Exhibit 10.3

 
[***] = 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.

LICENSE, DEVELOPMENT AND COOPERATION AGREEMENT

VILAZODONE (EMD 68843)

by and between:

Merck KGaA

and:

Genaissance Pharmaceuticals, Inc.

Effective as of: September 22, 2004

 
 
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TABLE OF CONTENTS:

PREAMBLE
 
1.
DEFINITIONS
   
2.
LICENSES
   
3.
RESEARCH AND DEVELOPMENT
   
4.
DILIGENCE AND CAPABILITIES, PLANS AND REPORTING
   
5.
MARKETING AND OPTIONS TO CO-COMMERCIALIZE
   
6.
LICENSE GRANT TO MERCK KGAA
   
7.
PAYMENTS AND ROYALTIES
   
8.
SUPPLY OF VILAZODONE AND PRODUCTION OF PRODUCT, THERANOSTIC PRODUCTS and
DIAGNOSTIC PRODUCTS
   
9.
GOVERNMENTAL APPROVALS / REGULATORY AFFAIRS.
   
10.
JOINT COMMITTEE
   
11.
INTELLECTUAL PROPERTY
   
12.
PATENT PROSECUTION, INFRINGEMENTS AND LITIGATION
   
13.
RIGHT OF FIRST NEGOTIATION
   
14.
PUBLICATIONS
   
15.
CONFIDENTIALITY
   
16.
TERM
   
17.
TERMINATION
   
18.
OBLIGATIONS ON TERMINATION
   
19.
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS
   
20.
LIMITATION OF LIABILITY
   
21.
INDEMNIFICATION AND INSURANCE
   
22.
RELATIONSHIP
   
23.
ASSIGNMENT
   
24.
ENTIRE AGREEMENT
   
25.
SEVERABILITY
   
26.
WAIVER AND AMENDMENT
   
27.
COUNTERPARTS
   
28.
FORCE MAJEURE
   
29.
DISPUTE RESOLUTION
   
30.
ATTORNEYS’ FEES
   
31.
Governing Law
   
32.
NOTICES
   
LIST OF SCHEDULES
   
Schedule 1
   
Schedule 2
   
Schedule 3
   
Schedule 3A
   
Schedule 3B
   
Schedule 4
   
Schedule 6
   
Schedule 7
   
Schedule 8
   
Schedule 9
   

 
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LICENSE, DEVELOPMENT AND COOPERATION AGREEMENT

VILAZODONE (EMD 68843)

Between
Merck KGaA
 
Frankfurter Strasse 250
 
64293 Darmstadt
 
Germany
     
(hereinafter referred to as “MERCK KGAA”)
   
and
Genaissance Pharmaceuticals, Inc.
 
Five Science Park
 
New Haven, CT 06511
 
USA
     
(hereinafter referred to as “GENAISSANCE”)
     
(GENAISSANCE and MERCK KGAA are also referred to herein as the “PARTIES” or a
“PARTY”)

PREAMBLE
 
Whereas, MERCK KGAA and GlaxoSmithKline (GSK) have carried out extensive
preclinical research and development work and certain clinical studies on
VILAZODONE defined below.
 
Whereas, MERCK KGAA holds the MERCK KGAA PATENTS defined herein in certain
countries.
 
Whereas, GENAISSANCE has developed a combination of pharmacogenetics
technologies and expertise, called HAP™ Technology, which includes a proprietary
database (the HAP™ Database) of gene specific SNPs and haplotypes (HAP™ Markers)
for pharmaceutically relevant genes and expertise in designing and conducting
pharmacogenetic studies.
 

 
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Whereas, GENAISSANCE desires to develop, test, certify for marketing, and
commercialize throughout the world one or more human therapeutic products
containing VILAZODONE as described herein;
 
Whereas, GENAISSANCE is interested to obtain a licence under the MERCK KGAA
PATENT RIGHTS and MERCK KGAA KNOW-HOW for the development and commercialization
of PRODUCT and to use its HAP™ Technology to aid in the development,
registration, and/or marketing of VILAZODONE for depression and other
INDICATIONS;
 
Whereas, MERCK KGAA has substantial know-how and expertise relating to
VILAZODONE and its manufacture and under certain conditions will grant
GENAISSANCE an option to manufacture VILAZODONE for developmental and commercial
purposes; and
 
Whereas, MERCK KGAA desires to retain the option to participate in the
commercial promotion of PRODUCTS containing VILAZODONE in certain countries.
 
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
 
1.           DEFINITIONS
 
For the purposes of this AGREEMENT, the following words and phrases, whether
used in the singular or plural, shall have the following meanings:
 
1.1
“AFFILIATE” shall mean any corporation, partnership or other entity, whether de
jure or de facto, that, directly or indirectly, owns or controls, is owned or
controlled by, or is under common ownership or control with, a PARTY, where
ownership or control means the ownership or voting control of at least fifty per
cent (50%) of the outstanding voting stock or other equity interests of a
corporation, partnership or entity (or such lesser percentage that is in a
particular jurisdiction the maximum percentage allowed to be owned by a foreign
owner).

 
1.2
“AGREEMENT” shall mean this License, Development and Cooperation Agreement
between GENAISSANCE and MERCK KGAA and all Schedules and Exhibits hereto.

 
1.3
“CHANGE OF CONTROL” as to a PARTY shall mean that: (i) any person or entity
acquires, directly or indirectly, the beneficial ownership of any voting
security of such

 

 
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PARTY or the percentage ownership of a person or entity in the voting securities
of such PARTY is increased through stock redemption, cancellation or other
recapitalization, and immediately after such acquisition or increase such person
or entity is, directly or indirectly, the beneficial owner of voting securities
representing fifty percent (50%) or more of the total voting power of the
then-outstanding voting securities of such PARTY; (ii) the stockholders or
equity holders of such PARTY shall approve a merger, consolidation,
recapitalization, or reorganization of such PARTY, a reverse stock split of
outstanding voting securities (or consummation of any such transaction if
stockholder or equity holder approval is not obtained), other than any such
transaction which would result in stockholders or equity holders of such PARTY
immediately prior to such transaction owning at least 50% of the outstanding
securities of the surviving entity in such transaction immediately following
such transaction, with the voting power of each such continuing holder relative
to other such continuing holders not substantially altered in the transaction;
or (iii) the stockholders or equity holders of such PARTY shall approve a plan
of complete liquidation of the PARTY or an agreement for the sale or disposition
by the PARTY of all or substantially all of that portion of the PARTY’s assets
that bears on or is required for performance under this AGREEMENT.
 
1.4
“CO-COMMERCIALIZE” or CO-COMMERCIALIZATION” shall mean (a) co-promotion meaning
that each co-promoting PARTY promotes sales of the same product under the same
trademark and revenues are shared based on the relative contributions of both
PARTIES,  (b) if the co-promotion activities described in (a) are commercially
impractical or illegal in a particular country, or if the PARTIES so agree, then
CO-COMMERCIALIZATION shall mean co-marketing, meaning that each co-marketing
PARTY performs marketing of the same product under different trademarks for its
own account, (c) if the PARTIES so agree, MERCK KGAA marketing a PRODUCT alone
on a country-by-country basis, or (d) any other joint promotion, or marketing
arrangement with respect to a PRODUCT, and (e) if MERCK KGAA elects to
CO-COMMERCIALIZE pursuant to Section 5.3.1, co-development whereby the PARTIES
share in development costs, whether by funding or by sharing in development
activities.

 
1.5
“CO-COMMERCIALIZATION AGREEMENT” means any agreement entered into between the
PARTIES for CO-COMMERCIALIZATION.

 

 
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1.6
“COMMERCIALLY REASONABLE EFFORTS” means that effort customarily exerted by a
PARTY on a substantially continuous basis under similar circumstances to achieve
its objectives with respect to its own products of similar scientific merit,
stage of development and commercial potential, taking into account, by example
and without limitation, such factors as intellectual property position, the cost
of development, regulatory risk, safety and efficacy, reimbursement factors,
parallel importation considerations, competitiveness of alternative products in
the marketplace, pricing, product life cycle and cost of sales and marketing,
and other relevant factors.

 
1.7
“DERIVATIVE” shall mean any compound, other than VILAZODONE, claimed under the
MERCK KGAA PATENTS existing as of the EFFECTIVE DATE.

 
1.8
“DEVELOPMENT PLAN” shall mean the detailed pre-clinical and clinical plans
describing developmental activities intended to gain GOVERNMENTAL APPROVAL for
the production, marketing and sale of PRODUCT(S), including the steps
GENAISSANCE will take and the resources it will devote to the development and
scale-up of the production and packaging of VILAZODONE and PRODUCTS from
VILAZODONE, both for clinical uses and for commercial supplies. An initial
DEVELOPMENT PLAN for the initial INDICATION is attached hereto as Schedule 2.

 
1.9
“DIAGNOSTIC PRODUCT” SHALL MEAN ANY PRODUCT, SERVICE OR TEST (A) THAT IS BASED
UPON GENETIC MARKERS COMPRISING THE RESULTING IP AND (B) THAT IS INTENDED FOR
THE USE IN DIAGNOSING THE PRESENCE OF, OR SUSCEPTIBILITY FOR, ANY DISEASE OR
CONDITION IN HUMANS, OTHER THAN A THERANOSTIC PRODUCT.

 
1.10
“DISCOVERY STUDY” shall mean all retrospective and prospective studies, as set
forth in the DEVELOPMENT PLAN for the initial INDICATION, in which an objective
is to discover or validate correlations between genetic markers for candidate
genes and defined clinical phenotypes related to response to VILAZODONE, whereby
(a) if a second prospective DISCOVERY STUDY, which is a well-designed,
adequately powered, placebo-controlled study, confirms a correlation between any
genetic markers and a response to VILAZODONE in a sub-group of patients or b) if
a prospective DISCOVERY STUDY succeeds in showing formal proof of efficacy of
VILAZODONE

 

 
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in a general population without any correlation between such genetic markers for
such INDICATION, and GENAISSANCE decides to conduct a PHASE II or PHASE III
CLINICAL TRIAL, then this prospective DISCOVERY STUDY shall be considered a
PHASE II CLINICAL TRIAL.
 
1.11
“EFFECTIVE DATE” shall mean September 22nd, 2004.

 
1.12
“EMEA” shall mean the European Agency for the Evaluation of Medicinal Products.

 
1.13
“EU” shall mean in the aggregate those countries that are at the EFFECTIVE DATE
members of the European Union.

 
1.14
“EURO” shall mean the European currency Euro.

 
1.15
“EXTENSION” shall mean any rule, process or policy whereby either the duration
of any patent may be extended or the expiration thereof may be delayed, and/or
any form of governmentally-recognized marketing, data or regulatory exclusivity
that may be obtained or continued for a PRODUCT, together with the result of
pursuing or applying such rule, process or policy, including Supplementary
Protection Certificates, data package exclusivity and other patent term
extensions (including those available under the Hatch Waxman Act (United States
Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No.
98-417) and any amendments thereto, patent term adjustments under 35 USC § 154,
and extensions under 35 USC § 156), orphan drug designations, and marketing
exclusivity rights based on pediatric testing or applications.

 
1.16
“FDA” shall mean the Food and Drug Administration of the US.

 
1.17
“FIRST CLINICAL TRIAL” shall mean the initiation of a) the first prospective
clinical trial of VILAZODONE that is started after the initiation of the final
DISCOVERY STUDY (which initiation shall occur when the first patient receives
the first dose), or b) completion of a prospective DISCOVERY STUDY which is
recognized as being a PHASE II CLINICAL TRIAL as defined in Section 1.10.

 
1.18
“GAAP” shall mean United States generally accepted accounting principles applied
in the ordinary course of business by the applicable Selling party referred to
in Section 1.31

 

 
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to such Selling party’s business and operations generally (i.e., not specially
or particularly to the PRODUCT or NET SALES).
 
1.19
“GOVERNMENTAL APPROVAL” shall mean all approvals, product and/or establishment
licenses, registrations, permits, or authorizations, including pricing and
reimbursement approvals, of any federal, state or local regulatory agency,
department, bureau or other GOVERNMENTAL AUTHORITY, necessary for the
manufacture, packaging, distribution, use, storage, importation, export,
transport, marketing and sale of a PRODUCT for therapeutic use in humans,
including THERANOSTIC PRODUCT and DIAGNOSTIC PRODUCT, in a country or countries
.

 
1.20
“GOVERNMENTAL AUTHORITY” SHALL MEAN ANY NATIONAL, SUPRA-NATIONAL (E.G., THE
EUROPEAN COMMISSION, THE COUNCIL OF THE EUROPEAN UNION, OR THE EMEA), REGIONAL,
STATE OR LOCAL REGULATORY AGENCY, DEPARTMENT, BUREAU OR OTHER GOVERNMENTAL
ENTITY RESPONSIBLE FOR ISSUING ANY TECHNICAL, MEDICAL OR SCIENTIFIC LICENSES,
REGISTRATIONS, AUTHORIZATIONS AND/OR APPROVALS OF VILAZODONE, THERANOSTIC
PRODUCT AND DIAGNOSTIC PRODUCT OR PRODUCTS INCLUDING ANY MARKETING
AUTHORIZATIONS BASED UPON SUCH APPROVALS AND PRICING, THIRD PARTY REIMBURSEMENT
OR LABELLING APPROVALS THAT ARE NECESSARY FOR THE MANUFACTURE, DISTRIBUTION,
USE, STORAGE, IMPORTATION, EXPORT, TRANSPORT, MARKETING AND SALE OF VILAZODONE
OR PRODUCT, THERANOSTIC PRODUCT AND DIAGNOSTIC PRODUCT.

 
1.21
“IMPROVEMENT” shall mean any invention, improvement, or technology (other than
any RESULTING IP or RESULTING IP PATENTS), patentable or not, that are owned or
controlled by the PARTIES or their AFFILIATES or any of them and that are
conceived in the course of this AGREEMENT to the extent relating to VILAZODONE
or to the VILAZODONE component of a PRODUCT or to a PRODUCT itself, including
the formulation, manufacture and use thereof.

 

 
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1.22
“INDICATION” shall mean the disease or condition that a particular PRODUCT is
intended to treat.  Potential INDICATIONS for PRODUCTS include (among others)
those listed in Schedule 4 to this AGREEMENT.  A PRODUCT will be deemed for
purposes of this AGREEMENT to be intended to treat the disease or condition for
which GOVERNMENTAL APPROVAL for such PRODUCT is then being sought or is
obtained, whether or not the PRODUCT may also have other uses or applications.

 
1.23
“JOINT COMMITTEE” shall mean the committee described in Section 10.

 
1.24
“MAA” or “NDA” means a new drug, biologic or other application for product
license approval, health registration, marketing authorization application,
common technical document, regulatory submission, notice of compliance or
similar application required to be approved before commercial sale or use of a
PRODUCT as a pharmaceutical or medicinal product in any formulation or dosage
form (excluding all pricing and reimbursement approvals).

 
1.25
“MAJOR COUNTRY” means the United States, France, Germany, Italy, Spain, and the
United Kingdom.

 
1.26
“MAJOR MILESTONE EVENT” shall mean each of those events that are specifically
designated as such in a particular DEVELOPMENT PLAN, and that mark significant
milestones demonstrating progress by GENAISSANCE in the development of a
PRODUCT, such as [***], and the filing of an NDA, in each case [***].

 
1.27
“MARKETING PLAN” means the plans with regard to the commercialization of
PRODUCTS, THERANOSTIC PRODUCTS or DIAGNOSTIC PRODUCTS in particular
INDICATIONS.  Each MARKETING PLAN will cover a period of [***] of active
commercialization of PRODUCTS for the applicable INDICATION.  Each MARKETING
PLAN will include the major features described in Schedule 5 to this
AGREEMENT.  The first MARKETING PLAN for PRODUCT in the initial INDICATION will
be [***].

 
1.28
“MERCK KGAA KNOW-HOW” shall mean inventions, discoveries, processes, methods
(including PK and other assay methods), compositions, formulae, procedures,
protocols, techniques, results of experimentation and testing, information, data
and know-how

 

 
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regarding VILAZODONE and its use, that are not generally and publicly known, and
that are owned or controlled on the EFFECTIVE DATE by MERCK KGAA or its
AFFILIATES, and MERCK KGAA’s interest in IMPROVEMENTS (except to the extent that
any of the foregoing is included within the MERCK KGAA PATENTS), but shall not
include VILAZODONE MANUFACTURING TECHNOLOGY.
 
1.29
“MERCK KGAA PATENT(S)” shall mean (a) the patent applications and patents listed
in Schedule 7,  all continuation, continuation-in-part (to the extent the claims
thereof are directed to subject matter specifically described in a patent or
patent application listed on Schedule 7), divisional, re-examination, and
reissue patent applications and patents and counterpart patent applications and
patents in any country that claim priority therefrom, (b) MERCK KGAA’s interest
in any and all patents claiming IMPROVEMENTS and (c) EXTENSIONS to (a) and
(b).  A MERCK KGAA PATENT will be considered to exist in any country during the
period in which an application for a patent is pending in such country or in
which any patent has been issued and has not expired or been declared invalid or
unenforceable in a final judgment or administrative ruling of a forum with
jurisdiction, as to which there either is no appeal or all rights of appeal have
been exhausted.

 
1.30
“NET SALES” shall mean the gross amount invoiced by GENAISSANCE or its
AFFILIATES and/or sub-licensees (“the Selling party”) to THIRD PARTIES for the
sale of PRODUCT and/or THERANOSTIC PRODUCT and/or DIAGNOSTIC PRODUCT, less
deductions that are actually allowed by the Selling party, to the extent
allocated to the PRODUCT, THERANOSTIC PRODUCT or DIAGNOSTIC PRODUCT under GAAP,
for:

 
 
a)
customary trade, quantity and cash discounts;

 
 
b)
customary rebates and charge backs including those granted to governmental
agencies and managed care entities;

 
 
c)
returns, rebates and allowances, including credits to customers on account of
retroactive price reductions;

 
 
d)
excise, sales, VAT or use taxes, customs duties and other tariffs or duties, and

 

 
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e)
actual transportation and insurance charges.

 
The aggregate deductions permitted under clauses (a) to (e) shall not exceed an
amount equal to [***] percent ([***]%) of the applicable gross amount invoiced
by the Selling party. If a PRODUCT, THERANOSTIC PRODUCT or DIAGNOSTIC PRODUCT is
sold, used or otherwise commercially disposed of (e.g. disposition in connection
with the delivery of other products or services of the Selling party) in a
transaction that is not an arm’s length sale to a THIRD PARTY, the NET SALES for
such transaction shall be calculated for purposes of this AGREEMENT as if the
Selling party had charged the price that would have been invoiced in such an
arm’s length sale at substantially that time in that country; provided that
transfers of PRODUCTS, THERANOSTIC PRODUCTS or DIAGNOSTIC PRODUCTS in connection
with clinical trials, physician samples, patient assistance programs or for
compassionate use shall not be included in the calculation of NET SALES.
 
1.31
“NONEXCLUSIVE PERIOD” shall mean a period when a THIRD PARTY has a market share
in a country of more than [***] percent ([***]%) on a units basis for sales of
(i) an UNLICENSED PRODUCT or (ii) an UNLICENSED THERANOSTIC PRODUCT or
UNLICENSED DIAGNOSTIC PRODUCT, the manufacture, sale or use of which would
infringe the claims of a RESULTING IP PATENT if such patent were issued and
existing during such period in such country.

 
1.32
“PACKAGED PRODUCT” shall mean the packaged form of VILAZODONE tablets as
described in Schedule 2 and Schedule 3 for use in the DISCOVERY STUDY.

 
1.33
“PHASE II CLINICAL TRIAL” shall mean a well controlled clinical study, as set
forth in the DEVELOPMENT PLAN, that is conducted during or after the DISCOVERY
STUDY by or for GENAISSANCE or its sublicensees and that involves the
administration of the PRODUCT to human beings, and in which the primary
objective is to obtain formal proof of efficacy of the PRODUCT in a sub-group of
patients or in a general population as described in Section 1.10 for the
treatment of the INDICATION as identified in the DISCOVERY STUDY.

 
1.34
“PHASE III CLINICAL TRIAL” shall mean any clinical study, as set forth in the
DEVELOPMENT PLAN for any INDICATION, that is conducted after the PHASE II

 

 
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CLINICAL TRIAL by or for GENAISSANCE or its sublicensees and that involves the
administration of a PRODUCT to humans, and in which the study design has been
developed in consultation with the EMEA or FDA or equivalent regulatory agency
to achieve the primary objective of the study providing a basis for filing an
MAA or NDA or their equivalent in any country.
 
1.35
“PRODUCT” shall mean any product containing VILAZODONE as either the single
active ingredient or as one of multiple active ingredients.

 
1.36
“QUARTER” shall mean each of the three-month periods ending on March 31, June
30, September 30 and December 31 of any YEAR.

 
1.37
“REGULATORY APPLICATION” shall mean all applications and phases of the process
of seeking and obtaining GOVERNMENTAL APPROVAL for the PRODUCTS, THERANOSTIC
PRODUCTS and DIAGNOSTIC PRODUCTS, including INDs and NDAs in the US and their
equivalent or analogous applications or filings in other countries or before
other GOVERNMENTAL AUTHORITIES.

 
1.38
“RESULTING IP” shall mean all intellectual property relating to VILAZODONE or
any PRODUCT, THERANOSTIC PRODUCT or DIAGNOSTIC PRODUCT that is conceived or
generated in the course of any DISCOVERY STUDY or any subsequent clinical study
in any INDICATION (including PHASE II CLINICAL TRIALS, PHASE III CLINICAL TRIALS
and post-approval clinical trials) conducted pursuant to this AGREEMENT or any
CO-COMMERCIALIZATION AGREEMENT, including any and all information and know-how,
inventions, discoveries, processes, methods, compositions, formulae, procedures,
protocols, techniques, results of experimentation and testing, information and
data, that are not generally and publicly known.

 
1.39
“RESULTING IP PATENTS” shall mean all patents and patent applications claiming
RESULTING IP and all continuation, continuation-in-part (to the extent the
claims thereof are directed to subject matter specifically described in a patent
or patent application from which such continuation-in-part claims priority),
divisional, re-examination, and reissue patent applications and patents and
counterpart patent applications and patents in any country that claim priority
therefrom, and EXTENSIONS thereto.  A RESULTING IP PATENT will be considered to
exist in any country during

 

 
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the period in which an application for a patent is pending in such country in
which any patent has been issued and has not expired or been declared invalid or
unenforceable in a final judgment or administrative ruling of a forum with
jurisdiction, as to which there either is no appeal or all rights of appeal have
been exhausted.
 
1.40
“TERRITORY” shall mean worldwide.

 
1.41
“THERANOSTIC PRODUCT” shall mean a home-brew test or FDA or EMEA approved kit or
device for detecting genetic markers that are correlated to VILAZODONE response
in humans.

 
1.42
“THIRD PARTY” shall mean any person or entity other than the PARTIES and their
AFFILIATES.

 
1.43
“TRADEMARK” SHALL MEAN ONE OR MORE TRADEMARKS, TRADE NAMES, TRADE DRESS, DOMAIN
NAMES, INCLUDING BACK-UPS IF NECESSARY, USED BY GENAISSANCE FOR THE
COMMERCIALIZATION OF PRODUCT, THERANOSTIC PRODUCT OR DIAGNOSTIC PRODUCT IN THE
TERRITORY, OTHER THAN “GENAISSANCE” AND ANY OTHER GENAISSANCE CORPORATE
TRADEMARK.

 
1.44
“US” shall mean the United States of America and its territories and
possessions, including the Commonwealth of Puerto Rico.

 
1.45
“USD” and “$” shall mean the United States Dollar.

 
1.46
“UNLICENSED PRODUCT” shall mean a PRODUCT marketed or sold by a THIRD PARTY who
does not have a sublicense from GENAISSANCE or its sublicensee to market or sell
such PRODUCT.

 
1.47
“UNLICENSED DIAGNOSTIC PRODUCT” shall mean a DIAGNOSTIC PRODUCT marketed or sold
by a THIRD PARTY who does not have a sublicense from GENAISSANCE or its
sublicensee to market or sell such DIAGNOSTIC PRODUCT.

 
 
 
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1.48
“UNLICENSED THERANOSTIC PRODUCT” shall mean a THERANOSTIC PRODUCT marketed or
sold by a THIRD PARTY who does not have a sublicense from GENAISSANCE or its
sublicensee to market or sell such THERANOSTIC PRODUCT.

 
1.49
“VILAZODONE” shall mean the active pharmaceutical ingredient internally referred
to by MERCK KGAA as “EMD 68843” as further described in Schedule 1 to this
AGREEMENT and all salts, esters, prodrugs, metabolites, hydrates solvates,
polymorphs and isomers thereof.

 
1.50
“VILAZODONE MANUFACTURING TECHNOLOGY” shall mean all know-how owned or
controlled by MERCK KGAA and its AFFILIATES relating to the production of
VILAZODONE API (as defined in Section 3.1) and VILAZODONE drug products laid
down in a) a development report including identification of critical steps and a
description of polymorphism including conditions for formation and
transformation and stability thereof (if a report is not available, all
available information to enable preparation of a report); and b) manufacturing
instructions of the most recent manufacturing campaign including amount and
ratio of all materials, equipment, operating parameters (e.g., time,
temperature, pressure) expected yields for all steps starting from commercially
available starting materials, in-process controls including analytical methods,
specifications for intermediates, starting materials, solvents, reagents, and
ancillary materials if defined; and c) batch analysis results for batches used
in toxicity and clinical studies, including impurity profile, date of
manufacture, manufacturing process information and batch size.  VILAZODONE
MANUFACTURING TECHNOLOGY also includes all know-how MERCK KGAA and its
AFFILIATES own or control at the time the VILAZODONE MANUFACTURING TECHNOLOGY is
transferred to GENAISSANCE related to the production of VILAZODONE tablets, i.e.
the development report (if a report is not available, all available information
to enable preparation of a report), manufacturing instructions including
equipment operating parameters; and in-process controls including analytical
methods.

 
1.51
“YEAR” shall mean a calendar year or a portion thereof during the term of this
AGREEMENT, ending either on December 31 or on the termination of this AGREEMENT.

 
 
 
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1.52
Word Usage.  References to a “day” or “days” are to calendar day(s) unless
otherwise indicated.  The words “including”, “includes”, “e.g.”, and “such as”
are used in their non-limiting sense and have the same meaning as “including
without limitation” and “including but not limited to”.  References to Sections,
subsections, and clauses in this AGREEMENT are to the same with all their
subparts.  “Herein” means anywhere in this AGREEMENT.  “Hereunder” and “hereto”
means under or pursuant to any provision of this AGREEMENT.  The headings used
in this AGREEMENT shall not be used as an instrument of interpretation or
definition, but shall only serve for purposes of convenience.

 
 
2.           LICENSES
 
2.1
MERCK KGAA PATENT and KNOW-HOW license.  MERCK KGAA hereby grants to
GENAISSANCE, and GENAISSANCE hereby accepts, the exclusive right and license
throughout the TERRITORY under the MERCK KGAA PATENTS and MERCK KGAA KNOW-HOW to
research, develop, use, sell, offer for sale, have sold, and import PRODUCTS and
THERANOSTIC PRODUCTS for all INDICATIONS, subject to [***].  GENAISSANCE shall
also have the right to sublicense after completion of the first prospective
DISCOVERY STUDY and expiry of the First Option Period referred to in Section
5.3.1 [***]; provided, that GENAISSANCE may sublicense its rights hereunder at
any time to a THIRD PARTY contract research organization for performing clinical
development on behalf of GENAISSANCE; provided, further, that such THIRD PARTY
contract research organization shall not be considered a sublicensee (except to
the extent it is granted the right to market, promote or sell the PRODUCT). For
the avoidance of doubt and except as otherwise provide in Section 2.5 or
otherwise in this AGREEMENT, MERCK KGAA retains the exclusive right to use the
MERCK KGAA KNOW-HOW for all other purposes.

 
2.2
Data License.  Such exclusive know-how license will include a license to use all
preclinical and clinical data that MERCK KGAA owns or has the right to license
to GENAISSANCE (including toxicology, pharmacology and animal data, and previous
phase I and phase II clinical trial clinical data, i.e., the study master file,
specifically including all data generated by GSK), and reports related to the
foregoing data.  MERCK KGAA shall supply GENAISSANCE with paper copies and/or
electronic copies (if

 

 
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available) of all such data and related reports, with such paper and/or
electronic copies provided in English if MERCK KGAA has English copies
available, and shall provideGENAISSANCE upon reasonable request access to all
original documents, including those documents that are not in English.
 
2.3
RESULTING IP.  Subject to any rights granted to MERCK KGAA pursuant to the terms
of a separate CO-COMMERCIALIZATION AGREEMENT with GENAISSANCE, MERCK KGAA hereby
grants and agrees to grant to GENAISSANCE a worldwide, exclusive right and
license, with right to sublicense (subject, in the case of PRODUCTS and
THERANOSTIC PRODUCTS, to same sublicensing terms set forth in Section 2.1), to
use the RESULTING IP and RESULTING IP PATENTS for all purposes, including the
research, development, manufacture, marketing and sale of PRODUCTS, THERANOSTIC
PRODUCTS and DIAGNOSTIC PRODUCTS.

 
2.4
MERCK KGAA PATENTS.  Except in respect of RESULTING IP, MERCK KGAA PATENTS owned
by MERCK KGAA prior to the EFFECTIVE DATE and other intellectual property rights
that will be or are filed by MERCK KGAA that are not the result of any inventive
contribution by GENAISSANCE remain the sole property of MERCK KGAA and shall be
part of the license grant hereunder to the extent necessary or useful to
practice the licenses granted GENAISSANCE herein.

 
2.5
VILAZODONE MANUFACTURING TECHNOLOGY Option.  Subject to the following provisions
of this paragraph, MERCK KGAA hereby grants GENAISSANCE an option to obtain a
semi-exclusive, paid-up, license under the VILAZODONE MANUFACTURING TECHNOLOGY,
MERCK KGAA PATENTS and MERCK KGAA KNOW-HOW to make and have made VILAZODONE and
PRODUCTS for so long as GENAISSANCE has a license to the MERCK KGAA PATENTS and
MERCK KGAA KNOW-HOW under Section 2.1 (which is also applicable in the case
MERCK KGAA is a contract manufacturer for GENAISSANCE).  For the purpose of this
Section 2.5, “semi-exclusive” shall mean that MERCK KGAA retains the right to
use the VILAZODONE MANUFACTURING TECHNOLOGY only to manufacture and supply
VILAZODONE and PRODUCT to GENAISSANCE and its sublicensees pursuant to Section
8.1.1, a separate CO-COMMERCIALIZATION AGREEMENT between the PARTIES pursuant to
Section 5.3, a separate license agreement between the PARTIES

 

 
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pursuant to Section 4.1, or a separate agreement for the supply of the
VILAZODONE API (as defined in Section 3.1).  GENAISSANCE may exercise such
option by written notice to MERCK KGAA (a) after [***], or (b) [***].  Upon
exercising the option stated above, GENAISSANCE shall pay MERCK KGAA a exercise
fee of [***] Euros (€[***]) for this license, with [***] Euros (€[***]) to be
paid upon exercising the option and [***] Euros (€[***]) to be paid upon
completion of the transfer of such VILAZODONE MANUFACTURING TECHNOLOGY from
MERCK KGAA.  Provided that GENAISSANCE has also exercised this option described
above, MERCK KGAA will also supply GENAISSANCE upon written request with all
know-how it owns or controls as of the date such option is exercised by
GENAISSANCE related to or necessary for the production of VILAZODONE tablets.
 
2.6
MERCK KGAA Technical Assistance. Upon written requests from GENAISSANCE, MERCK
KGAA shall provide GENAISSANCE with reasonable access to those employees of
MERCK KGAA who have participated in any significant manner in VILAZODONE’s
discovery, development, manufacturing development and patenting, at no charge to
GENAISSANCE, other than reasonable travel expenses incurred by such employees in
connection with providing such assistance.  To the extent legally or
contractually permitted, MERCK KGAA shall also supply GENAISSANCE with contact
information for outside experts, clinical investigators, regulatory authorities
and other persons involved with or consulted during VILAZODONE’s discovery,
clinical development, and patenting who are known to MERCK KGAA, and MERCK KGAA
shall, upon GENAISSANCE’s request and at no charge to GENAISSANCE, use
COMMERCIALLY REASONABLE EFFORTS to support GENAISSANCE to persuade such persons
to cooperate with GENAISSANCE in developing a detailed research, development and
patenting plan, or provide other assistance or information as reasonably
requested by GENAISSANCE.   If GENAISSANCE exercises its option to obtain a
license to the VILAZODONE MANUFACTURING TECHNOLOGY, MERCK KGAA shall provide
GENAISSANCE with reasonable manufacturing technical assistance to enable
GENAISSANCE’s contract manufacturer (which shall be reasonably experienced, i.e.
at the same technological level as regards e.g. machines, maintenance, etc as
MERCK KGAA´s VILAZODONE manufacturing facilities at the EFFECTIVE DATE) to use
the VILAZODONE MANUFACTURING TECHNOLOGY to manufacture VILAZODONE API.

 

 
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2.7
Acknowledgement and Trademarks. GENAISSANCE shall and shall cause its
sublicensees (if any), to the extent legally permissible, acknowledge the
license from MERCK KGAA on each package of PRODUCT by using the words “Licensed
by MERCK KGaA, Darmstadt (Germany)” in a manner and placement reasonably
approved by MERCK KGAA.  GENAISSANCE shall be responsible for the selection and
development of TRADEMARKs for use with the PRODUCTS, THERANOSTIC PRODUCTS AND
DIAGNOSTIC PRODUCTS IN THE TERRITORY, AND FOR ALL ASSOCIATED RISKS AND COSTS.

 
3.           RESEARCH AND DEVELOPMENT
 
3.1
GENAISSANCE will assume full financial risk and cost and regulatory
responsibility for the further preclinical and clinical development, the
manufacture of VILAZODONE as active pharmaceutical ingredient (“VILAZODONE API”)
and dosage forms for the commercialization of PRODUCTS.

 
3.2
IND applications.  MERCK KGAA will transfer ownership of the current IND and the
equivalent regulatory filings in countries outside the US to GENAISSANCE; to the
extent permitted by law, GENAISSANCE shall then be the holder of the IND and
such equivalent filings and responsible for compliance with all regulatory
requirements, including those related to synthesis of VILAZODONE API and
production of VILAZODONE and PRODUCT dosage forms.

 
3.3
DMFs.  To the extent MERCK KGAA supplies VILAZODONE API to GENAISSANCE, MERCK
KGAA will grant GENAISSANCE reasonable access to and a right to cross-reference
the technical information contained in the then current drug master file (“DMF”)
relevant for VILAZODONE API so that GENAISSANCE can include or cross reference
that information in its IND directly or through a GENAISSANCE DMF.  If
necessary, MERCK KGAA will update and maintain its DMF with VILAZODONE
MANUFACTURING TECHNOLOGY before PHASE III CLINICAL TRIALS and again before NDA
submission, and as may be otherwise necessary to reflect current manufacturing
methods, until such time when GENAISSANCE submits its own IND or DMF.

 

 
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3.4
DEVELOPMENT PLAN.  The DEVELOPMENT PLAN shall be implemented by GENAISSANCE with
the assistance of MERCK KGAA as described below. Each DEVELOPMENT PLAN will
specify in good faith the MAJOR MILESTONE EVENTS to be applicable to PRODUCT(S)
in the applicable INDICATION, and shall include a reasonable projected time
schedule for the achievement of such MAJOR MILESTONE EVENTS.  The DEVELOPMENT
PLAN for a PRODUCT in the initial INDICATION is set forth in Schedule 2 to this
AGREEMENT and may be amended from time to time pursuant to Section 10.1.  Any
such amendments shall be attached to Schedule 2.

 
3.5
DISCOVERY STUDY.  GENAISSANCE agrees to fund and perform the DISCOVERY STUDY as
described in the DEVELOPMENT PLAN.  GENAISSANCE will define the genetic,
clinical, and statistical parameters of the DISCOVERY STUDY and will prepare any
documents necessary to perform the DISCOVERY STUDY (including, but not limited
to, the study protocol and appropriate informed consent forms).  GENAISSANCE
agrees to perform at least one prospective DISCOVERY STUDY, and in addition may
choose at its sole discretion to perform a retrospective DISCOVERY STUDY, both
as outlined below.

 
3.5.1
Retrospective DISCOVERY STUDY.  If conducted, the retrospective DISCOVERY STUDY
will use the clinical data collected during the previous phase II clinical
trials conducted by MERCK KGAA or its former licensee GSK.  However, since the
phase II clinical trials did not include collection of patient samples and
informed consent for genetic analysis, GENAISSANCE and MERCK KGAA will
collaborate to obtain such samples and informed consent.  GENAISSANCE will
devise an informed consent, a study protocol and other documents providing
details on identification of subjects, the sample handling process and how the
samples may be utilized for future research, and will submit the informed
consent forms, protocols and/or amendments and other documents as required to
appropriate IRBs/Ethics Committees.  MERCK KGAA will use COMMERCIALLY REASONABLE
EFFORTS to provide as far as legally and contractually allowed, GENAISSANCE with
a list of all investigators (and their contact information) used in all clinical
studies.  GENAISSANCE will collaborate with these investigators to locate the
patients who participated in these trials and to obtain their informed consents
and samples for genetic analyses.  GENAISSANCE will extract DNA from the
samples, determine the patients’ haplotypes for the candidate genes, and

 

 
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perform a genetic association analysis using the previously collected clinical
data and the results of the haplotype analysis.
 
3.5.2
Prospective DISCOVERY STUDY.  In the prospective DISCOVERY STUDY, GENAISSANCE
will recruit patients and obtain their informed consent for a new clinical trial
of a PRODUCT and which will include administration of the PRODUCT and collection
of samples for genetic analyses and clinical data relevant to the defined
clinical phenotypes of interest to GENAISSANCE.  GENAISSANCE will extract DNA
from the samples, determine the patients’ haplotypes for the candidate genes,
and perform a genetic association analysis using the newly collected clinical
data and the results of the haplotype analysis.

 
3.6
Further Clinical Development.  Based on the results of the DISCOVERY STUDY
contained in the report provided to MERCK KGAA in accordance with Section 5.3.1,
GENAISSANCE will decide whether to proceed with further clinical development of
VILAZODONE.  GENAISSANCE will consult with appropriate GOVERNMENTAL AUTHORITIES
to develop a plan for conducting one or more additional clinical studies
designed to support [***].  Such clinical development may include PHASE II
CLINICAL TRIALS or PHASE III CLINICAL TRIALS.  If GENAISSANCE decides not to
proceed with further clinical development after completion of the DISCOVERY
STUDY or does not use COMMERCIALLY REASONABLE EFFORTS to start such clinical
development by initiating a clinical trial (first patient first visit) within
[***] from MERCK KGAA’s receipt of GENAISSANCE’s final report on the final
DISCOVERY STUDY, and GENAISSANCE has not commenced such trial within [***] after
MERCK KGAA’s notice to GENAISSANCE of its failure to comply with this Section
3.6, then the worldwide rights to VILAZODONE shall revert to MERCK KGAA in
accordance with Section 18.2; provided however, that this [***] deadline shall
be suspended during the time MERCK engages GENAISSANCE in discussions regarding
a CO-COMMERCIALIZATION AGREEMENT pursuant to Section 5.3
following.  Notwithstanding the foregoing, GENAISSANCE shall have the right to
extend the [***] deadline for delays caused by significant events or
circumstances beyond GENAISSANCE’s reasonable control.

 

 
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3.7
Development Activities.  GENAISSANCE shall design, fund and perform the
activities set forth in the DEVELOPMENT PLAN which includes all clinical trials
as set forth in the DEVELOPMENT PLAN, and preparing the study protocol,
appropriate informed consent forms and any other necessary documents for these
studies.  If GENAISSANCE decides to enrich the patient cohort of any of these
studies for response by identifying patients with predictive genetic markers
that are correlated with response to VILAZODONE, then GENAISSANCE may develop,
solely or in collaboration with a THIRD PARTY diagnostic partner, a THERANOSTIC
PRODUCT for identifying patients who have the correlated genetic markers.

 
If GENAISSANCE reasonably determines that the results of the PHASE III CLINICAL
TRIALS performed pursuant to the DEVELOPMENT PLAN do not fulfill the minimum
requirements [***], GENAISSANCE may choose to develop and present to MERCK KGAA,
within [***] after receipt of a written notice by MERCK KGAA regarding the
conclusion of the last trial, an alternative strategy to obtain data sufficient
to meet the requirements [***].  If GENAISSANCE does not choose to develop such
strategy or fails to present such strategy to MERCK KGAA at the end of such
[***], the worldwide rights to VILAZODONE will revert back to MERCK KGAA in
accordance with Section 18.2.
 
4.           DILIGENCE AND CAPABILITIES, PLANS AND REPORTING
 
4.1          Diligence.  GENAISSANCE shall use COMMERCIALLY REASONABLE EFFORTS
to develop PRODUCT(S), obtain GOVERNMENTAL APPROVALS for PRODUCT(S), and
commercialize PRODUCT(S) in the MAJOR COUNTRIES and such other countries in the
TERRITORY that GENAISSANCE determines, using commercially reasonable judgment,
are appropriate for such commercialization. For purposes of this Section 4.1 and
Section 5.1, the term “using commercial reasonable judgment” shall include
consideration of (i) whether a THERANOSTIC PRODUCT will be necessary to gain
approval or to effectively market PRODUCT(S) in a particular country and (ii)
the frequency in such country of the genetic marker(s) in the THERANOSTIC
PRODUCT.  If GENAISSANCE decides THERANOSTIC PRODUCT(S) are necessary in a
particular country, then GENAISSANCE shall use COMMERCIALLY REASONABLE EFFORTS
to obtain GOVERNMENTAL APPROVALS for THERANOSTIC PRODUCT(S) in such country and
to commercialize
           

 
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THERANOSTIC PRODUCT(S) in such country.  In case GENAISSANCE decides, using its
commercially reasonable judgment, not to commercialise PRODUCT(S), THERANOSTIC
PRODUCTS or DIAGNOSTIC PRODUCT either through its own organisation or a THIRD
PARTY in a certain country of the TERRITORY, then MERCK KGAA shall have the
right (but not the obligation) to commercialise such a PRODUCT, THERANOSTIC
PRODUCT or DIAGNOSTIC PRODUCT in such country either through its own
organisation, or a THIRD PARTY licensee under a separate license agreement with
terms to be negotiated between GENAISSANCE and MERCK KGAA in good faith,
provided that, GENAISSANCE shall not have any obligation to enter into an
agreement with respect to any country in which GENAISSANCE reasonably determines
that commercialisation by MERCK KGAA or a THIRD PARTY will have a material
adverse impact on NET SALES of the PRODUCT, THERANOSTIC PRODUCT or DIAGNOSTIC
PRODUCT in other countries.
 
4.2
Capability. GENAISSANCE shall demonstrate to MERCK KGAA by [***] after the
EFFECTIVE DATE that GENAISSANCE will have the financial resources, whether from
cash on hand, expected future cash flow, committed or reasonably confident
equity or debt financing or other sources, to fund the anticipated [***] dollar
($[***]) budget (less the amount expended prior to such [***] after the
EFFECTIVE DATE) for research and development activities scheduled for 2005.  If
MERCK KGAA reasonably determines that GENAISSANCE has not demonstrated such
financial resources then MERCK KGAA may terminate this AGREEMENT and the rights
to VILAZODONE shall revert to MERCK KGAA in accordance with Section 18.2.

 
4.3
Additional indications.  If at any time or times during the term of this
AGREEMENT, GENAISSANCE commences or intends to commence any development
activities for any PRODUCT(S), THERANOSTIC PRODUCTS or DIAGNOSTIC PRODUCTS for
INDICATIONS other than the initial INDICATION, GENAISSANCE shall promptly design
and submit to MERCK KGAA (through the JOINT COMMITTEE) a DEVELOPMENT PLAN and at
an appropriate time a MARKETING PLAN for each of such PRODUCT(S), THERANOSTIC
PRODUCTS and DIAGNOSTIC PRODUCTS.

 
4.4
Progress Reports.  GENAISSANCE will provide at least [***], written reports to
MERCK KGAA throughout the term of this AGREEMENT, summarizing

 

 
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GENAISSANCE’s activities and progress related to the development of PRODUCTS,
the development of standard operating procedures and scale-up for the production
of VILAZODONE and packaging of PRODUCTS, regulatory agency meetings, reports or
correspondence relating to securing of GOVERNMENTAL APPROVALS, and the
commercialization of PRODUCTS.  Such reports shall be provided
[***].  Nevertheless, GENAISSANCE shall in all events be and remain solely
responsible for the completion of the development of PRODUCTS, THERANOSTIC
PRODUCTS and DIAGNOSTIC PRODUCTS, their GOVERNMENTAL APPROVAL, the manufacture
and packaging of PRODUCTS from VILAZODONE, THERANOSTIC PRODUCTS and DIAGNOSTIC
PRODUCTS and their commercialization (except with respect to
CO-COMMERCIALIZATION, if any CO-COMMERCIALIZATION is undertaken as provided in
Section 5.3).
 
4.5
Achievement of MAJOR MILESTONE EVENTS.  Without limiting its general obligations
under Section 4.1, GENAISSANCE specifically commits to use its COMMERCIALLY
REASONABLE EFFORTS to achieve each MAJOR MILESTONE EVENT under each DEVELOPMENT
PLAN in substantial conformity with the time schedule contained in such
DEVELOPMENT PLAN; provided, however, that (i) in determining whether GENAISSANCE
is complying with this obligation, the PARTIES will take into account any
material adverse condition or event related to safety, bio-availability, or
efficacy of the PRODUCT, as well as any impediments caused by formulation,
manufacturing, regulatory, or other technical or governmental issues related to
the PRODUCT or its approval outside the reasonable control of GENAISSANCE; and
(ii) each PARTY will cooperatively and in good faith agree from time to time on
reasonable alterations of such time schedules to reflect unexpected deceleration
or acceleration of the developmental process, so long as the other PARTY has in
each case notified such PARTY as soon as the other PARTY becomes aware that a
particular MAJOR MILESTONE EVENT is not likely to be achievable within the
expected time frame, or that a particular MAJOR MILESTONE EVENT is not likely to
require as much time to achieve as was expected.

 
4.6
Information exchange.  During the [***] following the EFFECTIVE DATE, MERCK KGAA
will disclose to GENAISSANCE the existing MERCK KGAA KNOW-HOW. MERCK KGAA shall
disclose to GENAISSANCE all other MERCK KGAA KNOW-

 

 
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HOW, including all IMPROVEMENTS, during the term of this AGREEMENT promptly
after their discovery or acquisition.
 
4.7
Product Launch.  Without limiting its general obligations under Section 4.1,
GENAISSANCE will exert its COMMERCIALLY REASONABLE EFFORTS to obtain, as rapidly
as possible, all required pricing approvals and approvals of labelling and
marketing materials for a PRODUCT and THERANOSTIC PRODUCTS in each MAJOR COUNTRY
and each other country in which a GOVERNMENTAL APPROVAL for such PRODUCT and
THERANOSTIC PRODUCTS has been granted, and to launch such PRODUCT in such
country.  Notwithstanding the foregoing, MERCK KGAA acknowledges that it may not
be commercially reasonable for GENAISSANCE to seek pricing approvals or launch a
PRODUCT or THERANOSTIC PRODUCT in every country.

 
5.           MARKETING AND OPTIONS TO CO-COMMERCIALIZE
 
5.1
Marketing responsibility.  Except for activities undertaken by MERCK KGAA
pursuant to a CO-COMMERCIALIZATION AGREEMENT, GENAISSANCE shall be solely
responsible for the formulation and execution of a marketing strategy for the
PRODUCTS and for all promotional, marketing and commercialization of the
PRODUCTS in the MAJOR COUNTRIES and those other countries in the TERRITORY that
GENAISSANCE determines, using commercial reasonable judgment, to market PRODUCTS
in, either using its own resources or by partnering with a THIRD PARTY in a
co-commercialization arrangement, or by sublicensing such rights to a THIRD
PARTY.

 
5.2
Successor MARKETING PLANS.  GENAISSANCE shall, no later than [***] prior to the
expiration of the period covered by a MARKETING PLAN for a PRODUCT, design and
submit to MERCK KGAA (through the JOINT COMMITTEE) a MARKETING PLAN to cover the
[***] period following such expiration.

 
5.3
Option to co-develop and to CO-COMMERCILIZE.

 
5.3.1
After the DISCOVERY STUDY. For a period of [***] from MERCK KGAA’s receipt of
GENAISSANCE’s final report on the final prospective DISCOVERY STUDY (the “First
Option Period”), MERCK KGAA, at its sole discretion, shall have the exclusive
right,

 

 
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exercisable by notice to GENAISSANCE, to negotiate in good faith toward an
agreement with GENAISSANCE to co-develop and CO-COMMERCIALIZE, with GENAISSANCE,
the PRODUCT for all INDICATIONS in the elected territory. (As used in this
Section 5.3.1 and Section 5.3.2, “territory” shall mean a country or
geographical region consistent with typical drug regulatory and marketing
strategies). GENAISSANCE agrees to make such a final report available to MERCK
KGAA within [***] after the statistical evaluation of such final DISCOVERY
STUDY.  If MERCK KGAA exercises such option, the PARTIES shall negotiate in good
faith detailed terms that will govern CO-COMMERCIALIZATION rights, as well as
the elected territory in which MERCK KGAA desires to obtain such rights, based
on the understanding that the financial terms will [***], as well as the [***]
and [***].  If the PARTIES do not enter into a CO-COMMERCIALIZATION AGREEMENT by
the end of the First Option Period for such territory, or do not agree in
writing to extend the First Option Period, then GENAISSANCE shall be free to
negotiate with THIRD PARTIES for granting commercialisation rights in such
territory or any country in such territory, provided that GENAISSANCE shall not
agree with a THIRD PARTY terms that are more favorable in the aggregate to such
THIRD PARTY than the terms GENAISSANCE last discussed with MERCK KGAA without
offering such terms to MERCK KGAA.
 
5.3.2
After PHASE III CLINICAL TRIALs.  If, prior to completion of PHASE III CLINICAL
TRIALS, GENAISSANCE has not granted a THIRD PARTY any commercialization rights
in a particular territory, then for a period of [***] from MERCK KGAA’s receipt
of GENAISSANCE’s final report on the final PHASE III CLINICAL TRIAL (the “Second
Option Period”), MERCK KGAA shall have the exclusive option to negotiate in good
faith toward a CO-COMMERCIALIZATION AGREEMENT with GENAISSANCE to
CO-COMMERCIALIZE, with GENAISSANCE, the PRODUCT for all INDICATIONS in such
territory.  Such a final report shall be made available to MERCK KGAA within
[***] after the statistical evaluation of such trial.  MERCK KGAA may exercise
this right by providing written notice to GENAISSANCE during the Second Option
Period, such notice, to specify which territory MERCK KGAA is electing.  The
PARTIES will negotiate the terms of the CO-COMMERCIALIZATION AGREEMENT in good
faith, with the understanding that the financial terms will [***], as well as
the [***]. If the PARTIES do not enter into a CO-COMMERCIALIZATION AGREEMENT by
the end of the Second Option Period for such territory, or agree in

 

 
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writing to extend the Second Option Period, then GENAISSANCE shall be free to
negotiate with THIRD PARTIES for granting promotion rights in such territory, or
any country in such territory, provided that GENAISSANCE shall not agree with a
THIRD PARTY terms that are more favorable in the aggregate to the THIRD PARTY
than the terms GENAISSANCE last discussed with MERCK KGAA without offering such
terms to MERCK KGAA.
 
5.4
Theranostic Products.  If GENAISSANCE is developing or marketing the PRODUCT in
a particular country and INDICATION solely or with a THIRD PARTY, then
GENAISSANCE shall have the sole right to decide whether to develop and to use a
THERANOSTIC PRODUCT in connection with GOVERNMENTAL APPROVAL or marketing of the
PRODUCT in any such countries and INDICATIONS.  If GENAISSANCE HAS SO DECIDED,
GENAISSANCE WILL DEVELOP AND COMMERCIALIZE A THERANOSTIC PRODUCT AT ITS EXPENSE,
EITHER SOLELY OR IN COLLABORATION WITH ONE OR MORE THIRD PARTY DIAGNOSTIC
COMPANIES.  IF GENAISSANCE AND MERCK KGAA ARE CO-COMMERCIALIZING THE PRODUCT IN
A PARTICULAR COUNTRY, THEN ISSUES RELATING TO THE DEVELOPMENT AND USE OF
THERANOSTIC PRODUCTS IN SUCH COUNTRIES SHALL BE RESOLVED BY THE JOINT COMMITTEE,
AND GENAISSANCE SHALL RETAIN THE SOLE RIGHT TO DEVELOP ANY THERANOSTIC PRODUCTS
AND TO PROVIDE RELATED THERANOSTIC TESTING SERVICES, BY ITSELF OR WITH ONE OR
MORE THIRD PARTY DIAGNOSTIC COMPANIES.  IN CASE OF A CO-COMMERCIALIZATION
AGREEMENT FOR THE PRODUCT BETWEEN GENAISSANCE AND MERCK KGAA, GENAISSANCE SHALL
[***] AS DETERMINED BY THE JOINT COMMITTEE, FOR THE DEVELOPMENT OF VILAZODONE.

 
5.5
NDA FILINGS.  SUBJECT TO THE TERMS OF ANY CO-COMMERCIALIZATION AGREEMENT WITH
MERCK KGAA PURSUANT TO SECTION 5.3, GENAISSANCE WILL PREPARE AND FILE, AT ITS
EXPENSE, ALL REGULATORY APPLICATIONS.

 
6.           LICENSE GRANT TO MERCK KGAA
 

 
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6.1
VILAZODONE therapeutic rights.  If MERCK KGAA and GENAISSANCE enter into a
CO-COMMERCIALIZATION AGREEMENT as described in Section 5.3 for a particular
country, then GENAISSANCE will grant back to MERCK KGAA an exclusive (except as
to GENAISSANCE and its AFFILIATES) right and license, (to be governed by the
separate agreement) to use the MERCK KGAA PATENTS and RESULTING IP and RESULTING
IP PATENTS for the research, development, marketing and sale of the PRODUCT in
such country(s); provided that the scope of such right and license will be
equivalent to the scope of such co-development or CO-COMMERCIALIZATION
AGREEMENT.

 
6.2
VILAZODONE THERANOSTIC RIGHTS.  IF MERCK KGAA AND GENAISSANCE ENTER INTO A
CO-COMMERCIALIZATION AGREEMENT AS DESCRIBED IN SECTION 5.3 FOR A PARTICULAR
COUNTRY(S), THEN GENAISSANCE WILL GRANT BACK TO MERCK KGAA AN EXCLUSIVE (EXCEPT
AS TO GENAISSANCE AND ITS AFFILIATES) RIGHT AND LICENSE (TO BE GOVERNED BY A
SEPARATE AGREEMENT) TO USE THE MERCK KGAA PATENTS AND RESULTING IP AND RESULTING
IP PATENTS FOR USE IN THE MARKETING AND SALE OF THERANOSTIC PRODUCTs in each
such country(s); provided that the scope of such right and license will be
equivalent to the scope of CO-COMMERCIALIZATION AGREEMENT.

 
7.           PAYMENTS AND ROYALTIES
 
7.1
Initial payment. Upon execution of this AGREEMENT, GENAISSANCE shall pay MERCK
KGAA a non-refundable up-front fee of €1 million (€1,000,000) in the form of
GENAISSANCE equity shares for the patent license, with two hundred and fifty
thousand EUROS (€250,000) already paid following signature of the Letter of
Intent dated April, 29th 2004 and seven hundred and fifty thousand EUROS
(€750,000) to be paid within [***] following the execution of this AGREEMENT.

 
7.2
Milestone payments.  In addition, GENAISSANCE shall pay to MERCK KGAA each of
the following milestone payments, on a non-refundable, non-creditable basis,
provided that GENAISSANCE develops VILAZODONE from the EFFECTIVE DATE through
the indicated milestone without the assistance of a sublicensee:

 

 
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a.
[***] EURO (€[***]) within [***] following the FIRST CLINICAL TRIAL in the
TERRITORY.

 
 
b.
[***] EURO (€[***]) within [***] of the acceptance (as defined by the FDA or
EMEA, as appropriate) of a filing for the first NDA or MAA in the US or the EU
for any PRODUCT for the first INDICATION.

 
 
c.
[***] EURO (€[***]) within [***] of receipt of the first approval of an MAA or
NDA in the US or EU for any PRODUCT in any INDICATION.

 
 
d.
[***] EURO (€[***]) within [***] of first commercial sale of any PRODUCT in the
US or EU.

 
7.3
Payments.  All payments agreed under Sections 2.5, 7.1 and 7.2 shall be in the
form of equity shares of GENAISSANCE, which shall consist of common shares of
GENAISSANCE and the number of shares to be transferred to MERCK KGAA shall be
calculated by dividing the respective payments due by the average closing price
of GENAISSANCE shares at the NASDAQ during the ten (10) trading days prior to
the respective milestone date, provided, however, that if MERCK KGAA´s and its
AFFILIATES total share of common stock would exceed 19.9% of the total
outstanding shares of the total issued stock of GENAISSANCE, or if the average
closing price at the respective milestone date is below US$ 2.25, subject to
adjustment for stock splits or other re-capitalization of stock as a result of
the issuance of stock as a stock dividend or subdivision or combination of the
outstanding shares of stock or in connection with acquisitions or joint
ventures, then MERCK KGAA shall receive the payment in cash.

 
7.4
In each case under Sections 7.1-7.3, it is agreed and understood by GENAISSANCE
that:

 
7.4.1
GENAISSANCE will deliver the respective stock certificates to the address as
directed by MERCK KGAA within the given time-frame.  The terms applicable to the
equity shares of GENAISSANCE to be transferred to MERCK KGAA hereunder shall be
as set forth in the Pre-emptive Rights Rider in Schedule 8 and as otherwise
provided in a Registration Rights Agreement as set forth in Schedule 9.

 

 
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7.4.2
MERCK KGAA shall not be limited in its decision which of its AFFILIATES will
receive the shares at the time of receipt and later on.

 
7.4.3
For the purpose of determining the number of GENAISSANCE shares to be
transferred, the price of the GENAISSANCE shares which is set out in USD shall
be changed to EURO at the EURO exchange reference rate to the USD of the
European Central Bank Frankfurt at the date the respective payment is due.

 
7.5
Royalties.  In addition to the payments provided for in Sections 7.1 and 7.2
GENAISSANCE shall, pay to MERCK KGAA a royalty of [***] percent ([***]%) of the
aggregate NET SALES by GENAISSANCE or its AFFILIATES under this AGREEMENT from
all PRODUCTS on a country-by-country basis as long as the manufacture, use
and/or sale of PRODUCTS in such country would infringe at least one claim of a
MERCK KGAA PATENT or [***] years after the first commercial sale in such
country, whichever is longer (the “First Royalty Period”).   Upon expiration of
the First Royalty Period in a particular country, if the RESULTING IP PATENTS is
the basis for (1) a grant by the applicable agency in such country of a market
exclusivity period that effectively prevents THIRD PARTIES from making or
selling any drug product containing VILAZODONE, for which an exclusivity is
granted, and/or (2) for so long as the manufacture, use by others than the
prescribing physician, and/or sale of PRODUCT in such country would infringe
RESULTING IP PATENTS, then GENAISSANCE shall pay MERCK KGAA a reduced fee of
[***]% royalties on the NET SALES by GENAISSANCE or its AFFILIATES in such
country for so long as the circumstances described in clauses (1) or (2) exist
(the “Second Royalty Period”).  Should MERCK KGAA and GENAISSANCE enter into a
CO-COMMERCIALIZATION AGREEMENT pursuant to Sections 5.3 and 5.4; such agreement
will set forth any milestone and royalty payments by GENAISSANCE to MERCK KGAA.
Each of the aggregate time period of the First and Second Royalty Periods and of
the time periods during which royalties are payable under Sections 7.6.2 and
7.7.2 are referred to as a “ROYALTY TERM”.

 
7.6
Payments by GENAISSANCE for THERANOSTIC PRODUCTs

 
7.6.1
GENAISSANCE shall pay MERCK KGAA a royalty of [***]% ([***] percent) on the NET
SALES for each THERANOSTIC PRODUCT that the manufacture, use or sale of

 

 
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which would infringe at least one claim of a RESULTING IP PATENT or that uses
MERCK KGAA KNOW-HOW incorporated in or resulting from the VILAZODONE studies
performed by MERCK KGAA or any former licensee of MERCK KGAA.
 
7.6.2
This royalty shall be payable on a country-by-country basis until the expiration
of all RESULTING IP PATENT claims that would be infringed by the manufacture,
use or sale of such THERANOSTIC PRODUCT or [***] years after the first
commercial sale of the THERANOSTIC PRODUCT in such country, whichever is the
longer period.

 
7.6.3
If GENAISSANCE grants a license under the RESULTING IP or RESULTING IP PATENTS
to a THIRD PARTY to use or sell a THERANOSTIC PRODUCT, then GENAISSANCE agrees
to share with MERCK KGAA equally any and all license issue fees and milestone
payments received by GENAISSANCE from such THIRD PARTY allocable to such
license.

 
7.6.4
SHOULD MERCK KGAA AND GENAISSANCE ENTER INTO A CO-COMMERCIALIZATION AGREEMENT
PURSUANT TO SECTION 5.3; SUCH AGREEMENT WILL SET FORTH ANY MILESTONE AND royalty
payments by GENAISSANCE to MERCK KGAA.

 
7.7
Payments by GENAISSANCE for DIAGNOSTIC PRODUCTs.

 
7.7.1
GENAISSANCE shall pay to MERCK KGAA a royalty of [***]% ([***] percent) on the
NET SALES of GENAISSANCE and its sublicensees for each DIAGNOSTIC PRODUCT that
the manufacture, use or sale of which would infringe at least one claim of a
RESULTING IP PATENT or that uses MERCK KGAA KNOW-HOW incorporated in or
resulting from the VILAZODONE studies performed by MERCK KGAA or any former
licensee of MERCK KGAA.

 
7.7.2
This royalty shall be payable on a country-by-country basis until the expiration
of all RESULTING IP PATENT claims that would be infringed by the manufacture,
use or sale of such DIAGNOSTIC PRODUCT or [***] years after the first commercial
sale of the DIAGNOSTIC PRODUCT in such country, whichever is the longer period.

 

 
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7.7.3
If GENAISSANCE grants a license under the RESULTING IP or RESULTING IP PATENTS
to a THIRD PARTY to use or sell a DIAGNOSTIC PRODUCT, then GENAISSANCE agrees to
share with MERCK KGAA equally any and all license issue fees and milestone
payments received by GENAISSANCE from such THIRD PARTY allocable to such
license.

 
7.7.4
If GENAISSANCE, directly or indirectly, commercializes a DIAGNOSTIC PRODUCT or a
THERANOSTIC PRODUCT for use with a pharmaceutical product other than a PRODUCT,
the same royalties payable under Sections 7.6 and 7.7 shall be paid to MERCK
KGAA.  If GENAISSANCE grants a license under the RESULTING IP PATENTS to a THIRD
PARTY and receives revenues from such THIRD PARTY that are allocable to the
practice of such RESULTING IP PATENTS, GENAISSANCE shall share such revenues
with MERCK KGAA in the same manner as provided in Section 7.8(e).

 
7.8
Third Party Payments

 
 
Should GENAISSANCE grant a sublicense of the MERCK KGAA PATENTS and RESULTING IP
PATENTS to a THIRD PARTY to develop, market, promote or sell the PRODUCT, either
solely or jointly with GENAISSANCE, then GENAISSANCE shall share with MERCK KGAA
revenues received by GENAISSANCE, which are allocable to the PRODUCT, as
follows:

 
 
a)
Issue Fees.  GENAISSANCE agrees to pay MERCK KGAA a share, as calculated
pursuant to Section 7.8(e), of any up-front license issue fee within [***] upon
GENAISSANCE’s receipt of such fee;

 
 
b)
Milestone Payments.  GENAISSANCE agrees to pay MERCK KGAA the greater of (i) a
share, as calculated in Section 7.8(e), of each milestone payment received from
a THIRD PARTY; or (ii) the corresponding milestone payments described in Section
7.2;

 
 
c)
Equity.  If, as part of a such a sublicense transaction, GENAISSANCE issues
equity to a sublicensee, the portion of cash received in exchange for such
equity that exceeds [***]% of the then fair market value of such equity (based
on the

 

 
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average closing price during the 10 trading days preceding the date on which the
amount of consideration for such equity is finally determined) shall be regarded
as revenues to be shared with MERCK KGAA pursuant to this subsection 7.8.  If,
in lieu of cash, GENAISSANCE receives equity from a sublicensee as consideration
for the sublicense rights, MERCK KGAA shall have the option of electing to
receive (i) a share, as calculated in Section 7.8(e), of such equity; or (ii)
the corresponding milestone payments described in Section 7.2.
 
 
d)
Royalties.  In addition, GENAISSANCE shall pay MERCK KGAA, on a country by
country basis, royalties based on the total NET SALES of the PRODUCT (i.e.
sublicensee alone or sublicensee plus GENAISSANCE NET SALES in case of
co-commercialization) equal to the greater of (i) [***]% of NET SALES for the
First Royalty Period and [***]% for the Second Royalty Period, or (ii) a share,
as calculated in Section 7.8(e), of the royalties that GENAISSANCE receives from
such sublicensee.  If GENAISSANCE receives from a sublicensee a price for the
supply of VILAZODONE (i.e., bulk powder, tablets or final drug product) that is
higher than GENAISSANCE’s cost of goods supplied (“COGS”) as defined below in
supplying the VILAZODONE to such sub-licensee (subject to audit by MERCK KGAA),
then this additional amount shall also be considered as part of a royalty
payment to GENAISSANCE as considered in this subsection d. “COGS” means
GENAISSANCE’s actual cost paid to THIRD PARTIES, including any profits paid to
such THIRD PARTIES, to manufacture VILAZODONE API or the PRODUCT in the final
packaged form, or to the extent not procured from a THIRD PARTY, its Fully
Absorbed Standard Costs.  “Fully Absorbed Standard Cost” or “FASC” means the
fully allocated cost of manufacturing, which shall comprise all direct costs
(including labor, materials, energy, utilities, quality control or other costs
incurred directly in the manufacturing of PRODUCT) and indirect costs (including
administrative labor costs, manufacturing facility and equipment maintenance,
relevant insurances, and depreciation of manufacturing equipment and
manufacturing) specifically allocable to the production of the PRODUCT.  Such
calculation shall be based upon accepted contract manufacturing industry
standards (including those relating to the allocation of idle capacity and
overhead) and GAAP.  Prior to the commencement of any manufacturing by
GENAISSANCE,

 

 
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the PARTIES shall agree to more detailed provisions concerning the determination
of FASC in this manner consistent with the provisions of this definition.
 
 
(e)
Revenue Share.  In each of the revenue categories in this Section 7.8, the share
paid to MERCK KGAA shall be based on the development stage at which such
sublicense is granted, as follows:

 
 
(i)
If such sublicense is granted by GENAISSANCE after the completion of the last
prospective DISCOVERY STUDY, then the share shall be [***]% to GENAISSANCE and
[***]% to MERCK KGAA.

 
 
(ii)
If such sublicense is granted by GENAISSANCE after completion of the last PHASE
II CLINICAL TRIAL following achievement of the primary objective as defined in
Section 1.33, then the share shall be [***]% to GENAISSANCE and [***]% to MERCK
KGAA.

 
 
(iii)
If such sublicense is granted by GENAISSANCE after the completion of the first
prospective PHASE III CLINICAL TRIAL in which the primary endpoint as defined in
the DEVELOPMENT PLAN for the INDICATION is reached, then the share shall be
[***]% to GENAISSANCE and [***]% to MERCK KGAA.

 
For the avoidance of doubt, if a completed clinical trial conducted according to
the DEVELOPMENT PLAN for any INDICATION satisfies the criteria in more than one
of parts (i) to (iii) of this subsection 7.8(e), then the revenue share shall be
the highest share to GENAISSANCE.
 
7.9
Third Party Royalty Offset.  If the manufacture, use, marketing, or sale of a
PRODUCT, THERANOSTIC PRODUCT or DIAGNOSTIC PRODUCT would infringe a valid THIRD
PARTY patent claim in a certain country of the TERRITORY and therefore it is
necessary for GENAISSANCE or its sublicensee to obtain a license under such
THIRD PARTY patent in such country from one or more THIRD PARTIES to practice
the licenses granted under Sections 2.1, 2.3 or 2.5, then MERCK KGAA agrees to
share in the aggregate [***]% of the royalties to be paid by GENAISSANCE to the
THIRD

 

 
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PARTY in case of PRODUCT in such country and [***]% of the royalties to be paid
by GENAISSANCE to the THIRD PARTY in case of THERANOSTIC PRODUCT or DIAGNOSTIC
PRODUCT in such country under any license agreement, provided that GENAISSANCE
provides MERCK KGAA with notice of such obligation and sufficient documentation
to show the existence of such an obligation prior to entering into any license
agreement with a THIRD PARTY which would trigger such
deduction.  Notwithstanding the foregoing, MERCK KGAA’s share in such country
shall not exceed (a) [***] percentage points in the First Royalty Period or
[***] percentage points in the Second Royalty Period if the royalties payable to
MERCK KGAA are determined under Sections 7.5-7.8 as a percent of NET SALES, or
(b) [***]% of the amount otherwise payable to MERCK KGAA in such country if
royalties payable to it are determined pursuant to Section 7.8(e).
 
7.10
Royalty Rate Reduction for PRODUCTS. During any NON-EXCLUSIVE PERIOD in respect
of a particular country and a PRODUCT in which either:

 
 
(i)
all claims of and rights under all issued MERCK KGAA PATENTS covering the
manufacture, sale or use of such PRODUCT in such country (as then practiced by
GENAISSANCE or its sublicensees) have been declared unpatentable, invalid or
unenforceable by a final and non-appealable judgment of a court or
administrative agency having jurisdiction thereof or have expired or have been
finally abandoned, or

 
 
(ii)
there were at no time on or since the EFFECTIVE DATE any such claims under any
issued MERCK KGAA PATENTS in such country,

 
the royalty owed by GENAISSANCE for such country under Section 7.5 and 7.8(d)
shall be reduced by [***] percent ([***]%).
 
7.11
Royalty Rate Reduction for THERANOSTIC PRODUCTS and DIAGNOSTIC PRODUCTS.  During
any NON-EXCLUSIVE PERIOD in respect of a particular country and a THERANOSTIC
PRODUCT or DIAGNOSTIC PRODUCT in which either:

 
 
(i)
all claims of and rights under all issued RESULTING IP PATENTS covering the
manufacture, sale or use of such THERANOSTIC PRODUCT or

 

 
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DIAGNOSTIC PRODUCT in such country (as then practiced by GENAISSANCE or its
sublicensees) have been declared unpatentable, invalid or unenforceable by a
final and non-appealable judgment of a court or administrative agency having
jurisdiction thereof or have expired or have been finally abandoned, or
 
 
(ii)
there were at no time on or since the EFFECTIVE DATE any such claims under any
issued RESULTING IP PATENTS in such country,

 
the royalty owed by GENAISSANCE for such country under Section 7.6.1 or Section
7.7.1, whichever is applicable, shall be reduced by [***] percent ([***]%).
 
7.12
Payment terms.  The royalty payments under Section 7.5, 7.6, and 7.7 shall be
due and payable to MERCK KGAA within [***] after the end of each QUARTER with
respect to NET SALES during such QUARTER.  The royalties shall be paid in EURO
and shall be directly deposited to a bank account designated for this purpose
from time to time by MERCK KGAA. To the extent paid in cash, the initial payment
under Section 7.1 shall be transferred within [***] following the EFFECTIVE DATE
to a bank account designated for this purpose by MERCK KGAA.  To the extent paid
in cash, the milestone payments under Section 7.2 shall be transferred within
[***] following the occurrence of the respective stated events and shall be
directly deposited to a bank account designated for this purpose from time to
time by MERCK KGAA.  The PARTIES may vary the method of payment set forth herein
at any time upon mutual agreement; said change, if any, will be consistent with
the local law at the place of payment or remittance.

 
7.13
Exchange rate.  In those cases where an amount due hereunder is payable in EURO
but is to be calculated based upon one or more currencies other than EURO, such
amount due shall be determined on the basis of conversion of such other
currencies to EURO, at an exchange rate (the “Agreed Exchange Rate”) equal to
the average of the daily exchange rates for the QUARTER in which the applicable
NET SALES occurred as quoted each day by the European Central Bank in Frankfurt
for the EURO.  The PARTIES agree to cooperate to procure whatever licenses or
permits are required to obtain the waiver of restrictions or to otherwise
facilitate the conversion and transfer of all amounts payable hereunder.

 

 
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7.14
Late payment.  All payments under this AGREEMENT shall earn interest from the
date due until paid at a rate equal to the lesser of the maximum rate
permissible under applicable law or two percent (2%) above the 3-months EURIBOR
per annum.

 
7.15
Tax withholding.  All payments required under this contract shall be made
without any deductions for whatever reasons; however, if local law requires
GENAISSANCE to withhold tax on payments u nder this AGREEMENT, GENAISSANCE may
withhold such taxes.  Such withholdings on payments under this AGREEMENT are
only allowed if GENAISSANCE reasonably cooperates with MERCK KGAA in benefiting
from the reduced withholding tax laid down in the Double Taxation Convention
between Germany and the US (the “DTC”) and shall in no case exceed the
withholding tax rate for royalty payments mentioned in the DTC irrespective of
whether the payments are made by GENAISSANCE a sub-licensee or any other party,
such that for the tax purpose all payments due under this AGREEMENT by
GENAISSANCE shall either be made or deemed to have been made by GENAISSANCE,
being a US company. MERCK KGAA will reasonably assist GENAISSANCE in benefiting
from the reduced withholding tax rate as laid down in the DTC, which withholding
tax rate is currently 0%.  In case the Double Taxation Convention should be
amended in the future, GENAISSANCE will(i) promptly notify MERCK KGAA of such
requirement, (ii) remit such amount to the proper tax authorities, and (iii)
provide MERCK KGAA with the necessary tax receipts in a timely manner.

 
7.16
Other taxes.  Except as provided in Section 7.15 with respect to withholding
taxes, any sales taxes, turnover taxes, value added taxes and indirect taxes,
which are applicable to the royalty and milestones payments or any of the
activities of GENAISSANCE or its AFFILIATES or distributors, shall, as between
GENAISSANCE and MERCK KGAA be borne or reimbursed by GENAISSANCE; provided that
GENAISSANCE shall not be responsible for any income taxes (or any other taxes
levied on MERCK KGAA’s receipt of any payments) assessed on MERCK KGAA as a
result of any royalty, milestone or other payments made to it pursuant to this
AGREEMENT.  The PARTIES shall co-operate in good faith to reduce as far as law
permits in a given country the taxes imposed on any payment or activities under
this AGREEMENT.

 

 
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7.17
NET SALES Reports.  Concurrently with each quarterly royalty due date under
Section 7.5 to 7.7, GENAISSANCE shall provide MERCK KGAA with a detailed written
report of gross sales of PRODUCT, THERAPEUTIC PRODUCT AND DIAGNOSTIC PRODUCT
invoiced by GENAISSANCE or its AFFILIATES or sub-licensees since the last such
report, the NET SALES with respect thereto, and the royalties payable under this
AGREEMENT.

 
7.18
Right to audit.  GENAISSANCE shall keep and maintain, and shall cause its
AFFILIATES and Selling party to keep and maintain detailed and accurate books
and records with regard to all sales of PRODUCTS, THERANOSTIC PRODUCT and
DIAGNOSTIC PRODUCT, NET SALES, and payments to be made under this AGREEMENT, and
the basis of calculation thereof, for a period of at least [***] years after the
applicable payment of royalties.  MERCK KGAA shall have the right, at its own
expense, on reasonable notice and not more often than once annually, to have
GENAISSANCE’s and/or its AFFILIATES’ or Selling parties’ royalty reports,
inspected and audited by an independent auditor appointed by MERCK KGAA and
reasonably acceptable to GENAISSANCE, during normal business hours for the
purposes of verifying the amount of royalties, payments and other charges
due.  MERCK KGAA shall maintain the confidentiality of confidential information
obtained in any such inspection or audit, and shall put the information and
records inspected to no other use than the verification of amounts due hereunder
and the enforcement of this AGREEMENT.  If such an audit determines that
payments due to MERCK KGAA made during any QUARTER were [***] percent ([***] %)
or more below the amount actually due, then the reasonable expense of the audit
shall be borne by GENAISSANCE, and GENAISSANCE shall pay to MERCK KGAA any
amount shown to be due by the audit (together with interest pursuant to Section
7.11) within [***] after receipt of a notice from MERCK KGAA, containing a copy
of the audit report and setting forth the amount due.

 
8.
SUPPLY OF VILAZODONE AND PRODUCTION OF PRODUCT, THERANOSTIC PRODUCTS and
DIAGNOSTIC PRODUCTS

 
8.1
Development supplies and commercial supplies.

 

 
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8.1.1
CLINICAL SUPPLIES OF VILAZODONE.  MERCK KGAA WILL USE COMMERCIALLY REASONABLE
EFFORTS TO PROVIDE AS FURTHER DESCRIBED IN SCHEDULE 3, AT ITS COST, GENAISSANCE
WITH CLINICAL SUPPLIES OF VILAZODONE BULK TABLETS AND PLACEBO BULK TABLETS IN
AMOUNTS SUFFICIENT FOR CONDUCTING THE DISCOVERY STUDY, PROVIDED THAT MERCK KGAA
SHALL NOT BE OBLIGED TO MANUFACTURE ADDITIONAL VILAZODONE API DURING THIS
AGREEMENT.  SUCH TABLETS, WHICH SHALL BE MANUFACTURED FROM MERCK KGAA’S EXISTING
SUPPLY OF ABOUT ONE HUNDRED AND EIGHTY KILOGRAMS (180KG) OF VILAZODONE API,
SHALL COMPLY WITH THE PRODUCT SPECIFICATIONS VALID AT THE EFFECTIVE DATE AS SET
FORTH IN SCHEDULE 3.  MERCK KGAA SHALL ALSO CONDUCT IDENTITY TESTING TO
DETERMINE THE POLYMORPH IV/V RATIOS AND STABILITY STUDIES OF THE VILAZODONE
TABLES AND PACKAGED PRODUCT NECESSARY FOR THE DISCOVERY STUDY IN ACCORDANCE WITH
PROCEDURES AND METHODS SET FORTH IN SCHEDULE 3, OR AS OTHERWISE MUTUALLY
AGREED.  AFTER COMPLETION OF THE DISCOVERY STUDY, MERCK KGAA WILL SUPPLY
GENAISSANCE UPON WRITTEN REQUEST WITH ITS REMAINING STOCK OF VILAZODONE
API.  EXCEPT AS STATED ABOVE, GENAISSANCE WILL BE RESPONSIBLE FOR ASSURING
ADEQUATE SUPPLIES OF VILAZODONE FOR REMAINING CLINICAL TRIALS.  GENAISSANCE
SHALL ALSO HAVE THE RIGHT TO NEGOTIATE A SUPPLY AGREEMENT WITH MERCK KGAA FOR
THE SUPPLY OF VILAZODONE API FOR CLINICAL TRIALS AND FOR COMMERCIAL USE.

 
8.1.2
Commercial Production, Marketing and Distribution.  Subject to any rights
granted to MERCK KGAA in a CO-COMMERCIALIZATION AGREEMENT pursuant to Section
5.3 and any separately negotiated supply agreement, GENAISSANCE shall be
responsible for manufacture and production of VILAZODONE API and dosage forms in
sufficient quantities to service worldwide sales of PRODUCTS, marketing and
distribution of PRODUCTS upon GOVERNMENTAL APPROVAL, either using its own
resources or by partnering with a THIRD PARTY in a co-commercialization
arrangement, or by sublicensing such rights to a THIRD PARTY. GENAISSANCE shall

 

 
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also be responsible for obtaining all necessary approvals for the manufacture
and distribution of VILAZODONE API and dosage forms.

8.2
Production of PRODUCT, THERANOSTIC PRODUCTS and DIAGNOSTIC PRODUCTS.  Except as
otherwise provided herein, GENAISSANCE shall be fully responsible at its risk
and expense for all manufacturing, development, scale-up, facilities
certification, production, packaging, labelling, storage, and shipment of
PRODUCTS throughout the TERRITORY.

 
8.3
PRODUCT, THERANOSTIC PRODUCTS and DIAGNOSTIC PRODUCTS Recall.  Except as
provided in any supply agreement or CO-COMMERCIALIZATION AGREEMENT, any and all
recall decisions with respect to VILAZODONE or PRODUCT, THERANOSTIC PRODUCTS and
DIAGNOSTIC PRODUCTS distributed by GENAISSANCE shall be the responsibility of
GENAISSANCE, at its risk and expense.  Whenever a recall of PRODUCT, THERANOSTIC
PRODUCTS and DIAGNOSTIC PRODUCTS is to be effected, GENAISSANCE shall
immediately (but in any case in advance of any such recall) so notify MERCK
KGAA, together with a statement of any actions planned in connection with such
recall.

 
9.           GOVERNMENTAL APPROVALS / REGULATORY AFFAIRS.
 
9.1
MERCK KGAA regulatory transfer.  With the reasonable assistance of GENAISSANCE,
MERCK KGAA will effect the transfer to GENAISSANCE, within [***] after the
EFFECTIVE DATE, of the existing clinical trial license (i.e. IND) for the
PRODUCT previously or currently being tested where MERCK KGAA is the sponsor.
Thereafter, GENAISSANCE will take responsibility for reporting adverse drug
reactions and updating all clinical trial licenses.

 
9.2
Regulatory affairs related to VILAZODONE.   Except as the PARTIES may otherwise
agree, GENAISSANCE will be responsible, at its risk and expense, for preparing,
filing, and prosecuting any and all regulatory filings required for the
production of VILAZODONE.

 
9.3
Responsibility for REGULATORY APPLICATIONS.  GENAISSANCE is responsible, at its
risk and expense, for preparing, filing, and prosecuting all REGULATORY

 

 
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APPLICATIONS with respect to PRODUCTS, THERANOSTIC PRODUCTS and DIAGNOSTIC
PRODUCTS and for obtaining all necessary GOVERNMENTAL APPROVALS for the
PRODUCTS, THERANOSTIC PRODUCTS and DIAGNOSTIC PRODUCTS throughout the TERRITORY.
 
9.4
General responsibility.  GENAISSANCE shall have exclusive authority and
responsibility FOR COMPLYING WITH ALL REGULATORY REQUIREMENTS AND MAINTAINING
ALL GOVERNMENTAL AUTHORITY CONTACTS RELATING TO REGULATORY APPLICATIONS OR
OTHERWISE WITH RESPECT TO THE PRODUCT, THERANOSTIC PRODUCTS AND DIAGNOSTIC
PRODUCTS IN THE TERRITORY, INCLUDING OBTAINING ALL REQUIRED GOVERNMENTAL
APPROVALS, THE MAINTAINING AND UPDATING OF THE GOVERNMENTAL APPROVALS, THE
REPORTING OF PRODUCT COMPLAINTS OR ANY ADVERSE DRUG REACTIONS, THE COMPLIANCE OF
PROMOTIONAL MATERIALS WITH APPLICABLE RULES AND REGULATIONS, AND THE FILING OF
PROMOTIONAL MATERIALS WITH GOVERNMENTAL AUTHORITIES, IF PERMISSIBLE ACCORDING TO
MANDATORY APPLICABLE LAWS.

 
9.5
Regulatory communications.  As part of GENAISSANCE’s periodic reports pursuant
to Section 4.4, GENAISSANCE shall provide to MERCK KGAA summaries of all major
communications from or to any GOVERNMENTAL AUTHORITY regarding any REGULATORY
APPROVALS relating to the PRODUCT, THERANOSTIC PRODUCTS and DIAGNOSTIC PRODUCTS
or their manufacture or sale, and shall promptly report to MERCK communications
from or to any GOVERNMENTAL AUTHORITY regarding any recalls, facility
suspensions or closures, or serious adverse events relating to the PRODUCT,
THERANOSTIC PRODUCTS and DIAGNOSTIC PRODUCTS.

 
9.6
APPROVAL OWNERSHIP.  EXCEPT AS PROVIDED IN A CO-COMMERCIALIZATION AGREEMENT, ALL
GOVERNMENTAL APPROVALS WITHIN THE TERRITORY RELATING TO THE PRODUCT, THERANOSTIC
PRODUCTS AND DIAGNOSTIC PRODUCTS OBTAINED BY GENAISSANCE SHALL BE THE PROPERTY
OF GENAISSANCE OR ANY APPLICABLE

 

 
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GENAISSANCE AFFILIATE AND SHALL BE HELD, TO THE EXTENT LEGALLY PERMISSIBLE, IN
GENAISSANCE’S OR SUCH AFFILIATE’S NAME.

9.7
Delegation.  GENAISSANCE may delegate any of its rights or obligations under
this Section 9 to any sublicensee or THIRD PARTY with which GENAISSANCE is
developing or commercializing any PRODUCT, THERANOSTIC PRODUCT or DIAGNOSTIC
PRODUCT.

 
10.           JOINT COMMITTEE
 
10.1
JOINT COMMITTEE responsibilities. The JOINT COMMITTEE, which shall remain in
place during the term of this AGREEMENT and shall act as a vehicle to facilitate
the exchange of information and knowledge about VILAZODONE, collaborate to
expedite the retrospective DISCOVERY STUDY described in Section 3.5.1, supervise
progress in development, and approve any changes in the DEVELOPMENT PLAN which
may become necessary.  To the extent legally permissible, the JOINT COMMITTEE
will also facilitate the exchange of information about the commercialization of
VILAZODONE, including sales and marketing plans, and business opportunities for
sublicensing and decide the course of action about sublicensing issues,
potential partners, and lifecycle management for VILAZODONE. The
responsibilities of the JOINT COMMITTEE include the following:

 
(a)  Reviewing and monitoring GENAISSANCE’s progress, challenges, and
achievements in conducting the activities called for in all active DEVELOPMENT
PLANS;
 
(b)  Coordinating the PARTIES’ activities under the MARKETING PLANS as provided
in a CO-COMMERCIALIZATION AGREEMENT.
 
10.2
FORMATION OF THE JOINT COMMITTEE.  THE JOINT COMMITTEE SHALL BE ESTABLISHED NO
LATER THAN NINETY (90) DAYS FOLLOWING THE EFFECTIVE DATE AND SHALL INITIALLY
HAVE UP TO EIGHT (8) MEMBERS.  EACH PARTY SHALL APPOINT UP TO FOUR OF THE
MEMBERS, AND IN DOING SO, SHALL ATTEMPT TO INSURE THAT EACH MEMBER IS QUALIFIED,
KNOWLEDGEABLE, AND EXPERIENCED IN THE FUNCTIONAL

 

 
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AREA(S) THEN LIKELY TO COME BEFORE THE JOINT COMMITTEE.  EITHER PARTY MAY CHANGE
ANY OF ITS REPRESENTATIVES ON THE JOINT COMMITTEE UPON NOTICE TO THE OTHER
PARTY.  UPON THE REASONABLE REQUEST OF EITHER PARTY FROM TIME TO TIME, THE JOINT
COMMITTEE MAY BE RECONSTITUTED WITH FEWER OR WITH ADDITIONAL MEMBERS, OR WITH
MEMBERS WITH DIFFERING OR ADDITIONAL COMPETENCIES, AS IS REASONABLY RELATED TO
CHANGES IN THE ROLE OF THE JOINT COMMITTEE (E.G., WHERE MERCK KGAA HAS EXERCISED
ITS OPTION TO CO-COMMERCIALIZE AND A MARKETING PLAN IS TO BE COMPLETED AND COME
INTO EFFECT).
 
10.3
JOINT COMMITTEE meetings.   The JOINT COMMITTEE shall meet in-person at least
twice per year during the initial five (5) years following the EFFECTIVE DATE,
at least once thereafter.  The initial meeting shall be held without undue delay
following the establishment of the JOINT COMMITTEE.  The JOINT COMMITTEE may
hold meetings, and shall also address issues as they arise in the interim
between meetings, via telephone conference, videoconference and/or electronic
mail.  If MERCK KGAA exercises its option under Section 5.3 to CO-COMMERCIALIZE,
the JOINT COMMITTEE shall thereafter meet at least once each QUARTER, either by
telephone conference or videoconference, or in-person, provided that it shall in
any case hold in-person meetings at least annually.

 
10.4
JOINT COMMITTEE roles.  The JOINT COMMITTEE will facilitate the exchange of
information and will discuss commercialization of the PRODUCT, including
MARKETING PLANS and business opportunities for sublicense issues, potential
partners, reasons for the decision on PRODUCT launches in the TERRITORY
according to Sections 4.1 and 4.7 and lifecycle management for the PRODUCT, and
discuss the status of development, regulatory and marketing activities.  Except
to the extent otherwise provided in a CO-COMMERCIALIZATION AGREEMENT, all
development and commercialization issues and all other issues coming before the
JOINT COMMITTEE shall be resolved by consensus, with GENAISSANCE having the
casting vote.  In all cases, each PARTY shall be bound by this AGREEMENT and its
obligations of good faith and fair dealing.

 
 
 
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10.5
JOINT COMMITTEE Chairperson.  Upon the formation of the JOINT COMMITTEE,
GENAISSANCE will appoint the chairperson of the JOINT COMMITTEE who shall have
sole authority to: (i) collect issues for the meeting agendas with due regard to
the interests and requests of MERCK KGAA’s representatives; (ii) call emergency
meetings of the JOINT COMMITTEE at the request of any JOINT COMMITTEE member;
(iii) have minutes of the JOINT COMMITTEE meetings recorded, prepared and,
within a reasonable time, issued, which meeting minutes shall be submitted for
approval of the members of the JOINT COMMITTEE.

 
11.           INTELLECTUAL PROPERTY
 
11.1
Ownership of RESULTING IP.  Any and all RESULTING IP and RESULTING IP PATENTS
will be jointly owned by GENAISSANCE and MERCK KGAA, with each PARTY having an
equal undivided interest.  During the term of, and for the purposes of, this
AGREEMENT and except for the purposes of Sections 7.5 and 7.10 or as otherwise
provided hereunder, MERCK KGAA’s interest in RESULTING IP and RESULTING IP
PATENTS shall be deemed to be part of MERCK KGAA KNOW-HOW or MERCK KGAA PATENTS
(as appropriate) licensed to GENAISSANCE hereunder; provided, however, that the
addition of such MERCK KGAA PATENTS on such RESULTING IP shall not automatically
extend the duration of the exclusivity in the EU of GENAISSANCE’s license under
Section 2.1, unless and to the extent that EU law or rules at any time permit
such an extension.

 
11.2
OWNERSHIP OF IMPROVEMENTS.  MERCK KGAA SHALL BE THE OWNER OF ANY IMPROVEMENT
MADE SOLELY BY MERCK KGAA AND SHALL OWN AN EQUAL UNDIVIDED INTEREST WITH
GENAISSANCE IN ANY IMPROVEMENT MADE JOINTLY WITH GENAISSANCE. MERCK KGAA’S
INTERESTS IN IMPROVEMENTS SHALL BE DEEMED TO BE PART OF THE MERCK KGAA PATENTS
OR THE MERCK KGAA KNOW-HOW (AS APPROPRIATE) LICENSED TO GENAISSANCE HEREUNDER;
PROVIDED, HOWEVER, THAT THE ADDITION OF SUCH MERCK KGAA PATENTS ON SUCH
IMPROVEMENTS SHALL NOT AUTOMATICALLY EXTEND THE DURATION OF THE EXCLUSIVITY IN
THE EU OF GENAISSANCE’S LICENSE UNDER SECTION 2.1, UNLESS AND TO THE EXTENT THAT
EU LAW OR RULES AT ANY TIME

 

 
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PERMIT SUCH AN EXTENSION.  GENAISSANCE SHALL BE THE OWNER OF ANY IMPROVEMENT
MADE SOLELY BY GENAISSANCE.

11.3
Information exchange.  Each PARTY shall inform the other promptly upon the
discovery or creation of any IMPROVEMENT or RESULTING IP conceived or acquired
by it, together with all available details of such IMPROVEMENT and RESULTING IP.

 
11.4
Inventors’ fees.  Each PARTY shall bear the costs of sums payable to its own
past, present or future employees or contractors in respect of any IMPROVEMENT
or RESULTING IP made or discovered during the term of this AGREEMENT.

 
12.           PATENT PROSECUTION, INFRINGEMENTS AND LITIGATION
 
12.1
Patent Prosecution.  Except in respect of RESULTING IP, MERCK KGAA shall retain
the responsibility for the prosecution and maintenance of the MERCK KGAA
PATENTS.  The pursuit of patent protection for IMPROVEMENTS solely owned by a
PARTY shall be the responsibility of the owning PARTY, who shall bear all the
costs of such pursuit.  For jointly owned IMPROVEMENTS, the PARTIES shall
consult in good faith as to which of them is the most appropriate PARTY to
pursue patent protection, with the out of pocket costs for such pursuit to be
shared equally by the PARTIES.  Unless otherwise agreed, GENAISSANCE shall
pursue patent protection for the RESULTING IP, with the out of pocket costs for
such pursuit [***].  The PARTY designated in the preceding sentences of this
Section 12.1 as responsible for pursuing patent protection for a particular
category of inventions (the “Prosecuting PARTY”) shall exert its COMMERCIALLY
REASONABLE EFFORTS to secure the broadest possible scope and coverage for that
invention category throughout the TERRITORY.  The Prosecuting Party shall inform
the other PARTY of the plan for the filing, prosecution and maintenance of
patent applications and patents for that invention category and any significant
changes thereto.  The Prosecuting Party shall consider in good faith any
comments made by the other PARTY with respect to such plan.

 
12.2
Information and cooperation.  Each PARTY agrees to cooperate with the other with
respect to the patent prosecution activities described in this Section 12,
including, without limitation, the execution of all such documents and
instruments and the performance of such acts as may be reasonably necessary in
order to permit the Prosecuting PARTY

 

 
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to perform its responsibilities hereunder.  The Prosecuting PARTY shall consult
with the other PARTY regarding the course of patent prosecution or other
proceedings (e.g. grant, interference, opposition, re-examination, reissue,
revocation or nullification).  Such consultation shall include: (i) providing
the other PARTY with a draft of any patent application or document relating to
the prosecution thereof no less than [***] prior to filing with any patent
office and considering in good faith the other PARTY’s comments thereon; (ii)
providing the other PARTY copies of all documents filed with or received from
any patent office within [***] of such filing or receipt; and (iii) providing,
on an annual basis, the other Party with a list of all patents and patent
applications prosecuted pursuant to this Section 12, and the status
thereof.  The Prosecuting PARTY shall provide all such consultation at no cost
to the other PARTY.  Each PARTY shall hold all information disclosed to it under
this Section 12 as confidential in accordance with the provisions of Section 15.
 
12.3
EXTENSIONS.  The Prosecuting PARTY for a particular patent pursuant to Section
12.1 shall be responsible for obtaining all available EXTENSIONS to such patent,
other than any EXTENSIONS based on a marketing, data or regulatory exclusivity
(e.g, pediatric exclusivity, data package exclusivity and SPCs) relating to
PRODUCTS, THERANOSTIC PRODUCTS, and DIAGNOSTIC PRODUCTS, which shall be the
responsibility of GENAISSANCE.  If the PARTY responsible for obtaining a
particular EXTENSION (the “Extending PARTY”) is not eligible to seek such
EXTENSION, then the other PARTY shall take on such responsibility in
consultation with the Extending PARTY and with the mutual agreement of the
PARTIES as to any material choices to be made with respect thereto.  Each PARTY
shall provide the other PARTY with copies of all relevant information, data,
documentation and assistance which is reasonably necessary for such PARTY to
obtain those EXTENSIONS for which it is responsible pursuant to this Section
12.3.  Any such assistance, supply of information and consultation shall be
performed promptly and in a manner that will insure that all EXTENSIONS are
obtained wherever, and to the maximum extent, they may be
available.  Notwithstanding the foregoing, MERCK KGAA shall not seek any
EXTENSION to any patent in respect of any product other than PRODUCTS,
THERANOSTIC PRODUCTS, and DIAGNOSTIC PRODUCTS if GENAISSANCE reasonably believes
that such EXTENSION might adversely affect GENAISSANCE’s

 

 
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right to obtain an EXTENSION with respect to any PRODUCT, THERANOSTIC PRODUCT,
or DIAGNOSTIC PRODUCT.

12.4
Abandonment or forfeiture.  If a PARTY intends to not file, abandon or otherwise
cause or allow to be forfeited in any country a patent application or patent for
which it is the Prosecuting PARTY pursuant to Section 12.1, or any claim within
such patent application or patent, then such PARTY shall notify the other PARTY
of such intention at least [***] in advance of any filing date or bar date or
any other applicable deadline, and the other PARTY shall have the right to
assume responsibility for the prosecution, defense, or maintenance of such
claim, patent application or patent in such country.  Should GENAISSANCE assume
responsibility for prosecuting or maintaining any MERCK KGAA PATENT, or claim
therein, pursuant to this Section 12.4, then GENAISSANCE may deduct its out of
pocket costs for such prosecution and maintenance from any payments due to MERCK
under this AGREEMENT.

 
12.5
THIRD PARTY infringement suits.  In the event of the institution of any suit by
a THIRD PARTY against MERCK KGAA, GENAISSANCE, or their respective AFFILIATES,
sub-licensees or distributors for patent infringement involving the manufacture,
use, sale, distribution or marketing of VILAZODONE or PRODUCT, THERANOSTIC
PRODUCT or DIAGNOSTIC PRODUCT anywhere in the TERRITORY, the PARTY sued (or
whose AFFILIATES or distributors are sued) shall promptly notify the other PARTY
in writing.  The commercializing PARTY shall have the right to defend such suit
at its own option and expense, but it shall in any event reasonably consult with
the other PARTY with respect to such defense.  MERCK KGAA and GENAISSANCE shall
assist one another and co-operate in any such litigation at the other’s
reasonable request without expense to the requesting PARTY.

 
12.6
Patent enforcement.  In the event that MERCK KGAA or GENAISSANCE becomes aware
of actual, suspected or threatened infringement of a MERCK KGAA PATENT or
RESULTING IP PATENT anywhere in the TERRITORY, that PARTY shall promptly notify
the other PARTY thereof, with all available information about the
situation.  GENAISSANCE shall have the first right, but not the obligation, to
bring, at its own expense, an appropriate action against any THIRD PARTY and to
defend any opposition or declaratory judgment action for non-infringement or
invalidity, to use MERCK

 

 
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KGAA’s name in connection therewith, and to join MERCK KGAA as a party to any
such action.  If GENAISSANCE does not commence such action within [***] of its
receipt of a written demand from MERCK KGAA that it do so, then MERCK KGAA,
after notifying GENAISSANCE in writing, shall be entitled to bring such
infringement action at its own expense, to use GENAISSANCE’s name in connection
therewith, and to join GENAISSANCE as a party to any such action; provided that
it commences the action within a further [***] (or else thereafter GENAISSANCE’s
first right under this section shall again be applicable to the situation).  The
PARTY conducting any such action under this Section 12.6 shall have full control
over its conduct; provided, however, that any settlement thereof shall be
subject to Section 12.8.  In any event, MERCK KGAA and GENAISSANCE shall assist
one another and co-operate in any such enforcement efforts
 
or litigation at the other’s reasonable request without expense to the
requesting PARTY.  Either PARTY may join at its own expense any action brought
by the other PARTY.
 
12.7
Indemnification.  In any action brought pursuant to Section 12.6, the PARTY
bringing the action shall indemnify the other PARTY, its officers, directors,
shareholders, employees, agents, successors and assigns from any damages or
liability awarded by a court, including for reasonable attorney’s fees and
costs, which may result from claims, counterclaims or cross-claims asserted by a
defendant, except to the extent that such damages or liabilities result from the
gross negligence or wilful misconduct of the other PARTY.

 
12.8
Recoveries.  MERCK KGAA and GENAISSANCE shall recover their respective
reasonable out-of-pocket expenses associated with any litigation or settlement
thereof from any recovery made by any PARTY as described in this Section 12.
Notwithstanding Section 7, the PARTIES will share any recovery for patent
infringement as follows: first, the PARTY initiating an infringement suit shall
be reimbursed for all its reasonable out-of-pocket expenses of the action,
second, the other PARTY shall be reimbursed for all its reasonable out-of-pocket
expenses of such suit, and third, the PARTY initiating the suit shall receive
[***]% of any remaining balance and the other PARTY will receive the other
[***]% of any remaining balance.

 
 
 
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12.9
Information about enforcement.  The PARTIES shall keep one another informed in a
timely manner of the status of, and of their respective activities regarding,
any litigation or settlement thereof concerning PRODUCT, THERANOSTIC PRODUCT or
DIAGNOSTIC PRODUCT in the TERRITORY; provided, however, that no settlement or
consent judgment or other voluntary final disposition of any suit defended or
action brought by a MERCK KGAA pursuant to this Section 12 may be entered into
without the consent of the GENAISSANCE (such consent not to be unreasonably
withheld or delayed). To the extent that either PARTY initiates an action
pursuant to Section 12.7, if the PARTIES reasonably fail to agree upon the terms
of any such settlement, consent judgment or other voluntary final disposition,
the PARTY wishing to continue any litigation shall solely bear the monetary loss
or monetary benefit from the future outcome of such litigation and shall
guarantee to the other PARTY that wished to make such settlement that such other
PARTY will obtain, either from the proceeds of such litigation (if any) or from
the PARTY an amount at least as large as it would have obtained from such
settlement had it been entered.

 
13.           RIGHT OF FIRST NEGOTIATION
 
13.1
UNTIL THE FIRST COMMERCIAL SALE, BY GENAISSANCE OR A SUB-LICENSEE OF
GENAISSANCE, OF THE FIRST PRODUCT OR THE TERMINATION OF THIS AGREEMENT, WHATEVER
COMES EARLIER, MERCK KGAA SHALL NOTIFY GENAISSANCE PRIOR TO THE COMMENCEMENT OF
HUMAN CLINICAL TRIALS IF IT WANTS TO DEVELOP OR COMMERCIALLY EXPLOIT, DIRECTLY
OR INDIRECTLY THROUGH A THIRD PARTY, ANY PHARMACEUTICAL PRODUCT CONTAINING A
DERIVATIVE OR ANY DUAL SSRI AND 5-HT1A PARTIAL AGONIST OR ANY SSRI OR ANY 5-HT1A
PARTIAL AGONIST FOR THE TREATMENT OF ANY INDICATION LISTED IN SCHEDULE 4 (“MERCK
COMPOUND”).  THEREAFTER, GENAISSANCE WILL HAVE THE FIRST RIGHT FOR A PERIOD OF
[***] AFTER SUCH NOTIFICATION TO NEGOTIATE A DEVELOPMENT AND COMMERCIALIZATION
AGREEMENT FOR SUCH COMPOUND OR PRODUCT.  MERCK KGAA MAY NOT ENTER INTO AN
AGREEMENT WITH ANY THIRD PARTY IN RESPECT OF SUCH MERCK COMPOUND BASED UPON
INFORMATION MATERIALLY DIFFERENT THAN

 

 
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THAT GIVEN GENAISSANCE WITH RESPECT TO SUCH MERCK COMPOUND, WITHOUT PROVIDING
GENAISSANCE WITH SUCH DIFFERENT INFORMATION AND GRANTING GENAISSANCE AN
ADDITIONAL [***] AFTER PROVIDING SUCH INFORMATION TO NEGOTIATE A DEVELOPMENT AND
COMMERCIALIZATION AGREEMENT FOR SUCH MERCK COMPOUND. AS USED IN THIS SECTION
13.2 AND IN SECTION 13.2, “SSRI” SHALL MEAN A SELECTIVE SEROTONIN REUPTAKE
INHIBITOR, WHICH IS A SUBSTANCE THAT ACTS AT A SYNAPSE BY INHIBITING OR
PREVENTING THE REUPTAKE OF SEROTONIN (5-HYDROXY-TRYPTAMINE), “5HT1A PARTIAL
AGONIST” SHALL MEAN A SUBSTANCE THAT ELICITS A LOWER MAXIMAL RESPONSE OF THE
5HT1A RECEPTOR, WHEN COMPARED TO AN EQUAL CONCENTRATION OF SEROTONIN, AND “DUAL
SSRI/5-HT1A PARTIAL AGONIST” SHALL MEAN A SUBSTANCE THAT COMBINES THE PROPERTIES
OF AN SSRI AND A 5-HT1A PARTIAL AGONIST.  FOR THE AVOIDANCE OF DOUBT, THIS
SECTION 13.1 IS NOT APPLICABLE TO SARIZOTAN (5HT1A AND DOPAMINE D4 AGONIST) FOR
THE INDICATION OF PARKINSON’S DISEASE AND EMD 281014 (5HT2A ANTAGONIST) AND ITS
DERIVATIVES CLAIMED IN PATENT NUMBER EP1198453 FOR ALL INDICATIONS.
 
13.2
Until the first commercial sale, by GENAISSANCE or a sub-licensee of
GENAISSANCE, of the first PRODUCT or the termination of the AGREEMENT for
VILAZODONE, whatever comes earlier, GENAISSANCE shall notify MERCK KGAA prior to
the commencement of human clinical trials, if it wants to develop or
commercialize, by itself or with a THIRD PARTY, a pharmaceutical product
containing a Dual SSRI and 5-HT1A Partial Agonist (other than VILAZODONE) or any
SSRI or any 5-HT1A Partial Agonist for the treatment of any INDICATION listed in
Schedule 4 (“Genaissance Compound”).  Thereafter, MERCK KGAA will have the first
right for a period of [***] to negotiate a development and commercialization
agreement for such compound or product.  GENAISSANCE may not enter into an
agreement with any THIRD PARTY in respect of such Genaissance Compound based
upon information materially different than that given MERCK KGAA with respect to
such Genaissance Compound, without providing MERCK KGAA with such different
information and granting MERCK KGAA an additional [***] after providing such
information to negotiate a development and commercialization agreement for such
GENAISSANCE

 

 
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Compound.  For purposes of clarification, GENAISSANCE shall not be deemed to be
developing or commercializing any compound or product owned or controlled by a
THIRD PARTY which pays GENAISSANCE a reasonable arm’s length service fee to
perform a genomic or pharmacogenomic service in connection with such compound or
product and GENAISSANCE does not acquire any rights in intellectual property
relating to such compound or product or its use that was generated under such
service arrangement.
 
13.3
If GENAISSANCE, using the RESULTING IP, identifies a DERIVATIVE that GENAISSANCE
believes may show potential as the active ingredient in a pharmaceutical
product, GENAISSANCE shall notify MERCK KGAA of the identity of such DERIVATIVE
and MERCK KGAA shall grant GENAISSANCE an exclusive option to negotiate in good
faith for a period of [***] the terms of a license agreement for the development
and commercialization of a product containing such DERIVATIVE.  If the PARTIES
do not enter into such a license agreement, MERCK KGAA shall return and may not
use or disclose any of the information or data GENAISSANCE may have disclosed in
connection with such negotiations in respect of such DERIVATIVE and may not
directly or indirectly with THIRD PARTIES grant rights to or develop such
DERIVATIVE.

 
14.           PUBLICATIONS
 
14.1
Neither MERCK KGAA nor GENAISSANCE shall disclose to the public or any THIRD
PARTY the existence of this AGREEMENT or the terms described herein except with
the prior written consent of the other or as required by law.  Notwithstanding
the foregoing, (a) either PARTY may disclose such terms as are required to be
disclosed in its publicly-filed financial statements or other public statements
pursuant to applicable laws, regulations and stock exchange rules (e.g., the
U.S. Securities and Exchange Commission or any other stock exchange on which
securities issued by GENAISSANCE or MERCK KGAA may be issued); provided, that in
making such disclosures, each PARTY shall redact the terms of this AGREEMENT to
the extent reasonably possible, (b) either Party shall have the further right to
disclose the material financial terms of this AGREEMENT under confidentiality
undertakings to any potential acquirer, merger partner or potential providers of
financing and their advisors, and (c) either PARTY shall

 

 
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have the right to disclose information regarding the development or
commercialization status of a PRODUCT to the extent such disclosure is customary
and material to their current or prospective investors, or required by
applicable laws or stock exchange rules. Neither PARTY shall make any other
statement to the public regarding the execution and/or any other aspect of the
subject matter of this AGREEMENT, except: (i) where a PARTY reasonably believes
disclosure is required under applicable laws or ethical commercial practice,
(ii) for customary discussions with current or prospective investors and
analysts, and (iii) either PARTY may use the text of a statement previously
approved by the other Party.  Genaissance shall make commercially reasonable
efforts to coordinate with MERCK KGAA all press releases and announcements that
relate to this AGREEMENT or any product developed hereunder.
 
14.2
Neither PARTY shall make any form of scientific publication which discloses
Confidential Information of the other PARTY or information to which the other
PARTY has an exclusive license without the prior written consent of the other
PARTY, but GENAISSANCE acknowledges the interest of MERCK KGAA and the former
licensee GSK to publish preclinical scientific data relating to VILAZODONE
obtained before the EFFECTIVE DATE which shall be made available to GENAISSANCE
reasonably in advance before such publication in which case the written consent
of GENAISSANCE shall not be unreasonably withheld or delayed.  Following any
reversion of rights to MERCK KGAA under Sections 3.6, 3.7 or 4.2 or any
termination under Sections 17.1 – 17.3, GENAISSANCE (in the case of any such
reversion of rights), the non-terminating party (in the case of a termination
under Section 17.1(b)) or both parties (in the case of a termination under
Sections 17.1(a), 17.2 or 17.3), shall not make any such publications about a
PRODUCT, except to the extent required by law or a manuscript was submitted for
publication prior to the date of notice of termination.

 
 
15.
CONFIDENTIALITY

 
15.1
Each PARTY agrees that (i) all information disclosed by the PARTIES and
identified as, or acknowledged to be, confidential, and (ii) all results
achieved under this AGREEMENT, ((i) and (ii) to be understood as “Confidential
Information” under this

 
 
 
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Section 15) they obtain from the other PARTY are the confidential property of
the disclosing party and shall be held in confidence for the [***].
 
15.2
The receiving party (“the Recipient”) shall not be obligated under this Section
15 to the extent that (a) the Recipient is required to disclose information by
law, order or regulation of an administrative agency or a court of competent
jurisdiction, provided in either case that the Recipient shall provide notice
thereof to the disclosing party and sufficient opportunity to object, time
permitting, to any such disclosure or to request confidential treatment thereof;
or (b) the Recipient can demonstrate that (i) the information was public
knowledge, other than as a result of acts attributable to the Recipient in
violation hereof; (ii) the information was rightfully known by the Recipient (as
shown by its written records) prior to the date of disclosure to the Recipient
by the other party hereunder; (iii) the information was disclosed to the
Recipient on an unrestricted basis from a THIRD PARTY not under a duty of
confidentiality to the disclosing party; or (iv) the information was
independently developed by employees or agents of the Recipient without access
to the Confidential Information of the disclosing party.

 
15.3
Notwithstanding the foregoing, both PARTIES shall have the right to disclose
Confidential Information (i) to those persons, entities and/or contractors that
such PARTY employs for the purposes of testing, evaluation, demonstration,
development, production, sale and/or development of the PRODUCT, THERANOSTIC
PRODUCT or DIAGNOSTIC PRODUCT or VILAZODONE to the extent that such persons,
entities and/or contractors require such information to comply with their
obligations towards such PARTY (ii) to any administrative agency for purposes of
obtaining approval to manufacture, test or market a PRODUCT, THERANOSTIC PRODUCT
or DIAGNOSTIC PRODUCT, or obtain patent protection and (iii) as reasonably
necessary to protect or practice its licenses hereunder, including disclosure to
potential sublicensees.  Such PARTY shall bind these persons, entities,
contractors and potential sublicensees, other than any governmental agency, by
confidentiality obligations similar to the ones contained in this Section
15.  Each PARTY shall inform the other PARTY prior to providing Confidential
Information to such persons, entities, and/or contractors, other than any
governmental agency, and such PARTY may object to passing on the

 
 
 
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Confidential Information, and, if it has material reasons for so objecting, the
other PARTY shall not make such disclosure (or shall make it under altered terms
or circumstances reasonably satisfactory to the objecting PARTY.
 
16.
TERM

 
16.1
This AGREEMENT becomes effective on the EFFECTIVE DATE and, subject to earlier
termination under Section 17, shall remain in full force until expiration of all
ROYALTY TERMS.  On a country-by-country, product-by-product basis, for the
period commencing upon expiration of the applicable ROYALTY TERM and ending on
the second anniversary date of such expiration, GENAISSANCE shall have an
exclusive license under the MERCK KGAA KNOW-HOW, RESULTING IP, RESULTING IP
PATENTS and VILAZODONE MANUFACTURING TECHNOLOGY to make, use and sell PRODUCTS,
THERANOSTIC PRODUCTS and DIAGNOSTIC PRODUCTS as long as GENAISSANCE pays to
MERCK a know-how royalty at a royalty rate equal to [***] percent ([***]%) of
the last royalty rate payable in the immediately preceding ROYALTY TERM, but not
less than a royalty of [***] percent of NET SALES.  After the second anniversary
date of such expiration, or upon earlier notification by GENAISSANCE to MERCK
that it is terminating such exclusive license, each PARTY shall have the
non-exclusive right, including the right to sub-license, to use the MERCK KGAA
KNOW-HOW, RESULTING IP, RESULTING IP PATENTS and VILAZODONE MANUFACTURING
TECHNOLOGY to make, have made, use have used, sell or have sold the PRODUCTS and
the obligation to make royalty payment as set forth in the preceding sentence
ends simultaneously.

 
17.
TERMINATION

 
17.1
Termination for breach.  If either PARTY is in breach or default of any of its
material obligations hereof (which includes GENAISSANCE’s obligations under
Sections 4.1 and 4.5) or a material breach of a representation or warranty and
does not reasonably remedy such breach or default within sixty (60) days after
receipt of notice from the other PARTY of such breach or default, the other
PARTY may either:

 
 
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(a) terminate this AGREEMENT by a notice to the PARTY in breach or default or
 
(b) the non-breaching PARTY may terminate the licenses and other rights granted
to the breaching Party under this AGREEMENT; and the breaching Party shall grant
the non-breaching Party the right to exercise the licenses and other rights
granted to it under this AGREEMENT, subject to the terms and conditions of this
AGREEMENT, including any obligation to pay milestone payments or royalties.
 
In either case, such termination shall be effective thirty (30) days after
delivery of written notice from the non-breaching PARTY of its intent to so
terminate following the cure period.  In the event that the breaching PARTY
should wish to dispute the exercise of the other PARTY’s rights under this
Section 17.1, then during such sixty (60) day period, the breaching PARTY must
invoke the arbitration procedure described in Section 29.  Failure to invoke
such rights by the breaching PARTY shall constitute a forfeit of the right to
contest such termination.
 
17.2
Termination for commercial infeasibility.  If GENAISSANCE reasonably determines,
based on the DISCOVERY STUDY or the results of clinical trials for the PRODUCTS
or (despite GENAISSANCE’s exertion of the efforts required hereunder) obtaining
unsatisfactory labelling, pricing, or reimbursement authorizations for the
PRODUCTS or if GENAISSANCE otherwise determines, in the exercise of its
reasonable judgment, that the patent, medical, scientific, technical, regulatory
or commercial profile of the PRODUCT does not justify continued development or
commercialization, that no PRODUCT in the INDICATION can be developed or
economically commercialized by it, GENAISSANCE shall have the right to terminate
this AGREEMENT in its entirety upon ninety (90) days written notice to the MERCK
KGAA.

 
17.3
Termination of license to contested patents.  If during the term of this
AGREEMENT, either PARTY or its AFFILIATES, or any other party related to such
PARTY or acting under its authority or sublicensees, for its benefit or with its
support, challenges the validity of any of the MERCK KGAA PATENTS or RESULTING
IP PATENTS in any forum (including a court, a patent office, or an arbitral
tribunal, and whether in the form

 
 
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of petitions for declaratory relief, claims, counterclaims, defenses,
interferences, petitions for re-examination, oppositions, or otherwise), then
the other PARTY shall be entitled to terminate this AGREEMENT immediately to the
extent applicable to such MERCK KGAA PATENT and RESULTING IP PATENTS and the use
or application of any MERCK KGAA KNOW-HOW to support making, using or selling
any PRODUCT, THERANOSTIC PRODUCT or DIAGNOSTIC PRODUCT within the scope of the
claims of such MERCK KGAA PATENT or RESULTING IP PATENT.

17.4
Insolvency.  Each PARTY shall have the right to terminate this AGREEMENT for
cause for any of the following reasons:

 
 
a)
Insolvency of the other PARTY;

 
 
b)
Appointment of a trustee or receiver with respect to all any material part of
the assets of the other PARTY; or

 
 
c)
Filing of application for bankruptcy, composition, liquidation, public auction,
or any other similar procedure in respect of the other PARTY or its assets if,
in the case of filing made without the other PARTY’s consent, such application
is not dismissed within ninety (90) days after filing.

 
17.5
CHANGE OF CONTROL.  In the event of a CHANGE OF CONTROL of a PARTY, the other
PARTY shall have, in addition to its other rights provided in this AGREEMENT,
the right to terminate this AGREEMENT if the surviving PARTY does not
acknowledge compliance with this AGREEMENT upon request of the other PARTY and
such other PARTY can reasonably object to the ability or willingness of the
PARTY subject to the CHANGE OF CONTROL to perform such PARTY’s obligations under
this AGREEMENT following the CHANGE OF CONTROL.  Promptly following public
notice of any proposed CHANGE OF CONTROL of a PARTY, it shall discuss such
proposed change with, and consider the reasonable concerns expressed by the
other PARTY to protect each PARTY’s interests in the PRODUCT and assure, in the
case of a CHANGE OF CONTROL involving GENAISSANCE, that its obligations to use
COMMERCIALLY REASONABLE EFFORTS are not diminished as a result thereof.

 
18.
OBLIGATIONS ON TERMINATION

 
 
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18.1
Return of materials.  Immediately following the valid termination of this
AGREEMENT for any reason, GENAISSANCE and its AFFILIATES and/or sublicensees
shall cease any and all use of the MERCK KGAA PATENTS, MERCK KGAA KNOW-HOW and
VILAZODONE MANUFACTURING TECHNOLOGY, and all related documentation, and all
other information and materials including all documents, raw data, files, study
protocols and results, remaining clinical supply of VILAZODONE provided by MERCK
KGAA to GENAISSANCE (not to include VILAZODONE provided pursuant to a separate
supply agreement), and GENAISSANCE shall return all of the foregoing items and
materials to MERCK KGAA within [***] of such termination at no cost to MERCK
KGAA.  Furthermore, GENAISSANCE shall supply to MERCK KGAA all raw data and
results from all studies conducted pursuant to any DEVELOPMENT PLAN in the form
such data and results are in as of the date of termination, including any
available reports of such data or results.

 
18.2
Post-reversion license.

 
18.2.1
Licenses to MERCK KGAA to the PRODUCT.  If MERCK KGAA terminates this AGREEMENT
according to Section 17.1, or if the rights to VILAZODONE or the PRODUCT revert
to MERCK KGAA in accordance with Sections 3.6, 3.7 or 4.2, GENAISSANCE shall
grant to MERCK KGAA and its AFFILIATES, a perpetual, transferable, worldwide,
royalty-free, exclusive (subject to applicable laws) license (with right to
sublicense) to make, use, sell, and import PRODUCTS under GENAISSANCE’s interest
in all RESULTING IP and RESULTING IP PATENTS.  Except in respect of RESULTING IP
and RESULTING IP PATENTS, GENAISSANCE’s licenses to the MERCK KGAA PATENTS, the
MERCK KGAA KNOW-HOW and the VILAZODONE MANUFACTURING TECHNOLOGY shall terminate
and GENAISSANCE shall transfer rights in any IND and all data and documents
relating to the PRODUCT to MERCK KGAA within [***] of such reversion or
termination.

 
18.2.2
DIAGNOSTIC PRODUCT Rights.  Notwithstanding the provisions of Section 18.2.1 and
subject to Section 18.6, MERCK KGAA’s grant to GENAISSANCE of the exclusive
right to use the RESULTING IP for DIAGNOSTIC PRODUCTS shall survive such
reversion or termination.

 
 
 
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18.2.3
THERANOSTIC PRODUCT Rights. If the rights to VILAZODONE and the PRODUCT revert
to MERCK KGAA as set forth in Section 18.2.1, then GENAISSANCE will grant back
to MERCK KGAA a fully paid exclusive (subject to applicable laws) right and
license to use the RESULTING IP for the research, development, marketing and
sale of THERANOSTIC PRODUCTs.  If thereafter, MERCK KGAA decides to market the
PRODUCT in conjunction with a THERANOSTIC PRODUCT, GENAISSANCE shall have a
right of first negotiation and right of first refusal to commercialise
(including developing, marketing or selling) such THERANOSTIC PRODUCT in
partnership with MERCK KGAA’s marketing of the PRODUCT. These rights shall
operate according to the following procedure.  If MERCK KGAA decides to market
the PRODUCT in conjunction with a THERANOSTIC PRODUCT, MERCK KGAA shall provide
GENAISSANCE with written notice of such decision.  If GENAISSANCE notifies MERCK
KGAA in writing within [***] of its receipt of such notice (“First Notice
Period”) that it wishes to exercise its right of first negotiation, then the
PARTIES shall negotiate in good faith for a period of up to [***] commencing
with the date of GENAISSANCE’s notice (“Negotiation Period”), a commercially
reasonable term sheet for partnering with MERCK KGAA to commercialise such
THERANOSTIC PRODUCT.  During the First Notice Period and the Negotiation Period,
MERCK KGAA shall not, directly or indirectly, solicit bids for such
commercialisation.  MERCK KGAA shall be free to negotiate with THIRD PARTIES to
provide such THERANOSTIC PRODUCT if (a) GENAISSANCE does not notify MERCK KGAA
within the First Notice Period that it wishes to exercise its right of first
negotiation or (b) the PARTIES do not agree on commercially reasonable terms
within the Negotiation Period.  If the PARTIES conduct unsuccessful negotiations
for such THERANOSTIC PRODUCT, and MERCK KGAA is subsequently prepared to accept
terms and conditions from a THIRD PARTY for commercializing substantially the
same THERANOSTIC PRODUCT, then prior to entering into an agreement with such
THIRD PARTY, MERCK KGAA shall first submit to GENAISSANCE such terms and
conditions and GENAISSANCE shall have the right, within [***] after receipt of
such terms and conditions (“Second Notice Period”), to notify MERCK KGAA that
GENAISSANCE elects to enter into an agreement with MERCK KGAA on equivalent
terms and conditions, in which event the PARTIES shall enter into an agreement
on such terms and conditions.  If GENAISSANCE does not notify MERCK KGAA within
the Second Notice Period that it wishes to enter into such agreement, then MERCK
KGAA shall be free to enter into an agreement with the THIRD PARTY on such terms
and conditions.

 
 
 
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18.3
Payments made or due.  Except to the extent remedies are available to
GENAISSANCE in respect of fraud or rescission, any payments by GENAISSANCE
already made or due on or before the date of termination of this AGREEMENT shall
be non-refundable and GENAISSANCE’s obligation to pay the same shall not be
affected by such termination.

 
18.4
Post-term liability.  GENAISSANCE shall be liable to MERCK KGAA for all damages
and all other available remedies for any unauthorized use or exploitation by
GENAISSANCE or its AFFILIATES or sublicensees of the MERCK KGAA PATENTS,
RESULTING IP, MERCK KGAA KNOW-HOW and VILAZODONE MANUFACTURING TECHNOLOGY after
the date of the valid termination of this AGREEMENT.

 
18.5
No continuing use of Know-How.  GENAISSANCE and its AFFILIATES or sub-licensees
shall not, following the termination of this AGREEMENT under Article 17,
develop, manufacture, use or sell products, whether or not they are PRODUCTS or
THERANOSTIC PRODUCTS, or services based on or use or application of any of the
MERCK KGAA KNOW-HOW that remains confidential.

 
18.6
Survival.   All rights and obligations that by their nature are intended to
survive expiration or termination of this AGREEMENT, including the provisions of
Section 7 (Payments and Royalties), Section 15 (Confidentiality), Section 18.2
(Post-term license), Section 19 (Warranties and Disclaimers), Section 20
(Limitation of Liability), Section 21 (Indemnification and Insurance), and
Section 29 (Dispute Resolution), shall survive any termination or expiration of
this AGREEMENT.

 
19.
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS

 
19.1
Representations and Warranties of MERCK KGAA.  MERCK KGAA hereby represents and
warrants as follows as of the EFFECTIVE DATE (or, in the case of the VILAZODONE
MANUFACTURING TECHNOLOGY, the date of its transfer to GENAISSANCE):

 
 
 
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19.1.1
The sale, manufacture or use of VILAZODONE and the PRODUCTS contemplated
hereunder do not infringe any patent owned or controlled by MERCK KGAA or its
AFFILIATES (other than the MERCK KGAA PATENTS licensed hereunder) and, to MERCK
KGAA’s knowledge, (a) the sale and use of VILAZODONE and PRODUCTS does not
infringe any existing valid and enforceable rights of any THIRD PARTY and (b)
the manufacture of VILAZODONE using the starting materials, intermediates,
solvents, reagents, and any ancillary materials set forth in the manufacturing
instructions described in Section 1.50 (b) does not infringe any existing valid
and enforceable rights of any THIRD PARTY.

 
19.1.2
MERCK KGAA owns or controls all the MERCK KGAA PATENTS, MERCK KGAA KNOW-HOW and
VILAZODONE MANUFACTURING TECHNOLOGY, free and clear of any liens, licenses,
obligations, transfer agreements, transfer restrictions, enforceable claims,
royalties, reversionary rights or encumbrances whatsoever.  MERCK KGAA is
unaware of any assertion or claim challenging the ownership, use, validity or
enforceability of any of the MERCK KGAA PATENTS, MERCK KGAA KNOW-HOW or the
ownership, validity or enforceability of the VILAZODONE MANUFACTURING TECHNOLOGY
and, to MERCK KGAA’s knowledge, there is no basis for any such claim.  Any
licenses associated with the MERCK KGAA PATENTS, MERCK KGAA KNOW-HOW and
VILAZODONE MANUFACTURING TECHNOLOGY are valid and binding and are enforceable in
accordance with their respective terms, and there are no material breaches or
defaults thereunder.

 
19.1.3
MERCK KGAA is unaware of any infringement of the MERCK KGAA PATENTS by any THIRD
PARTY.

 
19.1.4
Any data and information provided to GENAISSANCE by MERCK KGAA prior to the
EFFECTIVE DATE relating to the pre-clinical studies and clinical studies of
VILAZODONE and the PRODUCT accurately represent the underlying raw data in all
material respects.  The data and information provided to GENAISSANCE or to be
transferred hereunder includes all information and data relating to any
pre-clinical or clinical study conducted by MERCK KGAA or any of its licensees,
including GSK. MERCK KGAA has provided to, or made available for review by,
GENAISSANCE all material reports and data collections containing information
about adverse safety issues (including adverse drug experiences) related to
VILAZODONE and the PRODUCT of which it has knowledge.

 
 
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19.1.5
MERCK KGAA represents and warrants that the VILAZODONE MANUFACTURING TECHNOLOGY
transferred to GENAISSANCE shall be all material know how and methods used by
MERCK KGAA to manufacture VILAZODONE, and, to MERCK KGAA’s knowledge, the
VILAZODONE MANUFACTURING TECHNOLOGY provided hereunder is sufficient to enable a
reasonably experienced contract manufacturer to manufacture the VILAZODONE API.

19.1.6
MERCK KGAA represents and warrants that it has made all payments to past and
present employees and contractors in respect of any MERCK KGAA PATENTS, MERCK
KGAA KNOW-HOW and VILAZODONE MANUFACTURING TECHNOLOGY made prior to the
EFFECTIVE DATE.

 
19.1.7
EXCEPT TO THE EXTENT PROVIDED HEREIN, MERCK KGAA DOES NOT WARRANT THE VALIDITY
OF THE MERCK KGAA PATENTS, THE USEFULNESS OF THE MERCK KGAA KNOW-HOW, VILAZODONE
MANUFACTURING TECHNOLOGY OR THE COMMERCIAL EXPLOITABILITY OR READINESS FOR
PRODUCTION OF VILAZODONE OR ANY PRODUCT.

 
19.2
Representations and Warranties of GENAISSANCE.  GENAISSANCE hereby represents
and warrants as follows as of the EFFECTIVE DATE:

 
19.2.1
To GENAISSANCE´s knowledge, the experiments and pharmacogenetic studies
contemplated hereunder and specifically the use of the HAP™ Technology and the
proprietary database (the HAP™ Database) of gene specific SNPs and haplotypes
(HAP™ Markers) do not infringe any existing valid and enforceable right of any
THIRD PARTY.

 
 
 
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19.3
Representations and Warranties of both PARTIES.  Each or MERCK KGAA and
GENAISSANCE hereby represent and warrants to the other PARTY that as of the
EFFECTIVE DATE as follows:

 
19.3.1
It is duly organized, validly existing and in good standing under the laws of
the jurisdiction of incorporation.  It has the requisite legal and company power
and authority to conduct its business as presently being conducted and as
proposed to be conducted by it and is duly qualified to do business in those
jurisdictions where its ownership of property or the conduct of its business
requires.

 
19.3.2
It has all requisite legal and company power and authority to enter into this
Agreement and to perform the services contemplated hereunder.  All company
actions on its part, its boards of director or managers, or similar governing
body and its equity holders necessary for (i) the authorization, execution,
delivery and performance by it of this Agreement, and (ii) the consummation of
the transactions contemplated hereby, have been duly taken.

 
19.3.3
EXCEPT TO THE EXTENT PROVIDED HEREIN, NEITHER PARTY MAKES ANY WARRANTY WITH
RESPECT TO THE MERCK KGAA PATENTS, THE MERCK KGAA KNOW-HOW, THE RESULTING IP,
IMPROVEMENTS, VILAZODONE, THE PRODUCT, OR ANY OTHER SUBJECT MATTER OF THIS
AGREEMENT.  EACH PARTY HEREBY DISCLAIMS ANY AND ALL WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH
RESPECT TO ANY AND ALL OF THE FOREGOING.

 
20.
LIMITATION OF LIABILITY

 
EXCEPT FOR BREACHES OF SECTION 15 (CONFIDENTIALITY), NEITHER PARTY SHALL BE
LIABLE UNDER THIS AGREEMENT FOR ANY INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY,
SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER FROM THE PERFORMANCE OR
BREACH OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT THIS LIMITATION WILL NOT
REDUCE OR AFFECT THE PARTIES’ INDEMNIFICATION OBLIGATIONS UNDER SECTION 12.7 OR
SECTION 21. THE FOREGOING LIMITATIONS SHALL NOT AFFECT ANY LIABILITY OF A PARTY
IN THE EVENT OF A PARTY’S WILFUL MISCONDUCT OR IN THE EVENT OF A LIABILITY
ACCORDING TO THE GERMAN PRODUCT LIABILITY ACT OR THE GERMAN MEDICINAL PRODUCT
ACT.
 
 
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21.
INDEMNIFICATION AND INSURANCE

 
21.1
Indemnification.  Each PARTY shall indemnify and hold harmless the other PARTY
and its AFFILIATES and the officers, directors, employees, agents, counsel,
successors, and assigns thereof from and against any and all losses, claims,
damages and liabilities (and all expenses associated therewith, including
attorneys’ fees, experts’ fees, and other defense costs at all levels of
proceedings and preparation) arising out of any breaches of any representation
or warranty of such PARTY, or out of any activities of or for such PARTY or its
AFFILIATES, distributors or contractors under or in connection with this
AGREEMENT, including any production, testing, regulatory approvals (or failure
to obtain regulatory approvals), promotion, sale, labelling, recall, or use of
any PRODUCT, THERANOSTIC PRODUCT or DIAGNOSTIC PRODUCT, including liabilities
for personal injury or product liability, except to the extent such losses,
claims, damages, and liabilities are the result of the negligence or intentional
conduct of the Indemnitee (as hereinafter defined).

 
21.2
Indemnification procedures.  The person or entity (“the Indemnitee”) that
intends to claim indemnification under this Section 21 shall promptly notify the
PARTY required to indemnify hereunder (“the Indemnitor”) of any loss, liability,
damage or expense, or any claim, demand, action or other proceeding with respect
to which the Indemnitee intends to claim such indemnification.  The Indemnitor’s
indemnity obligations under this Section 21 shall not apply to amounts paid in
any settlement if effected without the consent of the Indemnitor, which consent
shall not be unreasonably withheld or delayed.  The Indemnitor shall not settle
or consent to an adverse judgment in any such claim, demand, action or other
proceeding that adversely affects the rights or interests of any Indemnitee or
imposes additional obligations on such Indemnitee, without the prior express
written consent of such Indemnitee.  The Indemnitee shall cooperate fully with
the Indemnitor and its legal representatives in the investigation of any action,
claim or liability covered by this indemnification.

 
 
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21.3
Insurance.  During the term of this AGREEMENT and for a period of [***] after
its termination or expiration, each PARTY shall obtain and maintain,
respectively, at its sole cost and expense, product liability insurance in
amounts, respectively, which are reasonable and customary in the pharmaceutical
industry for companies of comparable size and activities at the respective place
of business of each PARTY.  Such product liability insurance to be maintained by
GENAISSANCE shall insure against all liability, including personal injury,
physical injury, or property damage arising out of the manufacture, sale,
distribution, or marketing of any PRODUCT, THERANOSTIC PRODUCT or DIAGNOSTIC
PRODUCT.  Such product liability insurance to be maintained by MERCK KGAA shall
insure against all liability, including personal injury, physical injury, or
property damage arising out of the manufacture, sale, distribution, or marketing
of any VILAZODONE supplied by it.  Each PARTY shall provide written proof of the
existence of such insurance to the other PARTY upon request.

 
22.
RELATIONSHIP

 
This AGREEMENT shall not create any employer-employee relationship between the
PARTIES, nor shall it be deemed to establish a joint venture or partnership
between them.  Neither PARTY shall at any time enter into or incur, or hold
itself out to THIRD PARTIES as having the authority to enter into or incur, on
behalf of the other PARTY, any commitment, expense or liability
whatsoever.  Nothing contained in this AGREEMENT shall be construed, by
implication or otherwise, as an obligation incurred by either PARTY to enter
into any further agreement with the other PARTY.
 
23.
ASSIGNMENT

 
23.1
This AGREEMENT shall be binding upon and inure to the benefit of the PARTIES and
their respective successors and permitted assigns.  Neither party shall assign
its rights and obligations hereunder unless:  (i) such assignment is to an
AFFILIATE or sublicensee of GENAISSANCE and GENAISSANCE remains obligated for
all its obligations hereunder, (ii) such assignment is to an AFFILIATE of MERCK
KGAA and MERCK KGAA remains obligated for all its obligations hereunder or (iii)
such assignment is in connection with the merger or sale of all or substantially
all of the assets of a PARTY or relating to VILAZODONE or the PRODUCT, or (iii)
such assignment is made with the prior written consent of the other PARTY, which
consent shall not be unreasonably withheld or delayed.

 

 
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23.2
The PARTIES hereby acknowledge that neither the use of contractors (following
the exercise of the option in Section 2.5)  to make or package PRODUCTS for sale
by GENAISSANCE or its AFFILIATES nor the appointment of distributors or other
resellers of PRODUCTS shall constitute the grant of sublicenses by GENAISSANCE.

 
24.
ENTIRE AGREEMENT

 
This AGREEMENT embodies the entire understanding between the PARTIES and
supersedes any prior understandings and agreements between and among them
respecting the subject matter hereof.  There are no implied licenses,
representations, agreements, arrangements or understandings, oral or written,
between the parties hereto relating to the subject matter of this AGREEMENT
which are not fully expressed herein.
 
25.
SEVERABILITY

 
Any of the provisions of this AGREEMENT that are determined to be invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability in such jurisdiction, without rendering invalid
or unenforceable the remaining provisions hereof and without affecting the
validity or enforceability of any of the terms of this AGREEMENT in any other
jurisdiction.
 
26.
WAIVER AND AMENDMENT

 
26.1
No waiver of this AGREEMENT or any of the provisions hereof, shall be valid
unless made in writing and signed by a duly authorized representative of the
PARTY sought to be bound thereby.  The waiver by either PARTY of any right
hereunder or of a breach by the other PARTY shall not be deemed a waiver of any
other right hereunder or of any other breach by said other PARTY whether of a
similar nature or otherwise.

 
 
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26.2
This AGREEMENT may not be amended, modified, altered or supplemented except by
means of a written instrument executed on behalf of both PARTIES.

 
27.
COUNTERPARTS

 
This 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.
 
28.
FORCE MAJEURE

 
Neither PARTY shall be liable to the other for a failure to perform any of its
obligations under this AGREEMENT, except for payment obligations previously
incurred, during any period in which such performance is delayed due to
circumstances beyond its reasonable control, including labor difficulties of
THIRD PARTIES, interruption of transit, delays in performance or supplies from
its suppliers and subcontractors, acts of any government or government agency or
GOVERNMENTAL AUTHORITY, acts, omissions or delays of the other party, delays in
receiving any INDs or REGULATORY APPROVALS; provided such PARTY notifies the
other of the delay and uses its reasonable best efforts to avoid or remove such
causes of non-performance and continues performance with the utmost dispatch
whenever such causes are removed.  When such circumstances arise, the PARTIES
shall discuss what, if any, modification of the terms of this AGREEMENT may be
required in order to arrive at an equitable solution.  If either PARTY, however,
is unable to fulfil its obligations under this AGREEMENT due to such events, and
such inability continues for a period of more than [***], then the other PARTY
shall have the right to terminate this AGREEMENT by giving at least thirty (30)
days prior notice of termination to the other PARTY.
 
29.
DISPUTE RESOLUTION

 
29.1
If a dispute arising out of or in connection with this AGREEMENT, including any
question regarding its existence, validity or termination arises between the
PARTIES relating to the interpretation or performance of this AGREEMENT or any
other matter arising under this AGREEMENT, including the grounds for the
termination hereof, the PARTIES agree to hold a meeting within [***] after
notification by one PARTY to the other PARTY of such dispute expressly referring
to this provision, attended by individuals from their respective senior
management with decision-making authority, to attempt in good faith to negotiate
a resolution of the dispute prior to pursuing other available remedies.

 

 
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29.2
If, within [***] after such meeting, or, if such meeting does not occur, within
[***] after the notification of the dispute, the PARTIES have not succeeded in
resolving the dispute, such dispute, on the written request of one party
delivered to the other party, shall be submitted to and settled by final and
binding arbitration, in accordance with the Rules of the London Court of
International Arbitration in effect on the date that a request for arbitration
is filed, by three arbitrators.  The seat of arbitration shall be London,
England and the language of the proceedings shall be English.  Judgment on the
award of the arbitrators may be entered in any court having jurisdiction
thereof.  Without prejudice to the foregoing, either PARTY may seek appropriate
preliminary or interim equitable relief from a court of competent jurisdiction.

 
29.3
Each PARTY is required to continue to perform its obligations under this
AGREEMENT pending final resolution of any such dispute.

 
30.
ATTORNEYS’ FEES

 
In any action or proceeding to enforce rights under this AGREEMENT, the
prevailing party shall be entitled to recover its costs and attorneys’ fees.
 
31.
Governing Law

 
This AGREEMENT shall be exclusively governed by the laws of Germany, without
giving regard to its conflict of law principles.  The United Nations Convention
on the International Sale of Goods is not applicable.
 
32.
NOTICES

 
Any notice, request, approval or other document required or permitted to be
given under this AGREEMENT shall be in writing and shall be deemed to have been
given when delivered in person, or sent by overnight courier service, postage
prepaid, or sent by certified or registered mail, return receipt requested, or
by facsimile transmission, to the following addresses of the PARTIES and to the
attention of the persons identified below (or to such other address, addresses
or persons as may be specified from time to time in a written notice).  Any
notices given pursuant to this AGREEMENT shall be deemed to have been given and
delivered upon the earliest of (i) if sent by courier service, the date

 
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when received at the address set forth below as proven by a written receipt from
the delivery service verifying delivery, or (ii) if sent by certified or
registered mail, seven days after mailed by certified or registered mail postage
prepaid and properly addressed, with return receipt requested, or (iii) if sent
by facsimile transmission, the day when sent by facsimile as confirmed by
automatic transmission report, or (iv) if delivered in person, the date of
delivery to the address set forth below as proven by written signature of the
recipient.
 
If to MERCK KGAA:
 
Merck KGaA
Frankfurter Strasse 250
64293 Darmstadt
Attn.: Business Development
 
with a cc: to:
 
Corporate Legal Department
 
If to GENAISSANCE:
 
Genaissance Pharmaceuticals, Inc.
Five Science Park
New Haven, CT 06511
USA
Attn.: CEO
 
with a cc: to:
 
Vice President, Medical Affairs
 
 
 
 
 

 
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IN WITNESS WHEREOF, MERCK KGAA and GENAISSANCE have caused this AGREEMENT to be
signed by their respective duly authorized officers.
 

New Haven,  September 22, 2004
 
 
Darmstadt, September 22, 2004

Genaissance Pharmaceuticals, Inc.
Merck KGaA
               
ppa.
           
By
/s/ Ben Kaplan
 
By
/s/ Dr. Inge Lues
   
Ben Kaplan
   
Dr. Inge Lues
 
CFO
   
Executive Vice President
   
Global Preclinical R&D
               
ppa.
       
By
/s/ Klaus-Peter Brandis
     
Klaus-Peter Brandis
   
Head Corporate Legal Department
             

 
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LIST OF SCHEDULES

Schedule 1:
EMD 68843
       
Schedule 2:
DEVELOPMENT PLAN
       
Schedule 3:
CLINICAL TRIAL SUPPLY AND PRODUCT SPECIFICATIONS
       
Schedule 4:
INDICATIONS
       
Schedule 5:
NECESSARY CONTENT OF MARKETING PLANS
       
Schedule 6:
MARKETING PLAN for initial INDICATION (to be attached later)
       
Schedule 7:
MERCK KGAA PATENTS
       
Schedule 8:   PRE-EMPTIVE RIGHTS RIDER.
       
Schedule 9:   REGISTRATION RIGHTS AGREEMENT
 

 
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Schedule 1
 
EMD68843
 
 
 

Schedule 1 [schedule1.jpg]

 
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Schedule 2
 
DEVELOPMENT PLAN FOR THE INITIAL INDICATION
 
Schedule 2
 
Development Plan for the Initial Indication
 
The overall objective for the VILAZODONE DEVELOPMENT PLAN is to develop and
achieve marketing approval of a new, dual mechanism of action therapeutic for
the worldwide treatment of depression.  The PRODUCT will be indicated for
patients who are diagnosed with [***] who may be genetically identified to be
responsive to VILAZODONE treatment.  The DEVELOPMENT PLAN for the initial
INDICATION of [***] includes discovery and validation of the marker(s) that
genetically select a population of patients who are likely to respond to
vilazodone.  The markers will be discovered in a prospective DISCOVERY
STUDY.  Validation of these markers will be [***] DISCOVERY STUDY.  Efficacy of
the PRODUCT will be established in two 8-week, [***].  The DEVELOPMENT PLAN also
includes Sections for [***] and THERANOSTIC PRODUCT Development.  Initially,
regulatory approval of [***].
 
 
I.
Prospective DISCOVERY STUDY

 
 
A.
Study Design

 
[***] Prospective DISCOVERY STUDY will be designed with the primary objective of
demonstrating that vilazodone [***] to discover genetic markers that identify
patients with a superior response to vilazodone [***].  This trial will be
[***].  Patients will be [***]. The patients [***] vilazodone will have the
[***].  To maximize the likelihood of patients remaining in the study, those who
experience tolerance issues will [***].  The [***].
 
 
1)
Genetic Marker Discovery

 
For genetic marker discovery, enrollment of [***] vilazodone treated patients
yields [***] power at the [***] in order to obtain [***].  For purposes of
discovering genetic markers, [***].
 
To discover genetic markers associated with VILAZODONE response, 100-200
candidate genes will be selected based on the mechanism of action of VILAZODONE
and metabolism of the drug.  Genes with known or hypothesized involvement in
depression and response to treatment of
 

 
71

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

 

depression will also be selected.  SNPs will be selected from GENAISSANCE’s HAP™
Database or, if the SNPs have not yet been discovered, SNPs will be discovered
at GENAISSANCE.  For the vast majority of selected SNPs, assays will be designed
and validated [***].  For a small subset of SNPs, genotyping may be performed
using [***].  DNA samples from vilazodone treated patients will be genotyped for
the selected SNPs and the genotype information will be used to correlate genetic
variability with response to vilazodone.  For the analysis, the change in
[***] will be considered [***] will be considered and an analysis of covariance
(ANCOVA) will be used, with appropriate adjustments, which may include
[***] tests will be conducted to [***].  If correlations are discovered,
[***].[***]
 
 
2)
Primary Objective

 
For the primary endpoint, a sample size of [***] based on [***] power, and an
effect size of [***].  A sample of [***] patients [***] in the primary analysis.
 
The statistical analysis for the primary objective will be an analysis of
variance (ANOVA), [***].  Vilazodone [***].
 
To finalize the clinical trial protocol, GENAISSANCE will employ opinion leaders
in depression and in the genetics and pharmacogenetics of depression.
 
 
B.
Clinical Trial Operations

 
We anticipate the [***] subjects to be enrolled in approximately [***] at
approximately [***] sites in [***]. GENAISSANCE will contract with a mid-sized
CRO with experience in depression to conduct the clinical TRIAL.  In addition,
GENAISSANCE will hire a medical director, whose main responsibility will be
oversight of clinical trial conduct.
 
We will make efforts to manage the placebo response rate.  Rater training will
occur during the [***] and will be conducted by an experienced, well-regarded
rater.  Site selection will be based on recommendations from consultants and key
opinion leaders, with a major consideration being [***]. Another major
consideration will be [***].  Recruiting by [***]. In addition, we [***] in the
operations of the clinical trial.
 

 
72

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

 

Retrospective DISCOVERY STUDY
 
GENAISSANCE may re-enroll subjects from the phase II trials conducted by MERCK
KGAA and GSK in a retrospective DISCOVERY STUDY.  [***] who was enrolled in any
of the five previous phase II vilazodone trials[***]. IRB approval will be
obtained for the protocol and the clinical sites.  Patient blood samples will be
shipped to GENAISSANCE’s North Carolina facility, where DNA will be isolated and
stored under GLP compliant conditions.  The Case Report Form collection and
study database will be managed by GENAISSANCE.
 
GENAISSANCE will determine [***] retrospective DISCOVERY STUDY.  The objectives
being considered for this Retrospective DISCOVERY STUDY are as follows:  1) to
discover vilazodone response markers on 100 – 200 genes 2) [***].
 
If the samples collected in the Retrospective DISCOVERY Study are used to
discover vilazodone response markers, GENAISSANCE will [***] VILAZODONE response
[***] of treatment in patients taking vilazodone.  When [***] vilazodone-treated
subjects with efficacy measurements at [***] have been enrolled, they will be
genotyped for 100-200 candidate genes.  This number of subjects provides
[***] power to [***]. The 100-200 candidate genes and their SNPs will be
selected as described in Section I above.  The appropriate DNA samples will be
genotyped for the selected SNPs and the genotype information will be used to
correlate genetic variability with response to vilazodone.  For the analysis,
the change in [***] will be considered [***] will be considered and an analysis
of covariance (ANCOVA) will be used, with adjustments for [***] tests will be
conducted to [***] in each gene.  If correlations are discovered, [***] will be
genotyped to assess [***].  If correlations are discovered, [***] will be
genotyped to assess [***].  The [***] will [***] to assess the marker(s)’ [***].
 
Alternatively, the samples collected [***] described above.  This [***] will be
conducted on [***] vilazodone treated subjects [***]. The analysis will consist
of the [***] statistical analysis [***] the marker(s) discovered [***] will be
examined and [***].
 
A decision [***] the Retrospective DISCOVERY STUDY will be made [***]  For the
[***], we will [***] to determine [***] and [***] participate in the
Retrospective DISCOVERY STUDY.  The process for assessing the [***] is as
follows:
 
 
[***]

 

 
73

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

 

The decision [***] will be [***]. This decision will be [***]. In [***] the
results of the Retrospective DISCOVERY STUDY will not affect the decision to
conduct the Prospective DISCOVERY STUDY.
 
 
II.
THERANOSTIC PRODUCT Development

 
GENAISSANCE may partner with a diagnostic company for development of a
THERANOSTIC PRODUCT to detect marker(s) validated in the DISCOVERY STUDY on a
validated platform.  Target partnering companies include, but are not limited
to, Bayer Diagnostics, BD, and [***].  The THERANOSTIC PRODUCT that may be used
in combination with vilazodone as a therapy for depression will be validated on
the selected platform.  FDA approval of this THERANOSTIC PRODUCT is anticipated
to be in parallel with that of the PRODUCT.
 
 
III.
Regulatory Strategy

 
An FDA Meeting will be requested for [***]. The request will be submitted to
[***] with the [***] that this [***] for the [***] clinical development
plan.  [***]. Following successful [***] will be [***] will be [***] and the
[***].
 
 
IV.
Additional Clinical Development

 
 
A.
Phase II/III

 
In the sense of this AGREEMENT, the first of the trials shall be considered a
PHASE II CLINICAL TRIAL [***], and the second of these trials shall be
considered a PHASE III CLINICAL TRIAL.  We anticipate completing at least 2
placebo controlled, double blind Phase II/III trials with appropriate
evaluations of safety.  We [***] to determine [***] and [***] that has
[***]. The design of the PHASE III CLINICAL TRIAL(S) will be dependent upon the
results of the [***].
 
 
B.
[***] Trials

 
The [***] trials [***] and [***].  These trials [***] and [***].
 
 
C.
[***] Studies

 
[***], GENAISSANCE will [***] assess [***] in [***].
 

 
74

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

 

 
D.
Drug Supply

 
There is expected to be sufficient API available from MERCK KGAA to use in
performing the the PHASE II and PHASE III CLINICAL TRIALS for the initial
INDICATION, as well as [***] Trials.  GENAISSANCE will evaluate and select a CRO
to produce the PRODUCT for these trials [***]. For the commercial supply,
assuming that GENAISSANCE has exercised its option pursuant to Section 2.5,
GENAISSANCE will evaluate and [***] and [***]. Production of the API will begin
with sufficient time to [***].
 
 
E.
Development Outside the US

 
GENAISSANCE will begin discussions with a European regulatory consultant [***] 
after the EFFECTIVE DATE.  The detailed design of the Prospective DISCOVERY
STUDY may be modified following the discussions.
 
After discovery of genetic markers associated with response to vilazodone,
GENAISSANCE will determine the [***] of the marker(s) [***]. Based on these
results, GNSC will determine [***] development for [***].
 
Major Milestone Events
 
Prospective DISCOVERY STUDY
 
First Patient First Visit:  [***] 2005
Final Report:  [***]

 

Retrospective DISCOVERY STUDY
 
[***]

 

PHASE II/III CLINICAL TRIALS
 
First Patient First Visit:  [***] 2007
Final Report for PHASE III CLINICAL TRIAL(S):  [***]

 

Submission of NDA and PMA/510(k) for THERANOSTIC PRODUCT:  [***] 2010

 
Approval of NDA and/or PMA/510(k) for THERANOSTIC PRODUCT:  [***] 2011

 
Launch in the US:  [***] 2011

 
75

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

 

Schedule 3
 
Clinical Trial Supply and PRODUCT Specifications
 
MERCK KGAA will provide [***].  The [***] is [***]. The [***] is [***] on [***].
GENAISSANCE will be responsible for [***] and packaging the clinical supply of
[***] EMD68843 [***] supplied by MERCK KGAA.  GENAISSANCE is in the process of
[***].  The [***]. The packaging of the clinical trial supply will be [***].
MERCK KGAA will [***]and will provide [***] for the final clinical supply of
[***] vilazodone [***] in accordance with the [***] shown in Table
1.  GENAISSANCE will provide MERCK KGAA with [***].  MERCK KGAA will [***].  If
the [***].

Table 1       [***]
 

   
[***]
[***]
 
[***]
 
[***]
 
[***]
 
[***]
 
[***]
 
[***]
 
[***]
[***]
 
[***]
 
[***]
 
[***]
 
[***]
 
[***]
 
[***]
 
[***]
[***]
   
[***]
 
[***]
 
[***]
 
[***]
 
[***]
 
[***]
[***]
                           

 
The current specifications for drug substance and drug product [***] are
attached as Schedule 3A and Schedule 3B, respectively.  The may be revised from
time to time, if appropriate.

 
76

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

 

Schedule 3A

 
77

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

 

MERCK
EMD 68 843                      Monograph:  EMD 68 843
Specifications

Description:
[***]
   
Identification:
     
[***]
     
Assay:
 
[***]
         
Impurities:
 
[***]
 

 
78

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

 

MERCK
EMD 68 843                      Monograph:  EMD 68 843

Residual Solvents by GC:
     
[***]
               
Water Content:
     
[***]
[***]
   
Inorganic impurities:
     
[***]
     

 
79

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

 

Schedule 3B

 

 

 

 

 

 

 
80

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

 

MERCK KgaA
 
Spezifikation Für Die Freigabe
 
EMD 68 843 Vilazodon [***]
 

 
81

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

 

MERCK KgaA
 
Spezifikation Für Die Freigabe
 
EMD 68 843 Vilazodon [***]
 

 
82

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

 

MERCK KgaA
 
Spezifikation Für Die Freigabe
 
EMD 68 843 Vilazodon [***]
 

 
83

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

 

MERCK KgaA
 
Spezifikation Für Die Freigabe
 
EMD 68 843 Vilazodon [***]
 

 
84

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

 

MERCK KgaA
 
Spezifikation Für Die Freigabe
 

 
EMD 68 843 Vilazodon [***]
 

 
85

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

 

Schedule 4
 
INDICATIONS
 
 
Depressive Disorder, including but not limited to:

 
 
•
Minor Depressive Disorder

 
 
-
Recurrent brief depressive disorder

 
 
-
Major Depressive Disorder

 
 
-
Dysthymic Disorder

 
 
-
Adjustment Disorder With Depressed Mood

 
 
-
Adjustment Disorder With Mixed Anxiety and Depressed Mood

 
 
-
Premenstrual dysphoric disorder

 
 
-
Postpsychotic depressive disorder of Schizophrenia

 
 
Anxiety Disorder, including but not limited to:

 
 
-
Panic Disorder

 
 
-
Agoraphobia

 
 
-
Specific Phobia

 
 
-
Social Anxiety Disorder

 
 
-
Obsessive-Compulsive Disorder

 
 
-
Posttraumatic Stress Disorder

 
 
-
Acute Stress Disorder

 
 
-
Generalized Anxiety Disorder

 

 
86

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

 

Schedule 5
Necessary Content of MARKETING PLANS
MARKET
- target population
- INDICATION market overview
- vilazodone market definition
- sales potential
- competitive environment

PRODUCT
- labeling
- presentation
- pricing
- branding
- SWOT

STRATEGY
- Strategic objectives
- regulatory strategy
- Marketing & Commercial Strategy incl. distribution
- positioning & key messages
- Key success factors & key issues
- Key opinion leader development
- Lifecycle Management strategy

TACTICS (Operating plan)
- Plan of action for next year

FINANCIALS
- unit planning
- sales planning [***] years
(- marketing & selling expenses (incl. sales force))

 
87

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

 

Schedule 6
 
(To be attached in accordance with Section 1.27)

 
88

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

 

Schedule 7
 
 
Vilazodone Patent Rights (updated [***])

 
1.           Basic Patent (our ref.: P 4333254, priority Sept. 30,1993)
 
Country
 
Publication no.
 
Date of grant
AU (Australia)
 
AU 679774
 
10.30.97
BR (Brazil)
 
BR 1100891
 
06.06.00
CA (Canada)
 
CA 2133152*
   
CL (Chile)
 
CL 040399
 
03.13.00
CN (China)
 
CN 058268
 
07.07.00
CZ (Czech republic)
 
CZ 94-2370*
 
04.02.04
EP (Europe)
 
EP/ES 0648767
 
05.28.97
HU (Hungary)
 
HU 218918
 
10.04.00
JP (Japan)
 
JP 95-149762
   
KR (Republic of Korea)
 
KR 341190
 
05.06.02
MX (Mexico)
 
MX 192651
 
07.15.99
NO (Norway)
 
NO 306948
 
01.17.00
PL (Poland)
 
PL 178137
 
09.03.99
RU (Russian federation)
 
RU 2132848
 
07.10.99
SE (Sweden)
 
SE 94114798
 
05.28.97
SK (Slovakia)
 
SK 281793
 
04.26.01
TW (Taiwan)
 
TW 089183
 
12.26.97
UA (Ukraine)
 
UA 034449
 
03.15.01
US (United States of America)
 
US 5532241
 
07.02.96
ZA (South Africa)
 
ZA 94-7622
 
07.26.95

___________________
* indicates the filing no.

 
89

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

 

2.           Intermediates (our ref.: P 9514567, priority Apr. 20,1995)

Country
 
Publication no.
 
Date of grant
AU
 
AU 704495
 
07.29.99
CA
 
CA 2174494*
   
CL
 
CL 040124
 
09.07.99
CN
 
CN 1140171
   
CZ
 
CZ 96-1131*
   
EP
 
EP 0738722
 
25.06.03
HU
 
HU 9601033
   
JP
 
JP 96-291161
   
KR
 
KR 96-37673
   
[***]
 
[***]
   
NO
 
NO 19961579*
   
[***]
 
[***]
   
RU
 
RU 2159238
 
11.20.00
SK
 
SK PV 0486-1996S*
   
SK (Divisional)
 
SK PV 0117-2003S*
   
TW
 
TW 095622
 
11.03.98
UA
 
UA 45958
 
15.05.02
US
 
US 5723614
 
03.03.98
US
 
US 5977112
 
11.02.99
ZA
 
ZA 96-3155
 
12.31.96

___________________
* indicates the filing no.

 
90

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

 

3.           Process (our ref.: P 9858340, priority Dec. 17, 1998)

Country
 
filing no.
 
Date of grant
AR (Argentina)
 
AR 021901*
   
AU
 
19689/00
 
11.06.03
BR
 
9916187.7
   
CA
 
2355138
   
[***]
 
[***]
   
CN
 
1330635A*
   
CZ
 
PV 2001-2118
   
EP
 
1140824*
   
HK
 
1043363A*
 
05.19.04
HU
 
P 0104957*
   
ID
 
W00200101416
   
[***]
 
[***]
   
JP
 
P 2002-532469A*
   
[***]
 
[***]
   
[***]
 
[***]
   
[***]
 
[***]
   
NO
 
20012963
   
PH (Philippines)
 
14*
   
[***]
 
[***]
   
PL
 
348060
   
[***]
 
[***]
   
SG
 
81612*
 
31.07.2003
SK
 
PV 0812-2001S
   
TH (Thailand)
 
TH 042665*
   
[***]
 
[***]
   
[***]
 
[***]
   
US
 
6,509,475*
 
21.01.2003
WO
 
WO 00-35872*
   
VN
 
1-2001-00677
 
02.06.04
ZA
 
2001/5841*
 
24.12.2002

___________________
* indicates the Publication no.

 
91

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

 

4.           Novel use (our ref.: P 0099214, priority May 27,1999)

Country
 
filing no.
 
Date of grant
AR
 
AR 024112*
   
AU
 
50663/00
   
BR
 
PI 0010948.7
   
CA
 
2,372,668
   
[***]
 
[***]
   
CN
 
1361692A*
   
CZ
 
01-4226
   
EP
 
1185272*
 
04.07.04
HK
 
1048444A*
   
HU
 
P 0201275*
   
[***]
 
[***]
   
IL
 
146707
   
[***]
 
[***]
   
JP
 
P 2003-500441A*
   
[***]
 
[***]
   
[***]
 
[***]
   
[***]
 
[***]
   
NO
 
20015746
   
PH (Philippines)
 
3*
   
PK (Pakistan)
 
PK 00-0459
   
PL
 
352373
   
[***]
 
[***]
   
[***]
 
[***]
   
SK
 
PV 1646-2001S
   
TH (Thailand)
 
TH 057853*
   
TR
 
2001/03361
   
TW
 
NI-171358*
 
03.06.2003
[***]
 
[***]
   
[***]
 
[***]
   
WO
 
WO 00-72832*
   
VN
 
0172*
   
ZA
 
00/7283*
 
09.23.03

___________________
*indicates the Publication no.

 
92

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

 

5.           Intermediates (our ref.: P 9932314, priority July 10,1999)

Country
 
filing no.
 
Date of grant
AR
 
AR 024691*
   
AU
 
62665/00
 
02.19.04
BR
 
PI 0012329-3
   
CA
 
2,378,603
   
[***]
 
[***]
   
CN
 
1356996A*
   
CZ
 
PV 2002-0011
   
EP
 
1194426*
   
HK
 
1047275A*
   
HU
 
P 0201903*
   
[***]
 
[***]
   
IL
 
147494
   
[***]
 
[***]
   
JP
 
P 2003-504364A*
   
KR
 
2002-0016815*
   
MX
 
PA/a/2002000316*
   
[***]
 
[***]
   
NO
 
2002 0095
   
PH (Philippines)
 
5*
   
[***]
 
[***]
   
PL
 
353157
   
[***]
 
[***]
   
SG
 
200200186.5
 
01.30.04
SK
 
PV 0006-2002S
   
TH (Thailand)
 
TH 45895*
   
TR
 
2002/00017
   
UA
 
2002022055/M
   
US
 
6,531,503*
 
11.03.2003
WO
 
WO 01-04112*
   
VN
 
0173*
   
ZA
 
2002/1085*
 
30.07.2003

___________________
*indicates the Publication no.

 
93

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

 

6.           2nd med. Use (our ref.: P 100D103, priority Nov. 20, 2000)

Country
 
filing no.
AR
 
AR 031436*
AU
 
2002221803
BR
 
1709*
CA
 
2,429,216
[***]
 
[***]
[***]
 
[***]
CZ
 
PV 2003-1448
EP
 
1225716*
HU
 
P0400504*
[***]
 
[***]
[***]
 
[***]
JP
 
P2004-513916A*
KR
 
2003-0048477*
[***]
 
[***]
[***]
 
[***]
NO
 
20032248
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
SK
 
PV 0644-2003S
[***]
 
[***]
[***]
 
[***]
US
 
2004-0014771*
VN
 
8463*
WO
 
02/39989*
[***]
 
[***]

___________________
*indicates the Publication no.

 
94

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

 

7.           2nd med. use (our ref.: P 100D085, priority Nov. 14, 2000)

Country
 
filing no.
AR
 
AR 031335*
AU
 
2002215027
BR
 
1704*
CA
 
2428511
[***]
 
[***]
CN
 
1474091A*
CZ
 
PV 2003-1433
EP
 
1333832*
HU
 
P 0302751*
JP
 
P2004-513924A*
KR
 
2003-0059244*
[***]
 
[***]
[***]
 
[***]
NO
 
2003 2148
[***]
 
[***]
[***]
 
[***]
PL
 
P 360310*
[***]
 
[***]
[***]
 
[***]
SK
 
PV0638-2003S
[***]
 
[***]
[***]
 
[***]
US
 
2004-0082594*
WO
 
02/40024*
[***]
 
[***]

___________________
*indicates the Publication no.

 
95

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

 

8.           Intermediates (our ref.: P 9958496, priority Dec. 4,1999)

Country
 
filing no.
AR
 
AR 026677*
AU
 
28382/01
BR
 
1649*
CA
 
2,393,183
[***]
 
[***]
CN
 
1407981A*
CZ
 
PV 2002-1822
EP
 
1233961*
HK
 
1053471A*’
HU
 
P 0203800*
[***]
 
[***]
IL
 
149974
[***]
 
[***]
JP
 
P 2003-515605A*
KR
 
2002-0062313*
[***]
 
[***]
[***]
 
[***]
NO
 
20022620
PH (Philippines)
 
8*
[***]
 
[***]
PL
 
P 355227
[***]
 
[***]
[***]
 
[***]
SK
 
PV 0745-2002
TH (Thailand)
 
TH 50758*
[***]
 
[***]
[***]
 
[***]
US
 
2003-0125558*
WO
 
WO 01-40219*
[***]
 
[***]
ZA
 
2002/5326

___________________
*indicates the Publication no.

 
96

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

 

9.           Polymorphic forms (our ref.: P 101B148, priority June. 19,2001)

Country
 
filing no.
AR
 
AR 034595*
[***]
 
[***]
BR
 
PI0210495-4
CA
 
2,451,028
CL
 
1333/2002*
[***]
 
[***]
CO
 
073*
CZ
 
PV2004-26
[***]
 
[***]
EE
 
P20040019
EP
 
1397357*
HU
 
P0400236*
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
[***]
 
[***]
SK
 
PV 0016-2004S
[***]
 
[***]
[***]
 
[***]
US
 
10,481,270
WO
 
02/102794*
[***]
 
[***]

___________________
*indicates the Publication no.

 
97

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Schedule 8
 
Pre-emptive Rights Rider
 
(a)           Except with respect to Excluded Issuances (as defined below in
Section (d) of this Schedule 8) and except as provided below in Section (f) of
this Schedule 8, if GENAISSANCE proposes to offer and sell any shares of its
common stock, $0.001 par value per share (“Common Stock”), GENAISSANCE shall
first offer to sell to MERCK (together with its Affiliates, the “Holder”) a
portion of such shares of Common Stock (the “Offered Amount”).  The number of
shares constituting the Offered Amount will be determined by multiplying
 
(i)           the number of shares of Common Stock GENAISSANCE proposes to
issue; times
 
(ii)           the quotient determined by dividing (A) the number of shares of
Common Stock issued to the Holder pursuant to Section 2.5, 7.1, 7.2 or 7.8
hereof and then held by the Holder by (B) the number of shares of Common Stock
then outstanding (calculated on a fully diluted basis, i.e., assuming the
exercise of all securities exercisable into Common Stock and the conversion of
all securities convertible into Common Stock).
 
GENAISSANCE shall offer to sell the Offered Amount by means of written notice
(each a “Proposal Notice”) delivered to the Holder in accordance with Section 32
hereof as soon as GENAISSANCE intends to offer and sell any shares of its Common
Stock, but at least five (5) working days prior to the proposed issuance.  Such
Proposal Notice shall set forth the Offered Amount and, in reasonable detail,
the purchase price and other terms upon which the shares of Common Stock are
proposed to be issued.  During the 3-day period following delivery of the
Proposal Notice (the “Offer Period”), the Holder shall be entitled to purchase
the Offered Amount at the most favorable price and on the most favorable terms
as the Common Stock are offered to any other party.
 
(b)           In order to exercise its purchase rights hereunder, within three
(3) days after delivery of the Proposal Notice by GENAISSANCE, the Holder must
deliver a written notice (the “Notice of Acceptance”) to GENAISSANCE describing
the Holder’s election to purchase some or all of the Offered Amount; provided,
that any such election may be subject to the consummation
 

 
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of the sale of the Common Stock and other rights described in the Proposal
Notice on the terms set forth therein.
 
(c)           GENAISSANCE shall be entitled to sell any or all of the Offered
Amount as to which the Holder does not provide a Notice of Acceptance (the
“Refused Shares”); provided, that such Refused Shares may only be sold during
the ninety (90) days following the expiration of the Offer Period and only upon
terms and conditions that are not more favorable, in the aggregate, to the
purchasers thereof than those offered to the Holder.  Any Refused Shares not
offered or sold by GENAISSANCE to any party after such 90-day period must be
reoffered to the Holder pursuant to the terms of Section (a) of this Schedule 8.
 
(d)           For purposes of the foregoing, “Excluded Issuances” means:
 
(i)           issuances to employees, officers, directors and consultants of
GENAISSANCE of options to acquire shares of Common Stock, restricted stock or
other stock awards under any equity incentive or restricted stock plan or plans
currently existing or as amended or approved hereafter by the Board of Directors
of GENAISSANCE,
 
(ii)           the issuance of shares of Common Stock upon exercise of stock
options currently outstanding as well as the options referred to in Section
(d)(i) of this Schedule 8 in accordance with their respective terms,
 
(iii)           issuances of Common Stock or other securities of GENAISSANCE
upon conversion or exchange of any shares of series A preferred stock, $0.001
par value per share, of GENAISSANCE or of any securities issued directly or
indirectly upon conversion or exchange thereof, in each case in accordance with
the Certificate of Incorporation of GENAISSANCE,
 
(iv)           the issuance of shares of securities pursuant to the respective
terms of warrants outstanding on the EFFECTIVE DATE and listed in the attachment
hereto,
 
(v)           the issuance of securities of GENAISSANCE or any of its successors
issued as dividends or as a result of stock splits and similar
reclassifications,
 
(vi)           the issuance of securities of GENAISSANCE in connection with the
(i) acquisitions of any business, patents, patent rights, intellectual property
rights, products, product
 

 
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candidates or technology (including by way of license), (ii) secured debt
financings or (iii) equipment lease financings,
 
(vii)           the issuance of securities of GENAISSANCE in a public offering
pursuant to an effective registration statement and
 
(viii)           any other issuance of securities of GENAISSANCE if and to the
extent that the Holder has waived in writing the provisions of Section a of this
Schedule 8 in respect thereof.
 
(e)           Notwithstanding the foregoing, an issuance of Common Stock by
Genaissance which would otherwise qualify as an Excluded Issuance pursuant to
Section (d) of this Schedule 8 shall not be deemed an Excluded Issuance if
Genaissance has made such issuance (i) primarily for the purpose of decreasing
MERCK’s ownership of Common Stock below the Threshold (as defined below in
Section (f)(ii) of this Schedule 8) or (ii) without an independent business
purpose therefor.
 
(f)           Notwithstanding the foregoing, the pre-emptive rights granted to
any Holder pursuant to Section (a) of this Schedule 8] shall only apply to the
extent that
 
(i)           MERCK is entitled to be issued shares pursuant to Sections 2.5,
7.1, 7.2 or 7.8 hereof and is otherwise in material compliance with terms of
this AGREEMENT; and
 
(ii)           MERCK holds no less than five percent (5%) of the
then-outstanding shares of Common Stock of GENAISSANCE (calculated on a fully
diluted basis, i.e., assuming the exercise of all securities exercisable into
Common Stock and the conversion of all securities convertible into Common Stock)
(the “Threshold”).
 

 
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Listing of Warrants Outstanding on Effective Date
 
GENAISSANCE PHARMACEUTICALS, INC.
 
Analysis of outstanding warrants:

 
Genaissance Pharmaceuticals, Inc

 
Common Stock warrants

Granted
 
Date
 
Number
 
Exercise
 
Expiration
 
Outstanding
 
Exercised
 
Cancelled
 
Granted
 
Outstanding
 
To
 
Granted
 
Granted
 
Price
 
Date
 
at 12/31/03
 
in 2004
 
in 2004
 
in 2004
 
8/31/2004
                                         
Transamerica
 
4/30/1999
 
50,000
 
$4.00
 
4/30/2006
 
50,000
             
50,000
                                         
Legg Mason
 
3/8/2000
 
400,000
 
$6.05
 
3/7/2005
 
400,000
             
400,000
                                         
Dresdner Klienwort Benson
 
11/23/1999
 
3,273
 
$5.50
 
11/23/2004
 
3,272
             
3,272
                                         
Merifin
 
11/23/1999
 
1,636
 
$5.50
 
11/23/2004
 
1,636
             
1,636
 
International BM Biomedicine
                                     
Reissued in August 2003 to Biomedicine L.P.
 
11/23/1999
 
5,455
 
$5.50
 
11/23/2004
 
5,455
             
5,455
                                         
Winchester Capital
 
11/23/1999
 
545
 
$5.50
 
11/23/2004
 
546
             
546
                                         
Finova
 
2/25/2000
 
7,091
 
$5.50
 
2/25/2005
 
7,091
             
7,091
                                         
Finova
 
3/8/2000
 
14,545
 
$5.50
 
3/8/2005
 
14,545
             
14,545
                                         
Finova (was originally issued for 41,667)
 
5/31/2000
 
18,462
 
$16.25
 
5/31/2005
 
18,462
             
18,462
                                         
Legg Mason
 
5/15/2003
 
65,000
 
$2.00
 
5/15/2008
 
65,000
             
65,000
                                         
Joseph Klein (Gauss Capital)
 
5/15/2003
 
10,000
 
$2.00
 
5/15/2008
 
10,000
             
10,000
                                         
Ritchie Long/ Short Trading LTD
 
6/30/2004
 
261,500
 
$4.17
 
6/30/2009
             
261,500
 
261,500
                                         
TOTAL
                 
576,007
 
0
 
0
 
0
 
837,507
 

 
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Schedule 9
 
REGISTRATION RIGHTS AGREEMENT
 
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of September
__, 2004, by and between Genaissance Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), and Merck KGaA, a company organized under the laws
of Germany (the “Investor”).
 
WHEREAS, on April 29, 2004, the Company issued to the Investor 84,159 shares of
common stock, $0.001 par value per share (the “Common Stock”), of the Company
(the “LOI Shares”) pursuant to the terms of a letter of intent dated as of April
29, 2004, by and between the Company and the Investor (the “LOI”);
 
WHEREAS, pursuant to the terms of the LOI and the term sheet regarding
pharmacogenetics collaboration between the Company and the Investor attached
thereto, the Company and the Investor are currently negotiating the terms of a
license and development agreement (the “License Agreement”);
 
WHEREAS, the parties hereto currently contemplate the issuance by the Company to
the Investor of additional shares of Common Stock upon the satisfaction of
certain conditions, as specified in greater detail in the License Agreement (the
“License Agreement Shares”);
 
WHEREAS, pursuant to the terms of, and in partial consideration for the
Investor’s agreement to enter into, the LOI, the Company has agreed to enter
into this Agreement to provide the Investor with certain registration rights, as
well as certain other related rights and remedies set forth in this Agreement
with respect to the Shares upon the satisfaction of certain conditions contained
herein;
 
WHEREAS, prior to the date hereof, the Company has entered into the following
agreements which provide for certain registration rights: (i) Second Amended and
Restated Registration Rights Agreement dated as of March 10, 2000 by and between
the Company and the persons and entities listed on the signature pages thereto
(the “Series A Registration Rights Agreement”); (ii) Amended and Restated
Registration Rights Agreement dated as of March 10, 2000 by and between the
Company and the persons and entities listed on the signature pages
 

 
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thereto (the “Series B Registration Rights Agreement”); (iii) Registration
Rights Agreement dated as of March 10, 2000 by and between the Company and the
persons and entities listed on the signature pages thereto (the “Series C
Registration Rights Agreement”); and (iv) Stock Subscription Warrant dated as of
April 30, 1999 issued by the Company to TBCC Funding Trust II (the “TBCC
Warrant” and collectively with the Series A Registration Rights Agreement, the
Series B Registration Rights Agreement and the Series C Registration Rights
Agreement, the “Prior Registration Rights Agreements”); and
 
WHEREAS, the Company wishes to provide the Investor with the opportunity to
purchase its pro rata portion of certain issuances of Common Stock after the
date hereof, subject to the conditions contained herein.
 
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
 
1.           Definitions.
 
Unless otherwise provided in this Agreement, capitalized terms used herein shall
have the following meanings:
 
“Advice” has the meaning specified in Section 3.
 
“Agreement” has the meaning set forth in the first paragraph hereof.
 
“Demand Registration Statement” means a registration statement filed by the
Company with the SEC (as defined below) for a public offering and sale of
securities of the Company (other than a registration statement on Form S-8 or
Form S-4, or their successors, or any other form for a similar limited purpose,
or any registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation).
 
“Holder” means the Investor and any transferee of the Investor’s Registrable
Securities with respect to the rights that such transferee shall have acquired
in accordance with Section 9, at such times as such Persons shall own
Registrable Securities.
 

 
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“Losses” has the meaning specified in Section 8.1.
 
“Participating Holders” means the Holders participating in a registration
hereunder.
 
“Registrable Securities” means the Shares and any Common Stock issued or
issuable with respect to the Shares by way of a stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.  As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when they
have been (i) distributed to the public pursuant to an offering registered under
the Securities Act, (ii) distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act or (iii) otherwise become eligible for resale pursuant to
Rule 144(k) under the Securities Act.  For purposes of this Agreement, a Person
shall be deemed to be the holder of Registrable Securities, and the Registrable
Securities shall be deemed to be outstanding and in existence, whenever such
Person has the right to acquire Registrable Securities, and such Person shall be
entitled to exercise the rights of a holder of such Registrable Securities
hereunder.
 
“Restricted Securities” means all securities of the Company then outstanding and
having registration rights pursuant to the Prior Registration Rights Agreements.
 
“SEC” means the United States Securities and Exchange Commission, including any
governmental authority or agency succeeding to the functions thereof.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Shares” means the LOI Shares together with the License Agreement Shares.
 
“Suspension Period” has the meaning specified in Section 3.
 
“Transfer” means and includes the act of selling, giving, transferring, creating
a trust (voting or otherwise), assigning or otherwise disposing of (other than
pledging, hypothecating or otherwise transferring as security) (and correlative
words shall have correlative meanings); provided, however, that any transfer or
other disposition upon foreclosure or other exercise of remedies of a secured
creditor after an event of default under or with respect to a pledge,
hypothecation or other transfer as security shall constitute a “Transfer”.
 

 
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“Violation” has the meaning specified in Section 8.1.
 
2.           Required Registration.
 
2.1           If at any time after the date on which an aggregate of 1,500,000
Shares shall be issued or issuable to the Investor, the Holders of more than
fifty percent (50%) of those Registrable Securities, request that the Company
effect the registration under the Securities Act of the Registrable Securities,
the Company shall promptly give written notice of such proposed registration to
all Holders of outstanding Registrable Securities, and thereupon the Company
shall promptly use its commercially reasonable efforts to effect the
registration under the Securities Act of the Registrable Securities which the
Company has been requested to register for disposition described in the request
of said Holder or Holders and received within 45 days after the giving of the
written notice by the Company; provided, however, that:
 
(a)           The Company shall not be obligated to file and use its best
efforts to cause to become effective more than two registration statements in
which Registrable Securities are registered under the Securities Act pursuant to
this Section 2.1; provided, however, that if Form S-3 is available to the
Company for the registration of such Registrable Securities, the Holders shall
be entitled to an unlimited number of such registrations on Form S-3 (provided
that the aggregate amount of the proceeds of any such S-3 offering is at least
$1,500,000) and such registrations shall not be counted as demands for
registration effected pursuant to this Section 2.1; and
 
(b)           Anything contained herein to the contrary notwithstanding, with
respect to each registration requested pursuant to this Section 2.1, the Company
may include in such registration any authorized but unissued shares of Common
Stock for sale by the Company or any issued and outstanding shares of Common
Stock for sale by others; provided, however, that if the number of shares of
Common Stock so included pursuant to this clause (b) exceeds the number of
shares registered by the Holder or Holders of outstanding Registrable Securities
requesting such registration, then such registration shall not count against the
limit in Section 2.1(a) of this Agreement; provided further, however, that the
inclusion of such previously authorized but unissued shares by the Company or
issued and outstanding shares of Common Stock by others in such registration
shall not prevent the Holders of outstanding Registrable Securities requesting
such registration from registering the entire
 

 
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number of Registrable Securities requested by them and, in the event the
registration is, in whole or in part, an underwritten public offering and the
managing underwriter determines and advises in writing that the inclusion of all
Registrable Securities proposed to be included in such registration and such
previously authorized but unissued shares of Common Stock by the Company and/or
issued and outstanding shares of Common Stock by persons other than the Holders
of Registrable Securities proposed to be included in such registration would
interfere with the successful marketing (including pricing) of such securities,
then such other previously authorized but unissued shares of Common Stock
proposed to be included by the Company and issued and outstanding shares of
Common Stock proposed to be included by persons other than the Holders of
Registrable Securities shall be reduced or excluded from such registration (as
the case may be) in accordance with the terms and provisions of the Prior
Registration Rights Agreements.  If the inclusion of all such Registrable
Securities would still nevertheless so interfere with the successful marketing
of such securities, then the number of shares to be registered shall be reduced
pro rata among the Holders of the Registrable Securities; provided, however,
that if the amount of Registrable Securities is reduced by more than twenty-five
percent (25%), then such offering shall not count against the limit in Section
2.1(a).
 
2.2           The Company shall use its commercially reasonable efforts to keep
the Demand Registration Statement continuously effective under the Securities
Act (subject to Section 3) until the earliest of (i) the date that all
Registrable Securities covered by the Demand Registration Statement have been
publicly sold, (ii) the date on which all Registrable Securities not otherwise
sold pursuant to clause (i) and covered by the Demand Registration Statement may
be sold pursuant to Rule 144(k), or (iii) two years from the effective date of
any such Demand Registration Statement plus any Suspension Period imposed in
paragraph 3 below.
 
3.           Incidental Registration / Piggyback Registration.  For so long as
any Holder holds Registrable Securities, if the Company at any time proposes for
any reason to register any of its securities under the Securities Act (other
than on Forms S-4 or S-8 or any similar or successor form), other than pursuant
to Section 2 hereof, it shall each such time promptly give written notice to the
Holder of its intention to do so, and, upon written request, given within 30
days after receipt of any such notice, of the Holder to register any Registrable
Securities (which request shall specify the Registrable Securities intended to
be sold or disposed of by the Holder and shall state the intended method of
disposition of such Registrable Securities
 

 
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by the prospective seller), the Company shall use its best efforts to cause all
such Registrable Securities to be registered under the Securities Act promptly
upon receipt of the written request of the Holder for such registration, all to
the extent requisite to permit the sale or other disposition (in accordance with
the intended methods thereof, as aforesaid) by the prospective seller or sellers
of the Registrable Securities so registered.  In the event that the proposed
registration by the Company is, in whole or in part, an underwritten public
offering of securities of the Company, any request pursuant to this Section 3 to
register Registrable Securities shall specify that such shares are to be
included in the underwriting (i) on the same terms and conditions as the shares
of Common Stock, if any, otherwise being sold through underwriters under such
registration or (ii) on terms and conditions comparable to those normally
applicable to offerings of Common Stock in reasonably similar circumstances in
the event that no other shares of Common Stock are being sold through
underwriters under such registration; provided, however, that if the managing
underwriter determines and advises in writing that the inclusion of all
Registrable Securities and Restricted Securities requested to be included in
such registration would interfere with the successful marketing (including
pricing) of such securities, then the number of Registrable Securities and
Restricted Securities to be included in the underwritten public offering shall
be reduced, first among the Holders of the Registrable Securities on a pro rata
basis, and second among holders of the Restricted Securities in accordance with
the terms and provisions of the Prior Registration Rights Agreements; provided
further, however,  that this Section 3 shall not be construed to require the
exclusion of any shares of Common Stock that are issuable upon exercise of the
TBCC Warrant if such exclusion would conflict with the terms of the TBCC
Warrant.  Any Registrable Securities which are excluded from the underwritten
public offering (either because such shares were not requested by the Holder
thereof to be included therein or which were excluded pursuant to the
immediately preceding sentence or in connection with a registration pursuant to
Section 2 hereof) shall be withheld from the market by the Holder thereof for a
period, not to exceed 180 days, which the managing underwriter reasonably
determines as necessary in order to effect the underwritten public offering.
 
4.            Temporary Suspensions of Demand Registration
Statement.  Notwithstanding anything to the contrary contained in this
Agreement, the Company shall be entitled, from time to time by providing written
notice to the Holders, to require the Holders to suspend the use of the
prospectus forming a part of the Demand Registration Statement for sales of
Registrable Securities for a period of time, not to exceed 90 days in any
12-month period (a “Suspension Period”), if the Company shall determine that it
is required to disclose in the Demand
 

 
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Registration Statement a financing, acquisition, corporate reorganization or
other similar corporate transaction or other material event or circumstance
affecting the Company or its securities, and that such disclosure of such
information at such time would be seriously detrimental to the Company and its
stockholders.  Immediately upon receipt of such notice, the Holder of
Registrable Securities covered by the Demand Registration Statement shall
suspend the use of the prospectus forming a part of the Demand Registration
Statement until requisite changes to such prospectus have been made as required
herein or until the Holders are advised in writing (the “Advice”) by the Company
that the use of the prospectus may be resumed.  After the expiration of any
Suspension Period and without any further request from a Holder, the Company
shall as promptly as reasonably practicable prepare a post-effective amendment
or supplement to the Demand Registration Statement or the prospectus forming a
part thereof, or any document incorporated therein by reference, or file any
other required document so that, as thereafter delivered to purchasers of
Registrable Securities included therein, such prospectus will not include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
 
5.           Registration Procedures; Additional Agreements.  With respect to
the Company’s obligations under Section 2, the Company shall:
 
5.1           Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its commercially reasonable
efforts to cause such registration statement to become effective; provided,
however, that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to one law firm
selected by the Holders copies of all such documents in the form substantially
as proposed to be filed with the SEC at least three (3) Business Days (or with
respect to any prospectus or any amendment or supplement, at least two (2)
Business Days) prior to filing for review and comment by such counsel, which
opportunity to comment shall include an absolute right to control or contest
disclosure if any Participating Holder reasonably believes that it may be
subject to controlling person liability under applicable securities laws with
respect thereto, and if such review lasts longer than 48 hours, the filing and
effectiveness requirements set forth in Section 2 shall be suspended during the
pendency of such review.
 
 
 
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5.2           Notify the Holder of the effectiveness of any registration
statement with respect to the Registrable Securities and prepare and file with
the SEC such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act and rules
thereunder with respect to the disposition of all securities covered by such
registration statement.  The Company shall amend the registration statement or
supplement the prospectus included therein so that it will remain current and in
compliance with the requirements of the Securities Act for the period specified
in Section 2.2, and if during such period any event or development occurs as a
result of which the registration statement or prospectus contains a misstatement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, the Company
shall promptly notify each Holder, amend the registration statement or
supplement the prospectus so that each will thereafter comply with the
Securities Act and furnish each Holder such amended or supplemented prospectus,
which such Holders shall thereafter use in the sale of Registrable Securities
pursuant to such registration statement.
 
5.3           Furnish to each Holder, without charge, such numbers of copies of
such registration statement, any pre-effective or post-effective amendment
thereto, the prospectus included therein, including each preliminary prospectus,
and any amendments or supplements thereto, in each case in conformity with the
requirements of the Securities Act, and such other related documents as such
Holders may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by it pursuant to such registration statement.
 
5.4           Use its commercially reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or blue sky laws of such states or jurisdictions as shall be
reasonably requested by a Holder; provided, however, that the Company shall not
be required in connection therewith or as a condition thereto to qualify to do
business as a foreign corporation, to consent to general service of process or
to subject itself to taxation in any state or jurisdiction.
 
5.5           Promptly notify the Holder of any stop order issued by the SEC in
connection therewith and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered.
 

 
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5.6           Use its commercially reasonable efforts to cause all Registrable
Securities to be listed on the NASDAQ National Market.
 
5.7           Take such other actions as are reasonably required in order to
expedite or facilitate the disposition of Registrable Securities.
 
6.            Holders’ Obligations.  It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of each Holder of Registrable Securities
that each such Holder shall furnish to the Company such information regarding
it, the number of the Registrable Securities owned by it, the number of
Registrable Securities being registered and the intended method of disposition
of such securities as shall be required to effect the registration of the
Holder’s Registrable Securities, and to cooperate with the Company in preparing
such registration.
 
7.            Registration Expenses.
 
7.1           Company Expenses.  All expenses incident to the Company’s
performance of or compliance with this Agreement, including, without limitation,
all registration and filing fees, fees of any transfer agent and registrar, fees
and expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, fees and disbursements of custodians, fees and
disbursements of counsel for the Company and its independent certified public
accountants, the Company’s internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any liability insurance and the expenses and
fees for listing the securities to be registered on each securities exchange or
quotation system on which similar securities issued by the Company are then
listed or quoted shall be borne by the Company; provided, however, that the
Company shall only bear such expenses in connection with up to two registrations
on Form S-3 requested pursuant to the proviso in Section 2.1(a) hereof.
 
7.2           Holder Expenses.  All expenses of the Holder in connection with
the registration of Registrable Securities hereunder shall be bourne by the
Holders including Registrable Securities in such registration statement.
 
8.           Indemnification; Contribution.
 

 
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8.1           With respect to a Demand Registration Statement, to the extent
permitted by applicable law, the Company shall indemnify and hold harmless each
Holder, each Person, if any, who controls each such Holder within the meaning of
the Securities Act, and each officer, director, partner, and employee of each
such Holder and such controlling Person, against any and all losses, claims,
damages, liabilities and expenses (joint or several), including reasonable
attorneys’ fees and disbursements and expenses of investigation (collectively,
“Losses”), incurred by such party pursuant to any actual or threatened action,
suit, proceeding or investigation, or to which any of the foregoing Persons may
become subject under the Securities Act, the Exchange Act or other federal or
state laws, insofar as such Losses arise out of or are based upon any of the
following statements, omissions or violations (collectively a “Violation”):
 
(a)      any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein, or any amendments or supplements thereto;
 
(b)      the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading; or
 
(c)      any violation or alleged violation by the Company of any federal or
state securities law applicable to the Company relating to any action or
inaction by the Company in connection with the registration effected by the
registration statement;
 
provided, however, that the indemnification required by this Section 8.1 shall
not apply to amounts paid in settlement of any such Loss if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such Loss to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the indemnified party expressly for use in
connection with such registration; provided, further, that any indemnification
required by this Section 8.1 shall not apply to a Holder to the extent that any
such Loss is based on or arises out of (i) sales of Registrable Securities
during any Suspension Period or (ii) an untrue statement or alleged untrue
statement of a material fact, or an omission or alleged omission to state a
material fact, contained in or omitted from any preliminary prospectus if the
final prospectus shall correct such untrue statement or
 

 
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alleged untrue statement, or such omission or alleged omission, and a copy of
the final prospectus has been delivered to each such Holder but has not been
sent or given by each such Holder to such Person alleging damage.
 
8.2           To the extent permitted by applicable law, each such Holder shall,
severally and not jointly, indemnify and hold harmless the Company, each of its
directors, each of its officers who shall have signed the registration
statement, each Person, if any, who controls the Company within the meaning of
the Securities Act against any and all Losses incurred by the Company or such
Person pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which the Company or any of the foregoing Persons may
otherwise become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such Losses arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation arises out of or is based upon and in conformity with written
information furnished by or on behalf of such Holder expressly for use in
connection with such registration; provided, however, that (x) the
indemnification required by this Section 8.2 shall not apply to amounts paid in
settlement of any such Loss if such settlement is effected without the consent
of such Holder, (which consent shall not be unreasonably withheld), and (y) in
no event shall the amount of any indemnity obligation under this Section 8.2
exceed the net proceeds from the applicable offering received by such
Participating Holder.
 
8.3           (a)           Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof for which such indemnified party may make a
claim under this Section 8, such indemnified party shall deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to assume the defense thereof.  The
failure to deliver written notice to the indemnifying party as soon as
practicable following the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 8 to the extent of such
prejudice but shall not relieve the indemnifying party of any liability that it
may have to any indemnified party otherwise than pursuant to this Section
8.  Any fees and expenses incurred by the indemnified party (including any fees
and expenses incurred in connection with investigating or preparing to defend
such action or proceeding) shall be paid to the indemnified party, as incurred
 

 
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(regardless of whether it is ultimately determined that an indemnified party is
not entitled to indemnification hereunder).
 
(b)   Any such indemnified party shall have the right to employ separate counsel
in any such action, claim or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be the expenses of such
indemnified party unless (i) the indemnifying party shall have failed to
promptly assume the defense of such action, claim or proceeding or (ii) the
named parties to any such action, claim or proceeding (including any impleaded
parties) include both such indemnified party and the indemnifying party, and
such indemnified party shall have been advised by counsel that there may be one
or more legal defenses available to it which are different from or in addition
to those available to the indemnifying party and that the assertion of such
defenses would create a conflict of interest such that counsel employed by the
indemnifying party could not faithfully represent the indemnified party (in
which case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties.
 
8.4           If the indemnification required by this Section 8 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any Losses referred to in this Section 8:
 
(a)   The indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such Losses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions which resulted in such Losses, as well as any other relevant
equitable considerations.  The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any Violation has been committed by, or relates to information supplied
by, such indemnifying party or indemnified parties, and the parties’ relative
intent, knowledge, access to information and
 

 
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opportunity to correct or prevent such Violation.  The amount paid or payable by
a party as a result of the Losses referred to above shall be deemed to include,
subject to the limitations set forth in Section 8.1 and Section 8.2, any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding.
 
(b)   The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8.4 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in Section 8.4(a).  No Person guilty of
fraudulent misrepresentation (within the meaning of Section 12(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
 
8.5           If indemnification is available under this Section 8, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 8 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 8.4.
 
8.6           The obligations of the Company and any Holder under this Section 8
shall survive the completion of any offering of Registrable Securities pursuant
to a registration statement under this Agreement, and otherwise.
 
9.            Transfer of Registration Rights.  The rights of a Holder with
respect to Registrable Securities pursuant to this Agreement may be Transferred
by such Holder to any parent or subsidiary of such Holder in connection with the
Transfer of Registrable Securities to such party, in all cases, if (a) the
transferor shall have delivered to the Company written notification of such
proposed Transfer, setting forth the name of the transferor, name and address of
the transferee, and the number of Registrable Securities which shall be so
Transferred, (b) such transferee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement and the Company is provided a copy of
such agreement and (c) the transferor is Transferring at least 10,000 Shares (as
adjusted for any stock split, stock dividend, recapitalization or otherwise) at
any given time.
 
10.            Miscellaneous.
 

 
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10.1            Remedies.  Any Person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.  The parties hereto agree and
acknowledge that money damages are not an adequate remedy for any breach of the
provisions of this Agreement and that any party may apply for specific
performance and for other injunctive relief in order to enforce or prevent
violation of the provisions of this Agreement.
 
10.2            Amendments and Waivers.
 
(a)            This Agreement may not be amended, modified or supplement except
by a written instrument signed by each of the Company and the Holder or Holders,
as the case may be.
 
(b)           Any term or provision of this Agreement may be waived, or the time
for performance extended, as authorized in writing by the party or parties
entitled to the benefit thereof.  No waiver of any term or condition of this
Agreement shall operate as a waiver of any other breach of such term and
condition or any other term or condition, nor shall any failure to enforce any
provision hereof operate as a waiver of such provision or of any other provision
hereof.  No written waiver hereunder, unless it by its own terms explicitly
provides to the contrary, shall be construed to effect a continuing waiver of
the provisions being waived and no such waiver in any instance shall constitute
a waiver in any other instance or for any other purpose or impair the right of
the party against whom such waiver is claimed in all other instances or for all
other purposes to require full compliance with such provision.
 
10.3            Successors and Assigns.  All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto.
 
10.4            Entire Agreement.  This Agreement, together with the License
Agreement, constitutes the entire agreement of the parties hereto with respect
to the subject matter contained herein, and supersedes all prior agreements,
negotiations, discussions and understandings between the parties hereto with
respect to such subject matter.
 

 
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10.5            Severability.  Wherever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law and in such a way as to, as closely as possible, achieve the
intended economic effect of such provision and this Agreement as a whole, but if
any provision contained herein is, for any reason, held to be invalid, illegal
or unenforceable in any respect, such provision shall be ineffective to the
extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such provision or any
other provisions hereof, unless such a construction would be unreasonable.
 
10.6            Notices.  All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
(a) when delivered personally, (b) if transmitted by facsimile when confirmation
of transmission is received, (c) if sent by registered or certified mail,
postage prepaid, return receipt requested, three Business Days after mailing or
(d) if sent by reputable overnight courier service, one Business Day after
delivery to such service; and shall be addressed as follows:
 
If to the Company, to:
 
Genaissance Pharmaceuticals, Inc.
Five Science Park
New Haven, Connecticut  06511
Attention:  Chief Financial Officer
Facsimile:  (203) 786-3567
 
If to any Holder, to:
 
Merck KGaA
Frankfurter Strasse 250
64291 Darmstadt
Germany
Attention:
 
a)           Corporate Legal Department
 
b)           Corporate Finance & Treasury
 
10.7            Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without giving
effect to any choice of law
 

 
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or conflict of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.  In furtherance of the foregoing,
the internal law of the State of Delaware shall control the interpretation and
construction of this Agreement, even though under that jurisdiction’s choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
 
10.8           Execution in Counterparts.  This Agreement may be executed in any
number of counterparts (including via facsimile), each of which will be
considered an original instrument, but all of which together will be considered
one and the same agreement, and will become binding when one or more
counterparts have been signed by and delivered to each of the parties.
 
10.9            Termination.  This Agreement may be terminated at any time by a
written instrument signed by all parties hereto.
 
10.10            Attorneys’ Fees.  In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys’ fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available remedy.
 
10.11           No Third Party Beneficiaries.  Nothing herein expressed or
implied is intended to confer upon any person, other than the parties hereto or
their respective permitted assigns, successors, heirs and legal representatives,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
 
10.12            Further Assurances.  Each of the parties hereto shall execute
all such further instruments and documents and take all such further action as
any other party hereto may reasonably require in order to effectuate the terms
and purposes of this Agreement.
 

 
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IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be executed the day and year first above written.

 
GENAISSANCE PHARMACEUTICALS, INC.
             
By:
/s/ Ben Kaplan
         
Name:
Ben Kaplan
           
Title:
CFO
             
MERCK KGaA
             
By:
/s/ Dr. Inge Lues
         
Name:
Dr. Inge Lues
           
Title:
Executive Vice President
Global Preclinical R&D
             
By:
/s/ Klaus-Peter Brandis
         
Name:
Klaus-Peter Brandis
           
Title:
Head Corporate Legal Department

 
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