Exhibit 10.65
IDM PHARMA, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is made and entered into effective
as of August 27th, 2007 by and among IDM Pharma Inc., a Delaware corporation
(the “Company”) and Jeffrey W. Sherman, M.D. (the “Executive”). The Company and
the Executive are hereinafter collectively referred to as the “Parties”, and
individually referred to as a “Party”.
Recitals
     A. The Company desires assurance of the association and services of the
Executive in order to retain the Executive’s experience, skills, abilities,
background and knowledge, and is willing to engage the Executive’s services on
the terms and conditions set forth in this Agreement.
     B. The Executive desires to be in the employ of the Company, and is willing
to accept such employment on the terms and conditions set forth in this
Agreement.
Agreement
     In consideration of the foregoing Recitals and the mutual promises and
covenants herein contained, and for other good and valuable consideration, the
Parties, intending to be legally bound, agree as follows:
     1. Employment.
          1.1 Term. The Company hereby employs the Executive, and the Executive
hereby accepts employment by the Company, upon the terms and conditions set
forth in this Agreement. The term of this Agreement shall begin on the Effective
Date and shall continue until it is terminated pursuant to Section 4 herein (the
“Term”).
          1.2 Title. The Executive shall have the title of Senior Vice President
Research and Development, Chief Medical Officer (“CMO”) of the Company and shall
serve in such other capacity or capacities as the Board of Directors of the
Company (the “Board”) may from time to time prescribe.
          1.3 Duties. The Executive shall do and perform all services, acts or
things necessary or advisable to manage and conduct the business of the Company
and which are normally associated with the position of Senior Vice President
Research and Development, Chief Medical Officer. The Executive shall report to
the President and Chief Executive Officer.
          1.4 Policies and Practices. The employment relationship between the
Parties shall be governed by the policies and practices established by the
Company and the Board. The Executive will acknowledge in writing that he has
read the Company’s Employee Handbook that will govern the terms and conditions
of his employment with the Company, along with this Agreement. In the event that
the terms of this Agreement differ from or are in conflict with the Company’s
policies or practices or the Company’s Employee Handbook, this Agreement shall
control.

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     2. Loyal and Conscientious Performance; Noncompetition.
          2.1 Loyalty. During the Executive’s employment by the Company, the
Executive shall devote Executive’s full business energies, interest, abilities
and productive time to the proper and efficient performance of Executive’s
duties under this Agreement.
          2.2 Covenant not to Compete. During the term of this Agreement, and
during any period in which the Executive receives severance benefits from the
Company, the Executive shall not engage in competition with the Company and/or
any of its controlled Affiliates (as defined below), either directly or
indirectly, in any manner or capacity, as adviser, principal, agent, affiliate,
promoter, partner, officer, director, employee, stockholder, owner, co-owner,
consultant, or member of any association or otherwise, in any phase of the
business of developing, manufacturing and marketing of products or services that
are in the same field of use or which otherwise compete with the products or
services of the Company, except with the prior written consent of the Company’s
Board. For purposes of this Agreement, “Affiliate,” means, with respect to any
specific entity, any other entity that, directly or indirectly, through one or
more intermediaries, controls, is controlled by or is under common control with
such specified entity. Ownership by the Executive, in professionally managed
funds over which the Executive does not have control or discretion in investment
decisions, or as a passive investment, of less than two percent (2%) of the
outstanding shares of capital stock of any corporation with one or more classes
of its capital stock listed on a national securities exchange or publicly traded
on the Nasdaq Stock Market or in the over-the-counter market shall not
constitute a breach of this Section 2.2.
          2.3 Agreement not to Participate in Company’s Competitors. During the
Term, the Executive agrees not to acquire, assume or participate in, directly or
indirectly, any position, investment or interest known by Executive to be
adverse or antagonistic to the Company, its business or prospects, financial or
otherwise or in any company, person or entity that is, directly or indirectly,
in competition with the business of the Company or any of its Affiliates.
Ownership by the Executive, in professionally managed funds over which the
Executive does not have control or discretion in investment decisions, or as a
passive investment, of less than two percent (2%) of the outstanding shares of
capital stock of any corporation with one or more classes of its capital stock
listed on a national securities exchange or publicly traded on the Nasdaq Stock
Market or in the over-the-counter market shall not constitute a breach of this
Section 2.3.
     3. Compensation of the Executive.
          3.1 Base Salary. The Company shall pay the Executive a base salary at
the annualized rate of three hundred thousand dollars ($300,000) per year (“Base
Salary”), less payroll deductions and all required withholdings, payable in
regular periodic payments in accordance with the Company’s normal payroll
practices. Such base salary shall be prorated for any partial year of employment
on the basis of a 365-day fiscal year.
          3.2 Discretionary Bonus. Provided the Executive meets the conditions
stated in this Section 3.2, the Executive shall be eligible for an annual
discretionary bonus (“Bonus”) of up to a maximum of thirty-five percent (35%) of
his annual salary, based on the Board’s determination, in its sole discretion,
of whether the Executive has met such performance milestones as are established
for the Executive by the Board in consultation with the Executive (“Performance
Milestones”). The Performance Milestones will be based on certain factors

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including, but not limited to, the Executive’s performance and the Company’s
financial performance. The Board will have the sole discretion to award any
Bonus, to determine the amount of any such Bonus, and to determine the timing of
the payment of any Bonus. The Executive must be employed on the date the Bonus
is awarded to be eligible for the Bonus. No pro-rata Bonus will be available.
          3.3 Stock Options. Subject to approval by the Board, to such
shareholder approval as may be required, and to the terms of the Company’s 2000
Stock Plan, as amended (the “Plan”), the Executive shall be granted an option to
purchase one hundred thousand (100,000) shares of the Company’s common stock
(the “Option”). The exercise price of the Option will be set at the closing
price of the Company’s common stock as quoted on the Nasdaq Global Market on the
date of the grant. The Option will vest daily in equal installments over a
period of four (4) years from the effective date of this Agreement for so long
as the Executive provides Continuous Service (as defined in the Plan) to the
Company.
          3.4 Restricted Stock Award. Subject to approval by the Board and the
terms of the Plan, the Executive will be granted a stock award covering twenty
thousand (20,000) shares of the Company’s common stock (the “Stock Award”). Ten
thousand (10,000) shares of the Stock Award shall vest on the first anniversary
of the effective date of this Agreement and the remaining ten thousand (10,000)
shares of the Stock Award shall vest on the second anniversary of the effective
date of this Agreement, provided in both instances that the Executive shall have
provided Continuous Service (as defined in the Plan) to the Company through the
vesting date(s). The Stock Award shares shall issue upon the earlier of i) the
fifth anniversary of the grant date; or ii) the date upon which the Executive’s
employment by the Company terminates, subject to, in the case of either
termination by the Company of the Executive’s employment without “Cause” (as
defined below) or termination by the Executive of the Executive’s employment for
“Good Reason” (as defined below), the Executive’s delivery of a fully effective
waiver and release as provided by Section 4.4.3 of this Agreement in exchange
for any acceleration of shares provided by Section 4.4.3 (iii) or (iv).
          3.5 Signing Bonus. The Executive shall receive a signing bonus of
fifteen thousand Dollars ($15,000.00), less payroll deductions and required
withholdings, in connection with his assumption of the duties specified in this
Agreement, said bonus to be paid within thirty (30) days of said assumption of
duties.
          3.6 Legal Review. Upon the Executive’s submission of appropriate
itemized proof and verification of reasonable and customary legal fees incurred
by the Executive in obtaining legal advice associated with review of this
Agreement, the Company shall pay for such legal fees up to a maximum of two
thousand dollars ($2,000) subject to receipt of appropriate proof and
verification of such legal fees.
          3.7 Changes to Compensation. The Executive’s compensation may be
changed from time to time by mutual agreement of the Executive and the Company.
          3.8 Employment Taxes. All of the Executive’s compensation shall be
subject to customary withholding taxes and any other employment taxes as are
commonly required to be collected or withheld by the Company.
          3.9 Benefits. The Executive shall, in accordance with Company policy
and the terms of the applicable plan documents, be eligible to participate in
benefits under any

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executive benefit plan or arrangement which may be in effect from time to time
and made available to the Company’s executive or key management employees,
provided however, that the Executive shall be entitled to at least four
(4) weeks of paid vacation annually.
     4. Termination.
          4.1 Termination By the Company. The Executive’s employment with the
Company may be terminated under the following conditions:
                  4.1.1 Termination for Death or Disability. The Executive’s
employment with the Company shall terminate effective upon the date of the
Executive’s death or “Complete Disability” (as defined in Section 4.4.1),
provided, however, that this Section 4.1.1 shall in no way limit the Company’s
obligations to provide such reasonable accommodations to Executive as may be
required by law.
                  4.1.2 Termination by the Company For Cause. The Company may
terminate the Executive’s employment under this Agreement for “Cause” (as
defined in Section 4.5.3) by delivery of written notice to the Executive
specifying the Cause or Causes relied upon for such termination, provided that
such notice is delivered within two (2) months following the occurrence of any
event or events constituting “Cause”. Any notice of termination given pursuant
to this Section 4.1.2 shall effect termination as of the date of the notice or
such date as specified in the notice.
                  4.1.3 Termination by the Company Without Cause. The Company
may terminate the Executive’s employment under this Agreement at any time and
for any reason, or no reason. Such termination shall be effective on the date
the Executive is so informed or as otherwise specified by the Company.
          4.2 Termination By The Executive. The Executive may terminate his
employment with the Company at any time and for any reason or no reason,
including, but not limited, under the following conditions:
                  4.2.1 Good Reason. The Executive may terminate his employment
under this Agreement for “Good Reason” (as defined below in Section 4.5.2) by
delivery of written notice to the Company specifying the “Good Reason” relied
upon by the Executive for such termination, provided that such notice is
delivered within two (2) months following the occurrence of any event or events
constituting Good Reason.
                  4.2.2 Without Good Reason. The Executive may terminate the
Executive’s employment hereunder for other than Good Reason upon thirty
(30) days written notice to the Company.
          4.3 Termination by Mutual Agreement of the Parties. The Executive’s
employment pursuant to this Agreement may be terminated at any time upon a
mutual agreement in writing of the Parties. Any such termination of employment
shall have the consequences specified in such agreement.
          4.4 Compensation Upon Termination.
                  4.4.1 Death or Complete Disability. If the Executive’s
employment shall be terminated by death or Complete Disability as provided in
Section 4.1.1, the Company

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shall pay to the Executive, and/or Executive’s heirs, the Executive’s Base
Salary and accrued and unused vacation benefits earned through the date of
termination at the rate in effect at the time of termination, less standard
deductions and withholdings, and the Company shall thereafter have no further
obligations to the Executive and/or Executive’s heirs under this Agreement,
except to the extent that the Executive and/or Executive’s heirs is/are eligible
for benefits pursuant to any insurance policies maintained by the Company in
connection with his death or Complete Disability, and except as otherwise
provided by law.
                  4.4.2 With Cause or Without Good Reason. If the Executive’s
employment shall be terminated by the Company for Cause, or if the Executive
terminates employment hereunder without Good Reason, the Company shall pay the
Executive’s Base Salary and accrued and unused vacation benefits earned through
the date of termination at the rate in effect at the time of termination, less
standard deductions and withholdings, and the Company shall thereafter have no
further obligations to the Executive under this Agreement, except as provided by
law.
                  4.4.3 Without Cause or For Good Reason. If the Company
terminates the Executive’s employment without Cause or the Executive terminates
his employment for Good Reason, the Company shall pay the Executive’s Base
Salary and accrued and unused vacation earned through the date of termination,
at the rate in effect at the time of termination subject to standard deductions
and withholdings. In addition, subject to the limitations stated in
Section 4.4.5 herein and upon the Executive’s furnishing to the Company an
effective waiver and release of claims (a form of which is attached hereto as
Exhibit A), the Executive shall be entitled to:
                  (i) the equivalent of the Executive’s annual Base Salary in
effect at the time of termination for a period of six (6) months (the “Severance
Period”), less standard deductions and withholdings, to be paid over a period of
six (6) months after the date of termination pursuant to the Company’s standard
payroll practices; and
                  (ii) in the event the Executive elects continued coverage
under COBRA, the Company will reimburse the Executive for the same portion of
Executive’s COBRA health insurance premium as the percentage of health insurance
premiums that it paid during the Executive’s employment up until the earlier of
either (i) the last day of the Severance Period or, (ii) the date on which the
Executive begins full-time employment with another company or business entity
which provides comparable health insurance coverage to the Executive; provided,
however, that
                  (iii) if such termination shall occur on or after the first
anniversary of the effective date of this Agreement, the Severance Period shall
be increased to twelve (12) months for purposes of calculating the benefits owed
to the Executive pursuant to 4.4.3 (i) and (ii).
                  4.4.2 Equity Award Acceleration.
                  (i) Not in connection with a Change in Control. In the event
that the Executive’s employment is terminated without Cause or for Good Reason
before the first anniversary of the effective date of this Agreement, and such
termination is not effected within the ninety (90) days immediately preceding or
the twelve (12) months immediately following a Change in Control, the vesting of
the Stock Award shall be accelerated such that twenty

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thousand (20,000) of the Stock Award shares shall be fully vested and
immediately exercisable.
                  (ii) In connection with a Change in Control. In the event that
the Executive’s employment is terminated without Cause or for Good Reason within
the ninety (90) days immediately preceding or the twelve (12) months immediately
following a Change in Control (as defined below) of the Company which Change in
Control is consummated after the first anniversary of the effective date of this
agreement, the vesting of the Option and the Stock Award shall be fully
accelerated such that on the effective date of such termination one hundred
percent (100%) of the Option and Stock Award shares shall be fully vested and
immediately exercisable. Further, in the event that the Executive’s employment
is terminated without Cause or for Good Reason within the ninety (90) days
immediately preceding or the twelve (12) months immediately following a Change
in Control of the Company which Change in Control is consummated on or before
the first anniversary of the effective date of this Agreement, the vesting of
the Option and Stock Award shall be accelerated such that on the effective date
of such termination fifty percent (50%) of the Option and Stock Award shares
that are unvested as of the effective date of such termination shall be fully
vested and immediately exercisable.
                  (iii) Release and waiver. Any acceleration pursuant to this
Section 4.4.4 shall be conditioned upon and subject to the Executive’s delivery
to the Company of a fully effective release as specified by Section 4.4.3 hereof
and such acceleration shall be in addition to the benefits provided by
Section 4.4.3 hereof.
                  4.4.5 Conditions. Notwithstanding any provisions in this
Agreement to the contrary, the Company’s obligations and the Executive’s rights
pursuant to Section 4.4.3 shall cease and be rendered a nullity immediately
should the Executive violate any provision of Section 2.2 herein, or should the
Executive violate the terms and conditions of the Executive’s Proprietary
Information and Inventions Agreement.
          4.5 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
                  4.5.1 Complete Disability. “Complete Disability” shall mean
the inability of the Executive to perform the Executive’s duties under this
Agreement, whether with or without reasonable accommodation, because the
Executive has become permanently disabled within the meaning of any policy of
disability income insurance covering employees of the Company then in force. In
the event the Company has no policy of disability income insurance covering
employees of the Company in force when the Executive becomes disabled, the term
“Complete Disability” shall mean the inability of the Executive to perform the
Executive’s duties under this Agreement, whether with or without reasonable
accommodation, by reason of any incapacity, physical or mental, which the Board,
based upon medical advice or an opinion provided by a licensed physician
acceptable to the Board, determines to have incapacitated the Executive from
satisfactorily performing all of the Executive’s usual services for the Company,
with or without reasonable accommodation, for a period of at least one hundred
twenty (120) days during any twelve (12) month period (whether or not
consecutive). Based upon such medical advice or opinion, the determination of
the Board shall be final and binding and the date such determination is made
shall be the date of such Complete Disability for purposes of this Agreement.

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                  4.5.2 Good Reason. “Good Reason” for the Executive to
terminate the Executive’s employment hereunder shall mean the occurrence of any
of the following events without the Executive’s consent:
                  (i) a material reduction in the Executive’s duties, position,
authority, or responsibilities relative to the duties, position, authority, or
responsibilities in effect immediately prior to such reduction;
                  (ii) the relocation of the Company’s executive offices or
principal business location to a point more than thirty (30) miles from Irvine,
California;
                  (iii) the relocation of the Executive’s principal place of
business to a point more than thirty (30) miles from the Irvine, California; or
                  (iv) a material reduction by the Company of the Executive’s
base salary as initially set forth herein or as the same may be increased from
time to time, provided that if such reduction occurs in connection with a
Company-wide decrease in Executive salaries and the percent decrease in the
Executive’s base salary does not exceed the percent decrease in base salary of
any other executive of the Company such reduction will not constitute Good
Reason to terminate Executive’s employment for purposes of this Agreement.
Provided however that, such termination by the Executive shall only be deemed
for Good Reason pursuant to the foregoing definition if (i) the Company is given
written notice from the Executive within thirty (30) days following the first
occurrence of the condition that you consider to constitute Good Reason
describing the condition and the Company fails to remedy such condition within
thirty (30) days following such written notice, and (ii) the Executive
terminates employment within thirty (30) days following the end of the period
within which the Company was entitled to remedy the condition constituting Good
Reason but failed to do so.
                  4.5.3 Cause. “Cause” for the Company to terminate Executive’s
employment hereunder shall mean the occurrence of any of the following events,
as determined reasonably and in good faith by the Board or a committee
designated by the Board:
                  (i) the Executive’s willful and habitual failure to attend to
his duties as assigned by the Board of Directors or officers of the Company to
whom he reports;
                  (ii) misconduct by the Executive which materially and
adversely reflects upon his ability to perform his duties for the Company;
                  (iii) the Executive’s conviction of a felony involving moral
turpitude that is likely to inflict or has inflicted material injury on the
business of the Company;
                  (iv) the Executive’s engaging or in any manner participating
in any activity which violates any provisions of Section 2 hereof or the
Executive’s Proprietary Information and Inventions Agreement with the Company;
or
                  (v) the Executive’s commission of any fraud against the
Company, its controlled Affiliates, employees, agents or customers or use or
intentional appropriation for his personal use or benefit of any funds or
properties of the Company not authorized by the Board to be so used or
appropriated.

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                  4.5.4 Change in Control. For purposes of this Agreement,
“Change in Control” means: (i) a sale of all or substantially all of the assets
of the Company; (ii) a merger or consolidation in which the Company is not the
surviving entity and in which the holders of the Company’s outstanding voting
stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) of the voting
power of the entity surviving such transaction or, where the surviving entity is
a wholly-owned subsidiary of another entity, the surviving entity’s parent;
(iii) a reverse merger in which the Company is the surviving entity but the
shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities of the surviving entity’s parent, cash or otherwise, and in which the
holders of the Company’s outstanding voting stock immediately prior to such
transaction own, immediately after such transaction, securities representing
less than fifty percent (50%) of the voting power of the Company or, where the
Company is a wholly-owned subsidiary of another entity, the Company’s parent; or
(iv) an acquisition by any person, entity or group within the meaning of Section
13(d) or 14(d) of the Exchange Act, or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored or maintained
by the Company or subsidiary of the Company or other entity controlled by the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least seventy five percent (75%) of the combined
voting power entitled to vote in the election of Directors; provided, however,
that nothing in this paragraph shall apply to a sale of assets, merger or other
transaction effected exclusively for the purpose of changing the domicile of the
Company.
          4.6 Survival of Certain Sections. Sections 2.2, 4.4.5, 5, and 16 of
this Agreement will survive the termination of this Agreement.
          4.7 Parachute Payment. If any payment or benefit the Executive would
receive pursuant to this Agreement (“Payment”) would (i) constitute a “parachute
payment” within the meaning of Section 280G of the Internal Revenue Code (the
“Code”), and (ii) but for this sentence, be subject to the excise tax imposed by
Section 4999 of the Code (the “Excise Tax”), then such Payment shall be reduced
to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest
portion of the Payment that would result in no portion of the Payment being
subject to the Excise Tax or (y) the largest portion of the Payment, which such
amount, after taking into account all applicable federal, state and local
employment taxes, income taxes, and the Excise Tax (all computed at the highest
applicable marginal rate), results in the Executive’s receipt, on an after-tax
basis, of the greater amount of the Payment notwithstanding that all or some
portion of the Payment may be subject to the Excise Tax. If a reduction in
payments or benefits constituting “parachute payments” is necessary so that the
Payment equals the Reduced Amount, reduction shall occur in the following order
unless the Executive elects in writing a different order (provided, however,
that such election shall be subject to Company approval if made on or after the
effective date of the event that triggers the Payment): reduction of cash
payments; cancellation of accelerated vesting of stock awards; reduction of
employee benefits. In the event that acceleration of vesting of stock award
compensation is to be reduced, such acceleration of vesting shall be cancelled
in the reverse order of the date of grant of the Executive’s stock awards unless
the Executive elects in writing a different order for cancellation.
     The accounting firm then engaged by the Company for general audit purposes
shall perform the foregoing calculations. The Company shall bear all expenses
with respect to the determinations by such accounting firm required to be made
hereunder.

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     The accounting firm engaged to make the determinations hereunder shall
provide its calculations, together with detailed supporting documentation, to
the Executive and the Company within fifteen (15) calendar days after the date
on which the Executive’s right to a Payment is triggered (if requested at that
time by the Executive or the Company) or such other time as requested by the
Executive or the Company. If the accounting firm determines that no Excise Tax
is payable with respect to a Payment, either before or after the application of
the Reduced Amount, it shall furnish the Executive and the Company with an
opinion reasonably acceptable to the Executive that no Excise Tax will be
imposed with respect to such Payment. Any good faith determinations of the
accounting firm made hereunder shall be final, binding and conclusive upon the
Executive and the Company.
          4.8 Application of Internal Revenue Code Section 409A. Severance
benefits paid pursuant to Section 4 above, to the extent of payments made from
the date of termination of the Executive’s employment through March 14th of the
calendar year following such termination, are intended to constitute separate
payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations and
thus payable pursuant to the “short-term deferral” rule set forth in
Section 1.409A-1(b)(4) of the Treasury Regulations; to the extent such payments
are made following said March 14th, they are intended to constitute separate
payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations made
upon an involuntary termination from service and payable pursuant to Section
1.409A-1(b)(9)(iii) of the Treasury Regulations, to the maximum extent permitted
by said provision. Notwithstanding the foregoing, if the Company determines that
any other payments hereunder fail to satisfy the distribution requirement of
Section 409A(a)(2)(A) of the Internal Revenue Code of 1986, as amended (the
“Code”), the payment of such benefit shall be delayed to the minimum extent
necessary so that such payments are not subject to the provisions of
Section 409A(a)(1) of the Code.
          4.9 Indemnification Agreement. The Company and the Executive will
enter into an indemnification agreement in the Company’s standard form, a copy
of which is attached hereto as Exhibit B.

    5. Confidential And Proprietary Information.

          As a condition of employment the Executive agrees to execute and abide
by the Company’s standard form of proprietary information and inventions
agreement.

    6. Assignment and Binding Effect.

          This Agreement shall be binding upon and inure to the benefit of the
Executive and the Executive’s heirs, executors, personal representatives,
assigns, administrators and legal representatives. Because of the unique and
personal nature of the Executive’s duties under this Agreement, neither this
Agreement nor any rights or obligations under this Agreement shall be assignable
by the Executive. This Agreement shall be binding upon and inure to the benefit
of the Company and its successors, assigns and legal representatives. Any such
successor of the Company will be deemed substituted for the Company under the
terms of this Agreement for all purposes. For this purpose, “successor” means
any person, firm, corporation or other business entity which at any tie, whether
by purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company.

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    7. Notices.

          All notices or demands of any kind required or permitted to be given
by the Company or the Executive under this Agreement shall be given in writing
and shall be personally delivered (and receipted for) or faxed during normal
business hours or mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Company:
IDM Pharma Inc.
9 Parker
Suite 100
Irvine, California 92618
Attention: President & Chief Executive Officer
If to the Executive:
Jeffrey W. Sherman, M.D.
c/o IDM Pharma Inc.
9 Parker
Suite 100
Irvine, California 92618
     Any such written notice shall be deemed given on the earlier of the date on
which such notice is personally delivered or three (3) days after its deposit in
the United States mail as specified above. Either Party may change its address
for notices by giving notice to the other Party in the manner specified in this
section.

    8. Choice of Law.

          This Agreement is made in the State of California. This Agreement
shall be construed and interpreted in accordance with the internal laws of the
State of California.

    9. Integration.

          This Agreement, including Exhibit A, the Stock Option Agreement and
the Plan, as well as the Employee Handbook contains the complete, final and
exclusive agreement of the Parties relating to the terms and conditions of the
Executive’s employment and the termination of Executive’s employment, and
supersedes all prior and contemporaneous oral and written employment agreements
or arrangements between the Parties.

    10. Amendment.

          This Agreement cannot be amended or modified except by a written
agreement signed by the Executive and the Company.

    11. Waiver.

          No term, covenant or condition of this Agreement or any breach thereof
shall be deemed waived, except with the written consent of the Party against
whom the wavier is claimed, and any waiver or any such term, covenant, condition
or breach shall not be deemed to

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be a waiver of any preceding or succeeding breach of the same or any other term,
covenant, condition or breach.

    12. Severability.

          The finding by a court of competent jurisdiction of the
unenforceability, invalidity or illegality of any provision of this Agreement
shall not render any other provision of this Agreement unenforceable, invalid or
illegal. Such court shall have the authority to modify or replace the invalid or
unenforceable term or provision with a valid and enforceable term or provision,
which most accurately represents the Parties’ intention with respect to the
invalid or unenforceable term, or provision.

    13. Interpretation; Construction.

          The headings set forth in this Agreement are for convenience of
reference only and shall not be used in interpreting this Agreement. This
Agreement has been drafted by legal counsel representing the Company, but the
Executive has been encouraged to consult with, and has consulted with,
Executive’s own independent counsel and tax advisors with respect to the terms
of this Agreement. The Parties acknowledge that each Party and its counsel has
reviewed and revised, or had an opportunity to review and revise, this
Agreement, and any rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.

    14. Representations and Warranties.

          The Executive represents and warrants that Executive is not restricted
or prohibited, contractually or otherwise, from entering into and performing
each of the terms and covenants contained in this Agreement, and that
Executive’s execution and performance of this Agreement will not violate or
breach any other agreements between the Executive and any other person or
entity.

    15. Counterparts.

          This Agreement may be executed in two counterparts, each of which
shall be deemed an original, all of which together shall contribute one and the
same instrument.

    16. Arbitration.

          To ensure the rapid and economical resolution of disputes that may
arise in connection with the Executive’s employment with the Company, the
Executive and the Company agree that any and all disputes, claims, or causes of
action, in law or equity, arising from or relating to Executive’s employment, or
the termination of that employment, will be resolved, to the fullest extent
permitted by law, by final, binding and confidential arbitration in Orange
County or San Diego County, California conducted by the Judicial Arbitration and
Mediation Services/Endispute, Inc. (“JAMS”), or its successors, under the then
current rules of JAMS for employment disputes; provided that the arbitrator
shall: (a) have the authority to compel adequate discovery for the resolution of
the dispute and to award such relief as would otherwise be permitted by law; and
(b) issue a written arbitration decision including the arbitrator’s essential
findings and conclusions and a statement of the award. Accordingly, the
Executive and the Company hereby waive any right to a jury trial. Both the
Executive and the Company shall be entitled to all rights and remedies that
either the Executive or the Company

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would be entitled to pursue in a court of law. The Company shall pay any JAMS
filing fee and shall pay the arbitrator’s fee. Nothing in this Agreement is
intended to prevent either the Executive or the Company from obtaining
injunctive relief in court to prevent irreparable harm pending the conclusion of
any such arbitration. Notwithstanding the foregoing, the Executive and the
Company each have the right to resolve any issue or dispute involving
confidential, proprietary or trade secret information, or intellectual property
rights, by Court action instead of arbitration.

    17. Trade Secrets Of Others.

          It is the understanding of both the Company and the Executive that the
Executive shall not divulge to the Company and/or its subsidiaries any
confidential information or trade secrets belonging to others, including the
Executive’s former employers, nor shall the Company and/or its Affiliates seek
to elicit from the Executive any such information. Consistent with the
foregoing, the Executive shall not provide to the Company and/or its Affiliates,
and the Company and/or its Affiliates shall not request, any documents or copies
of documents containing such information.

    18. Advertising Waiver.

          For so long as he remains employed, the Executive agrees to permit the
Company, and persons or other organizations authorized by the Company to use,
publish and distribute advertising or sales promotional literature concerning
the products and/or services of the Company, or the machinery and equipment used
in the provision thereof, in which the Executive’s name and/or pictures of the
Executive taken in the course of the Executive’s provision of services to the
Company appear. The Executive hereby waives and releases any claim or right the
Executive may otherwise have arising out of such use, publication or
distribution.

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     In Witness Whereof, the Parties have executed this Agreement as of the date
first above written.
IDM Pharma Inc.

         
By:
Its:
  /s/ Timothy P. Walbert
 
President and Chief Executive Officer    
Dated:
  August 27, 2007    

     
Executive:
   
 
   
/s/ Jeffrey W. Sherman, M.D.
 
JEFFREY W. SHERMAN, M.D.
   
Dated: August 27, 2007
   

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