Patent and Know-How License, Development and Commercialization Agreement

(1)

SDI DIAGNOSTICS INTERNATIONAL LTD a limited liability company organized under the laws of Switzerland (“SDI”) whose registered office is at ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇/▇▇ ▇▇▇▇ ▇▇-▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇; and

(2)

AVIGEN, INC. a corporation organized under the laws of Delaware (“Avigen”) whose registered office is at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇.

A.

Tolperisone has been sold as a pharmaceutical product to treat acute and chronic pain, and muscle spasm and rigidity, for many years in some European countries and Japan, but has never been approved as a pharmaceutical product in North America and is anticipated to qualify for new chemical entity status in the US;

B.

SDI and its Affiliates have developed and manufacture two formulations of Tolperisone, one in an immediate release dosage form and one in a controlled release dosage form (the Current IR Product and Current CR Product, each as more particularly defined below);

C.

SDI has conducted some clinical development of each the Current IR Product and the Current CR Product, and plans further clinical development of each of them in order to seek approval to sell them in Europe;

D.

SDI possesses some and will develop more clinical data and other know-how relating to the Current IR Product and Current CR Product, and [*];

E.

Avigen is located in North America and has a team experienced in developing and commercializing pharmaceutical products for the North American market, including in particular pharmaceutical products for neurological conditions;

F.

Avigen wishes to acquire rights under SDI’s clinical data, other know-how, and patent rights relating to tolperisone products, as well as supply from SDI of these products, all for the development and commercialization of tolperisone products in North America (the Territory, more particularly defined below), in accordance with the provisions of this Agreement.

1

Definitions

Advance Payment

Shall have the meaning given such phrase in Section 4.5.1.

Affiliate

Shall mean, in relation to a Party, any entity or person that Corporately Controls, is Corporately Controlled by, or is under common Corporate Control with that Party.

SDI’s Affiliates include Sanochemia Pharmazeutika AG, an Austrian corporation.

Agreement

This Patent and Know-How License, Development and Commercialization Agreement (meaning this entire document, including all Schedules and Attachments, including the Supply Terms).

ANDA

Shall mean an abbreviated new drug application (abbreviated NDA) in the US.

API

Shall have the meaning given in the Supply Terms.

Article

An article of this Agreement. This Agreement contains 12 Articles.

Avigen Indemnitees

Shall have the meaning given such phrase in Section 9.6.

Clinical Trial Information

All technical information and data [*] to the [*] is [*] by or on behalf of [*] or [*]. This includes the following kinds of data: data regarding the chemical and physical properties of the Licensed Product; pharmacological, toxicological, pharmacokinetic and clinical data; and quality control, testing and assay data.

Closely Related Compounds

Shall mean analogs and derivatives of Tolperisone described by the following chemical structure:

[*]

Combination Product

Shall have the meaning given such phrase in Section 4.3.5.

Commencement Date

Shall mean the date first set forth above, in the first paragraph of this Agreement (the first paragraph appearing after the initial title).

Committee

Shall have the meaning given such phrase in Section 5.1.

Competent Authority

Any national or local agency, authority, department, inspectorate, minister, ministry official, parliament or public or statutory person or other entity (whether autonomous or not) of any government of any country having jurisdiction or authority over either any of the activities and functions contemplated or described by this Agreement or the Parties including the European Commission, the Court of First Instance and the European Court of Justice.

Competent Authorities include Regulatory Bodies.

Competing Product

Shall mean any [*] that (a) is a [*] or contains a [*] as [*], (b) is [*], and (c) [*] be [*] to [*] a [*] on the [*] of the [*] in the [*].

Confidential Information

Shall have the meaning given such phrase in Section 3.3.1.

Control

Shall mean, with respect to a Party and a Patent or item of Know-How, the ability of such Party to grant a license as provided for hereunder under such Patent or item of Know-How, [*]

Corporate Control

Shall mean, with respect to any entity, either (i) direct or indirect beneficial ownership of fifty percent (50%) or more of the capital stock, voting shares or other participating interest carrying the right to vote or to distribution of profits of that entity, or such lesser share as may be the maximum share permitted to be held in accordance with law; or (ii) the actual power to elect the management of or to control the policies of that entity.

CR-Qualified Product

Any pharmaceutical composition [*] providing for [*]. A pharmaceutical composition providing for [*] in this context means that such pharmaceutical composition (a) [*] in a manner that [*] a [*] in the [*] that is [*] of the [*] and (b) is [*] to be [*] of [*] or, where [*] satisfies the following paragraph (i.e. the remainder of the text of this definition excluding the final paragraph).

In evaluating (b), [*] to the [*] a particular such pharmaceutical composition [*] in the [*] if:

(i) [*] a [*] of such pharmaceutical composition [*] that would permit the [*] of [*] to be [*] has [*] and/or [*] in the [*] or in [*] within the [*] demonstrating that [*] in the [*] a [*] for [*] of [*] and [*] the FDA [*] that [*] composition would be [*] to be [*] for a [*] that if [*] to be [*] and (y) [*] as [*] as [*] in such [*]

(ii) the Parties otherwise agree (in their sole discretions) that such pharmaceutical composition [*] and [*]

then such pharmaceutical composition shall be a CR-Qualified Product until and unless (x) whether it qualified under (i) or (ii), a [*] such pharmaceutical composition either [*] not [*] such [*] and/or [*] or such pharmaceutical composition [*] but [*] to be [*] for [*] of [*] in the case of a pharmaceutical composition that [*] Avigen [*] thereof or [*] not to [*] for [*] (it being understood that such a pharmaceutical composition [*] In accordance with this determination of prong (b), the same pharmaceutical composition may be a CR-Qualified Product at one time, but not at another later time.

If the Parties do not agree as to the application of clause (i) (above in this definition) to any particular formulation proposed as a possible CR-Qualified Product, then the determination of whether such formulation qualifies under clause (i) (above in this definition) shall be determined as set forth in Section 12.9.2.

CR-Qualified Products may include the Current CR Product and other formulations of Tolperisone (to the extent described by the foregoing in this definition), and shall include them to the extent described by the foregoing definition or as provided in Section 5.6.

Current CR Product

That certain formulation of Tolperisone that SDI tested in that certain clinical trial identified by protocol number SFK-0300-01/I-003 filed with Independent

Ethics Committee, Assen, The Netherlands.

Current IR Product

That certain formulation of Tolperisone that SDI most recently tested in those certain clinical trials identified by protocol numbers SFK-0300-01/I-001 and SFK-0300-01/I-002 filed with Independent Ethics Committee of the Landesärztekammer ▇▇▇▇▇▇▇▇▇▇▇, Cottbus, Germany

Diligence Plan

Shall have the meaning given such phrase in Section 7.4.

Diligent and Reasonable Efforts

The level of efforts which, consistent with the exercise of prudent scientific and business judgment, would be applied by a company in the biotechnology industry for a product owned by it or to which it has rights, that (relative to Licensed Product) is of similar market potential and is at a similar stage in its development or product life, taking into account issues of safety and efficacy, product profile, the competitiveness of the marketplace, the proprietary position of the product, the regulatory structure involved, the profitability of the applicable products, and all other relevant factors.

Diligent and Reasonable Efforts is evaluated in the context of Territory-wide efforts, recognizing that some development and commercialization activities may or may not be required by this standard for countries other than the US, and that a reasonable development and commercialization program may stage or stagger activities for different countries over time.

A Party’s obligation to devote Diligent and Reasonable Efforts may be satisfied by the actions of a Party’s or its Affiliate’s own efforts, or those of a subcontractor or service provider; and in Avigen’s case the actions of a Sublicensee or Distributor.

Disclosing Party

Shall have the meaning given such phrase in Section 3.3.1.

Distributor

Shall have the meaning given such phrase in Section 2.4.

EMEA

European Medicines Evaluation Agency.

Event of Force Majeure

Shall have the meaning given such phrase in Section 12.1.

Excess

Shall have the meaning given such phrase in Section 4.5.3.

FDA

The United States Food and Drug Administration.

Field

The treatment of muscle spasticity and acute muscle spasm.

Finished Product

IR Product or CR-Qualified Product in finished product form, that is filled, labeled and packaged into finished product.

Fully Burdened Manufacturing Cost

Shall mean, with respect to any Licensed Product (in bulk or finished product form, as the case may be), one hundred percent (100%) of SDI’s fully burdened manufacturing cost to manufacture such Licensed Product in such form, consisting solely of: [*]

Fully Burdened Manufacturing Costs excludes [*]

Fully Burdened Manufacturing Cost shall be calculated in accordance with [*] generally accepted accounting principles, consistently applied throughout the manufacturing organization with respect to all product candidates and products that it manufactures.

Further Payment

Shall have the meaning given such phrase in Section 4.5.2.

Improvement

Shall have the meaning given such phrase in Section 8.3.1.

Improvement Patent

Shall have the meaning given in Section 8.3.1.

IND

An Investigational New Drug application in the US, or an equivalent filing in another country of the Territory required to be approved (or not rejected) in order for human clinical testing of a Licensed Product in such country to be legally conducted.

Indemnify

Shall have the meaning given such phrase in Section 9.5.

Industry Valuation Expert

Shall mean a human person who is unaffiliated with both Parties (including through their Affiliates) and has at least ten (10) years experience valuing pharmaceutical and/or biopharmaceutical assets in a senior business development, chief financial officer or investment banking role.

Information

Shall have the meaning given such phrase in Section 3.1.

IR Product

Any pharmaceutical composition containing Tolperisone as an active ingredient, that is not a CR-Qualified Product, [*]

IR Products include the Current IR Product.

Joint Improvement Patents

Shall have the meaning given such phrase in Section 8.3.1.

Know-How

Shall mean data, know-how, instructions, processes (including manufacturing and QA/QC processes), methods (including analytical methods), formulae, materials, expert opinions, technical or scientific information and biological materials (including without limitation cell lines, vectors and their progeny and derivatives), including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, clinical, safety, manufacturing and quality control data and information.

Launch

Shall mean, for each IR Product and CR-Qualified Product in each country of the Territory, the first commercial sale of an IR Product or CR-Qualified Product (respectively) by or on behalf of Avigen, its Affiliates, Sublicensees or Distributors in such country following the Regulatory Approval of such IR Product or CR-Qualified Product (respectively) in such country.

Licensed Know-How

Shall mean the Clinical Trial Information (other than Avigen’s Clinical Trial Information), and all other Know-How Controlled by SDI or its Affiliates at any time prior to expiration of the term of this Agreement that is necessary or useful for the development (including seeking Regulatory Approval for), manufacture, use, sale, or commercialization of Tolperisone Products.

As regards any of the foregoing Know-How that is useful but not necessary for

such activities (“Useful Know-How”), the Licensed Know-How shall exclude Useful Know-How that only qualifies as such with respect to Licensed Products that include another active ingredient in addition to Tolperisone (due to the presence of such other active ingredient) in the Licensed Product, and [*] to active pharmaceutical ingredients other than [*]

The Licensed Know-How includes the Information.

Licensed Patents

The Listed Patent Rights, and all other Patents Controlled by SDI or any Affiliate of SDI during the term of this Agreement that claim any invention that is necessary or useful for the manufacture, use or sale of Tolperisone Products.

The Licensed Patents exclude Patents that meet all of the following descriptions: (a) they are not referred to in the next paragraph, (b) they would not cover any Tolperisone Product but for the inclusion of another active ingredient other than Tolperisone or a Closely Related Compound in such Tolperisone Product, (c) they are directed [*] to active pharmaceutical ingredients other than Tolperisone or Closely Related Compounds, and (d) they are not directed in whole or in part to combining (or the combination of) Tolperisone with any other active pharmaceutical ingredient; provided, however, that until all Royalty Terms under this Agreement have expired, SDI shall not for the Territory grant any Third Party a license under any of such excluded Patents with respect to any Tolperisone Product.

The Licensed Patents include all Patents claiming inventions conceived or reduced to practice in the course of the SDI CR Clinical Program (and SDI shall ensure that it or an SDI Affiliate Controls such Patents for the full scope of activities specified in Section 2.1). Except to the extent excluded under (b), (c) and (d) above, the Licensed Patents also include all Patents claiming inventions conceived or reduced to practice in the course of all other testing of Licensed Product by or on behalf of SDI or its Affiliates, which inventions relate to Licensed Product (including via the composition, manufacture, formulation or use of any Licensed Product), and SDI shall ensure that it or an SDI Affiliate Controls such Patents for the full scope of activities specified in Section 2.1. The Licensed Patents also include SDI’s interest in all Improvements Patents, including those solely owned by SDI and the Joint Improvement Patents.

Licensed Products

IR Products, CR-Qualified Products, and all other Tolperisone Products.

Listed Patent Rights

The patents and patent applications listed in Schedule 1; all divisionals, converted provisionals, continuations, continuations-in-part, and substitutions of, and all other applications claiming priority to (or claiming priority to a common priority document as), any of the foregoing applications; all patents issuing on any of the foregoing applications; all re-examinations, reissues, renewals and extensions (including supplementary protection certificates or their equivalent) of the foregoing patents; all registrations and confirmations of any of the foregoing; and all counterparts in other countries of the Territory to any of the foregoing patents and patent applications.

Losses

Shall have the meaning given such phrase in Section 9.5.

NDA

A New Drug Application in the United States of America under Section 21 of the United States Code of Federal Regulations, Part 314.

Necessary

Shall have the meaning given such phrase in Section 8.9.1.

Net Sales

The gross invoice price of Licensed Products sold by or on behalf of Avigen or its Affiliates or Sublicensees to Third Parties, after deduction of all of the following (reasonably documented):

(a)    cash, trade and quantity discounts, actually paid or incurred;

(b)    discounts, refunds, rebates, chargebacks, retroactive price adjustments, and any other allowances actually made which effectively reduce the net selling price, including any institutional rebate or discount for government subsidy or reimbursement programs such as Medicare or Medicaid provided in the United States or any similar organization elsewhere in the world; amounts due under inventory management agreements or any comparable agreements with wholesalers or distributors; and distribution fees and sales commissions paid to Third Parties;

(c)    credits and allowances for product returns actually made and actually taken (for the selling entities’ financial reporting purposes) for recalls, retroactive price reductions, and billing corrections;

(d)    freight, packing, shipping, handling and insurance fees, but solely to the extent separately stated on the invoice and included in the gross invoice price; and

(e)    taxes, including value added taxes and sales taxes, but excluding taxes on seller’s net income.

Amounts invoiced between Avigen, its Affiliates and Sublicensees for quantities of Licensed Product for use in clinical trials or for resale shall not be included in the calculation of Net Sales.

Provided that Avigen’s (or its Affiliate’s or Sublicensee’s) invoiced sales of Licensed Product to Distributors are included in the calculation of Net Sales, amounts invoiced by Distributors to their customers are excluded from Net Sales, except as provided in the next sentence. If any Distributor pays Avigen or an Avigen Affiliate [*] then for purposes of calculating Net Sales hereunder such Distributor [*]

Offsettable Consideration

Shall have the meaning given such phrase in Section 4.3.4.2.

Orange Book

The FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known as the “Orange Book”).

Other Licensee

Shall have the meaning given such phrase in Section 5.11.2.

Other Party

Shall have the meaning given such phrase in Section 10.2.3.

Parties

SDI and Avigen, and “Party” shall mean either of them.

Patent

Shall mean any patent application or patent, including all of the following kinds: provisional, converted provisional or regular, divisional, continuation, continuation-in-part, and substitution applications; and regular utility, re-issue,

re-examination, renewal and extended patents.

Patent Expert

Shall have the meaning given such phrase in Section 8.9.1.2.

Phase II Design Standard

Shall mean with respect to a phase II clinical trial (a) that the design of such trial is consistent with the clinical program set forth in Schedule 2, and (b) that if a trial conducted in accordance with such design [*] in the [*] or [*] the [*] (but otherwise [*] such [*] a determination that the subject pharmaceutical composition is [*]

Pivotal Clinical Trial

Shall mean a clinical trial that is a part of a Pivotal Trial Program.

Pivotal Trial Program

That clinical trial or those clinical trials in humans that is or are required to [*] on the basis of the results of such trial or trials alone (if such results are favorable), without the need for any further clinical testing to support such US Regulatory Approval Application (NDA).

Quarter

A period of three months commencing on 1st January, 1st April, 1st July and 1st October in each year during the term of this Agreement, and “Quarterly” shall be construed accordingly.

Receiving Party

Shall have the meaning given such phrase in Section 3.3.

Regulatory Approval

Any approval (in whatever form, whether a license, registration, authorization or approval) of any supra-national, national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity, necessary for the legal sale of a given pharmaceutical product as such.

In the US, Regulatory Approval is achieved by NDA approval.

Regulatory Approval Application

Shall mean an application for Regulatory Approval. Regulatory Approval Applications in the US include NDAs.

Regulatory Body

The FDA in the US, and any authorities responsible for the grant of Regulatory Approvals in the other countries of the Territory.

Related Entity End User

Shall have the meaning given such phrase in Section 4.3.8.

Relevant Patent

Shall have the meaning given such phrase in Section 8.5.1.

Required Phase II Clinical Trial

Shall have the meaning given such phrase in Section 5.5. The Required Phase II Clinical Trial is part of the SDI CR Clinical Program.

Royalty Term

Shall mean, with respect to each Licensed Product in each country of the Territory, the period (x) beginning on the date of Launch of (if such Licensed Product is an IR Product) the first IR Product anywhere in the Territory, or (if such Licensed Product is a CR-Qualified Product) the first CR-Qualified Product anywhere in the Territory, and (y) ending on the latest of:

(a) the date on which there is first no longer any Valid Claim of the Licensed Patents that would be infringed by the manufacture, use or sale by Avigen of such Licensed Product in such country but for the license granted Avigen

hereunder;

(b) the date on which [*] -- if any -- [*] to Avigen, an Avigen Affiliate or a Sublicensee with respect to such Licensed Product expires or lapses; and

(c) the [*] of (if such Licensed Product is an IR Product) the Launch of the first IR Product in the United States, or (if such Licensed Product is a CR-Qualified Product) the Launch of the first CR-Qualified Product in the United States, in each case by Avigen, an Avigen Affiliate or a Sublicensee or Distributor.

If (c) occurs later than (a) or (b) with respect to any Licensed Product in any country of the Territory, then the period from the later of (a) and (b) (with respect to such Licensed Product in such country) to (c) (with respect to such Licensed Product in such country) is the “Second Part-Royalty Term” with respect to such Licensed Product in such country.

The period of the Royalty Term includes -- to avoid any doubt -- that period that is the Second Part-Royalty Term.

Sales Estimate

Shall have the meaning given such phrase in Section 6.4.

SDI Communicator

Shall have the meaning given such phrase in Section 5.10.

SDI CR Clinical Program

Shall have the meaning given such phrase in Section 5.2.

SDI Indemnitees

Shall have the meaning given such phrase in Section 9.5.

SEC

Shall have the meaning given such phrase in Section 3.7.1.

Second Part-Royalty Term

Shall have the meaning given such phrase in the definition of Royalty Term.

Section

Shall mean a section of this Agreement. These Sections are the smaller (than Articles) numbered units that make up the Articles.

Significant Supply Failure

Shall mean SDI’s failure to supply at least [*] of Licensed Product properly ordered in accordance with the procedures contained in the Supply Terms by Avigen for delivery [*] which failure SDI has not cured [*] either by supplying itself or through another appropriately validated source.

Sublicensee

Any Third Party to which Avigen or an Avigen Affiliate grants a license under the Licensed Patents and/or Licensed Know-How to offer to sell, have sold or import Licensed Product in the Territory.

Sublicensees exclude Distributors.

Supply Terms

Those terms and conditions for the supply of IR Product and CR-Qualified Product attached as Schedule 2.

Supply Terms Article

Shall mean an article of the Supply Terms.

Supply Terms Section

Shall mean a section of the Supply Terms.

Territory

North America. North America includes the United States of America, its territories and possessions; Canada, its territories and possessions; and Mexico, its territories and possessions.

Territory Infringement

Shall have the meaning given such phrase in Section 8.4.1.

Third Party

Any person, firm, trust, partnership, company or corporate or other entity that is not either a Party or an Affiliate of either Party. Once appointed, a Sub-licensee or Distributor shall cease to be a “Third Party” for the purposes of this Agreement.

Third-Party Claim

Shall have the meaning given such phrase in Section 9.5.

Trade ▇▇▇▇

Shall have the meaning given such phrase in Section 8.8.1.

Transfer Price Percentage

[*]

Tolperisone

The compound currently identified by SDI as “Tolperisone,” the chemical formula for which is C16H23NO.HCl (including all isomers and steric forms described by such chemical formula).

Tolperisone Product

shall mean any pharmaceutical composition containing as an active ingredient Tolperisone or any [*] of Tolperisone.

US

The United States of America, its territories and possessions.

Valid Claim

An issued claim of a patent, which claim has not expired, lapsed, been abandoned, been cancelled, been revoked, been held invalid or unenforceable by a court of competent jurisdiction in a final and non-appealable or unappealed judgment, and has not been admitted to be invalid or unenforceable through reissue, re-examination, disclaimer or otherwise.

2

Grant of license rights.

2.1

Licenses. Subject to the terms and conditions of this Agreement, SDI hereby grants to Avigen an exclusive, sublicenseable (subject to compliance with and as set forth in Section 2.3) license under the Licensed Patents and the Licensed Know-How to develop, have developed, use, have used, market, have marketed, offer for sale, sell, have sold, import and have imported the Licensed Products in the Territory. For the avoidance of doubt, such license shall not include any right to manufacture or have manufactured the Licensed Product. (However, for clarity, Avigen shall have those manufacturing rights that are set forth in Sections 4.5.5 and 10.4.2 and in Supply Terms Sections 6.5 and 8.3, under the circumstances referred to in such Section and Supply Terms Sections.)

2.2

Formal Licenses for Recordation Purposes Only. The Parties shall -- if requested in writing by Avigen -- execute such formal license recordation documents as may be necessary or appropriate for registration with Patent Offices and other relevant authorities in particular countries of the Territory. If any such license recordation document conflicts with this Agreement, this Agreement shall prevail, govern and control, in all cases. Prior to the execution of the formal license recordation document(s) (if any) referred to in this Section 2.2, the Parties shall so far as possible have the same rights and obligations towards one another as if such formal license recordation document(s) had been executed and recorded. The Parties shall use reasonable endeavors to ensure that, to the extent permitted by relevant authorities, this Agreement shall not form part of any public record, subject to Section 3.7.

2.3

Sublicensing. Avigen shall be entitled to grant sublicenses of its rights under this Agreement through one or more tiers of sublicensees without consent, including to its Affiliates and to Third Parties, provided that all of the following are satisfied:

2.3.1

Avigen notifies SDI in writing the identity of each Sublicensee within thirty (30) days after granting the sublicense.

2.3.2

The sublicense shall include obligations on the Sublicensee which are sufficient to allow Avigen to fulfil its obligations under this Agreement (e.g., the Sublicensee shall report its Net Sales to Avigen on a timeline that enables Avigen to make any royalty payments on the Sublicensee’s Net Sales required by this Agreement in a timely manner).

2.3.3

The sublicenses shall terminate automatically on termination of this Agreement under Section 10.2.3 for Avigen’s uncured material breach or insolvency or under Section 10.2.2 by Avigen at will. Avigen shall notify its Sublicensees promptly (within 30 days) after any such termination of this Agreement. If within 30 days of such notification a Sublicensee notifies SDI in writing that the Sublicensee wishes its sublicensed rights to continue as a direct license from SDI for the then remainder of the term of its sublicense, SDI may grant to the Sublicensee a direct license on the same terms as the sublicense provided such terms are in SDI’s reasonable view no more onerous and no less favorable to SDI than the terms of this Agreement.

2.3.4

Within 30 days of the grant of any sublicense Avigen shall provide to SDI a true copy of such portions of the sublicense as are necessary to verify that the sublicense is in accordance with this Agreement; and

2.3.5

Avigen shall remain responsible to SDI for any act or omission of a Sublicensee to the extent it constitutes a breach of the Agreement.

2.4

Distributors. In addition to its right to grant sublicenses, without granting a sublicense, Avigen may appoint any one or more Affiliate(s) or Third Party(ies) to distribute and sell Licensed Products (any such Third Party that is so appointed (but not any Affiliate that is so appointed), a “Distributor”) in one or more country(ies) of the Territory provided that all of the following are satisfied:

2.4.1

Avigen notifies SDI in writing the identity of each Distributor within thirty (30) days after granting the Distributorship;

2.4.2

The Distributor’s appointment shall terminate automatically on termination of this Agreement under Section 10.2.3 for Avigen’s uncured material breach or insolvency or under Section 10.2.2 by Avigen at will. Avigen shall notify its Distributors promptly (within 30 days) after any such termination.

2.4.3

Within 30 days after the appointment of a Distributor, Avigen shall provide to SDI a true copy of such portions of the distribution agreement as are necessary to verify compliance with this Section 2.4.

2.4.4

Avigen shall remain responsible to SDI for any act or omission of a Distributor to the extent it constitutes a breach of the Agreement.

2.5

Reservation of rights. No right, title or interest is granted, whether expressly or by implication, to any Patents or Know-How owned by SDI, except for the rights and licenses expressly granted under this Agreement under the Licensed Patents and Licensed Know-How. SDI reserves to itself all rights not expressly granted under this Agreement. This Agreement shall not be deemed to restrict SDI from exploiting any of its rights not expressly granted to Avigen under this Agreement. Without prejudice to the generality of the foregoing SDI reserves all rights under any and all Patents outside the Territory that are x-Territory counterparts to the Licensed Patents, and under the Licensed Know-How outside the Territory; provided, however, that SDI shall not grant any license or other right to practice outside the Territory under Licensed Patent counterparts outside the Territory, or under Licensed Know-How, with respect to Tolperisone Products, which license covers activities to supply any Tolperisone or Tolperisone Product into the Territory or would permit the licensee to supply any Tolperisone Product into the Territory.

2.6

Exclusivity Commitments. The Parties are making the exclusivity commitments set forth in Article 11.

2.7

Avigen License and Disclaimer. Avigen is granting SDI the license set forth in Section 8.3.2. Avigen makes the disclaimer with regard to all other licenses that is set forth in the second paragraph of Section 8.3.2.

3

Know-how and Confidential Information

3.1

Provision of Information. Upon Avigen’s reasonable request, SDI shall supply Avigen with all Know-How in SDI’s possession at the date of the request that (a) SDI Controls, (b) has not previously been supplied to Avigen; and (c) is necessary or useful to enable Avigen to undertake (x) the further development of the Licensed Products (including without limitation any such Know-How that is necessary or useful to include in an IND or NDA for any Licensed Product) and (y) prosecution for the Territory of the Licensed Patents (“Information”). The Information shall be subject to the confidentiality provisions of Clause 3.3. The Information shall include at a minimum each of the following:

3.1.1

[*

3.1.2

3.1.3

3.1.4

3.1.5

]

3.2

Use of Information. Avigen undertakes that for so long as any part of the Information remains subject to the obligations of confidence of Section 3.3 it shall -- to the full extent provided for in such Section and subject to the exceptions and permitted disclosures of Sections 3.4-3.7 -- protect the Information as Confidential Information and shall not use the Information for any purpose except in accordance with (including pursuant to any license granted Avigen under this Agreement) the provisions of this Agreement. This Section 3.2 is not intended to impose any different standard or obligation on Avigen for confidentiality and use of Information than the confidentiality and non-use provisions of Section 3.3 regarding all Confidential Information.

3.3

Confidentiality obligations. Each Party (“Receiving Party”) undertakes:

3.3.1

to maintain as secret and confidential all Know-How and other business information disclosed by the other Party (“Disclosing Party”) (whether directly through the Disclosing Party or indirectly through its Affiliate, Sublicensee or Other Licensee) under this Agreement or that certain Confidential Disclosure Agreement between Avigen and Sanochemia Pharmazeutika AG dated August 11^th, 2005 (all of the foregoing information disclosed by a Party, including disclosures under Section 5.11 and including in the case of SDI, the Information, collectively, that Party’s “Confidential Information”);

3.3.3

to disclose Confidential Information only to those of its employees, contractors, Sublicensees and potential Sublicensees pursuant to this Agreement (if any) to whom and to the extent that such disclosure is reasonably necessary or useful for the purposes of this Agreement and as provided in Section 3.6.

3.4

Exceptions to obligations. The provisions of Section 3.3 shall not apply to Confidential Information that the Receiving Party can demonstrate by competent proof:

3.4.1

was, prior to its receipt by the Receiving Party from the Disclosing Party, in the possession of the Receiving Party and not subject to legally binding obligations of confidentiality or non-use; or

3.4.2

is subsequently disclosed to the Receiving Party without any obligations of confidence or non-use by a third party who has not derived it directly or indirectly from the Disclosing Party; or

3.4.3

is or becomes generally available to the public or publicly known through no act or default of the Receiving Party or its agents, employees, Affiliates or Sublicensees; or

3.4.4

[*]

3.5

Legally Required Disclosures. If the Receiving Party is legally required to disclose Confidential Information of the Disclosing Party to the courts of any competent jurisdiction, or to any government regulatory agency or financial authority, the Receiving Party shall be entitled to do so; provided that the Receiving Party shall (i) inform the Disclosing Party as soon as is reasonably practicable, and (ii) at the Disclosing Party’s request seek or provide the Disclosing Party with reasonable assistance to seek to persuade the court, agency or authority to have the information treated in a confidential manner, where this is possible under the court’s, agency’s or authority’s procedures.

3.6

Disclosure to employees etc. The Receiving Party is entitled to disclose the Disclosing Party’s Confidential Information: to the Receiving Party’s employees, contractors, Affiliates, legal and financial advisors, and to investors and underwriters doing diligence on the Receiving Party and their legal and financial advisors; in Avigen’s case, to actual and potential Sublicensees and Distributors; and in SDI’s case, subject to Section 5.11.2, to SDI’s actual and potential Other Licensees. The Receiving Party shall procure, however, that all of the foregoing entities (if any) who have access to any of the Disclosing Party’s Confidential Information shall be made aware of and legally bound to obligations of confidentiality and non-use at least as restrictive as provided in this Article 3 and which apply to the Disclosing Party’s Confidential Information. Disclosures to employees and contractors shall be limited as per Section 3.3.3.

3.7

Publicity. Neither Party may use the name of the other party in any publicity, advertising or in any other public way nor issue press releases or otherwise publicize or disclose any information related to the existence of this Agreement, the terms or conditions of this Agreement or any information relating to the subject matter hereof without the prior written consent of the other Party. A Party is not required to get permission to repeat information that has already been publicly disclosed in accordance with this Agreement. Nothing in the foregoing shall prohibit a Party from making disclosures to the extent required to any Competent Authority or by any Competent Authority or any securities exchange on which such Party’s stock is listed.

3.7.1

In particular (but without limitation), SDI hereby acknowledges that Avigen is a publicly traded company in the US. Because of this: (a) Avigen will be required to publicly file this Agreement with the US Securities and Exchange Commission (“SEC”), (b) to the extent considered material to Avigen (as Avigen may determine in its reasonable judgment or as it may be advised by outside counsel), Avigen is required to publicly disclose events and information that relate to the Licensed Products and this Agreement, and (c) Avigen will be required to refer to this Agreement, Licensed Products and information and events relating thereto in Avigen’s SEC filings (both its regular filings and those that it makes in relation to financing events). Avigen shall be entitled to make all of the foregoing legally required disclosures. On initial filing of this Agreement, Avigen will request confidential treatment of the sensitive terms of this Agreement (to the extent reasonably available based on current law and SEC practice). On achievement of material events or receipt of material information regarding the Licensed Products, if requested by Avigen SDI shall -- while it may make comments for Avigen to reasonably consider as to wording -- approve a press release (or other appropriate public disclosure requested by Avigen) to announce the event or information.

3.7.2

Also in particular but without limitation, Avigen hereby acknowledges that SDI is an Affiliate of a publicly traded company in Germany. Because of this, Section 3.7.1 shall apply mutatis mutandis for SDI as it does for Avigen.

4

Accounting and Payment

4.1

Signature fee. Within 30 days of signature of this Agreement, Avigen shall pay to SDI three million US dollars (US$3,000,000) by wire transfer of immediately available funds in one lump sum. The foregoing sum is non-refundable, and shall not be set-off against and is not an advance on any other payments or sums which may be due or payable by Avigen to SDI whether by way of milestones, transfer payments, royalties or otherwise.

4.2

Milestones. Avigen shall pay to SDI the following sums within thirty (30) days after the first occurrence of the stated milestones. Such sums shall be non-refundable, and shall not be set-off against and not an advance on any other payments or sums which may be due or payable by Avigen to SDI whether by way of other milestone payments, transfer payments, royalties or otherwise:

Amount

Milestone

[*

*]

4.3

Royalties.

4.3.1

Base Rate. Avigen shall pay SDI a royalty of [*] of Net Sales [*] For Net Sales that [*] Avigen shall pay SDI a royalty of

4.3.2

Second Part-Royalty Term Rate. For Net Sales during the Second Part-Royalty Term, Avigen shall pay royalties on such Net Sales at a rate equal to [*] the rate otherwise set forth in Section 4.3.1, instead of a royalty at the rate set forth in Section 4.3.1.

4.3.3

Competition Adjustment. If (a) any Third Party [*] or (b) in any [*] Tolperisone Products not sold by Avigen, its Affiliate, Distributor or Sublicensee (i.e., Tolperisone Products sold by other Third Parties, taken all together) [*] achieve a [*] market share [*] then, with respect to such country, Avigen shall be entitled to the royalty reductions of Section 4.3.3.1 and/or 4.3.3.2 respectively as applicable. For purposes of (b), market share shall be measured by number of prescriptions filled (or units sold), by reference to IMS data, or an at-least similarly reputable, validated audit source. This Section 4.3.3 (including the reductions and measurements provided below) shall apply with respect to all IR Products taken together, and separately to all CR-Qualified Products taken together. IR Products and CR-Qualified Products shall not be aggregated for purposes of measuring the [*] market share described above.

4.3.3.1

In the case of (a), the royalty reduction shall apply on a country by country basis in the Territory, and shall be in an amount that compensates Avigen for [*] in the US for Tolperisone Products licensed under this Agreement. The extent of this [*] shall be determined [*] by reference to the [*]

4.3.3.2

In the case of (b), the royalty rates set forth in Section 4.3.1 shall be reduced to rates equal to [*] the rates set forth in such Section with respect to Net Sales in all Quarters in the relevant country of the Territory. This reduction shall only apply from the beginning of the [*] and thereafter [*] the [*]

4.3.4

Third-Party IP.

4.3.4.1

General. Rights and responsibilities as between the Parties regSarding Third-Party intellectual property are set out in Section 8.9.

4.3.5

Calculation of Net Sales of Combination Products. Net Sales of any Licensed Product sold by or on behalf of Avigen, its Affiliates and/or its Sublicensees as part of a product that in addition to Tolperisone (or any of the forms of it referred to in the definition of Tolperisone Product) contains one or more other active ingredients (the product is a “Combination Product”), shall be calculated as follows:

4.3.5.1

The Net Sales for the purpose of determining royalties on sales of the Combination Product shall be calculated by multiplying Net Sales of such Combination Product by the fraction A/(A+B) where A is either: (a) the price to Third Party end users of the Tolperisone Product component of the Combination Product when sold separately, should Tolperisone Products be sold separately in the applicable country; or (b) the fair market value of the portion of the Combination Product containing the Tolperisone Product included in such Combination Product, as such fair market value is determined in good faith by the Parties, if Tolperisone Products are not sold separately in the applicable country, and B is either (c) the price to Third Party end users of product containing the other active ingredients of the Combination Product when sold separately should such active ingredients be sold separately in the applicable country; or (d) the fair market value of the portion of the Combination Product containing the other active ingredients, as such fair market value is determined in good faith by the Parties, should such active ingredients not be sold separately in the applicable country.

4.3.5.2

Regarding list prices when sold separately referred to in Section 4.3.5.1, if these are available for different dosages of Tolperisone and the other active ingredients than their dosages that are included in the Combination Product, then Avigen shall be entitled to make an equitable (typically, proportional) adjustment to the list prices in calculating the royalty-bearing Net Sales of the Combination Product.

4.3.5.3

Regarding fair market values called for in Section 4.3.5.1, if the Parties do not agree as to fair market values by good faith negotiations of no less than [*] days after either Party first proposes in writing such values to the other Party, then the mechanism of the second paragraph of Section 4.3.3.1 shall apply mutatis mutandis to have an Industry Valuation Expert decide which of the Parties’ proposals as to such fair market values shall be used for the calculation of Section 4.3.5.1.

4.3.7

Payment Schedule. Avigen shall pay SDI the royalty required under this Section 4.3 within [*] days of the end of each Quarter in respect of sales of Licensed Product made and Net Sales generated during such Quarter.

4.3.8

Sales to Related Parties as End Users. Sales to Third Parties are presumed to occur at arm’s length. Net Sales regarding these sales in general require no special adjustments to ensure arm’s-length pricing. In cases, however, where Avigen or its Affiliate or Sublicensee sells Licensed Product to an entity in which any of them has a [*] and such entity (a) is not marketing or clinically testing Licensed Product, and (b) is the end user of such Licensed Product (“Related Entity End User”), then the value of Net Sales for the units sold to the Related Entity End User shall be equal to the average per-unit Net Sales price for Licensed Product in the country of the Related Entity End User. (To avoid any doubt, the sales to the Related Entity End User itself shall be excluded from the calculation of the average per-unit Net Sales value, which shall be based on the other sales of the applicable Licensed Product in that country.)

4.4

Clinical Supply Price. Supply of Finished Product to Avigen and made available by Avigen on a free of charge basis for the purposes of conducting clinical trials necessary for obtaining Regulatory Approvals and/or label expansions for Licensed Products that have already been approved, or for use in marketing studies, shall be at the price set forth in Schedule 5 for the Current IR Product and corresponding placebos, and the Current CR Product, and [*] If for such clinical purposes Avigen requires supply of any differently formulated IR Product or CR-Qualified Product (for example, if the FDA requires a modification to either of them), then SDI shall supply Avigen at a price that reflects any increase in SDI’s Fully Burdened Manufacturing Cost to manufacture the differently formulated version, relative to SDI’s Fully Burdened Manufacturing Cost as of the Commencement Date, to manufacture the Current IR Product and the Current CR Product. To avoid any doubt, nothing in this Section 4.4 is intended to make Avigen responsible in any way (on a pass-through basis through the supply price or otherwise) for any capital improvements that may be required for SDI to manufacture Licensed Products to supply Avigen hereunder.

4.5.1

An advance payment of [*] of Finished Product for the IR Product, and a price per pack of the CR-Qualified Product determined in accordance with Section 4.5.4, in each case delivered to Avigen or its designee (“Advance Payment”); and

4.5.2

A payment calculated as Net Sales in any Quarter multiplied by the Transfer Price Percentage (“Further Payment”); and

4.5.3

The payment required in Section 4.5.2 shall be reduced by the amount of the Advance Payment attributable to that same Quarter (i.e., by [*] of Licensed Product sold that Quarter to generate that Quarter’s Net Sales), and the payment of Section 4.5.2 is only required to actually be made to the extent the Further Payment in any Quarter exceeds the Advance Payment attributable to that same Quarter. To the extent the Advance Payment attributable to a Quarter (i.e., [*] of such Licensed Product sold that Quarter to generate that Quarter’s Net Sales) exceeds the Further Payment for that Quarter, Avigen is entitled to credit the amount by which such Advance Payment exceeds such Further Payment (the “Excess”) against subsequent payments due SDI hereunder, or, if no further payments are due SDI hereunder SDI shall refund to Avigen the Excess within [*] after requested in writing by Avigen.

4.5.4

When a phase III clinical trial to support US Regulatory Approval of a CR-Qualified Product is commenced, the Parties shall [*] Such Advance Payment on a per-unit basis shall be less than [*] If the [*] in [*] then the [*] shall be such Advance Payment.

4.5.5

If Net Sales per [*] then the Parties shall meet to discuss in good faith such measures as are appropriate and reasonable under the circumstances. Neither Party is required to agree to any change, reformation or amendment to this Agreement to address such circumstances. If the Parties are not able to agree in writing on such measures within six (6) months, then SDI shall either continue to supply Avigen in accordance with this Agreement (including the Supply Terms), or (b) notify Avigen in writing that the following rights of Avigen with respect to Licensed Product manufacture apply:

4.5.5.1

Avigen is released of its obligations to purchase its requirements of Licensed Product from SDI;

4.5.5.2

SDI hereby grants Avigen, effective upon grant of such rights hereunder, the exclusive right to manufacture Avigen’s (and its Affiliates’ and Sublicensees’) requirements of Licensed Product for the Territory (in any and all forms, including Tolperisone API and Finished Product forms), under all Patents and Know-How the subject matter of which was practiced under the Supply Terms; such license shall be sublicenseable through one (1) or more tiers of sublicensees without consent;

4.5.5.3

SDI shall -- and SDI shall cause all of its Affiliates and contractors who have been manufacturing Licensed Product (in any and all forms) supplied (or to be supplied) to Avigen under the Supply Terms to -- promptly after written request by Avigen perform all technology transfer requested by Avigen to establish all then-current manufacturing processes (including analytical methods) for Licensed Products (in any and all forms) at Avigen’s

4.5.5.4

SDI shall continue to fill Avigen’s purchase orders for Licensed Product placed in accordance with the Supply Terms, until such time as Avigen is able to establish (pursuing such establishment with Diligent and Reasonable Efforts) an alternative source of supply that has been validated with and accepted by all Regulatory Bodies of the Territory in which Licensed Products have received Regulatory Approval, such that Avigen may legally sell Licensed Products under such Regulatory Approvals in such country;

4.5.5.5

Avigen shall remain responsible for royalties under Section 4.3, but except with respect to quantities actually supplied to Avigen by SDI in accordance with Section 4.5.5.4, Avigen shall not be responsible for any additional payments under Section 4.5.

4.6

Timing of Commercial Supply Payments.

4.6.1

The Advance Payment shall be paid within [*] of delivery in accordance with the Supply Terms.

4.6.2

The Further Payment (if any actual payment is required under Section 4.5.3) shall be made within [*] of the end of the Quarter to which such payment is attributable. The Further Payment shall be accompanied by an accurate and reasonably detailed statement setting out Avigen’s calculation of the Further Payment for such Licensed Products in accordance with clause 4.5 above based on actual invoiced gross sales (and deductions in accordance with the definition of Net Sales), as well as reconciling Advance Payments made with Further Payments due in that Quarter.

4.7

Late Payments. Any payment which is not paid within the time frames specified in this Article 4 shall bear interest, to the extent permitted by applicable law, at the prime rate of the Bank of America (or if it no longer exists under such name, the entity succeeding to all or substantially all of its banking assets) as reported in the Wall Street Journal (or its successor) from time to time, calculated on the number of days such payment is overdue.

4.8

Withholding. If provision is made in law or regulation of any country for withholding of taxes of any type, levies or other charges with respect to the signature fee, milestone payments, royalties or other amounts payable under this Agreement (including, to avoid any doubt, the Supply Terms) to SDI, then Avigen shall be entitled to deduct such taxes, levies and other charges from such amounts payable under this Agreement. Avigen shall promptly pay such tax, levy or charge for and on behalf of SDI to the proper government authority. Avigen shall thereafter promptly (within sixty (60) days) furnish SDI with receipt of payment. Avigen shall be entitled to be promptly reimbursed by SDI if no further payments are due from Avigen to SDI. Each Party agrees to assist the other Party in claiming exemption from such deductions or

4.9

No Set Off. Except to the extent expressly stated otherwise in this Agreement (for example, in Section 4.8 with respect to withholding and [*]), all payments to SDI hereunder shall all be made without deduction or set-off of any nature whatsoever.

4.10

Records and Audits.

4.10.1

Avigen shall keep and ensure that its Affiliates and Sublicensees keep complete and accurate records of its inventory of Licensed Products, and sales and other dispositions (including use in clinical trials, or provision on a compassionate use basis or as marketing samples) of the Licensed Products including all such records that may be necessary for the purposes of calculating all payments due under this Agreement. SDI shall have the right to have a certified public accounting firm that is nationally recognized in the US examine such records. Avigen shall make such records available for inspection by SDI’s chosen such accounting firm at Avigen’s premises in the US on reasonable notice during regular business hours.

4.10.2

Accordingly, at the expense of SDI no more than once per year, SDI has the right to have such certified public accountant from a nationally recognized accounting firm perform on behalf of SDI an audit -- conducted in accordance with US generally accepted accounting principles -- of such books and records of Avigen, its Affiliates and its Sublicensees, as are deemed necessary by the independent public accountant to report on Net Sales for the period or periods requested by SDI and the correctness of any report or payments made under this Agreement (all subject to Section 4.10.3).

4.10.3

Upon timely request and at least [*] business days’ prior written notice from SDI, Avigen shall permit such audit to be conducted during regular business hours in such a manner as to not unnecessarily interfere with Avigen’s normal business activities. Such audit shall be limited to results in the [*] prior to audit notification.

4.10.4

All information, data, documents and abstracts herein referred to shall be used only for the purpose of verifying compliance with this Agreement, shall be treated as Avigen Confidential Information subject to the obligations of this Agreement (in particular Article 3) and need neither be retained more than [*] after completion of an audit hereof, if an audit has been requested; nor more than [*] from the end of the calendar year to which each shall pertain; nor more than one (1) year after the date of termination of this Agreement.

4.10.5

Audit results shall be shared by Avigen and SDI. However, no information that is not necessary to demonstrate any under- or over-payment will be disclosed by the auditor to SDI (nor is this information otherwise required under this Section to be shared with SDI). The auditor shall be under written obligations to Avigen of confidentiality and non-use (other than uses required by this Section 4.10).

4.10.6

If the audit reveals an overpayment, SDI shall promptly reimburse Avigen for the amount of overpayment.

4.11

Currency. All payments hereunder shall be made in US dollars by wire transfer to a bank account designated by SDI. Where the Net Sales underlying any royalty due hereunder are in a currency other than US dollars, the amount of each payment concerned shall be converted from such other currency using the exchange rate for the currency concerned available from the Bank of America (or if it no longer exists under such name, the entity succeeding to all or substantially all of its banking assets) on the date payment is first due.

5

Development and Regulatory.

5.1

Joint Committee. Promptly after the execution of this Agreement the Parties will form a joint information sharing committee (the “Committee”). The Committee shall be made up of an equal number of representatives of each of SDI and Avigen. It shall include at least one person at the level of Vice President or above from each Party. The role of the Committee is to provide a regular forum for communication between the Parties. The Committee is anticipated to be the first place and opportunity for the Parties to discuss any desired elements of collaboration and to consider together any potential amendments to this Agreement with regard to development activities. Neither Party is required to agree to any such amendments. Any actual amendments require an authorized officer of each Party to sign in writing the amendment. The Committee has no decision-making authority. The Committee has no power to amend, modify or waive compliance with this Agreement. The Committee shall meet Quarterly until Launch of the CR-Qualified Product in the US (or, if development of any CR-Qualified Product is abandoned by SDI, Launch of the IR Product in the US) and annually thereafter.

5.2

Overview and Background. SDI is seeking to gain Regulatory Approval to market the Current IR Product and Current CR Product in Europe. To work to achieve this, SDI has conducted certain clinical trials of each of the Current IR Product and the Current CR Product prior to the Commencement Date. For the Current IR Product, the Parties expect that data from the clinical trials for which SDI already (as of the Commencement Date) has the final reports and final data should enable Avigen to proceed directly to conduct [*]. For the Current CR Product, in contrast, SDI has conducted a PK trial, but not yet any phase II clinical trials on the Current CR Product. The phase II trial envisaged for the Current CR Product is the Required Phase II CR Clinical Trial, as further described in Section 5.5. As specified in Section 5.5, Avigen will not be conducting such trial or any similar trial unless it elects in its sole discretion to do so. It is not possible for Avigen to proceed directly to a Pivotal Trial Program of the

5.3

Avigen Overall Responsibility. Avigen shall as between the Parties be responsible to: (a) develop and obtain Regulatory Approval for Licensed Product for the Field in the Territory; (b) carry out a Launch in respect of Licensed Product in all countries in the Territory in which it receives Regulatory Approval (and any applicable governmental pricing approval that may in effect be required for a commercially reasonable product launch); and (c) promote, market, sell or otherwise commercially exploit Licensed Products for the Field in the Territory. All expenses incurred by Avigen for research, development and commercialization, including all required expenses for toxicology and all expenses for preclinical development, clinical trials, preparing, filing and maintaining INDs and NDAs and other regulatory activities, shall be borne and paid by Avigen.

5.4

Certain Service Providers for the Territory. Attached at Schedule 7is a list of agreements initiated and entered by SDI or its Affiliates prior to the Commencement Date and related to the development of the Licensed Products. By way of background, each item on the list [*] that Avigen would require written agreement with the service provider on in order to take over the relationships with these service providers for [*] Avigen shall [*] to reach [*] as to [*] with the service provider for each item listed at Schedule 7. If Avigen reaches such agreement on any item listed at Schedule 7, then Avigen shall assume all of SDI’s obligations under and responsibility for, and shall pay all fees and expenses payable by SDI under, such agreement to the extent they accrue and /or fall due on or after the Commencement Date. If Avigen fails to reach such agreement on any item listed at Attachment 4, then SDI shall retain responsibility for and the relationship

5.5

SDI CR Clinical Program. Schedule 2 contains a description of the basic elements of the SDI CR Clinical Program. The SDI CR Clinical Program shall encompass [*] and that must meet the Phase II Design Standard (the “Required Phase II CR Clinical Trial”). Within one hundred twenty (120) days after the Commencement Date, the Parties shall discuss through the Committee a more detailed specification for such program, including protocols to be submitted for Regulatory Body and institutional permissions to conduct the trial, and in particular the design of and the formulation (recognizing that the Parties currently intend it to be the Current CR Product) of the potential CR-Qualified Product which is to be used in such Required Phase II CR Clinical Trial. These discussions are intended to explore advice, suggestions and questions Avigen may have regarding the Required Phase II CR Clinical Trial as proposed by SDI and to provide an opportunity for Avigen to give SDI feedback. However, [*] for [*] the [*] as to the [*] implementation of the Phase II CR Clinical Trial [*] the [*] or [*] of the [*] as [*] as well as the decisions regarding whether or how to conduct any further phase II clinical testing of potential CR-Qualified Products that SDI may choose to undertake to demonstrate whether a particular pharmaceutical composition actually meets the definition of CR-Qualified Product. SDI shall use its Diligent and Reasonable Efforts to conduct and complete the Required Phase II CR Clinical Trial. The costs of the Required Phase II Clinical Trial shall be borne by the Parties as follows:

5.6

Avigen Clinical Trials. Except for the SDI CR Clinical Program, Avigen shall be solely responsible for the cost of all studies necessary to file for Regulatory Approval of the Licensed Products in the Territory, whether or not such studies are contracted out to a Third Party. Avigen’s current plans for its clinical trials of the Current IR Product for the Field are as set forth in Schedule 6. Such plans are subject to change. Avigen does not covenant, represent or warrant that its actual clinical program for the Current IR Product will be as set forth in such Schedule. However, as Avigen develops these plans Avigen will discuss them with SDI through the Committee meetings. Avigen is not required to obtain SDI’s consent to Avigen’s clinical plans for any Licensed Product.

5.7

Avigen Regulatory Filings. Avigen shall file and process all applications for Regulatory Approval in the Territory in its own name and shall be solely responsible for the cost of the filing and processing of all such applications in the Territory, taking such steps and actions as may be necessary and advisable to obtain Regulatory Approval for the Licensed Products in the Territory, including, without limitation, making all applications, requests for authorizations, submissions of information and data, connected with or related to the approval of clinical trials work and Regulatory Approvals for the Licensed Products under this Agreement with the Regulatory Body or other competent authorities of the Territory. Avigen shall provide to SDI copies of a draft summary of all manufacturing data and draft related submissions sufficiently in advance of submission to such Regulatory Body or authorities to allow SDI reasonable opportunity to comment thereon, and Avigen shall take reasonable account of SDI’s comments. In addition, upon request of SDI, Avigen shall provide to SDI copies of a draft summary of all other data and draft related submissions sufficiently in advance of submission to such Regulatory Body or authorities to allow SDI reasonable opportunity to comment thereon, [*] Avigen is entitled, if it chooses, to provide these copies in electronic form. SDI shall have the right to receive a copy with regard to any written submission to such Regulatory Body or authority.

5.8

Certain SDI Supply, Information Disclosure and Regulatory Responsibilities. In order to enable Avigen to file and process INDs and Regulatory Approval Applications SDI shall:

5.8.1

At the price referred to in Section 4.4 provide to Avigen Avigen’s requirement of clinical supplies of Licensed Products to support the work to be carried out by Avigen to obtain Regulatory Approval or any phase IV clinical trials.

5.8.2

Free of charge, provide to Avigen all information and documentation in its possession at the relevant time regarding the relevant Licensed Products and the manufacturing process therefore to the extent necessary to support such applications. This shall include but not be limited to any information typically required in drug master files (DMFs).

5.9

Notices Regarding Certain Regulatory Submissions and Grants. Avigen shall promptly inform SDI of the submission and grant of any Regulatory Approval.

5.10

No SDI Communications with Territory Regulatory Bodies. Except to the extent Avigen requests in writing, SDI and its Affiliates and Other Licensees (“SDI Communicators”), shall not communicate with any Regulatory Body of the Territory (including the FDA) regarding any Licensed Products.

5.11

Clinical Trial Information from Each Party.

5.11.1

Disclosure. Each Party shall promptly disclose to the other, free of charge, and for the other Party’s use in accordance with this Agreement, any and all Clinical Trial Information that the disclosing Party develops or obtains or that otherwise becomes available to it before and during the term of this Agreement with respect to Licensed Product safety and Licensed Product efficacy for the Field.

5.11.2

Sharing with Other Licensees. Avigen acknowledges that SDI shall, subject to appropriate terms as to confidentiality, provide relevant Clinical Trial Information to its other Licensed Product licensees outside the Territory (together with any Licensed Product distributors outside the Territory, the “Other Licensees”), subject to the last sentence of this Section 5.11.2. SDI shall be entitled to use Avigen’s Clinical Trial Information itself for SDI’s own activities with regard to the Licensed Products outside the Territory. SDI shall only provide Avigen’s Clinical Trial Information to those Other Licensees who agree in writing in advance to provide all Know-How of the Other Licensee that if such Know-How were Controlled by SDI would be Clinical Trial Information, to Avigen, and that Avigen shall be entitled to use, practice and disclose such Know-How within the scope of, and for activities in exercise of, Avigen’s license under Section 2.1.

5.11.3

Control of Information from SDI CR Clinical Program. SDI covenants that it shall have the right to license to Avigen for the activities specified in Section 2.1 all Know-How generated in connection with the SDI CR Clinical Program and all other testing of Licensed Product by or on behalf of SDI or its Affiliates.

6

Commercialization and Commercial Supply.

6.1

Committee at Commercialization Stage. The Committee shall (as per Section 5.1) continue to meet annually after US Launch of the CR-Qualified Product (or if CR-Qualified Product development is abandoned by SDI or Avigen, of the IR Product in the US). Avigen will provide the Committee with written updates regarding Avigen’s progress to commercialize Licensed Products, every [*] prior to the anticipated date of first Launch in the Territory and continuing so long as the Committee meets.

6.2

Marketing Plans. Avigen shall be responsible for the creation and implementation of marketing plans for the Licensed Products in the Territory. Avigen shall not be required to obtain SDI’s approval of Avigen’s marketing plans, promotional advertising and selling material. At a reasonable time and in no event later than [*] before anticipated Launch of a Licensed Product in the Territory, Avigen shall provide SDI with its marketing plan for the Territory. Thereafter Avigen shall provide SDI’s Marketing Representative (meaning one of SDI’s Committee members, whom SDI will designate as the primary contact for marketing information sharing) with Avigen’s annual marketing plan for the Territory [*] until (as to each Licensed Product) [*] after Launch of such Licensed Product in the US. SDI’s Marketing Representative’s function is to provide comment to Avigen to which Avigen shall give due consideration, but all decision-making authority (including the final decision) with regard to all promotional and other commercialization activity for the Licensed Products in the Territory shall remain with Avigen. Such marketing plans shall include (at a gross level of detail) the activities of Avigen’s Affiliates and Sublicensees, if any. Such marketing plan for Licensed Products shall include the following information:

6.2.1

[*

6.2.2

6.2.3

6.2.4

6.2.5

]

6.3

Net Sales Reports. Avigen shall inform SDI in writing within [*] following the end of each Quarter about the Net Sales value and calculation for the Quarter, and Avigen’s and its Affiliates’ and/or its Sublicensees’ inventories of the Licensed Products. Avigen may choose to combine this report with the report of Section 4.6.2.

6.4

Sales Estimates. In addition to the forecast and ordering procedures set out in the Supply Terms, Avigen shall provide to SDI a sales target report showing Avigen’s estimates of sales of Licensed Products by or on behalf of Avigen over a [*] period (“Sales Estimate”). The first Sales Estimate shall be provided no later than [*] prior to the anticipated date of Launch of the first Licensed Product, and shall estimate sales for the [*] period from Launch. The Sales Estimate shall be updated [*]. The Sales Estimate shall not be binding, but Avigen shall use its Diligent and Reasonable Efforts to ensure that it is a true and accurate reflection of Avigen’s then-expected sales performance, fairly and reasonably estimated based upon the information then available to Avigen.

6.5

Launch Notice. Avigen shall promptly (within [*] days after occurrence) inform SDI in writing of the date of actual Launch of each Licensed Product in the Territory.

6.6

Pricing. Pricing policy for Licensed Products shall be the exclusive responsibility of Avigen.

6.7

Quality. Avigen shall procure that all of the Licensed Products marketed by or on behalf of it, its Affiliates and its Sublicensees are of satisfactory quality and comply with all applicable laws and regulations in each part of the Territory, including without limitation the Regulatory Approval therefor, and all subject to SDI meeting its obligations under the Supply Terms.

6.8

Promotional Material. No more frequently than once per year the Committee will review Avigen’s printed promotional materials for the Licensed Product. SDI shall be entitled to share its thoughts and comments with Avigen. Avigen, however, as between the Parties retains sole decision-making authority as to promotional materials.

6.9

Supply Terms. During the term of this Agreement, SDI agrees to supply Avigen and Avigen agrees to purchase from SDI, Avigen’s and its Affiliates’ and Sublicensees’ total clinical and commercial requirements of the Licensed Product for the Territory (to be clear, except as provided in Section 4.5.5, Section 10.4, and Supply Terms Articles 6 and 8). The supply and purchase shall be pursuant to the Supply Terms.

6.10

Relationship to Supply Terms. The Supply Terms shall be deemed part of this Agreement, and any breach thereof shall be deemed a breach of this Agreement.

7

Diligence and Diligence Determinations.

7.1

Diligence Obligation. Avigen shall devote Diligent and Reasonable Efforts, subject to SDI supplying Licensed Products in accordance with the Supply Terms, to:

7.1.1

conduct any Pivotal Clinical Trials of the Current IR Product that may be required to support US Regulatory Approval of the Current IR Product for [*];

7.1.2

if the results of the SDI CR Clinical Program are sufficient to support the commencement of a Pivotal Clinical Trial, which Pivotal Clinical Trial would be of a formulation that (at that stage) meets the definition of CR-Qualified Product, conduct those Pivotal Clinical Trials that are required to support US Regulatory Approval of that CR-Qualified Product for [*] provided, however, that for formulations that [*] to avoid any doubt, this Section 7.1.2 in no way alters the application of [*] and shall not be read or deemed to prevent Avigen from choosing to discontinue clinical trials of a formulation that [*] (so that unless the formulation separately [*] and this

7.1.3

within [*] after US Regulatory Approval of a first IR Product, Launch such IR Product in the US;

7.1.4

within [*] after US Regulatory Approval of a first CR-Qualified Product, Launch such CR-Qualified Product in the US;

7.1.5

after US Launch of each Licensed Product, promote and market such Licensed Product, including [*]; and

7.1.6

after US Regulatory Approval, determine a strategy for whether to seek Regulatory Approval of such Licensed Product in the other countries of the Territory (it being understood and agreed that depending on pricing, parallel importation and all other relevant issues and concerns a reasonable commercial strategy for the Licensed Product may not involve seeking Licensed Product Regulatory Approval in or selling Licensed Product in such other countries of the Territory). It is anticipated by the Parties that not seeking Regulatory Approval for and selling Licensed Product in such other countries of the Territory may be consistent with the exercise of Diligent and Reasonable Efforts.

7.2

Development and Launch Diligence Goals and Timelines. Avigen shall be deemed to be meeting its obligations under Section 7.1 so long as it does not fail to meet any of the following diligence goals on the timeline set forth in this Section 7.2:

7.2.1

IR Product.

7.2.1.1

File an IND with [*] for an IR Product within [*]

7.2.1.2

commence a clinical trial of the Current IR Product [*] for such trial ([*] to [*]); and

7.2.1.3

if warranted by the results of the clinical program, submit an NDA to the FDA to request Regulatory Approval to market the Current IR Product, [*] after [*] of such Licensed Product data from which trial will be incorporated in the NDA [*] of such Product data from which trial will be incorporated in the NDA [*]

7.2.2

CR-Qualified Product.

7.2.2.1

file an IND for a CR-Qualified Product within four [*] after a pre-IND meeting with the FDA at which FDA indicates it will not reject such an IND and the clinical study for which it provides would be viewed by the FDA as a Pivotal Clinical Trial of the Current CR Product [*]

7.2.2.2

commence a Pivotal Clinical Trial of the Current CR Product within [*] after IND non-rejection for such trial;

7.2.2.3

if warranted by the results of such Pivotal Clinical Trial, submit an NDA to the FDA to request US Regulatory Approval for the Current CR Product, [*] after [*] if [*] as a [*] or [*] after [*] of such Licensed Product data from which trial will be incorporated in the NDA [*]

7.2.3

Reformulations. If either of the Current IR Product or the Current CR Product does not proceed in development or must be reformulated in order to proceed in development, then Avigen shall meet the diligence goals set forth in Sections 7.2.1 and 7.2.2 and Avigen’s other diligence obligations under this Agreement with a different IR Product or the CR Trial Formulation, as the case may be.

7.2.4

Clarification in Relation to Supply Failures. Further, any failure by SDI to supply Licensed Products in accordance with the Supply Terms shall extend the timelines of this Section 7.2 by an amount of time equal to any delay resulting from this failure to supply.

7.3

Effect of Timelines. The Parties have agreed timelines for Licensed Product clinical development and regulatory diligence goals for Avigen for the Territory that the Parties consider are reasonable and likely to be consistent with the application of Diligent and Reasonable Efforts. However, the Parties recognize that Avigen’s failure to meet any diligence goal set forth in such Sections by the corresponding deadlines set forth in the applicable Section shall not in and of itself constitute a diligence failure nor a material breach of this Agreement for purposes of Section 7.4 so long as Avigen has devoted its Diligent and Reasonable Efforts but despite such efforts it has failed to meet the timelines set forth above. Furthermore, to the extent that Avigen has devoted its Diligent and Reasonable Efforts, and thereafter complies with the procedures set forth in Section 7.4 in relation to any failure to achieve a diligence milestone by the corresponding deadline, and carries out any Diligence Plan established in accordance with such Section to address such failure, Avigen shall not be deemed to have materially breached this Agreement by virtue of failure to achieve a Section 7.2 milestone by the corresponding deadline.

7.4

Milestone Timeline Meetings; Diligence Plans. If Avigen fails to meet any of the diligence goals set forth in Section 7.2 by the corresponding deadlines, then SDI may request a meeting with Avigen in writing. The Committee shall meet within [*] after SDI’s written request to discuss the reasons for Avigen not meeting the deadline, how Avigen may overcome any impediments that may have prevented it from achieving any of the diligence goal deadlines, and a reasonable revised timeline for Avigen to achieve the remaining diligence goals applying Diligent and Reasonable Efforts. Within [*] after the Parties’ meeting, Avigen shall provide to SDI Avigen’s written plan for the further development and commercialization of the applicable Product (the “Diligence Plan”). Any Diligence Plan shall take into consideration among other factors (including without limitation regulatory issues) that which is out of the reasonable control of Avigen or its ability to plan for (e.g., serious adverse events, Regulatory Authority-imposed or mandated delays or IRB-imposed or mandated delays). Avigen’s Diligence Plans must be reasonably calculated (taking into consideration the foregoing) to promptly meet all remaining diligence milestones set forth in the applicable Section of this Agreement as soon as is reasonably practicable after the original deadlines by the application of Diligent and Reasonable Efforts. However, while any Diligence Plan will include timelines, each will be focused primarily on activities. SDI may comment on Avigen’s Diligence Plan. If requested by SDI the Parties shall promptly (within [*] after SDI’s request) meet to discuss SDI’s comments. Avigen shall provide to SDI a revised written plan reasonably addressing SDI’s concerns within thirty (30) days after any such meeting, and this revised version will be the Diligence Plan. Once a Diligence Plan is in place, then Avigen shall use Diligent and Reasonable Efforts to carry out the Diligence Plan. So long as Avigen uses Diligent and Reasonable Efforts to comply with such a Diligence Plan, Avigen shall not be deemed to have been in breach of this Agreement by virtue of the failure to meet a particular diligence milestone set forth in this Agreement as of the Commencement Date by the corresponding deadline. Any failure by Avigen to use Diligent and Reasonable Efforts to comply with such a Diligence Plan shall be eligible to qualify as a material breach of this Agreement. However, any evaluation of whether a material breach has occurred must be based on an evaluation of all relevant facts and circumstances.

7.5

Commercial Diligence Discussions.

8

Intellectual Property.

8.1

Ownership. Any and all right, title and interest to any Patents and Know-How related to Licensed Product created by or on behalf of SDI (or its Affiliates) shall remain owned by SDI. Any and all right, title and interest to any Patents and Know-How related to Licensed Product created by or on behalf of Avigen (or its Affiliates, Sublicensees or Distributors) shall as between the Parties remain owned by Avigen.

8.2

Obtain and Maintain the Licensed Patents. Avigen shall have the right at its own cost and expense to file, prosecute, and maintain the Licensed Patents in the Territory. This includes prosecuting to issuance, paying the issue fees for and maintaining valid and enforceable issued Patents in the name of SDI for each of the patent applications listed in Schedule 1. (To facilitate this, SDI shall provide to Avigen within [*] after the Commencement Date, a complete copy of the file history and correspondence for each Listed Patent Right. Also, SDI shall inform Avigen within [*] business days after the Commencement Date of any impending deadlines (such as office action responses falling due) within the first [*] after the Commencement Date. SDI shall also promptly provide to Avigen any letter of authorization or similar documents required for Avigen to assume prosecution of the Licensed Patents in the Territory.)

8.3.1

Disclosure and Ownership. All patentable [*] made or generated by either Party or its Affiliate in the course of performing hereunder or exercising a right granted hereunder (or, in SDI’s case, performing Tolperisone-related activities for outside the Territory) and whether or not having broader applicability than with Tolperisone Products (each, an “Improvement” and all Patent rights therein, an “Improvement Patent”) shall be promptly disclosed by the inventing Party to the other Party in reasonable detail. All such Improvements (and the Improvement Patents claiming them) solely invented by either Party (or solely by its employees or other humans who are its agents) shall be and remain the sole property of the solely inventing Party. All such Improvements (and the Improvement Patents claiming them) jointly invented by the Parties (or jointly invented by at least one employee or other human who is the agent of one Party, and at least one employee or other human who is the agent of the other Party) (these Improvement Patents are “Joint Improvement Patents”) shall be jointly owned by the Parties, subject to the licenses (a) to Avigen in Section 2.1, Section 10.4.2 (in case of a termination covered by such Section) and in the Supply Terms and (b) to SDI in Section 8.3.2. The right of the Parties as joint owners outside the scope of such licenses shall be as per Section 8.3.4.

8.3.2

Rights and Licenses under Improvements and Improvement Patents. The Improvement Patents to the extent owned by SDI (including SDI’s interest in the Joint Improvement Patents) are included among the Licensed Patents exclusively licensed to Avigen in Section 2.1, Section 4.5.5, Section 10.4.2 (in case of a termination covered by such Section) and in the Supply Terms. Avigen hereby grants to SDI [*] exclusive license under Avigen’s interest in the Improvements Patents (including Avigen’s interest in the Joint Improvement Patents) to practice such Inventions outside the Territory. Such license granted by Avigen shall only be sublicensable to Other Licensees who grant an equivalent license back to Avigen with respect to the Territory under all Tolperisone-related (including via claiming its composition, manufacture, formulation or use (including methods of administration)) Patents (a) claiming inventions by or on behalf of such Other Licensee, or (b) otherwise Controlled by such Other Licensee. Such license granted by Avigen shall endure for the full term of this Agreement, and shall survive all terminations of this Agreement other than terminations for SDI’s material breach.

8.3.3

Filing and Prosecution. Prosecution of Improvement Patents that are Licensed Patents but are not Joint Improvement Patents is as per Section 8.2. The Parties shall mutually agree which Party shall file, prosecute and maintain the Joint Improvement Patents; provided that if they are unable to agree, [*] The Parties shall cooperate with respect to the filing, prosecution and maintenance of the Joint Improvement Patents. Avigen has the sole right to file, prosecute and maintain Improvement Patents that are solely owned by Avigen.

8.3.4

Joint Ownership Rights. Outside the scope of the licenses to Avigen in Section 2.1, Section 4.5.5, Section 10.4.2 (in case of a termination covered by such Section) and in the Supply Terms, and to SDI in Section 8.3.2, the Parties shall have rights as joint

8.4

Infringement of the Licensed Patents

8.4.1

Notice. Each Party shall inform the other Party promptly if it becomes aware of any actual infringement, or potential or threatened infringement, of any of the Licensed Patents by Tolperisone Product-related activities in the Territory. A Party providing a notice under this Section shall disclose any evidence in its possession to support an allegation of infringement. The Parties shall consult with each other promptly after any such notice to decide the best way to respond to such infringement. In these discussions, the Parties may seek to agree on a joint program of action, including how the costs of any such action are to be borne and how any damages or other sums received from such action are to be distributed, however, unless the Parties execute a written amendment to this Agreement (executed by authorized officers of each Party, as per Section 12.2), with respect to alleged actual infringement of the Licensed Patents in the Territory by activities with Tolperisone Products (“Territory Infringement” Territory Infringement includes, to avoid any doubt, any acts that would give rise to a right to bring suit against a generic under ▇▇▇▇▇-▇▇▇▇▇▇ (as it may be amended or under any legislation that may replace or supersede it)), the remainder of this Section 8.4 shall apply.

8.4.2

First Right for Territory Infringement. [*] shall have the first right to bring suit under the Licensed Patents against all instances of Territory Infringement, at [*] sole expense. [*] is, subject to Section 8.4.4, entitled to fully control all suits brought by it under this Section 8.4.2.

8.4.3

Back-Up Right for Territory Infringement. If [*] fails to bring suit to end any instance of Territory Infringement within 180 days after a notice between the Parties under Section 8.4.1 of the Territory Infringement, then [*] shall be entitled to bring suit against the Territory Infringer, at [*] sole expense. [*] is entitled to fully control all suits brought by it under this Section 8.4.3.

8.4.4

Cooperation. Each Party shall reasonably cooperate with the other Party in any suit brought by that other Party under Section 8.4.2 or 8.4.3. To support the costs of this cooperation, the Party bringing suit shall reimburse the cooperating Party for all reasonable out-of-pocket, external costs and expenses incurred by the cooperating Party in providing such cooperation. This excludes, however, the cooperating Party’s costs of retaining independent counsel, if the cooperating Party chooses to do so. The cooperating Party is entitled to invoice the Party bringing suit for such costs and expenses as frequently as monthly; the cooperating Party shall provide documentation for the invoice if requested in writing by the Party bringing suit; and these invoices shall be payable (and the Party bringing suit shall pay them) within thirty (30) days after receipt of the invoice by the Party bringing suit.

8.4.5

Settlements. A Party bringing suit under 8.4.2 or 8.4.3 is entitled to settle the suit. However: (a) Avigen shall not settle any such suit in a manner involving [*] without first obtaining SDI’s consent, such consent not to be unreasonably withheld; and (b) SDI shall not settle any such suit in a manner involving [*]

8.4.6

Recoveries.

8.4.6.1

Any of Avigen’s recoveries in a suit under [*] shall go (a) first to reimburse Avigen its costs (including costs Avigen has reimbursed to SDI) of such suit, (b) second, where as a result of such suit the circumstances referred to in Section 4.3.3 no longer apply, to [*] and (c) and third, any remaining recovery shall be divided between the Parties as follows: the amount of infringing sales underlying such remaining awards shall be [*] with [*] on [*] and [*] the [*]

8.4.6.2

Any of SDI’s recoveries in a suit under Section [*] shall go (a) first to reimburse SDI its costs (including costs SDI has reimbursed to Avigen) of such suit, and (b) second, where as a result of such suit the circumstances referred to in Section 4.3.3 no longer apply, [*] and (c) and third, any remaining recovery shall be divided between the Parties as follows: the amount of infringing sales underlying such remaining award shall be determined; Avigen shall receive an amount equal

8.5

Orange Book Listings

8.5.1

Intention. The Parties agree that they wish any issued patent within the Licensed Patents that claims the Licensed Products’ composition, manufacture or use in a way that legally qualifies for listing in the Orange Book for the Licensed Products (“Relevant Patents”) to be listed in the Orange Book with respect to the Licensed Products in accordance with the Federal Food, Drug, and Cosmetic Act, as amended by the ▇▇▇▇▇-▇▇▇▇▇▇ Act and any subsequent amendments. The Parties shall commence discussions to seek to agree, at NDA filing for a particular Licensed Product, and shall agree no later than [*] thereafter (or within such time period commence the procedures of Section 8.5.3 to determine whether particular Licensed Patents are Relevant Patents), which of the Licensed Patents meet the standard for Relevant Patents, that will therefore be notified to the FDA for listing in the Orange Book. Avigen shall be responsible for providing the FDA with the required patent information regarding the Relevant Patents, and for using all Diligent and Reasonable Efforts to seek to procure that the Relevant Patent(s) is/are listed in the Orange Book, whether such Relevant Patents issue prior to, on the date of or subsequent to NDA Approval.

8.5.2

Timing to List. Avigen shall provide the FDA with such patent information as soon as practicable, but in any event no later than [*] prior to the deadline for listing. Avigen shall notify SDI contemporaneously upon submitting such patent information to the FDA. Should Avigen fail to notify SDI of submission of such patent information within such period, then [*] and [*] with respect to [*] or that have been determined [*] to be [*] the patent information regarding that Relevant Patent to the FDA [*] (other than if this Agreement terminates) [*] in such circumstance.

8.5.3

Procedure to Determine Relevant Patents. For Licensed Patents that are issued as of NDA filing for a particular Licensed Product, if the Parties do not agree in writing whether particular such Licensed Patents are Relevant Patents within [*] after such NDA filing, then within an additional [*] then SDI may refer the matter for dispute resolution. The dispute resolution shall be as per the procedure of Section 8.9.1.2 applied mutatis mutandis to determine on a Licensed Patent-by-Licensed Patent basis which of them are Relevant Patents. For Licensed Patents that are not issued as of NDA filing but later issue, the Parties shall commence their discussions as to whether such Licensed Patent is a Relevant Patent promptly after the notice of allowance for such Licensed Patent is received by Avigen, shall complete such discussions within [*] and shall commence the determination procedure under this Section 8.5.3 (if any) within [*] thereafter.

8.6

Patent Term Extension. The Parties shall discuss any extension of patent term that may be available for any Licensed Patent with respect to each Licensed Product. After consulting with SDI, if Avigen chooses to do so it shall be entitled to apply to extend the term of any Licensed Patent with respect to Licensed Product(s) in any one or more countries of the Territory. If at the time the last Valid Claim of a Licensed Patent supporting a Royalty Term hereunder is scheduled to expire it is the case that in the US only one Patent may be extended with respect to each Licensed Product, and each Patent may only be extended once, Avigen shall make its decision whether to extend the term of a Licensed Patent with respect to a particular Licensed

8.7

Infringement of third party rights

8.7.1

If any warning letter or other notice of infringement is received by a Party, or legal suit or other action is brought against a Party, alleging infringement of Third-Party rights in the manufacture, use or sale of any Licensed Product, that Party shall promptly provide full details of the notice or a copy of the complaint filed in the suit to the other Party, and the Parties shall discuss the best way to respond.

8.7.2

The Party against which such Third-Party infringement is brought is entitled to defend itself against the suit and to control such defense, and will bear the full costs of such defense (but to the extent any resulting damages are required to be indemnified for under Article 9, this indemnification shall remain available). Nothing in this Section 8.7 is intended to alter the provisions of Article 9 regarding Indemnification. Avigen is entitled to tender defense of any Third-Party infringement suit to SDI to the full extent SDI is required to Indemnify for such suit under Article 9. In addition, to the extent any such suit that Avigen is entitled to tender relates to an injunction rather than money damages, Avigen is entitled to defend and control at its expense the portion of the suit that relates to the injunction, while still tendering defense of the remainder of the suit.

8.8

Trademarks

8.8.1

Avigen may market the Licensed Products in the Territory under a trade ▇▇▇▇ of its choice (“Trade ▇▇▇▇”), subject to first conferring with SDI as to the selection of such Trade ▇▇▇▇ (however Avigen is not required to obtain consent from SDI as to such selection).

8.8.2

Upon termination (but not expiry) of this Agreement by SDI under Section 10.2.3 for Avigen’s uncured material breach or insolvency or by Avigen at will under Section 10.2.2, upon request Avigen shall assign and transfer to SDI the Trade ▇▇▇▇ and all rights therein including any goodwill attached thereto. Such assignment and transfer shall be for the sum of $1.

8.8.3

In any event, Avigen shall not market any products in the Field under any trade ▇▇▇▇ which is confusingly similar to the Trade ▇▇▇▇.

8.9

Licenses for Third-Party Intellectual Property

8.9.1

Discussions. The Parties will discuss all potentially desirable intellectual property licenses for the Territory for Licensed Products through the mechanism provided in Section 8.9.1.1. Patent and Know-How and/or trademark licenses for the Territory that [*] shall be “Necessary”. If the Parties do not agree as to whether a particular license is Necessary, they will resolve the matter through the procedure stated in Section 8.9.1.2.

8.9.1.1

Licensing Discussion Procedures. While this Agreement is in effect, if either Party identifies any Third-Party Patents or Know-How that it believes may be desirable to license to cover activities hereunder, it shall request (in writing) a meeting of the Committee with internal or external counsel for each Party. Such meeting shall occur within thirty (30) days after requested. If requested by counsel for either Party, the Parties shall enter into an appropriate and customary joint defense/common interest agreement to cover any and all such discussions and document the Parties’ common interest with respect to Licensed Product-related Third-Party intellectual property. In their meeting and any follow-up meetings, the Parties shall seek to reach consensus as to the relevance of such Third-Party intellectual property to Licensed Products and their manufacture for the Territory, and whether a related license is Necessary. Any minutes of such meeting(s) shall be prepared and kept only by counsel and shall be at an appropriate level of detail and include only statements that are appropriate in view of the possibility of litigation.

8.9.1.2

Patent-Related Dispute Resolution. If the Parties through a period of up to one month of Committee discussions cannot agree as to the Necessity of any license, they will submit the disagreement to an experienced patent attorney mutually acceptable to the Parties -- and who does not otherwise perform work for either Party or any of its Affiliates and is not affiliated with them -- (a “Patent Expert”) for resolution. They shall engage such attorney within [*] days after either Party notifies the other of a disagreement as to Necessity. (If they cannot agree as to who such attorney shall be within such time period, then the total of two nominees of the Parties (one from each Party) shall select a third Patent Expert who shall be the attorney to resolve the dispute. If such two (2) people cannot agree on the third person, then the arbitral body referred to in Section 12.9.2 shall select the Patent Expert who shall be the attorney to resolve the dispute.) The Parties shall share equally the expenses incurred for the services of such Patent Expert and arbitral body. Within [*] days after engaging the patent attorney, the Parties shall each submit up to [*] pages of documentation to the patent attorney. Within [*] Business Days thereafter, the Parties shall convene a discussion with the patent attorney during which each Party may orally present its position as to Necessity for no more than [*] The Parties shall require the patent attorney to render his or her guidance as to Necessity within [*] Business Days after the oral presentations. Neither Party shall engage in any ex parte communications with the patent attorney. The Parties shall accept the patent attorney’s decision on Necessity of each license absent any fraud.

8.9.2

SDI is, as between the Parties, solely responsible to obtain all Necessary licenses to the extent those licenses [*] or [*] of [*] or [*] of [*] to [*] under this Agreement (except where such license is Necessary only because [*] approves an [*] SDI shall, for the avoidance of doubt, solely bear all costs payments and royalties that might be payable under any Necessary license for which SDI is responsible under this Section 8.9.2. Avigen has the right to offset under Section 4.3.4.2 [*] that Avigen pays on licenses that were SDI’s responsibility that Avigen takes because SDI has failed to do so.

8.9.3

Avigen is, as between the Parties, solely responsible to obtain all Necessary licenses to the extent those licenses [*] or [*] of [*] under this Agreement, excluding specifically those licenses for which SDI is responsible under Section 8.9.2. This means Avigen shall be solely responsible to obtain Necessary licenses under Patents that claim [*] in the [*], but only where [*] Avigen shall, for the avoidance of doubt, solely bear all costs payments and royalties that might be payable under any Necessary license for which Avigen is responsible under this Section 8.9.3. Because Avigen is the marketing and selling Party, SDI is not entitled to take any Necessary licenses for which Avigen is responsible but must instead [*]

9.

Representations, Warranties and Indemnification.

9.1

Representations and Warranties by Both Parties. Each Party represents and warrants to the other that:

9.1.1

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

9.1.2

the representing and warranting Party is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and the person or persons executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate action.

9.1.3

this Agreement is legally binding upon the representing and warranting Party and enforceable in accordance with its terms. The execution, delivery and performance of this Agreement by it does not conflict with any agreement, instrument or understanding, oral or written, to which the representing and warranting Party is a party or by which it may be bound, nor violate any material law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.

9.1.4

the representing and warranting Party has not granted, and shall not grant during the term of the Agreement, any right to any Third Party which would conflict with the rights granted to the other Party hereunder. It has (or shall have at the time performance is due) maintained and shall maintain and keep in full force and effect all agreements necessary to perform its obligations hereunder.

9.1.5

the representing and warranting Party is not aware of any action, suit or inquiry or investigation instituted by any governmental agency which questions or threatens the validity of this Agreement.

9.2

Additional Representations and Warranties by SDI. SDI represents and warrants to Avigen as follows:

9.2.1

SDI is the sole and lawful owner of the entire right, title, and interest in and to the Listed Patent Rights and Controls the Information within the scope of activities included in Avigen’s license in Section 2.1;

9.2.2

as of the Commencement Date, there are no outstanding liens, security interests, pledges, charges, mortgages, restrictions, interests and/or encumbrances of any kind in or burdening any of the Listed Patent Rights or the Information;

9.2.3

as of the Commencement Date, the only Patents Controlled by SDI or any of its Affiliates that claim or relate to the Current IR Product, the Current CR Product, Tolperisone or any other Tolperisone Product are the Listed Patent Rights;

9.2.4

as of the Commencement Date, SDI has not granted, expressly or otherwise, any assignment, license or other extension of rights, covenant not to ▇▇▇, or other similar interest or benefit, exclusive or otherwise, to, under or in the Listed Patent Rights or the Information with respect to the Territory, which remains in effect or in force, nor has any of SDI’s Affiliates done any of the foregoing;

9.2.5

SDI has not executed, and SDI further covenants that it shall not execute, any agreements inconsistent with this Agreement or to the detriment of the Listed Patent Right, other Licensed Patents or the Information (or other Licensed Know-How (including Clinical Trial Information); nor have nor shall any of SDI’s Affiliates;

9.2.6

as of the Commencement Date, SDI is not aware of any Patents or Know-How owned or controlled by a Third Party that would be infringed or misappropriated by the manufacture, use, sale, offer for sale, importation or development of Tolperisone Products (including the Current IR Product and Current CR Product);

9.2.7

as of the Commencement Date there are no interferences pending, declared or threatened regarding the Listed Patent Rights;

9.2.8

the safety- and efficacy-related data and information (including without limitation non-clinical and clinical data) regarding Tolperisone, the Current IR Product and the Current CR Product is -- as of the Commencement Date -- true and accurate in all material respects. SDI has not omitted to disclose to Avigen any data or information (including without limitation non-clinical and clinical data) that is or reasonably could be expected to be material to Avigen’s (or any reasonable prospective licensee’s) decision to enter into the transaction contemplated in this Agreement;

9.2.9

other than the Current IR Product and Current CR Product, SDI and its Affiliates do not as of the Commencement Date have in non-clinical development, IND-enabling work or clinical development any Tolperisone Products or Competing Product, nor does any of them market any Tolperisone Product or Competing Product in each case themselves or through contract(s) with any Third Party(ies); and

9.2.10

SDI and its Affiliates are not aware of any Third Party developing any Tolperisone Product for anywhere in the Territory. SDI and its Affiliates are not aware of any Third Party that has filed an IND for any Tolperisone Product anywhere in the Territory. SDI and its Affiliates are not aware of any Third Party that has submitted a Regulatory Approval Application for any Tolperisone Product to any Regulatory Body of the Territory.

9.3

Additional Representations and Warranties by Avigen. Avigen hereby warrants and represents to SDI that as of the Commencement Date neither Avigen nor its Affiliates has any Tolperisone Product or Competing Product in non-clinical development, IND-enabling work or clinical development or on the market.

9.4

No Other Warranties; Disclaimer. Each of Avigen and SDI acknowledges that, in entering into this Agreement, it does not do so in reliance on any representation, warranty or other provision except as expressly provided in this Agreement, and any conditions, warranties or other terms implied by statute or common law are excluded from this Agreement to the fullest extent permitted by law. Nothing in this Agreement shall be construed as a warranty by SDI or any acknowledgement or reliance by Avigen, that the Patent Rights are valid or enforceable or that their exercise does not infringe any Third Party patent rights. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN SECTIONS 9.1-9.3, ALL PATENTS AND KNOW-HOW PROVIDED BY EACH PARTY HEREUNDER ARE PROVIDED “AS IS” AND EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THAT ANY PROGRAM TO SEEK REGULATORY APPROVAL IN THE US OR ELSEWHERE IN THE TERRITORY WILL BE SUCCESSFUL.

9.5

Indemnification by Avigen. Avigen hereby agrees to defend, hold harmless and indemnify (collectively “Indemnify”) SDI and its Affiliates, and its and their agents, directors, officers and employees (the “SDI Indemnitees”) from and against any and all liabilities, expenses, damages and/or losses (including without limitation reasonable legal expenses and attorneys’ fees) (collectively “Losses”) resulting from suits, claims, actions and demands, in each case brought by a Third Party (each, a “Third-Party Claim”) arising directly or indirectly out of (i) a breach of any of Avigen’s representations and warranties or covenants pursuant to Section 9.1 or 9.3; (ii) the development, storage, handling, use, sale, offer for sale or importation of Licensed Products by or on behalf of Avigen, its Affiliates, Sublicensees and Distributors in the Territory other than as part of transition assistance to SDI under Section 10.2.2 but including liabilities for which Avigen is responsible under Supply Terms Section 4.12; or (iii) [*] Avigen’s obligation to Indemnify the SDI Indemnitees pursuant to this Section 9.5 shall not apply to the extent that any such Losses (A) arise from the negligence or intentional misconduct of any SDI Indemnitee; (B) arise from any breach by SDI of this Agreement; or (C) are Losses for which SDI is obligated to Indemnify Avigen Indemnitees pursuant to Section 9.6.

9.7

Procedure. To be eligible to be indemnified hereunder, the Indemnified Party shall provide the indemnifying Party with prompt notice of the Third-Party Claim giving rise to the indemnification obligation (provided that any delay in giving notice -- if and to the extent it does not materially prejudice the claim -- shall not relieve the indemnifying Party of its Indemnification obligation) pursuant to this Article 9 and (except as provided in Section 8.7) the exclusive ability to defend (with the reasonable cooperation of the indemnified Party) or settle any such claim; provided, however, that the indemnifying Party shall not enter into any settlement for damages other than monetary damages without the indemnified Party’s written consent, such consent not to be unreasonably withheld or delayed. The indemnified Party shall have the right to participate, at its own expense and with counsel of its choice, in the defense of any claim or suit that has been assumed by the indemnifying Party. If the Parties cannot agree as to the application of Sections 9.5 and 9.6 to any particular Third Party Claim, the Parties may conduct separate defenses of such Third Party Claim. Each Party reserves the right to claim indemnity from the other in accordance with Sections 9.5 and 9.6 above upon resolution of the underlying claim, notwithstanding the provisions of this Section 9.7 requiring the indemnified Party to tender to the indemnifying Party the exclusive ability to defend such claim or suit.

9.8

Insurance. Each Party shall procure and maintain insurance, including product liability insurance, adequate to cover its obligations hereunder and which are consistent with normal business practices of prudent companies similarly situated, at all times during which any Product is being clinically tested in human subjects or commercially distributed or sold by or on behalf of such Party in amounts that are reasonable and customary in the U.S. for companies of comparable size and activities, in any event no less than [*] It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article 9. Each Party shall provide the other with written evidence of such insurance or self-insurance upon request. Each Party shall provide the other with written notice at least thirty (30) days prior to the cancellation, non renewal or material change in such insurance or self-insurance which materially adversely affects the rights of the other Party hereunder.

9.9

Limitation of Liability. EXCEPT TO THE EXTENT SUCH PARTY MAY BE REQUIRED TO INDEMNIFY THE OTHER PARTY UNDER THIS ARTICLE 9 OR IN RESPECT OF A BREACH OF SECTION 3.2 OR 3.3 (CONFIDENTIALITY AND NON-USE OBLIGATIONS), NEITHER PARTY NOR ITS RESPECTIVE AFFILIATES AND LICENSEES SHALL BE LIABLE FOR SPECIAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, STRICT LIABILITY OR OTHERWISE.

10

Duration and Termination.

10.1

Commencement and Termination by Expiry. This Agreement, and the licenses granted hereunder, shall come into effect on the Commencement Date and, unless terminated earlier in accordance with this Article 10, shall continue in force on a country-by-country and Licensed Product-by-Licensed Product basis until the expiration of the last Royalty Term in such country with respect to such Licensed Product expires. On expiration of this Agreement with respect to a particular Licensed Product in a particular country, Avigen’s license in Section 2.1 shall, with respect to that Licensed Product in that country, become a perpetual, irrevocable royalty-free license under the Licensed Know-How.

10.2

Early Termination

10.2.1

This Agreement may be terminated by the mutual written agreement of Avigen and SDI. Each Party is entitled to withhold its agreement to terminate, in its sole discretion.

10.2.2

Avigen may terminate this Agreement with or without cause on [*] written notice to SDI. In such circumstances, SDI may seek to reallocate the rights and responsibilities of Avigen hereunder to another person. Should SDI choose to do so, and despite using Diligent and Reasonable Efforts, has been unable to make such alternative arrangements within such [*] unless the reason for Avigen’s termination is a Licensed Product safety or liability concern, Avigen shall [*] provide reasonable assistance to SDI with a view to [*] Avigen may exercise its right of termination under this Section with respect to this entire Agreement, with respect to solely all IR Products, or with respect to solely all CR-Qualified Products.

10.2.3

Without prejudice to any other right or remedy, either Party may terminate this Agreement at any time by notice in writing to the other Party (“Other Party”), such notice to take effect as specified in the notice:

10.2.3.1

if the Other Party is in material breach of this Agreement remaining uncured ninety (90) days after such Other Party receives notice specifying the breach and requiring its remedy, except the time periods and cure requirements are as follows: (a) where the material breach is an undisputed payment obligation the Agreement may be terminated if the Party in default has not remedied or dispute the default within thirty (30) days of receiving notice from the non-defaulting Party, and (b) for breaches not reasonably capable of cure within ninety (90) days, such Other Party may within such ninety (90) days deliver a plan to cure the breach as promptly as possible by the application of Diligent and Reasonable Efforts together with an undertaking to carry out such plan (and the non-breaching Party shall not be entitled to terminate so long as such Other Party is carrying out such plan); or

10.2.3.2

if: (A) the Other Party becomes insolvent or unable to pay its debts as and when they become due, (B) an order is made or a resolution is passed for the winding up of the Other Party (other than voluntarily for the purpose of solvent amalgamation or reconstruction), (C) a liquidator, administrator, administrative receiver, receiver or trustee is appointed in respect of the whole or any part of the Other Party’s assets or business, (D) the Other Party ceases to continue its business, or (E) as a result of debt and/or maladministration the Other Party takes or suffers any similar or analogous action.

10.2.3.3

For terminations under 10.2.3.1, [*] under this Agreement, in which case the Agreement shall terminate in its entirety, if Avigen is the breaching Party, and the breach relates primarily or exclusively to only one of an IR Product or a CR-Qualified Product, then SDI’s termination right will be only for the IR Product or the CR-Qualified Product (respectively).

10.2.4

SDI may terminate this Agreement by giving written notice to Avigen, such notice to have immediate effect if [*] or [*] the [*] or [*] of any of the [*] This explicitly does not apply to [*] of [*] in [*] this Agreement.

10.2.5

A Party’s right of termination under this Agreement, and the exercise of any such right, shall be without prejudice to any other right or remedy (including any right to claim damages) that such Party may have in the event of a breach of contract or other default by the other Party. If the material breach for which a Party seeks to terminate is disputed, then this Agreement shall not terminate prior to the dispute being resolved in accordance with Section 12.9.

10.3

Consequences of Termination -- Avigen Voluntary Terminations and Terminations where Avigen is at Fault.

10.3.1

Upon termination of this Agreement as a whole by Avigen under Section 10.2.2, or by SDI under Section 10.2.3.1, 10.2.3.2 or 10.2.4:

10.3.1.1

Avigen shall grant to SDI an exclusive, sublicenseable (through one (1) or more tiers of sublicensees), fully-paid, perpetual license under all data and information regarding the Licensed Products (including all Licensed Product specific (a) techniques, technology, practices, trade secrets, inventions (whether or not patentable), methods, manufacturing processes, formulae, formulations, specifications, documents, knowledge, skill, experience, test data and results (including that related to pharmacology, toxicology, preclinical testing, clinical testing, trials and studies, safety and efficacy, analytical and quality control), (b) compounds, formulations and compositions of matter, and (c) marketing data, including clinical studies designed to support promotional efforts), to make, have made, use, sell, offer to sell and import the Licensed Products in the Territory;

10.3.1.2

Avigen shall no longer be licensed to use or otherwise exploit in any way, either directly or indirectly, the Licensed Patents, in so far and for as long as any of such Patents remains in force, or the Licensed Know-How;

10.3.1.3

Any trade ▇▇▇▇ used by Avigen solely with the Licensed Products shall be assigned to SDI in accordance with Section 8.8.

10.3.1.4

Avigen shall consent to the cancellation of any formal license granted to it, or of any registration of it in any register, in relation to any of the Licensed Patent Rights and under Section 2.2; and

10.3.1.5

commensurate with legislative and regulatory requirements transfer to SDI or its nominee all Regulatory Approvals, Regulatory Approval Applications and INDs of Avigen and its Affiliates for the Licensed Products in the Territory.

10.3.2

Upon termination of this Agreement by Avigen under Section 10.2.2, or by SDI under Section 10.2.3.1, in either case with respect to either all IR Products or all CR-Qualified Products rather that as to this Agreement as a whole, then 10.3.1.1-10.3.1.5 shall apply, but solely with respect to all IR Products or solely with respect to all CR-Qualified Products (respectively).

10.4

Consequences of Termination -- Terminations where SDI is at Fault. Upon termination of this Agreement by Avigen under Section 10.2.3, (a) Avigen shall retain all of its rights under this Agreement; (b) Avigen shall be relieved of all of its obligations hereunder (including without limitation its diligence obligations under Article 7), except for its obligations with respect to royalties under Section 4.3, milestones under Section 4.2, confidentiality under Sections 3.2-3.7, and indemnification under Article 9; and (c) Avigen shall have the following rights with respect to Licensed Product manufacture:

10.4.1

Avigen is released of its obligations to purchase its requirements of Licensed Product from SDI;

10.4.2

SDI hereby grants Avigen, effective upon each such termination by Avigen, the exclusive right to manufacture Avigen’s (and its Affiliates’ and Sublicensees’) requirements of Licensed Product for the Territory (in any and all forms including Tolperisone API and Finished Product forms), under all Patents and Know-How the subject matter of which was practiced under the Supply Terms; such license shall be sublicenseable through one (1) or more tiers of sublicensees without consent;

10.4.3

SDI shall -- and SDI shall cause all of its Affiliates and contractors who have been manufacturing Licensed Product (in any and all forms) supplied (or to be supplied) to Avigen under the Supply Terms to -- promptly after written request by Avigen perform all technology transfer requested by Avigen to establish all then-current manufacturing processes (including analytical methods) for Licensed Products (in any and all forms) at Avigen’s manufacturing facility or the manufacturing facility of Avigen’s chosen supplier.

10.4.4

SDI shall continue to fill Avigen’s purchase orders for Licensed Product placed in accordance with the Supply Terms, until such time as Avigen is able to establish an alternative source of supply that has been validated with and accepted by all Regulatory Bodies of the Territory in which Licensed Products have received Regulatory Approval, such that Avigen may legally sell Licensed Products under such Regulatory Approvals in such country, but in any event no longer than [*];

10.4.5

Avigen shall remain responsible for royalties under Section 4.3, but except with respect to quantities actually supplied to Avigen by SDI in accordance with Section 10.4.4, Avigen shall not be responsible for any additional payments under Section 4.5.

10.5

Survival Generally. All rights of the Parties having accrued prior to expiration or termination of this Agreement shall survive all expirations and terminations of this agreement. In addition, the following shall survive all expirations and terminations of this Agreement (subject to any later expiration provided for in such provisions).

10.5.1

Articles 1, 3, 4 (but solely with respect to Net Sales prior to termination or expiration or as required to implement any surviving royalty obligation provided for under Section 10.4), 9, 10 and 12 ;

10.5.2

Sections 2.5, 5.12 (if the Parties are required after termination by law to report to Regulatory Bodies the events covered by the protocol adopted pursuant to such Section)), 8.3.1, the second paragraph of Section 8.3.2, 8.3.3 (to the extent regarding Joint Improvement Patents), 8.3.4, and 8.4 (as regards infringement while this Agreement or any surviving license to Avigen was or is in effect);

10.5.3

All Schedules, including the Supply Terms, except that the Supply Terms shall expire and may be terminated as set forth therein; the Supply Terms will not survive a termination the effects of which are stated in Section 10.3 (except to the extent required to supply Avigen during the transition period provided for in such Section), and except that to the extent Section 10.4 contradicts the Supply Terms Section 10.4 shall prevail and govern in the circumstances in which it applies.

11

Non-Competition.

11.1

Avigen. During the term of this Agreement neither Avigen nor its Affiliates shall directly or indirectly [*] a Competing Product in the Territory, except that where a Competing Product is obtained by Avigen through the acquisition or merger with a third party or any other circumstances under which a third party becomes an affiliate of Avigen, Avigen shall have a period of one (1) year or such longer period as may be reasonable under the circumstances provided it uses all commercially reasonable efforts from the date of consummation of such acquisition or merger or other triggering event, to divest of or otherwise dispose of any [*] in such Competing Product in the Territory.

11.2

SDI. During the term of this Agreement neither SDI nor its Affiliates shall directly or indirectly [*] a Competing Product in the Territory, except that where a Competing Product is obtained by SDI through the acquisition or merger with a third party or any other circumstances under which a third party becomes an affiliate of SDI, SDI shall have a period of one (1) year or such longer period as may be reasonable under the circumstances provided it uses all commercially reasonable efforts from the date of consummation of such acquisition or merger or other triggering event, to divest of or otherwise dispose of any [*] in such Competing Product in the Territory.

12

General.

12.1

Force majeure. Neither Party shall have any liability or be deemed to be in breach of this Agreement for any delays or failures in performance of this Agreement which result from extraordinary circumstances beyond the reasonable control of that Party (“Event of Force Majeure”). Events of Force Majeure are limited to extraordinary events. Extraordinary events include floods, earthquakes, tsunamis, acts of God, acts of war, acts of terrorism, general strikes and like events. Events of Force Majeure exclude labor disputes and strikes of solely the Party’s personnel. The Party affected by an Event of Force Majeure shall promptly notify the other Party in writing when such circumstances cause a delay or failure in performance and when they cease to do so and shall further exert Diligent and Reasonable Efforts to eliminate, cure and overcome any such Event of Force Majeure and to resume performance of its obligations with all possible speed.

12.2

Amendment. This Agreement may only be amended in writing signed by duly authorized officers of SDI and Avigen.

12.3

Assignment and third party rights.

12.3.1

Subject to Sections 12.3.2 and 12.3.3 below, neither Party shall assign, mortgage, charge or otherwise transfer any rights or obligations under this Agreement, including

12.3.2

Either Party may assign all its rights and obligations under this Agreement to any company with which it merges or to which it transfers all of its assets or business to which this Agreement relates, PROVIDED that the assignee undertakes to the other Party to be bound by and perform the obligations of the assignor under this Agreement. However a Party shall not have such a right to assign this Agreement if it is insolvent or any other circumstance described in Section 10.2.3.2 applies to it.

12.3.3

Either Party may assign or transfer all or any of its rights or obligations under this Agreement to, and/or may have any of its obligations fulfilled by, an Affiliate of such Party.

12.4

Waiver. No failure or delay on the part of either Party to exercise any right or remedy under this Agreement shall be construed or operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy preclude the further exercise of such right or remedy. Obligations under this Agreement may only be waived by a writing explicitly stating the waiver and signed by an authorized officer of the waiving Party.

12.5

Invalid clauses. If any provision or part of this Agreement is held to be invalid, such provision shall be deemed stricken and severed from this Agreement but the other provisions of this Agreement to the maximum extent permissible under applicable law shall remain in effect.

12.6

No Agency. Neither Party shall act or describe itself as the agent of the other, nor shall it make or represent that it has authority to make any commitments on the other’s behalf.

12.7

Interpretation. In this Agreement:

12.7.1

the headings are used for convenience only and shall not affect its interpretation;

12.7.2

references to persons shall include incorporated and unincorporated persons; references to the singular include the plural and vice versa; and references to the masculine include the feminine;

12.7.3

references to Articles, Sections and Schedules mean articles and sections of, and schedules to, this Agreement;

12.7.4

references in this Agreement to termination shall include termination by expiry; and

12.7.5

where the word “including” (or a derivative form) is used it shall be understood as meaning “including without limitation” (or the appropriate derivative form); similarly, where the phrase “such as” or a like phrase is used or an example given, the intent is not to be limiting, and the provision shall not be read to be limiting.

12.8

Notices

12.8.1

Any notice to be given under this Agreement shall be in writing and shall be sent by first class mail or air mail, or by fax (confirmed by first class mail or air mail) to the address of the relevant Party set out at the head of this Agreement, or to the relevant fax number set out below, or such other address or fax number as that Party may from

12.8.2

Notices sent as above shall be deemed to have been received three working days after the day of posting (in the case of inland first class mail), or seven working days after the date of posting (in the case of air mail), or on the next working day after transmission (in the case of fax messages, but only if a transmission report is generated by the sender’s fax machine recording a message from the recipient’s fax machine, confirming that the fax was sent to the number indicated above and confirming that all pages were successfully transmitted).

12.9

Law and Jurisdiction.

12.9.1

The validity, construction and performance of this Agreement, and all disputes arising hereunder, shall be governed by [*] law. All disputes arising under this Agreement (including disputes regarding its interpretation, but other than those disputes referred to in Section 12.9.2 or 12.9.3) shall first be submitted to the CEOs of each Party for good faith negotiation. If good faith negotiations over a period of [*] days do not resolve the dispute (and each Party shall make its CEO reasonably available for such discussions during such time period), then either Party may by written notice to the other Party refer the dispute for resolution before the [*] using its most relevant and applicable rules. The fees of such arbitral body shall be equally shared by the Parties. The arbitration shall take place in [*] The arbitration shall be conducted in English before arbitrator(s) from neutral country(ies). Such an arbitration proceeding, or a resolution in accordance with Section 12.9.2 or 12.9.3, shall be the exclusive means to resolve disputes arising under this Agreement. Such disputes shall not be submittable to any court, except as provided in the next sentence. A Party may seek an interim injunction in any court of competent jurisdiction pending arbitration under Section 12.9.1 or other resolution under Section 12.9.2 or 12.9.3.

12.9.2

If the Parties are unable to agree on whether the Current CR Product or an alternative formulation asserted to be a CR-Qualified Product, in either case following the completion of the Required Phase II CR Clinical Trial (or commensurate trial data from which is being presented under Section 7.2.3) in the US -- which dispute remains unresolved [*] days after referral to the Parties’ CEOs for good-faith discussions (and each Party shall make its CEO reasonably available for such discussions)) -- then either Party is entitled to refer this issue for decision by a panel of people each of whom is unaffiliated with both of the Parties and their Affiliates, and who have the following characteristics: One such person shall have been [*] leading up to the dispute. Two other such people shall be [*] to [*] One other such person shall be a [*] within the [*] The [*] role is to advise the other panel members objectively. The [*] will be a non-voting member of the panel (all other members are voting members). If possible, the Parties shall agree on each member of the panel. If the Parties cannot agree on the people who will be on the panel within [*] after referral of the dispute for resolution, then the arbitral body referred to in Section 12.9.1 shall designate such people. The panel shall, with access to and on the basis of [*] plus no more than [*] of argument and no more than [*] determine whether the applicable formulation -- at that time -- is a CR-Qualified Product in accordance with clause (i) of the definition of such term. The panel's decision shall be binding on the Parties as to whether the subject formulation -- at that time -- qualifies as a CR-Qualified

12.9.3

Sections [*] provide specialized dispute resolution procedures for particular issues as provided for in such Sections. Disputes as to the subject matter of such dispute resolution procedures shall be resolved solely as set forth in each respective such Section, and not in any other manner.

12.10

Language. This Agreement has been prepared in the English language, American usage, which shall govern its meaning and interpretation.

12.11

Entire Agreement. This Agreement, including its Schedules and Attachments (including to avoid any doubt the Supply Terms), sets out the entire agreement between the Parties relating to its subject matter and supersedes all prior oral or written agreements, arrangements or understandings between them (or between either of them and the other’s Affiliate) relating to such subject matter, including the confidentiality agreement referred to in Section 3.3.1. The Parties acknowledge that they (and their Affiliates) are not relying on any representation, agreement, term or condition which is not set out in this Agreement.

12.12

Performance by Affiliates. A Party is entitled to perform hereunder via its Affiliates. Each Party hereby guarantees the performance of its Affiliates performing under this Agreement. A Party and its Affiliates performing hereunder shall be jointly and severally liable for such Party’s performance under this Agreement, and the other Party shall be entitled to proceed against any of them (or any combination of them) in such other Party’s sole discretion, without any obligation to first pursue a remedy against any of the others of them. For these purposes, it is understood and agreed that Sanochemia Pharmazeutika AG is an Affiliate of SDI performing under this Agreement. Accordingly, in case of any breach, Avigen is entitled to pursue a remedy against Sanochemia Pharmazeutika AG, if Avigen so chooses.

12.13

Third Parties. This Agreement does not create any right enforceable by any person who is not a party to it (‘Third Party’) under the Contracts (Rights of Third Parties) ▇▇▇ ▇▇▇▇, but this clause does not affect any right or remedy of a Third Party which exists or is available apart from that Act. There are no third party beneficiaries to this Agreement.

12.14

No Partnership or JV. The Parties’ relationship to each other is that of independent contractors. No partnership or joint venture, express or implied, is created by this Agreement of the Parties’ relationship hereunder. The Parties expressly disclaim and reject any partnership or joint venture between then in connection with this Agreement.

12.15

Counterparts; Facsimile Execution. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute a single instrument. This Agreement may be executed by facsimile.

For and on behalf of

SANOCHEMIA DIAGNOSTICS INTERNATIONAL LTD

  /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇          

signed

   ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇          

print name

  CEO                                         

title

  12 January, 2006                    

Date

For and on behalf of

AVIGEN, INC

  /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇          

signed

   ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇          

print name

      CEO                                              

title

  12 January, 2006                              

Date

SCHEDULE

NUMBER

PATENTS AND PATENT APPLICATIONS

1

SDI CR CLINICAL PROGRAM

2

SUPPLY TERMS

3

CURRENT SDI IR PRODUCT AND CR PRODUCT CLINICAL TRIALS

4

CLINICAL SUPPLY PRICING

5

AVIGEN CURRENT PLANNED CLINICAL TRIAL PROGRAM

6

EXISTING SDI AGREEMENTS REGARDING LICENSED PRODUCTS

7

ADVERSE EVENT REPORTING PROTOCOL

8

•

[*]

1

DEFINITIONS and interpretation

API

Shall mean, for a given Licensed Product, the active pharmaceutical ingredient of such Licensed Product.

Binding Amount

Shall have the meaning given such phrase in Supply Terms Section 2.3.4.

Certificate of Analysis

Shall mean, with respect to an API, other ingredient, or Finished Product, an appropriately signed certificate of analysis stating the identity, strength, quality and purity of such API, other ingredient, or Finished Product.

License Agreement

Shall mean the body of this Agreement (to avoid any doubt, excluding these Supply Terms and all Schedules and Exhibits to the Agreement).

Lot

Shall mean a single production run of any Licensed Product or the API for that Licensed Product.

Manufacturing Defect

Shall mean, with respect to a specimen of API or Licensed Product, [*]

Manufacturing Liaison

Shall have the meaning given such phrase in Supply Terms Section 3.1.

Regulatory Filings

Shall mean, for a given Licensed Product, all INDs, Regulatory Approval Applications, and Regulatory Approvals for such Licensed Product in or for the Territory.

Regulatory Requirements

Shall mean all requirements of Regulatory Bodies of the Territory and/or otherwise having jurisdiction over a facility for Licensed Product manufacture for supply under these Supply Terms.

Required

Shall have the meaning given such phrase in Supply Terms Section 4.5.2.

Second Source Failure

Shall have the meaning given such phrase in Supply Terms Section 6.3.

2.

Specifications

Shall mean, for a given API or Licensed Product, the specifications for such API or Licensed Product, as provided in Supply Terms Section 3.3, as these may be updated in accordance with such Supply Terms Section or Supply Terms Section 4.5.

2.1

Supply -- General Obligation. SDI shall supply Avigen with Finished Products in the quantities ordered by Avigen in accordance with the forecasting and ordering provisions set forth in Supply Terms Section 2.3. SDI shall also supply Avigen with placebos for clinical trials of Licensed Products, as also ordered by Avigen in accordance with such Supply Terms Sections. While these Supply Terms refer primarily to SDI, it is understood and agreed that SDI may perform its obligations under these Supply Terms by acting through SDI’s Affiliates. SDI’s Affiliates performing hereunder will be held to the same standards and obligations as SDI. SDI guarantees the performance of its Affiliates under these Supply Terms. Further, Avigen has the rights set forth in Section 12.12 of the License Agreement as regards all performance by SDI and SDI Affiliates. While these Supply Terms refer to “Licensed Product” throughout, the Parties do not intend for SDI to be required to supply to Avigen any Combination Product, unless the Parties agree in writing otherwise in our sole discretions.

2.2

Pricing.

2.2.1

Clinical Supply Price. The price for supply of Licensed Products for use in clinical trials is as set forth in Section 4.4 of the License Agreement. The price for quantities of placebo Avigen orders from SDI shall be as set forth in Schedule 5 to the License Agreement.

2.2.2

Commercial Supply Prices.

2.2.2.2

Ultimate Supply Price.

(c)

Refund. If there is any Excess for the quantity of Licensed Product sold

3.

4.

2.2.2.3

Samples for Marketing.

2.2.3

Third-Party Royalties. Sections 8.9 and 9.2 of the License Agreement, govern the Parties responsibilities regarding royalties owed Third Parties in connection with Licensed Product manufacture.

2.3

Forecasts - Orders.

2.3.1

Clinical. The Parties shall cooperate as to a reasonable lead time for Avigen to order quantities of Licensed Product for clinical supply. Avigen shall not be required to give more than [*] lead time prior to the requested delivery date. SDI shall supply Avigen with quantities requested by Avigen on such number of days notice. In addition, if Avigen requires quantities of Licensed Product for clinical testing faster than that, then SDI shall devote Diligent and Reasonable Efforts to deliver the requested quantities on the timeline Avigen requests, but SDI shall be deemed not to be in breach if, having devoted such Diligent and Reasonable Efforts to deliver on less than [*] lead time, it fails to deliver the requested quantities on the faster timeline that Avigen requested.

2.3.2

Long-range Non-binding Planning Forecast. [*] months prior to the date Avigen anticipates as the date of Launch of each Licensed Product, Avigen shall provide SDI with a written, [*] forecast of Avigen’s projected requirements of such Licensed Product. Avigen shall make its projections and prepare such forecast in good faith. However, such forecast is for informational purposes only and is not binding on Avigen nor SDI.

5.

2.3.3

Commercial Forecasts. [*] prior to Launch of each Licensed Product, Avigen shall provide SDI with a forecast of quantities of such Licensed Product for delivery under these Supply Terms through the first [*] after such Launch. Thereafter, Quarterly on or before the first business day of each Quarter, Avigen shall provide an updated [*] forecast, rolling forward one Quarter in each forecast. The quantities specified in the fourth Quarter of each forecast shall in no event increase by more than [*] as it rolls forward over the next [*] to be the [*] of that forecast. The first [*] of each such forecast (and any prior period in the initial forecast) are binding as follows: (a) Avigen’s purchase order under Supply Terms Section 2.3.4 shall be for no less than [*] of the amount forecasted for delivery [*] (and any earlier period in the initial forecast) and -- to the extent ordered by Avigen in such a purchase order -- SDI must supply up to [*] of the amount forecasted for delivery [*] and (b) as regards [*] when it rolls forward in the [*] to be the [*] Avigen is not entitled (without SDI’s consent) to [*]

2.3.4

Commercial Purchase Orders. [*] prior to the first day of the Quarter of delivery, Avigen shall provide SDI with Avigen’s purchase order for quantities to be delivered in such Quarter. Such quantities must be for no less than [*] of the amount forecasted in the last Quarterly forecast under Supply Terms Section 2.3.3 for delivery in such Quarter. SDI is required to supply up to [*] of such amounts from such forecast. If Avigen places a purchase order for more than this [*] then SDI shall notify Avigen in writing within [*] working days what quantities beyond such [*] (if any) SDI accepts to timely deliver to Avigen. Any such additional amounts requested by Avigen that SDI accepts (within such [*] working days) to deliver in that Quarter, together with such portion of the [*] as Avigen ordered in its purchase order, is the “Binding Amount” for that Quarter.

2.3.5

Delivery Dates. In its forecasts, Avigen shall state the dates on which it anticipates requesting delivery in each Quarter for informational purposes only. In its purchase orders, Avigen shall state the dates on which it requires delivery of each quantity of Licensed Product. The delivery dates in the purchase orders are binding on Avigen and SDI.

2.3.6

IR Product and CR-Qualified Product Separately Forecasted and Ordered. In its forecasts and purchase orders, Avigen shall separately state quantities of IR Product and CR-Qualified Product. The bindingness of forecasts and Binding Amounts of purchase orders each operate on a Licensed Product-by-Licensed Product basis.

2.4

Invoicing. Each delivery of Finished Product supplied hereunder shall be invoiced separately by SDI on the day of delivery in accordance with Supply Terms Section 5.2 (but not before) for the Advance Payment associated with such quantities. These invoices shall be payable by Avigen within [*] days after receipt.

2.5

No Change in Terms Through Purchase Orders. No forecast, purchase order, purchase order acceptance or other document under these Supply Terms shall alter or amend the terms of these Supply Terms or the Agreement. This Agreement (including these Supply Terms) shall govern and control if there is any inconsistency between it (including them) and any such forecast, purchase

6.

3

PROCESS ESTABLISHMENT; SPECIFICATIONS; REGULATORY.

3.1

Manufacturing Liaisons. To facilitate coordination among the Parties with respect to process development, scale-up and supply of Licensed Products, within thirty (30) days after the Commencement Date each Party shall designate a “Manufacturing Liaison.” The Manufacturing Liaisons’ responsibilities include: (a) communicating regularly regarding the Parties’ activities under these Supply Terms; (b) remaining current on the status of such activities; (c) generally serving as the point-people between the Parties for these issues; and (d) escalating for Committee discussion any issues arising between the Parties under these Supply Terms that they are not able to resolve by their own discussions. SDI’s Manufacturing Liaison shall at all times be the person through whom the personnel working on Licensed Product process development and manufacturing activities report. The Manufacturing Liaisons have no power to amend, modify or waive compliance with this Agreement.

3.2

Scale-Up. SDI hereby covenants that it shall scale up to commercial scale the processes (including API manufacture, Finished Product manufacture, and all associated QA/QC and analytical methods) for each the IR Product and the CR-Qualified Product. SDI shall finish doing so for each Licensed Product prior to Avigen commencing any Pivotal Clinical Trial(s) of such Licensed Product that Avigen may undertake. Currently (as of the Commencement Date), Pivotal Clinical Trials of an IR Product are expected to commence no earlier than [*] However, these dates are not binding. Avigen will keep SDI updated as to Avigen’s clinical plans for Licensed Products through Committee meetings under Section 5.1 of the License Agreement.

3.3

Specifications.

3.3.1

Initial. The initial Specifications for the Current IR Product shall be SDI’s current specifications for the Current IR Product. These current specifications are the ones to which the quantities used in the clinical trials referenced in the definition of Current IR Product were required to be manufactured. The initial Specifications for the Current CR Candidate shall be SDI’s current Specifications for the Current CR Candidate. These current specifications are the ones to which the quantities used in the clinical trial referenced in the definition of Current CR Candidate were required to be manufactured.

3.3.2

NDA Submission. Avigen may require updates to the Specifications for each Licensed Product prior to Avigen’s Pivotal Clinical Trials of each Licensed Product or prior to NDA submission or in response to an FDA requirement to approve the NDA. SDI shall implement all such changes at SDI’s expense. There shall not be any change to the Advance Payment for any of these changes.

3.3.3

Subsequent Updates. All subsequent updates shall be made only as set forth in Supply Terms Section 4.5. The costs of all such subsequent updates shall be as set forth in such Supply Terms Section.

7.

3.4.1

CMC Information and Support. If requested by Avigen, SDI shall, at no cost to Avigen, provide all information required by Avigen to include in the CMC (or other manufacturing) portion of its NDA or other Regulatory Filing for Licensed Products in the Territory. This includes provision of information regarding manufacture and supply by any Third-Party suppliers’ activities. To facilitate sharing of this information regarding SDI’s Third-Party suppliers’ activities, SDI shall provide any permissions necessary for such suppliers to provide such information directly to Avigen. If requested by Avigen, any or all of the foregoing information will be provided in electronic form.

3.4.2

Approvals. SDI shall obtain and procure that its Affiliates and other suppliers obtain and in both cases maintain all necessary permits, licenses and consents from the Regulatory Body and any other governmental departments or agencies and other bodies which may be required to enable them to manufacture the IR Products and the CR-Qualified Products and supply them to Avigen in compliance with the relevant, then-current Good Manufacturing Practice(s) (cGMP) and all applicable Regulatory Requirements. Before communicating with the Regulatory Bodies and other governmental departments and agencies regarding Licensed Products, SDI shall follow the procedures of Supply Terms Section 3.4.3. This Supply Terms Section shall not be read to limit Avigen’s right to approve of SDI’s future Third-Party Licensed Product suppliers as set forth in Supply Terms Section 3.5. Avigen shall have and SDI hereby grants Avigen (and shall require that its Affiliates and Third-Party suppliers grant Avigen) the right to reference for the Territory all approvals obtained by SDI, its Affiliates and Third-Party Licensed Product suppliers under this Supply Terms Section 3.4.2, including all DMFs for Licensed Products.

3.4.3

Communications with Regulatory Authorities; Governmental Inquiries.

8.