[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

Exhibit 10.91

EXCLUSIVE LICENSE AGREEMENT

between

MERCK SHARP & DOHME CORP.

and

EXELIXIS, INC.

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

TABLE OF CONTENTS

 

1.   DEFINITIONS         1    2.   LICENSE; EXCLUSIVITY; DEVELOPMENT AND
COMMERCIALIZATION      7              2.1    Exclusive License Grants      7   
          2.2    Non-Exclusive License Grant      7              2.3   
Exclusivity      7              2.4    Disclosure of EXELIXIS Know-How      7   
          2.5    Development and Commercialization Diligence      8     
        2.6    Development, Commercialization and Regulatory Costs      8     
        2.7    Excused Performance      8              2.8    No Implied
License; MERCK Covenants      8    3.   CONFIDENTIALITY; PUBLICITY AND
PUBLICATION      9              3.1    Nondisclosure Obligation      9     
        3.2    Publicity and/or Use of Names      10              3.3   
Publication      10    4.   PAYMENTS; ROYALTIES AND REPORTS      10     
        4.1    Consideration for License      10              4.2    Development
and Regulatory Milestone Payments      11              4.3    Sales Threshold
Milestone Payments      11              4.4    Royalties      11     
        4.5    Reports; Payment of Royalty      12              4.6    Audits   
  12              4.7    Payment Exchange Rate      13              4.8   
Income Tax Withholding      13    5.   REPRESENTATIONS AND WARRANTIES      13   
          5.1    EXELIXIS Representation and Warranty      13              5.2
   Mutual Representation and Warranty      14    6.   INTELLECTUAL PROPERTY
PROVISIONS      14              6.1    Ownership      14              6.2   
Prosecution of Patents      15              6.3    Interference, Opposition,
Reexamination and Reissue      16   

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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

          6.4    Enforcement and Defense    16           6.5    Patent Term
Restoration    18

7.

  TERM AND TERMINATION    18           7.1    Term and Expiration    18  
        7.2    Termination at Will    18           7.3    Termination for Cause
   18           7.4    Effect of Expiration or Termination; Survival    20

8.

  INDEMNITY    20           8.1    Indemnification by MERCK    20           8.2
   Indenmnification by EXELIXIS    21           8.3    Notice of Indemnification
Obligation and Defense    21

9.

  MISCELLANEOUS    21           9.1    Force Majeure    21           9.2   
Assignment: Change of Control    22           9.3    Severability    22  
        9.4    Notices    22           9.5    Applicable Law    23           9.6
   Dispute Resolution    23           9.7    Entire Agreement; Amendments    24
          9.8    Headings    25           9.9    Independent Contractors    25  
        9.10    Waiver    25           9.11    Cumulative Remedies    25  
        9.12    Waiver of Rule of Construction    25           9.13    Certain
Conventions    25           9.14    Business Day Requirements    25  
        9.15    Counterparts    26

SCHEDULE A         EXELIXIS PATENT RIGHTS

SCHEDULE B         EXELIXIS PI3Kdelta SPECIFIC COMPOUNDS

SCHEDULE C         EXELIXIS COMPOUNDS

SCHEDULE D         EXELIXIS KNOW-HOW

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

ii

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SCHEDULE E         EXELIXIS RELATED INACTIVE COMPOUNDS

SCHEDULE F         PRESS RELEASE

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

iii

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EXCLUSIVE LICENSE AGREEMENT

THIS AGREEMENT is effective as of December 21, 2011 (the “Effective Date”)
between Merck Sharp & Dohme Corp., a corporation organized and existing under
the laws of New Jersey (“MERCK”), and Exelixis, Inc., a corporation organized
and existing under the laws of Delaware (“EXELIXIS”).

RECITALS:

WHEREAS, EXELIXIS has developed EXELIXIS Technology (as hereinafter defined) and
has rights to EXELIXIS Technology; and

WHEREAS, MERCK desires to obtain a license under the EXELIXIS Technology, upon
the terms and conditions set forth herein, and EXELIXIS desires to grant such a
license;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the Parties hereby agree as follows:

 

1. DEFINITIONS

Unless specifically set forth to the contrary herein, the following terms,
whether used in the singular or plural, shall have the respective meanings set
forth below:

 

1.1 “Affiliate” shall mean: (a) any corporation or business entity of which
fifty percent (50%) or more of the securities or other ownership interests
representing the equity, the voting stock or general partnership interest are
owned, controlled or held, directly or indirectly, by MERCK or EXELIXIS; or
(b) any corporation or business entity which, directly or indirectly, owns,
controls or holds fifty percent (50%) (or the maximum ownership interest
permitted by law) or more of the securities or other ownership interests
representing the equity, the voting stock or, if applicable, the general
partnership interest, of MERCK or EXELIXIS; provided that “Affiliates” of
EXELIXIS shall not include the Change of Control Group upon completion of a
Change of Control of EXELIXIS, so long as such Change of Control Group has
agreed to the restrictions specified in Section 2.1(c).

 

1.2 “Calendar Quarter” shall mean the respective periods of three
(3) consecutive calendar months ending on March 31, June 30, September 30 and
December 31.

 

1.3 “Calendar Year” shall mean each successive period of twelve (12) months
commencing on January 1 and ending on December 31.

 

1.4 “Change of Control” shall be deemed to occur if a Party is involved in a
merger, reorganization or consolidation, or if there is a sale of all or
substantially all of such Party’s assets or business relating to this Agreement,
or if a person or group other than the current Controlling person or group shall
effectively acquire Control of the management and policies of such Party.

 

1.5 “Change of Control Group” shall mean with respect to a Party, the person or
entity, or group of persons or entities, that is the acquirer of, or a successor
to, a Party in connection with a Change of Control of such Party, together with
affiliates of such persons or entities that are not Affiliates of such Party
immediately prior to the completion of such Change of Control of such Party.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

1

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1.6 “Clinical Trial” shall mean a Phase I Clinical Trial, Phase II Clinical
Trial, Phase III Clinical Trial, and/or Post-approval Clinical Trial.

 

1.7 “Combination Product” shall mean a Product that contains one or more
therapeutically active ingredients (other than Royalty Compound) in a fixed dose
combination with a Royalty Compound. Each Combination Product shall be deemed to
be a Royalty Product for all purposes of the Agreement.

 

1.8 “Compound” shall mean any EXELIXIS Compound, Joint Compound or MERCK
Compound and in all cases including [ * ].

 

1.9 “Control”, “Controls” or “Controlled by” shall mean with respect to any item
of or right under EXELIXIS Technology, MERCK Patent Rights, or other
intellectual property rights, the possession of (whether by ownership or
license, other than pursuant to this Agreement) or the ability of a Party and/or
its Affiliates, as the case may be, to grant access to, or a license or
sublicense of, such items or right as provided for herein without violating the
terms of any agreement or other arrangement with any Third Party existing at the
time such Party and/or its Affiliates would be required hereunder to grant the
other Party such access or license or sublicense.

 

1.10 “Diligent Effort” shall mean that effort customarily exerted by MERCK with
respect to its own products of similar scientific merit and commercial
potential, taking into account, [ * ], and also including the timing and
promptness with which such efforts and resources would be applied. The efforts
required by MERCK necessary to constitute Diligent Efforts will not be reduced
by consideration of the fact in and of itself, that MERCK has an interest in
developing or commercializing pharmaceuticals other than the Royalty Compounds
and Royalty Products, that may be marketed for the same therapeutic indications
as such Royalty Compounds and Royalty Products. Diligent Efforts are [ * ].

 

1.11 “EMEA” shall mean the European Medicines Agency (a cross-national
Regulatory Authority in the European Union) and any successor governmental
authority having substantially the same function.

 

1.12 “EXELIXIS Compound” shall mean: (a) any PI3Kdelta Specific Compound that is
Controlled by EXELIXIS as of the effective date of the Agreement and is listed
on Schedule B; (b) any PI3Kdelta Specific Compound that is claimed or covered by
the EXELIXIS Patent Rights listed on Schedule A; and/or (c) any small molecule
compound that is listed on Schedule C, which consists of compounds that are [ *
] from EXELIXIS’ PI3Kdelta program that are [ * ]. For clarity, any PI3Kdelta
Specific Compounds that are [ * ] shall [ * ].

 

1.13 “EXELIXIS Know-How” shall mean:

 

  (a) PI3Kdelta specific [ * ] and other know-how Controlled by EXELIXIS that is
not generally known, and is necessary or useful to MERCK to research, develop,
make, have made, use, import, export, sell and/or offer for sale Compounds and
Products in the Territory for use in the Field, including but not limited to,
those items listed in Schedule D;

 

  (b) all [ * ] listed on Schedule C; and

 

  (c) those [ * ] that are related [ * ] and that are listed in Schedule E.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

2

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

For avoidance of doubt and without limiting the foregoing, to the extent it is
legally able to do so, EXELIXIS shall provide to MERCK [ * ] regarding PI3K
activity developed by EXELIXIS as of the Effective Date with respect to the
EXELIXIS Compounds and the compounds listed on Schedule C (such [ * ] shall be
provided as part of the know-how disclosure described in Section 2.4).

 

1.14 “EXELIXIS Patent Rights” shall mean those Patent Rights included in
Schedule A and all Patent Rights that are Controlled by EXELIXIS and that claim
or cover: (a) any EXELIXIS Compound; (b) PI3Kdelta [ * ], (c) methods of use of
PI3Kdelta Specific Compounds, and/or (d) manufacturing and formulation
technology useful for Compound or Product.

 

1.15 “EXELIXIS Product” shall mean any pharmaceutical product preparation in
final form for sale for use in the Field that contains or comprises an EXELIXIS
Compound including all dosage forms, formulations and line extensions thereof.

 

1.16 “EXELIXIS Technology” shall mean EXELIXIS Patent Rights, EXELIXIS Know-How,
and EXELIXIS’ interest in Joint Technology.

 

1.17 “Field” shall mean all therapeutic, diagnostic or prophylactic uses in
humans and animals.

 

1.18 “Filing” of an NDA shall mean the acceptance by a Regulatory Authority of
an NDA for filing.

 

1.19 “First Commercial Sale” shall mean, with respect to any Product, the first
sale for end use or consumption of such Product in a country after all required
approvals, including Regulatory Approval, have been granted by the Regulatory
Authority of such country.

 

1.20 “IND” shall mean an Investigational New Drug application, Clinical Study
Application, Clinical Trial Exemption, or similar application or submission for
approval to conduct human clinical investigations filed with or submitted to a
Regulatory Authority in conformance with the requirements of such Regulatory
Authority.

 

1.21 “IND-Enabling GLP Toxicology Study” shall mean a genotoxicity, acute
toxicology, safety pharmacology or sub-chronic toxicology study, in species that
satisfies applicable regulatory requirements, using applicable GLP, and meets
the standard necessary for submission as part of an IND filing with a Regulatory
Authority.

 

1.22 “Indication” shall mean [ * ] prophylactic and/or therapeutic purpose for
which the Product is developed [ * ] (e.g., [ * ] would be a single Indication,
[ * ]. However [ * ] shall be considered a different Indication.

 

1.23 “Information” shall mean any and all information and data, including
without limitation all EXELIXIS Know-How, MERCK Know-How, and all other
scientific, pre-clinical, clinical, regulatory, manufacturing, marketing,
financial and commercial information or data, whether communicated in writing or
orally or by any other method, which is provided by one Party to the other Party
in connection with this Agreement.

 

1.24 “Initiates”, “Initiated” or “Initiation” shall mean, with respect to
Section 1.35 and/or a milestone event as set forth in Section 4.2, the
administration of the first dose to an animal in an IND-Enabling GLP Toxicology
Study or, a patient or subject in a Clinical Trial.

 

1.25 “Joint Compound” shall mean any PI3Kdelta Specific Compounds that are
discovered or invented jointly by, or on behalf of, MERCK and EXELIXIS.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

3

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1.26 “Joint Know-How” shall mean unpatented PI3Kdelta Specific Compound(s) or
PI3Kdelta enzyme assays and techniques and other know-how that is discovered or
invented jointly by or on behalf of MERCK and EXELIXIS, that is not generally
known, and that is necessary or useful to MERCK to develop, make, have made,
use, import, export, sell and/or offer for sale Compounds and Products in the
Territory for use in the Field.

 

1.27 “Joint Patent Rights” shall mean all Patent Rights that are Controlled
jointly by MERCK and EXELIXIS and that claim or cover: (a) any Joint Compound;
(b) PI3Kdelta [ * ]; (c) methods of use of PI3Kdelta Specific Compounds; and/or
(d) PI3Kdelta Specific Compound manufacturing and formulation, in each case,
that is developed or invented jointly by or on behalf of EXELIXIS and MERCK.

 

1.28 “Joint Product” shall mean any pharmaceutical product preparation in final
form for sale for use in the Field that contains or comprises a Joint Compound
including all dosage forms, formulations and line extensions thereof.

 

1.29 “Joint Technology” shall mean Joint Patent Rights and Joint Know-How.

 

1.30 “Major European Country” shall mean any one of the following countries: [ *
].

 

1.31 “MERCK Compound” shall mean any PI3Kdelta Specific Compound that is:
(a) Controlled by MERCK during the term of the Agreement; and/or (b) claimed or
covered by MERCK Patent Rights; but excluding any [ * ] acquired by [ * ] at any
time [ * ].

 

1.32 “MERCK Compound Period” shall mean the period from [ * ] until [ * ],
unless the Agreement is terminated earlier.

 

1.33 “MERCK Know-How” shall mean any information and materials, including but
not limited to, discoveries, improvements, processes, methods, protocols,
formulas, data, inventions (including without limitation MERCK’s rights in Joint
Technology), know-how and trade secrets, patentable or otherwise, which during
the term of this Agreement: (a) are in MERCK’s Control; (b) are not generally
known; and (c) are in MERCK’s opinion necessary to EXELIXIS in the performance
of its obligations under this Agreement.

 

1.34 “MERCK Patent Rights” shall mean all Patent Rights Controlled by MERCK that
claim or cover: (a) any PI3Kdelta Specific Compound; (b) PI3Kdelta [ * ];
(c) methods of use of PI3Kdelta Specific Compound; and/or (d) PI3Kdelta Specific
Compound manufacturing and formulation.

 

1.35 “MERCK Royalty Compound” shall mean any MERCK Compound for which [ * ].

 

1.36 “MERCK Royalty Product” shall mean any pharmaceutical product preparation
in final form for sale for use in the Field that contains or comprises a MERCK
Royalty Compound including all dosage forms, formulations and line extensions
thereof.

 

1.37 “NDA” shall mean a New Drug Application, Worldwide Marketing Application,
Marketing Application Authorization, or similar application or submission for
Regulatory Approval of a Product filed with a Regulatory Authority to obtain
marketing approval for a pharmaceutical or diagnostic product in that country or
in that group of countries.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

4

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1.38 “Net Sales” shall mean the gross invoice price (not including value added
taxes, sales taxes, or similar taxes) of Royalty Product sold by MERCK or its
Related Parties to the first Third Party after deducting, if not previously
deducted, from the amount invoiced or received:

(a) trade and quantity discounts other than early pay cash discounts;

(b) returns, rebates, chargebacks and other allowances;

(c) retroactive price reductions that are actually allowed or granted;

(d) a fixed amount equal to [ * ] to cover bad debt, early payment cash
discounts, transportation and insurance, custom duties, and other governmental
charges; and

(e) if applicable as to the Royalty Product sold, MERCK’s standard inventory
cost, using MERCK’s standard internal system for determining such costs across
all its products consistently applied, of a Product Delivery Device (as defined
below) that is sold with the Royalty Product. A “Product Delivery Device” shall
mean a device or delivery system that is used for administering or delivering a
Royalty Product (such as a syringe or specialized drug delivery system) and is
packaged and sold with such Royalty Product, such as in a sterile kit.

With respect to sales of Combination Products, Net Sales for the purpose of
determining royalties owed for sales of such Combination Product shall be
calculated by multiplying the total Net Sales of the Combination Product by the
fraction A/(A+B), where A is the average gross invoice price in the applicable
country in the Territory of the Royalty Product sold separately in the same
formulation and dosage, and B is the sum of the average gross invoice prices in
the applicable country in the Territory of all other therapeutically active
ingredients in the Combination Product sold separately in the same formulation
and dosage, during the applicable royalty period, provided that such sales are
in arms-length transactions and such gross invoice prices are available. In the
event that such gross invoice prices are not available in such period, then Net
Sales of the Royalty Product shall be calculated on the basis of the gross
invoice price of the Combination Product multiplied by a fraction, the numerator
of which shall be [ * ] and the denominator of which shall be [ * ]. The
deductions set forth in paragraphs (a) through (e) above will be applied in
calculating Net Sales for a Combination Product. In the event that either Party
reasonably believes that the calculation carried out with respect to the
Combination Product does not fairly reflect the value of the Royalty Compound in
the Combination Product relative to the other clinically active components in
the Combination Product, the Parties shall negotiate in good faith and agree on
another, commercially reasonable means of calculating Net Sales with respect to
such Combination Product that fairly reflects the relative contribution, to the
total market value of such Combination Product, of the Royalty Compound in the
Product.

 

1.39 “Party” shall mean MERCK and EXELIXIS.

 

1.40 “Patent Rights” shall mean any and all issued patents and pending patent
applications (including any provisional applications, continuations,
divisionals, continuations-in-part, re-examinations, reissues, substitutions,
confirmations, registrations, re-validations, patents of addition, patent term
extensions, supplementary protection certificates and the like, as well as any
foreign counterparts of any of the foregoing).

 

1.41 “Phase I Clinical Trial” shall mean a human clinical trial in any country
that would satisfy the requirements of 21 CFR 312.21(a).

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

5

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1.42 “Phase II Clinical Trial” shall mean a human clinical trial in any country
that would satisfy the requirements of 21 CFR 312.21(b).

 

1.43 “Phase III Clinical Trial” shall mean a human clinical trial in any country
that would satisfy the requirements of 21 CFR 312.21(c).

 

1.44 “PI3K” shall mean Phosphatidylinositol 3-kinases, a family of enzymes that
phosphorylate the 3 position hydroxyl group of the inositol ring of
phosphatidylinositol. Class 1A kinases are composed of a p85 regulatory chain
and a p110 catalytic chain, of which there are three (3) isoforms: PI3Kalpha,
PI3Kbeta, PI3Kdelta. Class IB kinase is composed of a p101 regulatory chain and
a p110 catalytic chain, of which there is one (1) isoform: PI3Kgamma.

 

1.45 “PI3Kdelta Specific Compound” shall mean any small molecule compound that
meets both of the following requirements: (a) [ * ] inhibits the activity of
PI3Kdelta [ * ] in a biochemical assay for PI3Kdelta activity [ * ]; and (b) in
a selectivity panel of multiple targets, demonstrates [ * ] selectivity against
PI3Kdelta relative to the following targets: [ * ].

 

1.46 “Product” shall mean any pharmaceutical product preparation in final form
for sale for use in the Field that contains or comprises a Compound including
all dosage forms, formulations and line extensions thereof.

 

1.47 “Prosecute” shall mean in relation to any Patent Rights: (a) prepare and
file patent applications and represent applicant(s) or assignee(s) before
relevant patent offices or other relevant authorities during examination, and in
appeal processes, or in any equivalent proceedings, (b) to secure the grant of
any Patent Rights arising from such patent applications, (c) to maintain in
force any issued Patent Rights (including through payment of any relevant
maintenance fees), and (d) to make all decisions with regard to any of the
foregoing activities. “Prosecution” has a corresponding meaning.

 

1.48 “Regulatory Application” shall mean any submission for Regulatory Approval
of a Product filed with a Regulatory Authority to obtain marketing approval for
a pharmaceutical product in that country or in that group of countries.

 

1.49 “Regulatory Approval” shall mean all approvals from the relevant Regulatory
Authority necessary to market and sell a Product in any country (including
without limitation, all applicable pricing and governmental reimbursement
approvals even if not legally required to sell Product in a country).

 

1.50 “Regulatory Authority” shall mean any applicable government regulatory
authority involved in granting approvals for the manufacturing, marketing,
reimbursement and/or pricing of a Product in the Territory, including, in the
United States, the United States Food and Drug Administration and any successor
governmental authority having substantially the same function.

 

1.51 “Related Party” shall mean MERCK, its Affiliates, and permitted licensees
and sublicensees (which term does not include distributors).

 

1.52 “Royalty Compounds” shall mean MERCK Royalty Compounds, Joint Compounds,
and EXELIXIS Compounds.

 

1.53 “Royalty Products” shall mean MERCK Royalty Products, Joint Products, and
EXELIXIS Products.

 

1.54 “Territory” shall mean all of the countries in the world, and their
territories and possessions.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

6

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1.55 “Third Party” shall mean an entity other than MERCK and its Related
Parties, and EXELIXIS and its Affiliates.

 

1.56 “Valid Patent Claim” shall mean any claim of an issued and unexpired Patent
Rights included within the EXELIXIS Patent Rights, Joint Patent Rights, or MERCK
Patent Rights that, in each case, claim the applicable Compound as a composition
of matter and which has not been revoked or held unenforceable or invalid by a
decision of a court or other governmental agency of competent jurisdiction
(which decision is not appealable or has not been appealed within the time
allowed for appeal), and which claim has not been disclaimed, denied or admitted
to be invalid or unenforceable through reissue, re-examination or disclaimer or
otherwise.

 

2. LICENSE; EXCLUSIVITY; DEVELOPMENT AND COMMERCIALIZATION

 

2.1 Exclusive License Grants

Subject to the terms and conditions of this Agreement:

(a) EXELIXIS hereby grants to MERCK an exclusive, royalty-bearing license, with
the right to sublicense, under the EXELIXIS Technology to research, develop,
make, have made, import, use, offer for sale and sell Compounds and /or Products
in the Territory for use in the Field. Such license grant shall be exclusive
even as to EXELIXIS.

(b) EXELIXIS hereby grants to MERCK an exclusive, royalty-free license, with the
right to sublicense, under the EXELIXIS Technology for research purposes in
order to identify, derivatize, pre-clinically develop, make, have made and use
Compounds. For clarity, this research license would allow MERCK to [ * ] for the
purpose of identifying, derivatizing, making and having made Compounds.

(c) In order to provide MERCK with the exclusive licenses set forth in this
Section 2.1 EXELIXIS will not [ * ], but rather will [ * ] that [ * ] so that [
* ] or [ * ], including without limitation [ * ], [ * ] during the term of the
Agreement, provided that [ * ].

 

2.2 Non-Exclusive License Grant

In the event that the [ * ] would infringe during the term of this Agreement a
claim of issued letters patent which [ * ], EXELIXIS hereby grants to MERCK, to
the extent EXELIXIS is legally able to do so, a non-exclusive, sublicensable,
royalty-free license in the Territory under [ * ] for MERCK and its Related
Parties to [ * ].

 

2.3 Exclusivity

During the term of this Agreement, EXELIXIS and/or its Affiliates shall not (by
itself or with any Third Party) [ * ]; provided, however, that if [ * ], and [ *
], EXELIXIS may [ * ].

 

2.4 Disclosure of EXELIXIS Know-How

Subject to all applicable provisions of this Agreement, EXELIXIS shall begin
disclosing to MERCK, promptly following the Effective Date, all EXELIXIS
Know-How existing as of the Effective Date, and

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

7

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EXELIXIS shall complete such disclosure no later than [ * ] following the
Effective Date. All such EXELIXIS Know-How shall be delivered in electronic
format, where available, and shall be in English. During such [ * ] period,
EXELIXIS will make its and its Affiliates’ employees and consultants available
to MERCK for consultation as reasonably required by MERCK in order to ensure an
orderly transition to MERCK of all such EXELIXIS Know-How. No later than [ * ]
after the end of such [ * ] period, and at MERCK’s reasonable request, there
shall be a meeting at EXELIXIS between such MERCK and EXELIXIS representatives
for EXELIXIS to answer any additional questions regarding the orderly transition
to MERCK of all such EXELIXIS Know-How. Each Party shall bear its own costs in
performing any activities pursuant to this Section 2.4.

 

2.5 Development and Commercialization Diligence

MERCK shall use Diligent Efforts to research, develop and commercialize of at
least one Royalty Compound and/or Royalty Product. Beginning [ * ] after the
Effective Date, and every [ * ] thereafter until the first approval of a Royalty
Product in the United States, EMEA or Japan, MERCK shall submit to EXELIXIS a
written report in reasonably sufficient detail describing the research,
development, manufacturing and commercialization progress performed by or on
behalf of MERCK on Royalty Compounds and/or Royalty Products. If reasonably
necessary for EXELIXIS to exercise its rights under this Agreement, EXELIXIS may
request that MERCK provide more detailed information and data regarding such
reports by MERCK, and MERCK shall promptly provide EXELIXIS with information and
data as is reasonably related to such request, at EXELIXIS’ expense. All such
reports shall be considered Information of MERCK subject to Article 3.

 

2.6 Development, Commercialization and Regulatory Costs

(a) After the Effective Date of the Agreement, MERCK will be responsible for all
costs and activities relating to research, development and regulatory affairs of
Compounds and Products, except that EXELIXIS would bear its own costs to
transfer to MERCK the licensed EXELIXIS Technology.

(b) After the Effective Date of the Agreement, MERCK will be responsible for all
costs and activities relating to commercialization and manufacturing of
Compounds and Products.

 

2.7 Excused Performance

The obligation of MERCK with respect to any Product under Section 2.5 are [ * ],
and the obligation of MERCK to develop or market any such Product shall be
delayed or suspended so long as [ * ].

 

2.8 No Implied Licenses; MERCK Covenants

Except as expressly provided in Sections 2.1, 2.2, and Article 7, nothing in
this Agreement grants either Party any right, title or interest in and to the
intellectual property rights of the other Party (either expressly or by
implication or estoppel). For clarity, the licenses granted in Sections 2.1 and
2.2 by EXELIXIS to MERCK do not give MERCK any right or license to incorporate
into any Product (e.g., as a combination product) any compound that is
Controlled by EXELIXIS and that is not a PI3Kdelta Specific Compound. MERCK
hereby covenants that MERCK shall not (and shall ensure that any of its Related
Parties shall not) use any EXELIXIS Know-How or EXELIXIS Patent Rights for a
purpose other than that expressly permitted in Sections 2.1, 2.2, and Article 7.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

8

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3. CONFIDENTIALITY; PUBLICITY AND PUBLICATION

 

3.1 Nondisclosure Obligation

All Information disclosed by one Party to the other Party hereunder shall be
maintained in confidence by the receiving Party and shall not be disclosed to a
Third Party or used for any purpose except as set forth herein without the prior
written consent of the disclosing Party, except to the extent that such
Information:

 

  (a) is known by receiving Party at the time of its receipt, and not through a
prior disclosure by the disclosing Party, as documented by the receiving Party’s
business records;

 

  (b) is properly in the public domain;

 

  (c) is subsequently disclosed to the receiving Party by a Third Party who may
lawfully do so and is not under an obligation of confidentiality to the
disclosing Party;

 

  (d) is developed by the receiving Party independently of Information received
from the disclosing Party, as documented by the receiving Party’s business
records;

 

  (e) is disclosed to governmental or other regulatory agencies in order to
obtain patents on the Patent Rights subject to this Agreement (EXELIXIS Patent
Rights, MERCK Patent Rights and/or Joint Patent Rights) or to gain or maintain
approval to conduct clinical trials or to market Product, but such disclosure
may be only to the extent reasonably necessary to obtain such patents or
approvals; or

 

  (f) is deemed necessary by a MERCK to be disclosed to Related Parties, agents,
consultants, and/or other Third Parties for any and all purposes MERCK and/or
its Affiliates deem necessary or advisable in the ordinary course of business in
accordance with this Agreement on the condition that such Third Parties agree to
be bound by the confidentiality and non-use obligations contained this
Agreement; provided the term of confidentiality for such Third Parties shall be
no less than [ * ].

Any combination of features or disclosures shall not be deemed to fall within
the foregoing exclusions merely because individual features are published or
available to the general public or in the rightful possession of the receiving
Party unless the combination itself and principle of operation are published or
available to the general public or in the rightful possession of the receiving
Party.

If a Party receiving Information that is subject to the non-disclosure
provisions of this Section 3.1 is required by judicial or administrative process
to disclose such Information, such receiving Party shall promptly inform the
other Party of the disclosure that is being sought in order to provide the other
Party an opportunity to challenge or limit the disclosure obligations.
Information that is disclosed by judicial or administrative process shall remain
otherwise subject to the confidentiality and non-use provisions of this
Section 3.1, and the Party disclosing Information pursuant to law or court order
shall take all steps reasonably necessary, including without limitation
obtaining an order of confidentiality, to ensure the continued confidential
treatment of such Information.

 

3.2 Publicity and/or Use of Names

Upon full execution of this Agreement, EXELIXIS may issue a press release as set
out in Schedule F. In addition, after full execution of this Agreement each
Party may, in its public and confidential disclosures to Third Parties refer to
the name of the other Party and the information set out in Schedule F. Any other
publication, news release or other public announcement relating to the execution
of this Agreement shall first

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

9

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be reviewed and approved by both Parties. Furthermore, no Party shall use the
name, trademark, trade name or logo of the other Party, its Affiliates or their
respective employees in any publicity, news release or disclosure relating to
this Agreement or its subject matter, without the prior express written
permission of the other Party, except as may be required by law, rule or
regulation. The foregoing provisions of this Section 3.2 notwithstanding, each
Party shall have the right to disclose information related to the existence
and/or terms and conditions of this Agreement as follows: (i) to the extent
necessary (as reasonably determined by its legal counsel) to be disclosed in
order to comply with the rules and regulations of the United States Securities
and Exchange Commission (or another similar securities exchange authority in
Territory); (ii) to existing or potential acquirers or merger candidates,
potential sublicensees or collaborators (to the extent contemplated hereunder),
or to Affiliates, each of whom prior to disclosure must be bound by obligations
of confidentiality and non-use at least equivalent in scope to those set forth
in this Article 3; (iii) to investment bankers, existing or potential investors,
venture capital firms or other financial institutions or investors for purposes
of obtaining financing, if such recipients are bound by obligations of
confidentiality and non-use at least equivalent in scope to those set forth in
this Article 3; or (iv) in response to a valid order of a court or other
governmental body. In each such event set forth in (i) and/or (iv), the Party so
required to disclose shall notify the other Party in advance of any such
disclosure, shall provide the other Party with a reasonable opportunity to
review and comment on the form and content of any such disclosure, shall
disclose only the minimum information required in order to comply with such
disclosure requirements, and shall use commercially reasonable efforts to obtain
confidential treatment (to the fullest extent available).

 

3.3 Publication

The Parties acknowledge each other’s interest in publishing the results of its
research in order to obtain recognition within the scientific community and to
advance the state of scientific knowledge. Each Party also recognizes the mutual
interest in obtaining valid patent protection and in protecting business
interests and trade secret information. Consequently, except for disclosures
permitted pursuant to Section 3.1, in the event that a Party wishes to make a
publication containing any EXELIXIS Technology, such Party shall deliver to the
other Party a copy of the proposed written publication at least [ * ] prior to
submission for publication. The Parties shall have the right to propose
modifications to or delay of the publication for patent reasons, trade secret
reasons or business reasons. If a reviewing Party requests a delay for patent
reasons, the other Party shall delay submission for a period of up to [ * ] to
enable patent applications protecting each Party’s rights in such information to
be filed in accordance with Article 6 below. Upon expiration of such delay, the
Party seeking to publish shall be free to proceed with the publication. If a
Party requests modifications to the publication, the Party seeking to publish
shall edit such publication to prevent disclosure of trade secret or proprietary
business information prior to submission of the publication.

 

4. PAYMENTS; ROYALTIES AND REPORTS

 

4.1 Consideration for License

In consideration for the licenses granted herein under the EXELIXIS Technology,
upon the terms and conditions contained herein, MERCK shall pay to EXELIXIS
twelve million dollars ($12,000,000) within [ * ] of the Effective Date of this
Agreement. Such payment shall be non-creditable and non-refundable.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

10

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4.2 Development and Regulatory Milestone Payments

Subject to the terms and conditions in this Agreement, MERCK shall pay to
EXELIXIS the following development and regulatory milestone payments with
respect to Royalty Compounds or Royalty Products:

 

Event

   Milestone Payment [ * ]    [ * ]

Each of the foregoing milestones would be payable [ * ], and [ * ] unless [ * ]
as indicated above.

MERCK shall notify EXELIXIS in writing within [ * ] upon the achievement of each
milestone, and shall make the appropriate milestone payment within [ * ] of the
achievement of such milestone. Each such payment shall be non-creditable and
non-refundable.

 

4.3 Sales Threshold Milestone Payments

The following Sale Threshold Milestones shall be payable within [ * ] after the
end of the Calendar Year in which such Sales Threshold Milestone was first
achieved by Merck or its Related Parties. Sales Threshold Milestones shall be
payable only once regardless of the number of additional Indications developed.

 

Aggregate Annual Net Sales (Worldwide)

   Payment [ * ]    [ * ]

 

4.4 Royalties

4.4.1 Patent Royalties Payable By MERCK Subject to the terms and conditions of
this Agreement and except as set forth in Section 4.4.3, MERCK shall pay
EXELIXIS, during the Royalty Period, royalties on worldwide annual Net Sales of
Royalty Product in the Territory (for all Indications and without regard to
formulation) as follows:

 

Royalty

  

Net Sales

[ * ] of:    Net Sales in the applicable countries in the Territory in each
Calendar Year up to and including [ * ] in worldwide Net Sales [ * ] of:    Net
Sales in the applicable countries in the Territory in each Calendar Year for the
portion of worldwide Net Sales exceeding [ * ] up to and including [ * ] [ * ]
of:    Net Sales in the applicable countries in the Territory in each Calendar
Year for the portion of worldwide Net Sales exceeding [ * ]

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

11

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All royalties shall be calculated based on Net Sales in US Dollars and payment
shall be made to EXELIXIS in US Dollars. All royalties shall be non-creditable
and non-refundable (except to the extent provided under Section 4.6).

4.4.2 Royalty Period Royalties will be payable on a product-by-product and
country-by-country basis from First Commercial Sale of such Royalty Product in
such country until the later of: [ * ] (the “Royalty Period”); provided that, [
* ] a particular Royalty Product in a particular country, the Royalty Period for
such Royalty Product in such country shall [ * ].

4.4.3 Know-How Royalties Payable By MERCK On Net Sales of Royalty Product which
would not infringe a Valid Patent Claim, royalties would be payable on a
product-by-product, country-by-country basis at [ * ] of the applicable royalty
rate set forth in Section 4.4.1 [ * ].

4.4.4 Compulsory Licenses If a compulsory license is granted to a Third Party
with respect to Royalty Product in any country in the Territory [ * ], then the
royalty rate to be paid by MERCK on Net Sales in that country under this
Section 4.4 shall be [ * ].

4.4.5 Third Party Licenses In the event that one or more licenses under patents
that claim or cover the Royalty Compound as a composition of matter are required
from Third Parties in order for MERCK and/or its Related Parties to develop,
make, have made, use, offer to sell, sell or import Royalty Compound or Royalty
Product(s) (hereinafter “Third Party Patent Licenses”), [ * ] of the
consideration actually paid under such Third Party Patent Licenses by MERCK or
its Related Parties for sale of such Royalty Compound or Royalty Product in a
country for a Calendar Quarter shall be creditable against the royalty payments
due EXELIXIS by MERCK with respect to the sale of such Royalty Compound or
Royalty Products in such country. Notwithstanding the foregoing, in no event
shall the royalty credit set forth above apply to reduce the royalty paid to
EXELIXIS for the sale of such Royalty Product by more than [ * ] of the amount
otherwise owed under the terms of Section 4.4.1 for such sale.

 

4.5 Reports; Payment of Royalty

During the term of the Agreement following the First Commercial Sale of a
Product, MERCK shall furnish to EXELIXIS a quarterly written report for the
Calendar Quarter showing the Net Sales of all Royalty Products subject to
royalty payments sold by MERCK and its Related Parties in the Territory during
the reporting period and the royalties payable under this Agreement. Reports
shall be due on the [ * ] following the close of each Calendar Quarter.
Royalties shown to have accrued by each royalty report shall be due and payable
on the date such royally report is due. MERCK shall keep (and shall ensure that
its Related Parties shall keep) complete and accurate records in sufficient
detail to enable the royalties payable hereunder to be determined, and MERCK
shall keep (and shall ensure that its Related Parties shall keep) such records
for the period that is the greater of [ * ] or the expiration of the statute of
limitations under applicable tax law.

 

4.6 Audits

 

  (a) Upon the written request of EXELIXIS [ * ], MERCK shall permit an
independent certified public accounting firm of nationally recognized standing
selected by EXELIXIS and reasonably acceptable to MERCK, at the EXELIXIS’
expense, to have access during normal business hours to such of the records of
MERCK as may be reasonably necessary to verify the accuracy of the royalty
reports hereunder for any year ending not more than [ * ] prior to the date of
such request. The accounting firm shall disclose to EXELIXIS only whether the
royalty reports are correct or incorrect and the specific details concerning any
discrepancies. No other information shall be provided to EXELIXIS.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

12

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  (b) If such accounting firm correctly identifies a discrepancy made during
such period, the appropriate Party shall pay the other Party the amount of the
discrepancy within [ * ] of the date EXELIXIS delivers to MERCK such accounting
firm’s written report so correctly concluding, or as otherwise agreed upon by
the Parties. The fees charged by such accounting firm shall be paid by EXELIXIS;
provided, however, that if such audit uncovers an underpayment of royalties by
MERCK that exceeds [ * ], then the fees of such accounting firm shall be paid by
MERCK.

 

  (c) MERCK shall include in each sublicense granted by it pursuant to this
Agreement a provision requiring the sublicensee to make reports to MERCK, to
keep and maintain records of sales made pursuant to such sublicense and to grant
access to such records by EXELIXIS’ independent accountant to the same extent
required of MERCK under this Agreement.

 

  (d) Upon the expiration of [ * ] following the end of any year, the
calculation of royalties payable with respect to such year shall be binding and
conclusive upon EXELIXIS, and MERCK and its Related Parties shall be released
from any liability or accountability with respect to royalties for such year.

 

  (e) EXELIXIS shall treat all financial information subject to review under
this Section 4.6 or under any sublicense agreement in accordance with the
confidentiality and non-use provisions of this Agreement, and shall cause its
accounting firm to enter into an acceptable confidentiality agreement with MERCK
and/or its Related Parties obligating it to retain all such information in
confidence pursuant to such confidentiality agreement.

 

4.7 Payment Exchange Rate

All payments to be made by MERCK to EXELIXIS under this Agreement shall be made
in United States dollars and may be paid by check made to the order of EXELIXIS
or bank wire transfer in immediately available funds to such bank account in the
United States designated in writing by EXELIXIS from time to time. In the case
of sales outside the United States, the rate of exchange to be used in computing
the monthly amount of currency equivalent in United States dollars due EXELIXIS
shall be made at the monthly rate of exchange utilized by MERCK in its worldwide
accounting system, prevailing on the third to the last business day of the month
preceding the month in which such sales are recorded by MERCK.

 

4.8 Income Tax Withholding

EXELIXIS shall be liable for all income and other taxes (including interest)
imposed upon any payments made by MERCK to EXELIXIS under this Article 4. If
laws, rules or regulations require withholding of income taxes or other taxes
imposed upon payments set forth in this Article 4, MERCK shall [ * ] and [ * ].
MERCK shall submit appropriate proof of payment of the withholding taxes to
EXELIXIS within [ * ] of filing with the relevant tax authority.

 

5. REPRESENTATIONS AND WARRANTIES

 

5.1 EXELIXIS Representation and Warranty

EXELIXIS represents and warrants to MERCK that as of the date of this Agreement:

 

  (a) to the best of EXELIXIS’ knowledge, the EXELIXIS Patent Rights and
EXELIXIS Know-How set forth in Schedule D exist;

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

13

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

  (b) it has the full right, power and authority to grant the licenses granted
under Article 2 hereof;

 

  (c) it has not previously assigned, transferred, conveyed or otherwise
encumbered its right, title and interest in the EXELIXIS Patent Rights or
EXELIXIS Know-How;

 

  (d) to EXELIXIS’ knowledge (without duty of inquiry), it is the sole and
exclusive owner of the EXELIXIS Patent Rights and EXELIXIS Know-How, all of
which are free and clear of any liens, charges and encumbrances, and no other
person, corporate or other private entity, or governmental entity or subdivision
thereof, has or shall have any claim of ownership whatsoever with respect to the
EXELIXIS Patent Rights and EXELIXIS Know-How;

 

  (e) to EXELIXIS’ knowledge (without duty of inquiry) there are no claims,
judgments or settlements against or owed by EXELIXIS or pending or threatened
claims or litigation relating to the EXELIXIS Patent Rights and EXELIXIS
Know-How; and

 

  (f) EXELIXIS has disclosed to MERCK all reasonably relevant information
regarding the EXELIXIS Patent Rights and EXELIXIS Know-How licensed under this
Agreement.

 

5.2 Mutual Representation and Warranty

Each of MERCK and EXELIXIS represents and warrants to the other Party that as of
the date of this Agreement:

 

  (a) it has the authority and right to enter into and perform this Agreement;

 

  (b) this Agreement is a legal and valid obligation binding upon it and is
enforceable in accordance with its terms, subject to applicable limitations on
such enforcement based on bankruptcy laws and other debtors’ rights; and

 

  (c) its execution, delivery and performance of this Agreement shall not
conflict in any material fashion with the terms of any other agreement or
instrument to which it is or becomes a party or by which it is or becomes bound,
nor violate any law or regulation of any court, governmental body or
administrative or other agency having authority over it.

 

6. INTELLECTUAL PROPERTY PROVISIONS

 

6.1 Ownership

 

6.1.1 All rights title and interest in or to any and all intellectual property
shall be determined in accordance with the following terms and conditions:

 

  (a) EXELIXIS shall solely own all EXELIXIS Patent Rights and EXELIXIS
Know-How;

 

  (b) MERCK shall solely own all MERCK Patent Rights and MERCK Know-How; and

 

  (c) EXELIXIS and MERCK shall jointly own Joint Patent Rights and Joint
Know-How.

 

6.1.2 In the event of a dispute regarding ownership, the Parties shall establish
a procedure to resolve such dispute, which may include engaging independent
Third Party patent attorneys jointly selected by the Parties to resolve such
dispute. The Parties acknowledge that the ownership rights set out in this
Section 6.1 are subject to the terms and conditions of this Agreement (including
the license granted by EXELIXIS to MERCK), and subject thereto, including
without limitation Sections 2.1 and 2.3, each

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

14

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

 

Party shall be free to use and exploit (which shall include the right to grant
licenses under) any Joint Patent Rights and Joint Know-How, without any duty of
accounting to the other Party during the term and after expiry or termination of
this Agreement.

 

6.2 Prosecution of Patents

 

6.2.1 Prosecution of Patent Rights [ * ] (using external patent counsel
reasonably acceptable to [ * ]) agrees to Prosecute in the Territory, upon
appropriate consultation with [ * ], the [ * ] Patent Rights [ * ]. [ * ] agrees
to Prosecute in the Territory, upon appropriate consultation with [ * ], the [ *
] Patent Rights in the Territory. [ * ] shall implement all reasonable requests
made by [ * ] with regard to the Prosecution of [ * ] Patent Rights. With
respect to [ * ] Patent Rights, [ * ] may elect not to file and/or Prosecute and
if so, [ * ] shall notify [ * ] and [ * ] shall have the right to Prosecute such
[ * ] Patent Rights. In such event, [ * ] shall execute such documents and
perform such acts at [ * ] expense as may be reasonably necessary to provide [ *
] with a power of attorney for such Patent Rights to [ * ] in a timely manner to
allow [ * ] to continue such prosecution or maintenance. Thereafter, such
assigned [ * ] Patent Rights shall be considered [ * ] Patent Rights under this
Agreement. With respect to [ * ] Patent Rights, [ * ] may elect not to file
and/or Prosecute and if so, [ * ] shall notify [ * ] and [ * ] shall have the
right to Prosecute such [ * ] Patent Rights. In such event, [ * ] shall execute
such documents and perform such acts at [ * ] expense as may be reasonably
necessary to provide [ * ] with a power of attorney for such [ * ] Patent Rights
to [ * ] in a timely manner to allow [ * ] to continue such prosecution or
maintenance. With respect to both [ * ] Patent Rights and [ * ] Patent Rights,
the non-filing Party shall have full rights of consultation with filing Party
and the patent counsel selected by the filing Party in all matters related to
such [ * ] Patent Rights or [ * ] Patent Rights, as the case may be. In
addition, the filing Party shall give the non-filing Party an opportunity to
review the text of the application before filing, shall consult with the
non-filing Party with respect thereto, and shall supply the non-filing Party
with a copy of the application as filed, together with notice of its filing date
and serial number. The filing Party shall keep the non-filing Party advised of
the status of the actual and prospective patent filings and upon the request of
the non-filing Party, provide advance copies of any papers related to the
Prosecution of such patent filings. The filing Party shall promptly give notice
to the non-filing Party of the grant, lapse, revocation, surrender, invalidation
or abandonment of any [ * ] Patent Rights or [ * ] Patent Rights, as the case
may be.

 

6.2.2 Prosecution Costs for [ * ] Patent Rights [ * ] shall bear all reasonable
and documented out-of-pocket costs and expenses incurred [ * ] in connection
with the Prosecution of [ * ] Patent Rights [ * ] in [ * ]. [ * ] shall also
reimburse the reasonable and documented out-of-pocket costs and expenses for the
Prosecution of [ * ] Patent Rights in [ * ] and for [ * ] Patent Rights [ * ];
provided, that [ * ] provides [ * ] with advance written notice of such
Prosecutions and [ * ] that such Prosecution in such country is commercially
reasonable. If [ * ] provides notice to [ * ] within [ * ] of receiving notice
of Prosecution of [ * ] Patent Rights [ * ] that [ * ] does not agree with
Prosecution, or at any time thereafter notifies [ * ] that its does not agree
that continuing the Prosecution of such [ * ] Patent Rights in such country is
commercially reasonable, [ * ] shall thereafter [ * ] Prosecute the [ * ] Patent
Rights in such country. [ * ] shall reimburse [ * ] for the reasonable and
documented out-of-pocket costs and expenses as set forth above within [ * ]
after receiving an invoice from [ * ] for such costs. Notwithstanding anything
to the contrary above, in the event that [ * ] or [ * ] or [ * ] any of the [ *
] Patent Rights [ * ], [ * ] shall [ * ] the costs of Prosecution for such [ * ]
Patent Rights. By way of example, if [ * ] the [ * ] Patent Rights [ * ], [ * ]
shall [ * ] the costs of Prosecution of such [ * ] Patent Rights.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

15

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6.2.3 Prosecution Costs for [ * ] Patent Rights With respect to [ * ] Patent
Rights, [ * ] shall be responsible for payment of the costs and expenses related
to Prosecution of such Patent Rights [ * ]. If [ * ], then [ * ] shall bear the
expenses for [ * ].

 

6.3 Interference, Derivation, Opposition, Reissue Reexamination and Post Grant
Review Proceedings

(a) The filing Party shall, within [ * ] of learning of any request for, or
filing or declaration of, any interference, derivation, opposition,
reexamination, or post grant review (or similar proceedings as set forth under
the America Invents Act) relating to [ * ] Patent Rights or [ * ] Patent Rights,
as the case may be, inform the non-filing Party of such event. MERCK and
EXELIXIS shall thereafter consult and cooperate fully to determine a course of
action with respect to any such proceeding. The non-filing Party shall have the
right to review and approve any submission to be made in connection with such
proceeding.

(b) [ * ] shall not initiate any interference, derivation, reissue, or
reexamination proceeding (or similar proceedings as set forth under the America
Invents Act) relating to [ * ] Patent Rights without the prior written consent
to [ * ], which consent shall not be unreasonably withheld, delayed or
conditioned.

(c) In connection with any interference, derivation, opposition, reissue,
reexamination, or post grant review proceeding (or similar proceedings as set
forth under the America Invents Act) relating to [ * ] Patent Rights or [ * ]
Patent Rights, MERCK and EXELIXIS will cooperate fully and will provide each
other with any information or assistance that either may reasonably request. The
filing Party shall keep the non-filing Party informed of developments in any
such action or proceeding, including, to the extent permissible by law,
consultation and approval of any settlement, the status of any settlement
negotiations and the terms of any offer related thereto.

(d) To the extent MERCK and EXELIXIS mutually agree with the course of action
with respect to any interference, derivation, opposition, reexamination,
reissue, or post grant review proceeding (or similar proceedings as set forth
under the America Invents Act) relating to [ * ] Patent Rights or [ * ] Patent
Rights, [ * ] shall bear the expense of such proceeding, subject to [ * ].

 

6.4 Enforcement and Defense

(a) Each of EXELIXIS and MERCK shall give the other Party notice of either
(i) any infringement of [ * ] Patent Rights and/or [ * ] Patent Rights, or
(ii) any misappropriation or misuse of [ * ] Know-How, that may come to either
EXELIXIS’ or MERCK’s attention. MERCK and EXELIXIS shall thereafter consult and
cooperate fully to determine a course of action, including but not limited to
the commencement of legal action by either or both MERCK and EXELIXIS, to
terminate any infringement of [ * ] Patent Rights and/or [ * ] Patent Rights or
any misappropriation or misuse of [ * ] Know-How. [ * ], upon written notice to
[ * ], shall have the first right to initiate and prosecute such legal action at
its own expense and in the name of [ * ], or to control the defense of any
declaratory judgment action relating to [ * ] Patent Rights, [ * ] Know-How, or
[ * ] Patent Rights. [ * ] shall promptly notify [ * ] in writing if it elects
not to exercise such first right and [ * ] shall thereafter have the right to
either initiate and prosecute such action or to control the defense of such
declaratory judgment action in the name of [ * ]. Each Party shall have the
right to be represented by counsel of its own choice.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

16

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(b) In the event that [ * ] elects not to initiate and prosecute an action as
provided in paragraph (a), and [ * ] elects to do so, the costs of any
agreed-upon course of action to terminate infringement of [ * ] Patent Rights or
[ * ] Patent Rights or misappropriation or misuse of [ * ] Know-How, including
without limitation the costs of any legal action commenced or the defense of any
declaratory judgment, shall be [ * ].

(c) For any action to terminate any infringement of [ * ] Patent Rights or [ * ]
Patent Rights or any misappropriation or misuse of [ * ] Know-How, in the event
that [ * ] is unable to initiate or prosecute such action solely in its own
name, [ * ] will join such action voluntarily and will execute and cause its
Affiliates to execute all documents necessary for [ * ] to initiate litigation
to prosecute and maintain such action. In connection with any action, MERCK and
EXELIXIS will cooperate fully and will provide each other with any information
or assistance that either may reasonably request. Each Party shall keep the
other informed of developments in any action or proceeding, including, to the
extent permissible by law, the consultation and approval of any settlement
negotiations and the terms of any offer related thereto. The foregoing
notwithstanding, neither Party shall have the right to settle any patent
infringement litigation under this Section 6.4 without the prior written consent
of the other Party if such settlement would: (i) impose an injunction or other
similar restriction of the other Party; (ii) impose any financial obligations on
the other Party; (iii) materially diminish or adversely affect the scope,
exclusivity or duration of any Patent Rights licensed under this Agreement;
and/or (iv) would constitute an admission of guilt or liability by or on behalf
of the other Party, such consent not to be unreasonably withheld, delayed or
conditioned.

(d) Any recovery obtained by either or both MERCK and EXELIXIS in connection
with or as a result of any action contemplated by this Section 6.4, whether by
settlement or otherwise, shall be shared in order as follows:

 

  (i) the Party which initiated and prosecuted the action shall recoup all of
its costs and expenses incurred in connection with the action;

 

  (ii) the other Party shall then, to the extent possible, recover its costs and
expenses incurred in connection with the action; and

 

  (iii) the amount of any recovery remaining shall then be allocated between the
Parties as follows: (A) [ * ]; and (B) [ * ].

(e) [ * ] shall inform [ * ] of any certification regarding any [ * ] Patent
Rights it has received pursuant to either 21 U.S.C. §§355(b)(2)(A)(iv) or
(j)(2)(A)(vii)(IV) or it successor provisions or any similar provisions in a
country in the Territory other than the United States and shall provide [ * ]
with a copy of such certification within [ * ] of receipt. [ * ] shall inform [
* ] of any certification regarding any [ * ] Patent Rights it has received
pursuant to either 21 U.S.C. §§355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or it
successor provisions or any similar provisions in a country in the Territory
other than the United States and shall provide EXELIXIS with a copy of such
certification within [ * ] of receipt. EXELIXIS’ and MERCK’s rights with respect
to the initiation and prosecution of any legal action as a result of such
certification or any recovery obtained as a result of such legal action shall be
as defined in Sections 6.4(a)-(d) hereof; provided, however, [ * ] shall
exercise its first right to initiate and prosecute any action and shall inform [
* ] of such decision within [ * ] of receipt of the certification, after which
time [ * ] shall have the right to initiate and prosecute such action.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

17

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6.5 Patent Term Restoration

The Parties hereto shall cooperate with each other in obtaining patent term
restoration or supplemental protection certificates or their equivalents in any
country in the Territory where applicable to [ * ] Patent Rights. In the event
that elections with respect to obtaining such patent term restoration are to be
made, [ * ] shall have the right to make the election and [ * ] agrees to abide
by such election, and assist as needed with the filing and Prosecuting of any
such application for patent term restoration or supplemental protection
certificates.

 

7. TERM AND TERMINATION

 

7.1 Term and Expiration

This Agreement shall be effective as of the Effective Date and unless terminated
earlier pursuant to Sections 7.2 or 7.3 below, this Agreement shall continue in
effect until expiration of payment obligations hereunder. Upon expiration of
this Agreement, MERCK shall retain a perpetual, fully-paid, non-exclusive,
non-royalty-bearing license, with the right to sublicense, under the EXELIXIS
Technology to research, develop, make, have made, import, use, offer for sale
and sell Compounds and or Products in the Territory for use in the Field.

 

7.2 Termination at Will

Notwithstanding anything contained herein to the contrary, MERCK shall have the
right to terminate this Agreement at will at any time in its sole discretion by
giving [ * ] advance written notice to EXELIXIS. Not later than [ * ] after the
date of such termination, each Party shall return or cause to be returned to the
other Party all Information in tangible form received from the other Party and
all copies thereof, except that each Party may retain one copy in its
confidential files for records purposes. In the event of termination under this
Section 7.2: (a) each Party shall pay all amounts then due and owing as of the
termination date (within the time period set forth in this Agreement for the
applicable payment type); (b) the licenses granted to MERCK under Article 2
shall terminate; (c) each Party shall [ * ]; (d) MERCK shall [ * ] and [ * ];
(e) [ * ] and [ * ] shall survive until [ * ]; (f) MERCK and its Affiliates,
sublicensees and distributors shall be entitled, during the [ * ] period
immediately following the effective date of termination, to finish any
work-in-progress and to sell any Compounds and or Products remaining in
inventory, in accordance with the terms of this Agreement; (g) in the event that
a clinical trial is being terminated (which termination would occur at MERCK’s
sole discretion), MERCK would be responsible for its own costs of winding down
of any clinical trials of Compounds and/or Products that were ongoing as of the
effective date of the termination; and (h) except for the surviving provisions
set forth in this Section 7.2 and in Section 7.4 hereof, the rights and
obligations of the Parties hereunder shall terminate as of the date of such
termination.

 

7.3 Termination for Cause

 

7.3.1 Cause for Termination This Agreement may be terminated at any time during
the term of this Agreement:

(a) upon written notice by either Party if the other Party is in breach of its
material obligations hereunder by causes and reasons within its control and has
not cured such breach within [ * ] after notice requesting cure of the breach.
If such breach is not cured within such period, this Agreement shall terminate
immediately at the end of such period on written notice of the termination from
the non-breaching Party, or where the breach is not capable of being cured in [
* ] if the breaching Party fails to (i) initiate actions during such [ * ]
period that are reasonably anticipated to cure the

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

18

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default within a reasonable period (not to exceed [ * ]) and (ii) thereafter use
continuing diligent efforts to cure the default, then the non-breaching Party
may immediately terminate this Agreement at any time by providing written notice
of the termination; provided, however, in the event of a good faith dispute with
respect to the existence of a material breach, the [ * ] cure period shall be
tolled until such time as the dispute is resolved pursuant to Section 9.6
hereof; or

(b) in the event that MERCK or its Affiliate challenges the validity of any
patent application or patent within the EXELIXIS Patent Rights, EXELIXIS may, in
its sole discretion, terminate MERCK’s licenses under this Agreement to such
patent application or patent; and in the event that EXELIXIS or its Affiliate
challenges the validity of any patent application or patent within the MERCK
Patent Rights, [ * ] shall [ * ] under this Agreement with respect to such
patent application (if and when a patent issues thereon) or patent.

(c) by either Party upon the filing or institution of bankruptcy,
reorganization, liquidation or receivership proceedings, or upon an assignment
of a substantial portion of the assets for the benefit of creditors by the other
Party; provided, however, in the case of any involuntary bankruptcy proceeding
such right to terminate shall only become effective if the Party consents to the
involuntary bankruptcy or such proceeding is not dismissed within [ * ] after
the filing thereof.

 

7.3.2 Effect of Termination for Cause on License

(a) If MERCK terminates this Agreement under Section 7.3.1(a) or (b) or (c),
MRECK’s license pursuant to Article 2 shall become [ * ] (subject to [ * ]
reduction in MERCK’s payment obligations to EXELIXIS under Article 4), and
EXELIXIS shall, within thirty (30) days after such termination, return or cause
to be returned to MERCK all Information provided by MERCK in tangible form.

(b) If EXELIXIS terminates this Agreement under Section 7.3.1(a) or (b) or (c),
MERCK’s licenses pursuant to Article 2 shall terminate as of such termination
date, and MERCK shall, within [ * ] after such termination, return or cause to
be returned to EXELIXIS Information in tangible form and substances or
compositions delivered or provided by EXELIXIS. Furthermore, with respect to
each Joint Product that: (i) [ * ]; (ii) [ * ] and (iii) [ * ] (each such Joint
Product, a “Reverted Product”), MERCK shall, and hereby does, grant to EXELIXIS
a worldwide, perpetual, irrevocable, fully-paid, exclusive license, with the
right to grant sublicenses, under the Joint Technology to clinically develop,
make, use, sell, offer for sale and import each such Reverted Product; provided,
however, that (iv) that [ * ]; and (v) EXELIXIS shall Prosecute the Joint Patent
Rights with respect to such Joint Technology and shall be responsible for
payment of the costs and expenses related to such Prosecution. At EXELIXIS’ sole
discretion, MERCK shall provide (or shall have provided) to EXELIXIS: (v) all
Information reasonably necessary for the development and commercialization of
the Reverted Products; (vi) all regulatory filings (including any Regulatory
Approvals, drug dossiers, and drug master files) that relate to each such
Reverted Product, including transferring ownership of such regulatory filings;
(vii) trademark rights Controlled by MERCK or its Related Party, that relate to
each such Reverted Product to the extent that such trademarks have been approved
by a Regulatory Agency to be used in connection with the Reverted Product, but
excluding any rights to the names, trademarks, logos and the like of MERCK
and/or its Related Parties; and (viii) supplies of each such Reverted Product,
that are existing and in the Control of MERCK or its Related Party and are
reasonably available to MERCK; provide that [ * ] for [ * ] and [ * ]. MERCK
shall take such other actions and execute such other documents as may be
necessary to effect the assignment of rights hereunder to EXELIXIS, and any such
actions or assignments shall be at the reasonable expense of MERCK, except as
otherwise provided above. If EXELIXIS does not request that any items described
in subsections 7.3.2(b)(v) – (viii) be assigned to EXELIXIS within [ * ] of the
effective date of termination, then MERCK shall have no further obligation to
EXELIXIS to provide any such items.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

19

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(c) Upon termination of this Agreement by EXELIXIS pursuant to Section 7.3.1(a)
and (b), MERCK and its Affiliates, sublicensees and distributors shall be
entitled, during the [ * ] period immediately following the effective date of
termination, to finish any work-in-progress and to sell any MERCK Royalty
Compound, EXELIXIS Compound, MERCK Royalty Product and/or EXELIXIS Products
remaining in inventory, in accordance with the terms of this Agreement.

(d) If this Agreement is terminated by MERCK pursuant to Section 7.3.1(b) due to
rejection of this Agreement by or on behalf of EXELIXIS under Section 365 of the
United States Bankruptcy Code (the “Code”), all licenses and rights to licenses
granted under or pursuant to this Agreement by EXELIXIS to MERCK are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the Code, licenses
of rights to “intellectual property” as defined under Section 101(35A) of the
Code. The Parties agree that MERCK, as a licensee of such rights under this
Agreement, shall retain and may fully exercise all of its rights and elections
under the Code, and that upon commencement of a bankruptcy proceeding by or
against EXELIXIS under the Code, MERCK shall be entitled to a complete duplicate
of or complete access to (as MERCK deems appropriate), any such intellectual
property and all embodiments of such intellectual property. Such intellectual
property and all embodiments thereof shall be promptly delivered to MERCK:
(i) upon any such commencement of a bankruptcy proceeding upon written request
therefore by MERCK, unless EXELIXIS elects to continue to perform all of its
obligations under this Agreement; or (ii) if not delivered under (i) above, upon
the rejection of this Agreement by or on behalf of EXELIXIS upon written request
therefore by MERCK. The foregoing provisions of this Section 7.3.2(c) are
without prejudice to any rights MERCK may have arising under the Code or other
applicable law.

 

7.4 Effect of Expiration or Termination; Survival

Expiration or termination of the Agreement shall not relieve the Parties of any
obligation accruing prior to such expiration or termination. Any expiration or
termination of this Agreement shall be without prejudice to the rights of either
Party against the other accrued or accruing under this Agreement prior to
expiration or termination, including without limitation the obligation to pay
royalties on sales prior to such expiration or termination. The provisions of
Article 3 shall survive the expiration or termination of the Agreement and shall
continue in effect for [ * ]. In addition, the provisions of Articles [ * ], and
Sections [ * ], Sections [ * ] shall survive any expiration or termination of
this Agreement.

 

8. INDEMNITY

 

8.1 Indemnification by MERCK

MERCK shall indemnify, defend and hold EXELIXIS, its Affiliates and their
respective agents, employees, officers and directors (each a “EXELIXIS
Indemnitee”) harmless from and against any and all judgments, liabilities,
expenses, costs and/or losses, including reasonable legal expense and attorneys’
fees (collectively, “Losses”) to which any EXELIXIS Indemnitee may become
subject as a result of any claim, suit, demand, action or other proceeding by
any Third Party against an EXELIXIS Indemnitee to the extent such Losses arise
directly or indirectly out of (a) any breach by MERCK of any of its material
obligations and/or its representations and warranties pursuant to this
Agreement; (b) the research, development, manufacture, use, promotion,
marketing, sale or other disposition of Compounds and Products by MERCK or its
Related Parties; (c) the negligence, gross negligence or willful misconduct of
any of the MERCK Indemnitees (as defined in

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

20

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Section 8.2); except, in each case, to the extent such Losses result from the
material breach by EXELIXIS or its Affiliates of any covenant, representation,
warranty or other agreement made by EXELIXIS in this Agreement or the
negligence, gross negligence or willful misconduct of any EXELIXIS Indemnitee.

 

8.2 Indemnification by EXELIXIS

EXELIXIS shall indemnify, defend and hold MERCK, its Related Parties and their
respective agents, employees, officers and directors (each a “MERCK Indemnitee”)
harmless from and against any and all Losses, to which any MERCK Indemnitee may
become subject as a result of any claim, demand, action or other proceeding by
any Third Party against a MERCK Indemnitee to the extent such Losses arise
directly or indirectly out of (a) any breach by EXELIXIS of any of its material
obligations and/or its representations and warranties pursuant to this
Agreement; (b) any of EXELIXIS’ representations and warranties set forth in the
Agreement being untrue in any material respect when made; (c) the negligence,
gross negligence or willful misconduct of any of the EXELIXIS Indemnitees; or
(d) the development, manufacture, use, promotion, marketing, sale or other
disposition of Reverted Products by EXELIXIS or its Affiliates, licensees or
sublicensee; except, in each case, to the extent such Losses result from the
material breach by MERCK, its Related Parties or subcontractors of any agreement
made by MERCK in this Agreement or the negligence, gross negligence or willful
misconduct of any MERCK Indemnitee.

 

8.3 Notice of Indemnification Obligation and Defense

Any Party entitled to indemnification under Section 8.1 or 8.2 shall give notice
to the indemnifying Party of any Losses that may be subject to indemnification,
promptly after learning of such Losses, but the omission to so notify the
indemnifying Party promptly will not relieve the indemnifying Party from any
liability under Section 8.1 or 8.2 except to the extent that the indemnifying
Party shall have been prejudiced as a result of the failure or delay in
providing such notice. The indemnifying Party shall assume the defense of such
Losses with counsel reasonably satisfactory to the indemnified Party. If such
defense is assumed by the indemnifying Party, the indemnifying Party will not be
subject to any liability for any compromise or settlement of such Losses made by
the indemnified Party without its consent (but such consent will not be
unreasonably withheld, delayed or conditioned), and will not be obligated to pay
the fees and expenses of any separate counsel retained by the indemnified Party
with respect to such Losses. The indemnified Party shall provide the
indemnifying Party with all information in its possession and all assistance
reasonably necessary to enable the indemnifying Party to carry on the defense of
any such Losses. The foregoing notwithstanding, the indemnifying Party may not
enter into any compromise or settlement of such Losses without the prior written
consent of the indemnified Party if such compromise or settlement would:
(i) impose an injunction or other similar restriction of the indemnified Party;
(ii) impose any financial obligations on the indemnified Party; (iii) materially
diminish or adversely affect the scope, exclusivity or duration of any Patent
Rights licensed under this Agreement; and/or (iv) would constitute an admission
of guilt or liability by or on behalf of the indemnified Party.

 

9. MISCELLANEOUS

 

9.1 Force Majeure

Neither Party shall be held liable to the other Party nor be deemed to have
defaulted under or breached the Agreement for failure or delay in performing any
obligation under the Agreement when such failure or delay is caused by or
results from causes beyond the reasonable control of the affected Party
including, but not limited to, embargoes, war, acts of war (whether war be
declared or not), insurrections, riots, civil commotions, strikes, lockouts or
other labor disturbances, fire, floods, or other acts of God, or acts, omissions
or delays in acting by any governmental authority or the other Party. The
foregoing sentence shall not apply to a Party’s

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

21

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obligation to pay the other Party under this Agreement when such payment
obligation arose prior to the occurrence of such force majeure event and where
such force majeure event does not prevent the method of making such payment. The
affected Party shall notify the other Party of such force majeure circumstances
as soon as reasonably practical, and shall promptly undertake all reasonable
efforts necessary to cure such force majeure circumstances.

 

9.2 Assignment; Change of Control

Except as provided in this Section 9.2, this Agreement may not be assigned or
otherwise transferred, nor may any right or obligation hereunder (other than
Exelixis’ right to receive payments under Article 4) be assigned or transferred,
by either Party without the consent of the other Party; provided, however, that
MERCK may, without such consent, assign the Agreement and its rights and
obligations hereunder to an Affiliate or in connection with a Change of Control.
EXELIXIS may, without MERCK’s consent, assign this Agreement and its rights and
obligations hereunder to a member of the Change of Control Group in connection
with an EXELIXIS Change of Control subject to the following;

(a) EXELIXIS shall provide written notice to MERCK at least [ * ] prior to the
completion of a Change of Control, subject to any confidentiality obligations of
EXELIXIS then in effect (but, if such confidentiality obligations prevent
EXELIXIS from providing such written notice, EXELIXIS shall so notify MERCK
within [ * ] after completion of such Change of Control;

(b) the Change of Control Group in connection with the EXELIXIS Change of
Control shall agree in writing with MERCK, within [ * ] from the Change of
Control event, that [ * ] and that [ * ];

(c) in the event [ * ], [ * ] shall [ * ] and [ * ] and [ * ] with respect to
the [ * ] and [ * ] of [ * ] and [ * ] and [ * ]; and

(d) [ * ] may, in its discretion, [ * ] with respect the [ * ] of [ * ] under
this Agreement, including [ * ] and [ * ] to [ * ] that [ * ] or [ * ], and [ *
] shall [ * ] and [ * ].

Any attempted assignment not in accordance with this Section 9.2 shall be null
and void. Any permitted assignee shall assume all assigned obligations of its
assignor under the Agreement. The terms and conditions of this Agreement shall
be binding upon and shall inure to the benefit of the Parties and their
respective successors and permitted assigns.

 

9.3 Severability

If any one or more of the provisions contained in this Agreement is held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby, unless the absence of the invalidated
provision(s) adversely affects the substantive rights of the Parties. The
Parties shall in such an instance use their best efforts to replace the invalid,
illegal or unenforceable provision(s) with valid, legal and enforceable
provision(s) which, insofar as practical, implement the purposes of this
Agreement.

 

9.4 Notices

All notices which are required or permitted hereunder shall be in writing and
sufficient if delivered personally, sent by facsimile or a pdf document sent by
electronic mail (and promptly confirmed by personal

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

22

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delivery, registered or certified mail or overnight courier), sent by
nationally-recognized overnight courier or sent by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:

 

   if to EXELIXIS, to:    Exelixis, Inc.       210 East Grand Ave.       So. San
Francisco, CA 94080       Attention: EVP and General Counsel       Facsimile
No.: (650) 837-7179            and    Cooley LLP       3175 Hanover Street      
Palo Alto, CA 94304       Attention: Marya A. Postner, Esq.       Facsimile No.:
(650) 849-7400    if to MERCK, to:    Merck Sharp & Dohme Corp.       One Merck
Drive       P.O. Box 100, WS3A-65       Whitehouse Station, NJ 08889-0100      
Attention: Office of Secretary       Facsimile No.: (908) 735-1246   
        and    Merck Sharp & Dohme Corp.       One Merck Drive       Attention:
Chief Licensing Officer       P.O. Box 100, WS2A-30       Whitehouse Station, NJ
08889-0100       Facsimile: (908) 735-1214

or to such other address as the Party to whom notice is to be given may have
furnished to the other Party in writing in accordance herewith. Any such notice
shall be deemed to have been given: (a) when delivered if personally delivered
or sent by facsimile or pdf document on a business day; (b) on the business day
after dispatch if sent by nationally-recognized overnight courier; and/or (c) on
the fifth business day following the date of mailing if sent by mail.

 

9.5 Applicable Law

The Agreement shall be governed by and construed in accordance with the laws of
[ * ] and the patent laws of the United States without reference to any rules of
conflict of laws. The United Nations Convention on the Sale of Goods shall not
apply.

 

9.6 Dispute Resolution

 

9.6.1

Except for any “Excluded Claim” (defined in Section 9.6.6 below), the Parties
shall negotiate in good faith and use reasonable efforts to settle any dispute,
controversy or claim arising from or related to this Agreement, or the breach
thereof, as follows. A Party shall notify the other Party in writing of such
dispute, controversy or claim, and the Parties shall meet within [ * ] of
receipt of such notice. If

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

23

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the Parties do not fully settle within [ * ] of such meeting, and a Party wishes
to pursue the matter, each such dispute, controversy or claim that is not an
Excluded Claim shall be finally resolved by binding arbitration in accordance
with the Commercial Arbitration Rules and Supplementary Procedures for Large
Complex Disputes of the American Arbitration Association (“AAA”), and judgment
on the arbitration award may be entered in any court having jurisdiction
thereof.

 

9.6.2 The arbitration shall be conducted by a panel of three (3) persons
experienced in the pharmaceutical business (provided that such arbitrators are
not required to be selected from AAA’s list of arbitrators) as follows:
(a) within [ * ] after initiation of arbitration, each Party shall select one
(1) person to act as arbitrator, and (b) the two (2) Party-selected arbitrators
shall select a third arbitrator within [ * ] of their appointment. If the
arbitrators selected by the Parties are unable or fail to agree upon the third
arbitrator, the third arbitrator shall be appointed promptly by the AAA. The
place of arbitration shall be [ * ], and all proceedings and communications
shall be in English.

 

9.6.3 Either Party may apply to the arbitrators for any applicable interim
injunctive relief until the arbitration award is rendered or the controversy is
otherwise resolved. Either Party also may, without waiving any remedy under this
Agreement, seek from any court having jurisdiction any injunctive or provisional
relief necessary to protect the rights or property of that Party pending the
arbitration award. The arbitrators shall have no authority to award punitive or
any other type of damages not measured by a Party’s compensatory damages. Each
Party shall bear its own costs and expenses and attorneys’ fees and an equal
share of the arbitrators’ and any administrative fees of arbitration.

 

9.6.4 Except to the extent necessary to confirm an award, or as may be required
by applicable law, rule or regulation, neither a Party nor an arbitrator may
disclose the existence, content, or results of an arbitration without the prior
written consent of both Parties. In no event shall an arbitration be initiated
after the date when commencement of a legal or equitable proceeding based on the
dispute, controversy or claim would be barred by the applicable [ * ] statute of
limitations.

 

9.6.5 The Parties agree that, in the event of a dispute over the nature or
quality of performance under this Agreement, neither Party may terminate the
Agreement until final resolution of the dispute through arbitration or other
judicial determination. The Parties further agree that any payments made
pursuant to this Agreement pending resolution of the dispute shall be refunded
if an arbitrator or court determines that such payments are not due.

 

9.6.6 As used in this Section 9.6, the term “Excluded Claim” shall mean a
dispute, controversy or claim that concerns: (a) the validity or infringement of
a patent, trademark or copyright; (b) any antitrust, anti-monopoly or
competition law or regulation, whether or not statutory; or (c) the need to seek
preliminary or injunctive measures or other equitable relief (e.g., in the event
of a potential or actual breach of the confidentiality and non-use provisions in
Article 3). An Excluded Claim need not be resolved through the procedure
described in Sections 9.6.1 – 9.6.5 and may be immediately brought in a court of
competent jurisdiction.

 

9.7 Entire Agreement; Amendments

The Agreement contains the entire understanding of the Parties with respect to
the licenses granted hereunder. All express or implied agreements and
understandings, either oral or written, with regard to the licenses granted
hereunder are superseded by the terms of this Agreement. The Agreement may be
amended, or any term hereof modified, only by a written instrument duly executed
by authorized representatives of both Parties hereto.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

24

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9.8 Headings

The captions to the several Articles and Sections hereof are not a part of the
Agreement, but are merely for convenience to assist in locating and reading the
several Articles and Sections hereof.

 

9.9 Independent Contractors

It is expressly agreed that EXELIXIS and MERCK shall be independent contractors
and that the relationship between the two Parties shall not constitute a
partnership, joint venture or agency. Neither EXELIXIS nor MERCK shall have the
authority to make any statements, representations or commitments of any kind, or
to take any action, which shall be binding on the other Party, without the prior
written consent of the other Party.

 

9.10 Waiver

The waiver by either Party hereto of any right hereunder, or the failure of the
other Party to perform, or a breach by the other Party, shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by such
other Party whether of a similar nature or otherwise. Any waiver by a Party of
any right under this Agreement must be in writing, must specify the right that
is waived and the time period of such waiver, and must be signed by the waiving
Party.

 

9.11 Cumulative Remedies

No remedy referred to in this Agreement is intended to be exclusive, but each
shall be cumulative and in addition to any other remedy referred to in this
Agreement or otherwise available under law.

 

9.12 Waiver of Rule of Construction

Each Party has had the opportunity to consult with counsel in connection with
the review, drafting and negotiation of this Agreement. Accordingly, the rule of
construction that any ambiguity in this Agreement shall be construed against the
drafting Party shall not apply.

 

9.13 Certain Conventions

Any reference in this Agreement to an Article, Section, subsection, paragraph,
clause, Schedule or Exhibit shall be deemed to be a reference to an Article,
Section, subsection, paragraph, clause, Schedule or Exhibit, of or to, as the
case may be, this Agreement, unless otherwise indicated. Unless the context of
this Agreement otherwise requires: (a) words of any gender include each other
gender, (b) words such as “herein”, “hereof”, and “hereunder” refer to this
Agreement as a whole and not merely to the particular provision in which such
words appear, and (c) words using the singular shall include the plural, and
vice versa.

 

9.14 Business Day Requirements

In the event that any notice or other action or omission is required to be taken
by a Party under this Agreement on a day that is not a business day then such
notice or other action or omission shall be deemed to be required to be taken on
the next occurring business day.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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9.15 Counterparts

The Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.

 

MERCK SHARP & DOHME CORP.    EXELIXIS, INC. BY:   

/s/ Barbara Yanni

   BY:   

/s/ Michael M. Morrissey

   Barbara Yanni       Michael M. Morrissey, Ph.D TITLE:    Vice President and
Chief Licensing Officer    TITLE:    President and CEO DATE:    20 Dec 2011   
DATE:    12-19-2011

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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SCHEDULES

SCHEDULE A    EXELIXIS PATENT RIGHTS

[ * ]

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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SCHEDULE B    EXELIXIS PI3Kdelta SPECIFIC COMPOUNDS

[ * ]

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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SCHEDULE C    EXELIXIS COMPOUNDS

[ * ]

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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SCHEDULE D    EXELIXIS KNOW-HOW

[ * ]

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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SCHEDULE E    EXELIXIS RELATED INACTIVE COMPOUNDS

[ * ]

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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SCHEDULE F    PRESS RELEASE

 

LOGO [g246328img001.jpg]

Contact:

Charles Butler

Vice President,

Investor Relations and

Corporate Communications

Exelixis, Inc.

(650) 837-7277

cbutler@exelixis.com

Exelixis Licenses PI3K-Delta Program to Merck

Exelixis to receive $12M upfront payment and be eligible for potential
development, regulatory and commercial milestones, plus royalties

South San Francisco, Calif. – December XX, 2011 – Exelixis, Inc. (NASDAQ:EXEL)
today announced that it has granted to Merck, known as MSD outside of the United
States and Canada, an exclusive worldwide license to its PI3K-delta research and
development program, including XL499, the company’s most advanced preclinical
PI3K-delta inhibitor and other related compounds. Under the agreement, Merck
will have a worldwide exclusive license and have sole responsibility to
research, develop, and commercialize compounds originating from the program.

Merck will make an upfront payment of $12 million to Exelixis and Exelixis will
be eligible for potential development and regulatory milestone payments for
multiple indications of up to $239 million. Exelixis will also be eligible for
potential combined sales performance milestones and royalties on net-sales of
products emerging from the agreement. Milestones and royalties are payable on
compounds emerging from Exelixis’ PI3K-delta program or from certain compounds
that arise from Merck’s internal discovery efforts targeting PI3K-delta during a
certain period.

“PI3K-delta is an interesting target with potential utility in a number of
therapeutic areas, including inflammation and oncology, said Michael M.
Morrissey, president and chief executive officer of Exelixis. “Our PI3K-delta
program builds on our prior interest in the PI3K family, which led to the
advancement of pan-PI3K inhibitors into clinical development for cancer. Merck’s
global presence and significant resources make it the ideal organization to
carry the PI3K-delta program forward. At the same time, this agreement provides
Exelixis with resources for the continued development and potential
commercialization of our lead compound, cabozantinib, which is in late-stage
development for medullary thyroid and prostate cancers.”

“Exelixis has established a strong reputation for innovation in the development
of targeted kinase inhibitors,” said Don Nicholson, Ph.D., Vice President and
Head of Worldwide Discovery, Respiratory and Immunology Franchise, Merck
Research Laboratories. “Collaborations like this are an important part of our
strategy as we seek new ways to address unmet needs in inflammatory disease and
oncology.”

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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PI3K-delta is a member of the Class 1 family of phosphoinositide-3 kinases and
is predominantly expressed in cells of the immune system. Activation of
PI3K-delta occurs in response to a variety of immune cell stimuli, and
inappropriate PI3K delta activation is thought to contribute to multiple
inflammatory and allergic disorders, including rheumatoid arthritis and allergic
asthma. Selectively targeting PI3K-delta has also shown potential in the
treatment of certain lymphomas.

About Exelixis

Exelixis, Inc. is a biotechnology company committed to developing small molecule
therapeutics for the treatment of cancer. Exelixis is focusing its proprietary
resources and development efforts exclusively on cabozantinib, its most advanced
solely-owned product candidate, in order to maximize the therapeutic and
commercial potential of this compound. Exelixis believes cabozantinib has the
potential to be a high-quality, differentiated pharmaceutical product that can
make a meaningful difference in the lives of patients. Exelixis has also
established a portfolio of other novel compounds that it believes have the
potential to address serious unmet medical needs. For more information, please
visit the company’s web site at www.exelixis.com.

Forward-Looking Statements

This press release contains forward-looking statements, including, without
limitation, statements related to: the payment to Exelixis of an upfront
payment; Exelixis’ potential receipt of development, regulatory and sales
milestones, as well as royalties on sales of products; the clinical, therapeutic
and commercial potential of the PI3K-delta program; the belief that Merck is the
ideal organization to carry the PI3K-delta program forward; the belief that the
agreement will provide resources for the continued development and potential
commercialization of cabozantinib; and the clinical, therapeutic and commercial
potential of cabozantinib. Words such as “will,” “eligible,” “potential,”
“emerging,” “arise,” “provides,” “continued,” and similar expressions are
intended to identify forward-looking statements. These forward-looking
statements are based upon Exelixis’ current plans, assumptions, beliefs and
expectations. Forward-looking statements involve risks and uncertainties.
Exelixis’ actual results and the timing of events could differ materially from
those anticipated in such forward-looking statements as a result of these risks
and uncertainties, which include, without limitation: risks related to Exelixis’
dependence on the activities of Merck under the described agreement, the
potential failure of the PI3K-delta program or cabozantinib to demonstrate
safety and efficacy in clinical testing; the therapeutic and commercial value of
the PI3K-delta program and cabozantinib; Exelixis’ ability to conduct clinical
trials of cabozantinib sufficient to achieve a positive completion; the
sufficiency of Exelixis’ capital and other resources; uncertain timing and level
of expenses associated with the development of cabozantinib; the uncertainty of
the FDA approval process; market competition; and changes in economic and
business conditions. These and other risk factors are discussed under “Risk
Factors” and elsewhere in Exelixis’ quarterly report on Form 10-Q for the
quarter ended September 30, 2011 and Exelixis’ other filings with the Securities
and Exchange Commission. Exelixis expressly disclaims any duty, obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in Exelixis’ expectations with
regard thereto or any change in events, conditions or circumstances on which any
such statements are based.

# # #

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

34