exv10w3






Exhibit 10.3




Execution copy




IDERA PHARMACEUTICALS, INC.




STOCK PURCHASE AGREEMENT



December 8, 2006



     This Stock Purchase Agreement (this “Agreement”) is entered into as of the date set forth
above by and between Idera Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and Merck
& Co., Inc., a New Jersey corporation
(“Merck”). The parties hereby agree as follows:



ARTICLE 1




AUTHORIZATION AND SALE OF SECURITIES



     1.1 Authorization. In accordance with the Exclusive License and Research
Collaboration Agreement dated as of December 8, 2006 (the “Execution Date”) between the parties
(the “Collaboration Agreement”), the Company has duly authorized the sale and issuance to Merck
pursuant to the terms and conditions hereof of 1,818,182 shares (the “Shares”) of the Company’s
common stock, par value $0.001 per share (the “Common Stock”).



     1.2 Sale of Securities. Subject to the terms and conditions hereof, at the Closing
(as defined in Section 2.1 below) the Company will issue and sell to Merck, and Merck agrees, to
purchase from the Company, the Shares, at a purchase price of $5.50 per Share.



ARTICLE 2




CLOSING; DELIVERY



     2.1 Closing. The closing of the purchase by Merck and the sale by the Company of the
Shares (the “Closing”) shall be held at the offices of Wilmer Cutler Pickering Hale and Dorr LLP,
60 State Street, Boston, Massachusetts 02109 on the Execution Date or at such other time and place
as the Company and Merck may agree either in writing or orally (the “Closing Date”).



     2.2 Delivery. At the Closing,



          (a) Merck and the Company shall execute and deliver (i) the Registration Rights Agreement
attached hereto as Exhibit A (the “Rights Agreement”) and together with this Agreement, the
“Transaction Documents”) and (ii) the Collaboration Agreement;




          (b) the Company shall issue and deliver to Merck the following:




               (i) a legal opinion of Company’s counsel dated as of the Closing Date, in form, scope and
substance satisfactory to Merck; and;



               (ii) a certificate of the Company executed by its Chief Executive Officer or Chief Financial
Officer attaching thereto (i) the Certificate of Incorporation as in




1.









 







effect at the time of the
Closing, (ii) the Company’s Bylaws as in effect at the time of the Closing, (iii) resolutions
approved by the Board of Directors authorizing the transactions contemplated hereby, and (iv) good
standing certificates with respect to the Company from the applicable authority(ies) in Delaware
and any other jurisdiction in which the Company is qualified to do business, dated a recent date
before the Closing; and




          (c) Merck shall deliver the purchase price for the Shares to the Company by wire transfer in
same day funds.




          The Company covenants and agrees that it shall issue and deliver to Merck a certificate in
Merck’s name representing the Shares against payment of the purchase price therefor within three
business days of the Execution Date and that it shall provide a fax copy of such certificate to
Merck as soon as practicable following the Execution Date.




ARTICLE 3




REPRESENTATIONS AND WARRANTIES OF THE COMPANY



     The Company hereby represents and warrants to Merck that except as set forth in the Exchange
Act Reports (as defined in Section 3.11):



     3.1 Organization and Qualification. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware, and the Company is
qualified to do business as a foreign corporation in each jurisdiction in which qualification is
required, except where failure to so qualify would not reasonably be expected to have a Material
Adverse Effect (as defined herein). For purposes of this Agreement, the term “Material Adverse
Effect” shall mean a material adverse effect upon the business, financial condition, properties, or
results of operations of the Company. The Company does not have any subsidiaries.



     3.2 Authorized Capital Stock. On the date hereof, the Company has (i) authorized
40,000,000 and outstanding 18,200,585 shares of Common Stock and (ii) authorized 5,000,000 shares
of Preferred Stock, $0.01 par value per share (“Preferred Stock”), of which 1,500,000 shares have
been designated Series A Convertible Preferred Stock, 655 shares of which are outstanding, and of
which 200,000 shares have been designated Series C Junior Participating Preferred Stock, none of
which are outstanding; the issued and outstanding shares of the Common Stock and Preferred Stock
have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in
compliance in material respects with all federal and state securities laws, were not issued in
violation of and are not subject to any preemptive rights or other rights to subscribe for or
purchase securities granted by the Company, and conform (except with respect to the number of
authorized, issued and outstanding shares) in all material respects to the description thereof
contained in the Exchange Act Reports with the Securities and Exchange Commission (the “Commission”
or the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or in any
Registration Statement on Form 8-A filed with the SEC by the Company.



     3.3 Issuance, Sale and Delivery of the Shares. The Shares have been duly authorized
and, when issued, delivered and paid for in the manner set forth in this Agreement, will be duly



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authorized, validly issued, fully paid and nonassessable and free and clear of all pledges, liens,
and encumbrances imposed by the Company (other than restrictions on transfer under state and/or
federal securities laws). No preemptive rights or other rights to subscribe for or purchase from
the Company exist with respect to the issuance and sale of the Shares by the Company pursuant to
this Agreement. Except as disclosed in the Exchange Act Reports, no stockholder of the Company has
any right (which has not been waived or has not expired by reason of lapse of time following
notification of the Company’s intent to file the registration statement to be filed by it pursuant
to the Rights Agreement (the “Registration Statement”)) to require the Company to register the sale
of any shares owned by such stockholder under the Securities Act of 1933, as amended (the
“Securities Act”) in the Registration Statement. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the issuance and sale of
the Shares to be sold by the Company as contemplated herein.




     3.4 Due Execution, Delivery and Performance of this Agreement. The Company has full
legal right, corporate power and authority to enter into the Transaction Documents and consummate
the transactions contemplated hereby and thereby. The Transaction Documents have been duly
authorized, executed and delivered by the Company. The execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the transactions contemplated
herein and therein: (i) will not violate any provision of the certificate of incorporation or
bylaws of the Company, (ii) will not result in the creation of any lien, charge, security interest
or encumbrance upon any assets of the Company pursuant to the terms or provisions of, and will not
conflict with, result in the breach or violation of, or constitute, either by itself or upon notice
or the passage of time or both, a default under any agreement, lease, franchise, license, permit or
other instrument to which the Company is a party or by which the Company or any of its properties
are bound, except, in each case, for any lien, charge, security interest, encumbrance, conflict,
breach, violation or default which would not reasonably be expected to have a Material Adverse
Effect, or (iii) conflict with or result in the violation of any statute or any judgment, decree,
order, rule or regulation of any court or any regulatory body, administrative agency or other
governmental body applicable to the Company or any of its properties except for any such conflict
or violation which would not reasonably be expected to have a Material Adverse Effect. No consent,
approval, authorization or other order of any court, regulatory body, administrative agency or
other governmental body is required for the execution and delivery by the Company of the
Transaction Documents or the consummation by the Company of the transactions contemplated by the
Transaction Documents, except for compliance with the blue sky laws and federal securities laws,
the listing of the Shares on the American Stock Exchange and the filing of the Registration
Statement. Upon the execution and delivery of the Transaction Documents, and assuming the valid
execution thereof by Merck, each Transaction Document will constitute a valid and binding
obligation of the Company, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except to the extent
enforcement of the indemnification obligations of the Company set forth in the Rights Agreement may
be limited by federal or state securities laws or the public policy underlying such laws.



3









 





     3.5 Contracts. There is no material contract or agreement required by the Exchange
Act and the rules and regulations promulgated thereunder to be described in or filed as an exhibit
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, or any other
document that the Company was required to file with the Commission since December 31, 2005 which is
not described or filed therein as required. Any contracts filed as exhibits to the Exchange Act
Reports that are material to the Company are in full force and effect on the date hereof.



     3.6 No Actions. Except as disclosed in the Exchange Act Reports, (1) there are no
legal or governmental actions, suits or proceedings pending and (2) to the Company’s knowledge,
there are no inquiries or investigations pending, or any legal or governmental actions, suits, or
proceedings threatened, against the Company (it being understood that the interaction between the
Company and the United States Food and Drug Administration and such other comparable governmental
bodies relating solely to the clinical development and product approval process shall not be deemed
proceedings for purposes of this representation), which actions, suits or proceedings, individually
or in the aggregate, would reasonably be expected to have a Material Adverse Effect; and no labor
disturbance by the employees of the Company exists or, to the Company’s knowledge, is imminent
which would reasonably be expected to have a Material Adverse Effect. The Company is not party to
or subject to the provisions of any outstanding injunction, judgment, decree or order of any court,
regulatory body, administrative agency or other governmental body specifically naming the Company
that would reasonably be expected to have a Material Adverse Effect.



     3.7 Financial Statements. The consolidated financial statements of the Company and
the related notes contained in the Exchange Act Reports (collectively, the “Financial Statements”)
present fairly, in accordance with United States generally accepted accounting principles (“GAAP”),
the consolidated financial position of the Company as of the dates indicated, and the results of
operations and cash flows for the periods therein specified, subject, in the case of unaudited
financial statements for interim periods, to normal year-end audit adjustments. The Financial
Statements (including the related notes) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods therein specified, except that unaudited financial
statements are subject to normal year-end audit adjustments and may not contain all footnotes
required by GAAP.



     3.8 No Material Change. Since September 30, 2006, and except as described in the
Exchange Act Reports:



          (a) the Company has not incurred any material liabilities or obligations, indirect, or
contingent, or entered into any material oral or written agreement or other transaction, which was
not incurred or entered into in the ordinary course of business other than the Collaboration
Agreement and draw downs under the Common Stock Purchase Agreement dated March 24, 2006 between the
Company and Biotech Shares Ltd.;




          (b) the Company has not sustained any material loss or interference with its business or
properties from fire, flood, windstorm, accident or other calamity not covered by insurance;







4









 








          (c) the Company has not paid or declared any dividends or other distributions with respect to
its capital stock and the Company has not defaulted in the payment of principal or interest on any
outstanding debt obligations;




          (d) there has not been any material change or amendment to a contract filed as an exhibit to
an Exchange Act Report that is material to the Company;




          (e) there has not been any sale, assignment or transfer of all or substantially all of the
Company’s rights in any patents, trademarks, copyrights, trade secrets or other intangible assets
or other material assets, except a sale, assignment or transfer made in the ordinary course of
business;




          (f) there has not been any waiver by the Company of a material debt owed to it;




          (g) there has not been any agreement or commitment by the Company to do any of the acts
described in subsections (a) through (f) above; and




          (h) there has not been any event which has caused a Material Adverse Effect other than
continued incurrence of operating losses incurred in the ordinary course of the Company’s business
at a rate consistent with the Company’s rate of operating losses for the quarter ended September
30, 2006 as reflected in the Company’s Financial Statements.




     3.9 Compliance. The Company is conducting its business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is conducting its business,
including, without limitation, all applicable local, state and federal environmental laws and
regulations; except where failure to be so in compliance would not reasonably be expected to have a
Material Adverse Effect.



     3.10 Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other
than income taxes) which are required to be paid in connection with the issuance and sale of the
Shares to be sold to Merck hereunder will be, or will have been, fully paid or provided for by the
Company and all laws imposing such taxes will be or will have been complied with.



     3.11 Investment Company. The Company is not an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for an investment company, within the meaning
of the Investment Company Act of 1940, as amended.



     3.12 Disclosure. The information contained in the following documents, as of the date
hereof, do not, when read together, include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances in which they were made, not misleading, as of:



          (a) the Company’s Annual Report on Form 10-K for the year ended December 31, 2005;




          (b) the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006, June
30, 2006 and September 30, 2006; and







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          (c) all other documents, if any, filed by the Company with the Commission since September 30,
2006 pursuant to the reporting requirements of the Exchange Act (together with paragraphs (a) and
(b), the “Exchange Act Reports”).




     3.13 Price of Common Stock. The Company has not taken, and will not take, directly or
indirectly, any action designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the price of the shares
of the Common Stock to facilitate the sale or resale of the Shares.



     3.14 Reporting Company; Form S-3. The Company is subject to the reporting
requirements of the Exchange Act and since December 31, 2005 has timely filed all reports required
thereby. As of their respective filing dates, all Exchange Act Reports complied in all material
respects with the requirements of the Exchange Act. The Company is eligible to register the Shares
for resale by Merck on a registration statement on Form S-3 under the Securities Act. To the
Company’s knowledge, there exist no facts or circumstances that would prohibit or delay the
preparation and filing of a registration statement on Form S-3 with respect to the Registrable
Securities (as defined in the Rights Agreement). The Company does not know of any basis to believe
that its present independent registered public accountants will withhold their consent to the
inclusion, or incorporation by reference, of their audit opinion concerning the Company’s financial
statements that will be included in the Registration Statement.



     3.15 Use of Proceeds. The Company intends to use the proceeds from the sale of the
Shares for research and clinical development activities, manufacturing and commercialization of its
product candidates, working capital and general corporate purposes, including for potential
acquisitions of additional technologies and intellectual property rights.



     3.16 Governmental Permits, Etc. The Company has all franchises, licenses,
certificates and other authorizations from such federal, state or local government or governmental
agency, department or body that are currently required for the operation of the business of the
Company as currently conducted, except where the failure to posses currently such franchises,
licenses, certificates and other authorizations would not reasonably be expected to have a Material
Adverse Effect. The Company has not received any notice of proceedings relating to the revocation
or modification of any such permit.



     3.17 Listing. The Common Stock is presently listed on the American Stock Exchange.
The Company has not, in the two years preceding the date hereof, received any written notice from
the American Stock Exchange to the effect that the Company is not in compliance with the
maintenance requirements of such exchange. The Company has secured or prior to the issuance of the
Shares will secure the listing of the Shares upon each national securities exchange or automated
quotation system upon which shares of Common Stock are currently listed (subject to official notice
of issuance). Trading in the Common Stock (or the AMEX generally) has not been suspended by the
SEC or the AMEX.



     3.18 Sarbanes-Oxley Act; Accounting Controls. The Company is in compliance in all
material respects with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it.
The Company maintains a system of internal accounting controls that the Company reasonably
believes is sufficient to provide reasonable assurance that (i) transactions are



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executed in accordance with management’s general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.




     3.19 Foreign Corrupt Practices. Neither the Company, nor, to the knowledge of the
Company, any director, officer, agent, employee or other Person acting on behalf of the Company
has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political
activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; (iii) violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.



     3.20 Employee Relations. The Company is not a party to any collective bargaining
agreement and does not employ any member of a union. No executive officer of the Company (as
defined in Rule 501(f) of the Securities Act) has notified the Company that such officer intends to
leave the Company or otherwise terminate such officer’s employment with the Company. No executive
officer of the Company, to the knowledge of the Company, is in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive covenant with the
Company, and, to the knowledge of the Company, the continued employment of each such executive
officer does not subject the Company to any liability with respect to any of the foregoing matters.
To the Company’s knowledge, no employee, officer or consultant of the Company is in violation of
any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant. Except as set forth in the Exchange Act Reports, no employee of the Company
has been granted the right to any severance following termination of employment with the Company in
excess of $200,000.



     3.21 Securities Law Exemptions. Assuming the accuracy of the representations and
warranties of Merck contained in Section 4 hereof, the offer, sale and issuance of the Shares are
exempt from the registration requirements of the Securities Act, and the registration, permit or
qualification requirements of any applicable state securities laws. Neither the Company nor any
person acting on its behalf has taken any action to sell, offer for sale or solicit offers to buy
any securities of the Company that would reasonably be expected to subject the offer, issuance or
sale of the Shares, as contemplated by this Agreement, to the registration requirements of Section
5 of the Securities Act.



     3.22 No Integrated Offering. Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances that would cause this
offering of Securities to be integrated with any prior or contemporaneous offering of securities of



7









 




the Company for purposes of the Securities Act or any applicable state securities law or any
applicable stockholder approval provisions.




ARTICLE 4




REPRESENTATIONS AND WARRANTIES OF MERCK



     Merck hereby represents and warrants as follows:



     4.1 This Agreement and the Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of Merck and are valid and binding agreements of Merck enforceable against
Merck in accordance with their terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except to the extent enforcement of Merck’s indemnification obligations set
forth in the Rights Agreement may be limited by federal or state securities laws or the public
policy underlying such laws.



     4.2 Merck represents and warrants to, and covenants with, the Company that: (i) Merck is
knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with
respect to investments in securities representing an investment decision like that involved in the
purchase of the Shares, including investments in securities issued by the Company and comparable
entities, and has had the opportunity to request, receive, review and consider all information it
deems relevant in making an informed decision to purchase the Shares; (ii) Merck is acquiring the
Shares set forth in Section 1 above in the ordinary course of its business and for its own account
for investment only and with no present intention of distributing any of such Shares or any
arrangement or understanding with any other persons regarding the distribution of such Shares (this
representation and warranty not limiting Merck’s right to sell pursuant to the Registration
Statements or in compliance with the Securities Act and the Rules and Regulations, or Merck’s right
to indemnification under the Rights Agreement); (iii) Merck has not been organized, reorganized or
recapitalized specifically for the purpose of investing in the Shares; (iv) Merck has completed or
caused to be completed the Registration Statement Questionnaire attached hereto as part of Exhibit
B, for use in preparation of the Registration Statements, and the answers thereto are true and
correct as of the date hereof and will be true and correct as of the effective date of the
Registration Statements and Merck will notify the Company promptly of any material change in any
such information provided in the Registration Statement Questionnaire until such time as Merck has
sold all of its Shares or until the Company is no longer required to keep the Registration
Statements effective; (v) Merck has had an opportunity to discuss this investment with
representatives of the Company and ask questions of them; (vi) Merck is an “accredited investor”
within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act; (vii) Merck
agrees to notify the Company promptly of any change in any of the foregoing information until such
time as Merck has sold all of its Shares or the Company is no longer required to keep the
Registration Statement effective; and (viii) Merck will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire to take a pledge of) any of the



8









 




Shares except in compliance with the Securities Act, the Rules and Regulations, and applicable
state securities laws.




     4.3 Merck understands that the Shares are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of the Securities Act, the Rules and
Regulations and state securities laws and that the Company is relying upon the truth and accuracy
of, and Merck’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of Merck set forth herein in order to determine the availability of such exemptions
and the eligibility of Merck to acquire the Shares.



     4.4 Merck understands that its investment in the Shares involves a significant degree of risk,
including a risk of total loss of Merck’s investment, and Merck has full cognizance of and
understands all of the risk factors related to Merck’s purchase of the Shares. Merck understands
that the market price of the Common Stock has been volatile and that no representation is being
made as to the future value of the Common Stock. Merck has the knowledge and experience in
financial and business matters as to be capable of evaluating the merits and risks of an investment
in the Shares and has the ability to bear the economic risks of an investment in the Shares.



     4.5 Merck understands that no United States federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or endorsement of the Shares.



     4.6 Except for Section 3.19, nothing in this Section 4 shall lessen or obviate the
representations and warranties of the Company set forth in this Agreement.



ARTICLE 5




COVENANTS



     5.1 Blue Sky Laws. The Company shall, on or before the Closing Date, take such action
as the Company shall reasonably determine is necessary to qualify the Shares for sale to Merck
pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the
United States or obtain exemption therefrom.



     5.2 Reporting Status. So long as Merck beneficially owns any of the Shares and so
long as the Company is subject to the periodic reporting obligations of the Exchange Act, the
Company shall timely file (within applicable extension periods) all reports required to be filed
with the SEC pursuant to the Exchange Act.



     5.3 Listing. The Company will use its best efforts to continue the listing and
trading of its Common Stock, including the Shares, on the American Stock Exchange (“AMEX”), the New
York Stock Exchange, the Nasdaq National Market, the Nasdaq Capital Market or other equivalent U.S.
national exchange or automated trading market (a “Permitted Exchange”) and to comply with the
reporting, filing and other obligations under the bylaws or rules thereof.



9









 





     5.4 Securities Laws; No Integrated Offerings. The Company shall not make any offers
or sales of any security under circumstances that would cause the offer and sale of the Shares
hereunder to violate the Securities Act or the Rules or Regulations or cause the offer and sale of
the Shares to be subject to any stockholder approval provision applicable to the Company or its
securities.



     5.5 Restriction on Sales.



          (a) Merck hereby agrees that (i) during the period commencing on the date hereof and ending on
the first anniversary of the Closing Date, Merck will not offer, sell or otherwise dispose of any
Shares, and (ii) during the period commencing on the first trading day following the first
anniversary of the Closing Date and ending upon the expiration of the Research Program Term (as
defined in the Collaboration Agreement), it will not offer, sell or otherwise dispose of in any
consecutive three-month period a number of shares that exceeds 1% of the then outstanding Common
Stock; provided, however, that if Merck terminates the Research Program pursuant to Section 8.3.1
of the Collaboration Agreement, then the restrictions in this Section 5.5(a) shall no longer be
applicable and instead Merck shall be obligated during the one-year period following the effective
date of such termination not to offer, sell or otherwise dispose of in any consecutive three-month
period a number of Shares that exceeds 1% of the then outstanding Common Stock.




          (b) Notwithstanding paragraph (a), the restrictions on sale provided in paragraph (a) shall
not be applicable to (i) an offer, sale or other disposition pursuant to Section 2(c) of the Rights
Agreement and (ii) an offer, sale or other disposition in connection with and as part of a merger,
consolidation, business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company pursuant to which the stockholders of the Company immediately
preceding such transaction will hold less than fifty and one-tenth percent (50.1%) of the aggregate
equity interests in the surviving or resulting entity of such transaction or any direct or indirect
parent thereof or other Change of Control as defined in the Collaboration Agreement.




ARTICLE 6




RESTRICTIONS ON TRANSFERABILITY OF SECURITIES



     6.1 Restrictions on Transferability. The Shares shall not be sold, transferred,
assigned or hypothecated unless (i) there is an effective registration statement under the
Securities Act covering such Shares, (ii) the sale is made in accordance with Rule 144 under the
Securities Act, or (iii) the Company receives an opinion of counsel for the holder of the Shares
reasonably satisfactory to the Company stating that such sale, transfer, assignment or
hypothecation is exempt from the registration requirements of the Securities Act, and each such
case upon all other conditions specified in this Section 6.



     6.2 Restrictive Legends. Each certificate representing the Shares, and any other
securities issued in respect of the Shares upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event (except as otherwise permitted by the provisions of this



10









 




Section 6), shall be stamped or otherwise imprinted with a legend in substantially the
following form:





	 	 	“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SHARES LAWS OF ANY STATE OF THE UNITED
STATES OR IN ANY OTHER JURISDICTION. THE SHARES REPRESENTED HEREBY MAY NOT BE
OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SHARES UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE
LAWS.”





     6.3 Removal of Legend and Transfer Restrictions. Any legend endorsed on a certificate
pursuant to subsection 6.2 and any stop transfer instructions with respect to such legended Shares
shall be removed and the Company shall issue a certificate without such legend to the holder of
such Shares, if (i) the resale of such Shares is registered under the Securities Act and a
prospectus meeting the requirements of Section 10 of the Securities Act is available with respect
to such Shares and (a) Merck delivers to the Company an opinion by counsel, reasonably satisfactory
to the Company, that a registration statement under the Securities Act is at that time in effect
with respect to the resale of the legended security or that such security can be freely transferred
in a public sale without such a registration statement being in effect and that such transfer will
not eliminate the exemption or exemptions from registration pursuant to which the Company issued
the Shares, or (b) in connection with a proposed transfer of the Shares, Merck delivers to the
Company a certificate executed by an officer of, or other person duly authorized by Merck, in the
form attached hereto as Exhibit C, (ii) if such holder sells the Shares in accordance with the
requirements of Rule 144 under the Securities Act, or (iii) the Security is eligible to be sold
pursuant to Rule 144(k) under the Securities Act. If the Company is required to issue unlegended
certificates pursuant to this Section 6.3 following the sale of some or all of the Shares evidenced
by such certificates, the Company shall use its best efforts to deliver or cause to be delivered to
Merck such unlegended certificates within four (4) business days of submission by that Purchaser of
legended certificate(s) to the Company’s transfer agent, together with any other documents required
by the transfer agent to consummate such transaction.



ARTICLE 7




MISCELLANEOUS



     7.1 Survival of Representations, Warranties and Agreements. Notwithstanding any
investigation made by any party to this Agreement, all covenants, agreements, representations and
warranties made by the Company and Merck herein shall survive the execution of this Agreement, the
delivery to Merck of the Shares being purchased and the payment therefor; provided, however, that
the representations and warranties made by the Company and Merck herein shall expire upon the
second anniversary of the Closing Date.



     7.2 Broker’s Fee. The Company represents that it neither is nor will be obligated for
any finder’s or broker’s fee or commission in connection with this transaction. The Company



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agrees to indemnify and hold harmless Merck from any liability for any commission or
compensation in the nature of a finder’s or broker’s fee (and any asserted liability) for which the
Company or any of its officers, employees or representatives is responsible.




     7.3 Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (i) upon delivery to the party to be notified, (ii) when
received by confirmed facsimile, or (iii) one (1) business day after deposit with a nationally
recognized overnight carrier, specifying next business day delivery, with written verification of
receipt. All communications shall be sent to the Company and Merck as follows or at such other
addresses as the Company or Merck may designate upon ten (10) days’ advance written notice to the
other party:




	 	(a)	 	if to the Company, to:
	 
	 	 	 	Idera Pharmaceuticals, Inc.

345 Vassar Street

Cambridge, MA 02139

Attention: Chief Executive Officer

Facsimile: (617) 679-5542
	 
	 	 	 	with a copy to:
	 
	 	 	 	Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, MA 02109

Attention: Stuart Falber, Esq.

Facsimile: (617) 526-500






	 	(b)	 	if to Merck:
	 
	 	 	 	Merck & Co., Inc.

One Merck Drive (WS 3A-65)

P.O. Box 100

Whitehouse Station, NJ 08889-0100

Attn.: Office of Secretary

Fax: (908) 735-1246
	 
	 	 	 	and
	 
	 	 	 	Merck & Co., Inc.

One Merck Drive (WS 3A-65)

P.O. Box 100

Whitehouse Station, NJ 08889-0100

Attn: Vice President, Business Development and Corporate Licensing

Fax: (908) 735-1214










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     7.4 Changes. This Agreement may not be modified or amended except pursuant to an
instrument in writing signed by the Company and Merck. No provision hereunder may be waived other
than in a written instrument executed by the waiving party.



     7.5 Headings. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of this Agreement.



     7.6 Severability. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or impaired thereby.



     7.7 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without reference to any rules of conflict of laws.



     7.8 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been signed by each party
hereto and delivered (including by facsimile) to the other parties.



     7.9 Entire Agreement. This Agreement and the instruments referenced herein contain the
entire understanding of the parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company nor Merck make any
representation, warranty, covenant or undertaking with respect to such matters.



     7.10 Assignment. Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the parties hereto and their respective
permitted successors, assigns, heirs, executors and administrators.



     7.11 Further Assurances. Each party agrees to cooperate fully with the other parties
and to execute such further instruments, documents and agreements and to give such further written
assurance as may be reasonably requested by any other party to evidence and reflect the
transactions described herein and contemplated hereby and to carry into effect the intents and
purposes of this Agreement.



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     IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement as of the
date first set forth above.



	 	 	 	 	 
	 	IDERA PHARMACEUTICALS, INC.

 	 
	 	By:  	/S/ Sudhir Agrawal
 	 
	 	 	Sudhir Agrawal 	 
	 	 	Chief Executive Officer 	 
	 



	 	 	 	 	 
	 	MERCK & CO., INC.

 	 
	 	By:  	/s/ Peter S. Kim
 	 
	 	 	Peter S. Kim 	 
	 	 	President, Merck Research Laboratories