LICENSE AGREEMENT

EXHIBIT 10.10

LICENSE AGREEMENT

by and between

PHARMASSET, INC.

and

RFS PHARMA LLC

Dated as of February 10, 2006

Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

TABLE OF CONTENTS

 

 

i

TABLE OF CONTENTS

(continued)

 

 

ii

TABLE OF CONTENTS

(continued)

 

Exhibits

 

 

iii

LICENSE AGREEMENT

This LICENSE AGREEMENT (this “ Agreement ”), dated as of February 4, 2006 (the “ Effective Date ”), is made by and between Pharmasset, Inc., a Delaware corporation having its principal place of business at 303-A College Road East, Princeton, New Jersey 08540 (“ Pharmasset ”), and RFS Pharma LLC, a Georgia limited liability company having its principal place of business at 2881 Peachtree Road N.E., Atlanta, Georgia 30305 (“ RFSP ”). Pharmasset and RFSP are each referred to individually as a “ Party ” and together as the “ Parties .”

RECITALS

WHEREAS, RFSP possesses certain patents and technology rights relating to certain dioxolane thymine compounds, including pursuant to a license from Emory University and the University of Georgia Research Foundation, Inc.;

WHEREAS, Pharmasset has expertise in the development, manufacture and commercialization of pharmaceutical products; and

WHEREAS, Pharmasset desires to obtain from RFSP, and RFSP desires to grant to Pharmasset, an exclusive worldwide license and sublicense of rights relating to such dioxolane thymine compounds for the development, manufacture and commercialization of pharmaceutical products.

NOW, THEREFORE, in consideration of the foregoing premises and the representations, covenants and agreements contained herein, Pharmasset and RFSP, intending to be legally bound, hereby agree as follows:

ARTICLE 1

DEFINITIONS

When used in this Agreement, whether in the singular or plural, each of the following capitalized terms shall have the meanings set forth in this Article 1.

1.1 “ Affiliate ” means a Person that, directly or indirectly, through one or more intermediates, controls, is controlled by, or is under common control with, the Person specified. For the purposes of this definition, “control” shall mean the direct or indirect ownership of (i) in the case of corporate entities, securities authorized to cast more than fifty percent (50%) of the votes in any election for directors, (ii) in the case of non-corporate entities, more than fifty percent (50%) ownership interest with the power to direct the management and policies of such non-corporate entity, or (iii) such lesser percentage as may be the maximum percentage allowed to be owned by a foreign corporation under Applicable Law) of the equity having the power to vote in the election of directors or to direct the management and policies of another entity. Notwithstanding the foregoing, the term “ Affiliate ” shall not include subsidiaries in which a Person or its Affiliates owns a majority of the ordinary voting power to elect a majority of the board of directors, but is restricted from electing such majority by contract or otherwise, until such time as such restriction is no longer in effect, provided, however, that the foregoing exception to the definition of the term “Affiliate” shall not apply for purposes of the definition

 

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of “Net Sales” or otherwise reduce the amount of any Royalties or other payments due under this Agreement.

1.2 “ Agreement Year ” has the meaning set forth in Section 5.2.

1.3 “ Applicable Law ” means any applicable foreign, federal, national, supranational, state, provincial, local or similar law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law), as amended and in effect from time to time.

1.4 “ Breach Notice ” has the meaning set forth in Section 10.3.

1.5 “ Breaching Party ” has the meaning set forth in Section 10.3.

1.6 “ Business Day ” means any day except Saturday and Sunday, on which commercial banking institutions in New York, New York are open for business. Any reference in this Agreement to “day” whether or not capitalized shall refer to a calendar day, not a Business Day.

1.7 “ CMC Section ” means the Chemistry, Manufacturing and Controls Section of a regulatory submission document included in an NDA as set forth in 21 C.F.R. §314.50.

1.8 “ Combination Product ” means a Licensed Product that contains both a Licensed Compound and one or more additional active ingredients(s) that is not a Licensed Compound.

1.9 “ Commercially Reasonable Efforts ” means, with respect to a Party, the efforts and resources which would be used by that Party consistent with prevailing pharmaceutical industry standards for a company of similar size and scope to such Party with respect to a product or potential product at a similar stage in its development or product life and of similar market potential taking into account efficacy, safety, the anticipated Regulatory Authority approved labeling, the competitiveness of alternative products in the market place or under development, the patent and other proprietary position of the product, the likelihood of Regulatory Approval, the commercial value of the product and any other relevant factors. Notwithstanding the foregoing, the Parties to this Agreement hereby acknowledge and agree that “Commercially Reasonable Efforts” shall in all cases include all efforts required to be performed in order to fulfill, in all respects, all obligations of RFSP under the University License Agreement to develop and commercialize the Licensed Product under Sections 3.1, 3.4(b), (c) and (d), 15.2, 15.4 and 15.11 of the University License Agreement.

1.10 “ Competition ” means that there shall be commercially available one or more products (other than a Licensed Product for which RFSP shall be receiving royalties hereunder) for use in human beings (the “Generic Products”), which contain a dioxolane thymine compound as an active pharmaceutical ingredient in a country within the Territory and where the sales of such one or more Generic Products (or aggregate sales of such Generic Products if more than one such Generic Product is being marketed) are equal to or greater than twenty-five percent (25%) of the aggregate of all Licensed Products and Generic Products sold in such country, based on data provided by IMS International, or if such data is not available, such other reliable data source as reasonably agreed by the Parties (such agreement not to be unreasonably withheld, conditioned or delayed) as measured by unit sales.

 

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Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

 

1.11 “ Confidential Information ” means all secret, confidential or proprietary information or data, whether provided in written, oral, graphic, video, computer or other form, provided by one Party (the “ Disclosing Party ”) to the other Party (the “ Receiving Party ”) or generated pursuant to this Agreement, including but not limited to, information relating to the Disclosing Party’s existing or proposed research, development, patent applications, business or products and any other materials that have not been made available by the Disclosing Party to the general public. The terms of this Agreement shall also be deemed Confidential Information hereunder, except to the extent disclosure is permitted pursuant to Section 8.5 herein. Notwithstanding the foregoing sentences, Confidential Information shall not include any information or materials that:

(a) were already known to the Receiving Party (other than under an obligation of confidentiality), at the time of disclosure by the Disclosing Party to the extent such Receiving Party has documentary evidence to that effect;

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

(c) became generally available to the public or otherwise part of the public domain after its disclosure or development, as the case may be, and other than through any act or omission of a Party (or any Affiliate or employee or agent thereof) in breach of such Party’s confidentiality obligations under this Agreement;

(d) were subsequently lawfully disclosed to the Receiving Party by a Third Party who had no obligation to the Disclosing Party not to disclose such information to others and which did not involve any act or omission of a Party (or any Affiliate or employee or agent thereof) in breach of such Party’s confidentiality obligations under this Agreement; or

(e) were independently discovered or developed by or on behalf of the Receiving Party without the use of the Confidential Information belonging to the other Party and the Receiving Party has documentary evidence to that effect.

1.12 “ Control ,” “ Controls ,” “ Controller ” or “ Controlled ” means with respect to Licensed Technology or Licensed Patent Rights (or the corresponding Licensed Patents), the ownership thereof, or the possession of the ability to grant licenses or sublicenses thereto without violating the terms of any agreement or other arrangement with, or the rights of, any Third Party existing as of the date on which such license or sublicense is granted.

1.13 “ Direct Royalty Payment ” has the meaning set forth in Section 5.1.

1.14 “ Disclosing Party ” has the meaning set forth in Section 1.11.

1.15 “ DOT ” means dioxolane thymine compounds, including prodrugs, as disclosed in [***] or [***].

 

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1.16 “ Emory ” means Emory University.

1.17 “ FDA ” means the United States Food and Drug Administration, or any successor agency.

1.18 “ Field of Use ” means all therapeutic and preventative uses for any indication or purpose, including without limitation the prevention and treatment of human immunodeficiency virus (HIV-1 and HIV-2) and hepatitis B virus (HBV).

1.19 “ First Commercial Sale ” means the first Sale by Pharmasset or its Affiliates or sublicensees of a Licensed Product to a Third Party for end use or consumption of such Licensed Product in the Territory after a Regulatory Authority in the Territory has granted Regulatory Approval of such Licensed Product.

1.20 “ Force Majeure ” means any occurrence beyond the reasonable control of a Party that prevents or substantially interferes with the performance by the Party of any of its obligations hereunder, if such occurs by reason of any act of God, flood, fire, explosion, earthquake, strike, lockout, labor dispute, casualty or accident; or war, revolution, civil commotion, acts of public enemies, terrorist attack, blockage or embargo; or any injunction, law, order, proclamation, regulation, ordinance, demand or requirement of any government (to the extent such government has ruling authority over such Party) or of any subdivision, authority or representative of any such government; or other similar event, beyond the reasonable control of such Party, if and only if the Party affected shall have used reasonable efforts to prevent, mitigate and avoid such occurrence; it being understood that any failure or delay in fulfilling a term shall not be considered a result of a Force Majeure event if it arises from a failure of any applicable Party to comply with applicable laws and regulations.

1.21 “ GAAP ” has the meaning set forth in Section 1.41.

1.22 “ IND ” means an Investigational New Drug Application, as defined in the U.S. Federal Food, Drug, and Cosmetic Act, pursuant to 21 C.F.R. §312.3 as amended, and the regulations promulgated thereunder, or the equivalent thereto as specified in any succeeding legislation.

1.23 “ Indemnitee ” has the meaning set forth in Section 9.3.

1.24 “ Indemnitor ” has the meaning set forth in Section 9.3.

1.25 “ Independent Sublicensee ” has the meaning set forth in Section 10.5.

1.26 “ Infringement Notice ” has the meaning set forth in Section 11.7(a).

1.27 “ Large Pharmaceutical Company ” means any pharmaceutical company that had at least one billion dollars ($1,000,000,000) in aggregate sales revenue for pharmaceutical products (based on data provided by IMS International, or, if such data is not available, such

 

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Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

 

other reliable data source as reasonably agreed by the Parties, such agreement not to be unreasonably withheld, conditioned or delayed) for the most recent calendar year, as applicable.

1.28 “ Licensed Compounds ” means DOT, including their [***]-derivatives, any and all salts, esters, racemic mixtures and stereoisomers, and purified enantiomers of any of the foregoing, and any and all polymorphs, hydrates and solvates of any of the foregoing.

1.29 “ Licensed Patents ” means the Licensed RFSP Patents and the Licensed University Patents.

1.30 “ Licensed Patent Rights ” means all rights under any Licensed Patent.

1.31 “ Licensed Product ” means any process, service or product involving the manufacture, use, sale or import of one or more Licensed Compounds, including any pharmaceutical product containing one or more Licensed Compounds as active ingredients, alone or in combination with other active ingredients, which is covered by a Valid Claim or incorporates any Licensed Technology.

1.32 “ Licensed RFSP Patents ” means, other than the Licensed University Patents, any and all issued patents and pending patent applications, including, without limitation, provisional applications, substitutions, continuations, continuations-in-part, divisions, and renewals, all letters patent granted thereon, and all patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, and all supplementary protection certificates, together with any foreign counterparts thereof, which are or become Controlled by RFSP and which relate to any Licensed Compound or the manufacture, use or sale of any Licensed Compound, including, without limitation, any improvements thereto.

1.33 “ Licensed RFSP Technology ” means, other than the Licensed University Technology, any and all Technology which is or hereafter becomes Controlled by RFSP and which is necessary or useful for the development, manufacture, use or sale or other commercialization of any Licensed Product.

1.34 “ Licensed Technology ” means the Licensed RFSP Technology and the Licensed University Technology.

1.35 “ Licensed University Patents ” means any and all Universities Patents (as defined in the University License Agreement) that contain claims to the Licensed Compounds. For purposes of clarification, however, it is agreed that “ Licensed University Patents shall not include any claims of any such Universities Patents to the extent that such claims (a) exclusively cover DAPD (as defined in the University License Agreement) or Other Dioxolanyl Purines (as defined in the University License Agreement) or (b) exclusively cover the combination of DOT with DAPD (as defined in the University License Agreement) or Other Dioxolanyl Purines (as defined in the University License Agreement). [***].

 

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Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

 

1.36 “ Licensed University Technology ” means any and all Licensed Technology (as such term is defined in the University License Agreement) to the extent relating to the Licensed Compounds. For clarification purposes, the reference to the term “Licensed Technology” in the preceding sentence is solely for purposes of the definition of “Licensed University Technology” and is distinct and unrelated to the defined term “Licensed Technology” as set forth in Section 1.34 above.

1.37 “ Losses ” has the meaning set forth in Section 9.1.

1.38 “ Major Markets ” means [***].

1.39 “ Milestone Payments ” has the meaning set forth in Section 4.2.

1.40 “ NDA ” means a New Drug Application pursuant to 21 U.S.C. Section 505(b)(1) or Section 505(b)(2) submitted to the FDA or any successor application or procedure required for Regulatory Approval to commence sale of a Licensed Product.

1.41 “ Net Sales ” means the gross amounts paid to Pharmasset, any of its Affiliates and/or any of its sublicensees or its Affiliates’ sublicensees on account of Sales of Licensed Products to Third Parties (including without limitation Third Party distributors and wholesalers), less the total of: a) customary trade, quantity and cash discounts, rebates, charge backs and retroactive price reductions actually allowed and taken; b) credits actually given for rejected or returned Licensed Products; c) freight and insurance costs, if separately itemized on the invoice paid by the customer; and d) excise taxes and customs duties included in the invoiced amount. Where a Sale is deemed consummated by disposition of Licensed Products for other than a selling price stated in cash, the term “Net Sales” shall be determined by using the average gross selling price billed by Pharmasset, any of its Affiliates and/or any of its sublicensees or its Affiliates’ sublicensees in consideration of Sales of comparable Licensed Products during the three (3) month period immediately preceding such Sale, and deducting estimated average amounts as described in clauses (a) – (d). If no Sales of Licensed Products have occurred in the preceding three (3) months, then the parties shall, in good faith, negotiate the cash value of such Sale for purposes of this provision. In the event that the parties cannot agree on the Net Sales for such purpose within thirty (30) days of beginning such negotiations, it shall be determined by a mutually agreeable qualified appraiser.

“Net Sales” with respect to any Combination Product shall be determined by multiplying the gross selling price, or gross lease or rental payment, paid to Pharmasset, any of its Affiliates and/or any of its sublicensees or its Affiliates’ sublicensees by a purchaser of a Combination Product by the fraction [A/(A + B)], where A is the average sale price of the Licensed Product when sold separately in finished form and B is the average sale price of the additional active ingredient sold separately in finished form, as shown by the following formula:

 

 

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In the event that such average sale price cannot be determined for either the Licensed Product or for the other active ingredient within the Combination Product, Net Sales for purposes of determining royalties on sales of the Combination Product shall be as mutually agreed upon by the parties based upon the relative value contributed by each active component of the Combination Product.

1.42 “ Non-Breaching Party ” has the meaning set forth in Section 10.3.

1.43 “ Patent Expenses ” has the meaning set forth in Section 11.2.

1.44 “ Patent Rights ” means the rights and interests in and to all issued patents and pending patent applications, including without limitation, all provisional applications, substitutions, continuations, continuations-in-part, divisions, and renewals, all letters patent granted thereon, and all patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, and all supplementary protection certificates, together with any foreign counterparts thereof in the Territory.

1.45 “ Person ” or “ person ” means any individual, firm, corporation, partnership, limited liability company, trust, unincorporated organization or other entity or a government agency or political subdivision thereto, and shall include any successor (by merger or otherwise) of such Person.

1.46 “ Pharmasset Inventions ” has the meaning set forth in Section 11.1(a).

1.47 “ Pharmasset’s Development Plan ” means the development plan set forth on Exhibit D to this Agreement, as the same may be amended from time to time by Pharmasset, consistent with this Agreement.

1.48 “ Phase II Clinical Trial ” means a controlled human clinical trial designed to evaluate clinical efficacy and safety of a Licensed Product as well as to obtain an indication of the dosage regimen required, as more fully described in 21 C.F.R. §312.21(b), or the equivalent thereof as required by a Regulatory Authority other than the FDA.

1.49 “ Prosecution ” or “ Prosecute ” means the preparation, filing, prosecution, obtaining issuance and maintenance (including, without limitation, engagement in interference, opposition and similar third party proceedings before the U.S. Patent and Trademark Office or the foreign equivalent thereof) of patents and patent applications.

1.50 “ Publishing Party ” has the meaning set forth in Section 8.5(a).

1.51 “ Receiving Party ” has the meaning set forth in Section 1.11.

 

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1.52 “ Regulatory Approval ” means the technical, medical and scientific licenses, registrations, authorizations and approvals (including, without limitation, approvals of NDAs, supplements and amendments, pre- and post- approvals, pricing and Third Party reimbursement approvals, and labeling approvals) of any national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity in the Territory, necessary for the development (including the conduct of clinical trials), manufacture, distribution, marketing, promotion, offer for sale, use, import, reimbursement, export or sale of a Licensed Product in a regulatory jurisdiction.

1.53 “ Regulatory Authority ” means any national ( e.g. , the FDA), supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity involved in the granting of Regulatory Approval in any country in the Territory.

1.54 “ Report ” has the meaning set forth in Section 5.5(b).

1.55 “ Royalties ” has the meaning set forth in Section 5.1.

1.56 “ Sale ” or “ Sold ” (as applicable) means the sale, transfer, exchange or other disposition of Licensed Products. Sales of Licensed Products shall be deemed consummated upon the first to occur of: (a) receipt of a payment from the purchaser; (b) delivery of Licensed Products to the purchaser or a common carrier; (c) release of Licensed Products from consignment; (d) if otherwise transferred, exchanged or disposed of, whether by gift or otherwise, when such transfer, exchange, gift or other disposition occurs. None of the following shall be deemed a Sale for the purposes of this Agreement: (w) the provision of Licensed Products at or below their cost of production and distribution, prior to the approval of Licensed Products in a country and pursuant to a requirement issued by the appropriate governmental agency in that country; (x) the provision of Licensed Products at or below their cost of production and distribution pursuant to a requirement issued by a governmental agency or otherwise for consumption by or administration to persons for humanitarian purposes or compassionate use, (y) the provision of Licensed Products at or below their cost of production and distribution for use in bona fide research and development, including without limitation preclinical and clinical trials, and (z) the provision of samples in reasonable quantities without charge for promotional purposes.

1.57 “ Serious Adverse Drug Experience ” means any of an “adverse drug experience,” a “life-threatening adverse drug experience,” a “serious adverse drug experience,” or an “unexpected adverse drug experience,” as those terms are defined at either 21 C.F.R. §312.32 or 21 C.F.R. §314.80 or relevant foreign regulation within the Territory.

1.58 “ Shortfall Royalty Amount ” has the meaning set forth in Section 5.2.

1.59 “ Technology ” means formulations, designs, technical information, know-how, knowledge, data, specifications, test results and other information, whether or not patented or patentable, including, without limitation, any information relating to pharmacology, toxicology, preclinical or clinical testing, CMC data, batch records, safety and efficacy, manufacturing processes and quality control.

 

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Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

 

1.60 “ Term ” has the meaning set forth in Section 10.1.

1.61 “ Territory ” means the entire world.

1.62 “ Third Party(ies) ” means any Person other than RFSP, Pharmasset and their respective Affiliates.

1.63 “ Third Party Claim ” has the meaning set forth in Section 9.3.

1.64 “ Third Party IP Rights ” means intellectual property rights Controlled by a Third Party which: (a) in the reasonable judgment of Pharmasset, are necessary for the development, manufacture, use or sale of any Licensed Product, and (b) have been consented to by the Universities as well as RFSP as required to manufacture, use, import or sell Licensed Product(s) in any such country (such approval of RFSP not to be unreasonably withheld or delayed). It is understood and agreed that at the request of Pharmasset, RFSP shall seek the consent regarding such Third Party Controlled intellectual property rights, but RFSP shall have no obligation to compel such consent or bear any liability to Pharmasset in the event that such Third Parties decline to give such consent.

1.65 “ Trademarks ” has the meaning set forth in Section 11.1.

1.66 “ UGARF ” means the University of Georgia Research Foundation, Inc.

1.67 “ Universities ” means Emory and/or UGARF.

1.68 “ University Letter Agreement ” has the meaning set forth in Section 5.1.

1.69 “ University License Agreement ” means that certain License Agreement, dated as of October 29, 2004, by and among UGA, Emory and RFSP in the redacted form attached as Exhibit B to this Agreement, and as amended by the University Letter Agreement.

1.70 “ Valid Claim ” means an issued claim of any unexpired patent or claim of any pending patent application included among the Licensed Patents, which has not been held unenforceable, unpatentable or invalid by a decision of a court or governmental body of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, which has not been rendered unenforceable through disclaimer or otherwise and which has not been lost through an interference proceeding. Notwithstanding the foregoing, a claim of a pending patent application shall not be considered a Valid Claim if such claim has been pending for more than [***] ([***]) years after the filing of its first priority application.

1.71 “ Withholding Taxes ” has the meaning set forth in Section 5.6.

 

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ARTICLE 2

LICENSES AND EXCLUSIVITY

2.1 License Grant .

(a) Subject to the terms and conditions of this Agreement, RFSP hereby grants to Pharmasset an exclusive (even as to RFSP) right and license under the Licensed RFSP Patent Rights and Licensed RFSP Technology to make, have made, develop, use, import, offer for sale and sell Licensed Products in the Field of Use in the Territory.

(b) Subject to the terms and conditions of this Agreement, RFSP hereby grants to Pharmasset an exclusive (even as to RFSP) right and sublicense under the Licensed University Patent Rights and Licensed University Technology to make, have made, develop, use, import, offer for sale and sell Licensed Products in the Field of Use in the Territory.

2.2 Use of Affiliates, Sublicensees and Subcontractors . Pharmasset shall have the right to sublicense the rights licensed and sublicensed to it under Section 2.1, without the consent of RFSP, to (a) its Affiliates, (b) distributors, contract manufacturers and other subcontractors in order to exercise the rights, and to carry out the obligations, of Pharmasset under this Agreement, and (c) to one or more Large Pharmaceutical Companies in strategic collaboration partner arrangements. Pharmasset shall provide RFSP advance written notice of any sublicense to be granted to any Large Pharmaceutical Company and a reasonable opportunity to comment on the identity of such sublicensee, and Pharmasset shall take into consideration RFSP’s comments with respect thereto. Any other sublicense by Pharmasset shall require the prior written consent of RFSP. Pharmasset acknowledges that the grant of a sublicense shall not relieve Pharmasset from its obligations under this Agreement. Pharmasset shall be fully responsible for the compliance of its Affiliates, sublicensees, distributors and other subcontractors with the terms and conditions of this Agreement. Notwithstanding anything to the contrary contained herein, any sublicense or sub-contract granted by Pharmasset shall: (i) convey no greater rights than granted hereunder and shall provide that, in the event of any conflict between such sublicensee or sub-contracting agreement and this Agreement, such sublicense or sub-contracting party shall comply with this Agreement; (ii) procure for RFSP equivalent rights of audit and inspection vis-à-vis a sublicensee as RFSP has vis-à-vis Pharmasset pursuant to this Agreement; (iii) provide that RFSP is entitled to rely upon a sublicensee’s performance of its obligations under the sublicense or sub-contracting agreement, in accordance with the terms thereof; and (iv) provide that a termination of this Agreement shall immediately result in a termination of all such rights sublicensed or sub-contracted thereunder, as applicable. Pharmasset further agrees that in the event of any breach by any sublicensee of its obligations under such sublicense or sub-contract which correspondingly results in a material breach of this Agreement entitling RFSP to terminate this Agreement, in the event that Pharmasset does not avail itself of its rights and remedies under its agreement with the sublicensee in respect of such breach within thirty (30) days of such breach, RFSP shall be entitled to exercise such rights and remedies in the place and stead of Pharmasset. Notwithstanding the foregoing, Pharmasset shall remain liable to RFSP for all acts and omissions of any sublicensee or sub-contracting party which would, if committed by

 

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Pharmasset, constitute a breach of this Agreement as though such acts and omissions were by Pharmasset.

2.3 Retained License . Pharmasset acknowledges and agrees that, pursuant to Section 2.3 of the University License Agreement and under applicable law, the Universities retain on behalf of themselves and The University of Georgia, and any research collaborators for any non-profit organization, a royalty-free right and license to make and use Licensed Products and to practice Licensed University Technology only for non-commercial research, educational and clinical uses.

2.4 No Implied Licenses; Non-Assertion . Only the license expressly granted herein shall be of legal force and effect. No license rights shall be created hereunder in favor of either Party by implication, estoppel or otherwise.

ARTICLE 3

DEVELOPMENT, COMMERCIALIZATION AND SUPPLY

3.1 Technology and Data Transfer and Right of Reference .

(a) RFSP shall promptly transfer, or cause to be transferred (but in all events within forty-five (45) days following the Effective Date), to Pharmasset one copy of each physical embodiment of the Licensed Technology, Licensed Patent Rights and Licensed Compounds in RFSP’s possession, including without limitation all preclinical, clinical, pharmacology and toxicology data and information in RFSP’s possession that relate to Licensed Compounds, provided that RFSP may redact such materials insofar and to the extent that they do not relate exclusively to the Licensed Compounds. Without limiting the foregoing, RFSP shall provide to Pharmasset copies of all study reports in its possession, and all progress reports that have been prepared as required under Section 5.2 of the University License Agreement, relating to the Licensed Compounds, provided that RFSP may redact such study reports and progress reports insofar and to the extent that they do not relate exclusively to the Licensed Compounds.

(b) RFSP shall promptly make reasonably available to Pharmasset, on at least thirty (30) days prior notice, such books and records in its possession, as Pharmasset may reasonably request for purposes of technology transfer, training or otherwise to further the purposes of this Agreement, as contemplated by this Agreement, provided that RFSP may restrict access to or redact such books and records insofar and to the extent that they do not relate exclusively to the technology being transferred hereunder.

(c) RFSP shall make reasonably available to Pharmasset, such then current officers, employees or consultants of RSFP as Pharmasset may reasonably request to consult or provide training in connection with the technology transfer as contemplated by this Agreement, provided that (i) unless the Parties expressly agree otherwise, all such consulting and/or training shall take place exclusively at the facilities of RFSP, (ii) Pharmasset shall pay all travel and other costs and expenses incurred by either Pharmasset or RFSP in connection with the provision of such consulting/training services, (iii) Pharmasset shall only be entitled to a cumulative total of eight (8) free hours of such consulting/training services which must be exercised within the

 

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Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

 

initial three (3) months after the Effective Date, (iv) any additional consulting/training services beyond the initial eight (8) hours during such initial three (3) month period or any consulting/training services provided after such initial three (3) month period shall be provided to Pharmasset at a rate of $[***] ([***] Dollars) an hour for each RFSP officer, employee or consultant involved, and (v) in no event shall Pharmasset be entitled to more than a cumulative total of fifty (50) hours of such consulting/training services and unless the Parties expressly agree otherwise, all such services must be provided within the initial six (6) months after the Effective Date.

3.2 Diligence . Pharmasset acknowledges and agrees that it shall assume and perform, in all respects, all obligations of RFSP to develop and commercialize the Licensed Product under Sections 3.1, 3.4(b), (c) and (d), 15.2, 15.4 and 15.11 of the University License Agreement. Accordingly, Pharmasset shall use Commercially Reasonable Efforts to develop and commercialize Licensed Product within the Territory and to comply with Pharmasset’s Development Plan. Subject to the terms of this Agreement (including the preceding two sentences), Pharmasset shall have sole discretion in determining which Licensed Product(s) it will submit for Regulatory Approval, in which countries it will file for Regulatory Approvals of such Licensed Product(s) and in which countries in the Territory it will commercialize such Licensed Product(s). Except as specifically provided herein or as otherwise mutually agreed upon by the Parties, Pharmasset shall be responsible for conducting all clinical studies, development and commercialization activities for Licensed Products in the Territory. In accordance with Section 2.4 of the University License Agreement, RFSP shall remain responsible to the Universities with respect to all the operations of its sublicensees relevant to the use of Licensed Products, including the provision of reasonable commercial efforts in the development, manufacture, registration and launch of the Licensed Product, the making of any payments under the University License Agreement, the provision of indemnities and the provision of insurance and compliance with applicable law.

3.3 Reports . Within twenty (20) days after (a) each December 31 during the Term and prior to the first filing with the FDA of an IND for a Licensed Product (the “First IND Filing”), and (b) each June 30 and December 31 during the Term and from and after the First IND Filing, in the case of each of clauses (a) and (b), Pharmasset shall provide RFSP with a written progress report detailing the activities of Pharmasset and its Affiliates, and their sublicensees, relating to the obligations set forth under Section 3.2. In addition, in the event the Universities request that RFSP provide additional progress reports pursuant to Section 5.2 of the University License Agreement, Pharmasset shall provide RFSP with such interim progress reports in writing (detailing activities relating to the obligations set forth under Section 3.2) within twenty (20) days following Pharmasset’s receipt of written notice from RFSP regarding such request.

3.4 Regulatory Matters; RFSP Assistance . All Regulatory Approvals with respect to Licensed Products in the Territory shall be in Pharmasset’s name. Subject to the terms of this Agreement (including without limitation the first two sentences of Section 3.2), Pharmasset shall have exclusive control over, and authority and responsibility for, the regulatory strategies relating to the development and commercialization of all Licensed Products in the Territory, including, without limitation: (a) the preparation of all documents submitted to Regulatory

 

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Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

 

Authorities and the filing of all submissions relating to Regulatory Approval of Licensed Products; and (b) all regulatory actions, communications and meetings with any Regulatory Authority with respect to any Licensed Product, provided that Pharmasset shall promptly provide RFSP with a copy of all documents submitted to Regulatory Authorities and all regulatory actions, and written communications with any Regulatory Authority with respect to any Licensed Product. Upon the request of Pharmasset, RFSP shall provide to Pharmasset on a timely basis such information in its possession relating to the Licensed Products as may be reasonably required for the foregoing regulatory activities, and otherwise provide reasonable assistance to Pharmasset in complying with all regulatory obligations in the Territory, including without limitation, safety updates, amendments, annual reports, pharmacovigilance filings, investigator notifications, manufacturing facility inspections and certifications and product approvals. Pharmasset shall be responsible for interfacing, corresponding and meeting with all Regulatory Authorities in the Territory with respect to any Licensed Product. Except as required by Applicable Law, RFSP shall not communicate directly with the FDA or any other Regulatory Authority in the Territory relating to the Licensed Products without the prior written consent of Pharmasset. In furtherance thereof, RFSP shall refer to Pharmasset all FDA communications directly relating to and identifying any Licensed Product that RFSP may receive. RFSP shall cooperate with Pharmasset to provide all reasonable assistance and take all actions reasonably requested by Pharmasset that are necessary to comply with any law applicable to any Licensed Product, including, but not limited to, reporting of adverse drug experience reports (and serious adverse drug experiences) to Regulatory Authorities in the Territory. Notwithstanding anything to the contrary contained herein, Pharmasset hereby agrees to reimburse RFSP for all reasonable out-of-pocket costs owed to any Third Party incurred by RFSP in assisting Pharmasset, at Pharmasset’s request, in any way pursuant to the terms of this Section 3.4.

3.5 Materials; Supply . Pharmasset shall, at RFSP’s direction, either reimburse RFSP or remit directly to RFSP’s supplier(s) the appropriate amount(s) owed by RFSP for all orders of DOT placed by RFSP on or prior to, and that have not been delivered as of, the Effective Date, up to a maximum payment by Pharmasset of $[***] in the aggregate for such order(s), provided that if such amount(s) owed exceeds $[***] in the aggregate, Pharmasset shall have no obligation to purchase any such DOT (or reimburse or remit any amounts in respect thereof). RFSP shall instruct such supplier(s) to deliver such orders to Pharmasset’s designated address. Any such payment by Pharmasset shall be made within five (5) Business Days after all applicable order(s) of DOT have been delivered to Pharmasset’s designated address. It is understood by the Parties that between [***] ([***]) and [***] ([***]) kilograms of DOT in bulk form has been ordered, but not delivered, as of the Effective Date. The Parties acknowledge and agree that Pharmasset may appoint Third Party subcontractors, without the consent of RFSP, to carry out the manufacture and supply of Licensed Products on Pharmasset’s behalf.

 

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Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

 

ARTICLE 4

INITIAL PAYMENT AND MILESTONE PAYMENTS

4.1 Initial Payment . Within five (5) Business Days after the Effective Date, Pharmasset shall pay RFSP four hundred thousand U.S. Dollars ($400,000), by wire transfer, to the credit of such bank account as designated by RFSP.

4.2 Milestone Payments . Pharmasset shall pay the following milestone payments (the “ Milestone Payments ”) within thirty (30) calendar days (except with respect to the payment under Section 4.2(c)) following the first occurrence of the specified event (whether the applicable milestone is achieved by Pharmasset or any of its Affiliates or sublicensees):

(a) IND Filing . [***] U.S. Dollars ($[***]) upon the filing in the U.S. of an IND with the FDA for the first Licensed Product.

(b) Phase II Clinical Trial . [***] U.S. Dollars ($[***]) upon initiation of the first Phase II Clinical Trial of a Licensed Product by or on behalf of Pharmasset. For clarification purposes, initiation shall mean commencement of dosing of a Licensed Product to the first patient.

(c) NDA Approval . [***]U.S. Dollars ($[***]) within ninety (90) days of approval of an NDA by the FDA with respect to any Licensed Product or a counterpart application with any Regulatory Authority allowing the distribution of a Licensed Product in a Major Markets Country, it being understood that such amounts shall be paid a reasonable period of time prior to the expiration of the aforementioned time periods in order for RFSP to meet its payment obligations to the Universities for the corresponding milestone set forth in Section 4.7(a) of the University License Agreement. At RFSP’s direction in writing, Pharmasset shall pay directly to the Universities any amount owed to RSFP under this Section 4.2(c). For clarity, Pharmasset shall not be obligated to pay any amount that may be owed under Section 4.5(a) of the University License Agreement.

(d) For purposes of clarification, each of the foregoing Milestone Payments (x) shall be made only once and in connection with the first occurrence of each milestone, regardless of the number of Licensed Products or occurrences of each milestone for Licensed Products under the same NDA or other Regulatory Approval, and (y) shall be non-refundable and shall be non-creditable and not subject to offset of any kind.

4.3 Unreimbursed Expenses . Within ninety (90) days of approval of an NDA by the FDA with respect to any Licensed Product or a counterpart application with any Regulatory Authority allowing the distribution of a Licensed Product in a Major Markets Country, Pharmasset shall pay RFSP the sum of [***] U.S. Dollars ($[***]) as reimbursement for unitemized administrative costs and expenses associated with RFSP’s performance of its obligations under this Agreement which are not otherwise reimbursed under this Agreement.

 

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Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

 

ARTICLE 5

ROYALTIES

5.1 Royalty Rate . Subject to and in accordance with the provisions of this Article 5, Pharmasset shall pay to RFSP a royalty equal to [***] percent ([***]%) of aggregate Net Sales in the Territory (“ Royalties ”). In addition, for that portion of Net Sales that exceeds [***] U.S. Dollars ($[***]) in any Agreement Year, Pharmasset shall pay an additional amount equal to [***] percent ([***]%) of such Net Sales directly to the Universities (“ Direct Royalty Payment ”), which Direct Royalty Payment shall be made within forty-five (45) days after the end of such Agreement Year. Pharmasset shall provide RFSP with written proof of such Direct Royalty Payment with the applicable Report under Section 5.5(b). Prior to and as a condition for the execution of this Agreement, RFSP shall have entered into a letter agreement with the Universities with respect to such Direct Royalty Payment substantially in the form of Exhibit F (the “ University Letter Agreement ”).

5.2 Minimum Royalties . Pharmasset shall be obligated to pay to RFSP, for each twelve (12) month period (or, if applicable, such shorter period on a pro-rated basis) during the Term that commences on July 1 (an “ Agreement Year ”) and for each Licensed Product after its initial Sale in the first Major Markets country (a “ Launch ”), the following minimum amount of Royalties, and as further set forth in this Section 5.2:

 

In the event the aggregate Royalties for any Licensed Product during a particular Agreement Year is less than the applicable minimum amount indicated above, Pharmasset shall pay to RFSP the shortfall amount (the “ Shortfall Royalty Amount ”) in accordance with the provisions of Section 5.5(b). Licensed Products that contain the same active ingredient(s) will be considered a single “Licensed Product” for purposes of determining whether any minimum Royalty requirement for a particular Licensed Product has been achieved, regardless of variations in such Licensed Products’ dosage strengths, formulations or delivery forms, labeling or otherwise. For clarification purposes, Royalties from Net Sales of a Licensed Product anywhere the Territory shall be counted towards determining whether any minimum Royalty requirement for such Licensed Product has been achieved.

5.3 Royalty Term . Subject to the provisions of Section 5.4, the Royalties set forth in Section 5.1 shall be payable on a Licensed Product-by-Licensed Product basis and a country-by-country

 

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Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

 

basis for so long as there exists in such country a Valid Claim of an issued patent within the Licensed Patents covering a Licensed Product, or, if longer, the term of the University License Agreement with respect to such Licensed Product in such country.

5.4 Royalty Reductions .

(a) Third Party Intellectual Property Rights . If Pharmasset has licensed any Third Party IP Rights for any country in the Territory, Pharmasset shall deduct from the Royalties due for any such applicable country in the Territory an amount equal to [***] percent ([***]%) of the royalties payable to the relevant Third Party(ies) for the corresponding Third Party IP Rights, provided that in no event shall the Royalties due for any such country be reduced to an amount that is less than [***] percent ([***]%) of such Royalties, and in no event shall any deduction be made for any increased or enhanced damages, including increased or enhanced damages awarded under 35 U.S.C. 284 and attorney fees awarded under 35 U.S.C. 285, increased damages awarded under anti-trust laws, any similar or analogous increased or enhanced damages, or any attorney fee awards in jurisdictions other than the United States

(b) Reductions for Competition . All Royalties on a Licensed Product in a particular country in the Territory shall be reduced by [***], effective on and after the date when Competition occurs with respect to such Licensed Product in such country, provided that the reduction for any given year shall not reduce the Royalties otherwise payable to RFSP with respect to such country for such year by more than [***] percent ([***]%). If Competition ceases to exist, then beginning with the first calendar quarter after Competition does not exist, the Royalties on a Licensed Product will again be calculated based on a [***] percent ([***]%) royalty rate as set forth in Section 5.1 until such time as Competition may again exist with respect to such Licensed Product.

(c) Request for Reductions . If Pharmasset reasonably and in good faith believes that a lower royalty rate is required in order to permit Pharmasset to commercialize the Licensed Product in a particular country with a reasonable profit, Pharmasset may notify RFSP of such belief and their basis therefor and, if such notification is made, the Parties shall meet as promptly as practicable to discuss in good faith whether a reduction to the royalty rate for such Licensed Product in such country is appropriate provided that nothing shall require RFSP to agree to such a reduction and provided that any such reduction shall be subject to the approval of the Universities. In the event that RFSP and Pharmasset mutually believe that a reduction to the royalty rate for a Licensed Product in a particular country might be appropriate, RFSP shall seek the approval of the Universities for such a reduction, provided that in no event shall RFSP be obliged to agree to such a reduction if the Universities decline to approve such a reduction.

5.5 Reports and Payments .

(a) Cumulative Royalties . The obligation to pay Royalties or a Direct Royalty Payments under this Article 5 shall be imposed only once with respect to any sale of the same unit of any Licensed Product.

(b) Reports and Payment . Pharmasset shall deliver to RFSP, within forty-five (45) days after (i) December 31 and June 30 during the first twelve (12) month period after the

 

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Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

 

First Commercial Sale of a Licensed Product, and (ii) the end of each calendar quarter (or partial calendar quarter) thereafter during the remainder of the Term and the twelve (12) month period immediately following the termination or expiration of this Agreement, in each case, a written report setting forth for the preceding, just-ended calendar quarter or six (6) month period the information required on Exhibit A (a “ Report ”). Pharmasset shall remit to RFSP the total Royalties due with respect to Net Sales during such just-ended calendar quarter or six (6) month period at the time the corresponding Report is delivered. Pharmasset shall also remit to RFSP any Shortfall Royalty Amount required to be paid with respect to a Licensed Product at the time the Report is delivered for the applicable just-ended calendar quarter or six (6) month period ending on June 30 of each Agreement Year. Payments required under this Agreement shall, if overdue, bear interest until payment at a per annum rate [***] percent ([***]%) above the average of the prime rate as published in the Wall Street Journal during the ninety (90) days immediately preceding the due date of such overdue payment. The payment of such interest shall not foreclose RFSP from exercising any other rights it may have because any payment is late.

5.6 Taxes and Withholding .

(a) Each Party shall bear and pay any and all taxes duly imposed on it by any governmental authority.

(b) Pharmasset shall be entitled to deduct from its payments to RFSP the amount of any withholding Taxes required to be withheld by Pharmasset to the extent Pharmasset pays to the appropriate governmental authority on behalf of RFSP such Taxes and delivers to RFSP documentary proof of payment of all such Taxes .

5.7 Currency Exchange . With respect to Net Sales invoiced or expenses incurred in U.S. dollars, the Net Sales or expense amounts and the amounts due to RFSP hereunder shall be expressed in U.S. dollars. If any Licensed Product(s) are Sold for consideration other than United States dollars, the Net Sales of such Licensed Product(s) shall first be determined in the foreign currency of the country in which such Licensed Product(s) are Sold and then converted to United States dollars at a ninety (90)-day trailing average published by the Wall Street Journal (U.S. edition) for conversion of that foreign currency into United States dollars on the last day of the quarter for which such payment is due. All payments shall be made by wire transfer in U.S. dollars to the credit of such bank account as shall be designated at least five (5) Business Days in advance by RFSP in writing to Pharmasset.

5.8 Maintenance of Records . During the Term and for a period of three (3) years thereafter, Pharmasset shall maintain, and shall require its respective Affiliates and sublicensees to maintain, true and accurate records of all sales of Licensed Products in accordance with GAAP, IAS or their equivalent in the respective country in the Territory where such sales occur and in such form and manner so that all Royalties and other payments may be readily and accurately determined. Pharmasset shall furnish RFSP, or shall cause RFSP to be furnished, with copies of such records upon RFSP’s request, which shall be made in accordance with the provisions of Section 5.9.

 

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5.9 Audit . RFSP (or RFSP’s designee) shall have the right, from time to time at reasonable times during normal business hours through an independent certified accountant, to examine the records of Pharmasset, including, without limitation, sales invoice registers, sales analysis reports, original invoices, inventory records, price lists, sublicense and distributor agreements, accounting general ledgers, and sales tax returns, in order to verify the calculation of any Royalties or other payments. Such examination and verification procedures shall not occur more than once each twelve (12) month period during the Term and the twelve (12) month period immediately following termination of this Agreement. Before permitting such independent certified accountant to have access to such books and records, Pharmasset may require that such independent certified accountant sign a confidentiality agreement (in form and substance reasonably acceptable to Pharmasset) as to any confidential information which is to be provided to such independent certified accountant or to which such independent certified accountant will have access, while conducting the examination and verification under this Section 5.8. The independent certified accountant will prepare and provide to each Party a written report stating whether the royalty reports submitted and Royalties paid are correct or incorrect and the details concerning any discrepancies which report and amounts owed shall be final and binding upon the Parties. Such independent certified accountant may not reveal to RFSP (or its designee) any Confidential Information learned in the course of such examination and verification other than the amount of any such discrepancies. In the event there was an underpayment by Pharmasset hereunder, Pharmasset shall promptly (but in no event later than thirty (30) days after RFSP’s receipt of the independent certified accountant’s report) pay to RFSP the shortfall amount. In the event there was an overpayment by Pharmasset hereunder, RFSP shall promptly (but in no event later than thirty (30) days after RFSP’s receipt of the independent certified accountant’s report) refund to Pharmasset or credit to future Royalties, at RFSP’s option, the excess amount. RFSP (or its designee) shall be responsible for the fees and expenses of performing such examination and verification, provided, however, that if such examination and verification reveals an underpayment by Pharmasset of more than five percent (5%), or any overpayment, for any quarter examined, Pharmasset shall be responsible for such fees and expenses.

5.10 Third Party Royalties . In the event RFSP acquires Control of any Patent Rights (other than Licensed University Patents) that would otherwise qualify as Licensed RFSP Patents under this Agreement and RFSP is obligated to pay any royalties or other amounts to a Third Party with respect to such Patent Rights, RFSP shall offer Pharmasset in writing to include such Patent Rights as Licensed RFSP Patents under this Agreement and in the event that Pharmasset so elects in writing, such Patent Rights shall be included in the Licensed RFSP Patents, provided that Pharmasset shall reimburse RFSP for any such royalties or other amounts actually paid by RFSP to such Third Party in respect of a Licensed Product, provided that RFSP provides written evidence of such payments that is reasonably satisfactory to Pharmasset. Pharmasset may at any time elect to no longer make such reimbursements with respect to any such Patent Rights, whereupon such Patent Rights shall no longer be included in the Licensed RFSP Patents.

 

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5.11 No Additional Payments . Except as expressly provided for under Section 4.2(c) or Section 5.1 of this Agreement, RFSP shall be solely responsible for any and all payments due to the Universities under the University License Agreement.

ARTICLE 6

REPRESENTATIONS, WARRANTIES AND COVENANTS

6.1 Mutual Representations and Warranties . Each Party hereby represents, warrants and covenants to the other Party that:

(a) such Party is a corporation or entity duly organized, validly existing and in good standing under the laws of its state of incorporation or formation, and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;

(b) such Party is duly authorized, by all requisite corporate action, to execute and deliver this Agreement and the execution, delivery and performance of this Agreement by such Party does not require any shareholder action or approval, and the Person executing this Agreement on behalf of such Party is duly authorized to do so by all requisite corporate action;

(c) no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of such Party in connection with the valid execution, delivery and performance of this Agreement, except where the failure to obtain any of the foregoing would not have a material adverse impact on the ability of such Party to meet its obligations hereunder;

(d) this Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms except as enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights and (ii) equitable principles of general applicability;

(e) the execution, delivery and performance by it of this Agreement and its compliance with the terms and provisions of this Agreement does not and will not conflict with or result in a breach of any of the terms or provisions of (i) any other contractual or other obligations of such Party, (ii) the provisions of its charter, operating documents or bylaws, or (iii) any order, writ, injunction or decree of any court or governmental authority entered against it or by which it or any of its property is bound except where such breach or conflict would not materially impact the Party’s ability to meet its obligations hereunder; and

(f) it shall comply in all material respects with all laws, rules and regulations applicable to its performance under this Agreement.

6.2 Additional RFSP Representations, Warranties and Covenants . RFSP additionally represents, warrants and covenants to Pharmasset that:

(a) RFSP has the full right, power and authority to grant, and is not prohibited by the terms of any agreement to which it is a party from granting (including, without limitation,

 

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the University License Agreement), the licenses and sublicenses granted to Pharmasset under Article 2 hereof;

(b) RFSP has not previously granted and will not grant any rights inconsistent with the rights, and licenses and sublicenses, granted herein;

(c) to the knowledge of RFSP, the representations and warranties of the Universities contained in the University License Agreement were true and accurate in all material respects as of October 29, 2004;

(d) RFSP has not received any written notice, during the period from October 29, 2004 to the date hereof, that any Third Party is challenging the validity or enforceability of any of the Licensed Patents, or that the manufacture, use or sale of any Licensed Product would infringe any Patent Rights or similar intellectual property rights of any Third Party;

(e) as of the date hereof, there are currently no Licensed RFSP Patents;

(f) there are no pending claims, judgments or settlements against or owed by RFSP pending with respect to the Licensed Patents or Licensed Technology, and, RFSP has not received written notice of any threatened claims or litigation seeking to invalidate the Licensed Patents;

(g) to the knowledge of RSFP, there are no inquiries, actions or other proceedings pending before or threatened by any Regulatory Authority or other government agency with respect to the Licensed Compounds or any facility where the Licensed Compounds are manufactured, and RFSP has not received written notice and, to the knowledge of RFSP, neither of the Universities has received written notice threatening any such inquiry, action or other proceeding. To the knowledge of RFSP, there are no investigations pending before or threatened by any Regulatory Authority or other government agency with respect to the Licensed Compounds or any facility where the Licensed Compound is manufactured, and RFSP has not received, and to the knowledge of RFSP, neither of the Universities has received written notice threatening any such investigation;

(h) to the knowledge of RFSP, the University License Agreement is in full force and effect, and neither RFSP nor, to the knowledge of RFSP, any other party to such agreement is in breach or default thereunder, including, without limitation, as to achievement of any milestone requirements. RFSP has not received, and to the best of RFSP’s knowledge neither of the Universities has received, any written notice threatening or alleging a breach of the University License Agreement. A copy of a redacted version of the University License Agreement is attached hereto as Exhibit B , which redacted version, RFSP represents and warrants contains all relevant provisions with respect to the Licensed University Patent Rights and the Licensed University Technology, provided that the parties acknowledge that RFSP has not created and will not create a “LICENSEE Development Plan” as provided for in the University License Agreement;

(i) Exhibit C sets forth, to the knowledge of RFSP, a complete and accurate list of all Licensed Patents indicating whether such Licensed Patent is a Licensed University

 

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Patent or a Licensed RFSP Patent, and if the Licensed RFSP Patent is not owned by RFSP, the owner of such patent; and

(j) Each founder, officer and director of RFSP has entered into, and RFSP shall cause any person that hereafter becomes an officer or director of RFSP to enter into, an agreement with RFSP, substantially in the form attached as Exhibit E , providing that for the term of this Agreement, such person shall not, and shall cause any and all entities controlled by such person to not, conduct any research or development activities relating exclusively to DOT or the Licensed Products independent of the Universities.

6.3 Disclaimer of Warranties . EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, CONCERNING THE SUCCESS OR POTENTIAL SUCCESS OF THE DEVELOPMENT, COMMERCIALIZATION, MARKETING OR SALE OF ANY LICENSED PRODUCT. EXCEPT AS EXPRESSLY SET FORTH HEREIN, EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

6.4 Payment Obligations . Notwithstanding anything to the contrary contained in this Agreement, in the case of any claim by any party alleging any breach of this Agreement by the other party, any payment obligation pursuant to this Agreement including without limitation the royalty and milestone obligations herein (collectively, the “ Payment Obligations ”), will not be considered as constituting special, incidental, indirect or consequential damages under this Agreement (and, accordingly, nothing in Section 6.3 shall prevent recovery of amounts owed under the Payment Obligations).

ARTICLE 7

OBLIGATIONS RELATING TO THE UNIVERSITY LICENSE AGREEMENT

7.1 General Obligations . Subject to the terms and conditions of this Agreement, RFSP and Pharmasset shall cooperate in good faith to ensure compliance with RSFP’s obligations under the University License Agreement. RFSP shall promptly provide Pharmasset with true and complete copies of any communication received from the Universities under the University License Agreement relating in any material respect to the Licensed Compound or Licensed Patents. Pharmasset shall provide RFSP with true and complete copies of any communication received from or sent to the Universities relating in any material respect to the Licensed Compound, Licensed Patents and/or Licensed Products. RFSP shall not, without the prior written approval of Pharmasset, (a) voluntarily amend any provision of the University License Agreement that would reasonably be expected to have a material adverse effect on Pharmasset’s rights under this Agreement, (b) terminate the University License Agreement under Section 12.6 thereof in whole or in part (as it pertains to the Licensed University Patents and Licensed University Technology), or (c) except in connection with any material breach by Pharmasset under this Agreement which has remained uncured during the entirety of the cure period provided in Section 10.3, make any election or exercise any right that could have a material adverse effect on Pharmasset’s rights under this Agreement, including, without

 

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Certain portions of this Exhibit have been omitted pursuant to a request for confidentiality. Such omitted portions, which are marked with brackets and asterisks [***], have been separately filed with the Commission.

 

limitation, exercising its right, under Section 7.1 of the University License Agreement, to elect to no longer reimburse the Universities for patent expenses.

7.2 Termination and Right to Cure . In the event RFSP receives any notice of termination from the Universities pursuant to Section 12.4 of the University License Agreement, RFSP shall promptly notify Pharmasset thereof in writing. RFSP shall consult with Pharmasset as to the circumstances giving rise to such notice of termination and shall discuss with Pharmasset possible cures for any breaches or otherwise how to remedy such circumstances, including the resolution of any good faith disputes regarding the right of the Universities to terminate the University License Agreement. Notwithstanding the foregoing, Pharmasset shall have the right, at the expense of Pharmasset, to cure any breaches of the University License Agreement on RFSP’s behalf. RFSP agrees to promptly forward to Pharmasset a copy of any material correspondences, including any termination notices, from the Universities that relate in any material respect to the Licensed University Patents or Licensed University Technology.

7.3 Arbitration . In the event RFSP and the Universities engage in arbitration proceedings pursuant to Article 14 of the University License Agreement with regard to the Licensed University Patents or Licensed University Technology, RFSP shall provide Pharmasset reasonable prior written notice thereof, and permit a representative of Pharmasset to participate in any such proceedings together with RFSP. Without limitation to the provisions of Section 7.1 above, RFSP shall not voluntarily enter into any agreement in connection with such arbitration proceedings that could have a material adverse effect on the rights of Pharmasset to the Licensed University Patents or Licensed University Technology without the prior written consent of Pharmasset.

7.4 [***].

ARTICLE 8

CONFIDENTIALITY, PUBLIC ANNOUNCEMENTS AND PUBLICATIONS

8.1 Confidentiality . Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, each of Pharmasset or RFSP, upon receiving or learning of any Confidential Information of the other Party, shall keep such Confidential Information confidential during the Term and at all times thereafter, and otherwise shall not use such Confidential Information for any purpose other than in the exercise of its rights and performance of its obligations under this Agreement. The Receiving Party shall advise its employees and consultants who might have access to the Disclosing Party’s Confidential Information of the confidential nature thereof and agrees that its employees shall be bound by the terms of this Agreement. The Receiving Party shall not disclose any Confidential Information of the Disclosing Party to any employee who does not have a need for such information.

 

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8.2 Authorized Disclosure . Notwithstanding the foregoing, each of Pharmasset and RFSP may disclose Confidential Information of the other Party to a Third Party to the extent such disclosure is reasonably necessary (a) to comply with applicable governmental regulations, stock exchange or NASDAQ rules, or to submit information to Regulatory Authorities to the extent reasonably required to desirable to obtain Regulatory Approvals, or (b) to conduct preclinical and clinical studies hereunder where reasonably necessary with respect to Licensed Products provided that such disclosure is subject to customary non-disclosure and non-use agreements, (c) in connection with the negotiation, formation or operation of a sublicense, collaboration, joint venture or similar partnering arrangement, or in connection with any capital raising activities and/or to investors, or (d) to otherwise exercise its rights and perform its obligations under this Agreement (including, without limitation, disclosures to contract manufacturers), provided, in each case, that the Receiving Party informs the disclosee of the confidential nature of the Confidential Information.

8.3 Unauthorized Use . If either Party becomes aware or has knowledge of any unauthorized use or disclosure of the other Party’s Confidential Information, it shall promptly notify the disclosing Party of such unauthorized use or disclosure.

8.4 Public Announcements . Without the prior written consent of Pharmasset (which consent may be granted or withheld in Pharmasset’s sole discretion), RFSP shall not originate, disseminate or otherwise distribute any materials used for publicity, news release or public announcement, written or oral, whether to the public, the press or other media organizations, investors, customers, suppliers or otherwise regarding the transactions contemplated under this Agreement. Notwithstanding anything to the contrary contained herein, a Party may disclose the existence and terms of this Agreement where required, as reasonably determined by the disclosing Party, by applicable law, by applicable stock exchange or NASDAQ regulation or by order or other ruling of a competent court, provided that such disclosing Party has sought to obtain such confidentiality treatment for such disclosures as may be available under applicable law or regulation.

8.5 Publications . The following provisions shall apply to the Parties with respect to all publications, presentations and other public disseminations of any information relating to the Licensed Compounds or Licensed Products or to scientific work carried out under this Agreement:

(a) The Party desiring to publish, present or otherwise publicly disseminate such information (the “ Publishing Party ”) shall provide the other Party with a copy of any proposed publication, presentation or other public dissemination at least thirty (30) days prior to submission for publication, presentation or other public dissemination so as to provide such other Party an opportunity to recommend any changes it reasonably believes are necessary to preserve the Confidential Information belonging in whole or in party to such other Party or to preserve such other Party’s ability to obtain Patents covering any relevant inventions. The incorporation of any such recommended changes shall not be unreasonably refused.

 

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(b) If such other party provides written notice to the Publishing Party within fifteen (15) days after receipt of the copy of the proposed publication, presentation or other public dissemination that such publication, presentation or other public dissemination in its reasonable judgment (i) discloses information about an invention for which the other Party desires patent protection or (ii) discloses Confidential Information of the other Party, the Publishing Party shall prevent such publication or delay such publication, presentation or other dissemination until the Parties have agreed on mutually acceptable modifications thereto so as not to prejudice the other Party’s right to obtain Patents and not to disclose the other Party’s Confidential Information. In the case of an invention, a delay shall be for a period reasonably sufficient to permit the timely preparation and filing of a patent application(s) covering the invention, and in no event less than sixty (60) days from the date of the aforementioned notice.

ARTICLE 9

INDEMNIFICATION

9.1 Pharmasset . Pharmasset shall indemnify and hold harmless RFSP, its Affiliates and the Universities, and their respective directors, officers, employees and agents, from and against any and all losses, costs, damages, fees or expenses (including reasonable attorney’s fees and expenses) (“ Losses ”) incurred in connection with or arising out of (a) any breach by Pharmasset of any of its representations, warranties or obligations pursuant to this Agreement, (b) any gross negligence or willful misconduct of Pharmasset, or its Affiliates or sublicensees, relating to the subject matter of this Agreement, or (c) the development, manufacture, use, sale or other disposition of any Licensed Compound or Licensed Product by Pharmasset or any of its Affiliates or sublicensees, including without limitation any actual or alleged product liability involving any Licensed Product. Notwithstanding the foregoing, Pharmasset shall have no indemnification obligations under this Article 9 to the extent any Losses arise out of the circumstances set forth in clauses (a) through (c) of Section 9.2.

9.2 RFSP . RFSP shall indemnify and hold harmless Pharmasset and its Affiliates and sublicensees, and their respective directors, officers, employees and agents, from and against any and all Losses incurred in connection with or arising out of (a) any breach by RFSP of any of its representations, warranties or obligations pursuant to this Agreement (including, without limitation, such representations and warranties relating to intellectual property rights), (b) any gross negligence or willful misconduct of RFSP or its Affiliates relating to the subject matter of this Agreement, or (c) the development, manufacture, use, sale or other disposition of any Licensed Compound or Licensed Product by RFSP or its Affiliates prior to the Effective Date. Notwithstanding the foregoing, RFSP shall have no indemnification obligations under this Article 9 to the extent any Losses arise out of the circumstances set forth in clauses (a) through (c) of Section 9.1.

9.3 Indemnification Procedures .

(a) In the event that any Third Party asserts a claim with respect to any matter for which a Party (the “Indemnified Party”) is entitled to indemnification under this Agreement (a “Third Party Claim”), then the Indemnified Party shall promptly notify the Party obligated to indemnify the Indemnified Party (the “Indemnifying Party”) thereof; provided , however , that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the

 

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Indemnifying Party from any obligation hereunder unless (and then only to the extent that) the Indemnifying Party is prejudiced thereby.

9.4 Direction and Control .

(a) The Indemnifying Party shall have the right, exercisable by notice to the Indemnified Party within fifteen (15) calendar days of receipt of notice from the Indemnified Party of the commencement of or assertion of any Third Party Claim, to assume direction and control of the defense, litigation, settlement, appeal or other disposition of the Third Party Claim (including the right to settle the claim solely for monetary consideration) with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party; provided that (i) the Third Party Claim solely seeks monetary damages and (ii) the Indemnifying Party expressly agrees in writing that as between the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be solely obligated to satisfy and discharge the Third Party Claim in full (the conditions set forth in clauses (i) and (ii) above are collectively referred to as the “Litigation Conditions”).

(b) Within fifteen (15) calendar days after the Indemnifying Party has given notice to the Indemnified Party of its intended exercise of its right to defend a Third Party Claim, the Indemnified Party shall give notice to the Indemnifying Party of any objection thereto based upon the Litigation Conditions. If the Indemnified Party reasonably so objects, the Indemnified Party shall continue to defend the Third Party Claim, at the expense of the Indemnifying Party, until such time as such objection is withdrawn. If no such notice is given, or if any such objection is withdrawn, the Indemnifying Party shall be entitled, at its sole cost and expense, to assume and conduct such defense, with counsel selected by the Indemnifying Party. During such time as the Indemnifying Party is controlling the defense of such Third Party Claim, the Indemnified Party shall cooperate, and cause its Affiliates and agents to cooperate upon request of the Indemnifying Party in the defense or prosecution of the Third Party Claim, including by furnishing such records, information and testimony and attending such conferences, discovery proceedings, hearings, trials or appeals as may reasonably be requested by the Indemnifying Party. In the event that the Indemnifying Party does not satisfy the Litigation Conditions or does not notify the Indemnified Party of the Indemnifying Party’s intent to defend any Third Party Claim within fifteen (15) calendar days after notice thereof, the Indemnified Party may (with notice to the Indemnifying Party) undertake the defense thereof with counsel of its choice and at the Indemnifying Party’s reasonable expense (including reasonable, out-of-pocket attorneys’ fees and costs and expenses of enforcement or defense). The Indemnifying Party or the Indemnified Party, as the case may be, shall have the right to join in (including the right to conduct discovery, interview and examine witnesses and participate in all settlement conferences), but not control, at its own expense, the defense of any Third Party Claim that the other Party is defending as provided in this Agreement.

(c) The Indemnifying Party shall not, without the prior consent of the Indemnified Party, enter into any compromise or settlement which commits the Indemnified Party to take or forbear to take any action.

(d) In no event may an Indemnified Party settle or compromise any Third Party Claim for which it/he/she intends to seek indemnification from the Indemnifying Party

 

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hereunder without the prior consent of the Indemnifying Party, or the indemnification provided under this Agreement as to such Third Party Claim shall be null and void.

9.5 Insurance Proceeds . Any indemnification hereunder shall be made net of any insurance proceeds recovered by the Indemnitee (it being understood that an Indemnitee may simultaneously pursue an insurance claim and a claim for indemnification hereunder); provided, however, that if, following the payment to the Indemnitee of any amount under this Article 9, such Indemnitee recovers any insurance proceeds in respect of the claim for which such indemnification payment was made, the Indemnitee shall promptly pay an amount equal to the amount of such proceeds (but not exceeding the amount of such indemnification payment) to Indemnitor.

9.6 Insurance . Pharmasset agrees to obtain and maintain commercial general liability insurance, including clinical trials and products liability insurance, with reputable and financially secure insurance carriers, with “claims made” type coverage in such amounts and subject to such deductibles as are reasonable and customary in the pharmaceutical industry for companies of comparable size and activities. Pharmasset shall maintain such insurance for during the Term and for a period of ten (10) years thereafter. Upon reasonable request by RFSP, Pharmasset shall produce evidence that such insurance policy are valid, fully updated and in full force and effect.

ARTICLE 10

TERM AND TERMINATION

10.1 Term .

(a) The term of this Agreement shall commence on the Effective Date and, unless earlier terminated by mutual agreement of the Parties in writing or pursuant to the provisions of this Article 10, shall expire on a country-by-country (in the Territory) and Licensed Product-by-Licensed Product upon the expiration (as contemplated in Section 5.2) of the obligation to pay Royalties with respect to the Sale of each Licensed Product in such country (the “ Term ”).

(b) Upon the scheduled expiration (as contemplated in Section 5.2) of the obligation to pay Royalties with respect to the Sale of such Licensed Products in a particular country in the Territory, the licenses and sublicenses granted hereunder shall become fully paid up, royalty free, perpetual (i) with respect to the Licensed RFSP Patents (subject to any reimbursement obligations for amounts paid or owing to Third Parties under Section 5.10) and the Licensed RFSP Technology, and (ii) with respect to the Licensed University Patents and the Licensed University Technology, provided and to the extent that RFSP continues to have a valid fully paid up, royalty free, license in perpetuity with respect to such Licensed University Patents and the Licensed University Technology for the Licensed Products in such country under the terms of the University License Agreement.

10.2 Termination by Pharmasset . Pharmasset may terminate this Agreement on a country-by-country basis and/or Licensed Product-by-Licensed Product basis or in its entirety at any time (a) upon thirty (30) days advance written notice to RFSP at any time prior to the

 

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Launch of any Licensed Product, and (b) upon one hundred eighty (180) days advance written notice to RFSP at any time following the Launch of any Licensed Product.

10.3 Termination for Material Breach . Upon a material breach of this Agreement by Pharmasset on the one hand, or RFSP on the other hand (in such capacity, the “ Breaching Party ”), the other Party (in such capacity, the “ Non-Breaching Party ”) may provide written notice (a “ Breach Notice ”) to the Breaching Party specifying the material breach. If the Breaching Party fails to cure such material breach during the ninety (90) day period, then the Non-Breaching Party may terminate this Agreement on a Licensed Product-by-Licensed Product and country-by-country basis with respect to the Licensed Product and country(ies) to which the breach relates.

10.4 Termination for Bankruptcy . Either Party may, subject to the provisions set forth herein, terminate this Agreement by giving the other Party written termination notice if, at any time, the other Party shall (a) file in any court pursuant to any statute a voluntary petition for bankruptcy or insolvency, or for reorganization in bankruptcy, or for an arrangement or for the appointment of a receiver, trustee or administrator of such Party or of its assets, (b) be served with an involuntary petition against it, filed in any insolvency proceeding, and such petition shall not be dismissed within sixty (60) days after the filing thereof, (c) propose or be a party to any dissolution, or (d) ma