Exhibit 10.11

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***]
HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE
COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

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RESEARCH COLLABORATION AND OPTION TO LICENSE AGREEMENT

by and between

SYNTHETIC GENOMICS, INC.

and

MERCK SHARP & DOHME CORP.

 

 

 

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TABLE OF CONTENTS

10

 

 

Article 1 DEFINITIONS.

1

Article 2 RESEARCH PROGRAM

10

2.1

General

10

2.2

Performance of Research Plan

10

2.3

Joint Steering Committee

10

2.4

Alliance Managers

11

2.5

Exchange of Information

12

2.6

Records and Reports

12

2.7

Research Information and Inventions

12

2.8

Term of the Research Program(s)

13

2.9

Compliance with Law and Ethical Business Practices

13

2.10

Animal Research

14

2.11

Materials

14

Article 3 OPTION TO LICENSE; LICENSE; DEVELOPMENT AND COMMERCIALIZATION.

15

3.1

Option

15

3.2

Following Option Exercise by Merck.

15

3.3

No Implied Licenses

16

3.4

No Grant of Inconsistent Rights by Company

16

3.5

Sublicenses

16

3.6

Development and Commercialization

17

3.7

Exclusivity

17

Article 4 CONFIDENTIALITY AND PUBLICATION.

17

4.1

Nondisclosure Obligation

17

4.2

Publication

19

4.3

Publicity/Use of Names

19

Article 5 PAYMENTS; ROYALTIES AND REPORTS

20

5.1

Payments During the Research Program

20

5.2

Payments Upon and After Option Exercise (if any)

21

Article 6 REPRESENTATIONS AND WARRANTIES

27

 

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6.1

Representations and Warranties of Each Party

27

6.2

Company Representations and Warranties

28

6.3

Warranty Disclaimer

28

Article 7 PATENT PROVISIONS.

28

7.1

Filing, Prosecution and Maintenance of Patents

28

7.2

Interference, Derivation, Opposition, Reexamination, Reissue, Supplemental
Examination, Inter Partes Review and Post-Grant Review Proceedings

33

7.3

Enforcement and Defense

34

Article 8 TERM AND TERMINATION

36

8.1

Term and Expiration

36

8.2

Termination by Merck

36

8.3

Termination for Cause

36

8.4

Effects of Termination

38

8.5

Effect of Expiration or Termination; Survival

38

Article 9 MISCELLANEOUS

39

9.1

Indemnification

39

9.2

Limitation of Liability

39

9.3

Force Majeure

40

9.4

Assignment

40

9.5

Use of Affiliates

40

9.6

Severability

40

9.7

Notices

40

9.8

Applicable Law

41

9.9

Dispute Resolution

41

9.10

Entire Agreement; Amendments

42

9.11

Headings

43

9.12

Independent Contractors

43

9.13

Waiver

43

9.14

Waiver of Rule of Construction

43

9.15

Certain Conventions.

43

9.16

Business Day Requirements

43

9.17

Counterparts

43

 

 

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RESEARCH COLLABORATION AND OPTION TO LICENSE AGREEMENT

This Research Collaboration and Option to License Agreement (this “Agreement”)
is effective as of May 22, 2017 (the “Effective Date”) and is entered into by
and between SYNTHETIC GENOMICS, INC., a corporation organized and existing under
the laws of Delaware (“Company”), and MERCK SHARP & DOHME CORP., a corporation
organized and existing under the laws of New Jersey (“Merck”).

 

RECITALS:

WHEREAS, Company has developed and is the owner of certain proprietary
technology relating to engineering bacteriophages;

WHEREAS, Merck is interested in working with the Company to generate a [***]
bacteriophage targeting [***] and, [***]

WHEREAS, through the [***] Research Plan (as defined below), and, if entered
into pursuant to the terms hereof, the [***] Research Plan (as defined below),
the Company will endeavor to generate bacteriophages meeting certain criteria as
set forth herein; and

WHEREAS, during the term of the License Option (as defined below), Merck shall
have the exclusive option to exclusively license any such bacteriophage meeting
such criteria.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the receipt and sufficiency of which are hereby
acknowledged, Company and Merck hereby agree as follows:

ARTICLE 1  DEFINITIONS.

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

1.1       “AAALAC” means the Association for Assessment and Accreditation of
Laboratory Animal Care International.

1.2       “Act” means, as applicable, the United States Federal Food, Drug and
Cosmetic Act, 21 U.S.C. §§ 301 et seq., and/or the Public Health Service Act, 42
U.S.C. §§ 262 et seq., as amended from time to time.

1.3       “Affiliate” means (i) any corporation or business entity of which, now
or hereafter, fifty percent (50%) or more of the securities or other ownership
interests representing the equity, the voting

 

 

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stock or general partnership interest are owned, controlled or held, directly or
indirectly, by Merck or Company; or (ii) any corporation or business entity
which, now or hereafter, directly or indirectly, owns, controls or holds fifty
percent (50%) (or the maximum ownership interest permitted by law) or more of
the securities or other ownership interests representing the equity, the voting
stock or, if applicable, the general partnership interest, of Merck or Company.
A corporation or entity shall be deemed to be an Affiliate only during the
period for which it meets the foregoing criteria.

1.4       “Agreement” has the meaning given such term in the preamble to this
document.

1.5       “Agreement Payments” has the meaning set forth in Section 5.2.7.

1.6       “Alliance Manager” has the meaning set forth in Section 2.4.

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

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

1.9       “Clinical Trial” means a Phase I Clinical Trial, Phase II Clinical
Trial, Phase IIb Clinical Trial, Phase III Clinical Trial, and/or Post-approval
Clinical Trial.

1.10     “Code” has the meaning set forth in Section 8.3.3.

1.11     “Combination Product” means a Product that includes one or more
pharmaceutically active ingredients other than Product Candidate in combination
with Product Candidate.

1.12     “Commercially Reasonable Efforts” means, with respect to the efforts to
be expended by a Party with respect to any objective, such reasonable and
diligent efforts to accomplish such objective as such party would normally use
to accomplish a similar objective under similar circumstances, but in any event
no less than the efforts consistent with those used by similarly situated
companies in the pharmaceutical industry.  It is understood and agreed that with
respect to the research, development and sale of Product by either Party, such
efforts shall be substantially equivalent to those efforts and resources
commonly used by such Party for pharmaceutical or biological products owned by
such Party or to which such Party has rights (and in any event no less than the
efforts consistent with those used by similarly situated companies in the
pharmaceutical industry), which product is at a similar stage in its development
or product life and is of similar market potential taking into account efficacy,
safety, approved labeling, the competitiveness of alternative products in the
marketplace, the patent and other proprietary position of the product, the
likelihood of regulatory approval given the Regulatory Authority involved, the
profitability of the product including the amounts payable to licensors of
patent or other intellectual property rights, alternative products, other risks
associated with the development or commercialization of the product and other
relevant factors.  Commercially Reasonable Efforts shall be determined on a
market-by-market basis for a particular Product, and it is anticipated that the
level of effort will be different for different markets, and will change over
time, reflecting among other things changes in the status of the Product and the
market(s) involved.

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1.13     “Committee” has the meaning set forth in Section 2.3.

1.14     “Company” has the meaning given such term in the preamble to this
Agreement.

1.15     “Company Background IP” means (a) the Patent Rights set forth on
Schedule 1.12 and know-how owned or controlled by Company or any of its
Affiliates as of the Effective Date and (b) the Company Platform Improvements.

1.16     “Company Indemnified Parties” has the meaning set forth in Section
9.1.1.

1.17     “Company Information and Inventions” means all protocols, formulas,
data, Inventions (but not Company Platform Improvements), know-how and trade
secrets, patentable or otherwise, resulting from the Research Program developed
or invented solely by employee(s) of Company and/or its Affiliates, and/or a
Third Party acting on behalf of Company and/or its Affiliates and not employed
by Merck and/or its Affiliates.

1.18     “Company Know-How” means all information and materials, including but
not limited to discoveries, improvements, processes, methods, protocols,
formulas, data, inventions (including without limitation Company Information and
Inventions and Company’s rights in Joint Information and Inventions), know-how
and trade secrets, patentable or otherwise (but excluding any Company Patent
Rights in any of the foregoing), which during the term of this Agreement (i) are
in the possession of, and owned or controlled by, Company or its Affiliates,
(ii) are not generally known and (iii) are reasonably necessary for the
manufacture, marketing, use or sale of Product Candidate or Product in the
Territory.

1.19     “Company Patent Rights” means Patent Rights that claim or cover Company
Information and Inventions.

1.20     “Company Platform Improvements” means all Inventions relating to an
improvement or enhancement to any invention, process or technique claimed in or
covered by the Patent Rights within clause (a) of the definition of Company
Background IP, including to any invention, process or technique that relies upon
or infringes any Patent Rights within clause (a) of the definition of Company
Background IP.

1.21     “Competitive Product” means, with respect to a particular Product that
has received Marketing Authorization in a country, a product sold by a Third
Party in such country of that contains the same bacteriophage, or a
bioequivalent form thereof, as such Product resulting in substantially the same
antibacterial mechanism of action and generating substantially the same
pharmacological outcome with substantially the same relative magnitude.

1.22     “Dispute” has the meaning set forth in Section 9.9.1.

1.23     “Field” means the use of Product and Product Candidate for any and all
purposes.

1.24     “First Commercial Sale” means, with respect to any Product, the first
sale for end use or consumption of such Product in a country that triggers a
royalty payment to Company under this Agreement, excluding, however, any sale or
other distribution for use in a Clinical Trial.

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1.25     “GLP” or “Good Laboratory Practice” means the applicable then-current
standards for laboratory activities for pharmaceuticals or biologicals, as set
forth in the Act and any regulations or guidance documents promulgated
thereunder, as amended from time to time, together with any similar standards of
good laboratory practice as are required by any Regulatory Authority in the
Territory.

1.26     “[***] Engineered Phage” means an engineered bacteriophage
[***]pursuant to the criteria set forth in the [***] Research Plan.

1.27     “[***] License Option” has the meaning set forth in Section 3.1.1.

1.28     “[***] Option Term” has the meaning set forth in Section 3.1.1.

1.29     “[***] Research Option” has the meaning set forth in Section 2.1.2.

1.30     “[***] Research Plan” has the meaning set forth in Section 2.1.1.

1.31     “[***] Research Term” has the meaning set forth in Section 2.8.

1.32     “[***] Milestone 1” has the meaning set forth in Section 5.1.3.

1.33     “[***] Milestone 2” has the meaning set forth in Section 5.1.3.

1.34     “[***] Milestone 3” has the meaning set forth in Section 5.1.3.

1.35     “[***] Milestone 4” has the meaning set forth in Section 5.1.3.

1.36     “[***] Preclinical Milestones” has the meaning set forth in Section
5.1.3.

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

1.38     “Indemnified Party” has the meaning set forth in Section 9.1.3.

1.39     “Indemnifying Party” has the meaning set forth in Section 9.1.3.

1.40     “Indication” means a separate and distinct disease or medical condition
in humans (i) which a Product that is in Clinical Trials is intended to treat,
prevent and/or diagnose, and/or (ii) for which a Product has received Marketing
Authorization based on a separate Clinical Trial, meaning that such Indication
is contained in the Product’s labeling approved by a Regulatory Authority as
part of the Marketing Authorization for such Product.

1.41     “Information” means any and all information and data, including without
limitation all Merck Know-How, all Company Know-How, and all other scientific,
pre-clinical, clinical, regulatory, manufacturing, marketing, financial and
commercial information or data, whether communicated

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in writing or orally or by any other method, which is provided by one Party to
the other Party in connection with this Agreement.

1.42     “Initiation” means, with respect to a Clinical Trial, the
administration of the first dose to a human subject in such Clinical Trial.

1.43     “Invention” means any process, method, composition of matter, article
of manufacture, discovery or finding that is conceived and/or reduced to
practice as a result of the Research Program.

1.44     “In Vivo POC”, with respect to the [***] Research Plan, has the meaning
set forth in subsection d. of “COMPANY deliverables” under “[***] Milestone 3:
Proof-of-concept efficacy in a [***] animal model [***]” in the [***] Research
Plan, and with respect to the [***] Research Plan, has the meaning set forth in
subsection c. of “COMPANY deliverables” under “[***] Milestone 3:
Proof-of-concept efficacy in a [***]animal model [***]” in the [***] Research
Plan.

1.45     “Joint Information and Inventions” means all protocols, formulas, data,
Inventions (but not Company Platform Improvements), know-how and trade secrets,
patentable or otherwise, resulting from the Research Program developed or
invented jointly by employee(s) of Merck and/or its Affiliates, and/or a Third
Party acting on behalf of Merck and/or its Affiliates, and by employee(s) of
Company and/or its Affiliates, and/or a Third Party acting on behalf of Company
and/or its Affiliates.

1.46     “Joint Patent Rights” means Patent Rights that claim or cover Joint
Information and Inventions.

1.47     “License Option” has the meaning set forth in Section 3.1.

1.48     “Major European Market” means anyone of the following countries:  the
United Kingdom, France, Germany, Italy or Spain.

1.49     “Major Market” means any one of the following countries: United States,
Japan, the United Kingdom, France, Germany, Italy or Spain.

1.50     “Marketing Authorization” means all approvals from the relevant
Regulatory Authority necessary to market and sell a Product in any country
(including without limitation all applicable pricing and governmental
reimbursement approvals even if not legally required to sell Product in a
country).

1.51     “Materials” has the meaning set forth in Section 2.1.1.

1.52     “Merck” has the meaning given such term in the preamble to this
Agreement.

1.53     “Merck Indemnified Parties” has the meaning set forth in Section 9.1.2.

1.54     “Merck Information and Inventions” means all protocols, formulas, data,
Inventions (but not Company Platform Improvements), know-how and trade secrets,
patentable or otherwise, resulting from the Research Program developed or
invented solely by employee(s) of Merck

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and/or its Affiliates, and/or a Third Party acting on behalf of Merck and/or its
Affiliates, and not employed by Company and/or its Affiliates.

1.55     “Merck Know-How” means all information and materials, including but not
limited to discoveries, improvements, processes, methods, protocols, formulas,
data, inventions (including without limitation Merck Information and Inventions
and Merck’s rights in Joint Information and Inventions), know-how and trade
secrets, patentable or otherwise, which during the term of this Agreement (i)
are in Merck’s possession or control, (ii) are not generally known and (iii) are
in Merck’s opinion necessary to Company in the performance of its obligations
under the Research Program.

1.56     “NDA” means a New Drug Application, Biologics License Application,
Marketing Authorization Application, filing pursuant to Section 510(k) of the
Act, or similar application or submission for Marketing Authorization of a
Product filed with a Regulatory Authority to obtain marketing approval for a
biological, pharmaceutical or diagnostic product in that country or in that
group of countries.

1.57     “Net Sales” means the gross invoice price (not including value added
taxes, sales taxes, or similar taxes) of Product sold by Merck or its Related
Parties to the first Third Party  (or, if not invoiced, amounts received by
Merck or its Related Parties for the sale of Products to Third Parties) after
deducting, if not previously deducted, from the amount invoiced or received the
following items to the extent included in the gross invoiced sales price of such
Product and not separately invoiced:

1.57.1  trade and quantity discounts other than early payment cash discounts
actually allowed and taken specifically with respect to the sales of Product;

1.57.2  returns, rebates, chargebacks and other allowances for the Products
actually allowed and taken and applied in a uniform manner among Product and not
other products;

1.57.3  retroactive price reductions that are actually allowed or granted;

1.57.4  deductions for Health Care Reform fees and similar deductions to gross
invoice price of Product imposed by Regulatory Authorities or other governmental
entities when adjusted for rebates and refunds;

1.57.5  a fixed amount equal to three percent (3%) of the amount invoiced to
cover bad debt, early payment cash discounts, transportation and insurance and
custom duties; and

1.57.6  the standard inventory cost of specialty devices or delivery systems
used for dispensing or administering Product.

With respect to sales of Combination Products in a country during an accounting
period, Net Sales shall be calculated on the basis of the gross invoice price of
Product(s) containing the same dosage of Product Candidate sold without other
active ingredients in such country and during such accounting period.  In the
event that Product with a certain dosage of Product Candidate is sold only as a
Combination Product in a country during an accounting period, Net Sales shall be
calculated on the basis of the gross invoice price of the Combination Product
multiplied by a

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fraction, the numerator of which shall be the inventory cost of Product
Candidate in the Product and the denominator of which shall be the inventory
cost of all of the active ingredients in the Combination Product during such
accounting period.  Inventory cost shall be determined in good faith in
accordance with Merck's regular accounting methods, consistently applied.  The
deductions set forth in Sections 1.37.1 through 1.37.6 will be applied in
calculating Net Sales for a Combination Product prior to the application of the
calculation in this paragraph.  In the event that Product is sold only as a
Combination Product and either Party reasonably believes that the calculation
set forth in this Paragraph does not fairly reflect the value of Product
Candidate relative to the other active ingredients in the Combination Product,
the Parties shall reasonably negotiate other means of calculating Net Sales with
respect to Combination Products.

1.58     “Officials” has the meaning set forth in Section 2.9.3.

1.59     “Party” means Merck or Company, individually, and “Parties” means Merck
and Company, collectively.

1.60     “Patent Rights” means any and all patents and patent applications in
the Territory (which for the purpose of this Agreement shall be deemed to
include certificates of invention and applications for certificates of
invention), including divisionals, continuations, continuations-in-part,
reissues, renewals, substitutions, registrations, re-examinations,
revalidations, extensions, supplementary protection certificates, and the like
of any such patents and patent applications, and foreign equivalents of the
foregoing.

1.61     “Payment” has the meaning set forth in Section 2.9.3.

1.62     “Person” means any individual, partnership, joint venture, limited
liability company, corporation, firm, trust, association, unincorporated
organization, governmental authority or agency, or any other entity not
specifically listed herein.

1.63     “Phage” means a [***] Engineered Phage and/or [***] Engineered Phage.

1.64     “Phase I Clinical Trial” means a human clinical trial in any country
that would satisfy the requirements of 21 CFR 312.21(a) or its non-United States
equivalents.

1.65     “Phase II Clinical Trial” means a human clinical trial in any country
that would satisfy the requirements of 21 CFR 312.21(b) or its non-United States
equivalents.

1.66     “Phase IIb Clinical Trial” means a Phase II Clinical Trial of a Product
Candidate the principal purpose of which is to confirm efficacy and safety
consistent with the efficacy and safety observed in a previous Clinical Trial of
such Product Candidate in the target population at the intended dose or doses or
range of doses on a sufficient number of subjects and for a sufficient period of
time to determine the optimal manner of use of a Product Candidate (dose and
dose regimen) prior to the Initiation of a Phase III Clinical Trial of such
Product Candidate. For clarity, a Phase IIb Clinical Trial does not include a
Phase Ib/IIa clinical trial.

1.67     “Phase III Clinical Trial” means a human clinical trial in any country
that would satisfy the requirements of 21 CFR 312.21(c) or its non-United States
equivalents.

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1.68     “Preclinical Milestone” means a [***] Preclinical Milestone or a [***]
Preclinical Milestone and “Preclinical Milestones” means the [***] Preclinical
Milestones and the [***] Preclinical Milestones.

1.69     “Product(s)” means any pharmaceutical or biological preparation for use
in humans in final form containing Product Candidate as an active ingredient (i)
for sale by prescription, over-the-counter or any other method; or (ii) for
administration to human patients in a Clinical Trial, for any and all uses in
the Field, including without limitation any Combination Product.

1.70     “Product Candidate” means (a) a [***] Engineered Phage (including [***]
Engineered Phage) made by or on behalf of Company under the [***] Research Plan
to the extent Merck exercises the [***] License Option, (b) an [***] Engineered
Phage (including [***] Engineered Phage) made by or on behalf of Company under
the [***] Research Plan to the extent Merck exercises the [***] License Option
or (c) a [***] referred to in clauses (a) and (b), and with respect to each of
clauses (a), (b), and (c), [***] CMC and regulatory purposes. References to
“Product Candidate” in this Agreement will exclude clause (b) above in the event
that Merck does not exercise the [***] Research Option.

1.71     “Product-Specific Company Patent Right” means any Company Patent Right
that specifically claims (i) [***] and/or (ii) [***], and in the case of each of
clause (i) and (ii) [***].

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

1.73     “Related Party” means each of Merck, its Affiliates, and their
respective sublicensees (which term does not include distributors), as
applicable.

1.74     “Research Plan” means the [***] Research Plan or the [***] Research
Plan, as applicable.

1.75     “Research Program” means the research activities undertaken by the
Parties as set forth in Article 2 and the [***] Research Plan and, if Merck
exercises the [***] Research Plan Option, the [***] Research Plan.

1.76     “Research Program Patent Rights” means Company Patent Rights other than
Product-Specific Company Patent Rights.

1.77     “Research Term” means the [***] Research Term or the [***] Research
Term, as applicable.

1.78     “Royalty Period” has the meaning set forth in Section 5.2.3(a)(iii).

1.79     “Second Marketing Authorization” means a Marketing Authorization for a
different Indication than one for which a Product Candidate has received
Marketing Authorization.  For the avoidance of doubt, expansion of an already
approved Indication or approval for a subpopulation shall not constitute a
Second Marketing Authorization.

1.80     “[***] Milestone 1” has the meaning set forth in Section 5.1.2.

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1.81     “[***] Milestone 2” has the meaning set forth in Section 5.1.2.

1.82     “[***] Milestone 3” has the meaning set forth in Section 5.1.2.

1.83     “[***] Milestone 4” has the meaning set forth in Section 5.1.2.

1.84     “[***] Preclinical Milestones” has the meaning set forth in Section
5.1.2.

1.85     “[***] Engineered Phage” means an engineered bacteriophage [***]
pursuant to the criteria set forth in the [***] Research Plan.

1.86     “[***] License Option” has the meaning set forth in Section 3.1.1.

1.87     “[***] Option Term” has the meaning set forth in Section 3.1.1.

1.88     “[***] Research Plan” has the meaning set forth in Section 2.1.1.

1.89     “[***] Research Term” has the meaning set forth in Section 2.8.

1.90     “Taxes” has the meaning set forth in Section 5.2.7.

1.91     “Territory” means all of the countries in the world, and their
territories and possessions.

1.92     “Third Party” means an entity other than Merck and its Related Parties,
and Company and its Affiliates.

1.93     “Third Party License” has the meaning set forth in Section 5.2.3(e).

1.94     “Valid Patent Claim” means a claim of an issued, unexpired and in-force
patent included within the Company Background IP, the Company Patent Rights or
the Joint Patent Rights that claims Product Candidate as a composition of matter
or, on a country-by-country basis, a method of treatment of a human disease
which has received Marketing Authorization by the appropriate Regulatory
Authority in the country in the Territory, which has not been revoked or held
unenforceable or invalid by a decision of a court or other governmental agency
of competent jurisdiction (which decision is not appealable or has not been
appealed within the time allowed for appeal), and which claim has not been
disclaimed, denied or admitted to be invalid or unenforceable through reissue,
re-examination, supplemental examination or disclaimer or otherwise.

1.95     “Violation” means that either Party, or any of its officers or
directors has been: (a) convicted of any of the felonies identified among the
exclusion authorities listed on the U.S. Department of Health and Human
Services, Office of Inspector General (OIG) website, including 42 U.S.C.
1320a-7(a) (https://oig.hhs.gov/exclusions/index.asp); and/or (b) identified in
the OIG List of Excluded Individuals/Entities (LEIE) database
(https://oig.hhs.gov/exclusions/exclusions_list.asp) or the U.S. General
Services Administration's list of Parties Excluded from Federal Programs
(https://www.sam.gov/portal/public/SAM/) (each of (a) and (b), singly and
collectively, the “Exclusions Lists”).

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ARTICLE 2  RESEARCH PROGRAM

2.1       General.

2.1.1    Company and Merck shall engage in the Research Program upon the terms
and conditions set forth in this Agreement.  Schedule 2.1.1(a) sets forth the
activities to be undertaken beginning as of the Effective Date (as the same may
be amended, the “[***] Research Plan”). Schedule 2.1.1(b) sets forth the
activities to be undertaken, if at all, following exercise by Merck of the [***]
Research Option (as the same may be amended, the “[***] Research Plan”).

2.1.2    Company hereby grants to Merck an exclusive option, exercisable at any
time prior to expiration of the [***] Research Term to require Company to engage
in the [***] Research Plan (such option, the “[***] Research Option”). Merck may
exercise the [***] Research Option, in Merck’s sole discretion, by sending
Company written notice of such exercise, and paying [***] in accordance with
Section 5.2.1(a).

2.2       Performance of Research Plan.  Each Party shall be responsible for its
costs and expenses in connection with the Research Program. Each Party shall
proceed diligently and in good faith with the work set out in the Research Plan
by using its reasonable efforts to allocate sufficient time, effort, equipment
and facilities to the Research Program and to use personnel with sufficient
skills and experience as are required to accomplish its activities under the
Research Program in accordance with the terms of this Agreement and the Research
Plan.  Merck shall be entitled to utilize the services of its Affiliates and
Third Parties to perform its Research Program activities.  Company shall be
entitled to utilize the service of Third Parties to perform its Research Program
activities only upon Merck’s prior written consent, as set forth on Schedule
2.2, or as specifically set forth in the Research Plan.  Notwithstanding any
such utilization, each Party shall remain at all times fully liable for its
respective responsibilities under the Research Program.

2.3       Joint Steering Committee.  The Parties hereby establish a committee to
facilitate the Research Program as follows:

2.3.1    Composition of the Joint Steering Committee.  The Research Program
shall be conducted under the direction of a joint steering committee (the
“Committee”) comprised of two (2) senior representatives of Merck (who shall be
employees of Merck or its Affiliate, as applicable) and two (2) senior
representatives of Company (who shall be employees of Company or its Affiliate,
as applicable).  Each Party may change its representatives to the Committee 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, and ongoing familiarity with the Research
Program.  Additional representative(s) or consultant(s) may, from time to time
by mutual consent of the Parties, be invited to attend Committee meetings,
subject to such representative’s or consultants written agreement to comply with
the requirements of Section 4.1.  The goal of all decision-making of the
Committee shall be to achieve consensus.  Decisions of the Committee shall be
made unanimously by the representatives.  In the event that the Committee cannot
or does not, after reasonable good faith efforts, reach agreement on an issue
within the scope of the Committee’s decision-making

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authority as set forth in Section 2.3.2 below, such issue shall be escalated
pursuant to Section 9.9 hereof.

2.3.2    Scope of Committee Oversight.  The Committee shall be responsible for
overseeing the Research Program, including to (i) review and amend the Research
Plan from time to time, (ii) review and coordinate the Parties’ activities under
the Research Program, (iii) confer regarding the status of the Research Program
and the progress under the Research Program and to make determinations and
decisions in connection with the Research Plan (including issues of priority),
(iv) review results under the Research Program, (v) consider and advise on
technical issues a Party wishes to raise to the other Party under the Research
Program, and (vi) determine whether the Preclinical Milestones have been
achieved.  With respect to any determination by the Committee as to the
achievement of a Preclinical Milestone, the Committee shall be required to make
any such determination within no less than forty-five (45) days after receiving
written notice from the Company of its assessment that such Preclinical
Milestone has been achieved. The Committee shall not have the authority to: (w)
modify or amend the terms and conditions of this Agreement; (x) waive either
Party’s compliance with the terms and conditions of this Agreement; (y)
determine any issue in a manner that would conflict with the express terms and
conditions of this Agreement; or (z) amend the Research Plan in a manner that
would increase the Preclinical Milestones or modify the definitions thereof.

2.3.3    Meetings.  During the Research Term, the Committee shall meet in
accordance with a schedule established by mutual written agreement of the
Parties, but no less frequently than once per Calendar Quarter, with the
location for such meetings alternating between Company and Merck facilities (or
such other location may be determined by the Committee or by means of
teleconference, videoconference or other similar communications equipment).  The
Committee shall confer regarding the status of the Research Program, review
relevant data, consider and advise on any technical issues that arise, consider
issues of priority, and review and advise on any budgetary and economic matters
relating to the Research Program which may be referred to the Committee.  Each
Party shall bear its own expenses related to the attendance of such meetings by
its representatives.

2.3.4    Disbandment of Committee.  Upon completion (or earlier termination) of
the Research Program, the Committee shall have no further authority with respect
to the activities hereunder.  The Committee shall be disbanded upon expiration
of the term of the License Option.

2.4       Alliance Managers.  Each Party shall have the right to appoint an
employee who shall oversee interactions between the Parties for all matters
related to this Agreement (each an “Alliance Manager”).  Such persons shall
endeavor to ensure clear and responsive communication between the Parties and
the effective exchange of information, and may serve as a single point of
contact for any matters arising under this Agreement.  The Alliance Managers
shall have the right to attend all Committee meetings as non-voting participants
and may bring to the attention of the Committee any matters or issues either of
them reasonably believes should be discussed, and shall have such other
responsibilities as the Parties may mutually agree in writing.  Each Party may
designate different Alliance Managers by notice in writing to the other Party.

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2.5       Exchange of Information.  During the Research Term, Company shall
disclose to Merck in English and in writing or in an electronic format all
results generated by or on behalf of Company under the Research Program and all
Company Know-How reasonably necessary for Merck to determine whether to exercise
a License Option. If Merck exercises a License Option, Company shall disclose to
Merck such other Company Know-How requested by, or required to be disclosed to,
a Regulatory Authority in connection with the development or commercialization
of a Product or Product Candidate; provided,  however, that if Company
reasonably determines that such Company Know-How is particularly sensitive,
Company may instead disclose such Company Know-How directly to such Regulatory
Authority.  Company shall make itself reasonably available to Merck and such
Regulatory Authority in connection with the foregoing.

2.6       Records and Reports.

2.6.1    Records. Each Party shall maintain records, in sufficient detail and in
good scientific manner appropriate for patent and regulatory purposes, which
shall fully and properly reflect all work done and results achieved in the
performance of the Research Program by or on behalf of such Party.

2.6.2    Copies and Inspection of Records. Merck shall have the right, during
normal business hours and upon reasonable notice, to inspect and copy all such
records of Company referred to in Section 2.6.1.  Merck shall maintain such
records and the information disclosed therein in confidence in accordance with
Section 4.1.  Merck shall have the right to arrange for its employee(s) and/or
consultant(s) involved in the activities contemplated hereunder to visit the
offices and laboratories of Company and any of its Third Party contractors as
permitted under Section 2.2 during normal business hours and upon reasonable
notice, and to discuss the Research Program work and its results in detail with
the technical personnel and consultant(s) of Company.  Upon request, Company
shall provide copies of the records described in Section 2.6.1.

2.6.3    Semi-annual Reports.  Within thirty (30) days after each June 30 and
December 31 during the term of this Agreement, Company shall provide to Merck a
written progress report in English which shall describe the work performed to
date on the applicable Research Plan, evaluate the work performed in relation to
the goals of such Research Plan and provide such other information as may be
required by such Research Plan or reasonably requested by Merck relating to the
progress of the goals or performance of such Research Plan.  Following exercise
by Merck of a License Option with respect to a Research Plan, if at all, such
reports for such Research Plan shall be considered the Confidential Information
of Merck.

2.7       Research Information and Inventions.

2.7.1    The entire right, title and interest in:

(a)        Company Platform Improvements shall be owned solely by Company;

(b)        Company Information and Inventions shall be owned solely by Company;

(c)        Merck Information and Inventions shall be owned solely by Merck; and

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(d)        Joint Information and Inventions shall be owned jointly by Company
and Merck.

2.7.2    Each Party shall promptly disclose to the other Party in writing the
development, making conception or reduction to practice of Joint Information and
Inventions, and Company shall reasonably promptly disclose to Merck in writing
the development, making, conception or reduction to practice of Company
Information and Inventions. For the purposes of determining ownership under this
Section 2.7, inventorship shall be determined in accordance with United States
patent laws (regardless of where the applicable activities occurred).  Subject
to the licenses granted to the other Party under this Agreement and the other
terms and conditions of this Agreement, each Party shall have the non-exclusive
right to exploit its interest in Joint Information and Inventions and Joint
Patent Rights, and to grant licenses under its interest in Joint Information and
Inventions and Joint Patent Rights, as it deems appropriate, without the consent
of, and without accounting to, the other Party; provided, however, that for
clarity, the foregoing joint ownership rights shall not be construed as
granting, conveying or creating any license or other rights to the other Party’s
intellectual property, unless otherwise expressly set forth in this Agreement;
and further provided that, in the event that any Joint Patent Rights claim or
cover a Product Candidate or the manufacturing process therefor, Company shall
not grant any license under its interest in such Joint Patent Rights to any
Third Party without Merck’s prior written consent.

2.8       Term of the Research Program(s).  Unless this Agreement is terminated
pursuant to Section 8.2 or 8.3, the term of the [***] Research Program shall
commence on the Effective Date and continue until the second anniversary of the
Effective Date (the “[***] Research Term”).  To the extent Merck exercises the
[***] Research Option, and unless this Agreement is terminated pursuant to
Section 8.2 or 8.3, the term of the [***] Research Plan shall expire on the date
that is eighteen (18) months after the date of commencement of the [***]
Research Plan(the “[***] Research Term”).

2.9       Compliance with Law and Ethical Business Practices.

2.9.1    Each Party shall conduct the Research Program in accordance with all
applicable laws, rules and regulations including, without limitation, all
current governmental regulatory requirements concerning Good Laboratory
Practices.  Each Party shall notify the other Party in writing of any deviations
from applicable regulatory or legal requirements.  Each Party hereby certifies
that it has not and will not employ or otherwise use in any capacity the
services of any person or entity debarred under Section 21 USC 335a in
performing any services hereunder.  Each Party shall notify the other Party in
writing immediately if any such debarment occurs or comes to its attention, and
shall promptly remove any person or entity so disbarred from performing any
activities under the Research Program, or function or capacity related to the
Research Program.

2.9.2    Company acknowledges that Merck’s corporate policy requires that
Merck’s business must be conducted within the letter and spirit of the law.  By
signing this Agreement, each Party agrees to conduct the services contemplated
herein in a manner which is consistent with both law and good business ethics.

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2.9.3    Each Party warrants that none of its employees, agents, officers or
other members of its management are officials, officers, agents or
representatives of any government or public international organization (as such
term is defined in the Foreign Corrupt Practices Act). Neither Party shall make
any payment, either directly or indirectly, of money or other assets, including
but not limited to the compensation such Party derives from this Agreement
(hereinafter collectively referred as a “Payment”), to government or political
party officials, officials of international public organizations, candidates for
public office, or representatives of other businesses or persons acting on
behalf of any of the foregoing (hereinafter collectively referred as
“Officials”) where such Payment would constitute violation of any law.  In
addition regardless of legality, neither Party shall make any Payment either
directly or indirectly to Officials if such Payment is for the purpose of
influencing decisions or actions with respect to the subject matter of this
Agreement or any other aspect of the other Party’s business.

2.9.4    Company acknowledges that no employee of Merck or its Affiliates shall
have authority to give any direction, either written or oral, relating to the
making of any commitment by Company or its agents to any Third Party in
violation of terms of this or any other provisions of this Agreement.

2.9.5    Each Party certifies to the other Party that as of the date of this
Agreement it has screened itself, and its officers, directors and employees
against the Exclusions Lists and that it has informed the other Party whether it
or any of its officers or directors has been in Violation.  After the execution
of this Agreement, each Party shall notify the other Party in writing
immediately if any such Violation occurs or comes to its attention.

2.9.6    Any failure to abide by the provisions of this Section 2.9 shall be
deemed a material breach of this Agreement.

2.10     Animal Research.  If animals are used in research hereunder, Company
will comply with the Animal Welfare Act or any other applicable local, state,
national and international laws and regulations relating to the care and use of
laboratory animals.  Merck encourages Company to use the highest standards, such
as those set forth in the Guide for the Care and Use of Laboratory Animals (NRC,
1996), for the humane handling, care and treatment of such research
animals.  Company hereby certifies that it has and shall maintain current and
valid accreditation from AAALAC during the Research Term. Any animals which are
used in the course of the Research Program, or products derived from those
animals, such as eggs or milk, will not be used for food purposes, nor will
these animals be used for commercial breeding purposes.

2.11     Materials.  Merck may, in its sole discretion, provide Company with
certain materials solely for the purpose of enabling Company to perform its
activities under the Research Program in accordance with the terms of this
Agreement (“Materials”).  To the extent Merck provides such Materials, such
Materials are not to be used in humans, nor shall any of the Materials, or any
derivatives, analogs, modifications or components thereof be transferred,
delivered or disclosed to any Third Party without the prior written approval of
Merck.  Any unused Materials and any derivatives, analogs, modifications or
components thereof shall be, at Merck’s option, either returned to Merck, or
destroyed in accordance with instructions by Merck. To the extent Company
provides any biological materials to Merck under this Agreement, (i) such
materials are not to be used in humans, and (ii) if this Agreement terminates
prior to the exercise of a

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License Option by Merck, any unused amounts of such materials and any
derivatives, analogs, modifications or components thereof shall be, at Company’s
option, either returned to Company, or destroyed in accordance with instructions
by Company.

ARTICLE 3  OPTION TO LICENSE; LICENSE; DEVELOPMENT AND COMMERCIALIZATION.

3.1       Option.  Company hereby grants to Merck an exclusive option to obtain
with respect to any and all Product Candidates developed during any Research
Term a worldwide license as set forth in Section 3.2 pursuant to the terms of
this Agreement (the “License Option”). Merck may exercise the License Option, in
its sole discretion, in the following circumstances by sending Company written
notice of such exercise and making the applicable payment in accordance with
Section 5.2.1(b) or (c):

3.1.1    if Merck does not exercise the [***] Research Option pursuant to
Section 2.1.2, Merck may, in its sole discretion, at any time during the [***]
Research Term and for a period of ninety (90) days thereafter (the “[***] Option
Term”), exercise the License Option with respect to Product and Product
Candidates from the [***] Research Plan (the “[***] License Option”); and

3.1.2    if Merck exercises the [***] Research Option pursuant to Section 2.1.2,
Merck may, in its sole discretion, at any time during the [***] Research Term
and for a period of ninety (90) days thereafter (the “[***] Option Term”),
exercise its [***] License Option and/or the License Option with respect to
Product and Product Candidates from the [***] Research Plan (the “[***] License
Option”).

3.2       Following Option Exercise by Merck.  Upon and following exercise by
Merck of the [***] License Option and/or the [***] License Option, if at all:

3.2.1    License Grant.

(a)        Company hereby grants to Merck an exclusive license (even as to
Company) in the Territory under Company Patent Rights and its interest in Joint
Patent Rights, with the right to grant and authorize sublicenses, for any and
all uses in the Field, including, without limitation, to make, have made, use,
import, offer to sell and sell (but not genetically modify) Product Candidate
and Product.

(b)        Company hereby grants to Merck an exclusive license (even as to
Company) in the Territory under the Patent Rights included in Company Background
IP, with the right to grant and authorize sublicenses, for any and all uses in
the Field, solely to make, have made, use, import, offer to sell and sell (but
not genetically modify) Product Candidate and Product.

(c)        Company hereby grants to Merck an exclusive license (even as to
Company) in the Territory under Company Know-How, with the right to grant and
authorize sublicenses, for any and all uses in the Field, solely to make, have
made, use, import, offer to sell and sell (but not genetically modify) Product
Candidate and Product.

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3.2.2    Genetic Modifications to Product or Product Candidate for CMC or
Regulatory Purposes.  In the event Merck reasonably determines that a
modification to Product Candidate is needed for CMC or regulatory purposes, and
such modification is genetic in nature, Merck will notify Company, and Company
will use reasonable efforts to make such needed modification as requested by
Merck. Merck will reimburse Company for its reasonable out-of-pocket expenses
and FTEs conducting such work to the extent Company provides appropriate
documentation (including original receipts) and an invoice. Until the fifth
anniversary of the Effective Date, the FTE rates shall not exceed $360,000 for a
full-time equivalent person year, and thereafter the Parties shall agree in good
faith on a reasonable increase in FTE rates to reflect inflation and
then-current industry standards.  Merck will pay the undisputed amount of such
invoice within sixty (60) days after receipt thereof.

3.2.3    Non-Exclusive License Grant.  In the event that the making, having
made, use, import, offer for sale and/or sale by Merck or its Related Parties of
Product Candidate or Product (other than with respect to any pharmaceutically
active ingredients controlled by Company or its Affiliate other than Product
Candidate) would infringe during the term of this Agreement a claim of an issued
letters patent that Company (or its Affiliate)  owns or has the rights to
license and which patents are not covered by the grant in Section 3.2.1, Company
hereby grants to Merck, to the extent Company is legally able to do so without
incurring any payment obligations to any Third Party, a non-exclusive,
sublicensable, royalty-free license in the Territory under such issued letters
patent for Merck and its Related Parties to make, have made, use, import, offer
to sell and sell Product Candidate and Product in the Territory.

3.3       No Implied Licenses.  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 disclosed to
it under this Agreement or under any patents or patent applications owned or
controlled by the other Party or its Affiliates.

3.4       No Grant of Inconsistent Rights by Company.  Company (and its
Affiliates) shall not assign, transfer, convey or otherwise grant to any Person
or otherwise encumber (including through lien, charge, security interest,
mortgage, encumbrance or otherwise) (i) any rights to any Company Know-How or
Company Patent Rights (or any rights to any intellectual property that would
otherwise be included in the Company Know-How or Company Patent Rights), in any
manner that is inconsistent with or would interfere with the grant of the rights
or licenses to Merck hereunder, or (ii) any rights to any Product Candidates or
Products (other than as set forth herein).  Without limiting the foregoing,
during the term of the Agreement, Company (and its Affiliates) shall not use
(and shall not grant to any Third Party the right to use) any Product Candidate
or Products for any purpose (including the development, manufacturing or
commercialization thereof).

3.5       Sublicenses.  Merck shall have the right to sublicense (through
multiple tiers of sublicenses) any or all of the licenses granted to Merck
hereunder.  Merck shall be responsible for ensuring that the performance by any
of its sublicensees hereunder that are exercising rights under a sublicense
hereunder is in accordance with the applicable terms of this Agreement, any
breach of the terms of this Agreement by a sublicensee shall be deemed to be a
breach by Merck, and the grant of any such sublicense shall not relieve Merck of
its obligations under this Agreement (except with

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respect to the diligence obligations to the extent they are performed by any
such sublicensee(s) in accordance with this Agreement).

3.6       Development and Commercialization.  Following exercise of a License
Option by Merck, if at all:

3.6.1    Merck shall use Commercially Reasonable Efforts, at its own expense, to
develop and commercialize a Product and shall conduct the development and
commercialization in accordance with all applicable laws, rules and
regulations.  For avoidance of doubt, the satisfaction of Merck’s obligations
under this Section 3.6 shall take into account any adverse condition or event
relating to the safety or efficacy of the Product, and the obligation of Merck
to meet development or marketing diligence milestones for any such Product shall
be reasonably delayed or suspended to account for such conditions or events.

3.6.2    Until the First Commercial Sale of any Product, Merck shall submit to
Company annual written reports providing a status of Merck’s and its Affiliates’
and Sublicensees’ activities related to the research and development of a
Product during the preceding twelve (12) months.

3.7       Exclusivity. Except as contemplated by a Research Plan, during the
[***] Research Term and the [***] Research Term, if any, Company will work
exclusively (even as to Company itself) with Merck in any effort targeting
[***]. Except as contemplated by a Research Plan: (a) during the term of this
Agreement, Company may not conduct research or develop, for any use, (i) any
Product Candidate or Product or (ii) any other bacteriophage in the same
International Committee on Taxonomy of Viruses taxonomic family as such Product
or Product Candidate that targets [***]; and (b) for a period of [***] years
following exercise of the [***] License Option and/or the [***] License Option
by Merck, if at all, Company may not research or develop [***].

ARTICLE 4  CONFIDENTIALITY AND PUBLICATION.

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

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

4.1.2    is in the public domain by use and/or publication before its receipt
from the disclosing Party, or thereafter enters the public domain through no
fault of the receiving Party;

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

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

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4.1.5    is disclosed to governmental or other regulatory agencies in order to
obtain patents directed to Company Information and Inventions, Merck Information
and Inventions or Joint Information and Inventions, as applicable, or to gain or
maintain approval to conduct clinical trials or to market Product, but such
disclosure may be only to the extent reasonably necessary to obtain patents or
authorizations;

4.1.6    is, after the exercise of the [***] License Option and/or the [***]
License Option by Merck, reasonably deemed necessary by Merck to be disclosed to
Related Parties, agent(s), consultant(s), and/or other Third Parties for any and
all purposes Merck and its Affiliates deem necessary or advisable in the
ordinary course of business in connection with the development or
commercialization of Products in the Field in accordance with this Agreement on
the condition that such Third Parties agree to be bound by confidentiality and
non-use obligations that substantially are no less stringent than those
confidentiality and non-use provisions contained in this Agreement; provided,
 however, that the term of confidentiality for such Third Parties shall be no
less than ten (10) years;

4.1.7    is, prior to exercise of the [***] License Option and/or the [***]
License Option by Merck, if at all, reasonably deemed necessary by Company to be
disclosed to its Affiliates and consultant(s), and/or other Third Party
contractors for purposes of performing Company’s obligations under this
Agreement, on the condition that such Third Parties agree to be bound by
confidentiality and non-use obligations that substantially are no less stringent
than those confidentiality and non-use provisions contained in this Agreement;
provided,  however, that the term of confidentiality for such Third Parties
shall be no less than ten (10) years; or

4.1.8    is reasonably deemed necessary to the receiving Party to be disclosed
to such Party’s attorneys, independent accountants or financial advisors for the
sole purpose of enabling such attorneys, independent accountants or financial
advisors to provide advice to the receiving Party, on the condition that such
attorneys, independent accountants and financial advisors agree to be bound by
confidentiality and non-use obligations contained this Agreement; provided,
 however, that the term of confidentiality for such attorneys, independent
accountants and financial advisors shall be no less than ten (10) years.

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

If a Party is required by judicial or administrative process (including a
request for discovery received in an arbitration or litigation proceeding) to
disclose Information that is subject to the non-disclosure provisions of this
Section 4.1 or Section 4.2, such Party shall promptly inform the other Party of
the disclosure that is being sought in order to provide the other Party an
opportunity to challenge or limit the disclosure obligations.  Information that
is disclosed by judicial or administrative process shall remain otherwise
subject to the confidentiality and non-use provisions of this Section 4.1 and
Section 4.2, and the Party disclosing Information pursuant to law or court order
shall take all steps reasonably necessary, including without limitation
obtaining an order of confidentiality, to ensure the continued confidential
treatment of such Information.

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4.2       Publication.

4.2.1    Prior to the earlier of (x) Merck’s exercise of the [***] License
Option and/or the [***] License Option (if at all) and (y) expiration of the
term of the License Option, neither Party shall publish results of the [***]
Research Plan or the [***] Research Plan, if any, without the other Party’s
prior written consent. Provisions governing the filing of patent applications,
which may be published by patent offices in which such filing is made, before
the earlier of (x) Merck’s exercise of the [***] License Option and/or the [***]
License Option (if at all) and (y) expiration of the term of the License Option,
by the Parties, are provided under Section 7 of this Agreement.

4.2.2    If Merck exercises the [***] License Option and/or the [***] License
Option, Company shall have no right to publish results of the applicable
Research Plan, and Merck shall have the right to publish results of such
Research Plan. Prior to a written publication or oral presentation of any such
results, Merck shall deliver to Company a copy of the proposed written
publication or an outline of an oral disclosure at least sixty (60) days prior
to submission for publication or presentation.  Company shall have the right to:
(a) propose modifications to the publication or presentation for patent reasons,
trade secret reasons or business reasons or (b) request a reasonable delay in
publication or presentation in order to protect patentable information for which
Merck does not have filing rights in accordance with Article 7.  If Company
requests such a delay, Merck shall delay submission or presentation for a period
of up to ninety (90) days as necessary to enable patent applications protecting
Company’s rights in such information to be filed in accordance with Article
7.  Upon expiration of such ninety (90) days, Merck shall be free to proceed
with the publication or presentation; provided that if Company requests
modifications to the publication or presentation, Merck shall edit such
publication to prevent disclosure of trade secret or proprietary business
information prior to submission of the publication or presentation.  Provisions
governing the filing of patent applications by the Parties, which may be
published by patent offices in which such filing is made, if Merck exercises the
[***] License Option and/or the [***] License Option, are provided under Section
7 of this Agreement.

4.2.3    If Merck does not exercise the [***] License Option and/or the [***]
License Option prior to the expiration of the term of the License Option, then
Company may publish results of any Research Plan for which Merck does not
exercise a License Option; provided,  however, that the Company may not make any
publication containing Confidential Information of Merck, including any Merck
Know-How, or use Merck’s name without Merck’s prior written consent.

4.3       Publicity/Use of Names.  No disclosure of the existence, or the terms,
of this Agreement may be made by either Party, and no Party shall use the name,
trademark, trade name or logo of the other Party, its Affiliates or their
respective employee(s) 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 (a) as may be required by law
(provided that the disclosing party shall seek confidential treatment, or a
protective order, as applicable, for the terms of the Agreement to the extent
permitted by applicable laws and regulations as determined by such Party), (b)
in confidence to its legal and financial advisors to the extent such disclosure
is reasonably necessary in connection with such Party's activities in connection
with this Agreement

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and (c) to any bona fide potential or actual financial investor or lender (but
not including any corporate pharmaceutical venture groups), acquirer or merger
partner for the sole purpose of evaluating an actual or potential investment,
acquisition, merger or loan; provided that in each case, such disclosees are
bound by written obligations of confidentiality consistent with the
confidentiality obligations of this Agreement, and the disclosing Party shall be
responsible for any breach by any such disclosee of the confidentiality
obligations of this Agreement.

ARTICLE 5  PAYMENTS; ROYALTIES AND REPORTS

5.1       Payments During the Research Program.

5.1.1    In partial consideration for Company's performance of its obligations
under the Research Program, upon the terms and conditions contained herein,
Merck shall pay Company a one-time, non-refundable upfront payment equal to
[***], payable within thirty (30) days after the Effective Date.

5.1.2    Subject to the terms and conditions of this Agreement, Merck shall pay
to Company the applicable milestone payments provided for in this Section 5.1.2
upon the first occurrence of the indicated milestone event during the [***]
Research Term.  Following a payment for a milestone set forth in this Section
5.1.2, the subsequent or repeated occurrence of the same milestone event
(whether with a different candidate or otherwise or whether during or after the
[***] Research Term) will not under any circumstance trigger any additional
payment as a result of such event.  Each such milestone payment will be due and
payable to the Company within sixty (60) days after the Committee determines
that such milestone event has been achieved.

 

 

Milestone Event

Milestone Payment

[***] (“[***] Milestone 1”)

$[***]

[***] (“[***] Milestone 2”)

$[***]

[***] (“[***] Milestone 3”)

$[***]

[***]  (“[***] Milestone 4” and together with [***] Milestones 1, 2, and 3, the
“[***] Preclinical Milestones”)

$[***]

 

5.1.3    Subject to the terms and conditions of this Agreement, Merck shall pay
to Company the applicable milestone payments provided for in this Section 5.1.3
upon the first occurrence of the indicated milestone event during the [***]
Research Term, if any.  Following a payment for a milestone set forth in this
Section 5.1.3, the subsequent or repeated occurrence of the same milestone event
(whether with a different candidate or otherwise or whether during or after the
[***] Research Term) will not under any circumstance trigger any additional
payment as a result of such event.  Each such milestone payment will be due and
payable to the Company within sixty (60) days after the Committee determines
that such milestone event has been achieved.

 

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Milestone Event

Milestone Payment

[***] (“[***] Milestone 1”)

$[***]

[***] (“[***] Milestone 2”)

$[***]

[***] (“[***] Milestone 3”)

$[***]

[***] (“[***] Milestone 4” and together with [***] Milestones 1, 2, and 3, the
“[***] Preclinical Milestones”)

$[***]

 

5.2       Payments Upon and After Option Exercise (if any).  This Section 5.2
shall apply only if Merck exercises the [***] Research Option and/or a License
Option pursuant to Section 3.1 of this Agreement.

5.2.1    Option Exercise Payments.

(a)        In the event that Merck exercises the [***] Research Option pursuant
to Section 2.1.2 of this Agreement, Merck shall pay to Company a one-time,
non-refundable payment of [***] within thirty (30) days of the written notice
contemplated thereby.

(b)        In the event that Merck exercises the [***] License Option and the
[***] License Option pursuant to Section 3.1.2 of this Agreement, in
consideration for the licenses and other rights granted to Merck herein, upon
the terms and conditions contained herein, Merck shall pay to Company, within
thirty (30) days of the written notice contemplated thereby, a one-time,
non-refundable payment equal to one of the following, as applicable:

(i)         [***]; or

(ii)       [***]; or

(iii)      [***].

(c)        In the event that Merck exercises the [***] License Option or the
[***] License Option, but not both, pursuant to Section 3.1.1 or 3.1.2, as
applicable, in consideration for the licenses and other rights granted to Merck
herein, upon the terms and conditions contained herein, Merck shall pay to
Company, within thirty (30) days of the written notice contemplated thereby, a
one-time, non-refundable payment equal to [***].

5.2.2    Milestone Payments.

(a)        Subject to the terms and conditions of this Agreement, in the event
that Merck has exercised a License Option, Merck shall pay to Company the
following milestone

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payments, for which Merck achieves the following milestone events hereunder
following such exercise:

(i)         Development and Regulatory Milestones

Milestone Event

Milestone Payment

Initiation of the first Phase I Clinical Trial of a Product in the first
Indication.

$[***]

Initiation of the first Phase IIb Clinical Trial of a Product in the first
Indication.

$[***]

Initiation of the first Phase III Clinical Trial of a Product in the first
Indication.

$[***]

Marketing Authorization for a Product in the United States for the first
Indication.

$[***]

Marketing Authorization for a Product (i) in the first Major European Market for
the first Indication, or (ii)  from the EMA under a centralized filing for
Product for the first Indication

$[***]

Marketing Authorization for a Product in Japan for the first Indication

$[***]

Initiation of the first Phase III Clinical Trial of a Product in a second
Indication.

$[***]

Second Marketing Authorization for a Product in the United States

$[***]

Second Marketing Authorization for a Product (i) in the first Major European
Market, or (ii) from the EMA under a centralized filing for Product

$[***]

Second Marketing Authorization for a Product in Japan

$[***]

 

In the event one or more clinical development milestones set forth in this
Section 5.2.2(a)(i) are combined or skipped for any reason (e.g., as a result of
FDA’s agreement that an alternative clinical trial design would be appropriate
for the Product), the listed payment for the relevant milestone event(s) will be
due upon the earlier of (A) achievement of the next clinical development
milestone; or (B) the first Marketing Authorization of the Product.

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(ii)       Sales Milestones

Milestone Event

Milestone Payment

The achievement of aggregate total of worldwide Net Sales of Products in any
single Calendar Year of [***]) or more but less than [***].  

$[***]

The achievement of aggregate total of worldwide Net Sales of Products in any
single Calendar Year of [***] or more but less than [***].

$[***]

The achievement of aggregate total of worldwide Net Sales of Products in any
single Calendar Year of [***] or more but less than [***].

$[***]

The achievement of aggregate total of worldwide Net Sales of Products in any
single Calendar Year [***].

$[***]

 

(b)        Merck shall notify Company in writing within sixty (60) days
following the achievement of each milestone set forth in Section 5.2.2(a)(i) and
(ii). With respect to the achievement of a milestone under Section 5.2.2(a)(i),
Merck shall make the appropriate milestone payment within sixty (60) days after
the achievement of such milestone. With respect to the achievement of a
milestone under Section 5.2.2(a)(ii), Merck shall make the appropriate milestone
payment within sixty (60) days after the close of the Calendar Quarter in which
such milestone was achieved.  The milestone payments set forth in this Section
5.2.2 shall be payable only upon the initial achievement of such milestone and
no amounts shall be due hereunder for subsequent or repeated achievement of such
milestone.

5.2.3    Royalties.  If Merck has exercised a License Option:

(a)        Royalties Payable By Merck.  Subject to the terms and conditions of
this Agreement, Merck shall pay Company royalties, calculated on a
Product-by-Product basis, as set forth in this Section 5.2.3. Solely in
connection with this Section 5.2.3(a), the Parties acknowledge that as of the
Effective Date, the Parties [***]. However, if a [***], the Parties will discuss
in good faith [***]for purposes of determining the applicable royalty tier would
be appropriate.

(i)         Patent Royalties. Subject to the provisions of Section 5.2.3(a)(ii),
Merck shall pay Company royalties in an amount equal to the following percentage
of Net Sales of Products where the sale of Product would infringe a Valid Patent
Claim in the country of sale; provided that a Competitive Product is not sold in
the country of sale:

a.          [***] of worldwide Net Sales in each Calendar Year up to and
including [***];

b.         [***] of worldwide Net Sales in each Calendar Year for the portion of
Net Sales exceeding [***] up to and including [***];

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c.          [***] of worldwide Net Sales in each Calendar Year for the portion
of Net Sales exceeding [***] up to and including [***]; and

d.         [***] of worldwide Net Sales in each Calendar Year for the portion of
Net Sales exceeding [***].

(ii)       Know-How Royalty.  Notwithstanding the provisions of Section
5.2.3(a)(i), in countries where the sale of Product by Merck or its Related
Parties would not infringe a Valid Patent Claim or a Competitive Product is sold
in the country, Merck shall pay royalty rates that shall be set at [***] of the
applicable royalty rate determined according to 5.2.3(a)(i). Such royalties
shall be calculated after first calculating royalties under Section 5.2.3(a)(i).

(iii)      Royalty tiers pursuant to Section 5.2.3(a)(i) and Section
5.2.3(a)(ii) shall be calculated based on worldwide Net Sales of each Product,
provided that the determination of whether the royalty shall be calculated under
Section 5.2.3(a)(i) or 5.2.3(a)(ii) shall be determined on a country-by-country
basis.  Royalties on each Product at the rates set forth above shall continue on
a country-by-country basis until the expiration of the later of: (i) the
last-to-expire Valid Patent Claim; or (ii) for a period of [***] years after
First Commercial Sale of such Product in such country (the “Royalty Period”).

(iv)       All royalties are subject to the following conditions:

(1)        that only one royalty shall be due with respect to the same unit of
Product;

(2)        that no royalties shall be due upon the sale or other transfer among
Merck or its Related Parties, but in such cases the royalty shall be due and
calculated upon Merck’s or its Related Party’s Net Sales to the first
independent Third Party;

(3)        no royalties shall accrue on the sale or other disposition of Product
by Merck or its Related Parties for use in a Clinical Trial; and

(4)        no royalties shall accrue on the disposition of Product in reasonable
quantities by Merck or its Related Parties as samples (promotion or otherwise)
or as donations (for example, to non-profit institutions or government agencies
for a non-commercial purpose).

(b)        Change in Sales Practices.  The Parties acknowledge that during the
term of this Agreement, Merck’s sales practices for the marketing and
distribution of Product may change to the extent to which the calculation of the
payment for royalties on Net Sales may become impractical or even
impossible.  In such event the Parties

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agree to meet and reasonably discuss new ways of compensating Company to the
extent currently contemplated under Section 5.2.3(a).

(c)        Royalties for Bulk Product Candidate.  In those cases in which Merck
or a Related Party sells bulk Product Candidate rather than Product in packaged
form to an independent Third Party where neither Merck nor any Related Party
receives any consideration for the sales of Product by such Third Party, the
royalty obligations of this Section 5.2.3 shall be applicable to the bulk
Product Candidate.

(d)        Compulsory Licenses.  If a compulsory license is granted to a Third
Party with respect to Product Candidate or Product in any country in the
Territory with a royalty amount lower than the royalty amount provided by
Section 5.2.3(a), then, following the First Commercial Sale of Competitive
Product in such country under such compulsory license, the royalty amount to be
paid by Merck on Net Sales in that country under Section 5.2.3(a) shall be
reduced to the amount paid by the compulsory licensee during the term of such
compulsory license.

(e)        Third Party Licenses. In the event that Merck obtains (after the
Effective Date) a license under, or other rights to, Patent Rights or know-how
or other intellectual property from any Third Party(ies) that are necessary in
order to make, have made, use, import, offer to sell and/or sell Product(s)
(hereinafter “Third Party Licenses”), [***] of the royalties actually paid under
such Third Party Licenses by Merck or its Related Parties in connection with the
manufacture, use, sale or import, as applicable, of Product(s) in a country for
a Calendar Quarter shall be creditable against the royalty payments due Company
by Merck with respect to the sale of such Product in such Calendar Quarter in
such country.  Notwithstanding the foregoing, (i) in no event shall the
royalties owed by Merck to Company for such Calendar Quarter for any Product for
sales in a country be reduced by more than [***] pursuant to this Section
5.2.3(e) and (ii) if the Product is a Combination Product, then this Section
5.2.3(e) shall only apply to the extent that the Third Party License applies to
the Product Candidate and not to the other pharmaceutically active ingredient.
If Merck is not able to fully recover the amounts paid by Merck or its Related
Parties under any Third Party License as a result of the foregoing restriction,
then Merck shall be entitled to carry forward such right of off-set to future
Calendar Quarters with respect to such excess amount.  At the request of Merck,
Company shall provide reasonable assistance to Merck (at Merck’s expense) (or
its Related Parties) in obtaining any such Third Party Licenses or otherwise
taking action with respect Patent Rights or know-how or other intellectual
property of any Third Party(ies) that is reasonably necessary in order to make,
have made, use, import, offer to sell and/or sell Product(s).

5.2.4    Reports; Payment of Royalty.   Following both (a) exercise of a License
Option by Merck, if at all, and (b) the First Commercial Sale of a Product:
Merck shall furnish to Company a quarterly written report for the Calendar
Quarter showing the Net Sales of all Products, on a product-by-product and
country-by-country basis, subject to royalty payments sold by Merck and its
Related Parties in the Territory during the reporting period and the royalties
payable under this Agreement, which reports shall show the aggregate deductions
from gross sales under the definition of Net Sales and the calculation of

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royalties from Combination Products, if any, as determined in accordance with
the applicable formula under the definition of Net Sales.  Reports shall be due
on the sixtieth (60th) day following the close of each Calendar
Quarter.  Royalties shown to have accrued by each royalty report shall be due
and payable on the date such royalty report is due. Merck shall keep complete
and accurate records in sufficient detail to enable the royalties payable
hereunder to be determined.

5.2.5    Audits. Following both (a) exercise of a License Option by Merck, if at
all, and (b) the First Commercial Sale of a Product:

(a)        Upon the written request of Company and not more than once in each
Calendar Year, Merck shall permit an independent certified public accounting
firm of nationally recognized standing selected by Company and reasonably
acceptable to Merck, at Company’s expense, to have access during normal business
hours to such of the records of Merck as may be reasonably necessary to verify
the accuracy of the royalty reports hereunder for any Calendar Year ending not
more than thirty-six (36) months prior to the date of such request.  The
accounting firm shall disclose to Company only whether the royalty reports are
correct or incorrect and the amount of any discrepancy.  No other information
shall be provided to Company.

(b)        If such accounting firm correctly identifies a discrepancy made
during such period, the appropriate Party shall pay the other Party the amount
of the discrepancy within thirty (30) days of the date Company delivers to Merck
such accounting firm’s written report so correctly concluding, or as otherwise
agreed upon by the Parties.  The fees charged by such accounting firm shall be
paid by Company;  provided,  however, that if such audit uncovers an
underpayment of royalties by Merck that exceeds [***], then the fees of such
accounting firm shall be paid by Merck.

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

(d)        Upon the expiration of thirty-six (36) months following the end of
any Calendar Year, the calculation of royalties payable with respect to such
Calendar Year shall be binding and conclusive upon Company, and Merck and its
Related Parties shall be released from any liability or accountability with
respect to royalties for such Calendar Year.

(e)        Company shall treat all financial information subject to review under
this Section 5.2.5 or under any sublicense agreement in accordance with the
confidentiality and non-use provisions of this Agreement, and shall cause its
accounting firm to enter into an acceptable confidentiality agreement with Merck
and/or its Related Parties obligating it to retain all such information in
confidence pursuant to such confidentiality agreement.

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5.2.6    Payment Terms.  All payments to be made by Merck to Company under this
Agreement shall be made in United States dollars and may be paid by check made
to the order of Company or bank wire transfer in immediately available funds to
such bank account in the United States as may be designated in writing by
Company from time to time.  In the case of sales outside the United States, the
rate of exchange to be used in computing the monthly amount of currency
equivalent in United States dollars due Company shall be determined by Merck at
the monthly rate of exchange utilized by Merck in its worldwide accounting
system.

5.2.7    Income Tax Withholding.  Company shall be liable for all taxes on
Company’s income and other taxes (including interest) (“Taxes”) imposed upon any
payments made by Merck to Company under this Article 5 (“Agreement
Payments”).  If applicable laws, rules or regulations require the withholding of
Taxes, Merck shall make such withholding payments to the appropriate tax
authority and shall subtract the amount thereof from the Agreement
Payments.  Merck shall submit to Company appropriate proof of payment of the
withheld Taxes as well as the official receipts within a reasonable period of
time.  Merck shall provide Company reasonable assistance in order to allow
Company to obtain the benefit of any present or future treaty against double
taxation which may apply to the Agreement Payments.

ARTICLE 6 REPRESENTATIONS AND WARRANTIES

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

6.1.1    such Party is duly organized and validly existing under the laws of the
state or jurisdiction of its organization and has full corporate right, power
and authority to enter into this Agreement and to perform its obligations
hereunder;

6.1.2    the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the necessary
corporate actions of such Party.  This Agreement has been duly executed by such
Party.  This Agreement and any other documents contemplated hereby constitute
valid and legally binding obligations of such Party enforceable against it in
accordance with their respective terms, except to the extent that enforcement of
the rights and remedies created thereby is subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application
affecting the rights and remedies of creditors; and

6.1.3    the execution, delivery and performance by such Party of this Agreement
and any other agreements and instruments contemplated hereunder will not (i) in
any respect violate any statute, regulation, judgment, order, decree or other
restriction of any governmental authority to which such Party is subject, (ii)
violate any provision of the corporate charter, by-laws or other organizational
documents of such Party, or (iii) constitute a material violation or breach by
such Party of any provision of any material contract, agreement or instrument to
which such Party is a party or to which such Party may be subject although not a
party.

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6.2       Company Representations and Warranties.  Company represents and
warrants to Merck that as of the date of this Agreement:

6.2.1    to Company’s knowledge, the issued Patent Rights within the Company
Background IP are not invalid or unenforceable, in whole or in part;

6.2.2    it has the full right, power and authority to enter into this
Agreement, to perform the activities hereunder, including the Research Program,
and to grant the licenses granted hereunder (including under Article 3);

6.2.3    it (and its Affiliates) has not prior to the Effective Date otherwise
granted any rights to any Third Parties that would conflict with the rights
granted to Merck hereunder;

6.2.4    to Company’s knowledge, it owns or controls the Company Background IP,
all of which are (and shall be, in the case of Company Information and
Inventions) free and clear of any liens, charges and encumbrances;

6.2.5    neither it nor any of its Affiliates has received any written
notification from a Third Party that the use of the Company Background IP
infringes or misappropriates the Patent Rights or know-how owned or controlled
by such Third Party, and Company has no actual knowledge that a Third Party has
any basis for any such claim;

6.2.6    Company has obtained all necessary consents, approvals and
authorizations of all governmental authorities and other Persons required to be
obtained by it as of the Effective Date, as applicable, in connection with the
execution, delivery and performance of this Agreement by Company; and

6.2.7    Company (and its Affiliates) has not employed or otherwise used in any
capacity, and will not employ or otherwise use in any capacity, the services of
any Person debarred under United States law, including under Section 21 USC 335a
or any foreign equivalent thereof, in performing any portion of the Research
Program.

6.3       Warranty Disclaimer.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY TECHNOLOGY,
PATENTS, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT, AND
EACH PARTY HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE
FOREGOING.  THE PARTIES ACKNOWLEDGE THAT ANY INFORMATION, BIOLOGICAL MATERIAL
AND KNOW-HOW PROVIDED BY ONE PARTY TO ANOTHER HEREUNDER, ARE PROVIDED “AS IS”
WITH NO WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED.

ARTICLE 7  PATENT PROVISIONS.

7.1       Filing, Prosecution and Maintenance of Patents.

7.1.1    Patent Rights in Company Background IP.  Company, or, as applicable,
Company’s licensors, shall be solely responsible for the preparation, filing,
prosecution and

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maintenance of any patent or patent application claiming Company Background IP
and during the term of this Agreement, shall keep Merck reasonably informed
regarding the filing and prosecution of any such patent applications filed by
Company during the Research Term.

7.1.2    Company Patent Rights Prior to Option Exercise.  On a
program-by-program basis, until the earlier of (i)(A) [***] License Option
exercise by Merck or (B) [***] License Option exercise by Merck (as applicable)
and (ii) expiration of the later of (A) the [***] Option Term or (B) the [***]
Option Term (as applicable), Company shall have the sole right to prosecute all
Research Program Patent Rights arising from the applicable program, in
consultation with Merck, and in accordance with the following:

(a)        Company shall give Merck an opportunity to review the text of any
draft patent application before filing. Company shall consult with Merck with
respect to such patent application, and shall make all changes to such
application reasonably requested by Merck.  Merck shall provide to Company any
feedback regarding such application within thirty (30) days of Company
consulting with Merck under this section. For clarity, Company shall not be
required to make a change requested by Merck to any Research Program Patent
Right that Company reasonably determines would be detrimental to any Company
Background IP.

(b)        Company agrees not to file any patent application that would be a
Product-Specific Company Patent Right or Joint Patent Right (in the event that
Merck were to exercise the applicable Option).  Merck, in consultation with
Company, shall have the right to determine whether claims or unclaimed
disclosure in any draft patent application under this section cover such subject
matter and, if Merck so determines, then Company will remove such claims or
disclosure from the draft.

(c)        Company shall supply Merck with a copy of the application as filed,
together with notice of its filing date and serial number.

(d)        Company shall keep Merck advised of the prosecution and maintenance
status of the Research Program Patent Rights and, upon Merck’s request, shall
provide advance copies of draft responses to substantive official office actions
for review and comment by Merck. Such comments shall be provided by Merck within
fourteen (14) days after receipt of such office actions. Company shall follow
any reasonable advice and suggestions timely provided by Merck in connection
therewith.

(e)        Company shall promptly give notice to Merck of the grant, lapse,
revocation, surrender, invalidation or abandonment of any Research Program
Patent Rights licensed to Merck.

(f)        Company shall give notice to Merck of any desire to cease prosecution
and/or maintenance of any Research Program Patent Right on a country-by-country
basis in the Territory and, in such case, shall permit Merck, in its sole
discretion, to continue prosecution or maintenance of such Research Program
Patent Right at its own expense.  If Merck elects to continue prosecution or
maintenance of such

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Research Program Patent Right, Company shall execute documents in a timely
manner as may be reasonably necessary to allow Merck to continue such
prosecution and maintenance.  During prosecution of an application, however,
Company may on its own, without providing such notice, abandon an application as
long as a parent or child of such application is co-pending.

7.1.3    Product-Specific Company Patent Rights Following Option Exercise.  If
Merck exercises a License Option, from the date of such License Option exercise:
Merck shall have the first right to file the corresponding patent applications
claiming such Product-Specific Company Patent Rights included within such
License Option at its own expense; and the following provisions shall apply with
respect to such patent applications in the Product-Specific Company Patent
Rights claiming or covering the corresponding subject matter:

(a)        Merck shall give Company an adequate opportunity to review the text
of any draft patent application before filing. Company shall provide to Merck
any feedback regarding such application within thirty (30) days of receipt
thereof. Merck shall supply Company with a copy of the application as filed,
together with notice of its filing date and serial number.

(b)        Upon request from Merck, at Merck’s expense, Company will cooperate
with Merck in the drafting, prosecution and filing of Product-Specific Company
Patent Rights including, but not limited to, determination of proper
inventorship, execution of formal papers (including declarations, powers of
attorney and assignments) and providing technical feedback and experimental
data.

(c)        Merck has the first right to prosecute and maintain the
Product-Specific Company Patent Rights and to select countries in which to file
the Product-Specific Company Patent Rights.  Merck shall use Commercially
Reasonable Efforts with regard to selecting countries in which to file the
Product-Specific Company Patent Rights.

(d)        Merck shall keep Company advised of the status of the prosecution and
maintenance status of the Product-Specific Company Patent Rights and, upon
Company’s written request, shall provide copies of office actions related to the
prosecution and maintenance of the Product-Specific Company Patent Rights.

(e)        Merck shall promptly give notice to Company of the grant, lapse,
revocation, surrender, invalidation or abandonment of any Product-Specific
Company Patent Rights.

(f)        Merck shall give at least fifteen (15) days’ advanced written notice
to Company of any desire to cease prosecution and/or maintenance of
Product-Specific Company Patent Rights on a country-by-country basis in the
Territory and, in such case, shall permit Company, in its sole discretion, to
assume and continue prosecution or maintenance of such Product-Specific Company
Patent Rights at its own expense. During prosecution of an application, however,
Merck may on its own, without providing such notice, abandon an application as
long as a parent or child of such application is co-pending.

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7.1.4    Research Program Patent Rights Following Option Exercise.  If Merck
exercises a License Option, from the date of such License Option exercise:
Company shall have the first right to prosecute all Research Program Patent
Rights arising from the applicable program, in consultation with Merck, and in
accordance with the following:

(a)        Company shall give Merck an opportunity to review the text of any
draft patent application before filing. Company shall consult with Merck with
respect to such patent application, and shall make all changes to such
application reasonably requested by Merck.  Merck shall provide to Company any
feedback regarding such application within thirty (30) days of Company
consulting with Merck under this section. For clarity, Company shall not be
required to make a change requested by Merck to any Research Program Patent
Right that Company reasonably determines would be detrimental to any Company
Background IP.

(b)        Company agrees not to file any patent application that would be a
Product-Specific Company Patent Right or Joint Patent Right.  Merck, in
consultation with Company, shall have the right to determine whether claims or
unclaimed disclosure in any draft patent application under this section cover
Product-Specific Company Patent Rights or Joint Patent Rights and, if Merck so
determines, then Company will remove such claims or disclosure.

(c)        Company shall supply Merck with a copy of the application as filed,
together with notice of its filing date and serial number.

(d)        Company shall keep Merck advised of the prosecution and maintenance
status of the Research Program Patent Rights and, upon Merck’s request, shall
provide advance copies of draft responses to substantive official office actions
for review and comment by Merck. Such comments shall be provided by Merck within
fourteen (14) days after receipt of such office actions. Company shall follow
any reasonable advice and suggestions timely provided by Merck in connection
therewith.

(e)        Company shall promptly give notice to Merck of the grant, lapse,
revocation, surrender, invalidation or abandonment of any Research Program
Patent Rights licensed to Merck.

(f)        Company shall give notice to Merck of any desire to cease prosecution
and/or maintenance of Research Program Patent Rights on a country-by-country
basis in the Territory and, in such case, shall permit Merck, in its sole
discretion, to continue prosecution or maintenance of such Research Program
Patent Rights at its own expense.  If Merck elects to continue prosecution or
maintenance of such Research Program Patent Rights, Company shall execute
documents in a timely manner as may be reasonably necessary to allow Merck to
continue such prosecution and maintenance.  During prosecution of an
application, however, Company may on its own, without providing such notice,
abandon an application as long as a parent or child of such application is
co-pending.

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7.1.5    Joint Patent Rights.  Until the earlier of (i)(A) the [***] License
Option exercise by Merck or (B) the [***] Option Exercise by Merck and (ii)
expiration of the later of (A) the [***] Option Term or (B) the [***] Option
Term, neither Party shall, without the other Party’s written consent, file
patent applications that claim or cover Joint Information and Inventions.
Company shall have the first right to file the corresponding patent applications
claiming or covering such Joint Information and Inventions only if Merck does
not exercise the corresponding License Option. Following exercise by Merck of a
License Option, if at all: Merck shall have the first right to file the
corresponding patent applications claiming or covering such Joint Information
and Inventions; and the following provisions shall apply with respect to patent
applications in such Joint Patent Rights:

(a)        Merck shall give Company an adequate opportunity to review the text
of any patent application before filing, shall consult with Company with respect
thereto, and shall supply Company with a copy of the application as filed,
together with notice of its filing date and serial number.

(b)        Upon request from Merck, at Merck’s expense, Company will cooperate
with Merck in the drafting, prosecution and filing of Joint Patent Rights
including, but not limited to, determination of proper inventorship, execution
of formal papers (including declarations, powers of attorney and assignments)
and providing technical feedback and experimental data.

(c)        Merck has the first right to prosecute and maintain the Joint Patent
Rights and to select countries in which to file the Joint Patent Rights.

(d)        Merck shall keep Company advised of the status of the Joint Patent
Rights and, upon Company’s written request, shall provide copies of office
actions related to the prosecution and maintenance of the Joint Patent Rights.

(e)        Merck shall give notice to Company of the grant, lapse, revocation,
surrender, invalidation or abandonment of any Joint Patent Rights.

(f)        Merck shall give at least fifteen (15) days’ advanced written notice
to Company of any desire to cease prosecution and/or maintenance of Joint Patent
Rights on a country-by-country basis in the Territory and, in such case, shall
permit Company, in its sole discretion, to assume and continue prosecution or
maintenance of such Joint Patent Rights at its own expense. During prosecution
of an application, however, Merck may on its own, without providing such notice,
abandon an application as long as a parent or child of such application is
co-pending.

7.1.6    Other Provisions. Following exercise of a License Option by Merck, if
at all:

(a)        Patent Term Extension.  The Parties shall cooperate fully with each
other to provide necessary information and assistance, as the other Party may
reasonably request, in obtaining patent term extension or supplemental
protection certificates or their equivalents in any country in the Territory
where applicable to Company Patent Rights and Joint Patent Rights of the
corresponding exercised License Option.  In the event that elections with
respect to obtaining such patent term

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extension are to be made, Merck shall have the right to make the election and
Company agrees to abide by such election.

(b)        Other Cooperation.  The Parties agree to cooperate fully and provide
any information and assistance that either may reasonably request for the
filing, prosecution and maintenance of Company Patent Rights and Joint Patent
Rights.  The Parties further agree to take reasonable actions to maximize the
protections available under the safe harbor provisions of 35 U.S.C. 102(c) for
U.S. patents and patent applications.

7.1.7    Filing, Prosecution and Maintenance Expenses.  With respect to all
filing, prosecution and maintenance activities under this Section 7.1, the
filing and/or prosecuting Party shall be responsible for payment of all costs
and expenses related to such activities.

7.1.8    Inventor Remuneration.  Company shall comply with all applicable
country-specific inventor remuneration laws and regulations associated with
Company Patent Rights and Joint Patent Rights when inventor remuneration
obligations are triggered by an employee of Company and/or its Affiliates, or a
Third Party acting on behalf of Company and/or its Affiliates.  Merck shall
comply with all applicable country-specific inventor remuneration laws and
regulations associated with Joint Patent Rights when inventor remuneration
obligations are triggered by an employee of Merck and/or its Affiliates, or a
Third Party acting on behalf of Merck and/or its Affiliates.

7.2       Interference, Derivation, Opposition, Reexamination, Reissue,
Supplemental Examination, Inter Partes Review and Post-Grant Review
Proceedings.  Following exercise by Merck of the [***] License Option or [***]
License Option, if at all, the following provisions shall apply with respect to
any Product-Specific Company Patent Rights or Joint Patent Rights corresponding
to the exercised License Option:

7.2.1    Third Party Initiated Proceedings. Each Party shall, within ten (10)
days of learning of such event, inform the other Party of any request for, or
filing or declaration of, any interference, derivation proceeding, opposition,
reexamination requested by a Third Party, inter partes review, post-grant review
or similar contested administrative proceeding involving a Third Party relating
to Product-Specific Company Patent Rights or Joint Patent Rights.  Merck and
Company shall thereafter consult and cooperate fully to determine a course of
action with respect to any such proceeding.  Merck shall have the right to
control such proceedings with respect to Product-Specific Company Patent Rights
and Joint Patent Rights, and Company shall have the right to review any
submission to be made in connection with such proceeding.  The controlling Party
shall bear all costs of conducting such proceedings.

7.2.2    Party Initiated Proceedings.  Merck shall have the sole right and
discretion to initiate a reexamination, supplemental examination, reissue or
similar administrative proceeding relating to Product-Specific Company Patent
Rights or Joint Patent Rights.  Company shall have the right to review any
submission to be made in connection with such proceeding.  If there is
disagreement regarding whether a reexamination, supplemental examination,
reissue or similar administrative proceeding relating to Product-Specific
Company Patent Rights or Joint Patent Rights should be initiated, such
disagreement shall be referred to the

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senior intellectual property officers of the Parties.  In the event that these
two executives do not, after reasonable efforts, reach agreement, the resolution
and/or course of conduct shall be determined by Merck.  In the event that Merck
chooses not to initiate a proceeding under this Section 7.2.2, and upon Merck’s
written consent, Company shall have the right to initiate such
proceedings.  Merck shall have the right to control such proceedings.

7.2.3    Cooperation.  In connection with any administrative proceeding under
Section 7.2.1 or 7.2.2, Merck and Company shall cooperate fully and provide each
other with any information or assistance that either may reasonably request. The
Parties shall keep each other informed of developments in any such action or
proceeding, including the status of any settlement negotiations and the terms of
any offer related thereto.  For any proceeding not controlled by Merck, Company
shall obtain prior approval from Merck of any settlement offer or settlement
agreement, which approval shall not be unreasonably withheld, conditioned or
delayed.

7.2.4    Expenses. The Party controlling any administrative proceeding pursuant
to Section 7.2.1 and 7.2.2 shall bear all expenses related thereto.

7.3       Enforcement and Defense.  Following exercise by Merck of the [***]
License Option or the [***] License Option, if at all, the following provisions
shall apply with respect to any Know-How, Product-Specific Company Patent
Rights, or Joint Patent Rights; or any Company Background IP or Research Program
Patent Rights that claim Product or Product Candidate as a composition-of-matter
or, on a country-by-country basis, a method of treatment of a human disease
which has received Marketing Authorization by the appropriate Regulatory
Authority in the country in the Territory corresponding to the exercised License
Option:

7.3.1    The Parties shall give notice to each other of either (i) any
infringement of Product-Specific Company Patent Rights or Joint Patent Rights;
or any Company Background IP or Research Program Patent Rights that claim
Product or Product Candidate as a composition-of-matter or, on a
country-by-country basis, a method of treatment of a human disease which has
received Marketing Authorization by the appropriate Regulatory Authority in the
country in the Territory (including filing of a Biosimilar Application filed
under Section 351(k) of the Public Health Service Act for which Merck is a
reference product sponsor), or (ii) any misappropriation or misuse of Company
Know-How, that may come to its attention.  Merck and Company shall thereafter
consult and cooperate fully to determine a course of action, including but not
limited to the commencement of legal action by either or both Merck and Company,
to terminate any infringement of Product-Specific Company Patent Rights or Joint
Patent Rights; or any Company Background IP or Research Program Patent Rights
that claim Product or Product Candidate as a composition-of-matter or, on a
country-by-country basis, a method of treatment of a human disease which has
received Marketing Authorization by the appropriate Regulatory Authority in the
country in the Territory or any misappropriation or misuse of Company
Know-How.  The final decision regarding the course of action, however, will be
Merck’s.  Merck, upon notice to Company, shall have the first right to initiate
and prosecute such legal action at its own expense and in the name of Merck
and/or Company.  Merck will have the right to control such legal action relating
to Product-Specific Company Patent Rights, Company Know-How or Joint Patent
Rights; or any Company Background IP or Research Program Patent Rights that
claim Product or Product Candidate as a composition-of-matter or, on a
country-by-country

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basis, a method of treatment of a human disease which has received Marketing
Authorization by the appropriate Regulatory Authority in the country in the
Territory, including selection of any patents for listing under 42 U.S.C.
§262(l), and to control the defense of any declaratory judgment action relating
to Product-Specific Company Patent Rights, Company Know-How or Joint Patent
Rights; or any Company Background IP or Research Program Patent Rights that
claim Product or Product Candidate as a composition-of-matter or, on a
country-by-country basis, a method of treatment of a human disease which has
received Marketing Authorization by the appropriate Regulatory Authority in the
country in the Territory. Each Party shall have the right to be represented by
counsel of its own choice.

7.3.2    Merck shall promptly inform Company if it elects not to exercise its
first right under Section 7.3.1 to initiate and prosecute legal action, and, if
Merck consents, Company shall thereafter have the right to either initiate and
prosecute such action or to control the defense of such declaratory judgment
action in the name of Company and, if necessary, Merck.  If Company elects to do
so, the costs of any agreed-upon course of action to terminate infringement of
Product-Specific Company Patent Rights or Joint Patent Rights; or any Company
Background IP or Research Program Patent Rights that claim Product or Product
Candidate as a composition-of-matter or, on a country-by-country basis, a method
of treatment of a human disease which has received Marketing Authorization by
the appropriate Regulatory Authority in the country in the Territory; or
misappropriation or misuse of Company Know-How, including without limitation the
costs of any legal action commenced or the defense of any declaratory judgment,
shall be paid by Company.  Each Party shall have the right to be represented by
counsel of its own choice.

7.3.3    For any action to terminate any infringement of Product-Specific
Company Patent Rights or Joint Patent Rights; or any Company Background IP or
Company Patent Rights that claim Product or Product Candidate as a
composition-of-matter or, on a country-by-country basis, a method of treatment
of a human disease which has received Marketing Authorization by the appropriate
Regulatory Authority in the country in the Territory; or any misappropriation or
misuse of Company Know-How, in the event that a Party is unable to initiate or
prosecute such action solely in its own name, the other Party will join such
action voluntarily and will execute and cause its Affiliates to execute all
lawful documents necessary for the Party to initiate litigation to prosecute and
maintain such action under this Section 7.3.  In connection with any action or
potential action, Merck and Company will cooperate fully and will provide each
other with any information or assistance that either may reasonably request,
including cooperating with regard to any pre-litigation review of the
Product-Specific Company Patent Rights and Joint Patent Rights; or any Company
Background IP or Research Program Patent Rights that claim Product or Product
Candidate as a composition-of-matter or, on a country-by-country basis, a method
of treatment of a human disease which has received Marketing Authorization by
the appropriate Regulatory Authority in the country in the Territory.  Each
Party shall keep the other informed of developments in any action or
proceeding.  For any proceeding not controlled by Merck, Company shall obtain
prior approval from Merck of any settlement offer or settlement agreement, such
approval not to be unreasonably withheld, delayed or conditioned.

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7.3.4    Any recovery obtained by either or both Merck and Company in connection
with or as a result of any action contemplated by this Section, whether by
settlement or otherwise, shall be shared in order as follows:

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

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

(c)        the amount of any recovery remaining shall then be allocated between
the Parties on a pro rata basis taking into consideration the relative economic
losses suffered by each Party.

ARTICLE 8  TERM AND TERMINATION

8.1       Term and Expiration.  This Agreement shall be effective as of the
Effective Date and unless terminated earlier pursuant to Sections 8.2 or 8.3,
this Agreement shall continue in full force and effect until one or more
Products has received Marketing Authorization and, thereafter, until expiration
of all royalty obligations hereunder.  Upon expiration of this Agreement,
Merck's licenses pursuant to Section 3.2.1 and 3.2.2 shall become fully paid-up,
perpetual licenses.

8.2       Termination by Merck.

8.2.1    During the Term of the License Option. During the term of the License
Option, notwithstanding anything contained herein to the contrary, Merck shall
have the right to terminate this Agreement, in its sole discretion, by giving
ninety (90) days’ advance written notice of such termination to Company. For the
avoidance of doubt, termination by Merck under this Section can be effected only
through a written notice specifically referring to this Section.

8.2.2    Following Option Exercise. Notwithstanding anything contained herein to
the contrary, and following exercise of a License Option by Merck, if at all,
Merck shall have the right to terminate this Agreement at any time in its sole
discretion by giving ninety (90) days’ advance written notice to Company.  For
the avoidance of doubt, termination by Merck under this Section can be effected
only through a written notice specifically referring to this Section.

8.2.3    Termination due to Option Expiration. If Merck does not exercise a
License Option on or before the end of the term of the License Option, this
Agreement shall terminate automatically with no further action of the Parties.

8.3       Termination for Cause.

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

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(a)        upon written notice by either Party if the other Party is in breach
of its material obligations hereunder by causes and reasons within its control
and has not cured such breach within ninety (90) days after notice requesting
cure of the breach; provided,  however, in the event of a good faith dispute
with respect to the existence of a material breach, the ninety (90) day cure
period shall be tolled until such time as the dispute is resolved pursuant to
Section 9; or

(b)        by either Party upon the filing or institution of bankruptcy,
reorganization, liquidation or receivership proceedings, or upon an assignment
of a substantial portion of the assets for the benefit of creditors by the other
Party; provided,  however, that in the case of any involuntary bankruptcy
proceeding such right to terminate shall only become effective if the Party
consents to the involuntary bankruptcy or such proceeding is not dismissed
within ninety (90) days after the filing thereof.

8.3.2    Effect of Termination by Merck for Cause under Section 8.3.1(a).  In
addition to Sections 8.4 and 8.5, if this Agreement is terminated by Merck
pursuant to Section 8.3.1(a) following exercise by Merck of a License Option for
a material breach by Company of Article 4 of this Agreement, Merck’s licenses
pursuant to Sections 3.2.1 and 3.2.2 shall become perpetual licenses subject to
the payment of royalties pursuant to the terms of Section 5.2.3 in an amount
equal to fifty percent (50%) of any amounts set forth in such Section 5.2.3.

8.3.3    Effect of Termination for Cause under Section 8.3.1(b).  In addition to
Sections 8.4 and 8.5, if this Agreement is terminated by Merck pursuant to
Section 8.3.1(b) due to the rejection of this Agreement by or on behalf of
Company under Section 365 of the United States Bankruptcy Code (the “Code”), all
licenses and rights to licenses granted under or pursuant to this Agreement by
Company to Merck are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of the Code, licenses of rights to “intellectual property” as
defined under Section 101(35A) of the Code.  The Parties agree that Merck, as a
licensee of such rights under this Agreement, shall retain and may fully
exercise all of its rights and elections under the Code, and that upon
commencement of a bankruptcy proceeding by or against Company under the Code,
Merck shall be entitled to a complete duplicate of or complete access to (as
Merck deems appropriate), any such intellectual property and all embodiments of
such intellectual property.  Such intellectual property and all embodiments
thereof shall be promptly delivered to Merck (i) upon any such commencement of a
bankruptcy proceeding upon written request therefore by Merck, unless Company
elects to continue to perform all of its obligations under this Agreement or
(ii) if not delivered under (i) above, upon the rejection of this Agreement by
or on behalf of Company upon written request therefore by Merck.  The foregoing
provisions of this Section 8.3.3 are without prejudice to any rights Merck may
have arising under the Code or other applicable law.

8.3.4    Termination of Certain Licenses. If Merck or a Related Party commences
or otherwise, directly or indirectly, pursues (or assists Third Parties to do
so) any Challenge of any Patent Right included in the Company Patent Rights,
Merck’s licenses hereunder shall terminate.  For the purpose of this Section,
“Challenge” means any challenge to the validity or enforceability of the
applicable Patent Right, including by (i) filing a declaratory judgment action
in which the applicable Patent Right is alleged to be invalid or unenforceable,
(ii)

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citing prior art pursuant to 35 U.S.C. §301, filing a request for re-examination
of the applicable Patent Right, or provoking or becoming party to an
interference with the applicable Patent Right pursuant to 35 U.S.C. §135 or
(iii) filing or commencing any re-examination, opposition, cancellation, nullity
or similar proceedings against the applicable Patent Right, or petitioning for
any form of administrative or judicial (or arbitration) review of the applicable
Patent Right, including post-grant review, Inter Partes Review, or opposition
proceedings.

8.4       Effects of Termination.  In the event of any termination of this
Agreement (except as otherwise expressly stated):

8.4.1    Except for the surviving provisions set forth in Section 8.5, the
rights and obligations of the Parties hereunder (including the licenses and
option rights under Article 3) shall terminate as of the date of such
termination.

8.4.2    No later than thirty (30) days after the effective date of termination,
each Party shall return or cause to be returned to the other Party all
Information  in tangible form received from the other Party and all copies
thereof; provided,  however, that each Party may retain any Information
reasonably necessary for such Party’s continued practice under any license(s)
which do not terminate pursuant to this Section, and may keep one copy of
Information received from the other Party in its confidential files for record
purposes.

8.4.3    Each Party shall pay all amounts then due and owing as of the
termination date.

8.4.4    The Parties shall confer to determine how the Joint Patent Rights will
be addressed.

8.4.5    Upon termination of this Agreement by either Party (other than a
termination of this Agreement by Merck where Section 8.3.2 applies) following
exercise of a License Option by Merck, (i) Merck and its Affiliates,
sublicensees and distributors shall be entitled, during the twelve (12)-month
period immediately following the effective date of termination, to finish any
work-in-progress and to sell any Product or Product Candidate remaining in
inventory, in accordance with the terms of this Agreement, subject to royalties
therefor, and (ii) the obligations under Article 5 (Payments, Royalties and
Reports) in connection with any selling permitted by clause (i) above shall
continue in force and effect during such twelve (12)-month period until the
expiration of the Royalty Period for each Product (provided for clarity that
this clause shall not be construed to grant any licenses to Merck other than the
permissions granted pursuant to this Section 8.4.5).

8.5       Effect of Expiration or Termination; Survival.  Expiration or
termination of this Agreement shall not relieve the Parties of any obligation
accruing prior to such expiration or termination.  Any expiration or termination
of this Agreement shall be without prejudice to the rights of either Party
against the other accrued or accruing under this Agreement prior to expiration
or termination, including without limitation the obligation to pay royalties for
Product(s) or Product Candidate sold prior to such expiration or termination.
The provisions of Section 4.1 shall survive the expiration or termination of
this Agreement and shall continue in effect for ten (10) years.  The provisions
of Article 1 (Definitions), Article 8 (Termination) and Article 9
(Miscellaneous) and Sections 2.7.1 (Research Information and Inventions), 7.1.5
(Joint Patent Rights), shall survive any expiration or termination of this
Agreement.

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ARTICLE 9  MISCELLANEOUS

9.1       Indemnification.

9.1.1    Indemnification by Merck.  Merck hereby agrees to indemnify, hold
harmless and defend Company, its Affiliates and their respective officers,
directors, agents, employees, successors and assigns (collectively, the “Company
Indemnified Parties”) against any and all losses, costs, expenses, fees or
damages arising out of or relating to claims, allegations, suits, actions or
proceedings asserted by any Third Party, whether governmental or private,
arising out of or relating to (i) breach by Merck of Section 2.9 (Compliance
with Law and Ethical Business Practices), or (ii) if a License Option is
exercised by Merck, the clinical development, manufacture, use, sale or other
disposition of any Product Candidate or Product by Merck any Related Party.

9.1.2    Indemnification by Company.  Company agrees to indemnify, hold harmless
and defend Merck, its Affiliates and their respective officers, directors,
agents, employees, successors and assigns (collectively, the “Merck Indemnified
Parties”) against any and all losses, costs, expenses, fees or damages arising
out of or relating to claims, allegations, suits, actions or proceedings
asserted by any Third Party, whether governmental or private, arising out of or
relating to breach by Company of Section 2.9 (Compliance with Law and Ethical
Business Practices).

9.1.3    Procedure.  If either Party is seeking indemnification under Section
9.1 (the “Indemnified Party”), it shall inform the other Party (the
“Indemnifying Party”) of the claim giving rise to the obligation to indemnify
pursuant to such Section as soon as reasonably practicable after receiving
notice of the claim (provided,  however, any delay or failure to provide such
notice shall not constitute a waiver or release of, or otherwise limit, the
Indemnified Party’s rights to indemnification under, as applicable, Section 9.1,
except to the extent that such delay or failure materially prejudices the
Indemnifying Party’s ability to defend against the relevant claims). The
Indemnifying Party shall have the right to assume the defense of any such claim
for which it is obligated to indemnify the Indemnified Party. The Indemnified
Party shall cooperate with the Indemnifying Party and the Indemnifying Party’s
insurer as the Indemnifying Party may reasonably request, and at the
Indemnifying Party’s cost and expense. The Indemnified Party shall have the
right to participate, at its own expense and with counsel of its choice, in the
defense of any claim or suit that has been assumed by the Indemnifying Party.
The Indemnifying Party shall not settle any claim without the prior written
consent of the Indemnified Party, not to be unreasonably withheld or delayed.
The Indemnified Party shall not settle or compromise any such claim without the
prior written consent of the Indemnifying Party, which it may provide (or not)
in its sole discretion. If the Parties cannot agree as to the application of
Section 9.1 to any claim, pending resolution of the dispute pursuant to Section
9.9, the Parties may conduct separate defenses of such claims, with each Party
retaining the right to claim indemnification from the other Party in accordance
with Section 9.1 upon resolution of the underlying claim.

9.2       Limitation of Liability.  NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY UNDER ANY THEORY FOR, NOR SHALL ANY INDEMNIFIED PARTY HAVE THE RIGHT TO
RECOVER, ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT OR

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OTHER SIMILAR DAMAGES OR ANY PUNITIVE DAMAGES OR ANY LOST PROFIT, LOST SALE OR
LOST OPPORTUNITY DAMAGES (WHETHER SUCH DAMAGES ARE CLAIMED DIRECTLY OR
INDIRECTLY) ARISING FROM OR RELATING TO THIS AGREEMENT (INCLUDING BREACH OF THIS
AGREEMENT) OR THE EXERCISE OF ITS RIGHTS HEREUNDER, REGARDLESS OF ANY NOTICE OF
THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT SUCH LIMITATION SHALL
NOT APPLY TO DAMAGES PAID OR PAYABLE TO A THIRD PARTY BY AN INDEMNIFIED PARTY
FOR WHICH THE INDEMNIFIED PARTY IS ENTITLED TO INDEMNIFICATION HEREUNDER AND
WITH RESPECT TO DAMAGES ARISING OUT OF OR RELATED TO A BREACH OF ITS
CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE 4.

9.3       Force Majeure.  Neither Party shall be held liable to the other Party
nor be deemed to have defaulted under or breached this Agreement for failure or
delay in performing any obligation under this Agreement to the extent such
failure or delay is caused by or results from causes beyond the reasonable
control of the affected Party, potentially including, but not limited to,
embargoes, war, acts of war (whether war be declared or not), acts of terrorism,
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, fire, floods, or other acts of God, or acts, omissions or delays
in acting by any governmental authority or the other Party.  The affected Party
shall notify the other Party of such force majeure circumstances as soon as
reasonably practical, and shall promptly undertake all reasonable efforts
necessary to cure such force majeure circumstances.

9.4       Assignment.  Except as provided in this Section 9.4, this Agreement
may not be assigned or otherwise transferred, nor may any right or obligation
hereunder be assigned or transferred, by either Party without the consent of the
other Party; provided,  however, that (i) Merck may, without such consent,
assign, in whole or in part, this Agreement and its rights and obligations
hereunder to an Affiliate and (ii) either Party may, without such consent,
assign this Agreement in connection with the transfer or sale of all or
substantially all of its assets related to the subject matter of this Agreement,
or in the event of its merger or consolidation or change in control or similar
transaction. Any attempted assignment not in accordance with this Section 9.4
shall be void.  Any permitted assignee shall assume all assigned obligations of
its assignor under this Agreement.

9.5       Use of Affiliates.  Merck shall have the right to exercise its rights
and perform its obligations under this Agreement either itself or through any of
its Affiliates; provided, for clarity, that Merck shall remain at all times
fully liable for its responsibilities under this Agreement and a Merck Affiliate
shall have no right to enforce this Agreement against Company.

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

9.7       Notices.  All notices which are required or permitted hereunder shall
be in writing and sufficient if delivered personally, sent by facsimile (and
promptly confirmed by personal delivery,

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

 

if to Company, to:

SYNTHETIC GENOMICS, INC.11149 North Torrey Pines Road

La Jolla, CA 92037

Attention: Chief Executive Officer

 

 

 

 

and:

Attention: Office of General Counsel

 

 

 

if to Merck, to:

Merck Sharp & Dohme Corp.

One Merck Drive

Whitehouse Station, NJ 08889-0100

Attention: Office of Secretary

Facsimile No.:  (908) 735-1246

and

Merck Sharp & Dohme Corp.

2000 Galloping Hill Road

PO Box 539

Mailstop K-1-4161

Kenilworth, NJ 07033-1310

Attention: Senior Vice President, Business Development

 

 

 

or to such other address(es) as the Party to whom notice is to be given may have
furnished to the other Party in writing in accordance herewith.  Any such notice
shall be deemed to have been given: (a) when delivered if personally delivered
or sent by facsimile on a business day (or if delivered or sent on a
non-business day, then on the next business day); (b) on the business day after
dispatch if sent by nationally-recognized overnight courier; or (c) on the fifth
(5th) business day following the date of mailing, if sent by mail.  The Parties
hereby agree that, to the extent permitted by law, any notice provided in
accordance with this Section shall constitute due service of process with
respect to any legal proceeding between the Parties arising hereunder and that
compliance with the Hague Convention for the Service of Process, if otherwise
applicable, shall not be required.

9.8       Applicable Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to any rules
of conflict of laws or renvoi.

9.9       Dispute Resolution.

9.9.1    The Parties shall negotiate and use reasonable efforts to settle any
dispute, controversy or claim arising from or related to this Agreement or the
breach thereof (a “Dispute”). Any Party shall give the other Party written
notice of any Dispute not resolved in the normal course of business. Within 20
days from the date of delivery of such notice, the receiving Party shall submit
to the other Party a written response.  The notice and response shall include
(A) a statement of that Party's position and a summary of arguments supporting

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that position, and (B) the name and title of the executive who will represent
that Party and of any other person who will accompany the executive.  Within 45
days from the date of delivery of the initial notice, the executives of both
Parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, to attempt to resolve the Dispute.
These executives shall have the authority to settle the Dispute and shall be at
a higher level of management than the persons with direct responsibility for
administration of this Agreement. All negotiations pursuant to this paragraph
are confidential and shall be treated as compromise and settlement negotiations
for purposes of applicable rules of evidence.

9.9.2    If the Parties do not fully settle following the procedure in Section
9.9.1, and a Party wishes to pursue the matter, each dispute, controversy or
claim arising from or related to this Agreement or the breach thereof that is
not an “Excluded Claim” shall be brought in (i) if the suit is initiated by
Company, the federal court for the District of New Jersey, if federal
jurisdiction is available, or, alternatively, in the state courts in Union
County, New Jersey or (ii) if the suit is initiated by Merck, the federal court
for the Southern District of California, if federal jurisdiction is available,
or, alternatively, in the state courts in San Diego County, California.  Each of
the Parties hereby submits to the exclusive jurisdiction of such courts for the
purpose of any such litigation; provided, that a final judgment in any such
litigation shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Each party
irrevocably and unconditionally agrees not to assert (a) any objection which it
may ever have to the laying of venue of any such litigation in such courts, (b)
any claim that any such litigation brought in any such court has been brought in
an inconvenient forum, and (c) any claim that such court does not have
jurisdiction with respect to such litigation. EACH PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY AND AGREES THAT ANY OF THEM
MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE
KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO
WAIVE ITS RIGHT TO TRIAL BY JURY IN ANY LITIGATION.

9.9.3    As used in this Section, the term “Excluded Claim” means a dispute,
controversy or claim that concerns (a) the validity or infringement of a patent,
trademark or copyright; or (b) any antitrust, anti-monopoly or competition law
or regulation, whether or not statutory.  Any action concerning Excluded Claims
identified in clauses (a) and (b) of this Paragraph may be brought in any court
having jurisdiction.

9.10     Entire Agreement; Amendments.  This Agreement, together with the
Schedules and Exhibits hereto, contains the entire understanding of the Parties
with respect to the subject matter hereof.  Any other express or implied
agreements and understandings, negotiations, writings and commitments, either
oral or written, with respect to the subject matter hereof are superseded by the
terms of this Agreement.  The Schedules and Exhibits to this Agreement are
incorporated herein by reference and shall be deemed a part of this
Agreement.  This Agreement may be amended, or any term hereof modified, only by
a written instrument duly executed by authorized representative(s) of both
Parties hereto. Notwithstanding anything to the contrary in the foregoing, that
certain confidentiality agreement between the Parties dated as of August 17,
2016,

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shall remain in full force and effect with respect to the subject matter thereof
and information disclosed thereunder.

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

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

9.13     Waiver.  The waiver by either Party hereto of any right hereunder, or
of any failure of the other Party to perform, or of any breach by the other
Party, shall not be deemed a waiver of any other right hereunder or of any other
breach by or failure of such other Party whether of a similar nature or
otherwise.

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

9.15     Certain Conventions.  Any reference in this Agreement to an Article,
Section, subsection, paragraph, clause, Schedule or Exhibit shall be deemed to
be a reference to an Article, Section, subsection, paragraph, clause, Schedule
or Exhibit, of or to, as the case may be, this Agreement, unless otherwise
indicated.  Whenever this Agreement refers to a number of days, unless otherwise
specified, such number refers to calendar days.  Unless the context of this
Agreement otherwise requires, (a) words of any gender include each other gender,
(b) words such as “herein”, “hereof”, and “hereunder” refer to this Agreement as
a whole and not merely to the particular provision in which such words appear,
(c) words using the singular shall include the plural, and vice versa, (d) the
words “include”, “includes”, and “including” shall be deemed to be followed by
the words “without limitation”, unless otherwise specified, and (e) any
reference to a statute, directive, regulation or other instrument having the
force of law shall be deemed to be a reference to such statute, directive,
regulation or instrument as it may be amended from time to time.

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

9.17     Counterparts.  This Agreement may be signed in any number of
counterparts (including by facsimile or electronic transmission), each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.  After facsimile or electronic transmission, the Parties agree to
execute and exchange documents with original signatures.

 

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

 

MERCK SHARP & DOHME CORP.

    

SYNTHETIC GENOMICS, INC.

 

 

 

BY:

/s/ Benjamin Thorner

 

BY:

/s/ Oliver Fetzer

 

Benjamin Thorner

 

 

Oliver Fetzer

 

 

 

TITLE: SVP & Head of BD&L

 

TITLE: Chief Executive Officer

 

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