Jean-Pierre Somadossi

  	
   

  	
  Name:

  	
  Paul Laikind

  	 

	
  Title:

  	
  Vice President

  	
   

  	
  Title: 

  	
  President and CEO

  	 

							

 

 43

EXHIBIT A

IDENIX CORE PATENTS

	
  [***]

  
	
   

  

 

***Confidential
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 A-1
 

[***]

 

***Confidential
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 A-2
 

[***]

	
  [***]

  

 

	
  Country

  	
   

  	
  Filing

  Date

  	
   

  	
  Application No.

  	
   

  	
  Patent No.

  
	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

***Confidential
Treatment Requested

 A-3
 

 

	
  [***]

  

 

	
  [***]

  

 

	
  Country

  	
   

  	
  Filing

  Date

  	
   

  	
  Application No.

  	
   

  	
  Patent No.

  
	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

***Confidential
Treatment Requested

 A-4
 

[***]

 

***Confidential
Treatment Requested

 A-5
 

[***]

	
  [***]

  

 

	
  Country

  	
   

  	
  Filing

  Date

  	
   

  	
  Application No.

  	
   

  	
  Patent No.

  
	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

***Confidential
Treatment Requested

 A-6
 

[***]

 

***Confidential
Treatment Requested

 A-7
 

[***]

	
  [***]

  

 

	
  Country

  	
   

  	
  Filing

  Date

  	
   

  	
  Application No.

  	
   

  	
  Patent No.

  
	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

***Confidential
Treatment Requested

 A-8
 

[***]

***Confidential
Treatment Requested

 A-9
 

 

	
  [***]

  

 

	
  Country

  	
   

  	
  Filing

  Date

  	
   

  	
  Application No.

  	
   

  	
  Patent No.

  
	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

***Confidential
Treatment Requested

 A-10

[***]

***Confidential
Treatment Requested

 A-11
 

 

	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Country

  	
   

  	
  Filing

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  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

***Confidential
Treatment Requested

 A-12
 

[***]

***Confidential
Treatment Requested

 A-13
 

 

	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Country

  	
   

  	
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  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

***Confidential
Treatment Requested

 A-14
 

[***]

	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Country

  	
   

  	
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  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

***Confidential
Treatment Requested

 A-15
 

 

	
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***Confidential
Treatment Requested

 A-16
 

 

	
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  Country

  	
   

  	
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***Confidential
Treatment Requested

 A-17
 

[***]

 

***Confidential
Treatment Requested

 A-18
 

[***]

	
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***Confidential
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 A-19
 

[***]

 

***Confidential
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 A-20

EXHIBIT B

METABASIS CORE PATENTS

 

	
  Exhibit B

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
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  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

***Confidential Treatment
Requested

 

 B-1
 

 

[***]

 

 

***Confidential
Treatment Requested

 B-2
 

 

	
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***Confidential Treatment
Requested

 B-3

EXHIBIT C

IDENIX PATENTS

 

	
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  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

***Confidential
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 C-1
 

[***]

 

***Confidential
Treatment Requested

 C-2
 

[***]

 

	
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***Confidential
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 C-3
 

[***]

 

	
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***Confidential
Treatment Requested

 C-4
 

[***]

 

 

***Confidential
Treatment Requested

 C-5
 

[***]

 

	
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***Confidential
Treatment Requested

 C-6
 

[***]

 

 

***Confidential
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 C-7
 

[***]

 

	
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***Confidential
Treatment Requested

 C-8
 

[***]

 

 

***Confidential
Treatment Requested

 C-9
 

[***]

 

	
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***Confidential
Treatment Requested

 C-10
 

 

	
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***Confidential
Treatment Requested

 C-11
 

[***]

 

 

***Confidential
Treatment Requested

 C-12

 

	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
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***Confidential
Treatment Requested

 C-13
 

[***]

 

***Confidential
Treatment Requested

 C-14
 

 

	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
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***Confidential
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 C-20
 

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***Confidential
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EXHIBIT D

METABASIS PATENTS

	
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***Confidential
Treatment Requested

 D-1
 

 

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***Confidential
Treatment Requested

 

 D-2
 

 

	
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***Confidential
Treatment Requested

 D-3
 

 

	
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***Confidential
Treatment Requested

 D-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00119-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00119-of-00352.parquet"}]]