Document:

<PAGE>
** CERTAIN CONFIDENTIAL MATERIAL CONTAINED IN THIS DOCUMENT HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO 17
C.F.R. SUBSECTION 200.80(B)(4) 200.83 AND 230.406**

                                                                   EXHIBIT 10.18

                        DEVELOPMENT AND LICENSE AGREEMENT

                                     BETWEEN

                          METABASIS THERAPEUTICS, INC.

                                       AND

                            ICN PHARMACEUTICALS, INC.

                           DATED AS OF OCTOBER 1, 2001
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
<S>                                                                         <C>
ARTICLE I DEFINITIONS AND INTERPRETATION...................................   1

         1.1      Definitions..............................................   1
         1.2      Interpretation...........................................   6

ARTICLE II LICENSE.........................................................   6

         2.1      License..................................................   6
         2.2      Sublicense...............................................   6
         2.3      Exclusivity..............................................   7
         2.4      Provision of Information.................................   7
         2.5      Limits on the Use of Licensed Compound by Metabasis......   7
         2.6      Optimization of Licensed Compound........................   7
         2.7      Non Competition..........................................   8

ARTICLE III SUBSTITUTE COMPOUND............................................   8

ARTICLE IV COMPENSATION....................................................   9

         4.1      License Fee..............................................   9
         4.2      Milestone Payments.......................................   9
         4.3      Royalties................................................  10
         4.4      Duration of Royalty Obligations..........................  11
         4.5      Payment Terms............................................  11
         4.6      Taxes....................................................  11
         4.7      Reports..................................................  12
         4.8      Records..................................................  12
         4.9      Sales in Foreign Currencies..............................  13

ARTICLE V DEVELOPMENT STEERING COMMITTEE...................................  14

         5.1      Appointment and Administration of the Development
                  Steering Committee.......................................  14
         5.2      Responsibility and Authority of the Development Steering
                  Committee................................................  14

ARTICLE VI DEVELOPMENT AND MARKETING OBLIGATIONS...........................  15

         6.1      Commercial Development Obligation........................  15
         6.2      Use of Name..............................................  16

ARTICLE VII FUTURE COLLABORATION...........................................  16

         7.1      New Products.............................................  16
         7.2      [REDACTED] Prodrug Option................................  17
         7.3      Discovery of New Hepatitis B Drugs.......................  18
</TABLE>

                                       i
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<TABLE>
<S>                                                                         <C>
ARTICLE VIII INTELLECTUAL PROPERTY.........................................  18

         8.1      Patent Prosecution and Maintenance.......................  18
         8.2      Notification of Infringement.............................  19
         8.3      Patent Enforcement.......................................  19
         8.4      Ownership................................................  19
         8.5      Trademarks...............................................  20
         8.6      Defense of Infringement and Invalidity Actions...........  21

ARTICLE IX REPRESENTATIONS, WARRANTIES AND LIMITATION OF LIABILITY.........  21

         9.1      Representations of Metabasis.............................  21
         9.2      Representations of ICN...................................  22
         9.3      Disclaimer of Warranties.................................  22

ARTICLE X INDEMNIFICATION AND INSURANCE....................................  23

         10.1     Indemnification by ICN...................................  23
         10.2     Indemnification by Metabasis.............................  23
         10.3     Obligations of the Party Seeking to Be Indemnified.......  24

ARTICLE XI CONFIDENTIALITY AND PUBLICATION.................................  24

         11.1     Confidentiality..........................................  24
         11.2     Disclosure...............................................  24
         11.3     Publicity................................................  25
         11.4     Scientific Publications..................................  25

ARTICLE XII TERM AND TERMINATION...........................................  26

         12.1     Term.....................................................  26
         12.2     [Intentionally omitted]..................................  26
         12.3     Termination For Cause....................................  26
         12.4     Rights and Obligations Upon Termination for Cause........  27
         12.5     Surviving Provisions.....................................  28

ARTICLE XIII ASSIGNMENT; SUCCESSORS........................................  29

         13.1     Assignment...............................................  29
         13.2     Binding Upon Successors and Assigns......................  29
         13.3     Parties Guarantee Performance of Affiliates..............  29

ARTICLE XIV DISPUTE RESOLUTION.............................................  29

         14.1     Arbitration..............................................  29
         14.2     Pre-Arbitration Dispute Resolution.......................  30
         14.3     Provisional Remedy.......................................  30
         14.4     "Last Offer" Procedure...................................  30
         14.5     Confidentiality..........................................  31
</TABLE>

                                       ii
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<TABLE>
<S>                                                                         <C>
ARTICLE XV GENERAL PROVISIONS..............................................  31

         15.1     Relationship of the Parties..............................  31
         15.2     Excusable Delay..........................................  31
         15.3     Notices..................................................  31
         15.4     Expenses.................................................  32
         15.5     Further Assurances.......................................  32
         15.6     Amendment................................................  33
         15.7     Waiver...................................................  33
         15.8     No Third Party Beneficiaries.............................  33
         15.9     Entire Agreement.........................................  33
         15.10    Construction.............................................  33
         15.11    Incorporation of Exhibits................................  33
         15.12    Counterparts.............................................  33
         15.13    Severability.............................................  34
         15.14    Bankruptcy...............................................  34
         15.15    Remedies Cumulative......................................  34
         15.16    Governing Law............................................  34
</TABLE>

                                      iii
<PAGE>
                        DEVELOPMENT AND LICENSE AGREEMENT

         This Development and License Agreement (this AGREEMENT) is made as of
October 1, 2001 (the CLOSING DATE) by and among Metabasis Therapeutics, Inc., a
Delaware corporation (METABASIS) and ICN Pharmaceuticals, Inc., a Delaware
corporation (ICN).

                                    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.       ICN 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.

         D.       Metabasis wishes to grant an exclusive license to ICN and ICN
wishes to acquire an exclusive license with respect to, and to develop,
manufacture, and market Products, in accordance with 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.

                                   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.Section
301, et seq.), including any amendments or supplements.

         ACCOUNTING PERIOD means a calendar quarter commencing on the first day
of an Accounting Period, 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.

         ADJUSTED GROSS SALES means the amount of gross sales in the Territory
of Products (whether in active ingredient form, semi-finished form, finished
product form, or otherwise) invoiced by ICN and its Affiliates to Third Parties
less deductions for returns (including allowances actually given for spoiled,
damaged, out-dated, rejected, returned Products sold,
<PAGE>
withdrawals and recalls), rebates (price reductions, rebates to social and
welfare systems, chargebacks, and government mandated rebates), cash and volume
(quantity) discounts, commissions or concessions paid to Third Parties, taxes
(value added or sales taxes, government mandated exceptional taxes and other
taxes imposed on the gross sales amount but excluding income taxes), as reported
on a product by product basis in ICN's worldwide financial reporting system in
accordance with GAAP as measured in U.S. Dollars for the countries concerned,
whereby the amount of such sales in foreign currencies is converted into U.S.
Dollars on a basis consistent with Section 4.9. Notwithstanding the foregoing,
amounts received by ICN and its Affiliates for the sale of Products among ICN
and its Affiliates for resale will not be included in the computation of
Adjusted Gross Sales.

         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.

         AGREEMENT has the meaning set forth in the preamble.

         APPROVAL AUTHORITY means a governmental authority whose approval is
required in a country for any Product Registration.

         BANKRUPTCY CODE means Title 11, U.S. Code.

         BREACHING PARTY has the meaning set forth in Section 12.3.

         BUSINESS DAY means a day when banks are open for business in Los
Angeles, California.

         CLAIMS has the meaning set forth in Section 10.1.

         CLOSING DATE has the meaning set forth in the preamble.

         COMBINED PRODUCT means a pharmaceutical product with two or more active
ingredients, one of which is a Product and one or more of which is not, sold as
a single item for one price.

         COMPASSIONATE SALES means, with respect to a Product in any country in
the Territory, any sale of the Product by ICN 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.

         DEVELOPMENT PLAN means the plan to be prepared and approved by the
Development Steering Committee pursuant to Section 5.2 for development of the
Licensed Compound in accordance with this Agreement, as amended from time to
time by the Development Steering Committee.

         DEVELOPMENT STEERING COMMITTEE has the meaning set forth in Section
5.1.

                                       2
<PAGE>
         EMEA means the European Medicines Evaluation Agency, or any successor.

         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.

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

         FIELD means all human pharmaceutical and diagnostic applications of the
Products.

         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 commercial quantities of a Product by ICN or any of its Affiliates or
Sublicensees, after Product Registration 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.

         GAAP means United States generally accepted accounting principles
consistently applied.

         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 owned by Metabasis or to which Metabasis has
rights to grant licenses or to grant other rights under this Agreement.

         HEPDIRECT TECHNOLOGY means all proprietary information, 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, results
(including physical, chemical, biological, toxicological, pharmacological,
pre-clinical and clinical data, product forms and formulations of the Licensed
Compound) which are owned, possessed, developed, conceived, acquired by, or
licensed to Metabasis that are useful for making prodrugs that are metabolized
to an active compound primarily in the liver, and generally set forth in the
specifications or supporting any of the claims in any of the WO/99/45016
publication dated 10 September 1999, the WO/00/52015 publication dated 8
September 2000, or the WO/01/18013 dated 15 March 2001 regardless of whether any
such claims eventually issue in a patent in the United States or elsewhere.

         ICN has the meaning set forth in the preamble.

         INDEMNIFIED PARTY has the meaning set forth in Section 10.3.

         INDEMNIFYING PARTY has the meaning set forth in Section 10.3.

         LICENSED COMPOUND means all forms of MB6866 including all salts and
prodrugs thereof, or any Substitute Compound substituted in accordance with
Article III, and its various forms including salts and prodrugs.

                                       3
<PAGE>
         LICENSED PATENTS means rights under patents and patent applications, as
well as corresponding certificates of invention or certificates of protection,
substitutes, extensions, supplementary protection certificates, renewals,
continuations-in-part, divisions, patents of addition (re-examination or
re-issue), to which Metabasis has the right to grant licenses or sublicenses
without breach of other agreements to which Metabasis is a party on the Closing
Date, in any country of the Territory, which (a) but for this Agreement would be
infringed by the developing, making, having made, marketing, importing, using,
offering for sale or sale by ICN, its Affiliates or Sublicensees of Products in
the Field and (b) are owned by, or licensed to, Metabasis as of the Closing Date
or during the Term, to the extent such rights are legally necessary to develop,
make, have made, market, import, use, offer for sale or sell a Product in the
Field in the Territory. Licensed Patents include, without limitation, the
patents and patent applications set forth on Schedule A.

         LICENSED TECHNOLOGY means all HepDirect Technology to which Metabasis
has the right to grant licenses or sublicenses hereunder, without breach of
other agreements to which Metabasis is a party, on the Closing Date or during
the Term, which are useful to develop, make, have made, market, import, use,
offer for sale or sell a Product in the Field in the Territory. By way of
clarification,Licensed Technology includes all HepDirect Technology conceived or
acquired in whole or in part by Metabasis on or after the Closing Date including
without limitation the items set forth in Section 8.4(a) below.

         MAJOR MARKET COUNTRY means each of the following countries and its
territories and possessions: the Benelux countries, France, Germany, Italy,
Japan, Spain, the United Kingdom, and the United States.

         METABASIS has the meaning set forth in the preamble.

         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 in 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 the amount calculated by subtracting from the amount of
Adjusted Gross Sales a lump sum deduction of [REDACTED] of Adjusted Gross Sales
in Major Market Countries and [REDACTED] of Adjusted Gross Sales in countries
other than Major Market Countries, in lieu of any other deductions (including
deductions which are not accounted for on a product by product basis, such as
outward freight, postage charges, transportation, insurance, packaging materials
for dispatch of goods, custom duties, bad debt, discounts granted later than at
the time of invoicing and other direct sales expenses).

         NEW PRODUCT has the meaning set forth in Section 7.1(a).

         NON-BREACHING PARTY has the meaning set forth in Section 12.3(a).

         PARTY means each of Metabasis and ICN.

                                       4
<PAGE>
         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 an expanded controlled and uncontrolled
clinical trial performed after preliminary evidence suggesting effectiveness of
a drug has been obtained, primarily in order to gather the additional
information about effectiveness and safety that is needed to evaluate the
overall benefit-risk relationship of the drug and to provide an adequate basis
for physician labeling.

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

         PRODUCT PERCENTAGE means the proportion of a Combined Product
attributable to a Product, as agreed by the Parties after consideration of (i)
the respective contribution of each active ingredient to the overall efficacy of
the Combined Product, (ii) the respective market value of the Licensed Compound
used alone and the other active ingredients used alone, (iii) the respective
cost of goods for the Licensed Compound and the other active ingredients, and
(iv) other factors customarily used in the pharmaceuticals industry to apportion
value to active ingredients of pharmaceutical products.

         PRODUCT REGISTRATION 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.

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

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

         [REDACTED] PRODRUG means a HepDirect Compound that is metabolized into
[REDACTED] in humans.

         ROYALTY OBLIGATION PERIOD has the meaning set forth in Section 4.4.

         SUBLICENSEE means each person to whom ICN has granted a sublicense
under Section 2.2.

         SUBSTITUTE COMPOUND means a HepDirect Compound provided to ICN pursuant
to Article III.

         TERM means the term of this Agreement, as set forth in Section 12.1.

                                       5
<PAGE>
         TERRITORY means all the countries of the world and their territories
and possessions.

         THIRD PARTY means any person other than Metabasis, ICN, or any of their
Affiliates.

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

         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)      "including" means including without limitation; and

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

                                   ARTICLE II

                                     License

         2.1      LICENSE

         Subject to the terms and conditions of this Agreement and effective as
of the Closing Date, Metabasis grants to ICN, and ICN accepts, the right and
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 develop, manufacture, have manufactured, market, import, use,
offer for sale, and sell 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 products that do not fall within the definition
herein of Products.

         2.2      SUBLICENSE

                  (a)      Subject to Sections 2.2(b), 6.1 and 12.4, ICN has the
sole and exclusive right to grant sublicenses under the Licensed Patents, and to
grant sublicenses under the Licensed Technology, in each case within the Field
throughout the Territory, to any Affiliate or Third Party (as such, a
SUBLICENSEE), to develop, manufacture, have manufactured, market, import, use,
offer for sale, and sell Products.

                                       6
<PAGE>
                  (b)      In the case of any sublicense to an Affiliate of ICN,
ICN will send written notice to Metabasis disclosing the identity of such
Affiliate and the scope and other terms of such sublicense. In the case of any
proposed sublicense to a Third Party, ICN must obtain the written consent of
Metabasis prior to the grant of any such sublicense under this Agreement. ICN
will request such consent from Metabasis by written notice to Metabasis
disclosing the identity of the proposed Third Party Sublicensee and the proposed
scope and other terms of the sublicense. Metabasis will not unreasonably
withhold or delay such consent.

                  (c)      ICN shall remain responsible for ensuring compliance
with the terms of this Agreement by Sublicensees.

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

         2.3      EXCLUSIVITY

         Except as provided in Section 2.1 and as permitted by Sections 6.1,
12.3 and 12.4, Metabasis will not license or otherwise grant any rights under
the Licensed Patents or the Licensed Technology to develop, manufacture, have
manufactured, market, import, use, offer to sell, or sell Products during the
Term in the Territory within the Field.

         2.4      PROVISION OF INFORMATION

         During the Term, as soon as practicable after it becomes available and
upon ICN's request, Metabasis will disclose and provide information relating to
the Licensed Patents and the Licensed Technology to ICN to the extent necessary
or useful to enable ICN to perform its obligations under this Agreement,
including, to the extent reasonably available to Metabasis, information relating
to manufacturing, clinical data, any agreements in respect of the Licensed
Compound, and any related correspondence with the FDA. Such information is
subject to the confidentiality provisions of Article XI hereof.

         2.5      LIMITS ON THE USE OF LICENSED COMPOUND BY METABASIS

         From the Closing Date, Metabasis and its Affiliates will not develop,
manufacture, have manufactured, market, import, use, offer for sale, or sell the
Licensed Compound, other than as contemplated by this Agreement. The rights
granted hereunder are to the exclusion of Metabasis, except as otherwise set
forth in this Agreement.

         2.6      OPTIMIZATION OF LICENSED COMPOUND

         ICN will be responsible for, but Metabasis will supply reasonable
assistance at ICN's request, in the form of advice, consultation, review and
communication of data to the extent reasonably available to Metabasis,
concerning all chemistry efforts to optimize the Licensed Compound with respect
to its desired efficacy, metabolic profile, bio-availability, scale-up
synthesis, physiological clinical properties and cost of goods considerations,
and in particular to optimize the yield of the chemical synthesis for the
scale-up production. In addition, with respect to the selected compound MB6866,
Metabasis will supply at its expense a sufficient amount of such compound for
preclinical and development studies, currently estimated to be [REDACTED]

                                       7
<PAGE>
[REDACTED]. In addition, Metabasis will also provide [REDACTED] to ICN for the
control experiments. With respect to any Substitute Compound, Metabasis will
provide the same assistance as referred to above concerning MB6866 as well as an
initial supply of [REDACTED] of any such Substitute Compound for initial
preclinical studies, and the technical documentation and expertise and support
to make any such Substitute Compound. Metabasis represents and warrants that all
chemistry efforts and studies which Metabasis is required to provide under this
Agreement for an IND filing with respect to the Licensed Compound have been or
will be conducted in accordance with the agreed IND and NDA timetables
determined by the Development Steering Committee.

         2.7      NON COMPETITION

         Metabasis agrees that for so long as ICN is engaged in the development
of, or manufactures, has manufactured, markets, imports, uses, offers for sale
or sells, a Product during the Term pursuant to the Agreement, Metabasis and its
Affiliates will not engage in the development of, or manufacture, have
manufactured, market, import, use, offer for sale or sell, any product
containing HepDirect Compounds of PMEA, or license, assign, permit or otherwise
assist, Third Parties to engage in any of such activities.

                                  ARTICLE III

                               SUBSTITUTE COMPOUND

         If ICN, 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, ICN
will provide written notice of such determination to Metabasis. Metabasis will
then promptly and in good faith provide to ICN a complete list of all prodrugs
of PMEA which Metabasis has the right to license and all other HepDirect
Compounds 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. ICN will have a
period of sixty (60) days from the date it receives the list from Metabasis to
evaluate the listed HepDirect Compounds, and to select one of them for
development by written notice to Metabasis (the SUBSTITUTE COMPOUND). Any
additional research and development costs required to provide the Substitute
Compound will be paid by ICN. From the date when the selection of the Substitute
Compound is made by ICN, 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. The substitution rights of ICN 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 license fee provided for in
Section 4.1 and 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.

                                       8
<PAGE>
                                   ARTICLE IV

                                  COMPENSATION

         4.1      LICENSE FEE

         ICN will pay to Metabasis an initial nonrefundable license fee in the
amount of Two Million Dollars ($2,000,000), One Million Dollars ($1,000,000) of
which will be payable on the Closing Date; Five Hundred Thousand Dollars
($500,000) of which will be payable six (6) months after the Closing Date; and
the remaining Five Hundred Thousand Dollars ($500,000) of which will be payable
twelve (12) months after the Closing Date. Notwithstanding any contrary
provision of this Agreement, ICN's obligations under this Section 4.1 shall be
unconditional, shall survive any termination of this Agreement and shall not be
subject to any offset or other reduction.

         4.2      MILESTONE PAYMENTS

                  (a)      In addition to the license fee payable under Section
4.1

                           (i)      upon the initiation of the first [REDACTED]
         Clinical Trial for the first Product for which [REDACTED] Clinical
         Trials are undertaken by ICN or any of its Affiliates or any
         Sublicensee, ICN will make a one-time payment to Metabasis in the
         amount of [REDACTED];

                           (ii)     upon the initiation of the first [REDACTED]
         Clinical Trial for the first Product for which [REDACTED] Clinical
         Trials are undertaken by ICN or any of its Affiliates or any
         Sublicensee, ICN will make a one-time payment to Metabasis in the
         amount of [REDACTED];

                           (iii)    upon the filing of the first [REDACTED] for
         the first Product for which an [REDACTED] by ICN or any of its
         Affiliates or any Sublicensee, ICN will make a one-time payment to
         Metabasis in the amount of [REDACTED];

                           (iv)     upon the first approval by the [REDACTED]
         for the first Product in respect of which an [REDACTED], ICN will make
         a one-time payment to Metabasis in the amount of [REDACTED]; and

                           (v)      upon the [REDACTED] of a Product by ICN or
         any of its Affiliates or any Sublicensee in a Major Market Country, ICN
         will make a one-time payment to Metabasis in the amount of [REDACTED].

                  (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. ICN will promptly notify Metabasis
in writing of the occurrence of each Milestone and make all Milestone Payments
within thirty (30) days after the occurrence of the Milestone. The subsequent
occurrence of any similar event in respect of any Product will not give rise to
any

                                       9
<PAGE>
additional obligation of ICN to make a Milestone Payment with respect to such
subsequent event.

         4.3      ROYALTIES

                  (a)      In addition to the amounts payable under Sections 4.1
and 4.2, ICN will pay Metabasis, in any calendar year during the Royalty
Obligation Period, a royalty in an amount equal to [REDACTED] on the first
[REDACTED] of Net Sales of each Product and [REDACTED] on Net Sales of each
Product in excess of [REDACTED]. If a Product is included in a Combined Product,
the royalty on the Product will be calculated as the applicable percentage of
Net Sales of the Combined Product as determined above in this Section 4.3(a),
multiplied by the Product Percentage. The Parties will use their best efforts to
agree upon the Product Percentage for a Combined Product prior to the first
launch of that Product.

                  (b)      Royalties on Net Sales will be calculated quarterly
as of March 31, June 30, September 30 and December 31 (each being the last day
of an Accounting Period) and will be paid by ICN quarterly within sixty (60)
days after the end of each Accounting Period in which such Net Sales occur,
commencing with the calendar quarter in which the First Commercial Sale of any
Product is made by ICN, any of its Affiliates or any Sublicensee.

                  (c)      ICN may, with the consent of Metabasis which may not
be unreasonably withheld or delayed, obtain a license under any issued patent
from one or more Third Parties which patent, but for such license, would be
infringed by the development, manufacture, having manufactured, marketing,
importing, use, offering for sale or sale of Products in the Territory. In such
a case, ICN may reduce the royalties otherwise due to Metabasis hereunder by an
amount equal to [REDACTED] of the total cumulative consideration paid by ICN to
such Third Party or Third Parties, including any upfront payments, milestone
payments and royalties, provided, however, that such reduction shall not cause
the royalties due to Metabasis in any calendar year to fall below one half of
the royalties which would otherwise be due to Metabasis in such year. Any
portion of such reduction which is unused in any year because of the foregoing
proviso may be applied by ICN in one or more subsequent years.

                  (d)      If a Third Party sells a product which is generically
equivalent to a Product in any country in which ICN, an Affiliate or Sublicensee
is selling such Product, the royalty payable by ICN to Metabasis under this
Agreement with respect to such Product in each such country will be reduced to
[REDACTED] of Net Sales. For the purposes of this Section 4.3(d), generic
equivalence will be as understood by the Approval Authority or other applicable
authority in the particular country.

                  (e)      If an Approval Authority imposes a price limitation
for specific indications or patients, and ICN claims that such limitation
significantly adversely affects its profitability for a Product in such country,
there will be an appropriate reduction in the applicable royalty to reflect the
diminution in profitability for the affected Product, which reduction will apply
for so long as such price limitation continues to have such effect. If the
Parties fail to promptly agree to the amount of the reduction in the royalty,
the matter will be referred to arbitration pursuant to Article XIV and the
amount of such reduction will be

                                       10
<PAGE>
definitively determined by an arbitrator in accordance with the "last offer"
procedure referred to in Section 14.4. ICN will use reasonable commercial
efforts to resist the imposition or continuation of any such price limitation.

                  (f)      With respect to sublicenses entered into by ICN with
a Third Party in a country in the Territory, ICN will pay to Metabasis
consideration, if, when, and as received by ICN, equal to [REDACTED] of the
amount of any license fees, milestones, or other cash consideration and/or
[REDACTED] of the value of any non-cash consideration in respect of such
sublicense agreement received by ICN. For a period of ten (10) years from the
Closing Date or the life of the longest running patent that covers the
manufacture, use or sale of the Product in such country, whichever is greater,
Metabasis will also receive, in lieu of receiving a royalty on sales by the
Sublicensee, the lesser of (i) the royalty set forth in Section 4.3(a) as
applied to the Sublicensee's Net Sales or (ii) [REDACTED] of any royalty or
similar payments received by ICN under the sublicense agreement.

         4.4      DURATION OF ROYALTY OBLIGATIONS

         The period during which ICN 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)      ten (10) years after the First Commercial Sale in
such country of such Product.

         4.5      PAYMENT TERMS

                  (a)      ICN will make all payments required under this
Agreement in United States 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.

                  (b)      In the event that any payment due 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 30-day
LIBOR in effect on the date such payment was due plus three percentage points,
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 ICN under the laws of
any country for the account of Metabasis (withholding taxes) will be promptly
paid by ICN for and on behalf of Metabasis to the appropriate governmental

                                       11
<PAGE>
authority, and ICN will furnish Metabasis with 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 ICN if no further payments are
due Metabasis. ICN will reasonably assist Metabasis in minimizing the
withholding taxes applicable to any payment made by ICN 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      REPORTS

                  (a)      Not more than sixty (60) calendar days after the end
of each Accounting Period, ICN will give Metabasis a written report estimating
the Net Sales, if any, for such Accounting Period (unless ICN makes the royalty
payment required by Section 4.3 within such sixty (60) day period in which case
Section 4.7(b) shall apply), and summarizing any Milestones met during such
Accounting Period or certifying that no Milestones were met during such
Accounting Period.

                  (b)      With each royalty payment ICN will deliver to
Metabasis a full and accurate accounting of the basis for determining such
royalty payments including supporting documentation and the following
information:

                           (i)      total Adjusted Gross Sales for each Product
         subject to royalty sold (by country) by ICN, its Affiliates and
         Sublicensees; and

                           (ii)     total royalties payable to Metabasis for the
         relevant period.

         4.8      RECORDS

         ICN 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 GAAP. Such books of account will be
kept, as the case may be, at ICN's or its Affiliate's or Sublicensee's principal
place of business. From time to time in accordance with this Agreement, a
nationally recognized independent public accounting firm retained by Metabasis
may perform an audit of such books and records of ICN, its Affiliates and
Sublicensees for the period or periods requested by Metabasis for the purpose of
ensuring compliance with the terms of this Agreement by ICN, 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
thirty (30) days' prior written notice from Metabasis, such audit will be
conducted during regular business hours in such a manner as to not unnecessarily
interfere with ICN's normal business activities or those of its Affiliates or
Sublicensees, and will be limited to results in the two (2) calendar years 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

                                       12
<PAGE>
royalty statements or compliance with this Agreement, will be treated by
Metabasis as ICN confidential information subject to the obligations of Article
11 of this Agreement and need not be retained more than one (1) year after
completion of an audit hereof, if an audit has been requested; nor more than two
(2) years from the end of the calendar year to which each pertains; nor more
than one (1) year after the date of termination of this Agreement. Audit work
papers and results will be shared by ICN and Metabasis. If the audit reveals an
underpayment, ICN 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 was not
paid in accordance with this Agreement or the royalties payable by ICN or its
Affiliates or Sublicensees for the audited period are more than one hundred ten
percent (110%) of the royalties actually paid for such period, in which case ICN
will pay the fees and expenses charged by the accountant. ICN will require each
of its Affiliates and Sublicensees to make reports to ICN to the same extent as
is required of ICN 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 ICN under this Agreement. Any disagreement between Metabasis and ICN
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 ICN and its Affiliates, when calculating the Adjusted
Gross Sales, the amount of such sales in foreign currencies will be converted
into United States Dollars as computed in ICN's United States Dollars financial
reporting system for the countries concerned, using for internal foreign
currency translation ICN's then current standard practices actually used on a
consistent basis in preparing its audited financial statements in accordance
with GAAP; and

         (b)      for a Sublicensee in a country, when calculating the Adjusted
Gross Sales, the amount of such sales estimate will be reported by the
Sublicensee to ICN within sixty (60) days from the end of an Accounting Period,
after having converted each applicable monthly sales amount in foreign currency
into United States Dollars (or applicable reporting currency) using the average
rate of exchange published in the United States Federal Reserve Releases H.10
and G5 (or some other source agreed upon in writing by the Parties for any
particular country) for each respective month of the applicable Accounting
Period; and

         (c)      when calculating the royalties on Net Sales, such conversion
will be in accordance with ICN's then current standard practices and GAAP.

                                       13

<PAGE>
                                   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 Closing Date, the Parties
will establish a four (4) person steering committee to oversee and review the
development of Products, which will include two (2) representatives of each of
Metabasis and ICN (the DEVELOPMENT STEERING COMMITTEE) and will be chaired by
one of the representatives of ICN. At least one member appointed by each Party
will be a senior officer of such Party responsible for product development or a
person with substantial experience in product development for similar products
who is acceptable 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 upon prior written notice to the other Party. 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 once
every calendar quarter, or more or less frequently as the Parties mutually deem
appropriate, on dates and at times and places as agreed by the Parties. 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 not
promptly resolved within the Development Steering Committee will be promptly
presented by the representatives on the Development Steering Committee to the
executive of each of Metabasis and ICN who has the principal responsibility for
his respective company's work under this Agreement. Such executives will
promptly meet to discuss each Party's view and to explain the basis for
disagreement. If such executives are unable to resolve such dispute, the matter
will be resolved by the ICN executive who has the principal responsibility for
ICN's work under this Agreement.

            (d)   The Development Steering Committee will exist until the first
approval of a Product by the relevant Approval Authority is obtained in each of
the Major Market Countries, unless otherwise agreed by the Parties.

      5.2   RESPONSIBILITY AND AUTHORITY OF THE DEVELOPMENT STEERING COMMITTEE

      Subject to the other terms of this Agreement, the Development Steering
Committee will be responsible only for all decisions concerning (i) clinical
trials of Products, and (ii) the necessity for and selection of Substitute
Compounds. Promptly after the signature hereof, the Parties will consult with
each other concerning the preparation of the Development Plan pursuant to which
all development with respect to the Licensed Compound will be conducted. ICN
will give serious consideration to all reasonable suggestions made by Metabasis
concerning the

                                       14
<PAGE>
Development Plan. The Development Plan will be subject to the review, comment,
modification, and approval of the Development Steering Committee. The parties
will keep each other informed through the Development Steering Committee as to
the development of Products including contracts relating to their development,
and the formulation used in respect of Products.

                                   ARTICLE VI

                      DEVELOPMENT AND MARKETING OBLIGATIONS

      6.1   COMMERCIAL DEVELOPMENT OBLIGATION

            (a)   ICN will at its sole expense diligently develop,
commercialize, promote and sell Products in each Major Market Country in the
Field, as well as elsewhere in the Territory, as promptly as is reasonably and
commercially feasible. For purposes of this Section 6.1(a), the standard of
commercial feasibility shall mean the standard that ICN and companies comparable
to ICN use for similar products of similar potential at a similar stage of
development on a worldwide basis. Upon a showing of lack of commercial
feasibility with respect to any country in the Territory other than a Major
Market Country, ICN may upon written notice to Metabasis, without being in
violation of its obligations under this Section 6.1(a), elect to cease
developing, commercializing, promoting and selling Products in such country;
provided that such election shall not release ICN from any of its obligations to
Metabasis up to the date of such notice, including payment of all amounts owed
to Metabasis up to such date. If within six months after such written notice ICN
shall not have resumed diligently developing, commercializing, promoting and
selling Products in such country in accordance with Section 6.1, all licenses
granted to ICN pursuant to Section 2 with respect to such country shall become
non-exclusive and ICN shall make available to Metabasis, to the extent they are
available to ICN, all clinical information, data, INDs, NDAs and other Product
Registrations applicable to all Licensed Compounds and Products to the extent
necessary to permit Metabasis and/or its assignees, sublicensees and
distributors to develop, commercialize, promote and sell Products in such
country.

            (b)   Until all of the milestone payments referred to in Section
4.2(a) have been paid, ICN will keep the Development Steering Committee fully
informed on a reasonable basis as to ICN's progress in the development of
Products, including without limitation in respect of all development,
commercialization and marketing efforts undertaken by ICN, its Affiliates and
Sublicensees, as applicable, with respect to the Licensed Compound and Products,
by providing a written report of such efforts on a semiannual basis. Until all
of the milestone payments referred to in Section 4.2(a) have been paid,
Metabasis may request, no more often than once every calendar quarter, a meeting
at which Metabasis may meet with the principal ICN individuals responsible for
such development, commercialization and marketing. ICN agrees to arrange such a
meeting promptly following such request. At such meeting the ICN representatives
will discuss ICN's commercialization efforts for Products, including answering
Metabasis' questions regarding such efforts. ICN may satisfy its obligation to
meet with Metabasis under this Section 6.1(b) through meetings of the
Development Steering Committee.

                                       15
<PAGE>
            (c)   If ICN fails to meet a material obligation under this Section
6.1, then Metabasis may terminate this Agreement pursuant to Section 12.3.

      6.2   USE OF NAME

      Metabasis may not use the name of ICN or any of its Affiliates or any
variant thereof, and ICN 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.

                                   ARTICLE VII

                              FUTURE COLLABORATION

      7.1   NEW PRODUCTS

            (a)   For a period of five (5) years following the Closing Date, if
Metabasis determines to develop or otherwise exploit with a Third Party a
particular HepDirect Compound for the treatment of Hepatitis B in humans that is
not subject to the license under Section 2.1 (a NEW PRODUCT), Metabasis will,
before entering into negotiations with a Third Party, first offer to ICN the
opportunity to participate in such development or exploitation by written notice
to ICN setting forth in reasonable detail the proposed development or
exploitation. ICN will have a period of [REDACTED] from receiving such notice to
notify Metabasis in writing whether it wishes to participate. If ICN elects to
participate, the Parties will negotiate in good faith the terms and conditions
for such participation, which will include without limitation provision for the
following payments to the extent they are in concept consistent with industry
practice then applicable:

                        (i)   upon execution of a definitive agreement, ICN will
      pay [REDACTED];

                        (ii)  ICN will pay Metabasis [REDACTED] upon initiation
      of [REDACTED] Clinical Trials of the New Product;

                        (iii) ICN will pay Metabasis [REDACTED] upon approval by
      the [REDACTED] relating to the New Product;

                        (iv)  ICN will pay Metabasis [REDACTED] upon the
      [REDACTED] of the New Product in a Major Market Country other than the
      United States by ICN or any of its Affiliates or any Sublicensee; and

                        (v)   ICN will pay a royalty to Metabasis of [REDACTED]
      on Net Sales of the New Product.

            Metabasis may offer participation in the development or exploitation
of the New Product to a Third Party, or entertain offers from and, subject to
Section 7.1(b), enter into an agreement with a Third Party to develop or exploit
the New Product, if (i) ICN does not notify Metabasis during such [REDACTED]
period that it wishes to participate in the development or exploitation of the
New Product, (ii) ICN notifies Metabasis during such period that it does not

                                       16
<PAGE>
wish to participate, or (iii) after good faith negotiation, ICN and Metabasis
are unable to reach agreement on the terms and conditions for ICN's
participation in the development or exploitation of the New Product within
[REDACTED] from the date on which ICN notifies Metabasis that it wishes to
participate.

            (b)   Neither Metabasis nor any of its Affiliates will enter into a
binding agreement with a Third Party concerning the development or exploitation
of the New Product on terms substantially better as a whole (for the Third
Party) than those offered to ICN under Section 7.1(a) unless Metabasis provides
ICN with written notice setting forth the material terms and conditions upon
which Metabasis or its Affiliates proposes to enter into an agreement with such
Third Party (the THIRD PARTY CONDITIONS) and ICN fails within [REDACTED]
from receiving such notice of the Third Party Conditions to commit to enter into
an agreement with Metabasis on the Third Party Conditions. If ICN so commits
during such [REDACTED]  period, the Parties will promptly document an
agreement setting forth such terms and conditions, and other terms and
conditions within customary industry parameters. If the Parties do not agree on
all terms and conditions of the participation of ICN in the development and
exploitation of the New Product, arbitration, pursuant to Article XIV, will
definitively determine, in accordance with the "last offer" procedure referred
to in Section 14.4, such terms and conditions upon which the Parties do not
agree. If ICN does not so commit during such period, then Metabasis may within
[REDACTED] thereafter enter into such agreement with such Third Party on
terms and conditions not substantially better as a whole (for the Third Party)
than those included in Metabasis' notice to ICN of its proposal to enter into an
agreement with such Third Party. Notwithstanding the above, if Metabasis has not
entered into a binding agreement with a Third Party [REDACTED] of the
expiration of the later of (i) the [REDACTED] period following Metabasis'
written notice to ICN referred to in Section 7.1 (a), or (ii) the termination of
the negotiation referred to in Section 7.1(a) (which negotiation may be
terminated by written notice sent by either Party to the other Party), Metabasis
will again offer participation concerning such New Product to ICN in accordance
with this Section 7.1.

      7.2   [REDACTED] PRODRUG OPTION

      For a period of [REDACTED] years after the Closing Date, ICN will have the
exclusive option to obtain an exclusive (even as to Metabasis) license to
develop, manufacture, have manufactured, market, import, use, offer for sale and
sell any [REDACTED] Prodrug which Metabasis owns or controls or to which
Metabasis has rights to grant licenses or sublicenses. If ICN exercises such
option, the Parties will negotiate in good faith a collaborative agreement on
commercially reasonable terms which will in no event be less favorable to ICN
than those set forth in Section 7.1. If any of such terms cannot be agreed to by
the Parties, the matter will be referred to arbitration pursuant to Article XIV
and the determination of such terms will be made in accordance with the "last
offer" procedure referred to in Section 14.4. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement does not and shall not at
any time in the future grant any rights to Metabasis with respect to [REDACTED]
or any [REDACTED] Prodrug.

                                       17
<PAGE>
      7.3   DISCOVERY OF NEW HEPATITIS B DRUGS

      For a period of five (5) years after the Closing Date, ICN will have the
right to enter into an additional collaborative arrangement with Metabasis to
apply the HepDirect Technology to the extent Metabasis has the right to grant
licenses or sublicenses hereunder to compounds which ICN has the right to
commercialize for the discovery of new pharmaceutical products for the treatment
of Hepatitis B. If ICN exercises such right, the Parties will negotiate in good
faith a collaborative agreement on commercially reasonable terms.

                                  ARTICLE VIII

                              INTELLECTUAL PROPERTY

      8.1   PATENT PROSECUTION AND MAINTENANCE

            (a)   PATENTS COVERING INVENTIONS OWNED BY METABASIS. Metabasis will
at its own expense, (i) prepare, file, prosecute and maintain (collectively,
HANDLE) all Licensed Patents and any other patents covering inventions owned by
Metabasis pursuant to this Agreement (such Licensed Patents and other patents
being hereinafter collectively referred to as METABASIS PATENTS), (ii) consult
with ICN as to the Handling of such Metabasis Patents in Major Market Countries
as such Metabasis Patents relate to Products, and (iii) furnish to ICN copies of
all documents relevant to any such Handling. Metabasis will furnish such
documents and consult with ICN in sufficient time before any action by Metabasis
is due to allow ICN to provide comments thereon, which comments Metabasis must
consider. At Metabasis' expense and reasonable request, ICN shall cooperate, in
reasonable ways in connection with the preparing, filing, prosecution and
maintenance 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 Products, it will promptly advise
ICN thereof. In such circumstances, ICN may, but is not obligated to, Handle the
same at ICN's own cost, to the extent that ICN desires to do so.

            (b)   PATENTS COVERING INVENTIONS OWNED BY ICN. ICN will, at its own
expense, (i) Handle all patents or patent applications covering inventions owned
by ICN, which claim the manufacture, formulation, use or sale of Products (other
than Metabasis Patents) (the ICN PATENTS), (ii) consult with Metabasis as to the
Handling of such ICN Patents in Major Market Countries as such patents relate to
Products, and (iii) furnish to Metabasis copies of all documents relevant to any
such Handling. ICN will furnish such documents and consult with Metabasis in
sufficient time before any action by ICN is due to allow Metabasis to provide
comments thereon, which comments ICN must consider. At ICN's expense and
reasonable request, Metabasis shall cooperate, in reasonable ways, in connection
with the preparing, filing, prosecution and maintenance of all ICN Patents.
Should ICN decide that it does not desire to Handle a patent or patent
application within the ICN Patents in a country in the Territory, as it relates
to Products, it will promptly advise Metabasis thereof. In such circumstances,
Metabasis may, but is not obligated to, Handle the same at Metabasis' own cost
and expense, to the extent that Metabasis desires to do so.

                                       18
<PAGE>
            (c)   COOPERATION OF THE PARTIES. Each Party agrees to cooperate
fully in the preparation, filing, prosecution and maintenance of any patents or
patent applications under this Agreement. Such cooperation includes, but is not
limited to:

                        (i)   executing all papers and instruments, or requiring
      its employees or agents to execute all such papers and instruments, so as
      to effectuate in accordance with this Agreement the ownership of
      inventions, patents and patent applications set forth in Sections 8.4(a) -
      8.4(b) herein, and 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 affect the preparation, filing,
      prosecution or maintenance of any such patent applications or patents.

      8.2   NOTIFICATION OF INFRINGEMENT

      If a Party learns of infringement or threatened infringement or
misappropriation by a Third Party of any Licensed Patent, non-Licensed Patent or
Licensed Technology relating to Products within the Territory, it will promptly
notify the other Party and provide the other Party with all available evidence.

      8.3   PATENT ENFORCEMENT

      ICN 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 use, manufacture or sale of Products 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. If
ICN fails to bring an action or proceeding within (a) sixty (60) days following
the notice of alleged infringement or (b) ten (10) days 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
ICN shall have the right, at its own expense, to be represented in any such
action by counsel of its own choice. 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 adversely affects the other
Party will require the other Party's prior written consent, which will not be
unreasonably withheld or delayed. 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 ICN constitutes compensation for lost sales, the excess of such
award or recovery, net of the litigation and related expenses of obtaining such
award or recovery, shall be treated as Net Sales hereunder with respect to which
royalties shall be payable pursuant to Section 4.3 of this Agreement.

      8.4   OWNERSHIP

            (a)   METABASIS OWNED INVENTIONS. As between Metabasis and ICN,
Metabasis shall own all rights in and to any and all inventions made by or on
behalf of Metabasis

                                       19
<PAGE>
or ICN during the Term of this Agreement with respect to HepDirect Technology
including, without limitation, any and all patents, patent claims or patent
applications claiming any of the foregoing, but excluding all items set forth in
Section 8.4 (b)(i) below.

            (b)   ICN OWNED INVENTIONS. As between Metabasis and ICN, ICN shall
own all rights in and to any and all inventions made solely by or on behalf of
ICN during the Term of this Agreement with respect to any of the following:

                        (i)   the manufacture (including scale-up), formulation,
      use or sale of Products,

                        (ii)  any liver delivery technology or any compound that
      does not involve the HepDirect Technology,

including, without limitation, any and all patents, patent claims or patent
applications claiming any of the foregoing. ICN will grant to Metabasis a right
to practice any such invention which is made with respect to Section 8.4(b)(i)
above, together with a right to sublicense such right, on the basis of a royalty
and other terms that are commercially reasonable (which royalty and other terms
will be determined by arbitration pursuant to Article XIV in accordance with the
"last offer" procedure referred to in Section 14.4 if the Parties cannot reach
agreement thereon after good faith negotiation between them), so long as such
right to practice and such sublicense does not enable Metabasis or such
sublicensee to compete with any of the Products manufactured, used or sold by
ICN.

            (c)   ASSIGNMENT OF INVENTIONS. ICN agrees to assign, and hereby
does assign all intellectual property rights in and to any and all inventions
addressed in sections 8.4(a) herein, as is necessary to vest ownership of such
inventions as set forth in sections 8.4(a). If the foregoing assignment would
be void or impermissible in a given country, then the assigning Party
automatically shall be deemed to have granted to the other Party the exclusive
(co-exclusive with respect to jointly owned inventions) perpetual, irrevocable,
fully paid-up, freely sublicensable license to use and practice such invention,
and all intellectual property rights related thereto, in such country for any
and all purposes consistent with this Agreement, and which license shall survive
any expiration or termination of this Agreement.

      8.5   TRADEMARKS

      ICN will 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. ICN will be
responsible for obtaining, maintaining and protecting all applicable trademarks
in connection with the manufacture, marketing and sale of any Products.

                                       20
<PAGE>
      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)   ICN 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 ICN, any of its Affiliates or Sublicensees
is or becomes a defendant and which is related to alleged infringement of a
Third Party patent, as a result of the development or sale of Products, and
Metabasis shall have the right, at its own expense, to be represented in any
such action by counsel of its own choice. Metabasis will reimburse ICN for
twenty-five percent (25%) of the costs reasonably incurred by ICN in connection
with such defense, settlement, and/or damage award, if, when and as incurred. If
ICN fails to proceed in a timely fashion with regard to such defense, Metabasis
shall have the right to control any such defense, and ICN shall have the right,
at its own expense, to be represented in any such action by counsel of its own
choice. In such case, ICN will reimburse Metabasis for seventy-five percent
(75%) of the costs reasonably incurred by Metabasis in connection with such
defense, settlement, and/or damage award, if, when and as incurred. The
defending Party will at all times keep the other Party reasonably informed as to
the status of any such action. 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 adversely affects the other Party will require the other
Party's prior written consent, which will not be unreasonably withheld or
delayed.

                                   ARTICLE IX

             REPRESENTATIONS, WARRANTIES AND LIMITATION OF LIABILITY

      9.1   REPRESENTATIONS OF METABASIS

      Metabasis represents and warrants to ICN 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. 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. 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. This
Agreement constitutes a valid and binding obligation of Metabasis, enforceable
in accordance with its terms. Except as have been or will be obtained by
Metabasis and except for Product Registration, 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.

            (b)   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

                                       21
<PAGE>
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.

            (c)   To the best knowledge of Metabasis, Metabasis owns, and will
own, all right, title and interest in and to the Licensed Patents and Licensed
Technology as they exist from time to time during the Term. There are no adverse
actions, suits, or claims pending or threatened against Metabasis in any court
or by or before any governmental body or agency with respect to the Licensed
Technology or the Licensed Patents and, to the best knowledge of Metabasis,
there are no Third Party patents which would reasonably be expected to give rise
to such actions, suits or claims.

            (d)   Metabasis has not granted a license to any Third Party or
Affiliate covering any PMEA prodrugs or any other part of the HepDirect
Technology that would prevent ICN from fully benefiting from this Agreement and
has shown ICN all Metabasis compounds that Metabasis has tested, or as to which
Metabasis has acquired data, which indicate potential usefulness against
Hepatitis B.

      9.2   REPRESENTATIONS OF ICN

      ICN represents and warrants to Metabasis as follows.

            (a)   ICN is a corporation duly organized under the laws of the
State of Delaware. ICN has all requisite legal and corporate power and authority
to carry on its business and perform its obligations under this Agreement. All
action on the part of ICN necessary for the execution and delivery of this
Agreement and the performance of ICN's obligations under this Agreement has been
taken. The person(s) executing this Agreement on behalf of ICN have all
necessary corporate powers and have been duly authorized by ICN to execute this
Agreement on its behalf. This Agreement constitutes a valid and binding
obligation of ICN, enforceable in accordance with its terms. Except as have been
or will be obtained by ICN and except for Product Registration, 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 ICN of this Agreement.

            (b)   The execution, delivery and performance of this Agreement by
ICN 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 ICN is a party or by which it is
bound, or, to the best knowledge of ICN, any statute, rule or governmental
regulation applicable to ICN.

      9.3   DISCLAIMER OF WARRANTIES

      EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE LICENSED COMPOUND, THE
LICENSED TECHNOLOGY AND PRODUCTS LICENSED BY METABASIS TO ICN 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

                                       22
<PAGE>
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 study or test commenced
pursuant to this Agreement, or (b) the safety or usefulness for any purpose of
the Licensed Compound, the Licensed Technology or Products.

                                    ARTICLE X

                                INDEMNIFICATION

      10.1  INDEMNIFICATION BY ICN

      ICN will at all times, during and after the Term, indemnify, defend and
hold harmless Metabasis, its Affiliates, and its directors, officers, employees,
and agents against any and all claims, demands, actions and liabilities,
including reasonable attorneys' fees and costs (collectively, CLAIMS), arising
out of or relating to (i) any breach of any representation, warranty or covenant
of ICN under this Agreement or (ii) the possession, storage, transport,
manufacture, use, administration, sale, distribution or other disposition of the
Licensed Compound or Products by or on behalf of ICN or its Affiliates or
Sublicensees. This indemnity obligation will not apply to:

            (a)   any 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 grossly negligent act or willful
misconduct of Metabasis, its Affiliates, or its Sublicensees, or their
directors, officers, employees or agents.

      10.2  INDEMNIFICATION BY METABASIS

      Metabasis will at all times, during and after the Term, indemnify, defend
and hold harmless ICN, its Affiliates, and its Sublicensees and their respective
directors, officers, employees and agents against any and all Claims arising out
of or relating to any breach of any representation, warranty or covenant of
Metabasis under this Agreement. This indemnity obligation will not apply with
respect to:

            (a)   any claims against ICN or its Affiliates that are for personal
injury or death based on or relating to the Licensed Compound sold or Products
sold by or on behalf of ICN, its Affiliates or its Sublicensees.

            (b)   any Claim indemnifiable by ICN under Section 10.1; or

            (c)   to the extent that any claim, loss, damage, liability or Third
Party claim or suit is the result of any grossly negligent act or willful
misconduct of ICN, its Affiliates, or its Sublicensees, or their directors,
officers, employees or agents.

                                       23
<PAGE>
      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 ICN, 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 Claim to the extent known
to the Indemnified Party. Failure to give timely notice to the 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. If the Indemnifying Party does not assume the defense of the
claim or, having done so, does not pursue the defense, the Indemnified Party may
assume the defense, with counsel of its choice, but at the cost and for the
account of the Indemnifying Party. If the Indemnifying Party so assumes such
defense, the Indemnified Party may participate through counsel of its choice,
but the cost of such counsel will be for the account of the Indemnified Party.
The Party not assuming the defense of the claim will render all reasonable
assistance to the Party assuming the defense, and all out-of-pocket costs of
such assistance will be for the account of the Indemnifying Party. No such claim
will be settled other than by the Party defending the claim, and then only with
the consent of the other Party, which will not be unreasonably withheld. In the
event that the Indemnified Party is an Affiliate, director, officer, employee or
agent of a Party to this Agreement, such Indemnified Party's rights to
indemnification shall be pursued through and such Indemnified Party shall be
represented for such purposes by such Party to this Agreement.

                                   ARTICLE XI

                         CONFIDENTIALITY AND PUBLICATION

      11.1  CONFIDENTIALITY

      Subject to Section 11.2, during the Term and for five (5) years after the
Term, each Party will maintain in confidence, to the same extent to which such
Party maintains its own proprietary information, all information and materials
disclosed by the other Party, including Licensed Patents and Licensed
Technology, whether provided prior to or after the Closing Date, and will not
use such information or materials for any purpose except as permitted by this
Agreement, and will not disclose such information and materials to 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. 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

                                       24
<PAGE>
            (a)   either Party (as such, the RECIPIENT) is required to disclose
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
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 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
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)   disclosure is made to a government regulatory agency as part
of such agency's product license approval process, provided, however, that the
Recipient will notify the other Party, limit the disclosure to the extent
permitted and, where appropriate, seek confidential treatment; 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
permitted and, where appropriate, seek confidential treatment.

      11.3  PUBLICITY

      Except as otherwise provided in this Agreement (including without
limitation Section 11.2) or required by law or regulation, no Party will
originate any publication, news release or other public announcement, written or
oral, whether in the public press, stockholders' reports or otherwise, relating
to 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 the other Party, which approval will not
be unreasonably withheld or delayed.

      11.4  SCIENTIFIC PUBLICATIONS

      ICN and Metabasis will seek to arrive at a consensus as to the publication
of scientific articles concerning the Licensed Compound or Products. Absent such
a consensus, ICN shall be free to publish scientific articles about the Licensed
Compound or Products in scientific

                                       25
<PAGE>
publications but Metabasis may only do so with the consent of ICN, which consent
may not be unreasonably withheld or delayed. Notwithstanding the immediately
preceding sentence, 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 ICN 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.

                                   ARTICLE XII

                              TERM AND TERMINATION

      12.1  TERM

            (a)   The Term of this Agreement (the TERM) commences as of the
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 Patent(s) which but for this
      Agreement would be infringed by the sale of such Product using such
      Licensed Patents in such country, including any extension of such Licensed
      Patents; and

                        (ii)  ten (10) years after the First Commercial Sale in
      such country of such Product.

            (b)   Upon expiration of the Term in a country with respect to any
Product, ICN will have a perpetual, fully paid-up, royalty free, non-exclusive
license within the Field in such country (with the right to grant sublicenses in
accordance with Section 2.2) to develop, manufacture, have manufactured, market,
import, use, offer for sale, and sell such Product.

      12.2  [INTENTIONALLY OMITTED]

      12.3  TERMINATION FOR CAUSE

            (a)   Either Party (as such, the NON-BREACHING PARTY) may terminate
this Agreement if

                        (i)   the other Party (as such, the BREACHING PARTY)
      does not comply with any of its material obligations in this Agreement;

                        (ii)  the Non-Breaching Party gives 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;

                                       26
<PAGE>
                        (iii) the Chief Executive Officer of Metabasis and the
      head of Research and Development and/or Executive Vice President of
      Strategic Planning of ICN have met and been unable to resolve any dispute
      arising from the alleged default within the thirty (30) days following the
      notice referred to in Section 12(a)(ii) (each of the Parties hereby
      agreeing to cause such individuals to meet promptly); and

                        (iv)  the default is not cured within sixty (60) days
      after the receipt of such notice (or, in the event that cure cannot be
      effected within such sixty (60) day period, reasonable efforts by the
      Breaching Party are not commenced and continuing throughout such period
      and the default is not finally cured within one hundred and twenty (120)
      days after the receipt of such notice).

            (b)   Upon the occurrence of any event under Section 12.3(a) that
entitles a Party to terminate this Agreement, such Party may deliver to the
other Party written notice of termination of this Agreement, and the termination
will be effective upon delivery of such notice. The right to terminate will be
in addition to and not in substitution for any other available remedy.

            (c)   If Metabasis has the right to terminate this Agreement under
Section 12.3(a), Metabasis at its option, instead of terminating this Agreement,
may by written notice to ICN convert the license granted under Section 2.1
(including the right to sublicense under Section 2.2) into a non-exclusive
license. All other provisions of this Agreement will otherwise remain in effect.

            (d)   A Party entitled to terminate this Agreement, or convert the
license under this Agreement, under this Section 12.3 may elect to terminate or
convert 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 or convert the license. If a Party elects to
terminate with respect to a particular country, the licenses and other rights
granted to ICN pursuant to Article II with respect to that particular country
will terminate.

            (e)   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 or
convert 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.

            (f)   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.

      12.4  RIGHTS AND OBLIGATIONS UPON TERMINATION FOR CAUSE

      Upon any termination by Metabasis under Section 12.3 with respect to a
particular country or countries, all licenses and other rights granted to ICN
pursuant to Article II will terminate with respect to such country or countries.
Upon such termination of all licenses and

                                       27
<PAGE>
rights, Metabasis will have an option, executable for a period of [REDACTED]
commencing on the effective date of the termination, to acquire ICN's clinical
information and data generated with respect to its development activities for
the Licensed Compound and Products, all INDs, NDAs and other Product
Registrations applicable to all Licensed Compounds and Products, with respect to
such country or countries, so as to enable Metabasis or its assignees,
sublicensees or distributors to continue to develop, manufacture, market and
sell the Products in such country or countries. If Metabasis elects to exercise
its option, it will give notice to ICN of such exercise together with the notice
of termination and a proposed purchase price and ICN will make the items
referred to in the immediately preceding sentence promptly available to
Metabasis. The Parties will then negotiate in good faith the price and other
terms of the acquisition and consummate the transaction within the [REDACTED]
following such notice to ICN. If the Parties do not consummate the purchase and
sale of the above referenced ICN product rights within such [REDACTED] period,
the matter will be referred to arbitration in accordance with Article XIV and
the price and other terms of the acquisition will be determined in accordance
with the "last offer" procedure referred to in Section 14.4. The price of such
acquisition shall be paid by Metabasis to ICN or, at Metabasis' option, credited
against the amount of damages, if any, ultimately determined to be due to
Metabasis as a result of the default giving rise to such right of termination.
In the event that such credit exceeds the amount of such damages, then, until
such excess has been reimbursed to ICN, Metabasis shall pay ICN the amount of
such excess either by

            (a)   paying over to ICN, as and when received by Metabasis, all
license fees, milestones or other cash considerations and/or the value of
non-cash considerations, if Metabasis grants a license or licenses to Third
Parties with respect to the Products; or

            (b)   paying to ICN a royalty equal to [REDACTED] on the first
[REDACTED] of Net Sales of each Product and [REDACTED] on Net Sales of
each Product in excess of [REDACTED], if Metabasis or its Affiliates sell the
Products.

      12.5  SURVIVING PROVISIONS

      The Parties' rights and obligations under Sections 4.8, 11.1, 11.2, 11.3
and Articles VII (except in the case of a termination for cause under Section
12.3 where ICN is the Breaching Party), X, XII, XIII and XIV 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
expiration of this Agreement. Termination or expiration of this Agreement will
not terminate ICN's obligation to pay all royalties accrued. 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.

                                       28
<PAGE>
                                  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 ICN without the prior written
consent of Metabasis.

            (b)   Subject to Section 13.1(d), neither this Agreement nor any
interest under this Agreement may be assigned by Metabasis without the prior
written consent of ICN.

            (c)   No assignment or sublicense will release ICN, its Affiliates
or its Sublicensees from any liability under this Agreement.

            (d)   Each of ICN and Metabasis may assign this Agreement or any
rights or performance obligations under this Agreement to any wholly owned
Affiliate or to any successor by merger, consolidation or sale of 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.

      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 ICN. Any
successor or assignee of ICN's or Metabasis' interest will expressly assume in
writing the performance of all the terms and conditions of this Agreement to be
performed by ICN or Metabasis, as the case may be.

      13.3  PARTIES GUARANTEE PERFORMANCE OF AFFILIATES

      Each Party shall remain responsible for and shall guarantee 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, will be referred to and finally settled by the
American Arbitration Association ("AAA") in

                                       29
<PAGE>
accordance with the Commercial Arbitration Rules in force on the date of
commencement of the arbitration. The arbitration will be 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 ICN, which arbitrators will then
jointly select the third arbitrator. If either party fails to nominate an
arbitrator within thirty (30) days from the date of notification made to it of
the other Party's request for arbitration, then the AAA will appoint the
arbitrator in accordance with its rules. The place of the arbitration will be
Los Angeles, California and California law will be applied. Each of the
arbitrators will have at least 10 years experience in commercial transactions.
The arbitration will commence within thirty (30) days after appointment of the
arbitrators and will continue uninterrupted, unless otherwise suspended by the
arbitrators for good cause, for not longer than one hundred and twenty (120)
days (including without limitation any discovery permitted by the arbitrators).
The arbitrators will, within such one hundred and twenty (120) day period,
render a written decision with findings of fact and conclusions of law and
deliver such decision to the Parties. The decision of the arbitrators will be
final and non-appealable and binding upon the Parties, and may be entered and
enforced in any court having jurisdiction.

      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. The Chief
Executive Officer of Metabasis and the head of the Research and Development
and/or Executive Vice President of Strategic Planning of ICN 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 30 days 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 thirty (30) calendar
days 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  "LAST OFFER" PROCEDURE

      In the case of any dispute as to which this Agreement calls for the "last
offer" procedure to be applicable, each Party will submit to the arbitrators and
exchange with the other Party in advance of the hearing its last, best offer.
The arbitrators will be limited to awarding only one or the other of the two
amounts and/or submissions.

                                       30
<PAGE>
      14.5  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 ICN is
that of an independent contractor. Metabasis and ICN are not joint venturers,
partners, principal and agent, master and servant or employer and employee. With
respect to the subject matter of this Agreement, Metabasis and ICN 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,
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 ninety (90) days. A Party subject to such an excusable delay
will take all reasonable steps 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:

                                       31
<PAGE>
                        if to Metabasis, to:

                        Metabasis Therapeutics, Inc.
                        9390 Towne Centre Drive
                        San Diego, California  92122
                        Attention:  Chief Executive Officer

                        with a copy to:

                        Thomas A. Coll, Esq.
                        Cooley Godward LLP
                        4401 Eastgate Mall
                        San Diego, California  92121

                        if to ICN, to:

                        ICN Pharmaceuticals, Inc.
                        3300 Hyland Avenue
                        Costa Mesa, California  92626
                        Attention:  Head of Research and Development
                        Fax:  (714) 641-7207

                        with a copy to:

                        ICN Pharmaceuticals, Inc.
                        3300 Hyland Avenue
                        Costa Mesa, California 92626
                        Attention:  General Counsel
                        Fax:  (714) 641-7207

      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.

                                       32
<PAGE>
      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.

      15.8  NO THIRD PARTY BENEFICIARIES

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

      15.9  ENTIRE AGREEMENT

      This Agreement constitutes the entire agreement between the Parties with
respect to its subject matter and 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 that certain letter of intent dated August 3, 2001 between
ICN and Metabasis as amended.

      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.

                                       33
<PAGE>
      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.

      15.14 BANKRUPTCY

      All rights and licenses granted under or pursuant to this Agreement by
Metabasis to ICN 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. ICN, 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 California without regard to its principles regarding
conflicts of law.

      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: Chairman, Chief Executive Officer and President

                        ICN PHARMACEUTICALS, INC.

                        By: /s/ Bill A. MacDonald
                            ------------------------------------------
                        Name: Bill A. MacDonald
                        Title: Executive Vice President, Strategic Planning

                                       34
<PAGE>
                                   SCHEDULE A

                                  CONFIDENTIAL
                                  ------------

[Redacted]

U.S. (CIP2)    09/392,352         9/8/99       Issued (pd. NOA on 8/1/01)

PCT            PCT/US99/04908     3/6/98       Published 9/10/99 as WO99/45016

[Redacted]

Europe         99912300.3         3/6/98       Published 12/20/00 as No. 1060182

Hong Kong      01102253.7         3/6/98       Published 6/15/01 as No. 1031386A

[Redacted]
[Redacted]

PCT            PCT/US00/05672     3/5/99       Published 9/8/00 as WO00/52015

[Redacted]

                                  CONFIDENTIAL
                                  ------------
[Redacted]

PCT            PCT/US00/24693     9/8/99       Published 3/15/01 as WO01/18013

                                       2<PAGE>

                                                                   EXHIBIT 10.19

                                     FORM OF
                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT (this "Agreement") is made by and between
Ribapharm Inc., a Delaware corporation (the "Company"), and [INSERT NAME]
("Employee") and is entered as of the effective date of the initial public
offering of the Company (the "Start Date").

                                    RECITALS

      WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the threat of an unsolicited takeover of the Company or ICN
Pharmaceuticals, Inc., a Delaware corporation ("ICN"), may occur which can
result in significant distractions of its management personnel because of the
uncertainties inherent in such a situation;

      WHEREAS, the Board has determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of its key
management personnel in the event of a threat of a change in control and to
ensure their continued dedication and efforts in such event without undue
concern for their personal financial and employment security; and

      WHEREAS, in order to induce Employee to remain in the employ of the
Company, particularly in the event of a threat of a change in control, the
Company desires by this writing to set forth the employment relationship of
Employee with the Company, and Employee is willing to enter into such employment
relationship on the terms and conditions set forth herein.

                                    AGREEMENT

      NOW THEREFORE, for consideration, the value, sufficiency, and receipt of
which are hereby acknowledged, the parties hereto agree as follows.

      1. Employment.

            (a) Position. The Company hereby employs Employee, and Employee
agrees to be employed by the Company, commencing on the Start Date and
continuing during the term (as defined in Section 2 below). Employee shall hold
the position of [INSERT TITLE] of the Company and such other positions as the
Board may designate. Employee's duties and responsibilities hereunder shall
include (a) providing senior executive management services as the Company may
designate through its Board consistent with the position of [INSERT TITLE], and
(b) such other duties and responsibilities as are assigned to Employee from time
to time by the Board and accepted by Employee.
<PAGE>
            (b) Performance of Duties. Except as otherwise provided herein or
hereafter agreed upon in writing, Employee shall devote reasonable attention and
time during usual business hours to the performance of his duties hereunder and
shall, except as provided herein, render his services solely and exclusively for
the Company during the employment term and agrees to serve the Company
diligently, in good faith, and to the best of his abilities. The Employee may
(i) serve on corporate, civil or charitable boards of committees, (ii) manage
personal investments and (iii) deliver lectures and teach at education
institutions, so long as such activities do not significantly interfere with the
performance of the Employee's responsibilities hereunder.

      2. Term. The initial term of this Agreement shall be three (3) years from
the Start Date (the "Initial Term"); provided, however, that the term of this
Agreement shall be automatically extended for one (1) year on the expiration of
the Initial Term and on each anniversary thereof unless either the Company or
the Employee shall have given written notice to the other not less than ninety
(90) days prior thereto that the term of this Agreement shall not be so
extended; and provided, further, that, notwithstanding any such notice by the
Company given after a Change in Control (as defined below) not to extend the
term of this Agreement, the term of this Agreement shall not expire prior to the
expiration of the third anniversary of a Change in Control.

      3. Base Salary. The Company shall pay Employee during the term of this
Agreement a base salary at the rate of $_________ per annum or such larger
amount as the Board may from time to time determine (hereinafter referred to as
the "Base Salary"). Such Base Salary shall be payable no less frequently than
monthly during the year in accordance with the Company's customary payroll
practices applicable to its executives. Employee agrees that the Company may
deduct and withhold from the payments to be made to Employee hereunder amounts
required to be deducted and withheld by the Company under the provisions of any
statute, law, regulation, or ordinance heretofore or hereafter enacted.

      4. Benefits. Employee shall be eligible to participate in all stock
option, stock bonus, incentive compensation, retirement, savings, fringe
benefit, disability insurance, group health and group life, vacation, and
similar health and benefit plans maintained by the Company or ICN in accordance
with the terms and conditions thereof on a basis which is no less favorable than
that applicable to employees of the Company who are similarly situated to
Employee. No additional compensation provided under any of such plans shall be
deemed to modify or otherwise affect the terms of this Agreement or any of
Employee's entitlements hereunder, unless such modification is explicitly
required herein or by any of such plans.

      5. Vacation and Sick Leave. At such reasonable times as the Board shall in
its discretion permit, Employee shall be entitled, without loss of pay, to
absent himself voluntarily from the performance of his employment under this
Agreement, provided that:

            (a) Employee shall be entitled to annual vacation in accordance with
the policies as periodically established by the Board for similarly situated
executives of the Company.

                                       2
<PAGE>
            (b) The Board shall be entitled to grant to Employee a leave or
leaves of absence with or without pay at such time or times and upon such terms
and conditions as the Board in its discretion may determine.

            (c) Employee shall be entitled to sick leave (without loss of pay)
in accordance with the Company's policies as in effect from time to time.

      6. Expenses. Employee shall be entitled to reimbursement for reasonable
expenses necessary for the performance of his duties hereunder or for promoting,
pursuing, or otherwise furthering the business or interests of the Company. All
claims for expenses shall be reasonable and made on the basis of statements
thereof (together with vouchers or other documents evidencing such expenses)
furnished by Employee to the Company at monthly or more frequent intervals and
in accordance with the Company's expense reimbursement policy and standard
procedures as they exist from time to time.

      7. Office and Facilities. Employee shall be provided with an appropriate
office in Costa Mesa, California, or such other place as may be mutually agreed
upon and with such secretarial and other support facilities as are commensurate
with Employee's status with the Company and adequate for the performance of his
duties hereunder.

      8. Termination.

            (a) Employee's employment hereunder may be terminated under the
following circumstances:

                  (1) Death. Employee's employment by the Company shall
      automatically terminate upon Employee's death.

                  (2) Disability. The Company may terminate Employee's
      employment after having established Employee's Disability. For purposes of
      this Agreement, "Disability" means a physical or mental infirmity which
      impairs Employee's ability to substantially perform his duties under this
      Agreement which continues for a period of at least one hundred eighty
      (180) consecutive days. Employee shall be entitled to the compensation and
      benefits provided for under this Agreement for any period during the term
      of this Agreement and prior to the establishment of Employee's Disability
      during which Employee's ability to substantially perform his duties under
      this Agreement is impaired due to a physical or mental infirmity.
      Notwithstanding anything contained in this Agreement to the contrary,
      until the Termination Date specified in a Notice of Termination (as each
      term is hereinafter defined) relating to Employee's Disability, Employee
      shall be entitled to return to his position with the Company as set forth
      in this Agreement in which event no Disability of Employee will be deemed
      to have occurred.

                  (3) Cause. The Company may terminate Employee's employment for
      Cause. A termination for "Cause" is a termination evidenced by a
      resolution adopted in good faith by two-thirds (2/3) of the Board that
      Employee --

                                       3
<PAGE>
                        (i) willfully and continually failed to substantially
            perform his duties with the Company (other than a failure resulting
            from Employee's incapacity due to physical or mental illness), or
            materially breached any of the provisions of this Agreement, which
            failure or breach continued for a period of at least thirty (30)
            days after a written notice of demand for substantial performance or
            other correction has been delivered to Employee specifying the
            manner in which Employee has failed to substantially perform,

                        (ii) willfully engaged in conduct which is demonstrably
            and materially injurious to the Company, monetarily or otherwise,

                        (iii) has been indicted or convicted of an act which is
            defined as a felony under federal or state law, or

                        (iv) willfully engaged in other acts of misfeasance in
            connection with the performance of his duties;

      provided, however, that no termination of Employee's employment shall be
      for Cause as set forth in clause (ii) or (iv) above until (x) there shall
      have been delivered to Employee a copy of a written notice setting forth
      that Employee was guilty of the conduct set forth in clause (ii) or (iv),
      as applicable, and specifying the particulars thereof in detail, and (y)
      Employee shall have been provided an opportunity to be heard by the Board
      (with the assistance of Employee's counsel if Employee so desires). No
      act, nor failure to act, on Employee's part, shall be considered "willful"
      unless he has acted or failed to act, with an absence of good faith and
      without a reasonable belief that his action or failure to act was in the
      best interest of the Company. Notwithstanding anything contained in this
      Agreement to the contrary, no failure to perform by Employee after Notice
      of Termination is given by Employee shall constitute Cause for purposes of
      this Agreement.

                  (4) Without Cause. The Company shall have the right and
      option, exercisable by giving written notice to Employee, to terminate
      Employee's employment by the Company without Cause and for any reason or
      for no reason. This right is not limited or restricted by, and shall
      supersede, any policy of the Company requiring or favoring continued
      employment of its executives during satisfactory performance, any
      seniority system or any procedure governing the manner in which the
      Company's discretion is to be exercised. No exercise by the Company of
      this termination right shall, under any circumstances, be deemed to
      constitute (i) a breach by the Company of any term of this Agreement,
      express or implied (including without limitation a breach of any implied
      covenant of good faith and fair dealing), (ii) a wrongful discharge of
      Employee or a wrongful termination of Employee's employment by the
      Company, (iii) a wrongful deprivation by the Company of Employee's
      corporate office (or authority, opportunities or other benefits relating
      thereto) or (iv) the breach by the Company of any other duty or
      obligation, express or implied, which the Company may owe to Employee
      pursuant to any principle or provision of law (whether contract or tort);
      provided, however, that notwithstanding the foregoing, a breach by the
      Company of its payment obligations pursuant to Section 9 shall be deemed
      to be a breach of this Agreement.

                                       4
<PAGE>
                  The failure or refusal of the Company to renew or extend the
      Employment Period shall not constitute a termination of Employee's
      employment by the Company without Cause under this Agreement.

                  (5) Good Reason. Employee may terminate his employment for
      Good Reason. For purposes of this Agreement, "Good Reason" shall mean the
      occurrence after a Change in Control of any of the events or conditions
      described in subsections (i) through (viii) below:

                        (i) a change in Employee's status, title, position or
            responsibilities (including reporting responsibilities) which, in
            Employee's reasonable judgment, does not represent a promotion from
            his status, title, position or responsibilities as in effect
            immediately prior to the Change in Control; the assignment to
            Employee of any duties or responsibilities which, in Employee's
            reasonable judgment, are inconsistent with such status, title,
            position or responsibilities immediately prior to the Change in
            Control; or any removal of Employee from or failure to reappoint or
            reelect him to any of such positions, except in connection with the
            termination of his employment for Disability, Cause, as a result of
            his death or by Employee other than for Good Reason;

                        (ii) a reduction in Employee's Base Salary;

                        (iii) the Company's requiring Employee to be based at
            any place outside a 30-mile radius from Costa Mesa, California,
            except for reasonably required travel on the Company's business
            which is not materially greater than such travel requirements prior
            to the Change in Control;

                        (iv) the failure by the Company to (A) continue in
            effect any material compensation or benefit plan in which Employee
            was participating at the time of the Change in Control, or (B)
            provide Employee with compensation and benefits at least equal (in
            terms of benefit levels and/or reward opportunities) to those
            provided for under each other employee benefit plan, program and
            practice as in effect immediately prior to the Change in Control (or
            as in effect following the Change in Control, if greater);

                        (v) the insolvency or the filing (by any party,
            including the Company) of a petition for bankruptcy of the Company;

                        (vi) any material breach by the Company of any material
            provision of this Agreement; and

                                       5
<PAGE>
                        (vii) any purported termination of Employee's employment
            for Cause by the Company which does not comply with the terms of
            Section 8 of this Agreement.

      Any event or condition described in this Section 8(a)(5)(i) through (vii)
      which occurs prior to a Change in Control but which (x) was at the request
      of a third party who has taken steps reasonably calculated to effect a
      Change in Control, or (y) otherwise arose in connection with a Change in
      Control, shall (provided that a Change in Control actually occurs)
      constitute Good Reason for purposes of this Agreement notwithstanding that
      it occurred prior to a Change in Control. Employee's right to terminate
      his employment pursuant to this Section 8(a) shall not be affected by his
      incapacity due to physical or mental illness. "Good Reason" shall not
      include acts not taken in bad faith which are cured by the Company in all
      respects not later than thirty (30) days from the date of receipt by the
      Company of a Notice of Termination from Employee.

            (b) For purposes of this Agreement, a "Change in Control" shall mean
any of the following:

                  (1) an acquisition (other than directly from the Company in
the case of voting securities of the Company or from the Parent (as defined
below) in the case of voting securities of the Parent) of any voting securities
(the "Voting Securities") of the Company or its Parent by any "Person" (as the
term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act)
immediately after which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more than
twenty-five percent (25%) of the then outstanding shares of common stock (the
"Shares") of the Company or its Parent (as applicable) or the combined voting
power of the then-outstanding Voting Securities of the Company or its Parent (as
applicable). For purposes of this Agreement, "Parent" shall mean an entity that
owns, directly or indirectly, more than fifty percent (50%) of the
then-outstanding Shares of the Company or the combined voting power of the
then-outstanding Voting Securities of the Company (including ICN prior to (but
only prior to) the "Distribution" (as defined below)); provided, however, in
determining whether a Change in Control has occurred pursuant to this Section
8(b)(1), Shares or Voting Securities which are acquired in a "Non-Control
Acquisition" (as hereinafter defined) shall not constitute an acquisition which
would cause a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust forming a part thereof)
sponsored or maintained by (A) the Company or its Parent or (B) any corporation
or other Person of which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or indirectly, by the Company
(for purposes of this definition, a "Company Subsidiary") or its Parent (for
purposes of this definition, a "Parent Subsidiary"), (ii) the Company, a Parent,
any Company Subsidiary, any Parent Subsidiary or any of their affiliates, (iii)
any underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) any Person in connection with a "Non-Control Transaction"
(as hereinafter defined);

                  (2) The consummation of:

                                       6
<PAGE>
                        (i) a merger, consolidation or reorganization with or
into the Company or a Parent, as the case may be, or in which securities of the
Company or its Parent are issued (a "Merger"), unless such Merger is a
"Non-Control Transaction." A "Non-Control Transaction" shall mean a Merger
where:

                              (A) the stockholders of the Company or such Parent
immediately before such Merger own directly or indirectly immediately following
such Merger at least fifty percent (50%) of the combined voting power of the
outstanding voting securities of (x) the corporation resulting from such Merger
(the "Surviving Corporation"), if the Surviving Corporation has no Parent
immediately following such Merger, or (y) the ultimate Parent of the Surviving
Corporation, if there is one or more Parents of the Surviving Corporation
immediately following such Merger; and

                              (B) the members of the "Incumbent Board" (as
defined below) or the "ICN Incumbent Board" (as defined below), as the case may
be, immediately prior to the execution of the agreement providing for such
Merger, constitute at least a majority of the members of the board of directors
of (x) the Surviving Corporation, if the Surviving Corporation has no Parent
immediately following such Merger, or (y) the ultimate Parent of the Surviving
Corporation, if there is one or more Parents of the Surviving Corporation
immediately following such Merger;

                        (ii) a complete liquidation or dissolution of the
Company or a Parent, as the case may be; or

                        (iii) the sale or other disposition of all or
substantially all of the assets of the Company or a Parent, as the case may be,
to any Person (other than a transfer to a Company Subsidiary or Parent
Subsidiary or under conditions that would constitute a Non-Control Transaction
(with the disposition of assets being regarded as a Merger for this purpose),
the Distribution or any other distribution to the stockholders of the Company or
a Parent of the stock of a Company Subsidiary or a Parent Subsidiary or any
other assets); or

                  (3) the individuals who, at the time of the initial public
offering of the Company, are members of the Board (the "Incumbent Board") cease
for any reason to constitute a majority of the members of the Board or,
following a Merger which results in a Parent, the board of directors of the
ultimate Parent; provided, however, that if the appointment or election, or
nomination for election by the Company's stockholders, of any new director was
approved by a vote of at least two-thirds (2/3) of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered as a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board (a "Proxy Contest") including by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or

                  (4) prior to (but only prior to) the Distribution, the
individuals who, as of May 1, 2001, are members of the board of directors of ICN
(the "ICN Incumbent Board")

                                       7
<PAGE>
cease for any reason to constitute a majority of the members of such board of
directors or, following a merger, consolidation or reorganization with or into
ICN that results in a Person owning, directly or indirectly, more than fifty
percent (50%) of the then-outstanding Shares of ICN or the combined voting power
of the then-outstanding Voting Securities of ICN (an "ICN Parent"), the board of
directors of the ultimate ICN Parent; provided, however, that if the appointment
or election, or nomination for election by ICN's stockholders, of any new
director was approved by a vote of at least two-thirds (2/3) of the ICN
Incumbent Board, such new director shall, for purposes of this Agreement, be
considered as a member of the ICN Incumbent Board; provided further, however,
that no individual shall be considered a member of the ICN Incumbent Board if
such individual initially assumed office as a result of either an actual or
threatened Election Contest or other actual or threatened Proxy Contest,
including by reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest.

      Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then-outstanding Shares or
Voting Securities of the Company or a Parent as a result of the acquisition by
the Company or by a Parent of its Shares or Voting Securities which, by reducing
the number of Shares or Voting Securities then outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person;
provided, however, that, if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Shares or Voting
Securities by the Company, and after such share acquisition by the Company or by
such Parent, the Subject Person becomes the Beneficial Owner of any additional
Shares or Voting Securities which increases the percentage of the
then-outstanding Shares or Voting Securities of the Company or of such Parent
Beneficially Owned by the Subject Person, then a Change in Control shall occur.

      For purposes of this definition, the "Distribution" shall mean the
distribution of the Company's common stock by ICN in one or more transactions
occurring after the Company's initial public offering that collectively have the
effect that all shares of such common stock held by ICN are distributed to ICN
stockholders, whenever such transaction or transactions shall occur.

            (c) Notice of Termination. Any purported termination by the Company
or by Employee shall be communicated by written Notice of Termination to the
other. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which indicates the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Employee's employment under the
provision so indicated. For purposes of this Agreement, no such purported
termination of employment shall be effective without such Notice of Termination.

            (d) Termination Date. "Termination Date" shall mean in the case of
Employee's death, his date of death, or in all other cases, the date specified
in the Notice of Termination subject to the following:

                  (1) if Employee's employment is terminated by the Company for
Cause or due to Disability, or voluntarily by Employee (other than for Good
Reason), the date specified in the Notice of Termination shall be at least
thirty (30) days from the date the Notice

                                       8
<PAGE>
of Termination is given to Employee, provided that in the case of Disability
Employee shall not have returned to the full-time performance of his duties
during such period of at least thirty (30) days; and

                  (2) if Employee's employment is terminated for Good Reason or
without Cause, the date specified in the Notice of Termination shall not be more
than sixty (60) days, and shall not be less than thirty (30) days, from the date
the Notice of Termination is given to the Company.

      9. Compensation Upon Termination. Upon termination of Employee's
employment during the term of this Agreement (including any extensions thereof),
Employee shall be entitled to the following benefits:

            (a) Cause, Disability, Death or Voluntary Termination (Other Than
for Good Reason). If Employee's employment is terminated by the Company for
Cause or Disability or by Employee (other than for Good Reason), or by reason of
Employee's death, the Company shall pay Employee all amounts earned or accrued
hereunder through the Termination Date but not paid as of the Termination Date,
including (1) Base Salary, (2) reimbursement for any and all monies advanced or
expenses incurred in connection with Employee's employment for reasonable and
necessary expenses incurred by Employee on behalf of the Company for the period
ending on the Termination Date, (3) vacation pay, (4) any bonuses or incentive
compensation and (5) any previous compensation which Employee has previously
deferred (including any interest earned or credited thereon) (collectively,
"Accrued Compensation"). In addition to the foregoing, if Employee's employment
is terminated by the Company for Disability or by reason of Employee's death,
the Company shall pay to Employee or his beneficiaries (as the case may be) an
amount equal to the annual bonus or incentive award that Employee would have
been entitled to receive in respect of the fiscal year in which Employee's
Termination Date occurs had he continued in employment until the end of such
fiscal year, calculated as if all performance targets and goals (if applicable)
had been fully met by the Company and by Employee, as applicable, for such year,
multiplied by a fraction the numerator of which is the number of days in such
fiscal year through the Termination Date and the denominator of which is 365 (a
"Pro Rata Bonus"). Employee's entitlement to any other compensation or benefits
shall be determined in accordance with the Company's employee benefit plans and
other applicable programs and practices then in effect.

            (b) Without Cause or Good Reason. If Employee's employment by the
Company shall be terminated by the Company other than for Cause, death or
Disability, or by Employee for Good Reason, then Employee shall be entitled to
the benefits provided below:

                  (i) the Company shall pay Employee all Accrued Compensation
and a Pro Rata Bonus;

                  (ii) the Company shall pay Employee as severance pay and in
lieu of any further salary for periods subsequent to the Termination Date, in a
single payment, an amount in cash equal to three (3) times the sum of (A)
Employee's Base Salary at the highest rate in effect at any time within the
ninety (90) day period ending on the date the Notice of

                                       9
<PAGE>
Termination is given (or if Employee's employment is terminated after a Change
in Control, Employee's Base Salary immediately prior to the Change in Control,
if greater) and (B) the "Bonus Amount" (as defined below). The term "Bonus
Amount" shall mean (x) the greatest amount of any annual cash bonus or annual
incentive compensation received by Employee during the three (3) fiscal years
immediately preceding the Termination Date or (y) if no such bonus was received
by Employee during any of such three (3) years, then an amount equal to
Employee's maximum annual bonus which could be awarded for the fiscal year in
which the Termination Date occurs had he continued in employment until the end
of such fiscal year, assuming all performance targets and goals (if applicable)
had been fully met by the Company and by Employee, as applicable, for such year;

                  (iii) during the thirty-six (36) month period following the
Termination Date, the Company shall at its expense continue on behalf of
Employee and his dependents and beneficiaries the life insurance, disability,
medical, dental and hospitalization benefits which were being provided to
Employee at the time Notice of Termination is given (or, if Employee is
terminated following a Change in Control, the benefits provided to Employee at
the time of the Change in Control, if greater). The benefits provided in this
Section 9(b)(iii) shall be no less favorable to Employee, in terms of amounts
and deductibles and costs to him, than the coverage provided Employee under the
plans providing such benefits at the time Notice of Termination is given (or, if
Employee is terminated following a Change in Control, at the time of the Change
in Control if more favorable to Employee). The Company's obligation hereunder
with respect to the foregoing benefits shall be limited to the extent that
Employee obtains any such benefits pursuant to a subsequent employer's benefit
plans, in which case the Company may reduce the coverage of any benefits it is
required to provide Employee hereunder as long as the aggregate coverage of the
combined benefit plans is no less favorable to Employee, in terms of amounts and
deductibles and costs to him, than the coverage required to be provided
hereunder. This subsection (iii) shall not be interpreted so as to limit any
benefits to which Employee or his dependents may be entitled under any of the
Company's employee benefit plans, programs or practices following Employee's
termination of employment, including without limitation, retiree medical and
life insurance benefits;

                  (iv) the Company shall pay in a single payment an amount in
cash equal to the excess of (A) the actuarial equivalent of the aggregate
retirement benefit Employee would have been entitled to receive under the
Company's supplemental and excess retirement plans had (x) Employee remained
employed by the Company for an additional three (3) complete years of credited
service, (y) his annual compensation during such period been equal to his Base
Salary (at the rate used for purposes of subsection (ii)) and the Bonus Amount,
and (z) he been fully (100%) vested in his benefit under each such retirement
plan, over (B) the actuarial equivalent of the aggregate retirement benefit
Employee is actually entitled to receive under such retirement plans. For
purposes of this subsection (iv), "actuarial equivalent" shall be determined in
accordance with the actuarial assumptions used for the calculation of benefits
under any retirement plan as applied prior to the Termination Date in accordance
with such plan's past practices (but shall in any event take into account the
value of any subsidized early retirement benefit); and

                                       10
<PAGE>
                  (v) notwithstanding anything contained in the Ribapharm Inc.
2002 Stock Option and Award Plan or any grant agreement to the contrary, (A) all
restrictions on any outstanding awards (including restricted stock awards)
granted by the Company or any subsidiary of the Company to Employee will lapse
and such awards will become fully (100%) vested, and (B) all stock options and
stock appreciation rights granted by the Company or any subsidiary of the
Company to Employee will become fully (100%) vested and will become immediately
exercisable for the duration of the term thereof; provided, however, that,
notwithstanding anything contained herein to the contrary, in no event shall any
such options or stock appreciation rights be exercisable prior to the earlier of
(x) the consummation of the distribution by ICN of its remaining interest in the
Company to ICN's shareholders in a tax-free spin-off following the Initial
Public Offering and (y) September 30, 2003.

            (c) The amounts provided for in Sections 9(a) and 9(b)(i), (ii) and
(iv) shall be paid within five (5) days after Employee's Termination Date.

            (d) Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to Employee in any subsequent employment.

      10. Effect of Section 280G of the Internal Revenue Code.

            (a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that any payment or distribution of any type to or for
the benefit of Employee by the Company, any affiliate of the Company, any person
who acquires ownership or effective control of the Company or ownership of a
substantial portion of the Company's assets (within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder), or any affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (the "Payments") is or will be subject to the excise tax imposed
under Section 4999 of the Code (the "Excise Tax"), then the Payments shall be
reduced (but not below zero) if and to the extent that a reduction in the
Payments would result in Employee retaining a larger amount, on an after-tax
basis (taking into account federal, state and local income taxes and the Excise
Tax), than if Employee received the entire amount of such Payments. Unless
Employee shall have given prior written notice specifying a different order to
the Company to effectuate the foregoing, the Company shall reduce or eliminate
the Payments, by first reducing or eliminating the portion of the Payments which
are not payable in cash and then by reducing or eliminating cash payments, in
each case in reverse order beginning with payments or benefits which are to be
paid the farthest in time from the Determination (as hereinafter defined). Any
notice given by Employee pursuant to the preceding sentence shall take
precedence over the provisions of any other plan, arrangement or agreement
governing Employee's rights and entitlements to any benefits or compensation.

            (b) The determination of whether the Payments shall be reduced as
provided in Section 10(a) and the amount of such reduction shall be made at the
Company's expense by an accounting firm selected by the Company from among the
five largest accounting firms in the United States (the "Accounting Firm"). The
Accounting Firm shall provide its determination (the "Determination"), together
with detailed supporting calculations and documentation to the Company and
Employee within ten (10) days of the Termination Date. If the Accounting Firm
determines that no Excise Tax is payable by Employee with respect to the
Payments, it shall furnish Employee with an opinion reasonably acceptable to
Employee that no Excise Tax will be imposed with respect to any such payments
and, absent manifest error, such Determination shall be binding, final and
conclusive upon the Company and Employee. If the Accounting Firm determines that
an Excise Tax would be payable, Employee shall have the right to accept the
Determination of the Accounting Firm as to the extent of the reduction, if any,
pursuant to Section 10(a), or to have such Determination reviewed by an
accounting firm selected by

                                       11
<PAGE>
Employee, at the expense of the Company, in which case the determination of such
second accounting firm shall be binding, final and conclusive upon the Company
and Employee.

      11. Employee Covenants.

            (a) Non-Solicit. Employee will not, directly or indirectly (whether
for compensation or otherwise), alone or in concert with others, for the
Non-Solicit Period (defined below), (a) solicit for employment any employee of
the Company or any person who was an employee of the Company during any part of
the two (2) year period preceding Employee's termination or otherwise encourage
any employee to leave the Company's employ, or (b) solicit any client or
customer of the Company or any client or customer which was a client or customer
of the Company during any part of the two (2) year period preceding Employee's
termination. The "Non-Solicit Period" means the term of this Agreement plus two
(2) years from the end thereof.

            (b) Non-Compete. During the term of the Agreement, Employee will
not, directly or indirectly (whether for compensation or otherwise), alone or in
concert with others, own, manage, operate, join, control, or participate in the
ownership, management, operation, or control of, or furnish any capital to, or
be connected in any manner with (whether alone or as a partner, officer,
director, employee, agent or shareholder), or provide any advice or services as
a consultant for, any business which competes with the Company's business or
that of any subsidiary, partnership, corporation, joint venture, or other
similar entity of which the Company is a shareholder, partner, or member as such
business may be conducted from time to time. Notwithstanding the foregoing,
Employee may be a passive investor in a business which competes with the
Company's business, provided Employee's equity holding does not exceed 2% of
such business.

            (c) Proprietary Information. Employee agrees to execute and deliver
simultaneously herewith a Proprietary Information and Inventions Agreement in
the form attached hereto as Exhibit A.

      12. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against Employee or others.

      13. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit Employee's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or any of its
subsidiaries and for which Employee may qualify, nor shall anything herein limit
or reduce such rights as Employee may have under any other agreements with the
Company or any of its subsidiaries. Amounts which are vested benefits or which
Employee is otherwise entitled to receive under any plan or program of the
Company or any of its subsidiaries shall be payable in accordance with such plan
or program, except as explicitly modified by this Agreement.

      14. Arbitration.

                                       12
<PAGE>
            (a) Procedure. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, will be settled by arbitration in
accordance with the Commercial Rules of the American Arbitration Association
("AAA"), and those provisions of the AAA Employment Arbitration Rules determined
by the arbitrators as necessary under applicable law. The arbitration will be
binding and judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. For controversies or claims involving
employment matters only, there will be one (1) arbitrator mutually selected by
the parties within ten (10) business days from the date of notification made to
one of the parties of the other party's request for arbitration. If the parties
fail to agree upon an arbitrator within such ten (10) days, the AAA will
promptly appoint the arbitrator in accordance with its rules. For all other
controversies or claims, there will be three (3) arbitrators, one arbitrator
selected by the Company and one arbitrator selected by Employee, which
arbitrators will then jointly select the third arbitrator. If any party fails to
nominate an arbitrator within thirty (30) days from the date of notification
made to it of a party's request for arbitration, then the AAA will appoint the
arbitrator in accordance with its rules. The place of the arbitration will be
Los Angeles, California. All arbitrators will have at least ten (10) years
experience in commercial or employment-related transactions. The arbitration
will commence within sixty (60) days after appointment of the arbitrators and
will continue uninterrupted, unless otherwise suspended by the arbitrators for
good cause, for not longer than one hundred twenty (120) days (including without
limitation any discovery permitted by the arbitrators). The arbitrators will,
within such one hundred twenty (120) day period, render a written decision with
findings of fact and conclusions of law and deliver such decision to the
parties.

            (b) Judicial Relief. Notwithstanding Section 14(a), nothing
contained in this Agreement will prevent or be construed to prevent any party
from seeking a temporary restraining order, preliminary injunction, other form
of interim, provisional, or temporary equitable relief, or the enforcement of
any award delivered pursuant to Section 14(a) in any court of competent
jurisdiction.

      15. Fees and Expenses. The Company shall pay all legal fees, arbitration
costs and related expenses (including the costs of experts, evidence and
counsel) incurred by Employee as they become due as a result of (i) Employee's
termination of employment (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination of employment), (ii)
Employee's hearing before the Board as contemplated in Section 8(a)(3) of this
Agreement, or (iii) Employee's seeking to obtain or enforce any right or benefit
provided by this Agreement or by any other plan or arrangement maintained by the
Company under which Employee is or may be entitled to receive benefits.

      16. Survival. In the event that Employee's employment by the Company is
terminated pursuant to the provisions set forth under Section 8 hereof or
otherwise, this Agreement shall then also terminate; provided, however, that the
rights and obligations set forth under Sections 9, 10, 11, 14 and 15 of this
Agreement shall survive until such rights and obligations are fully satisfied in
accordance with the terms set forth herein.

      17. Miscellaneous.

                                       13
<PAGE>
            (a) Amendment; Waiver. This Agreement may not be amended or
otherwise modified or its provisions waived except by an instrument in writing
signed, in the case of an amendment or modification, by all parties hereto and,
in the case of waiver, by the party sought to be charged. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.

            (b) Severability. In the event that any one or more of the
provisions of this Agreement are held to be invalid, illegal, or unenforceable
by a court of competent jurisdiction in a jurisdiction, such invalidity,
illegality, or unenforceability in such jurisdiction will not affect any of the
other provisions hereof, which will nevertheless remain in full force and
effect, this Agreement will be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein, and such determination
will have no effect on this Agreement in any other jurisdiction.

            (c) Successors and Assigns.

                  (1) Company. This Agreement shall be binding upon and shall
inure to the benefit of the Company, its successors and assigns and the Company
shall require any successor or assign to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession or assignment had taken place.
The term "the Company" as used herein shall include such successors and assigns.
The term "successors and assigns" as used herein shall mean a corporation or
other entity acquiring all or substantially all the assets and business of the
Company (including this Agreement) whether by operation of law or otherwise.

                  (2) Employee. Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by Employee, his beneficiaries or
legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
Employee's legal personal representative.

            (d) Third Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their respective successors-in-interest and
permitted assigns. No other person is entitled to rely upon or receive any
benefit from this Agreement.

            (e) Entire Agreement. This Agreement, the Proprietary Information
and Inventions Agreement, and the other documents and certificates delivered
pursuant to the terms hereof, constitute the entire agreement of the parties
hereto in respect of the transactions contemplated herein. There are no
restrictions, promises, representations, warranties, covenants, or undertakings,
other than those expressly set forth or referred to herein. This Agreement
supersedes all prior discussions, negotiations, correspondence, agreements, and
understandings between the parties with respect to the transactions contemplated
herein.

            (f) Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by

                                       14
<PAGE>
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses last given by each party to the other, provided that all
notices to the Company shall be directed to the attention of the Board with a
copy to the Secretary of the Company. All notices and communications shall be
deemed to have been received on the date of delivery thereof or on the third
business day after the mailing thereof, except that notice of change of address
shall be effective only upon receipt.

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

            (h) Captions. The headings of the sections of this Agreement are
inserted for convenience of reference only, do not constitute a part hereof, and
do not affect in any way the meaning, interpretation, or enforcement of this
Agreement.

            (i) Governing Law. This Agreement and the rights and obligations of
the parties hereunder will be governed by, and construed and interpreted in
accordance with, the laws of the State of California without giving effect to
the choice of law provisions thereof. Solely for purposes relating to seeking
equitable relief set forth in Section 14 hereof, each party hereby submits to
the non-exclusive jurisdiction of the federal or state courts located in
California with respect to any claim or matter arising under this Agreement.

                                       15
<PAGE>
      IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and Employee has executed this Agreement as of
the Start Date.

                                    RIBAPHARM INC.:

ATTEST:                             By:________________________________
                                        [INSERT NAME]

                                    Title:_______________________________

__________________________
Secretary

                                    EMPLOYEE:

                                    By:________________________________
                                        [INSERT NAME]

                                       16
<PAGE>
                                                                       EXHIBIT A

                PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
                                 ("AGREEMENT")

      A. I recognize that Ribapharm Inc. (the "Company"), a Delaware
corporation, is engaged in a continuous program of research, development, and
production respecting its present and future business.

      B. I understand that as part of my employment by the Company I am expected
to make new contributions and inventions of value to the Company;

      C. I understand that my employment creates a relationship of confidence
and trust between me and the Company with respect to any information

            (i) applicable to the business of the Company or

            (ii) applicable to the business of any client or customer of the
Company

which may be made known to me by the Company or by a client or customer of the
Company, or learned by me during the period of my employment;

      D. I understand that the Company possesses and will continue to possess
information that has been created, discovered, or developed, or has otherwise
become known to the Company (including without limitation information created,
discovered, developed, or made known by or to me during the period of or arising
out of my employment by the Company), or in which property rights have been
assigned or otherwise conveyed to the Company, which information has commercial
value in the business in which the Company is engaged (all of the aforementioned
information is hereinafter called "Proprietary Information"; by way of
illustration, but not limitation, Proprietary Information includes trade
secrets, processes, formulae, data and know-how, improvements, inventions,
manufacturing and other techniques, marketing plans, strategies, forecasts, and
customer lists); and

      E. I understand that, as used herein, the period of my employment includes
any time in which I may be retained by the Company as an employee or as a
consultant.

      In consideration of my employment and the compensation received by me from
the Company from time to time, I hereby represent and agree as follows.

            1. Prior to entering the employ of the Company, I have terminated
employment with one or more prior employers. I represent that my performance of
all the terms of this Agreement and as an employee of the Company does not and
will not breach any agreement to keep in confidence proprietary information
acquired by me in confidence or in trust prior to my employment by the Company.
I have not entered into, and I agree that I shall not enter into, any agreement
either written or oral in conflict herewith.
<PAGE>
            2. I understand, as part of the consideration for the offer of
employment extended to me by the Company and of my employment or continued
employment by the Company, that I have not brought and shall not bring with me
to the Company or use in the performance of my responsibilities at the Company
any materials or documents of a former employer which are not generally
available to the public, unless I have obtained written authorization from the
former employer for their possession and use. Accordingly, I advise the Company
that the only materials or documents of a former employer which are not
generally available to the public that I have brought or shall bring to the
Company or have used or shall use in my employment are identified on Attachment
I hereto, and, as to each such item, I represent that I have obtained prior to
the effective date of my employment with the Company written authorization for
their possession and use in my employment with the Company. I also understand
that, in my employment with the Company, I am not to breach any obligation of
confidentiality that I have to former employers, and I agree that I shall
fulfill all such obligations during my employment with the Company.

            3. I agree to indemnify and hold harmless the Company, its
stockholders, directors, officers, employees, and agents against any and all
liabilities and expenses, including amounts paid in settlement, incurred by any
of them in connection with any claim by any of my prior employers that the
termination of my employment with such employer, my employment by the Company,
or use of any skills and knowledge by the Company is a violation of contract or
law.

            3. All Proprietary Information will be the sole property of the
Company and its assigns, and the Company and its assigns will be the sole owner
of all patents and other rights in connection therewith. I hereby assign to the
Company any rights I may have or acquire in all Proprietary Information. At all
times, both during my employment by the Company and after its termination, I
shall keep in confidence and trust all Proprietary Information, and I shall not
use or disclose any Proprietary Information or anything relating to it without
the written consent of the Company, except as may be (i) reasonably necessary or
appropriate in the ordinary course of performing my duties as an employee of the
Company, (ii) known generally to the public (or than as a result of disclosure
by me in violation of this Section 2), or (iii) legally required.

            4. In the event of the termination of my employment by me or by the
Company for any reason or no reason, I shall deliver to the Company all
documents and data of any nature pertaining to my work with the Company and I
shall not take with me any documents or data of any description or any
reproduction of any description containing or pertaining to any Proprietary
Information.

            5. I shall promptly disclose to the Company, or any persons
designated by it, all improvements, inventions, formulae, processes, techniques,
know-how, and data, whether or not patentable, made or conceived or reduced to
practice or learned by me, either alone or jointly with others, during the
period of my employment which are related to or useful in the business of the
Company, or result from tasks assigned me by the Company, or result from use of
premises owned, leased, or contracted for by the Company (all said improvements,
inventions, formulae, processes, techniques, know-how, and data will be
collectively hereinafter called "Inventions").
<PAGE>
            6. I agree that all Inventions will be the sole property of the
Company and its assigns, and the Company and its assigns will be the sole owner
of all patents and other rights in connection therewith. I hereby assign to the
Company any rights I may have or acquire in all Inventions. I further agree as
to all Inventions to assist the Company in every proper way (but at the
Company's expense) to obtain and from time to time enforce patents on Inventions
in any and all countries, and to that end I shall execute all documents for use
in applying for and obtaining such patents thereon and enforcing same, as the
Company may desire, together with any assignments thereof to the Company or
persons designated by it. My obligation to assist the Company in obtaining and
enforcing patents for Inventions in any and all countries will continue beyond
the termination of my employment, but the Company will compensate me at a
reasonable rate after such termination for time actually spent by me at the
Company's request on such assistance.

            I understand that, in accordance with Section 2872 of the California
Labor Code, the assignment provisions in this paragraph 7 do not apply to
inventions for which no equipment, supplies, facility, or trade secret
information of the Company was used, which were developed entirely on my own
time, and (i) which do not relate (a) to the business of the Company or (b) to
the Company's actual or demonstrably anticipated research or development or (ii)
which do not result from any work performed by me for the Company.

            7. I have identified on Attachment II hereto all inventions or
improvements relevant to the subject matter of my employment by the Company
which have been made or conceived or first reduced to practice by me alone or
jointly with others prior to my engagement by the Company which I desire to
remove from the operation of this Agreement; and I covenant that such list is
complete. If there is no such list on Attachment II, I represent that I have
made no such inventions and improvements at the time of signing this Agreement.

            8. I agree that in addition to any other rights and remedies
available to the Company for any breach by me of my obligations hereunder, the
Company will be entitled to enforcement of my obligations hereunder by court
injunction.

            9. If any provision of this Agreement is declared invalid, illegal
or unenforceable, such provision shall be severed and all remaining provisions
will continue in full force and effect.

            10. This Agreement will become effective as of the effective date of
the initial public offering of the Company.

            11. This Agreement is binding upon me, my heirs, executors, assigns
and administrators and shall inure to the benefit of the Company, its successors
and assigns.

            12. This Agreement will be governed in all respects by the laws of
the State of California.

Dated: ___________________                ______________________________
                                          Name:
<PAGE>
ACCEPTED AND AGREED TO:

Ribapharm Inc.,
a Delaware corporation

By:__________________________
Name:
Title:
<PAGE>
                                  ATTACHMENT I

                    Materials or Documents of Former Employer
                        Not Generally Available to Public
<PAGE>
                                  ATTACHMENT II

                      Inventions or Improvements Made Prior
                            to Engagement by Company

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