Exhibit 10.1

 

CONFIDENTIAL    EXECUTION VERSION

 

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Double asterisks denote omissions.

LICENSE AND COLLABORATION AGREEMENT

By and Among

BAXTER INTERNATIONAL INC.,

BAXTER HEALTHCARE CORPORATION,

BAXTER HEALTHCARE SA

and

MERRIMACK PHARMACEUTICALS, INC.

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CONFIDENTIAL   EXECUTION VERSION

 

TABLE OF CONTENTS

 

             Page  

ARTICLE I

 

DEFINITIONS

     1     

Section 1.1

 

“Affiliate”

     1     

Section 1.2

 

“Bankruptcy Code”

     2     

Section 1.3

 

“BAXTER Intellectual Property”

     2     

Section 1.4

 

“BAXTER Patent Rights”

     2     

Section 1.5

 

“BAXTER Technology”

     2     

Section 1.6

 

“Business Day”

     2     

Section 1.7

 

“China”

     2     

Section 1.8

 

“CMO”

     2     

Section 1.9

 

“Commercialization”

     2     

Section 1.10

 

“Commercially Reasonable Efforts”

     2     

Section 1.11

 

“Companion Diagnostic”

     3     

Section 1.12

 

“Comparator Drug”

     3     

Section 1.13

 

“Conditional Approval”

     3     

Section 1.14

 

“Confidential Information”

     3     

Section 1.15

 

“Control” or “Controlled”

     3     

Section 1.16

 

“Cover”, “Covering” or “Covered”

     3     

Section 1.17

 

“Development Costs”

     3     

Section 1.18

 

“Drug Approval Application”

     4     

Section 1.19

 

“Drug Product”

     4     

Section 1.20

 

“Electronic BAXTER Data Management Standards”

     4     

Section 1.21

 

“EMA”

     4     

Section 1.22

 

“EU”

     4     

Section 1.23

 

“Executive Officers”

     4     

Section 1.24

 

“FDA”

     4     

Section 1.25

 

“Field”

     4     

Section 1.26

 

“First Commercial Sale”

     5     

Section 1.27

 

“First Indication”

     5     

Section 1.28

 

“Freedom to Operate Opinions”

     5     

Section 1.29

 

“FTE”

     5   

 

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Section 1.30

 

“FTE Rate”

     5     

Section 1.31

 

“Global Development Plan”

     5     

Section 1.32

 

“Global Marketing and Commercialization Principles”

     5     

Section 1.33

 

“IND”

     5     

Section 1.34

 

“Joint Patent Rights”

     6     

Section 1.35

 

“Joint Technology”

     6     

Section 1.36

 

“Know-How”

     6     

Section 1.37

 

“Knowledge of MERRIMACK Management”

     6     

Section 1.38

 

“Laws”

     6     

Section 1.39

 

“Licensed Asian Territory”

     6     

Section 1.40

 

“Licensed Compound”

     6     

Section 1.41

 

“Licensed Intellectual Property”

     6     

Section 1.42

 

“Licensed Patent Rights”

     6     

Section 1.43

 

“Licensed Product”

     6     

Section 1.44

 

“Licensed Sub-Territory”

     6     

Section 1.45

 

“Licensed Technology”

     7     

Section 1.46

 

“Licensed Territory”

     7     

Section 1.47

 

“Major Asian Countries”

     7     

Section 1.48

 

“Major EU Countries”

     7     

Section 1.49

 

“Major ROW Countries”

     7     

Section 1.50

 

“Manufacturing Costs”

     7     

Section 1.51

 

“Marketing Authorization”

     8     

Section 1.52

 

“MERRIMACK Territory”

     8     

Section 1.53

 

“MHLW”

     8     

Section 1.54

 

“MM-111”

     8     

Section 1.55

 

“MM-141”

     8     

Section 1.56

 

“MM-302”

     8     

Section 1.57

 

“MM-398”

     8     

Section 1.58

 

“Net Sales”

     8     

Section 1.59

 

“Other Indication”

     10     

Section 1.60

 

“Party”

     10     

Section 1.61

 

“Patent Right”

     10     

Section 1.62

 

“Person”

     10   

 

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Section 1.63

 

“PharmaEngine”

     10     

Section 1.64

 

“PharmaEngine Collaboration Agreement”

     10     

Section 1.65

 

“PharmaEngine Territory”

     10     

Section 1.66

 

“Phase 3 Clinical Study”

     10     

Section 1.67

 

“Pivotal Clinical Study”

     10     

Section 1.68

 

“Regulatory Approval”

     10     

Section 1.69

 

“Regulatory Authority”

     11     

Section 1.70

 

“Regulatory Exclusivity”

     11     

Section 1.71

 

“Regulatory Filings”

     11     

Section 1.72

 

“ROW Territory”

     11     

Section 1.73

 

“Second Indication”

     11     

Section 1.74

 

“Taiwan”

     11     

Section 1.75

 

“Third Party”

     11     

Section 1.76

 

“US”

     11     

Section 1.77

 

“Valid Claim”

     12     

Section 1.78

 

Additional Definitions

     12   

ARTICLE II

 

GOVERNANCE; DECISION-MAKING

     13     

Section 2.1

 

Joint Steering Committee

     13   

ARTICLE III

 

DEVELOPMENT; MANUFACTURE AND SUPPLY

     17     

Section 3.1

 

Overview; Global Development Plan

     17     

Section 3.2

 

Second Indication Development Costs

     18     

Section 3.3

 

Other Development Costs

     18     

Section 3.4

 

Certain Development Responsibilities of Each Party

     18     

Section 3.5

 

Clinical Supply

     20     

Section 3.6

 

MERRIMACK Supply Agreement

     20     

Section 3.7

 

Secondary Supply

     20     

Section 3.8

 

Technology Transfer

     21     

Section 3.9

 

Quality Agreement

     21     

Section 3.10

 

Development Reports

     22   

ARTICLE IV

 

REGULATORY MATTERS

     22     

Section 4.1

 

Overview; Regulatory Filings

     22     

Section 4.2

 

Communications with Regulatory Authorities

     24     

Section 4.3

 

Product Withdrawals and Recalls

     25   

 

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Section 4.4

 

Pharmacovigilance; Safety Data Reporting

     26     

Section 4.5

 

Regulatory Compliance

     26   

ARTICLE V

 

COMMERCIALIZATION

     26     

Section 5.1

 

Overview

     26     

Section 5.2

 

Commercialization Reports

     27     

Section 5.3

 

Product Labeling

     27   

ARTICLE VI

 

DILIGENCE; RIGHT OF FIRST NEGOTIATION

     27     

Section 6.1

 

Diligence Obligations; Development and Commercialization Activities

     27     

Section 6.2

 

Right of First Negotiation

     28   

ARTICLE VII

 

GRANT OF LICENSES

     29     

Section 7.1

 

License Grants from MERRIMACK to BAXTER

     29     

Section 7.2

 

License Grants from BAXTER to MERRIMACK

     30     

Section 7.3

 

Sublicense Rights

     30     

Section 7.4

 

Compliance with Third Party Agreements

     31     

Section 7.5

 

Retained Rights

     32     

Section 7.6

 

No Implied Licenses

     32     

Section 7.7

 

Section 365(n) of the Bankruptcy Code

     32   

ARTICLE VIII

 

FINANCIAL PROVISIONS

     32     

Section 8.1

 

Upfront Payment

     32     

Section 8.2

 

Research and Development Milestones

     33     

Section 8.3

 

Regulatory Milestones

     34     

Section 8.4

 

Sales Milestones

     35     

Section 8.5

 

Royalties

     36     

Section 8.6

 

Reconciliation and Payment of Development Costs

     37     

Section 8.7

 

Recordkeeping; Audit Rights

     37     

Section 8.8

 

Method of Payment

     38     

Section 8.9

 

Invoices

     38     

Section 8.10

 

Late Payments

     39     

Section 8.11

 

Tax Withholding

     39     

Section 8.12

 

Blocked Payments

     40   

ARTICLE IX

 

INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION AND RELATED MATTERS

     40     

Section 9.1

 

Ownership of Inventions

     40   

 

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Section 9.2

 

Prosecution and Maintenance of Patent Rights

     41     

Section 9.3

 

Third Party Infringement

     43     

Section 9.4

 

Claimed Infringement

     44     

Section 9.5

 

Patent Invalidity Claim

     45     

Section 9.6

 

Certification Under Drug Price Competition and Patent Restoration Act

     45     

Section 9.7

 

Patent Marking

     45   

ARTICLE X

 

CONFIDENTIALITY

     45     

Section 10.1

 

Confidential Information

     45     

Section 10.2

 

Employee, Director, Consultant and Advisor Obligations

     46     

Section 10.3

 

Publicity

     46     

Section 10.4

 

Other Disclosures

     47     

Section 10.5

 

Publications

     47     

Section 10.6

 

Clinical Trial Registry

     48     

Section 10.7

 

Confidentiality Term

     48   

ARTICLE XI

 

REPRESENTATIONS AND WARRANTIES

     48     

Section 11.1

 

Representations and Warranties of Both Parties

     48     

Section 11.2

 

Representations and Warranties of MERRIMACK

     49     

Section 11.3

 

Mutual Covenants

     50     

Section 11.4

 

DISCLAIMER

     51   

ARTICLE XII

 

TERM AND TERMINATION

     51     

Section 12.1

 

Term

     51     

Section 12.2

 

Survival of Licenses

     51     

Section 12.3

 

Termination For Material Breach

     52     

Section 12.4

 

Termination by BAXTER for Convenience

     52     

Section 12.5

 

Termination by MERRIMACK for BAXTER Patent Challenge

     53     

Section 12.6

 

Effects of Termination by MERRIMACK for BAXTER Uncured Breach or BAXTER Patent
Challenge, or Termination by BAXTER of Entire Agreement for Convenience

     53     

Section 12.7

 

Effects of Termination with Respect to One or More, but Not All, Licensed
Products, Licensed Sub-Territories or Countries by BAXTER for Convenience

     55     

Section 12.8

 

Survival

     56   

ARTICLE XIII

 

DISPUTE RESOLUTION

     57     

Section 13.1

 

Disputes; Executive Officers

     57     

Section 13.2

 

Arbitration

     57   

 

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ARTICLE XIV

 

INDEMNIFICATION

     59     

Section 14.1

 

Indemnification by BAXTER

     59     

Section 14.2

 

Indemnification by MERRIMACK

     59     

Section 14.3

 

Procedure

     60     

Section 14.4

 

Insurance

     61     

Section 14.5

 

Limitation of Liability

     61   

ARTICLE XV

 

MISCELLANEOUS PROVISIONS

     61     

Section 15.1

 

Governing Law

     61     

Section 15.2

 

Assignment

     61     

Section 15.3

 

Entire Agreement; Amendments

     62     

Section 15.4

 

Notices

     62     

Section 15.5

 

Exports

     63     

Section 15.6

 

Force Majeure

     64     

Section 15.7

 

Performance by Affiliates and Sublicensees; Joint and Several Liability

     64     

Section 15.8

 

Independent Contractors

     64     

Section 15.9

 

Construction

     64     

Section 15.10

 

Interpretation

     64     

Section 15.11

 

Headings

     65     

Section 15.12

 

English Language

     65     

Section 15.13

 

No Implied Waivers; Rights Cumulative

     65     

Section 15.14

 

Severability

     65     

Section 15.15

 

Execution in Counterparts

     65   

Exhibits

 

Exhibit A – Initial Global Development Plan Exhibit B – Licensed Patent Rights
Exhibit C – MM-398 Exhibit D – Terms of MERRIMACK Supply Agreement Exhibit E –
BAXTER Restrictions

 

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LICENSE AND COLLABORATION AGREEMENT

This License and Collaboration Agreement (this “Agreement”), dated the 23rd day
of September, 2014 (the “Effective Date”), is by and among BAXTER INTERNATIONAL
INC., a company organized under the laws of Delaware with its principal place of
business at One Baxter Parkway, Deerfield, IL 60015, US (“BII”), BAXTER
HEALTHCARE CORPORATION, a company organized under the laws of Delaware with its
principal place of business at One Baxter Parkway, Deerfield, IL 60015, US
(“BHC”), and BAXTER HEALTHCARE SA, a company organized under the laws of
Switzerland with its principal place of business at Postfach 8010, Zurich,
Switzerland (“BHSA” and together with BII and BHC, “BAXTER”), on the one hand,
and MERRIMACK PHARMACEUTICALS, INC., a Delaware corporation with its principal
offices at One Kendall Square, Suite B7201, Cambridge, MA 02139, US
(“MERRIMACK”), on the other hand.

INTRODUCTION

1. MERRIMACK has worldwide rights, excluding rights in Taiwan that are held by
PharmaEngine (as defined below), to a nanoliposomal formulation of irinotecan,
known as MM-398, as more specifically described below.

2. BAXTER is engaged in the research, development, manufacture and
commercialization of therapeutic products for various diseases and disorders.

3. BAXTER and MERRIMACK are interested in collaborating in the development of
products comprising MM-398 and in entering into a licensing arrangement granting
BAXTER certain rights as to such products in the Licensed Territory (as defined
below) on the terms and conditions set forth herein.

4. In addition, MERRIMACK is interested in granting BAXTER a right of first
negotiation related to the commercialization of certain additional compounds
known as MM-111, MM-141 and MM-302.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt of which is hereby
acknowledged, BAXTER and MERRIMACK agree as follows:

Article I

Definitions

For purposes of clarity, when used in this Agreement, each of the following
terms shall have the meanings set forth in this Article I:

Section 1.1 “Affiliate”. Affiliate means, with respect to a Party, any Person
that controls, is controlled by, or is under common control with such Party. For
purposes of this Section 1.1, “control” shall refer to (a) in the case of a
Person that is a corporate entity, direct or indirect ownership of fifty percent
(50%) or more of the stock or shares having the right to vote for the election
of directors of such Person, or (b) in the case of a Person that is not a
corporate entity, the possession, directly or indirectly, of the power to
direct, or cause the direction of, the management or policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.

 

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Section 1.2 “Bankruptcy Code”. Bankruptcy Code means 11 U.S.C. §§ 101-1330 of
the US Bankruptcy Code, as amended, and similar laws governing bankruptcy and
insolvency in countries outside the US.

Section 1.3 “BAXTER Intellectual Property”. BAXTER Intellectual Property means,
collectively, BAXTER Patent Rights and BAXTER Technology.

Section 1.4 “BAXTER Patent Rights”. BAXTER Patent Rights means all Patent Rights
Controlled by BAXTER, itself or jointly with MERRIMACK, as of the Effective Date
and thereafter during the Term that Cover any BAXTER Technology or the
manufacture, use, offer for sale, sale or importation of the Licensed Compound
or any Licensed Product.

Section 1.5 “BAXTER Technology”. BAXTER Technology means all Know-How Controlled
by BAXTER, itself or jointly with MERRIMACK, as of the Effective Date and
thereafter during the Term, that is used in, or necessary or useful for, the
research, development, manufacture or Commercialization of the Licensed Compound
or any Licensed Product.

Section 1.6 “Business Day”. Business Day means a day on which banking
institutions in New York, New York, US are open for business, excluding any
Saturday or Sunday.

Section 1.7 “China”. China means the People’s Republic of China.

Section 1.8 “CMO”. CMO means a Third Party contract manufacturing organization.

Section 1.9 “Commercialization”. Commercialization means all activities related
to the commercial exploitation of the Licensed Compound and/or the Licensed
Products, including importation, exportation, marketing, promotion,
distribution, pre-launch, launch, sale or offering for sale of any Licensed
Product. When used as a verb, “Commercialize” or “Commercializing” means to
engage in Commercialization.

Section 1.10 “Commercially Reasonable Efforts”. Commercially Reasonable Efforts
means, with respect to the performing Party, a level of efforts and resources,
not less than reasonable efforts and resources, that is consistent with the
efforts and resources that BAXTER or MERRIMACK, as applicable, typically devotes
to its own internally discovered products, to which it solely owns all rights
without financial obligations to any licensor, of similar market potential at a
similar stage in the development or product life thereof, taking into account
scientific and commercial factors, including issues of safety and efficacy,
product profile, difficulty in developing or manufacturing the Licensed Compound
or Licensed Product, competitiveness of alternative Third Party products in the
marketplace, the patent or other proprietary position of the Licensed Compound
or Licensed Product (including the ability to obtain or enforce, or have
obtained or enforced, such patent or other proprietary positions), the
regulatory requirements involved and the potential profitability, cost, market
share, price or reimbursement to the performing Party of the Licensed Compound
or Licensed Product marketed or to be marketed.

 

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Section 1.11 “Companion Diagnostic”. Companion Diagnostic means a diagnostic
intended to assist physicians in making treatment decisions with respect to the
use of the Licensed Compound or Licensed Product.

Section 1.12 “Comparator Drug”. Comparator Drug means unexpired comparator drugs
used for Global Development Plan activities after the Effective Date.

Section 1.13 “Conditional Approval”. Conditional Approval means conditional
approval of a Licensed Product by the EMA in accordance with Regulation (EC) No
507/2006, adopted on March 29, 2006.

Section 1.14 “Confidential Information”. Confidential Information means all
Know-How or other confidential or proprietary information of a Party that is
disclosed (whether in written, graphic, oral, electronic or other form) by or on
behalf of such Party to the other Party pursuant to this Agreement, including
information regarding a Party’s or its licensor’s technology, products,
business, business plans, financial status, biological substances, chemical
substances, formulations, techniques, methodology, equipment, sources of supply
and patent positioning. The status, prospects or objectives regarding the Global
Development Plan, Licensed Compound or Licensed Products shall be deemed
“Confidential Information” of both Parties. All information disclosed prior to
the Effective Date by or on behalf of either Party under, and subject to, the
Mutual Confidential Disclosure Agreement, by and between MERRIMACK and Baxter
Healthcare Corporation, dated June 18, 2013 and as amended July 28, 2014 (the
“Confidentiality Agreement”), shall be deemed “Confidential Information” of the
disclosing Party hereunder.

Section 1.15 “Control” or “Controlled”. Control or Controlled means with respect
to any Know-How, Patent Right or other intellectual property right, the
possession (whether by license (other than pursuant to this Agreement) or
ownership, or control over an Affiliate with such a license or ownership) by a
Party of the ability to grant to the other Party access or a license as provided
herein without violating the terms of any agreement or arrangement with any
Third Party existing before or after the Effective Date.

Section 1.16 “Cover”, “Covering” or “Covered”. Cover, Covering or Covered means,
with respect to a Patent Right, that, but for a license granted to a Party under
a Valid Claim included in such Patent Right (or, in the case of Joint Patent
Rights, such Party’s ownership interest in such Joint Patent Right), the
practice by such Party of any invention claimed in such Patent Right would
infringe such Valid Claim (or, in the case of a Valid Claim in a pending patent
application, would infringe such Valid Claim if such pending patent application
were to issue).

Section 1.17 “Development Costs”. Development Costs means, as to a Party, such
Party’s direct and identifiable internal and external costs of developing the
Licensed Compound and Licensed Products in accordance with the Global
Development Plan, consisting of the following:

(a) with regard to a Party’s internal costs and charges, Development Costs shall
include all internal costs of such Party’s personnel engaged in the development
of the Licensed Compound and Licensed Products, at the [**] FTE Rate;

 

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(b) with regard to a Party’s external costs and charges, Development Costs shall
consist of the actually incurred out-of-pocket costs and charges of suppliers of
goods, including raw materials, and services, including contract research
organizations, to the extent directly related to the development of the Licensed
Compound and Licensed Products; and

(c) all internal and external costs associated with conducting clinical trials
of the Licensed Compound and Licensed Products and all internal and external
costs associated with the use of clinical supply of Licensed Product and any
Comparator Drug in such trials, including the Manufacturing Cost of such
clinical supply as described in Section 3.5.

Section 1.18 “Drug Approval Application”. Drug Approval Application means an
application submitted to a Regulatory Authority for Marketing Authorization
required before commercial sale or use of (a) a pharmaceutical product as a drug
in a regulatory jurisdiction or country and shall include a New Drug Application
(“NDA”) filed with the FDA, or any successor applications or procedures, (b) any
non-US equivalent of a NDA, and (c) all supplements and amendments that may be
filed with respect to the foregoing.

Section 1.19 “Drug Product”. Drug Product means Licensed Product in bulk form,
excluding any final packaging, finishing and labeling.

Section 1.20 “Electronic BAXTER Data Management Standards”. Electronic BAXTER
Data Management Standards means a document management system that encompasses
tools (templates) for authoring, reviewing and approving submission content,
publishing and archiving that meets 21 C.F.R. Part 11 requirements.

Section 1.21 “EMA”. EMA means the European Medicines Agency or any successor
agency thereof.

Section 1.22 “EU”. EU means the European Union, as it may be constituted from
time to time.

Section 1.23 “Executive Officers”. Executive Officers mean the Chief Executive
Officer of BAXTER (or a senior executive officer of BAXTER who is not a JSC
member designated by BAXTER’s Chief Executive Officer) and the Chief Executive
Officer of MERRIMACK (or a senior executive officer of MERRIMACK who is not a
JSC member designated by MERRIMACK’s Chief Executive Officer).

Section 1.24 “FDA”. FDA means the US Food and Drug Administration or any
successor agency thereto.

Section 1.25 “Field”. Field means all therapeutic, prophylactic and palliative
uses in all possible indications.

 

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Section 1.26 “First Commercial Sale”. First Commercial Sale means, with respect
to a given Licensed Product in a given country, the date on which such Licensed
Product is first sold following Marketing Authorization of such Licensed Product
in such country (or, in a country in which no Marketing Authorization is
required, the date on which the Licensed Product is first sold) by, on behalf of
or under the authority of BAXTER or any of BAXTER’s Affiliates or sublicensees
in arm’s-length transactions to Third Parties (but not including sales relating
to transactions among BAXTER and BAXTER’s Affiliates and sublicensees and agents
unless such Person is the end user thereof).

Section 1.27 “First Indication”. First Indication means the treatment of [**].

Section 1.28 “Freedom to Operate Opinions”. Freedom to Operate Opinions means
all outside legal counsel opinions as to non-infringement.

Section 1.29 “FTE”. FTE means a full time equivalent person year (consisting of
a total of [**] hours per year) of scientific or technical work or scientific or
technical managerial work on or directly related to activities undertaken by a
Party hereunder.

Section 1.30 “FTE Rate”. FTE Rate means, with respect to manufacturing
technology transfer activities under this Agreement, [**] Dollars (US$[**]) per
FTE (as increased or decreased as set forth below, the “[**] FTE Rate”), and
with respect to all other activities under this Agreement, [**] Dollars
(US$[**]) per FTE (as increased or decreased as set forth below, the “[**] FTE
Rate”). Each such FTE Rate shall be increased or decreased annually on January 1
of each year, commencing with January 1, 2016, by the percentage increase or
decrease in the Consumer Price Index (“CPI”) as of the then-most-recent
December 31 over the CPI as of the preceding December 31. As used in this
Section 1.30, Consumer Price Index or CPI means the Consumer Price Index – Urban
Wage Earners and Clerical Workers, US City Average, All Items, 1982-84 = 100,
published by the US Department of Labor, Bureau of Labor Statistics (or its
successor equivalent index).

Section 1.31 “Global Development Plan”. Global Development Plan means the global
development plan for the preclinical, clinical and other research, development,
regulatory and pre-commercial manufacturing activities of the Parties directed
to the Licensed Compound and any Licensed Product, as such plan is agreed upon,
updated and amended from time to time in accordance with this Agreement. The
initial Global Development Plan is attached to this Agreement as Exhibit A (the
“Initial Global Development Plan”).

Section 1.32 “Global Marketing and Commercialization Principles”. Global
Marketing and Commercialization Principles means the global marketing and
Commercialization principles for the Licensed Compound and any Licensed Product
which shall address global product positioning, branding and Commercialization.

Section 1.33 “IND”. IND means an application submitted to a Regulatory Authority
to initiate human clinical trials, including (a) an Investigational New Drug
Application or any successor application or procedure filed with the FDA,
(b) any non-US equivalent of a US Investigation New Drug Application, and
(c) all supplements and amendments that may be filed with respect to the
foregoing.

 

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Section 1.34 “Joint Patent Rights”. Joint Patent Rights means all Patent Rights
that Cover any Joint Technology.

Section 1.35 “Joint Technology”. Joint Technology means Know-How that is
developed by one or more employees, agents or consultants of MERRIMACK on the
one hand, and one or more employees, agents or consultants of BAXTER, on the
other hand, in the performance of this Agreement.

Section 1.36 “Know-How”. Know-How means any technical, scientific and business
information, data and materials, including all biological, chemical,
pharmacological, toxicological, preclinical, clinical, and assay information,
data and materials, analyses, ideas, discoveries, inventions, methods,
techniques, improvements, concepts, designs, processes, procedures,
compositions, plans, formulae, specifications and trade secrets, whether or not
patentable, including documents and other media (including paper, notebooks,
books, files, ledgers, records, tapes, discs, diskettes, CD-ROM, trays and
containers and any other media developed following the Effective Date)
containing or storing any of the foregoing.

Section 1.37 “Knowledge of MERRIMACK Management”. Knowledge of MERRIMACK
Management means the knowledge of Seth Fidel, Fazal Khan, Peter Laivins, Gavin
MacBeath, William McClements, Robert Mulroy, Jeffrey Munsie, Ulrik Nielsen,
Birgit Schoeberl, Edward Stewart and William Sullivan.

Section 1.38 “Laws”. Laws means all laws, statutes, rules, regulations, orders,
judgments or ordinances having the effect of law of any federal, national,
multinational, state, provincial, county, city or other political subdivision.

Section 1.39 “Licensed Asian Territory”. Licensed Asian Territory means all
Asian countries except for Taiwan.

Section 1.40 “Licensed Compound”. Licensed Compound means MM-398.

Section 1.41 “Licensed Intellectual Property”. Licensed Intellectual Property
means, collectively, Licensed Technology and Licensed Patent Rights.

Section 1.42 “Licensed Patent Rights”. Licensed Patent Rights means all Patent
Rights in the Licensed Territory Controlled by MERRIMACK that claim inventions
necessary or useful for the development, manufacture or Commercialization of any
Licensed Product in the Licensed Territory, including MERRIMACK’s rights to any
Joint Patent Rights. The Licensed Patent Rights include those Patent Rights in
the Licensed Territory listed on Exhibit B.

Section 1.43 “Licensed Product”. Licensed Product means any pharmaceutical
product including the Licensed Compound, or any reformulation thereof, as an
active ingredient. For purposes of clarity, unless the context otherwise
dictates, all references to “Licensed Product” shall include the Licensed
Compound contained in such Licensed Product.

Section 1.44 “Licensed Sub-Territory”. Licensed Sub-Territory means any of the
EU, Licensed Asian Territory or ROW Territory.

 

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Section 1.45 “Licensed Technology”. Licensed Technology means any Know-How that
is Controlled (disregarding any grant of rights to BAXTER pursuant to this
Agreement) by MERRIMACK, itself or jointly with BAXTER, as of the Effective Date
and thereafter during the Term, that is used in, or necessary or useful for, the
research, development, manufacture or Commercialization of any Licensed Product.

Section 1.46 “Licensed Territory”. Licensed Territory means the EU, Licensed
Asian Territory and ROW Territory.

Section 1.47 “Major Asian Countries”. Major Asian Countries means China, Japan,
the Republic of Korea and Singapore.

Section 1.48 “Major EU Countries”. Major EU Countries means France, Germany,
Italy, Spain and the United Kingdom.

Section 1.49 “Major ROW Countries”. Major ROW Countries means Argentina,
Australia, Brazil, Canada, India, Mexico, Russia, South Africa, Switzerland and
Turkey.

Section 1.50 “Manufacturing Costs”. Manufacturing Costs means:

(a) To the extent that manufacturing of any Licensed Product or any component
thereof is performed by MERRIMACK or BAXTER itself, the actual consolidated,
fully burdened cost incurred by MERRIMACK or BAXTER to manufacture Licensed
Product or any component thereof, which costs are limited to:

(i) direct labor costs (salaries, wages, incentive compensation, share-based
compensation and employee benefits);

(ii) direct materials and packaging costs;

(iii) operating costs of facilities and equipment, excluding any surplus or idle
capacity costs;

(iv) a charge for depreciation, repairs and maintenance costs of facilities and
equipment;

(v) quality and in-process control costs;

(vi) a charge for overhead costs for raw material and manufacturing
administration and management, materials management, storage and handling, and
manufacturing and employee training; and

(vii) charges for spoilage, scrap, rework costs and expired goods;

in each of the above cases to the extent reasonably allocable to the manufacture
of Licensed Product as determined in accordance with US generally accepted
accounting principles, consistently applied; and/or

 

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(b) To the extent that manufacturing of Licensed Product or any component
thereof is performed for MERRIMACK or BAXTER by a Third Party, the actual
amounts paid by the Party to such Third Party in connection with the
manufacturing of Licensed Product or any component thereof.

Section 1.51 “Marketing Authorization”. Marketing Authorization means the
authorization issued by the relevant Regulatory Authority necessary to place on
the market a Licensed Product in any country or regulatory jurisdiction (such
as, for example, the approval of a Marketing Authorization Application in EU
under Regulation (EC) n° 726/2004 or Directive 2001/83/EC), including
governmental price and reimbursement approvals. [**].

Section 1.52 “MERRIMACK Territory”. MERRIMACK Territory means all other
territories outside of the Licensed Territory, including the PharmaEngine
Territory.

Section 1.53 “MHLW”. MHLW means the Japanese Ministry of Health, Labor and
Welfare, and any successor agency thereto.

Section 1.54 “MM-111”. MM-111 means the MERRIMACK proprietary bispecific
antibody that targets ErbB2 and ErbB3 in clinical development as of the
Effective Date.

Section 1.55 “MM-141”. MM-141 means the MERRIMACK proprietary bispecific
tetravalent antibody that targets IGF-1R and ErbB3 in clinical development as of
the Effective Date.

Section 1.56 “MM-302”. MM-302 means the MERRIMACK proprietary HER2-targeted
nanoliposomal encapsulation of doxorubicin in clinical development as of the
Effective Date.

Section 1.57 “MM-398”. MM-398 means the nanoliposomal encapsulation of
irinotecan described on Exhibit C, as such product may be modified after the
Effective Date.

Section 1.58 “Net Sales”. Net Sales means the gross price invoiced by BAXTER,
its Affiliates or its sublicensees in connection with the sale or other transfer
for value of a Licensed Product in the Licensed Territory; less the following
items (as they apply specifically to the Licensed Product) to the extent
actually incurred or reasonably accrued and to the extent not separately
invoiced or already deducted from the amount invoiced:

(a) trade, cash or quantity discounts actually allowed or taken;

(b) governmental customs, duties, sales and similar taxes (including, for the
avoidance of doubt, value added or import/export taxes, sales taxes and excise
taxes but excluding taxes based on income), if any, imposed on the Licensed
Product, to the extent directly related to such sale with respect to such sale;

(c) amounts actually allowed or credited by reason of rejections, return of
goods (including as a result of recalls), any retroactive price reductions or
allowances specifically identifiable as relating to the Licensed Product
(including those resulting from inventory management or similar agreements with
wholesalers);

 

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(d) amounts incurred resulting from government mandated rebate programs,
including programs mandated by any agency thereof;

(e) rebates actually given to a Third Party specifically for Licensed Product;

(f) freight, postage, shipping and applicable shipping insurance charges, to the
extent same are separately itemized in the invoice price and charged to the
buyer;

(g) patient discount programs, administrative fees and chargebacks or similar
price concessions related to the sale of the Licensed Product; and

(h) price concessions either mandated or negotiated with commercial or
governmental payers;

provided, however, that any rebate to BAXTER, gift, excess payment on other
compounds or similar compensation received by BAXTER from a Third Party whether
in the applicable country or any other and whether intended to be applicable to
Licensed Product or not shall be added to Net Sales.

Such amounts shall be determined from the books and records of BAXTER, its
Affiliates or its sublicensees, as applicable, maintained in accordance with US
generally accepted accounting principles, consistently applied.

In the case of any sale of Licensed Products for consideration other than cash,
such as barter or countertrade, Net Sales shall be calculated on average sales
price for the applicable Licensed Product(s) in the applicable country in the
entire applicable year.

Sales of Licensed Products between BAXTER and its Affiliates or its
sublicensees, or among such Affiliates and sublicensees, shall be disregarded
for purposes of calculating Net Sales hereunder.

In the event a Licensed Product is sold in combination with one or more other
products (a “Combination Product”), Net Sales will be calculated by multiplying
the Net Sales of the end user product by the fraction A over A+B, in which A is
the net selling price of the Licensed Product portion of the Combination Product
when such Licensed Product is sold separately during the applicable accounting
period in which the sales of the Combination Product were made, and B is the net
selling price of the other proprietary active ingredient(s) contained in of the
Combination Product sold separately during the accounting period in question.
All net selling prices of the Licensed Product portion of the Combination
Product and of the other products of such Combination Product will be calculated
as the average net selling price of the said ingredients during the applicable
accounting period for which the Net Sales are being calculated in the particular
country where the Combination Product is sold. In the event that, in any country
or countries, no separate sale of either such above designated Licensed Product
or such other proprietary active ingredient(s) contained in the Combination
Product are made during the accounting period in which the sale was made or if
the average net selling price of the other proprietary active ingredient(s)
cannot be determined for an accounting period, Net Sales allocable to the
Licensed Product in each such country will be determined by mutual agreement
reached in good faith by BAXTER and MERRIMACK prior to the end of the accounting
period in question.

 

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Section 1.59 “Other Indication”. Other Indication means any use of the Licensed
Compound or any Licensed Product in a cancer indication other than the First
Indication or the Second Indication.

Section 1.60 “Party”. Party means BAXTER or MERRIMACK; “Parties” means BAXTER
and MERRIMACK.

Section 1.61 “Patent Right”. Patent Right means (a) unexpired and currently
in-force letters patent (or other equivalent legal instrument), including
utility and design patents, and including any extension, substitution,
registration, confirmation, reissue or renewal thereof, (b) applications for
letters patent, a reissue application, a continuation application, a
continuation-in-part application, a divisional application or any equivalent of
the foregoing applications, that are pending at any time during the term of this
Agreement before a government patent authority and (c) all foreign or
international equivalents of any of the foregoing in any country.

Section 1.62 “Person”. Person means any natural person or any corporation,
company, partnership, limited liability company, joint venture, firm, agency or
other entity, including a Party.

Section 1.63 “PharmaEngine”. PharmaEngine means PharmaEngine, Inc., a company
organized and existing under the laws of the Republic of China with its
principal offices at 16F, 237, Sung-Chiang Road, Taipei, Taiwan 104, Republic of
China.

Section 1.64 “PharmaEngine Collaboration Agreement”. PharmaEngine Collaboration
Agreement means the Assignment, Sublicense and Collaboration Agreement, dated
May 5, 2011, by and between MERRIMACK (as successor-in-interest to Merrimack
Pharmaceuticals (Bermuda) Ltd.) and PharmaEngine.

Section 1.65 “PharmaEngine Territory”. PharmaEngine Territory means Taiwan.

Section 1.66 “Phase 3 Clinical Study”. Phase 3 Clinical Study means a controlled
study in humans of the efficacy and safety of a product, which is prospectively
designed to demonstrate statistically whether such product is effective and safe
for use in a particular indication in a manner sufficient to file a Drug
Approval Application to obtain Marketing Authorization, as further defined in 21
C.F.R. Part 312.21(c) (or the non-US equivalent thereof).

Section 1.67 “Pivotal Clinical Study”. Pivotal Clinical Study shall mean a human
clinical study, including any Phase 3 Clinical Study, the results of which, if
the pre-defined endpoints are met, are intended to provide data necessary to
support Marketing Authorization for the Licensed Product in any country.

Section 1.68 “Regulatory Approval”. Regulatory Approval means any and all
approvals, licenses, registrations or authorizations of any Regulatory Authority
necessary for the manufacture, use, storage, import, promotion, marketing and
sale of a product in a country or jurisdiction, including Marketing
Authorizations.

 

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Section 1.69 “Regulatory Authority”. Regulatory Authority means any federal,
national, multinational, state, provincial or local regulatory agency,
department, bureau or other governmental entity with authority over the testing,
approval, manufacture, use, storage, import, promotion, marketing or sale of a
product in a country, including the FDA, EMA or MHLW.

Section 1.70 “Regulatory Exclusivity”. Regulatory Exclusivity means any rights
or protections which are recognized, afforded or granted by any Regulatory
Authority in any country or region of the Licensed Territory in association with
obtaining Marketing Authorization for the Licensed Product, providing such
Licensed Product: (a) a period of marketing exclusivity during which the
applicable Regulatory Authority shall refrain from either reviewing or approving
a Marketing Authorization application or similar regulatory submission submitted
by a Third Party seeking to market a competing product, or (b) a period of data
exclusivity during which a Third Party seeking to market a competing product
and/or the Regulatory Authority responsible for granting Marketing Authorization
therefor is precluded from either referencing or relying upon, without an
express right of reference from the dossier holder, such Licensed Product’s
clinical dossier or relying on previous Regulatory Authority findings of safety
or effectiveness with respect to such Licensed Product to support the
submission, review or approval of a Marketing Authorization application or
similar regulatory submission before the applicable Regulatory Authority.
Regulatory Exclusivity shall include rights conferred in the EU pursuant to
Section 10.1(a)(iii) of Directive 2001/EC/83.

Section 1.71 “Regulatory Filings”. Regulatory Filings means any Drug Approval
Application, notification or other submission made to or with a Regulatory
Authority that is necessary or reasonably desirable to develop, manufacture or
Commercialize the Licensed Product in the Licensed Field in a particular country
or regulatory jurisdiction, whether made before or after receipt of Marketing
Authorization in the country or regulatory jurisdiction, and any approval
resulting from any such application is a “Regulatory Approval”. The term
“Regulatory Filings” shall include all amendments and supplements to any of the
foregoing and all proposed labels, labeling, package inserts, monographs and
packaging for a Licensed Product in a particular country.

Section 1.72 “ROW Territory”. ROW Territory means all countries of the world,
excluding the US, EU, Licensed Asian Territory and Taiwan.

Section 1.73 “Second Indication”. Second Indication means the treatment of
advanced, locally-advanced or metastatic pancreatic cancer patients who (a) have
not received previous treatment with a gemcitabine-containing regimen or
(b) [**].

Section 1.74 “Taiwan”. Taiwan means the Republic of China.

Section 1.75 “Third Party”. Third Party means any Person other than a Party or
any of its Affiliates.

Section 1.76 “US”. US means the United States of America, its territories and
possessions.

 

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Section 1.77 “Valid Claim”. Valid Claim means (a) a claim of an issued patent
that has not expired or been abandoned, or been revoked, held invalid or
unenforceable by a patent office, court or other governmental agency of
competent jurisdiction in a final and non-appealable judgment (or judgment from
which no appeal was taken within the allowable time period); or (b) a claim of a
pending patent application which claim has not been revoked, cancelled,
withdrawn or abandoned and that has not been pending for more than [**] years
from the date such claim, or a claim of substantially identical scope, was first
presented in any patent application in the same country.

Section 1.78 Additional Definitions. Each of the following definitions is set
forth in the section of this Agreement indicated below:

 

Definitions

  

Location

1934 Act    Exhibit E 1974 Convention    Section 15.1 Additional Response Period
   Section 6.2(b) Agreement    Preamble Alliance Manager    Section 2.1(c)
Arbitration Request    Section 13.2(a) BAXTER    Preamble BAXTER Supply
Agreement    Section 3.7 BHC    Preamble BHSA    Preamble BII    Preamble
Biological Materials    Section 3.4(e) Breaching Party    Section 12.3 Claims   
Section 14.1 Competitive Infringement    Section 9.3(a) Confidentiality
Agreement    Section 1.14 CPI    Section 1.30 CPR    Section 13.2(d) CPR Rules
   Section 13.2(d) [**] FTE Rate    Section 1.30 Effective Date    Preamble EPO
   Section 9.2(e)(iii) Flow-Through Sections    Section 7.4(a) Global Dossier   
Section 4.1(b) Indemnified Party    Section 14.3(a) Indemnifying Party   
Section 14.3(a) Initial Global Development Plan    Section 1.31 Initial Press
Release    Section 10.3 Invalidity Claim    Section 9.5(a) Joint Inventions   
Section 9.1(b) JSC    Section 2.1(a) Licensing Opportunity    Section 6.2(a)
Losses    Section 14.1 Manufacturing Technology    Section 3.8(a)(i)

 

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Definitions

  

Location

MERRIMACK    Preamble MERRIMACK Supply Agreement    Section 3.6 Negotiation
Period    Section 6.2(c) New Baxter    Section 15.2 NDA    Section 1.18
Non-Breaching Party    Section 12.3 Patent Challenge    Section 12.5 Patent
Prosecution    Section 9.2(e) Paying Party    Section 8.11(a) PCT    Section
9.2(a) Publishing Party    Section 10.5(a) Quality    Section 3.9 Quality
Agreement    Section 3.9 Recipient Party    Section 8.11(a) Response Period   
Section 6.2(a) ROFN Program(s)    Section 6.2 Royalty Term    Section 8.5(b)
SDEA    Section 4.4 SEC    Section 10.1(e) Severed Clause    Section 15.14 [**]
FTE Rate    Section 1.30 Term    Section 12.1 Terminated Products    Section
12.7 Terminated Territories    Section 12.7 Third Party License    Section
8.5(c)(i) Third Party License Costs    Section 8.5(c)(i) USPTO    Section
9.2(e)(iii) WIPO    Section 9.2(e)(iii) Withholding Taxes    Section 8.11(a)

Article II

Governance; Decision-Making

Section 2.1 Joint Steering Committee.

(a) Formation and Membership. Within [**] days after the Effective Date, BAXTER
and MERRIMACK shall establish a joint steering committee (the “JSC”) to review,
coordinate and provide overall strategic direction to their activities pursuant
to this Agreement. The JSC shall be comprised of [**] senior executives of
BAXTER and [**] senior executives of MERRIMACK with appropriate experience and
level of decision-making authority. Each Party may replace any one or more of
its representatives on the JSC at any time upon written notice to the other
Party. From time-to-time, the JSC may, in its discretion, establish one or more
subcommittees or project teams to oversee particular projects or activities, as
the JSC deems necessary or advisable and the JSC may, in its discretion,
establish one or more project teams, to, upon mutual agreement of the Parties,
implement and coordinate various aspects of the Global Development Plan and
Global Marketing and Commercialization Principles.

 

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(b) Responsibilities. The JSC shall be responsible for and shall have final
decision-making authority with respect to the following matters related to the
development and Commercialization of the Licensed Compound and all Licensed
Products:

(i) approving changes to the Initial Global Development Plan and initial budget;

(ii) annually (or more frequently as agreed by the JSC) reviewing the Global
Development Plan and suggesting or approving such updates or amendments to the
Global Development Plan, as the JSC deems appropriate, including all budget
amendments;

(iii) providing overall strategic direction with respect to development and
regulatory activities conducted under the Global Development Plan;

(iv) overseeing the research and development of the Licensed Compound and any
Licensed Product in accordance with the Global Development Plan;

(v) overseeing the progress of development activities relating to the Global
Development Plan and monitoring the Parties’ compliance with their respective
obligations under the Global Development Plan, including the accomplishment of
key objectives;

(vi) overseeing the development of the Global Marketing and Commercialization
Principles;

(vii) approving the Global Marketing and Commercialization Principles;

(viii) reviewing all changes, updates and amendments to the Global Marketing and
Commercialization Principles;

(ix) periodically reviewing the Global Marketing and Commercialization
Principles and suggesting or approving such updates or amendments to the Global
Marketing and Commercialization Principles, as the JSC deems appropriate;

(x) overseeing the formation and operation of any subcommittees or project teams
and the Parties’ progress in the conduct of activities under the Global
Development Plan and Global Marketing and Commercialization Principles
hereunder;

(xi) reviewing and approving the protocols of all clinical studies;

(xii) discussing, reviewing and approving a joint publication strategy with
respect to the publication of results of any clinical trial conducted by the
Parties with respect to the Licensed Compound and any Licensed Product;

(xiii) discussing, reviewing and approving an investigator initiated trial
strategy and related budget;

 

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(xiv) providing strategic direction with respect to development activities for
the Licensed Compound and any Licensed Product;

(xv) discuss, review and approve any issues related to the development or
commercialization of a Companion Diagnostic in the Licensed Territory, provided
that each Party shall have the obligation to notify the JSC of any potential
Companion Diagnostic that such Party acquires, in-licenses or has developed or
intends to acquire, in-license or develop, and, at the request of the other
Party following any such notification, the Parties shall discuss in good faith
terms and conditions (including financial terms) under which the notifying Party
would grant the other Party access or rights to such potential Companion
Diagnostic to the extent Controlled by the notifying Party;

(xvi) attempting to resolve disputes arising under this Agreement at the JSC,
any subcommittees or project teams of either of the Parties (for clarity, the
JSC shall not have the authority to resolve disputes between the Parties
regarding whether a Party has fulfilled or breached any obligation under this
Agreement);

(xvii) subject to the terms of the MERRIMACK Supply Agreement and the BAXTER
Supply Agreement, if applicable, overseeing and providing strategic direction to
the manufacture of the Licensed Product for the Licensed Territory, including
discussing, preparing and approving a manufacturing plan for each Licensed
Product for the Licensed Territory and overseeing implementation of each such
manufacturing plan; and

(xviii) performing such other tasks and undertaking such other responsibilities
as may be set forth in this Agreement.

(c) Alliance Managers. Each Party shall appoint one representative to serve as
an alliance manager (“Alliance Manager”) with responsibility for overseeing that
the Parties’ activities are conducted in accordance with this Agreement, and for
being the primary point of contact between the Parties with respect to all such
activities. The Alliance Manager is responsible for driving the alliance
progress and the resolution of issues between the Parties.

(d) Administrative Matters. The JSC shall have a chairperson who shall serve for
a term of one (1) year from the date of appointment. MERRIMACK and BAXTER shall
alternate the appointment of the JSC chairperson, with the initial JSC
chairperson appointed by [**]. The chairperson shall work together with the
Alliance Managers to develop the JSC meeting agendas, which shall be circulated
to all JSC members at least [**] Business Days in advance of the meetings. The
chairperson shall be responsible for calling meetings of the JSC and for leading
the meetings. A JSC member from the Party that has not appointed the chairperson
shall serve as secretary of such meetings (or shall appoint a secretary who does
not need to be a JSC member). The secretary shall prepare and distribute to all
members of the JSC draft minutes of the meeting for review and comment,
including a list of any actions or decisions approved by the JSC, with the goal
of distributing final approved minutes of each JSC meeting within [**] days
after the meeting.

(e) Decision-Making. Each Party shall have one (1) vote on the JSC. The JSC
shall operate by consensus and both Parties must vote in the affirmative to
allow the JSC to

 

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take any action that requires the approval of the JSC. Decisions on any matter
may be taken at a meeting, by teleconference, videoconference or by written
agreement. Either Party may convene a special meeting of the JSC in accordance
with Section 2.1(g)(iii) for the purpose of resolving any disagreement within
the JSC’s jurisdiction in case any such disagreement represents a material
issue, the resolution of which cannot reasonably wait until the next scheduled
meeting of the JSC. Subject to Section 2.1(f), the following decisions shall not
be made by the JSC but shall be made in good faith exclusively by MERRIMACK or
BAXTER, as the case may be:

(i) [**] shall have final decision-making authority with respect to matters
relating to the conduct of [**] Territory-specific clinical trials and other
[**] Territory-specific development activities unless [**] objects to a proposed
[**] Territory-specific clinical trial or [**] Territory-specific development
activity based on bona fide scientific, technical or safety concerns that could
affect the Licensed Product in the [**] Territory;

(ii) [**] shall have final decision-making authority with respect to matters
relating to the conduct of [**] Territory-specific clinical trials and other
[**] Territory-specific development activities unless [**] objects to a proposed
[**] Territory-specific clinical trial or other [**] Territory-specific
development activity based on bona fide scientific, technical or safety concerns
that could affect the Licensed Product in the [**] Territory;

(iii) [**] shall have final decision-making authority with respect to
Commercialization in the [**] Territory, subject to [**] material compliance
with the Global Marketing and Commercialization Principles;

(iv) [**] shall have final decision-making authority with respect to
Commercialization in the [**] Territory, subject to [**] material compliance
with the Global Marketing and Commercialization Principles; and

(v) [**] shall have final decision-making authority with respect to the
development and Commercialization of a Companion Diagnostic in the [**]
Territory, subject to any subsequent agreement into which the Parties might
enter regarding such development and Commercialization.

For the avoidance of doubt, neither the JSC nor either Party shall have final
decision-making authority over interpretations of, amendments to or disputes
regarding the Parties’ respective rights and obligations under this Agreement.

(f) Dispute Resolution by Executive Officers. If (i) the JSC is unable to reach
consensus on a particular issue or resolve any dispute within the
responsibilities of the JSC specified in Section 2.1(b) within [**] days after
such issue or dispute is first presented to the JSC, or (ii) either Party
objects to a territory-specific clinical trial or development activity proposed
to be taken by the other Party pursuant to Section 2.1(e)(i) or
Section 2.1(e)(ii), then such issue shall be resolved pursuant to the dispute
resolution processes set forth in Article XIII.

(g) Meetings.

(i) The JSC shall meet at least [**] and at least [**] meetings each year shall
be in-person, alternating between the Parties’ respective locations in the US
(or a

 

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location outside of the US that is mutually agreed to by the Parties). The
specific timing and location of JSC meetings shall be as determined by the
chairperson, and may be held in person, by telephone conference call or by
videoconference.

(ii) Each Party shall use reasonable efforts to cause its representatives to
attend the meetings of the JSC. In addition, each Party may, with the prior
consent of the chairperson, invite a reasonable number of non-voting employees
or officers, consultants or scientific advisors, to attend meetings of the JSC
or the relevant portion thereof, provided that any such consultants or
scientific advisors are bound by written obligations of confidentiality that are
at least as stringent as those set forth in this Agreement. Notwithstanding the
foregoing, neither Party’s legal counsel may attend a JSC meeting without
sufficient prior notice to the other Party to allow that other Party’s counsel
to attend or to expressly waive attendance.

(iii) Each Party may also call a special meeting of the JSC for the purpose of
resolving disputes in connection with, or for the purpose of reviewing or making
a decision pertaining to, any material matter within the purview of the JSC, the
examination or resolution of which cannot reasonably be postponed until the next
scheduled JSC meeting, by providing written notice to the other Party. Such
meeting shall be convened at such time as may be mutually agreed upon by the
Parties, but in any event shall be held within [**] days after the date of such
notice.

Article III

Development; Manufacture and Supply

Section 3.1 Overview; Global Development Plan.

(a) Subject to and in accordance with the terms and conditions of this
Agreement, including Section 3.4, the Parties shall collaborate on the research
and development of the Licensed Compound and Licensed Product(s) in accordance
with the Global Development Plan. Unless otherwise agreed by the Parties or
decided by the JSC, MERRIMACK shall be responsible for conducting and shall be
the “sponsor” of all clinical trials contemplated by the Global Development
Plan. The Global Development Plan, and any change, update or amendment to the
Global Development Plan, shall be prepared by MERRIMACK in consultation with
BAXTER, shall be reviewed and approved by the JSC, shall be consistent with the
terms and conditions of this Agreement and shall specify, among other things:

(i) research and development objectives;

(ii) activities to be performed, including all clinical trials and Regulatory
Approvals required for manufacturing, marketing and selling Licensed Products;

(iii) timelines for performance; and

(iv) specific deliverables.

(b) Each Party shall use Commercially Reasonable Efforts to perform its
respective obligations under the Global Development Plan in accordance with the
Global Development Plan and all applicable Laws.

 

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Section 3.2 Second Indication Development Costs.

(a) Development Costs Prior to Effective Date. MERRIMACK shall, except as
otherwise provided in this Agreement as to inventory of Licensed Product and
Comparator Drug existing as of the Effective Date, be responsible for and shall
pay all Development Costs incurred prior to the Effective Date.

(b) Second Indication Development Costs. MERRIMACK shall pay for all Development
Costs incurred by it in performing activities under the Initial Global
Development Plan necessary to obtain initial Marketing Authorizations for the
Second Indication; provided, however, if Development Costs for activities for
the Second Indication under the Initial Global Development Plan exceed the
budget for the Second Indication set forth in the Initial Global Development
Plan, then (i) Development Costs in excess of the budget for the Second
Indication set forth in the Initial Global Development Plan shall be shared
equally between BAXTER and MERRIMACK and (ii) BAXTER shall pay to MERRIMACK
BAXTER’s share of such Development Costs incurred by MERRIMACK, within [**] days
following MERRIMACK’s invoice therefor.

(c) Additional Development Costs. If the JSC determines that an additional
clinical trial or other development activity for the Second Indication that is
not contemplated by the Initial Global Development Plan is required or advisable
for the Commercialization of the Licensed Compound or Licensed Product, then the
Development Costs for such additional clinical trial or other development
activity other than Development Costs exclusively related to either the Licensed
Territory or the MERRIMACK Territory (and paid directly by either BAXTER or
MERRIMACK pursuant to Section 3.4) will be shared equally between BAXTER and
MERRIMACK. BAXTER shall pay to MERRIMACK BAXTER’s share of such Development
Costs incurred by MERRIMACK, within [**] days following MERRIMACK’s invoice
therefor, and MERRIMACK shall pay to BAXTER MERRIMACK’s share of such
Development Costs incurred by BAXTER, within [**] days following BAXTER’s
invoice therefor.

Section 3.3 Other Development Costs. Development Costs incurred pursuant to the
Global Development Plan other than Development Costs allocated pursuant to
Section 3.2 and other than Development Costs exclusively related to either the
Licensed Territory or the MERRIMACK Territory (and paid directly by either
BAXTER or MERRIMACK pursuant to Section 3.4) shall be shared equally between
BAXTER and MERRIMACK. BAXTER shall pay to MERRIMACK BAXTER’s share of such
Development Costs incurred by MERRIMACK, within [**] days following MERRIMACK’s
invoice therefor, and MERRIMACK shall pay to BAXTER MERRIMACK’s share of such
Development Costs incurred by BAXTER, within [**] days following BAXTER’s
invoice therefor.

Section 3.4 Certain Development Responsibilities of Each Party.

(a) As to the Licensed Compound and Licensed Product(s) in each indication,
BAXTER shall (i) be solely responsible, at BAXTER’s sole expense, for conducting
all clinical trials (for which BAXTER shall be the “sponsor”) and other
development activities that exceed those clinical trials and development
activities that are set forth in the Global Development Plan

 

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that are solely required to obtain Regulatory Approval to manufacture, market
and sell the Licensed Compound or Licensed Product(s) specifically for the
Licensed Territory and (ii) be solely responsible for all costs of modifications
to global clinical trials and other development activities made solely to obtain
Regulatory Approval to manufacture, market and sell the Licensed Compound or
Licensed Product(s) for the Licensed Territory.

(b) As to the Licensed Compound and Licensed Product(s) in each indication,
MERRIMACK shall (i) be solely responsible, at MERRIMACK’s sole expense, for
conducting all clinical trials (for which MERRIMACK shall be the “sponsor”) and
other development activities that exceed those clinical trials and development
activities that are set forth in the Global Development Plan that are solely
required to obtain Regulatory Approval to manufacture, market and sell the
Licensed Compound or Licensed Product(s) specifically for the MERRIMACK
Territory and (ii) be solely responsible for all costs of modifications to
global clinical trials and other development activities made solely to obtain
Regulatory Approval to manufacture, market and sell the Licensed Compound or
Licensed Product(s) for the MERRIMACK Territory.

(c) If either Party intends to conduct a clinical trial or other development
activity pursuant to this Section 3.4 that is not contemplated by the Global
Development Plan and that is necessary to obtain Regulatory Approval in the
Licensed Territory, such Party shall inform and provide no less than [**] days’
prior written notice to the JSC of such intended clinical trial or development
activity and will reasonably consider any input of the JSC on such clinical
trial.

(d) As further set forth in Article IV and except as otherwise provided in
Section 4.1(c)(i) and Section 4.1(h), (i) BAXTER shall be responsible for
preparing, filing, obtaining and maintaining all Regulatory Approvals necessary
to develop, manufacture, market and sell the Licensed Compound and Licensed
Product(s) in the Licensed Territory and (ii) MERRIMACK shall be responsible for
preparing, filing, obtaining and maintaining all Regulatory Approvals necessary
to develop, manufacture, market and sell the Licensed Compound and Licensed
Product(s) in the MERRIMACK Territory.

(e) For purposes of facilitating the conduct of the Global Development Plan,
each Party shall provide to the other Party animal or human tissues, cells,
blood samples and other materials (“Biological Materials”) specified from time
to time in the Global Development Plan and applicable Laws. Each Party agrees to
provide all such Biological Materials to the other Party in accordance with the
Global Development Plan. The Parties agree that:

(i) all Biological Materials provided by one Party to the other shall be used by
the receiving Party solely for research and development purposes for the
Licensed Compound or any Licensed Product in material compliance with all
applicable Laws;

(ii) all such Biological Materials are provided without any warranties, express
or implied;

 

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(iii) the Party providing such Biological Materials shall obtain (or cause its
Third Party collaborators to obtain or certify that they have obtained) all
appropriate and required consents from the source of such Biological Materials;
and

(iv) Biological Materials provided by one Party to the other shall not be made
available by the other Party to any Third Party except as contemplated in the
Global Development Plan or upon the prior written consent of the Party providing
such Biological Materials.

Section 3.5 Clinical Supply.

(a) MERRIMACK shall manufacture and supply (or have manufactured or supplied)
clinical supplies of Licensed Product for use by the Parties in the development
of Licensed Product on a delivery schedule and other customary supply terms and
conditions as are mutually agreed by the Parties.

(b) Within [**] days following MERRIMACK’s invoice therefor, BAXTER shall pay
MERRIMACK for [**] percent ([**]%) of all Manufacturing Costs for clinical
supply of Licensed Product and Comparator Drug for Global Development Plan
activities incurred by MERRIMACK (excluding, for clarity, costs associated with
clinical supply of Licensed Product and Comparator Drug for development
activities conducted pursuant to Section 3.2(b), Section 3.4(a) and
Section 3.4(b), which shall be borne solely by the applicable Party).
Notwithstanding Section 3.2(a), such Manufacturing Costs may include such costs
incurred prior to the Effective Date by MERRIMACK for clinical supply of the
Licensed Product used for Global Development Plan activities after the Effective
Date.

Section 3.6 MERRIMACK Supply Agreement. On or before a date to be established by
the JSC, but in no event later than [**] days after the Effective Date,
MERRIMACK shall use Commercially Reasonable Efforts and shall cooperate with
BAXTER to become an approved BAXTER supplier and the Parties shall enter into a
supply agreement (the “MERRIMACK Supply Agreement”) pursuant to which MERRIMACK
will supply Drug Product to BAXTER. The terms of such MERRIMACK Supply Agreement
shall be negotiated in good faith by the Parties and will contain customary
terms and conditions that are consistent with this Agreement and the agreed-upon
terms attached hereto as Exhibit D.

Section 3.7 Secondary Supply. Within [**] days after the Effective Date, BAXTER
shall elect, and notify MERRIMACK of such election, either (a) to commit to
establishing commercial scale manufacturing capabilities for Drug Product either
directly or through a Third Party and, if BAXTER elects, Licensed Product, or
(b) not to commit to establishing such capabilities. If BAXTER makes the
election set forth in the foregoing clause (a), BAXTER shall thereafter use
Commercially Reasonable Efforts to establish such capabilities at BAXTER’s sole
expense and BAXTER and MERRIMACK shall enter into a supply agreement (the
“BAXTER Supply Agreement”) pursuant to which BAXTER will supply Drug Product to
MERRIMACK. The terms of such BAXTER Supply Agreement shall be negotiated in good
faith by the Parties and will contain customary terms and conditions that are
consistent with this Agreement and the agreed-upon terms attached hereto as
Exhibit D. If BAXTER makes the election set forth in the foregoing clause (b),
MERRIMACK will develop a plan for the construction of a facility to serve

 

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as a second Drug Product manufacturing facility, including a budget therefor.
MERRIMACK will review such plan with the JSC (or appropriate working group of
the JSC). MERRIMACK will have no obligation to pursue any such plan unless and
until MERRIMACK secures financing for such plan that is satisfactory to
MERRIMACK in its discretion, which financing may include BAXTER providing
MERRIMACK with a line of credit, and such plan is otherwise satisfactory to
MERRIMACK in its discretion.

Section 3.8 Technology Transfer. If BAXTER elects option (a) pursuant to
Section 3.7, or at any time thereafter if BAXTER determines to establish its own
commercial scale manufacturing, then MERRIMACK shall perform a technology
transfer of MERRIMACK’s manufacturing process for the Drug Product and/or
Licensed Product to BAXTER (or its designated Affiliate or CMO), which
technology transfer shall be performed in accordance with a mutually agreed
technology transfer plan, timeline and budget.

(a) As part of such technology transfer to BAXTER (or BAXTER’s designated
Affiliate or CMO), MERRIMACK shall:

(i) subject to BAXTER’s prior approval of a budget, transfer to BAXTER (or
BAXTER’s designated Affiliate or CMO) copies of Regulatory Filings and other
Licensed Technology that are necessary or useful for BAXTER (or the Affiliate or
CMO identified by BAXTER) to manufacture the Drug Product and/or Licensed
Product, including manufacturing processes, analytical methods, specifications,
protocols, assays, batch records, quality control data, transportation and
storage requirements, and other manufacturing documentation or files
(collectively, “Manufacturing Technology”); and

(ii) provide technical assistance to BAXTER (or BAXTER’s Affiliate or designated
CMO) with respect to the use and implementation of such Manufacturing Technology
as may be mutually agreed by the Parties.

(b) BAXTER shall pay MERRIMACK, within [**] days following MERRIMACK’s invoice,
for (i) all internal costs of MERRIMACK personnel at the [**] FTE Rate, plus
(ii) all out-of-pocket costs and expenses incurred by MERRIMACK, to the extent
incurred in performing the technology transfer activities contemplated
hereunder, and provided that all aforesaid costs and expenses do not exceed the
amounts set forth in the corresponding budget set forth in the agreed technology
transfer plan, it being understood that such approved budget shall incorporate
into the budget an allowance of [**] percent ([**]%) for cost overruns, provided
that such overruns, upon their occurrence, are appropriately documented and
justified.

(c) The Parties will cooperate in good faith in undertaking all such technology
transfer activities, including with respect to the scheduling and planning of
associated meetings.

Section 3.9 Quality Agreement. In connection with the negotiation and execution
of the MERRIMACK Supply Agreement or the BAXTER Supply Agreement, as applicable,
the Parties shall also enter into a separate agreement governing the quality
control, quality assurance and validation (the “Quality”) of any Drug Product
and/or Licensed Product (as applicable) delivered to BAXTER under the MERRIMACK
Supply Agreement or delivered to MERRIMACK under the BAXTER Supply Agreement
(each a “Quality Agreement”). Any

 

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Quality Agreement shall be negotiated in good faith by the Parties, will contain
customary terms and conditions that are consistent with this Agreement, and
shall set forth the respective requirements, roles and responsibilities of the
Parties.

Section 3.10 Development Reports. Each Party shall provide written reports to
the other Party within [**] days after the end of each [**] month period (i.e.,
[**]) during each calendar year during the Term, setting forth in reasonable
detail such Party’s and its Affiliates’ and sublicensees’ (a) activities and
progress during such preceding [**] month period related to the pre-commercial
research, development and manufacture of the Licensed Compound and Licensed
Product(s), including [**].

Article IV

Regulatory Matters

Section 4.1 Overview; Regulatory Filings.

(a) BAXTER will prepare the Drug Approval Applications for the Licensed
Territory and thereafter will maintain such Drug Approval Applications and
resulting Marketing Authorizations. MERRIMACK will, if requested by BAXTER,
assist BAXTER in preparing responses to any EMA inquiries during the review
cycle for the First Indication until receipt of Marketing Authorization in the
Licensed Territory.

(b) BAXTER will be responsible (in collaboration with MERRIMACK through the JSC)
for the creation and control of a global dossier (the “Global Dossier”) using
Electronic BAXTER Data Management Standards, which BAXTER shall use as the basis
for all Drug Approval Applications and Regulatory Filings in the Licensed
Territory, provided that the creation of such Global Dossier shall not be
required to be pursued in any manner that results in delays in the development
of the Licensed Product in the MERRIMACK Territory. The Parties agree to create
such Global Dossier at BAXTER’s sole expense.

(c) Within [**] days following the Effective Date, MERRIMACK shall:

(i) transfer to BAXTER ownership of all Drug Approval Applications, Regulatory
Approvals and Regulatory Filings submitted to any Regulatory Authority for the
Licensed Compound and any Licensed Products that are in MERRIMACK’s name and
Controlled by MERRIMACK in the Licensed Territory, provided that MERRIMACK shall
not transfer to BAXTER any IND relating to clinical studies of the Licensed
Compound or Licensed Product conducted by or on behalf of MERRIMACK; or

(ii) to the extent that such transfer is not permitted under applicable Laws,
provide to BAXTER a right of reference or use to such Regulatory Approvals and
Regulatory Filings.

(d) MERRIMACK shall retain all Regulatory Approvals and Regulatory Filings
submitted to any Regulatory Authority for the Licensed Compound and any Licensed
Product that are in MERRIMACK’s name and Controlled by MERRIMACK in the
MERRIMACK Territory.

 

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(e) Subject to Section 4.1(c)(i) and Section 4.1(h), following the Effective
Date, BAXTER shall own and be responsible for preparing, filing and maintaining
all Regulatory Filings and Regulatory Approvals that are required for the
research, development, manufacture, use, marketing or sale of the Licensed
Compound and Licensed Product in the Licensed Territory, provided that:

(i) MERRIMACK shall provide BAXTER with assistance as may be reasonably
requested by BAXTER for the maintenance of the Global Dossier;

(ii) MERRIMACK shall have a right of reference or use to such Regulatory Filings
and Regulatory Approvals to the extent necessary for the conduct of MERRIMACK’s
activities with respect to the Licensed Product in the MERRIMACK Territory (and
MERRIMACK shall have the right to extend such right of reference or use to
PharmaEngine);

(iii) BAXTER shall provide MERRIMACK with copies of material regulatory
submissions to, and material communications with, Regulatory Authorities in the
Licensed Territories and MERRIMACK shall have the right to review and comment on
such submissions and communications, in each case as set forth in Section 4.2(a)
below; and

(iv) BAXTER shall take such actions and otherwise cooperate with MERRIMACK as
may be reasonably requested by MERRIMACK to enable MERRIMACK to conduct the
clinical trials and perform other development, regulatory and manufacturing
activities assigned to MERRIMACK under the Global Development Plan.

(f) Each Party will cooperate with the other Party with respect to any required
correspondence with Regulatory Authorities required to transfer ownership of any
Regulatory Filings pursuant to this Section 4.1.

(g) BAXTER shall pay MERRIMACK, within [**] days following MERRIMACK’s monthly
invoice, [**] expenses incurred by MERRIMACK pursuant to this Section 4.1,
including (i) [**] at the [**] FTE Rate, plus (ii) [**] incurred by MERRIMACK,
with respect to each of clause (i) and (ii) to the extent incurred in
transferring to BAXTER Regulatory Approvals and Regulatory Filings (or providing
BAXTER with a right of reference thereto) and providing regulatory assistance to
BAXTER.

(h) Following the Effective Date, MERRIMACK shall own and be responsible for
preparing, filing and maintaining all Regulatory Filings and Regulatory
Approvals that are required for the research, development, manufacture, use,
marketing or sale of the Licensed Compound and Licensed Product in the MERRIMACK
Territory, as well as any IND relating to clinical studies of the Licensed
Compound or Licensed Product conducted by or on behalf of MERRIMACK, provided
that:

(i) BAXTER shall provide MERRIMACK with assistance as may be reasonably
requested by MERRIMACK with respect to Regulatory Filings in accordance with the
Global Development Plan in the MERRIMACK Territory for which BAXTER shall be
reimbursed based on the [**] FTE Rate and all reasonably incurred expenses;

 

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(ii) BAXTER shall have a right of reference and right to use such Regulatory
Filings and Regulatory Approvals to the extent necessary for the conduct of
BAXTER’s activities under this Agreement, in the Licensed Territory;

(iii) MERRIMACK shall provide BAXTER with copies of all regulatory submissions
to, and material communications with, Regulatory Authorities in the Licensed
Territories and BAXTER shall have the right to review and comment on such
submissions and communications as to the Licensed Territory, in each case as set
forth in Section 4.2(a) below; and

(iv) MERRIMACK shall take such actions and otherwise cooperate with BAXTER as
may be reasonably requested by BAXTER to enable BAXTER to conduct the clinical
trials and perform other development, regulatory and manufacturing activities
assigned to BAXTER under the Global Development Plan; provided, however, that
MERRIMACK shall serve as the “sponsor” for all clinical trials contemplated by
the Global Development Plan.

Section 4.2 Communications with Regulatory Authorities.

(a) Following the Effective Date, subject to Section 4.1(c)(i) and
Section 4.1(h), BAXTER shall be responsible for all submissions to, and
communications and interactions with, Regulatory Authorities in the Licensed
Territory with respect to the Licensed Compound and Licensed Product, provided
that:

(i) BAXTER shall keep MERRIMACK promptly informed regarding BAXTER’s (or its
Affiliate’s or sublicensee’s) regulatory strategy, planned regulatory
submissions and material communications with Regulatory Authorities in the
Licensed Territories with respect to the Licensed Compound and all Licensed
Products, including any changes to such strategy, submissions or communications;

(ii) BAXTER shall provide MERRIMACK with copies, for information, of material
regulatory submissions to, and material communications with, any Regulatory
Authorities in the Licensed Territories relating to the Licensed Compound and
Licensed Products and MERRIMACK shall have an opportunity to review in advance
and comment on all such planned regulatory submissions; and

(iii) BAXTER shall give due consideration in good faith to incorporating any and
all comments provided by MERRIMACK on any planned regulatory submissions to, or
material communications with, any Regulatory Authorities in the Licensed
Territory with respect to such clinical trial (or the results thereof) or the
Licensed Compound or Licensed Product used in such clinical trial, unless such
comments are unreasonable.

(b) Following the Effective Date, MERRIMACK shall be responsible for all
submissions to, and communications and interactions with, Regulatory Authorities
in the MERRIMACK Territory with respect to the Licensed Compound and Licensed
Product, provided that as to any human clinical trial for the Licensed Compound
or Licensed Product for a given indication conducted or to be conducted under
the Global Development Plan, MERRIMACK shall give due consideration in good
faith to incorporating any and all comments provided by BAXTER on any planned
regulatory submissions to, or material communications with, any Regulatory
Authorities in the MERRIMACK Territory with respect to such clinical trial,
unless such comments are unreasonable.

 

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(c) In addition to each Party’s rights and obligations under clauses (a) and
(b), each Party shall provide the other Party, if feasible, with reasonable
advance notice of any material meeting or substantive telephone conference with
any regulatory agency in the Licensed Territory or MERRIMACK Territory
(including the FDA, MHLW or EMA) relating to the Licensed Compound or Licensed
Product(s).

(d) Without limiting the generality of any of the foregoing in this
Section 4.2(d), each Party shall also promptly provide the other Party with a
copy of all material correspondence that such Party (or its Affiliate or
sublicensee) receives from, or submits to, any Regulatory Authorities in the
Licensed Territory or MERRIMACK Territory, as applicable, including contact
reports concerning conversations or substantive meetings, contact reports of all
Regulatory Authority interactions concerning conversations or substantive
meetings, all IND annual reports (including any equivalent filings outside the
US), manufacturing-related regulatory submissions and correspondence,
development safety update reports and cover letters of all agency submissions
(it being understood that either Party may request, and shall then receive,
copies of all attachments to any such cover letters) relating to the Licensed
Compound or Licensed Product(s), each to the extent material. Each Party shall
also provide the other Party with any meeting minutes that such Party prepares
that reflect material communications with any Regulatory Authorities in the
Licensed Territory or MERRIMACK Territory, as applicable, regarding the Licensed
Compound or Licensed Product(s).

(e) The Parties will cooperate in providing technical regulatory expertise for
assistance in developing the submission strategy for Regulatory Filings and
defining technical content in the Licensed Territory. Each Party shall designate
a global regulatory affairs representative to represent it in connection with
such Regulatory Filings. Each such representative or such representative’s
designee along with other subject matter experts (as needed) will be invited to
attend critical meetings with Regulatory Authorities associated with the
submission of Regulatory Filings for Licensed Products in the Licensed
Territory.

Section 4.3 Product Withdrawals and Recalls. If any Regulatory Authority
(a) threatens, initiates or advises any action to remove any Licensed Product
from the market in either the Licensed Territory or the MERRIMACK Territory, or
(b) requires or advises either Party or such Party’s Affiliates or sublicensees
to distribute a “Dear Doctor” letter or its equivalent regarding use of such
Licensed Product, then the Party receiving notice from the Regulatory Authority
shall notify the other Party of such event within [**] Business Days (or sooner
if required by applicable Laws) after such Party becomes aware of the action,
threat, advice or requirement. The JSC will discuss and attempt to agree upon
whether to recall or withdraw a Licensed Product in the Licensed Territory or
the MERRIMACK Territory, as applicable; provided, however, that if the Parties
fail to agree within an appropriate time period or if the matter involves a
safety issue that, in order to protect patient safety, does not allow for
sufficient time for a discussion at the JSC level (in which event the holder of
the Drug Approval Application or Marketing Authorization for the Licensed
Product at issue shall nonetheless provide advance notice and consultation with
the other Party to the maximum practical extent prior to making a decision),
either (i) [**] shall decide whether to recall or withdraw such

 

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Licensed Product in the [**] Territory and shall undertake any such recall or
withdrawal at its own cost and expense, except as may otherwise be provided in
the MERRIMACK Supply Agreement, or (ii) [**] shall decide whether to recall or
withdraw such Licensed Product in the [**] Territory and shall undertake any
such recall or withdrawal at its own cost and expense, except as may otherwise
be provided in the BAXTER Supply Agreement. Notwithstanding the foregoing,
MERRIMACK’s compliance with this Section 4.3 shall be subject to PharmaEngine’s
rights with respect to withdrawals and recalls of Licensed Product in the
PharmaEngine Territory as set forth in Section 5.5 of the PharmaEngine
Collaboration Agreement and MERRIMACK shall be responsible for any communication
to PharmaEngine as required by Section 5.5 of the PharmaEngine Collaboration
Agreement, provided that BAXTER shall not prevent or otherwise obstruct such
communication and BAXTER shall cooperate to provide MERRIMACK with timely
information as may be needed for MERRIMACK to comply with such obligations.

Section 4.4 Pharmacovigilance; Safety Data Reporting. The collaboration between
the Parties will involve exchanging safety information and adverse events for
the Licensed Product. Therefore, the Parties agree to enter into negotiations to
set up, if required, a detailed safety data exchange agreement (the “SDEA”) in
due time (i.e., prior to the start of clinical development or Commercialization
by BAXTER) to arrange access by BAXTER to the pharmacovigilance database for the
Licensed Product, which shall be owned by MERRIMACK, and any future
pharmacovigilance exchange between the Parties when relevant (e.g., in the case
where MERRIMACK is sponsoring clinical studies or co-developing Licensed
Product(s)). Each Party shall ensure, through its JSC representatives or
designated personnel, that the competent pharmacovigilance groups or personnel
from such Party begin to negotiate and establish the appropriate SDEA no later
than [**] months before BAXTER commences clinical development or
Commercialization hereunder. The SDEA shall be negotiated in good faith between
the pharmacovigilance departments of each Party. The SDEA shall define the roles
and responsibilities of both Parties in terms of pharmacovigilance and define
the detailed safety exchange required to permit compliance by both Parties with
safety reporting requirements to Regulatory Authorities and other entities in
their respective territories and ensure worldwide safety surveillance.

Section 4.5 Regulatory Compliance. Each Party agrees that in performing its
obligations under this Agreement, (a) it shall comply in all material respects
with all applicable FDA, EMA and MHLW requirements and standards, including
FDA’s and EMA’s current Good Manufacturing Practices and Good Clinical
Practices, and (b) it will not employ or use the services of any person that has
been debarred under Section 306(a) or 306(b) of the US Federal Food, Drug, and
Cosmetic Act or excluded by the US Department of Health and Human Services from
participation in federal healthcare programs.

Article V

Commercialization

Section 5.1 Overview. Subject to the terms and conditions of this Agreement and
BAXTER’s compliance with the Global Marketing and Commercialization Principles
approved by the JSC, BAXTER will have sole responsibility for the
Commercialization of Licensed Products in the Field in the Licensed Territory,
including all costs and expenses relating thereto, and for booking sales of
Licensed Products throughout the Licensed Territory.

 

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Section 5.2 Commercialization Reports. With respect to each Licensed Product
developed pursuant to this Agreement, commencing with the calendar year in which
an application for Marketing Authorization is first filed with respect to such
Licensed Product in any Licensed Sub-Territory, and for each subsequent calendar
year thereafter, BAXTER shall provide to MERRIMACK for MERRIMACK’s review and
comment, within [**] days following the end of each [**] month period (i.e.,
[**]) during each calendar year during the Term, a written report setting forth
in reasonable detail BAXTER’s and its Affiliates’ and sublicensees’
(a) activities and progress during such preceding [**] month period related to
the Commercialization of the Licensed Compound and Licensed Products, including
[**].

Section 5.3 Product Labeling. To the extent permitted under applicable Laws, all
Licensed Products sold in the Licensed Territory shall carry the BAXTER name and
logo on the product label. If required by applicable Laws in any specific
country or jurisdiction, all Licensed Products sold in such specific country or
jurisdiction shall state on the product label and written promotional material
that the Licensed Product is licensed from MERRIMACK.

Article VI

Diligence; Right of First Negotiation

Section 6.1 Diligence Obligations; Development and Commercialization Activities.

(a) BAXTER shall use Commercially Reasonable Efforts to research, develop,
obtain all necessary Regulatory Approvals for and, upon receipt of such
Regulatory Approvals, Commercialize the Licensed Product in each of the Licensed
Sub-Territories, except to the extent BAXTER has terminated this Agreement with
respect to a particular Licensed Sub-Territory pursuant to Section 12.4, in
which case BAXTER will be relieved of its obligations to use Commercially
Reasonable Efforts in such terminated Licensed Sub-Territory.

(b) BAXTER’s obligations to use Commercially Reasonable Efforts under
Section 6.1(a) hereof shall require and shall be deemed to be satisfied:

(i) in the EU if BAXTER uses Commercially Reasonable Efforts to develop, obtain
necessary Regulatory Approvals for and Commercialize [**] such Licensed Product
for each indication for which the Licensed Product is being developed pursuant
to the Global Development Plan in any [**] of the Major EU Countries;

(ii) in the Licensed Asian Territory if BAXTER uses Commercially Reasonable
Efforts to develop, obtain necessary Regulatory Approvals for and Commercialize
(including by commercially launching within [**] days of receipt of Marketing
Authorization) such Licensed Product for each indication for which the Licensed
Product is being developed pursuant to the Global Development Plan in any [**]
of the Major Asian Countries; and

(iii) in the ROW Territory if BAXTER uses Commercially Reasonable Efforts to
develop, obtain necessary Regulatory Approvals for and Commercialize (including
by commercially launching within [**] days of receipt of Marketing
Authorization) such Licensed Product for each indication for which the Licensed
Product is being developed pursuant to the Global Development Plan in any [**]
of the Major ROW Countries;

 

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provided, however, that any particular subsection (i), (ii) or (iii) does not
need to be satisfied in order to fully satisfy this Section 6.1(b) if BAXTER
terminates this Agreement pursuant to Section 12.4 with respect to the Licensed
Sub-Territory corresponding to such particular subsection, and further provided
that successfully achieving Regulatory Approvals and Commercialization of
Licensed Products as set forth in the foregoing shall not be required to satisfy
the foregoing (i.e., the use of Commercially Reasonable Efforts to achieve the
foregoing objectives will satisfy such obligations).

(c) BAXTER shall not be in breach of the obligations set forth in Section 6.1(a)
to the extent that BAXTER’s failure to develop, obtain necessary Regulatory
Approvals for and Commercialize a Licensed Product results from (i) the
occurrence of a supply failure or breach under the MERRIMACK Supply Agreement or
any other failure of MERRIMACK to supply material amounts of Drug Product,
(ii) any recall, withdrawal or field correction ordered by a Regulatory
Authority or undertaken by BAXTER or MERRIMACK in accordance with this
Agreement, or (iii) the occurrence of an event of force majeure (in which case
the Parties shall have the rights and obligations set forth in Section 15.6).

Section 6.2 Right of First Negotiation. MERRIMACK hereby grants to BAXTER a
right of first negotiation to obtain rights to MM-111, MM-141 and MM-302
(collectively, the “ROFN Programs”, each a “ROFN Program”) outside of the US or
with regard to any Licensing Opportunity (as defined below) that includes any
territory outside of the US during the Term of this Agreement on the terms and
conditions set forth in this Section 6.2.

(a) If MERRIMACK intends to begin negotiations with a Third Party (other than
contract research organizations, other services providers and other Third
Parties to which MERRIMACK does not grant commercialization rights) to grant an
exclusive or non-exclusive Commercialization license to such Third Party to
develop and commercialize any ROFN Program in the Field outside of the US (the
“Licensing Opportunity”), MERRIMACK shall provide written notice of such intent
to BAXTER and BAXTER shall notify MERRIMACK in writing within [**] days (the
“Response Period”) as to whether BAXTER has a bona fide interest in discussing
the Licensing Opportunity and wishes to receive further data and information
relating to the Licensing Opportunity on a confidential basis. Such written
notice from MERRIMACK shall include a reasonable summary of scientific data
relevant to the use, safety, efficacy and any other matters as MERRIMACK can
reasonably provide on a non-confidential basis relating to such Licensing
Opportunity, to allow BAXTER to assess its interest in discussing the Licensing
Opportunity.

(b) If, before the expiration of the Response Period, BAXTER indicates in
writing that it is interested in discussing the Licensing Opportunity, MERRIMACK
shall provide BAXTER with confidential data and information within [**] days,
and BAXTER shall have an additional [**] days (the “Additional Response Period”)
to notify MERRIMACK in writing as to whether BAXTER wishes to enter into
exclusive negotiations with MERRIMACK regarding such Licensing Opportunity;
provided, however, that the Additional Response Period may be extended by BAXTER
for up to an additional [**] days if the Licensing Opportunity relates to more
than one ROFN Program.

 

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(c) If, before the expiration of the Additional Response Period, BAXTER
indicates in writing that it is interested in entering into exclusive
negotiations regarding the Licensing Opportunity, the Parties agree to negotiate
a license to develop and Commercialize the ROFN Program in the Field outside of
the US, exclusively, for a period of [**] days commencing on the date of
BAXTER’s indication of interest pursuant to this Section 6.2(c) (the
“Negotiation Period”); provided, however, that the Negotiation Period may be
extended by BAXTER for up to an additional [**] days if the Licensing
Opportunity relates to more than one ROFN Program.

(d) If:

(i) BAXTER does not indicate before the expiration of the Response Period or the
Additional Response Period, as the case may be, that it is interested in
discussing the Licensing Opportunity;

(ii) BAXTER indicates before the expiration of the Response Period or the
Additional Response Period, as the case may be, that it has no interest in the
Licensing Opportunity; or

(iii) BAXTER indicates such an interest before the expiration of the Response
Period and Additional Response Period but the Parties do not enter into a
definitive agreement with respect to the Licensing Opportunity prior to the
expiration of the Negotiation Period;

then BAXTER’s right to negotiate the terms of, or enter into an agreement with
respect to, the Licensing Opportunity with MERRIMACK under this Section 6.2
shall terminate and have no further force or effect, and MERRIMACK shall be free
to negotiate and enter into a transaction relating to the Licensing Opportunity
with any Third Party(-ies).

(e) In consideration of the rights granted to BAXTER and MERRIMACK’s obligations
as set forth in this Agreement, including the rights granted to BAXTER under
this Section 6.2, BAXTER agrees to the restrictions described in Exhibit E.

Article VII

Grant of Licenses

Section 7.1 License Grants from MERRIMACK to BAXTER. Subject to the terms and
conditions of this Agreement, including Section 7.2(b), MERRIMACK hereby grants
to BAXTER:

(a) a royalty-bearing, exclusive right and license under the Licensed
Intellectual Property, to research, have researched, develop, have developed,
make, have made, use, offer for sale, sell, have sold and import the Licensed
Compound and Licensed Products in the Field in the Licensed Territory, provided
that MERRIMACK reserves the right to (i) conduct research and development
activities in the Licensed Territory solely to support the research, development
and Commercialization of the Licensed Compound and Licensed Products in the
MERRIMACK Territory, and (ii) manufacture the Licensed Compound and Licensed
Products inside the Licensed Territory solely for use and distribution in the
MERRIMACK Territory; and

 

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(b) a royalty-bearing, non-exclusive right and license in the Field in the
MERRIMACK Territory under the Licensed Intellectual Property and counterparts
thereto in the MERRIMACK Territory Controlled by MERRIMACK, (i) to the extent
necessary for BAXTER to perform its obligations under the Global Development
Plan, and (ii) to research, develop and manufacture (or have manufactured) the
Licensed Compound and Licensed Products in the MERRIMACK Territory solely in
support of research, development and Commercialization of the Licensed Compound
and Licensed Products within the Licensed Territory.

The licenses granted to BAXTER under this Section 7.1 shall be
(i) sublicenseable by BAXTER only in accordance with Section 7.3(a) and
Section 7.3(c) and (ii) transferable by BAXTER only in accordance with
Section 15.2.

Section 7.2 License Grants from BAXTER to MERRIMACK. Subject to the terms and
conditions of this Agreement, including Section 7.1(b), BAXTER hereby grants to
MERRIMACK:

(a) a fully paid-up, royalty-free, exclusive right and license under the BAXTER
Intellectual Property that is related to the Licensed Compound and Licensed
Products and developed during the Term, to research, have researched, develop,
have developed, make, have made, use, offer for sale, sell, have sold, import
and export the Licensed Compound and Licensed Products in the Field in the
MERRIMACK Territory, provided that BAXTER reserves the right to (i) conduct
research and development activities in the MERRIMACK Territory solely to support
the research, development and commercialization of the Licensed Compound and
Licensed Products in the Licensed Territory, and (ii) manufacture the Licensed
Compound and Licensed Products in the MERRIMACK Territory solely for use and
distribution within the Licensed Territory; and

(b) a fully paid-up, royalty-free, non-exclusive right and license in and
outside the Field in the Licensed Territory under the BAXTER Intellectual
Property that is related to the Licensed Compound and Licensed Products and
developed during the Term, (i) to the extent necessary for MERRIMACK to perform
its obligations under the Global Development Plan, and (ii) to research, develop
and manufacture the Licensed Compound and Licensed Products in the Licensed
Territory solely in support of research, development and Commercialization of
the Licensed Compound and Licensed Products in the MERRIMACK Territory.

The licenses granted to MERRIMACK under this Section 7.2 shall be
(i) sublicenseable by MERRIMACK only in accordance with Section 7.3(b) and
Section 7.3(c) and (ii) transferable by MERRIMACK only in accordance with
Section 15.2.

Section 7.3 Sublicense Rights.

(a) On a country-by-country basis, prior to obtaining Marketing Authorization
for the Licensed Product in any applicable country within the Major Asian
Countries, Major EU Countries or Major ROW Countries, [**]. On a
country-by-country basis, either (i) following receipt of Marketing
Authorization for the Licensed Product in any applicable country within the
Major Asian Countries, Major EU Countries or Major ROW Countries, or (ii) at any
time after the Effective Date within any applicable country that is not a Major
Asian Country, Major EU

 

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Country or Major ROW Country, BAXTER shall have the right to sublicense any of
its rights under Section 7.1. Any sublicense granted by BAXTER shall be subject
to the terms of this Agreement, including Section 7.3(c).

(b) Subject to the terms of this Agreement, including Section 7.3(c), MERRIMACK
shall have the right to grant sublicenses of any of its rights under
Section 7.2.

(c) Any sublicense granted under this Agreement shall be pursuant to a written
agreement that imposes on such sublicensee obligations that are at least as
restrictive as all relevant restrictions and limitations set forth in this
Agreement, including the confidentiality provisions of Article X and, in the
case of BAXTER, to the extent applicable to the sublicensed rights, diligence
obligations with respect to the sublicensed territory that are sufficient to
enable BAXTER to satisfy its diligence obligations under Section 6.1. If either
Party grants a sublicense to a Third Party as permitted by this Section 7.3,
then such sublicensing Party shall provide the other Party prompt written notice
thereof. The sublicensing Party shall provide the non-sublicensing Party with an
executed copy of any such sublicense (redacted as the sublicensing Party may
reasonably determine to protect confidential or commercially sensitive
information, provided that the sublicensing Party may not redact any information
that is necessary for the non-sublicensing Party to determine whether such
sublicense meets the requirements of this Agreement). Except as otherwise agreed
by the Parties in writing, each Party shall be jointly and severally responsible
with its sublicensees to the other Party for failure by its sublicensees to
comply with this Agreement. Any sublicense shall terminate upon the termination
or expiration of this Agreement.

Section 7.4 Compliance with Third Party Agreements.

(a) The grants by MERRIMACK under Licensed Intellectual Property set forth in
Section 7.1 include the sublicense of certain Licensed Intellectual Property
that is owned by PharmaEngine. BAXTER’s rights and licenses under, or with
respect to, Licensed Intellectual Property, including any prosecution or
enforcement undertaken by the Parties pursuant to Article IX, are limited with
respect to the rights granted to MERRIMACK under the PharmaEngine Collaboration
Agreement and are subject to all applicable restrictions, limitations and
obligations imposed on MERRIMACK or its sublicensees in Sections 4.2(b), 4.2(d),
4.4, 5.2(c), 5.4, 5.5, 8.3, 8.4(b) and 9.7 (the “Flow-Through Sections”) of such
PharmaEngine Collaboration Agreement; provided, however, if the Flow-Through
Sections require communication with PharmaEngine, that MERRIMACK shall be
responsible for such communication but BAXTER shall not prevent or otherwise
obstruct such communication and BAXTER shall cooperate to provide MERRIMACK with
timely information as may be needed for MERRIMACK to comply with such
obligations. BAXTER shall comply, and cause its Affiliates and sublicensees to
comply, with all of the Flow-Through Sections. For the avoidance of doubt, the
Flow-Through Sections specifically do not include any payment obligations.

(b) The Flow-Through Sections of the PharmaEngine Collaboration Agreement shall
be deemed to be included in this Agreement and BAXTER shall cooperate with
MERRIMACK as reasonably requested by MERRIMACK to enable MERRIMACK to comply
with such provisions.

 

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(c) MERRIMACK shall be solely responsible for paying all amounts due pursuant to
the PharmaEngine Collaboration Agreement; provided, however, that if MERRIMACK
fails to pay amounts due under the PharmaEngine Collaboration Agreement as a
consequence of BAXTER failing to pay amounts payable by BAXTER to MERRIMACK
hereunder in breach of this Agreement (which failure to pay materially
contributes to MERRIMACK’s inability to pay PharmaEngine), then MERRIMACK shall
not have any liability to BAXTER hereunder for MERRIMACK’s failure to pay such
amounts.

(d) Upon a claim of breach of the PharmaEngine Collaboration by PharmaEngine,
MERRIMACK and BAXTER shall discuss in good faith a mutually agreeable solution
to remedy such claim of breach which solution may, if mutually agreed by the
Parties, include the assumption by BAXTER and/or one of its Affiliates of the
obligation to make any required payments related to the Licensed Technology and
Licensed Patent Rights directly to PharmaEngine. MERRIMACK shall indemnify
BAXTER for any such amounts paid by BAXTER to PharmaEngine, which may, at
BAXTER’s option, be credited against any amounts otherwise due or payable in the
future from BAXTER to MERRIMACK hereunder.

Section 7.5 Retained Rights. Notwithstanding the rights and licenses granted to
BAXTER in Section 7.1, MERRIMACK retains rights under the Licensed Technology
and Licensed Patent Rights to the extent necessary for MERRIMACK to perform its
obligations and exercise its rights under this Agreement.

Section 7.6 No Implied Licenses. Except as explicitly set forth in this
Agreement, neither Party grants to the other Party any license, express or
implied, under its intellectual property rights.

Section 7.7 Section 365(n) of the Bankruptcy Code. All rights and licenses
granted under or pursuant to any section of this Agreement are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code
licenses of rights to “intellectual property” as defined under Section 101(35A)
of the Bankruptcy Code. The Parties shall retain and may fully exercise all of
their respective rights and elections under the Bankruptcy Code.

Article VIII

Financial Provisions

Section 8.1 Upfront Payment. BAXTER shall pay to MERRIMACK a one-time,
non-refundable, non-creditable fee of One Hundred Million Dollars
(US$100,000,000) within [**] Business Days of the Effective Date.

 

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Section 8.2 Research and Development Milestones

(a) BAXTER shall pay to MERRIMACK the following amounts for achievement of the
following milestones:

 

    Research and Development Milestone Event    US Dollars  

(i)

 

[**]

   $ [**]   

(ii)

 

[**]

   $ [**]   

(iii)

 

[**]

   $ [**]   

(iv)

 

[**]

   $ [**]   

(v)

 

[**]

   $ [**]     

TOTAL

   $ 100,000,000   

(b) Each milestone payment set forth in this Section 8.2 shall be payable by
BAXTER upon the achievement of the related milestone event by MERRIMACK or any
of its Affiliates, and MERRIMACK shall provide notice to BAXTER promptly upon
achievement of such milestone event within [**] days from such achievement.
MERRIMACK shall prepare and provide BAXTER with a corresponding invoice and
BAXTER shall pay MERRIMACK each such milestone payment within [**] days after
receipt of such invoice.

(c) With respect to milestone events set forth in Section 8.2(a)(iii),
Section 8.2(a)(iv) and Section 8.2(a)(v), the JSC shall determine prior to the
initiation of each clinical study in the Global Development Plan whether such
clinical study is intended to become a Pivotal Clinical Study. Notwithstanding
the foregoing, if a clinical study is reflected in the Global Development Plan
as a clinical study that is intended to provide the basis for an application for
Marketing Authorization, then such clinical study shall be deemed to be a
Pivotal Clinical Study. If a clinical study that was not considered to be a
Pivotal Clinical Study upon first dosing becomes a Pivotal Clinical Study after
the first dosing in such study, then the applicable milestone event shall be
deemed achieved and become payable at such time.

 

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Section 8.3 Regulatory Milestones.

(a) BAXTER shall pay to MERRIMACK the following amounts for achievement of the
following milestones:

 

        

First

Indication

    

Second

Indication

    

For Each of Two

Other Indications

                        

on an indication-by-

indication basis

      Regulatory Milestone Event    US Dollars  

(i)

 

[**]

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

(ii)

 

[**]

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

[**]

        

(iii)

 

[**]

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

[**]

        

(iv)

 

[**]

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

[**]

        

(v)

 

[**]

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

[**]

        

(vi)

 

[**]

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

[**]

        

(vii)

 

[**]

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

TOTAL

   $ 120,000,000       $ 200,000,000        
 
 
 
  $100,000,000
per indication,
up to a
maximum of
$200,000,000   
  
  
  
  

(b) With respect to the milestone events for the First Indication, if [**], then
(i) the milestone set forth in Section 8.3(a)(ii) for the First Indication shall
be reduced from $[**] to $[**] and (ii) the milestone payment set forth in
Section 8.3(a)(iii) for the First Indication shall be reduced from $[**] to
$[**]. Upon the [**], the amount of $[**] shall be paid to MERRIMACK in
accordance with this Section 8.3.

(c) Each milestone payment set forth in this Section 8.3 shall be payable by
BAXTER upon the achievement of the related milestone event by BAXTER or any of
its Affiliates or sublicensees, and BAXTER shall provide notice to MERRIMACK
promptly upon achievement of such milestone event within [**] days from such
achievement. Upon receipt of BAXTER’s notice that a milestone event has been
achieved or achievement by MERRIMACK or its Affiliates of a milestone event,
MERRIMACK shall prepare and provide BAXTER with the corresponding invoice and
BAXTER shall pay MERRIMACK each such milestone payment within [**] days after
receipt of such invoice.

 

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(d) With respect to the regulatory events set forth in clause (i) of the table
set forth in Section 8.3(a) above, the Parties acknowledge that they anticipate
that [**]. Notwithstanding the foregoing, in the event that [**], the regulatory
event set forth in clause (i) of the table set forth in Section 8.3(a) above
shall be deemed to have been achieved upon the [**].

Section 8.4 Sales Milestones.

(a) As to each Licensed Product, BAXTER shall pay MERRIMACK the following
one-time Net Sales milestones, on a Licensed Product-by-Licensed Product basis:

 

Sales Milestone Event for Licensed Product    US Dollars  

(i)

 

Total Licensed Territory Net Sales for such Licensed Product exceed $[**] in any
four (4) consecutive calendar quarters

     [**]   

(ii)

 

Total Licensed Territory Net Sales for such Licensed Product exceed $[**] in any
four (4) consecutive calendar quarters

     [**]   

(iii)

 

Total Licensed Territory Net Sales for Licensed Product exceed $[**] in any four
(4) consecutive calendar quarters

     [**]   

(iv)

 

Total Licensed Territory Net Sales for Licensed Product exceed $[**] in any four
(4) consecutive calendar quarters

     [**]     

TOTAL

   $ 250,000,000   

(b) Each milestone payment set forth in Section 8.4(a) shall be payable by
BAXTER only one time upon the achievement of the related milestone event by
BAXTER and its Affiliates or sublicensees, and BAXTER shall provide notice to
MERRIMACK of such achievement concurrently with BAXTER’s royalty report pursuant
to Section 8.5(e) for the calendar quarter in which such milestone event is
achieved. BAXTER shall pay MERRIMACK each such milestone payment together with
BAXTER’s royalty payment pursuant to Section 8.5(e) for the calendar quarter in
which the related milestone event is achieved.

(c) For purposes of clarity, more than one of the Net Sales milestones set forth
above may be earned in the same four (4) consecutive calendar quarter period
with respect to a Licensed Product. For example, if total Licensed Territory Net
Sales with respect to a given Licensed Product have not achieved any of the
lower sales milestone thresholds set forth in clause (i) or (ii) of
Section 8.4(a) above in any previous four (4) consecutive calendar quarter
period, but total Licensed Territory Net Sales with respect to such Licensed
Product exceed $[**] in a subsequent four (4) consecutive calendar quarter
period, then all three milestone payments, totaling $[**], payable upon
achievement of the sales milestone thresholds set forth in clause (i), (ii) and
(iii) of Section 8.4(a) above shall become payable to MERRIMACK hereunder.

 

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Section 8.5 Royalties.

(a) Royalty Rate for Licensed Territory. As to each Licensed Product sold in the
Licensed Territory, subject to adjustment under the remainder of this
Section 8.5, BAXTER shall pay MERRIMACK royalties on aggregate annual (calendar
year) Net Sales of such Licensed Product in the Licensed Territory, at the
incremental royalty rates set forth below, on a Licensed Product-by-Licensed
Product basis:

 

Aggregate Annual Net Sales (in US Dollars) for such Licensed Product in the
Licensed
Territory    Royalty Rates as a
Percentage (%) of
Net Sales  

Portion of calendar year Net Sales up to and including $[**]

     [**]   

Portion of calendar year Net Sales that exceeds $[**], up to and including $[**]

     [**]   

Portion of calendar year Net Sales that exceeds $[**], up to and including $[**]

     [**]   

Portion of calendar year Net Sales that exceeds $[**]

     [**]   

For example, if aggregate annual Net Sales of a given Licensed Product in the
Licensed Territory for a given calendar year are US$[**], then the royalty
payable to MERRIMACK on such Net Sales of such Licensed Product in the Licensed
Territory under this Section 8.5(a) for that year would be US$[**], which is
calculated as follows: [**].

(b) Royalty Term. BAXTER’s obligation to pay the applicable royalties payable to
MERRIMACK under Section 8.5(a) above (as the royalty rates applicable under each
of the foregoing may be reduced by Section 8.5(c)) shall expire on a
country-by-country and Licensed Product-by-Licensed Product basis, upon the
latest of (i) the last to expire Valid Claim of a Licensed Patent (including,
for the avoidance of doubt, any Joint Patent Rights) in such country that Covers
the manufacture, Commercialization or therapeutic use of such Licensed Product
in the Licensed Field in such country, taking into consideration all applicable
patent extensions, (ii) the expiration of all applicable Regulatory Exclusivity
for such Licensed Product in the Licensed Field in such country, or
(iii) ten (10) years from the First Commercial Sale of such Licensed Product in
such country (the “Royalty Term”).

(c) Third Party Licenses.

(i) Third Party License Costs. Subject to Section 8.5(c)(iii), BAXTER shall be
responsible for the costs, including royalties, milestones and fees, of all
Third Party licenses entered into by BAXTER with Third Parties after the
Effective Date. If BAXTER, in the opinion of reputable patent counsel, is
required to obtain a license under any Third Party Patent Rights in order to
manufacture, use, offer for sale, sell or import the Licensed Compound or
Licensed Products in the Licensed Territory hereunder (each such arrangement, a
“Third Party License”), and the costs, including royalties, milestones and fees,
of all such Third Party Licenses (“Third Party License Costs”). The Parties
agree that BAXTER shall take the

 

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lead in negotiating and entering into any Third Party Licenses after the
Effective Date, provided that [**] percent ([**]%) of the Third Party License
Costs directly paid by BAXTER to the applicable licensors shall be subject to
deduction by BAXTER pursuant to Section 8.5(c)(iii), and provided further that
in the case of Third Party License Costs that are not payable solely with
respect to the Licensed Compound or Licensed Products, BAXTER shall only be
permitted to deduct the portion of such Third Party License Costs reasonably
allocated to the Licensed Compound or Licensed Products.

(ii) Royalty Stacking. Subject to Section 8.5(c)(iii), BAXTER may deduct from
any royalties that are subsequently due to MERRIMACK under this Agreement, on a
Licensed Product-by-Licensed Product and country-by-country basis, up to [**]
percent ([**]%) of any Third Party License Costs actually paid by BAXTER
pursuant to Section 8.5(c)(i) above to BAXTER’s Third Party licensor(s) with
respect to the Licensed Compound or Licensed Products in the Licensed Territory.

(iii) Limitation on Aggregate Deduction. Notwithstanding Section 8.5(c)(i) and
Section 8.5(c)(ii), in no event shall the amount of any royalties payable to
MERRIMACK pursuant to Section 8.5(a) be reduced to less than [**] percent
([**]%) of the amounts specified in Section 8.5(a), for the applicable calendar
quarter, as a result of all reductions made under this Section 8.5; provided,
however, any reductions of royalties for Third Party License Costs that are
limited by this Section 8.5(c)(iii) shall be offset, subject to this
Section 8.5(c)(iii), against future royalties payable to MERRIMACK in subsequent
quarters.

(d) Royalties Payable Only Once. The obligation to pay royalties is imposed only
once with respect to the same unit of a Licensed Product.

(e) Royalty Reports and Payments. BAXTER shall deliver to MERRIMACK, within [**]
days after the end of each calendar quarter, a reasonably detailed written
accounting of Net Sales of Licensed Products, and royalties and sales milestone
payments, if any, due to MERRIMACK for such calendar quarter. Such quarterly
reports shall indicate [**]. When BAXTER delivers such accounting to MERRIMACK,
BAXTER shall also deliver all royalty payments due hereunder to MERRIMACK for
the calendar quarter.

Section 8.6 Reconciliation and Payment of Development Costs. Each Party shall
pay to the other Party following the other Party’s invoice, the paying Party’s
share of Development Costs and Manufacturing Costs incurred by the other Party
in performing activities under the Global Development Plan pursuant to Article
III in accordance with Section 8.9.

Section 8.7 Recordkeeping; Audit Rights.

(a) Audits by MERRIMACK. BAXTER shall keep, and shall require its Affiliates and
sublicensees to keep, complete and accurate records of the latest [**] years of
any Development Costs or Manufacturing Costs incurred in the conduct of
development and manufacturing activities hereunder or sales of Net Sales of
Licensed Products to which royalties or sales milestones attach hereunder. For
the sole purpose of verifying amounts payable to or by MERRIMACK hereunder,
MERRIMACK shall have the right [**] at MERRIMACK’s expense to retain an
independent certified public accountant selected by MERRIMACK and reasonably

 

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acceptable to BAXTER, to review such records in the location(s) where such
records are maintained by BAXTER, its Affiliates or its sublicensees upon
reasonable notice and during regular business hours and under obligations of
confidence. Results of such review shall be made available to both MERRIMACK and
BAXTER. If the review reflects an underpayment of any amounts payable to
MERRIMACK, such underpayment shall be remitted to MERRIMACK, within [**] days
after the notification of the results and submission of an invoice by MERRIMACK
to BAXTER, together with interest calculated in the manner provided in
Section 8.10. If the underpayment is equal to or greater than [**] percent
([**]%) of the amount that was otherwise due, BAXTER shall pay all of the
reasonable out of pocket expenses of such review. If the review reflects an
overpayment of any amounts to MERRIMACK, the amount of such overpayment shall be
refunded to BAXTER within [**] days of such review and submission of an invoice.

(b) Audits by BAXTER. MERRIMACK shall keep, and shall require its Affiliates and
sublicensees to keep, complete and accurate records of the latest [**] years of
any Development Costs or Manufacturing Costs incurred in the conduct of
development and manufacturing activities hereunder, internal costs of MERRIMACK
personnel at the applicable FTE Rate and out-of-pocket costs and expenses
incurred by MERRIMACK in the conduct of research, development and regulatory
activities under the Global Development Plan. For the sole purpose of verifying
amounts payable to or by BAXTER hereunder, BAXTER shall have the right [**] at
BAXTER’s expense to retain an independent certified public accountant selected
by BAXTER and reasonably acceptable to MERRIMACK, to review such records in the
location(s) where such records are maintained by MERRIMACK, its Affiliates or
its sublicensees upon reasonable notice and during regular business hours and
under obligations of confidence. Results of such review shall be made available
to both MERRIMACK and BAXTER. If the review reflects an underpayment of any
amounts payable to BAXTER, such underpayment shall be remitted to BAXTER, within
[**] days after notification of the results and submission of an invoice by
BAXTER to MERRIMACK, together with interest calculated in the manner provided in
Section 8.10. If the underpayment is equal to or greater than [**] percent
([**]%) of the amount that was otherwise due, MERRIMACK shall pay all of the
reasonable out of pocket expenses of such review. If the review reflects an
overpayment of any amounts to BAXTER, the amount of such overpayment shall be
refunded to MERRIMACK within [**] days after such review and submission of an
invoice.

Section 8.8 Method of Payment. All amounts payable by a Party hereunder shall be
paid by or on behalf of such paying Party in US Dollars. With respect to sales
of Licensed Products invoiced in US Dollars, the royalties payable to MERRIMACK
shall be expressed in US Dollars. With respect to sales of Licensed Products
invoiced in a currency other than US Dollars, the royalties payable shall be
expressed in their US Dollar equivalent, calculated using the applicable
conversion rates for buying US Dollars published by Bloomberg on the last
Business Day of the calendar month in which such sales were made. All payments
due to a Party hereunder shall be made by wire transfer directly to an account
designated by such Party.

Section 8.9 Invoices. Unless otherwise expressly stated in this Agreement,
MERRIMACK shall invoice BAXTER on a monthly basis for costs or expenses that
become due and payable to MERRIMACK hereunder, including Development Costs and
Manufacturing Costs, internal costs of MERRIMACK personnel at the applicable FTE
Rate and out-of-pocket

 

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costs and expenses incurred by MERRIMACK in the conduct of MERRIMACK’s
activities under this Agreement, Third Party License Costs and patent
preparation, filing, prosecution and maintenance costs and expenses, and BAXTER
shall pay MERRIMACK such invoiced amount within [**] days following receipt
thereof. The foregoing shall apply reciprocally with respect to any costs
invoiced by BAXTER to MERRIMACK.

Section 8.10 Late Payments. Any payment under this Agreement that is not paid on
or before the date such payment is due shall bear interest at the lesser of
(a) [**] as announced on the date such payment is due, or (b) the highest rate
permitted by applicable Laws, calculated on the number of days such payments are
overdue and compounded monthly. In addition, the Party responsible for paying
shall reimburse the payee Party for all costs and expenses, including attorneys’
fees and legal expenses, incurred in the collection of late payments, provided
that the foregoing shall not apply with respect to payments disputed in good
faith by the paying Party unless the payee Party is successful in such dispute
or the paying Party ceases to dispute such payments.

Section 8.11 Tax Withholding.

(a) All payments under this Agreement shall be made without any deduction or
withholding for or on account of any tax, except as set forth in this
Section 8.11. The Parties agree to cooperate with one another and use reasonable
efforts to minimize under applicable Law obligations for any and all income or
other taxes required by Law to be withheld or deducted from any of the royalty
and other payments made by or on behalf of a Party hereunder (“Withholding
Taxes”). The applicable paying Party under this Agreement (the “Paying Party”)
shall, if required by Law, deduct from any amounts that it is required to pay to
the recipient Party hereunder (the “Recipient Party”) an amount equal to such
Withholding Taxes, provided that the Paying Party shall give the Recipient Party
reasonable notice prior to paying any such Withholding Taxes. Such Withholding
Taxes shall be paid to the proper taxing authority for the Recipient Party’s
account and, if available, evidence of such payment shall be secured and sent to
the Recipient Party within [**] days of such payment. The Paying Party shall, at
the Recipient Party’s cost and expense, do all such lawful acts and things and
sign all such lawful deeds and documents as the Recipient Party may reasonably
request to enable the Paying Party to avail itself of any applicable legal
provision or any double taxation treaties with the goal of paying the sums due
to the Recipient Party hereunder without deducting any Withholding Taxes.

(b) Notwithstanding anything to the contrary herein:

(i) Either BII, BHC or BHSA will make all payments under this Agreement to
MERRIMACK;

(ii) based on MERRIMACK being a US corporation and thus, a resident of the
United States as that term is defined in Article 4 of the US-Switzerland Income
Tax Treaty, if BHSA makes any payment to MERRIMACK under this Agreement, BHSA
will take the position that any such payment is treated for all tax purposes as
being sourced in Switzerland and being a royalty exempt from Withholding Taxes
pursuant to Article 12 of the US-Switzerland Income Tax Treaty, provided that
MERRIMACK shall have provided BHSA on a timely basis with the documentation
required to support such an exemption, and provided further there are no changes
to the treaty that would affect the exemption; and

 

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(iii) if there is an assignment of this Agreement by BAXTER or the payment of
any amount hereunder by a party other than BAXTER that results in the imposition
of a Withholding Tax then there will be an obligation on the party making such
payment and BAXTER to increase or “gross up” any payments made hereunder so that
the net amount paid, after deduction of Withholding Taxes, shall equal the
amount that would have been paid if no Withholding Taxes had been imposed.

Section 8.12 Blocked Payments. In the event that, by reason of applicable Laws
in any country, it becomes impossible or illegal for BAXTER or its Affiliates or
sublicensees, to transfer, or have transferred on its behalf, royalties or other
payments to MERRIMACK, such royalties or other payments shall be deposited in
local currency in the relevant country to the credit of MERRIMACK in a
recognized banking institution designated by MERRIMACK or, if none is designated
by MERRIMACK within a period of [**] days, in a recognized banking institution
selected by BAXTER or its Affiliates or sublicensees, as the case may be, and
identified in a notice in writing given to MERRIMACK. The foregoing shall apply
reciprocally to any payment that would be due by MERRIMACK to BAXTER hereunder.

Article IX

Intellectual Property Ownership, Protection and Related Matters

Section 9.1 Ownership of Inventions.

(a) Solely-Owned Inventions. Each Party shall exclusively own all right, title
and interest in and to all inventions made or conceived solely by the employees,
agents, consultants or contractors of such Party or its Affiliates in the course
of performing its activities under this Agreement and without relying on any
Confidential Information received from the other Party.

(b) Joint Inventions. All inventions made or conceived jointly by employees,
agents and consultants of MERRIMACK or its Affiliates, and employees, agents,
consultants or contractors of BAXTER or its Affiliates, shall be owned jointly
on the basis of each Party having an undivided interest in the whole (“Joint
Inventions”). Any invention made or conceived solely by one Party’s employees,
agents or contractors but relying on Confidential Information of the other Party
shall also be deemed a Joint Invention. Subject to the licenses granted herein
and each Party’s payment obligations hereunder, each Party shall have the right
to exploit such Joint Inventions without any duty to account to the other Party,
provided that during the Term of this Agreement neither Party shall use or grant
rights to any Third Party for Joint Inventions in the Field in relation to any
nanoliposomal formulation of irinotecan for use in the Field.

(c) Inventorship. For purposes of determining the Parties’ rights under this
Agreement, the determination of inventorship shall be made in accordance with US
patent laws. In the event of any dispute regarding inventorship, if the Parties
are unable to resolve the dispute, the Parties shall jointly engage mutually
acceptable independent US patent counsel not regularly employed by either Party
(or, if the Parties are unable to mutually agree on such patent counsel,

 

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the New York, New York, US office of the CPR shall appoint such patent counsel)
to resolve such dispute. The decision of such independent patent counsel shall
be based upon evidence submitted by the Parties within a fixed time to be
designated at the outset by such counsel and shall be binding on the Parties
with respect to the issue of inventorship.

Section 9.2 Prosecution and Maintenance of Patent Rights.

(a) Licensed Patent Rights Solely Controlled by MERRIMACK. Subject to any rights
of and obligations to MERRIMACK’s Third Party licensors with respect to Licensed
Patent Rights not owned by MERRIMACK, MERRIMACK shall use Commercially
Reasonable Efforts to prepare, file and prosecute any patent applications and to
maintain any patents within the Licensed Patent Rights (other than any Joint
Patent Right), in MERRIMACK’s name, and to control any interference, opposition
and similar proceedings relating thereto, in any patent jurisdictions requested
by BAXTER, at BAXTER’s expense, provided that each Party [**] of
pre-nationalization expenses incurred by MERRIMACK in the preparation, filing
and prosecution of provisional patent applications and Patent Cooperation Treaty
(“PCT”) patent applications within such Licensed Patent Rights in which both the
US and country(-ies) of the Licensed Territory are designated. Subject to any
rights of and obligations to MERRIMACK’s Third Party licensors with respect to
Licensed Patent Rights not owned by MERRIMACK, MERRIMACK shall inform and
consult with BAXTER regarding the preparation, filing, prosecution, defense and
maintenance of all such patent applications sufficiently in advance of any
deadline for taking any substantive action in connection therewith to permit
meaningful consultation, and shall give due consideration to any BAXTER
suggestions or recommendations. By way of example and without limitation, each
the following shall be considered a substantive action: preparing and/or filing
an original application; canceling or amending claims; responding to an office
action regarding unity of invention or on the merits (irrespective of whether
claims are amended or canceled); filing a continuing application or request for
continued examination; filing an appeal; filing an appeal brief; abandoning or
withdrawing an application; allowing an application to lapse through inaction or
nonpayment of fees; issuing notice letters to suspected infringers; bringing
suit to enforce a patent; and settling, dismissing or withdrawing such suit.

(b) BAXTER Patent Rights Solely Controlled by BAXTER. BAXTER shall have the
exclusive right and option (but not the obligation), at its sole cost and
expense, to prepare, file and prosecute any patent applications and to maintain
any patents within BAXTER Patent Rights (other than Joint Patent Rights) in
BAXTER’s name, and to control any interference, opposition and similar
proceedings relating thereto.

(c) Joint Patent Rights. MERRIMACK shall use Commercially Reasonable Efforts to
prepare, file and prosecute any patent applications and to maintain any patents
within the Joint Patent Rights, in both Parties’ names, and to control any
interference, opposition and similar proceedings relating thereto, in the US and
any patent jurisdictions requested by BAXTER, at MERRIMACK’s expense for the US
and otherwise at BAXTER’s expense, provided that each Party shall bear fifty
percent (50%) of pre-nationalization expenses incurred by MERRIMACK in the
preparation, filing and prosecution of provisional patent applications and PCT
patent applications within such Joint Patent Rights in which both the US and
country(-ies) of the Licensed Territory are designated. MERRIMACK shall inform
and consult with BAXTER regarding the preparation, filing, prosecution, defense
and maintenance of all such

 

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Joint Patent Rights sufficiently in advance of any deadline for taking any
substantive action in connection therewith to permit meaningful consultation,
and shall give due consideration to any BAXTER suggestions or recommendations.
By way of example and without limitation, each the following shall be considered
a substantive action: preparing and/or filing an original application; canceling
or amending claims; responding to an office action regarding unity of invention
or on the merits (irrespective of whether claims are amended or canceled);
filing a continuing application or request for continued examination; filing an
appeal; filing an appeal brief; abandoning or withdrawing an application;
allowing an application to lapse through inaction or nonpayment of fees; issuing
notice letters to suspected infringers; bringing suit to enforce a patent; and
settling, dismissing or withdrawing such suit. In the event that MERRIMACK
elects not to file, prosecute, or maintain, or elects to abandon any Joint
Patent Right, or declines to control any related interference, opposition or
similar proceedings, MERRIMACK shall give BAXTER reasonable written notice to
this effect, sufficiently in advance to permit BAXTER, in its sole discretion
and expense, to undertake such filing, prosecution and maintenance, or to
control such interference, opposition or similar proceedings, without a loss of
rights, and thereafter BAXTER may, upon written notice to MERRIMACK and jointly
in both Parties’ names, file, prosecute and maintain such Joint Patent Rights
and control such interference, opposition or similar proceedings. If required
under applicable Laws in order for the prosecuting Party to control any
interference, opposition and similar proceedings relating to the Patent
Prosecution of any Joint Patent Rights, the other Party shall join as a party to
such interference, opposition or similar proceeding.

(d) Invoicing and Payment of Costs and Expenses. The Parties shall invoice one
another for and pay their respective share of such costs and expenses for
Licensed Patent Rights and Joint Patent Rights in accordance with Section 8.9.

(e) Cooperation. Each Party agrees to cooperate with the other with respect to
the preparation, filing, prosecution and maintenance of patents and patent
applications pursuant to this Section 9.2 (“Patent Prosecution”), subject to any
rights of, and obligations to, MERRIMACK’s Third Party licensors, including the
following actions:

(i) executing all such documents and instruments and performing such acts as may
be reasonably necessary in order to permit the other Party to continue any
Patent Prosecution that such Party has elected not to pursue, as provided for in
Section 9.2(c);

(ii) making its employees, agents and consultants reasonably available to the
other Party (or to the other Party’s authorized attorneys, agents or
representatives), to the extent reasonably necessary to enable the prosecuting
Party to undertake Patent Prosecution;

(iii) providing (itself or through patent counsel) the other Party a copy of
each proposed material correspondence pertaining to substantive Patent
Prosecution on the merits with the US Patent and Trademark Office (“USPTO”), the
World Intellectual Property Office (“WIPO”) or the European Patent Office
(“EPO”), as well as providing draft copies of patent applications to be
submitted to the USPTO or to the WIPO under the Patent Cooperation Treaty, or
submitted to any patent office in the Licensed Territory in a form substantially
different from that previously submitted to the USPTO or to the WIPO, reasonably
in advance of any applicable filing or response deadline to allow the other
Party to review and comment on the

 

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content of such proposed correspondence and advise the prosecuting Party as to
the conduct of such Patent Prosecution, which comments and advice the
prosecuting Party will reasonably consider, provided that doing so is consistent
with the goal of obtaining optimal patent coverage for Licensed Products;

(iv) providing (itself or through patent counsel) the other Party with copies of
all material correspondence pertaining to substantive Patent Prosecution on the
merits with the USPTO, the WIPO or the EPO after its submission or receipt, as
the case may be; and

(v) seeking patent term extensions, adjustments and the like wherever available
for the Licensed Patent Rights in the Licensed Territory.

Section 9.3 Third Party Infringement.

(a) Notice. Each Party shall promptly report in writing to the other Party
during the Term any known or suspected (i) infringement of any issued claims
within the Licensed Patent Rights, or (ii) misappropriation of any of the
Licensed Technology of which such Party becomes aware. In the event such known
or suspected infringement or misappropriation involves the manufacture, use or
Commercialization of a product or product candidate that is or may be
competitive with the Licensed Compound or a Licensed Product being developed or
Commercialized by BAXTER hereunder in the Licensed Territory (“Competitive
Infringement”), the reporting Party shall provide the other Party with all
available evidence supporting such infringement, suspected infringement,
misappropriation or suspected misappropriation. Promptly after receipt of a
notice of a Competitive Infringement, the Parties shall discuss in good faith
the infringement and appropriate actions that could be taken to cause such
infringement of Licensed Patent Rights or use of misappropriated Licensed
Technology to cease.

(b) Enforcement. Subject to any rights of and obligations to MERRIMACK’s Third
Party licensors, BAXTER shall have the first right to initiate a suit or take
other appropriate action that it believes is reasonably required to protect
(i.e., prevent or abate actual or threatened misappropriation or infringement
of, or otherwise enforce, in the best commercial interests of Licensed Products)
the Licensed Intellectual Property (including Joint Patent Rights and Joint
Technology) against any Competitive Infringement, at BAXTER’s sole control and
expense. If BAXTER fails to initiate a suit or take other appropriate action
that it has the initial right to initiate or take to protect the Licensed
Intellectual Property against any Competitive Infringement within [**] days (or
such shorter period specified below in this Section 9.3(b) or in Section 9.6, if
applicable) after becoming aware of the basis for such suit or action, then
MERRIMACK may, in its discretion, initiate a suit or take other appropriate
action that it believes is reasonably required to protect the Licensed
Intellectual Property at issue. The [**] day period in the immediately preceding
sentence shall be shortened as reasonably necessary to enable MERRIMACK to
initiate a suit or take other appropriate action if, in the absence of such
shortening, a loss of rights with respect to such suit or other action would
occur. The Party filing any such suit or taking any such action shall be
responsible for all costs in connection therewith and, therefore, shall control
all decision-making related to any such suit or action, subject to
Section 9.3(c) below.

 

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(c) Conduct of Actions. The Party initiating suit or action shall have the sole
and exclusive right to select counsel for any suit initiated by it referred to
in Section 9.3(b) above. If required under applicable Laws in order for the
initiating Party to initiate or maintain such suit or action, the other Party
shall join as a party to the suit or action. Such other Party shall offer
reasonable assistance to the initiating Party in connection therewith [**] to
the initiating Party except for reimbursement of reasonable out-of-pocket
expenses incurred in rendering such assistance. The Party filing any such suit
or taking any such action shall provide the other Party with an opportunity to
make suggestions and comments regarding such suit or action. Thereafter, the
Party filing any such suit or taking any such action shall, to the extent
permitted by applicable Laws, keep the other Party promptly informed, and shall
from time to time consult with such other Party regarding the status of any such
suit or action and shall provide such other Party with copies of all material
documents (i.e., complaints, answers, counterclaims, material motions, orders of
the court, memoranda of law and legal briefs, interrogatory responses,
depositions, material pre-trial filings, expert reports, affidavits filed in
court, transcripts of hearings and trial testimony, trial exhibits and notices
of appeal) filed in, or otherwise relating to, such suit or action. The Party
not initiating such suit or action shall cooperate with the Party initiating
such suit or action to the extent reasonably requested, and shall have the right
to participate and be represented in any such suit by its own counsel at its own
expense. Neither Party shall conduct any such suit or action in a manner that
materially places at risk the scope or validity of any Licensed Patent Right
without the prior written approval of the other Party, and neither Party shall
settle or compromise any claim or proceeding relating to Licensed Intellectual
Property without obtaining the prior written consent of the other Party, such
consent not to be unreasonably withheld.

(d) Recoveries. With respect to any suit or action to protect Licensed
Intellectual Property referred to in Section 9.3(b) above, any recovery obtained
as a result of any such proceeding, by settlement or otherwise, shall be applied
in the following order of priority:

(i) first, the Party initiating the suit or action with respect to Licensed
Intellectual Property shall be reimbursed for all costs and expenses in
connection with such proceeding paid by such Party and not otherwise recovered;
and

(ii) second, any remainder shall be paid [**] percent ([**]%) to the Party
initiating such suit or action and [**] percent ([**]%) to the other Party.

Section 9.4 Claimed Infringement. In the event that a Party becomes aware of any
claim or threat of claim that the research, development, manufacture or
Commercialization of the Licensed Compound or any Licensed Product by MERRIMACK
or BAXTER hereunder infringes in the Licensed Territory or misappropriates the
intellectual property rights of any Third Party, such Party shall promptly
notify the other Party. Each Party shall provide to the other Party copies of
any notices it receives from Third Parties regarding any patent nullity actions,
any declaratory judgment actions, any alleged infringement of Third Party Patent
Rights or any alleged misappropriation of Third Party Know-How. Such notices
shall be provided promptly, but in no event after more than [**] days following
receipt thereof. In any such instance, the Parties shall cooperate in
undertaking an appropriate course of action.

 

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Section 9.5 Patent Invalidity Claim.

(a) If a Third Party at any time asserts a claim that any Licensed Patent Right
in the Licensed Territory is invalid or otherwise unenforceable (“Invalidity
Claim”), whether as a defense in an infringement action brought by BAXTER or
MERRIMACK pursuant to Section 9.3 or in an action brought against BAXTER or
MERRIMACK under Section 9.4, including any declaratory judgment action, the
Parties shall cooperate with each other in preparing and formulating a response
to such Invalidity Claim. Neither Party shall settle or compromise any
Invalidity Claim without the consent of the other Party, which consent shall not
be unreasonably withheld.

(b) If any Invalidity Claim is brought against BAXTER or MERRIMACK in any new
action (and not as a defense in any action brought by BAXTER or MERRIMACK)
asserting that any Licensed Patent Right is invalid or otherwise unenforceable,
the Parties shall bear the costs of defending such Invalidity Claim in the same
manner as they bear costs of Patent Prosecution pursuant to Section 9.2 unless
the Invalidity Claim is brought against the same patent and in the same country
where BAXTER or MERRIMACK has commenced an enforcement action against either the
entity bringing the Invalidity Claim or an affiliate thereof. In the latter case
the costs and recoveries, if any, will be shared as if they had been incurred in
the enforcement action.

Section 9.6 Certification Under Drug Price Competition and Patent Restoration
Act. If a Party becomes aware of any certification filed pursuant to any Law in
any other jurisdiction in the Licensed Territory that is comparable to 21 U.S.C.
§355(b)(2)(A)(iv) or §355(j)(2)(A)(vii)(IV), including any amendment or
successor statute thereto, and such certification claims that any Licensed
Patent Right or Joint Patent Right, in each case Covering the Licensed Compound
or a Licensed Product in the Field in the Licensed Territory, is invalid or
otherwise unenforceable, or that infringement will not arise from the
manufacture, use, import or sale or offer of sale of a product by a Third Party,
such Party shall promptly notify the other Party in writing within [**] Business
Days after its receipt thereof.

Section 9.7 Patent Marking. BAXTER agrees to comply with the patent marking
statutes in each country in which Licensed Products are sold by BAXTER, its
Affiliates or sublicensees.

Article X

Confidentiality

Section 10.1 Confidential Information. All Confidential Information disclosed by
a Party or any of its Affiliates to the other Party or any of its Affiliates
during the Term shall not be used by the receiving Party or any of its
Affiliates except in connection with the activities contemplated by this
Agreement, shall be maintained in confidence by the receiving Party and its
Affiliates (except to the extent disclosure is reasonably necessary for
research, development, manufacture or Commercialization of the Licensed Compound
or a Licensed Product as contemplated hereunder, for the filing, prosecution
and/or maintenance of Patent Rights for which such receiving Party is
responsible, or to enforce the provisions of this Agreement), and shall not
otherwise be disclosed by the receiving Party or its Affiliates to any Person
that is not a Party or one of its Affiliates (except as set forth in the
remainder of this Article X), without the prior written consent of the
disclosing Party, except to the extent that the Confidential Information:

(a) was known or used by the receiving Party or any of its Affiliates prior to
its date of disclosure to the receiving Party;

 

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(b) either before or after the date of the disclosure to the receiving Party
hereunder is lawfully disclosed to the receiving Party or any of its Affiliates
by sources other than the disclosing Party rightfully in possession of the
Confidential Information;

(c) either before or after the date of the disclosure to the receiving Party
hereunder becomes published or generally known to the public through no fault or
omission on the part of the receiving Party;

(d) is independently developed by or for the receiving Party or any of its
Affiliates without reference to or reliance upon the Confidential Information;
or

(e) is required to be disclosed by the receiving Party to comply with applicable
Laws, including the rules of the Securities and Exchange Commission (the “SEC”)
or any stock exchange, or to defend or prosecute litigation or to comply with
legal process, provided that the receiving Party provides prior written notice
of such disclosure to the disclosing Party (to the extent feasible) and only
discloses Confidential Information of the other Party to the extent necessary
for such legal compliance or litigation purpose.

Section 10.2 Employee, Director, Consultant and Advisor Obligations. BAXTER and
MERRIMACK each agrees that it and its Affiliates shall provide Confidential
Information received from the other Party only to the receiving Party’s
respective employees, directors, consultants, agents and advisors, and to the
employees, directors, consultants, agents and advisors of the receiving Party’s
Affiliates, who have a need to know such Confidential Information to assist the
receiving Party in fulfilling its obligations under this Agreement and who are
bound by obligations of confidentiality and non-use that are at least as
restrictive as those set forth in this Agreement. Each Party shall remain
responsible for any failure by any of such Party’s Affiliates, employees,
directors, consultants, agents and advisors to treat such Confidential
Information as required under Section 10.1.

Section 10.3 Publicity. Upon execution of this Agreement, the Parties shall, at
their discretion, either (a) jointly issue a mutually agreed upon press release
announcing the execution of this Agreement or (b) issue separate press releases
announcing the execution of this Agreement with the prior written consent of the
other Party, which consent shall not be unreasonably withheld, conditioned or
delayed (the “Initial Press Release”). Except with respect to the Initial Press
Release, or any other public disclosure with contents substantially similar
thereto, no public disclosure shall be made by either Party concerning the
execution of this Agreement or the terms and conditions hereof without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld, conditioned or delayed. Each Party may issue press releases and public
announcements concerning the development or Commercialization of a Licensed
Product, provided that such Party shall provide the Alliance Manager of the
other Party with a draft of such press release or public announcement at least

 

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[**] days in advance of its intended publication or release thereof and shall
consider in good faith the comments of the other Party, which comments shall be
provided as promptly as reasonably practicable, but in no event more than [**]
days, following receipt of the press release or public announcement from the
Party desiring to make the disclosure. If the Parties are unable to agree on any
proposed material modifications to the press release or public announcement,
then the JSC (or at least one member of the JSC from each of MERRIMACK and
BAXTER if not all JSC members are available) shall meet telephonically and
attempt to resolve the disagreement within [**] days after receipt of the
original comments. Notwithstanding the foregoing, [**], as applicable.
Notwithstanding anything contained in this Section 10.3, neither Party will be
prevented from complying on a timely basis with any duty of disclosure it may
have pursuant to Law or pursuant to the rules of any recognized stock exchange
or quotation system.

Section 10.4 Other Disclosures. Notwithstanding anything in this Agreement to
the contrary, each Party shall have the right to disclose Confidential
Information and/or the terms of this Agreement (as applicable):

(a) to investors, potential investors, lenders, potential lenders, acquirers,
potential acquirers, investment bankers and other Third Parties in connection
with financing, partnering and acquisition activities, solely under obligations
of confidentiality and non-use that are at least as restrictive as those set
forth in this Article X;

(b) to sublicensees, potential sublicensees, collaborators, potential
collaborators and Third Party contractors for purposes of engaging in the
research, development, manufacture or Commercialization of the Licensed Compound
or Licensed Products as contemplated hereunder, solely under obligations of
confidentiality and non-use that are at least as restrictive as those set forth
in this Article X; and

(c) as required by applicable Laws, including rules of the SEC or similar
regulatory agency in a country other than the US or of any stock exchange or
other securities trading institution. In the event that this Agreement shall be
included in any report, statement or other document filed by either Party or an
Affiliate of either Party with the SEC or similar regulatory agency in a country
other than the US or any stock exchange or other securities trading institution,
such Party shall use, or shall cause such Party’s Affiliate, as the case may be,
to use, reasonable efforts to obtain confidential treatment from the SEC,
similar regulatory agency, stock exchange or other securities trading
institution of any financial information or other information of a competitive
or confidential nature, and shall use reasonable efforts to include in such
confidentiality request such provisions of this Agreement as may be reasonably
requested by the other Party.

Section 10.5 Publications.

(a) A Party seeking to publish or present scientific or technical data, results
or other information with respect to the Licensed Compound or any Licensed
Product (the “Publishing Party”) shall provide the other Party and the Alliance
Managers with a copy of any proposed publication or presentation at least [**]
days (or at least [**] days in the case of abstracts or oral presentations)
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Affiliates so as to provide such other Party with an opportunity to recommend
any changes it reasonably believes are necessary to continue to maintain the
Confidential Information disclosed by the other Party to the Publishing Party in
accordance with the requirements of this Agreement or to not jeopardize the
patentability of any results or data.

(b) If the non-Publishing Party notifies the Publishing Party that such
publication or presentation, in the non-Publishing Party’s reasonable judgment,
(i) contains an invention for which such Party desires to obtain patent
protection, or (ii) contains any Confidential Information of such Party, or
could be expected to have an adverse effect on the commercial value of any
Confidential Information disclosed by such Party to the Publishing Party, the
Publishing Party shall delete such Confidential Information from the proposed
publication or presentation and shall further delay such publication or
presentation for a period reasonably sufficient to permit the timely preparation
and filing of a patent application(s) on any invention disclosed in such
publication or presentation (but no less than [**] days from the date of the
non-Publishing Party’s notice thereof).

(c) The JSC or designated working group shall be responsible for overseeing and
facilitating the Parties’ communications and activities with respect to
publications and presentations under this Section 10.5, and for serving as the
initial forum for resolving any disputes (in accordance with Section 2.1(e)
between the Parties arising under this Section 10.5, with any unresolved
disputes being escalated to the Executive Officers for resolution pursuant to
Section 13.1).

Section 10.6 Clinical Trial Registry. Each of BAXTER and MERRIMACK shall have
the obligation to the extent required by applicable Laws or regulations to
publish summaries of data and results from any human clinical trials conducted
by such Party under this Agreement on its clinical trials registry or on a
government-sponsored database such as www.clinicaltrials.gov or other publicly
available websites such as www.clinicalstudyresults.org, without requiring the
consent of the other Party. The content of such publication shall be submitted
to the JSC or designated working group for prior approval.

Section 10.7 Confidentiality Term. All obligations of confidentiality imposed
under this Article X shall expire [**] years following termination or expiration
of this Agreement.

Article XI

Representations and Warranties

Section 11.1 Representations and Warranties of Both Parties. Each Party hereby
represents and warrants to the other Party, as of the Effective Date, that:

(a) such Party is duly organized, validly existing and in good standing under
the Laws of the jurisdiction of its incorporation and has full corporate power
and authority to enter into this Agreement and to carry out the provisions
hereof;

(b) such Party has taken all necessary action on its part to authorize the
execution and delivery of this Agreement and the performance of its obligations
hereunder;

 

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(c) this Agreement has been duly executed and delivered on behalf of such Party,
and constitutes a legal, valid, binding obligation, enforceable against it in
accordance with the terms hereof;

(d) the execution, delivery and performance of this Agreement by such Party does
not conflict with any agreement or any provision thereof, or any instrument or
binding understanding, oral or written, to which it is a party or by which it is
bound, nor to the best of its knowledge violate any law or regulation of any
court, governmental body or administrative or other agency having jurisdiction
over such Party; and

(e) no government authorization, consent, approval, license, exemption of or
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, under any
applicable Laws currently in effect, is or will be necessary for, or in
connection with, the transaction contemplated by this Agreement or any other
agreement or instrument executed in connection herewith, or for the performance
by it of its obligations under this Agreement and such other agreements to
conduct clinical trials or to seek or obtain Marketing Authorizations.

Section 11.2 Representations and Warranties of MERRIMACK. MERRIMACK hereby
represents and warrants to BAXTER, as of the Effective Date, that, except as
MERRIMACK has disclosed to BAXTER as of the Effective Date:

(a) MERRIMACK is the owner of, or has Control of, the Licensed Patent Rights
listed on Exhibit B;

(b) Exhibit B is a complete and correct list of all Licensed Patent Rights that
claim or are directed to MM-398 and are Controlled by MERRIMACK as of the
Effective Date;

(c) MERRIMACK has the right to grant all rights and licenses it purports to
grant to BAXTER with respect to the Licensed Intellectual Property under this
Agreement;

(d) MERRIMACK has not granted, as of the Effective Date, any right or license,
to any Third Party relating to any of the Licensed Intellectual Property in the
Licensed Territory, that would conflict with, or limit the scope of, any of the
rights or licenses granted to BAXTER hereunder;

(e) To MERRIMACK’s knowledge, it has not (i) employed or used any contractor or
consultant that employs any individual or entity debarred by the FDA (or subject
to a similar sanction of EMA) or (ii) employed any individual or entity that is
the subject of an FDA debarment investigation or proceeding (or similar
proceeding of EMA);

(f) As of the Effective Date, there is no written allegation of, and there is no
pending or, to MERRIMACK’s knowledge, threatened claim, litigation or any other
proceeding brought by a Third Party that any of the Licensed Patent Rights is
invalid or unenforceable or that any Patent Right within the Licensed Patent
Rights is subject to interference, reexamination, reissue, revocation,
opposition, appeal or other administrative proceedings;

 

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(g) To the knowledge of MERRIMACK, the research, development, manufacture, use
and/or sale as of the Effective Date of MM-398 in the Licensed Territory as a
therapeutic in the Field can be carried out in the manner contemplated by this
Agreement without infringing any Patent Right Controlled by a Third Party;

(h) To the Knowledge of MERRIMACK Management, MERRIMACK has provided all Freedom
to Operate Opinions applicable to MM-398 and the Licensed Patent Rights in the
Licensed Territory as of the Effective Date;

(i) MERRIMACK has not received, with respect to the Licensed Patent Rights or
the Licensed Technology, any written notice of infringement or misappropriation
or any other written communication relating to a possible infringement or
misappropriation of any Patent Right or any know-how Controlled by a Third
Party;

(j) The Licensed Patent Rights listed in Exhibit B represent all Patent Rights
within MERRIMACK’s Control necessary for the development, manufacture and
Commercialization of the a Licensed Product in the Licensed Territory;

(k) The Patent Rights listed on Exhibit B (solely as to the knowledge of
MERRIMACK as to Patent Rights not owned by MERRIMACK) have been filed in good
faith, have been prosecuted in accordance with any applicable duty of candor,
and have been maintained in a manner consistent with MERRIMACK’s or its
licensor’s standard practice, in each applicable jurisdiction in which such
Patent Rights have been filed, no official final deadlines with respect to
prosecution thereof have been missed and all applicable fees have been paid on
or before the due date for payment;

(l) All inventors of inventions claimed in the Licensed Intellectual Property
listed on Exhibit B (solely as to the knowledge of MERRIMACK as to Patent Rights
not owned by MERRIMACK) have assigned (and all current MERRIMACK employees are
subject to a policy or agreement that requires them to assign) their entire
right, title and interest in and to such inventions to MERRIMACK or MERRIMACK’s
licensor, the inventors listed are correct and MERRIMACK is aware of no claims
or assertions regarding the inventorship of such Patent Rights alleging that
additional or alternative inventors ought to be listed;

(m) MERRIMACK has taken reasonable measures to protect the confidentiality of
the Licensed Technology, and, to MERRIMACK’s best knowledge, no event has
occurred which has resulted in the unauthorized use or disclosure of the
Licensed Technology by MERRIMACK or its personnel of any material part of the
Licensed Technology or which otherwise resulted in any material part of the
Licensed Technology entering the public domain; and

(n) MERRIMACK is not in breach of the PharmaEngine Collaboration Agreement and
the PharmaEngine Collaboration Agreement is in full force and effect.

Section 11.3 Mutual Covenants. Each Party hereby covenants to the other Party
that:

(a) All employees of such Party or its Affiliates working under this Agreement
will be under the obligation to assign all right, title and interest in and to
their

 

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inventions and discoveries arising in the performance of such work, whether or
not patentable, to such Party as the sole owner thereof, either immediately upon
invention or, if applicable Law so provides, upon disclosure to and demand made
by such Party;

(b) To its knowledge, such Party will not (i) employ or use any contractor or
consultant that employs any individual or entity debarred by the FDA (or subject
to a similar sanction of EMA) or (ii) employ any individual who or entity that
is the subject of an FDA debarment investigation or proceeding (or similar
proceeding of EMA), in each of clauses (i) and (ii) in the conduct of its
activities under this Agreement;

(c) Such Party shall perform its activities pursuant to this Agreement in
compliance in all material respects with applicable Laws; and

(d) Neither Party shall, during the Term, grant any right or license to any
Third Party relating to any of the intellectual property rights it owns or
Controls which would conflict with, or limit the scope of, any of the rights or
licenses granted or to be granted to the other Party hereunder.

Section 11.4 DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF ANY
KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY THAT ANY PATENTS ARE
VALID OR ENFORCEABLE, AND EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, EACH PARTY DISCLAIMS ANY WARRANTIES
WITH REGARDS TO: (A) THE SUCCESS OF ANY STUDY OR TEST COMMENCED UNDER THIS
AGREEMENT, (B) THE SAFETY OR USEFULNESS FOR ANY PURPOSE OF THE TECHNOLOGY OR
MATERIALS, INCLUDING ANY COMPOUNDS, IT PROVIDES OR DISCOVERS UNDER THIS
AGREEMENT, OR (C) THE VALIDITY, ENFORCEABILITY OR NON-INFRINGEMENT OF ANY
INTELLECTUAL PROPERTY RIGHTS OR TECHNOLOGY IT PROVIDES OR LICENSES TO THE OTHER
PARTY UNDER THIS AGREEMENT.

Article XII

Term and Termination

Section 12.1 Term. This Agreement shall become effective as of the Effective
Date, may be terminated as set forth in this Article XII, and otherwise remains
in effect until the expiration of the Royalty Term in the Licensed Territory and
satisfaction of the applicable payment obligations of BAXTER (including
milestone payments) under this Agreement (the “Term”).

Section 12.2 Survival of Licenses. Notwithstanding anything herein, on a
Licensed Product-by-Licensed Product and country-by-country basis, upon the
expiration (but not the earlier termination) of all royalty payment obligations
for a Licensed Product in a country, the licenses granted to BAXTER in
Section 7.1 shall be deemed to be perpetual and fully paid-up with respect to
such Licensed Product in such country.

 

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Section 12.3 Termination For Material Breach. Upon any material breach of this
Agreement by either Party (in such capacity, the “Breaching Party”), the other
Party (in such capacity, the “Non-Breaching Party”) may terminate this Agreement
by providing [**] days’ prior written notice ([**] days’ prior written notice
with respect to any payment breach) to the Breaching Party, specifying the
material breach. The termination shall become effective at the end of the [**]
day (or, with respect to any payment breach, [**] day) period unless (a) the
Breaching Party cures such breach during such [**] day (or, with respect to any
payment breach, [**] day) period (unless the Party owing payment believes in
good faith that such payment is not due and has notified the other Party thereof
(including the basis of its good faith belief in reasonable detail) and paid any
undisputed amount to the other Party, in which case the dispute shall be settled
in accordance with Article XIII, and this Agreement shall not be terminated as
long as the dispute is pending), or (b) solely with respect to a breach that is
not a payment breach, if such breach is not susceptible to cure within [**])
days of the receipt of written notice of the breach, the Breaching Party is
diligently pursuing a cure (unless such breach, by its nature, is incurable, in
which case this Agreement may be terminated immediately) and effects such cure
within an additional [**] days after the end of such [**] day period. It is
understood and agreed that a private, non-public request to amend or waive a
restriction set forth in Exhibit E communicated by a senior executive at BAXTER
only to a senior executive of MERRIMACK and which MERRIMACK reasonably
determines, after consultation with legal counsel, does not require public
disclosure by MERRIMACK pursuant to applicable Law shall not constitute a
material breach of this Agreement; provided, however, that BAXTER shall
immediately withdraw any such request for an amendment or waiver of a
restriction set forth in Exhibit E upon instruction from MERRIMACK (with failure
to so withdraw any such request constituting a material breach of this
Agreement).

Section 12.4 Termination by BAXTER for Convenience. BAXTER shall have the right
to terminate this Agreement, with respect to (a) one or more Licensed Products,
(b) one or more country or countries, (c) one or more Licensed
Sub-Territory(-ies) and/or (d) in its entirety, at any time for any reason upon
one hundred eighty (180) days prior written notice, provided that, after
receiving such notice, MERRIMACK shall have the right to elect, in MERRIMACK’s
sole option and discretion and by written notice to BAXTER, to accelerate such
termination period to a date specified by MERRIMACK. For clarity, other than
BAXTER’s obligations explicitly set forth in Section 12.6 (or Section 12.7 as
applicable) and Section 12.8, but without limiting BAXTER’s obligations or
liability for any breach of Section 6.1, no compensation whatsoever shall be due
by BAXTER by reason of termination under this Section 12.4. If BAXTER terminates
this Agreement in accordance with this Section 12.4 in any country within the
Major Asian Countries, Major EU Countries or Major ROW Countries, then such
termination as to such country shall not serve as the basis for or otherwise
contribute to a claim for breach of BAXTER’s obligations under Section 6.1(a) of
this Agreement as to any Licensed Sub-Territory other than the Licensed
Sub-Territory to which such country belongs and, notwithstanding such
termination, BAXTER may satisfy its obligations under Section 6.1(a) as to such
Licensed Sub-Territory by using Commercially Reasonable Efforts as set forth in
Section 6.1(b). If BAXTER terminates this Agreement in accordance with this
Section 12.4 in any Licensed Sub-Territory, then such termination shall not
serve as the basis for or otherwise contribute to a claim for breach of BAXTER’s
obligations under Section 6.1(a) of this Agreement, and BAXTER shall be relieved
of any obligations to use Commercially Reasonable Efforts in such Licensed
Sub-Territory.

 

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Section 12.5 Termination by MERRIMACK for BAXTER Patent Challenge. If BAXTER or
any of its Affiliates or sublicensees challenges the validity, enforceability,
patentability or scope of any claim(s) included in any Licensed Patent Rights,
or supports, directly or indirectly, any such challenge (any of the foregoing, a
“Patent Challenge”), MERRIMACK shall have the right to terminate this Agreement
upon thirty (30) days’ written notice to BAXTER with respect to the Licensed
Patent Rights so challenged by BAXTER or any of its Affiliates or sublicensees.

Section 12.6 Effects of Termination by MERRIMACK for BAXTER Uncured Breach or
BAXTER Patent Challenge, or Termination by BAXTER of Entire Agreement for
Convenience. Upon termination of this Agreement in its entirety by MERRIMACK
pursuant to Section 12.3 (Termination for Material Breach) or pursuant to
Section 12.5 (Termination for BAXTER Patent Challenge), or termination of this
Agreement in its entirety by BAXTER pursuant to Section 12.4 (Termination by
BAXTER for Convenience):

(a) All rights and licenses granted by MERRIMACK to BAXTER shall terminate and
revert to MERRIMACK;

(b) To the extent permitted by applicable Laws, BAXTER shall transfer to
MERRIMACK or its designee ownership of all Regulatory Approvals, Regulatory
Filings, data and the Global Dossier (but not any of BAXTER’s proprietary
templates or proprietary technology related to the Global Dossier, provided that
BAXTER shall provide the Global Dossier in a reasonably usable form) in BAXTER’s
or its Affiliates’ possession or control relating to the Licensed Compound and
all Licensed Products (for clarity the foregoing obligation shall not apply in
case of termination by BAXTER for MERRIMACK uncured material breach);

(c) To the extent necessary for MERRIMACK to resume development or manufacturing
or Commercialization of the Licensed Compound or a Licensed Product, BAXTER
shall:

(i) grant MERRIMACK or its designee a right of reference or use to any such
data, Global Dossier, Regulatory Filings and Regulatory Approvals in the
Licensed Territory that are not permitted to be transferred to MERRIMACK under
applicable Laws, which filings or Regulatory Approvals are in BAXTER’s or its
Affiliates’ possession or control and relate to the Licensed Compound and
Licensed Products; and

(ii) sign, and cause its Affiliates to sign, any instruments reasonably
requested by MERRIMACK in order to effect the grants contemplated above in this
Section 12.6(c);

(d) BAXTER shall assign to MERRIMACK its entire right, title and interest in and
to all preclinical and clinical data, safety data and all other supporting data,
including pharmacology and biology data, in BAXTER’s or its Affiliates’
possession or control relating to, and to the extent necessary for MERRIMACK to
continue the research, development or Commercialization of, the Licensed
Compound and Licensed Products;

 

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(e) At MERRIMACK’s option and upon MERRIMACK’s request as to any or all of the
following, BAXTER (or its relevant Affiliate) shall:

(i) transfer to MERRIMACK (or its designee) the manufacturing process,
documents, materials and other Know-How relating to the manufacture of the
Licensed Product, to the extent the foregoing is Controlled by BAXTER, it being
understood that in the case of any manufacturing process or other Know-How,
BAXTER shall only be obligated to transfer to MERRIMACK what it is legally or
contractually, as applicable, permitted to transfer, and shall use Commercially
Reasonable Efforts to have transferred to MERRIMACK any process or other
Know-How which is not under the Control of BAXTER (in all cases provided that
BAXTER shall not be committed to incur any costs pursuant to the use of such
process or other Know-How by or on behalf of MERRIMACK) which are used (at the
time of the termination) by or on behalf of BAXTER, its Affiliates or
sublicensees in the manufacture of the Licensed Compound and Licensed Products,
and provide reasonable technical assistance relating to the manufacture, testing
and supply of the Licensed Compound and Licensed Products as necessary for
MERRIMACK to be qualified or to qualify a Third Party for the manufacturing of
such Licensed Compound or Licensed Products, such assistance being limited to
assistance that a manufacturer familiar with, and having experience with
equipment for, manufacturing of liposomes and products containing liposomes,
would require, and in any case not to exceed a total of [**] hours of working
time by BAXTER’s personnel over a period not to exceed [**] months;

(ii) sell to MERRIMACK (or its designee), and MERRIMACK shall purchase from
BAXTER, BAXTER’s then-existing inventory of the Licensed Compound and Licensed
Products, at BAXTER’s Manufacturing Cost plus [**] percent ([**]%);

(iii) promptly transfer to MERRIMACK or its designee ongoing clinical trials
being conducted by or under authority of BAXTER as of the date of the
termination notice, continue to conduct such clinical trials up to such transfer
or, if requested by MERRIMACK, terminate such clinical trials in a manner
conforming to applicable Laws and regulations. It is understood that BAXTER
shall in no case be obligated to incur costs beyond those budgeted for the
termination period in the Global Development Plan applying to such period, costs
related to any change of any kind decided by MERRIMACK to the Global Development
Plan, costs related to any translation or reformatting of documents or databases
(it being understood that any data or databases shall be transferred on an as is
basis) or costs related to converting or adapting any database or software; and

(iv) transfer to MERRIMACK any Marketing Authorization obtained on or before the
date of termination and, if commercial launch of Licensed Product(s) has
occurred on or before the date of termination, BAXTER shall, at the request of
MERRIMACK, continue to market, promote, distribute and Commercialize the
Licensed Product(s), and continue to pay amounts due to MERRIMACK pursuant to
Article VIII, until the date when, on a country-by-country basis, the Marketing
Authorization has been transferred to MERRIMACK or MERRIMACK’s designee;

(f) BAXTER shall grant to MERRIMACK a non-exclusive, worldwide, royalty-free,
irrevocable, perpetual license, with the right to grant sublicenses to any Third
Party,

 

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under the BAXTER Intellectual Property and BAXTER’s interest in any Joint Patent
Rights or Joint Technology, in each case solely to the extent used by BAXTER,
its Affiliates or sublicensees in the research, development, manufacture or
Commercialization of the Licensed Compound or Licensed Products in the Field and
for the sole purpose of conducting research, development, manufacturing and/or
Commercialization of the Licensed Compound or Licensed Products in the Field.

(g) BAXTER shall assign to MERRIMACK BAXTER’s and its Affiliates’ entire right,
title and interest in, to and under any trademark used by BAXTER, its Affiliates
or sublicensees exclusively in connection with the marketing and sale of a
Licensed Product, it being understood that such assignment shall not include the
BAXTER name or trademark for the BAXTER company itself.

Section 12.7 Effects of Termination with Respect to One or More, but Not All,
Licensed Products, Licensed Sub-Territories or Countries by BAXTER for
Convenience. If this Agreement is terminated pursuant to Section 12.4 with
respect to one or more Licensed Products (“Terminated Products”) or with respect
to one or more Licensed Sub-Territories or to countries outside a Licensed
Sub-Territory (collectively, the “Terminated Territories”), then:

(a) the effects of termination set forth in Section 12.6(a),
Section 12.6(e)(iii), Section 12.6(e)(iv), Section 12.6(f) and Section 12.6(g)
above shall apply solely as to such Terminated Territories (in case this
Agreement is terminated with respect to one or more Terminated Territories) and
the effects of termination set forth in Section 12.6(a), Section 12.6(e),
Section 12.6(f) and Section 12.6(g) above shall apply solely as to such
Terminated Products (in case this Agreement is terminated with respect to one or
more Terminated Products);

(b) in lieu of the effects of termination set forth in Section 12.6(b) with
respect to Regulatory Filings, Regulatory Approvals, data and the Global Dossier
in BAXTER’s or its Affiliates’ possession or control relating to the Licensed
Compound and all Licensed Products, BAXTER shall:

(i) to the extent permitted by applicable Laws, transfer to MERRIMACK or its
designee ownership of all such data, Global Dossier, Regulatory Filings filed
in, and Regulatory Approvals received with respect to, any Terminated Products
and/or Terminated Territories (or any country therein), which filings or
Regulatory Approvals are in BAXTER’s or its Affiliates’ possession or control
and relate to the Licensed Compound and Licensed Products; provided, however, if
a Terminated Product received EMA Marketing Authorization based on a centralized
Drug Approval Application with the EMA and BAXTER retains any country(-ies)
within the EU, then BAXTER shall not be required to transfer the centralized EMA
Marketing Authorization or other Regulatory Filing to MERRIMACK but shall
provide MERRIMACK with a fully paid-up, non-royalty-bearing license or other
authorization with the right to sublicense that enables MERRIMACK to
Commercialize the applicable Terminated Product in the applicable Terminated
Territory(-ies) following the termination pursuant to Section 12.4; and

 

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(ii) to the extent necessary for MERRIMACK to resume development or
manufacturing or Commercialization of the Licensed Compound or a Licensed
Product in any Terminated Territory;

(A) grant MERRIMACK or its designee a right of reference or use to any and all
such data, Global Dossier, Regulatory Filings filed in, and Regulatory Approvals
received with respect to, any country or territory other than a Terminated
Territory (or any country therein) and any such filings and Regulatory Approvals
in any Terminated Territory (or any country therein) that are not permitted to
be transferred to MERRIMACK under applicable Laws, which filings or Regulatory
Approvals are in BAXTER’s or its Affiliates’ possession or control and relate to
the Licensed Compound and Licensed Products, (for clarity BAXTER shall transfer
to MERRIMACK ownership of all such Regulatory Filings and Regulatory Approvals
in the event of a termination of this Agreement in its entirety (except for a
termination by BAXTER for MERRIMACK uncured material breach)); and

(B) sign, and cause its Affiliates to sign, any instruments reasonably requested
by MERRIMACK in order to effect the grants contemplated above in this
Section 12.7(b); and

(c) BAXTER shall transfer to MERRIMACK, and grant MERRIMACK a right to use
(consistent with the license granted to MERRIMACK under Section 12.6(f)), all
preclinical and clinical data, safety data and all other supporting data,
including pharmacology and biology data, in BAXTER’s or its Affiliates’
possession or control relating to, and to the extent necessary for MERRIMACK to
continue, the research, development or Commercialization of Terminated Products,
or of the Licensed Compound or Licensed Products in any Terminated
Territory(-ies), as applicable.

Section 12.8 Survival.

(a) Upon expiration or termination of this Agreement for any reason, all rights
and obligations of each Party shall terminate hereunder, except as expressly set
forth in Section 12.2, Section 12.6, Section 12.7 or this Section 12.8;
provided, however, that nothing in this Agreement shall be construed to release
either Party from any obligations or liabilities that matured prior to the
effective date of expiration or termination, or which are attributable to a
period prior to such expiration or termination. In addition, and notwithstanding
the terms of Section 12.6(e)(iii) and Section 12.7(a), BAXTER shall remain
responsible for payment to MERRIMACK of all such costs that are committed by
MERRIMACK in connection with any human clinical trials conducted by MERRIMACK
hereunder for a period of [**] months beyond the effective date of termination
by BAXTER under Section 12.4, to the extent that the clinical trials giving rise
to such costs were non-terminable as of the date of termination of this
Agreement, for ethical or regulatory reasons.

(b) Notwithstanding anything in this Agreement to the contrary, the following
provisions shall expressly survive any expiration or termination of this
Agreement in accordance with their terms: Article VIII (in each case, to the
extent any amounts are due but unpaid as of the effective date of expiration or
termination); Section 9.1; Article X; Section 12.2; Section 12.6; Section 12.7;
Section 12.8; Article XIII; Article XIV; and Article XV.

 

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Article XIII

Dispute Resolution

Section 13.1 Disputes; Executive Officers. Subject to Section 2.1(f) and except
for Section 2.1(e)(iii) and Section 2.1(e)(iv), in the event any dispute, claim
or controversy arises out of or in relation to or in connection with this
Agreement, including failure to perform under or breach of, this Agreement or
any issue relating to the interpretation or application of this Agreement, the
Parties shall use good faith efforts to resolve such dispute within [**] days
through the JSC if the dispute is within the responsibilities of such a
committee. If the Parties are unable to resolve such dispute at the JSC level or
otherwise within such [**] day period or a dispute is within the
responsibilities of the JSC but the JSC no longer remains in place at the time
of such dispute and the Parties are unable to resolve such dispute within [**]
days, the Parties shall refer such dispute to their respective Executive
Officers, and such Executive Officers shall attempt in good faith to resolve
such dispute within [**] days and, if the Executive Officers are unable to
resolve such dispute within such [**] day period, such dispute shall be referred
to binding arbitration pursuant to Section 13.2, except that any dispute
concerning inventorship arising under Section 9.1(c) shall not be subject to
resolution by the Executive Officers under this Section 13.1 or by binding
arbitration under Section 13.2, but shall instead be resolved by independent
patent counsel as set forth in Section 9.1(c).

Section 13.2 Arbitration. If the Executive Officers are unable to resolve a
given dispute referred to such Executive Officers pursuant to Section 13.1
within [**] days following such referral of such dispute to such Executive
Officers, either Party may have the given dispute settled by binding arbitration
in the manner described below:

(a) Arbitration Request. If a Party intends to begin an arbitration to resolve a
dispute arising under this Agreement, such Party shall provide written notice
(the “Arbitration Request”) to the other Party of such intention and the issues
for resolution.

(b) Additional Issues. Within [**] days after the receipt of the Arbitration
Request, the other Party may, by written notice, add additional issues for
resolution.

(c) Arbitration Location; Language. The arbitration shall be located in New
York, New York, US and shall be conducted in English and a transcribed record
shall be prepared in English. Documents submitted in the arbitration (the
originals of which are not in English) shall be submitted together with a
reasonably complete and accurate English translation.

(d) Arbitration Rules. Except as expressly provided herein, the sole mechanism
for resolution of any claim, dispute or controversy arising out of or in
connection with or relating to this Agreement or the breach or alleged breach
thereof shall be arbitration by the International Institute for Conflict
Prevention & Resolution (“CPR”) pursuant to its Arbitration Rules and Procedures
(the “CPR Rules”). References herein to any arbitration rules or procedures mean
such rules or procedures as amended from time to time, including any successor
rules or procedures, and references herein to the CPR include any successor
thereto. The arbitration shall be before three (3) arbitrators. Each Party shall
designate one arbitrator in accordance with the “screened” appointment procedure
provided in Rule 5.4 of the CPR Rules. The two Party-appointed arbitrators will
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president. All three (3) arbitrators shall have experience in the pharmaceutical
or biologics industry. This arbitration provision, and the arbitration itself,
shall be governed by the laws of the State of New York, US and the Federal
Arbitration Act, 9 U.S.C. §§1-16.

(e) Consistent with the expedited nature of arbitration, each Party will, upon
the written request of the other Party, promptly provide the other with copies
of documents on which the producing Party may rely in support of or in
opposition to any claim or defense. At the request of a Party, the arbitrators
shall have the discretion to order examination by deposition of witnesses to the
extent the arbitrator deems such additional discovery relevant and appropriate.
Depositions shall be limited to a maximum of [**] per Party and shall be held
within [**] days of the grant of a request. Additional depositions may be
scheduled only with the permission of the arbitrators, and for good cause shown.
Each deposition shall be limited to a maximum of [**] duration. All objections
are reserved for the arbitration hearing except for objections based on
privilege and proprietary or confidential information. The parties shall not
utilize any other discovery mechanisms, including international processes and US
federal statutes, to obtain additional evidence for use in the arbitration. Any
dispute regarding discovery, or the relevance or scope thereof, shall be
determined by the arbitrators, which determination shall be conclusive. All
discovery shall be completed within [**] days following the appointment of the
arbitrators. All costs and/or fees relating to the retrieval, review and
production of electronic discovery shall be paid by the Party requesting such
discovery.

(f) The panel of arbitrators shall have no power to award non-monetary or
equitable relief of any sort, other than injunctions. The arbitrators will have
no authority to award punitive or other damages not measured by the prevailing
Party’s actual damages, except as may be required by statute. Except as may be
required by statute, each Party expressly waives and foregoes any right to
consequential, punitive, special, exemplary or similar damages or lost profits.
The arbitrators shall have no power or authority, under the CPR Rules for
Non-Administered Arbitration or otherwise, to relieve the Parties from their
agreement hereunder to arbitrate or otherwise to amend or disregard any
provision of this Agreement. The award of the arbitrators shall be final,
binding and the sole and exclusive remedy to the Parties. Either Party may seek
to confirm and enforce any final award entered in arbitration, in any court of
competent jurisdiction. The cost of the arbitration, including the fees of the
arbitrators, shall be borne by the Party the arbitrator determines has not
prevailed in the arbitration.

(g) If an arbitral award does not impose an injunction on the losing Party or
contain a money damages award in excess of US$[**], then the arbitral award
shall not be appealable to a tribunal of appellate arbitrators via the CPR
Arbitration Appeal Procedure but may only be challenged as permissible under the
Federal Arbitration Act, 9 U.S.C. §§ 1-16. In the event that the arbitration
does result in an arbitral award, which imposes an injunction or a monetary
award in excess of US$[**], such award may be appealed to a tribunal of
appellate arbitrators via the CPR Arbitration Appeal Procedure, subject to any
further challenges permissible under the Federal Arbitration Act, 9 U.S.C. §§
1-16.

(h) Except as may be required by law, neither a Party nor an arbitrator may
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of both parties.

 

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Article XIV

Indemnification

Section 14.1 Indemnification by BAXTER. BAXTER shall indemnify, defend and hold
harmless MERRIMACK and its Affiliates, and its and their respective directors,
officers, employees and agents, from and against any and all liabilities,
damages, losses, costs and expenses, including the reasonable fees of attorneys
and other professional Third Parties (collectively, “Losses”), arising out of or
resulting from any and all Third Party suits, claims, actions, proceedings or
demands (“Claims”) based upon:

(a) the negligence, recklessness or wrongful intentional acts or omissions of
BAXTER or its Affiliates and its or their respective directors, officers,
employees and agents, in connection with BAXTER’s performance of its obligations
or exercise of its rights under this Agreement;

(b) any breach of any representation, warranty or covenant made by BAXTER under
this Agreement;

(c) any act or omission by BAXTER that results in a breach of any of MERRIMACK’s
agreements with MERRIMACK Third Party licensors, including the PharmaEngine
Collaboration Agreement; or

(d) the research, development, manufacturing and Commercialization activities
that are actually conducted by or on behalf of BAXTER as to the Licensed
Compound or any Licensed Product solely for the Licensed Territory, including
(i) any product liability, personal injury, property damage or other damage, and
(ii) infringement of any Patent Right or other intellectual property right of
any Third Party (subject to the rights of BAXTER under Section 8.5(c) and
excluding any such infringement Losses arising from a breach by MERRIMACK of its
representations and warranties set forth in Section 11.2), in each case
resulting from any of the foregoing activities described in this
Section 14.1(d).

Section 14.2 Indemnification by MERRIMACK. MERRIMACK shall indemnify, defend and
hold harmless BAXTER and its Affiliates, and its or their respective directors,
officers, employees and agents, from and against any and all Losses, arising out
of or resulting from any and all Third Party Claims based upon:

(a) the negligence, recklessness or wrongful intentional acts or omissions of
MERRIMACK or its Affiliates or its or their respective directors, officers,
employees and agents, in connection with MERRIMACK’s performance of its
obligations or exercise of its rights under this Agreement;

(b) any breach of any representation, warranty or covenant made by MERRIMACK
under this Agreement;

(c) any breach of the PharmaEngine Collaboration Agreement except if such breach
was caused by any action or omission of BAXTER; and

 

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(d) the research, development, manufacturing and Commercialization activities
that are actually conducted by or on behalf of MERRIMACK as to the Licensed
Compound or any Licensed Product solely for the MERRIMACK Territory, including
(i) any product liability, personal injury, property damage or other damage, and
(ii) infringement of any Patent Right or other intellectual property right of
any Third Party arising from a breach by MERRIMACK of its representations and
warranties set forth in Section 11.2, in each case resulting from any of the
foregoing activities described in this Section 14.2(d).

Section 14.3 Procedure.

(a) A Person entitled to indemnification under this Article XIV (an “Indemnified
Party”) shall give prompt written notification to the Person from whom
indemnification is sought (the “Indemnifying Party”) of the commencement of any
action, suit or proceeding relating to a Third Party claim for which
indemnification may be sought or, if earlier, upon the assertion of any such
claim by a Third Party (it being understood and agreed, however, that the
failure by an Indemnified Party to give notice of a Third-Party claim as
provided in this Section 14.3 shall not relieve the Indemnifying Party of its
indemnification obligation under this Agreement except and only to the extent
that such Indemnifying Party is actually damaged as a result of such failure to
give notice).

(b) Within [**] days after delivery of such notification, the Indemnifying Party
may, upon written notice thereof to the Indemnified Party, assume control of the
defense of such action, suit, proceeding or claim with counsel reasonably
satisfactory to the Indemnified Party.

(c) If the Indemnifying Party does not assume control of such defense, the
Indemnified Party shall control such defense and, without limiting the
Indemnifying Party’s indemnification obligations, the Indemnifying Party shall
reimburse the Indemnified Party for all costs and expenses, including reasonable
attorney’s fees, incurred by the Indemnified Party in defending itself within
[**] days after receipt of any invoice therefor from the Indemnified Party.

(d) The Party not controlling such defense may participate therein at its own
expense, provided that if the Indemnifying Party assumes control of such defense
and the Indemnified Party in good faith concludes, based on advice from counsel,
that the Indemnifying Party and the Indemnified Party have conflicting interests
with respect to such action, suit, proceeding or claim, the Indemnifying Party
shall be responsible for the reasonable fees and expenses of counsel to the
Indemnified Party in connection with its participation in the defense action.

(e) The Party controlling such defense shall keep the other Party advised of the
status of such action, suit, proceeding or claim and the defense thereof and
shall consider recommendations made by the other Party with respect thereto.

(f) The Indemnified Party shall not agree to any settlement of such action,
suit, proceeding or claim without the prior written consent of the Indemnifying
Party, which shall not be unreasonably withheld, delayed or conditioned. The
Indemnifying Party shall not agree to any settlement of such action, suit,
proceeding or claim or consent to any judgment in respect

 

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thereof that does not include a complete and unconditional release of the
Indemnified Party from all liability with respect thereto, that imposes any
liability or obligation on the Indemnified Party or that acknowledges fault by
the Indemnified Party without the prior written consent of the Indemnified
Party.

Section 14.4 Insurance. Each Party shall procure and maintain insurance,
including product liability insurance, adequate to cover its obligations and
liabilities hereunder and which are consistent with normal business practices of
comparable companies with respect to similar obligations and liabilities, at all
times during which the Licensed Compound and Licensed Products are clinically
tested or commercially distributed or sold by or on behalf of such Party or its
Affiliates. It is understood that such insurance shall not be construed to
create any limit of either Party’s obligations or liabilities with respect to
its indemnification obligations hereunder. Each Party shall provide the other,
upon request, with evidence of such insurance. Each Party shall have the right
to meet its insurance obligations under this Section 14.4 through a
self-insurance program that is consistent with the normal business practices of
comparable companies in lieu of procuring and maintaining Third Party insurance.

Section 14.5 Limitation of Liability. EXCEPT TO THE EXTENT SUCH PARTY MAY BE
REQUIRED TO INDEMNIFY THE OTHER PARTY UNDER THIS ARTICLE XIV WITH RESPECT TO
THIRD PARTY CLAIMS AND WITH RESPECT TO BREACHES OF ARTICLE X, NEITHER PARTY NOR
ITS RESPECTIVE AFFILIATES OR SUBLICENSEES SHALL BE LIABLE FOR ANY (AND HEREBY
DISCLAIM ALL) SPECIAL, EXEMPLARY, CONSEQUENTIAL, PUNITIVE OR OTHER INDIRECT
DAMAGES, WHETHER BASED UPON WARRANTY, CONTRACT, TORT, STRICT LIABILITY OR OTHER
LEGAL THEORY.

Article XV

Miscellaneous Provisions

Section 15.1 Governing Law. Except for matters of intellectual property law,
which shall be determined in accordance with the national intellectual property
laws relevant to the intellectual property in question, this Agreement, and any
disputes between the Parties relating to the subject matter of this Agreement,
shall be construed and the respective rights of the Parties hereto determined
according to the substantive laws of the State of New York, US, excluding
(a) its conflicts of laws principles, (b) the United Nations Conventions on
Contracts for the International Sale of Goods, (c) the 1974 Convention on the
Limitation Period in the International Sale of Goods (the “1974 Convention”),
and (d) the Protocol amending the 1974 Convention, done at Vienna April 11,
1980.

Section 15.2 Assignment. Neither MERRIMACK nor BAXTER may assign this Agreement
in whole or in part without the prior written consent of the other, except to an
Affiliate or in connection with the merger, sale, divestiture, spin-off or
transfer of all or substantially all of the stock, assets or business of
MERRIMACK, on the one hand, or BAXTER, on the other, to which the subject matter
of this Agreement pertains. The assigning Party shall remain primarily liable
for the performance of this Agreement notwithstanding any such assignment of
this Agreement, provided that following the assignment of this Agreement by BII,
BHC and BHSA to a new entity to be formed by BAXTER (“New Baxter”) pursuant to
the

 

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planned spin-off transaction that was publicly announced prior to the Effective
Date, and New Baxter’s and its ultimate parent entity’s assumption of BAXTER’s
obligations hereunder in connection therewith, BII, BHC and BHSA shall no longer
be liable for any performance under this Agreement.

Section 15.3 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter hereof, and
supersedes all previous arrangements with respect to the subject matter hereof,
whether written or oral, including the Confidentiality Agreement. Any amendment
or modification to this Agreement shall be made in writing signed by both
Parties.

Section 15.4 Notices. Any notice required or provided for by the terms of this
Agreement shall be in writing and shall be sufficient if (a) delivered
personally or (b) sent by registered or certified mail, return receipt
requested, reputable overnight business courier, email or fax (each with return
confirmation) in each case properly addressed to a Party as set forth below. The
effective date of notice shall be the actual date of receipt by the Party
receiving the same.

Notices to MERRIMACK shall be addressed to:

Merrimack Pharmaceuticals, Inc.

One Kendall Square, Suite B7201

Cambridge, MA 02139

U.S.A.

Telephone: (617) 441-1000

Facsimile: (617) 491-1386

Attention: Chief Executive Officer

with a copy to:

Merrimack Pharmaceuticals, Inc.

One Kendall Square, Suite B7201

Cambridge, MA 02139

U.S.A.

Telephone: (617) 441-1000

Facsimile: (617) 491-1386

Attention: Legal Department

with a copy to:

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, Massachusetts 02109

U.S.A.

Telephone: (617) 526-6238

Facsimile: (617) 526-5000

Email: Steven.Barrett@wilmerhale.com

Attention: Steven D. Barrett, Esq.

 

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Notices to BAXTER shall be addressed to:

Baxter Healthcare SA

Postfach

8010 Zürich, Switzerland

Telephone: +41 44 878 60 00

Facsimile: +41 44 878 63 50

Attention: Legal Department

with a copy to:

Baxter Healthcare Corporation

One Baxter Parkway

Deerfield, Illinois 60015

U.S.A.

Telephone: (224) 948-3440

Facsimile: (224) 948-2590

Email: david_scharf@baxter.com

Attention: General Counsel

and a copy to:

McDermott Will & Emery LLP

227 W. Monroe Avenue

Chicago, IL 60601

U.S.A.

Telephone: (312) 984-2157

Facsimile: (312) 984-7700

Email: kwerling@mwe.com

Attention: Kristian A. Werling

Any Party may change its notification address by giving notice to the other
Party in the manner herein provided. For clarity, the additional copy will be
addressed for convenience only and the notification shall be deemed to have been
validly delivered when addressed to the main addressee.

Section 15.5 Exports. The Parties acknowledge that the export of technical data,
materials or products is subject to the exporting Party receiving any necessary
export licenses and that the Parties cannot be responsible for any delays
attributable to export controls that are beyond the reasonable control of either
Party. BAXTER and MERRIMACK agree not to export or reexport, directly or
indirectly, the Licensed Compound or any Licensed Product (or any associated
products, information, items, articles, computer software, media, technical
data, the direct product of such data, samples or equipment received or
generated under this Agreement) in violation of any US export laws or other Laws
or regulations that may be applicable. BAXTER and MERRIMACK agree to obtain
similar covenants from their Affiliates, sublicensees and contractors with
respect to the subject matter of this Section 15.5.

 

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Section 15.6 Force Majeure. Either Party shall be excused from the performance
of its obligations under this Agreement, and no failure or omission by a Party
in the performance of any obligation of this Agreement shall be deemed a breach
of this Agreement or create any liability if the same shall arise from any cause
or causes beyond the control of such Party, (including the following: acts of
God; acts or omissions of any government; any rules, regulations or orders
issued by any governmental authority or by any officer, department, agency or
instrumentality thereof; labor disputes, epidemic, failure or default of public
utilities or common carriers, fire; storm; flood; earthquake; accident; war;
rebellion; terrorism; insurrection; riot; and invasion) and such excuse shall be
continued so long as the condition constituting force majeure continues,
provided that such failure or omission resulting from one of the above causes is
cured as soon as is practicable after the end of the occurrence of one or more
of the above-mentioned causes. The Party claiming such force majeure shall
notify the other Party with notice of the force majeure event as soon as
practicable, but in no event longer than five (5) Business Days after its
occurrence, which notice shall reasonably identify the affected obligations
under this Agreement and the extent to which performance thereof will be
affected. In such event, the Parties shall meet and/or discuss promptly to
determine an equitable solution to minimize and if reasonably feasible,
overcome, the effects of any such event.

Section 15.7 Performance by Affiliates and Sublicensees; Joint and Several
Liability. To the extent that this Agreement imposes obligations on Affiliates
or sublicensees of a Party, such Party agrees to cause such Party’s Affiliates
and sublicensees to perform such obligations. Without limiting the foregoing,
BII, BHC and BHSA shall be jointly and severally liable for all of BAXTER’s
obligations under this Agreement.

Section 15.8 Independent Contractors. It is understood and agreed that the
relationship between the Parties hereunder is that of independent contractors
and that nothing in this Agreement shall be construed as authorization for
either MERRIMACK or BAXTER to act for, bind or commit the other in any way. The
Alliance Managers shall remain employees of BAXTER or MERRIMACK, as the case may
be.

Section 15.9 Construction. Each Party agrees that this Agreement shall be
interpreted without regard to any presumption or rule requiring construction
against the Party causing this Agreement to be drafted.

Section 15.10 Interpretation. Any reference in this Agreement to an Article,
Section, subsection, paragraph, clause, Schedule or Exhibit shall be deemed to
be a reference to any Article, Section, subsection, paragraph, clause, Schedule
or Exhibit, of or to, as the case may be, this Agreement. Except where the
context clearly otherwise requires, (a) wherever used, the use of any gender
will be applicable to all genders, (b) any definition of or reference to any
agreement, instrument or other document refers to such agreement, instrument
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein or therein), (c) any reference to any laws refers to such laws
as from time to time enacted, repealed or amended, (d) the words “herein”,
“hereof” and hereunder”, and words of similar import, refer to this Agreement in
its entirety and not to any particular provision hereof, (e) the words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “but not limited to”, “without limitation” or words of similar import,
(f) the word “day” means a calendar day, the word

 

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“month” means a calendar month and the word “year” means a calendar year,
(g) the word “quarterly” refers to calendar quarters (e.g., January 1 to
March 31, April 1 to June 30, July 1 to September 30 or October 1 to
December 31) and (h) each accounting term used herein that is not specifically
defined herein shall have the meaning given to it under applicable IFRS, to the
extent consistent with its usage and the other definitions in this Agreement.

Section 15.11 Headings. The captions or headings of the Sections or other
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.

Section 15.12 English Language. This Agreement was prepared and is established
in the English language, any translation thereof shall be deemed for convenience
only and shall never prevail against the original English version. All reports,
notices and communications to be exchanged under this Agreement shall be in the
English language; provided, however, that, notwithstanding anything herein to
the contrary, neither Party shall be under any obligation to translate into
English any document originally established and existing in another language,
for the sole purpose of communicating such document to the other Party, it being
agreed that such documents will be provided on an as is basis.

Section 15.13 No Implied Waivers; Rights Cumulative. No failure on the part of
MERRIMACK or BAXTER to exercise, and no delay in exercising, any right, power,
remedy or privilege under this Agreement, or provided by statute or at law or in
equity or otherwise, shall impair, prejudice or constitute a waiver of any such
right, power, remedy or privilege or be construed as a waiver of any breach of
this Agreement or as an acquiescence therein, nor shall any single or partial
exercise of any such right, power, remedy or privilege preclude any other or
further exercise thereof or the exercise of any other right, power, remedy or
privilege.

Section 15.14 Severability. If, under applicable Laws, any provision of this
Agreement is held to be invalid or unenforceable, or otherwise directly or
indirectly affects the validity of any other material provision(s) of this
Agreement (such invalid or unenforceable provision, a “Severed Clause”), this
Agreement shall endure except for the Severed Clause. The Parties shall consult
one another and use reasonable efforts to agree upon a valid and enforceable
provision that is a reasonable substitute for the Severed Clause in view of the
objectives contemplated by the Parties when entering into this Agreement and the
general balance of the respective interests of the Parties as initially intended
under this Agreement.

Section 15.15 Execution in Counterparts. This Agreement may be executed in
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.

 

MERRIMACK PHARMACEUTICALS, INC. By:  

/s/ Robert J. Mulroy

  Name:   Robert J. Mulroy   Title:   President + CEO BAXTER INTERNATIONAL INC.
By:  

/s/ Robert J. Hombach

  Name:   Robert J. Hombach   Title:   CVP, Chief Financial Officer BAXTER
HEALTHCARE CORPORATION By:  

/s/ Robert J. Hombach

  Name:   Robert J. Hombach   Title:   CVP, Chief Financial Officer BAXTER
HEALTHCARE SA By:  

/s/ Stuart Edgley

  Name:   Stuart Edgley   Title:   VP Finance EMEA

 

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Exhibit A

Initial Global Development Plan

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. A total of two pages were omitted. [**].

The initial budget for the Second Indication will be $98,800,000.

[**].

 

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Exhibit B

Licensed Patent Rights

 

MM Case # / Country

  

Status

  

Application #

  

Date

  

Patent Number

  

Issue Date

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

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. A total of one page was omitted. [**]

 

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Exhibit C

MM-398

[**]

 

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Exhibit D

Terms of MERRIMACK Supply Agreement

The following is a summary of certain material terms relating to the manufacture
and supply of Drug Product from MERRIMACK to BAXTER that will be contained in a
definitive MERRIMACK Supply Agreement. In accordance with Section 3.5 of the
Agreement, the Parties shall enter into the MERRIMACK Supply Agreement on or
before a date to be established by the JSC, but in no event later than [**] days
after the Effective Date. The negotiated terms of the MERRIMACK Supply Agreement
shall be consistent with the Agreement and the following binding terms, provided
that neither Party shall have any obligation to perform such terms until the
Parties have entered into a definitive MERRIMACK Supply Agreement:

 

    

Topic

  

Description

1    Objectives and Scope    MERRIMACK and BAXTER shall enter into an exclusive
commercial supply agreement whereby MERRIMACK will manufacture and supply Drug
Product to BAXTER for BAXTER to use, market, sell, offer for sale and have sold
in the Licensed Territory. 2    Drug Product    Bulk drug product containing the
Licensed Compound, but excluding any final packaging, finishing and vialing. 3
   Territory    Licensed Territory 4    Term   

The MERRIMACK Supply Agreement will have an initial term of five (5) years and
will automatically renew for additional two (2) year periods unless notice not
to renew is delivered by BAXTER at least twelve (12) months prior to the end of
the then current term.

 

Notwithstanding the foregoing, at any time after [**], MERRIMACK may elect to
terminate the MERRIMACK Supply Agreement upon twenty-four (24) months’ advance
written notice to BAXTER.

 

Upon notice of termination or, in the case of expiration, no less than [**]
months prior to expiration or termination, of the MERRIMACK Supply Agreement as
described above, MERRIMACK would, if requested by BAXTER, commence providing
BAXTER with a technology transfer of MERRIMACK’s manufacturing process such that
the technology transfer is completed prior to termination or expiration in
accordance with terms and conditions substantially the same as set forth in
Section 3.8 of the Agreement.

5    Forecasts    BAXTER shall provide MERRIMACK with forecasts (partial
binding/non-binding). The timeframe for such forecasts shall be aligned with
relevant CMO, raw material procurement and capacity planning timelines. BAXTER
shall include in its forecast any requirement for safety stock and BAXTER shall
be responsible for all costs associated with such safety stock.

 

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6    Supply Price   

BAXTER shall purchase Drug Product from MERRIMACK at a supply price equal to
[**] percent ([**]%) of MERRIMACK’s Manufacturing Costs (as defined in Section
1.50 of the Agreement). Solely for purposes of reference, the current
Manufacturing Costs for Drug Product are estimated at $[**] per gram, yielding a
current supply price of $[**] per gram.

 

Fill and finish, freight, insurance and other subsequent supply chain expenses
are not included in the supply price.

 

The supply price shall be adjusted on an annual basis to reflect changes in
MERRIMACK’s Manufacturing Costs.

7    Delivery    EXW (ICC Incoterms 2010) MERRIMACK’s manufacturing facility. 8
   Specifications, Certificate of Analysis    In conjunction with each delivery,
MERRIMACK shall provide a signed Certificate of Analysis certifying that such
shipment was tested and meets the specifications. 10    Payment    MERRIMACK
shall issue invoices upon delivery of Drug Product to BAXTER. BAXTER shall pay
such invoices within [**] days. 11    Supply Failure    The MERRIMACK Supply
Agreement shall include appropriate technology transfer provisions sufficient to
enable BAXTER to manufacture or have manufactured Drug Product in the event of a
supply failure (which shall be defined as the failure to supply at least [**]
percent ([**]%) of BAXTER’s forecasts for a period of [**] days). If a
technology transfer is commenced following a failure to supply resulting from a
breach by MERRIMACK of the MERRIMACK Supply Agreement, then such technology
transfer shall be promptly provided by MERRIMACK [**] to BAXTER. 12   
Representations, Warranties / Indemnification / Limitations of Liability    The
MERRIMACK Supply Agreement shall contain customary representations and
warranties relating to the manufacture and supply of Drug Product, including
each Party’s obligation to comply with all applicable Laws. In addition, the
MERRIMACK Supply Agreement shall include appropriate indemnification provisions
and limitations of liability. Such representations, warranties and
indemnification shall be consistent with the liability allocation provisions of
the Agreement (i.e., shall be tailored to address manufacturing defect-caused
liability) and such limitations of liability shall be consistent with
limitations of liability that are typical for commercial contract manufacturing
contracts. 13    Recalls    Section 4.3 of the Agreement shall govern the
Parties’ obligations with respect to recalls, withdrawals or field corrections;
provided, however, that the MERRIMACK Supply Agreement shall provide for no-cost
replacement of Drug Product and allocation of recall expenses if the recall,
withdrawal or field correction was due to the failure of the Drug Product to
comply with specifications or cGMP (unless such non-compliance was caused by
BAXTER). 14    Non-Conforming Supply    The MERRIMACK Supply Agreement shall
contain timelines for receipt, testing and acceptance of Drug Product by BAXTER,
as well as terms for the replacement of non-conforming Drug Product if
necessary.

 

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15    Supply Constraints    The MERRIMACK Supply Agreement will include
provisions for the management of a constrained supply of Drug Product such that
MERRIMACK and BAXTER share available supply so that each Party’s allocation is
proportionate to their respective [**]-month rolling forecast submitted to the
fill-finish supplier. For example, if A is MERRIMACK’s [**]-month rolling
forecast, B is BAXTER’s [**]-month rolling forecast and T is the total supply
available, then if a supply constraint occurs, MERRIMACK’s share of available
supply shall be (A/(A+B))*T and BAXTER’s share of available supply shall be
(B/(A+B))*T. 16    Approvals and Inspections   

MERRIMACK shall use Commercially Reasonable Efforts to ensure that MERRIMACK’s
Drug Product manufacturing facility, the facility of MERRIMACK’s current
irinotecan API supplier and the facility of MERRIMACK’s current fill/finish CMO
comply with requirements of EMA and MHLW prior to launch in the first Major EU
Territory, Japan and in any other Major Asian Countries and Major ROW Countries
and that any other Drug Product manufacturing facility, irinotecan API supplier
or fill/finish CMO controlled by or under contract with MERRIMACK at any time
after the Effective Date comply with such requirements in a timely manner, as
applicable (including the provision of necessary development and process
information required to support Regulatory Filings). If there is a change in
MERRIMACK’s irinotecan API supplier at any time, MERIMACK will provide notice of
such change to BAXTER in advance and such irinotecan supplier will comply with
applicable EMA and MHLW requirements. BAXTER shall be responsible for all
reasonable costs related to complying with EMA or MHLW requirements.

 

For the avoidance of doubt, MERRIMACK shall use Commercially Reasonable Efforts
to ensure that MERRIMACK’s Drug Product manufacturing facility, the facility of
MERRIMACK’s current irinotecan API supplier and the facility of MERRIMACK’s
current fill/finish CMO are “inspection-ready” by [**] for an EMA inspection.
MERRIMACK shall cooperate in any such inspections. However, MERRIMACK shall not
be responsible for any regulatory submissions in the Licensed Territory,
including any submissions that would trigger inspection by a Regulatory
Authority.

 

BAXTER shall reasonably cooperate with and provide assistance to MERRIMACK with
respect to the activities to be undertaken in the preceding two paragraphs, at
BAXTER’s cost.

 

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CONFIDENTIAL   EXECUTION VERSION

 

17    Process Changes    MERRIMACK shall give BAXTER reasonable advance notice
and opportunity to approve (which approval shall not be unreasonably withheld)
any material changes that are being considered with respect to the manufacturing
process for Drug Product that may reasonably be expected to impact the
manufacture of the Drug Product or the Commercialization of the Licensed Product
in the Licensed Territory. 18    Confidentiality    Article X of the Agreement
shall govern the Parties’ obligations with respect to confidentiality. 19   
Dispute Resolution    Article XIII of the Agreement shall govern the Parties’
rights and obligations with respect to the resolution of disputes. 20   
Mutuality of Terms    If BAXTER elects to establish its own commercial scale
manufacturing capabilities for Drug Product, MERRIMACK and BAXTER shall enter
into an agreement pursuant to which BAXTER shall, at MERRIMACK’s option, provide
Drug Product to MERRIMACK under substantially the same terms as MERRIMACK
provides to BAXTER. 21    Fill and Finish   

BAXTER shall have the option to (A) perform, by itself or through one or more
CMOs, vialing of Drug Product or (B) have MERRIMACK, on BAXTER’S behalf, manage
the vialing of Drug Product at MERRIMACK’s current fill/finish CMO or such other
CMO as the Parties mutually agree upon. BAXTER shall provide appropriate notice
of BAXTER’s intention to elect either (A) or (B) above to allow MERRIMACK to
plan resources appropriately and align on timing with the CMO.

 

Regardless of whether BAXTER elects (A) or (B) above, BAXTER shall be
responsible for vialing and all downstream supply chain activities and all costs
related to vialing, including freight, insurance, materials and vendor
management. Third Party costs will be passed through to BAXTER [**] and
MERRIMACK personnel will be billed at the [**] FTE Rate.

 

BAXTER shall be responsible for releasing vialed Licensed Product for use in the
Licensed Territory. MERRIMACK will perform analytical methods transfer in a
timely manner to BAXTER or BAXTER’S CMO in order to enable BAXTER to release
Licensed Product in the Licensed Territory. MERRIMACK shall invoice BAXTER for
the reasonable costs of transferring the analytical methods at the [**] FTE
Rate.

 

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CONFIDENTIAL   EXECUTION VERSION

 

Exhibit E

BAXTER Restrictions

In partial consideration of the rights and licenses granted to BAXTER under this
Agreement, BAXTER hereby agrees that, during the three (3) year period after the
Effective Date, unless BAXTER shall have been specifically invited in writing by
MERRIMACK, neither BAXTER nor any of its controlled affiliates (as such term is
defined under the Securities Exchange Act of 1934, as amended (the “1934 Act”))
will in any manner, directly or indirectly:

(a) effect or seek, offer or propose (whether publicly or otherwise) to effect,
or cause or participate in or in any way advise, assist or encourage any other
Person to effect or seek, offer or propose (whether publicly or otherwise) to
effect or participate in, (i) any acquisition of any securities (or beneficial
ownership thereof) or a substantial portion of the assets of MERRIMACK, or any
rights to acquire any such securities (including derivate securities
representing the right to vote or economic benefit of any such securities) or
assets; (ii) any tender or exchange offer, merger or other business combination
involving MERRIMACK; (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to MERRIMACK; or
(iv) any “solicitation” of “proxies” (as such terms are used in the proxy rules
of the SEC) or consents to vote any voting securities of MERRIMACK;

(b) form, join or in any way participate in a “group” (as defined under the 1934
Act) with respect to any securities of MERRIMACK;

(c) otherwise act, alone or in concert with others, to seek to control or
influence the management, Board of Directors or policies of MERRIMACK;

(d) take any action that might force MERRIMACK to make a public announcement
regarding any of the types of matters set forth in (a) above; or

(e) enter into any discussions or arrangements with any Third Party with respect
to any of the foregoing.

BAXTER also agrees during such period not to request MERRIMACK (or its
directors, officers, employees or agents), directly or indirectly, to amend or
waive any provision of this paragraph (including this sentence). Notwithstanding
anything to the contrary contained in this Agreement, (A) if, at any time a
Third Party (w) commences a tender offer for at least fifty percent (50%) of the
outstanding capital stock of MERRIMACK, (x) commences a proxy contest with
respect to the election of any directors of MERRIMACK, or (y) enters into an
agreement with MERRIMACK contemplating the acquisition (by way of merger, tender
offer or otherwise) of at least fifty percent (50%) of the outstanding capital
stock of MERRIMACK or all or substantially all of its assets, then, in any of
the foregoing cases, the restrictions set forth in this paragraph shall
terminate and cease to be of any further force or effect, (B) if MERRIMACK
publicly announces its plans to complete a transaction for at least fifty
percent (50%) of the outstanding capital stock of MERRIMACK, the restrictions
set forth in this paragraph shall terminate and cease to be of any further force
or effect, (C) the restrictions set forth in this paragraph shall not apply to
any acquisition of assets or securities of MERRIMACK, as debtor, in a
transaction subject to the approval of the US Bankruptcy Court pursuant to
proceedings under the

 

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CONFIDENTIAL   EXECUTION VERSION

 

Bankruptcy Code and (D) the restrictions set forth in this Exhibit E shall not
apply to (I) any investment in any securities of MERRIMACK by or on behalf of
any pension or employee benefit plan or trust, or (II) securities of MERRIMACK
held by a Person acquired by BAXTER on the date such Person first entered into
an agreement to be acquired by BAXTER. BAXTER represents and warrants that as of
the Effective Date, neither BAXTER nor any of its controlled affiliates owns, of
record or beneficially, any voting securities of MERRIMACK, or any securities
convertible into or exercisable for any such voting securities.

 

E-2