CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS([*]), HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE EXCHANGE ACT OF 1934, AS
AMENDED

 

RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

BETWEEN

CYSTIC FIBROSIS FOUNDATION THERAPEUTICS INCORPORATED

AND

COMBINATORX, INCORPORATED

 

DATED MAY 31, 2006

 

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

TABLE OF CONTENTS

RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

 

1

 

 

 

 

 

ARTICLE I — DEFINITIONS

 

2

 

 

 

 

 

ARTICLE II — RESEARCH PROGRAM

 

11

 

 

 

 

 

2.1

 

Commencement; Objective

 

11

 

 

 

 

 

2.2

 

Research Diligence

 

11

 

 

 

 

 

2.3

 

Research Plan

 

12

 

 

 

 

 

2.4

 

Joint Research Committee

 

12

2.4.1

 

Composition and Purposes

 

12

2.4.2

 

Decision-Making

 

14

2.4.3

 

Additional Clinical Development Candidate Criteria

 

15

 

 

 

 

 

2.5

 

Joint Steering Committee

 

16

2.5.1

 

Composition and Purposes

 

16

 

 

 

 

 

2.6

 

Exchange of Information

 

17

2.6.1

 

Sharing of Information

 

17

2.6.2

 

Restrictions on CFFT Use

 

17

 

 

 

 

 

2.7

 

Third Party Testing

 

17

2.7.1

 

CFFT Testing Request

 

17

2.7.2

 

Agreed Lab

 

18

2.7.3

 

Testing Request

 

18

2.7.4

 

Lead Compounds

 

18

2.7.5

 

CombinatoRx Cooperation

 

19

 

 

 

 

 

ARTICLE III — DEVELOPMENT

 

20

 

 

 

 

 

3.1

 

Commencement of Clinical Development Program

 

20

 

 

 

 

 

3.2

 

Joint Development Committee

 

20

3.2.1

 

Formation and Responsibilities

 

20

3.2.2

 

Clinical Development Plan

 

21

3.2.3

 

Meeting Materials

 

22

 

 

 

 

 

3.3

 

Clinical Development Responsibility

 

23

 

 

 

 

 

3.4

 

Regulatory Approvals

 

23

3.4.1

 

CombinatoRx Ownership

 

23

 

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

 

3.4.2

 

Principal Interface

 

23

3.4.3

 

Regulatory Meetings

 

23

 

 

 

 

 

3.5

 

Data and Material Transfer

 

23

 

 

 

 

 

ARTICLE IV — PAYMENTS

 

24

 

 

 

 

 

4.1

 

Staffing and Research Support Payments

 

24

 

 

 

 

 

4.2

 

Clinical Trial Commencement Milestone

 

26

 

 

 

 

 

4.3

 

Records

 

27

 

 

 

 

 

ARTICLE V — COMMERCIALIZATION; ROYALTIES

 

28

 

 

 

 

 

5.1

 

Marketing and Promotion

 

28

 

 

 

 

 

5.2

 

Trademarks

 

28

 

 

 

 

 

5.3

 

Due Diligence

 

29

 

 

 

 

 

5.4

 

Royalties on Net Sales in the Field

 

29

 

 

 

 

 

5.5

 

Reduction of Royalty

 

30

 

 

 

 

 

5.6

 

Royalties on Net Sales Outside the Field

 

30

 

 

 

 

 

5.7

 

Royalties to CFFT in the Event of a 10.4 Termination

 

30

 

 

 

 

 

5.8

 

Royalties to CombinatoRx in the Event of an Interruption License

 

30

 

 

 

 

 

5.9

 

Royalty Stacking

 

31

 

 

 

 

 

5.10

 

Sales Reports

 

32

5.10.1

 

Contents

 

32

5.10.2

 

Payments

 

33

5.10.3

 

Currency

 

33

5.10.4

 

CFFT Audit of Sales Reports

 

33

 

 

 

 

 

5.11

 

Royalty Stream Purchase

 

34

 

 

 

 

 

ARTICLE VI — CONFIDENTIALITY

 

36

 

 

 

 

 

6.1

 

Undertaking

 

36

 

 

 

 

 

6.2

 

Exceptions

 

38

 

 

 

 

 

6.3

 

Publicity

 

39

 

 

 

 

 

ARTICLE VII — PUBLICATION

 

40

 

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

 

 

 

 

 

ARTICLE VIII — INDEMNIFICATION

 

42

 

 

 

 

 

8.1

 

Indemnification by CombinatoRx

 

42

 

 

 

 

 

8.2

 

Indemnification by CFFT

 

43

 

 

 

 

 

8.3

 

Claims Procedures

 

43

 

 

 

 

 

ARTICLE IX — OWNERSHIP OF INTELLECTUAL PROPERTY

 

45

 

 

 

 

 

9.1

 

Ownership

 

45

9.1.1

 

CombinatoRx Background Intellectual Property

 

45

9.1.2

 

CFFT Background Intellectual Property

 

45

 

 

 

 

 

9.2

 

License to CFFT Background Intellectual Property

 

46

 

 

 

 

 

9.3

 

Ownership of New Intellectual Property

 

46

 

 

 

 

 

9.4

 

Ownership and Licensing of New Assays

 

46

 

 

 

 

 

9.5

 

CFFT’s Right to Interruption License

 

47

 

 

 

 

 

ARTICLE X — TERM AND TERMINATION

 

49

 

 

 

 

 

10.1

 

Term

 

49

 

 

 

 

 

10.2

 

Termination of the Research Program by CFFT for Cause

 

50

 

 

 

 

 

10.3

 

Termination of the Research Program by CombinatoRx for Cause

 

50

 

 

 

 

 

10.4

 

Termination Without Cause

 

51

 

 

 

 

 

10.5

 

General Effect of Termination

 

51

10.5.1

 

Survival

 

51

10.5.2

 

Retention of License

 

52

 

 

 

 

 

ARTICLE XI — RESTRICTIONS ON OTHER CFTR MODULATORS

 

52

 

 

 

 

 

ARTICLE XII — REPRESENTATIONS AND WARRANTIES

 

53

 

 

 

 

 

12.1

 

Representations and Warranties of CombinatoRx

 

53

 

 

 

 

 

12.2

 

Representations and Warranties of CFFT

 

53

 

 

 

 

 

ARTICLE XIII — DISPUTE RESOLUTION

 

54

 

 

 

 

 

13.1

 

Governing Law, and Jurisdiction

 

54

 

 

 

 

 

13.2

 

Dispute Resolution

 

54

 

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

 

 

 

 

 

ARTICLE XIV — MISCELLANEOUS PROVISIONS

 

57

 

 

 

 

 

14.1

 

Waiver

 

57

 

 

 

 

 

14.2

 

Force Majeure

 

57

 

 

 

 

 

14.3

 

Severability

 

57

 

 

 

 

 

14.4

 

Assignment and Successors

 

58

 

 

 

 

 

14.5

 

Counterparts

 

58

 

 

 

 

 

14.6

 

Insurance

 

59

 

 

 

 

 

14.7

 

No Agency

 

59

 

 

 

 

 

14.8

 

Notice

 

59

 

 

 

 

 

14.9

 

Headings

 

60

 

 

 

 

 

14.10

 

Entire Agreement

 

61

 

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

RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

THIS RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT is made this      day
of May, 2006, (the “Effective Date”) (the “Agreement”), by and between
CombinatoRx, Incorporated (“CombinatoRx”), a Delaware corporation with principal
offices at 245 First Street, Cambridge, MA, 02142 (“CombinatoRx”), and Cystic
Fibrosis Foundation Therapeutics Incorporated, a Maryland corporation with
principal offices at 6931 Arlington Road, Bethesda, Maryland 20814 (“CFFT”).
CombinatoRx and CFFT may each be referred to as a “party” and collectively, as
the “Parties.”

WHEREAS, CombinatoRx is a biopharmaceutical company focused on developing new
medicines built from synergistic combinations of approved drugs and has created
a systematic combination high throughput screening platform for the discovery of
such combinations; and

WHEREAS, CFFT is a Section 501(c)(3) organization the principal charitable
mission of which is to foster the discovery and development of methods of
treatment for cystic fibrosis; and

WHEREAS, CFFT wishes to enter into this Agreement with CombinatoRx to accelerate
the discovery, development and commercialization of cystic fibrosis drug
products.

NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, accepted and agreed to, the
Parties hereby agree as follows:

[*] Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed with the
Commission.

1

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

ARTICLE I - DEFINITIONS

For purposes of this Agreement, the terms defined in this Article 1 shall have
the following meanings whether used in their singular or plural forms. Use of
the singular shall include the plural and vice versa, unless the context
requires otherwise:

1.1      “ACTIVE INGREDIENT” MEANS ANY COMPONENT OF A DRUG INTENDED TO FURNISH
PHARMACOLOGICAL ACTIVITY OR OTHER DIRECT EFFECT IN THE TREATMENT OF DISEASE, OR
TO AFFECT THE STRUCTURE OR ANY FUNCTION OF THE BODY OF HUMANS OR OTHER ANIMALS.
ACTIVE INGREDIENTS INCLUDE THOSE COMPONENTS OF THE PRODUCT THAT MAY UNDERGO
CHEMICAL CHANGE DURING THE MANUFACTURE OF THE DRUG PRODUCT AND BE PRESENT IN THE
DRUG PRODUCT IN A MODIFIED FORM INTENDED TO FURNISH THE SPECIFIED ACTIVITY OR
EFFECT.

1.2      “AFFILIATE” SHALL MEAN, WITH RESPECT TO ANY PERSON, ANY OTHER PERSON
WHO DIRECTLY OR INDIRECTLY, BY ITSELF OR THROUGH ONE OR MORE INTERMEDIARIES,
CONTROLS, OR IS CONTROLLED BY, OR IS UNDER DIRECT OR INDIRECT COMMON CONTROL
WITH, SUCH PERSON. THE TERM “CONTROL” MEANS THE POSSESSION, DIRECT OR INDIRECT,
OF THE POWER TO DIRECT OR CAUSE THE DIRECTION OF THE MANAGEMENT AND POLICIES OF
A PERSON, WHETHER THROUGH THE OWNERSHIP OF VOTING SECURITIES, BY CONTRACT OR
OTHERWISE. CONTROL WILL BE PRESUMED IF ONE PERSON OWNS, EITHER OF RECORD OR
BENEFICIALLY, MORE THAN 50% OF THE VOTING STOCK OF ANY OTHER PERSON. FOR THE
AVOIDANCE OF ANY DOUBT, THE CYSTIC FIBROSIS FOUNDATION AND CFFT ARE CONSIDERED
TO BE AFFILIATES.

1.3      “AGREED LAB” SHALL HAVE THE MEANING ASCRIBED TO IT IN SECTION 2.7.2.

1.4      “AGREED UPON PURCHASE PRICE” SHALL HAVE THE MEANING ASCRIBED TO IT IN
SECTION 5.11.

2

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

1.5      “BUDGET” SHALL MEAN THE BUDGET SET FORTH IN EXHIBIT A, AS IT MAY BE
REVISED FROM TIME TO TIME IN ACCORDANCE WITH THIS AGREEMENT.

1.6      “CF” MEANS THE DISEASE KNOWN AS CYSTIC FIBROSIS.

1.7      “CF FIELD” MEANS THE TREATMENT OF HUMANS DIAGNOSED WITH CF.

1.8      “CFFT BACKGROUND INTELLECTUAL PROPERTY” SHALL MEAN INTELLECTUAL
PROPERTY OWNED OR LICENSED BY CFFT ON OR PRIOR TO THE EFFECTIVE DATE TOGETHER
WITH ANY MODIFICATIONS OR ENHANCEMENTS TO SUCH INTELLECTUAL PROPERTY.

1.9      “CFTR” SHALL MEAN A CF TRANSMEMBRANE CONDUCTANCE REGULATOR PROTEIN
WHICH HAS THE BIOLOGICAL EFFECT OF TRANSPORTING MOLECULES ACROSS HUMAN CELLULAR
MEMBRANES.

1.10   “CLINICAL DEVELOPMENT CANDIDATE” SHALL MEAN A COMPOUND THAT MEETS THE
CLINICAL DEVELOPMENT CANDIDATE CRITERIA FOR THE INITIATION OF A CLINICAL
DEVELOPMENT PROGRAM IN THE FIELD, AND WHICH IS THE SUBJECT OF A WRITTEN NOTICE
FROM COMBINATORX TO CFFT THAT COMBINATORX INTENDS TO COMMENCE DEVELOPMENT OF THE
COMPOUND IN THE FIELD PURSUANT TO THE PROVISIONS OF SECTION 3.1 HEREOF.

1.11   “CLINICAL DEVELOPMENT CANDIDATE CRITERIA” SHALL MEAN THE CRITERIA
DETERMINED BY THE JRC, AS DEFINED IN SECTION 1.32 HEREOF, WHICH SHALL BE
APPLICABLE TO ANY COMPOUND SELECTED BY COMBINATORX AS A CLINICAL DEVELOPMENT
CANDIDATE HEREUNDER.

1.12   “CLINICAL DEVELOPMENT CANDIDATE INFORMATION” SHALL MEAN A SUMMARY OF ALL
MATERIAL INFORMATION KNOWN TO COMBINATORX ABOUT A CLINICAL DEVELOPMENT
CANDIDATE, WHICH CFFT, THE JRC AND THE JSC, REASONABLY NEEDS IN ORDER TO ASSESS
THE POTENTIAL OF THAT CLINICAL

3

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

DEVELOPMENT CANDIDATE AS A TREATMENT FOR CF.

1.13   “CLINICAL DEVELOPMENT PLAN” SHALL HAVE THE MEANING ASCRIBED TO IT IN
SECTION 3.2.2 HEREOF.

1.14   “CLINICAL DEVELOPMENT PROGRAM” SHALL MEAN ACTIVITIES ASSOCIATED WITH THE
CLINICAL DEVELOPMENT OF A DRUG PRODUCT CANDIDATE WHICH ARE CONDUCTED BY OR AT
THE DIRECTION OF COMBINATORX, ITS AFFILIATES, LICENSEES OR SUBLICENSEES,
INCLUDING BUT NOT LIMITED TO:  (A) MANUFACTURE AND FORMULATION OF DRUG PRODUCT
CANDIDATES FOR USE IN CLINICAL TRIALS; (B) PLANNING, IMPLEMENTATION, EVALUATION
AND ADMINISTRATION OF HUMAN CLINICAL TRIALS; (C) MANUFACTURING PROCESS
DEVELOPMENT, SCALE-UP AND MANUFACTURE/ANALYSIS/ QUALITY CONTROL/QUALITY
ASSURANCE OF DRUG PRODUCT CANDIDATE FOR CLINICAL TRIALS; (D) PREPARATION AND
SUBMISSION OF APPLICATIONS FOR REGULATORY APPROVAL; AND (E) POST-MARKET
MONITORING OF APPROVED DRUG INDICATIONS, AS REQUIRED OR AGREED AS PART OF A
MARKETING APPROVAL BY ANY GOVERNMENTAL REGULATORY AUTHORITY.

1.15   “COMBINATORX BACKGROUND INTELLECTUAL PROPERTY” SHALL MEAN INTELLECTUAL
PROPERTY OWNED OR LICENSED BY COMBINATORX ON OR PRIOR TO THE EFFECTIVE DATE
TOGETHER WITH ANY MODIFICATIONS OR ENHANCEMENTS TO SUCH INTELLECTUAL PROPERTY.

1.16   “COMBINATORX SHARE” SHALL HAVE THE MEANING ASCRIBED TO IT IN SECTION 4.1.

1.17   “COMMERCIALLY REASONABLE EFFORTS” SHALL MEAN EFFORTS AND RESOURCES
COMMENSURATE WITH THE EFFORTS AND RESOURCES IN RESEARCH AND DEVELOPMENT USED BY
A REASONABLE PARTY FOR PROJECTS OF COMMENSURATE ECONOMIC VALUE TAKING INTO
ACCOUNT THE THEN STATE OF SCIENTIFIC KNOWLEDGE AND AVAILABLE RESOURCES.

4

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

1.18   “COMPOUND” SHALL MEAN A SINGLE ACTIVE INGREDIENT OR A COMBINATION OF TWO
OR MORE ACTIVE INGREDIENTS TOGETHER WITH PRO-DRUGS, METABOLITES, RACIMERS,
ISOMERS, ENANTIOMERS, SALTS, ESTERS, FREE-BASE, FREE-ACID AND OPTICALLY ACTIVE
FORMS OF ANY OF THE FOREGOING WITH RESPECT TO WHICH SCREENING HAS BEEN CONDUCTED
IN CONNECTION WITH THE RESEARCH PROGRAM.

1.19   “CONFIDENTIAL INFORMATION” SHALL HAVE THE MEANING ASCRIBED TO IT IN
SECTION 6.1 HEREOF.

1.20   “DISCUSSION PERIOD” SHALL HAVE THE MEANING ASCRIBED TO IT IN SECTION 5.11
HEREOF.

1.21   “DRUG PRODUCT” RESULTING FROM A DRUG PRODUCT CANDIDATE SHALL MEAN A
FINISHED DOSAGE FORM WHICH IS APPROVED BY A REGULATORY AUTHORITY FOR
ADMINISTRATION TO PATIENTS AS A PHARMACEUTICAL.

1.22   “DRUG PRODUCT CANDIDATE” SHALL MEAN ANY CLINICAL DEVELOPMENT CANDIDATE
FOR WHICH A CLINICAL DEVELOPMENT PROGRAM HAS COMMENCED UNDER SECTION 3.1
HEREUNDER.

1.23   “EARLY TERMINATION DECISION” SHALL HAVE THE MEANING ASCRIBED TO IT IN
SECTION 10.4.

1.24   “EFFECTIVE DATE” SHALL BE THE DATE ON WHICH THIS AGREEMENT IS FULLY
EXECUTED AND DELIVERED.

1.26   “FIELD” SHALL MEAN THE TREATMENT OF CONDITIONS OR DISEASES IN THE CF
FIELD, ASTHMA, CHRONIC BRONCHITIS AND CHRONIC OBSTRUCTIVE PULMONARY DISEASE.

1.26   “FIRST SALE” SHALL MEAN THE FIRST SALE OF A DRUG PRODUCT BY COMBINATORX
OR AN AFFILIATE, LICENSEE OR SUBLICENSEE OF COMBINATORX IN THE TERRITORY
FOLLOWING REGULATORY

5

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

APPROVAL OF THE DRUG PRODUCT, OR IF NO SUCH REGULATORY APPROVAL OR SIMILAR
MARKETING APPROVAL IS REQUIRED, THEN THE DATE ON WHICH THE DRUG PRODUCT IS FIRST
COMMERCIALLY LAUNCHED. FOR THE AVOIDANCE OF DOUBT, SALES PRIOR TO RECEIPT OF ALL
REGULATORY APPROVALS, SUCH AS SO-CALLED “TREATMENT IND SALES,” “NAMED PATIENT
SALES” AND “COMPASSIONATE USE SALES,” SHALL NOT BE CONSTRUED AS A FIRST SALE.

1.27   “GO DECISION” SHALL HAVE THE MEANING ASCRIBED TO IT IN SECTION 10.4.

1.28   “INTELLECTUAL PROPERTY” MEANS ANY DISCOVERY, INVENTION, FORMULATION,
KNOW-HOW, METHOD, TECHNOLOGICAL DEVELOPMENT, ENHANCEMENT, MODIFICATION,
IMPROVEMENT, WORK OF AUTHORSHIP, COMPUTER SOFTWARE (INCLUDING, BUT NOT LIMITED
TO, SOURCE CODE AND EXECUTABLE CODE), PATENT, PATENT APPLICATIONS, TRADE SECRETS
AND DOCUMENTATION THEREOF, DATA OR COLLECTION OF DATA, WHETHER PATENTABLE OR
NOT, OR SUSCEPTIBLE TO COPYRIGHT OR ANY OTHER FORM OF LEGAL PROTECTION.

1.29   “INTERRUPTION” MEANS THE CESSATION OF COMMERCIALLY REASONABLE EFFORTS
DIRECTED TOWARD DEVELOPMENT AND COMMERCIALIZATION OF ACTIVITIES PRIOR TO
COMMERCIAL LAUNCH OF A DRUG PRODUCT IN THE FIELD FOR MORE THAN [*].

1.30   “INTERRUPTION LICENSE DATA PACKAGE” SHALL MEAN ALL INFORMATION KNOWN BY
COMBINATORX ABOUT A CLINICAL DEVELOPMENT CANDIDATE OR A DRUG PRODUCT CANDIDATE,
AS THE CASE MAY BE, WHICH CFFT REASONABLY NEEDS TO PURSUE THE INTERRUPTION
LICENSE AND WHICH WAS GENERATED OR DEVELOPED PURSUANT TO THIS AGREEMENT. WITHOUT
LIMITATION, SUCH INFORMATION SHALL INCLUDE SCREENING AND ASSAY DATA; RESULTS
FROM ANIMAL MODEL STUDIES; COPIES OF RELEVANT SECTIONS FROM LABORATORY
NOTEBOOKS; REPORTS, RESULTS AND DATA RELATED TO PK, ADME AND TOXICOLOGY STUDIES;
PROTOCOLS AND CLINICAL STUDY REPORTS.

6

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

1.31   “JOINT DEVELOPMENT COMMITTEE” OR “JDC” SHALL HAVE THE MEANING ASCRIBED TO
IT IN SECTION 3.2  HEREOF

1.32   “JOINT RESEARCH COMMITTEE” OR “JRC” SHALL HAVE THE MEANING ASCRIBED TO IT
IN SECTION 2.4 HEREOF.

1.33   “JOINT STEERING COMMITTEE”“ OR “JSC” SHALL HAVE THE MEANING ASCRIBED TO
IT IN SECTION 2.5 HEREOF.

1.34   “LEAD COMPOUNDS” SHALL HAVE THE MEANING ASCRIBED TO IT IN SECTION 2.7.4.

1.35   “NDA” MEANS A NEW DRUG APPLICATION OR THE EQUIVALENT, AND ALL SUPPLEMENTS
PURSUANT TO THE REQUIREMENTS OF THE FDA, INCLUDING ALL DOCUMENTS, DATA AND OTHER
INFORMATION CONCERNING DRUG PRODUCTS WHICH ARE NECESSARY FOR FDA APPROVAL TO
MARKET A DRUG PRODUCT, OR THE EQUIVALENT GOVERNMENTAL APPROVAL IN ANY OTHER
COUNTRY.

1.36   “NEGATIVE DIFFERENCE” SHALL HAVE THE MEANING ASCRIBED TO IT IN
SECTION 4.3.

1.37   “NEGATIVE GO DECISION” SHALL HAVE THE MEANING ASCRIBED TO IT IN
SECTION 10.4.

1.38   “NET SALES” WITH RESPECT TO ANY DRUG PRODUCT SHALL MEAN THE GROSS AMOUNT
INVOICED BY COMBINATORX AND ANY COMBINATORX AFFILIATE, LICENSEE OR SUBLICENSEE
FOR THAT DRUG PRODUCT SOLD IN BONA FIDE, ARMS-LENGTH TRANSACTIONS TO THIRD
PARTIES FOR USE IN THE FIELD, LESS: (I) QUANTITY AND/OR CASH DISCOUNTS FROM THE
GROSS INVOICE PRICE WHICH ARE ACTUALLY ALLOWED OR TAKEN; (II) FREIGHT, POSTAGE
AND INSURANCE INCLUDED IN THE INVOICE PRICE; (III) AMOUNTS REPAID OR CREDITED BY
REASONS OF REJECTIONS OR RETURN OF GOODS OR BECAUSE OF RETROACTIVE PRICE
REDUCTIONS SPECIFICALLY IDENTIFIABLE TO THE DRUG PRODUCT; (IV) AMOUNTS PAYABLE
RESULTING FROM GOVERNMENT (OR

7

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

AGENCY THEREOF) MANDATED REBATE PROGRAMS; (V) THIRD-PARTY REBATES TO THE EXTENT
ACTUALLY ALLOWED; (VI) INVOICED CUSTOMS DUTIES AND SALES TAXES (EXCLUDING
INCOME, VALUE-ADDED AND SIMILAR TAXES), IF ANY, ACTUALLY PAID AND DIRECTLY
RELATED TO THE SALE THAT ARE NOT REIMBURSED BY THE BUYER; AND (VII) ANY OTHER
SPECIFICALLY IDENTIFIABLE AMOUNTS INCLUDED IN THE DRUG PRODUCT’S GROSS INVOICE
PRICE THAT SHOULD BE CREDITED FOR REASONS SUBSTANTIALLY EQUIVALENT TO THOSE
LISTED ABOVE; ALL AS DETERMINED IN ACCORDANCE WITH COMBINATORX’S USUAL AND
CUSTOMARY ACCOUNTING METHODS, WHICH ARE IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES. NET SALES SHALL ALSO INCLUDE LICENSING FEES, UPFRONT
PAYMENTS, MILESTONE PAYMENTS AND THE LIKE RECEIVED FROM THIRD PARTIES IN
EXCHANGE FOR AN INTEREST IN ANY DRUG PRODUCT OR CLINICAL RESEARCH CANDIDATE OR
DRUG PRODUCT CANDIDATE. PAYMENTS RECEIVED IN OTHER THAN CASH SHALL BE INCLUDED
IN NET SALES AT THEIR FAIR MARKET VALUE.

1.39   “NON OFFERING PARTY” SHALL HAVE THE MEANING ASCRIBED TO IT IN
SECTION 5.11 HEREOF.

1.40   “OFFERED ROYALTY STREAM” SHALL HAVE THE MEANING ASCRIBED TO IT IN
SECTION 5.11 HEREOF.

1.41   “OFFERING PARTY” SHALL HAVE THE MEANING ASCRIBED TO IT IN SECTION 5.11
HEREOF.

1.42   “PATENTS” MEANS ALL EXISTING PATENTS AND PATENT APPLICATIONS AND ALL
PATENT APPLICATIONS HEREAFTER FILED, INCLUDING ANY CONTINUATION,
CONTINUATION-IN-PART, DIVISIONAL, PROVISIONAL OR ANY SUBSTITUTE APPLICATIONS,
ANY PATENT ISSUED WITH RESPECT TO ANY SUCH PATENT APPLICATIONS, ANY REISSUE,
REEXAMINATION, RENEWAL OR EXTENSION (INCLUDING ANY SUPPLEMENTARY PROTECTION
CERTIFICATE) OF ANY SUCH PATENT, AND ANY CONFIRMATION PATENT OR REGISTRATION
PATENT OR PATENT OF ADDITION BASED ON ANY SUCH PATENT, AND ALL FOREIGN
COUNTERPARTS OF ANY OF THE FOREGOING.

8

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

1.43   “PERSON” MEANS ANY INDIVIDUAL, CORPORATION, PARTNERSHIP, ASSOCIATION,
LIMITED LIABILITY COMPANY, JOINT-STOCK COMPANY, TRUST, UNINCORPORATED
ORGANIZATION OR GOVERNMENT OR POLITICAL SUBDIVISION THEREOF.

1.44   “PRIME RATE” SHALL MEAN THE AVERAGE PRIME RATE PUBLISHED IN THE WALL
STREET JOURNAL DURING THE RELEVANT PERIOD.

1.45   “PURCHASE AMOUNT” SHALL HAVE THE MEANING ASCRIBED TO IT IN SECTION 5.11
HEREOF.

1.46   “PURCHASE DOCUMENTATION” SHALL HAVE THE MEANING ASCRIBED TO IT IN
SECTION 5.11 HEREOF.

1.47   “REGULATORY APPROVAL” SHALL MEAN, WITH RESPECT TO ANY COUNTRY, ALL
AUTHORIZATIONS BY THE APPROPRIATE GOVERNMENTAL ENTITY OR ENTITIES NECESSARY FOR
COMMERCIAL SALE OF A DRUG PRODUCT IN THAT COUNTRY INCLUDING, WITHOUT LIMITATION
AND WHERE APPLICABLE, APPROVAL OF LABELING, PRICE, REIMBURSEMENT AND
MANUFACTURING. “REGULATORY APPROVAL” IN THE UNITED STATES SHALL MEAN FINAL
APPROVAL OF A NEW DRUG APPLICATION PURSUANT TO 21 CFR § 314, PERMITTING
MARKETING OF THE APPLICABLE DRUG PRODUCT IN INTERSTATE COMMERCE IN THE UNITED
STATES. “REGULATORY APPROVAL” IN THE EUROPEAN UNION SHALL MEAN FINAL APPROVAL OF
A MARKETING AUTHORIZATION APPLICATION, OR EQUIVALENT.

1.48   “RESEARCH INITIATION DATE” SHALL MEAN THE DATE ON WHICH THE RESEARCH PLAN
IS APPROVED THE PARTIES

1.49   “RESEARCH PLAN” SHALL HAVE THE MEANING SET FORTH IN SECTION 2.3 HEREOF.

1.50   “RESEARCH PROGRAM” SHALL MEAN ALL RESEARCH ACTIVITIES UNDERTAKEN UNDER
THIS

9

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

AGREEMENT ASSOCIATED WITH THE IDENTIFICATION AND DESIGN OF COMPOUNDS AND
CLINICAL DEVELOPMENT CANDIDATES AS PROVIDED HEREIN; INCLUDING BUT NOT LIMITED TO
THE IDENTIFICATION AND INITIAL TESTING OF COMPOUNDS; THE CONDUCT OF THOSE
ACTIVITIES REFERENCED IN THE CLINICAL DEVELOPMENT CANDIDATE CRITERIA WITH
RESPECT TO COMPOUNDS; SELECTION OF CLINICAL DEVELOPMENT CANDIDATES AND THE
PRESENTATION OF THOSE CLINICAL DEVELOPMENT CANDIDATES AND RELATED CLINICAL
DEVELOPMENT CANDIDATE INFORMATION TO CFFT.

1.51   “REVIEW PERIOD” SHALL HAVE THE MEANING ASCRIBED TO IT IN SECTION 5.11
HEREOF.

1.52   “TDN” SHALL MEAN THE THERAPEUTICS DEVELOPMENT NETWORK ESTABLISHED BY
CYSTIC FIBROSIS FOUNDATION THERAPEUTICS.

1.53   “TERM” SHALL MEAN THAT PERIOD SPECIFIED IN SECTION 10.1.

1.54   “TERRITORY” SHALL MEAN WORLDWIDE.

1.55   “TESTING REQUEST” SHALL HAVE THE MEANING ASCRIBED TO IT IN SECTION 2.7.3.

1.56   “THIRD PARTY” SHALL MEAN ANY PERSON OR ENTITY WHICH IS NOT A PARTY OR AN
AFFILIATE OF ANY PARTY TO THIS AGREEMENT.

1.57   “TRANSFER NOTICE” SHALL HAVE THE MEANING ASCRIBED TO IT IN SECTION 5.11.

1.58   “VALID CLAIM” MEANS A CLAIM IN A PENDING PATENT APPLICATION OR AN ISSUED
AND UNEXPIRED PATENT THAT (A) HAS NOT BEEN FINALLY CANCELLED, WITHDRAWN,
ABANDONED OR REJECTED BY ANY ADMINISTRATIVE AGENCY OR OTHER BODY OF COMPETENT
JURISDICTION NOT SUBJECT TO FURTHER APPEAL, (B) HAS NOT BEEN REVOKED, HELD
INVALID, OR DECLARED UNPATENTABLE OR UNENFORCEABLE IN A DECISION OF A COURT OR
OTHER BODY OF COMPETENT JURISDICTION THAT IS UNAPPEALABLE OR UNAPPEALED WITHIN
THE

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TIME ALLOWED FOR APPEAL, (C) HAS NOT BEEN RENDERED UNENFORCEABLE THROUGH
DISCLAIMER, ABANDONMENT, WITHDRAWAL OR OTHERWISE, AND (D) WITH RESPECT TO A
CLAIM IN A PENDING PATENT APPLICATION, SUCH CLAIM IS BEING ACTIVELY PROSECUTED
IN GOOD FAITH AND IS BELIEVED IN GOOD FAITH TO MEET THE REQUIREMENTS OF
PATENTABILITY IN THE RELEVANT JURISDICTION.

ARTICLE II— RESEARCH PROGRAM

2.1      COMMENCEMENT; OBJECTIVE.

CombinatoRx will be responsible for the conduct of the Research Program and CFFT
will provide financial support, consultation and advice as provided herein and
through its participation on the JRC, the JSC and the JDC, as provided below.
The Research Program will be directed toward the identification of Clinical
Development Candidates which may be suitable for development and
commercialization in the CF Field.

2.2      RESEARCH DILIGENCE.

The common objective of the Parties is to identify Clinical Development
Candidates for CFTR modulation for development and marketing under the terms of
this Agreement. CombinatoRx will use Commercially Reasonable Efforts, consistent
with prudent business judgment, to perform in vitro studies, in vivo studies,
pharmacological studies and formulation studies to potentially identify Clinical
Development Candidates and to potentially commence the development of those
Clinical Development Candidates as Drug Product Candidates. Subject to funding
by CFFT and the timely performance by CFFT of its obligations under this
Agreement, CombinatoRx will dedicate to the Research Program that level of
staffing referenced in the Research Plan. CFFT will dedicate to the Research
Program that level of funding referenced in

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the Budget attached hereto as Exhibit A, as it may be modified from time to time
in accordance with this Agreement.

2.3      RESEARCH PLAN.

CombinatoRx and CFFT agree that they will finalize the Research Plan as the
basis for the Research Program and complete the preparation of the Research Plan
within sixty (60) days following the Effective Date. The date on which the
Research Plan is finalized shall be designated as the  “Research Initiation
Date”. Once completed and agreed upon by the Parties, the Research Plan shall be
attached hereto as Exhibit B. At each meeting of the JRC, the members will
review and evaluate the Research Plan, taking into consideration ongoing
research outcomes and other scientific and commercial developments, and any
resulting modifications recommended by the JRC will be incorporated into the
Research Plan (the original plan, and any such modifications are referred to
herein as the “Research Plan”). Modifications to the Research Plan may be
proposed by either CombinatoRx or CFFT and will be reviewed by the JRC before
being adopted. No modifications to the Research Plan shall change the scope of
the Research Plan in a manner that would require CombinatoRx, without its
written approval, to devote more resources from the allocation specified in the
Research Plan in the performance of all of its obligations under this Agreement
or  increases the materials and capital equipment required for CombinatoRx to
perform its activities under the Research Plan. No modification to the Research
Plan shall increase the financial support CFFT has agreed to provide without its
written approval.

2.4      JOINT RESEARCH COMMITTEE.

2.4.1.             COMPOSITION AND PURPOSES. COMBINATORX AND CFFT WILL ESTABLISH
A JOINT RESEARCH COMMITTEE (“JRC”) CONSISTING INITIALLY OF SIX (6) MEMBERS (AS
MAY BE INCREASED

12

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OR DECREASED BY THE JRC) WITH THE REQUISITE EXPERIENCE AND SENIORITY TO ENABLE
THEM TO MAKE RECOMMENDATIONS ON BEHALF OF THE PARTIES WITH RESPECT TO THE
INITIATION, PLANNING AND PERFORMANCE OF THE ACTIVITIES OF THE RESEARCH PROGRAM,
HALF OF WHOM SHALL BE DESIGNATED FROM TIME TO TIME BY EACH PARTY. IF THE JRC
CHOOSES TO DESIGNATE A COMMITTEE CHAIR, THE CHAIR WILL BE APPOINTED FROM AMONG
THE MEMBERS OF THE JRC DESIGNATED BY COMBINATORX. THE JRC SHALL TERMINATE UPON
THE FORMATION OF THE JDC. THE JRC SHALL MEET, IN PERSON OR BY CONFERENCE
TELEPHONE, FORMALLY NO LESS FREQUENTLY THAN ONCE IN EACH THREE (3) MONTH PERIOD
DURING THE RESEARCH PROGRAM, AND AT SUCH TIME AND LOCATION OR BY SUCH MEANS,  AS
MAY BE ESTABLISHED BY THE JRC, FOR THE FOLLOWING PURPOSES:

(i)     To review reports prepared by CombinatoRx, which shall be submitted to
the JRC at least fifteen (15) days prior to each meeting, and shall include a
summary in written text of the progress made during the preceding three
(3) month period under the Research Plan;

(ii)   To review and discuss the Research Plan and to evaluate, consider and
make recommendations to the JSC regarding any proposed revisions to the Research
Plan; and

(iii)  To recommend to the JSC amendments to the Clinical Development Candidate
Criteria as required.

(iv)   To review the criterion for the selection of Clinical Development
Candidates proposed by CombinatoRx and to assess whether a Clinical Development
Candidate proposed by CombinatoRx meets the Clinical Development Candidate
Criteria.

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CombinatoRx shall prepare and deliver minutes of the meetings to the members of
the JRC, within thirty (30) days after the adjournment date of each meeting,
setting forth, inter alia, all recommendations of the JRC, and including as an
attachment the report on the progress of work performed required by
Section 2.4.1(i).

2.4.2              DECISION-MAKING.

(i)     The objective of the JRC shall be to reach consensus on all matters
within the scope of the Research Plan. However, in the event consensus cannot be
reached with respect to any matter either party shall request in writing
referral to the JSC for resolution.

(ii)   Regarding the following matters referred to the JSC:

(x) as to whether or not a given Compound proposed by CombinatoRx as a Clinical
Development Candidate meets the Clinical Development Candidate Criteria, any
disagreement between the Parties that cannot be resolved by the JRC within ten
(10) days shall be referred to the JSC for resolution and if not resolved by the
JSC within seven (7) business days after referral, shall be referred for
resolution by the Chief Executive Officer of CombinatoRx and the Chief Executive
Officer of CFFT, and failing resolution at that level, the matter shall be
referred for final decision under the provisions of Section 13.2(b) of this
Agreement; and

14

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(y) as to the nature and extent of any additional Clinical Development Candidate
Criteria referenced in Section 2.4.3 hereof, if any disagreement cannot be
resolved by the JRC and the JSC as provided in (x) above, then there will be no
change in the Clinical Development Candidate Criteria.

(iii)    Each party shall retain the rights, powers, and discretion granted to
it under this Agreement, and the JRC shall not be delegated or vested with any
such rights, powers or discretion except as expressly provided in this
Agreement. The JRC shall not have the power to amend or modify this Agreement,
which may only be amended or modified in a writing executed by the Parties.

2.4.3              ADDITIONAL CLINICAL DEVELOPMENT CANDIDATE CRITERIA. THE
PARTIES ACKNOWLEDGE THAT IT MAY BE NECESSARY OR APPROPRIATE AFTER THE EFFECTIVE
DATE TO ADOPT ADDITIONAL CLINICAL DEVELOPMENT CANDIDATE CRITERIA WHICH MORE
SPECIFICALLY DEFINE THE PRE-DEVELOPMENT CHARACTERISTICS OF COMPOUNDS WHICH THE
PARTIES BELIEVE MAY BE SUITABLE FOR DEVELOPMENT AND COMMERCIALIZATION BASED UPON
THE PARTICULAR FEATURES OF THAT COMPOUND. THE PARTIES WILL USE GOOD FAITH
EFFORTS THROUGH THEIR RESPECTIVE REPRESENTATIVES ON THE JRC TO AGREE ON ANY SUCH
ADDITIONAL CLINICAL DEVELOPMENT CANDIDATE CRITERIA AS SOON AS PRACTICABLE AFTER
A CHANGE IS PROPOSED TO THE JRC BY EITHER PARTY. ANY DISAGREEMENTS WITH RESPECT
TO THE SELECTION OF ADDITIONAL CLINICAL DEVELOPMENT CANDIDATE CRITERIA HEREUNDER
WILL BE ADDRESSED AS PROVIDED IN SECTION 2.4.2(II).

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                2.5          Joint Steering Committee.

2.5.1       Composition and Purposes.  CombinatoRx and CFFT will establish a
Joint Steering Committee (“JSC”) which shall consist of an equal number of
senior management personnel from each party with the requisite experience and
seniority to enable them to make decisions on behalf of the Parties with respect
to the initiation, planning and performance of the activities of the Research
Program, as may be agreed by the Parties from time to time. The JSC shall
initially have a total of four (4) members. If the JSC chooses to designate a
Committee Chair, the Chair will be appointed from among the members of the JSC
designated by CombinatoRx. The JSC shall terminate upon the completion of the
Research Program. The JSC shall meet, in person or by conference telephone,
annually, or with such other frequency, and at such time and location or by such
means, as may be established by the Committee, for the following purposes:

(i)         To provide general oversight of the Research Program;

(ii)        To periodically review the overall goals and strategy of the
Research Program;

(iii)       To discuss and attempt to resolve any deadlocked issues submitted to
it by the JRC, although the vote of CombinatoRx’s representatives shall prevail
if the JSC is unable to reach a consensus on any matter other than matters
referred to it under Section 2.4.2(ii)(x) and 2.4.2(ii)(y), which shall be
resolved as provided therein.

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                2.6          Exchange of Information.

                       2.6.1       Sharing of Information. CombinatoRx will
share information with the JRC and JSC on a confidential basis as soon as
practicable following its availability; as is necessary to facilitate mutual
understanding of the status of the Research Program and decision-making in
connection therewith.

                       2.6.2       Restrictions on CFFT Use. CFFT shall not use
CombinatoRx Background Intellectual Property, now or at any time in the future,
for any purpose, including, without limitation, the filing of patent
applications containing such information.

                2.7          Third Party Testing.

                       2.7.1       CFFT Testing Request. At CFFT’s written
request (a “Testing Request”) delivered as provided below, CombinatoRx will, in
accordance with the provisions of this Agreement, supply to an Agreed Lab
reasonably adequate quantities of its Lead Compounds as necessary to enable the
Agreed Lab to conduct in vitro testing of the efficacy and potency of the Lead
Compounds in agreed CF assay models. All such testing will be undertaken at the
expense of CFFT in addition to any funding otherwise provided hereunder.
Notwithstanding anything to the contrary herein contained, CFFT agrees, that as
a condition to CombinatoRx complying with the provisions of this Article 2.7,
CFFT agrees that all test results, data, reports and the like relating to
testing by an Agreed Lab (the “Reports”) shall be CombinatoRx’s Confidential
Information and shall be made available to CombinatoRx and CFFT simultaneously.
CombinatoRx shall be considered the owner of the Reports and any Intellectual
Property derived therefrom or from the testing activities of the Agreed Lab and
may use the Reports and any Intellectual Property therefrom as it deems
appropriate.

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                       2.7.2       Agreed Lab. An Agreed Lab is a testing
laboratory unaffiliated with either CFFT or CombinatoRx and reasonably
acceptable to both Parties, which (a) agrees to render services to CFFT;
(b) would be free of any real or apparent conflict of interest in performing the
services which are the subject of this Section 2.7; and (c) is bound by the
terms of a confidentiality  and invention assignment agreement with CombinatoRx
which is customary in form and content, which covers the testing contemplated by
this Section 2.7, and which permits the Agreed Lab to report to CFFT, directly,
the results which it obtains with respect to efficacy and potency of the Lead
Compounds, but only those results.

                       2.7.3       Testing Request. A Testing Request is a
written request relating to the testing of Lead Compounds which is delivered by
CFFT to CombinatoRx during any of the following periods:  (i) the ninety (90)
day period prior to the due date for potential delivery to CombinatoRx of any
Early Termination Notice under Section 10.4 hereof; (ii) the sixty (60) day
period following the delivery by either party to the other of a Research
Extension Proposal as provided in Section 10.1 hereof, and (iii) the ninety (90)
day period prior to the date CFFT will be asked to make a Go Decision.
CombinatoRx shall respond to a Testing Request in a commercially reasonable 
manner with the goal of  allowing CFFT adequate time to perform testing prior to
the dates specified above.

                       2.7.4       Lead Compounds. Lead Compounds shall mean not
more than two Compounds for which a Testing Request is delivered, which meet the
following criteria, as evidenced in writing signed by the Parties:  (i) the
Compound(s) have been selected by CFFT, as relevant to the Testing Request;
(ii) each Compound will be representative of those Compounds in which
CombinatoRx believes to be the most promising as a Clinical Development
Candidate;

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and (iii) each Compound shall have been previously tested by CombinatoRx, in
vitro, as to potential efficacy and potency in CF, and the results of that
testing shall have been provided to CFFT.

                       2.7.5       CombinatoRx Cooperation. CombinatoRx will
provide the Agreed Lab with reasonably required amounts of each Lead Compound,
in connection with written Testing Requests from CFFT as provided above, and up
to three additional Compounds out of any supplies which CombinatoRx may have on
hand, the chemical structures of which have been published by CombinatoRx in
peer-reviewed journals or through posters or presentations at scientific
conferences, which the Agreed Lab may use for control purposes; CombinatoRx also
will provide telephone consulting to appropriate representatives of the Agreed
Lab concerning applicable assay methodology. If the Parties indicate in writing
that conventional testing will not yield adequate results, and upon the written
request of CFFT rendered with due regard to the lead time which may be required
to establish an assay based on proprietary protocols from CombinatoRx,
CombinatoRx will provide its proprietary assay protocol to the Agreed Lab
sufficiently in advance of any testing provided for in this Section 2.7 to
accommodate such testing, under provisions of confidentiality, restricted access
and non-use (for other than testing hereunder), and will ensure that appropriate
CombinatoRx representatives are available by telephone from time to time to
answer questions and otherwise assist the Agreed Lab representatives in its
efforts to establish CombinatoRx’s proprietary assay. CombinatoRx shall in no
event be responsible for any failure by the Agreed Lab to establish an effective
assay using CombinatoRx’s protocols, nor shall any time periods provided herein
for action by CFFT be extended by reason of any such failure.

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ARTICLE III- CLINICAL DEVELOPMENT

                3.1          Commencement of Clinical Development Program.

                AS SOON AS PRACTICABLE FOLLOWING COMBINATORX’S IDENTIFICATION OF
A CLINICAL DEVELOPMENT CANDIDATE WHICH IT BELIEVES MEETS THE CLINICAL
DEVELOPMENT CANDIDATE CRITERIA, IT WILL SO NOTIFY CFFT AND THE JRC IN WRITING,
AND WILL INCLUDE WITH THAT NOTICE THE CLINICAL DEVELOPMENT CANDIDATE INFORMATION
WITH RESPECT TO THAT CLINICAL DEVELOPMENT CANDIDATE. ONCE THE JRC AGREES IN
WRITING THAT A CLINICAL DEVELOPMENT CANDIDATE MEETS THE CLINICAL DEVELOPMENT
CANDIDATE CRITERIA THIS SHALL SIGNIFY THE DESIGNATION OF SAID CLINICAL
DEVELOPMENT CANDIDATE AS A DRUG PRODUCT CANDIDATE. FOR EACH DESIGNATED CLINICAL
DEVELOPMENT CANDIDATE, COMBINATORX SHALL PROPOSE, AND CFFT SHALL APPROVE, A
CLINICAL DEVELOPMENT PROGRAM AND BUDGET. ONCE APPROVED BY CFFT IN WRITING,
COMBINATORX WILL PROMPTLY COMMENCE AND PURSUE A CLINICAL DEVELOPMENT PROGRAM
WITH RESPECT TO THAT DRUG PRODUCT CANDIDATE IN ACCORDANCE WITH SECTION 3.2
HEREOF, WITH THE PAYMENT BY CFFT MADE TO COMBINATORX AS SET FORTH IN SECTION 4.2
HEREOF, APPLYING DILIGENT, COMMERCIALLY REASONABLE EFFORTS TO DEVELOP SELECTED
DRUG PRODUCT CANDIDATES INTO DRUG PRODUCTS. COMBINATORX SHALL USE CFFT’S DATA
SAFETY MONITORING BOARD AND THE THERAPEUTICS DEVELOPMENT NETWORK (“TDN”), AS
FEASIBLE, IN CONNECTION WITH ITS CLINICAL TRIALS INVOLVING CF PATIENTS.

                3.2          Joint Development Committee.

3.2.1       Formation and Responsibilities. As soon as practicable after the
commencement by CombinatoRx of a Clinical Development Program with respect to a
Drug Product Candidate, CombinatoRx will establish a Joint Development Committee
(“JDC”). Additional JDC’s may be established from time to time in connection
with the development of

20

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additional Drug Product Candidates. CFFT shall appoint one-half of the members
of the JDC for the period beginning with the formation of the JDC and ending on
the second anniversary following the last date on which CFFT provides Phase1 and
Phase 2a funding to CombinatoRx. Thereafter, the JDC shall include one
representative to be designated by CFFT. The JDC (or its successor organization,
as designated by CombinatoRx) will be the principal body through which the
development of a Drug Product Candidate is planned, evaluated and managed,
subject to appropriate review and approval as required by CombinatoRx from time
to time. In addition to the CFFT members, the JDC will typically have members
from the various functional groups (e.g., research, preclinical safety,
clinical, regulatory, and marketing) which are or will be expected to be
involved in development and launch of the Drug Product Candidate. CombinatoRx
will appoint the JDC Chair. The JDC will typically meet at least quarterly,
depending on the level of current development activity, and will be responsible
for preparation and implementation of the Clinical Development Plan described in
Section 3.2.2 with respect to each Drug Product Candidate. The JDC shall
terminate upon the earlier of either the grant of an NDA for the Drug Product
Candidate or the termination of the Clinical Development Program for the Drug
Product Candidate. CombinatoRx’s representatives shall have the ultimate
decision-making authority if the JDC is unable to reach a consensus and/or
agreement on any matter. For avoidance of doubt, it is agreed and understood
that Section 13.2 shall not apply to any matters or issues arising under
Sections 3.2.1 through 3.2.3.

3.2.2       Clinical Development Plan. The JDC shall be responsible for
reviewing the goals and strategy for development of each Drug Product Candidate
and shall oversee the implementation of an overall Clinical Development Plan for
each Drug Product Candidate. The Clinical Development Plan and budget shall,
among other things, detail, schedule and describe

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the proposed toxicology and pharmacokinetic studies, clinical trials, regulatory
plans, clinical trial and commercial material requirements, and process
development and manufacturing plans for each Drug Product Candidate, along with
relevant budget information for the described items, and will outline the key
elements involved in obtaining Regulatory Approval in each country where the
Drug Product is to be marketed.

3.2.3       Meeting Materials. The JDC will consider all information that is
material to an assessment of the status, direction and progress of each Clinical
Development Program, including all clinical trial protocols, data and reports.
The JDC Chair will have minutes prepared and distributed to each member of the
JDC promptly after each meeting. Those minutes shall contain a report on the
activities of the JDC during its meeting. CFFT’s representatives on the JDC will
receive all documents and information distributed or communicated to members of
the JDC, and may review copies of all other information material to the
development of a Drug Product Candidate. CFFT shall treat all such documents and
information as Confidential Information.

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                3.3          Clinical Development Responsibility.

                CombinatoRx will have sole responsibility for administering the
Clinical Development Program with respect to each Drug Product Candidate.

                3.4          Regulatory Approvals.

                CombinatoRx shall be solely responsible for preparing and
submitting submissions for Regulatory Approval of Drug Product Candidates in the
Territory.

3.4.1       CombinatoRx Ownership. All Regulatory Approvals shall be held by and
in the name of CombinatoRx and all submissions in connection with Regulatory
Authorities shall be in the name of and owned by CombinatoRx.

3.4.2       Principal Interface. All formulary or marketing approvals shall also
be submitted by and obtained  in the name of CombinatoRx, and CombinatoRx will
exclusively handle all interactions with regulatory agencies concerning any Drug
Product Candidate or Drug Product.

3.4.3       Regulatory Meetings. Upon written request of CombinatoRx, CFFT will
arrange for one or more representatives of CFFT to participate in meetings
between representatives of CombinatoRx and any of the FDA, the EMEA and Koseisho
(MHW Japan).

                3.5          Data and Material Transfer. After the completion of
clinical studies of a Drug Product Candidate, CombinatoRx shall transfer data
from all study visits and patients to the TDN Data Bank. CFFT will remove from
such data all patient identifiers, will ensure the integrity and confidentiality
of such information and shall indemnify CombinatoRx and its affiliates pursuant
to Section 8.2 for any losses incurred by CRXX for the disclosure of patient
data or breach of

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confidentiality. The TDN Data Bank (as further described in Exhibit C) is a
central repository for data from completed TDN studies to serve as a resource of
data from CF clinical trials. In addition, CombinatoRx shall collect two
(2) milliliters of plasma from each patient enrolled in clinical trials during
each blood draw and transfer it to the CFFT specimen bank. CFFT will reimburse
CombinatoRx for any incremental costs CombinatoRx incurs in collecting the data
and materials. CFFT will delay the release of such data and materials as is
appropriate to protect the Intellectual Property generated by the Research
Program.

ARTICLE IV — PAYMENTS

                4.1          Staffing and Research Support Payments.

                       (A)           CFFT WILL MAKE PAYMENTS TO COMBINATORX IN
SUPPORT OF THE BUDGET. THE INITIAL BUDGET SHALL COVER ESTIMATED COSTS FOR THE
RESEARCH PROGRAM DURING EACH ANNUAL PERIOD ENCOMPASSED BY THE RESEARCH PROGRAM
PRIOR TO THE GO DECISION. IF A GO DECISION IS MADE, CFFT WILL PAY SEVENTY-FIVE
PERCENT (75%) AND COMBINATORX WILL PAY TWENTY-FIVE PERCENT (25%) (THE
“COMBINATORX SHARE”) OF THE PHASE I AND PHASE IIA COSTS OF THE FIRST DRUG
PRODUCT  CANDIDATE AND THE BUDGET SHALL BE MODIFIED AS PART OF THE GO DECISION
PROCESS TO PROJECT SUCH COSTS. THE PARTIES WILL NEGOTIATE IN GOOD FAITH WITH
RESPECT TO ANY LEVEL OF FINANCIAL SUPPORT CFFT WILL PROVIDE FOR ANY SUBSEQUENT
DRUG PRODUCT CANDIDATE. ANY MATERIAL REVISIONS TO THE BUDGET WHICH WOULD RESULT
IN AN INCREASE IN TOTAL FUNDING FOR THE RESEARCH PROGRAM BY CFFT WILL REQUIRE
THE PRIOR APPROVAL OF CFFT.

(B)           IN ADDITION TO THE FOREGOING, ALL LICENSING COSTS REQUIRED TO
OBTAIN A LICENSE NECESSARY FOR THE PERFORMANCE OF THE RESEARCH PROGRAM WILL BE
BORNE BY CFFT AFTER CFFT’S

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PRIOR REVIEW AND APPROVAL. ANY ROYALTIES REQUIRED BY SUCH LICENSE SHALL BE
SUBJECT TO SECTION 5.9.

(c)           Payments due under the Budget on account of internal FTEs shall be
made by CFFT quarterly in advance, except the payment for the quarter following
the Research Initiation Date shall be made pursuant to this subparagraph
following receipt of an invoice submitted to CFFT by CombinatoRx after the
Research Initiation Date. FTE’s shall be identified on invoices or in the budget
by the individual constituting the FTEs. During the quarter following its
invoicing, internal FTE shall be trued up to actual with appropriate adjustment
to such quarter’s payment. Internal FTE costs will be calculated at an annual
rate of $[*] per FTE. Payments due under the Budget on account of external costs
shall be made by CFFT quarterly in arrears. Payment pursuant to this Section 4.1
shall be made within thirty (30) days following receipt of an invoice from
CombinatoRx for such costs accompanied by reasonable documentation of such costs
and, during Phase I and IIa of clinical development, reasonable evidence that
CombinatoRx has paid the CombinatoRx Share. All payments shall be made without
deduction for withholding or other similar taxes, in United States dollars to
the credit of such bank account as may be designated by CombinatoRx in writing
to CFFT. Any payments which are due on a date which is a legal holiday in the
Commonwealth of Massachusetts may be made on the next following day which is not
a legal holiday in the Commonwealth. On or before each January 31 during the
Term, CombinatoRx will provide CFFT with an accounting of all internal FTE costs
and outsourcing costs incurred under the Research Program during the most
recently concluded calendar year. Costs incurred will be compared with funds
provided by CFFT on account of that year, and any excess of funds provided over
costs incurred will be refunded to CFFT within thirty (30) days or, as to
amounts due while the Research Program is ongoing, applied as a credit against
amounts due with respect to the following quarter[s].

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(d)           If CombinatoRx continues the development of a Drug Product
Candidate beyond Phase IIa clinical trials, all development, clinical and
regulatory costs and expenses will be borne by CombinatoRx.

                4.2          Clinical Trial Commencement Milestone.

CFFT will pay to CombinatoRx within thirty (30) days of receipt of invoice from
CombinatoRx, accompanied by appropriate documentation, such as a copy of the
NDA, of the milestone event specified below, a non-refundable and non-creditable
milestone payment in accordance with respect to the each Drug Product Candidate
under the Clinical Development Program. Such milestone payment shall be made
whether or not a Go Decision has been made or the Research Program has
previously terminated if it occurs during the original Term of the Research
Program as it may be extended by the Parties in accordance with this Agreement,
but it shall not be made if the milestone event occurs after an Interruption.

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Milestone Event

 

Amount

 

 

 

1. Opening of an IND

 

$[*]

 

 

 

2. At the initiation of a Phase III of a Drug Product Candidate after CFFT has
received and approved a commercialization plan for the Drug Product Candidate
prepared by CombinatoRx

 

$[*]

 

 

 

3. Approval of NDA

 

$[*]

                4.3          Records.

                CombinatoRx shall provide a quarterly report summarizing the
FTEs, the activities that the FTEs were engaged in, and external costs incurred
by CombinatoRx in the Research Program. CFFT’s internal auditors shall have the
right at its expense to audit CombinatoRx’s relevant records to verify
compliance with FTE and other research funding allocation requirements
hereunder. CFFT and CombinatoRx will agree on a time for the audit.

                At CFFT’s request, CombinatoRx shall make those records
available no more than once a year during reasonable working hours for review by
CFFT internal auditors for the sole purpose of verifying the accuracy of those
records in the calculation of Research Program FTEs and external costs.
CombinatoRx shall not, however, be required to retain or make available to CFFT
or its accountants, any such records or books of account beyond thirty-six (36)
months after the termination of the Research Program. CFFT shall retain all such
information as Confidential Information.

                In the event that the aggregate costs actually chargeable to the
Research Program during any year are different than the amount previously paid
to CombinatoRx by CFFT for any year (a

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“Difference”), CombinatoRx will offset the Difference against requests for
payments due from CFFT pursuant to the Budget, or if the Difference occurs in
the final year of the Research Program, CombinatoRx will refund the Difference
to CFFT.

ARTICLE V — COMMERCIALIZATION; ROYALTIES

                5.1          Marketing and Promotion.

                CombinatoRx and/or its licensees and sublicensees shall have
exclusive rights to manufacture, market, sell and distribute all Drug Products
in the Territory.

                5.2          Trademarks.

                CombinatoRx shall have the right to choose, at its sole
discretion, the trademarks under which the Drug Products may be marketed in the
Territory. CombinatoRx shall be the sole owner of such trademarks.

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                5.3          Due Diligence.

                CombinatoRx shall use Commercially Reasonable Efforts consistent
with the requirements of the Clinical Development Program and reasonable and
ethical business practices and judgment to introduce Drug Products into the
Territory after Regulatory Approval.

                5.4          Royalties on Net Sales in the Field.

(a)           In consideration of CFFT’s payments and grant of license to
CombinatoRx pursuant to this Agreement, CombinatoRx shall pay to CFFT the
following royalties on the Net Sales of Drug Products for use in the Field:

                                       (i)            [*];

                                       (ii)           [*];

                                       (iii)         [*].

(b)           After any [*] in which [*] since the [*] shall be substituted for
[*].

(c)           For purposes of subparagraph (a), annual sales shall be calculated
on the basis of a calendar year, and royalties shall be paid [*] pursuant to
this Agreement shall be applied on [*]; and for purposes of subparagraph
(b) [*] also shall be determined on [*].

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5.5      Reduction of Royalty.

Notwithstanding Section 5.4, in any country after any date there is no Valid
Claim in such country, the royalty rate payable to CFFT shall be reduced to [*]
of the applicable rate specified in Section 5.4.

5.6      Royalties on Net Sales Outside the Field.

CombinatoRx shall pay CFFT a royalty of [*] of Net Sales of Drug Products for
use outside the Field.

5.7      Royalties to CFFT in the Event of a 10.4 Termination.

In lieu of the royalties CFFT will receive pursuant to Sections 5.4, 5.5 and
5.6:  (a) if CFFT terminates this Agreement pursuant to Section 10.4 on or
before the second anniversary of the Research Initiation Date: [*]%; or (b) if
CFFT terminates this Agreement pursuant to Section 10.4 after the second
anniversary of the Research Initiation Date:  [*]%.

5.8      Royalties to CombinatoRx in the Event of an Interruption License

If CFFT exercises its rights under Section 9.5(c)  to an Interruption License
and a Drug Product is marketed, CombinatoRx shall receive the following
royalties:  if (a) there has been a Go Decision pursuant to Section 10.4; or
(b) CFFT terminates this Agreement after the second anniversary of the Research
Initiation Date, each party shall share [*] in any royalty or other payment
received with respect to a Clinical Development Candidate, Drug Product
Candidate and Drug Product, provided that, a CFFT’s share shall increase and
CombinatoRx’s share shall decrease by [*] percentage points (or fraction
thereof) for each $[*] (or fraction thereof)

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additional investment CFFT makes in the Clinical Development Candidate, Drug
Product Candidate and Drug Product after the effective date of the Interruption
License, except that notwithstanding the foregoing, CombinatoRx’s share shall
not decrease below [*] percent ([*]%). For purposes of determining a party’s
“investment” pursuant to the preceding sentence, such investment shall include
only direct expenditures (i.e., without allocation of overhead) and (x) only
CombinatoRx investment after any CFFT termination pursuant to Section 10.4 shall
be taken into account; and (y) only CFFT’s investment after an Interruption
shall be taken into account; and (z) investments by both Parties during such
times shall be offset against one another prior to making the determination in
the preceding sentence. CombinatoRx shall have the right at its expense to have
a third party auditor review and audit at an agreed upon time CFFT’s investment
in a Drug Product Candidate or Drug Product after there effective date of the
Interruption License. If such auditor’s report shows less investment by CFFT
than reported, and the findings are agreed upon by CFFT, then the royalty rate
shall be adjusted accordingly.

5.9      Royalty Stacking.

In the event that after the Effective Date (a) CombinatoRx, its Affiliates or
sublicensees determine that it is necessary to pay royalties or other fees to
any Third Party to obtain a license to practice any Third Party’s rights in
order to market or develop a Drug Product Candidate or a Drug Product in any
given country with respect to rights that relate to the composition, its
formulation, or method of use, then in such event, CombinatoRx and its
Affiliates shall pay such royalties or other fees and may deduct [*] of such
royalties due to such Third Parties (or such amounts expended in settlement of
such claim, or for securing such rights) from the

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royalties otherwise due to CFFT under this Agreement, provided that such
reduction shall not exceed [*] of the royalties otherwise due to CFFT in such
year with respect to such country.

5.10   Sales Reports.

5.10.1         Contents. After the First Sale of a Drug Product, CombinatoRx
shall furnish or cause to be furnished to CFFT on a quarterly basis, a written
report or reports covering each calendar quarter (each such calendar quarter
being sometimes referred to herein as a “reporting period”) within sixty days
after the close of each quarter showing:  (i) the Net Sales of each Drug Product
in each country in the world during the reporting period by CombinatoRx and each
Affiliate, licensee and sublicensee; (ii) the royalties, payable in U.S. dollars
(“Dollars”), which shall have accrued under Sections 5.4, 5.6 and 5.7 hereof in
respect of such sales and the basis of calculating those royalties;
(iii) withholding taxes, if any, required by law to be deducted from any
royalties payable in respect of any such sales; (iv) the exchange rates used in
converting into Dollars, from the currencies in which sales were made, any
payments due which are based on Net Sales; and (v) dispositions of Drug Products
other than pursuant to sale for cash. With respect to sales of Drug Products
invoiced in Dollars, the Net Sales amounts and the amounts due to CFFT hereunder
shall be expressed in Dollars. With respect to sales of Drug Products invoiced
in a currency other than Dollars, the Net Sales and amounts due to CFFT
hereunder shall be expressed in the domestic currency of the party making the
sale, together with the Dollar equivalent of the amount payable to CFFT,
calculated by translating foreign currency sales into U.S. dollars based on the
average of the exchange rates reported in the Wall Street Journal or comparable
publication over the period covered by the royalty report.

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5.10.2         Payments. Amounts shown to have accrued by each such sales report
provided for under Section 5.10.1, above, shall be due and payable on the date
that such sales report is due.

5.10.3         Currency. All payments shall be made in United States Dollars. If
at any time legal restrictions prevent the prompt remittance of any payments
with respect to any country in the Territory where Drug Products are sold,
CombinatoRx or its sublicensees shall have the right and option to make such
payments by depositing the amount thereof in local currency to CFFT’s account in
a bank or depository in such country.

5.10.4         CFFT Audit of Sales Reports. Upon the written request of CFFT, at
CFFT’s expense and not more than once in or in respect of any calendar year,
CombinatoRx shall permit an independent accountant of national prominence
selected by CFFT to have access during normal business hours to those records of
CombinatoRx as may be reasonably necessary to verify the accuracy of the sales
reports furnished by CombinatoRx pursuant to this Section 5.10, with respect to
any calendar year ending not more than thirty-six (36) months prior to the date
of such notice. The report prepared by such independent accountant, a copy of
which shall be sent or otherwise provided to CombinatoRx by such independent
accountant at the same time it is sent or otherwise provided to CFFT, shall
contain the conclusions of such independent accountant regarding the audit and
will specify that the amounts paid to CFFT pursuant thereto were correct or, if
incorrect, the amount of any underpayment or overpayment. If such independent
accountant’s report shows any underpayment, CombinatoRx shall remit to CFFT
within thirty (30) days after CombinatoRx’s receipt of such report, (i) the
amount of such underpayment plus interest at the Prime Rate plus two
(2) percentage points calculated from the date the original payment was due, and
(ii) if the amount of the underpayment exceeds 3% of the

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amount due, the reasonable and necessary fees and expenses of such independent
accountant performing the audit. Any overpayments shall be fully creditable
against amounts payable in subsequent payment periods. CFFT agrees that all
information subject to review under this Section 5.10 or under any sublicense
agreement is Confidential Information and that CFFT shall retain and cause its
accountant to retain all such information in confidence. If CFFT has not
requested an audit with respect to any Sales Report on or before thirty-six (36)
months following the end of any calendar year during which sales reports were
rendered, the calculation of amounts payable with respect to such fiscal year
shall be binding and conclusive upon CFFT, and CombinatoRx shall be released
from any liability or accountability with respect to payments for such year on
or before such period.

5.11   Royalty Stream Purchase.

At any time after completion of a Phase III clinical trial  of a Drug Product
Candidate (as indicated by the final Phase III study report), either party (the
“Offering Party”) shall have the right to propose the purchase or sale (as the
case may be) of all or any portion of the royalties payable to CFFT (the
“Offered Royalty Stream”) under Section 5.4 and 5.6 of this Agreement in
accordance with the procedures set forth hereinafter in this Section 5.11. If
CFFT wishes to sell any interest in such royalties, engaging in the process set
forth below shall be a prerequisite to any sale to a Third Party.

The Offering Party shall propose, in writing, to sell or purchase (as the case
may be) all the royalty stream (or a portion constituting the royalty stream in
a separate territory) for an amount equal to the net present value of the
royalty obligation based on the then customary and

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reasonable standards and assumptions (including an appropriate discount rate and
projected revenue assumptions) (the “Purchase Amount”).

The Offering Party shall notify the other party (the “Non Offering Party”) of
its offer, such notice to specify the Purchase Amount and the details,
information and assumptions employed by the Offering Party in determining the
Purchase Amount (the “Purchase Documentation”). It is the intention of the
Parties that the Purchase Amount be revenue neutral, meaning that the Purchase
Amount should fairly represent the present value of what CFFT would have
received during the anticipated life of the underlying Drug Product had
CombinatoRx not purchased such royalties.

The Non Offering Party shall have a period of [*] (the “Review Period”) to
consider the Purchase Amount and evaluate the Purchase Documentation. If it
agrees during the Review Period that the Purchase Amount is revenue neutral,
then it shall accept the Purchase Amount in writing and the Offering Party shall
pay the Purchase Amount within [*] following such written acceptance; and
thereafter, CombinatoRx shall have no further royalty obligations to CFFT or any
other party for the Offered Royalty Stream and the same shall be deemed
extinguished. If the Non Offering Party is CombinatoRx, it may also decide that
it does not wish to purchase the Offered Royalty Stream. In such event,
CombinatoRx shall notify CFFT within the Review Period of such fact, and CFFT
shall have the right to sell the Offered Royalty Stream to a Third Party during
the [*] period following such notice. If no such sale is completed on or before
such date, this Section 5.11 shall again be applicable to any such sale.

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In the event that the Non Offering Party wishes to sell or purchase (as the case
may be) the Offered Royalty Stream but determines in good faith and after
reasonable due diligence and analysis of the Purchase Documentation that the
Purchase Amount is not revenue neutral then, prior to the expiration of the
Review Period, it shall provide the Offering Party with an amount that would be
in the Non Offering Party’s reasonable opinion revenue neutral together with
written documentation supporting such analysis. The Parties shall thereafter
negotiate in good faith for a period not to exceed [*] (the “Discussion
Period”), using their good faith efforts to reach agreement on the amount to be
paid by CombinatoRx to CFFT that would be revenue neutral (the “Agreed Upon
Purchase Amount”), and if the Agreed Upon Purchase Amount is determined,
CombinatoRx shall pay the Agreed Upon Purchase Amount within [*] days following
such written determination; and thereafter, CombinatoRx shall have no further
royalty obligations to CFFT or any other party for the Offered Royalty Stream
and the same shall be deemed extinguished.

If the Parties, notwithstanding their good faith efforts, are unable to agree
upon an Agreed Upon Purchase Amount, then all offers for the Offered Realty
Stream shall be deemed withdrawn and CFFT shall have the right to sell the
Offered Royalty Stream to a Third Party during the [*] period after the date of
the withdrawal. If no such sale is completed on or before such date, this
Section 5.11 shall again be applicable to any such sale.

ARTICLE VI - CONFIDENTIALITY

6.1      Undertaking.

Each party shall keep confidential, and other than as provided herein, shall not
use or disclose, directly or indirectly, any trade secrets, confidential or
proprietary information, or any

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other knowledge, information, documents or materials, owned, developed or
possessed by the other party, whether in tangible or intangible form
(“Confidential Information”). All Confidential Information shall be identified
as such by the party disclosing such information. Neither CFFT nor CombinatoRx
will use the other party’s Confidential Information except as expressly
permitted in this Agreement. In addition:

(a)       Each party shall use the level of care to prevent the unauthorized use
and disclosure of the other party’s Confidential Information that is the same
as  the level of care used for its own Confidential Information, but not less
that a reasonable level of care, and to prevent unauthorized persons or entities
from obtaining or using that Confidential Information.

(b)       Each party will refrain from directly or indirectly taking any action
which would constitute or facilitate the unauthorized use or disclosure of the
other party’s Confidential Information. Each party may disclose that
Confidential Information to its officers, employees, advisors, consultants and
agents, to Affiliates, to authorized licensees and sublicensees, and to
subcontractors in connection with the development or manufacture of Clinical
Development Candidates, Drug Product Candidates or Drug Products to the extent
necessary to enable such persons to perform their obligations hereunder or under
the applicable license, sublicense or subcontract, as the case may be; provided,
that such officers, employees, agents, licensees, sublicensees and
subcontractors have entered into appropriate confidentiality agreements or
obligations for secrecy and non-use of such Confidential Information.

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(c)       Each party shall be liable for any unauthorized use and disclosure of
the other party’s Confidential Information by its officers, employees, advisors,
consultants, Affiliates and agents and any such sublicensees and subcontractors.

6.2      Exceptions.

Notwithstanding the foregoing, the provisions of Section 6.1 hereof shall not
apply to Confidential Information which the receiving party can conclusively
establish:

(a)       has entered the public domain without such party’s breach of any
obligation owed to the disclosing party;

(b)       is permitted to be disclosed by the prior written consent of the
disclosing party;

(c)       has become known to the receiving party from a source other than the
disclosing party, other than by breach of an obligation of confidentiality owed
to the disclosing party;

(d)       is disclosed by the disclosing party to a Third Party without
restrictions on its disclosure;

(e)       is independently developed by the receiving party without breach of
this Agreement as demonstrated by the receiving parties contemporaneously made
written records; or

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(f)        is required to be disclosed by the receiving party to comply with
applicable laws or regulations, to defend or prosecute litigation or to comply
with governmental regulations, provided that the receiving party provides prior
written notice of such disclosure to the disclosing party and takes reasonable
and lawful actions to avoid or minimize the degree of such disclosure.

Further, CombinatoRx shall be permitted to disclose any Confidential Information
as may be legally required by stock exchange or quotation system rule without
first obtaining the approval of CFFT. In the event of such disclosure,
CombinatoRx shall provide CFFT a copy of the proposed disclosure with such
advanced notice as is practicable under the circumstances for the purpose of
allowing CFFT to review and comment upon such disclosure.

6.3      Publicity.

The Parties will agree upon the timing and content of any initial press release
or other public communications relating to this Agreement and the research
contemplated herein as follows:

(a)       Except to the extent already disclosed in the initial press release or
other public communication, no public announcement concerning the terms of this
Agreement or concerning the transactions described herein shall be made, either
directly or indirectly, by CombinatoRx or CFFT, except:  (i) as may be required
by applicable laws, regulations, securities and exchange listing requirements,
or judicial order, or (ii) if limited to the fact that the Research Program
exists, that research is in progress, and its duration, without first

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obtaining the approval of the other party. Approval of the nature, text, and
timing of such announcement shall not be unreasonably withheld.

(b)       The party desiring to make any such press release shall provide the
other party with a written copy of the proposed announcement in sufficienttime
prior to public release to allow such other party to comment upon such
announcement prior to public release.

ARTICLE VII - PUBLICATION

Each of CombinatoRx and CFFT reserves the right to publish or publicly present
the results (the “Results”) of the Research Program, subject to the following
terms and conditions. The party proposing to publish or publicly present the
Results (the “publishing party”) will submit a draft of any proposed manuscript
or speech to the other party (the “non-publishing party”) for comments at least
forty (45) days prior to submission for publication or oral presentation. The
non-publishing party shall notify the publishing party in writing within thirty
(30) days of receipt of such draft whether such draft contains (i) information
of the non-publishing party which it considers to be confidential under the
provisions of Article VI or hereof, (ii) information that if published would
have an adverse effect on a patent application covering the subject matter of
this Agreement which the non-publishing party intends to file, or
(iii) information which the non-publishing party reasonably believes would be
likely to have a material adverse impact on the development or commercialization
of a Drug Product Candidate. In any such notification, the non-publishing party
shall indicate with specificity its suggestions regarding the manner and degree
to which the publishing party may disclose such information.

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In the case of item (ii) above, the non-publishing party may request a delay,
and the publishing party shall delay such publication, for a period not
exceeding ninety (90) days, to permit the timely preparation and filing of a
patent application or an application for a certificate of invention on the
information involved. In the case of item (i) above, no party may publish
Confidential Information of the other party without its consent in violation of
Article VI of this Agreement. In the case of item (iii) above, if the publishing
party shall disagree with the non-publishing party’s assessment of the impact of
the publication, then the issue shall be referred to the JSC for resolution. If
the JSC is unable to reach agreement on the matter within thirty (30) days after
such referral, the matter shall be referred by the JSC to the Chief Executive
Officer of CFFT and the Chief Executive Officer of CombinatoRx who shall attempt
in good faith to reach a fair and equitable resolution of this disagreement. If
the disagreement is not resolved in this manner within two (2) weeks of referral
by the JSC as aforesaid, then the proposed information will not be published.
The Parties agree that authorship of any publication will be determined based on
the customary standards then being applied in the relevant scientific journal,
and that appropriate credit will be acknowledged when the subject matter of a
publication is derived in whole or in significant part from CombinatoRx or CFFT.
The Parties will use Commercially Reasonable Efforts to gain the right to review
proposed publications relating to the subject matter of the Research Program by
consultants or contractors.

It is CombinatoRx’s objective, in part, to advance  the body of general
scientific knowledge of CF and its potential therapies, and to contribute to the
identification of chemical tools as optimal scientific benchmarks, all in a
manner consistent with its general scientific and commercial objectives in
entering into the collaboration with CFFT to which this Agreement relates. In
furtherance of that objective, CombinatoRx would expect, after giving due

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consideration to the appropriate protection of intellectual property, to publish
information in peer-reviewed scientific journals concerning its efforts under
the Research Program, including chemical structural information about at least
two Compounds. CombinatoRx will include as co-authors of any such publication
contributing CFFT personnel and consultants and other persons who would
customarily be considered in that regard, including members of the JRC as
appropriate. CFFT’s financial contribution to the Research Program also will be
acknowledged.

ARTICLE VIII - INDEMNIFICATION

8.1      Indemnification by CombinatoRx.

CombinatoRx will indemnify and hold CFFT and its Affiliates and their employees,
officers and directors harmless, from and against any loss, damages, action,
suit, claim, demand, liability, expense, bodily injury, death or property damage
(a “Loss”), that may be brought or instituted by a Third Party to the extent
such Loss is based on or arises out of:

(a)       the development, manufacture, use, sale, storage or handling of a
Compound, a Clinical Development Candidate, a Drug Product Candidate or a Drug
Product by CombinatoRx or its Affiliates or their representatives, agents,
authorized licensees, sublicensees or subcontractors under this Agreement;

(b)       the breach by CombinatoRx of any of its covenants, representations or
warranties set forth in this Agreement; and

(c)       provided however, that the foregoing indemnification shall not apply
to any Loss to the extent such Loss is caused by the negligence or willful
misconduct of CFFT or its Affiliates.

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8.2      Indemnification by CFFT.

CFFT will indemnify and hold CombinatoRx, and its Affiliates and their
employees, officers and directors harmless from and against any Loss that may be
brought or instituted by a Third Party to the extent such Loss is based on or
arises out of:

(a)       the development, manufacture, use, sale, storage or handling of a
Compound, a Clinical Development Candidate, a Drug Product Candidate or a Drug
Product by CFFT or its Affiliates or their representatives, agents, authorized
licensees, sublicensees or subcontractors under this Agreement;

(b)       the breach by CFFT of any of its covenants, representations or
warranties set forth in this Agreement; and

(c)       provided that the foregoing indemnification shall not apply to any
Loss to the extent such Loss is caused by the negligence or willful misconduct
of CombinatoRx or its Affiliates.

8.3      Claims Procedures.

Each party entitled to be indemnified by the other party (an “Indemnified
Party”) pursuant to Section 8.1 or 8.2 hereof shall give notice to the other
party (an “Indemnifying Party”) promptly after such Indemnified Party has actual
knowledge of any threatened or asserted claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided:

(a)       That counsel for the Indemnifying Party, who shall conduct the defense
of such claim or any litigation resulting therefrom, shall be approved by

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the Indemnified Party (whose approval shall not unreasonably be withheld) and
the Indemnified Party may participate in such defense at such Indemnified Party
expense unless: (i) the employment of counsel by such Indemnified Party has been
authorized by the Indemnifying Party; or (ii) the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in the defense of such action, in
each of which cases the Indemnifying Party shall pay the reasonable fees and
expenses of one law firm serving as counsel for the Indemnified Party, which law
firm shall be subject to approval, not to be unreasonably withheld, by the
Indemnifying Party;

(b)       The failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Agreement
to the extent that the failure to give notice did not result in harm to the
Indemnifying Party.

(c)       No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the approval of each Indemnified Party which approval shall
not be unreasonably withheld, consent to entry of any judgment or enter into any
settlement which (i) would result in injunctive or other relief being imposed
against the Indemnified Party; or (ii) does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation.

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(d)       Each Indemnified Party shall furnish such information regarding itself
or the claim in question as an Indemnifying Party may reasonably request in
writing and shall be reasonably required in connection with the defense of such
claim and litigation resulting therefrom.

ARTICLE IX— OWNERSHIP OF INTELLECTUAL PROPERTY

9.1      Ownership.

The ownership of all Intellectual Property owned by the Parties as of the
Effective Date or developed by or on behalf of a party, or the Parties,
hereunder shall be as set forth in this Section 9.

9.1.1           CombinatoRx Background Intellectual Property. All rights, title
and interest in, to and under the CombinatoRx Background Intellectual Property
and any additions, enhancements or improvements thereto however created or
discovered, shall be owned by, and remain, with CombinatoRx. Except as expressly
set forth in this Agreement and as necessary to pursue its Interruption License,
CFFT shall have no interest in any CombinatoRx Background Intellectual Property.

9.1.2           CFFT Background Intellectual Property. All rights, title and
interest in, to and under the CFFT Background Intellectual Property and any
additions, enhancements or improvements thereto however created or discovered,
shall be owned by, and remain, with CFFT. Except as expressly set forth in this
Agreement, CombinatoRx shall have no interest in any CFFT Background
Intellectual Property.

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9.2 License to CFFT Background Intellectual Property.

CFFT hereby grants to CombinatoRx, a worldwide, non-exclusive, non-royalty
bearing license for the Term, without the right to sublicense, to the CFFT
Background Intellectual Property, and such Intellectual Property as may be
conceived, developed or acquired by CFFT, for all uses and purposes by
CombinatoRx related to the Research Program and Research Plan and that may be
necessary or useful for the development or exploitation of a Drug Product.

9.3 Ownership of New Intellectual Property.

The Parties agree that any new Intellectual Property whether or not in the
Field, made by either party, in the course of the conduct, or resulting from the
performance of, or arising out of the Research Program shall be owned
exclusively by CombinatoRx. If either party believes that any new Intellectual
Property has been made in the course of the conduct, or resulting from or
arising out of the performance of, the Research Program, such party will, within
a reasonable period of time thereafter, give notice (the “Invention Notice”) of
such new Intellectual Property to the other party; and thereafter CombinatoRx
shall determine if the new Intellectual Property is patentable. If CombinatoRx
determines that the same is patentable, then CombinatoRx shall prepare, file,
prosecute and maintain now and in the future in its sole discretion, the
appropriate patent filings in the United States and in such other jurisdictions
as CombinatoRx determines after consultation with CFFT.

9.4 Ownership and Licensing of New Assays.

The Parties agree that any new assay(s) developed under, as a result of, or in
connection with the performance of this Agreement, will be owned by CombinatoRx.
Upon

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written request from CFFT, CombinatoRx shall grant non-exclusive, fully paid up
licenses for use of any new assays in the Field to nonprofit organizations with
which CFFT or its Affiliates has some pre-existing relationship for internal,
research and development purposes only. At CombinatoRx’s request, CFFT will
administer any such license program.

9.5 CFFT’s Right to Interruption License.

(a)           If at any time after CFFT terminates funding of the Research
Program because (i) CombinatoRx notifies CFFT that CombinatoRx has ceased
Commercially Reasonable Efforts on the research or development of a Drug Product
Candidate or Drug Product, of the Research Program, or (ii) CFFT reasonably
believes that an Interruption has occurred, CFFT may provide CombinatoRx with
written notice (the “Interruption Notice”) that it intends to exercise its
rights pursuant to subparagraph (c) of this Section 9.5, and (iii) in the case
of a Interruption Notice occasioned by (ii) above, CFFT shall include in its
Interruption Notice the specifics and details stating the basis on which
CombinatoRx is not using Commercially Reasonable Efforts to develop a Drug
Product Candidate  in the Field.

(b)           From the date of receipt of the Interruption Notice, CombinatoRx
shall have a period of ninety (90) days to provide a written response (the
“Response Letter”) either:  (i) rejecting the Interruption Notice and stating,
in reasonable detail why CombinatoRx believes that it is using Commercially
Reasonable Efforts to develop a candidate either itself or through a Licensee in
the Field, or (ii) accepting the Interruption Notice and setting forth the steps
to be taken by CombinatoRx, within a period of one hundred and twenty (120) days
from the date of the Response Letter, to reinitiate development activities.
Within ninety (90) days after receipt of the Response Letter, CFFT shall
respond, in writing, either accepting the Response Letter or

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rejecting the same and requesting dispute mediation in accordance with
Section 13.2 hereof. If CFFT fails to timely respond for whatever reason, then
CFFT shall be deemed to have accepted the Response Letter.

(c)           If CombinatoRx provides notice in accordance with
Section 9.5(a)(i), or if CombinatoRx accepts the Interruption Notice pursuant to
Section 9.5(b)(ii), or it is finally determined pursuant to Section 13.2 to not
to be exercising Commercially Reasonable Efforts to develop a Drug Product
Candidate or a Drug Product in the Field, then CFFT shall have the right and
CombinatoRx hereby grants CFFT in the event of an Interruption, an exclusive,
sublicenseable license to the Clinical Development Candidate, Drug Product
Candidate, and the Drug Product, as they may exist at such time, to continue to
develop the same and to make, have made, use, sell, and import the Clinical
Development Candidate, the Drug Product Candidate and the Drug Product for use
in the Field (the “Interruption License”). If CFFT exercises its right to the
Interruption License, CombinatoRx shall promptly provide the Interruption
License Data Package to CFFT and shall thereafter cooperate with CFFT to furnish
such additional information to CFFT with respect to the Interruption License as
is in CombinatoRx’s possession.

(d)           In the event that CombinatoRx transfers all of or certain of its
rights and obligations to develop and commercialize a Drug Product Candidate or
a Drug Product at any time, the third party to which CombinatoRx transfers all
or certain rights and obligations to develop and commercialize the Drug Product
shall be subject to the obligations of the Interruption License. The
Interruption License shall be deemed to constitute intellectual property as
defined in Section 365(n) of the U.S. Bankruptcy Code. CombinatoRx agrees that
CFFT, as a licensee of such rights, shall retain and may exercise all of its
rights and elections

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under the U.S. Bankruptcy Code; provided however, that nothing in this Agreement
shall be deemed to constitute a present exercise of such rights and elections.

ARTICLE X — TERM AND TERMINATION

10.1               Term.

The Research Program will be deemed to have commenced on the Research Initiation
Date, and will conclude on the earlier of the completion of one Phase IIa
clinical trial of its first Drug Product Candidate or the seventh (7th)
anniversary of the Research Initiation Date (the “Term”) unless extended by
agreement of the Parties, or unless earlier terminated in accordance with the
provisions of this Article X hereof. CombinatoRx and CFFT may extend the Term by
mutual agreement. Any party desiring an extension of the Term shall notify the
other party in writing of that fact not less than ninety (90) days prior to the
anticipated initial termination of the Research Program. That notice shall
include a summary of the material terms upon which the extension is proposed.
Neither the fact that the Term hereunder is longer than the period covered by
the Budget or is extended from time to time by Agreement of the Parties shall
imply any increase in CFFT’s financial obligations pursuant to this Agreement
without CFFT’s separate agreement executed in writing to increase such
obligations.

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10.2               Termination of the Research Program by CFFT for Cause.

Upon written notice to CombinatoRx, CFFT may at its sole discretion unilaterally
terminate the Research Program and this Agreement upon the occurrence of any of
the following events:

(a)      CombinatoRx shall materially breach any of its material obligations
under this Agreement, and such material breach shall not have been remedied or
material steps initiated to remedy the same to CFFT’s reasonable satisfaction,
within sixty (60) days after CFFT sends written notice of breach to CombinatoRx;
or

(b)       CombinatoRx, or its successors, shall cease to function as a going
concern by suspending or discontinuing its business for any reason except for
interruptions in its normal business activities caused by events of force
majeure, as defined in Section 14.2.

10.3               Termination of the Research Program by CombinatoRx for Cause.

CombinatoRx may at its sole discretion terminate this Agreement upon written
notice to CFFT upon the occurrence of the following events:

(a)  CFFT shall materially breach any of its material obligations under this
Agreement and such material breach shall not have been remedied or material
steps initiated to remedy the same to CombinatoRx’s reasonable satisfaction,
within sixty (60) days after CombinatoRx sends written notice of breach to CFFT,
or

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(b)       CFFT shall cease to function as a going concern by suspending or
discontinuing its business for any reason except for interruptions in its normal
business activities caused by events of force majeure, as defined in
Section 14.2.

10.4               Termination Without Cause.

CFFT shall have the right upon at least ninety (90) days notice to CombinatoRx
to terminate its participation in the Research Program and the funding thereof
effective (i) on each anniversary of the Research Initiation Date (an “Early
Termination Notice”) and (ii) prior to the filing of an IND for the first Drug
Product Candidate (the latter a “Negative Go Decision”). In either such event,
CFFT shall pay, within thirty (30) days of being invoiced, all reasonable costs
relating to the Research Program for which CombinatoRx is legally obligated
prior to the effective date of such termination. A decision by CFFT to approve
the filing of an IND for the first Drug Product Candidate shall be referred to
as herein a “Go Decision”). At least ninety (90) days prior to the intended
filing of an IND for a Clinical Development Candidate, CombinatoRx shall inform
CFFT and furnish it with such information as will allow CFFT to make an informed
Go or Negative Go Decision.

10.5               General Effect of Termination.

10.5.1     Survival. Except where explicitly provided elsewhere herein,
termination of this Agreement for any reason, or expiration of this Agreement,
will not affect:  (i) obligations which have accrued as of the date of
termination or expiration, and (ii) obligations and rights which, expressly or
from the context thereof, are intended to survive termination or expiration of
this Agreement. Without limitation, the following shall survive termination
either indefinitely or

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for the period so stated:  Articles V, VI, VII, VIII, IX, XI and XIII and
Sections 3.1, 3.2.1, 3.2.3, 3.5, 4.2, 4.3 and 10.5.

10.5.2     Retention of License. Upon termination or expiration of this
Agreement and subject to CFFT’s rights in the event of an Interruption,
CombinatoRx will retain exclusive rights to Intellectual Property, Confidential
Information and the inventions licensed to it by CFFT pursuant to Article IX of
this Agreement.

ARTICLE XI — RESTRICTIONS ON OTHER CFTR MODULATORS

If there is a Go Decision, during the period ending after the earlier of (a) the
fifth (5th) anniversary of an Interruption, or (b) the third (3rd) anniversary
of FDA approval of a Drug Product, all of CombinatoRx’s research, development
and marketing efforts directed at the identification, development and
commercialization of pharmaceutical products that have as their principal mode
of action the modulation of CFTR shall be conducted under the Agreement;
provided that CombinatoRx may enter into an agreement with a Third Party (a
“Third Party Agreement”) or may engage in internal research directed toward the
eventual commercialization (including the acquisition and sale of a marketed
product) of a pharmaceutical product that has as its principal mode of action
the modulation of CFTR if CFFT will receive the same royalty rate from
CombinatoRx or the Third Party under the Third Party Agreement as is provided
under this Agreement on account of any Net Sales of the new product. This
Article shall be inapplicable if there is a Negative Go Decision. Further, this
Article shall be inapplicable to CombinatoRx Background Intellectual Property on
which it has conducted in vivo testing prior to the Research Initiation Date.

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ARTICLE XII — REPRESENTATIONS AND WARRANTIES

12.1               Representations and Warranties of CombinatoRx.

CombinatoRx represents and warrants to CFFT that this Agreement has been duly
executed and delivered by CombinatoRx and constitutes the valid and binding
obligation of CombinatoRx, enforceable against CombinatoRx in accordance with
its terms except as enforceability may be limited by bankruptcy, fraudulent
conveyance, insolvency, bankruptcy, reorganization, moratorium and other laws
relating to or affecting creditors’ rights generally and by general equitable
principles.

12.2               Representations and Warranties of CFFT.

CFFT represents and warrants to CombinatoRx that this Agreement has been duly
executed and delivered by CFFT and constitutes the valid and binding obligation
of CFFT, enforceable against CFFT in accordance with its terms except as
enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency,
bankruptcy, reorganization, moratorium and other laws relating to or affecting
creditors’ rights generally and by general equitable principles.

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ARTICLE XIII — DISPUTE RESOLUTION

13.1               Governing Law, and Jurisdiction.

This Agreement shall be governed and construed in accordance with the internal
laws of the State of Maryland. The Parties acknowledge and agree that, in the
event of a breach or a threatened breach by either party of this Agreement for
which it will have no adequate remedy at law, the other party may suffer
irreparable damage and, accordingly, shall be entitled to seek injunctive and
other equitable remedies to prevent or restrain such breach or threatened
breach, in addition to any other remedy they might have at law or at equity.

13.2               Dispute Resolution.

(a)         In the event of any dispute, claim or controversy arising out of,
relating to or in any way connected to the interpretation of any provision of
this Agreement, the performance of either party under this Agreement or any
other matter under this Agreement, including any action in tort, contract or
otherwise, at equity or law (a “Dispute”), either party may at any time provide
the other party written notice specifying the terms of such Dispute in
reasonable detail. As soon as practicable after receipt of such notice, the
Chief Executive Officers of both CFFT and CombinatoRx shall meet at a mutually
agreed upon time and location for the purpose of resolving such Dispute. The
Chief Executive Officers shall engage in good faith discussions and/or
negotiations for a period of up to thirty (30) days to resolve the Dispute or
negotiate an interpretation or revision of the applicable portion of this
Agreement which is mutually agreeable to both Parties without the necessity of
formal dispute resolution procedures relating thereto. During the course of such
discussion and/or negotiation, the Parties

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shall reasonably cooperate  in order so that each of the Chief Executive
Officers may be fully informed with respect to the issues in the Dispute.

(b)         In the event that any non-business type Dispute (including, but not
limited to, those relating to development, preclinical activities, regulatory
matter, formulation, or intellectual property) is not resolved by the Chief
Executive Officers pursuant to Section 13.2(a) then the Dispute shall be
referred to an independent expert appointed by agreement of the Parties. The
independent expert’s decision shall be final and binding and its costs shall be
borne as directed by the independent expert. Each party shall cooperate in good
faith with the expert. In the event that the Parties are unable to agree as to
whether a particular dispute is governed by this Section 13.2(b), then this
Section 13.2(b) shall be utilized to resolve such dispute.

(c)         In the event any business-related Dispute is not resolved by the
Chief Executive Officers pursuant to Section 13.2(a), then the Parties shall
resolve such Dispute by final and binding arbitration. Whenever a party decides
to institute arbitration proceedings, it shall give written notice to that
effect to the other party. Arbitration shall be held in Washington, DC,
according to the then-current commercial arbitration rules of the American
Arbitration Association (“AAA”), except to the extent such rules are
inconsistent with this Section 13.2. The arbitration will be conducted by a
panel of three (3) arbitrators appointed in accordance with AAA rules; provided
that each party shall within thirty (30) days after the institution of the
arbitration proceedings appoint one arbitrator each, and such arbitrators shall
select, if available, a third arbitrator within thirty (30) days thereafter. If
the two first arbitrators are unable to

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select a third arbitrator within such period, the third arbitrator shall be
appointed in accordance with AAA rules. Any arbitrator chosen hereunder shall
have educational training and industry experience sufficient to demonstrate a
reasonable level of relevant scientific, financial, medical and industry
knowledge. Within twenty (20) days of the selection of all arbitrators, each
party shall submit to the arbitrators a proposed resolution of the Dispute that
is the subject of the arbitration (the “Proposals”). The arbitrators shall
thereafter select one of the Proposals so submitted as the resolution of the
Dispute, but may not alter the terms of either Proposal and may not resolve the
Dispute in a manner other than by selection of one of the submitted Proposals.
If a party fails to submit a Proposal in accordance with the terms of this
Section 13.2, the arbitrators shall select the Proposal of the other party as
the resolution of the Dispute. All arbitrators eligible to conduct the
arbitration must agree to render their opinion(s) within thirty (30) days of the
final arbitration hearing. No arbitrator (nor the panel of arbitrators) shall
have the power to award punitive damages under this Agreement regardless of
whether any such damages are contained in a Proposal, and such award is
expressly prohibited. The proceedings and decisions of the arbitrators shall be
confidential, final and binding on all of the Parties. Judgment on the award so
rendered may be entered in a court having jurisdiction thereof. The Parties
shall share the costs of arbitration according to the decision of the
arbitrators. Nothing in this Section 13.2(c) will preclude either party from
seeking equitable relief in accordance with Section 13.1 or interim or
provisional relief from a court of competent jurisdiction, including a temporary
restraining order, preliminary injunction or other interim equitable relief,
concerning a dispute either prior to or during any arbitration if necessary to
protect the

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interests of such party or to preserve the status quo pending the arbitration
proceeding. Notwithstanding the foregoing, the Parties are not required to
resolve disputes related to ownership, filing, prosecution, maintenance, defense
or enforcement of Patents pursuant to this Section 13.2(c).

ARTICLE XIV — MISCELLANEOUS PROVISIONS

14.1               Waiver.

No provision of this Agreement may be waived or amended except in writing by
both Parties hereto. No failure or delay by either party hereto in exercising
any right or remedy hereunder or under applicable law will operate as a waiver
or amendment thereof, or a waiver of any right or remedy on any subsequent
occasion.

14.2               Force Majeure.

Neither party will be in breach hereof by reason of its delay in the performance
of or failure to perform any of its obligations hereunder, if that delay or
failure is caused by strikes, acts of God or the public enemy, riots,
incendiaries, interference by civil or military authorities, compliance with
governmental priorities for materials, or any fault beyond its control or
without its fault or negligence.

14.3               Severability.

Should one or more provisions of this Agreement be or become invalid, then the
Parties hereto shall attempt to agree upon valid provisions in substitution for
the invalid provisions, which in their economic effect come so close to the
invalid provisions that it can be reasonably assumed that the Parties would have
accepted this Agreement with those new provisions. If the

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Parties are unable to agree on such valid provisions, the invalidity of such one
or more provisions of this Agreement shall nevertheless not affect the validity
of the Agreement as a whole, unless the invalid provisions are of such essential
importance for this Agreement that it may be reasonably presumed that the
Parties would not have entered into this Agreement without the invalid
provisions.

14.4               Assignment and Successors.

This Agreement may not be assigned or otherwise transferred by either party
without the prior written consent of the other party; provided, however, that
either Party may assign this Agreement, without the consent of the other party,
(i) to any of its Affiliates, if the assigning party guarantees the full
performance of its Affiliates’ obligations hereunder, or (ii) in connection with
the transfer or sale of all or substantially all of its assets or business or in
the event of its merger or consolidation with another company. Any purported
assignment in contravention of this Section 14.4 shall, at the option of the
non-assigning party, be null and void and of no effect. No assignment shall
release either party from responsibility for the performance of any accrued
obligation of such party hereunder. This Agreement shall be binding upon and
enforceable against the successor to or any permitted assignees from either of
the Parties hereto.

14.5               Counterparts.

This Agreement may be executed in duplicate, each of which shall be deemed to be
original and both of which shall constitute one and the same Agreement.

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14.6               Insurance.

Each party shall have and maintain such type and amounts of liability insurance
covering the Research Program and its activities as is normal and customary for
a party similarly situated and shall upon request provide the other with a copy
of certificates evidencing such insurance, along with any amendments and
revisions thereto.

14.7               No Agency.

Nothing herein contained shall be deemed to create an agency, joint venture,
amalgamation, partnership or similar relationship between CFFT and CombinatoRx.
Notwithstanding any of the provisions of this Agreement, neither party to this
Agreement shall at any time enter into, incur, or hold itself out to third
parties as having authority to enter into or incur, on behalf of the other
party, any commitment, expense, or liability whatsoever, and all contracts,
expenses and liabilities in connection with or relating to the obligations of
each party under this Agreement shall be made, paid, and undertaken exclusively
by such party on its own behalf and not as an agent or representative of the
other.

14.8               Notice.

All communications between the Parties with respect to any of the provisions of
this Agreement will be sent to the addresses set out below, or to such other
addresses as may be designated by one party to the other by notice pursuant
hereto, by prepaid, certified air mail (which shall be deemed received by the
other party on the seventh business day following deposit in the mails),
overnight express mail or by facsimile transmission, or other electronic means
of communication (which shall be deemed received when transmitted), with
confirmation

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by first class letter, postage pre-paid, given by the close of business on or
before the next following business day:

if to CFFT, at:
Cystic Fibrosis Foundation Therapeutics Incorporated
6931 Arlington Road
Bethesda, Maryland  20814
Attention:  Dr. Robert J. Beall, President and CEO

with a copy to: Kenneth I. Schaner, Esq.
Bingham McCutchen LLP
3000 K Street, N.W., Suite 300
Washington, D.C. 20007

if to CombinatoRx, at:
CombinatoRx, Incorporated
Sixteenth Floor
245 First Street
Cambridge, MA  02142
Attention:  Daniel Grau, Senior Vice President Commercial Operations

with a copy to: Jason Cole, SVP and General Counsel

with a copy to: Peter B. Finn, Esq.
Rubin and Rudman LLP
50 Rowes Wharf
Third Floor
Boston, MA  02110

14.9               Headings.

The paragraph headings are for convenience only and will not be deemed to affect
in any way the language of the provisions to which they refer.

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14.10             Entire Agreement.

This Agreement, together with all schedules, exhibits and appendices contains
the entire understanding of the Parties relating to the matters referred to
herein, and supersedes any prior agreements or understandings, oral, written or
otherwise.

COMBINATORX, INCORPORATED

 

 

 

 

 

By:/s/ ALEXIS BORISY

 

Alexis Borisy, President and CEO

 

 

 

 

 

CYSTIC FIBROSIS FOUNDATION

 

THERAPEUTICS INCORORATED

 

 

 

 

 

By:/s/ ROBERT J. BEALL

 

Dr. Robert J. Beall, President and CEO

 

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EXHIBIT A

BUDGET

To be adjusted by the Parties upon finalization of the Research Plan

[*]

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EXHIBIT B

RESEARCH PLAN

To be inserted after agreement by the Parties

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EXHIBIT C

TDN DATA BANK

The Therapeutics Development Network Data Bank

What is the TDN Data Bank?

The TDN Data Bank is a central repository for data from completed TDN studies.
For a particular TDN study, the bank contains individual patient data collected
in case report forms and/or from a central laboratory.

The purpose of the TDN Data Bank is to serve as a resource of precious data from
CF clinical trials. Data in the bank can be used to address several research
questions not addressed in the original studies from which the data was
obtained. Examples include:

·                  What are the baseline laboratory abnormalities among CF
patients?  This research question could be addressed combining baseline data
from several studies in order to look at the distribution of laboratory
parameters among different subgroups of CF patients, and can provide information
on how abnormal CF patients’ laboratory parameters are in the absence of study
drug compared to normal, healthy individuals.

·                  What is the variability in CF outcome measures such as
FEV1 over time?  Spirometry is used in several TDN studies, and the more
information we collect on variables such as FEV1, the better we can estimate
sample sizes required for future CF clinical trials.

·                  Is there a more efficient way to analyze CF outcome
measures?  Data in the TDN Data Bank can be instrumental for the development of
new methodologic approaches for analyzing data in CF clinical trials. Novel
statistical methods can be derived to make CF clinical trials more efficient,
and hence reduce the sample size needed for future CF clinical trials.

Using data from TDN studies to address questions such as these fulfill the
mission of the TDN, and more importantly, enhance our knowledge of CF and help
us to design the most efficient and appropriate CF clinical trials.

What data is included in the TDN Data Bank?

At the beginning of a study, the TDN negotiates with the Sponsor to determine
the extent of data that will be included in the data bank. Sponsors are asked to
donate data from all study visits and all patients to the TDN Data Bank for
maximum benefit supporting the TDN’s mission. Sponsors should be encouraged to
donate their entire study database to the TDN Data Bank, since they will likely
benefit from both their own donation and the donation of other Sponsor’s data to
aid in the design of future clinical trials.

At the completion of the study, the data will be extracted from the study
database and stripped of patient identifiers (e.g. initials, date of birth) and
reposited in the bank. For patients who signed a data bank informed consent,
they will be assigned a unique TDN identification

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number that will enable them to be later linked with data from other studies.
The link between the TDN identification number and patient identifiers will be
kept in a secure location and is not part of the TDN bank. The data from
patients who did not sign a data bank informed consent will be maintained
anonymously in the data bank.

Who uses the TDN Data Bank?

A primary use of the TDN Data Bank is for the design of future CF clinical
trials. In the design phase of a TDN clinical trial, the TDN Statistical
Analysis Unit (SAU) utilizes the data in the bank, in particular for identifying
the most appropriate endpoints, assessing the size of eligible study
populations, and generation of sample sizes. The TDN SAU also uses this data to
evaluate and develop different methodologic approaches for analyzing key
endpoints; the goal of this work is to find the most powerful approach that
could ultimately estimate the treatment effect most robustly and with the least
variability, resulting in a smaller sample size needed for future trials.

A second purpose of the TDN Data Bank is to facilitate ancillary studies, which
are investigations that are not part of an approved TDN protocol but uses
existing data that has been collected in a previous TDN study or studies.
Ancillary studies are supported by funding mechanisms other than the TDN.
Examples include studies funded by investigator-initiated NIH research awards
(R01s), grants from academic institutions, CFF research grants, private sources
(e.g. industry sponsors), or those performed at no cost (generally because of
the special interest of a researcher).

A proposal for each ancillary study must be submitted to the TDN. Proposals must
be reviewed and approved by the TDN Data Use Subcommittee of the National
Resource Committee before data from the TDN Data Bank can be released. A TDN
investigator must be at least a Co-Investigator and is usually expected to be
the Principal Investigator on any ancillary study using TDN data. Ancillary
studies requesting data from industry sponsored trials will receive full
analysis support from the TDN Coordinating center. Thus, data from industry
sponsored studies will not be released outside of the TDN Coordinating Center.
In the scenario for which industry sponsored study data has not yet been
published and an ancillary study is referring by name to this data in a
manuscript to be submitted for publication, the sponsor will be given 30 days to
review the manuscript prior to submission.

For ancillary studies requesting data from select grant funded studies, data
from the TDN data bank is released upon agreement that the applicant will be a
responsible user of the data and will only use the data for the exact purpose
for which it was requested. A TDN Data Use Agreement must be signed and
submitted by the investigator before TDN data is released and implementation of
the proposed study begins.

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