Exhibit No. 10.1

 

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Double asterisks denote omissions.

COLLABORATIVE RESEARCH, DEVELOPMENT

AND LICENSE AGREEMENT

By and Between

CURIS, INC.

and

GENENTECH, INC.

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Table of Contents

 

1. DEFINITIONS   1    2. CONDUCT OF COLLABORATION; GOVERNANCE   9    2.1
Objective   9    2.2 Joint Steering Committee   9    2.3 Co-Development Steering
Committee   10    2.4 Product Prioritization   11    3. RESEARCH PROGRAM;
DESIGNATION AND DEVELOPMENT OF LEAD PRODUCTS   11    3.1 Research Plan   11   
3.2 Designation of Lead Products   12    3.3 Genentech Development and
Commercialization Responsibilities   12    4. CO-DEVELOPMENT OF COLLABORATION
PRODUCTS   13    4.1 Co-Development Plan and Budget   13    4.2 Collaboration
Products   13    4.3 Sharing of Operating Profits (Losses)   15    4.4
Co-Development Responsibilities   15    5. TECHNOLOGY TRANSFER; THIRD PARTY
LICENSORS   16    5.1 Transfer of Materials   16    5.2 IND Transfer   16    5.3
Transfer of Data   16    5.4 Existing License Agreements   16    5.5 Research
Materials   17    6. CURIS DEVELOPMENT RIGHTS   17    6.1 Development of
Compounds Other Than Lead Products   17    6.2 Commercialization of Curis
Products   19    7. LICENSE GRANTS   20    7.1 License Grants to Genentech   20
   7.2 License Grants to Curis   21    7.3 Retained Rights   22    7.4 No
Implied Licenses   22    8. FEES AND PAYMENTS   22   

 

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8.1 Upfront Fee   22    8.2 Annual License Fee   22    8.3 Equity Investment  
23    8.4 Milestone Payments   23    8.5 Royalties Payable by Genentech   25   
8.6 Royalties Payable by Curis   27    8.7 Payments to Evotec OAI   28    8.8
Payments to Third Party Licensors   28    9. PAYMENTS; RECORDS; AUDITS   28   
9.1 Payment; Reports   28    9.2 Exchange Rate; Manner and Place of Payment   29
   9.3 Late Payments   29    9.4 Records and Audits   29    9.5 Withholding of
Taxes   29    9.6 Exchange and Royalty Rate Controls   30    10. INTELLECTUAL
PROPERTY   30    10.1 Ownership of Technology   30    10.2 Patent Prosecution  
30    10.3 Cooperation of the Parties   31    10.4 Infringement by Third Parties
  32    10.5 Infringement of Third Party Rights   33    11. REPRESENTATIONS AND
WARRANTIES   33    11.1 Mutual Representations and Warranties   33    11.2
Representations and Warranties of Curis; Covenants of Curis   34    11.3
Disclaimer Concerning Technology   34    12. CONFIDENTIALITY; PUBLICATION   35
   12.1 Confidentiality   35    12.2 Exceptions   35    12.3 Terms of Agreement
  35    12.4 Authorized Disclosure   35    12.5 Publications   36    13. TERM
AND TERMINATION   36    13.1 Term of the Agreement   36   

 

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13.2 Termination by Genentech   37    13.3 Termination for Cause   37    13.4
Effect of Termination or Expiration; Surviving Obligations   37    13.5 Exercise
of Right to Terminate   38    13.6 Damages; Relief   38    13.7 Termination of
the Harvard Licenses   38    13.8 Termination of the 1996 Stanford License   39
   14. INDEMNITY   39    14.1 Indemnification   39    14.2 Indemnification
Procedure   40    15. GOVERNING LAW; DISPUTE RESOLUTION   40    15.1 Governing
Law   40    15.2 Disputes   40    15.3 Arbitration Procedures   42    16.
GENERAL PROVISIONS   42    16.1 Notices   43    16.2 Force Majeure   43    16.3
Entirety of Agreement   43    16.4 Amendment   43    16.5 Non-Waiver   43   
16.6 Disclaimer of Agency or Partnership   43    16.7 Severability   43    16.8
Assignment; Acquisition   44    16.9 Headings   44    16.10 Limitation of
Liability   44    16.11 Compliance with Laws   44    16.12 Counterparts   44   
16.13 Currency   44    16.14 Bankruptcy   44    16.15 Manufacture in United
States   45    16.16 Public Disclosure   45    16.17 Export   45   

 

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COLLABORATIVE RESEARCH, DEVELOPMENT

AND LICENSE AGREEMENT

THIS COLLABORATIVE RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT (this
“Agreement”), entered into as of June 11, 2003 (the “Effective Date”), by and
between CURIS, INC., a Delaware corporation (“Curis”), with offices at 61
Moulton Street, Cambridge, Massachusetts 02138, on behalf of itself and its
Affiliates, and GENENTECH, INC., a Delaware corporation (“Genentech”), with
offices at 1 DNA Way, South San Francisco, California 94080. Curis and Genentech
may each be referred to herein individually as a “Party” and collectively as the
“Parties.”

W I T N E S S E T H:

WHEREAS, Curis possesses proprietary technologies, including small molecules,
antibodies and proteins that may antagonize or inhibit the Hedgehog Pathway (as
defined below) for use in research, discovery and development of pharmaceutical
products;

WHEREAS, Genentech is engaged in the research, development, marketing,
manufacture and sale of pharmaceutical products;

WHEREAS, Genentech desires to have access to Curis’ Hedgehog Pathway assets, and
discovery and development capabilities for purposes of discovering and
developing human therapeutic products; and

WHEREAS, Curis and Genentech desire to enter into a collaborative relationship
for research, discovery and development activities using Curis’ Hedgehog Pathway
technologies and for the development and commercialization of human therapeutic
products resulting from such activities.

NOW, THEREFORE, in consideration of the foregoing and the covenants and premises
contained in this Agreement, the Parties agree as follows:

1. DEFINITIONS. As used herein, the following terms shall have the following
meanings:

1.1 “1996 Stanford License” shall have the meaning set forth in the definition
of Existing License Agreements.

1.2 “Active R&D” shall mean, with respect to any indication in the Limited
Field, that Genentech is engaged in active research and development activities
with respect to human pharmaceutical products for use in such indication as
reasonably demonstrated by Genentech’s contemporaneously-created written
records.

1.3 “Affiliate” shall mean any company or entity controlled by, controlling, or
under common control with a Party hereto and shall include any company or entity
of which

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greater than fifty percent (50%) of the voting stock or participating profit
interest of which is owned or controlled, directly or indirectly, by a Party,
and any company or entity which owns or controls, directly or indirectly,
greater than fifty percent (50%) of the voting stock of a Party. In the case of
Genentech, for purposes of this Agreement, the term “Affiliate” shall [**].

1.4 “Antibody Compound” shall have the meaning set forth in the definition of
Compound.

1.5 “BCC” shall mean basal cell carcinoma.

1.6 “BCC Cost Sharing Ratio” shall have the meaning set forth in Section 4.2(a).

1.7 “BCC Field” shall mean the treatment of BCC with a formulation that is
delivered topically or intralesionally and not via Systemic Delivery.

1.8 “BLA” shall mean a Biologics License Application, filed with the FDA, or the
equivalent application or filing in another country, as applicable.

1.9 “Co-Development Budget” shall have the meaning set forth in Section 4.1.

1.10 “Co-Development Plan” shall have the meaning set forth in Section 4.1.

1.11 “Co-Development Steering Committee” or “CSC” shall have the meaning set
forth in Section 2.3.

1.12 “Co-Development Territory” shall mean (a) in the case of a Collaboration
Product designated pursuant to Section 3.2, the United States of America,
including its territories and possessions, and (b) in the case of a
Collaboration Product designated pursuant to Section 6.1(a), the Territory.

1.13 “Collaboration” shall mean the programs of collaborative research and
development with respect to Compounds under this Agreement.

1.14 “Collaboration Product” shall mean (a) a Lead Product that is designated as
a “Collaboration Product” pursuant to Section 3.2, or (b) a Compound that is
designated as a “Collaboration Product” pursuant to Section 6.1(a).

1.15 “Compound” shall mean [**].

1.16 “Compound Class” shall mean either (a) Small Molecule Compounds or
(b) Antibody Compounds

1.17 “Confidential Information” shall mean all information disclosed by a Party
to the other pursuant to this Agreement, including, without limitation,
manufacturing, marketing, financial, personnel, scientific and other business
information and plans, whether in oral, written, graphic or electronic form;
provided, however, that such information, if disclosed in tangible form, shall
be marked “Confidential” and, if disclosed orally, shall within thirty (30) days
of oral disclosure be summarized in writing, marked “Confidential,” and
transmitted to the other Party.

 

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1.18 “Control” shall mean possession of the ability to grant a license or
sublicense without violating (a) any law or governmental regulation applicable
to such license or sublicense or (b) the terms of any agreement or other
arrangement with any Third Party.

1.19 “Cost Sharing Ratio” shall mean the BCC Cost Sharing Ratio or the Hair
Growth Prevention Cost Sharing Ratio, as applicable.

1.20 “Curis Collaboration Patent” shall mean all Joint Patents issued during the
Term that solely claim Curis Inventions.

1.21 “Curis Expenses” shall have the meaning provided in Section 6.1(c)(ii).

1.22 “Curis Inventions” shall mean all Inventions having as a named inventor
only employees, agents, sublicensees, Affiliates, subcontractors or other
designated Third Parties of Curis.

1.23 “Curis Know-How” shall mean, to the extent useful for the purposes of the
Collaboration, all tangible or intangible know-how, trade secrets, inventions,
(whether or not patentable), data, preclinical results, physical, chemical or
biological material and other information and data pertaining to Compounds or
Products, or otherwise necessary or useful for the practice of the Curis Patents
which are not generally publicly known and are Controlled by Curis as of the
Effective Date or during the Term, including any replication or any part of such
information or material, but excluding any Curis Patents.

1.24 “Curis Patents” shall mean, to the extent useful for the purposes of the
Collaboration and Controlled by Curis as of the Effective Date or during the
Term, all foreign and domestic: (a) patents existing as of the Effective Date or
issued during the Term; (b) patents issuing from patent applications that are
pending as of the Effective Date or during the Term (including provisionals,
divisionals, continuations and continuations-in-part of such applications); and
(c) substitutions, extensions, reissues, renewals and inventors certificates
relating to the foregoing patents, in each case, which pertain to any of the
Compounds or Products. The Curis Patents as of the Effective Date are listed on
Schedule 1.24 hereto.

1.25 “Curis Product” shall mean any Product designated as a “Curis Product”
pursuant to Article 6.

1.26 “Curis Plan” shall have the meaning set forth in Section 6.1(a).

1.27 “Curis Technology” shall mean the Curis Patents and the Curis Know-How.

1.28 “Development Costs” shall have the meaning set forth in Schedule 4.2.

 

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1.29 “Evotec Agreement” shall mean that certain Service and Secrecy Agreement
dated May 1, 2001 between Curis and Evotec OAI, as may be amended from time to
time.

1.30 “Evotec Payments” shall have the meaning set forth in Section 8.7.

1.31 “Existing Genentech Patents” shall mean those U.S. Patents set forth on
Schedule 1.31 hereto, all foreign counterparts thereof, patents issuing from any
of the foregoing (including provisionals, divisionals, continuations and
continuations-in-part of such applications); and substitutions, extensions,
reissues, renewals and inventors certificates relating to any of the foregoing
patents.

1.32 “Existing License Agreements” shall mean (a) the Agreement dated
September 26, 1996 among Curis, The Johns Hopkins University and the University
of Washington (the “JHU License”), (b) the Exclusive License Agreement dated
May 3, 2000 between Curis and The Johns Hopkins University, (c) the License
Agreement dated February 9, 1995 between Curis and Harvard, (d) the License
Agreement dated February 1, 1997 between Curis and Harvard (together (c) and
(d) are referred to herein as the “Harvard Licenses”), (e) the License Agreement
dated January 1, 1995 between Curis and the Trustees of Columbia University,
(f) the Agreement dated February 12, 1996 between Curis and The Board of
Trustees of the Leland Stanford Junior University (the “1996 Stanford License”),
and (g) The License Agreement dated November 20, 1997 between Curis and the
Board of Trustees of the Leland Stanford Junior University, in each case as may
be amended from time to time as permitted by this Agreement.

1.33 “Existing Licensors” shall mean the parties to the Existing License
Agreements other than Curis.

1.34 “FDA” shall mean the United States Food and Drug Administration or any
successor agency thereto having the administrative authority to regulate the
marketing of human pharmaceutical products or biological therapeutic products,
delivery systems and devices in the United States of America.

1.35 “FTE” shall mean the equivalent of a full-time scientist’s work time over a
twelve (12) month period (including normal vacations, sick days and holidays).
The portion of an FTE year devoted by a scientist to a particular activity or
program shall be determined by dividing the number of full working days during
any twelve (12) month period devoted by such scientist to such activity or
program by the total number of working days during such twelve (12) month
period.

1.36 “Genentech Inventions” shall mean all Inventions having as a named inventor
only employees, agents, sublicensees, Affiliates, subcontractors or other
designated Third Parties of Genentech.

1.37 “Genentech Know-How” shall mean, to the extent useful for the purposes of
the Collaboration, all tangible or intangible know-how, trade secrets,
inventions (whether or not patentable), data, preclinical results, physical,
chemical or biological material and other information and data pertaining to
Compounds or Products or otherwise necessary or

 

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useful for the practice of the Genentech Patents, which are not generally
publicly known and are Controlled by Genentech during the Term, including any
replication or any part of such information or material, but excluding any
Genentech Patents.

1.38 “Genentech Patents” shall mean, to the extent Controlled by Genentech as of
the Effective Date or during the Term: (a) the Existing Genentech Patents; and
(b) all foreign and domestic: (i) Joint Patents issued during the Term that
solely claim Genentech Inventions; (ii) Joint Patents issuing from patent
applications that are pending during the Term that solely claim Genentech
Inventions (including provisionals, divisionals, continuations and
continuations-in-part of such applications); and (iii) substitutions,
extensions, reissues, renewals and inventors certificates relating to the
foregoing patents, in each case, which are necessary to make, have made, use,
sell, have sold, offer for sale or import any of the Compounds or Products.

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

1.40 “Good Laboratory Practices” or “GLP” shall mean current good laboratory
practices under FDA rules and regulations.

1.41 “Good Manufacturing Practices” or “GMP” shall mean current good
manufacturing practices under FDA rules and regulations.

1.42 “Hair Growth Prevention Cost Sharing Ratio” shall have the meaning set
forth in Section 4.2(b).

1.43 “Hair Growth Prevention Field” shall mean any human therapeutic use for the
regulation of hair growth.

1.44 “Harvard” shall mean the President and Fellows of Harvard College.

1.45 “Harvard Licenses” shall have the meaning set forth in the definition of
Existing License Agreements.

1.46 “Hedgehog Pathway” shall mean either or both (as the case may be) (a) the
Hedgehog protein family or (b) the signaling pathway activated by an
extracellular ligand of the Hedgehog protein family.

1.47 “IND” shall mean an Investigational New Drug Application filed with the
FDA, or the equivalent application or filing necessary to commence human
clinical trials in another country, as applicable.

1.48 “Inventions” shall have the meaning set forth in Section 10.1.

1.49 “JHU License” shall have the meaning set forth in the definition of
Existing License Agreements.

 

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1.50 “Joint Invention” shall mean any Invention made jointly by employees or
agents of both Curis and Genentech.

1.51 “Joint Patents” shall have the meaning set forth in Section 10.1.

1.52 “Joint Steering Committee” or “JSC” shall mean the committee formed
pursuant to Section 2.2.

1.53 “Know-How Product” shall mean any formulation of a Compound, which
formulation is not a Valid Claim Product.

1.54 “Lead Product” shall mean any Product that, after reasonable evaluation by
the JSC pursuant to Section 3.2 using mutually agreed upon criteria, has been
selected by the JSC for clinical development.

1.55 “License Fee” shall have the meaning set forth in Section 8.2.

1.56 “License Field” shall mean [**].

1.57 “Limited Field” shall mean [**].

1.58 “Major Market” shall mean (a) with respect to the License Field, the United
States of America, the United Kingdom, Germany, France, Spain, Italy and Japan
and (b) with respect to the BCC Field, the United States of America, the United
Kingdom, Germany, France, Spain, Italy and Australia.

1.59 “Materials” shall have the meaning set forth in Section 3.1.

1.60 “Milestone Payments” shall have the meaning set forth in Section 8.4.

1.61 “Modified Product” shall mean any Product that either:

(a) does not contain any Compound that was created, developed or in-licensed by
Curis, but contains one or more Compounds created, developed or in-licensed
(other than from Curis) by Genentech; or

(b) contains a Compound that is [**] a Compound [**] under U.S. patent law,
[**].

1.62 “NDA” shall mean a New Drug Application or BLA, as applicable, or an
equivalent application filed with the FDA, or the equivalent community
application filed in the European Union, or the equivalent application filed as
a national application in any other country or regulatory jurisdiction.

1.63 “Net Sales” shall mean, with respect to a given period of time, the gross
amount invoiced by a Party and its Affiliates and sublicensees for sales of Lead
Products, Collaboration Products or Curis Products, as applicable, during such
period, less the following

 

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deductions from such gross amounts as allocable to such Lead Products,
Collaboration Products or Curis Products (if not previously deducted from the
amount invoiced) to the extent actually incurred, allowed or taken:

(a) credits or allowances granted for damaged Lead Products, Collaboration
Products or Curis Products, as applicable, returns or rejections of Lead
Products, Collaboration Products or Curis Products, as applicable, price
adjustments and billing errors;

(b) governmental and other rebates (or equivalents thereof) granted to managed
health care organizations, pharmacy benefit managers (or equivalents thereof),
federal, state/provincial, local and other governments, their agencies and
purchasers and reimbursers or to trade customers;

(c) normal and customary trade, and quantity discounts, allowances and credits
allowed or paid;

(d) commissions paid to Third Party distributors, brokers or agents (excluding
sales personnel, sales representatives and sales agents that are employees or
consultants of a Party or its Affiliates or sublicensees) in countries outside
the United States in which such commissions are paid by deducting such
commissions from the gross sales invoiced for sales to such Third Parties;

(e) transportation costs, including insurance, for outbound freight related to
delivery of the product; and

(f) sales taxes, VAT taxes and other taxes directly linked to the sales of the
product.

Sales between or among a Party and its Affiliates and sublicensees shall be
excluded from the computation of Net Sales, but the subsequent final sales to
Third Parties by such Affiliates or sublicensees shall be included with Net
Sales; provided however, that if such Affiliates or sublicensees are the end
users of such Product, the amount billed therefore shall be deemed to be the
amount that would be invoiced to a Third Party in an arm’s-length transaction
for the sale of such products.

In the event a Lead Product, Collaboration Product or Curis Product is sold in
combination with one or more other active pharmaceutical ingredients (a
“Combination”), then Net Sales shall be calculated by multiplying the Net Sales
of that Combination by the fraction A/B, where A is the gross selling price of
the Product sold separately and B is the gross selling price of the Combination.
In the event that no such separate sales are made, Net Sales for royalty
determination shall be calculated by multiplying Net Sales of the Combination by
the fraction C/(C+D), where C is the fully allocated cost of the Lead Product,
Collaboration Product or Curis Product and D is the fully allocated cost of the
other active pharmaceutical ingredient(s) in the Combination.

1.64 “Operating Profits (Losses)” shall have the meaning set forth in
Schedule 4.2.

 

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1.65 “Phase I Clinical Trials” shall mean the initial trials in the Territory on
a limited number of normal volunteers or patients that are designed to establish
that a drug is safe for its intended use and to support its continued testing in
Phase II Clinical Trials.

1.66 “Phase II Clinical Trials” shall mean those trials in the Territory on a
limited number of patients that are designed to establish the safety and
biological activity of a drug for its intended use and to define warnings,
precautions and adverse reactions that are associated with the drug in the
dosage range to be prescribed.

1.67 “Phase II/III Clinical Trials” shall mean those trials in the Territory
designed to address the same matters addressed by a Phase II Clinical Trials as
well as to generate additional data related to dosing and the effect of the
relevant therapy on a limited number of patients.

1.68 “Phase III Clinical Trials” shall mean those pivotal trials in the
Territory of a drug on sufficient numbers of patients to establish the safety
and efficacy of such drug for the desired claims and indications.

1.69 “Product” shall mean any Know-How Product or Valid Claim Product.

1.70 “Regulatory Approval” shall mean any and all approvals (including price and
reimbursement approvals), licenses, registrations, or authorizations of the
United States or European Union or any country, federal, state or local
regulatory agency, department, bureau or other government entity that are
necessary for the manufacture, use, storage, import, transport and/or sale of a
Product in such jurisdiction.

1.71 “Research Plan” shall have the meaning set forth in Section 3.1.

1.72 “Royalty Term” shall mean:

(a) in the case of a Lead Product, the period beginning on the first commercial
sale of such Lead Product and ending, on a Compound-by-Compound and
country-by-country basis, upon (a) in the case of a Valid Claim Product, the
expiration of the last to expire patent containing a Valid Claim in the Curis
Patents or Joint Patents (excluding the Genentech Patents) in such country or
(b) in the case of a Know-How Product, [**] years from the date of first sale;
and

(b) in the case of a Curis Product, the period beginning on the first commercial
sale of such Curis Product and ending, on a Compound-by-Compound and
country-by-country basis, upon (a) in the case of a Valid Claim Product, the
expiration of the last to expire patent containing a Valid Claim in the
Genentech Patents or Joint Patents (excluding the Curis Collaboration Patents)
in such country or (b) in the case of a Know-How Product, [**] years from the
date of first sale.

1.73 “Small Molecule Compound” shall have the meaning set forth in the
definition of Compound.

 

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1.74 “Stock Purchase Agreement” shall mean that certain stock purchase agreement
between the Parties to be entered into concurrently herewith, in substantially
the form attached hereto as Exhibit A.

1.75 “Systemic Delivery” shall include, but not be limited to, [**] delivery.

1.76 “Term” shall have the meaning set forth in Section 13.1.

1.77 “Territory” shall mean the entire world.

1.78 “Third Party” shall mean any entity other than Curis or Genentech or an
Affiliate of Curis or Genentech.

1.79 “Upfront Fee” shall have the meaning set forth in Section 8.1.

1.80 “Valid Claim” shall mean a claim of an unexpired issued patent, which has
not been held unenforceable, unpatentable or invalid by a decision of a court or
other governmental agency of competent jurisdiction unappealable or unappealed
within the time allowed for appeal or which has not been admitted to be invalid
or unenforceable through reexamination, reissue, disclaimer, or otherwise.

1.81 “Valid Claim Product” shall mean any formulation of a Compound for which
(i) the manufacture, use or sale, but for the licenses granted to Genentech
hereunder, would infringe a Valid Claim of the Curis Patents, Genentech Patents
(other than Existing Genentech Patent Rights) or Joint Patents or (ii) the
method of identification of which or the method of identification of the utility
of which is covered by a Valid Claim of the Curis Patents, Genentech Patents
(other than Existing Genentech Patent Rights) or Joint Patents.

2. CONDUCT OF COLLABORATION; GOVERNANCE

2.1 Objective. Subject to the terms and conditions of this Agreement, Curis and
Genentech shall use commercially reasonable efforts, in accordance with standard
industry practice, to conduct collaborative research activities with the goal of
developing and commercializing one or more Compounds in the License Field as
quickly as reasonably possible.

2.2 Joint Steering Committee. Promptly after the Effective Date, the Parties
will form a Joint Steering Committee (the “JSC”) composed of an equal number of
employees of each of Curis and Genentech, but in no event to exceed four
(4) members from each Party. The JSC shall determine the specific goals for the
Collaboration, shall manage the ongoing research conducted under the
Collaboration in accordance with the Research Plan, shall monitor the progress
and results of such work, and shall oversee and coordinate the development and
commercialization of Compounds (other than Collaboration Products); provided,
however, that the JSC shall not have decision-making authority with respect to
the development and commercialization of Collaboration Products, which shall be
governed by the CSC. The presence of at least one (1) representative of each
Party shall constitute a quorum for the conduct of any JSC meeting. All
decisions of the JSC shall require unanimous approval, with the representatives
of each Party collectively having one (1) vote, provided in the event of a
deadlock, the issue shall be referred to the Chief Executive Officer of Curis
and the Senior Vice

 

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President of Research of Genentech, or their respective designees, who shall
promptly meet and attempt in good faith to resolve such issue within thirty
(30) days. If such executives cannot resolve such matter, then Genentech shall
have final decision-making authority with regard to decisions regarding the
Collaboration (including, without limitation, the JSC’s designation of a
Compound as either a Lead Product or Excluded Product); provided, however, that
in no event shall Genentech have the right or power to take any of the following
actions without the approval of Curis’ representatives on the JSC:

(a) approve the initial Research Plan (an outline of which has been agreed upon
by the Parties as of the Effective Date);

(b) amend or modify this Agreement or the Research Plan;

(c) resolve any such matter in a manner that conflicts with the provisions of
this Agreement (including, without limitation, the Research Plan);

(d) make any decision with respect to the development or commercialization of
Curis Products; or

(e) make any decision with respect to the prosecution, maintenance, defense or
enforcement of any Curis Patents.

The JSC shall meet at such frequency as the JSC agrees, except that, until the
filing of the first IND for a Lead Product utilizing Systemic Delivery in a
Major Market, the JSC shall meet on at least a quarterly basis. Meetings of the
JSC, and JSC dispute resolution meetings between Curis’ Chief Executive Officer
and Genentech’s Senior Vice President of Research (or their designees), may be
conducted by videoconference, teleconference or in person, as agreed by the
Parties, and the Parties shall agree upon the time and place of meetings. A
reasonable number of additional representatives of a Party may attend meetings
of the JSC in a non-voting capacity. The JSC shall exist for so long as either
any work is being conducted under the Research Plan or any Compound is being
developed or commercialized by Genentech, Curis, or any of their respective
Affiliate(s) or sublicensee(s) in any Major Market.

The JSC shall also be responsible for designating one or more representatives of
each Party with expertise in patent law (which individuals need not be members
of the JSC) to oversee intellectual property matters relating to the
Collaboration, subject to the provisions of Article 10, and such patent
committee shall coordinate with and report to the JSC.

2.3 Co-Development Steering Committee. Promptly following the JSC’s designation
pursuant to Section 3.2 of the first Collaboration Product, the Parties will
form a Co-Development Steering Committee (the “CSC”) for such Collaboration
Product and any subsequent Collaboration Product(s). The CSC will be composed of
an equal number of representatives from both Curis and Genentech. The CSC shall
meet within thirty (30) days of such designation of the first Collaboration
Product and shall be responsible for managing research and development
activities conducted in furtherance of the Co-Development Plan and monitoring
the progress and results of such work. The CSC shall also be responsible for
creating a finance subcommittee with individuals with expertise in the areas of
accounting, financial planning, financing reporting, cost allocations and
financial audits (which individuals need not

 

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be members of the CSC), and such finance committee shall coordinate with and
report to the CSC. The presence of at least one (1) representative of each Party
shall constitute a quorum for the conduct of any CSC meeting. All decisions of
the CSC shall require unanimous approval, with the representatives of each Party
collectively having one (1) vote, provided in the event of a deadlock, the issue
shall be referred to the Chief Executive Officer of Curis and the Chief Medical
Officer of Genentech, or their respective designees, who shall promptly meet and
attempt in good faith to resolve such issue within thirty (30) days. If such
executives cannot resolve such matter, then Genentech shall have final
decision-making authority with regard to decisions regarding the development and
the commercialization of Collaboration Products; provided, however, that in no
event shall Genentech have the right or power, without the approval of Curis’
representatives on the CSC, to approve any modification, or series of
modifications, to any Co-Development Plan or Co-Development Budget, which
modification(s) would increase the expenses to be borne by Curis by more than
[**] percent ([**]%) of the expenses Curis was obligated to bear in connection
with the unmodified Co-Development Plan or Co-Development Budget, as applicable.
The CSC shall meet on a quarterly basis or at such other frequency as the CSC
agrees. Meetings of the CSC, and CSC dispute resolution meetings between Curis’
Chief Executive Officer and Genentech’s Chief Medical Officer (or their
designees), may be conducted by videoconference, teleconference or in person, as
agreed by the Parties, and the Parties shall agree upon the time and place of
meetings. A reasonable number of additional representatives of a Party may
attend meetings of the CSC in a non-voting capacity.

2.4 Product Prioritization. The Parties acknowledge and agree that Genentech (or
the JSC as a whole) may, in good faith, prioritize the development of certain
Compounds over the development of other Compounds as a result of such factors as
product performance, safety and tolerability, dosing convenience, route of
administration, ease and expense of manufacturing, regulatory approval
prospects, the competitive landscape, economic factors and potential channel
conflicts with other Compounds or products. The Parties further acknowledge and
agree that (i) for some indications, one Compound Class may have greater utility
than the other Compound Class, and (ii) for some indications, the greatest
utility may be maintained through the use of Compounds from both Compound
Classes. Notwithstanding the foregoing, the Parties will use commercially
reasonable efforts to explore the utility and market potential of Compounds from
both Compound Classes for indications in the License Field.

3. RESEARCH PROGRAM; DESIGNATION AND DEVELOPMENT OF LEAD PRODUCTS

3.1 Research Plan. Within sixty (60) days following its formation, the JSC will
develop and approve a written research plan setting forth the research
obligations of each of the Parties under the Collaboration until the filing of
the first IND for a Lead Product utilizing Systemic Delivery in a Major Market
or the earlier termination of this Agreement in accordance with Article 13
hereof (the “Research Plan”), which will be deemed a part of, and is hereby
incorporated by reference in, this Agreement. The Parties anticipate that the
Research Plan will include the research responsibilities of Curis set forth in
the research program outline agreed upon by the Parties as of the Effective
Date. The Research Plan will also include a detailed list of the materials to be
provided by Curis to Genentech (the “Materials”), which may include, without
limitation, Compound samples, assays, reagents, cell lines and relevant animal
models. Curis and Genentech will each conduct research in accordance with the
Research Plan, as it may be amended from time to time upon unanimous approval of
the JSC, or as reasonably directed by

 

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the JSC, subject to the provisions of Section 2.2. Curis shall use commercially
reasonable and diligent efforts to advance and complete the foregoing research
in a timely manner. In furtherance of that obligation, Curis will assign no
fewer than 8 FTE’s approved by the JSC (such approval not to be unreasonably
withheld or delayed) for a period of no less than 2 years following the
Effective Date (unless this Agreement is earlier terminated) to complete the
tasks described above. The Parties agree that up to 4 of such FTE’s assigned to
the research may be Evotec OAI employees. If and to the extent that Genentech
wishes to have more than 4 of such FTE’s be Evotec OAI employees, Genentech
shall be responsible for the FTE costs charged by Evotec OAI with respect to the
number of Evotec OAI FTE’s that is in excess of 4. Curis shall cause the Evotec
Agreement to be renewed until at least April 30, 2005 and during such time shall
not, without the prior written consent of Genentech, amend the Evotec Agreement
in a manner that would diminish the rights granted to Genentech hereunder or
otherwise be detrimental to Genentech.

3.2 Designation of Lead Products. The JSC will assess each Compound and
designate, in writing, which will be designated as Lead Products. Any
designation of a Lead Product will also specify the indications for which the
Parties intend to develop such Lead Product. If the JSC designates any such Lead
Product for development in the BCC Field or the Hair Growth Prevention Field,
such Lead Product shall be deemed a “Collaboration Product” for purposes of this
Agreement. The Parties agree that the JSC shall make Lead Product determinations
in a reasonable period of time following presentation to the JSC of data
concerning each such Product sufficient to support making such determination.
The Parties anticipate that Lead Products will meet, without limitation, the
criteria set forth in Schedule 3.2.

3.3 Genentech Development and Commercialization Responsibilities. The following
provisions shall apply to the development and commercialization of Lead Products
other than Collaboration Products:

(a) Clinical Development Responsibilities. Genentech or its sublicensees will be
responsible for the clinical development of such Lead Products and will bear all
associated costs. In addition, if required for IND filing, Genentech and/or its
sublicensees will be responsible for conducting pharmacokinetics, toxicology or
other IND-enabling studies with respect to such Lead Products. Genentech will
use commercially reasonable efforts to develop and to obtain Regulatory Approval
of such Lead Products in the Major Markets and such other markets as Genentech
deems advisable in accordance with generally accepted practices in the
pharmaceutical industry.

(b) Regulatory Affairs. Genentech and/or its sublicensee(s) shall be responsible
for all interactions with regulatory authorities in the Territory with respect
to such Lead Products and will bear the associated costs, and, subject to
Genentech’s payment obligations herein, shall own any IND and NDA filings made
with respect to such Lead Products. Genentech shall regularly (and on at least a
semi-annual basis) provide Curis, via the JSC or CSC, as applicable, with an
update describing the progress made to date towards obtaining Regulatory
Approval of any such Lead Product(s) and the plans for achieving such Regulatory
Approval(s) in the future.

 

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(c) Manufacturing and Supply. Genentech and/or its sublicensee(s) shall be
responsible for, and shall bear all associated costs of, manufacturing all
preclinical, clinical and commercial forms of such Lead Products, including the
bulk drug substance and finished drug product forms thereof. Genentech shall
keep Curis reasonably informed of manufacturing and supply related activity.

(d) Formulation. Genentech and/or its sublicensee(s) shall be responsible for
formulating such Lead Products and shall bear all associated costs.

(e) Sales and Marketing. Genentech and/or its sublicensee(s) shall be
responsible for all sales and marketing activities, and all other
commercialization requirements, related to such Lead Products and shall bear all
associated costs. Genentech and/or its sublicensee(s) shall keep Curis
reasonably informed of sales and marketing related activity. Genentech and/or
its sublicensee(s) shall use commercially reasonable efforts, in accordance with
generally accepted practices in the pharmaceutical industry, to maximize Net
Sales of Lead Products in each country where such Lead Products have obtained
Regulatory Approval for the sale of such Lead Products.

4. CO-DEVELOPMENT OF COLLABORATION PRODUCTS

4.1 Co-Development Plan and Budget. Promptly following the designation of any
Collaboration Product, Genentech (in the case of a Collaboration Product to be
developed in the BCC Field (a “BCC Product”)) or Curis (in the case of a
Collaboration Product to be developed in the Hair Growth Prevention Field (a
“Hair Growth Prevention Product”)) shall, with input from the other Party,
prepare a comprehensive development plan for such Collaboration Product (a
“Co-Development Plan”) designed to generate the preclinical, clinical and
regulatory information required for filing a U.S. IND application and a U.S.
NDA. The Party that is primarily responsible for preparing a particular
Co-Development Plan under the preceding sentence shall be considered the
“Proposing Party” for purposes of this Article 4. The Co-Development Plan shall
describe in detail the development activities to be performed by each Party with
respect to such Collaboration Product, as well as criteria that must be met by
the Collaboration Product at each stage of development. For purposes of
clarification, upon CSC approval, the Co-Development Plan may include
development activities with respect to indications in the License Field that are
in addition to the BCC Field or the Hair Growth Prevention Field, as applicable.
Each Co-Development Plan shall also include a budget of projected Development
Costs for each calendar year with respect to the applicable Collaboration
Product (a “Co-Development Budget”). The Co-Development Plan and Co-Development
Budget shall be prepared within ninety (90) days of the initial meeting of the
CSC with respect to the applicable Collaboration Product (or as otherwise
mutually agreed by the Parties). The Co-Development Budget for a Collaboration
Product for a given calendar year shall constitute the maximum Development Costs
to be incurred by either Party under the Co-Development Plan in such calendar
year, unless a modification to such budget is approved by the CSC.

4.2 Collaboration Products.

(a) BCC Products. The Parties agree that BCC Products may be developed in one of
two ways pursuant to this Agreement. In Curis’ sole discretion, each BCC

 

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Product may be (i) re-designated as Lead Product, whereupon it will cease to be
a Collaboration Product for purposes of this Agreement and will instead be
developed by Genentech in accordance with Article 3 of this Agreement, or
(ii) co-developed by the Parties as a Collaboration Product in accordance with
this Article 4. Within thirty (30) days of finalization of the applicable
Co-Development Plan and Co-Development Budget, Curis will notify Genentech in
writing as to which of the preceding development methods Curis has chosen, and
if Curis elects to co-develop a BCC Product as described in the preceding
clause (ii), such notice shall also specify the percentage (not to exceed fifty
percent (50%)) of Development Costs for BCC and any subsequent indications
approved by the CSC for such Collaboration Product that Curis will bear (the
“BCC Cost Sharing Ratio”). In the event Curis notifies Genentech that a
Collaboration Product will be re-designated as a Lead Product, the CSC formed in
connection with such Collaboration Product shall be dissolved, unless, and until
such time as, another Collaboration Product has been designated. In the event
Curis notifies Genentech that a Collaboration Product will be co-developed by
the Parties under this Article 4, the CSC shall in good faith further elaborate
and refine the Co-Development Plan (as necessary) to describe in detail the
manner in which Operating Profits (Losses) (including, without limitation,
Development Costs) with respect to such Collaboration Product in the
Co-Development Territory will be reported, calculated and shared by the Parties,
which description shall include and be consistent with the principles set forth
in Schedule 4.2 hereto and shall be completed within sixty (60) days following
Curis’ notice of its desire to co-develop such Collaboration Product. Each such
further elaborated and refined Co-Development Plan shall be deemed a part of,
and is hereby incorporated by reference in, this Agreement.

(b) Hair Growth Prevention Products. The Parties agree that Hair Growth
Prevention Products may be developed in one of two ways pursuant to this
Agreement. In Genentech’s sole discretion, each Hair Growth Prevention Product
may be (i) designated as a Curis Product, whereupon it will cease to be a
Collaboration Product for purposes of this Agreement and will instead be
developed by Curis in accordance with Article 6 of this Agreement, or
(ii) co-developed by the Parties as a Collaboration Product in accordance with
this Article 4. Within thirty (30) days of finalization of the applicable
Co-Development Plan and Co-Development Budget, Genentech will notify Curis in
writing as to which of the preceding development methods Genentech has chosen,
and if Genentech elects to co-develop the Hair Growth Prevention Product as
described in the preceding clause (ii), such notice shall also specify the
percentage (not to exceed [**] percent ([**]%), unless otherwise agreed by
Curis) of Development Costs for Hair Growth Prevention and any subsequent
indications approved by the CSC for such Collaboration Product that Genentech
will bear (the “Hair Growth Prevention Cost Sharing Ratio”). In the event
Genentech notifies Curis that a Hair Growth Prevention Product will be
designated as a Curis Product, the CSC formed in connection with such
Collaboration Product shall be dissolved, unless, and until such time as,
another Collaboration Product has been designated. In the event Genentech
notifies Curis that a Collaboration Product will be co-developed by the Parties
under this Article 4, the CSC shall in good faith further elaborate and refine
the Co-Development Plan (as necessary) to describe in detail the manner in which
Operating Profits (Losses) (including, without limitation, Development Costs)
with respect to such Collaboration Product in the Co-Development Territory
(unless otherwise agreed by the Parties) will be reported, calculated and shared
by the Parties, which description shall include and be consistent with the
principles set forth in Schedule 4.2 hereto and shall be completed within sixty
(60) days following Genentech’s notice of its desire to co-develop such
Collaboration Product. Each such further elaborated and refined Co-Development
Plan shall be deemed a part of, and is hereby incorporated by reference in, this
Agreement.

 

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4.3 Sharing of Operating Profits (Losses).

(a) Except as set forth in Section 4.3(b) below, all Operating Profits (Losses)
from each Collaboration Product developed pursuant to this Article 4 will be
shared by the Parties in accordance with the applicable Cost Sharing Ratio for
such Collaboration Product (e.g., if Curis bears 35% of Development Costs for
such Collaboration Product, then Operating Profits (Losses) for such
Collaboration Product will be allocated 35% to Curis and 65% to Genentech). The
Parties agree to maintain records in sufficient detail to calculate and confirm
all elements of Operating Profits (Losses). Except as otherwise provided in
Section 4.3(b), the Parties’ obligation to share Operating Profits (Losses) with
respect to each Collaboration Product shall continue for so long as the Parties
are selling such Collaboration Product in the Co-Development Territory.

(b) On a Collaboration Product-by-Collaboration Product basis, Curis (in the
case of a BCC Product) or Genentech (in the case of a Hair Growth Prevention
Product) shall have the right to terminate its obligation to fund the percentage
of Development Costs determined by the applicable Cost Sharing Ratio for a
Collaboration Product at any time, including, but not limited to, in the event
such Party is unable to meet its obligation to fund such costs. A Party’s
decision to terminate co-development of a Collaboration Product will have no
effect on that Party’s right to co-develop (or continue to co-develop) any other
Collaboration Product. Effective upon the other Party’s receipt of written
notice from the terminating Party that the terminating Party has elected to
terminate co-development with respect to a Collaboration Product, such
Collaboration Product will be deemed re-designated as a Lead Product (if Curis
is the terminating Party) or a Curis Product (if Genentech is the terminating
Party) for purposes of this Agreement, including, without limitation, for the
purposes of Article 8, and the obligation of the Parties to share Operating
Profits (Losses) with respect thereto shall cease; provided, however, that no
retroactive milestone payments shall be due to Curis with respect to such former
Collaboration Product for any milestones that occurred prior to or within three
(3) months following the date that Curis elected to elected to terminate
co-development of such Collaboration Product. From and after re-designation of a
Collaboration Product as a Lead Product or Curis Product pursuant to this
Section 4.3(b), such Lead Product or Curis Product shall no longer be eligible
for designation as a Collaboration Product hereunder.

4.4 Co-Development Responsibilities. To the extent that a Collaboration Product
will be co-developed by the Parties under this Article 4, the Parties will
undertake the applicable Co-Development Plan. The Parties anticipate that each
Party will take the lead in the areas of its expertise as directed by the CSC.
All activities in connection with the development of such Collaboration Product
will be performed in accordance with the Co-Development Plan and Co-Development
Budget or as otherwise directed by the CSC. Except as otherwise expressly set
forth herein, Genentech shall have the sole and final decision-making authority
with respect to development and commercialization of, and the nature and timing
of all regulatory filings for, each Collaboration Product.

 

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5. TECHNOLOGY TRANSFER; THIRD PARTY LICENSORS

5.1 Transfer of Materials. As soon as reasonably practicable following the
Effective Date, Curis will provide the Materials to Genentech, at no cost to
Genentech. Genentech will use the Materials solely for the Collaboration.
Genentech shall not sell, transfer, disclose or otherwise provide access to the
Materials, any proprietary Curis method or process embodied therein, or any
material that could not have been made but for the foregoing, to any person or
entity without the prior written consent of Curis, except that Genentech may
allow access to the Materials to its employees, agents, sublicensees, Affiliates
or subcontractors for purposes consistent with this Agreement. Genentech will
take reasonable steps to ensure that such employees, agents and permitted
subcontractors will use the Materials in a manner that is consistent with the
terms of this Agreement. Genentech understands that the Materials may have
unpredictable and unknown biological and/or chemical properties, and that they
are to be used with caution. Genentech will use the Materials in compliance with
all applicable laws and regulations. For purposes of clarification, Genentech
acknowledges and agrees that Curis shall have the right to retain stocks of the
Materials (a) for its own use outside the scope of this Agreement and/or (b) for
its internal use in connection with research within the scope of this Agreement.

5.2 IND Transfer. As of the Effective Date, Curis hereby transfers and assigns
to Genentech all Curis’ right, title and interest in and to United States IND
application entitled “CUR-61414 for the Treatment of Basal Cell Carcinoma.”
Within a reasonable period of time following the Effective Date, Curis shall
take such actions and execute such documents as may be reasonably required to
effectuate such transfer and assignment, at Genentech’s expense. Curis will
provide to Genentech copies of all regulatory correspondence related thereto.

5.3 Transfer of Data. As soon as reasonably practicable following the Effective
Date, Curis will disclose to Genentech for use in connection with the
Collaboration all chemical structures, pre-clinical data and reports (e.g., PK,
ADME, toxicology, etc.) on the Compounds, to the extent in the possession and
Control of Curis.

5.4 Existing License Agreements. Genentech agrees to use reasonable efforts to
assist Curis in complying with Curis’ obligations under the Existing License
Agreements, including but not limited to record keeping with respect to Lead
Products and Collaboration Products sold, provisions for patent infringement by
Third Parties and patent marking requirements. Curis shall be responsible for
required communications with the Existing Licensors with respect to diligence
obligations under the Existing License Agreements. Curis shall not, without the
prior written consent of Genentech, amend any Existing License Agreement in a
manner that would diminish the rights granted to Genentech hereunder or
otherwise be detrimental to Genentech. Genentech agrees that, to the extent
Genentech is a sublicensee of Curis’ rights under the 1996 Stanford License,
Genentech shall be subject to the provisions set forth in Articles 8, 9 and 10
of the 1996 Stanford License that apply to Curis, and that to the extent
Genentech is a sublicensee of Curis’ rights under the JHU License, Genentech
shall be subject to the provisions set forth in Articles 8, 9, 10 and 12 of the
JHU License for the benefit of The Johns Hopkins University, the Howard Hughes
Medical Institute and the University of Washington.

 

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5.5 Research Materials. Genentech acknowledges and agrees that the Existing
Licensors retain certain rights under the Existing License Agreements. To the
extent an Existing Licensor requests, for research purposes, samples of
Materials licensed to Curis pursuant to an Existing License Agreement, Genentech
agrees to provide such Materials on Curis’ behalf to the Existing Licensor or
its designee to the extent that Genentech has sufficient quantities of such
Materials and Curis does not. Genentech’s obligation pursuant to this
Section 5.5 shall be limited to the provision of reasonable quantities of
Materials. Curis agrees to reimburse Genentech for the direct cost of such
Materials within ninety (90) days of receipt of written invoice for Materials
Genentech has provided pursuant to this Section.

6. CURIS DEVELOPMENT RIGHTS

6.1 Development of Compounds Other Than Lead Products.

(a) In the event that Curis wishes to pursue pre-clinical and clinical
development of any Compound other than a Lead Product in one or more indications
in the Limited Field, then, provided that human pharmaceutical products for use
in such indication(s) are not then the subject of Active R&D by Genentech,
Curis, working together with Genentech, may develop and propose to the JSC a
development plan (each, a “Curis Plan”) for such Compound for such
indication(s). Within [**] days of delivery of such Curis Plan to Genentech in
accordance with Section 16.1, Genentech shall notify Curis in writing as to
whether Genentech will pursue the development of such Compound as a Lead
Product. If Genentech timely provides Curis with written notice of its election
to undertake the development of such Compound, such Compound will be designated
as a Lead Product and be developed in accordance with the development plan
approved by the JSC and this Agreement. Alternatively, if a Curis Plan provides
for development of a Compound in the Hair Growth Prevention Field, such Compound
may, at Genentech’s option, be developed as a “Collaboration Product” (instead
of a Lead Product) for purposes of this Agreement in accordance with the
provisions of Article 4.

(b) If Genentech decides not to pursue development of a Compound proposed for
development pursuant to Section 6.1(a) as a Lead Product, or fails to respond in
writing within such [**] day period, Curis may pursue development of such
Compound for the indication(s) set forth in the Curis Plan on its own, whereupon
any formulation of such Compound will be deemed a “Curis Product” for purposes
of this Agreement. Thereafter, Curis may independently conduct preclinical and
clinical development of such Curis Product, or Curis may license a Third Party
sublicensee reasonably acceptable to Genentech (such acceptance not to be
unreasonably withheld or delayed) to conduct such development according to a
development plan and other terms and conditions (including appropriate
compensation to Genentech) as are mutually agreed by the Parties, in each case
subject to the provisions of this Section 6.1.

(c) With respect to each Curis Product that is designated pursuant to
Section 6.1(b) and with respect to which Curis will independently conduct
development, the following conditions will apply:

(i) Curis and Genentech will mutually agree on the design of any preclinical
studies, Phase I Clinical Trials and Phase II Clinical Trials, and will also
agree upon the endpoints for such Phase I Clinical Trials and Phase II Clinical
Trials;

 

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(ii) Subject to Section 6.1(c)(iv) below, Curis shall be responsible for
conducting all such preclinical studies, Phase I Clinical Trials and Phase II
Clinical Trials and shall bear [**]% of the costs thereof. Curis shall keep
complete and accurate written records of the direct historical costs of such
preclinical studies, Phase I Clinical Trials and Phase II Clinical Trials
(including, but not limited to, cost of drug substance and drug product)
actually incurred by Curis with respect to such Curis Product (the “Curis
Expenses”);

(iii) Curis will notify Genentech in writing of Curis’ requirements for the
manufacture of the drug substance and the drug product for the Phase I Clinical
Trials and Phase II Clinical Trials and may also solicit offers from Third Party
contract manufacturers for such supply. Genentech shall have the right, but not
the obligation, to manufacture such drug substance and drug product, such right
to be exercised no later than thirty (30) days from receipt of any such Curis
notice by Genentech providing a written proposal to Curis setting forth the
financial and other material terms upon which Genentech (or its Affiliate) is
willing to manufacture such drug substance and drug product; provided, however,
the Parties agree that the price to be paid by Curis to Genentech for any such
materials shall be [**] percent ([**]%) of Genentech’s Cost of Goods, except
that if the price offered to Curis in a bona fide offer of a reputable Third
Party contract manufacturer for the same quantity of drug substance and drug
product is less than [**] percent ([**]%) of Genentech’s Cost of Goods, then
Curis shall have the right to contract with such Third Party, instead of which
Genentech, for such manufacture, unless within [**] days of Genentech’s receipt
of such Third Party terms, Genentech agrees to match the price offered by such
Third Party. Except to the extent Curis is entitled to contract with such Third
Party for such manufacture in accordance with the preceding sentence, Curis and
Genentech shall negotiate and enter into a definitive manufacturing agreement on
commercially reasonable terms within [**] days of the date Genentech submits its
manufacturing proposal to Curis.

(iv) Curis shall keep Genentech regularly and fully informed of the results of
such preclinical and clinical development activities. Upon Genentech’s written
request, and in any event within thirty (30) days following completion of
Phase II Clinical Trials of a Curis Product, Curis shall provide Genentech with
written documentation of the Curis Expenses incurred by Curis with respect to
such Curis Product. At any time prior to the date that is [**] days after
disclosure to Genentech of the results of Phase II Clinical Trials of such Curis
Product (the “Exercise Period”), Genentech shall have the right either:

(1) to designate such Curis Product as a Lead Product and assume responsibility
for further development and commercialization thereof, in which event Genentech
shall provide Curis with written notice thereof and shall pay to Curis [**]
percent ([**]%) of the Curis Expenses incurred to date for such Curis Product,
in each case prior to the end of the Exercise Period; or

(2) to require that Curis cease all further development of such Curis Product,
in which event Genentech shall provide Curis with written notice thereof and
shall pay to Curis [**] percent ([**]%) of the Curis Expenses incurred to date
for such Curis Product, in each case prior to the end of the Exercise Period.

 

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(v) Any Curis Product for which Genentech has exercised its right under
Section 6.1(c)(iv)(1) and paid Curis [**] percent ([**]%) of the Curis Expenses
as set forth above shall, effective upon such payment, be deemed a Lead Product
for purposes of this Agreement, except that Genentech shall not be obligated to
pay to Curis any milestone payments hereunder with respect to any milestone
event that occurred prior to such exercise and payment. Curis shall transfer to
Genentech, and Genentech shall have the right to use, all information generated
by Curis with respect to such Lead Product for the indication(s) specified in
the applicable Curis Plan, and Genentech shall bear all costs of, and shall have
exclusive rights and control over, further clinical development, regulatory
affairs, and commercialization of such Lead Product in such indication(s) in the
Territory in accordance with this Agreement.

(vi) If Genentech exercises its right under Section 6.1(c)(iv)(2) with respect
to a Curis Product and pays Curis [**] percent ([**]%) of the Curis Expenses as
set forth above shall, then neither Party shall thereafter have any right or
license to develop or commercialize such Curis Product.

(vii) If the Exercise Period with respect to a Curis Product expires without
Genentech having exercised its right under either Section 6.1(c)(iv)(1) or
Section 6.1(c)(iv)(2), then Genentech shall have no further right to cause such
Curis Product to be designated a Lead Product or to require that Curis cease
development or commercialization of such Curis Product.

6.2 Commercialization of Curis Products. With respect to any Curis Product as to
which Genentech has no further development rights hereunder (including, without
limitation, an option to designate it as a Lead Product), Curis will be solely
responsible for the manufacture, formulation and commercialization of such Curis
Product (either itself or through or in collaboration with a Third Party, but
subject to the oversight of the JSC) and shall bear all associated costs.
Genentech shall have the right, but not the obligation, to manufacture the drug
substance and drug product embodied in each Curis Product, such right to be
exercised no later than thirty (30) days following Genentech’s final refusal to
participate in the development of such Curis Product by Genentech providing a
written proposal to Curis setting forth the financial and other material terms
upon which Genentech (or its Affiliate) is willing to manufacture such drug
substance and drug product; provided, however, the Parties agree that the price
to be paid by Curis to Genentech for any such materials shall be [**] percent
([**]%) of Genentech’s Cost of Goods, except that if the price offered to Curis
in a bona fide offer of a reputable Third Party contract manufacturer for the
same quantity of drug substance and drug product is less than [**] percent
([**]%) of Genentech’s Cost of Goods, then Curis shall have the right to
contract with such Third Party, instead of which Genentech, for such
manufacture, unless within ten (10) days of Genentech’s receipt of such Third
Party terms, Genentech agrees to match the price offered by such Third Party.
Except to the extent Curis is entitled to contract with such Third Party for
such manufacture in accordance with the preceding sentence, Curis and Genentech
shall negotiate and enter into a definitive manufacturing agreement on
commercially reasonable terms within ninety (90) days of the date Genentech
submits its manufacturing proposal to Curis. For the avoidance of doubt, as
between the Parties, except to the extent Genentech has any further rights
hereunder

 

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to develop a Curis Product, Curis shall be responsible for all interactions with
regulatory authorities in the Territory with respect to such Curis Product and
will bear the associated costs. Curis shall own any IND and NDA filings made
with respect to each such Curis Product.

7. LICENSE GRANTS

7.1 License Grants to Genentech.

(a) Research License. Subject to the terms of this Agreement and subject to the
rights of Existing Licensors under the Existing License Agreements, Curis hereby
grants to Genentech an exclusive, royalty-free, worldwide right and license,
during the Term, with the right to sublicense in accordance with Section 7.1(c),
under the Curis Technology and Curis’ interest in Joint Patents to perform
Genentech’s obligations under the Research Plan.

(b) Development and Commercialization License for Lead Products and
Collaboration Products. Subject to the terms of this Agreement and subject to
the rights of Existing Licensors under the Existing License Agreements, Curis
hereby grants to Genentech an exclusive, royalty-bearing license, during the
Term, with the right to sublicense in accordance with Section 7.1(c), under the
Curis Technology and Curis’ interest in Joint Patents to make, have made, use,
sell, offer for sale, have sold and import Lead Products and Collaboration
Products in the License Field in the Territory.

(c) Sublicensing. Genentech’s right to sublicense its rights under
Sections 7.1(a) and 7.1(b) [**], to grant further sublicenses. [**], Genentech
hereby assumes responsibility [**], as applicable. Genentech [**] granted by
Genentech hereunder [**].

(d) Diligence. In the event that Curis in good faith believes that Genentech is
not meeting its diligence obligations as set forth in Section 3.3(a) or 3.3(e)
(subject to the provisions of Section 2.4), Curis may provide Genentech with
written notice thereof. Within [**] days of such notice, Genentech shall do one
of the following: (i) provide Curis with reasonably satisfactory evidence that
Genentech is meeting such diligence obligations; (ii) provide Curis with
reasonably satisfactory evidence that Genentech has commenced activities
sufficient to meet such diligence obligations; or (iii) provide Curis with
reasonably satisfactory evidence that it is not commercially reasonable for
Genentech to pursue development of the applicable Lead Product or other
Compound.

(e) Cessation of Development of Antibody Compounds. If, as a result of
development decisions made by Genentech or the JSC, no Antibody Compound is
under research or development as part of the Collaboration for a period of [**]
months or more and:

(i) Curis has presented Genentech with a development plan containing reasonably
satisfactory evidence that a given Antibody Compound may have utility for a
certain indication;

(ii) the potential market for a product based on that Antibody Compound approved
for such indication is not significant enough to warrant development and
commercialization of such product by Genentech (as determined solely by
Genentech in good faith); and

 

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(iii) a product based on that Antibody Compound developed for such indication
could not reasonably be expected to compete with any Small Molecule Compound (or
Product based thereon) then under research, development or commercialization by
Genentech pursuant to this Agreement;

then within [**] days of delivery of the development plan described in
subsection (i) above, Genentech will either (a) designate such Antibody Compound
as a Lead Product and initiate commercially reasonable efforts to develop same
or (b) designate such Antibody Compound as a Curis Product and Curis may develop
and commercialize such Curis Product in accordance with all of the terms and
conditions of the Agreement pertaining to Curis Products, including, without
limitation, Section 6.1 and Section 7.2(c).

7.2 License Grants to Curis.

(a) Research License. Subject to the terms of this Agreement, Genentech hereby:
(i) grants to Curis a non-exclusive, worldwide, royalty-free license during the
Term, [**], under the Genentech Technology, to perform Curis’ obligations under
the Research Plan; and (ii) grants back to Curis a non-exclusive, worldwide,
royalty-free license during the Term, [**], under the rights licensed to
Genentech under Section 7.1(a), to perform Curis’ obligations under the Research
Plan.

(b) Development License for Lead Products and Collaboration Products. Subject to
the terms of this Agreement, Genentech hereby: (i) grants to Curis a
non-exclusive, worldwide, royalty-free license during the Term, [**], under the
Genentech Technology, to perform Curis’ development obligations with respect to
Lead Products under this Agreement and with respect to Collaboration Products
under all applicable Co-Development Plans; and (ii) grants back to Curis a
non-exclusive, worldwide, royalty-free license during the Term, [**], under the
rights licensed to Genentech under Section 7.1(b), to perform Curis’ development
obligations with respect to Lead Products under this Agreement and with respect
to Collaboration Products under all applicable Co-Development Plans.

(c) Development and Commercialization License for Curis Products. Subject to the
terms of this Agreement (including, without limitation, Section 6.1), Genentech
hereby:

(i) grants to Curis an exclusive (except as set forth below), royalty-bearing
license during the Term, [**], under the Genentech Technology and Genentech’s
interest in the Joint Patents, to develop Curis Products in accordance with the
applicable JSC-approved Curis Plan and to make, have made, use, sell, offer for
sale, have sold and import such Curis Product in the License Field in the
Territory; provided, however, that Curis shall not have any right or license
under this Section 7.2(c) with respect to [**]; and

(ii) grants back to Curis an exclusive (except as set forth below), royalty-free
license during the Term, [**], under the Curis Technology and the Joint Patents,
to develop Curis Products in accordance with the applicable JSC-approved Curis
Plan and to make, have made, use, sell, offer for sale, have sold and import
such Curis Product in the License Field in the Territory.

 

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Notwithstanding the foregoing, the license granted under this Section 7.2(c)
shall terminate with respect to a Curis Product upon the earlier of
(A) designation of such Curis Product as a Lead Product or a Collaboration
Product or (B) Genentech’s exercise of its right to require Curis to cease
development and commercialization of such Curis Product in accordance with
Section 6.1(c)(iv)(2). In addition, the exclusivity of the foregoing license
shall be subject to Genentech’s retained rights under the Genentech Technology,
the Curis Technology and the Joint Patents to perform its manufacturing rights
under any manufacturing agreement entered into by Curis and Genentech in
accordance with Section 6.1(c)(iii).

(d) Subcontracting. The Parties agree that Curis shall have the right to
subcontract one or more of its obligations under the Research Plan or any
Co-Development Plan, provided that Curis shall be responsible for the
performance of such subcontractors to the same extent as if Curis were itself
performing the subcontracted activity and shall guarantee the compliance of such
subcontractors with the provisions of this Agreement, including, without
limitation, Sections 12.1 through 12.4.

7.3 Retained Rights. Curis hereby expressly reserves the right to practice, and
to grant licenses under, the Curis Technology and the Joint Patents for any and
all purposes other than [**]. Genentech hereby expressly reserves the right to
practice, and to grant licenses under, the Genentech Technology and the Joint
Patents for any and all purposes other than the purposes for which Curis has
been granted an exclusive license under Section 7.2.

7.4 No Implied Licenses. No right or license under any intellectual property
rights of either Party is granted or shall be granted by implication. All such
rights or licenses are or shall be granted only as expressly provided in the
terms of this Agreement.

8. FEES AND PAYMENTS

8.1 Upfront Fee. In partial consideration of the rights and licenses granted
hereunder with respect to Small Molecule Compounds, Genentech shall pay to Curis
a one-time, non-refundable fee (the “Upfront Fee”) of five million dollars
($5,000,000) within thirty (30) days of the Effective Date.

8.2 Annual License Fee. Within thirty (30) days of each of the first and second
anniversaries of the Effective Date, provided that Curis has used commercially
reasonable efforts to meet its obligations under Section 3.1 during the first or
second twelve (12) month period of this Agreement, as applicable, Genentech
shall pay to Curis an annual license fee (each a “License Fee”) of two million
dollars ($2,000,000), for an aggregate of four million dollars ($4,000,000) in
License Fees. Termination of this Agreement by Genentech effective twelve
(12) months or more after the Effective Date pursuant to Section 13.2 hereof
will not terminate Genentech’s obligation to pay the first License Fee required
by this Section 8.2. In addition, if Genentech provides notice to Curis of the
termination of this Agreement pursuant to Section 13.2 with one hundred eighty
(180) or fewer days remaining in the second twelve (12) month period of this
Agreement, Genentech shall pay the second License Fee on or before its scheduled
due date.

 

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8.3 Equity Investment. In partial consideration of the rights and licenses
granted hereunder with respect to Antibody Compounds, within thirty (30) days of
the Effective Date, Genentech shall purchase three million five hundred thousand
dollars ($3,500,000) of Curis common stock, at a price per share equal to the
average of the daily closing prices for the Curis common stock for the thirty
(30) consecutive trading days immediately preceding the Effective Date, and
otherwise on the terms set forth in the Stock Purchase Agreement.

8.4 Milestone Payments. Within thirty (30) days after achievement by Genentech
or its sublicensees of each of the following milestones solely with respect to
the first Small Molecule Compound or the first Antibody Compound to achieve the
first occurrence of each event set forth below for those first Compounds,
Genentech shall pay Curis the following non-refundable milestone payments (the
“Milestone Payments”):

(a) Small Molecule Compounds.

 

Milestone Event for Products Based on Small Molecule Compounds

   Payment Amount  

Filing of an IND in any Major Market for the treatment or prevention of any
human cancer, including, but not limited to, BCC

   $ 3,000,000   

Filing of an IND in any Major Market for the treatment or prevention of any
indication other than treatment or prevention of a human cancer (e.g.,
age-related macular degeneration or inflammatory conditions)

   $ 3,000,000   

First administration of the Compound in a patient enrolled in the first Phase II
Clinical Trial for:

  

BCC

   $ 3,000,000   

First non-BCC solid tumor indication

   $ 3,000,000   

Second non-BCC solid tumor indication

   $ 3,000,000   

First administration of the Compound in a patient enrolled in the first
Phase III or Phase II/III Clinical Trial for:

  

BCC

   $ 6,000,000   

[**]

   $ [**]   

[**]

   $ [**]   

First NDA filed and accepted by the FDA or foreign equivalent agency in:

  

United States

   $ 8,000,000   

Major Market in the European Union

   $ 6,000,000   

[**]

   $ [**]   

Australia (for BCC only)

   $ 4,000,000   

Approval of an NDA in United States for commercial sale of the Compound for:

  

BCC

   $ 10,000,000   

[**]

   $ [**]   

[**]

   $ [**]   

Approval of [**]

  

[**]

   $ [**]   

[**]

   $ [**]   

[**]

   $ [**]   

Approval of [**]

  

[**]

   $ [**]   

[**]

   $ [**]   

Approval of [**]

   $ [**]   

 

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(b) Antibody Compounds.

 

Milestone Event for Products Based on Antibody Compounds

  Payment Amount  

Filing of [**]

  $ [**]   

Filing of [**]

  $ [**]   

First [**]

 

[**]

  $ [**]   

[**]

  $ [**]   

[**]

  $ [**]   

First [**]:

 

[**]

  $ [**]   

[**]

  $ [**]   

[**]

  $ [**]   

First [**]

 

[**]

  $ [**]   

[**]

  $ [**]   

[**]

  $ [**]   

[**]

  $ [**]   

Approval of [**]

 

[**]

  $ [**]   

[**]

  $ [**]   

[**]

  $ [**]   

Approval of [**]:

 

[**]

  $ [**]   

[**]

  $ [**]   

[**]

  $ [**]   

Approval of [**]:

 

[**]

  $ [**]   

[**]

  $ [**]   

Approval of [**]

  $ [**]   

 

24

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8.5 Royalties Payable by Genentech.

(a) Royalty Payments on Lead Products.

(i) Except to the extent Section 8.5(a)(ii) applies, Genentech shall pay to
Curis the following royalties on worldwide Net Sales of each Lead Product
(excluding Collaboration Products and Curis Products), calculated on a Lead
Product-by-Lead Product and country-by-country basis:

(1) six percent (6%) of that portion of worldwide annual Net Sales of a Lead
Product that is less than or equal to one hundred fifty million dollars
($150,000,000);

(2) [**] percent ([**]%) of that portion of worldwide annual Net Sales of a Lead
Product that is in excess of one hundred fifty million dollars ($150,000,000)
and less than or equal to [**] dollars ($[**]);

(3) [**] percent ([**]%) of that portion of worldwide annual Net Sales of a Lead
Product that is in excess of [**]dollars ($[**]) and less than or equal to six
hundred million dollars ($600,000,000); and

(4) eight and one half percent (8.5%) of that portion of worldwide annual Net
Sales of a Lead Product that is in excess of six hundred million dollars
($600,000,000).

(ii) With respect to each Lead Product (excluding Collaboration Products and
Curis Products) for the treatment of BCC in a topical formulation (and not for
Systemic Delivery), Genentech shall pay to Curis the following royalties on Net
Sales of such Lead Product:

(1) [**] percent ([**]%) of that portion of annual Net Sales of such Lead
Product in the United States that is less than or equal to [**] dollars ($[**]);
and

 

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(2) [**] percent ([**]%) of that portion of annual Net Sales of such Lead
Product in the United States that is greater than [**] dollars ($[**]).

For purposes of clarification, the royalties described in this
Section 8.5(a)(ii) are not due with respect to a Collaboration Product which is
co-developed by Curis and Genentech unless such Collaboration Product is
re-designated as a Lead Product pursuant to Section 4.2 or 4.3(b).

(iii) With respect to Lead Products (excluding Collaboration Products and Curis
Products) in a topical formulation (and not for Systemic Delivery) approved for
the treatment of BCC in the Territory (regardless of whether such Lead Products
are approved and marketed in the United States as Collaboration Products), [**]
percent ([**]%) of annual Net Sales of such Lead Products in all countries of
the Territory, excluding the United States.

(b) Royalty Payment Reductions. Each of the following royalty reduction
mechanisms shall operate independently, and one or more may apply to a Lead
Product.

(i) Genentech’s total royalty obligation to Curis with respect to a Lead Product
shall be reduced by an amount equal to two percent (2%) of annual Net Sales of
such Lead Product in each country in which either (A) such Lead Product is a
Know-How Product or (B) a product (a “Competing Product”) that binds to the same
molecular target as such Lead Product has been approved by the applicable
regulatory authority and is being sold in such country by a Third Party for use
in the same indication as such Lead Product.

(ii) Genentech’s total royalty obligation to Curis with respect to a Lead
Product shall be reduced by an amount equal to one percent (1%) of annual Net
Sales of such Lead Product to the extent that such Lead Product is a Modified
Product.

(iii) If a license under a Valid Claim of any patent rights of one or more Third
Parties is required in order for Genentech to either (i) commercialize a Lead
Product, which Valid Claim, but for such license, would be infringed by the
practice of the Curis Patents, Genentech Patents or Joint Patents,
(ii) commercialize a Lead Product, which Valid Claim, but for such license,
would be infringed by the identification of, or the identification of the
utility of, such Lead Product or (iii) make, have made, use, sell, have sold,
offer for sale or import a Lead Product, which Valid Claim, but for such
license, would be infringed by such acts, then in each case (i), (ii) or
(iii) above, Genentech may deduct [**] percent ([**]%) of the amount of any
royalty payments made to such Third Party(ies) for such license(s) from the
royalties payable hereunder with respect to such Lead Product; provided,
however, that in no event shall any tier of the royalties that would otherwise
be due under Section 8.5(a) with respect to such Lead Product be reduced by more
than [**] ([**]) percentage points (e.g., the royalty payable under
Section 8.5(a)(i)(1) shall never be less than [**] percent ([**]%) of Net Sales
of such Lead Product).

 

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Notwithstanding the foregoing or any other provision of this Agreement to the
contrary, in no event shall all applicable royalty reduction provisions of
Sections 8.5(b)(i), 8.5(b)(ii) and 8.5(b)(iii) taken together reduce the
royalties that would otherwise be due under Section 8.5(a) by more than [**]
percent ([**]%).

(c) Royalty Term. Royalties for sales of each Lead Product in a given country
shall be paid for a period equal to the Royalty Term for such Lead Product in
such country. Upon expiration of the Royalty Term for a Lead Product in a
country, Genentech shall have a fully-paid, royalty free, non-exclusive,
perpetual license under the Curis Technology to make, have made, use, sell,
offer for sale and import such Lead Product in the License Field in such
country.

(d) No Credit. The Parties agree and understand that the Upfront Fee, both
License Fees and all Milestone Payments and Evotec Payments due hereunder are in
addition to, and shall not be creditable against, any royalty payments due
hereunder.

8.6 Royalties Payable by Curis.

(a) Royalty Payments on Curis Products. Curis shall pay to Genentech the
applicable royalty set forth below on worldwide Net Sales of each Curis Product,
calculated on a Product-by-Product basis:

(i) with respect to any Curis Product that was identified using, or the utility
of which was identified using, a Valid Claim of the Genentech Patents, but the
manufacture, use or sale of which, but for the licenses granted to Curis
hereunder, would not infringe a Valid Claim of the Genentech Patents, [**]
percent ([**]%) of annual Net Sales of such Curis Product; and

(ii) with respect to any Curis Product the manufacture, use or sale of which,
but for the licenses granted to Curis hereunder, would infringe a Valid Claim of
the Genentech Patents, [**] percent ([**]%) of annual Net Sales of such Curis
Product.

(b) Royalty Payment Reductions. If a license under a Valid Claim of any patent
rights of one or more Third Parties is required in order for Curis to either
(i) commercialize a Curis Product, which Valid Claim, but for such license,
would be infringed by the practice of the Genentech Patents or Joint Patents,
(ii) commercialize a Curis Product, which Valid Claim, but for such license,
would be infringed by the identification of, or the identification of the
utility of, such Curis Product or (iii) make, have made, use, sell, have sold,
offer for sale or import a Curis Product, which Valid Claim, but for such
license, would be infringed by such acts, then in each case (i), (ii) or
(iii) above, Curis may deduct [**] percent ([**]%) of the amount of any royalty
payments made to such Third Party(ies) for such license(s) from the royalties
payable hereunder with respect to such Curis Product; provided, however, that in
no event shall all deductions permitted by this Section 8.6(b) with respect to a
Curis Product reduce the royalties that would otherwise be due under
Section 8.6(a) with respect to such Curis Product by more than [**] percent
([**]%).

(c) Royalty Term. Royalties for sales of each Curis Product in a given country
shall be paid for a period equal to the Royalty Term for such Curis Product in
such

 

27

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country. Upon expiration of the Royalty Term for a Curis Product in a country,
Curis shall have a fully-paid, royalty free, non-exclusive, perpetual license
under the applicable Genentech Patent(s) to make, have made, use, sell, offer
for sale and import such Curis Product in the License Field in such country.

8.7 Payments to Evotec OAI. If Curis and Genentech reasonably determine that
Curis is obligated to pay milestone payments to Evotec OAI pursuant to the
Evotec Agreement (each, an “Evotec Payment”), Genentech will reimburse Curis for
such Evotec Payments, not to exceed on a Compound-by-Compound basis:

(a) [**] dollars ($[**]) upon completion of Phase II Clinical Trials for the
first indication for a Compound, and [**] dollars ($[**]) upon the earlier to
occur of (i) completion of Phase II Clinical Trials for the second indication
for such Compound and (ii) twenty-four (24) months after completion of Phase II
Clinical Trials for the first indication for such Compound;

(b) [**] dollars ($[**]) upon receipt of marketing approval of such Compound in
a Major Market for the first indication, and [**] dollars ($[**]) upon the
earlier to occur of (i) receipt of marketing approval of such Compound in a
Major Market for the second indication or (ii) twenty-four (24) months after
receipt of marketing approval of such Compound in a Major Market for the first
indication; and

(c) [**] dollars ($[**]) upon the achievement of [**] dollars ($[**]) in
cumulative worldwide Net Sales of a Product based on such Compound.

Curis will bear all costs that may become due under the Evotec Agreement as a
result of the transactions and activities contemplated by this Agreement other
than (A) those expressly set forth above and (B) to the extent that the JSC
approves having more than 4 Evotec OAI FTE’s assigned to performance of the
Research Plan in accordance with Section 3.1, the costs charged by Evotec OAI
for such number of FTEs in excess of 4.

8.8 Payments to Third Party Licensors. Curis will bear all costs that may become
due under the Existing License Agreements as a result of the transactions and
activities contemplated by this Agreement, including but not limited to license
fees, milestone payments and royalty payments required thereunder. Subject to
Section 8.5(b), Genentech shall be solely responsible for all payments that may
become due to Third Party licensors of patent rights necessary for the
development or commercialization of Lead Products other than payments due under
the Existing License Agreements.

9. PAYMENTS; RECORDS; AUDITS

9.1 Payment; Reports. Royalty payments and reports for the sale of Products
shall be estimated and reported for each of the first three (3) calendar
quarters of each year and reconciled following the last quarter of each year.
All estimated and reconciled royalty payments due to a Party under this
Agreement shall be paid within sixty (60) days of the end of the applicable
calendar quarter. Each payment of royalties shall be accompanied by a report of
Net Sales of Products in sufficient detail to permit confirmation of the
accuracy of the royalty payment made, including, without limitation, the number
of each Product sold, the gross sales

 

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and Net Sales of each Product in United States dollars, the royalties payable,
the exchange rates used and any other information necessary to determine the
appropriate amount of royalties due. To the extent annual reconciliation results
require a reimbursement by one Party to the other Party, such Party will remit
such amounts within thirty (30) days of receipt of the report detailing such
reconciliation. Each Party will keep complete and accurate records pertaining to
the development of Products and the sale or other disposition of Products in
sufficient detail to permit the other Party to confirm the accuracy of all
payments due hereunder. Such records shall be retained for at least three
(3) years.

9.2 Exchange Rate; Manner and Place of Payment. All payments hereunder shall be
payable in United States dollars. With respect to each quarter, for countries
other than the United States, whenever conversion of Net Sales from any foreign
currency shall be required, such conversion shall be made using the exchange
rate in effect on the last day of business for a given calendar quarter in which
the Net Sales are made, as published by Reuters. All payments owed under this
Agreement shall be made by wire transfer to a bank and account designated in
writing by the Party entitled to receive such payment, unless otherwise
specified by such Party.

9.3 Late Payments. In the event that any payment, including but not limited to
royalties, Milestone Payments, the Upfront Fee, Annual License Fees and Evotec
Payments, due hereunder is not made when due, the payment shall accrue interest
from the date due at the prime rate plus two (2) percentage points, as published
in the Federal Reserve Bulletin H.15 or successor thereto; provided, however,
that in no event shall such rate exceed the maximum legal annual interest rate
allowed by law. The payment of such interest shall not limit a Party from
exercising any other rights it may have as a consequence of the lateness of any
payment.

9.4 Records and Audits. On thirty (30) days prior written notice and no more
than once per calendar year, Curis and the Existing Licensors, if applicable, on
the one hand, and Genentech, on the other hand, shall have the right to have an
independent certified public accountant reasonably acceptable to the other Party
inspect the books and records of such other Party and its sublicensees, during
usual business hours for the sole purpose of verifying the completeness and
accuracy of the reports delivered and payments made under this Agreement. Such
examination with respect to any fiscal year shall not take place later than
three (3) years following the end of such fiscal year, and no fiscal year may be
audited more than once. The accountant shall inform the auditing Party (and, if
Curis is the auditing Party, the Existing Licensors, if applicable) only if
there has been an underpayment or an overpayment, and if so, the amount thereof
and whether the books and records have been kept in a manner consistent with
good accounting practices. The expense of any such inspection shall be borne by
the auditing Party; provided, however, that, if the inspection discloses an
underpayment in excess of five percent (5%) (in aggregate or for any twelve
(12) month period), then the audited Party shall pay the out-of-pocket costs of
such audit. The audited Party will promptly remit to the auditing Party the
amount of any underpayments revealed by such audit, plus interest.

9.5 Withholding of Taxes. Any withholding of taxes levied by tax authorities
outside the United States on the payments hereunder shall be borne by the Party
receiving such payment and deducted by the Party making such payment from the
sums otherwise payable by it hereunder for payment to the proper tax
authorities. The Parties agree to

 

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cooperate with each other, in the event a Party claims exemption from such
withholding or seeks deductions under any double taxation or other similar
treaty or agreement from time to time in force, such cooperation to consist of
providing receipts of payment of such withheld tax or other documents reasonably
available.

9.6 Exchange and Royalty Rate Controls. If at any time legal restrictions
prevent the prompt remittance of part or all royalties with respect to any
country where any Product is sold, payment shall be made through such lawful
means or methods as the paying Party may determine. When in any country the law
or regulations prohibit both the transmittal and deposit of royalties on sales
in such a country, royalty payments shall be suspended for as long as such
prohibition is in effect, and as soon as such prohibition ceases to be in
effect, all royalties that would have been obligated to be transmitted or
deposited, but for the prohibition, shall forthwith be deposited or transmitted
promptly to the extent allowable, as the case may be. If any royalty rate
specified in this Agreement should exceed the permissible rate established in
any country, the royalty rate for sales in such country shall be adjusted to the
highest legally permissible or government-approved rate.

10. INTELLECTUAL PROPERTY

10.1 Ownership of Technology. Inventorship with respect to inventions conceived
and reduced to practice during the Term by either (a) Genentech’s employees,
agents, sublicensees, Affiliates, subcontractors or other designated Third
Parties, (b) Curis’ employees, agents, sublicensees, Affiliates, subcontractors
or other designated Third Parties or (c) both Parties’ employees, agents,
sublicensees, Affiliates, subcontractors or other designated Third Parties, in
each case (a), (b) or (c), pursuant to work carried out under the Collaboration
(collectively, the “Inventions”) shall be jointly owned by Genentech and Curis
during the Term of this Agreement. Each Party shall require all of its
employees, agents, sublicensees, Affiliates, subcontractors or other designated
Third Parties to assign all Inventions invented by them and that are the subject
of patent applications, to Genentech and Curis as joint owners. All foreign and
domestic patents and patent applications (including provisionals, divisionals,
continuations and continuations-in-part thereof) claiming any Invention shall be
considered “Joint Patents” for purposes of this Agreement. Except as expressly
permitted under the terms of the Agreement, neither Party shall transfer any
ownership interest or grant any rights to any Third Party to any Inventions or
Joint Patents without the prior written consent of the other Party.

10.2 Patent Prosecution. It is the intention of the Parties to secure broad
patent protection for discoveries and inventions made in the course of the
Collaboration.

(a) Genentech shall be responsible for the filing, prosecution and maintenance,
at Genentech’s sole cost, of all Genentech Patents.

(b) Subject to the rights of the Existing Licensors pursuant to the Existing
License Agreements, the Parties shall be jointly responsible for the filing,
prosecution, maintenance, enforcement and defense of any Curis Patent licensed
to Genentech hereunder that claims any method of use, composition of matter, or
method of manufacture of any Compound (other than a Curis Product as to which
Genentech has no further development rights hereunder (including, without
limitation, an option to designate it as a Lead Product)), excluding the Curis

 

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Patents described in Section 10.2(c). As promptly as practicable following the
Effective Date, the Parties shall mutually agree upon an independent law firm to
file, prosecute, maintain, enforce and defend the Curis Patents that are subject
to this Section 10.2(b). The Parties agree to instruct the law firm to take and
act on the input and instructions of both Parties without prejudice to either
Party. The Parties shall share equally in all costs associated with such
prosecution, maintenance, enforcement and defense.

(c) Curis shall be solely responsible for the filing, prosecution and
maintenance, at Curis’ sole cost, of: (i) any Curis Patent licensed to Curis
pursuant to an Existing License Agreement which Curis does not have the sole
right to file, prosecute and maintain by the terms of such Existing License
Agreement; (ii) all Curis Patents under which any Third Party has been granted a
license prior to the Effective Date; (iii) all Curis Patents that claim any
composition of matter, method of use or method of manufacture of any compound
other than a Compound (regardless of whether any such Curis Patent also claims
any method of use, composition of matter, or method of manufacture of any
Compound); and (iv) all Curis Patents that claim a Curis Product as to which
Genentech has no further development rights hereunder (including, without
limitation, an option to designate it as a Lead Product).

(d) The Parties shall be jointly responsible for the filing, prosecution,
maintenance, enforcement and defense of Joint Patents using a mutually agreeable
independent law firm. The Parties agree to instruct the law firm to take and act
on the input and instructions of both Parties without prejudice to either Party.
The Parties shall share equally in all costs associated with such prosecution,
maintenance, enforcement and defense.

(e) To the extent that a Party is solely responsible for filing, prosecution and
maintenance under this Section 10.2 of patent rights that are owned or co-owned
by, or subject to a license granted under this Agreement to, such Party shall
(i) consider in good faith the requests and suggestions of such other Party with
respect to strategies for filing, prosecuting and maintaining such patent rights
that are subject to this Section 10.2, and (ii) keep such other Party informed
of progress with regard to the filing, prosecution and maintenance of such
patent applications and patents. In the event Curis is solely responsible for
the filing, prosecution and maintenance of patent applications or patents
hereunder that are owned or co-owned by, or are subject to an exclusive license
granted under this Agreement, and Curis elects not to do so (other than because
Curis has determined in good faith not to file a patent application with respect
to an invention but to maintain such invention as a trade secret), it shall
inform Genentech at least sixty (60) days before any relevant deadline for
filing or other action and transmit all information reasonable and appropriate
relating to such patent or patent application, and Genentech shall have the
right to file, prosecute and maintain such patent applications and patents at
its own expense, in which case Curis shall assign to Genentech its rights in
such patent applications and patents.

10.3 Cooperation of the Parties. Each Party agrees to cooperate fully in the
preparation, filing, and prosecution of any patent and patent applications
related to the Collaboration. Such cooperation includes, but is not limited to:

(a) executing all papers and instruments, or requiring its employees or agents
to execute such papers and instruments, so as to effectuate the ownership of
patent rights set forth in Section 10.1 above and to enable the owning Party to
apply for and to prosecute patent applications in any country; and

 

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(b) promptly informing the other Party of any matters coming to such Party’s
attention that may affect the preparation, filing, prosecution or maintenance of
any such patent applications.

10.4 Infringement by Third Parties.

(a) Curis and Genentech shall promptly notify the other in writing of any
alleged or threatened infringement of any Curis Patent, Genentech Patent or
Joint Patent of which they become aware.

(b) Genentech shall have the first right, but not the obligation, to bring and
control any action or proceeding, at its own expense and by counsel of its own
choice, with respect to infringement of any Genentech Patent.

(c) The enforcement of any Curis Patent that is subject to the provisions of
Section 10.2(b) against any Third Party shall be governed by such
Section 10.2(b).

(d) Curis shall have the first right, but not the obligation, to bring and
control any action or proceeding with respect to infringements of any Curis
Patent other than those subject to Section 10.2(b).

(e) The enforcement of any Joint Patent against any Third Party shall be
governed by Section 10.2(d).

(f) The Party not bringing an action under this Section 10.4 shall have the
right, at its own expense and by counsel of its own choice, to be represented in
any action involving any patent owned solely by such Party or jointly by the
Parties. If Curis fails to bring an action or proceeding with respect to a
patent that is owned or Controlled by Curis and that is subject to an exclusive
license granted under this Agreement to Genentech, Genentech within: (i) sixty
(60) days following the notice of alleged infringement; or (ii) ten (10) days
before the time limit, if any, set forth in the appropriate laws and regulations
for the filing of such actions, whichever comes first, Genentech shall have the
right to bring and control any such action at its own expense and by counsel of
its own choice, and Curis shall have the right, at its own expense and by
counsel of its own choice, to be represented in any such action. In the event a
Party brings an infringement action, the other Party shall cooperate fully,
including if required to bring such action, the furnishing of a power of
attorney. Neither Party shall have the right to settle any patent infringement
action under this Section 10.4 in a manner that diminishes the rights or
interests of the other Party without the consent of such other Party. Both the
right of Genentech to bring infringement actions under this Section 10.4 and the
distribution of any recovery received as a result of an action brought pursuant
to this Section 10.4 shall be subject to the rights of applicable Existing
Licensors under applicable Existing License Agreements. Except as provided in
the preceding sentence or otherwise agreed to by the Parties as part of a
cost-sharing arrangement, any recovery realized as a result of such litigation,
after reimbursement of any litigation expenses of the Parties, shall be:
(i) shared equally by the Parties in the case of litigation pursuant to
Section 10.4(c) or 10.4(e); or (ii) retained by Genentech, except that any

 

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portion of such recovery that is attributable to lost sales of a Lead Product or
Collaboration Product shall be treated as Net Sales of such Lead Product or
Collaboration Product for purposes of this Agreement. If, within ninety
(90) days following notice from Curis of evidence of an unabated infringing act
of a Third Party with respect to a Genentech Patent and that is subject to an
exclusive license granted under this Agreement to Curis, Genentech fails to
bring an action or proceeding against such Third Party for such infringing act,
then Curis’ total royalty obligation to Genentech with respect to any Curis
Product covered by a Valid Claim in such infringed Genentech Patent shall be
reduced by an amount equal to [**] percent ([**]%) of annual Net Sales of such
Curis Product in each country in the Territory in which such Third Party’s
infringing act results in the marketing and sale of an approved pharmaceutical
product that directly competes with the Curis Products in question; provided,
however, that no royalty due to Genentech with respect to any Curis Product
shall be reduced by more than [**] percent ([**]%).

10.5 Infringement of Third Party Rights. Each Party shall promptly notify the
other in writing of any allegation by a Third Party that the activity of either
of the Parties hereunder infringes or may infringe the intellectual property
rights of such Third Party. Genentech shall have the first right but not the
obligation to control any defense of any such claim involving alleged
infringement of Third Party rights by Genentech’s activities under this
Agreement at its own expense and by counsel of its own choice, and Curis shall
have the right but not the obligation, at its own expense, to be represented in
any such action by counsel of its own choice. If Genentech fails to proceed in a
timely fashion with regard to such defense, Curis shall have the right but not
the obligation to control any such defense of such claim at its own expense and
by counsel of its own choice, and Genentech shall have the right but not the
obligation, at its own expense, to be represented in any such action by counsel
of its own choice. Curis shall have the first right but not the obligation to
control any defense of any such claim involving alleged infringement of Third
Party rights by Curis’ activities under this Agreement at its own expense and by
counsel of its own choice, and Genentech shall have the right but not the
obligation, at its own expense, to be represented in any such action by counsel
of its own choice. If Curis fails to proceed in a timely fashion with regard to
such defense, Genentech shall have the right but not the obligation to control
any such defense of such claim at its own expense and by counsel of its own
choice, and Curis shall have the right but not the obligation, at its own
expense, to be represented in any such action by counsel of its own choice.
Neither Party shall have the right to settle any infringement action under this
Section 10.5 in a manner that diminishes the rights or interests of the other
Party hereunder without the consent of such Party.

11. REPRESENTATIONS AND WARRANTIES

11.1 Mutual Representations and Warranties. Each Party represents to the other
that as of the Effective Date:

(a) Corporate Power. It is duly organized and validly existing under the laws of
its state of incorporation or formation, and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof;

(b) Due Authorization. It is duly authorized to execute and deliver this
Agreement and to perform its obligations hereunder, and the person or persons
executing this Agreement on its behalf has been duly authorized to do so by all
requisite corporate action;

 

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(c) Binding Agreement. This Agreement is legally binding upon it and enforceable
in accordance with its terms. The execution, delivery and performance of this
Agreement by it do not conflict with, or require the consent of a Third Party
(including, without limitation, in the case of Curis any Existing Licensor)
under, any agreement, instrument or understanding, oral or written, to which it
is a Party or by which it may be bound (other than consents that have been
obtained prior to the Effective Date), nor violate any material law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it; and

(d) Grant of Rights; Maintenance of Agreements. It has not granted, and will not
grant during the Term, any right to any Third Party which would conflict with
the rights granted to the other Party hereunder. It has (or will have at the
time performance is due) maintained and will maintain and keep in full force and
effect all agreements (including license agreements) and filings (including
patent filings) necessary to perform its obligations in accordance with the
terms of this Agreement.

11.2 Representations and Warranties of Curis; Covenants of Curis. Curis hereby
represents and warrants to Genentech that as of the Effective Date:

(a) Curis has sufficient rights in the Curis Patents listed on Schedule 1.24 to
grant the licenses granted to Genentech hereunder;

(b) Curis is not aware of any action, suit or inquiry or investigation
instituted by or before any court or governmental agency that questions or
threatens the validity of any Curis Patent listed on Schedule 1.24 hereto;

(c) Curis has not received any notice from any Third Party alleging that the
practice of any Curis Patent listed on Schedule 1.24 infringes the intellectual
property rights of such Third Party; and

(d) Curis has not pledged, assigned or granted any security interest in any
Curis Patent listed on Schedule 1.24 hereto to any Third Party. In addition,
Curis shall not, during the Term, pledge, assign or grant any security interest
in any of the Curis Patents to any Third Party.

11.3 Disclaimer Concerning Technology. EXCEPT AS SPECIFICALLY SET FORTH HEREIN,
THE TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS PROVIDED BY EACH PARTY AND THE
MATERIALS PROVIDED BY CURIS HEREUNDER ARE PROVIDED “AS IS,” AND EACH PARTY
EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES.
Without limiting the generality of the foregoing, each Party expressly does not
warrant (a) the success of any study or test commenced under the Collaboration
or (b) the safety or usefulness for any purpose of the technology it provides
hereunder.

 

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12. CONFIDENTIALITY; PUBLICATION

12.1 Confidentiality. Except to the extent expressly authorized by this
Agreement or otherwise agreed in writing by the Parties, the Parties agree that,
during the Term and for the five (5) year period immediately following the Term,
each Party (the “Receiving Party”) shall keep confidential and shall not publish
or otherwise disclose and shall not use for any purpose (other than as expressly
provided for in this Agreement) any Confidential Information furnished to it by,
or otherwise belonging to, the other Party (the “Disclosing Party”) pursuant to
this Agreement. Each Party may use Confidential Information of the other Party
only to the extent required to accomplish the purposes of this Agreement. The
Receiving Party will use at least the same standard of care as it uses to
protect proprietary or confidential information of its own to ensure that its
employees, agents, consultants and other representatives do not disclose or make
any unauthorized use of the Disclosing Party’s Confidential Information. Each
Party will promptly notify the other upon discovery of any unauthorized use or
disclosure of the other Party’s Confidential Information.

12.2 Exceptions. The obligations of confidentiality and non-use contained in
Section 12.1 will not apply to the extent it can be established by the Receiving
Party by competent proof that such Confidential Information:

(a) is now, or hereafter becomes, through no act or failure to act on the part
of the Receiving Party, generally known or available;

(b) is known by the Receiving Party at the time of receiving such information,
other than under confidentiality, as evidenced by its records;

(c) is hereafter furnished to the Receiving Party by a Third Party, as a matter
of right and without restriction on disclosure;

(d) is independently developed by the Receiving Party without the aid,
application or use of Confidential Information of the Disclosing Party; or

(e) is the subject of a written permission to disclose provided by the
Disclosing Party.

12.3 Terms of Agreement. The Parties agree that this Agreement and the terms
hereof will be considered Confidential Information of both Parties.

12.4 Authorized Disclosure. Each Party may disclose Confidential Information
belonging to the other Party to the extent such disclosure is reasonably
necessary in the following instances:

(a) filing or prosecuting patent rights in accordance with this Agreement;

(b) submitting regulatory filings with respect to Products in accordance with
this Agreement;

 

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(c) prosecuting or defending litigation;

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

(e) complying with reporting requirements under the Existing License Agreements;

(f) conducting pre-clinical or clinical trials of Products in accordance with
this Agreement; and

(g) disclosure to bona fide potential sublicensees (to the extent permitted
hereunder), or to existing or potential investors and lenders for fundraising or
financing efforts or in connection with due diligence or similar investigations
by such Third Parties, in each case who agree to be bound by similar terms of
confidentiality and non-use at least equivalent in scope to those set forth in
this Section 12.

Notwithstanding the foregoing, in the event a Party is required to make a
disclosure of the other Party’s Confidential Information pursuant to
Section 12.4(c) or 12.4(d), it will provide the other Party with as much prior
written notice as reasonably possible and seek (or cooperate with the other
Party’s efforts to seek) to secure confidential treatment of such information at
least as diligently as such Party would use to protect its own Confidential
Information. The Parties will consult with each other on the provisions of this
Agreement to be redacted in any filings made by the Parties with the Securities
and Exchange Commission or as otherwise required by law.

12.5 Publications. Each Party to this Agreement recognizes that the publication
or disclosure of papers, presentations, abstracts or any other written or oral
presentations regarding results of and other information regarding the
Collaboration may be beneficial to both Parties provided such publications or
presentations are subject to reasonable controls to protect Confidential
Information. Accordingly, each Party shall have the right to review and approve
any paper or presentation proposed for disclosure by the other Party which
utilizes data generated from the Collaboration and/or includes Confidential
Information of the other Party. Before any such paper or presentation is
disclosed, the Party proposing disclosure shall deliver a complete copy to the
other Party at least thirty (30) days prior to submitting the paper to a
publisher or making the presentation to a Third Party. The JSC (or the other
Party if the JSC is no longer in existence) shall review any such paper or
presentation and give its comments to the disclosing Party within fifteen
(15) days of its receipt of such paper or presentation. The disclosing Party
shall comply with the reviewing Party’s request to delete references to
Confidential Information of the reviewing Party in any such paper or
presentation.

13. TERM AND TERMINATION

13.1 Term of the Agreement. The term of this Agreement (the “Term”) shall
commence on the Effective Date and continue until six (6) months after the later
to occur of either (i) the expiration of the last Royalty Term for any Product
or (ii) such time as no activities under the Collaboration have occurred for a
period of twelve (12) consecutive months, unless earlier terminated in
accordance with this Article 11.

 

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13.2 Termination by Genentech. Genentech may terminate this Agreement without
cause, effective no earlier than twelve (12) months after the Effective Date
upon six (6) months’ prior written notice to Curis of such termination.
Genentech may also terminate this Agreement solely with respect to one or more:
specific Compound, delivery system for a Compound (i.e., Systemic Delivery or
topical delivery) and/or indication for which a Compound may be used and/or the
country(ies) in which a Compound may be developed and commercialized. Any such
termination is permitted no earlier than twelve (12) months after the Effective
Date upon six (6) months’ prior written notice and the Agreement shall
thereafter be read and interpreted in light of such termination(s).

13.3 Termination for Cause. Each Party shall have the right to terminate this
Agreement upon sixty (60) days’ prior written notice to the other upon the
occurrence of either of the following:

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

(b) Upon or after the breach of any material provision of this Agreement by the
other Party if the breaching Party has not cured such breach within the sixty
(60) day period following written notice of termination by the non-breaching
Party.

13.4 Effect of Termination or Expiration; Surviving Obligations.

(a) Upon termination of this Agreement in its entirety by Genentech pursuant to
Section 13.2, or termination of this Agreement by Curis pursuant to
Section 13.3:

(i) all licenses granted by Curis to Genentech hereunder shall automatically
terminate and revert to Curis;

(ii) all licenses granted by Genentech to Curis under Section 7.2(c) that are in
effect as of the date of termination with respect to a Curis Product existing as
of such termination date shall survive such termination and remain in full force
and effect in accordance with their respective terms for so long as Curis is not
in breach of its obligations to Genentech under this Agreement (including,
without limitation, its obligations to make royalty payments to Genentech under
Section 8.6); and

(iii) from and after such termination, Genentech itself shall not conduct or
have conducted, or direct any Affiliate, licensee or sublicensee to engage in,
any development or commercialization activities relating to any Compound or
Product created or identified, or the utility of which was identified, in the
course of the Collaboration, for so long as a given Compound is covered by a
Valid Claim in a Curis Patent, Joint Patent or Genentech Patent (excluding the
Existing Genentech Patents).

(b) Upon termination of this Agreement by Genentech pursuant to Section 13.3:

(i) all licenses granted by Genentech to Curis hereunder shall automatically
terminate and revert to Genentech; and

 

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(ii) all licenses granted by Curis to Genentech under Sections 7.1(b) that are
in effect as of the time of termination shall survive such termination and
remain in full force and effect in accordance with their respective terms for so
long as Genentech is not in breach of its obligations to Curis under this
Agreement (including, without limitation, its obligations under Articles 8 and
9); provided, however, that each Collaboration Product as to which Genentech has
a license under Section 7.1(b) as of the effective time of such termination
shall thereafter be deemed a Lead Product for purposes of Articles 8 and 9 and
shall no longer be subject to sharing of Operating Profits (Losses).

(c) Within thirty (30) days after the expiration of the Agreement, or the
earlier termination of the Agreement by any Party for any reason, the Parties
hereto shall assign, as required, all issued and pending Joint Patents to each
Party in accordance with its relationship to the Invention(s) claimed in each
such patent. Accordingly, Genentech shall assign to Curis all of Genentech’s
ownership interest in those Joint Patents solely claiming a Curis Invention,
Curis shall assign to Genentech all of Curis’ ownership interest in those Joint
Patents solely claiming a Genentech Invention and any Joint Patents claiming
Joint Inventions or claiming both a Genentech Invention and a Curis invention
would remain jointly owned by the Parties.

(d) Expiration or termination of this Agreement shall not relieve either Party
of any obligation accruing prior to such expiration or termination. Except as
otherwise provided in this Section 13.4, upon expiration or termination of this
Agreement, all rights and obligations of the Parties under this Agreement shall
terminate, except that the terms of this Section 13.4 (and the provisions
referenced herein) and Sections 7.3, 7.4, 11.3, 12.1, 12.2, 12.3, 12.4, 13.5,
13.6, 13.7 and 13.8 and Articles 9, 14, 15 and 16 of this Agreement shall
survive expiration or termination of this Agreement. Within thirty (30) days
following the expiration or termination of this Agreement, except to the extent
and for so long as a Party retains license rights as provided in this
Section 13.4, each Party shall deliver to the other Party all embodiments of any
and all Confidential Information of the other Party (including all copies
thereof) in its possession.

13.5 Exercise of Right to Terminate. The use by either Party hereto of a
termination right provided for under this Agreement shall not give rise to the
payment of damages or any other form of compensation or relief to the other
Party with respect thereto.

13.6 Damages; Relief. Subject to Section 13.5 above, termination of this
Agreement shall not preclude either Party from claiming any other damages,
compensation or relief that it may be entitled to upon such termination.

13.7 Termination of the Harvard Licenses. In the sole discretion of Harvard,
upon the termination of each of the Harvard Licenses, Genentech’s rights and
obligations as a sublicensee of Curis under each such Harvard License shall
either (a) be terminated or (b) become rights and obligations of Genentech as if
Genentech were the direct licensee under each of the Harvard Licenses. Any
sublicenses granted by Genentech hereunder, to the extent the sublicense
includes rights conveyed by a Harvard License, will contain this right for
Harvard.

 

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13.8 Termination of the 1996 Stanford License. In the event the 1996 Stanford
License Agreement is terminated, Genentech’s rights and obligations as a
sublicensee of Curis under the 1996 Stanford License shall become rights and
obligations of Genentech as if Genentech were the direct licensee under the 1996
Stanford License.

14. INDEMNITY

14.1 Indemnification.

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

(b) Genentech hereby agrees to save, defend and hold Curis and its Affiliates
and their respective directors, officers, employees and agents (each, a “Curis
Indemnitee”) harmless from and against any and all Losses to which any Curis
Indemnitee may become subject as a result of any claim, demand, action or other
proceeding by any Third Party to the extent such Losses arise directly or
indirectly out of: (i) the practice by Genentech or its sublicensees (other than
Curis) of any license granted hereunder, (ii) the manufacture, use, handling,
storage, sale or other disposition of any Lead Product or Collaboration Product
by Genentech or its sublicensees (other than Curis), (iii) the breach by
Genentech or its sublicensees (other than Curis) of any warranty,
representation, covenant or agreement made by Genentech in this Agreement, or
(iv) the negligence or willful misconduct of any Genentech Indemnitee; except,
in each case, to the extent such Losses result from the negligence or willful
misconduct of any Curis Indemnitee or the breach by Curis of any warranty,
representation, covenant or agreement made by Curis in this Agreement.

14.2 Indemnification Procedure.

(a) Each indemnified Party agrees to give the indemnifying Party written notice,
as soon as is practicable, but in any event within thirty (30) days if possible,
of any Losses or the discovery of fact upon which such indemnified party intends
to base a request for indemnification under Section 14.1(a) or 14.1(b).

 

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(b) Each Party shall furnish promptly to the other Party copies of all papers
and official documents received in respect of any Losses. The indemnified Party
shall cooperate with the indemnifying Party, at the indemnifying Party’s
expense, in providing witnesses and records necessary in the defense against any
Losses.

(c) With respect to any Losses relating solely to the payment of money damages
and that will not result in the indemnified Party’s becoming subject to
injunctive or other relief, contains an admission of guilt or other
responsibility or liability or otherwise adversely affecting the business of the
indemnified party in any manner, and as to which the indemnifying Party shall
have acknowledged in writing the obligation to indemnify the indemnified Party
hereunder, the indemnifying Party shall have the sole right to defend, settle,
or otherwise dispose of such claim, on such terms as the indemnifying Party, in
its sole discretion, shall deem appropriate.

(d) With respect to all other Losses, the indemnifying Party shall obtain the
written consent of the indemnified Party, which shall not be unreasonably
withheld, prior to ceasing to defend, settling, or otherwise disposing thereof.

(e) The indemnifying Party shall not be liable for any settlement or other
disposition of a Loss by the indemnified Party that is reached without the
written consent of the indemnifying Party.

(f) Except as provided above, the costs and expenses, including fees and
disbursements of counsel, incurred by any indemnified Party in connection with
any claim shall be reimbursed on a Calendar Quarter basis by the indemnifying
Party, without prejudice to the indemnifying Party’s right to contest the
indemnified Party’s right to indemnification and subject to refund in the event
the indemnifying Party is ultimately held not to be obligated to indemnify the
indemnified Party.

15. GOVERNING LAW; DISPUTE RESOLUTION

15.1 Governing Law. This Agreement shall be governed by the laws of the State of
California as such laws are applied to contracts entered into or to be performed
entirely within such state.

15.2 Disputes. The Parties recognize that disputes as to certain matters may
from time to time arise which relate to either Party’s rights and obligations
hereunder. It is the objective of the Parties to establish procedures to
facilitate the resolution of such disputes in an expedient manner by mutual
cooperation and without resort to litigation. To accomplish this objective, the
Parties agree to follow the procedures set forth in Section 15.3 if and when
such a dispute arises between the Parties.

15.3 Arbitration Procedures.

(a) Discussions Between the Parties. If any claim, dispute, or controversy of
any nature arising out of or relating to this Agreement, including, without
limitation, any action or claim based on tort, contract or statute, or
concerning the interpretation, effect, termination, validity, performance and/or
breach of this Agreement, but specifically

 

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excluding any claim, dispute or controversy arising with respect to the JSC or a
CSC for which the Parties have established a complete dispute resolution
mechanism under Sections 2.2 and 2.3, respectively (each, a “Claim”), arises
between the Parties and the Parties cannot resolve the dispute within thirty
(30) days of a written request by either Party to the other Party, the Parties
agree to refer the Claim to the Vice President of Business Development of
Genentech and the Chief Executive Officer of Curis, or their respective
designees, for resolution. If, after an additional sixty (60) days, such
officers or their designees have not succeeded in negotiating a resolution of
the dispute, then, upon the written request of either Party, such dispute shall
be resolved by final and binding arbitration in accordance with Section 15.3(b).

(b) Arbitration. Claims between the Parties under this Section 15.3(b) shall be
finally settled by binding arbitration conducted in the English language in
accordance with the Rules of Commercial Arbitration of the American Arbitration
Association (“AAA”). The arbitration shall be held in San Francisco, California
and shall be conducted by three (3) arbitrators who are knowledgeable in the
subject matter at issue in the dispute. One (1) arbitrator will be selected by
Curis, one (1) arbitrator will be selected by Genentech, and the third
arbitrator will be selected by mutual agreement of the two (2) arbitrators
selected by the Parties, provided that if a Party fails to select an arbitrator
within thirty (30) days of the request for arbitration, the arbitrator that was
to be selected by such Party shall be appointed in accordance with the rules of
the AAA. During the period prior to the hearing, each Party shall have the right
to conduct up to two (2) depositions and to submit up to twenty (20) document
requests to the other Party. The arbitrators may proceed to an award,
notwithstanding the failure of either Party to participate in the proceedings.
The arbitrators shall, within forty-five (45) calendar days after the conclusion
of the arbitration hearing, issue a written award and statement of decision
describing the essential findings and conclusions on which the award is based,
including the calculation of any damages awarded. The arbitrators shall be
authorized to award compensatory damages, but shall NOT be authorized to
(i) award non-economic or punitive damages (except to the extent expressly
permitted by this Agreement), or (ii) reform, modify or materially change this
Agreement or any other agreements contemplated hereunder; provided, however,
that the damage limitations described in part (i) of this sentence will not
apply if such damages are statutorily imposed. The arbitrators also shall be
authorized to grant any temporary, preliminary or permanent equitable remedy or
relief that the arbitrators deem just and equitable and within the scope of this
Agreement, including, without limitation, an injunction or order for specific
performance. The award of the arbitrators shall be the sole and exclusive remedy
of the Parties. Judgment on the award rendered by the arbitrators may be
enforced in any court having competent jurisdiction thereof, subject only to
revocation on grounds of fraud or clear bias on the part of the arbitrators.
Notwithstanding anything contained in this Section 15.3(b) to the contrary, each
Party shall have the right to institute judicial proceedings against the other
Party or anyone acting by, through or under such other Party, in order to
enforce the instituting Party’s rights hereunder through specific performance,
injunction or similar equitable relief. This Section 15.3(b) shall not apply to
any dispute, controversy or claim that concerns (A) the validity, enforceability
or infringement of a patent, trademark or copyright; or (B) any antitrust,
anti-monopoly or competition law or regulation, whether or not statutory.

(c) Costs and Awards. Each Party shall bear its own attorneys’ fees, costs, and
disbursements arising out of the arbitration, and shall pay an equal share of
the fees and costs of the arbitrators; provided, however, that the arbitrators
shall be authorized to

 

41

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determine whether a party is the prevailing party, and if so, to award to that
prevailing party reimbursement for its reasonable attorneys’ fees, costs and
disbursements (including, for example, expert witness fees and expenses,
photocopy charges and travel expenses), and/or the fees and costs of the
arbitrators. Absent the filing of an application to correct or vacate the
arbitration award (if permitted by AAA rules), each Party shall fully perform
and satisfy the arbitration award within fifteen (15) days of the service of the
award.

(d) Waiver and Acknowledgment. By agreeing to this binding arbitration
provision, the Parties understand that they are waiving certain rights and
protections which may otherwise be available if a Claim between the Parties were
determined by litigation in court, including, without limitation, the right to
seek or obtain certain types of damages precluded by this provision, the right
to a jury trial, certain rights of appeal, and a right to invoke formal rules of
procedure and evidence.

16. GENERAL PROVISIONS

16.1 Notices. Any notice to be given under this Agreement must be in writing and
delivered either in person, by any method of mail (postage prepaid) requiring
return receipt, or by overnight courier or facsimile confirmed thereafter by any
of the foregoing, to the Party to be notified at its address(es) given below, or
at any address such Party has previously designated by prior written notice to
the other. Notice shall be deemed sufficiently given for all purposes upon the
earlier of: (a) the date of actual receipt; (b) if mailed, three days after the
date of postmark; or (c) if delivered by overnight courier, the next business
day the overnight courier regularly makes deliveries.

 

All notices to Genentech shall be addressed as follows:

Genentech, Inc.

1 DNA Way

South San Francisco, CA 94080

Attn: Corporate Secretary

Fax: (650) 952-9881

with a copy to:

Genentech, Inc.

1 DNA Way

South San Francisco, CA 94080

Attn: Vice President, Business Development

Fax: (650) 225-3009

All notices to Curis shall be addressed as follows:

Curis, Inc.

61 Moulton Street

Cambridge, Massachusetts 02138

Attn: Chief Executive Officer

Fax: (617) 503-6501

with a copy to:

Cooley Godward LLP

4401 Eastgate Mall

San Diego, CA 92121

Attn: L. Kay Chandler

Fax: (858) 550-6420

 

42

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Any Party may, by written notice to the other, designate a new address or fax
number to which notices to the Party giving the notice shall thereafter be
mailed or faxed.

16.2 Force Majeure. No Party shall be liable for any delay or failure of
performance (other than payment obligations) to the extent such delay or failure
is caused by circumstances beyond its reasonable control and that by the
exercise of due diligence it is unable to prevent, provided that the Party
claiming excuse uses its commercially reasonable efforts to overcome the same.

16.3 Entirety of Agreement. This Agreement (including the Research Plan, any and
all Co-Development Plans, and the Exhibit and the Schedules hereto) embodies the
entire, final and complete agreement and understanding between the Parties and
replaces and supersedes all prior discussions and agreements between them with
respect to its subject matter, other than the Stock Purchase Agreement and the
Registration Rights Agreement referenced therein, which shall continue in full
force and effect in accordance with their respective terms. Notwithstanding the
foregoing, this Agreement is subject to the terms of the Existing License
Agreements, as more fully described herein.

16.4 Amendment. No modification or waiver of any terms or conditions hereof
shall be effective unless made in writing and signed by a duly authorized
officer of each Party.

16.5 Non-Waiver. The failure of a Party to insist upon strict performance of any
provision of this Agreement or to exercise any right arising out of this
Agreement shall neither impair that provision or right nor constitute a waiver
of that provision or right, in whole or in part, in that instance or in any
other instance. Any waiver by a Party of a particular provision or right shall
be in writing, shall be as to a particular matter and, if applicable, for a
particular period of time and shall be signed by such Party.

16.6 Disclaimer of Agency or Partnership. The Parties are independent
contractors and nothing in this Agreement or the performance of the Parties
under this Agreement shall constitute (or be deemed to constitute in law or in
equity) a partnership, agency, fiduciary, distributorship, employment, or joint
venture relationship between the Parties. Neither Party is, or will be deemed to
be, the legal representative or agent of the other, nor shall either Party have
the right or authority to assume, create, or incur any Third Party liability or
obligation of any kind, express or implied, against or in the name of or on
behalf of another except as expressly set forth in this Agreement. In addition,
neither Party shall be deemed to be a member of a partnership with the other
Party for tax or any other purpose.

16.7 Severability. If a court of competent jurisdiction declares any provision
of this Agreement invalid or unenforceable, or if any government or other agency
having jurisdiction over either Curis or Genentech deems any provision to be
contrary to any laws, then that provision shall be severed and the remainder of
the Agreement shall continue in full force and effect. To the extent possible,
the Parties shall revise such invalidated provision in a manner that will render
such provision valid without impairing the Parties’ original intent.

 

43

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16.8 Assignment; Acquisition. Except as expressly provided hereunder, neither
this Agreement nor any rights or obligations hereunder may be assigned or
otherwise transferred by either Party without the prior written consent of the
other Party (which consent shall not be unreasonably withheld); provided,
however, that either Party may assign this Agreement and its rights and
obligations hereunder without the other Party’s consent in connection with the
transfer or sale of all or substantially all of the business of such Party to
which this Agreement relates to a Third Party, whether by merger, sale of stock,
sale of assets or otherwise. In the event of such transaction, however (whether
this Agreement is actually assigned or is assumed by the acquiring Party by
operation of law (e.g., in the context of a reverse triangular merger),
intellectual property rights of the acquiring party to such transaction (if
other than one of the Parties to this Agreement) shall not be included in the
technology licensed hereunder. The rights and obligations of the Parties under
this Agreement shall be binding upon and inure to the benefit of the successors
and permitted assigns of the Parties. Any assignment not in accordance with this
Agreement shall be void.

16.9 Headings. The headings contained in this Agreement are inserted for
reference only and shall not be deemed a part of the text hereof.

16.10 Limitation of Liability. EXCEPT FOR AMOUNTS PAYABLE UNDER SECTION 4.3 AND
ARTICLE 8 AND LIABILITY FOR BREACH OF CONFIDENTIALITY OR FOR INFRINGEMENT OR
MISAPPROPRIATION, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES, INCLUDING BUT NOT
LIMITED TO LOST PROFITS, ARISING FROM OR RELATING TO ANY BREACH OF THIS
AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES;
provided, however, that this Section 16.10 shall not be construed to limit
either Party’s indemnification obligations under Article 14.

16.11 Compliance with Laws. In exercising their rights and obligations under
this Agreement, the Parties shall comply fully with the requirements of any and
all applicable laws, regulations, rules, and orders of any federal, state, or
local, whether international or domestic, governmental body having jurisdiction
of the exercise of rights under this Agreement.

16.12 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be an original and all of which shall constitute together
the same document.

16.13 Currency. All dollar amounts stated herein are in United States dollars.

16.14 Bankruptcy. All rights and licenses granted under this Agreement will be
considered for purposes of Section 365(n) of the Bankruptcy Code, licenses of
rights to “intellectual property” as defined under Section 101(56) of the
Bankruptcy Code. The Parties agree that a licensee of such rights under this
Agreement will retain and may fully exercise all of its rights and elections
under the Bankruptcy Code. In the event that a licensor seeks or is

 

44

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involuntarily placed under the protection of the Bankruptcy Code, and the
trustee in bankruptcy rejects this Agreement, the licensee hereby elects,
pursuant to Section 365(n), to retain all rights granted to it under this
Agreement to the extent permitted by law.

16.15 Manufacture in United States. The Parties acknowledge that the Existing
License Agreements are subject to Title 35 United States Code Sections 200
through 204. As a result, the Parties agree to take all reasonable action
necessary to enable the Existing Licensors to satisfy their obligations to the
United States Federal Government in relation thereto.

16.16 Public Disclosure. Neither Party may make any public announcement or issue
any press releases disclosing achievement of regulatory, scientific or other
milestones regarding the Collaboration without the prior review and written
consent of the other Party, provided that Genentech shall not unreasonably
withhold or delay its consent to the issuance of a press release disclosing
achievement of any milestone event described in Section 8.4. Notwithstanding the
foregoing, no disclosure that are required, in the reasonable judgment of a
Party, to comply with applicable laws or regulations, no public announcement,
news release, public statement or publication relating to the existence of this
Agreement, or the terms hereof, will be made without the other Party’s prior
written approval, which approval shall not be unreasonably withheld. The Parties
agree that they will use reasonable efforts to coordinate the initial
announcement or press release relating to the existence of this Agreement so
that such initial announcement or press release is made within ten (10) days of
the Effective Date.

16.17 Export. The Parties agree not to export, directly or indirectly, any U.S.
source technical data acquired from the other Party or any products utilizing
such data to countries outside the United States, which export may be in
violation of the United States export laws or regulations.

[Remainder of this page intentionally left blank.]

 

45

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IN WITNESS WHEREOF, the Parties hereto have duly executed this COLLABORATIVE
RESEARCH, DEVELOPMENT AND LICENSE Agreement.

 

GENENTECH, INC. CURIS, INC. By:

/s/ Joseph S. McCracken

By:

/s/ Daniel R. Passeri

Name:

Joseph S. McCracken

Name:

Daniel R. Passeri

Title:

Vice President, Business and Commercial Development

Title:

President and Chief Executive Officer

--------------------------------------------------------------------------------

EXHIBIT A

Stock Purchase Agreement

[Filed separately as Exhibit 10.2 to the Company’s Current Report on Form 8-K

filed on July 10, 2003.]

--------------------------------------------------------------------------------

SCHEDULE 1.24

Curis Patents as of the Effective Date

 

Application Number

   Country   Filing Date   Patent Number   Issue Date

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

[**]

   [**]   [**]   [**]   [**]

--------------------------------------------------------------------------------

Application Number

   Country    Filing Date    Patent Number    Issue Date

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

--------------------------------------------------------------------------------

Application Number

   Country    Filing Date    Patent Number    Issue Date

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

--------------------------------------------------------------------------------

Application Number

   Country    Filing Date    Patent Number    Issue Date

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

[**]

   [**]    [**]    [**]    [**]

--------------------------------------------------------------------------------

SCHEDULE 1.31

Existing Genentech Patents

 

U.S. Patent Number    Title

[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

--------------------------------------------------------------------------------

SCHEDULE 3.2

Lead Product Criteria

 

1. Demonstration of [**]; or

 

2. Demonstration of [**].

 

-i-

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(CONTINUED)

PAGE

 

SCHEDULE 4.2

Calculation of Operating Profits (Losses)

The Co-Development Plan for a Collaboration Product shall reflect sharing by the
Parties of Operating Profits (Losses) with respect to such Collaboration Product
in accordance with the Cost Sharing Ratio for such Collaboration Product.

The “Operating Profits (Losses)” for each Collaboration Product will be equal
to: (i) Net Sales of such Collaboration Product and Sublicensing Revenues (as
defined below), less (ii) Allowable Expenses (as defined below), as more fully
described below. All calculations hereunder will be made using, and all defined
and undefined terms will be construed in accordance with, U.S. generally
accepted accounting principles, consistently applied, and consistent with
generally accepted costing methods (including appropriate Allocable Overhead)
for similar products in the pharmaceutical industry. Without limiting the
foregoing, no cost item will be included more than once in calculating Operating
Profits (Losses). In addition, neither Party will be entitled to include in
Operating Profits (Losses) any expense incurred by or on behalf of such Party
that was in excess of the most recently approved Co-Development Budget, unless
such excess amounts were pre-approved or are approved in writing by both
Parties.

Frequency of Reporting.

The fiscal year will be a calendar year. Reporting by each Party for revenues
and expenses will be performed as follows:

 

Reporting Event

  

Frequency

  

Timing of Submission

Actuals (including draft settlement statements)

   Quarterly    Q1-Q3:    +45 days       Q4:    +45 days

Forecasts (rest of year - by month)

   Quarterly    Q1-Q3    +60 days

Settlement payments between the Parties

   Quarterly    Quarter end    +60 days

Preliminary budgets (one year)

   Annually    September 15   

Final combined commercial and development budget (one year - by quarter)

   Annually    October 15   

Long Range Plan (current year plus 5 years)

   Annually    April 15   

 

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TABLE OF CONTENTS

(CONTINUED)

PAGE

 

Reports of actual results compared to budget will be made by the Parties to the
CSC on a quarterly basis. Variances from the total overall budgets, and
significant variances in budget line items for costs or revenue line items, will
be included in the calculation of Operating Profits and Losses only when
approved by the CSC.

Genentech will be responsible for the preparation of consolidated reporting of
the Collaboration (including Development Costs and any Operating Profit or
Loss), calculation of the sharing and initial determination of the cash
settlement (subject to approval by the CSC). Within forty-five (45) days of each
quarter end, Genentech will provide the financial representatives from each
Party with a statement showing the consolidated results and calculations of the
Operating Profit or Loss sharing (or calculation of expenses to be shared) and
cash settlement required in a format substantially as depicted above.

Genentech shall record sales in the United States. On a monthly basis, Genentech
will supply Curis with each month’s gross sales and Net Sales of Collaboration
Products in units and U.S. dollars in the United States. Each such report shall
be provided as early as possible, but no later than ten (10) days after the last
day of the month in question, and shall provide monthly and year-to-date
cumulative figures.

The financial representatives from the Parties will meet as appropriate but at
least quarterly to review and approve the following:

 

  •   Development Costs

 

  •   Costs of Products Sold

 

  •   Selling and Marketing expenses

 

  •   actual results

 

  •   forecasts

 

  •   budgets

 

  •   inventory levels

 

  •   sales returns and allowances

 

  •   other financial matters, including each Party’s methodologies for charging
costs to the collaboration, for determination of actuals, forecasts, budgets and
long range plans and the results of applying such methodologies.

Co-Development Budgets.

Co-Development Budgets will be prepared annually by the Parties.

Co-Development Budgets under this Schedule 4.2 will be supplemented with
detailed plans for U.S. clinical trials and drug approval applications as
determined by the Parties in accordance with the Agreement. Co-Development
Budgets, once approved by the CSC, can only be changed with the approval of the
CSC.

 

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(CONTINUED)

PAGE

 

The financial representatives of each Party will be responsible for identifying,
analyzing and reporting all significant line item budget variances and all
overall, total budget variances. Except as provided otherwise in the Agreement,
only the CSC may approve materially unfavorable line item budget variations, and
all total budget variations, chargeable to the collaboration during the course
of the year.

Payments between the Parties.

Payments to each Party of the agreed upon percentages of Operating Profit or
Loss as provided under the applicable Cost Sharing Ratio will be made quarterly,
based on actual results within sixty (60) days after the end of each quarter. A
report, as approved by the CSC, specifying how each payment was calculated shall
also be submitted with each payment to both Parties. Balancing payments by one
Party to reimburse the other Party for purposes of the sharing of Operating
Loss, including Development Costs, under the Agreement will be approved by the
CSC and shall be made within sixty (60) days of receipt of the approved CSC
report. In the event any payment is made after the time period specified herein,
the paying Party shall increase the amount otherwise due and payable by adding
interest thereon, computed at the Prime Rate plus two percent (2%). Genentech
will perform the consolidation and settlement calculations for submission to the
CSC.

Responsibility for Reporting.

The responsibility for the consolidated reporting of the collaboration to the
CSC shall be with Genentech in close cooperation with Curis and the financial
representatives of the Parties. This will be the basis for collaboration
accounting and determining of payments to the Parties. Genentech shall provide
Curis with a copy of the collaboration consolidated reporting and the
calculation serving as the basis of determining payments to the Parties. Curis
will provide Genentech with financial statements within thirty (30) days after
the end of the quarter for its activities in the United States, prepared in
accordance with the terms contained in this Schedule 4.2 in order for Genentech
to prepare the consolidated reports.

Each Party will keep and maintain complete and accurate records pertaining to
Net Sales of Collaboration Products, Sublicensing Revenues and Allowable
Expenses in sufficient detail to permit the other Party to confirm the accuracy
of the Operating Profits (Losses) subject to sharing by the Parties hereunder.
Such records shall be retained for at least three (3) years, and no fiscal year
may be audited more than once. Each Party shall have the right, upon reasonable
prior written notice to the other Party and no more than once per calendar year,
to have an independent certified public accountant reasonably acceptable to the
other Party inspect the books and records of the other Party, its Affiliates and
sublicensees, during usual business hours for the sole purpose of verifying the
accuracy of the Net Sales of Collaboration Products, Sublicensing Revenues and
Allowable Expenses reported by the audited Party hereunder. Such examination
with respect to any fiscal year shall not take place later than three (3) years
following the end of such fiscal year. The accountant shall inform the auditing
Party only if there has been an inaccuracy in such reporting, and if so, the
amount thereof and whether the

 

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books and records have been kept in a manner consistent with good accounting
practices. The expense of any such inspection shall be borne by the auditing
Party; provided, however, that, if the inspection discloses an underreporting of
Net Sales or Sublicensing Revenues, or an overreporting of Allowable Expenses,
in each case that is in excess of five percent (5%) of Operating Profits
(Losses) (in aggregate over no less than a twelve (12) month period), then the
audited Party shall pay the out-of-pocket costs of such audit. The Parties will
make prompt adjustments to reflect the results of such audit.

1. “Allocable Overhead” shall mean the costs incurred by a Party or for its
account which are attributable to a Party’s supervisory services, occupancy
costs, payroll and its payroll, information systems, human relations or
purchasing functions and which are allocated to company departments based on
space occupied or headcount or other activity-based method consistently applied
by a Party, or a standard rate if agreed to by the Parties. Allocable Overhead
shall not include any costs attributable to general corporate activities,
including, by way of example, executive management, investor relations, business
development, legal affairs and finance, and shall not duplicate General &
Administrative Expenses hereunder.

2. “Allowable Expenses” shall mean the following expenses to the extent incurred
with respect to such Collaboration Product: (i) Development Costs; (ii) Cost of
Products Sold; (iii) Selling and Marketing Expenses; and (iv) General &
Administrative Costs.

3. “Cost of Goods” shall mean, with respect to any bulk Collaboration Product or
finished Collaboration Product, but subject to the last sentence of this
paragraph 2, the actual fully allocated cost of manufacturing such Collaboration
Product (in accordance with cGMP’s) determined in accordance with U.S. generally
accepted accounting principles applied consistently throughout the organization
of a Party or its Affiliate(s) or sublicensee(s) determining such costs, which
includes the direct and indirect cost of any raw materials, packaging materials
and labor (including benefits) utilized in such manufacturing (including
formulation, filling, finishing, quality assurance, quality control and
stability testing, labeling and packaging, as applicable), plus an appropriate
share of all factory overhead, both fixed and variable, allocated to the
Collaboration Product being manufactured, in accordance with the normal
accounting practices for all other products manufactured in the applicable
facility. “Cost of Goods” shall exclude any allocation of cost related to idle
capacity, unless such excess capacity is specifically reserved for Collaboration
Product.

4. “Cost of Products Sold” shall mean the actual cost of bulk Collaboration
Products or finished Collaboration Products sold, determined in accordance with
U.S. generally accepted accounting principles applied consistently within and
throughout all operating units of a Party. “Cost of Products Sold” shall
include: (i) in the case of manufacturing services provided by a Party or its
Affiliate(s) or sublicensee(s), its Cost of Goods of such bulk Collaboration
Products or finished Collaboration Products, (ii) the net cost or credit of any
value-added taxes actually paid or utilized by a Party or its Affiliate(s) or
sublicensee(s) in respect of the manufacture of the bulk Collaboration Products
or finished Collaboration Products, (iii) in the

 

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case of finished Collaboration Products or bulk Collaboration Products acquired
by a Party or its Affiliate(s) or sublicensee(s) from a Third Party, payments
made to such Third Party for such acquisition, including the net cost or credit
of any value-added taxes actually paid or utilized by the purchaser in respect
of such acquisition of such finished products or bulk products, plus reasonable
expenses of quality assurance, quality control and transportation of
Collaboration Product, and (iv) royalties or other compensation payable to a
Third Party with respect to a license under Patents of such Third Party
necessary for the manufacture, use, sale, offer for sale or import of
Collaboration Products (other than royalties due under the Existing License
Agreements).

5. “Development Costs” means costs (including Allocable Overhead directly
attributable to the development of such Collaboration Product but excluding
other overhead) actually incurred by a Party or for its account after
designation of such Collaboration Product and specifically attributable to the
development of such Collaboration Product in the Co-Development Territory for
use in the BCC Field or Hair Growth Prevention Field, as applicable,.
Development Costs will include, but not be limited to: (a) costs of research and
development, including costs of studies on the toxicological, pharmacokinetic,
metabolic or clinical aspects of such Collaboration Product conducted internally
or by individual investigators or consultants; (b) Cost of Goods for
Collaboration Product for use in clinical trials in the BCC Field or Hair Growth
Prevention Field, as applicable, in the Co-Development Territory; (c) costs of
preparing and reviewing data or information for the purpose of submission to the
FDA for Regulatory Approval in the BCC Field or Hair Growth Prevention Field, as
applicable; (d) fees associated with U.S. regulatory filings or other U.S.
governmental requirements related to the Collaboration Product in the BCC Field
or Hair Growth Prevention Field, as applicable; and (e) applicable Allocable
Overhead, including expenses for data management, statistical designs and
studies, document preparation, and other administration expenses associated with
clinical testing programs.

6. “Selling and Marketing Expenses” shall mean the costs incurred by Genentech
or for its account attributable to the sale, promotion and marketing of
Collaboration Product in the Co-Development Territory from and after commercial
launch of such Collaboration Product in the Co-Development Territory and shall
consist of Selling Expenses, Marketing Management Expenses, Market and Consumer
Research Expenses, Advertising Expenses, Professional Promotion Expenses,
Education Expenses, Trademark Expenses, each as defined below; provided,
however, that to the extent the activities giving rise to any item of Selling
and Marketing Expenses relate to, or are conducted for the benefit of, multiple
products and/or services and one or more of such products and/or services are
not Collaboration Products, then such item of expense shall be allocated on a
pro rata basis among such Collaboration Product(s) and other product(s) and/or
service(s) based upon net sales of each respective product or service by such
operating unit during the most recent quarter:

 

  a)

“Selling Expenses” shall include the following costs directly associated with
the efforts of field sales representatives with respect to Collaboration
Products: field

 

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  sales force (including training expenses directly related to the Collaboration
Product); field sales offices; reimbursement (public payors, private payors and
others); customer support; home offices; staffs directly involved in the
management of and the performance of the selling functions; and payments to
Third Parties under contract sales and marketing agreements. The costs of
detailing sales calls will be allocated on a weighted average basis based on the
proportionate time and effort given to the detailing of Collaboration Products
versus product other than a Collaboration Product at an accounting charge rate
consistently applied within and across Genentech’s, its Affiliate’s or a Third
Party’s operating units and which is no less favorable than the internal charge
rate used by Genentech or such Affiliate or Third Party for its own internal
cost accounting purposes for products other than a Collaboration Product
(excluding internal profit margins and markups).

 

  b) “Marketing Management Expenses” shall include product management and sales
promotion management compensation and departmental expenses. This will include,
but not be limited to, costs associated with developing overall sales and
marketing strategies (e.g., product line or customer segment), including
marketing strategies for managed care providers, as well as planning and
programs for Collaboration Products.

 

  c) “Market and Consumer Research Expenses” shall include compensation and
departmental expenses for market and consumer research personnel and payments to
Third Parties related to conducting and monitoring professional and consumer
appraisals of existing, new or proposed Collaboration Products, such as market
share services (e.g., IMS data), special research testing and focus groups.

 

  d) “Advertising Expenses” shall include all media costs associated with
Collaboration Product advertising as follows (whether to professionals, patients
or lay consumers): production expense/artwork including set up; design and art
work for an advertisement; the cost of securing print space, air time, etc. in
newspapers, magazines, trade journals, television, radio, billboards, web sites,
etc.

 

  e) “Professional Promotion Expenses” shall include the expenses associated
with programs to promote a Collaboration Product directly to the prescriber or
end user. This category will include, but not be limited to, expenses associated
with promoting Collaboration Products directly to the professional community
such as professional samples, professional literature, promotional material
costs, patient aids and detailing aids.

 

  f) “Education Expenses” shall include expenses associated with professional
education with respect to a Collaboration Product through any means not covered
above, including, but not limited to, articles appearing in journals,
newspapers, magazines or other media; seminars, scientific exhibits, trade show
booths, financial support to professional societies and conventions; and
symposia, advisory boards and opinion leader development activities.

 

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  g) “Trademark Expenses” shall mean the fees and expenses paid to outside legal
counsel and experts, and filing and maintenance expenses, incurred to establish
and maintain trademarks for a Collaboration Product (other than any trademark
incorporating or based on a Party’s corporate name or logo).

 

  h) “Distribution Expenses” shall mean the costs, including applicable
Allocable Overhead, specifically identifiable to the distribution of a
Collaboration Product, including customer services, collection of data about
sales to hospitals and other end users, order entry, billing, credit and
collection and other such activities.

7. “General & Administrative Expenses” shall mean an amount intended to cover a
Party’s general and administrative costs chargeable to the Collaboration, which
shall be an amount equal to [**] percent ([**]%) of the sum of Development
Costs, Cost of Products Sold, and Selling and Marketing Expenses.

8. “Sublicensing Revenues” shall mean all license fees, milestone payments,
royalties, annual maintenance fee or similar payment or consideration paid by a
sublicensee to Genentech or its Affiliates solely in consideration for the grant
by Genentech or its Affiliates of a sublicense to develop, manufacture and/or
commercialize any Collaboration Product (with any of the foregoing consideration
received by Genentech or its Affiliates other than in the form of cash to be
valued at its fair market value as of the date of receipt); provided, however,
that “Sublicensing Revenues” shall in any event exclude payments for equity or
debt securities of Genentech or its Affiliates (at its fair market value upon
date of receipt) and reasonable payments tied to the provision of goods and/or
services by Genentech or its Affiliates to a sublicensee to compensate Genentech
or its Affiliates for the provision of such goods and/or services.

 

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