Exhibit 10.45
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
LICENSE AGREEMENT
Dated December 18, 2007
By and Between
Idera Pharmaceuticals, Inc.
And
Merck KGaA

 

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TABLE OF CONTENTS

             
ARTICLE 1
  DEFINITIONS     1  
 
           
ARTICLE 2
  LICENSES AND OTHER RIGHTS     12  
2.1
  GRANT OF LICENSE TO MERCK     12  
2.2
  GRANT OF SUBLICENSE TO MERCK     12  
2.3
  GRANT OF SUBLICENSE BY MERCK     12  
2.4
  TECHNOLOGY TRANSFER     13  
2.5
  MANUFACTURING TECHNOLOGY TRANSFER     13  
2.6
  PROCEDURES FOR TECHNOLOGY TRANSFER     13  
2.7
  MERCK EXCLUSIVITY     14  
2.8
  LIMITATIONS ON USE OF COMPOUNDS AND
FOLLOW-ON COMPOUNDS     14  
 
           
ARTICLE 3
  PRODUCT DEVELOPMENT AND COMMERCIALIZATION; REGULATORY MATTERS     14  
3.1
  DEVELOPMENT OF THE LICENSED PRODUCT BY MERCK     14  
3.2
  CLINICAL TRIAL ON-GOING AS OF EFFECTIVE DATE     14  
3.3
  REIMBURSEMENT OF DEVELOPMENT COSTS     15  
3.4
  LICENSOR SUPPORT IN THE DEVELOPMENT     15  
3.5
  JOINT RESEARCH COMMITTEE     16  
3.6
  FOLLOW-ON COMPOUNDS     16  
3.7
  COMMERCIALIZATION     17  
3.8
  MANUFACTURING AND SUPPLY     17  
3.9
  DILIGENCE BY MERCK     17  
3.10
  ANNUAL REPORTING     18  
3.11
  TRADEMARKS     18  
 
           
ARTICLE 4
  REGULATORY MATTERS     18  
4.1
  REGULATORY FILINGS     18  
4.2
  COMMUNICATIONS WITH AUTHORITIES     18  
4.3
  ADVERSE EVENT REPORTING     19  
 
           
ARTICLE 5
  FINANCIAL PROVISIONS     20  
5.1
  INITIAL FEE     20  
5.2
  MILESTONE PAYMENTS     20  
5.3
  COMMERCIAL EVENT PAYMENTS     22  
5.4
  ROYALTY PAYMENTS FOR LICENSED PRODUCTS     22  
5.5
  REDUCTIONS AND REIMBURSEMENTS     23  
5.6
  TIMING OF PAYMENT     25  
5.7
  MODE OF PAYMENT, CURRENCY AND INVOICING     25  
5.8
  ROYALTY REPORTS AND RECORDS RETENTION     25  
5.9
  LEGAL RESTRICTIONS     25  
5.10
  LATE PAYMENTS     25  
5.11
  AUDITS     26  
5.12
  COMPULSORY LICENSE     26  
5.13
  TAXES     27  

 

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ARTICLE 6
  INVENTIONS AND PATENTS     27  
6.1
  CERTIFICATION UNDER DRUG PRICE COMPETITION AND PATENT RESTORATION ACT     27  
6.2
  LISTING OF PATENTS     27  
6.3
  TITLE TO INVENTIONS     27  
6.4
  FURTHER ASSURANCES     28  
6.5
  PATENT PROSECUTION AND MAINTENANCE     28  
6.6
  ENFORCEMENT OF PATENTS     29  
6.7
  THIRD PARTY ACTIONS CLAIMING INFRINGEMENT     31  
 
           
ARTICLE 7
  CONFIDENTIALITY     31  
7.1
  CONFIDENTIALITY OBLIGATIONS     31  
7.2
  PUBLICATIONS     32  
7.3
  PRESS RELEASES AND DISCLOSURE     33  
 
           
ARTICLE 8
  REPRESENTATIONS, WARRANTIES AND COVENANTS     33  
8.1
  REPRESENTATIONS AND WARRANTIES     33  
8.2
  ADDITIONAL REPRESENTATIONS AND WARRANTIES OF LICENSOR     34  
8.3
  NO WARRANTY     35  
 
           
ARTICLE 9
  INDEMNIFICATION AND INSURANCE     36  
9.1
  INDEMNIFICATION BY MERCK     36  
9.2
  INDEMNIFICATION BY LICENSOR     36  
9.3
  NO CONSEQUENTIAL DAMAGES     36  
9.4
  NOTIFICATION OF CLAIMS; CONDITIONS TO INDEMNIFICATION OBLIGATIONS     36  
9.5
  INSURANCE     37  
 
           
ARTICLE 10
  TERM AND TERMINATION     37  
10.1
  TERM AND EXPIRATION     37  
10.2
  TERMINATION OF THE AGREEMENT BY MERCK FOR CONVENIENCE     37  
10.3
  TERMINATION UPON MATERIAL BREACH     38  
10.4
  EFFECTS OF TERMINATION     38  
10.5
  BANKRUPTCY     39  
 
           
ARTICLE 11
  DISPUTE RESOLUTION     40  
11.1
  DISPUTES     40  
11.2
  ESCALATION TO EXECUTIVE OFFICERS     40  
 
           
ARTICLE 12
  HSR MATTERS     40  
12.1
  HSR FILINGS     40  
12.2
  HSR COOPERATION; FURTHER ASSURANCES     40  
12.3
  HSR-RELATED DEFINED TERMS     41  
12.4
  TERMINATION BASED ON FAILURE TO OBTAIN HSR CLEARANCE     41  

 

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ARTICLE 13
  MISCELLANEOUS PROVISIONS     41  
13.1
  RELATIONSHIP OF THE PARTIES     41  
13.2
  ASSIGNMENT     42  
13.3
  PERFORMANCE BY AFFILIATES     42  
13.4
  CHANGE OF CONTROL     42  
13.5
  FURTHER ACTIONS     43  
13.6
  ACCOUNTING PROCEDURES     43  
13.7
  FORCE MAJEURE     43  
13.8
  NO TRADEMARK RIGHTS     43  
13.9
  ENTIRE AGREEMENT OF THE PARTIES; AMENDMENTS     43  
13.10
  CAPTIONS     43  
13.11
  GOVERNING LAW; JURISDICTION     43  
13.12
  NOTICES AND DELIVERIES     44  
13.13
  WAIVER     44  
13.14
  RIGTHS OF THIRD PARTIES     45  
13.15
  SEVERABILITY     45  
13.16
  COUNTERPARTS     45  

 

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LICENSE AGREEMENT
     THIS LICENSE AGREEMENT (the “Agreement”) is dated as of December 18, 2007
(the “Signing Date") by and between Idera Pharmaceuticals, Inc., a corporation
organized under the laws of Delaware having its place of business at 167 Sidney
Street, Cambridge, MA 02139, United States (“Licensor”), and Merck KGaA, a
general partnership limited by shares organized under German law having a place
of business at Frankfurter Strasse 250, 64293 Darmstadt, Germany (“Merck”).
Licensor and Merck may be referred to herein as a “Party” or, collectively, as
“Parties.”
RECITALS:
     Whereas, Licensor is a pharmaceutical company engaged in the discovery and
development of modulators of toll-like receptors (“TLRs”), including the
Compounds (as hereinafter defined);
     Whereas, Merck, through its division Merck Serono for innovative
pharmaceuticals, and its Affiliates (as hereinafter defined) are engaged in the
research, development and commercialization of pharmaceuticals products, and
Merck is interested in developing and commercializing products comprising the
Compounds; and
     Whereas, Merck desires to license from Licensor and Licensor wishes to
license to Merck, on an exclusive, worldwide basis, the right to develop and
commercialize products comprising the Compounds for certain Indications (as
hereinafter defined) and therapeutic areas.
     Now, Therefore, in consideration of the various promises and undertakings
set forth herein, the Parties agree as follows:
Article 1
DEFINITIONS
     Unless otherwise specifically provided herein, the following terms shall
have the following meanings:
     1.1 “Adverse Event” means any serious untoward medical occurrence in a
patient or subject who is administered a Licensed Product, but only if and to
the extent that such serious untoward medical occurrence is required under
applicable Laws to be reported to the FDA or any other Regulatory Authority.
     1.2 “Affiliate” shall mean, in relation to any Party: (a) any company or
other entity in which more than fifty percent (50%) of the voting rights, shares
or other equity interest are owned and controlled directly or indirectly by that
Party; and/or (b) any individual, company or other entity which owns and
controls directly or indirectly more than fifty percent (50%) of the voting
rights, shares or other equity interest of that Party; and/or (c) any
individual, company or other entity which has the power to direct or cause
direction of the management and policies of that Party (whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise); and/or (d) any company or other entity in which more than fifty

 

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percent (50%) of the voting rights, shares or other equity interest are owned
and controlled directly or indirectly by an individual or entity responding to
the definition of (c) above.
     1.3 “Calendar Quarter” means each three (3) month period commencing
January 1, April 1, July 1 or October 1.
     1.4 “Calendar Year” means the period beginning on the 1st of January and
ending on the 31st of December of the same year.
     1.5 “Clinical Trial” means a clinical trial in human subjects that has been
approved by a Regulatory Authority and is designed to measure the safety and/or
efficacy of a Licensed Product. Clinical Trials shall include Phase I Trials,
Phase I/II Trials, Phase II Trials and Phase III Trials.
     1.6 “Change of Control” means (a) a transaction or series of related
transactions that results in the sale or other disposition of all or
substantially all of a Party’s assets; or (b) a merger or consolidation in which
a Party is not the surviving corporation or in which, if a Party is the
surviving corporation, the shareholders of such Party immediately prior to the
consummation of such merger or consolidation do not, immediately after
consummation of such merger or consolidation, own stock or other securities of
the Party that possess a majority of the voting power of all of the Party’s
outstanding stock and other securities and the power to elect a majority of the
members of the Party’s board of directors; or (c) a transaction or series of
related transactions (which may include without limitation a tender offer for a
Party’s stock or the issuance, sale or exchange of stock of a Party) if the
shareholders of such Party immediately prior to the initial such transaction do
not, immediately after consummation of such transaction or any of such related
transactions, own stock or other securities of the Party that possess a majority
of the voting power of all of the Party’s outstanding stock and other securities
and the power to elect a majority of the members of the Party’s board of
directors.
     1.7 “Combination Product” means a Licensed Product containing one or more
Compounds and/or Follow-On Compounds together, in one package or formulated into
one product, with one or more other active ingredients.
     1.8 “Commercialization” or “Commercialize” means any and all activities
undertaken after Regulatory Approval of an NDA for a particular Licensed Product
and that relate to the marketing, promoting, distributing, importing for sale,
offering for sale, and selling of the Licensed Product, and interacting with
Regulatory Authorities regarding the foregoing. Commercialization shall also
include Phase IV Studies.
     1.9 “Commercially Reasonable Efforts” means, (a) with respect to the
efforts to be expended by any Party with respect to any objective, such
reasonable, diligent, and good faith efforts as such Party would normally use to
accomplish a similar objective under similar circumstances, and (b) with respect
to any objective relating to Development or Commercialization of a Licensed
Product by Merck, the application by Merck of diligent efforts and resources to
fulfill the obligation in issue where it is commercially viable to do so,
consistent with the usual practice followed by Merck for a product at a similar
stage in its product life as the Licensed Product and having profit potential
and strategic value comparable to that of the

 

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Licensed Product, taking into account, without limitation, scientific,
development, technical, commercial and regulatory factors, target product
profiles, product labeling, past performance, the regulatory environment and
competitive market conditions in the therapeutic area, safety and efficacy of a
subject product, the strength of its proprietary position and such other factors
as Merck may reasonably consider, all based on conditions then prevailing.
Commercially Reasonable Efforts will not mean that Merck commits that it will
actually accomplish the applicable task.
     1.10 “Competing Product” means any TLR-9 agonist compound developed by
Licensor for use in the Field that (a) stimulates TLR-9, or (b) stimulates the
TLR-9-mediated immune response through direct interaction with proteins that are
primarily involved in the TLR-9 intracellular signaling pathway.
     1.11 “Compound(s)” means (a) the TLR-9 agonist known as IMO-2055, (b) the
TLR-9 agonist known as IMO-2125, (c) any [**] (all described together in this
clause (c) hereinafter “Compound Improvements”), (d) any [**]. The molecular
structures of IMO-2055 and IMO-2125 are set forth on Schedule 1.11.
     1.12 “Compulsory License” means a compulsory license under Licensor
Technology obtained by a Third Party through the order, decree, or grant of a
competent Governmental Body or court, authorizing such Third Party to develop,
make, have made, use, sell, offer to sell or import a Licensed Product in any
country in the Field in the Territory.
     1.13 “Confidential Information” of a Party means such Party’s confidential
information relating to its business, operations and products, including but not
limited to, any technical information, Know-How, trade secrets, or inventions
(whether patentable or not) that it discloses to the other Party under this
Agreement.
     1.14 “Controlled” means, with respect to (a) Patent Rights, (b) Know-How or
(c) biological, chemical or physical material, that the Party or one of its
Owned Affiliates owns or has a license or sublicense to such right, item, or
material (or in the case of material, has the right to physical possession of
such material) and has the ability to grant a license or sublicense to, or
assign its right, title and interest in and to, such right, item or material as
provided for in this Agreement without violating the terms of any agreement or
other arrangement with any Third Party. For purposes of this Agreement,
inventions or discoveries (whether or not patentable) made jointly by employees
or others acting on behalf of Licensor together with employees or others acting
on behalf of Merck shall be deemed to be Controlled by both Parties. As used in
this Section 1.14 “Owned Affiliate” means any Affiliate as to which (i) the
relevant Party is the beneficial owner of at least fifty percent (50%) of the
voting share capital, and/or (ii) the relevant Party has the ability to control
the policies of (or to control the hiring and firing of the management who
determine the policies of) through a voting agreement or other contract.
     1.15 “Cover”, “Covering” or “Covered” means, with respect to a Licensed
Product, that the making or having made, using, selling, offering for sale or
importing of such Licensed Product would, but for ownership of, or a license
granted to, the relevant Patent Rights, infringe a Valid Claim of the relevant
Patent Rights in the country in which the activity occurs.

 

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     1.16 “Development” or “Develop” means, with respect to a Licensed Product,
the performance of all pre-clinical and clinical development (including, without
limitation, toxicology, pharmacology, test method development and stability
testing, process development, formulation development, quality control
development, statistical analysis, Clinical Trials (excluding post-Regulatory
Approval of an NDA Clinical Trials), manufacturing and regulatory activities
that are required to obtain Regulatory Approval of such Licensed Product in the
Field in the Territory under this Agreement.
     1.17 “Development Costs” means those Out-Of-Pocket Expenses incurred by
Licensor after the Effective Date that are directly and solely attributable to
the achievement of work or activities performed by or on behalf of Licensor
after the Effective Date toward the completion of the On-Going Trials.
     1.18 “Effective Date” means, (a) if HSR Filings are not required under the
HSR Act with respect to the transactions contemplated by this Agreement, the
Signing Date or (b) if HSR Filings are required under the HSR Act with respect
to the transactions contemplated by this Agreement, the HSR Clearance Date.
     1.19 “Euros” or “€” means the lawful currency of the Member States of the
European Union that adopt the single currency in accordance with the relevant
European Union Treaties.
     1.20 “EMEA” means the European Medicines Agency or any successor agency.
     1.21 “FDA” means the United States Food and Drug Administration, or a
successor federal agency thereto.
     1.22 “Field” means prevention, treatment, cure and/or delay of the onset or
progression of cancer in humans. The Field shall specifically include the use of
Licensed Product as a monotherapy product or as a Combination Product, whereby
the latter shall include, but not be limited to, the combination of the Licensed
Product with therapeutic monoclonal antibodies, including those labeled or
tagged, other therapeutic recombinant proteins, other biologically active
nucleic acids or derivatives thereof (excluding DNA vaccines), small molecule
chemical entities and irradiation. The Field excludes the use of any Compound,
Follow-On Compound and/or Licensed Product as an adjuvant contained in or
administered in conjunction with any prophylactic and/or therapeutic vaccine for
the prevention and/or treatment of any type of cancer, including (for purposes
of clarity) the prevention and/or treatment of viruses that are considered
precursors to cancer (a “Cancer Vaccine”); provided that [**].
     1.23 “First Commercial Sale” means, with respect to a Licensed Product in
any country, the first commercial transfer or disposition for value of such
Licensed Product giving rise to Net Sales in such country to a Third Party by
Merck, an Affiliate of Merck or a Sublicensee.
     1.24 “Follow-On Compound(s)” means (a) any of the [**] TLR-9 agonists
Covered by the Licensor Patents that Licensor shall offer to Merck pursuant to
Section 3.6 below, (b) any [**], (all described together in this clause
(b) hereinafter “Follow-On Compound Improvements”), and (c) any [**].
Notwithstanding the foregoing, for purposes of Sections 1.58 and 5.4, a
Follow-On Compound shall not cease to be a Follow-On Compound upon

 

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expiration of the last Licensor Patent Covering such Follow-On Compound. The
[**] TLR-9 agonists identified in clause (a) shall meet the criteria identified
on Schedule 1.24.
     1.25 “Governmental Body” means any: (a) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; (c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or entity and any court or other
tribunal); (d) multi-national or supranational organization or body; or
(e) individual, entity, or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police, military
or taxing authority or power of any nature.
     1.26 “Improvement(s)” means Compound Improvement(s) and Follow-On Compound
Improvement(s).
     1.27 “Indication” means a generally acknowledged disease or condition, a
significant manifestation of a disease or condition, or symptoms associated with
a disease or condition or a risk for a disease or condition. For the avoidance
of doubt, all variants of a single disease or condition (whether classified by
severity or otherwise) shall be treated as the same Indication.
     1.28 “Initiation” of a Clinical Trial means the first dosing of the first
patient or subject in such Clinical Trial.
     1.29 “IND” means an investigational new drug application filed with the FDA
or the equivalent application or filing filed with any equivalent agency or
Governmental Body outside the United States (including any supra-national entity
such as in the European Union) for approval to commence Clinical Trials in such
jurisdiction, and including all regulations at 21 CFR §312 et seq. and
equivalent foreign regulations.
     1.30 “Joint Patent(s)” means any Patent Right describing or claiming a
Joint Invention.
     1.31 “Know-How” means any scientific or technical information, results and
data of any type whatsoever, in any tangible or intangible form whatsoever, that
is not in the public domain or otherwise publicly known, including, without
limitation, discoveries, inventions, trade secrets, databases, practices,
protocols, regulatory filings, methods, processes, techniques, biological and
other materials, reagents, specifications, formulations, formulae, data
(including pharmacological, biological, chemical, toxicological and clinical
information) analytical, quality control, and stability data, studies and
procedures), and manufacturing process and development information, results and
data, whether or not patentable.
     1.32 “Knowledge” means, with respect to a matter that is the subject of a
given representation, or warranty of Licensor, the knowledge, information or
belief that any officer or director level employee (other than a member of the
board of directors) of Licensor, or such other employee of Licensor who would
reasonably be expected to have knowledge of the matter in question, has, or
should reasonably be expected to have, after making reasonable inquiry into the
relevant subject matter. “Knowingly” means with Knowledge.

 

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     1.33 “Label” means the specific label approved by the Regulatory Authority
or pursued in clinical Development with respect to a Compound, Follow-On
Compound or Licensed Product, whether within an Indication or a separate
Indication.
     1.34 “Law” or “Laws” means all applicable laws, statutes, rules,
regulations, ordinances and other pronouncements having the binding effect of
law of any Governmental Body.
     1.35 “Licensed Product” means any pharmaceutical product, including any
formulation thereof, containing or comprising any Compound or Follow-On
Compound.
     1.36 “Licensor Know-How” means all Know-How that is Controlled by Licensor
as of the Signing Date or thereafter during the Term and is necessary or useful
for the research, Development, manufacture, use, or Commercialization of any
Compound or Follow-On Compound in the Field.
     1.37 “Licensor Materials” means the quantities of Compounds and Follow-On
Compounds identified on Schedule 1.37.
     1.38 “Licensor Patents” means all Patent Rights, including but not limited
to the Patent Rights set forth on Schedule 1.38 and Licensor’s interest in Joint
Patents, that are Controlled by Licensor as of the Execution Date or during the
Term and that are necessary or useful (but with respect to the “usefulness of
Licensor Patents” only those that are not licensed in by Licensor after the
Signing Date, unless the Licensor agrees otherwise) for the research,
Development, manufacture, use, or Commercialization of Compounds or Follow-On
Compounds in the Field. Schedule 1.38 shall be updated from time to time during
the Term.
     1.39 “Licensor Technology” means the Licensor Patents, Licensor’s interest
in Joint Patents, the Licensor Know-How and the Licensor Materials.
     1.40 “Major EU Country(ies)” means France, Germany, Italy, Spain and/or the
United Kingdom.
     1.41 “Merck Patents” means all Patent Rights, that are Controlled by Merck
as of the Signing Date or during the Term, and, for greater certainty, shall
include Patent Rights claiming Merck’s Sole Inventions.
     1.42 “Merck Competitor” means any company that (itself or through an
Affiliate) markets, sells or is developing, a product that is, or could
reasonably be expected to be, in competition with any product that Merck (itself
or through an Affiliate) markets, sells or is developing.
     1.43 “Merck & Co. Agreement” means the Exclusive License and Research
Collaboration Agreement by and between Merck & Co., Inc. and Idera
Pharmaceuticals, Inc. dated December 8, 2006, as amended from time to time.
     1.44 “NDA” means a New Drug Application filed pursuant to the requirements
of the FDA, as more fully defined in U.S. statutory provisions 21 CFR §314.3 et
seq., a Biologics

 

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License Application filed pursuant to the requirements of the FDA, as more fully
defined in U.S. statutory provision 21 CFR §601, and any equivalent application
filed in any country in the Territory, together, in each case, with all
additions, deletions, supplements or variations thereto.
     1.45 “NDA Acceptance” means acceptance for filing by the relevant
Regulatory Authority of an NDA for the Licensed Product.
     1.46 “Net Sales” means the gross amounts invoiced by Merck, its Affiliates
and Sublicensees for sales of a Licensed Product to independent or unaffiliated
Third Party purchasers of such Licensed Product, less the following deductions
with respect to such sales to the extent that such amounts are either included
in the billing as a line item as part of the gross amount invoiced, or otherwise
documented in accordance with IFRS to be specifically attributable to actual
sales of a Licensed Product, and incurred by Merck, its Affiliates and
Sublicensees consistent with usual and customary practices for their products
generally: (i) trade discounts, including trade, cash and quantity discounts, or
rebates, credits or refunds; (ii) allowances or credits actually granted upon
claims, returns or rejections of products, including recalls, regardless of the
party requesting such recall; (iii) credits and allowances for wastage
replacement and bad debts; (iv) charges included in the gross sales price for
freight, insurance, transportation, postage, handling, insurance and any other
charges relating to the sale, transportation delivery or return of the Licensed
Product; (v) customs duties, sales, excise and use taxes and any other
governmental charges (including value added tax) actually paid in connection
with the transportation, distribution, use or sale of the Licensed Product (but
excluding what is commonly known as income taxes); (vi) rebates and chargebacks
or retroactive price reductions made to federal, state, or local governments (or
their agencies), or any Third Party payor, administrator or contractee,
including managed health organizations; (vii) payments to Third Party
wholesalers pursuant to inventory management agreements; and (viii) the actual
cost of goods of the delivery device that is included in the invoiced amount and
is used for administration of the Licensed Product.
     If a Licensed Product is sold in the form of a Combination Product, then
for the purpose of calculating royalties owed under this Agreement on sales of
the Combination Product, Net Sales shall be calculated on a country-by-country
basis as follows:
          (a) first, Merck shall determine the actual Net Sales of such
Combination Product (calculated using the above described deductions) and then
such amount shall be multiplied by the fraction A/(A+B), where A equals the
invoice price of such Licensed Product sold separately in finished form and B
equals the invoice price of the relevant other product(s) sold separately in
finished form, in each case in the relevant country in which sales were made,
or, if separate sales were not made for both such Licensed Product and such
other product(s) in such country but were made in the US and/or a Major EU
Country(-ies), in the US and/or such Major EU Country(-ies) in which both such
Licensed Product and such other product(s) were sold separately during the same
royalty reporting period;
          (b) In the event that the Licensed Product is sold separately in
finished form and the relevant other product(s) is not, and subsection (a) above
does not apply, then Net Sales shall be determined by multiplying the Net Sales
of the Combination Product in the applicable country by the fraction (A/C),
where A is the invoice price of the Licensed Product

 

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when sold separately in finished form and C equals the invoice price of such
Combination Product in the applicable country;
          (c) In the event that the relevant other product(s) is sold separately
in finished form and the Licensed Product is not, and neither subsection (a) nor
subsection (b) above applies, then Net Sales shall be determined by multiplying
the Net Sales of the Combination Product in the applicable country by the
fraction (D/(D+E)), where D is the actual cost of goods incurred by Merck or any
of its Affiliates or Sublicensees, as applicable, in connection with the
Licensed Product in the applicable country and E is the actual costs of goods
incurred by Merck or any of its Affiliates or Sublicensees, as applicable in
connection with such Combination Product in the applicable country; and
          (d) In the event that no separate sale of either Licensed Product or
the relevant other product(s) is made during the applicable royalty reporting
period in the relevant country in which the sale of the Combination Product was
made, and neither subsection (a) nor subsection (b) above applies, then Net
Sales shall be determined by multiplying the Net Sales of the Combination
Product in the applicable country by a fraction (D/(D+E)), where D is the actual
cost of goods incurred by Merck or any of its Affiliates or Sublicensees, as
applicable, in connection with the Licensed Product in the applicable country
and E is the actual costs of goods incurred by Merck or any of its Affiliates or
Sublicensees, as applicable in connection with such Combination Product in the
applicable country.
     For clarification, sale of Licensed Products by Merck, its Affiliates or
Sublicensees to another of these entities for resale by such entity to a Third
Party shall not be deemed a sale for purposes of “Net Sales” hereunder. Further,
transfers or dispositions of the Licensed Products (i) in connection with
patient assistance programs, (ii) for charitable or promotional purposes, (iii)
for preclinical, clinical, regulatory or governmental purposes or under
so-called “named patient” or other limited access programs, (iv) for use in any
tests or studies reasonably necessary to comply with any Law, regulation or
request by a regulatory or Regulatory Authority shall not, in each case, be
deemed “Net Sales.”
     1.47 “Out-of-Pocket Expenses” means expenses actually paid by a Party to
any Third Party which is either (i) not an Affiliate of such Party, or (ii) is
an Affiliate of such Party where such payment is limited to reimbursing such
Affiliate with such expenses actually paid by such Affiliate to a Third Party
which is not an Affiliate.
     1.48 “Patent Right” means: (a) an issued or granted patent, including any
extension, supplemental protection certificate, registration, confirmation,
reissue, reexamination, extension or renewal thereof; (b) a pending patent
application, including any continuation, divisional, continuation-in-part,
substitute or provisional application thereof; and (c) all counterparts or
foreign equivalents of any of the foregoing issued by or filed in any country or
other jurisdiction.
     1.49 “Person” means any natural person, corporation, firm, business trust,
joint venture, association, organization, company, partnership or other business
entity, or any government or agency or political subdivision thereof.

 

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     1.50 “Phase I Trial” means a clinical trial in which the Licensed Product
is administered to human subjects in the United States that would satisfy the
requirements of U.S. statutory provision 21 CFR §312.21(a), or an equivalent
clinical trial in any country outside the United States that would satisfy the
requirements applicable to such clinical trial in such country.
     1.51 “Phase I/II Trial” means (a) a Phase I Clinical Trial and a Phase II
Clinical Trial, collectively or (b) a single Clinical Trial meeting the
requirements of a Phase I Clinical Trial and a Phase II Clinical Trial.
     1.52 “Phase II Trial” means a clinical trial of the Licensed Product in
human patients in the United States that would satisfy the requirements of U.S.
statutory provision 21 CFR §312.21(b) or an equivalent clinical trial in any
country outside the United States that would satisfy the requirements applicable
to such clinical trial in such country.
     1.53 “Phase III Trial” means a human clinical trial of the Licensed Product
in the United States that would satisfy the requirements of U.S. statutory
provision 21 CFR §312.21(c) or an equivalent clinical trial in any country
outside the United States that would satisfy the requirements applicable to such
clinical trial in such country.
     1.54 “Phase IV Studies” means a study or data collection effort for the
Licensed Product that is initiated in the Territory after receipt of Regulatory
Approval for the Licensed Product.
     1.55 “Price Approvals” means in those countries in the Territory where
Regulatory Authorities approve or determine pricing and/or pricing reimbursement
for pharmaceutical products, such approval or determination.
     1.56 “Regulatory Authority” means (a) the FDA, (b) the EMEA or the European
Commission, or (c) any regulatory body with similar regulatory authority over
pharmaceutical or biotechnology products in any other jurisdiction anywhere in
the world.
     1.57 “Regulatory Approval” means any and all approvals, licenses,
registrations, or authorizations of the relevant Regulatory Authority, including
Price Approvals, legally necessary for the Development, manufacture, use,
storage, import, transport or Commercialization of the Licensed Product in a
particular country or jurisdiction.
     1.58 “Royalty Term” means, on a Licensed Product-by-Licensed Product and
country-by-country basis, the period from the First Commercial Sale of a
Licensed Product in such country until the later of (a) the last date on which
the Licensed Product is Covered by a Valid Claim within the Licensor Patents in
such country, and (b) ten (10) years after the First Commercial Sale of such
Licensed Product in such country.
     1.59 “Sublicensee” means a Person other than an Affiliate of Merck to which
Merck (or its Affiliate) has, pursuant to Section 2.2, granted sublicense rights
under any of the license rights granted under Section 2.1.
     1.60 “Territory” means all countries of the world.

 

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     1.61 “Third Party” means any Person other than Licensor, Merck or
Affiliates of either of them.
     1.62 “Third Party License Agreement” means any agreement entered into with
a Third Party, by Merck or its Affiliates or Sublicensees, or any amendment or
supplement thereto, whereby royalties, fees or other payments are to be made to
the Third Party in connection with the grant of rights under intellectual
property rights owned or controlled by such Third Party that Cover in the Field
(i) the composition of matter, (ii) method of use, or (iii) manufacture of a
Compound or Follow-On Compound, but with regard to (iii) only those techniques
and processes that are used in manufacturing of the Compound or Follow-On
Compound as of the Signing Date.
     1.63 “TLR-9” means the human toll-like receptor 9, as described in [**].
     1.64 “Valid Claim” means a claim of an issued and unexpired patent which
has not lapsed or been revoked, abandoned or held unenforceable or invalid by a
final decision of a court or governmental or supra-governmental agency of
competent jurisdiction, unappealable or unappealed within the time allowed for
appeal, and which has not been disclaimed, denied or admitted to be invalid or
unenforceable through reissue, reexamination or disclaimer or otherwise.
     1.65 Other Terms. The definition of each of the following terms is set
forth in the section of the Agreement indicated below:
     “Act” has the meaning set forth in Section 4.3(b).
     “Action” has the meaning set forth in Section 6.6(b).
     “Cancer Vaccine” has the meaning set forth in Section 1.22.
     “Compound Improvements” has the meaning set forth in Section 1.11.
     "Development Plan” has the meaning set forth in Section 3.1.
     "Development Support” has the meaning set forth in Section 3.4.
     “DOJ” has the meaning set forth in Section 12.3(a).
     "Executive Officers” has the meaning set forth in Section 11.2.
     “Follow-On Compound Improvements” has the meaning set forth in
Section 1.24(b).
     “FTC” has the meaning set forth in Section 12.3(b).
     “HSR Act” has the meaning set forth in Section 12.3(c).
     “HSR Clearance” has the meaning set forth in Section 12.3(d).
     “HSR Clearance Date” has the meaning set forth in Section 12.3(e).

 

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     “HSR Filings” has the meaning set forth in Section 12.3(f).
     “IFRS” has the meaning set forth in Section 13.6.
     “Joint Inventions” has the meaning set forth in Section 6.3.
     “JRC” has the meaning set forth in Section 3.5(a).
     “Licensor Indemnitees” has the meaning set forth in Section 9.1.
     “Manufacturing Support” has the meaning set forth in Section 3.8.
     “Manufacturing Technology Transfer” has the meaning set forth in
Section 2.4.
     “Merck Indemnitees” has the meaning set forth in Section 9.2.
     “Merck Trial Monitor” has the meaning set forth in Section 3.2.
     “On-Going Trials” has the meaning set forth in Section 3.2.
     “Owned Affiliate” has the meaning set forth in Section 1.14.
     “Sole Invention(s)” has the meaning set forth in Section 6.3.
     “Term” has the meaning set forth in Section 10.1.
     “Termination Date” has the meaning set forth in Section 10.1.
     “TLR(s)” has the meaning set forth in the Preamble.
     “Third Party Action” has the meaning set forth in Section 6.7(a).
Article 2
LICENSES AND OTHER RIGHTS
     2.1 Grant of License to Merck. Subject to the terms and conditions of this
Agreement, Licensor hereby grants to Merck an exclusive (even as to Licensor),
worldwide, royalty-bearing right and license (with the right to sublicense
subject to the provisions of Section 2.2) under the Licensor Technology to
research, Develop, make, have made, import, export, use and Commercialize the
Licensed Products in the Field in the Territory and create Improvements;
provided that Merck, its Affiliates and Sublicensees shall have no right to, and
Merck, its Affiliates and Sublicensees shall not, (a) alter the core structure
of any Compound or Follow-On Compound, or (b) use the Licensor Technology to
create any immunomodulatory oligonucleotide that is the same or substantially
structurally equivalent to any Compound or Follow-On Compound or that is Covered
by the Licensor Patents. For purposes of clarity, the license granted herein
shall in no event include any right or license to, and Merck and its Affiliates
and Sublicensees shall not, research, Develop, make or have made, import,
export, use or Commercialize any Compound, Follow-On Compound or Licensed
Product outside the Field,

 

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including for any use of a Compound, Follow-On Compound or Licensed Product as
an adjuvant contained in or administered in conjunction with any Cancer Vaccine.
     2.2 Grant of Sublicense by Merck. Merck shall have the right to grant
sublicenses under the licenses granted in Sections 2.1 and 2.2 subject to the
following conditions:
          (a) the granting by Merck of a sublicense shall not relieve Merck of
any of its obligations hereunder;
          (b) the Sublicensee agrees to be bound by all the relevant terms of
this Agreement, including Sections 2.7, 2.8, 3.9, 5.7, 5.8, 5.9 and 5.11;
          (c) Merck shall provide Licensor with a copy of the executed
sublicense agreement within ten (10) days after execution thereof; provided that
all such terms of such sublicense agreement that are not material to Licensor’s
assessment of whether the sublicense complies with the terms of this Section 2.2
may be redacted by Merck;
          (d) Merck shall procure that each of its Sublicensees complies with,
and Merck additionally guarantees to Licensor the compliance by each of its
Sublicensees with, all relevant restrictions and limitations in this Agreement;
and
          (e) in the event of a material default by any Sublicensee under a
sublicense agreement Merck will promptly inform Licensor and take such action,
after consultation with Licensor, that in Merck’s reasonable business judgment
will address such default.
     2.3 Technology Transfer. As soon as reasonably practicable after the
Effective Date, and in any event within thirty (30) days after the Effective
Date, (a) Licensor will transfer to Merck, at Licensor’s cost and expense, the
Licensor Know-How set forth on Schedule 2.3, and (b) Merck and Licensor shall
use Commercially Reasonable Efforts to establish mechanisms to allow Merck to
obtain the benefit of all applications and filings made by Licensor with any
Regulatory Authority with respect to the Compounds and Licensed Products
containing Compounds, including any IND and orphan drug designations, in each
case that are related to the rights and licenses granted hereunder to Merck in
the Field (it being understood that such mechanisms may involve Licensor
continuing to hold any such IND, subject to the provisions of the
pharmacovigilance agreement to be negotiated pursuant to Section 4.3(a));
provided that Idera shall assign to Merck all applications and filings made by
Licensor with any Regulatory Authority with respect to Follow-On Compounds and
Licensed Products containing Follow-On Compounds, including any IND and orphan
drug designations.
     2.4 Manufacturing Technology Transfer. As soon as reasonably practicable
after the Effective Date, but in no event later than thirty (30) days following
the Effective Date, Licensor will transfer to Merck, at Licensor’s cost and
expense, a copy of the Licensor Know-How and the Licensor Materials set forth in
item I of Schedule 2.4. The Parties will use Commercially Reasonable Efforts to
generate and transfer to Merck, as soon as reasonably practicable after the
Effective Date, a copy of the Licensor Know-How and the Licensor Materials set
forth in Item II of Schedule 2.4. The technology transfer described in this
Section 2.4 shall be referred to as the “Manufacturing Technology Transfer”.

 

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     2.5 Procedures for Technology Transfer. The technology transfers set forth
in Section 2.3 and Section 2.4 shall occur in an orderly fashion and in a manner
such that the value, usefulness and confidentiality of the transferred Licensor
Know-How and Licensor Materials are preserved in all material respects.
     2.6 Merck Exclusivity. During the Term of this Agreement, Licensor and its
Affiliates shall not develop, make, have made, sell, or have sold, any Competing
Product for use in the Field nor enter into any relationship with any Third
Party granting such Third Party any such rights; provided that, with respect to
Affiliates other than Owned Affiliates, the foregoing restriction shall be
limited as follows: (a) the definition of Competing Product shall be limited to
agonist compounds that stimulate TLR-9 and are developed for use in the Field,
(b) such restriction shall not apply to non-clinical research activities
conducted by such Affiliates that are not Owned Affiliates, and (c) such
restriction shall only apply from the Effective Date through the fifth (5th)
anniversary of the Effective Date. In addition, during the Term of this
Agreement, Licensor and its Affiliates shall not develop, make, have made, sell,
or have sold, IMO-2055, whether as monotherapy or as combination therapy, for
use in or outside the Field, nor enter into any relationship with any Third
Party granting such Third Party any such rights, provided however that the
rights granted to Merck & Co. under the Merck & Co. Agreement at the Signing
Date and Licensor’s performance under the Merck & Co. Agreement shall not
constitute a violation of this Section 2.6, and nothing in this Section 2.6
shall prevent Licensor from exploiting such rights or granting such rights to
another Third Party within the same scope provided therein should the Merck &
Co. Agreement expire or terminate. Further, during the Term of this Agreement,
Licensor and its Affiliates shall not conduct a Phase III Trial of IMO-2125 as
monotherapy, or Commercialize IMO-2125 as monotherapy, in or outside the Field,
nor enter into any relationship with any Third Party granting such Third Party
any such rights. The aforementioned restrictions shall remain in effect in the
event of a Change of Control of Licensor involving a Merck Competitor, and,
subject to the proviso in the first sentence of this Section 2.6, shall apply to
the Merck Competitor who is the successor to, or assignee of, Licensor as a
result of such Change of Control.
     2.7 No Implied Licenses; Retained Rights. Except as specifically set forth
in this Agreement, neither Party shall acquire any license or other intellectual
property interest, by implication or otherwise, in any information or materials
disclosed to it under this Agreement or under any patent applications, patents
or other intellectual property rights Controlled by the other Party or its
Affiliates. Merck acknowledges that Licensor has (a) retained the right to
research, Develop, make and have made, import, export, use and Commercialize
Compounds outside the Field, and to grant such rights to others, and (b) prior
to the Signing Date Licensor has granted certain rights to Merck & Co., Inc. to
research, Develop, make and have made, import, export, use and Commercialize
Compounds outside the Field.
     2.8 Limitations on Use of Compounds and Follow-On Compounds. Merck
understands and agrees that the Compounds and Follow-on Compounds are only to be
used for the research, Development, manufacture or Commercialization of
Compounds, Follow-On Compounds and Licensed Products in the Field in accordance
with this Agreement.

 

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Article 3
PRODUCT DEVELOPMENT AND COMMERCIALIZATION;
REGULATORY MATTERS
     3.1 Development of the Licensed Products by Merck. Merck shall have the
exclusive right, at its own cost, to research and Develop the Licensed Products
and to conduct (either itself or through its Affiliates, agents, subcontractors
and/or Sublicensees) all Clinical Trials and non-clinical studies Merck believes
appropriate to obtain Regulatory Approval for the Licensed Products in any
Indication in the Field. The Development of each Licensed Product in the Field
shall be governed by a development plan that describes the proposed overall
program of Development (the “Development Plan”), which Development Plan will be
updated by Merck at least [**]. Subject to the terms of this Agreement,
including Section 3.9, Merck shall have the sole right and responsibility for
preparing the Development Plan for each Licensed Product in the Field, and shall
in all events have the sole decision-making authority regarding each Development
Plan and the Development of each Licensed Product in the Field, including the
determination of which Indications in the Field to pursue with respect to each
such Licensed Product.
     3.2 Clinical Trials On-Going as of Signing Date. Following the Effective
Date (a) Licensor shall continue, and shall use Commercially Reasonable Efforts
to complete, (i) [**], and (ii) [**]; and (b) the Parties shall use Commercially
Reasonable Efforts to transfer to Merck as soon as is reasonably practicable
responsibility for the conduct of (i) [**]; and (ii) [**] (all of the Clinical
Trials in (a) and (b), collectively, the “Ongoing Trials”). Each Party shall, in
conducting its respective activities with respect to the On-Going Trials,
conduct its activities in a good scientific manner and in compliance with all
applicable Laws, and cGCP and cGLP standards, as applicable. Merck shall, within
thirty (30) days after the Effective Date, appoint a representative that shall
be an active member of the Licensor team responsible for the conduct or transfer
to Merck of the On-Going Trials (the “Merck Trial Monitor”) and Licensor hereby
accepts that the Merck Trial Monitor shall have such role in the conduct or
transfer to Merck of the On-Going Trials. The Merck Trial Monitor shall in
particular: (A) be informed by Licensor, on a periodic basis as required by the
Merck Trial Monitor, of all events and activities related to the On-Going
Trials, (B) take part in discussions and interactions with the sites and the
Regulatory Authorities for the On-Going Trials and shall have the right to make
direct contact with such sites and Authorities, provided it informs Licensor
thereof; and (C) take part in all decisions related to the On-Going Trials and
Licensor hereby accepts that no material decisions relating to the On-Going
Trials shall be taken without the prior written consent of the Merck Trial
Monitor (which consent, if given, shall be provided in a timely manner so as not
to delay the conduct or transfer of the On-Going Trials). Licensor shall, within
thirty (30) days after the Effective Date, deliver to the Merck Trial Monitor
copies of all relevant materials, data and regulatory information (including all
INDs) related to the On-Going Trials, whether written or electronic, including
all relevant clinical safety and efficacy data and all regulatory data and
information related to the use and sale of the Licensed Product in the Field.
Within thirty (30) days after the end of each Calendar Quarter during the
conduct or transfer of the On-Going Trials, Licensor shall deliver to the Merck
Trial Monitor new materials, data and information in its possession relating to
the On-Going Trials, in an orderly fashion and in a manner such that
confidentiality in the delivered information is preserved in all material
respects.

 

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     3.3 Reimbursement of Development Costs. All Development Costs incurred by
Licensor after the Effective Date relating to the On-Going Trials shall be paid
by Merck in accordance with the budget set forth in Schedule 3.3 (the “Budget”).
Within forty-five (45) days after the end of each Calendar Quarter during the
conduct of the On-Going Trials by Licensor, Licensor shall submit an invoice to
Merck for the budgeted and approved Development Costs relating to the On-Going
Trials it incurred during such Calendar Quarter, setting forth in reasonable
detail such Development Costs. Following receipt of such written invoice, Merck
shall, within thirty (30) days after receipt of such written report, reimburse
Licensor those budgeted and approved Development Costs incurred by Licensor
relating to the On-Going Trials during such Calendar Quarter. For the avoidance
of doubt, Merck shall have no obligation to reimburse any Development Costs not
set forth in the Budget or otherwise approved in writing by Merck.
     3.4 Licensor Support in the Development. For a period of [**] starting from
Effective Date, Licensor shall make its employees that are knowledgeable on the
Compound or Follow-On Compound, its properties and functions, reasonably
available to Merck, at Licensor’s facilities, for scientific and technical
explanations, advice and support, that may reasonably be required by Merck,
relating to the Development and registration of the Compound, Follow-On Compound
and the Licensed Products (the “Development Support”). The Development Support
shall be provided by Licensor [**] during such first [**] following the
Effective Date. Thereafter, during the remaining [**] period, Merck shall
reimburse Licensor for Licensor’s reasonable Out-of-Pocket Expenses incurred in
providing the Development Support should Merck require any of such Development
Support, subject however to Licensor providing Merck with documented evidence of
such Out-of-Pocket Expenses having been incurred.
     3.5 Joint Research Committee.
          (a) Composition of the Joint Research Committee. The Parties shall
form a joint research committee (the “JRC”) comprised of two (2) representatives
of Merck and two (2) representatives of Licensor. Each Party shall name its JRC
representatives and notify the other Party of its JRC representatives promptly
following the Effective Date. Each Party may change its representatives to the
JRC from time to time, in its sole discretion, effective upon notice to the
other Party of such change. These representatives shall have appropriate
technical credentials, experience and knowledge. Additional representatives or
consultants may from time to time, by mutual consent of the Parties, be invited
to attend JRC meetings. The JRC shall be chaired by a representative of
Licensor, but shall function solely as a forum for exchanging certain
information and not as a decision-making body. Each Party shall bear its own
expenses related to the attendance at such meetings by its representatives.
          (b) Role of JRC. The JRC’s role as a forum for exchanging information
shall consist of (a) conferring regularly regarding Licensor Know-How relating
to Compounds or Follow-On Compounds, (b) conferring regularly regarding the
status of preclinical testing of Follow-On Compounds, (c) reviewing data
regarding Follow-On Compounds, and considering and advising on any technical
issues that arise with respect to Follow-On Compounds and (d) addressing such
other matters relating to Licensor’s provision of Follow-On Compounds pursuant
to Section 3.6 and Merck’s testing thereof as either Party may bring before the
JRC. The JRC shall not have any supervisory or decision making authority.
Licensor shall use

 

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Commercially Reasonable Efforts to incorporate guidance provided by Merck’s JRC
representatives regarding the desired properties of Follow-On Compounds in
synthesizing or otherwise identifying Follow-On Compounds to be delivered by
Licensor pursuant to Section 3.6 after such time as Licensor receives such
guidance.
          (c) Meetings. The JRC shall meet in accordance with a schedule
established by mutual written agreement of the Parties, but no less frequently
than [**] per Calendar Quarter during any period in which Licensor remains
obligated to provide Follow-On Compounds pursuant to Section 3.6, or in the
period thereafter, no less than [**] a year for as long as Merck is clinically
developing Compounds or Follow-On Compounds (including Phase IV Studies), with
the location for such meetings alternating between Licensor and Merck facilities
(or such other location as may be determined by the JRC). Alternatively, the JRC
may meet by means of teleconference, videoconference or other similar
communications equipment. Unless otherwise mutually agreed by the Parties, the
JRC shall disband and cease to meet once Merck no longer clinically develops
Compounds or Follow-On Compounds (including Phase IV Studies).
     3.6 Follow-On Compounds. Licensor shall provide Merck with [**] TLR-9
agonists for evaluation purposes within a period of [**] after the Effective
Date in accordance with the following schedule: (a) [**] of such Follow-On
Compounds will be provided by Licensor within [**] after the Effective Date,
(b) an additional [**] Follow-On Compounds shall be provided on or before [**]
after the Effective Date, (c) an additional [**] Follow-On Compounds shall be
provided on or before [**] after the Effective Date and (d) an additional [**]
Follow-On Compounds shall be provided on or before [**] after the Effective
Date. Merck shall have the right, for a period commencing on the Effective Date
and ending [**] after the last batch of Follow-On Compounds is delivered to
Merck pursuant to this Section 3.6, to select up to [**] of the [**] Follow-On
Compounds for further Development and Commercialization. Licensor shall transfer
to Merck, at Licensor’s reasonable cost and expense, data relating to such
Follow-On Compounds as set forth in Schedule 1.24. Merck shall make its election
in writing, and upon such election, (a) the Follow-On Compounds shall be made
part of Licensed Products, and be subject to the terms and conditions applying
to Licensed Products under this Agreement, and (b) the remaining [**] compounds
not selected by Merck shall no longer be considered Follow-On Compounds
hereunder. In addition, Licensor agrees that it shall not, either by itself,
through any of its Affiliates or through any Third Party, Develop and/or
Commercialize any of the Follow-On Compounds selected by Merck outside the
Field.
     3.7 Commercialization. Subject to the terms and conditions of this
Agreement, including Merck’s obligations under Section 3.9, Merck shall have the
sole authority and the exclusive right to Commercialize the Licensed Products in
the Field, itself or through one or more Affiliates or Third Parties selected by
Merck, and shall have the sole authority and responsibility in all matters
relating to the Commercialization of the Licensed Products in the Field.
     3.8 Manufacturing and Supply. Subject to the terms and conditions of this
Agreement, Merck shall have the exclusive right to manufacture the Compounds,
the Follow-On Compounds and the Licensed Products in the Field, itself or
through one or more Third Parties selected by Merck. Starting from the Effective
Date and for [**] thereafter, Licensor shall make

 

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its employees that are knowledgeable on the manufacture of the Compound, the
Follow-On Compound and the Licensed Product reasonably available to Merck, at
Licensor’s facilities, for scientific and technical explanations, advice and
support, that may reasonably be required by Merck, relating to the manufacture
of the Compound, the Follow-On Compound and the Licensed Products and the
Manufacturing Technology Transfer (the “Manufacturing Support”). The
Manufacturing Support shall be provided by Licensor [**] during the [**] period
following Effective Date. Merck shall reimburse Licensor for Licensor’s
Out-of-Pocket Expenses incurred in providing the Manufacturing Support during
the [**] period thereafter, subject to Licensor providing Merck with documented
evidence of such Out-of-Pocket Expenses having been incurred.
     3.9 Diligence by Merck. Subject to Licensor’s fulfillment of its
obligations under this Agreement, Merck shall use Commercially Reasonable
Efforts to Develop and, upon receipt of Regulatory Approval, Commercialize a
Licensed Product in the Field. Merck shall have the exclusive right to
determine, in its sole discretion, the launch strategy for such Licensed
Products, based on its exercise of Commercially Reasonable Efforts and the
availability of any necessary Third Party licenses or other rights. Activities
by Merck’s Affiliates and Sublicensees will be considered as Merck’s activities
under this Agreement for purposes of determining whether Merck has complied with
any obligation to use Commercially Reasonably Efforts.
     3.10 Annual Reporting. Merck shall, on each anniversary of the Signing
Date, provide Licensor with a written report summarizing in reasonable detail
its Development and, as applicable, Commercialization activities conducted
during the prior Calendar Year.
     3.11 Trademarks. As between Licensor and Merck, Merck shall have the sole
authority to select trademarks for the Licensed Products in the Field, and shall
own all such trademarks. Licensor hereby assigns to Merck all of its rights,
title and interest in and to the trademark IMOxine and agrees to transfer to
Merck any registrations therefor held by Licensor. Licensor shall execute any
confirmatory assignment necessary or desirable to further effect such assignment
and transfer upon request by Merck.
Article 4
REGULATORY MATTERS
     4.1 Regulatory Filings. As between Merck and Licensor, Merck shall own and
maintain all regulatory filings and Regulatory Approvals for the Licensed
Products in the Field, including all INDs and NDAs, except the [**] for [**] and
[**] for [**] which will be owned and maintained by Licensor. Licensor shall
provide reasonable assistance to Merck, its Affiliates and any Merck Sublicensee
in the preparation of and filing for any INDs, IND amendments or NDAs with
respect to Licensed Products for use in the Field. Such assistance shall
include, in particular, Licensor providing Merck with a complete electronic copy
of all relevant documentation submitted to the FDA in the context of [**] for
[**] and [**] for [**] necessary to enable Merck to submit its own IND for
IMO-2055 and IMO-2125 in the Field, and to allow Merck to cross-reference such
INDs held by Licensor.

 

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     4.2 Communications with Authorities. Merck (or one of its Affiliates or
Sublicensees) shall be responsible for and act as the sole point of contact for
communications with Regulatory Authorities in connection with the Development,
Commercialization, and manufacturing of Licensed Products in the Field after the
end of the communications relating to the Ongoing Trials that were initiated by
Licensor before the Signing Date. Following the Effective Date, Licensor shall
not initiate, with respect to any Licensed Product in the Field, any meetings or
contact with Regulatory Authorities without Merck’s prior written consent. To
the extent Licensor receives any written or oral communication from any
Regulatory Authority relating to a Licensed Product in the Field, Licensor shall
(i) refer such Regulatory Authority to Merck, and (ii) as soon as reasonably
practicable, notify Merck and provide Merck with a copy of any written
communication received by Licensor or, if applicable, complete and accurate
minutes of such oral communication.

 

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     4.3 Adverse Event Reporting.
          (a) The Parties agree to meet within [**] after the Effective Date to
commence negotiations of a more detailed pharmacovigilance agreement. Such
pharmacovigilance agreement shall provide for the exchange by the Parties of any
information of which a Party becomes aware in the Territory concerning any side
effect, injury, toxicity or sensitivity reaction, or any unexpected incident, in
or involving a subject or, in the case of non-clinical studies, an animal in a
toxicology study, and the seriousness thereof, whether or not determined to be
attributable to any Licensed Product, Compound or Follow-On-Compound
(hereinafter “Adverse Experience”), including information regarding Adverse
Experiences received by either Party from Third Parties. The Parties contemplate
that initially Licensor will be responsible for receiving and providing
information regarding Adverse Experiences from and to both Merck and Merck & Co.
relating to Compounds, subject to confidentiality and other legal obligations.
          (b) With respect to Adverse Experiences that are serious and
associated with the use of any Licensed Product, whether or not determined to be
attributable to any such Licensed Product (hereinafter “Serious Adverse
Experience”), (i) in the event Licensor receives a Serious Adverse Experience
report from any Third Party, Licensor shall notify Merck in writing within two
(2) calendar days of receipt of such report, and (ii) in the event a Serious
Adverse Experience report is to be generated by either Party, such Party shall
provide its report to the other within four (4) calendar days for death and life
threatening, and seven (7) calendar days for all other Serious Adverse
Experience reports.
          (c) With respect to INDs filed by Merck, Merck shall be responsible
for reporting to Regulatory Authorities any Adverse Events, whether in
non-clinical or clinical studies for or during commercialization of any Licensed
Product in the Field in compliance with the requirements of the United States
Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 321 et seq., the regulations
promulgated thereunder, and equivalent foreign Laws. It is understood that these
adverse experience reporting requirement provisions are based on the policies
and procedures of Merck and regulatory requirements.
          (d) The relevant information can be transmitted by e-mail, facsimile,
overnight courier or any other means the Parties agree in the separate
pharmacovigilance agreement.

     
Transmission to Licensor:
  Drug Safety
 
  c/o VP of Development Programs
 
  167 Sidney Street
 
  Cambridge, MA 02139
 
  Drug Safety Mailbox: [**]
 
  Facsimile: 617-679-5582

 

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Transmission to Merck:
  Global Drug Safety
 
  Frankfurter Straße 250
 
  64271 Darmstadt, Germany
 
  Drug Safety Mailbox: [**]
 
  Facsimile: 49-6151-72- 6914

Article 5
FINANCIAL PROVISIONS
     5.1 Initial Fee. In partial consideration of Licensor’s grant of the rights
and licenses to Merck under this Agreement, Merck shall make, or cause to be
made, to Licensor, not later than (a) thirty (30) days after the Effective Date
in the event that no HSR Filing is to be made, or fifteen (15) days after the
Effective Date in the event that an HSR Filing is made, a one time payment in an
amount expressed in Euros that is the equivalent to US Dollars forty million
(USD 40,000,000.00), with the conversion of US Dollars into Euros to be made
using the US Dollar/Euros exchange rate of the European Central Bank on the
Effective Date, as set forth on the website of the European Central Bank
(http://www.ecb.int/stats/exchange/eurofxref/html/index.en.html).
     5.2 Milestone Payments.
          (a) As further partial consideration for Licensor’s grant of the
rights and licenses to Merck under this Agreement, Merck shall pay, or cause to
be paid to Licensor, the following milestone payments with respect to the first
[**] Labels, irrespective of the number of Licensed Products. Such milestone
payments shall accrue on the achievement of the applicable milestone event and,
except as otherwise provided in Section 10.4(a)(ii), shall be paid by Merck on
the later of: (i) [**] days after the achievement of each of the listed
milestone events, and (ii) [**] months after the Effective Date. Merck shall
promptly notify Licensor in writing of the occurrence of any such milestone
event.

          Milestone Event for   Milestone Payment (€)   Milestone Payments (€)
Licensed Products   Per Label   for first [**] Labels
(1) Subject to Section 5.2(b), on a Label-by-Label basis, Initiation of the
first Phase I Trial, or the first combined Phase I/II Trial, or first Phase II
Trial, for each of the first [**] Labels
  Euros [**]
(€ [**])   Euros [**]
(€ [**])

 

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          Milestone Event for   Milestone Payment (€)   Milestone Payments (€)
Licensed Products   Per Label   for first [**] Labels
(2) Initiation of first Phase III Trial, for each of the first [**] Labels
  Euros [**]
(€ [**])   Euros [**]
(€ [**])
 
       
(3) NDA Acceptance, for each of the first [**] Labels
  Euros [**]
(€ [**])   Euros [**]
(€ [**])
 
       
(4) Regulatory Approval in the United States, for each of the first [**] Labels
  Euros [**]
(€ [**])   Euros [**]
(€ [**])
 
       
(5) Regulatory Approval in the European Union, for each of the first [**] Labels
  Euros [**]
(€ [**])   Euros [**]
(€ [**])
 
       
(6) Regulatory Approval in Japan, for each of the first [**] Labels
  Euros [**]
(€ [**])   Euros [**]
(€ [**])

          (b) With respect to the milestone payments set forth in
Sections 5.2(a)(1), the first of such milestones achieved by a given Compound or
Follow-On Compound may be achieved through a Phase I Clinical Trial of such
Compound or Follow-On Compound, even if such Clinical Trial is (i) directed
solely to the safety of such Compound or Follow-On Compound and/or (ii) is not
directed to the use of such Compound or Follow-On Compound for any particular
Indication in the Field; provided that in the case of such a trial that is the
first Clinical Trial of a Compound or Follow-On Compound but is not specifically
directed to a particular Label, the initiation of the second Phase I, Phase I/II
or Phase II Clinical Trial with respect to the same Compound or Follow-On
Compound shall not count as the “second Label” with respect to such Compound or
Follow-On Compound.
          (c) A milestone event that occurs in or with respect to the “European
Union” shall mean any such event in or with respect to a milestone event
relating to Regulatory Approval, in any three of the Major EU Countries.
          (d) For purposes of this Section 5.2, Regulatory Approval for any
Licensed Product in the United States or Japan, if not earlier achieved, shall
be deemed to have been achieved upon the First Commercial Sale of such Licensed
Product in the United States or Japan (as the case may be), and Regulatory
Approval in the European Union, if not earlier achieved, shall be deemed to have
been achieved upon the First Commercial Sale of a Licensed Product in at least
[**] Major EU Countries.
          (e) The milestone payments to be made under Section 5.2(a) shall be
due and payable only once for the first [**] Labels to achieve the applicable
milestone event, regardless of the number of Compounds, Follow-On Compounds
and/or Licensed Products Developed, or the number of Indications pursued or
approved or whether a Compound, Follow-

 

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On Compound or Licensed Product is discontinued after a milestone payment has
been made; provided that, if, after [**] or more of the Regulatory Approval
milestone events set forth in Sections 5.2(a)(4), 5.2(a)(5) and 5.2(a)(6) has
been achieved by [**] or more Licensed Products containing, as active
ingredients, different Compound(s) or Follow-On Compound(s) (i.e., at least one
of such Licensed Products must contain at least [**] Compound or Follow-On
Compound that is not contained in at least [**] of such other Licensed
Products), a milestone event set forth in Section 5.2(a)(1) or Section 5.2(a)(2)
that has previously been achieved for at least [**] previous Labels is achieved
for a [**] Label with a Licensed Product that contains a [**] or subsequent
compound (i.e., a Compound or Follow-On Compound that is not contained in the
Licensed Products described above that previously achieved a Regulatory
Approval), then Merck shall not be obligated to pay Licensor the milestone
payment amount otherwise payable under Section 5.2(a)(1) or Section 5.2(a)(2)
for the achievement of such [**] Label milestone event by any Licensed Product
containing such [**] or subsequent compound (but, again for greater certainty,
shall continue to be obligated to pay to Licensor the milestone payments under
Section 5.2(a)(3) through 5.2(a)(6) upon achievement of each such milestone).
          (f) Subject to the proviso in Section 5.2(e) above, in the event that
a milestone payment is made for one of the first [**] Labels (for purposes
hereof, the “Current Milestone Payment”), and the preceding milestone payment
for that same Label has not been made, then such preceding milestone payment
shall be made concurrently with the Current Milestone Payment.
     5.3 Commercial Event Payments.
     As further partial consideration for Licensor’s grant of rights and
licenses to Merck under this Agreement, Merck shall pay Licensor the following
amounts for the achievement of the following commercial event milestones:
[**] Euros (€ [**]) upon the first achievement of cumulative Net Sales for all
Licensed Products greater than [**] Euros (€[**]) in a Calendar Year during the
Royalty Term;
Such commercial event payment shall be made by Merck only once within ninety
(90) days of the end of the Calendar Year in which the commercial event occurs.
     5.4 Royalty Payments for Licensed Products. As further consideration for
Licensor’s grant of the rights and licenses to Merck hereunder, Merck shall,
during the Royalty Term, pay to Licensor a royalty on Net Sales of the Licensed
Products at the percentage rates set forth below (subject to Sections 5.5(a) and
5.5(b) below):

      Annual Worldwide Licensed Product     Net Sales (in €) per Calendar Year  
Incremental Royalty Rate
For Net Sales of all Licensed Products from €[**]up to and including €[**]
  [**]%
 
   
For that portion of Net Sales of all Licensed Products that is greater than
€[**] and less than or equal to €[**]
  [**]%
 
   
For that portion of Net Sales of all Licensed Products that is greater than
€[**] and less than or equal to €[**]
  [**]%

 

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      Annual Worldwide Licensed Product     Net Sales (in €) per Calendar Year  
Incremental Royalty Rate
For that portion of Net Sales of all Licensed Products that is greater than
€[**]
  [**]%

By way of illustration, assume in a Calendar Year that (i) Net Sales of all
Licensed Products in Euros total €[**]and (ii) no adjustments or deductions to
payments under this Article 5 apply. The total royalties due and payable by
Merck to Licensor for such Net Sales would be € [**] Euros (€[**]), calculated
as follows:
          [**]
               Total Royalty      = €[**]
     For purposes of determining whether a royalty threshold, or the commercial
event milestone described in Section 5.3 above, has been attained, only Net
Sales that are subject to a royalty payment shall be included in the total
amount of Net Sales and any Net Sales of Licensed Products for which the
applicable Royalty Term has expired shall be excluded. In addition, in no event
shall the manufacture of a Licensed Product give rise to a royalty obligation.
For clarity, Merck’s obligation to pay royalties to Licensor under this
Article 5 is imposed only once with respect to the same unit of Licensed Product
regardless of the number of Licensor Patents pertaining thereto.
     5.5 Reductions and Reimbursements.
          (a) Subject to the terms herein, if Merck, its Affiliates or
Sublicensees enter into a Third Party License Agreement(s), the royalties due to
Licensor under Section 5.4 (as adjusted (where applicable) pursuant to
Section 5.5(b)) with respect to such Calendar Quarter shall be reduced, on a
Licensed Product-by-Licensed Product and country-by-country basis, by [**]
percent ([**]%) of any amounts paid by Merck, its Affiliates or Sublicensees
pursuant to such Third Party License Agreement(s) with respect to a given
Calendar Quarter, to the extent allocable to the applicable Licensed Product in
the applicable country. To the extent any such Third Party License Agreement
includes license rights as to which amounts paid are not eligible for offset
pursuant to this Section 5.5(a), the aforementioned reduction shall be made by
Merck in good faith using an allocation method reasonably determined by Merck.
The foregoing provisions of this Section 5.5(a) notwithstanding, in no event
shall the royalty payments with respect to a Licensed Product in a country due
to Licensor by Merck at the then-applicable royalty rates be reduced by more
than [**] percent ([**]%) as a result of the operation of this Section 5.5(a).
In the event that Merck is not able to take the full amount of its permitted
deductions under this Section 5.5(a) with respect to any Licensed Product in a
country due to the operation of the [**] percent ([**]%) royalty reduction
limitation provided for in this Section 5.5(a) with respect to the Licensed
Product in such country (including due to there being no royalty obligations
against which Merck can credit amounts paid by Merck, its Affiliates or
Sublicensees pursuant to such Third Party License Agreement(s)), Merck shall be
entitled to deduct any undeducted excess amounts against royalties due to
Licensor under Section 5.4 pertaining to such Licensed Product in such country
in subsequent Calendar Quarters until fully

 

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deducted, but the [**] percent ([**]%) royalty reduction limitation shall apply
to such subsequent Calendar Quarters.
          (b) The royalty rates then in effect set forth in Section 5.4
applicable to the sale of a Licensed Product in a country will be reduced by
[**] percent ([**]%) during any portion of the Royalty Term when there is no
Valid Claim of a Licensor Patent Covering such Licensed Product in such country.
          (c) In the event that in any Calendar Year during the Royalty Term,
off-label sales by Licensor, its Affiliates or licensees (or their successors)
of products containing [**] in the Field are detected through marketing
databases (such as, without limitation IMS Health) reach or exceed the lesser of
(i) [**] percent ([**]%) of annual worldwide Net Sales of all Compounds made by
Merck, its Affiliates or Sublicensees, or (ii) USD [**] ($[**]) (where such
off-label sales in the Field are calculated by reference to Merck’s relevant
average selling price(s), adjusted for different dosages), then the royalty
rates then in effect under Section 5.4 (as adjusted (where applicable) pursuant
to Sections 5.5(a) and 5.5(b)) applicable to the sale of all Licensed Product
will be reduced by [**] percent ([**]%) of the otherwise applicable royalty rate
during any such Calendar Year. Should the effect of off-label sales of [**] in
the Field thereafter fall below both of the thresholds described in the sentence
before, then the royalty rate in effect under Section 5.4 (as adjusted (where
applicable) pursuant to Sections 5.5(a) and 5.5(b)) shall be reinstated.
          (d) If Merck, its Affiliates or Sublicensees incur any liability,
damage, loss, cost or expense (including reasonable attorney fees) arising out
of Third Party claims or suits in connection with Licensed Product(s) related to
the matters set forth in [**], then Merck shall be entitled to deduct [**]
percent ([**]%) of such amounts from the royalties otherwise due to Licensor
under Section 5.4 (as adjusted (where applicable) pursuant to Sections 5.5(a),
5.5(b) and 5.5(c)). For the avoidance of doubt, such amounts shall be deducted
from royalty payments for worldwide Net Sales achieved, even if such Third Party
claims relate to certain countries in the world only. If the royalties otherwise
due to Licensor in any Calendar Quarter are less than [**] percent ([**]%) of
the liability, damage, loss, cost or expense (including reasonable attorney
fees) that Merck is permitted to deduct pursuant to the immediately preceding
sentence, Merck shall be entitled to carry forward any undeducted excess for
deduction against royalties otherwise payable to Licensor in future periods.
Each Party shall (a) promptly notify the other Party as soon as it becomes aware
of a claim or suit for which the foregoing deduction applies and (b) cooperate
with the other Party in the defense, settlement or compromise of such claim or
suit. In no event, however, shall Merck settle or compromise any such claim or
suit in a manner that admits any liability for the subject matter of such claim
or suit or involves making any payment to a Third Party in consideration for
such settlement or compromise without the prior written consent of Licensor, not
to be unreasonably withheld, delayed or conditioned.
     5.6 Timing of Payment. Royalties payable under Section 5.4 shall accrue at
the time the invoice for the sale of the Licensed Product is delivered and
royalty obligations that have accrued during a particular Calendar Quarter shall
be paid, on a Calendar Quarter basis, within sixty (60) days after the end of
the Calendar Quarter during which the royalty obligation accrued.

 

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     5.7 Mode of Payment, Currency and Invoicing. All payments to Licensor
hereunder shall be made by deposit of Euros in the requisite amount to such bank
account as Licensor may from time to time designate by written notice to Merck.
With respect to Net Sales not denominated in Euros, Merck shall convert each
applicable monthly sales in foreign currency into Euro by using the then current
and standard exchange rate methodology applied by Merck in its external
reporting. For accounting and documentation purposes, Licensor shall provide to
Merck an invoice for the upfront and milestone payments that are payable. The
Parties may vary the method of payment set forth herein at any time upon mutual
agreement, and any change shall be consistent with the local Law at the place of
payment or remittance. Merck agrees that Merck and its Affiliates shall make all
of their payments under this Agreement from Germany; and in case that payments
under this Agreement are to be made by an assignee of Merck, then Licensor and
Merck shall agree in good faith on a mode of payment by such assignee that does
not disadvantage Licensor if compared with a situation in which Licensor and
Merck would benefit from the application of the Double Taxation Convention
existing between Germany and the United States of America, as such convention is
in effect at the time of assignment and thereafter.
     5.8 Royalty Reports and Records Retention. Within sixty (60) days after the
end of each Calendar Quarter during which the Licensed Products have been sold,
Merck shall deliver to Licensor, together with the applicable royalty payment
due, a written report, on a Licensed Product-by-Licensed Product and a
country-by-country basis showing (a) the Net Sales in Euros of each Licensed
Product by type of Licensed Product and country in the Territory, (b) the
applicable royalty rates for such Licensed Product, (c) the exchange rates used
in calculating any of the foregoing, and (f) a calculation of the amount of
royalty due Licensor in Euros. In addition to the foregoing, within sixty
(60) days after the end of each Calendar Year during which Licensed Products
have been sold, Merck shall deliver to Licensor a written report showing the
gross sales in Euros of each Licensed Product by type of Licensed Product and
country for the United States, the Major EU Countries and Japan. Such reports
shall be deemed “Confidential Information” of Merck subject to the obligations
of Article 7 of this Agreement. For the current Calendar Year and the [**] most
recently completed Calendar Years, Merck shall keep (and shall ensure that its
Affiliates and Sublicensees shall keep) complete and accurate records of such
sales in sufficient detail to confirm the accuracy of the gross sales, Net
Sales, royalty and currency conversion calculations hereunder.
     5.9 Legal Restrictions. If at any time legal restrictions prevent the
remittance by Merck of all or any part of royalties on Net Sales in any country,
Merck shall have the right and option to make such payment by depositing the
amount thereof in local currency to an account in the name of Licensor in a bank
or other depository selected by Licensor in such country.
     5.10 Late Payments. All payments under this Agreement shall earn interest
from the date due until paid at a per annum rate equal to the lesser of (a) the
rate provided for at the relevant time pursuant to the Late Payments of
Commercial Debt (Interest) Act of 1998, and (b) [**] percent ([**]%). Interest
will be calculated on a 365/360 basis.
     5.11 Audits.

 

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          (a) During the Term and for one Calendar Year thereafter, upon the
written request of Licensor, and not more than [**] in each Calendar Year, Merck
shall permit, and shall cause its Affiliates and Sublicensees to permit, an
independent accounting firm of internationally recognized standing selected by
Licensor, and reasonably acceptable to Merck or such Affiliate or Sublicensee,
to have access to and to review, during normal business hours upon reasonable
prior written notice, the applicable records of Merck and its Affiliates and
Sublicensees to verify the accuracy of the royalty reports, any deductions taken
in calculating Net Sales, and payments under this Article 5. Such review may
cover the records for sales made in the current Calendar Year and any Calendar
Year ending not more than [**] prior to the date of such request. The accounting
firm shall disclose to Licensor and Merck only whether the royalty reports are
correct or incorrect and the specific details concerning any discrepancies. No
other information shall be provided to Licensor.
          (b) If such accounting firm concludes that additional royalties were
owed during such period, Merck shall pay the additional amounts, together with
interest accrued thereon in accordance with Section 5.10, within thirty
(30) days after the date Licensor delivers to Merck such accounting firm’s
written report. If such accounting firm concludes that an overpayment was made,
such overpayment shall be fully creditable against amounts payable in subsequent
payment periods. Licensor shall pay for the cost of such audit, unless the
underpayment of royalties is greater than [**] percent ([**]%) of the amount due
for the applicable period, in which case Merck shall pay the cost of such audit.
          (c) Each Party shall treat all information that it receives under this
Section 5.11 in accordance with the confidentiality provisions of Article 7 of
this Agreement, and shall cause its accounting firm to enter into a written
confidentiality agreement with the other Party having terms substantially the
same as the confidentiality obligations set forth in this Agreement and
obligating such firm to retain all such financial information in confidence
pursuant to such confidentiality agreement, except to the extent necessary for
such Party to enforce its rights under this Agreement.
     5.12 Compulsory License. In the event that Licensor or Merck receives a
request for a Compulsory License anywhere in the world, it shall promptly notify
the other Party. If any Third Party obtains a Compulsory License in the Field in
the Territory, then Licensor or Merck (whoever has first notice) shall promptly
notify the other Party. For purposes of calculating the royalties due Licensor
under Section 5.4 with respect to sales of the Licensed Product by any
compulsory licensee, Merck shall pay Licensor the lesser of (a) the amounts
otherwise due to Licensor pursuant to Section 5.4, and (b) [**] percent ([**]%)
of any amounts payable (including up-front license fees, milestones and other
non-royalty consideration as well as royalty consideration) by such compulsory
licensee to Merck.

 

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     5.13 Taxes.
          (a) Licensor shall be responsible for the payment of any and all taxes
levied on account of royalties and other payments paid to Licensor by Merck or
its Affiliates or Sublicensees under this Agreement, other than any value added
tax or similar tax. If applicable Law requires that taxes be deducted and
withheld from royalties or other payments paid under this Agreement, Merck shall
(a) deduct those taxes from the payment; (b) pay the taxes to the proper
Governmental Body; (c) send evidence of the obligation together with proof of
payment to Licensor within one hundred (100) days following such payment, such
evidence and proof to be reasonably satisfactory to Licensor; (d) remit to
Licensor the net amount, after deductions or withholding made under this
Section 5.13(a), and (e) cooperate with Licensor in any way reasonably requested
by Licensor, to obtain available reductions, credits or refunds of such taxes
Notwithstanding the foregoing, if Licensor shall provide Merck with a written
confirmation from the competent U.S. tax authority that Licensor has its tax
residence in the United States and any other documents necessary for the
application of the tax rate set forth in the Double Taxation Convention existing
between Germany and the United States of America. Merck shall not withhold any
German tax from royalties paid or payments for rights to Licensor under this
Agreement so long as the exemption from withholding tax set forth in such Double
Taxation Convention remains in effect. For purposes hereof, the Parties assume
that Licensor shall be the beneficial owner of both the royalty payments and the
payments for the rights.
          (b) It is understood and agreed between the Parties that any payments
described in this Agreement are expressed exclusive of any value added tax or
similar tax imposed upon such payments. Value added tax shall be added to all
such payments where applicable.
Article 6
Inventions and Patents
     6.1 Certification Under Drug Price Competition and Patent Restoration Act.
Each Party shall immediately give written notice to the other Party of any
certification of which they become aware filed pursuant to 21 U.S.C.
Section 355(b)(2)(A) (or any amendment or successor statute thereto) claiming
that any Licensor Patents Covering a Compound, Follow-On Compound or Licensed
Product, or the use of each of the foregoing, are invalid or unenforceable, or
that infringement will not arise from the manufacture, use or sale of a Licensed
Product in or outside the Field by a Third Party.
     6.2 Listing of Patents. Merck shall have the sole right to determine which
of the Licensor Patents, if any, shall be listed for inclusion in the Approved
Drug Products with Therapeutic Equivalence Evaluations pursuant to 21 U.S.C.
Section 355, or any successor Law in the United States, together with any
comparable Laws in any other country in the Territory.
     6.3 Title to Inventions. All inventions having as inventors solely
employees or independent contractors of one Party in the course of the Parties’
performance under this Agreement and all intellectual property rights therein
(“Sole Inventions”), shall be the property of such Party. All inventions having
as inventors one or more employees or independent

 

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contractors of each of the Parties in the course of the Parties’ performance
under this Agreement and all intellectual property rights therein (“Joint
Inventions”) shall be jointly owned both Parties.
     6.4 Further Assurances. Licensor shall require all of its employees, and
use Commercially Reasonable Efforts to require its contractors and agents, and
any Affiliates and Third Parties working on its behalf under this Agreement (and
their respective employees, contractors and agents), to assign to Licensor any
Licensor Technology.
     6.5 Patent Prosecution and Maintenance.
          (a) Merck. Merck shall have the right to file, prosecute and maintain
Merck Patents. Merck shall bear all costs and expenses of filing, prosecuting
and maintaining Merck Patents in the Territory.
          (b) Licensor Patents. Licensor shall have the first right to file,
prosecute and maintain Licensor Patents in the Territory; provided that Licensor
shall file, prosecute and maintain Licensor Patents in the countries listed in
the patent country list attached hereto as Schedule 6.5 (the “Patent
Countries”), it being acknowledged that with respect to Licensor Patents filed
prior to the Signing Date it may no longer be possible to file patent
applications in certain of the Patent Countries. Prosecution in the Patent
Countries shall be at Licensor’s sole discretion and control. Licensor shall
bear all costs and expenses of filing, prosecuting and maintaining Licensor
Patents in the Patent Countries. Licensor shall update Merck as to the course of
filing and prosecution of Licensor Patents or related proceedings (e.g.
interferences, oppositions, reexaminations, reissues, revocations or
nullifications) in the Patent Countries from time to time. Merck may provide
comments on such filings and proceedings and Licensor may take into
consideration the advice and recommendations of Merck. At Licensor’s request,
Merck will provide Licensor with reasonable assistance in prosecuting Licensor
Patents to the extent possible, including providing such data in Merck’s Control
that is, in Licensor’s reasonable judgment, needed to support the prosecution of
a Licensor Patent; provided, however, that Licensor shall reimburse Merck for
Merck’s Out-of-Pocket Expenses incurred in providing such assistance. Licensor
shall provide Merck with a routine annual update of the complete patent status
of the Licensor Patents in all countries in the Territory.
          (c) Joint Patents. Licensor and Merck will promptly disclose all Joint
Inventions to each other. Each Party shall execute such further assignments,
documents and other instruments as may be necessary or desirable to fully and
completely assign all Joint Inventions to Licensor and Merck and will assist
each other in applying for, obtaining and enforcing patents with respect to any
Joint Inventions, including equal sharing of the expenses associated therewith.
Questions of inventorship shall be resolved in accordance with United States
patent laws. In the event that one of the Parties is not interested in filing,
prosecuting or maintaining a patent or patent application covering a Joint
Invention in any particular country, then such Party agrees to transfer its
interest in such patent right or patent application to the other Party, and the
other Party shall have the right to assume the filing, prosecuting or
maintenance of such patent or patent application in such country, at such other
Party’s expense. In the event of a dispute regarding such questions, if the
Parties are unable to resolve the dispute, mutually acceptable independent
United States patent counsel not regularly employed or otherwise

 

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associated with either Party shall resolve such dispute and the parties shall be
bound by the decision of such counsel. The Parties shall reasonably discuss the
disposition of Joint Patents that disclose or claim inventions with
applicability outside the Field.
          (d) Election Not to File and Prosecute Licensor Patents Not Included
in Patent Countries List. Licensor and Merck recognize that with regard to
certain patents and patent applications for Compounds and Compound Improvements
(but not for Follow-On Compounds, Follow-On Compound Improvements, or patent
applications or patents filed on Joint Inventions) included in Licensor Patents,
if Licensor elects to discontinue prosecution or maintenance, [**] has the
right, in its sole discretion, to prosecute and maintain such patents or patent
applications. Subject to Licensor’s obligations under Section 6.5(b) with
respect to Licensor Patents in the Patent Countries, in the event Licensor
chooses not to file, continue prosecution or maintain a patent or patent
application within the Licensor Patents, except in the case of filing a related
continuation application, and [**] chooses not to continue such prosecution or
maintenance for Compounds and Compound Improvements (but not for Follow-On
Compounds, Follow-On Compound Improvements, or patent applications or patents
filed on Joint Inventions), Licensor shall promptly notify Merck in writing, and
Merck shall have the right, but not the obligation, to pursue the filing or
support the continued prosecution or maintenance of such patent or patent
application in the corresponding country. If Merck does elect to take such
action in a country in the Territory, then it shall promptly notify Licensor in
writing of such election, and Licensor shall reasonably cooperate with Merck in
this regard. Merck shall update Licensor as to the course of filing and
prosecution of Licensor Patents or related proceedings (e.g. interferences,
oppositions, reexaminations, reissues, revocations or nullifications) in such
countries from time to time. If Merck elects to continue such prosecution or
maintenance of such Licensor Patents, such patents or patent applications shall
no longer constitute Licensor Patents for purposes of determining Merck’s
royalty obligations under this Agreement.
          (e) Patent Term Extensions. Licensor agrees to use reasonable effort
to seek patent term extensions wherever available for Licensor Patents that
Cover a Licensed Product. The Parties agree to cooperate and to take reasonable
actions to maximize the protections available under the provisions of 35 U.S.C.
§156 for U.S. patents/patent applications. Merck shall provide Licensor with all
relevant information, documentation and assistance in this respect. Any such
assistance, supply of information and consultation shall be provided promptly
and in a manner that will ensure that all patent term extensions that are sought
for Licensed Products may be obtained wherever legally permissible, and to the
maximum extent available.
     6.6 Enforcement of Patents.
          (a) Notice. If either Party believes that a Licensor Patent is being
infringed by a Third Party, the Party possessing such knowledge or belief shall
notify the other Party and provide it with details of such infringement that are
known by such Party.
          (b) Right to bring an Action. Licensor shall have the first right to
attempt to resolve such infringement in and outside the Field, including by
filing an infringement suit or taking other similar action (each, an “Action”)
and to compromise or settle such infringement. If Licensor does not intend to
prosecute or defend an Action, Licensor shall promptly inform

 

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Merck. The Parties recognize that [**] has certain rights to initiate, prosecute
and defend against an infringement of the Licensor Patents. If both Licensor and
[**] decide not to initiate, prosecute or defend against an infringement of the
Licensor Patents inside or outside the Field, then Licensor shall promptly
notify Merck and Merck, at its sole expense, shall have the right to initiate or
prosecute such infringement. Licensor’s notice to Merck shall not be
unreasonably delayed and shall be provided as far in advance of any filing
deadline as possible. Merck shall promptly inform Licensor in writing of its
decision on initiating or prosecuting such infringement. In the event Merck
decides not to initiate or prosecute such infringement, such rights shall revert
to Licensor. In any Action initiated or prosecuted by Merck, Licensor shall have
the right to control the defense of all claims for revocation, of invalidity
and/or of unenforceability of Licensor Patents. The Party initiating such Action
shall have the sole and exclusive right to select counsel for any suit initiated
by it pursuant to this Section 6.6(b). For any case that Merck initiates,
prosecutes or defends, (i) Licensor and [**], at their expense, shall have the
right to be represented by counsel of their choosing, and (ii) Merck shall
reasonably consider the rights and interests of Licensor.
          (c) Costs of an Action. The Party taking an Action under
Section 6.6(b) shall pay all costs associated with such Action, other than
(subject to Section 6.6(e)) the expenses of the other Party if the other Party
elects to join such Action. Each Party shall have the right to be represented by
its own counsel in an Action relating to a Licensor Patent taken by the other
Party, at its own expense.
          (d) Settlement. In settling an Action, each Party shall have a
reasonable opportunity for meaningful participation in the decision making and
in settling the Action. When one Party’s settlement of an Action will obligate
the other Party to pay any amount, then the Party settling the Action shall seek
and obtain the other Party’s written consent prior to settling such Action. In
any settlement, each Party shall reasonably consider the rights and interests of
the other Party.
          (e) Reasonable Assistance. The Party not enforcing or defending
Licensor Patents shall (i) provide reasonable assistance to the other Party,
including providing access to relevant documents and other evidence and making
its employees available, subject to the other Party’s reimbursement of any
Out-Of-Pocket expenses incurred by the non-enforcing or non-defending Party in
providing such assistance; and (ii) join the Action as a named party if it is
required to file or maintain the Action.
          (f) Distribution of Amounts Recovered. Any amounts recovered by the
Party taking an Action pursuant to this Section 6.6, whether by settlement or
judgment, shall be allocated in the following order: (i) to reimburse the Party
initiating such Action for any documented, Out-of-Pocket Expenses incurred in
litigating the Action; (ii) to reimburse the Party not initiating such Action,
for any documented, Out-of-Pocket Expenses incurred in litigating such Action,
and (iii) the remaining amount of such recovery shall be allocated between the
Parties [**].

 

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     6.7 Third Party Actions Claiming Infringement.
          (a) Notice. If a Party is notified of any action by a Third Party
against either Party that claims that the Compound or Follow-on Compound, or its
use, Development, manufacture or sale in the Field infringes such Third Party’s
intellectual property rights (each, a “Third Party Action”), such Party shall
promptly notify the other Party in writing of such action.
          (b) Consultation. Following delivery of the written notice of the
Third Party Action, the Parties shall consult with each other on all material
aspects of the defense. Each Party shall have a reasonable opportunity for
meaningful participation in decision-making and formulation of defense strategy.
The Parties shall reasonably cooperate with each other in all such actions or
proceedings.
Article 7
CONFIDENTIALITY
     7.1 Confidentiality Obligations. Each Party agrees that, for the Term and
for [**] years thereafter, such Party shall, and shall ensure that its officers,
directors, employees and agents shall, keep completely confidential and not
publish or otherwise disclose and not use for any purpose except as expressly
permitted hereunder any Confidential Information disclosed to it by the other
Party pursuant to this Agreement. The foregoing obligations shall not apply to
any Confidential Information disclosed by a Party hereunder to the extent that
the receiving Party can demonstrate that such Confidential Information:
          (a) was already known to the receiving Party or its Affiliates, other
than under an obligation of confidentiality, at the time of disclosure;
          (b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
          (c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of this Agreement;
          (d) was subsequently lawfully disclosed to the receiving Party or its
Affiliates by a Third Party without an obligation of confidentiality other than
in contravention of a confidentiality obligation of such Third Party to the
disclosing Party; or
          (e) was developed or discovered by employees or agents of the
receiving Party or its Affiliates who had no access to the Confidential
Information of the disclosing Party.
     Notwithstanding the above obligations of confidentiality and non-use, a
Party may disclose information to the extent that such disclosure is reasonably
necessary in connection with:

 

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               (i) filing or prosecuting patent applications, subject to the
terms of Section 6.3;
               (ii) prosecuting or defending litigation;
               (iii) conducting pre-clinical studies or Clinical Trials;
               (iv) seeking Regulatory Approval of the Licensed Product in the
Field;
               (v) seeking advice from business, legal and financial advisors,
on the condition that such business, legal and financial advisors agree to be
bound by confidentiality and non-use obligations at least as strict as those
contained in this Agreement; or
               (vi) complying with applicable Law, including securities Law and
the rules of any securities exchange or market on which a Party’s securities are
listed or traded.
     In making any disclosures set forth in clauses (i) through (vi) above, the
disclosing Party shall, where reasonably practicable, give such advance notice
to the other Party of such disclosure requirement as is reasonable under the
circumstances and will use its reasonable efforts to cooperate with the other
Party in order to secure confidential treatment of such Confidential Information
required to be disclosed. In addition, in connection with any permitted filing
by either Party of this Agreement with any Governmental Body, including but not
limited to the U.S. Securities and Exchange Commission, the filing Party shall
endeavor to obtain confidential treatment of economic, trade secret information
and such other information as may be requested by the other Party, and shall
provide the other Party with the proposed confidential treatment request with
reasonable time for such other Party to provide comments, and shall include in
such confidential treatment request all reasonable comments of the other Party.
     7.2 Publications. Merck and Licensor each acknowledge the other Party’s
interest in publishing the results of its research in order to obtain
recognition within the scientific community and to advance the state of
scientific knowledge. Each Party also recognizes the mutual interest in
obtaining valid patent protection and in protecting business interests and trade
secret information. Consequently, except for disclosures permitted pursuant to
Section 7.1, either Party, its employees or consultants wishing to make a
publication regarding a Compound, Follow-On Compound or Licensed Product shall
comply with the provisions set forth in this Section 7.2.
          (a) Merck shall have the right to publish the results of its research
with respect to Compounds, Follow-On Compounds and Licensed Products inside the
Field, without notice to, or the prior consent of, Licensor.
          (b) Licensor shall have the right to publish the results of its
research with the Compounds outside the Field, without notice to, or the prior
consent of, Merck.
          (c) Licensor shall have the right to publish the results of Clinical
Trials Initiated by or on behalf of Licensor prior to the Signing Date, provided
that Licensor delivers to Merck a copy of the proposed written publication or an
outline of an oral disclosure at least thirty (30) days prior to submission for
publication or presentation. Merck shall have the right (i) to

 

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propose modifications to the publication or presentation for patent reasons,
trade secret reasons or business reasons or (ii) to request a reasonable delay
in publication or presentation in order to protect patentable information. If
Merck requests a delay, Licensor shall delay submission or presentation for a
period of up to an additional forty-five (45) days to enable patent applications
protecting Licensor’s rights in such information to be filed in accordance with
Article 6. Upon expiration of such additional forty-five (45) day period,
Licensor shall be free to proceed with the publication or presentation. If Merck
requests modifications to the publication or presentation, Licensor shall edit
such publication to prevent disclosure of trade secret or proprietary business
information prior to submission of the publication or presentation.
          (d) The foregoing provisions of this Section 7.2 notwithstanding, a
Party may disclose scientific information or results regarding a Compound,
Follow-On Compound or Licensed Product to the extent necessary to comply with
applicable Law, including securities Laws and the rules of any securities
exchange or market on which such Party’s securities are listed or traded.
     7.3 Press Releases and Disclosure. Upon execution of this Agreement, each
Party shall have the right to issue a press release in the form attached hereto
as Schedule 7.3.1 or Schedule 7.3.2, as applicable. Subject to the foregoing
sentence, no disclosure of the existence, or the terms, of this Agreement may be
made by either Party, and neither Party shall use the name, trademark, trade
name or logo of the other Party, its Affiliates or their respective employees in
any publicity, promotion, news release or disclosure relating to this Agreement
or its subject matter, without the prior express written permission of the other
Party, except as may be required by Law; provided that either Party may disclose
the terms of this Agreement to its business, legal and financial advisors and to
any Third Party that has provided such Party with a bona fide written offer to
purchase all or substantially all of the assets of such Party or to acquire
fifty percent (50%) or more of the voting equity securities or management
control of such Party, on the condition that such Third Party and its attorneys,
independent accountants and financial advisors agree to be bound by
confidentiality and non-use obligations at least as strict as those contained in
this Agreement. With respect to the achievement of milestones set forth in
Sections 5.2 and 5.3, Licensor may issue a press release regarding any such
achievement, provided that Merck is given five (5) business days to review and
comment on the proposed press release or public disclosure.
Article 8
REPRESENTATIONS, WARRANTIES AND COVENANTS
     8.1 Representations and Warranties. Each Party represents and warrants to
the other Party that, as of the Signing Date:
          (a) such Party is duly organized and validly existing under the Laws
of the jurisdiction of its incorporation or organization;
          (b) such Party has taken all action necessary to authorize the
execution and delivery of this Agreement and the performance of its obligations
under this Agreement;

 

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          (c) this Agreement is a legal and valid obligation of such Party,
binding upon such Party and enforceable against such Party in accordance with
the terms of this Agreement, except as enforcement may be limited by applicable
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other Laws relating to or affecting creditors’ rights generally and by general
equitable principles. The execution, delivery and performance of this Agreement
by such Party does not conflict with, breach or create in any Third Party the
right to accelerate, terminate or modify any agreement or instrument to which
such Party is a party or by which such Party is bound, and does not violate any
Law of any Governmental Body having authority over such Party;
          (d) such Party has all right, power and authority to enter into this
Agreement, to perform its obligations under this Agreement; and
          (e) no consent by any Third Party or Governmental Body (subject to
obtaining any necessary HSR Clearance) is required with respect to the execution
and delivery of this Agreement by such Party or the consummation by such Party
of the transactions contemplated hereby.
     8.2 Additional Representations and Warranties of Licensor. Licensor
represents and warrants to Merck, as of the Signing Date, that:
          (a) [**];
          (b) to the Knowledge of Licensor, there is no unauthorized use,
infringement or misappropriation of any of Licensor Technology by any employee
or former employee of Licensor, or any other Third Party;
          (c) to the Knowledge of Licensor, the Licensor Patents are subsisting
and are not the subject of any litigation procedure, discovery process,
interference, reissue, reexamination, opposition, appeal proceedings or any
other legal dispute;
          (d) The Licensor Patents constitute all Patent Rights Controlled by
Licensor as of the Signing Date that are necessary or useful for the research,
Development, manufacture, use or Commercialization of Compounds and Follow-On
Compounds in the Field;
          (e) The Compounds provided hereunder contain the molecular structures
described in Section 1.11;
          (f) Licensor has not licensed to a Third Party the right to perform
research, Develop, manufacture, use or Commercialize (i) a Compound for use in
the Field, or (ii) a Follow-On Compound for use in or outside the Field;
          (g) Licensor has not granted rights to Compounds or Follow-On
Compounds in or outside the Field to (i) [**], or (ii) [**];
          (h) the Licensor Know-How constitutes all Know-How Controlled by
Licensor as of the Signing Date that is necessary for the research, Development,
manufacture, use or Commercialization of the Compounds and Follow-On Compounds
in the Field;

 

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          (i) to Licensor’s Knowledge, the exercise of the licenses granted to
Merck with respect to the Compounds and Follow-On Compounds in the Field will
not infringe any intellectual property rights owned or possessed by any Third
Party Covering the composition of matter or method of use in the Field of such
Compound or Follow-On Compound;
          (j) the Compounds and Follow-On Compounds can be manufactured without
infringing any Third Party manufacturing process intellectual property rights;
          (k) it has the full right to provide the Licensor Materials to Merck
and to transfer to Merck all right, title and interest in and to the Licensor
Material to be provided to Merck pursuant to this Agreement;
          (l) all employees of Licensor who have performed any activities on its
behalf in connection with research regarding the Compounds and the Follow-On
Compounds, and all other inventors of Licensor Patents, have assigned to
Licensor the whole of their rights in any intellectual property made, discovered
or developed by them as a result of such research, and no Third Party has any
rights to any such intellectual property in the Field; and
          (m) to its Knowledge, all tangible information and data provided by or
on behalf of Licensor to Merck on or before the Signing Date in contemplation of
this Agreement was and is true, accurate and complete in all material respects,
and to its Knowledge, Licensor has not failed to disclose, or cause to be
disclosed, any Licensor Know-How that would cause the information and data that
has been disclosed to be misleading in any material respect.
     8.3 No Warranty. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY HERETO MAKES ANY REPRESENTATION AND EXTENDS NO WARRANTY OF ANY
KIND, EITHER EXPRESS OR IMPLIED. IN PARTICULAR, BUT WITHOUT LIMITATION, LICENSOR
MAKES NO REPRESENTATION AND EXTENDS NO WARRANTY CONCERNING WHETHER ANY OF THE
COMPOUNDS, FOLLOW-ON COMPOUNDS OR LICENSED PRODUCTS ARE FIT FOR ANY PARTICULAR
PURPOSE OR SAFE FOR HUMAN CONSUMPTION, OR THAT THE USE OF THE LICENSOR
TECHNOLOGY WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHTS
OF ANY THIRD PARTY.
Article 9
INDEMNIFICATION AND INSURANCE
     9.1 Indemnification by Merck. Merck shall indemnify, defend and hold
Licensor and its Affiliates and each of their respective employees, officers,
directors and agents (the “Licensor Indemnitees”) harmless from and against any
and all liability, damage, loss, cost or expense (including reasonable
attorneys’ fees) to the extent arising out of Third Party claims or suits
related to (a) the Development, manufacture, use or Commercialization of a
Compound, Follow-On Compound or Licensed Product by or on behalf of Merck, its
Affiliates or Sublicensees, (b) the use, handling or storage of any Licensor
Materials by or on behalf of Merck, its Affiliates or Sublicensees, (c) Merck’s
performance of its obligations under this Agreement, or (d) breach by Merck of
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this Agreement; provided, however, that Merck’s obligations pursuant to this
Section 9.1 shall not apply to the extent such claims or suits (i) result from
the negligence or willful misconduct of any of the Licensor Indemnitees, or
(ii) arise out of breach by Licensor of its representations, warranties or
covenants set forth in this Agreement.
     9.2 Indemnification by Licensor. Licensor shall indemnify, defend and hold
Merck and its Affiliates and each of their respective agents, employees,
officers and directors (the “Merck Indemnitees”) harmless from and against any
and all liability, damage, loss, cost or expense (including reasonable
attorney’s fees) to the extent arising out of Third Party claims or suits
related to (a) Licensor’s performance of the On-Going Trials, whether prior or
subsequent to the Effective Date; (b) the Development, manufacture, use or
Commercialization of Compounds or Follow-On Compounds by or on behalf of
Licensor, its Affiliates or licensees, or (c) Licensor’s performance of its
obligations under this Agreement; (d) breach by Licensor of its representations,
warranties or covenants set forth in this Agreement; or (e) the matters set
forth in [**]; provided, however, that Licensor’s obligations pursuant to this
Section 9.2 shall not apply to the extent such claims or suits (i) result from
the negligence or willful misconduct of any of the Merck Indemnitees or
(ii) arise out of a breach by Merck of its representations, warranties or
covenants set forth in this Agreement.
     9.3 No Consequential Damages. IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS
AFFILIATES BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES OR THEIR
RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS OR AGENTS FOR SPECIAL, INDIRECT,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER IN CONTRACT, WARRANTY,
TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY BREACH THEREOF; PROVIDED HOWEVER THAT THIS LIMITATION
SHALL NOT LIMIT THE INDEMNIFICATION OBLIGATIONS OF THE PARTIES WITH RESPECT TO
THIRD PARTY CLAIMS.
     9.4 Notification of Claims; Conditions to Indemnification Obligations. As a
condition to a Party’s right to receive indemnification under this Article 9, it
shall (a) promptly notify the other Party as soon as it becomes aware of a claim
or suit for which indemnification may be sought pursuant hereto; provided that
the failure or delay to so notify the indemnifying Party shall not relieve the
indemnifying Party of any obligation or liability that it may have to the
Indemnified Party, except to the extent that the indemnifying Party demonstrates
that its ability to defend or resolve such claim is adversely affected thereby,
(b) cooperate, and cause the individual indemnitees to cooperate, with the
indemnifying Party in the defense, settlement or compromise of such claim or
suit, and (c) permit the indemnifying Party to control the defense, settlement
or compromise of such claim or suit, including the right to select defense
counsel. In no event, however, may the indemnifying Party compromise or settle
any claim or suit in a manner which admits fault or negligence on the part of
the indemnified Party or any indemnitee without the prior written consent of the
indemnified Party, such consent not to be unreasonably withheld, delayed or
conditioned, it being understood that it would be reasonable for an indemnified
Party to withhold such consent to any proposed settlement that leads to
liability or imposes any financial obligation on the indemnified Party or any
indemnitee for which such indemnified Party (or any indemnitee) is not entitled
to indemnification hereunder, imposes any other obligation or restriction on the
indemnified Party (or any indemnitee), or which includes an

 

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admission of wrongdoing or responsibility for the claim by the indemnified Party
(or indemnitee). The indemnifying Party shall have no liability under this
Article 9 with respect to claims or suits settled or compromised without its
prior written consent.
     9.5 Insurance. During the Term, each Party shall obtain and maintain, at
its sole cost and expense, product liability insurance (including any
self-insured arrangements) in amounts, that are reasonable and customary in the
United States pharmaceutical and biotechnology industry for companies engaged in
comparable activities. It is understood and agreed that this insurance shall not
be construed to limit either Party’s liability with respect to its
indemnification obligations hereunder. Each Party will, except to the extent
self insured, provide to the other Party upon request a certificate evidencing
the insurance such Party is required to obtain and keep in force under this
Section 9.5. Each Party will notify the other Party at least thirty (30) days’
prior to the expiration or cancellation of such insurance, or any reduction in
coverage thereunder.
Article 10
TERM AND TERMINATION
     10.1 Term and Expiration. The term of this Agreement (the “Term”) shall
commence on the Effective Date and, unless earlier terminated as provided in
this Article 10 (the date of any such termination, the “Termination Date”),
shall continue in full force and effect, on a country-by-country and Licensed
Product-by-Licensed Product basis until there is no remaining royalty or other
payment obligation in such country with respect to such Licensed Product, at
which time this Agreement shall expire in its entirety with respect to such
Licensed Product in such country.
     10.2 Termination of the Agreement by Merck for convenience. During the
Term, Merck may, at its convenience, terminate this Agreement in its entirety
upon ninety (90) days’ prior written notice to Licensor.

 

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     10.3 Termination upon Material Breach.
          (a) If a Party breaches any of its material obligations under the
Agreement, the Party not in default may give to the breaching Party a written
notice specifying the nature of the default, requiring it to cure such breach,
and stating its intention to terminate this Agreement if such breach is not
cured within [**] (or, in the case of a payment breach, within [**])). If such
breach is not cured within [**] (or [**] in the case of a payment breach) after
the receipt of such notice, the Party not in default shall be entitled to
terminate this Agreement by written notice to the other Party.
          (b) In the event Merck fails to fulfill its obligations under
Section 3.9 (and does not cure such failure as provided in Section 10.3(a)),
Licensor’s sole and exclusive remedy shall be to terminate this Agreement as
provided in Section 10.3(a).
          (c) Any dispute regarding an alleged material breach of this Agreement
shall be resolved in accordance with Article 11 hereof.
          (d) If Merck has the right to terminate this Agreement under
Section 10.3(a) and it has been determined in a final judgment from which no
appeal can be taken, or that is unappealed within the time allowed for appeal,
that Licensor has breached a material obligation of this Agreement, Merck may
elect not to terminate this Agreement, and Merck may (i) offset against its
financial obligations hereunder the amount of any damages resulting from such
material breach by Licensor that are awarded to Merck pursuant to such final
judgment, and (ii) in the case of Licensor’s material breach of its obligations
under Section 2.6, reduce by [**] percent ([**]%) any milestone and royalty
payments that may become due and owing.
     10.4 Effects of termination.
          (a) Survival.
               (i) Without limiting the foregoing, Articles 1, 9 and 10, and
Sections 5.8, 5.9, 5.10, 5.11, 5.12, 5.13, 7.1, 7.3 and 13.11 hereof shall
survive the expiration or termination of this Agreement for any reason.
               (ii) Termination of this Agreement shall not relieve the Parties
of any liability that accrued hereunder prior to the effective date of such
termination. In addition, any milestone payments for milestone events set forth
in Section 5.2 and accrued prior to the effective date of any termination of
this Agreement, but not paid prior to the effective date of termination, shall
be due and payable by Merck on the effective date of termination, whether or not
such termination occurs prior to [**] months after the Effective Date. In
addition, subject to Section 10.3(b), termination of this Agreement shall not
preclude either Party from pursuing all rights and remedies it may have
hereunder or at Law or in equity with respect to any breach of this Agreement
nor prejudice either Party’s right to obtain performance of any obligation.
          (b) Expiration of Royalty Term. Upon expiration of the Royalty Term
with respect to any Licensed Product, then as of the effective date of such
expiration and on a Licensed Product-by-Licensed Product and a
country-by-country basis, the license from Licensor to Merck under Section 2.1
shall convert to a fully paid, royalty free, irrevocable, perpetual,

 

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exclusive, sublicensable license under the Licensor Technology to make, have
made, use, import, export, offer for sale and sell such Licensed Product in the
Field in the Territory.
          (c) Other Effects of Termination.
               Upon termination of this Agreement (i) pursuant to Section 10.2
or 10.3 by Merck (excluding, for the avoidance of doubt, any election by Merck
under Section 10.3(d) not to terminate this Agreement), or (ii) pursuant to
Section 10.3 by Licensor, provided that in the event Merck disputes any such
termination by Licensor, the following shall only apply from and after such time
as such termination has been upheld in a final judgment from which no appeal can
be taken, or that is unappealed within the time allowed for appeal, or such time
as Merck is no longer disputing such termination:
                    (1) all licenses granted to Merck under Section 2.1 shall
terminate;
                    (2) Merck, its Affiliates and Sublicensees shall, upon
written request by Licensor, transfer to Licensor all regulatory documentation,
applications for Regulatory Approval and Regulatory Approvals prepared or
obtained by or on behalf of Merck, its Affiliates or Sublicensees prior to the
date of such termination, to the extent related to Licensed Products and
transferable, and Licensor shall reimburse Merck for its reasonable
Out-of-Pocket Expenses incurred with respect to such transfer, and Merck, its
Affiliates and Sublicensees shall, in addition, promptly after the receipt of a
written request by Licensor, take the additional actions and provide Licensor
with the additional information, materials, access and rights set forth on
Schedule 10.4(c); and
                    (3) Merck, its Affiliates and Sublicensees shall promptly
return to Licensor all relevant records in its possession or control containing
or comprising the Licensor Know-How and the Licensor Materials, or such other
Confidential Information of Licensor.
          (d) Licensed Product Inventory. In the event Licensor terminates this
Agreement pursuant to Section 10.3, or Merck terminates this Agreement pursuant
to Section 10.2 or 10.3 (excluding, for the avoidance of doubt, any election by
Merck under Section 10.3(d) not to terminate this Agreement), Merck and its
Affiliates and Sublicensees shall, at Licensor’s election, either (i) be
entitled, during the [**] month period after the effective date of such
termination, to sell any inventory of Licensed Products which remains on hand as
of the effective date of termination, so long as Merck pays to Licensor the
royalties applicable to said subsequent sales in accordance with the terms and
conditions set forth in this Agreement, or (ii) sell to Licensor any inventory
of Licensed Products then remaining at a price equal to [**].
     10.5 Bankruptcy. All rights and licenses granted under or pursuant to this
Agreement by Licensor are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual
property” as defined under Section 101 of the U.S. Bankruptcy Code. The Parties
agree that Merck, as licensee of such rights under this Agreement, shall retain
and may fully exercise all of its rights and elections under the U.S. Bankruptcy
Code. The Parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against Licensor under the U.S. Bankruptcy Code,
Merck shall be

 

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entitled to a complete duplicate of (or complete access to, as appropriate) any
such intellectual property and all embodiments of such intellectual property,
which, if not already in Merck’s possession, shall be promptly delivered to it
(a) upon any such commencement of a bankruptcy proceeding upon Merck’s written
request therefor, unless Licensor elects to continue to perform all of its
obligations under this Agreement or (b) if not delivered under clause (a),
following the rejection of this Agreement by Licensor upon written request
therefor by Merck.
Article 11
DISPUTE RESOLUTION
     11.1 Disputes. The Parties recognize that disputes as to certain matters
may from time to time arise during the Term which relate to either Party’s
rights and/or obligations hereunder (a “Dispute”). It is the objective of the
Parties to resolve any such Dispute amicably, in an expedient manner, by mutual
cooperation and without resort to litigation. In the event that the Parties are
unable to resolve any Dispute with thirty (30) days (or fifteen (15) days in the
case of a payment Dispute) from the day that one Party had designated the issue
as a Dispute in writing to the other Party, then either Party shall have the
right to escalate such matter to senior management as set forth in Section 11.2.
     11.2 Escalation to Executive Officers. Either Party may, by written notice
to the other Party, request that any Dispute that remained unresolved for a
period of thirty (30) days (or fifteen (15) days in the case of a payment
Dispute) as set forth in Section 11.1 be referred to the President of Merck’s
Pharmaceutical business sector (or his designee) and the Chief Executive Officer
of Licensor (or his designee) (the “Executive Officers”) for resolution, within
fifteen (15) days after their first consideration of such Dispute. If the
Executive Officers cannot resolve such Dispute within fifteen (15) days after
their first consideration of such Dispute, then, at any time after such fifteen
(15) days period, either Party may proceed to enforce any and all of its rights
with respect to such Dispute. Notwithstanding the foregoing, nothing in this
Section 11.2 shall be construed as precluding a Party from bringing an action
for interim relief prior to the initiation or completion of the above procedure.
Article 12
HSR MATTERS
     12.1 HSR Filings. Each of Licensor and Merck shall as promptly as possible,
and not later than January 15, 2008 file with the FTC and the Antitrust Division
of the DOJ, any HSR Filing required of it under the HSR Act with respect to the
transactions contemplated by this Agreement. The Parties shall cooperate with
one another to the extent necessary in the preparation of any HSR Filing
required to be filed under the HSR Act. Each Party shall be responsible for its
own costs, expenses, and filing fees associated with any HSR Filing.
     12.2 HSR Cooperation; Further Assurances. Licensor and Merck agree, and
shall cause each of their respective Affiliates, to cooperate and to use their
respective commercially reasonable efforts to obtain any HSR Clearance required
for the consummation of the transactions contemplated under this Agreement, to
request early termination of the applicable

 

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

 

waiting period under the HSR Act (if HSR Clearance is required) and to respond
to any government requests for information under the HSR Act. The Parties will
consult and cooperate with one another, and consider in good faith the views of
one another, in connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or submitted by or on
behalf of either Party in connection with proceedings under or relating to the
HSR Act.
     12.3 HSR-Related Defined Terms.
          (a) “DOJ” means the United States Department of Justice.
          (b) “FTC” means the United States Federal Trade Commission.
          (c) “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (15 U.S.C. Sec. 18a), and the rules and regulations
promulgated thereunder.
          (d) “HSR Clearance” means either (a) early termination of the
applicable waiting period under the HSR Act with respect to the HSR Filings or
(b) expiration of the applicable waiting period under the HSR Act with respect
to the HSR Filings.
          (e) “HSR Clearance Date” means the earlier of (a) the date on which
the FTC or DOJ shall notify Licensor and Merck of early termination of the
applicable waiting period under the HSR Act or (b) the day after the date on
which the applicable waiting period under the HSR Act expires.
          (f) “HSR Filings” means the filings by Merck and Licensor with the FTC
and the Antitrust Division of the DOJ of a Notification and Report Form for
Certain Mergers and Acquisitions (as that term is defined in the HSR Act) with
respect to the matters set forth in this Agreement, together with all required
documentary attachments thereto.
     12.4 Termination Based on Failure to Obtain HSR Clearance. The Agreement
shall immediately terminate in the event that the FTC and/or the DOJ shall
obtain a permanent injunction under the HSR Act against Merck and Licensor to
enjoin the transactions contemplated by this Agreement. In addition, Licensor
shall have the right to terminate this Agreement upon notice to Merck if the HSR
Clearance Date shall not have occurred on or prior to the date that is one
hundred and eighty (180) days after the Parties’ filing of any required HSR
Filings.
Article 13
MISCELLANEOUS PROVISIONS
     13.1 Relationship of the Parties. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, joint venture or
employer-employee relationship between the Parties.
     13.2 Assignment.

 

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          (a) Except as expressly provided herein, neither this Agreement nor
any interest hereunder shall be assignable, nor any other obligation delegable,
by Licensor without the prior written consent of Merck (not to be unreasonably
withheld or delayed). Notwithstanding the foregoing, Licensor may assign this
Agreement in whole without the consent of Merck to (a) any Affiliate or (b) a
successor to substantially all of the business of the assigning Party to which
this Agreement relates, in connection with any merger, sale of stock, sale of
assets or other similar transaction; provided that such assignment shall not
provide Merck with rights or access to intellectual property rights of any such
successor.
          (b) Merck may assign this Agreement, in whole or in part, to any
Affiliate or Third Party without the consent of Licensor. Merck shall give
written notice to Licensor promptly following any such assignment.
          (c) No assignment under this Section 13.2 shall relieve the assigning
party of any of its responsibilities or obligations hereunder and provided,
further, that as a condition of such assignment, the assignee shall agree to be
bound by all obligations of the assigning party hereunder.
          (d) This Agreement shall be binding upon the successors and permitted
assigns of the Parties.
          (e) Any assignment not in accordance with this Section 13.2 shall be
void.
     13.3 Performance by Affiliates. Merck shall have the right to have any of
its obligations hereunder performed, or its rights hereunder exercised, by, any
of its Affiliates and the performance of such obligations by any such
Affiliate(s) shall be deemed to be performance by Merck; provided, however,
Merck shall be responsible for ensuring the performance of its obligations under
this Agreement and that any failure of any Affiliate performing obligations of
Merck hereunder shall be deemed to be a failure by Merck to perform such
obligations.
     13.4 Change of Control. In the event of a Change of Control of Licensor
involving a Merck Competitor, then from and after the date of such Change of
Control, (a) Merck shall cease to have any reporting obligations hereunder
toward Licensor or its successor entity, except for the royalty reports required
under Section 5.8; (b) require Licensor, including the Change of Control party,
to adopt reasonable procedures to be agreed upon in writing with Merck to
prevent the disclosure of all Confidential Information of Merck and its
Affiliates and other information with respect to the Development of Compounds,
Follow-On Compounds and Licensed Products (collectively “Sensitive Information”)
beyond Licensor personnel having access to and knowledge of Sensitive
Information prior to the Change of Control and to control the dissemination of
Sensitive Information disclosed after the Change of Control. The purposes of
such procedures shall be to strictly limit such disclosures to only those
personnel having a need to know Sensitive Information in order for Licensor to
perform its obligations under this Agreement and to prohibit the use of
Sensitive Information for competitive reasons against Merck and its Affiliates,
including the use of Sensitive Information for the development or
commercialization of Competing Products.

 

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     13.5 Further Actions. Each Party agrees to execute, acknowledge and deliver
such further instruments and to do all such other acts as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
     13.6 Accounting Procedures. Each Party shall calculate all amounts
hereunder and perform other accounting procedures required hereunder and
applicable to it in accordance with either, as applicable (a) United States
generally accepted accounting principles (US GAAP) or (b) International
Financial Reporting Standards (IFRS), whichever is normally used by such Party
to calculate its financial position, and in each case consistently applied by
such Party.
     13.7 Force Majeure. Neither Party shall be liable to the other for failure
or delay in the performance of any of its obligations under this Agreement for
the time and to the extent such failure or delay is caused by acts of God,
earthquake, riot, civil commotion, terrorism, war, strikes or other labor
disputes, fire, flood, failure or delay of transportation, default by suppliers
or unavailability of raw materials, governmental acts or restrictions or any
other reason which is beyond the control of the respective Party. The Party
affected by force majeure shall provide the other Party with full particulars
thereof as soon as it becomes aware of the same (including its best estimate of
the likely extent and duration of the interference with its activities), and
will use Commercially Reasonable Efforts to overcome the difficulties created
thereby and to resume performance of its obligations hereunder as soon as
practicable.
     13.8 No Trademark Rights. Except to the extent set forth in Section 3.11
above, no right, express or implied, is granted by this Agreement to a Party to
use in any manner the name or any other trade name or trademark of the other
Party in connection with the performance of this Agreement or otherwise.
     13.9 Entire Agreement of the Parties; Amendments. This Agreement and the
schedules and exhibits hereto constitute and contain the entire understanding
and agreement of the Parties respecting the subject matter hereof and cancel and
supersede any and all prior negotiations, correspondence, representations,
assurances, promises, understandings and agreements between the Parties, whether
oral or written, regarding such subject matter (each a “Pre-Contractual
Statement”). Each Party acknowledges that it is not entering into this Agreement
in reliance on any Pre-Contractual Statement. Neither Party shall have any right
of action against the other Party arising out of or in connection with any
Pre-Contractual Statement (except in the case of fraud or fraudulent
misrepresentation). Notwithstanding the foregoing, the [**], and the [**], shall
remain in full force and effect in accordance with its terms with respect to
transfers of materials and disclosures of information governed thereby prior to
the Effective Date, but shall be superseded by this Agreement with respect to
such transfers and disclosures occurring on or after the Effective Date. No
waiver, modification or amendment of any provision of this Agreement shall be
valid or effective unless made in a writing referencing this Agreement and
signed by a duly authorized officer of each Party.
     13.10 Captions. The captions to this Agreement are for convenience only,
and are to be of no force or effect in construing or interpreting any of the
provisions of this Agreement.
     13.11 Governing Law; Jurisdiction. This Agreement shall be governed by and
interpreted in accordance with English law, excluding application of any
conflict of laws

 

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principles that would require application of the Law of any other jurisdiction.
Subject to Article 11, the courts of England are to have exclusive jurisdiction
to settle any dispute arising out of or in connection with this Agreement. Any
proceedings, suit or action arising out of or in connection with this Agreement
(“Proceedings”) shall therefore be brought in the English courts. Each Party
agrees that this jurisdiction agreement is irrevocable and that it is for the
benefit of the other Party. Each Party irrevocably waives (and irrevocably
agrees not to raise) any objection, on the ground of forum non conveniens or on
any other ground, to the taking of Proceedings in the English courts. Each Party
also irrevocably agrees that a judgment against it in Proceedings brought in the
English courts shall (provided there is no appeal pending or open) be conclusive
and binding upon it and may be enforced in any other jurisdiction.
     13.12 Notices and Deliveries. Any notice, request, approval or consent
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been sufficiently given if delivered in person,
transmitted by facsimile (receipt verified) or by express courier service
(signature required) to the Party to which it is directed at its address or
facsimile number shown below or such other address or facsimile number as such
Party shall have last given by notice to the other Party.
If to Merck, addressed to:
Merck KGaA
Frankfurter Strasse 250
64293 Darmstadt, Germany
Attn: Merck Serono Legal Department
Facsimile: 49-6151-72-2373
If to Licensor, addressed to:
Idera Pharmaceuticals, Inc.
167 Sidney Street
Cambridge, MA 02139
Attention: Chief Executive Officer
Facsimile: (617) 679-5592
With a copy to:
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: David E. Redlick, Esq.
Facsimile: (617) 526-5000
     13.13 Waiver. A waiver by either Party of any of the terms and conditions
of this Agreement in any instance shall not be deemed or construed to be a
waiver of such term or condition for the future, or of any other term or
condition hereof. All rights, remedies, undertakings, obligations and agreements
contained in this Agreement shall be cumulative and

 

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none of them shall be in limitation of any other remedy, right, undertaking,
obligation or agreement of either Party.
     13.14 Rights Of Third Parties. The Parties to this Agreement do not intend
that any term of this Agreement shall be enforceable by virtue of the Contract
(Rights of Third Parties) Act 1999 or otherwise by any Person who is not a Party
to this Agreement.
     13.15 Severability. When possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable Law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable Law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement. The Parties shall make a good faith effort to replace the invalid or
unenforceable provision with a valid one which in its economic effect is most
consistent with the invalid or unenforceable provision.
     13.16 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, and all of which
together will be deemed to be one and the same instrument. A facsimile copy of
this Agreement, including the signature pages, will be deemed an original.
[Remainder of page intentionally left blank]

 

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     In Witness Whereof, the Parties have caused this Agreement to be executed
and delivered by their respective duly authorized officers as of the day and
year first above written, each copy of which shall for all purposes be deemed to
be an original.

                IDERA PHARMACEUTICALS, INC.
  MERCK KGaA
    By   /s/ Sudhir Agrawal     By   /s/ Elmar Schnee       Name:   Sudhir
Agrawal      Name:   Elmar Schnee      Title:   CEO and CSO      Title:  
General Partner
and Member of the Executive Board                                  i.V.
    By       By   /s/ Jens Eckhardt       Name:         Name:   Jens Eckhardt   
  Title:         Title:   Legal Counsel     

 

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Schedule 1.11
Molecular Structures of Compounds
IMO-2055:
[**]
IMO-2125:
[**]

 

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Schedule 1.24
Characteristics of Follow-On Compounds
Follow-On Compounds will be evaluated for their ability to meet or exceed the
activity of [**], which shall serve as the benchmark for the synthesis of
Follow-On Compounds. Follow-On Compounds that meet or exceed the activity of
[**] in the following assays will be deemed to have satisfied the evaluation
criteria and will be designated as Follow-On Compounds. Any assay conducted
using primary human cells shall be conducted separately using cells from two
individual donors.
[**]

 

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Schedule 1.37
Licensor Materials
Compounds
Present Inventory:
Licensor will provide Merck with the Drug Product vials [**].
The bulk API will be provided to Merck against reimbursement by Merck of the
costs which Idera had incurred [**]. Merck will elect in writing within [**]
days after Effective Date if and to what extent bulk API shall be transferred to
Merck. Such election shall be in [**] gram quantities.

         
[**]
  Approximately [**]
grams bulk API   Approximately [**]
[**]mg Drug Product
vials

Follow-On Compounds
Licensor will provide Merck with up to [**]mg of each Follow-On Compound at time
of transfer to Merck pursuant to Section 3.6, [**] to Merck.

          IDP Compound #   Sequence   Modifications
[**]
  [**]   [**]
[**]
  [**]   [**]
[**]
  [**]   [**]
[**]
  [**]   [**]
[**]
  [**]   [**]
[**]
  [**]   [**]

[**].

 

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Schedule 1.38
Licensor Patents

                                     
Idera Number:
  Docket #   Continuation   PCT
Nationalization
County   Title:   Status   Application
Number   Application
Date   Patent /Publication
Number   Grant
Date  

[**]
Confidential materials omitted and filed separately with the Securities and
Exchange Commission. A total of 7 pages have been omitted.

 

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Schedule 2.3
Initial Technology Transfer
Technology Transfer Plan — IMO-2055 & IMO-2125
     [**]

 

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Schedule 2.4
Manufacturing Technology Transfer
Manufacturing Technology Transfer Plan — IMO-2055 & IMO-2125
     [**]

 

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Schedule 3.3
On-Going Trials Budget
Theradex® Study Budget — IDP 2055-200 (NSCLC) — Payment Schedule.
[**]
Confidential materials omitted and filed separately with the Securities and
Exchange Commission. A total of 17 pages have been omitted.

 

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Schedule 6.5
Patent Countries
[**]

 

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Schedule 7.3.1
Idera Press Release
(IDERA PHARMACEUTICALS LOGO) [b68194ipb6819401.gif]
Contacts:

     
Idera Pharmaceuticals, Inc.
  MacDougall Biomedical Communications
Kelly Luethje
  Chris Erdman
617-679-5519
  508-647-0209
E-mail: kluethje@iderapharma.com
  E-mail: cerdman@macbiocom.com

Idera Pharmaceuticals and Merck KGaA to Collaborate
on Development of TLR9 Agonists for Treatment of Cancer
Cambridge, MA, December XX, 2007 — Idera Pharmaceuticals, Inc. (Nasdaq: IDRA)
announced today that it has entered into a worldwide licensing and collaboration
agreement with Merck KGaA of Darmstadt, Germany, for the research, development
and commercialization of Idera’s Toll-like Receptor 9 (TLR9) agonists for the
treatment of cancer.
Under the agreement, Idera has agreed to exclusively license the therapeutic
oncology applications, excluding cancer vaccines, of its lead TLR9 agonists,
IMO-2055 and IMO-2125. In addition, Idera and Merck KGaA have agreed to engage
in a research collaboration to identify a specified number of novel, follow-on
TLR9 agonists, which will be derived using Idera’s chemistry-based approach and
for which Merck will have the exclusive right to use in oncology applications
other than cancer vaccines.
“Merck is committed to the development of innovative approaches to cancer
therapy on a global basis and we expect that this collaboration with Idera will
help us move toward that goal,” said Vincent Aurentz, Executive Board Member and
Head of Portfolio Management and Business Development for the Merck Serono
division. “We believe that TLR9 agonists represent a novel mechanism of action
with great potential and we look forward to advancing their development for
various oncology indications.”
Under the terms of the agreement, Merck KGaA has agreed to pay an upfront
license fee of $40 million (about EUR 27 million based on current exchange
rates) to Idera. In addition, Idera is eligible to receive milestone payments of
up to $389 million, based on current exchange rates, (EUR 264 million),
depending on success in achieving clinical development and commercialization, as
well as royalties on sales of any products developed and commercialized by Merck
KGaA using IMO-2055, IMO-2125 or the follow-on TLR9 agonists. The contract will
take effect and the upfront fee will be paid

Page 2 of 18

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following, and subject to, regulatory clearance under the Hart-Scott-Rodino
Antitrust Improvements Act.
“Idera has chosen to collaborate with Merck KGaA for the application of our TLR9
agonists in oncology because of its proven capabilities and success in
developing novel therapies for cancer and their commitment to global research,
development and commercialization in this area,” said Sudhir Agrawal, D. Phil.,
Chief Executive Officer and Chief Scientific Officer of Idera. “This
collaboration adds Merck KGaA’s experience and resources to the development of
our TLR9 agonists in oncology and provides us with additional capital to advance
our internal TLR-targeted drug discovery and development programs. We look
forward to working closely with Merck KGaA to realize the potential of TLR9
agonists in cancer therapy.”
About IMO-2055
IMO-2055 is a novel DNA-based agonist of TLR9. IMO-2055 has been evaluated at
multiple-dose levels for safety and immunological activity in Phase 1 trials
involving healthy volunteers and patients with refractory solid tumors. IMO-2055
is currently in a Phase 1b trial in combination with Tarceva® and Avastin® in
patients with advanced non-small cell lung cancer and is being evaluated at two
dose levels in a Phase 2a trial in patients with renal cell carcinoma. IMO-2055
also is being evaluated in combination with chemotherapy agents in a Phase 1
trial in patients with refractory solid tumors.
About IMO-2125
IMO-2125 is a second DNA-based TLR9 agonist and is of a class designed to induce
high levels of interferon-alpha and other cytokines and chemokines. IMO-2125
presently is being evaluated in a Phase I trial in patients with chronic
hepatitis C virus infection who have not responded to standard treatment. This
indication is not included in the agreement with Merck KGaA.
About TLRs
Toll-like Receptors (TLRs) function in human immune cells as the sensors of
pathogens. They recognize different microbial products present in pathogens such
as bacteria, viruses and parasites, and mount an appropriate immune response
against the foreign invaders. TLRs have also been shown to recognize endogenous
ligands in autoimmune diseases. TLRs have become attractive targets for
developing immune modulators to treat a number of diseases, including cancers
and infectious, respiratory and autoimmune diseases, and for use as vaccine
adjuvants.
About Merck KGaA
Merck of Darmstadt, Germany, is a global pharmaceutical and chemical company
with sales of EUR 6.3 billion in 2006, a history that began in 1668, and a
future shaped by 30,962 employees in 61 countries. Its success is characterized
by innovations from entrepreneurial employees. Merck’s operating activities come
under the umbrella of Merck KGaA, in which the Merck family holds an
approximately 70% interest and free shareholders own the remaining approximately
30%. In 1917 the U.S. subsidiary Merck & Co. was expropriated and has been an
independent company ever since.

Page 3 of 18

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About Idera Pharmaceuticals, Inc.
Idera Pharmaceuticals is a drug discovery and development company that is
developing drug candidates to treat cancer and infectious, respiratory, and
autoimmune diseases, and for use as vaccine adjuvants. Idera’s proprietary drug
candidates are designed to modulate specific TLRs, which are a family of immune
system receptors. Idera’s pioneering DNA chemistry expertise enables it to
identify drug candidates for internal development and creates opportunities for
multiple collaborative alliances. Internal programs include IMO-2125, a lead
candidate for treating infectious diseases, and discovery-stage compounds for
autoimmune diseases. Idera has identified DNA-based compounds which have been
shown to act as antagonists to TLRs 7 and 9 in preclinical studies and are being
evaluated in preclinical disease models of lupus, collagen-induced arthritis and
multiple sclerosis. Idera is collaborating with Novartis International
Pharmaceutical, Ltd. for the discovery, development, and commercialization of
TLR9 agonists for the treatment of asthma and allergy indications. Idera is also
collaborating with Merck & Co., Inc. for the use of Idera’s TLR7, 8 and 9
agonists in combination with Merck & Co.’s therapeutic and prophylactic vaccines
in the areas of oncology, infectious diseases, and Alzheimer’s disease. Merck &
Co. of the U.S. is not related to Merck KGaA of Germany. For more information,
visit www.iderapharma.com.
Idera Forward Looking Statements
This press release contains forward-looking statements concerning Idera
Pharmaceuticals, Inc. that involve a number of risks and uncertainties. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “estimates,”
“intends,” “should,” “could,” “will,” “may,” and similar expressions are
intended to identify forward-looking statements. There are a number of important
factors that could cause Idera’s actual results to differ materially from those
indicated by such forward-looking statements, including whether the
collaboration with Merck KGaA will be successful and whether the Company will
receive any of the milestone payments provided for under the collaboration;
whether products based on Idera’s technology will advance into or through the
clinical trial process on a timely basis or at all and receive approval from the
United States Food and Drug Administration or equivalent foreign regulatory
agencies; whether, if the Company’s products receive approval, they will be
successfully distributed and marketed; whether the results of preclinical
studies will be indicative of results that may be obtained in clinical trials;
whether the Company’s collaborations with Novartis and Merck & Co. will be
successful; whether Idera’s cash resources will be sufficient to fund the
Company’s operations, including product development and clinical trials; and
such other important factors as are set forth under the caption “Risk Factors”
in Idera’s Quarterly Report on Form 10-Q filed on November 13, 2007, which
important factors are incorporated herein by reference. Idera disclaims any
intention or obligation to update any forward-looking statements.
# # #

Page 4 of 18

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Schedule 7.3.2
Merck Press Release

     
 
  Your Contact  
 
  Phyllis Carter
News Release
  Phone +49 6151-72 7144

December xx, 2007
Merck KGaA and Idera Pharmaceuticals to Collaborate
on Development of TLR9 Agonists for Treatment of Cancer
Darmstadt, December xx, 2007 — Merck KGaA announced today that it has entered
into a worldwide licensing and collaboration agreement on behalf of its Merck
Serono division with Idera Pharmaceuticals, Inc. of Cambridge, Massachusetts,
USA (Nasdaq: IDRA) for the research, development, and commercialization of
Idera’s Toll-like Receptor 9 (TLR9) agonists for the treatment of cancer.
Under the agreement, Idera has agreed to exclusively license the therapeutic
oncology applications, excluding their use with cancer vaccines, of its lead
TLR9 agonists, IMO-2055 and IMO-2125. In addition, Merck and Idera have agreed
to engage in a research collaboration to identify a specified number of novel,
follow-on TLR9 agonists, which will be derived using Idera’s chemistry-based
approach and for which Merck will have the exclusive right to use in oncology
applications other than cancer vaccines.
“Merck is committed to the development of innovative approaches to cancer
therapies on a global basis and we expect that this collaboration with Idera
will help us move toward that goal,” said Vincent Aurentz, Executive Board
Member and Head of Portfolio Management and Business Development for the Merck
Serono division. “We believe that TLR9 agonists represent a novel mechanism of
action with great potential and we look forward to advancing their development
for various oncology indications.”
Under the terms of the agreement, Merck has agreed to pay an up-front license
fee of $40 million (about EUR 27 million based on current exchange rates) to
Idera. In addition, Idera is eligible to receive milestone payments of up to
$389 million based on current exchange rates (EUR 264 million), depending on
success in achieving clinical development and commercialization, as well as
royalties on sales of any products developed and commercialized by Merck based
on IMO-2055, IMO-2125 or the follow-on TLR9 agonists. The contract will take
effect and the upfront fee will be paid following regulatory clearance under the
Hart-Scott-Rodino Antitrust Improvements Act.
“Idera has chosen to collaborate with Merck KGaA for the application of our TLR9
agonists in oncology because of its proven capabilities and success in
developing novel therapies for cancer and its commitment to global research,
development and

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commercialization in this area,” said Sudhir Agrawal, D. Phil., Chief Executive
Officer and Chief Scientific Officer of Idera.
About IMO-2055
IMO-2055 is a novel DNA-based agonist of TLR9. It has been evaluated at multiple
dose levels for safety and immunological activity in Phase I trials involving
healthy volunteers and patients with refractory solid tumors. IMO-2055 is
currently in a Phase 1b trial in combination with Tarceva® and Avastin® in
patients with advanced non-small cell lung cancer and is being evaluated at two
dose levels in a Phase IIa trial in patients with renal-cell carcinoma (kidney
cancer). It also is being evaluated in combination with chemotherapy agents in a
Phase I trial in patients with refractory solid tumors.
About IMO-2125
IMO-2125 is a second DNA-based TLR9 agonist and is of a class designed to induce
high levels of interferon-alpha and other cytokines and chemokines. IMO-2125
currently is being evaluated in a Phase I trial in patients with chronic
hepatitis C virus infection who have not responded to standard treatment. This
indication is not included in the agreement with Merck.
About TLRs
Toll-like Receptors (TLRs) function in human immune cells as the sensors of
pathogens. They recognize different microbial products present in pathogens such
as bacteria, viruses and parasites, and mount an appropriate immune response
against the foreign invaders. TLRs have also been shown to recognize endogenous
ligands in autoimmune diseases. TLRs have become attractive targets for
developing immune modulators to treat a number of illnesses, including cancers
and infectious, respiratory and autoimmune diseases, and for use as vaccine
adjuvants.
About Idera Pharmaceuticals, Inc.
Idera Pharmaceuticals is a drug discovery and development company that is
developing drug candidates to treat cancer and infectious, respiratory, and
autoimmune diseases, and for use as vaccine adjuvants. Idera’s proprietary drug
candidates are designed to modulate specific TLRs, which are a family of immune
system receptors. Idera’s pioneering DNA chemistry expertise enables it to
identify drug candidates for internal development and creates opportunities for
multiple collaborative alliances. For more information, visit
www.iderapharma.com.
All Merck Press Releases are distributed by e-mail at the same time they become
available on the Merck Website. Please go to http://www.subscribe.merck.de to
register online, change your selection or discontinue this service.
Merck is a global pharmaceutical and chemical company with sales of EUR
6.3 billion in 2006, a history that began in 1668, and a future shaped by 30,962
employees in 61 countries. Its success is characterized by innovations from
entrepreneurial employees. Merck’s operating activities come under the umbrella
of Merck KGaA, in which the Merck family holds an approximately 70% interest and
free shareholders own the remaining approximately 30%. In 1917 the U.S.
subsidiary Merck & Co. was expropriated and has been an independent company ever
since.

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Schedule 10.4(c)
Other Effects of Termination
Part I: General
Pursuant to Section 10.4(c), Merck, its Affiliates and Sublicensees shall, at
Licensor’s request:
     (A) notify the applicable Regulatory Authorities relating to such
regulatory documentation, applications for Regulatory Approvals and Regulatory
Approvals;
     (B) provide Licensor with copies of all correspondence between Merck and
any Regulatory Authorities relating to such regulatory filings, applications for
Regulatory Approval and Regulatory Approval;
     (C) assign (or cause its Affiliates to assign) to Licensor all agreements
with any Third Party with respect to the conduct of clinical trials for the
terminated Compounds, Follow-On Compounds and/or Licensed Products, including
agreements with contract research organizations, clinical sites and
investigators, unless expressly prohibited by any such agreement (in which case
Merck shall cooperate, and shall cause its Affiliates and Sublicensees to
cooperate, with Licensor in all reasonable respects to secure the consent of
such Third Party to such assignment);
     (D) provide Licensor with copies of all reports and data generated or
obtained by or on behalf of Merck or its Affiliates or Sublicensees pursuant to
this Agreement that relate to any Compounds, Follow-On Compounds and/or Licensed
Products that have not previously been provided to Licensor;
     (E) if Merck, its Affiliates or Sublicensees have manufactured, are
manufacturing or are having manufactured any Compounds, Follow-On Compounds,
Licensed Products and/or any intermediate thereof: (x) Merck shall, if requested
by Licensor, supply Licensor with requirements for all such Compounds, Follow-On
Compounds, Licensed Products and intermediates for up to [**] months after such
termination at a transfer price equal to [**], (y) within ninety (90) days after
Licensor’s written request, Merck shall provide to Licensor or its designee all
information in its possession with respect to the manufacture of each such
Compound, Follow-On Compound, Licensed Product or intermediate;
     (F) grant to Licensor a non-exclusive, world-wide, irrevocable, perpetual,
royalty-bearing (as set forth on this Schedule 10.4(c)), license, including the
right to grant sublicenses, in, to and under the Merck Patents, including
Merck’s interest in any Joint Patents, and under any other intellectual property
rights of Merck claiming or disclosing subject matter conceived, discovered,
made or reduced to practice (in whole or in part) after the Effective Date by or
on behalf of Merck, its Affiliates or Sublicensees pursuant to the research,
use, Development, manufacture, or Commercialization of Compounds, Follow-On
Compounds or Licensed Products, to research, Develop, make, have made, import,
export, use and Commercialize, Compounds, Follow-On Compounds and Licensed
Products in the Field; and

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     (G) grant to Licensor an exclusive, worldwide, irrevocable, perpetual,
royalty-bearing (as set forth on this Schedule 10.4(c)), license under all
trademarks (if any) then being used by Merck with respect to the applicable
Compounds, Follow-On Compounds and/or Licensed Products; provided that the
foregoing shall not include any right or license in or to Merck’s corporate
tradenames, trademarks or logos.
Part II: “Reverse” Royalty
If Licensor elects to (a) use clinical data owned by Merck, its Affiliates or
sublicensees and provided to Licensor pursuant to Section 10.4(c) or this
Schedule 10.4(c) (excluding safety data and other data required by a Regulatory
Authority to be submitted) to support an application for Regulatory Approval for
a Licensed Product that reverts to Licensor pursuant to Section 10.4(c),
(b) obtain a non-exclusive license under Merck Patents solely owned by Merck
pursuant to Paragraph F, and/or (c) obtain an exclusive trademark license under
Paragraph G, in consideration of such rights and licenses, then if (and only if)
Licensor’s notice of termination pursuant to Section 10.3 or Merck’s notice of
termination pursuant to Section 10.2 or 10.3 is given after Merck’s completion
of at least one Phase II Clinical Trial with respect to such Licensed Product,
the following provisions shall apply to such Licensed Product (but not to other
Licensed Products):
A. License Fee for Licensed Products
Within thirty (30) days after the first commercial sale of such Licensed Product
by Licensor, its Affiliates or sublicensees (with first commercial sale to be
determined by applying the definition of First Commercial Sale to the sale of
the Licensed Product by Licensor, its Affiliates and sublicensees, a “Licensor
First Commercial Sale”), Licensor shall pay to Merck a one-time payment equal to
[**] percent ([**]%) of all milestone payments actually paid by Merck to
Licensor pursuant to Section 5.2 with respect to such Licensed Product.
B. Royalty Payments for Licensed Products
In addition to A. above, Licensor shall pay Merck a royalty in the amount set
forth below on net sales of such Licensed Product by Licensor, its Affiliates or
sublicensees after the effective date of termination (with such net sales being
determined by applying the definition of Net Sales mutatis mutandis to any such
sales of such Licensed Product by Licensor, its Affiliates or sublicensees)
(hereinafter, respectively, “Licensor Net Sales” and the “Post-Termination
Royalty”).
The applicable royalty rate shall be determined on a Licensed
Product-by-Licensed Product and country-by-country basis based on the annual
worldwide Licensor Net Sales of such Licensed Product.
1. The use of clinical data owned by Merck, its Affiliates or sublicensees and
provided to Licensor pursuant to Section 10.4(c) or this Schedule 10.4(c)
(excluding safety data and other data required by a Regulatory Authority to be
submitted) to support an application for Regulatory Approval for a Licensed
Product that reverts to Licensor pursuant to Section 10.4(c) shall bear a
royalty between [**] percent ([**]%) and [**] percent ([**]%) of Licensor Net
Sales, as determined in accordance with the royalty chart set forth below. For
purposes of

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clarity, the provision of (a) safety data, and/or (b) data, information or
documentation other than clinical data, shall not, by itself, trigger a royalty
obligation pursuant to this Paragraph 1.
2. In addition to Paragraph 1 above of this Part II, the grant of a
non-exclusive license pursuant to Paragraph (F) of this Schedule 10.4(c) shall
bear a royalty between [**] percent ([**]%) and [**] percent ([**]%) of Licensor
Net Sales, as determined in accordance with the royalty chart set forth below;
provided that the royalty obligation set forth in this Paragraph 2 shall apply
solely with respect to a non-exclusive license elected under the Merck Patents
solely owned by Merck.
3. In addition to Paragraph 1 and/or 2 of this Part II, the grant of an
exclusive license to the trademark(s) pursuant to Paragraph (G) of this
Schedule 10.4(c) shall bear a royalty between [**] percent ([**]%) and [**]
percent ([**]%) of Licensor Net Sales, as determined in accordance with the
royalty chart set forth below.
4. Except as expressly provided on this Schedule 10.4(c), Licensor shall have no
obligation to make any payments to Merck in consideration for the rights,
licenses, information and materials provided or to be provided to Licensor
pursuant to Section 10.4(c) or this Schedule 10.4(c).

      Annual Worldwide Licensed Product Licensor Net Sales   Incremental Royalty
(in €) per Calendar Year   Rate
 
   
For Licensor Net Sales of all Licensed Products from €[**]up to and including
€[**]
  [**]%
 
   
For that portion of Licensor Net Sales of all Licensed Products that is greater
than €[**]and less than or equal to €[**]
  [**]%
 
   
For that portion of Licensor Net Sales of all Licensed Products that is greater
than €[**]and less than or equal to €[**]
  [**]%
 
   
For that portion of Licensor Net Sales of all Licensed Products that is greater
than €[**]
  [**]%

By way of illustration, assume in a Calendar Year that Licensor Net Sales of all
Licensed Products in Euros total €[**], and that only one of Paragraphs 1, 2 or
3 above applies. The total royalties due and payable by Licensor to Merck for
such Licensor Net Sales would be [**] Euros (€[**]), calculated as follows:
          [**]
               Total Royalty      = €[**]
If two (2) of Paragraphs 1, 2 and 3 above apply, the total royalties due and
payable by Licensor to Merck would be €[**]. If all of Paragraphs 1, 2 and 3
above apply, the total royalties due and payable by Licensor to Merck would be
€[**].
For purposes of determining whether a royalty threshold described above has been
attained, only Licensor Net Sales that are subject to a royalty payment shall be
included in the total amount of

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Licensor Net Sales and any Licensor Net Sales of Licensed Products for which the
applicable Post-Termination Royalty Term (as defined below) has expired shall be
excluded.
The royalty obligations set forth on this Schedule 10.4(c) shall be determined
on a Licensed Product-by-Licensed Product and country-by-country basis and shall
be payable for the period commencing on the Licensor First Commercial Sale of
such Licensed Product by Licensor, its Affiliates or sublicensees in such
country and ending ten (10) years thereafter, provided however, that in the
event Licensor elected to obtain a license to a Merck Patent under Paragraph F
of this Schedule 10.4(c), then such royalty shall be payable for the longer of
(i) ten 10 years after the date of the Licensor First Commercial Sale of such
Licensed Product by Licensor, its Affiliates or sublicensees in such country, or
(ii) the date on which the manufacture, use, sale, offer for sale or importation
of such Licensed Product in such country ceases to be Covered by a Valid Claim
of a Merck Patent solely owned by Merck (the “Post-Termination Royalty Term”).
Upon the expiration of each Post-Termination Royalty Term, all rights and
licenses with respect to which the Post-Termination Royalty Term has expired
shall become fully paid, royalty-free, irrevocable, perpetual, transferable and
sublicensable.
Except for the last sentence of Section 5.7, Sections 5.6 through 5.13 of the
Agreement shall apply mutatis mutandis to payments to be made by Licensor under
this Part B of Schedule 10.4(c) as if Licensor was Merck, and Merck was Licensor
in any of these Sections.

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