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Exhibit 10.37    
    

CONFIDENTIAL TREATMENT

AGREEMENT AND PLAN OF MERGER

        This
Agreement and Plan of Merger (this "Agreement") is made and entered into as of December 24, 2007 (the
"Agreement Date"), by and among (i) Cubist Pharmaceuticals, Inc., a Delaware corporation
("Parent"), (ii) Edison Merger Corp., a Delaware corporation and a wholly owned Subsidiary of
Parent ("Merger Sub"), (iii) Illumigen Biosciences, Inc. a Washington corporation (the
"Company"), and (iv) IB Securityholders, LLC as the Holders Representative referred
to herein for the limited purposes specifically set forth herein and only in its capacity as such. Capitalized terms used herein without definition shall have the respective meanings set forth in
Article 1 hereof. 

        WHEREAS, in accordance with the terms set forth herein, the Merger Sub shall merge with and into the Company (the
"Merger"), following which the Company shall continue as the surviving corporation and a wholly owned subsidiary of the Parent (the surviving
corporation is referred to herein as the "Surviving Corporation"), upon the terms and subject to the conditions set forth in this Agreement and in
accordance with the provisions of Washington Law and Delaware Law; 

        WHEREAS, the board of directors of the Company (the "Company Board") has carefully
considered the terms of this Agreement and has determined that this Agreement and the terms and conditions of the transactions contemplated hereby, including the Merger, are fair and in the best
interests of, and are advisable to, the Company and the Company Shareholders (as defined below); 

        WHEREAS, concurrently with the execution and delivery of this Agreement, Company and certain Company Shareholders are executing and
delivering a Voting and Support Agreement in the form of Exhibit A hereto pursuant to which, among other things, such Company Shareholders are
covenanting to: (i) immediately after the execution and delivery of this Agreement, vote in favor of the adoption of this Agreement and the transactions contemplated hereby, including, but not
limited to, the Merger, (ii) retain ownership of the shares of Company Stock held by them as of the date hereof until the earlier of the consummation of the Merger or the termination of this
Agreement pursuant to Article 10 hereof and (iii) otherwise to support this Agreement and the transactions contemplated hereby; and 

        WHEREAS, the Company Board will be submitting this Agreement and the performance of the transactions contemplated hereby to the holders of
the shares of the capital stock of the Company (collectively, the "Company Shareholders"), for their adoption by written consent in accordance with
Section 23B.07.040 of Washington Law, and the Company Board is recommending that the Company Shareholders vote for the adoption of this Agreement and the transactions contemplated hereby. 

        NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained and intending to be legally
bound hereby, the Parent, the Merger Sub and the Company hereby agree as follows: 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Securities and Exchange Commission (the "Commission"). 

 

  ARTICLE 1

DEFINITIONS  

        "Abandonment Notice" means the delivery by Parent to the Holders Representative, at any time after the Effective
Time, of a written notice disclosing the Parent's election to henceforth cease development of any and all Contingent Payment Products. 

        "Abandonment Grantback Notice" has the meaning ascribed to such term in Section 6.10(a) hereof. 

        "Accountants" has the meaning ascribed to such term in Section 2.7(k) hereof. 

        "Adverse Recommendation" has the meaning ascribed to such term in Section 7.24(d) hereof. 

        "Affiliate" shall mean, with respect to any person or entity, any person or entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, such person or entity. 

        "Affiliated Group" has the meaning ascribed to it in Section 1504 of the Code, and in addition includes any analogous combined,
consolidated or unitary group, as defined under any applicable state, local, or foreign income Tax law. 

        "Agreed Contingent Payment Amount" has the meaning ascribed to such term in Section 2.7(j) hereof. 

        "Agreement" has the meaning ascribed to such term in the introductory paragraph hereof. 

        "Agreement Date" has the meaning ascribed to such term in the introductory paragraph hereof. 

        "Amended Articles" has the meaning ascribed to such term in Section 4.30 hereof. 

        "Application For Marketing Approval" means a new drug application or a biologics license application or any functional equivalent of such
an application seeking approval to market a pharmaceutical product in the United States or elsewhere. 

        "Appraiser" has the meaning ascribed to such term in Section 2.7(k) hereof. 

        "Articles of Merger" has the meaning ascribed to such term in Section 2.2 hereof. 

        "Available Closing Cash" means the amount of the Company's and its Subsidiaries' cash that, as of the close of business on the business
day immediately preceding the Closing Date, is held on hand by the Company or any of its Subsidiaries or on deposit in any bank account in full compliance with the provisions of Section 6.14
hereof, subject to the following adjustments: (i) minus the aggregate amount of the Company's and its Subsidiaries' uncollected checks or other
payment orders or instructions as of the close of business on the business day immediately preceding the Closing Date; and (ii) minus the
aggregate amount of any checks or other payment orders or instructions made, given or executed by the Company and its Subsidiaries on the Closing Date;  provided, that the amount of any items listed in
clauses (ii) or (iii) shall not be a reduction of Available Closing Cash to the extent
that such items have been made, given or executed for the purpose of paying one or more Closing Liabilities that resulted in an adjustment of Closing Consideration. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

2

 

        "Blocking Third Party Patent" has the meaning ascribed to such term in Section 2.7(f) hereof. 

        "Blocking Third Party Patent Application" has the meaning ascribed to such term in Section 2.7(f) hereof. 

        "Board of Managers" has the meaning ascribed to such term in Section 3.7(a) hereof. 

        "Breach Dispute Notice" has the meaning ascribed to such term in Section 6.10(c) hereof. 

        "business day" (whether such term is capitalized or not) means any day (other than Saturday, Sunday or a legal holiday) that banks located
in Boston, Massachusetts are open for business. 

        "Buyer Group" means Parent and its direct and indirect Subsidiaries, Affiliates, successors, permitted assignees and permitted licensees
of any Compound, any Contingent Payment Product, the Company Program, or any portion of or interest in any of the foregoing, and includes, after the Effective Time, the Surviving Corporation and its
Affiliates, successors, permitted assignees and permitted licensees of any Compound, any Contingent Payment Product, the Company Program, or any portion of or interest in any of the foregoing (all of
the foregoing being collectively referred to as the "Members of the Buyer Group"). 

        "Capitalization Certificate" has the meaning ascribed to such term in Section 8.3(d)(ii) hereof. 

        "Certificate" or "Certificates" has the meaning ascribed to such term in
Section 3.2 hereof. 

        "CERCLA" has the meaning ascribed to such term in Section 4.14(b) hereof. 

        "Closing" has the meaning ascribed to such term in Section 2.2 hereof. 

        "Closing Consideration" means nine million dollars ($9,000,000.00), subject to the following adjustments:
(i) minus the aggregate amount of all Closing Liabilities that have not been paid, satisfied or discharged as of the close of business on the
business day immediately preceding the Closing Date; and (ii) plus the aggregate amount of all Available Closing Cash. 

        "Closing Date" has the meaning ascribed to such term in Section 2.2 hereof. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

3

 

        "Closing Liabilities" has the meaning ascribed to such term in Section 2.6(b) hereof. 

        "Code" means the Internal Revenue Code of 1986, as amended. 

        "Commercially Reasonable Efforts" means the level of efforts and resources reasonably appropriate to develop and/or commercialize (as
applicable) a Section 6.9 Contingent Payment Product in a sustained manner consistent with the efforts and resources that a similarly situated biopharmaceutical company would typically devote
to a product of similar market potential, profit potential, and/or proprietary protection, and similar scientific, technical, development, regulatory and competitive risks, based on market conditions
then prevailing; for this purpose, in order to be considered "similarly situated" to Parent and Company, a comparable biopharmaceutical company shall be presumed not to have
[]*. 

        "Common Warrants" shall mean all outstanding warrants exercisable for shares of Company Common Stock. 

        "Company" has the meaning ascribed to such term in the introductory paragraph hereof. 

        "Company Board" has the meaning ascribed to such term in the recitals hereof. 

        "Company Common Stock" means the Company's common stock, $.0001 par value per share. 

        "Company Disclosure Schedule" has the meaning ascribed to such term in Article 4 hereof. 

        "Company Employee Benefit Plan" has the meaning ascribed to such term in Section 4.13(a) hereof. 

        "Company Grantback Assets" has the meaning ascribed to such term in Section 6.10(a) hereof. 

        "Company Indemnified Party" has the meaning ascribed to such term in Section 9.3 hereof. 

        "Company Intellectual Property" means (i) Company Patents and (ii) all Intellectual Property (other than Company Patents)
owned by, or licensed to, the Company. 

        "Company Options" means the issued and outstanding options to purchase shares of Company Common Stock granted under the Company Plan. 

        "Company Patents" means those United States, international and foreign patents and patent applications (including provisional
applications), in each case that are listed in Schedule 4.9 of the Company Disclosure Schedule, and any subsequent continuations,
continuations-in-part, divisionals, reexaminations, reissues, restorations (together with supplemental protection certificates in Europe), provisions, foreign counterparts and
extensions thereof. 

        "Company Plan" means the Company's 2000 Stock Option Plan. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

4

 

        "Company Preferred Stock" means any or all of the Company's Series A Preferred Stock, $.0001 par value per share and any or all of
the Company's Series B Preferred Stock, $.0001 par value per share. 

        "Company Products" has the meaning ascribed to such term in Section 4.25(a) hereof. 

        "Company Program" means all of the Company's programs as currently being conducted, and as currently contemplated to be conducted, by the
Company related to the application of the Compound for the treatment of infections caused by HCV. 

        "Company Program Assets" means all assets of the Company used in or related to the Company Program, including, without limitation,
(a) any Compound, (b) all patent rights, inventions, know-how, trade secrets, trademarks and other intellectual property rights owned or controlled by the Company that are
necessary or useful to carry out such program or to research, develop, make, have made, use, import, export, market, distribute, have distributed, offer to sell, sell and have sold any Compound, and
(c) all non-disclosure, invention assignment and non-competition agreements entered into by the Company with its employees and consultants. 

        "Company Program Contract" has the meaning ascribed to such term in Section 4.17(a) hereof. 

        "Company Program Expenditures" means identifiable expenditures specifically related to the development of a Contingent Payment Product
with an indication for the treatment of infections caused by HCV (but excluding overhead and other expense allocations not specifically identifiable thereto). 

        "Company Registered Intellectual Property" means those United States, international and foreign: (a) patents and patent
applications (including provisional applications); (b) registered trademarks, registered service marks, applications to register trademarks or service marks,
intent-to-use applications, or other registrations or applications related to trademarks or service marks; (c) registered copyrights and applications for copyright
registration; and (d) registered domain names and applications for domain name registrations, in each case that are owned by or licensed to the Company. 

        "Company Stock" means, as the context may require, any or all of the Company Common Stock and the Company Preferred Stock. 

        "Company Shareholders" has the meaning ascribed to such term in the recitals hereof. 

        "Company's Most Recent Balance Sheet" has the meaning ascribed to such term in Section 4.6 hereof. 

        "Compensation Liabilities" has the meaning ascribed to such term in Section 6.16(b) hereof. 

        "Complementary Technology" has the meaning ascribed to such term in Section 2.7(f) hereof. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

5

 

        "Compound" means IB657 and any oligoadenylate synthetase protein, []*. 

        "Confidentiality Agreement" has the meaning ascribed to such term in Section 6.11 hereof. 

        "Contingent Consideration" means the aggregate amount that Parent is required to pay, if any, pursuant to, and in accordance with, the
provisions of Section 2.7 hereof, to the Holders Representative for the benefit of the Participating Holders. 

        "Contingent Earn-Out Payment" has the meaning ascribed to such term in Section 2.7(b) hereof. 

        "Contingent Earn-Out Payment Amount" means, with respect to all Contingent Payment Products, a payment amount equal to
(i) []* of the portion of Net Sales from sales of all Contingent Payment Products, if any, by Buyer Group everywhere in the world during any calendar year after the
Effective Time that is less than or equal to []*, plus, (ii) []* of the portion of Net Sales from
sales of all Contingent Payment Products, if any, by Buyer Group everywhere in the world during any calendar year after the Effective Time that exceeds []*. 

        "Contingent Earn-Out Payment Year" means each calendar year in which Net Sales of any Contingent Payment Product occur. 

        "Contingent Payment" means any payment resulting from the Contingent Consideration. 

        "Contingent Payment Amount" has the meaning ascribed to such term in Section 2.7(g) hereof. 

        "Contingent Payment Audit" has the meaning ascribed to such term in Section 2.7(h) hereof. 

        "Contingent Payment Audit Period" has the meaning ascribed to such term in Section 2.7(h) hereof. 

        "Contingent Payment Certificate" has the meaning ascribed to such term in Section 2.7(g) hereof. 

        "Contingent Payment Dispute Period" has the meaning ascribed to such term in Section 2.7(h) hereof. 

        "Contingent Payment Product" means any pharmaceutical composition or product that includes a Compound as an active pharmaceutical
ingredient, provided that the composition, use, or production of such Compound is the subject of a Valid and Enforceable Claim of a Company Patent,
which Company Patent (i) was owned or controlled by the Company immediately prior to the Effective Time, which ownership or control shall be deemed to have included any subsequent
continuations, continuations in part, divisionals, reexaminations, reissues, restorations (together with supplemental protection certificates in Europe), provisions, foreign counterparts, and
extensions, and (ii) is owned or controlled by Parent or the Surviving Corporation or any of their Affiliates, successors, permitted assignees and permitted licensees at all times following the
Effective Time. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

6

 

        "Corresponding HCV Milestone Payment" means, (i) with respect to HCV Milestone One, the HCV Milestone One Payment, (ii) with
respect to HCV Milestone Two, the HCV Milestone Two Payment, (iii) with respect to HCV Milestone Three, the HCV Milestone Three Payment, (iv) with respect to HCV Milestone Four, the HCV
Milestone Four Payment, (v) with respect to HCV Milestone Five, the HCV Milestone Five Payment, (vi) with respect to HCV Milestone Six, the HCV Milestone Six Payment, (vii) with
respect to HCV Milestone Seven, the HCV Milestone Seven Payment, (viii) with respect to HCV Milestone Eight, the HCV Milestone Eight Payment and (ix) with respect to HCV Milestone Nine,
the HCV Milestone Nine Payment. 

        "Corresponding HCV []* Milestone Payment" means, (i) with respect to HCV []*
Milestone Four, the HCV []* Milestone Four Payment, (ii) with respect to HCV []* Milestone Five, the HCV []* Milestone
Five Payment, (iii) with respect to HCV []* Milestone Six, the HCV []* Milestone Six Payment and (iv) with respect to HCV
[]* Milestone Seven, the HCV []* Milestone Seven Payment. 

        "Corresponding Non-HCV Milestone Payment" means, (i) with respect to Non-HCV Milestone One, the
Non-HCV Milestone One Payment, (ii) with respect to Non-HCV Milestone Two, the Non-HCV Milestone Two Payment, (iii) with respect to
Non-HCV Milestone Three, the
Non-HCV Milestone Three Payment, (iv) with respect to Non-HCV Milestone Four, the Non-HCV Milestone Four Payment, (v) with respect to
Non-HCV Milestone Five, the Non-HCV Milestone Five Payment, (vi) with respect to Non-HCV Milestone Six, the Non-HCV Milestone Six Payment and
(vii) with respect to Non-HCV Milestone Seven, the Non-HCV Milestone Seven Payment. 

        "Corresponding Sales-Based Milestone Payment" means, (i) with respect to Sales-Based Milestone One, the Sales-Based Milestone One
Payment and (ii) with respect to Sales-Based Milestone Two, the Sales-Based Milestone Two Payment. 

        "CPR" has the meaning ascribed to such term in Section 6.10(c) hereof. 

        "Cure Notice" has the meaning ascribed to such term in Section 6.10(c) hereof. 

        "D&O Policy" has the meaning ascribed to such term in Section 6.8 hereof. 

        "Damages" means all damages, losses, claims, demands, actions, causes of action, diminutions of value, suits, litigations, arbitrations,
liabilities, costs, and expenses, including court costs and the reasonable fees and expenses of legal counsel, in each case, regardless of whether relating to a third-party claim. 

        "Delaware Law" means the Delaware General Corporation Law, as amended from time to time. 

        "Dispute Notice" has the meaning ascribed to such term in Section 2.7(i) hereof. 

        "Disputed Contingent Payment Amount" has the meaning ascribed to such term in Section 2.7(j) hereof. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

7

 

        "Disqualified Shareholder" means (with respect to any securities of the Company) Parent, Merger Sub or any Subsidiary of Parent or Merger
Sub or any of their respective Affiliates or any transferees of any such securities of the Company at any time held by any of the foregoing. 

        "Dissenting Shares" means shares of Company Stock that are outstanding immediately prior to the Effective Time of the Merger and which are
held by shareholders who shall have not voted in favor of the Merger or consented thereto in writing and who shall have exercised rights of appraisal for such shares of Company Stock in accordance
with Washington Law and who, as of the Effective Time, have not effectively withdrawn or lost such dissenters' rights. 

        "dollars" (whether such word is capitalized or not) means United States dollars, the lawful currency of the United States of America. 

        "Effective Time" has the meaning ascribed to such term in Section 2.2 hereof. 

        "Eligible Company Option" has the meaning ascribed to such term in Section 3.1(c) hereof. 

        "EMEA" means the European Medicines Agency of the European Union with headquarters in London, United Kingdom. 

        "Environmental Laws" has the meaning ascribed to such term in Section 4.14(b) hereof. 

        "Environmental Permits" has the meaning ascribed to such term in Section 4.14(f) hereof. 

        "EPA" has the meaning ascribed to such term in Section 4.14(c) hereof. 

        "EPO" means the European Patent Office. 

        "ERISA" has the meaning ascribed to such term in Section 4.13(c) hereof. 

        "Escrow Agent" has the meaning ascribed to such term in Section 2.6(a)(ii) hereof. 

        "Escrow Agreement" has the meaning ascribed to such term in Section 2.6(a)(ii) hereof. 

        "Escrow Deposit Amount" has the meaning ascribed to such term in Section 2.6(a)(ii) hereof. 

        "Escrow Funds" shall mean the aggregate amounts being held by the Escrow Agent in escrow pursuant to the Escrow Agreement. 

        "Facility Leases" means (i) that certain Sublease, dated as of December 1, 2005, by and between the Company and Cell
Therapeutics, Inc and (ii) any lease or sublease that the Company may enter into in connection with relocating its operations to a different location from the location specified in the Sublease
set forth in clause (i) of this definition. 

        "FDA" means the United States Food and Drug Administration. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

8

 

        "FDCA" has the meaning ascribed to such term in Section 4.25(a) hereof. 

        "Financial Statements" has the meaning ascribed to such term in Section 4.6 hereof. 

        "First Commercial Sale" means the []* by a Member of the Buyer Group of a Contingent Payment Product
[]* to a purchaser []* for such sale in whichever country such sale occurs. 

        "First European Commercial Sale" means the []* by a Member of the Buyer Group of a Contingent Payment Product
[]* to a purchaser []* for such sale []*. 

        "First U.S. Commercial Sale" means the []* by a Member of the Buyer Group of a Contingent Payment Product
[]* to a purchaser []* for such sale []*. 

        "Fraud Claim" has the meaning ascribed to such term in Section 9.6(a) hereof. 

        "Governmental Authority" means any United States (federal, state or local) or foreign government, or governmental, regulatory or
administrative authority, agency or commission. 

        "Governmental Entity" means any government or any agency, bureau, board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign, as well as any corporations owned or chartered by any such governmental agency, bureau,
board, commission, court, department, official, political subdivision, tribunal or other instrumentality. 

        "Government Contract" means any Government Prime Contract or Government Subcontract, together with any modifications, amendments or
waivers thereto, as to which either (a) any performance is outstanding; (b) the Government
has not made final payment; (c) any routine cost audits have not been completed; or (d) there is any outstanding audit, investigation, or dispute. A task order or delivery order is not
itself a Government Contract but is a part of the Government Contract under which it was issued. 

        "Government Prime Contract" means any prime contract, basic ordering agreement, letter contract, or purchase order between the Company and
any state or the Federal government. 

        "Government Subcontract" means any subcontract, basic ordering agreement, letter subcontract, or purchase order between the Company and
any higher-tier contractor with respect to a Government Prime Contract. 

        "Grantback Assets" has the meaning ascribed to such term in Section 6.10(a) hereof. 

        "Grantback Date" means the date upon which Parent grants any and all licenses to the Holders Representative pursuant to
Section 6.10(a) or Section 6.10(d), as applicable. 

        "Grantback Licensed Patents" has the meaning ascribed to such term in Section 6.10(f) hereof. 

        "Hazardous Substances" has the meaning ascribed to such term in Section 4.14(c) hereof. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

9

 

        "HCV" means the hepatitis C virus and all genotypes, strains, quasispecies, and clinical isolates thereof. 

        "HCV First Commercial Sale" has the meaning ascribed to such term in Section 6.9(a) hereof. 

        "HCV Milestone" means any of HCV Milestone One, HCV Milestone Two, HCV Milestone Three, HCV Milestone Four, HCV Milestone Five, HCV
Milestone Six, HCV Milestone Seven, HCV Milestone Eight and HCV Milestone Nine. 

        "HCV Milestone One" means the []* by a Member of the Buyer Group of a []*. 

        "HCV Milestone Two" means the []* by a Member of the Buyer Group of a []*. 

        "HCV Milestone Three" means the []* by a Member of the Buyer Group for any Contingent Payment Product that
includes treatments of infections caused by HCV []*. 

        "HCV Milestone Four" means []* of any Contingent Payment Product []* with an indication
for the treatment of infections caused by HCV. 

        "HCV Milestone Five" means []* of any Contingent Payment Product []* with an indication
for the treatment of infections caused by HCV. 

        "HCV Milestone Six" means the []* by a Member of the Buyer Group of an []* any Contingent
Payment Product []* with an indication for the treatment of infections caused by HCV. 

        "HCV Milestone Seven" means the []*, by a Member of the Buyer Group of []* any Contingent
Payment Product []* with an indication for the treatment of infections caused by HCV. 

        "HCV Milestone Eight" means the []* of a Contingent Payment Product with an indication for treatment of infections
caused by HCV. 

        "HCV Milestone Nine" means the []* of a Contingent Payment Product with an indication for treatment of infections
caused by HCV. 

        "HCV Milestone Payment" means any of HCV Milestone One Payment, HCV Milestone Two Payment, HCV Milestone Three Payment, HCV Milestone Four
Payment, HCV Milestone Five Payment, HCV Milestone Six Payment, HCV Milestone Seven Payment, HCV Milestone Eight Payment and HCV Milestone Nine Payment. 

        "HCV Milestone One Payment" means one million two hundred fifty thousand dollars ($1,250,000.00). 

        "HCV Milestone Two Payment" means one million two hundred fifty thousand dollars ($1,250,000.00). 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

10

 

  
        "HCV Milestone Three Payment" means three million dollars ($3,000,000.00), provided that
if the Non-HCV Milestone One Payment has been made by the Parent prior to the occurrence of HCV Milestone Three, then the "HCV Milestone Three
Payment" shall mean zero dollars ($0.00). 

        "HCV Milestone Four Payment" means thirty million dollars ($30,000,000.00), provided that
if the HCV []* Milestone Four Payment has been made by the Parent prior to the occurrence of HCV Milestone Four, then the "HCV Milestone Four
Payment" shall mean fifteen million dollars ($15,000,000.00). 

        "HCV Milestone Five Payment" means twenty five million dollars ($25,000,000.00), provided
that if the HCV []* Milestone Five Payment has been made by the Parent prior to the occurrence of HCV Milestone Five*, then the "HCV Milestone Five
Payment" shall mean twelve million five hundred thousand dollars ($12,500,000.00)*. 

        "HCV Milestone Six Payment" means ten million dollars ($10,000,000.00), provided that if
the HCV []* Milestone Six Payment has been made by the Parent prior to the occurrence of HCV Milestone Six, then the "HCV Milestone Six
Payment" shall mean five million dollars ($5,000,000.00). 

        "HCV Milestone Seven Payment" means five million dollars ($5,000,000.00), provided that if
the HCV []* Milestone Seven Payment has been made by the Parent prior to the occurrence of HCV Milestone Seven, then the "HCV Milestone Seven
Payment" shall mean two million five hundred thousand dollars ($2,500,000.00). 

        "HCV Milestone Eight Payment" means thirty million dollars ($30,000,000.00). 

        "HCV Milestone Nine Payment" means ten million dollars ($10,000,000.00). 

        "HCV []* Milestone" means any of HCV []*
Milestone Four, HCV []* Milestone Five, HCV []* Milestone Six and HCV []* Milestone Seven. 

        "HCV []* Milestone Four" means []* of any
Contingent Payment Product []* with an indication for the treatment of infections caused by HCV. 

        "HCV []* Milestone Five" means []* of any Contingent Payment Product
[]* with an indication for the treatment of infections caused by HCV. 

        "HCV []* Milestone Six" means the []* by a Member of the Buyer Group of an
[]* any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV. 

        "HCV []* Milestone Seven" means the []*, by a Member of the Buyer Group of an
[]* any Contingent Payment Product []* with an indication for the treatment of infections caused by HCV. 

        "HCV []* Milestone Payment" means any of HCV []* Milestone Four Payment, HCV
[]* Milestone Five Payment, HCV []* Milestone Six Payment and HCV []* Milestone Seven Payment. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

11

 

        "HCV []* Milestone Four Payment" means fifteen million dollars ($15,000,000.00),  provided that if the HCV Milestone Four Payment has been made by the Parent prior to the
occurrence of HCV []* Milestone Four,
then the "HCV []* Milestone Four Payment" shall mean zero dollars ($0.00). 

        "HCV []* Milestone Five Payment" means twelve million five hundred thousand dollars ($12,500,000.00),  provided that if the HCV Milestone Five Payment has been made by
the Parent prior to the occurrence of HCV []* Milestone Five,
then the "HCV []* Milestone Five Payment" shall mean zero dollars ($0.00). 

        "HCV []* Milestone Six Payment" means five million dollars ($5,000,000.00),  provided that if the HCV Milestone Six Payment has been made by the Parent prior to the
occurrence of HCV []* Milestone Six,
then the "HCV []* Milestone Six Payment" shall mean zero dollars ($0.00). 

        "HCV []* Milestone Seven Payment" means two million five hundred thousand dollars ($2,500,000.00),  provided that if the HCV Milestone Seven Payment has been made by the
Parent prior to the occurrence of HCV []* Milestone Seven,
then the "HCV []* Milestone Seven Payment" shall mean zero dollars ($0.00). 

        "Holders Representative" means IB Securityholders, LLC, pursuant to its appointment to serve as such under Section 3.7
hereof. 

        "Holders Representative Reimbursement Amount" has the meaning ascribed to such term in Section 2.6(a)(i) hereof. 

        "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 

        "IB657" means the compound known as IB657 that is owned or exclusively licensed by the Company immediately prior to the Effective Time and
is being developed by the Company immediately prior to the Effective Time for the treatment of infections caused by HCV. 

        "Indebtedness," as applied to any person, means (a) all indebtedness of such person for borrowed money, whether current or funded,
or secured or unsecured, (b) all indebtedness of such person for the deferred purchase price of property or services represented by a note or other security, (c) all indebtedness of such
person created or arising under any conditional sale or other title retention agreement (even if the rights and remedies of the seller or lender under such agreement in the event of default are
limited to repossession or sale of specific property), (d) all indebtedness of such person secured by a purchase money mortgage or other Lien to secure all or part of the purchase price of
property subject to such mortgage or other Lien, (e) all accounts payable, notes payable and accrued expenses of such person, (f) all indebtedness or liabilities of such person that
would be required to be reflected on a balance sheet or referred to in the notes thereto in accordance with generally accepted accounting principles, (g) all indebtedness, liabilities or
obligations of such person that are identified in Schedule 4.10 of the Company Disclosure Schedule as "Indebtedness," if any, (h) all other
obligations of such person under leases that have been or must be, in accordance with generally accepted accounting principles, recorded as capital leases in respect of which such person is liable as
lessee, (i) any liability of such person in respect of banker's acceptances or letters of credit, and (j) all indebtedness referred to in clauses (a), (b), (c), (d), (e), (f),
(g), (h) or (i) hereof that is directly or indirectly guaranteed by such person or which such person has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect
of which such person has otherwise assured a creditor against loss. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

12

 

        "Indemnified Party" has the meaning ascribed to such term in Section 9.4 hereof. 

        "Indemnifying Party" has the meaning ascribed to such term in Section 9.4 hereof. 

        "Initial Press Release" has the meaning ascribed to such term in Section 11.15 hereof. 

        "Intellectual Property" means any or all of the following and all rights in, arising out of, or associated therewith: (a) all
United States, international and foreign patents and applications thereof and all reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (b) all inventions (whether patentable or not), invention disclosures, improvements, drug candidates, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (c) all copyrights, copyright registrations and applications
therefor, and all other rights corresponding thereto throughout the world; (d) all industrial designs and any registration and applications therefor throughout the world; (e) all trade
names, logos, common law trademarks and service marks, trademark and service mark registration and applications therefor throughout the world; (f) all databases and data collections and all
rights therein throughout the world; and (g) any similar or equivalent rights to any of the foregoing everywhere in the world. 

        "IRB" has the meaning ascribed to such term in Section 4.25(d) hereof. 

        "IRS" has the meaning ascribed to such term in Section 4.13(b) hereof. 

        "knowledge," when used to qualify a representation or warranty in this Agreement, has the following meaning: Where a representation or
warranty is made to the Company's knowledge, or with a similar qualification, the Company will be conclusively deemed to have knowledge of any matter with respect to which any of Charles Magness,
Shawn Iadonato or Donald Elmer has actual knowledge or which a reasonable investigation of facts or information in the possession of any of the Company's employees, attorneys or agents, including but
not limited to, any information contained in the patent searches described on Schedule 4.9(k) of the Company Disclosure Schedule, prior to the
Effective Time would have disclosed to any of them. Where a representation or warranty is made to the Parent's knowledge, or with a similar qualification, Parent will be conclusively deemed to have
knowledge of any matter with respect to which Parent's Chief Executive Officer, Chief Financial Officer, General Counsel, Senior Vice President of Research and Development and Corporate Development or
Senior Vice President of Commercial Operations has actual knowledge or which a reasonable investigation of facts or information in the possession of any employee, attorney or agent of Parent (or any
of its Subsidiaries or controlled Affiliates) prior to the Effective Time would have disclosed to any of them. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

13

 

        "Liens" means any and all liens, claims, mortgages, security interests, pledges, options, rights of first offer or refusal, charges,
encumbrances, limitations on voting rights, and restrictions on transfer of any kind, except (i) in the case of
references to securities, those arising under applicable securities laws solely by reason of the fact that such securities were issued pursuant to exemptions from registration under such securities
laws, (ii) mechanic's, materialmen's and similar liens, (iii) liens for Taxes not yet due and payable and (iv) liens arising under worker's compensation, unemployment insurance,
social security, retirement and similar legislation. 

        "LLC Agreement" shall mean the Limited Liability Company Agreement of IB Securityholders, LLC dated December 21, 2007 in the
form attached hereto as Exhibit B. 

        "Lost Certificate or Document Affidavit" has the meaning ascribed to such term in Section 3.4 hereof. 

        "Material Adverse Effect" means (a) with respect to the Company any change or effect that, when taken individually or together with
all other similar or related adverse changes or effects, is or is reasonably likely to be materially adverse to the business, results of operations and financial condition of the Company and its
Subsidiaries, taken as a whole, or to adversely affect the ability of the Company to consummate the transactions contemplated hereby, and (b) with respect to Parent any change or effect that,
when taken individually or together with all other similar or related adverse changes or effects, is or is reasonably likely to be materially adverse to the business, results of operations and
financial condition of Parent and its Subsidiaries, taken as a whole, or to adversely affect the ability of the Parent or the Merger Sub to consummate the transactions contemplated hereby, except, in
each case of (a) and (b) above, for any such changes or effects resulting from or arising as a result of (i) changes in general political or geopolitical conditions,
(ii) changes in the healthcare, pharmaceutical or biotechnology industries generally, or (iii) changes generally applicable to the economy or securities market in the United States or
the world economy or international securities markets, unless in any such instance such change described in (i), (ii) or (iii) above impacts the Company or Parent, as the case may be, in
a materially disproportionate manner relative to the majority of other similar entities impacted by such change. A decline or any fluctuation in the trading price or prices of Parent Common Stock
shall in no event constitute a Material Adverse Effect with respect to Parent. 

        "Material Contract" has the meaning ascribed to such term in Section 4.17(a) hereof. 

        "Maximum Amount" has the meaning ascribed to such term in Section 6.8 hereof. 

        "Member of the Buyer Group" has the meaning ascribed to such term in the definition of "Buyer
Group" hereof. 

        "Merger" has the meaning ascribed to such term in the recitals hereof. 

        "Merger Certificate" has the meaning ascribed to such term in Section 2.2 hereof. 

        "Merger Consideration" means, collectively, the Closing Consideration, the Contingent Consideration and any amounts distributed pursuant
to Section 2.6(c). 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

14

 

        "Merger Consideration Certificate" has the meaning ascribed to such term in Section 2.6(b) hereof. 

        "Merger Documents" has the meaning ascribed to such term in Section 2.2 hereof. 

        "Merger Sub" has the meaning ascribed to such term in the introductory paragraph hereof. 

        "Net Sales" means, with respect to a Contingent Payment Product, gross revenues recorded by Parent and gross revenues recorded by all
other Members of the Buyer Group in the aggregate during any calendar year (or portion of a calendar year as to which Contingent Earn-Out Payments may be due under Section 2.7(b))
arising from sales of such Contingent Payment Product in all countries of the world, except to the extent otherwise provided below in this definition and subject to certain deductions specified
further below. Net Sales shall be computed in accordance with generally accepted accounting principles as prescribed for application by publicly traded companies in the United States, but in any case
such gross revenues shall be reduced by the following amounts to the extent applicable with respect to any sale to a particular customer that is not a Member of the Buyer Group: applicable fees;
discounts; refunds; rebates; replacement or other credits allowed for return of product or as reimbursement for damaged product; freight and other shipping charges not borne by the customer; customs
duties; sales and use taxes, value added taxes (VAT) and any other governmental tax or charge (except income taxes) imposed on or at the time of the importation, exportation, use, transportation, or
sale of product to a particular customer, to the extent not borne by that customer. "Net Sales" shall not, however, include (A) gross revenues
with respect to sales of any Contingent Payment Product that (i) are recorded by any Member of the Buyer Group in a country where such sales by a person who is not a Member of the Buyer Group
would not infringe a Valid and Enforceable Claim of an issued patent in such country that is within the definition of Company Patents, and (ii) either (x) []* or
(y) arise after the time at which there is a generic or unlicensed version or equivalent of such Contingent Payment Product that has been lawfully marketed or received governmental marketing
approval in such country, (B) gross revenues with respect to sales of any Contingent Payment Product for non-commercial use in any country of the world, including sales for
compassionate use or for research, pre-clinical development or clinical development, or (C) gross revenues with respect to sales of any Contingent Payment Product by any member of
the Buyer Group to any other member of the Buyer Group in any country of the world if such sales are for re-sale or re-transfer purposes or for purposes of manufacturing or
packaging a product for re-sale or re-transfer. If a Contingent Payment Product is sold in combination with other products or other components proprietary to the Buyer Group,
then "Net Sales" shall be based on the []*. 

        "Non-Compliance Grantback Notice" has the meaning ascribed to such term in Section 6.10(d) hereof. 

        "Non-Compliance Grantback" has the meaning ascribed to such term in Section 6.10(d) hereof. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

15

 

        "Non-Compliance Notice" has the meaning ascribed to such term in Section 6.10(b) hereof. 

        "Non-HCV Indication" means any indication for treatment other than an indication for treatment of infections caused by HCV. 

        "Non-HCV Milestone" means any of Non-HCV Milestone One, Non-HCV Milestone Two, Non-HCV
Milestone Three, Non-HCV Milestone Four, Non-HCV Milestone Five, Non-HCV Milestone Six and Non-HCV Milestone Seven. 

        "Non-HCV Milestone One" means the []* by a Member of the Buyer Group of an []*
for any Contingent Payment Product that includes treatment of a Non-HCV Indication []*. 

        "Non-HCV Milestone Two" means []* of any Contingent Payment Product for the treatment of a
Non-HCV Indication. 

        "Non-HCV Milestone Three" means []* of any Contingent Payment Product for the treatment of a
Non-HCV Indication. 

        "Non-HCV Milestone Four" means the []* by a Member of the Buyer Group of an
[]* any Contingent Payment Product with a Non-HCV Indication. 

        "Non-HCV Milestone Five" means []* by a Member of the Buyer Group with the
[]*, of an []* any Contingent Payment Product with a Non-HCV Indication. 

        "Non-HCV Milestone Six" means []* by a Member of the Buyer Group of []* or its
functional equivalent with respect to any Contingent Payment Product for the treatment of a Non-HCV Indication. 

        "Non-HCV Milestone Seven" means []* by a Member of the Buyer Group of []*,
with respect to any Contingent Payment Product for the treatment of a Non-HCV Indication. 

        "Non-HCV Milestone Payment" means any of Non-HCV Milestone One Payment, Non-HCV Milestone Two Payment,
Non-HCV Milestone Three Payment,
Non-HCV Milestone Four Payment, Non-HCV Milestone Five Payment, Non-HCV Milestone Six Payment and Non-HCV Milestone Seven Payment. 

        "Non-HCV Milestone One Payment" means three million dollars ($3,000,000.00),  provided that if the HCV Milestone Three Payment has been made by the Parent prior to the
occurrence of Non-HCV Milestone One, then the
"Non-HCV Milestone One Payment" shall mean zero dollars ($0.00). 

        "Non-HCV Milestone Two Payment" means (i) thirteen million dollars ($13,000,000.00) upon the first occurrence, if any,
of Non-HCV Milestone Two and (ii) six million five hundred thousand dollars ($6,500,000.00) upon the second occurrence, if any, of Non-HCV Milestone Two. 

        "Non-HCV Milestone Three Payment" means (i) twenty million dollars ($20,000,000.00) upon the first occurrence, if any,
of Non-HCV Milestone Three and (ii) ten million dollars ($10,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Three. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

16

 

        "Non-HCV Milestone Four Payment" means (i) ten million dollars ($10,000,000.00) upon the first occurrence, if any, of
Non-HCV Milestone Four and (ii) five million dollars ($5,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Four. 

        "Non-HCV Milestone Five Payment" means (i) five million dollars ($5,000,000.00) upon the first occurrence, if any, of
Non-HCV Milestone Five and (ii) two million five hundred thousand dollars ($2,500,000.00) upon the second occurrence, if any, of Non-HCV Milestone Five. 

        "Non-HCV Milestone Six Payment" means (i) twenty million dollars ($20,000,000.00) upon the first occurrence, if any, of
Non-HCV Milestone Six and (ii) ten million dollars ($10,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Six. 

        "Non-HCV Milestone Seven Payment" means (i) ten million dollars ($10,000,000.00) upon the first occurrence, if any, of
Non-HCV Milestone Seven and (ii) five million dollars ($5,000,000.00) upon the second occurrence, if any, of Non-HCV Milestone Seven. 

        "Option Agreement" means that certain letter agreement between Parent and the Company dated as of October 15, 2007. 

        "Outside Date" has the meaning ascribed to such term in Section 10.1(g) hereof. 

        "Parent" has the meaning ascribed to such term in the introductory paragraph hereof. 

        "Parent Disclosure Schedule" has the meaning ascribed to such term in Article 5 hereof. 

        "Parent Grantback Assets" has the meaning ascribed to such term in Section 6.10(a) hereof. 

        "Parent Grantback Work Product" has the meaning ascribed to such term in Section 6.10(a) hereof. 

        "Parent Indemnified Parties" has the meaning ascribed to such term in Section 9.2 hereof. 

        "Participating Holders" means those persons (other than the holders of Dissenting Shares, the Company, any Disqualified Shareholder or any
Subsidiary of the Company) who, immediately prior to the Effective Time of the Merger, were holders of shares of Company Common Stock or Company Preferred Stock or holders of Common Warrants or
Eligible Company Options, and whose interests therein, as the result of the Merger, are converted into the right to receive a portion of the Merger Consideration. 

        "person" (whether such term is capitalized or not) means an individual, corporation, partnership, limited partnership, limited liability
company, syndicate, person (including a "person" as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or
instrumentality of a government. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

17

 

        "Personnel" has the meaning ascribed to such term in Section 6.16(a) hereof. 

        "Phase I" means a clinical trial, either singular or one of several such clinical trials, intended to provide an initial evaluation
of the safety, pharmacokinetic and/or pharmacological effects of a Contingent Payment Product in human subjects, either healthy or diseased, and to gather sufficient information about the drug's
pharmacokinetics and pharmacological effects to permit the design of a well-controlled, scientifically valid, Phase II study; provided that for certain indications, administration
to diseased patients may be required, necessary or useful in order for such trial to provide an indication of activity or effectiveness and in such instance(s) such a trial shall nonetheless be deemed
"Phase I". 

        "Phase II" means a clinical trial, either singular or one of several such clinical trials, usually but not always conducted after
the completion of a Phase I trial, intended to evaluate the effectiveness and/or side effects and risks of a Contingent Payment Product in human subjects, and to gather sufficient information
about the drug's effectiveness and/or side effects and risks to permit the design of a well-controlled, scientifically valid, Phase III study. 

        "Phase III" means a clinical trial, usually but not always conducted after the completion of a Phase II trial, that is
intended to gather additional information as to the effectiveness and safety of a Contingent Payment Product in human subjects, in order to evaluate the overall benefits and risks of such Contingent
Payment Product and to provide an adequate basis for physician labeling. 

        "Post-Approval Notice" has the meaning ascribed to such term in Section 6.5 hereof. 

        "Preferred Stock Closing Amount" has the meaning ascribed to such term in Section 2.6(a)(iii) hereof. 

        "Presumed Breach Events" has the meaning ascribed to such term in Section 6.9(b) hereof. 

        "PTO" means the United States Patent and Trademark Office. 

        "RCRA" has the meaning ascribed to such term in Section 4.14(b) hereof. 

        "Reimbursable Expenses" has the meaning ascribed to such term in Section 2.6(a)(i) hereof. 

        "Required Shareholder Approval" has the meaning ascribed to such term in Section 4.30 hereof. 

        "Rights Documents" has the meaning ascribed to such term in Section 3.2(a) hereof. 

        "Sales-Based Milestone" means any of Sales-Based Milestone One and Sales-Based Milestone Two. 

        "Sales-Based Milestone One" means the first occurrence of Net Sales of Contingent Payment Products in excess of
[]* after the Effective Time. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

18

 

        "Sales-Based Milestone Two" means the first occurrence of Net Sales of Contingent Payment Products in excess of
[]* after the Effective Time other than the year in which the Sales-Based Milestone One occurs. 

        "Sales-Based Milestone One Payment" means thirty million dollars ($30,000,000.00). 

        "Sales-Based Milestone Two Payment" means seventy million dollars ($70,000,000.00). 

        "Sales-Based Milestone Payment" means any of Sales-Based Milestone One Payment and Sales-Based Milestone Two Payment. 

        "SARA" has the meaning ascribed to such term in Section 4.14(b) hereof. 

        "SEC" has the meaning ascribed to such term in Section 5.4 hereof. 

        "Section 6.9 Contingent Payment Product" means any Contingent Payment Product that includes Section 6.9 IB657 as an active
pharmaceutical ingredient and that is being developed for the treatment of infections caused by HCV as an indication. 

        "Section 6.9 IB657" means []*. 

        "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 

        "Services Agreement" means the services agreement between Parent and ServicesCo substantially in the form of  Exhibit C attached hereto. 

        "ServicesCo" shall mean Lecura, Inc., a Washington corporation. 

        "Subsidiary" or "Subsidiaries" (whether or not capitalized) of any person means
(i) any corporation, or other legal entity of which such person (either above or through or together with any other Subsidiary or Subsidiaries), owns, directly or indirectly, more than 50% of
the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity or
(ii) any partnership, limited partnership, limited liability company, joint venture, association, trust, or other entity in which such person (directly or indirectly through another Subsidiary
or Subsidiaries) holds more than 50% of the equity interests the holders of which are generally entitled to vote for the election of the governing body of such legal entity. 

        "Superior Proposal" has the meaning ascribed to such term in Section 7.24(a) hereof. 

        "Surviving Corporation" has the meaning ascribed to such term in the recitals hereof. 

        "Surviving Corporation Articles" has the meaning ascribed to such term in Section 2.4(a) hereof. 

        "Takeover Proposal" has the meaning ascribed to such term in Section 7.24(a) hereof. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

19

 

        "Tax" or "Taxes" (and with correlative meaning,
"Taxable" and "Taxing") means any federal, state, local, or non-United States income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, import value added, excise, export, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, net worth, intangibles, social security, pension insurance contributions,
unemployment, disability, payroll, license, employee, withholding tax, including, but not limited to, on salaries and wages, or other tax or levy or contribution, of any kind whatsoever, including any
interest, penalties, special charges or additions to tax in respect of the foregoing. 

        "Tax Return" means any return, declaration, report, claim for refund, information return or other document (including any related or
supporting estimates, elections, schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Tax or the administration of
any laws, regulations or administrative requirements relating to any Tax. 

        "Taxation Authority" means any Governmental Authority having any responsibility for (a) the determination, assessment or collection
or payment of any Tax, or (b) the administration, implementation or enforcement of or compliance with any law relating to any Tax. 

        "Third Party Consideration Claim" has the meaning ascribed to such term in Section 9.2 hereof. 

        "Third Party Payment" has the meaning ascribed to such term in Section 2.7(d) hereof. 

        "Third Party Payment Offset" has the meaning ascribed to such term in Section 2.7(d) hereof. 

        "Threshold Amount" has the meaning ascribed to such term in Section 9.6(a) hereof. 

        "Transaction Expenses" means all expenses of each of the Company, its Subsidiaries and the Participating Holders incurred by the Company
or any of its Subsidiaries in connection with the preparation, execution and consummation of this Agreement, the transactions contemplated hereby and the Closing, including all fees and disbursements
of attorneys, accountants and other advisors (including, but not limited to, P2 Partners, LLC) and service providers of the Participating Holders or the Company or any of its Subsidiaries. 

        "Valid and Enforceable Claim" means (i) a claim of any issued patent which has not expired, lapsed, or been held invalid,
unpatentable or unenforceable by court or other authority of competent jurisdiction in the issuing country in a decision which is not subject to pending appeal or was not or is no longer appealable,
or (ii) a claim in any pending patent application which has not been the subject of a final rejection notice from which an appeal cannot be taken or with respect to which the applicable period
of appeal has expired. 

        "Washington Law" means the Business Corporation Act of the State of Washington (Title 23B of the Revised Code of Washington), as amended
from time to time. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

20

 

  ARTICLE 2

THE MERGER  

        2.1    The Merger.    Subject to the other terms and conditions of this Agreement, including those set forth in
Article 8 hereof, and in accordance with Washington Law and Delaware Law, at the Effective Time (as defined below), Merger Sub shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger. 

        2.2    Consummation of the Merger; Effective Time.    Subject to the fulfillment or waiver of all of the conditions
contained in Article 8, as soon as is reasonably practicable after, but in no event later than, the fifth business day following the fulfillment or waiver of such conditions, a closing (the
"Closing") will be held at the offices of Bingham McCutchen LLP in Boston, Massachusetts (or such other place as the parties may agree). The date
on which the Effective Time (as defined below) occurs is referred to herein as the "Closing Date." On the Closing Date, Parent, Merger Sub and the
Company shall cause the Merger to be consummated by filing (i) with the Secretary of State of the State of Delaware a certificate of merger, substantially in the form of  Exhibit D-1 hereto,
executed in accordance with the relevant provisions of Delaware Law (the "Merger
Certificate") and (ii) with the Secretary of State of the State of Washington articles of merger, substantially in the form of Exhibit
D-2 hereto, executed in accordance with the relevant provisions of Washington Law (the "Articles of Merger" and
together with the Merger Certificate, the "Merger Documents"). The term "Effective Time" means the later
of the date and time of the filing of the Merger Documents with (i) the Secretary of State of the State of Delaware and (ii) the Secretary of State of the State of Washington, as
applicable (or such later time as may be agreed by each of the parties hereto and specified in the Merger Documents in accordance with Delaware Law and Washington Law, as applicable). 

        2.3    Effect of the Merger.    At the Effective Time, the effect of the Merger shall be as provided in this
Agreement, the Merger Documents and as provided by the applicable provisions of Delaware Law and Washington Law. Without limiting the generality of the foregoing, and subject thereto, upon the
consummation of the Merger, all the property (including, but not limited to, the Company Program Assets and all related Intellectual Property and licenses to Intellectual Property), rights,
privileges, powers and franchises of the Company and the Merger Sub shall remain vested in the Surviving Corporation, and, subject to this Agreement, all debts, liabilities, obligations, restrictions,
disabilities and duties of each of those corporations shall continue to be the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. 

        2.4    Charter; Bylaws.    

        (a)   At
the Effective Time, the articles of incorporation of the Company shall be amended in their entirety, upon the filing of the Articles of Merger, to the form attached
as Exhibit E hereto, which shall thereafter be the articles of incorporation of Surviving Corporation (the "Surviving
Corporation Articles") until thereafter amended as provided by Washington Law, and as permitted under the terms of such Surviving Corporation Articles. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

21

 

        (b)   At
the Effective Time, the bylaws of the Company shall be amended in their entirety to the form attached as  Exhibit F hereto, which shall thereafter be the bylaws of Surviving Corporation until
thereafter amended as provided by Washington Law, and as
permitted under the terms of such bylaws. 

        2.5    Directors and Officers.    The directors of the Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in accordance with the Surviving Corporation Articles and the bylaws of the Surviving Corporation, and until their respective
successors are duly elected and qualified or until their earlier death, disability, resignation or removal. The officers of the Merger Sub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified or until their earlier death, disability, resignation or removal. 

        2.6    Closing Date Consideration.    

        (a)    Closing Consideration.    At the Effective Time or in the event the Effective Time is prior to
January 2, 2008, on January 2, 2008 (the "Closing Consideration Payment Date") and subject to the provisions of Article 3 hereof,
Parent shall pay the Closing Consideration, of which: 

          (i)  Two
Hundred Thousand Dollars ($200,000.00) (the "Holders Representative Reimbursement Amount") shall be deposited with
the Holders Representative, to be held by the Holders Representative for the payment of expenses incurred by the Holders Representative in performing its duties pursuant to this Agreement, the Escrow
Agreement and the LLC Agreement ("Reimbursable Expenses"); 

         (ii)  An
amount equal to one million five hundred thousand dollars ($1,500,000.00) (the "Escrow Deposit Amount") shall be
deposited with The Bank of New York (the "Escrow Agent") to be held for a period of one year from the Closing Date pursuant to an Escrow Agreement,
substantially in the form of Exhibit G attached hereto (the "Escrow Agreement"), and distributed
in accordance therewith; and 

        (iii)  The
remainder of the Closing Consideration shall, subject to Section 2.6(d) and Section 9.5(b), be payable in cash to those Participating Holders that
are holders of shares of Company Preferred Stock immediately prior to the Effective Time (such aggregate amount being hereinafter referred to in the aggregate as the "Preferred
Stock Closing Amount"), in the respective amounts reflected on the Merger Consideration Certificate, either: by (x) wire transfer to an account in the name of such
Participating Holder as provided to Parent by written notice from the Holders Representative at least two (2) business days prior to the Closing Consideration Payment Date; or
(y) delivery of a check, payable to such Participating Holder, to the Holders Representative on the Closing Consideration Payment Date. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

22

 

        (b)    Merger Consideration Certificate.    At Closing, the Company shall deliver to Parent and the Holders
Representative a certificate (the "Merger Consideration Certificate") that shall include (1) a complete and accurate list of all of the
liabilities of the Company and its Subsidiaries as of the close of business on the business day immediately preceding the Closing Date (the "Closing
Liabilities", which shall not include liabilities under written executory Company Program Contracts to the extent that such liabilities accrue and arise from and after the
Closing but shall include (i) amounts owing to Parent under the proviso to subparagraph 3(b) of the Option Agreement, (ii) any and all payment amounts due and payable by the
Company under equipment leases, real estate leases and any other agreements to which the Company is a party regardless of whether any such payment amounts are accrued or due and payable prior to or
after the Closing (other than payment amounts that accrue or arise from and after the Closing under Company Program Contracts) and (iii) the Transaction Expenses referred to below in
clause (5) of this paragraph, and shall be calculated net of any cash deposits held by the creditor to whom the liability is owed), (2) for each of the Company's and its Subsidiaries'
bank accounts, the uncollected checks or other payment orders or instructions made by the Company as of the close of business on the business day immediately preceding the Closing Date and the
respective amount of each such uncollected checks or other payment orders or instructions, (3) a complete and accurate list, including the amount, of all cash and cash equivalents, as well as
all cash deposits held by the Company, as of the close of business on the business day immediately preceding the Closing Date, (4) the Available Closing Cash, (5) the Transaction
Expenses, if any, that have not been paid or adequately provided for as of the close of business on the business day immediately preceding the Closing Date, and (6) the number of shares of
Company Preferred Stock outstanding immediately prior to the Effective Time. The Merger Consideration Certificate shall further set forth a calculation of (i) the Closing Consideration,
(ii) the Preferred Stock Closing Amount in accordance with Section 2.6(a), and (iii) the respective portions of the Preferred Stock Closing Amount payable to each holder of
Company Preferred Stock based on their respective holdings thereof immediately prior to the Effective Time and application of the provisions of Section 3.1 of the LLC Agreement. The
information and calculations set forth in the Merger Consideration Certificate shall be deemed to constitute a representation and warranty of the Company and any inaccuracy or calculation of any
information set forth in the Merger Consideration Certificate that results in Damages to Parent shall entitle Parent to make a claim for indemnification for breach of representation or warranty under
Section 9.2 of this Agreement. 

        (c)    Distribution of Holders Representative Reimbursement Amount.    Any of the Holders Representative Reimbursement
Amount that has not been spent on Reimbursable Expenses by the Holders Representative on or prior to the end of the period in which the Holders Representative has continuing duties to perform pursuant
to this Agreement, the Escrow Agreement or the LLC Agreement, shall be distributed by the Holders Representative to the Participating Holders as additional Merger Consideration pursuant to the
terms of Section 3.1 of the LLC Agreement. 

        (d)    Holdback.    In the event that any Participating Holder that is a holder of Company Preferred Stock shall not
have returned to Parent duly executed transmittal materials in proper form pursuant to, and in accordance with, Section 3.2(a) hereof at any time prior to the Effective Time, Parent shall be
entitled to hold back the portion of the Preferred Stock Closing Amount which such Participating Holder would have been entitled to receive pursuant to, and in accordance with, Section 2.6(a)
hereof. Upon Parent's receipt of such Participating Holder's properly executed transmittal materials, Parent shall promptly transmit any such holdback amounts to the Holders Representative for
distribution to the Participating Holder pursuant to, and in accordance with, Section 2.6(a)(iii) hereof. 

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        2.7    Contingent Consideration.    

        (a)    Milestone Payments.    

        (i)    HCV Milestone Payments and HCV []* Milestone Payments.    

        (A)  Subject
to the limitations set forth herein, including without limitation those set forth in Sections 2.7(d) through (f) below, if any HCV Milestone is
achieved by any Member of the Buyer Group, then, within sixty (60) days after the date on which such HCV Milestone has been achieved, Parent shall deliver to the Holders Representative, for the
benefit of the Participating Holders and for application and distribution in accordance with Section 3.1 of the LLC Agreement, an amount of cash equal to the remainder obtained by
subtracting from the Corresponding HCV Milestone Payment the aggregate amount of any and all outstanding set off claims, if any, made against any Contingent Payment pursuant to Sections 2.7(n),
3.7(e) or 9.5 hereof. The obligation of Parent under this Section 2.7(a)(i)(A) shall be subject to the provisions of Section 2.7(m) below. For purposes of clarification, Parent shall
make each HCV Milestone Payment contemplated under this Section 2.7(a)(i)(A) []*. 

        (B)  Subject
to the limitations set forth herein, including without limitation those set forth in Sections 2.7(d) through (f) below, if any HCV
[]* Milestone is achieved by any Member of the Buyer Group, then, within (60) days after the date on which such HCV []* Milestone has been
achieved, Parent shall deliver to the Holders Representative, for the benefit of the Participating Holders and for application and distribution in accordance with Section 3.1 of the LLC
Agreement, an amount of cash equal to the remainder obtained by subtracting from the Corresponding HCV []* Milestone Payment the aggregate amount of any and all outstanding set
off claims, if any, made against any Contingent Payment pursuant to Sections 2.7(n), 3.7(e) or 9.5 hereof. The obligation of Parent under this Section 2.7(a)(i)(B) shall be subject to
the provisions of Section 2.7(m) below. For purposes of clarification, Parent shall make each HCV []* Milestone Payment contemplated under this
Section 2.7(a)(i)(B) []*. 

        (ii)    Non-HCV Milestone Payments.    Subject to the limitations set forth herein, including without
limitation those set forth in Sections 2.7(d) through (f) below, if any Non-HCV Milestone is achieved by any Member of the Buyer Group, then, within sixty (60) days
after the date on which such Non-HCV Milestone has been achieved, Parent shall deliver to the Holders Representative, for the benefit of the Participating Holders and for
application and distribution in accordance with Section 3.1 of the LLC Agreement, an amount of cash equal to the remainder obtained by subtracting from the Corresponding
Non-HCV Milestone Payment the aggregate amount of any and all outstanding set off claims, if any, made against any Contingent Payment pursuant to Sections 2.7(n), 3.7(e) or 9.5
hereof. The obligation of Parent under this Section 2.7(a)(ii) shall be subject to the provisions of Section 2.7(m) below. For purposes of clarification: (i) Parent shall make the
Non-HCV Milestone One Payment contemplated under this Section 2.7(a)(ii) []*. 

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        (iii)    Sales-Based Milestone Payments.    Subject to the limitations set forth herein, including without limitation
those set forth in Sections 2.7(d) through (f) below, if any Sales-Based Milestone is achieved, then within ninety (90) days after the end of the calendar year in which such
Sales-Based Milestone has been achieved by any Member of the Buyer Group, Parent shall deliver to the Holders Representative, for the benefit of the Participating Holders and for application and
distribution in accordance Section 3.1 of the LLC Agreement, an amount of cash equal to the remainder obtained by subtracting from the Corresponding Sales-Based Milestone Payment the
aggregate amount of any and all outstanding set off claims, if any, made against any Contingent Payment pursuant to Sections 2.7(h), 2.7(j), 2.7(k), 2.7(n), 3.7(e) or 9.5 hereof,  provided however,
that commencing five (5) years from the Effective Date, such ninety (90) day time period shall be modified to require
payment of such Sales-Based Milestone Payment on or before March 15th of the calendar year following achievement of such Sales-Based Milestone. The obligation of Parent
under this Section 2.7(a)(iii) shall be subject to the provisions of Section 2.7(m) below. For purposes of clarification, Parent shall make each Sales-Based Milestone Payment
contemplated under this Section 2.7(a)(iii) []*. 

        (b)    Contingent Earn-Out Payments.    Subject to the limitations set forth herein, including without
limitation those set forth in Sections 2.7(d) through (f) below, and in addition to the HCV Milestone Payments, the Non-HCV Milestone Payments and the Sales-Based Milestone
Payments, if Parent or any Member of the Buyer Group at any time determines, in its sole discretion (subject to the obligations of Parent set forth in Section 6.9 below), to market and sell a
Contingent Payment Product, then within ninety (90) days after the end of each calendar year in which Net Sales of such Contingent Payment Product occur, Parent shall deliver to the Holders
Representative, for the benefit of the Participating Holders and for application and distribution in accordance Section 3.1 of the LLC Agreement, an amount of cash equal to the remainder
obtained by subtracting from the Contingent Earn-Out Payment Amount the aggregate amount of any and all outstanding set off claims, if any, made against any Contingent Payment pursuant to
Sections 2.7(h), 2.7(j), 2.7(k), 2.7(n), 3.7(e) or 9.5 hereof (each such payment, a "Contingent Earn-Out Payment"),  provided however, commencing five
(5) years from the Effective Date, such ninety (90) day time period shall be modified to require payment
of such Contingent Earn-Out Payment on or before March 15th of the calendar year following the year in which Net Sales of such Contingent Payment Product occur. The
obligation of Parent under this Section 2.7(b) shall be subject to the provisions of Section 2.7(m) below. For purposes of clarification, Parent shall make each Contingent
Earn-Out Payment contemplated under this Section 2.7(b) []* during any calendar year after the Effective Time. 

        (c)    Decision to Develop, Market or Sell.    Without limiting the obligations of the Parent set forth in
Section 6.9 below, nothing contained in this Section 2.7 or elsewhere in this Agreement shall obligate Buyer Group to develop, commence or continue marketing or selling, any Contingent
Payment Product. 

        (d)    Reduction of Contingent Payments for Licensing Fees and Royalty Payments to Third Parties.    In the event
that, in connection with the sale of any Contingent Payment Product by Buyer Group in any country of the world during any calendar year, there is any license fee, royalty payment or any similar
payment (each a "Third Party Payment") due or owing from any Member of the Buyer Group to any third party pursuant to (x) any license or other
agreement listed on the Company Disclosure Schedule or (y) any license or other agreement entered into by the Company with such third party prior to the Effective Time, then the Contingent
Payments required to be made by the Parent pursuant to this Agreement shall be reduced by an amount equal to []* of all such Third Party Payments (the
"Third Party Payment Offset"). The right of any Member of the Buyer Group to indemnification for Damages under any other provision of this Agreement
based on a breach of any representation or warranty pertaining to any license or other agreement described in clauses (x) and (y) above shall be reduced to the extent of any Third Party
Payment Offsets actually taken by Parent with respect to payments on such license. 

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        (e)    Reduction of Contingent Payments for Patent Expiration and Patent Invalidity.    Notwithstanding anything
express or implied to the contrary in this Section 2.7, in the event that the sale or manufacture of any Contingent Payment Product in any country of the world by any person would not, absent a
license or sublicense granted by Buyer Group, infringe any Valid and Enforceable Claim of any issued Company Patents in such country, then the amount of any Sales-Based Milestone Payment or Contingent
Earn-Out Payment that would otherwise be made with respect to sales of such Contingent Payment Product in such country may be reduced in accordance with the third sentence of the
definition of Net Sales. 

        (f)    Reduction of Contingent Payments for Payments in Respect of Third Party Patents and Technology.    If
(a) Parent reasonably determines that (i) a patent []* (each, a "Blocking Third Party Patent"), (ii) a
patent application []* (each, a "Blocking Third Party Patent Application") or (iii) a patented or proprietary
complementary technology []* of such Contingent Payment Product (a "Complementary Technology"), and (b) a Member of the
Buyer Group in-licenses such Blocking Third Party Patent, Blocking Third Party Patent Application or Complementary Technology pursuant to terms requiring any Member of the Buyer Group to
make payments to such third party, then, with respect to such Contingent Payment Product, []* of the amount of any cash payments that Parent pays in connection with, and
[]* of the amount by which the consideration paid to Parent by any Member of the Buyer Group is reduced because of, any such in-licensed Blocking Third Party
Patent, Blocking Third Party Patent Application or Complementary Technology, shall be offset by Parent against any and all amounts that Parent would otherwise be required to pay pursuant to
Sections 2.7 hereof (after giving effect to any other adjustments thereto pursuant to this Section 2.7) with respect to such Contingent Payment Product,  provided that in no event shall any and
all amounts that Parent would otherwise be required to pay pursuant to Sections 2.7 hereof (after giving
effect to any other adjustments thereto pursuant to this Section 2.7) during any calendar year be reduced by more than []* pursuant to this Section 2.7(f).
Nothing in this Section 2.7(f) shall limit any remedy or indemnification right that any member of the Buyer Group may have under any other provision of this Agreement based on a breach of any
representation or warranty contained in this Agreement. The right of any Member of the Buyer Group to indemnification for Damages under any other provision of this Agreement based on a breach of any
representation or warranty as a result of or pertaining to any Blocking Third Party Patent or Complementary Technology shall be reduced to the extent of any Contingent Payment reduction actually taken
by Parent with respect to payments on such license. 

        (g)    Delivery of Contingent Payment Certificate.    On or prior to the ninetieth (90th) day following
the last day of each Contingent Earn-Out Payment Year, Parent shall deliver to the Holders Representative a certificate (a "Contingent Payment
Certificate"), setting forth (a) the amount of Net Sales for such Contingent Earn-Out Payment Year (including the amount and location of any sales excluded
from Net Sales under the third sentence of the definition of Net Sales), and (b) Parent's determination of the amount of any Contingent Earn-Out Payments and Sales-Based Milestone
Payments, if any, due for such Contingent Earn-Out Payment Year (each such amount due being referred to herein as a "Contingent Payment
Amount"), including the calculation of any offsets or reductions of such amounts pursuant to Sections 2.7(d), 2.7(f) or 2.7(n). 

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        (h)    Holders Representative Audit Rights.    Parent hereby grants, and shall cause the other members of the Buyer
Group to grant, the Holders Representative and its representatives and advisers, at the Holders Representative's sole expense, the right, exercisable no more than once during each
forty-five (45) day period (the "Contingent Payment Dispute Period") following the receipt by the Holders Representative of a
Contingent Payment Certificate, subject to the execution of, and compliance with, a customary confidentiality agreement in form and substance reasonably satisfactory to Parent, to demand an
opportunity to examine and have full access to the Buyer Group's books of account and records of Net Sales, Third Party Payment Offsets, offsets related to Blocking Third Party Patents and offsets
related to Complementary Technologies for the applicable Contingent Earn-Out Payment Year with respect to which the most recent Contingent Payment Certificate has been delivered, at the
location of such records on prior written notice of at least ten (10) days, for the purpose of verifying the amount of Net Sales, Third Party Payment Offsets, offsets related to Blocking Third
Party Patents and offsets related to Complementary Technologies for such Contingent Earn-Out Payment Year (each such review shall be referred to herein as a
"Contingent Payment Audit"). Notwithstanding the foregoing, absent fraud, intentional misconduct, or the discovery (whether or not following the
completion of any Contingent Payment Audit) of a material fact that was required to be taken into account by Parent in the Contingent Payment Certificate and that was not disclosed by Parent to the
Holders Representative or its representatives either in the Contingent Payment Certificate or otherwise in the course of conducting such Contingent Payment Audit, which material fact, if taken into
account in the calculation of the applicable Contingent Payment Amount, would have resulted in an increase in such Contingent Payment Amount, the Holders Representative or its representatives shall
not be permitted to review any records of Net Sales, Third Party Payment Offsets, offsets related to Blocking Third Party Patents and offsets related to Complementary Technologies for any Contingent
Earn-Out Payment Year for which a Contingent Payment Audit has previously been performed, or, if no such Contingent Payment Audit was demanded or performed on a timely basis, after the
expiration of the Contingent Payment Dispute Period. For the purpose of conducting a Contingent Payment Audit, the Holders Representative may hire, at its expense, one or more auditors or attorneys of
the Holders Representative's choosing to assist in such examination, provided, that such auditors or attorneys have entered into customary
confidentiality agreements with Parent in form and substance reasonably acceptable to Parent. The Holders Representative and such representatives shall have access to all of the books and records
reasonably required to perform any Contingent Payment Audit at all times during the period of one hundred twenty (120) days following the date on which the Holders Representative delivers a
Dispute Notice to Parent (the "Contingent Payment Audit Period"). Nothing in this Section 2.7 shall be deemed to require any Member of the Buyer
Group to keep any books of account or records other than those which it maintains in the ordinary course of business in its usual and customary practice, to retain any such books of account or records
for any period in excess of the period for which it retains such records in the ordinary course of business in its usual and customary practice, or to provide access to any books and records other
than that specified above, and no presumption shall be made against any Member of the Buyer Group as a result of the absence of any such books and records as a result of the disposition of any such
books and records in the ordinary course of business; provided, however, that in no case shall any Member of the Buyer Group dispose of such books of
account or records with respect to a Contingent Earn-Out Payment Year earlier than the date that is four (4) years following the last day of the subsequent Contingent
Earn-Out Payment Year; and, provided further, that once the Holders Representative delivers to Parent a Dispute Notice indicating its
intention to commence a Contingent Payment Audit with
respect to a Contingent Earn-Out Payment Year, the Buyer Group shall use commercially reasonable efforts to keep and retain all books of account relating to Net Sales, Third Party Payment
Offsets, offsets related to Blocking Third Party Patents and offsets related to Complementary Technologies for the Contingent Earn-Out Payment Year for which such Contingent Payment Audit
is being conducted, including but not limited to those identified in a request or requests from the Holders Representative with respect to any Contingent Payment Amount for such Contingent
Earn-Out Payment Year. If any final Contingent Payment Amount determined pursuant to this Section 2.7(h) is greater than the corresponding Contingent Payment Amount set forth on the
relevant Contingent Payment Certificate by an amount equal to more than the greater of (i) []* or (ii) five percent (5%) of the applicable Contingent Payment
Amount set forth in the relevant Contingent Payment Certificate, Parent shall pay all of the reasonable out-of-pocket costs and expenses actually incurred by the Holders
Representative in connection with such Contingent Payment Audit. If any final Contingent Payment Amount determined pursuant to this Section 2.7(h) is less than the corresponding Contingent
Payment Amount set forth on the relevant Contingent Payment Certificate, then (x) the Holders Representative shall pay all of the reasonable out-of-pocket costs and
expenses actually incurred by the Holders Representative in connection with such Contingent Payment Audit and (y) Parent shall be entitled to offset the difference between the Contingent
Payment Amount set forth on the relevant Contingent Payment Certificate and such lesser amount against any and all amounts that Parent would otherwise be required to pay pursuant to this
Section 2.7 (after giving effect to any other adjustments thereto pursuant to this Section 2.7). 

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        (i)    Dispute Notice.    In the event that the Holders Representative does not agree with or desires to investigate
the calculation of any Contingent Payment Amount set forth on any Contingent Payment Certificate, the Holders Representative shall be entitled, during the Contingent Payment Audit Period, to give
Parent written notice (a "Dispute Notice"), of such disagreement or desire. In the event that the Holders Representative delivers a Dispute Notice, the
date by which Parent shall be obligated to deliver any Contingent Earn-Out Payment or Sales-Based Milestone Payment reflected in the Contingent Payment Certificate shall not be extended,
but the date by which Parent shall be obligated to deliver any additional increment of Contingent Earn-Out Payment or Sales-Based Milestone Payment determined as a result of the Contingent
Payment Audit, shall be extended until the date that is thirty (30) days following the final determination of any and all disputed Contingent Payment Amounts pursuant to the provisions of
Sections 2.7(j) and 2.7(k) below. In the event that the Holders Representative does not deliver a Dispute Notice during the Contingent Payment Audit Period, all Contingent Payment Amounts set
forth on such Contingent Payment Certificate shall irrevocably be deemed to be the final Contingent Payment Amounts for such Contingent Earn-Out Payment Year and all purposes of this
Agreement, absent fraud or intentional misconduct, or the discovery after the expiration of the Contingent Payment Dispute Period of a material fact in existence at such time that was required to be,
but was not, disclosed by Parent to the Holders Representative in the Contingent Payment Certificate. 

        (j)    Agreed Contingent Payment.    In the event that the Holders Representative delivers a Dispute Notice within the
Contingent Payment Dispute Period, the Holders Representative and Parent shall, for a period of not less than thirty (30) days after the later of delivery of the Dispute Notice or conclusion of
any Contingent Payment Audit demanded by the Holders Representative, attempt in good faith to resolve all Contingent Payment Amount(s) that is/are in dispute (each, a "Disputed
Contingent Payment Amount"), and mutually determine any adjustments to such Contingent Payment Amount(s) (each, an "Agreed Contingent Payment
Amount"). Parent and the Holders Representative shall, subject to the execution of a confidentiality agreement in form and substance reasonably satisfactory to the delivering
party, provide each other with such information, records and material kept in the ordinary course of business in such party's possession and which such party may disclose without violating
confidentiality obligations to third parties, as is reasonably necessary and appropriate in attempting to resolve any such Disputed Contingent Payment Amount, including the delivery of a copy to the
Holders Representative of any such information, records and material, to the extent then available, that was used to calculate the amount of Net Sales and the Contingent Payment Amount(s) set forth on
each relevant Contingent Payment Certificate. If any final Agreed Contingent Payment Amount determined pursuant to this Section 2.7(j) is greater than the corresponding Contingent Payment
Amount set forth on the relevant Contingent Payment Certificate by an amount equal to more than the greater of (i) []* or (ii) five percent (5%) of the applicable
Contingent Payment Amount set forth in the relevant Contingent Payment Certificate, Parent shall pay all of the reasonable out-of-pocket costs and expenses actually incurred by
the Holders Representative in connection with such Contingent Payment Audit. If any final Agreed Contingent Payment Amount determined pursuant to this Section 2.7(j) is less than the
corresponding Contingent Payment Amount set forth on the relevant Contingent Payment Certificate, then (x) Holders Representative shall pay all of the reasonable
out-of-pocket costs and expenses actually incurred by Parent in connection with such Contingent Payment Audit and (y) Parent shall be entitled to offset the difference
between the Contingent Payment Amount set forth on the relevant Contingent Payment Certificate and such lesser amount against any and all amounts that Parent would otherwise be required to pay
pursuant to this Section 2.7 (after giving effect to any other adjustments thereto pursuant to this Section 2.7). 

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        (k)    Appraisal of Disputed Contingent Payment Amount.    In the event that no agreement can be reached by the
Holders Representative and Parent as to the calculation of any Disputed Contingent Payment Amount within ninety (90) days after the later of the delivery of a Dispute Notice or the conclusion
of a Contingent Payment Audit, and such disagreement relates only to the amount of Net Sales, Third Party Payment Offsets, offsets related to Blocking Third Party Patents and offsets related to
Complementary Technologies of Contingent Payment Products, then either party shall have the right to seek a determination of such Disputed Contingent Payment Amount by appraisal by an accounting firm
(the "Appraiser") selected under this paragraph; provided,  however, that the provisions of this
Section 2.7(k) will only be applicable if there is a dispute or disagreement concerning the calculation or
determination of the specific amount of any of such items and there is no dispute or disagreement concerning the interpretation or application of any of the defined terms Net Sales, Third Party
Payment Offsets, Blocking Third Party Patents, Complementary Technologies and Contingent Payment Products or the nature or extent of the parties rights and obligations under this Agreement with
respect to any of such defined terms or any of the items covered by such defined terms. The accounting firms qualified to serve as Appraiser under this paragraph (each an
"Accountant") are the Boston, Massachusetts offices of Deloitte & Touche LLP, KPMG, Ernst & Young LLP,
PricewaterhouseCoopers, BDO Seidman, LLP, Grant Thornton LLP, or their respective successors, or such other accounting firms as the Company and Parent may mutually agree;  provided that such
firm is not the principal regularly-engaged outside accountant to Parent, the Company, any member of the Buyer Group involved in such
dispute, or any auditor that may have assisted the Holders Representative in any Contingent Payment Audit. The Holders Representative and Parent shall jointly select one (1) of the Accountants
to serve as the Appraiser within thirty (30) days after either Holders Representative or Parent delivers a written demand to the other to submit the dispute to appraisal. In the event that the
Holders Representative and Parent are unable to agree upon an Appraiser within such thirty (30) day period, then each of the Holders Representative and Parent shall select one of the
Accountants and the two Accountants so selected shall jointly select a third Accountant to be the Appraiser. The engagement and charge of the Appraiser shall be limited to determining the specific
amount of Net Sales, Third Party Payment Offsets, offsets related to Blocking Third Party Patents and offsets related to Complementary Technologies of any identified product or products for the
applicable Contingent Earn-Out Payment Year. The Appraiser shall determine such Disputed Contingent Payment Amount within the limitations set forth above within ninety (90) days
after the date of such Appraiser's engagement and the Appraiser shall be provided with such information and records, which may include on-site access, relating to such dispute as it may
reasonably request. Any Disputed Contingent Payment Amount determined by an Appraiser in accordance with this paragraph (l) shall be deemed to be the final determination of all matters within
the scope of the Appraiser's authority pursuant to this Section 2.7(k) with respect to the Contingent Payment Amount for the applicable Contingent Earn-Out Payment Year for all
purposes of this Agreement. The determination of any matters within the scope of the Appraiser's authority pursuant to this Section 2.7(k) shall be conclusive unless (i) the Appraiser's
determination was procured by fraud or intentional misconduct or (ii) a material fact that was (w) in existence at the time of such determination, (x) known to Parent,
(y) required to be made available by Parent and (z) not made available by Parent to the Holders Representative, its representatives or the 

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Appraiser
in the course of the dispute proceeding, is discovered by the Holders Representative after the completion of any determination by an Appraiser, and such material fact, if taken into account
in the calculation of the applicable Contingent Payment Amount, would have resulted in an increase in such Contingent Payment Amount. The fees and expenses of the Appraiser shall be paid by the party
who demands submission of the dispute to appraisal; provided, that if any Contingent Payment Amount calculated on the basis of matters determined by the
Appraiser in any examination conducted pursuant to this Section 2.7(k) is greater than the corresponding Contingent Payment Amount set forth on the relevant Contingent Payment Certificate by an
amount equal to more than the greater of (i) []* or (ii) five percent (5%) of the Contingent Payment Amount set forth in the relevant Contingent Payment
Certificate, then Parent shall pay all of the fees and expenses of the Appraiser; all reasonable out-of-pocket costs and expenses actually incurred by the Holders
Representative in connection with such Contingent Payment Audit; and if any final Contingent Payment Amount calculated on the basis of matters determined by the Appraiser in any examination conducted
pursuant to this Section 2.7(k) is less than the corresponding Contingent Payment Amount set forth on the relevant Contingent Payment Certificate, then (x) Holders Representative shall
pay all of the reasonable out-of-pocket costs and expenses actually incurred by Parent in connection with such Contingent Payment Audit and (y) Parent shall be entitled
to offset the difference between the Contingent Payment Amount set forth on the relevant Contingent Payment Certificate and such lesser amount against any and all amounts that Parent would otherwise
be required to pay pursuant to this Section 2.7 (after giving effect to any other adjustments thereto pursuant to this Section 2.7). For purposes of clarification, any dispute over any
matter relevant to any Contingent Payment Amount that the Appraiser is not authorized to determine pursuant to the foregoing provisions of this Section 2.7(k) shall fall within the purview of
the dispute resolution mechanics contemplated by Section 11.13 hereof. 

        (l)    Interest.    Any Contingent Earn-Out Payments or Sales-Based Milestone Payments, or portion
thereof, including any incremental amounts determined by agreement or pursuant to a determination by Appraiser, not paid when due under this Agreement shall bear interest at an annual rate equal to
the prime rate established by the Wall Street Journal from the date such incremental amount would originally have been due until the date such incremental amount is paid in full. 

        (m)    Holdback.    In the event that any Participating Holder shall not have (i) become a member of IB
Securityholders, LLC by executing the LLC Agreement and delivering to Parent a copy of such signed counterpart signature page thereto, or (ii) returned to Parent duly executed
transmittal materials in proper form pursuant to, and in accordance with, Section 3.2 hereof, in each case at any time prior to the time that Parent is required to make any payment pursuant to
Section 2.7(a) or 2.7(b) hereof, then Parent shall be entitled to hold back the portion of any such payment pursuant to Section 2.7(a) or 2.7(b) hereof to which such Participating Holder
would have been entitled to receive pursuant to, and in accordance with, Section 3.1 hereof and Section 3.1 of the LLC Agreement. Upon Parent's receipt of a copy of such
Participating Holder's executed counterpart signature page to the LLC Agreement and such Participating Holder's properly executed transmittal materials, Parent shall promptly transmit any such
holdback amounts to the Holders Representative for distribution to the Participating Holder pursuant to, and in accordance with, Section 2.7(n) below. 

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        (n)    Payment.    Parent shall make payment to the Holders Representative of any cash amount that Parent is required
to pay to the Holders Representative pursuant to the foregoing provisions of this Section 2.7 (including any increase in a Contingent Payment Amount determined in accordance with
Section 2.7(j) or 2.7(k) hereof) by wire transfer to an account in the name of the Holders Representative as the Holders Representative shall have provided to Parent by giving written notice
thereof in accordance with the provisions of Section 11.4 hereof at least two business days prior to the date when Parent shall be required to make such payment (which shall be within five
(5) business days after any increased amount is determined under Section 2.7(j) or 2.7(k) hereof). As soon as practicable after receipt of such cash amount from the Parent, the Holders
Representative shall pay to each Participating Holder that portion of such cash amount to which such Participating Holder is entitled in accordance with the terms of Section 3.1 of
the LLC Agreement. Notwithstanding anything to the contrary in this Agreement, Parent shall be entitled to offset against any Contingent Payment the amount(s) of any and all payroll, social
security, or other employment taxes imposed on Parent, the Surviving Corporation or any Affiliate of Parent or the Surviving Corporation in connection with any payment required to be made under
Section 3.1 hereof. 

        (o)    No Liability.    Subject to the right of the Holders Representative to dispute, audit and seek a determination
by an Appraiser as to the amount of any Contingent Payment under the foregoing provisions, payment by Parent of any portion of any Contingent Payment to the Holders Representative pursuant to this
Section 2.7 shall constitute full discharge as to that portion of such payment of any obligation Parent may have under this Agreement or otherwise to make payment of that portion of such
Contingent Payment in connection with the Merger. Parent shall have no liability or obligation of any kind to any Participating Holder (or any successor or assign of such Participating Holder)
(i) to make payment directly to any such Participating Holder of any portion of any payment made or required to be made by Parent to the Holders Representative pursuant to this
Section 2.7 and (ii) for the failure, inability or delay of the Holders Representative to make payment to such Participating Holder of the portion of any amount paid by Parent to the
Holders Representative pursuant to this Section 2.7 to which such Participating Holder may be entitled pursuant to this Agreement. 

ARTICLE 3

CONVERSION OF SECURITIES;

EXCHANGE OF CERTIFICATES; PAYMENTS  

        3.1    Conversion of Securities.    

        (a)    Common Stock.    At the Effective Time and in accordance with the procedures set forth in Section 3.2,
each share of the Company Common Stock (other than Dissenting Shares) issued and outstanding immediately prior to the Effective Time will be converted into the right to receive a portion of any
Contingent Consideration that may be paid or become payable by the Parent to the Holders Representative, such portion to be determined in accordance with the provisions of Section 3.1 of
the LLC Agreement. All shares of Company Common Stock (other than Dissenting Shares), when so converted, shall no longer be outstanding and shall automatically be canceled and cease to exist,
and each holder of a certificate representing any 

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Treatment Requested. Omitted portions filed with the Commission. 

31

 

shares
of Company Common Stock so converted shall cease to have any rights with respect thereto, except the right to receive the consideration set forth in this Section 3.1(a) following the
surrender of such certificate in accordance with the provisions of Sections 3.1 and 3.2 hereof and Section 3.1 of the LLC Agreement. 

        (b)    Preferred Stock.    At the Effective Time and in accordance with the procedures set forth in
Section 3.2, each share of Company Preferred Stock (other than Dissenting Shares) issued and outstanding immediately prior to the Effective Time will be converted into 

        (A)  the
right to receive from Parent a cash payment of a portion of the Preferred Stock Closing Amount, such portion payable to the holder of each such share of Company
Preferred Stock to be determined in accordance with the provisions of Section 3.1 of the LLC Agreement; 

        (B)  the
right to receive a portion of any Contingent Consideration that may be paid or payable by the Parent to the Holders Representative, such portion to be determined in
accordance with the provisions of Section 3.1 of the LLC Agreement; 

        (C)  the
right to receive a portion of any Escrow Funds that may be distributed to the Holders Representative pursuant to, and in accordance with, the Escrow Agreement, such
portion to be determined in accordance with Section 3.1 of the LLC Agreement; and 

        (D)  the
right to receive a portion of any of the Holders Representative Reimbursement Amount that may be distributed to the Participating Holders, such portion to be
determined in accordance with Section 3.1 of the LLC Agreement. 

        All
shares of Company Preferred Stock (other than Dissenting Shares), when so converted pursuant to this Section 3.1(b), shall no longer be outstanding and shall automatically be
cancelled and cease to exist, and each holder of a certificate representing any share of Company Preferred Stock so converted shall cease to have any rights with respect thereto, except the right to
receive the consideration set forth in this Section 3.1(b) following the surrender of such certificate in accordance with Sections 2.6(d), 3.1 and 3.2 hereof. 

        (c)    Options.    As soon as reasonably practicable following the Agreement Date, the Company Board (or, if
appropriate, any committee thereof administering the Company Plan) shall take all necessary action, including obtaining the consent of any holder of a Company Option, if necessary, to:
(i) terminate, as of the Effective Time, the Company Plan; (ii) terminate, as of the Effective Time, each Company Option that is then outstanding and unexercised, whether unvested or
vested (including Company Options that become vested as a result of any acceleration of the vesting schedule of such Company Options pursuant to the terms of such Company Options as a result of or in
connection with the Merger, or as a result of any such acceleration effected by the Company Board or any committee thereof prior to the Closing); (iii) exchange all such Company Options to the
extent vested (including any such acceleration) as of the Effective Time (an "Eligible Company Option"), for the right to receive, in the case of each
Eligible Company Option, subject to the holder of such Eligible Company Option executing and delivering the 

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32

 

Option
Notice and Termination Agreement attached as Exhibit B to the LLC Agreement, a portion of any Contingent Consideration that may be
paid or become payable by the Parent to the Holders Representative, such portion to be determined in accordance with the provisions of Section 3.1 of the LLC Agreement; and
(iv) terminate all unvested Company Options without consideration. Notwithstanding the foregoing, the portion of the Contingent Consideration, if any, that any holder of an Eligible Company
Option shall be entitled to receive in exchange for such Eligible Company Option shall be reduced by the total amount (including all principal and interest), if any, owed by such holder to the Company
under any promissory note outstanding at the Effective Time that was made by such holder to the Company in connection with the exercise of any such Eligible Company Option. All Company Options, when
terminated as contemplated under this Section 3.1(c), shall no longer be outstanding and shall automatically cease to exist, and each holder of a Company Option shall cease to have any rights
with respect thereto, except the right to receive the consideration set forth in this Section 3.1(c) with respect to any Company Option that is an Eligible Company Option. 

        (d)    Common Warrants.    As soon as reasonably practicable following the Agreement Date, the Company Board shall
take all necessary action, including obtaining the consent of any and all holders of Common Warrants, if necessary, to: (i) terminate, as of the Effective Time, each Common Warrant that is then
outstanding and unexercised (without the creation of additional liability to the Company or any of its Subsidiaries); and (ii) exchange all such Common Warrants, for the right to receive, in
the case of each Common Warrant, subject to the holder of such Common Warrant executing and delivering the Warrant Notice and Termination Agreement attached as  Exhibit C to the LLC Agreement,
a portion of any Contingent Consideration that may be paid or become payable by the Parent to the Holders
Representative, such portion to be determined in accordance with the provisions of Section 3.1 of the LLC Agreement. All Common Warrants, when terminated as contemplated under this
Section 3.1(d), shall no longer be outstanding and shall automatically cease to exist, and each holder of a Common Warrant shall cease to have any rights with respect thereto, except the right
to receive the consideration set forth in this Section 3.1(d). 

        (e)    Treasury Stock; Stock Held by Disqualified Shareholders.    Notwithstanding anything to the contrary expressed
or implied herein, each share of Company Stock held by any Subsidiary of the Company or by any Disqualified Shareholder, in each case immediately prior to the Effective Time, shall be cancelled and
extinguished at the Effective Time without any conversion thereof and no payment shall be made with respect thereto. 

        (f)    Stock of Merger Sub.    Each share of common stock of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into one (1) validly issued fully paid and nonassessable share of common stock of the Surviving Corporation. 

        3.2    Exchange of Certificates and Instruments.    

        (a)    Exchange Procedures.    Not less than five (5) business days prior to the Closing Date, Parent will send
to each Participating Holder that is a holder of Company Stock or of Eligible Company Options or Common Warrants a letter of transmittal, in substantially the form attached hereto as  Exhibit H, for the
delivery to Parent, together with the certificate or certificates representing the shares of Company Stock held by such Participating
Holder (each a "Certificate" 

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Treatment Requested. Omitted portions filed with the Commission. 

33

 

and
collectively the "Certificates") and the grant and other documents evidencing any Eligible Company Options or Common Warrants (the
"Rights Documents") held by such Participating Holder, or Lost Certificate or Document Affidavits pursuant to Section 3.4 hereof. Pursuant to
Section 2.6(d), the receipt by Parent and the Holders Representative of such transmittal letter and the Certificates for outstanding shares of Company Preferred Stock shall be a condition
precedent to the delivery by Parent to holders of any such shares of Company Preferred Stock of any portion of the Preferred Stock Closing Amount to which such Participating Holder may be entitled
under Sections 2.6(a) and 2.6(d) of this Agreement in respect of the shares of Company Preferred Stock held by such Participating Holder. Pursuant to Section 3.1 of the LLC
Agreement, the receipt by Parent and the Holders Representative of such transmittal letter and the Certificates and Rights Documents for all other shares of Company Stock, Eligible Company Options or
Common Warrants held by any Participating Holder shall be a condition precedent to the distribution by the Holders Representative of any portion of the Contingent Consideration to which such
Participating Holder may be or become entitled under Sections 2.7(a) or 2.7(b) of this Agreement. Whether or not surrendered as contemplated by this Section 3.2(a), each Certificate and
Rights Document shall be deemed at any time after the Effective Time to represent only the right to receive following such surrender the applicable amounts of the Merger Consideration payable with
respect thereto pursuant to this Agreement and Section 3.1 of the LLC Agreement. The transmittal materials contemplated by this Section 3.2(a) may include any certifications
Parent may request with respect to compliance with any withholding obligations of Parent or the Surviving Corporation under the Code or other applicable Tax law. 

        (b)    No Further Rights as Shareholders or Option or Warrant Holders.    After the Effective Time, holders of Company
Stock, Company Options, or Common Warrants outstanding immediately prior to the Effective Time will cease to be, and will have no rights as, shareholders or option or warrant holders of the Company or
the Surviving Corporation, other than (i) in the case of Company Stock (other than Dissenting Shares and other than any shares held by Disqualified Shareholders), Company Options or Common
Warrants, the rights to receive the applicable portions of the Merger Consideration payable with respect thereto pursuant to Sections 2.6 and 2.7 of this Agreement and Section 3.1 of
the LLC Agreement, and (ii) in the case of Dissenting Shares, the rights afforded to the holders thereof under Washington Law. 

        (c)    Abandoned Property.    None of Parent, the Surviving Corporation or the Holders Representative shall be liable
to any holder of Company Stock, Common Warrants or Company Options for any portion of the Merger Consideration properly delivered to an appropriate public official pursuant to any abandoned property,
escheat or similar law. 

        (d)    Withholding Rights.    Each of the Surviving Corporation, Parent and the Holders Representative shall be
entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Common Stock, Company Preferred Stock or Company Options such amounts as
are required to be deducted and withheld (or previously to have been deducted and withheld) under the Code, or under any provision of state, local or foreign Tax law, from such consideration (or from
any prior payment of Merger Consideration). To the extent that amounts are so withheld by the Surviving Corporation, Parent or the Holders Representative, as the case may be, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to such holder in respect of which such deduction and withholding was made by the Surviving Corporation or Parent, as the case
may be. 

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Treatment Requested. Omitted portions filed with the Commission. 

34

 

        3.3    No Transfers.    

        (a)   At
the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of Company Stock thereafter on the
records of the Company. If, after the Effective Time, Certificates are presented (for transfer or otherwise) to the Surviving Corporation or the Holders Representative, they will be canceled and
exchanged for the right to receive that portion of the Merger Consideration payable in respect thereof pursuant to Sections 2.6 and 2.7 of this Agreement and Section 3.1 of
the LLC Agreement (or returned to the presenting person, if such certificate represents Dissenting Shares), provided that each person
surrendering the Certificate or Certificates complies with all of the provisions of Section 3.2(a) hereof and this Section 3.3. 

        (b)   To
the extent permitted by applicable law, the right of each Participating Holder to receive the portion of the Merger Consideration, if any, to which such Participating
Holder is entitled pursuant to Sections 2.6 and 2.7 of this Agreement upon consummation of the Merger: (i) shall be personal to such Participating Holder; (ii) shall not be
transferable by such Participating Holder or any person claiming under such Participating Holder, whether by sale, assignment, pledge or otherwise, except as set forth below in this
Section 3.3(b), and any other purported transfer shall be void and of no force or effect; (iii) shall not constitute or represent any equity or ownership interest in Parent or the
Surviving Corporation; and (iv) shall not entitle such Participating Holder to any voting or dividend rights, or to any other rights common to shareholders in the Surviving Corporation.
Notwithstanding the foregoing, this Agreement shall not restrict any Participating Holder from transferring any part or all of such Participating Holder's right to receive the portion of the Merger
Consideration, if any, to which such Participating Holder is entitled pursuant to Sections 2.6 and 2.7 of this Agreement upon consummation of the Merger (A) to the Holders Representative
for application and distribution in accordance with the terms of the LLC Agreement, or indirectly by means of any transfers of part or all of the Participating Holder's membership interest in
the Holders Representative, (B) to other entities controlled by such Participating Holder, (C) in the case of any Participating Holder that is a corporation, general partnership, limited
partnership, limited liability company or venture capital firm, to such Participating Holder's shareholders, partners, members or other holders of equity securities in such Participating Holder, as
applicable, (D) in connection with tax, estate or financial planning, (E) upon the death of such Participating Holder, (F) to such Participating Holder's ancestors, descendants,
spouse, siblings or other family members, or to a trust for the benefit of some or all of such persons, or (G) by operation of law, provided
that, (1) such Participating Holder (or in the event of death, if applicable, such Participating Holder's executor or legal representative) provides to Parent and the Holders Representative
prompt written notice of such transfer, which written notice shall be given in accordance with the provisions of Section 11.4 hereof and shall set forth the name and address of each transferee,
(2) such Participating Holder does not receive any consideration in connection with such transfer, (3) any such permitted transferee agrees to assume that portion of the obligations of
such Participating Holder under this Agreement and the LLC Agreement to the extent such obligations are applicable to the portion of the Merger Consideration so transferred to such permitted
transferee, and (4) such transfer shall not violate, or cause Parent to be in violation, of any federal or state securities laws, as reasonably determined by Parent's legal counsel. Subsequent
transfers by any such transferee of the right to receive a portion of the Merger Consideration shall also be made pursuant to, and in accordance with, all of the provisions of this
Section 3.3(b) to the same extent as if each such transferee were a Participating Holder. 

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Treatment Requested. Omitted portions filed with the Commission. 

35

 

        3.4    Lost Certificates, Etc.    In the event that any Certificate or Rights Document has been lost, stolen, or
destroyed, then upon receipt by Parent or the Holders Representative, as applicable, of appropriate evidence as to such loss, theft, or destruction, and to the ownership of such Certificate or Rights
Document by the person claiming such Certificate or Rights Document to be lost, stolen, or destroyed, the receipt by Parent or the Holders Representative, as applicable, (or their designees) of an
affidavit (a "Lost Certificate or Document Affidavit") with appropriate and customary indemnification and the surrender pursuant to
Section 3.2(a) hereof by such person of all other Certificates and Rights Documents registered in the name of such person that have not been lost, stolen, destroyed or previously surrendered,
then such person shall be entitled to receive the appropriate portion of the Merger Consideration pursuant to the provisions of Sections 2.6 and 2.7 hereof and Section 3.1 of
the LLC Agreement. 

        3.5    No Interest.    Except as otherwise provided in Section 2.7(l), no interest shall be paid or shall
accrue on the Merger Consideration or any portion thereof payable by Parent or the Holders Representative pursuant to, and in accordance with, the provisions of this Agreement or the LLC
Agreement. 

        3.6    Dissenting Shares.    

        (a)   Notwithstanding
any provision of this Agreement to the contrary, Dissenting Shares shall not be converted into or represent the right to receive any portion of the
amounts to be paid pursuant to Section 3.1, but the holders thereof shall only be entitled to such rights as are granted by Washington Law. All Dissenting Shares held by shareholders who shall
have failed to perfect or who effectively shall have withdrawn or lost their appraisal rights shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the later
of the Effective Time or the occurrence of such event, the right to receive an appropriate portion of the amounts to be paid pursuant to Sections 2.6 and 2.7 of this Agreement and
Section 3.1 of the LLC Agreement, without any interest thereon, upon surrender, in the manner provided in Section 3.2, of the Certificates that formerly evidenced such shares. 

        (b)   The
Company shall give Parent prompt notice of any demands for (or notice of intent to demand) appraisal of shares of Company Stock received by the Company, any
withdrawals of such demands, and any other related instruments served pursuant to Washington Law, if any, and received by the Company. All negotiations and proceedings with respect to any demands for
the payment of fair value for shares of Company Stock under Washington Law shall be controlled by the Company prior to the Effective Time, and shall be jointly controlled by Parent and the Holders
Representative after the Effective Time. During any period of joint control of such negotiations and proceedings, Parent or the Holders Representative, as applicable, shall consult with the other
periodically, shall allow the other to participate at its own expense in any such negotiations or proceedings and shall not, except with the prior written consent of the other, which consent shall not
be unreasonably withheld, make any payment with respect to any demands for the appraisal of shares of Company Stock or settle or offer to settle any such demands other than by operation of law or
pursuant to a final order of a court of competent jurisdiction. In the event that any Company Shareholder exercises his, her or its appraisal rights pursuant to Washington Law, then Parent shall be
entitled to seek indemnification pursuant to, 

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36

 

and
in accordance with, the provisions of Article 9 hereof in connection with any Damages suffered or incurred by Parent in connection with such exercise of appraisal rights (other than costs
incurred by Parent as a result of participation at its own expense, as described above). 

        3.7    Holders Representative.    

        (a)    Appointment of Holders Representative.    IB Securityholders, LLC is hereby appointed, effective from
and after the Effective Time of the Merger, to act as the Holders Representative under this Agreement in accordance with the terms of this Section 3.7 and the Escrow Agreement. The member(s) of
the limited liability company acting as the Holders Representative under this Agreement are, pursuant to Section 2.7 of the LLC Agreement required to designate (and notify Parent of such
designation) a single member of the board of managers of such limited liability company (the "Board of Managers") upon whose instruction Parent, the
Merger Sub and the Surviving Corporation shall be entitled to rely, without any investigation or inquiry, as having been taken or not taken upon the authority of the Holders Representative. Any
provision of this Agreement that requires that any Member of the Buyer Group take any action with respect to the Holders Representative (including, without limitation, any notice given, or payment
made, by Parent to the Holders Representative) shall be deemed fully performed and complied with by such Buyer Group member in the event that any such action is taken by such Buyer Group member with
respect to such single member of the Board of Managers so designated by the members of such limited liability company pursuant to the provisions of the immediately preceding sentence. 

        (b)    Authority After the Effective Time.    From and after the Effective Time, the Holders Representative shall be
authorized to: 

          (i)  take
all actions required or permitted by, and exercise all rights granted to, the Holders Representative in this Agreement or the Escrow Agreement; 

         (ii)  receive
all notices or other documents given or to be given to the Holders Representative by Parent pursuant to this Agreement or the Escrow Agreement; 

        (iii)  negotiate,
undertake, compromise, defend, resolve and settle any suit, proceeding or dispute under this Agreement or the Escrow Agreement on behalf of the
Participating Holders; to this Agreement or the Escrow Agreement; 

        (iv)  subject
to Section 3.6 hereof, jointly control with Parent the negotiation, conduct and settlement of any claims or proceedings relating to Dissenting Shares; 

         (v)  execute
and deliver all agreements, certificates and documents required or deemed appropriate by the Holders Representative in connection with any of the transactions
contemplated by this Agreement (including executing and delivering the Escrow Agreement); 

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37

 

 

        (vi)  engage
special counsel, accountants and other advisors and incur such other expenses in connection with any of the transactions contemplated by this Agreement or the
Escrow Agreement on behalf of the Participating Holders; 

       (vii)  approve
of and execute amendments to this Agreement in accordance with this Agreement; 

      (viii)  apply,
out of the Holders Representative Reimbursement Amount or any portion of the Escrow Funds to which the Participating Holders are entitled pursuant to this
Agreement or the Escrow Agreement, to the payment of (or reimbursement of the Holders Representative for) expenses and liabilities which the Holders Representative may incur pursuant to this
Section 3.7; 

        (ix)  receive
and manage the Grantback Assets pursuant to Section 6.10 hereof; 

         (x)  receive
and distribute all or any portion of the Contingent Consideration pursuant to, and in accordance with, the provisions of Section 2.7 hereof and
Section 3.1 of the LLC Agreement; and 

        (xi)  take
such other action as the Holders Representative may deem appropriate on behalf of the Participating Holders, including: 

        (A)  agreeing
to any modification or amendment of this Agreement or the Escrow Agreement and executing and delivering any such modification or amendment agreement; 

        (B)  taking
any actions required or permitted under the Escrow Agreement or the LLC Agreement; and 

        (C)  all
such other matters as the Holders Representative may deem necessary or appropriate to carry out the intents and purposes of this Agreement, the Escrow Agreement and
the LLC Agreement. 

        (c)    Extent and Survival of Authority.    The appointment of the Holders Representative is intended to be an agency
coupled with an interest and is irrevocable and any action taken by the Holders Representative pursuant to the authority granted in this Section 3.7 or under the Escrow Agreement shall be
effective and absolutely binding on each Participating Holder notwithstanding any contrary action of or direction from such Participating Holder, except for actions or omissions of the Holders
Representative constituting willful misconduct or gross 

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Treatment Requested. Omitted portions filed with the Commission. 

38

 

negligence.
The death or incapacity, or dissolution or other termination of existence, of any Participating Holder shall not terminate the authority and agency of the Holders Representative. By virtue
of the adoption of this Agreement and the approval of the Merger by the shareholders of the Company, each Participating Holder (regardless of whether or not such Participating Holder votes in favor of
the adoption of this Agreement and the approval of the Merger, whether at a meeting or by written consent in lieu thereof) hereby agrees to the provisions of this Agreement, including, without
limitation, the provisions of this Section 3.7 and Article 9 hereof. 

        (d)    Release from Liability; Indemnification.    Each Participating Holder hereby releases the Holders
Representative from and each Participating Holder (in the same proportion as the portion of the Merger Consideration to which such Participating Holder is entitled as of the Effective Time bears to
the portion of the Merger Consideration to which all Participating Holders collectively are entitled as of the Effective Time) agrees to indemnify the Holders Representative, and each of its managers,
members, officers, agents and representatives, against, liability for any action taken or not taken by it or any of them relating to the Holders Representative's non-performance, actions
or omissions as such agent, except for the liability of the Holders Representative to Participating Holders for loss which such holder may suffer from the willful misconduct or gross negligence of the
Holders Representative in carrying out its duties hereunder or under the Escrow Agreement. 

        (e)    Reimbursement of Expenses.    The Holders Representative shall receive no compensation for services performed
as the Holders Representative, but shall receive reimbursement from, and be indemnified by, the Participating Holders, pro rata, for any and all expenses, charges and liabilities incurred in
connection with such performance, including, but not limited to, reasonable attorneys' fees, incurred by the Holders Representative in the performance or discharge of its duties pursuant to this
Section 3.7, the Escrow Agreement and the LLC Agreement, which expenses, charges and liabilities shall be (1) first, charged against any Holders Representative Reimbursement
Amounts retained on behalf of the Holders Representative, (2) second, charged against any Escrow Funds that would be distributed to the Participating Holders pursuant to this Agreement, the
Escrow Agreement or the LLC Agreement and (3) third, offset against the Contingent Consideration, if any, paid to the Holders Representative pursuant to this Agreement. Unless the
Participating Holders pay all such expenses, charges and liabilities upon demand by the Holders Representative, the Holders Representative shall have no obligation to incur such expenses, charges or
liabilities, or to continue to perform any duties hereunder. 

        (f)    Amendment of the LLC Agreement.    Without the prior written consent of Parent, which consent shall not
be unreasonably withheld, Section 3.1 of the LLC Agreement governing the distribution of the payments of the Merger Consideration to the Participating Holders shall not be amended. The
Holders Representative and the Participating Holders shall indemnify and hold Parent harmless from any liability arising out of errors or other breaches of the distributions provisions of
the LLC Agreement in connection with the allocation or payment of Merger Consideration to the Participating Holders for payment of the Merger Consideration. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

39

 
ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE COMPANY  

        The Company hereby represents and warrants to Parent, the Merger Sub and the Surviving Corporation as follows as of each of (a) the Agreement Date and
(b) the Closing Date, subject in each case to such exceptions as are set forth in the Company's disclosure schedule attached to this Agreement which disclosure schedule complies with
Section 11.5 hereof (the "Company Disclosure Schedule"): 

        4.1    Incorporation; Authority.    The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Washington and has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as presently conducted
and as presently proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction where such qualification is required and in which failure to
so qualify would have a Material Adverse Effect on the Company. The Company has delivered to Parent complete and correct copies of its articles of incorporation and by-laws, in each case
with all amendments thereto, which articles of incorporation and by-laws are in full force and effect. 

        4.2    Authorization and Enforceability.    The Company has all requisite corporate power to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company, subject only to the approval of the Merger and the adoption of this Agreement by the Company's shareholders. The Company Board has
(i) approved and declared the advisability of this Agreement and the transactions contemplated hereby and (ii) determined that the Merger is in the best interests of the shareholders of
the Company and is on terms that are fair to such shareholders. This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except as such enforcement may be limited by (i) the effect of bankruptcy, insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights, or (ii) the rules governing the availability of specific performance, injunctive relief or other equitable remedies and general principles of equity,
regardless of whether considered in a proceeding in law or equity. 

        4.3    Governmental and Other Third-Party Consents, Non-Contravention, Etc.    No consent, approval, order
or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection
with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for (i) the filing of Merger Documents with the Delaware Secretary of
State and Washington Secretary of State, as applicable; and (ii) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect on the Company and would not prevent, or materially alter or delay any of the transactions contemplated by this Agreement. The execution, delivery, and performance of this
Agreement and the consummation of such transactions will not violate (a) any provision of the Company's articles of incorporation or by-laws, as amended and in effect at the
Effective Time, (b) any order, judgment, injunction, award or decree of any court or state or federal governmental or regulatory body applicable to the Company, or (c) any judgment,
decree, order, statute, rule, regulation, agreement, instrument, or other obligation to which the Company is a party or by or to which it or any of its assets is bound or subject, which violation will
not have a Material Adverse Effect on the Company. 

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Treatment Requested. Omitted portions filed with the Commission. 

40

 

        4.4    Capitalization.    The authorized and outstanding capital stock and other securities of the Company are as set
forth in Schedule 4.4 of the Company Disclosure Schedule including (1) the total number of shares of Company Common Stock for which all
shares of Company Preferred Stock outstanding immediately prior to the Effective Time are then convertible in the aggregate, (2) the number of shares of Company Common Stock for which each
share of Company Preferred Stock outstanding immediately prior to the Effective Time is then convertible, (3) the total number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time, (4) a list of each Eligible Company Option and each Common Warrant, the exercise price per share thereof, the aggregate exercise price thereof and the
name of the holder thereof, (5) the number of shares of Company Common Stock issuable upon exercise of the Common Warrants immediately prior to the Effective Time, (6) the total number
of shares of Company Common Stock issuable upon exercise of all Eligible Company Options, (7) the aggregate exercise price of those Eligible Company Options that are entitled to receive any
portion of the Merger Consideration pursuant to Section 3.1(c) hereof, and (8) the aggregate exercise price of those Common Warrants, if any, that are outstanding immediately prior to
the Effective Time and that are entitled to receive any portion of the Merger Consideration pursuant to Section 3.1(d)(II) hereof. All of such outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and non-assessable, and all of such outstanding shares and other securities are owned of record as set forth in  Schedule 4.4 of the Company
Disclosure Schedule, and were issued in compliance with all applicable laws, including securities laws, and all
applicable preemptive or similar rights of any person. No person has a valid right to rescind any purchase of any shares of the Company's capital stock or other securities. Other than as set forth on  Schedule 4.4 of the Company Disclosure Schedule, there are no agreements or other obligations to which the Company is a party or by which it is
bound to purchase or sell any shares of its capital stock or other securities, and no outstanding convertible or exchangeable securities, options, warrants or other rights to acquire from the Company
any shares of its capital stock or other securities. Schedule 4.4 of the Company Disclosure Schedule sets forth the name of each person who holds
any option, warrant or other right to acquire shares of the Company's capital stock or other securities, the number and type of shares or securities subject to such option or right, the
per-share exercise price payable therefor and, in the case of warrants, the priority and amount of consideration to be payable upon exercise thereof. The per-share exercise
price payable for each of the options set forth on Schedule 4.4 of the Company Disclosure Schedule is equal to or greater than the fair market value of
the Company Common Stock as of the date of grant of each such option. Each option set forth on Schedule 4.4 of the Company Disclosure Schedule, and all
options outstanding immediately prior to the Effective Time, have been, or shall be, as the case may be, granted under, and are or shall be, as the case may be, subject to, all of the terms of the
Company Plan. 

        4.5    Subsidiaries.    The Company does not have any Subsidiaries or own any legal and/or beneficial interests in or
to any other business enterprise or other person. 

        4.6    Financial Statements.    Attached to Schedule 4.6 of the
Company Disclosure Schedule are copies of the audited balance sheet of the Company as of December 31, 2006, and the related audited statements of income and retained earnings and
cash flows, respectively, of the Company, for the fiscal year ended on such date, certified by Moss Adams LLC, independent 

	*
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Treatment Requested. Omitted portions filed with the Commission. 

41

 

public
accountants, and copies of the unaudited balance sheet of the Company as of June 30, 2007, and the related unaudited statements of income and retained earnings and cash flows,
respectively, of the Company for the six months then ended (collectively, the "Financial Statements" and such unaudited balance sheet as of
June 30, 2007, the "Company's Most Recent Balance Sheet"). Such financial statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods; such balance sheet presents fairly and accurately in all material respects the financial condition of the Company as of its
respective date; and such statements of income and retained earnings and cash flows, respectively, presents fairly and accurately in all material respects the results of operations and retained
earnings, or cash flows, as the case may be, of the Company for the period covered thereby, except, in the case of unaudited interim financial statements, subject to normal year-end
adjustments that have not been and are not expected to be material in amount. 

        4.7    Absence of Certain Changes.    Since the date of the Company's Most Recent Balance Sheet, except as disclosed
on Schedule 4.7 of the Company Disclosure Schedule, there has not been any: (i) change in the assets, liabilities, sales, income, or
business of the Company or in its relationships with suppliers, customers, or lessors, other than changes that were both in the ordinary course of business and have not caused, either in any case or
in the aggregate, a Material Adverse Effect on the Company; (ii) acquisition or disposition by the Company of any material asset or property; (iii) damage, destruction or loss, whether
or not covered by insurance, materially and adversely affecting, either in any case or in the aggregate, the business or any material property of the Company; (iv) declaration, setting aside or
payment of any dividend or any other distributions in respect of any shares of capital stock of the Company; (v) issuance of any shares of the capital stock of the Company or any direct or
indirect redemption, purchase, or other acquisition by the Company of any such capital stock; (vi) loss of the services of any officer or key employee or consultant, or any increase in the
compensation, pension, or other benefits payable or to become payable by the Company to any of its officers or key employees or consultants, or any bonus payments or arrangements made to or with any
of them; (vii) forgiveness or cancellation of any debts or claims by the Company or any waivers of any rights; (viii) entry by the Company into any transaction with any of its
Affiliates; (ix) incurrence by the Company of any obligations or liabilities, whether absolute, accrued, contingent or otherwise (including without limitation liabilities as guarantor or
otherwise with respect to obligations of others), other than obligations and liabilities incurred in the ordinary course of business with persons other than Affiliates of the Company;
(x) incurrence or imposition of any Lien on any of the assets, tangible or intangible, of the Company; or (xi) discharge or satisfaction by the Company of any Lien or payment by the
Company of any obligation or liability (fixed or contingent) other than (A) current liabilities included in the Company's Most Recent Balance Sheet, (B) current liabilities to persons
other than Affiliates of the Company incurred since the date of the Company's Most Recent Balance Sheet in the ordinary course of business, and (C) current liabilities incurred in connection
with the transactions contemplated hereby and as disclosed in Schedule 4.7 of the Company Disclosure Schedule. 

        4.8    Properties and Assets.    

        (a)   The
Company has good and marketable title or leasehold title, as the case may be, to all of its assets and properties that it purports to own or lease, including without
limitation all those reflected in the Company's Most Recent Balance Sheet (except for properties or assets 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

42

 

sold,
consumed, or otherwise disposed of in the ordinary course of business since the date of the Company's Most Recent Balance Sheet), all free and clear of Liens on the Company's interest therein.
All such properties and assets are in good condition and repair, reasonable wear-and-tear excepted, and are, and as of the Closing Date will be, adequate and sufficient to
carry on the business of the Company as presently conducted. Schedule 4.8 of the Company Disclosure Schedule sets forth a complete and correct
list of all capital assets of the Company. 

        (b)   The
Company does not own any real property. The Company has not received any notice that either the whole or any portion of any real property leased by it is to be
condemned, requisitioned, or otherwise taken by any public authority or is to be the subject of any public improvements that may result in special assessments against or otherwise affect such real
property. Schedule 4.8 of the Company Disclosure Schedule sets forth a complete and correct description of all leases of real property to which
the Company is a party. Complete and correct copies of all such leases have been delivered to Parent. Each such lease is valid and subsisting and no event or condition exists that constitutes, or
after notice or lapse of time or both could constitute, a default thereunder by the Company, or to its knowledge, any other person. The leasehold interests of the Company are subject to no Lien, and
the Company is in quiet possession of the properties covered by such leases. 

        4.9    Intellectual Property.    

        (a)   Schedule 4.9(a) of the Company Disclosure Schedule lists all inter
partes proceedings or actions known to the Company before any court or tribunal (including the PTO or equivalent authority anywhere in the world) related to any Company
Intellectual Property. To the Company's knowledge, no Company Intellectual Property is the subject of any inter partes proceeding or outstanding decree,
order, judgment, agreement, or stipulation restricting in any manner the use, transfer, or licensing thereof by the Company, or which may affect the validity, use or enforceability of such Company
Intellectual Property. 

        (b)   With
respect to each item of Company Registered Intellectual Property, necessary registration, maintenance, annuities and renewal fees in connection with such Company
Registered Intellectual Property have been made and all necessary documents and certificates in connection with such Company Registered Intellectual Property have been filed with the relevant patent
authorities in the United States and elsewhere in the world for the purposes of maintaining such Company Registered Intellectual Property and no information material to patentability under applicable
law has been withheld from the examining office that would constitute fraud or inequitable conduct. 

        (c)   All
Company Registered Intellectual Property is, and all agreements related thereto are, listed on Schedule 4.9(c)
of the Company Disclosure Schedule. The Company owns and has good and exclusive title, or the Company exclusively licenses, in each case free and clear of any Lien, all Company Registered Intellectual
Property listed on Schedule 4.9(c) of the Company Disclosure Schedule. 

        (d)   To
the extent that any work, invention, or material has been developed or created by a third party for the Company, the Company has a written agreement with such third
party with respect thereto and the Company has obtained ownership of, and is the exclusive owner of, or has a valid 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

43

 

license
to use, all Company Intellectual Property in such work, material or invention by operation of law or by valid assignment or by agreement, as the case may be. Schedule
4.9(d) of the Company Disclosure Schedule lists each such agreement referred to in the previous sentence of this Section 4.9(d). To the knowledge of the Company and any
of its Subsidiaries, no employee, independent contractor or agent of the Company or any of its Subsidiaries is in material default or breach of any term of any employment agreement,
non-disclosure agreement, assignment of invention agreement or similar agreement, contract or company policy or practice relating in any way to the protection, ownership, development, use
or transfer of Company Intellectual Property. 

        (e)   Except
as set forth on Schedule 4.9(e) of the Company Disclosure Schedule, the Company has not transferred
ownership of, or granted any license with respect to, any Company Intellectual Property to any third party. Schedule 4.9(e) of the Company
Disclosure Schedule lists all contracts, licenses and agreements to which the Company is a party that are currently in effect (i) with respect to Company Intellectual Property licensed or
offered to any third party; or (ii) pursuant to which a third party has licensed or transferred any Company Intellectual Property to the Company. 

        (f)    Schedule 4.9(f) of the Company Disclosure Schedule lists all contracts, licenses and agreements between the
Company and any third party wherein or whereby the Company has agreed to, or assumed, any obligation or duty to warrant, indemnify, hold harmless or otherwise assume or incur any obligation or
liability with respect to the infringement or misappropriation by the Company of any third party's Intellectual Property. 

        (g)   To
the Company's knowledge, the contracts, licenses and agreements listed on Schedules 4.9(e) and  4.9(f) of the Company Disclosure Schedule are in full
force and effect. The consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination, or suspension of, nor require the consent of any party to, such contracts, licenses and agreements listed on  Schedules 4.9(e) and 4.9(f) of the Company Disclosure Schedule. The Company is in compliance
with, and has not breached any term any of such contracts, licenses and agreements listed on Schedules 4.9(e) and  4.9(f) of the Company Disclosure
Schedule and, to the knowledge of the Company, all other parties to such contracts, licenses and agreements listed on  Schedules 4.9(e) and 4.9(f) of
the Company Disclosure Schedule are in compliance with, and have
not breached any term of, such contracts, licenses and agreements. To the Company's knowledge, following the Closing Date, the Surviving Corporation will be permitted to exercise all of the Company's
rights under the contracts, licenses and agreements listed on Schedules 4.9(e) and 4.9(f) of the
Company Disclosure Schedule to the same extent the Company would have been able to had the transaction contemplated by this Agreement not occurred and without the payment of any additional funds other
than ongoing fees, royalties or payments which the Company would otherwise be required to pay. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

44

 

        (h)   The
Company (including its executive officers, directors and, to the Company's knowledge, employees) has not received notice from any third party, nor does the Company
have knowledge of any basis for any third-party claim that could assert, that (i) the operation of its business, (ii) the research, development, use, manufacture, sale, other
commercialization or importation of any product or product candidate of the Company or (iii) the provision by the Company of any services, would, or is reasonably likely to, infringe or
misappropriate the Intellectual Property of any third party (other than any infringement of claims under patent applications of third parties that have not yet published) or constitute unfair
competition or trade practices under the laws of any jurisdiction. 

        (i)    Except
as set forth in Schedule 4.9(i) of the Company Disclosure Schedule, to the Company's knowledge,
(i) no person has infringed or misappropriated or is infringing or misappropriating any Company Intellectual Property and (ii) there have been, and are, no claims asserted against the
Company or against any licensee of the Company with respect to the Company Intellectual Property. 

        (j)    The
Company maintains reasonable security measures for the preservation of the secrecy and proprietary nature of such of the Company Intellectual Property as constitute
trade secrets or other confidential information. No officer, director, employee, or consultant of the Company is obligated under or bound by any agreement or instrument, or any judgment, decree, or
order of any court of administrative agency, that (i) conflicts or may conflict with his agreements and obligations to use his best efforts to promote the interest of the Company,
(ii) conflicts or may conflict with the business or operations of the Company, or (iii) restricts or may restrict the use or disclosure of any information that may be useful to the
Company. 

        (k)   Schedule 4.9(k) of the Company Disclosure Schedule lists all patent searches that have been performed, initiated
or requested by the Company or any of its employees, attorneys or agents. 

        4.10    Indebtedness.    The Company has no Indebtedness outstanding except as set forth in  Schedule 4.10 of the Company
Disclosure Schedule. The Company is not in default with respect to any outstanding Indebtedness or any agreement,
instrument, or other obligation relating thereto and no such Indebtedness or any agreement, instrument or other obligation relating thereto purports to limit the issuance of any securities by the
Company, or (except as set forth on Schedule 4.10 of the Company Disclosure Schedule) the operation of its businesses. Complete and correct
copies of all agreements, instruments, and other obligations (including all amendments, supplements, waivers, and consents) relating to any Indebtedness of the Company have been furnished to Parent. 

        4.11    Absence of Undisclosed Liabilities.    Except to the extent (a) reflected or reserved against in the
Company's Most Recent Balance Sheet, (b) described on Schedule 4.11 of the Company Disclosure Schedule, or (c) the payment or
satisfaction of which has been provided for by cash in the Company's bank accounts or otherwise in its possession, the Company does not have any liabilities or obligations, whether accrued, absolute,
contingent, or otherwise (including, without limitation, liabilities, as guarantor or otherwise, in respect of obligations of others) that would be required to be reflected or reserved against in a
balance sheet prepared in accordance with generally accepted accounting principles or referred to in the notes thereto. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

45

 

        4.12    Taxes.    

        (a)    Filing of Tax Returns and Payment of Taxes.    The Company has timely filed all Tax Returns required to be
filed by it, each such Tax Return has been prepared in compliance with all applicable laws and regulations, and all such Tax Returns are true, accurate and complete in all respects. All Taxes that
have become due and payable by the Company have been timely paid, and the Company is not and will not be liable for any additional Taxes in respect of any Taxable period or any portion thereof ending
on or before the date of the unaudited consolidated financial statements forming part of the Financial Statements included in the Company Disclosure Schedule in an amount that exceeds the
corresponding reserve therefor separately identified in Schedule 4.12(a) of the Company Disclosure Schedule, if any, as reflected in such Financial
Statements. Taxes of the Company arising after such date and at or before the Effective Time have been or will be incurred in the ordinary course of the business of the Company. The Company has
delivered to Parent true, correct and complete copies of all Tax Returns with respect to income Taxes filed by or with respect to it with respect to Taxable periods ended on or after
December 31, 2002 (the "Delivered Tax Returns"), and has delivered or made available to Parent all relevant documents and information with
respect thereto, including without limitation work papers, records, examination reports, and statements of deficiencies proposed, assessed against or agreed to by the Company. 

        (b)    Deficiencies.    No deficiency or adjustment in respect of Taxes has been proposed, asserted or assessed by any
Taxation Authority against the Company. There are no outstanding refund claims with respect to any Tax or Tax Return of the Company. 

        (c)    Liens.    There are no liens for Taxes (other than liens for current Taxes not yet due and payable) on any of
the assets of the Company. 

        (d)    Extensions to Statute of Limitations for Assessment of Taxes.    The Company has not consented to extend the
time in which any Tax may be assessed or collected by any Taxation Authority which extension is still in effect. 

        (e)    Extensions of the Time for Filing Tax Returns.    The Company has not requested or been granted an extension of
the time for filing any Tax Return that has not yet been filed. 

        (f)    Pending Proceedings.    There is no action, suit, Taxation Authority proceeding, or audit with respect to any
Tax now in progress, pending or, to the knowledge of the Company, threatened against or with respect to the Company. No claim for assessment or collection of Taxes which previously has been asserted
relating in whole or in part to the Company remains unpaid. 

        (g)    No Failures to File Tax Returns.    No claim has ever been made by a Taxation Authority in a jurisdiction where
the Company does not pay Tax or file Tax Returns that the Company is or may be subject to Taxes assessed by such jurisdiction. 

        (h)    Elections.    All elections with respect to Taxes affecting the Company that were not made in the Delivered Tax
Returns are described in Schedule 4.12(h) of the Company Disclosure Schedule. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

46

 

        (i)    Membership in Affiliated Groups, Liability for Taxes of Other Persons, Etc.    Except for the affiliated group
of corporations of which the Company was the common parent corporation, the Company has never been a member of any affiliated group of corporations (as defined in Section 1504(a) of the Code)
or filed or been included in a combined, consolidated or unitary Tax Return. The Company is neither a party to nor bound by any Tax sharing or allocation agreement. The Company is not presently
liable, nor does the Company have any potential liability, for the Taxes of another person other than the Company or any Subsidiary (i) under Treasury Regulations
Section 1.1502-6 (or comparable provision of state, local or foreign law), (ii) as transferee or successor, or (iii) by contract or indemnity or otherwise. 

        (j)    Adjustments under Section 481.    The Company will not be required, as a result of a change in method of
accounting for any period ending on or before or including the Effective Time, to include any adjustment under Section 481(c) of the Code (or any similar or corresponding provision or
requirement under any other Tax law) in Taxable income for any period ending on or after the Effective Time. The Company will not be required to include any item of income in Taxable income for any
Taxable period (or portion thereof) ending after the Closing Date as a result of any (i) prepaid amount received on or prior to the Closing Date, or (ii) "closing agreement" described in
Section 7121 of the Code (or any similar or corresponding provision of any other Tax law). 

        (k)    Withholding Taxes.    The Company has timely withheld and timely paid all Taxes which are required to have been
withheld and paid by it in connection with amounts paid or owing to any employee, independent contractor, creditor, supplier, shareholder or other person. 

        (l)    Permanent Establishments and Branches Outside the United States.    Except as set forth in  Schedule 4.12(l) of the Company
Disclosure Schedule, the Company does not have a "permanent establishment" as defined in the applicable Tax convention
or treaty, in any country with which the United States of America has such a Tax convention or treaty, and does not otherwise operate or conduct business through any branch subject to income Tax in
any country other than the United States. 

        (m)    U.S. Real Property Holding Corporation.    The Company is not and has not been a United States real property
holding corporation, within the meaning of Code Section 897(c)(2), during the applicable period specified in Code Section 897(c)(1)(A)(ii). 

        (n)    Safe Harbor Lease Property.    None of the property owned or used by the Company is subject to a Tax benefit
transfer lease executed in accordance with Section 168(f)(8) of the Internal Revenue Code of 1954, as amended by the Economic Recovery Tax Act of 1981. 

        (o)    Tax-Exempt Use Property.    None of the property owned by the Company is "tax-exempt
use property" within the meaning of Section 168(h) of the Code. 

        (p)    Security for Tax-Exempt Obligations.    None of the assets of the Company directly or indirectly
secures any Indebtedness, the interest on which is tax-exempt under Section 103(a) of the Code, and the Company is not directly or indirectly an obligor or a guarantor with respect
to any such Indebtedness. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

47

 

        (q)    Section 341(f) Consent.    The Company has not filed any consent agreement under Section 341(f)
of the Code (as in effect prior to its repeal by the Jobs and Growth Tax Relief Reconciliation Act of 2003) or agreed to have Section 341(f)(2) of the Code (as in effect prior to such repeal)
apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code prior to such repeal) owned by the Company. 

        (r)    Parachute Payments, Etc.    The Company has not made any payments, is not obligated to make any payments, and
is not a party to any agreement that could obligate it, in connection with this Agreement or the transactions contemplated by this Agreement, to make any payments, that will not be deductible under
Code Sections 162(m) or 280G, other than any payments for which stockholder approval satisfying the requirements of Code Section 280G(b)(5) and the Treasury Regulations thereunder will
be obtained prior to the Closing. 

        (s)    Rulings.    There are no outstanding rulings of, or requests for rulings by, any Taxation Authority addressed
to the Company that are, or if issued would be, binding on the Company. 

        (t)    Divisive Transactions.    The Company has never been either a "distributing corporation" or a "controlled
corporation" in connection with a distribution of stock qualifying for tax-free treatment, in whole or in part, pursuant to Section 355 of the Code. 

        (u)    Section 83(b) Elections.    To the knowledge of the Company, all persons who have purchased shares of
the Company's stock that at the time of such purchase were and at the Effective Time will be subject to a substantial risk of forfeiture under Section 83 of the Code have timely filed elections
under Section 83(b) of the Code and any analogous provisions of applicable foreign, state and local Tax laws. 

        (v)    Nonqualified Deferred Compensation Plans.    Each plan, program, arrangement or agreement maintained by the
Company which constitutes in any part a nonqualified deferred compensation plan within the meaning of Section 409A of the Code is identified as such in Schedule
4.12(v) of the Company Disclosure Schedule. Since December 31, 2004, each plan, program, arrangement or agreement there identified has been operated and maintained in
accordance with a good faith, reasonable interpretation of Section 409A of the Code and its purpose, as determined under applicable guidance of the U.S. Department of Treasury and the IRS, with
respect to amounts deferred (within the meaning of Section 409A of the Code) after December 31, 2004. 

        (w)    Reportable Transactions, Etc.    The Company has not participated, within the meaning of Treasury Regulations
Section 1.6011-4(c), in (i) any "reportable transaction" within the meaning of Section 6011 of the Code and the Treasury Regulations thereunder, (ii) any
"confidential corporate tax shelter" within the meaning of Section 6111 of the Code and the Treasury Regulations thereunder, or (iii) any "potentially abusive tax shelter" within the
meaning of Section 6112 of the Code and the Treasury Regulations thereunder. 

        (x)    Tax Exemptions and Holidays, Etc.    The Company is in compliance in all material respects with all terms and
conditions of any Tax exemptions, Tax holiday or other Tax reduction agreements, approvals or orders of any Taxation Authority and, to the Company's knowledge, the consummation of the Merger will not
have any adverse effect on the validity and effectiveness of any such Tax exemptions, Tax holidays or other Tax reduction agreements or orders. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

48

 

 

        (y)    Tax Attributes, Etc.    To the best of the Company's knowledge, it has never had any outstanding option that
has been at any time treated as exercised under and within the meaning of Treasury Regulations Section 1.382-4(d). The Company has not experienced an "ownership change" within the
meaning of Section 382(g)(1) of the Code to which either Section 382(l)(5) or Section 382(l)(6) applied. 

        For
purposes of this Section 4.12, references to the Company shall be deemed to include the Company and all of its Subsidiaries. 

        4.13    Employee Benefit Plans.    

        (a)   Except
as described on Schedule 4.13(a) of the Company Disclosure Schedule, the Company does not now maintain or
contribute to, or have any liability (contingent or otherwise) in respect of, any pension, profit-sharing, deferred compensation, bonus, stock option, share appreciation right, severance, group or
individual health, dental, medical, life insurance, survivor benefit, or similar plan, policy, or arrangement, whether formal or informal, for the benefit of any director, officer, consultant or
employee, whether active or terminated, of the Company. Each of the arrangements set forth on Schedule 4.13(a) of the Company Disclosure Schedule
is hereinafter referred to as a "Company Employee Benefit Plan". 

        (b)   The
Company has delivered or made available to Parent true, correct, and complete copies of each Company Employee Benefit Plan, and with respect to each such Company
Employee Benefit Plan (i) any associated trust, custodial, insurance, or service agreements, (ii) any annual report, actuarial report, or disclosure materials (including specifically any
summary plan descriptions) submitted to any governmental agency or distributed to participants or beneficiaries thereunder in the current calendar year or any of the three (3) preceding
calendar years, and (iii) the most recently received U.S. Internal Revenue Service ("IRS") determination letters and any governmental advisory
opinions or rulings. 

        (c)   Each
Company Employee Benefit Plan is and has heretofore been maintained and operated in material compliance with the terms of such Plan and with the requirements
prescribed (whether as a matter of substantive law or as necessary to secure favorable tax treatment) by any and all statutes, governmental or court orders, and governmental rules or regulations in
effect from time to time, including, but not limited to, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code, and
applicable to such Plan. Each Company Employee Benefit Plan that is intended to qualify under Section 401(a) of the Code is specifically so identified in  Schedule 4.13(a)
 of the Company Disclosure Schedule and has been determined by the IRS to be so
qualified, and to the Company's knowledge, nothing has occurred since the date of the last such determination as to each such Plan or trust that has resulted or is likely to
result in the revocation of such determination as to such Plan or trust, other than such failures as may be corrected without expenditure of more than ten thousand dollars ($10,000). 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

49

 

        (d)   There
is no pending, or to the Company's knowledge, threatened, legal action, proceeding, or investigation, other than routine claims for benefits, concerning any
Company Employee Benefit Plan, or to the Company's knowledge, any fiduciary thereof, and to the Company's knowledge, there is no basis for any such legal action, proceeding, or investigation. 

        (e)   No
Company Employee Benefit Plan nor any party in interest with respect thereto, has engaged in a prohibited transaction that could subject the Company directly or
indirectly to liability under Section 409 or 502(i) of ERISA or Section 4975 of the Code. 

        (f)    To
the Company's knowledge, no communication, report, or disclosure has been made that, at the time made, did not reflect accurately in all material respects the terms
and operations of any Company Employee Benefit Plan. 

        (g)   No
Company Employee Benefit Plan provides welfare benefits subsequent to termination of employment to employees or their beneficiaries (except to the extent required by
applicable state insurance laws and Title I, Part 6 of ERISA), other than (A) coverage mandated by applicable law, (B) benefits the full cost of which is borne by the current or
former employees (or their beneficiaries), or (C) benefits that have already been satisfied in full. 

        (h)   The
Company has not undertaken to maintain any Company Employee Benefit Plan for any period of time and each such Plan is terminable at the sole discretion of the
Company, subject only to such constraints as may be imposed by applicable law. 

        (i)    With
respect to each Company Employee Benefit Plan for which a separate fund of assets is or is required to be maintained, full payment has been made of all amounts that
the Company is required, under the terms of each such Plan, to have paid as contributions to that Plan as of the end of the most recently ended plan year of that Plan. The current value of the assets
of each such Company Employee Benefit Plan, as of the end of the most recently ended plan year of that Plan, exceeded the current value of all accrued benefits under that Plan. 

        (j)    The
execution of this Agreement and the consummation of the transactions contemplated hereby will not result in any payment (whether of severance pay or otherwise)
becoming due from any Company Employee Benefit Plan. to any current or former director, officer, consultant, or employee of the Company or result in the vesting, acceleration of payment, or increases
in the amount of any benefit payable to or in respect of any such current or former director, officer, consultant, or employee. 

        (k)   No
Company Employee Benefit Plan nor any retirement plan of an ERISA Affiliate of the Company is a multiemployer plan or subject to Section 412 of the Code or
Title IV of ERISA. 

        (l)    For
purposes of this Section 4.13, "multiemployer plan" and "party in interest" have the same meaning assigned such terms under Section 3 of ERISA, and
"ERISA Affiliate" means any entity that under Section 414 of the Code is treated as a single employer with the Company. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

50

 

        4.14    Safety and Environmental Matters.    Except as set forth on  Schedule 4.14 of the Company Disclosure Schedule:

        (a)   None
of the activities carried on by the Company at any plants, offices, or properties in or on which the Company operates are in violation of any zoning, health, or
safety law or regulation, including without limitation the Occupational Safety and Health Act of 1970, as amended, excluding only such violations as will not, either individually or in the aggregate,
have a Material Adverse Effect on the Company. 

        (b)   Neither
the Company, nor to the Company's knowledge, any operator of any real property presently or formerly owned, leased, or operated by the Company is in violation or
alleged violation of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, and applicable federal, state, foreign, and local statutes, regulations, ordinances, orders, and decrees relating to Hazardous
Substances (as defined in Section 4.14(c) hereof), natural resources, pollutants or protection of human health (as it relates to exposure to Hazardous Substances), safety, or the environment
(all of the foregoing, collectively, "Environmental Laws"), excluding only such violations as will not, either individually or in the aggregate, have a
Material Adverse Effect on the Company. 

        (c)   The
Company has not received notice from any third party, including without limitation any federal, state, foreign, or local governmental authority, that (i) the
Company has been identified by the United States Environmental Protection Agency (the "EPA") as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) any hazardous waste as defined by 42 U.S.C. §6903(5), any
hazardous substance as defined by 42 U.S.C. § 9601(14), any pollutant or contaminant as defined by 42 U.S.C. § 9601(33) or any toxic substance, oil, or hazardous
material or other chemical or substance regulated by or forming the basis of liability under any Environmental Laws (collectively, "Hazardous
Substances") that the Company has generated, transported, handled, used, or disposed of has been found at any site at which a federal, state, foreign, or local agency or other
third party has conducted or has ordered that the Company conduct a remedial investigation, removal, or other response action pursuant to any Environmental Law; or (iii) the Company is or will
be a named party to any claim, action, cause of action, complaint (contingent or otherwise), or legal or administrative proceeding arising out of any third party's incurrence of costs, expenses,
losses, or damages of any kind whatsoever in connection with the release of Hazardous Substances. 

        (d)   (i)    No
portion of any real property presently or formerly owned, leased, or operated by the Company has been used by the Company, to handle, use,
manufacture, transport, store, or dispose of Hazardous Substances except in accordance with applicable Environmental Laws; (ii) to the Company's knowledge, no portion of any real property
presently owned, leased, or operated by the Company has been used by any other person to handle, use, manufacture, transport, store or dispose of Hazardous Substances except in accordance with
applicable Environmental Laws; (iii) no underground tank or other underground storage receptacle for Hazardous Substances used by the Company is located on any real property presently owned,
leased, or operated by the Company, or to the Company's knowledge, any real property formerly owned, leased, or operated by it; (iv) to the Company's knowledge, there have been no releases
(i.e. any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

51

 

discharging,
injecting, escaping, disposing, or dumping) or threatened releases of Hazardous Substances by the Company on, upon, into, or from any real property presently or formerly owned, leased, or
operated by the Company; (v) to the Company's knowledge, there have been no releases on, upon, from, or into any real property in the vicinity of any real property presently owned, leased, or
operated by the Company that, through soil or groundwater contamination, have come to be located on, any of the real property presently owned, leased, or operated by the Company; and (vi) any
Hazardous Substances that have been generated by the Company, on any real property presently or formerly owned, leased, or operated by the Company, will have been transported offsite prior to the
Effective Time, and, to the Company's knowledge, treated or disposed of to the extent required by and in accordance with applicable Environmental Laws. Notwithstanding anything to the contrary in this
Section 4.14(d), for the purpose of continuing to develop the Company Program, small quantities of certain hazardous substances may be maintained within the real property leased by the Company,
but only to the extent necessary to continue the development of the Company Program at the request of Parent, and only in the type and quantity consistent with normal biotechnology research and
development and in accordance with applicable Environmental Laws. 

        (e)   No
real property presently owned, leased, or operated by the Company, and to the Company's knowledge, no real property formerly owned, leased, or operated by the
Company, and as a result of the present or past activities of the Company, is subject to any Environmental Law requiring the performance of any Hazardous Substances site assessment, the removal or
remediation of any Hazardous Substances, the giving of notice to any governmental agency or other person, or the recording and/or delivery to any governmental agency or other person of any
environmental disclosure statement or document, by reason of, or as a condition to the effectiveness of, the Merger and/or any other transaction contemplated hereby. 

        (f)    The
Company has and maintains, in full force and effect, all licenses, permits, registrations, consents, authorizations and other approvals (the
"Environmental Permits") from all governmental authorities as are required under Environmental Laws or are otherwise necessary for the conduct of the
business or operation of the Company, and the Company is in compliance with all of the Environmental Permits, excluding only such matters as will not, either individually or in the aggregate, have a
Material Adverse Effect on the Company. 

        4.15    Labor Relations.    The Company is and has been in compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of employment, wages and hours, and nondiscrimination in employment, and is not and has not been engaged in any unfair labor practice. There
is no charge or proceeding pending, or to the Company's knowledge, threatened, against the Company alleging unlawful discrimination in employment practices or unfair labor practice before any court or
agency, including without limitation the National Labor Relations Board. There is no labor strike, dispute, work slow-down, or work stoppage pending, or to the Company's knowledge,
threatened against or involving the Company. No one has petitioned within the last five years or is now petitioning for union representation of any of the employees of the Company. No grievance or
arbitration proceeding arising out of or under any collective bargaining agreement is pending against the Company and no claim therefor has been asserted. None of the employees of the Company is
covered by any collective bargaining agreement, and no collective bargaining agreement is currently being negotiated by the Company. The Company has not experienced any work stoppage or other labor
difficulty during the last five years. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

52

 

        4.16    Litigation.    Except as set forth in Schedule 4.16 of
the Company Disclosure Schedule, no litigation, arbitration, action, suit, proceeding, or investigation (whether conducted by any judicial or regulatory body, arbitrator, or other person) is pending
(as evidenced by the Company's receipt of service of process or other written notice of such pendency), or to the Company's knowledge, threatened, against the Company, nor is there any basis therefor
known to the Company. 

        4.17    Material Contracts.    

        (a)   Schedule 4.17(a)(i) of the Company Disclosure Schedule sets forth a complete and accurate list of all Company
Program Contracts (as defined below). Schedule 4.17(a)(ii) of the Company Disclosure Schedule sets forth a complete and accurate list of all
Material Contracts (as defined below). As used in this Agreement, the term "Company Program Contract" means any agreements or understanding of any kind,
written or oral, that is legally enforceable by or against or otherwise binding on the Company and relates to the Company Program. As used in this Agreement, the term "Material
Contract" means every agreement or understanding of any kind, written or oral, that is legally enforceable by or against or otherwise binding on the Company and which is
material to the Company's business, and specifically includes without limitation: (i) agreements with any current or former officer, director, employee, consultant, or shareholder, or any
partnership, corporation, joint venture, or any other entity in which any such person has an interest (other than agreements terminable by the Company upon thirty (30) days notice and which
termination does not result in any obligations or liabilities to the Company); (ii) agreements with any labor union or association representing any employee; (iii) agreements for the
provision of services by or to the Company in excess of $100,000; (iv) bonds or other security agreements provided by any party in connection with the business of the Company;
(v) agreements for the purchase or other acquisition or the sale or other disposition of assets or properties (other than in the ordinary course of business), or for the grant to any person of
any preferential rights to purchase any such assets or properties; (vi) joint venture agreements relating to the assets, properties, or business of the Company or by or to which it or any of
its assets or properties is bound or subject; (vii) agreements under which the Company agrees to indemnify any party, to share tax liability of any party, or to refrain from competing with any
party; (viii) agreements with regard to Indebtedness, including, without limitation, any indenture or other agreements in connection with issuances of bonds, debentures or other debt securities
by the Company and any agreements in connection with bank financings by the Company; (ix) any agreement, contract, commitment, transaction or series of transaction for any purpose relating to
capital expenditures or commitments or long-term obligations; (x) any purchase order or contract for the purchase of raw materials; (xi) any distribution, joint marketing or
development agreement; (xii) any assignment, license or other agreement with respect to any form of intangible property; (xiii) any research collaboration agreement; (xiv) any
agreements relating to venture capital and other equity financings by the Company; (xv) any shareholder agreements or other agreements with any of the Company Shareholders pertaining to the
shares of Company Stock held by them or their rights as shareholders of the Company; (xvi) any voting trust or voting agreements among the Company Shareholders and (xvii) all Company
Program Contracts. 

	*
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Treatment Requested. Omitted portions filed with the Commission. 

53

 

        (b)   All
of the Material Contracts are in full force and effect, and neither the Company nor, to the Company's knowledge, any other party thereto is in default under or in
breach of any of the terms thereof, nor does any event or condition exist that after notice or lapse of time or both could constitute a default thereunder or breach thereof on the part of the Company,
or to the Company's knowledge, any other party thereto. All payments required under each contract, agreement or understanding of any kind, written or oral, that is legally enforceable by or against or
otherwise binding on the Company have been accrued for in accordance with generally accepted accounting principles, consistently applied, and are reflected in the Company's financial statements. No
approval or consent of any person that has not already been obtained and listed on Schedule 4.17 of the Company Disclosure Schedule is needed in
order that the Material Contracts continue in full force and effect following the consummation of the Merger and the other transactions contemplated hereby, and, except as set forth on  Schedule 4.17 of
the Company Disclosure Schedule, no such Material Contract includes any provision, the effect of which may be to terminate (or give
rise to a right of termination under) such Material Contract, to enlarge or accelerate any obligations of the Company thereunder, or to give additional rights to any other person, as a result of the
consummation of the Merger or the other transactions contemplated hereby. The Company has delivered to Parent true, correct, and complete copies of all such Material Contracts, including all
amendments, modifications, and supplements thereto. 

        4.18    Potential Conflicts of Interest.    No officer, director, or, to the Company's knowledge, shareholder of the
Company (a) owns, directly or indirectly, any interest (excepting not more than five percent (5%) stock holdings for investment purposes in securities of publicly held and traded companies) in,
or is an officer, director, employee, or consultant of, any person that furnishes or sells services, drug candidates or products that the Company furnishes or sells or proposes to furnish or sell or
is a lessor, lessee, customer, or supplier of the Company; (b) owns, directly or indirectly, in whole or in part (other than solely as a result of his or its ownership of Company Stock), any
tangible or intangible property that the Company is using or the use of which is necessary for the business of the Company; or (c) to the Company's knowledge, has any cause of action or other
claim whatsoever against, or owes any amount to, the Company, except for claims in the ordinary course of business, including, without limitation, claims for accrued vacation pay, accrued benefits
under Employee Benefit Plans, and similar matters and agreements. 

        4.19    Insurance.    Schedule 4.19 of the Company Disclosure
Schedule lists the policies of products liability, theft, fire, liability, worker's compensation, life, property and casualty, directors and officers, and other insurance owned or held by the Company.
Such policies of insurance are of the kinds, cover such risks, and are in such amounts and with such deductibles and exclusions, as are consistent with prudent business practice for companies in the
Company's line of business and of a similar size and location. All such policies are in full force and effect; are sufficient for compliance by the Company with all requirements of law and of all
agreements to which the Company is a party; are valid, outstanding, and enforceable policies and provide that they will remain in full force and effect through the respective dates set forth on  Schedule 4.19 of the Company Disclosure Schedule; and will not in any way be affected by, or terminate or lapse as a result of the consummation
of, the transactions contemplated by this Agreement. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

54

 

        4.20    Bank Accounts, Signing Authority, Powers of
Attorney.    Schedule 4.20 of the Company Disclosure Schedule sets forth a complete and accurate list of all
bank, brokerage, and other accounts, and all safe-deposit boxes, of the Company, together with the balances and contents of each, and the persons with signing or other authority to act
with respect thereto. Except as so listed, the Company does not have any account or safe deposit box in any bank, and no person has any power, whether singly or jointly, to sign any checks on behalf
of the Company, to withdraw any money or other property from any bank, brokerage, or other account of the Company, or to act under any agency or power of attorney granted by the Company at any time
for any purpose. Schedule 4.20 of the Company Disclosure Schedule also sets forth the names of all persons authorized to borrow money or sign
notes on behalf of the Company. 

        4.21    Relationships With Suppliers and Licensors.    No current supplier to the Company has notified the Company of
an intention to terminate or substantially alter its existing business relationship with the Company, nor has any licensor under a license agreement with the Company notified the Company of an
intention to terminate or substantially alter the Company's rights under such license, which termination or alteration would have a Material Adverse Effect on the Company. 

        4.22    Employment of Officers, Employees.    The name and current annual salary and other compensation payable by the
Company to each of its employees including but not limited to wages, salary, commissions, normal bonus, profit sharing, deferred compensation, and other extra compensation) are as set forth on  Schedule 4.22 of the Company Disclosure Schedule. Except to the extent otherwise disclosed on  Schedule 4.22 of the Company Disclosure Schedule, none of the
current or former officers, directors, employees or consultants of the Company is a
party to, or the beneficiary of, any agreement, plan or arrangement that provides for any payment (whether of severance pay or otherwise) becoming due to such current or former officer, director,
employee or consultant upon termination of his or her relationship with the Company or as a result of the Merger, or that provides for the vesting, acceleration of payment, or increases in the amount
of any benefit payable to or in respect of such current or former director, officer, consultant, or employee upon termination of his or her relationship with the Company or as a result of the Merger. 

        4.23    Minute Books.    The minute books of the Company made available to Parent for inspection accurately record
therein all actions taken by the Company Board, all committees thereof, and the Company's shareholders. 

        4.24    Brokers.    Except as set forth on Schedule 4.24 of the
Company Disclosure Schedule, no finder, broker, agent, or other intermediary has acted for or on behalf of the Company in connection with the negotiation, preparation, execution, or delivery of this
Agreement or the consummation of the Merger or the other transactions contemplated hereby. Schedule 4.24 of the Company Disclosure Schedule sets forth
the compensation or payment obligations of the Company with respect to any such finder, broker, agent or other intermediary. The Company shall have provided to Parent a true, correct and complete copy
of any and all engagement letters or other agreements between the Company and any such finder, broker, agent or other intermediary. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

55

 

        4.25    Regulatory Compliance.    

        (a)   All
biological and drug products being manufactured, distributed or developed by the Company ("Company Products") that
are subject to the jurisdiction of the FDA are being manufactured, labeled, stored, tested, distributed and marketed in compliance with all applicable requirements under the Food and Drug and Cosmetic
Act ("FDCA"), the Public Health Service Act, their applicable implementing regulations and all comparable applicable foreign, state and local laws and
regulations. The Company has obtained all applicable approvals, clearances, authorizations, licenses, and registrations required by the FDA or any other Governmental Entity to permit any
manufacturing, distribution, marketing, storing, or testing of Company Products as previously conducted or currently being conducted by the Company, and the Company is in compliance with all reporting
requirements related thereto. 

        (b)   All
human clinical trials conducted by or on behalf of the Company have been, and are being, conducted in compliance with the applicable requirements of current Good
Clinical Practice, Informed Consent and all other applicable requirements relating to protection of human subjects specifically contained in 21 CFR Parts 312, 50, 54, 56 and 11 and all
applicable guidelines, and all applicable foreign, state and local laws and regulations. The Company has filed with the FDA or other appropriate Governmental Entities all required notices, and annual
or other reports, including notices of adverse events, serious and/or unexpected adverse events, and serious injuries or deaths related to the use of the Company Products in human clinical trials, and
the Company has provided copies of such notices to Parent. 

        (c)   All
manufacturing, warehousing, distributing, and testing operations conducted by or for the benefit of the Company with respect to Company Products being used in human
clinical trials have been and are being conducted in accordance with the FDA's recommended current Good Manufacturing Practices continuum for drug and biological products, as set forth in 21 CFR
Parts 210 and 211. In addition, the Company is in compliance with all applicable registration and listing requirements set forth in 21 U.S.C. Section 360 and 21 CFR Part 207 and
all similar applicable laws and regulations. 

        (d)   The
Company has not received any notice that the FDA or any other Governmental Entity or Institution Review Board ("IRB")
has initiated, or threatened to initiate, any action to suspend any clinical trial (i.e. clinical hold), suspend or terminate any Investigational New Drug Application sponsored by the Company
or otherwise restrict the preclinical or nonclinical research on or clinical study of any Company Product or any biological or drug product being developed by the Company, or to recall, suspend or
otherwise restrict the manufacture of any Company Product. 

        (e)   Neither
the Company nor any of its officers, key employees or, to the knowledge of the Company, agents or clinical investigators acting for the Company, has committed
any act, made any statement or failed to make any statement that would reasonably be expected to provide a basis for the FDA to invoke its policy with respect to "Fraud, Untrue Statements of Material
Facts, Bribery, and Illegal Gratuities" set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto. Neither the Company nor any officer, key employee or, to the knowledge
of the Company, independent contractor, or agent of the Company has been convicted of any crime or engaged in any conduct that has resulted in or would reasonably be expected to result in
(i) debarment under 21 U.S.C. Section 335a or any similar state law or (ii) exclusion under 42 U.S.C. Section 1320a-7 or any similar state law or regulation. 

	*
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Treatment Requested. Omitted portions filed with the Commission. 

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        (f)    All
animal studies or other preclinical tests performed in connection with or as the basis for any regulatory approval that has been sought or obtained for Company
Products either (x) have been conducted in accordance with all applicable statutes, laws and rules, including Good Laboratory Practice requirements, contained in 21 CFR Part 58, the
United States Animal Welfare Act, the International Conferences of Harmonization's (ICH) Guidance on Nonclinical Safety Studies for the Conduct of Human Clinical Trials for Pharmaceuticals or the ICH
Guideline on Safety Pharmacology Studies for Human Pharmaceuticals or (y) involved experimental research techniques that were performed for informational purposes only, whether or not included
in a regulatory filing, or could not be performed by a registered GLP testing laboratory (with appropriate notice being given to the FDA in regulatory filings) and have employed the procedures and
controls generally used by qualified experts in animal or preclinical studies of products comparable to those being developed by the Company. 

        (g)   There
are no lawsuits, actions, arbitrations, proceedings, charges, complaints or investigations pending with respect to a violation by the Company of the FDCA, PHSA,
FDA regulations adopted thereunder, the Controlled Substance Act or any other legislation or regulation promulgated by any other United States governmental entity. 

        (h)   The
Company has not received any warning or untitled letter, reports of inspection observations, including FDA Form 483s, established inspection reports, notices,
clinical holds, or other documents from the FDA, any other Governmental Entity, or IRB since inception relating to Company Products and alleging a lack of compliance by the Company with any applicable
laws or regulatory requirements (including those of the FDA). 

        (i)    The
Company has provided to Parent copies of all written communications to and from the FDA, any other Governmental Entity, or IRB relating specifically to Company
Products, and their respective operations or business, including any official notices, citations, decisions, warning or untitled letters, material reports of inspection observations and establishment
inspections. 

        4.26    Compliance with Other Agreements, Laws, Etc.    To Company's knowledge, it has complied with, and is in
compliance with, (a) all laws, statutes, governmental regulations and all judicial or administrative tribunal orders, judgments, writs, injunctions, decrees or similar commands applicable to
its business, (b) all unwaived terms and provisions of all contracts, agreements and indentures to which the Company is a party, or by which the Company or any of its properties is subject, and
(c) its articles of incorporation and by-laws, respectively, each as amended to date; in the case of the preceding clauses (a) and (b), excepting only any such noncompliance
that, both individually and in the aggregate, have not resulted and will not result in any Material Adverse Effect with respect to the Company. The Company has not been charged with, or to its
knowledge, been under investigation with respect to, any violation of any provision of any federal, state, or local law or administrative regulation. 

	*
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Treatment Requested. Omitted portions filed with the Commission. 

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        4.27    Permits, Licenses, and Programs; No Debarment.    

        (a)   Schedule 4.27 of the Company Disclosure Schedule contains a complete and correct copy of (i) each pending
application or registration for governmental approval and each governmental approval held by the Company to develop, manufacture, test (including, without limitation, preclinical tests and clinical
trials), import, export, store, market and sell the Company's Products or drug candidates, (ii) the most recent report by or on behalf of the FDA or any other governmental body involving or
relating to any facility inspection of the Company's facilities, and (iii) a description of all ongoing proprietary internal research and development programs. Except as are set forth on  Schedule 4.27 of the Company Disclosure Schedule, (i) the Company possesses such governmental approvals from all governmental bodies
including, without limitation, all FDA approvals, necessary to permit the operation of its business in the manner as the same is currently conducted, and to operate, own or occupy its properties,
(ii) there have been no product recalls, field corrective activity, medical device reports, warning letters or administrative actions by the FDA or any other governmental body, and
(iii) to the Company's knowledge, (A) there is no administrative action pending or threatened for the revocation of any such governmental approval and (B) assuming the obtaining
of the authorizations, consents, approvals and other actions listed on Schedule 4.27 of the Company Disclosure Schedule, no governmental
approvals and other actions listed on Schedule 4.27 of the Company Disclosure Schedule, no governmental approval by any governmental body having
jurisdiction over the operation of the Company's business, whether in whole or in part, will, to the knowledge of the Company, be revoked, or become ineffective or subject to revocation, as a
consequence of the transactions contemplated by this Agreement. 

        (b)   The
Company (i) has not been debarred or received notice of action or threat of action with respect to its debarment under the provisions of the Generic Drug
Enforcement Act of 1992, 31 U.S.C. Section 335(a) and (b), or (ii) to the Company's knowledge, has used in any capacity the services of any person which has been debarred under the
provisions of the Generic Drug Enforcement Act of 1992, 21 U.S.C. Section 335(a) and (b). 

        4.28    Manufacturing and Marketing Rights.    The Company has not granted rights to manufacture, produce, distribute,
assemble, license, market, or sell its products to any other person and is not bound by any agreement that affects the Company's exclusive right to manufacture, produce, distribute, assemble, license,
market, or sell its products. 

        4.29    Distribution of Merger Consideration.    The Merger Consideration, when distributed in accordance with the
terms of this Agreement and the LLC Agreement, will have been distributed to the holders of Company Stock in accordance with the provisions of the Company's articles of incorporation in effect
immediately prior to the Effective Time and any other document or agreement among the Company and such holders related to the distribution of the Merger Consideration. 

        4.30    Required Shareholder Approval.    The only votes, consents and approvals of the shareholders of the Company
required pursuant to Title 23B of the Revised Code of Washington to adopt this Agreement, approve the terms of this Agreement and approve the Merger and the transactions contemplated hereby (the
"Required Shareholder Approval") are as follows: (A) the affirmative vote of the holders of a majority of the outstanding voting power of the
Company Preferred Stock and the Company Common Stock, voting together as single class, in favor of the adoption of this Agreement and the approval
of the Merger and the terms thereof; (B) the affirmative vote of the holders of a majority of the outstanding shares of Company Preferred Stock, voting separately as a class, in favor of the
adoption of this Agreement and the approval of the Merger and the terms thereof; and (C) the affirmative vote of (i) the holders of a majority 

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of
the outstanding voting power of the Company Preferred Stock and the Company Common Stock, voting together as single class, (ii) the holders of a majority of the outstanding shares of Company
Preferred Stock, voting separately as a class, and (iii) the holders of a majority of the outstanding voting power of the Company Common Stock, approving the amendment of the Company's Articles
of Incorporation substantially in the form of Exhibit I attached hereto (the "Amended Articles"). 

        4.31    Government Contract Matters.    

        (a)   The
Company has been, and has conducted its business, in compliance with all applicable laws and regulations relating to its performance of commercial and government
contracts, all terms and conditions of its government and commercial contracts, all applicable import and export laws, regulations, licenses and provisos, and all applicable
anti-corruption laws and regulations. The Company has not received any notice from any Governmental Entity including, but not limited to the Defense Contract Audit Agency ("DCAA") and
Defense Contract Management Agency ("DCMA"), alleging any violation by the Company of any applicable law or regulation or notice regarding disallowance of costs under a government contract. None of
the Company's assets or businesses is subject to any judicial or administrative proceeding, order, or to the Company's knowledge, investigation of or by a Governmental Entity. 

        (b)   With
respect to each Government Contract and Bid listed on Schedule 4.31(b) of the Company Disclosure Schedule:
(i) the Company has complied in all material respects with all terms and conditions of such Government Contract and Bid and any requirements of law pertaining to such Government Contract and
Bid; (ii) each representation and certification executed by the Company pertaining to such Government Contract and Bid was true and correct in all material respects as of its effective date;
(iii) the Company has not submitted any inaccurate or untruthful cost or pricing data or any claim for payment to any Governmental Entity in connection with such Government Contract or Bid;
(iv) there is no suspension, stop work order, cure notice or show cause notice in effect for such Government Contract nor, to the Company's knowledge, is any Governmental Entity threatening to
issue one; and (v) no protest of any Government Contract or Bid is pending. 

        (c)   There
is no pending or, to the Company's knowledge, threatened: (i) civil fraud or criminal investigation that exists or has been threatened, indictment or
information of the Company by any Governmental Entity; (ii) suspension or debarment proceeding against the Company; or (iii) contracting officer's decision or legal proceeding by which a
Governmental Entity claims that the Company has breached or is liable to a Governmental Entity, in each case with respect to any Government Contract. The Company has not conducted or initiated any
internal investigation, or made a voluntary disclosure to the United States Government, with respect to any alleged misstatement or omission arising under or relating to any Government Contract or Bid
at any time since its inception and no such investigation or voluntary disclosure is anticipated. 

	*
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Treatment Requested. Omitted portions filed with the Commission. 

59

 

        (d)   Except
as set forth on Schedule 4.31(d) of the Company Disclosure Schedule, there are no pending or, to the
Company's knowledge, threatened material claims or disputes by or between the Company and any prime contractor, subcontractor or vendor relating to any Government Contract. Except as set forth on  Schedule 4.31(d)
 of the Company Disclosure Schedule, the Company has not received any notice of termination for convenience or default of any
Government Contract, in whole or in part, and to the Company's knowledge, no such termination has been threatened or is otherwise anticipated. 

        (e)   None
of the officers, directors or employees of the Company has: (i) made any payments or used any funds to influence federal transactions in violation of federal
laws and regulations and or failed to make any required disclosures; (ii) used any corporate or other funds or given anything of value for unlawful commissions, gratuities, contributions,
payments, gifts or entertainment, or made any unlawful expenditures relating to political activity to government officials or others or established or maintained any unlawful or unrecorded funds in
violation of any applicable foreign, federal or state law; or (iii) accepted or received any unlawful contributions, payments, expenditures or gifts. 

        (f)    Except
for those liens or assignments listed on Schedule 4.31(f) of the Company Disclosure Schedule, made in
accordance with 31 U.S.C. § 3727 (as amended), otherwise known as the Assignment of Claims Act, and 41 U.S.C. § 15 (as amended), otherwise known as the Assignment
of Contracts Act, the Company has not assigned or agreed to assign to any Person, or otherwise encumbered or agreed to encumber for the benefit of any Person, any right, title or interest in or to any
of the Government Contracts, or any account receivable relating thereto. 

        (g)   No
Person or Governmental Entity has notified the Company in writing or orally that any Governmental Entity intends to seek to lower rates under any Government Contract
or task order or delivery order thereunder. 

        4.32    Disclosure.    No representation or warranty by the Company in this Agreement or in any exhibit or Schedule
hereto contains or will contain at the time made or deemed to be made pursuant to this Agreement any untrue statement of a material fact or omits or will omit to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein or therein on the whole not false or misleading. 

ARTICLE 5

REPRESENTATIONS AND WARRANTIES

OF PARENT AND THE MERGER SUB  

        Parent and the Merger Sub hereby represent and warrant to the Company as follows as of each of (a) the Agreement Date and (b) the Closing Date,
subject in each case to such exceptions as are set forth in the Parent Disclosure Schedule attached to this Agreement (the "Parent Disclosure
Schedule"): 

        5.1    Incorporation; Authority.    Each of Parent and the Merger Sub is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as
presently conducted and as presently proposed to be conducted. Each of Parent and the Merger Sub is duly qualified to transact business and is in good standing in each jurisdiction where such
qualification is required and in which failure to so qualify would have a Material Adverse Effect on the Parent. 

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        5.2    Ownership of Merger Sub; No Prior Activities.    Merger Sub is a direct, wholly-owned Subsidiary of Parent,
was
formed solely for the purpose of engaging in the transactions contemplated by this Agreement and has engaged in no business activity other than as contemplated by this Agreement. 

        5.3    Authorization and Enforceability.    Each of Parent and the Merger Sub has all requisite corporate power to
enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent and the Merger Sub, subject only to the adoption of this Agreement by Parent as the sole stockholder of Merger Sub (which shall
be effected by written consent immediately following the execution and delivery of this Agreement). This Agreement has been duly executed and delivered by each of Parent and the Merger Sub and
constitutes the valid and binding obligation of each of Parent and the Merger Sub, enforceable in accordance with its terms, except as such enforcement may be limited by (i) the effect of
bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights, or (ii) the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and general principles of equity, regardless of whether considered in a proceeding in law or equity. 

        5.4    Governmental and Other Third-Party Consents, Non-Contravention, Etc.    No consent, approval, order
or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of Parent or Merger Sub is required in
connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for (i) the filing of Merger Documents with the Delaware
Secretary of State and Washington Secretary of State, as applicable; (ii) the filing by Parent of such reports and information with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder, as may be required in
connection with this Agreement, the Merger and the other transactions contemplated by this Agreement; and (iii) such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on Parent and would not prevent, or materially alter or delay any of the transactions contemplated by this Agreement. The execution,
delivery, and performance of this Agreement and the consummation of such transactions will not violate (a) any provision of Parent's or the Merger Sub's Certificate of Incorporation or
by-laws, as amended and in effect, (b) any order, judgment, injunction, award or decree of any court or state or federal governmental or regulatory body applicable to Parent or the
Merger Sub, or (c) any judgment, decree, order, statute, rule, regulation, agreement, instrument, or other obligation to which Parent or the Merger Sub is a party or by or to which such entity
or any of its assets is bound or subject, which violation will not have a Material Adverse Effect on Parent or Merger Sub. Parent's Board of Directors has in good faith estimated that the present
value of the Merger Consideration as of the Effective Time will not equal or exceed the minimum size-of-transaction threshold that would require notification under the HSR Act. 

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        5.5    Brokers.    Except as set forth on Schedule 5.5 of the Parent
Disclosure Schedule, neither Parent nor Merger Sub have incurred, nor will they incur, any liability for brokerage or finders' fees or agents' commissions or investment bankers' fees or any similar
charges in connection with this Agreement or the consummation of the transactions contemplated hereby. 

        5.6    Adequacy of Funds.    Parent currently has and will at the Closing have adequate financial resources to pay the
Closing Consideration as contemplated by Section 2.6 hereof, and Parent will have adequate financial resources to satisfy its payment obligations under Section 2.7 hereof, when such
payment obligations are due. 

        5.7    Absence of Certain Changes.    Since March 31, 2007, there has not been any change in the business,
financial condition or prospects, or business relationships of Parent that has or is reasonably likely to have a materially adverse effect on the ability or commitment of Parent to fulfill its
obligations under this Agreement, including but not limited to those under Section 6.9 hereof. 

ARTICLE 6

MUTUAL COVENANTS.  

        6.1    Satisfaction of Conditions.    Each of the parties will use commercially reasonable efforts to cause the
satisfaction as promptly as possible of the conditions contained in Sections 8.1 through 8.3 hereof that impose obligations on it or require action on its part or the part of any of its
shareholders or Affiliates. 

        6.2    Further Assurances.    Subject to the terms and conditions set forth in this Agreement, from time to time both
before and after the Effective Time, the Company, Parent, Merger Sub and the Holders Representative will use (and each of the foregoing will use commercially reasonable efforts to cause their
respective members, officers and directors to use) their respective commercially reasonable efforts, as promptly as is practicable, to take or cause to be taken all actions, and to do or cause to be
done all other things, as are necessary, proper, or advisable to consummate and make effective the Merger and the other transactions contemplated hereby. 

        6.3    Regulatory Approval; Further Assurances.    

        (a)   Parent
and the Company shall use commercially reasonable efforts to effectuate the Merger and make effective the other transactions contemplated by this Agreement as
soon as practicable following the Agreement Date. Without limiting the generality of the foregoing, each party to this Agreement shall: (i) make any filings and give any notices required to be
made or given by such party in connection with the Merger and the other transactions contemplated by this Agreement; (ii) use commercially reasonable efforts to obtain any consent, action or
non-action required (pursuant to any applicable legal requirement, contract or otherwise) in order to implement the Merger or any of the other transactions contemplated by this Agreement;
and (iii) use commercially reasonable efforts to lift any restraint, injunction or other legal bar to the Merger. To the extent permitted by law, each of Parent and the Company shall promptly
deliver to the other a copy of each such filing made, each such notice given and each 

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such
consent obtained after the Agreement Date and prior to the Effective Time. For the avoidance of doubt, the term "commercially reasonable efforts" as used in this paragraph is not the defined term
"Commercially Reasonable Efforts," and shall include, without limitation, the prompt submission of responsive materials in response to a request from a Governmental Entity for voluntary submission of
information and documents, and substantial compliance with a formal request for information and documentary materials issued by a Governmental Entity under any foreign, federal or state antitrust,
competition or fair trade law. 

        (b)   Parent
and the Company shall respond as promptly as practicable to (i) all inquiries or requests received by the Federal Trade Commission or the Department of
Justice for information or documentation and (ii) all inquiries or requests received from any state attorney general or other Governmental Entity in connection with antitrust or related
matters. Each of the Company and Parent shall (A) give the other party prompt notice of the commencement of any legal proceeding by or before any Governmental Entity with respect to the Merger
or any of the other transactions contemplated by this Agreement; (B) keep the other party informed as to the status of any such legal proceeding; and (C) promptly inform the other party
of any communication to or from the Federal Trade Commission, the Department of Justice or any other Governmental Entity regarding the Merger. The Company and Parent will consult and cooperate with
one another, and will consider in good faith the views of one another, in connection with any analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted by
either of them in connection with any legal proceeding under or relating to the HSR Act or any other foreign, federal or state antitrust, competition or fair trade law. In addition, except as may be
prohibited by any Governmental Entity or by any applicable law, in connection with any legal proceeding under or relating to the HSR Act or any other foreign, federal or state antitrust, competition
or fair trade law or any other similar legal proceeding relating to the Merger to which either the Company or Parent is a party, each of the Company and Parent will permit authorized representatives
of the other party to be present at each meeting or conference relating to any such legal proceeding (except with respect to meetings or conferences involving only a party and its own employees,
representatives, legal advisors, or consultants) and to have access to and be consulted in connection with any document, opinion or proposal made or submitted to any Governmental Entity in connection
with any such legal proceeding. For the avoidance of doubt, the term "legal proceeding" as used in this paragraph shall include, without limitation, an investigation relating to the Merger by any
Governmental Entity under the HSR Act or any other foreign, federal or state antitrust, competition or fair trade law. 

        6.4    Amended Articles and Required Shareholder Approval.    Following the execution of this Agreement, the Company
will (i) promptly solicit the Required Shareholder Approval by written consent and (ii) after having received the Required Shareholder Approval, file the Amended Articles with the
Secretary of State of the State of Washington. The Company Board will recommend to its shareholders the adoption and approval of this Agreement and the transactions contemplated hereby and the other
matters to be submitted to its shareholders in connection therewith, subject to withdrawal only as allowed under Section 7.24(d). 

        6.5    Notice of Merger and Appraisal Rights; Notice of Shareholder Approval.    As promptly as practicable following
the Agreement Date, the Company shall prepare and deliver to the shareholders of the Company a Notice of Merger and Appraisal Rights (the "Shareholder
Notice"), which Shareholder Notice shall comply in all respects with the requirements of 

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Washington
Law. As promptly as practicable after the Required Shareholder Approval has been obtained, the Company shall prepare and deliver a notice (the
"Post-Approval Notice") informing the Company's shareholders of the written consent obtaining the Required Shareholder Approval, which
Post-Approval Notice shall comply in all respects with the requirements of Washington Law. 

        6.6    Consents.    The Company shall use commercially reasonable efforts to obtain the consents, waivers and
approvals necessary for the consummation of the Merger and the transactions contemplated under this Agreement (all of such consents, waivers and approvals having been set forth in  Schedule 6.6 of the
Company Disclosure Schedule), including, but not limited to, all consents, waivers and approvals that are necessary or required in
connection with, or as a result of, the Merger to preserve all of the Company's rights and benefits in its business, assets, properties, leases and contracts following the Merger and without incurring
any additional or special liability, or accelerating any existing liability or obligation, in connection with or under its business, assets, properties, leases and contracts following the Merger. 

        6.7    Notification of Certain Matters.    

        (a)   Between
the date hereof and the Effective Time, each of Parent and the Company shall, upon obtaining knowledge of any of the following, promptly notify the other of: 

          (i)  any
notice or other communication from any person alleging that the consent of such person is or may be required in connection with the Merger; 

         (ii)  any
actions, suits, claims, investigations or other judicial proceedings known to its executive officers commenced or threatened against such party or any of its
Subsidiaries which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.16 hereof or which relate to the consummation of the Merger; 

        (iii)  occurrence
or non-occurrence of any other event known to its executive officers which is likely to cause any representation or warranty of such party
contained in this Agreement to be materially untrue or inaccurate at or prior to the Effective Time; and 

        (iv)  any
failure of such party known to its executive officers to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it
hereunder. 

        (b)   In
addition to its obligations set forth in Section 6.7(a) hereof, the Company shall promptly notify Parent of any adverse determination or recommendation in
connection with any governmental proceeding to license any of the Company's products and any report filed with the FDA regarding an unexpected fatal or life-threatening experience with
respect to any such product. 

        (c)   The
delivery of any notice pursuant to this Section 6.7 shall not limit or otherwise affect any remedies available to a party. 

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        6.8    Indemnification of Directors and Officers.    From and after the Effective Time, Parent shall cause the
Surviving Corporation to fulfill and honor in all respects the obligations, to the extent legally permissible, of the Company to its directors and officers pursuant to the indemnification provisions
under the Company's articles of incorporation or by-laws as in effect on the date hereof. Parent shall use commercially reasonable efforts to cause the Surviving Corporation to maintain in
effect for six (6) years from the Effective Time the current policies of directors' and officers' liability insurance (the "D&O Policy")
maintained by the Company (provided that Surviving Corporation may substitute in place thereof policies reasonably satisfactory to it of at least the same coverage containing terms and conditions
which are not materially less advantageous to the individuals covered by the D&O Policy); provided, that in no event shall the Surviving Corporation be
required to pay premiums for such insurance in excess of one hundred seventy-five percent (175%) of premiums currently paid by the Company (the "Maximum
Amount") and if current insurance coverage cannot be maintained or obtained for the Maximum Amount, the Surviving Corporation shall obtain as much directors' and officers'
liability insurance as can be obtained by paying an annual premium not in excess of the Maximum Amount. Nothing in this Section 6.8 shall obligate Parent or the Surviving Corporation to make
any payments, other than for premiums not to exceed the Maximum Amount, in respect of the D&O Policy. If at any time the Surviving Corporation or Parent is required to make indemnification payments to
persons who were directors, officers or employees of the Company at or prior to the Effective Time pursuant to this Section 6.8, then Parent shall have the right to make a claim for
indemnification therefor pursuant to Section 9.2 hereof, provided the indemnifiable claim against the former Company director, officer or
employee is of a type that is subject to indemnification coverage pursuant to Section 9.2. 

        6.9    Due Diligence Obligations.    

        (a)   Subject
to the provisions of this Section 6.9, Parent shall use Commercially Reasonable Efforts to []*. Parent may satisfy its obligations
under this Section 6.9(a) through the efforts of any of the Members of the Buyer Group. Notwithstanding anything express or implied in the foregoing provisions of this Section 6.9(a) or
in any other provision of this Agreement, Parent shall not be deemed to be in breach of any of its obligations in this Section 6.9(a) []*. 

        (b)   If
one or more Members of Buyer Group collectively have, on or before the []*, either (i) []* or
(ii) entered into []* with respect to a Contingent Payment Product with an indication for the treatment of infections caused by HCV, then Parent will be deemed to have
performed and satisfied its obligations under Section 6.9(a) throughout the period commencing on []*. If one or more Members of the Buyer Group collectively have not, on
or before the []* in this Section 6.9(b) (together, the "Presumed Breach Events"), then Parent shall be presumed to have
breached its obligations under Section 6.9(a) above (which presumption may be rebutted by Parent as further provided below in this Section 6.9(b)). Upon such a presumed breach, Holders
Representative may, if it so elects, deliver a Non-Compliance Notice to Parent pursuant to Section 6.10(b) hereof and this Section 6.9(b) no later than sixty (60) days
after the []*. If Holders Representative does not deliver a Non-Compliance Notice to Parent pursuant to Section 6.10(b) and this Section 6.9(b) within
such sixty (60) day period, Holders Representative, for itself and on behalf of all Holders, shall be deemed to have waived all rights and remedies against Parent for such presumed breach. If
Holders Representative delivers a Non-Compliance Notice to Parent pursuant to Section 6.10(b) and this Section 6.9(b) within such sixty (60) day period, Parent may 

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elect,
in its sole and absolute discretion by giving to the Holders Representative a Breach Dispute Notice pursuant to Section 6.10(c), either to challenge that the Presumed Breach Events have
occurred or to rebut any presumption that Parent has breached its obligations under Section 6.9(a) hereof solely because the Presumed Breach Events have occurred. If, upon receipt of any Breach
Dispute Notice from Parent that sets forth Parent's election to rebut any presumption that Parent has breached its obligations under Section 6.9(a) hereof solely because the Presumed Breach
Events have occurred, the Holders Representative elects thereafter to initiate judicial proceedings pursuant to Section 6.10(c), then, in such proceedings, Parent shall have the burden of proof
to establish that it has satisfied its obligations under Section 6.9(a) hereof notwithstanding that the Presumed Breach Events have occurred. 

        (c)   On
each successive six-month anniversary of the Closing Date during the period in which a Section 6.9 Contingent Payment Product is being developed by
Parent until the satisfaction of HCV Milestone Five or HCV []* Milestone Five, and thereafter on each successive anniversary of the Closing Date for so long as Parent is
developing or commercializing a Section 6.9 Contingent Payment Product, Parent shall provide to the Holders Representative []* in connection with such Section 6.9
Contingent Payment Product during the preceding six or twelve month period, as applicable, including []* incurred during such period. In addition, within the period of sixty
(60) days after each successive six-month anniversary of the Closing Date in which a Section 6.9 Contingent Payment Product is being developed by Parent until the
satisfaction of HCV Milestone Five or HCV []* Milestone Five, and thereafter within the period of sixty (60) days after each successive anniversary of the Closing Date
in which a Section 6.9 Contingent Payment Product is being developed or commercialized by Parent, Parent will, upon reasonable advance notice from Holders Representative, make
[]* with respect to such Section 6.9 Contingent Payment Product []* and for a period not to exceed []*. The Holders
Representative may suggest other []*, and, if not unduly burdensome to Parent or such other []* and not in conflict with other responsibilities or
activities that such other []* may have, such []* and encourage such other []*. For a period of sixty (60) days following
the delivery of any such []*, as applicable, Parent will require that such []*, if not unduly burdensome to Parent or to such
[]*, via telephone or email communications related to matters []*; provided that in
[]*. Notwithstanding anything in this Section 6.9(c) to the contrary, Parent shall not be required to provide any such []*, (x) unless and
until the Holders Representative executes and delivers a confidentiality agreement reasonably acceptable to the Parent for purposes of preserving the confidentiality of all []*
and information provided by Parent pursuant to this Section 6.9(c), and (y) if any such []* or information could adversely affect the attorney-client privilege
between Parent and its counsel, unless such privilege could be protected by a joint defense agreement between Parent and the Holders Representative and the Holders Representative has expressed a
willingness to enter into such an agreement on terms reasonably acceptable to Parent. 

        (d)   In
carrying out Parent's development activities in connection with the development of a Section 6.9 Contingent Payment Product, Parent shall, and shall ensure
that the Surviving Corporation shall, comply in all material respects with all applicable laws, rules and regulations applicable to such development activities. 

        (e)   The
Participating Holders are intended third party beneficiaries of the provisions of this Section 6.9, and the Holders Representative may enforce the
Participating Holders' interests under this Section 6.9 in case of breach hereof by Parent. 

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        6.10    Grantback Provisions.    

        (a)   Within
ninety (90) days following receipt by the Holders Representative of an Abandonment Notice, the Holders Representative shall be entitled to require, by
means of a written notice to Parent disclosing the election of the Holders Representative to exercise such right (an "Abandonment Grantback Notice"),
that Parent (and its Subsidiaries and controlled Affiliates) grant to the Holders Representative for the benefit of the Participating Holders (X) a []* (except to the
extent otherwise provided below in this Section 6.10), []* under all right, title and interest of Parent (and its Subsidiaries and controlled Affiliates) in and to
[]*, in either case only to the extent owned by Company at the Effective Time (collectively, the "Company Grantback Assets"), to
[]* a Contingent Payment Product for []*, provided that the obligations of Parent (and its Subsidiaries
and controlled Affiliates) under this clause (X) shall be subject to the limitations set forth below in this Section 6.10(a), (Y) a []* (except to the
extent otherwise provided below in this Section 6.10), []* under all right, title and interest of Parent (and its Subsidiaries and controlled Affiliates) in and to
[]*, in each case only to the extent []* (collectively, the "Parent Grantback Work Product"),
[]* Parent Grantback Work Product []* a Contingent Payment Product for []*,  provided that the obligations of Parent (and its Subsidiaries and controlled Affiliates) under this clause (Y) shall be
subject to the
limitations set forth below in this Section 6.10(a), and (Z) a []* (except to the extent otherwise provided below in this Section 6.10),
[]* under all right, title and interest of Parent (and its Subsidiaries and controlled Affiliates) in and to []* at any time after the Effective Time
and prior to the date of the Abandonment Grantback Notice and that []* a Contingent Payment Product (collectively, the "Parent Grantback
Assets" and together with the Company Grantback Assets and the Parent Grantback Work Product, the "Grantback Assets"),
[]* a Contingent Payment Product, provided that the obligations of Parent (and its Subsidiaries and controlled Affiliates) under
this clause (Z) shall be subject
to the limitations set forth below in this Section 6.10(a). Notwithstanding anything express or implied in any of the foregoing provisions of this Section 6.10(a) to the contrary,
(i) the obligations of Parent (and its Subsidiaries and controlled Affiliates) under clause (X), (Y) or (Z) of this Section 6.10 to grant any rights to the Holders
Representative for the benefit of the Participating Holders shall be subject the provisions of any third party agreements entered into by Parent (or any of its Subsidiaries or controlled Affiliates)
that may prohibit, limit or prevent Parent (or any of its Subsidiaries or controlled Affiliates) from complying with the provisions of any of such clauses (X), (Y) or (Z),  provided that any
such third party agreement complies with the provisions (other than the provisions of clause (B)) of Section 11.3(b)
hereof, and (ii) neither Parent nor any of its Subsidiaries or controlled Affiliates shall have any obligation to grant to the Holders Representative for the benefit of the Participating
Holders []* pursuant to any of clauses (X), (Y) or (Z) of this Section 6.10(a) []* a Contingent Payment Product for the
treatment of any non-HCV Indication if Parent (or any of its Subsidiaries or controlled Affiliates) has granted to any third party []* a Contingent Payment Product
in such non-HCV Indication, and, in the case of []*, Parent is contractually prohibited from transferring its []* to any third party, in
which case Parent hereby agrees that from and after the date of receipt by Parent of the Abandonment Grantback Notice, Parent shall not pursue the further development of any product in such
Non-HCV Indication. Such grant shall be consummated no later than thirty (30) days following delivery to the Parent of the Abandonment Grantback Notice, by means of execution and
delivery by the Parent (and any of its Subsidiaries or controlled Affiliates having any right or interest in the Grantback Assets) and the Holders Representative []*, without
[]* previously received by the Holders Representative or the Participating Holders. Notwithstanding any provision in this Section 6.10(a) that states or implies that
[]* by the Holders Representative in connection with the []* to be granted by Parent under this Section 6.10(a), the Holders Representative shall
be required to make payment of all payments and royalties required to be made under any and all third party licenses that are sublicensed by Parent to Holders Representative in connection with the
implementation by Parent of all of its obligations under this Section 6.10(a). 

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        (b)   In
the event that Parent has breached its obligations under Section 6.9(a) hereof, the Holders Representative shall be entitled, subject to the provisions of the
next sentence and Section 6.9(b) hereof, as applicable, to deliver a written notice (a "Non-Compliance Notice") to Parent specifying
in reasonable detail the facts and circumstances surrounding such breach and reasons as to why the Holders Representative believes that such facts and circumstances give rise to such breach.
Notwithstanding anything express or implied in the foregoing provisions of this Section 6.10(b), but subject to the provisions of Section 6.9(b) hereof, (i) the Holders
Representative shall only be entitled to deliver a Non-Compliance Notice pursuant to this Section 6.10(b) within sixty (60) days after any meeting held pursuant to
Section 6.9(c) hereof (or, if later, within sixty (60) days after the last day on which any such meeting was required to be held pursuant to Section 6.9(c) hereof) and
(ii) subject to the provisions of Section 6.9(b) hereof and absent fraud or intentional misconduct or the discovery by the Holders Representative after the expiration of the applicable
period described in clause (x) or (y) below, as applicable, of material facts or circumstances in existence during such period that reasonably relate to an ongoing breach by Parent of
its obligations set forth in Section 6.9(a) and would have been discovered or known by Holders Representative during such period if Parent had not breached any of its obligations under
Section 6.9(c) hereof to the extent applicable to such period, the facts and circumstances that constitute or give rise to the breach by Parent of its obligations under Section 6.9(a)
must have occurred or failed to occur either (x) if under Section 6.9(c) meetings are required to be held every six months, during the six-month period prior to the date when
the meeting relating to such Non-Compliance Notice was held or required to be held pursuant to Section 6.9(c) or (y) otherwise, during the 12-month period prior
to the date when the meeting relating to such Non-Compliance Notice was held or required to be held pursuant to Section 6.9(c) and Holders Representative shall not otherwise be
entitled to allege facts or circumstances that occurred or did not occur at any time prior to the applicable period under the foregoing clause (x) or (y), as applicable, to support an argument
or finding that Parent has breached its obligation under Section 6.9(a) hereof. 

        (c)   Within
thirty (30) days after its receipt of any Non-Compliance Notice, Parent shall have the option either (i) to provide written notice to
the Holders Representative of its acknowledgement of the breach asserted in such Non-Compliance Notice and a proposed plan to cure such breach (a "Cure
Notice"), which plan (and the proposed timetable for its completion) must be reasonably satisfactory to the Holders Representative, or (ii) to provide written notice to
the Holders Representative that it intends to dispute the asserted breach of its obligations under Section 6.9(a) (a "Breach Dispute Notice"). If
Parent fails to provide either a Cure Notice or Breach Dispute Notice within such thirty (30) day period, Parent will be presumed to have provided a Breach Dispute Notice. In the event that
Parent provides a Cure Notice and, within thirty (30) days after receipt by the Holders Representative of such Cure Notice, Parent and Holders Representative cannot agree on the proposed plan
to cure the breach, Parent and Holders Representative shall engage in mediation, which shall last for a period of no more than sixty (60) days, 

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pursuant
to the International Institute for Conflict Prevention and Resolution ("CPR") Mediation Procedure then in effect. Each party shall pay its own
expenses incurred in connection with such mediation, and the fees and expenses of the mediator shall be divided evenly between the parties. Notwithstanding anything else contained herein, any party to
such mediation shall have the right to commence litigation pursuant to Section 11.14 hereof at any time after the expiration of sixty (60) days after service of a demand for mediation
under this subsection. In the event that Parent provides or is deemed to have provided a Breach Dispute Notice, or in the event that Parent has provided a Cure Notice and Parent and the Holders
Representative have not, after mediation, agreed upon a plan to cure the breach, then Holders Representative shall be entitled to seek, pursuant to Section 11.14 hereof, a judicial declaration
that Parent is in breach of its obligations under Section 6.9(a). At Holders Representative's election, Holders' Representative may accompany such request for a judicial declaration with a
request for relief in the form of either money damages or implementation of the provisions of Sections 6.10(d) and 6.10(e) below; any such judicial proceedings shall be conducted in accordance
with Section 11.14 hereof. The remedy for any breach by Parent of its obligations under Section 6.9(a) hereof shall be, at the election of the Holders Representative, either money
damages or implementation of the provisions of Section 6.10(d) and 6.10(e), but not both such remedies. In no event shall the Holders Representative be entitled to any money damages upon any
breach by Parent of its obligations under Section 6.9(a) hereof in the event that the Holders Representative elects, in the manner provided above, to enforce its rights under
Sections 6.10(d) and 6.10(e) below. 

        (d)   In
the event that the Holders Representative makes an election, in accordance with the provisions of Section 6.10(c), for the implementation of this
Section 6.10(d) and Section 6.10(e) below in lieu of money damages, and in the event that a court finally determines, with no opportunity for further appeal, that Parent is in breach of
its obligations under Section 6.9(a), Holders Representative shall be entitled to deliver a written notice (a "Non-Compliance Grantback
Notice") to Parent requiring Parent (and its Subsidiaries and controlled Affiliates) to perform all of their respective obligations under Section 6.10(a) to the same
extent as if Parent had provided to the Holders Representative an Abandonment Notice and the Holders Representative had provided to Parent an Abandonment Grantback Notice;  provided, however, that, notwithstanding any provision of Section 6.10(a) hereof stating or
implying that the grant of any and all []* pursuant to Section 6.10(a) hereof to the Holders Representative shall be without any []*, in the
event that the grant of []* arises by virtue of the implementation of the provisions of this Section 6.10(d), then Parent shall be entitled to
[]* in connection with the grant []* if and to the extent so provided in Section 6.10(e) below (the grant []* by virtue
of the implementation of, and in accordance with, the provisions of this Section 6.10(d) to the Holders Representative shall be referred to in this Agreement as the
"Non-Compliance Grantback"). For the avoidance of doubt, the parties agree that the right to demand performance of this
Section 6.10(d) and Section 6.10(e) is a purely contractual remedy governed by the terms of this Agreement, and that any request for court assistance in enforcing such right shall not be
subject to the same principles of equity applied to requests for rescission. Notwithstanding anything express or implied in this Section 6.10 or elsewhere in this Agreement to the contrary, in
no event shall the foregoing provisions of this Section 6.10(d) or the provisions of Section 6.10(e) below apply or be implemented or enforced at any time after
[]*. 

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        (e)   If
the Non-Compliance Grantback occurs at any time before the earlier to occur of []*, then, subject to the provisions set forth
below in this Section 6.10(e) and Section 6.10(f), the grant []* to the Holders Representative that constitute the Non-Compliance Grantback shall
occur without []*. If the Non-Compliance Grantback occurs at any time following the occurrence of []*, but prior to the occurrence of
[]*, and if the Holders Representative thereafter effects a subsequent sublicense or other disposition of all or any portion of the []* granted by
Parent (or its Subsidiaries or controlled Affiliates) pursuant to Section 6.10(d) in order to implement the Non-Compliance Grantback, or if there is any sale of the Holders
Representative or any other person that is the direct or indirect owner or holder of []*, in either case for cash or other liquid consideration, then the Holders Representative
shall, within forty-five (45) days after receipt of such consideration, deliver or cause to be delivered to Parent a written report specifying the source and calculation of such
consideration received, []*. []* shall be calculated based on the fair market value of such non-marketable securities or other illiquid
assets at the time of such sublicense or other disposition or such sale of Holders Representative or other person based on valuation methods reasonably acceptable to both Parent and Holders
Representative) shall be deferred until the earlier of the date on which such consideration is converted into cash or the date on which Parent is permitted to receive its []*
without violating applicable securities laws. If the Non-Compliance Grantback occurs at any time following the occurrence of []*, but prior to the occurrence of
[]*, and if the Holders Representative thereafter develops and commercializes a Contingent Payment Product, then the Holders Representative shall make payment to Parent of
[]*. In the event that the provisions of the immediately preceding sentence become applicable, the provisions set forth in Sections 2.7(g) through 2.7(k) hereof with
respect to reporting, audit and dispute rights and obligations of the Parent and the Holders Representative, as applicable, pertaining to []* shall be applied  mutatis mutandis to create reporting, audit
and dispute rights and obligations of the Parent and the Holders Representative, as applicable, pertaining
to []*. Notwithstanding any provision in Section 6.10(d) that states or implies that []* by the Holders Representative in connection with the
[]* to be granted by Parent in connection with the Non-Compliance Grantback and in addition to []*, the Holders Representative shall be
required to make payment of all payments and royalties required to be made under []* in connection with the implementation by Parent of all of its obligations under
Section 6.10(d) and the Holders Representative shall be required to comply with its []* under Section 6.10(f) below. 

        (f)    Subject
to the provisions of this Section 6.10(f), upon the grant by Parent []* to the Holders Representative pursuant to
Section 6.10(a) or Section 6.10(d), as applicable, Parent shall
[]* (collectively, the "Grantback Licensed Patents"). The Holders Representative shall be obligated to
[]*; provided, however, that, (i) in the event that any of the Grantback
Licensed Patents are also []*, then the []*, and (ii) until the earlier of (x) the granting by Holders Representative of a license to a
third party to the right, title and interest of the Participating Rights Holders and/or the Holders Representative in and to any of the Grantback Licensed Patents or (y) the
[]* of the Grantback Date, Holders Representative shall have the right to elect to defer its obligation under the foregoing provisions of this Section 6.10(f) to
[]* is subject to compliance by the Holders Representative with the provisions of this Section 6.10(f). Parent may at any time terminate its obligation to
[]* to the Holders Representative or to any third party that is also a []* Grantback License Patent,  provided that, in the case of any such third party []*. In the case of any such []* of a Grantback
License Patent that has more than one []*. 

        (g)   For
purposes of clarification, if, at any time before the grant []* by Parent to the Holders Representative pursuant to Section 6.10(a)
hereof or the occurrence of the Non-Compliance Grantback, Parent grants to any Member of the Buyer Group []* any Contingent Payment Product, the grant
[]* to the Holders Representative shall not release Parent from any of its obligations under this Agreement with respect to such Contingent Payment Product except for those
obligations, if any, of Parent under this Agreement that correspond to the portion of Parent's right, title and interest in and to such Contingent Payment Product that have been
[]* to the Holders Representative pursuant to []*. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

70

 

  
        6.11    Confidentiality.    Any and all non-public information disclosed or made available by Parent to
the Company or by the Company to Parent as a result of the negotiations or due diligence investigations leading to the execution of this Agreement and the consummation of the transactions contemplated
under this Agreement, or in furtherance thereof, including, without limitation, any information disclosed or made available pursuant to Section 7.1 hereof, shall remain subject to the terms and
conditions of that certain Mutual Confidentiality Agreement, by and between the Company and Parent, dated May 19, 2006 (the "Confidentiality
Agreement"). 

        6.12    Employees.    The Company shall terminate, and shall cause its Subsidiaries, to the extent necessary, to
terminate, all employees of the Company and its Subsidiaries, respectively, effective as of immediately prior to the Effective Time. 

        6.13    Non-Company Program Liabilities.    Prior to the Effective Time, the Company shall satisfy,
discharge or pay, or provide for the satisfaction, discharge or payment of (which may include requesting Parent to pay or assume at Closing, and deduct from the Closing Consideration, the Closing
Liabilities set forth in the Merger Consideration Certificate pursuant to Section 2.6(b)), all of its and its Subsidiaries' liabilities or obligations (whether accrued or contingent),
including, without limitation, (i) accounts payable accrued for in the books and records of the Company immediately prior to the Effective Time, (ii) Transaction Expenses and
(iii) employee-related liabilities of any kind or nature; provided, however, that,
notwithstanding the foregoing, the Company may have liabilities under any written executory Company Program Contracts, but only if and to the extent that such liabilities accrue and arise from and
after the Closing. 

        6.14    Bank Accounts; Maintenance of Cash Balances.    Except for those bank accounts listed on  Schedule 4.20 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries shall open or maintain any bank, brokerage or other
accounts, or safe-deposit boxes. At Closing, all cash held by the Company or any of its Subsidiaries shall be held in one or more of those bank accounts listed on  Schedule 4.20 of the Company Disclosure
Schedules that are not foreign bank accounts. 

        6.15    Termination of Company Employee Benefit Plans.    Effective immediately prior to the Closing and contingent
upon the Closing, the Company will terminate any and all Company Employee Benefit Plans intended to qualify as a qualified cash or deferred arrangement under Section 401(k) of the Code and
effective as of such termination, no employee of the Company shall have any right to contribute any amounts to any Company Employee Benefit Plan intended to qualify as a qualified cash or deferred
arrangement under Section 401(k) of the Code. At the request of Parent, the Company will provide Parent with evidence that such Company Employee Benefit Plans have been terminated effective
immediately prior to the Closing pursuant to resolutions duly adopted by the Company Board. In addition, the Company will terminate any and all other Company Employee Benefit Plans, including any
group health, dental, severance, separation or salary continuation plans, programs or arrangements, effective immediately prior to the Closing and contingent upon the Closing, and, at the request of
Parent, the Company will provide Parent with evidence that such Company Employee Benefit Plans
have been so terminated pursuant to resolutions duly adopted by the Company Board. The Company also shall take such other actions in furtherance of terminating such Company Employee Benefit Plans as
Parent may reasonably require. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

71

 

        6.16    Employees and Compensation.    

        (a)   No
Member of the Buyer Group (including for the avoidance of doubt the Surviving Corporation) shall have any obligation to employ or continue the engagement of any
officer, director, employee or independent contractor employed or otherwise engaged by the Company and its Affiliates as of the Closing Date (collectively, the Company's
"Personnel"). After satisfaction of all applicable legal and contractual requirements, if any, the Company shall terminate the employment or engagement,
as the case may be, of each of its Personnel effective not later than the Closing Date. 

        No
Member of the Buyer Group (including for the avoidance of doubt the Surviving Corporation) shall have any obligation to provide or liability for the provision of compensation or
benefits to any of the Company's Personnel, current or former, whether in connection with their employment or engagement or the termination of the same and including without limitation under or in
connection with the establishment, maintenance, or termination of any Company Employee Benefit Plan (collectively, "Compensation Liabilities"). 

        6.17    Tax Certificate.    At the Closing, the Company shall deliver to Parent a certificate dated as of immediately
prior to the Effective Time, setting forth the following information as to each share of the Company's stock (as defined in Treas. Reg. § 1.382-2(a)(3)), as of the
Closing Date: (i) the date of issuance, (ii) the holder at issuance, (iii) the issue price and (if different), in the case of common stock or options on common stock, the most
recent fair market value determination of such common stock made by the Company's board of directors for purposes of option grants, (iv) the date(s) of any transfer(s), (v) any
information available to the Company as to the fair market value at the time of transfer, (vi) any information as to the holder of that share from time to time that is described in Treas. Reg.
§§ 1.382-2T(h)(6) and/or 1.382-2T(k) and is actually known to the Company (it being understood that the Company shall be considered to actually
know only such information as is available from existing Company records and shall not require the Company to make any investigation), and (vii) a summary of any written materials indicative
of, or other information or estimates as to, the fair market value of that share from time to time (including, e.g., the exercise price of any incentive stock options granted at any time at or
following the issuance date of that share to acquire shares of the same class of stock), provided that no obligation to indemnify shall arise as a result of any good-faith valuation errors
that may be reflected in the information provided pursuant to this Section 6.17. 

        6.18    Patent Diligence.    Without limiting Parent's obligations set forth in Section 6.9(a), following the
Effective Time, Parent shall use commercially reasonable efforts to obtain and maintain an issued Company Patent in each of []*. In addition, Parent shall use commercially
reasonable efforts to obtain issued patents from those patent applications within the Company Patents for which claims are allowed by the applicable patent authorities and for which the issuance of a
patent by such applicable patent authorities for such allowed claims would satisfy HCV Milestone One or HCV Milestone Two. Notwithstanding the foregoing, from and after the Grantback Date, the
provisions of this Section 6.18 shall be of no further force or effect and the provisions of Section 6.10(f) shall thereafter apply. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

72

 
ARTICLE 7

CONDUCT OF BUSINESS PENDING THE CLOSING  

        From and after the date of this Agreement and until the Closing, except as otherwise specifically agreed by Parent: 

        7.1    Full Access.    Subject to applicable law, the Company will afford to Parent and its authorized representatives
full access, upon request and reasonable notice and during normal business hours, to all of the properties, books, records, contracts, and documents of the Company, and a reasonable opportunity to
make such investigations as Parent desires to make, and will furnish or cause to be furnished to Parent and its authorized representatives all such information with respect to the Company's affairs
and businesses as Parent reasonably requests. No information or knowledge obtained by Parent in any investigation pursuant to this Section 7.1 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions of the parties to consummate the Merger. 

        7.2    Course of Business Pending the Closing.    Subject to the provisions set forth below in this Article 7,
the Company shall operate the Company's business in the ordinary course consistent with past practices. 

        7.3    No Dividends, Issuances, Repurchases, Etc.    Except as set forth on Schedule
7.3 of the Company Disclosure Schedule, the Company will not declare, set aside, or pay any dividends (whether in cash, shares of stock, other property, or otherwise) on, or
make any other distribution in respect of, any shares of its capital stock or other securities, or purchase, redeem, or otherwise acquire for value any shares of its capital stock or other securities.
Except as set forth on Schedule 7.3 of the Company Disclosure Schedule, the Company will not issue any shares of its capital stock or other securities
(including without limitation any options, warrants, or other rights to acquire Company Stock), other than shares of Company Stock issued upon the due exercise or conversion of Eligible Company
Options, Company Preferred Stock or Common Warrants listed in Schedule 4.4 of the Company Disclosure Schedule (which exercises or conversions will be
disclosed by the Company in a supplement to the Company Disclosure Schedule pursuant to Section 7.25 hereof). 

        7.4    No Compensation Changes.    Except in the ordinary course of business consistent with
past practices, the Company will not increase the base salary payable or to become payable to any of its officers, directors, employees, consultants or agents, or pay or increase any severance, bonus,
insurance, pension, or other benefit plan, payment, or arrangement made to, for, or with any such officers, directors, employees, consultants or agents, except as described in  Schedule 7.4 of the
Company Disclosure Schedule. The Company shall not pay any severance benefits to, enter into any contract, agreement or arrangement
to provide severance benefits to, or implement any severance plan for the benefit of, any of the Company's officers, directors, employees or consultants, except pursuant to any severance plan,
contract or arrangement described in Schedule 4.13 or Schedule 7.4 of the Company Disclosure Schedule. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

73

 

        7.5    Contracts and Commitments.    Except as set forth on  Schedule 7.5 of the Company Disclosure Schedule, the Company will
not enter into any material contract or commitment, or engage in any other
transaction, other than as specifically contemplated by this Agreement or in the schedules hereto or with the prior written consent of Parent. 

        7.6    Purchase and Sale of Assets.    Except as set forth on  Schedule 7.6 of the Company Disclosure Schedule, the Company
will not purchase, lease as lessee, license as licensee, or otherwise acquire any
interest in, or sell, lease as lessor, license as licensor, or otherwise dispose of any interest in, any assets (including, without limitation, any Company Intellectual Property), other than purchases
and sales of assets, leases, or licenses in the ordinary course of business or in amounts not exceeding ten thousand dollars ($10,000) individually or fifty thousand dollars ($50,000) in the
aggregate. Notwithstanding the foregoing, in no event shall the Company sell, lease, license or otherwise dispose of any Company Intellectual Property, computer hard drives, computer servers, computer
network hardware, physical or electronic offsite storage materials, electronic tapes and/or other backup media materials or material written documents of the Company. 

        7.7    Liabilities.    The Company shall not incur any Indebtedness or enter into any contracts or commitments
involving potential payments to or by the Company or any Subsidiary of the Company, except for accounts payable and payroll and other services liabilities incurred or entered into by the Company in
the ordinary course of business consistent with past practices and expenses incurred in furtherance of the Merger. 

        7.8    Charter and By-Laws.    Except as set forth on Schedule
7.8 of the Company Disclosure Schedule, the Company shall not cause, permit or propose any amendments to its articles of incorporation or by-laws except as
contemplated under this Agreement. 

        7.9    Acquisitions.    Except to the extent permitted under Section 7.6 above, the Company shall not make, or
permit to be made, any acquisition of property, assets or businesses. 

        7.10    Capital Expenditures.    The Company shall not authorize or incur any single capital expenditure in excess of
ten thousand dollars ($10,000) or capital expenditures which in the aggregate exceed fifty thousand dollars ($50,000). 

        7.11    Accounts Payable.    The Company shall make payment with respect to all of its accounts payable and its
Indebtedness in a timely manner in accordance with their respective terms in the ordinary course of business consistent with the Company's past practices, and shall make payment of or provision for
all such accounts payable and Indebtedness prior to Closing in accordance with Section 6.13 hereof. 

        7.12    Employees.    The Company shall not hire any employee without the prior written consent of Parent. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

74

 

        7.13    Accounting Policies.    Except as may be required as a result of a change in law or in generally accepted
accounting principles, change any of the accounting practices or principles used by it. 

        7.14    Taxes.    The Company shall not, and shall not permit any Subsidiary to, make any Tax election or settle or
compromise any material federal, state, local or foreign Tax liability (other than settlements or compromises not involving any payments of Taxes), change its annual tax accounting period, change any
method of Tax accounting, enter into any closing agreement relating to any Tax, surrender any right to claim a Tax refund, or consent to any extension or waiver of the limitations period applicable to
any Tax claim or assessment. The Company shall, and shall cause each of its Subsidiaries to, timely file all of its Tax Returns as they become due (taking all timely filed proper extension requests
into account), all such Tax Returns to be true, correct and complete, and the Company shall, and shall cause each of its Subsidiaries to, timely pay and discharge as they become due and payable all
Taxes (other than Taxes contested in good faith by the Company or its Subsidiaries in appropriate proceedings), assessments and other governmental charges or levies imposed upon it or its income or
any of its property. 

        7.15    Legal.    The Company shall not settle or compromise any pending or threatened suit, action or claim. 

        7.16    Extraordinary Transactions.    The Company shall not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company (other than the Merger, or except as permitted under Section 7.24(d)). 

        7.17    New Agreements; Amendments.    Except as set forth on Schedule
7.17 of the Company Disclosure Schedule, the Company shall not enter into or modify, or permit any Subsidiary to enter into or modify, any supply, license, development,
research or collaboration agreement with any other person or entity. 

        7.18    Obligations.    The Company shall not obligate itself to do any of the things that the Company is prohibited
from doing pursuant to any of the provisions of this Section 7. 

        7.19    Preservation of Organization.    The Company will use commercially reasonable efforts to preserve its business
organization intact, to preserve for the benefit of the Surviving Corporation its present business relationships with its suppliers, customers, employees, consultants and others having business
relationships with it. 

        7.20    Intellectual Property Rights.    The Company will maintain, preserve and protect the Company Intellectual
Property. 

        7.21    No Default.    The Company will not take or omit to take any action, or permit any action or omission to act,
that would cause a default under or a breach of any of its contracts, commitments, or obligations. 

        7.22    Compliance with Laws.    The Company will duly comply in all material respects with all applicable laws,
regulations, and orders. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

75

 

        7.23    Advice of Change.    The Company will promptly advise Parent in writing of any event or occurrence which
results in or is reasonably likely to result in a Material Adverse Effect on the Company. 

        7.24    No Solicitation by Target; Board Recommendation; Fiduciary Exceptions.    

        (a)   For
purposes of this Agreement: 

          (i)  The
term "Takeover Proposal" means any written proposal or offer from any person that would reasonably be expected to
lead to any acquisition or purchase, in one transaction or a series of related transactions, of assets or businesses that constitute 50% or more of the revenues, net income or the assets of the
Company and its Subsidiaries, taken as a whole, or 50% or more of any class of equity securities of the Company, any tender offer or exchange offer that if consummated would result in any person
beneficially owning 50% or more of any class of equity securities of the Company, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution, joint venture, binding
share exchange or similar transaction involving the Company pursuant to which any person or the shareholders of any person would own 50% or more of any class of equity securities of the Company or of
any resulting parent of the Company, other than the transactions contemplated by this Agreement; provided, that the term "Takeover Proposal shall not be deemed to include additional purchases of newly
issued Company Stock by Pacific Horizon Ventures or any of its Affiliates. 

         (ii)  The
term "Superior Proposal" means any written proposal made by a third party that if consummated would result in such
person (or its shareholders) owning, directly or indirectly, (A) all or substantially all of the shares of capital stock of the Company then outstanding, or (B) all or substantially all
of the assets of the Company and its Subsidiaries, taken as a whole, in each case which was not in any way solicited by the Company or any of its Subsidiaries, affiliates, agents or representatives
after the Agreement Date and did not otherwise result from a breach of this Agreement and which a majority of the members of the Company Board determines in good faith (after consultation with a
financial advisor of recognized reputation) to be (x) on terms, taking into account all the terms and conditions of such proposal and this Agreement (including any proposal by Parent to amend
the terms of this Agreement and the transactions contemplated hereby) more favorable to the shareholders of the Company from a financial point of view than the transactions contemplated by this
Agreement and (y) that has a high likelihood of being completed, taking into account all financial, legal, regulatory and other aspects of such proposal. 

        (b)   Subject
to Section 7.24(c), the Company shall not, nor shall it authorize or permit any of its Subsidiaries or any of their respective directors or officers to
(and the Company shall use its best efforts to cause its employees and any investment banker, financial advisor, attorney, accountant or other advisor, agent or representative retained by it or any of
its Subsidiaries not to), directly or indirectly, (i) solicit, initiate or encourage, or take any other action designed to facilitate, any Takeover Proposal or (ii) enter into any
discussions or negotiations with any third party regarding, or furnish to any person any information in connection with, any Takeover Proposal. The Company shall, and shall cause its Subsidiaries to,
immediately cease and cause to be terminated all existing discussions or negotiations with any person conducted heretofore with respect to any Takeover Proposal or that may reasonably be expected to
lead to a Takeover Proposal. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

76

 

        (c)   Notwithstanding
the provisions of clause (b) of this Section 7.24 or anything else in this Agreement, but subject to the termination provisions set forth
below in this Section 7.24(c), in response to any written Takeover Proposal received by the Company Board that constitutes a Superior Proposal or that a majority of the members of the Company
Board determines in good faith (after consultation with a financial advisor of recognized reputation and outside legal counsel) has a high likelihood of resulting in the completion of a Superior
Proposal, and which Takeover Proposal did not result from a breach of this Section 7.24 by the Company and was not in any way solicited by the Company or any of its Subsidiaries, affiliates,
agents or representatives after the Agreement Date, the Company may, if a majority of the members of the Company Board determines in good faith (after consultation with outside counsel) that the
failure to do so would be inconsistent with the fiduciary duties of the Company Board to the shareholders of the Company under applicable laws, (x) furnish information with respect to the
Company and its Subsidiaries to the person making such Takeover Proposal and such person's representatives pursuant to a customary confidentiality agreement not less restrictive of the other party
than the Confidentiality Agreement, provided that all such information has previously been provided to Parent or is provided to Parent prior to or substantially concurrent with the time it is provided
to such person and (y) participate in discussions or negotiations with the person making such Takeover Proposal (and such person's representatives) regarding such Takeover Proposal.
Notwithstanding anything to the contrary expressed or implied in this Agreement, the provisions of this Section 7.24(c) and the rights of the Company and the Company Board under this
Section 7.24(c) shall terminate immediately upon receipt of the Required Shareholder Approval. 

        (d)   Except
as permitted by this Section 7.24(d), neither the Company Board nor any committee thereof shall (i) (A) withdraw (or modify in a manner adverse to
Parent), or publicly propose to withdraw (or modify in a manner adverse to Parent), the approval, recommendation or declaration of advisability by the Company Board or any such committee thereof of
this Agreement, the Merger or the other transactions contemplated by this Agreement or (B) recommend, adopt or approve, or propose publicly to recommend, adopt or approve, any Takeover Proposal
(clauses (i)(A) and (i)(B) being collectively referred to herein as an "Adverse Recommendation") or (ii) allow, cause or authorize the
Company or any of its Subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint
venture agreement, partnership agreement or other similar agreement providing for or contemplating the consummation of any Takeover Proposal (other than a confidentiality agreement as provided in
Section 7.24(c)). Notwithstanding the foregoing or any other provision of this Agreement, but subject to the termination provisions set forth below in this Section 7.24(d),
(x) the Company Board may make an Adverse Recommendation as a result of a Superior Proposal, if (I) such Superior Proposal has been actually received by the
Company Board, (II) in light of such Superior Proposal a majority of the members of the Company Board determines in good faith (after consultation with outside counsel) that the failure to do
so would constitute a breach by the Company Board of its fiduciary obligations to the shareholders of the Company under applicable laws, (III) the Company has notified Parent in writing of the
determination described in clause (II) above, (IV) at least five (5) business days following receipt by Parent of the notice referred to in clause (III) above, and taking
into account any revised proposal made by Parent since receipt of the notice referred to in clause (III) above, such Superior Proposal remains a Superior Proposal and a majority of the members
of the Company Board has again made the determinations referred to in clause (II) above, (V) the Company is in compliance with this Section 7.24 and (VI) Parent is not at
such time entitled to terminate this Agreement pursuant to Section 10.1(c), and (y) if the Company Board receives a written Takeover Proposal that constitutes a Superior Proposal, and
which Takeover Proposal was not in any way solicited by the Company or any of its Subsidiaries, affiliates, agents or representatives after the Agreement Date (other than to the limited extent allowed
under Section 7.24(c)(x) and (y) above) and did not otherwise result from a breach of this Agreement, the Company may, contemporaneously with the termination of this Agreement pursuant
to Section 10.1(h) and within 24 hours after the three (3) business day period described in the following proviso, enter into a definitive agreement with respect to such Superior
Proposal, provided, however, that the Company may not enter into any such agreement until the third
business day following Parent's receipt of written notice from the Company advising Parent that the Company Board has received a Superior Proposal, specifying the material terms and conditions of such
Superior Proposal, identifying the person making such Superior Proposal and stating that the Company Board intends to exercise its right to enter into an agreement with respect to such Superior
Proposal (it being understood that, prior to entering into any such agreement, any amendment to the price or any other material terms of such Superior Proposal shall require a new notice to Parent and
a new three business day period). Notwithstanding anything to the contrary expressed or implied in this Agreement, the provisions of this Section 7.24(d) and the rights of the Company and the
Company Board under this Section 7.24(d), including the provisions of this Section 7.24(d) that allow the Company and the Company Board to take the actions described in clause (x)
or clause (y) above shall terminate immediately upon receipt of the Required Shareholder Approval. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

77

 

        (e)   In
addition to the obligations of the Company set forth in this Section 7.24, the Company shall promptly advise Parent orally and in writing after any director or
officer of the Company, or any investment banker, financial advisor, attorney or other advisor retained by the Company or any of its Subsidiaries in connection with the Merger, has become aware of any
Takeover Proposal (whether such Takeover Proposal was directed to any such director, officer, investment banker, financial advisor, attorney or other advisor or to any other person), of the material
terms and conditions of any such Takeover Proposal (including any changes to the price or other material terms thereof) and the identity of the person making any such Takeover Proposal. The Company
shall keep Parent reasonably informed of the status and details of any such Takeover Proposal and provide to Parent as soon as practicable after receipt or delivery thereof with copies of all
correspondence and other written material sent or provided to the Company from any third party in connection with any Takeover Proposal or sent or sent or provided by the Company to any third party in
connection with any Takeover Proposal. 

        (f)    Nothing
contained in this Section 7.24 shall prohibit the Company from making any required disclosure to the Company's shareholders if, in the good faith judgment
of the Company Board, after consultation with outside counsel, failure so to disclose would be inconsistent with its obligations under applicable law. Notwithstanding anything in this
Section 7.24, the Company Board may not take any action that would result in the Company's shareholders no longer being legally capable under Washington Law of validly adopting the Merger
Agreement. 

        7.25    Disclosure Supplements.    From time to time before the Closing, and in any event immediately before the
Closing, each of Parent and the Company will promptly advise the other in writing of any matter hereafter arising or becoming known to the disclosing party that, if existing, occurring, or known at or
before the date of this Agreement, would have been required to be set forth or described in the Company Disclosure Schedule or Parent Disclosure Schedule, as the case may be, or that is necessary to
correct any information in such Disclosure Schedule that is or has become inaccurate. No such disclosure will be taken into account in determining whether the conditions to (i) in the case of
any such supplemental disclosure by Parent, the obligations of the Company, and (ii) in the case of any such supplemental disclosure by the Company, the respective obligations of Parent and
Merger Sub, to consummate the transactions contemplated by this Agreement have been satisfied. If the Merger is consummated, then for purposes of the indemnification provisions of this Agreement, such
supplemental disclosures pursuant to this Section 7.25 will have no effect on the availability of indemnification hereunder. 

        7.26    Subsidiaries.    The Company shall not permit any Subsidiary to take any action that
the Company is not permitted to do pursuant to this Section 7. 

ARTICLE 8

CONDITIONS TO THE PARTIES' OBLIGATIONS  

        8.1    Mutual Conditions.    The parties' obligations to consummate the Merger are subject to the satisfaction (or
waiver by each such party, in its sole discretion) of each of the conditions set forth in this Section 8.1 on or before the Closing Date. If the Merger is consummated, such conditions will
conclusively be deemed to have been satisfied or waived. 

        (a)    No Injunctions or Restraints.    No temporary restraining order, preliminary or permanent injunction, or other
order issued by any court of competent jurisdiction, or other legal restraint or prohibition preventing the consummation of the Merger, shall be in effect, and no petition or request for any such
injunction or other order shall be pending. 

        (b)    Proceedings and Documents Satisfactory.    All proceedings in connection with the transactions contemplated by
this Agreement and all certificates and other documents delivered to such party pursuant to this Agreement or in connection with the Closing will be reasonably satisfactory to such party and its
counsel. 

        (c)    Escrow Agreement.    The Escrow Agreement shall have been executed and delivered by the Escrow Agent. 

        8.2    Conditions to the Company's Obligations.    The obligations of the Company to consummate the Merger are subject
to the satisfaction (or waiver by the Company, in its sole discretion) of each of the conditions set forth in this Section 8.2 on or before the Closing Date. If the Merger is consummated, such
conditions will conclusively be deemed to have been satisfied or waived. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

78

 

        (a)    Representations and Warranties.    Each of the representations and warranties made by Parent and/or Merger Sub
in or pursuant to this Agreement or in any statement, certificate, or other document delivered to the Company in connection with this Agreement, the Merger, or any of the other transactions
contemplated hereby (a) that is qualified as to materiality or Material Adverse Effect shall be true and correct in all respects when made and shall be true and correct in all respects as of
the Closing Date as though each such representation and warranty had been made on and as of the Closing Date, except to the extent any such representation and warranty expressly speaks only as of an
earlier date (in which case as of such earlier date), and (b) that is not so qualified shall be true and correct in all material respects when made and shall be true and correct in all material
respects as of the Closing Date as though each such representation and warranty had been made on and as of the Closing Date, except to the extent any such representation and warranty expressly speaks
only as of an earlier date (in which case as of such earlier date). 

        (b)    Compliance with Agreement.    Parent and Merger Sub shall have performed and complied in all material respects
with all of their respective obligations under this Agreement to be performed or complied with by them before or at the Closing. 

        (c)    Closing Certificate.    Parent and Merger Sub shall have executed and delivered to the Company, at and as of
the Closing, a certificate certifying that the conditions referred to in Sections 8.2(a) and 8.2(b) hereof have been satisfied. 

        (d)    Opinion of Counsel.    Bingham McCutchen LLP, counsel to Parent and Merger Sub, shall have delivered to
the Company a written legal opinion addressed to the Company, dated on and as of the Closing Date, in a form reasonably satisfactory to the Company. 

        (e)    Escrow Agreement.    The Escrow Agreement shall have been executed and delivered by Parent and Escrow Agent. 

        (f)    Third Party Consents of Parent.    Company shall have been furnished with evidence reasonably satisfactory to
it that the Parent has obtained the consents, approvals and waivers required pursuant to Section 5.4 hereof and any other consents, approvals and waivers that are necessary or required in
connection with, or as a result of, the Merger. 

        (g)    Services Agreement.    The Services Agreement shall have been executed and delivered by Parent. 

        8.3    Conditions to Parent's and Merger Sub's Obligations.    The obligations of each of Parent and Merger Sub,
respectively, to consummate the Merger are subject to the satisfaction (or waiver by Parent, in its sole discretion) of each of the conditions set forth in this Section 8.3 on or before the
Closing Date. If the Merger is consummated, such conditions will conclusively be deemed to have been satisfied or waived. 

        (a)    Representations and Warranties.    Each of the representations and warranties made by the Company in or
pursuant to this Agreement or in any statement, certificate, or other document delivered to Parent or Merger Sub in connection with this Agreement, the Merger, or any of the other transactions
contemplated hereby (a) that is qualified as to materiality or Material Adverse Effect shall be true and correct in all respects when made and shall be true and correct in all respects as of
the Closing Date as though each such representation and warranty had been made on and as of the Closing Date, except to the extent any such representation and warranty expressly speaks only as of an
earlier date (in which case as of such earlier date), and (b) that is not so qualified shall be true and correct in all material respects when made and shall be true and correct in all material
respects as of the Closing Date as though each such representation and warranty had been
made on and as of the Closing Date, except to the extent any such representation and warranty expressly speaks only as of an earlier date (in which case as of such earlier date). 

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        (b)    Required Shareholder Approval.    The Required Shareholder Approval shall have been obtained. 

        (c)    Compliance with Agreement.    The Company shall have performed and complied in all material respects with all
of its obligations under this Agreement to be performed or complied with by it before or at the Closing. 

        (d)    Closing Certificates.    The Company will have executed and delivered to Parent, at and as of the Closing, 

          (i)  a
certificate certifying that the conditions referred to in Sections 8.3(a), 8.3(b), 8.3(c), 8.3(f) and 8.3(g) hereof have been satisfied; 

         (ii)  a
certificate that incorporates by reference the representations and warranties set forth in Section 4.4 hereof and sets forth the information required to be set
forth on Schedule 4.4 of the Company Disclosure Schedule as of the Effective Time (the "Capitalization Certificate"), which Capitalization
Certificate shall be deemed to be a representation and warranty of the Company as of immediately prior to the Effective Time hereunder, together with a list of all Participating Holders and their
respective percentage interests in the Preferred Stock Closing Amount; and 

        (iii)  the
Merger Consideration Certificate, together with duly executed pay-off letters with respect to all Transaction Expenses (and anticipated Transaction
Expenses). 

        (e)   Opinion of Counsel.    Heller Ehrman LLP, counsel to the Company, will have delivered to Parent a
written legal opinion addressed to Parent, dated on and as of the Closing Date, and in a form reasonably satisfactory to Parent. 

        (f)    No Pending Litigation.    No action, suit or proceeding shall be pending against the Company or any of its
Subsidiaries wherein any unfavorable injunction, judgment, order, decree ruling or charge would have a Material Adverse Effect on the Company. 

        (g)    Third Party Consents.    Parent shall have been furnished with evidence reasonably satisfactory to it that the
Company has obtained the consents, approvals and waivers set forth in Schedule 4.17 of the Company Disclosure Schedule and any other consents,
approvals and waivers that are necessary or required in connection with, or as a result of, the Merger to preserve all of the Company's rights and benefits in its business, assets, properties, leases
and contracts following the Merger and without incurring any additional or special liability, or accelerating any existing liability or obligation, in connection with or under its business, assets,
properties, leases and contracts following the Merger. 

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        (h)    Resignation of Directors and Officers.    The directors and officers of the Company in office immediately prior
to the Effective Time shall have resigned as directors and officers of the Surviving Corporation effective as of the Effective Time. 

        (i)    Dissenters' Rights.    Either (i) the period provided under Washington Law for the exercise by Company
Shareholders of their rights of dissent and appraisal under Washington Law with respect to their shares of Company Stock by virtue of the Merger shall have expired with no Company Shareholders having
exercised or perfected such rights, or (ii) Company Shareholders that collectively hold shares of Company Stock representing no more than five percent (5%) of the issued and outstanding shares
of Company Stock, shall have exercised, or shall continue to be entitled to assert rights of dissent and appraisal under Washington Law with respect to their shares of the Company Stock by virtue of
the Merger. 

        (j)    Escrow Agreement.    The Escrow Agreement shall have been executed and delivered by the Holders Representative. 

        (k)    FIRPTA Certificate.    The Company shall have delivered to Parent a properly executed statement, dated as of
the Closing Date, in a form reasonably acceptable to Parent conforming to the requirements of Treasury Regulations Section 1.1445-2(c)(3). 

        (l)    Facility Leases.    With respect to each Facility Lease, ServicesCo the Company and shall have entered into an
agreement, which shall, among other things, (x) provide for the assumption of such Facility Lease and all of the Company's obligations thereunder by ServicesCo, and (y) be in form and
substance reasonably satisfactory to Parent. 

        (m)    Equipment Leases.    The Company shall have provided evidence reasonably satisfactory to Parent that all of the
Company's obligations under any and all equipment leases to which the Company is a party immediately prior to the Effective Time have been satisfied and discharged in full without the imposition of
any obligation on Parent under such equipment leases. 

        (n)    Services Agreement.    

          (i)  Parent
and ServicesCo shall have entered into a services agreement substantially in the form of Exhibit C
attached hereto (the "Services Agreement"); 

         (ii)  Parent
shall be reasonably satisfied (x) that ServicesCo has sufficient facilities, equipment, and other assets and resources required to perform its obligations
under the Services Agreement and (y) that each of Charles Magness, Shawn Iadonato, Christina Scherer and Maralee McVean are full-time employees of ServicesCo; and 

        (iii)  All
of the asset transfers and/or license grants contemplated by the Services Agreement shall have occurred. 

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        (o)    P2 Partners, LLC.    P2 Partners, LLC shall have agreed in writing to seek satisfaction of any
payments owing to it in connection with the Merger solely from the Holders Representative. 

        (p)    License Agreement Amendment.    The License Agreement, dated as of January 14, 2005, by and between the
Company and the University of South Florida Research Foundation, Inc., as amended by that certain Amendment No. 1 to License Agreement, dated as of August 14, 2007, by and between
the Company and the University of South Florida Research Foundation, Inc., shall remain in full force and effect and shall not have been further amended unless Parent shall have approved of any
such further amendment in writing to the Company. 

        (q)    Asset Transfer Agreement.    

          (i)  The
Company and ServicesCo shall have entered into an Asset Transfer Agreement substantially in the form of  Exhibit J attached hereto (the "Asset Transfer
Agreement"); 

         (ii)  All
of the transactions contemplated by the Asset Transfer Agreement shall have been consummated; and 

        (iii)  The
Promissory Note (as defined in the Asset Transfer Agreement) shall have been assigned by the Company to the Holders Representative. 

ARTICLE 9

INDEMNIFICATION  

        9.1    Effectiveness.    The provisions of this Article 9 shall apply and become effective only if the Merger
is consummated. 

        9.2    Joint and Several Indemnification by Participating Holders.    Subject to the limitations set forth in
Section 9.6 hereof, the Participating Holders, jointly and severally, shall indemnify, defend, and hold harmless Parent, the Surviving Corporation
and each of the directors, officers, employees, agents, representatives and other Affiliates of Parent and/or Merger Sub (all persons entitled to indemnification under this Section 9.2 being
hereinafter referred to as the "Parent Indemnified Parties") from and against any and all Damages related to or arising, directly or indirectly, out of
or in connection with (i) any breach by the Company of any representation, warranty, covenant, agreement, obligation, or undertaking made by the Company in this Agreement (including any
schedule or exhibit hereto), or any other agreement, instrument, certificate, or other document delivered by or on behalf of the Company in connection with this Agreement, the Merger, or any of the
other transactions contemplated hereby, (ii) any payments (and the amount thereof) made or to be made by Parent, the Merger Sub or the Surviving Corporation after the Effective Time with
respect to any Dissenting Shares, to the extent that such payments exceed the portion of the Merger Consideration that would have been paid with respect to such Dissenting Shares pursuant to
Section 3.1 had such Dissenting Shares not been Dissenting Shares, (iii) any claim made by any third party, other than any 

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Participating
Rights Holder or holder of Dissenting Shares, that all or any portion of the Merger Consideration is owed to such third party (a "Third Party Consideration
Claim"), (iv) any claim made by any Participating Rights Holder that all or any portion of the Merger Consideration to which such Participating Rights Holder is entitled
to under the Company's Certificate of Incorporation, as amended and in effect immediately prior to the Effective Time, any other agreement between the Company and such Participating Rights Holder
and/or applicable law has not been paid to or received by such Participating Rights Holder, (v) any claim arising as a result of any inaccuracy or error in the Capitalization Certificate or the
Merger Consideration Certificate, (vi) any claims made by any Company Shareholder in connection with this Agreement or the transactions contemplated hereby, whether based upon any alleged
breach of fiduciary or other duty by any officer, director or shareholder of the Company or otherwise, or any claims by any officer, director, employee or shareholder of the Company to indemnification
by the Company or the Surviving Corporation with respect to any such claim, (vii) any Transaction Expenses that are not paid by the Company prior to the Effective Time, (viii) severance
liabilities or obligations of the Company or any other employee-related liabilities of any kind of the Company, including, without limitation, any and all Compensation Liabilities and any and all
claims for post-termination health insurance benefits, (ix) any and all other liabilities arising from the operation of the business of the Company and its Subsidiaries prior to the
Effective Time, (x) any and all liabilities arising from or related to any Facility Lease whether arising prior to or after the Effective Time, or (xi) any and all liabilities arising
from or related to (A) that certain DAAD audit referred to on Schedule 4.11 of the Company Disclosure Schedule, (B) that certain U.S. Army Contract No.
DAAD19-03-C-005 dated April 8, 2005 or (c) a breach of any of the representations or warranties set forth in Section 4.31 of this Agreement, in
all such cases, whether arising prior to or after the Effective Time; provided, however, that the foregoing clauses (vii), (viii) and
(ix) shall in no event include any of the liabilities referred to in such clauses if and to the extent that such liabilities are paid by Parent and deducted from the Closing Consideration
pursuant to Section 6.13 hereof. 

        9.3    Indemnification by Parent.    Subject to the limitations set forth in Section 9.7 hereof, Parent shall
indemnify, defend, and hold harmless Company, the Participating Holders and the Holders Representative and each of the directors, officers, employees, agents, representatives and other Affiliates of
the Company and the Holders Representative (all persons entitled to indemnification under this Section 9.3 being hereinafter referred to as the "Company Indemnified
Parties") from and against any and all Damages related to or arising, directly or indirectly, out of or in connection with any breach by the Parent of any representation,
warranty, covenant, agreement, obligation, or undertaking made by the Parent in this Agreement (including any schedule or exhibit hereto), or any other agreement, instrument, certificate, or other
document delivered by or on behalf of the Parent in connection with this Agreement, the Merger, or any of the other transactions contemplated hereby. The Holders Representative shall have the
exclusive right to bring or defend, as applicable, any claims on behalf of any Company Indemnified Party. 

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        9.4    Third Party Claims.    Each Parent Indemnified Party or Company Indemnified Party (each, an
"Indemnified Party"), as applicable, shall give prompt written notification to the other party (the "Indemnifying
Party") of the commencement of any action, suit or proceeding relating to a third party claim for which indemnification pursuant to this Section 9 may be sought;  provided,
however, that no delay on the part of such Indemnified Party in notifying the other party
shall relieve the Indemnifying Party of any liability or obligation hereunder except to the extent of any damage or liability caused by or arising out of such delay. Within twenty (20) days
after delivery of such notification, the Indemnifying Party may (except to the extent otherwise provided below in this Section 9.4), upon written notice to such Indemnified Party, assume
control of the defense of such action, suit or proceeding with counsel reasonably satisfactory to such Indemnified Party, provided that, the third party
seeks monetary damages only. If the Indemnifying Party does not so assume control of such defense, the Indemnified Party may elect to control such defense. The party not controlling such defense may
participate therein at its own expense; provided that if the Indemnifying Party assumes control of such defense and such Indemnified Party reasonably concludes that the Indemnifying Party and such
Indemnified Party have conflicting interests or different defenses available with respect to such action, suit or proceeding, the reasonable fees and expenses of counsel to such Indemnified Party
shall be considered "Damages" for purposes of this Agreement. The party controlling such defense shall keep the other party advised of the status of such action, suit or proceeding and the defense
thereof and shall consider in good faith recommendations made by the other party with respect thereto. The Indemnified Party shall not agree to any settlement of such action, suit or proceeding
without the prior written consent of the Indemnifying Party which shall not be unreasonably withheld or delayed. The Indemnifying Party shall not agree to any settlement of or the entry of a judgment
in any action, suit or proceeding without the prior written consent of the applicable Indemnified Party, which shall not be unreasonably withheld or delayed (it being understood that it is reasonable
to withhold such consent if, among other things, the settlement or the entry of a judgment (A) lacks a complete release of all Indemnified Parties for all liability with respect thereto or
(B) imposes any liability or obligation on any Indemnified Party). For the avoidance of doubt, the Holders Representative shall be granted the right to bring or defend, as applicable, any
claims on behalf of any Company Indemnified Party. Notwithstanding anything to the contrary expressed or implied herein, Parent shall control all claims relating to any Third Party Consideration
Claim, Taxes and all claims relating to any Compound, Contingent Payment Product or intellectual property of the Company or any of its Affiliates or Subsidiaries. 

        9.5    Payment of Claims.    (a)    In the event of any claim for indemnification pursuant to
Section 9.2 or 9.3 hereof, the Indemnified Party will advise the Indemnifying Party in writing with reasonable specificity of the amount and circumstances surrounding such claim. If within
thirty (30) days of a claim for indemnification the Indemnifying Party has not contested pursuant to Section 11.13 such claim in writing, the full amount thereof shall be paid
(i) with respect to any Parent Indemnified Party, out of the Escrow Funds to the extent available and subject to the limitations set forth in Section 9.6 below, within two
(2) days after the expiration of such period, and (ii) with respect to any Company Indemnified Party, by Parent, subject to the limitations set forth in Section 9.7 below, via
wire transfer to the Holders Representative within two (2) days after the expiration of such period. With respect to the Parent Indemnified Party, to the extent the Escrow Funds are
insufficient or not available to satisfy the full amount of such claim for indemnification, Parent shall be entitled to set off, and accordingly reduce, any Contingent Payment that Parent would
otherwise be required to pay to the Holders Representative pursuant to Section 2.7 hereof, subject to the limitations set forth in Section 9.6 hereof,  provided, however, that any Parent
Indemnified Party shall not be entitled to set-off or reduce any Contingent Payment in the event and to
the extent that adequate funds have been reserved in escrow, or previously offset by the Parent. Upon the final determination of any indemnified claim pursuant to Section 9.2, the full amount
of any excess offset or reduction amount shall be released by the Parent Indemnified Party and paid by wire transfer to the Holders Representative within five (5) business days after such final
determination. 

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        (b)   Notwithstanding
anything to contrary set forth herein, in the event that any Closing Liability or any inaccuracy in the Merger Consideration Certificate, including but
not limited to the amount of Available Closing Cash or the amount of Transaction Expenses, or the Capitalization Certificate is discovered by Parent after the Effective Time and prior to the Closing
Consideration Payment Date that was not listed on the Merger Consideration Certificate, Parent shall be entitled to set off, and accordingly reduce the Closing Consideration that Parent would
otherwise be required to pay to the Holder's Representative pursuant to Section 2.6(a) hereof. Other than as provided in the preceding sentence, Parent's remedies and recourse with respect to
the Closing Consideration shall be limited in accordance with Sections 9.6(b) and 9.10 below. 

        9.6    Limitations of Liability of Company.    

        (a)    Threshold.    There shall be no liability for any claim for indemnification under Section 9.2 hereof
unless and until the aggregate amount of Damages in connection with all claims for indemnification under Section 9.2 hereof by any Parent Indemnified Party and all other Parent Indemnified
Parties (including, without limitation, prior claims for indemnification regardless of whether or not they are still pending) exceeds $100,000 (the "Threshold
Amount"), whereupon each Parent Indemnified Party shall be entitled to be paid the full amount of all Damages in connection with all claims for indemnification under this
Article 9 by such Parent Indemnified Party irrespective of such Threshold Amount; provided,  however that, notwithstanding the foregoing, (i) the
liability for any claim for indemnification under Section 9.2 shall be subject to the
limitations set forth in Section 9.6(b), (ii) the provisions of this Section 9.6(a) shall not apply to any claim for intentional fraud under applicable laws (a
"Fraud Claim") and (iii) the provisions of this Section 9.6(a) shall not apply to any claim for indemnification made by a Parent
Indemnified Party pursuant to clause (ii), (iii), (iv),(v), (vii), (viii), (x) or (xi) of Section 9.2 or with respect to a breach by the Company in the performance of any
covenant, agreement, obligations or undertaking made by the Company in this Agreement. 

        (b)    Limited Recourse.    Notwithstanding anything expressed or implied in this Agreement to the contrary, other
than as set forth in Section 9.10 and other than with respect to any Fraud Claim, the sole recourse available to any Parent Indemnified Party in connection with any claim for indemnification
under Section 9.2 hereof, or under any other common law or statutory recovery theory relating to the financial or other condition of the Company or any of the subject matters described in
Article 4, shall be limited to (i) proceeding against the Escrow Funds pursuant to, and in accordance with, the terms and conditions of the Escrow Agreement and/or (ii) setting
off against the Contingent Consideration, if any, that Parent would otherwise be required to pay to the Holders Representative, pursuant to Section 9.5 hereof. 

        (c)    Time Limit.    Except with respect to any Fraud Claim or claim based on intentional misconduct, there shall be
no liability in connection with any claim for indemnification under Section 9.2 hereof by any applicable Parent Indemnified Party unless such claim for indemnification is made in writing by
such Parent Indemnified Party on or prior to the date on which the Parent is required to make any final payment of the Contingent Consideration, if any, pursuant to Section 2.7 hereof. 

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        (d)    Reduction of Indemnification Amounts.    The amount of any Damages otherwise payable to any Parent Indemnified
Party hereunder will be reduced by (i) any insurance proceeds actually received by such Parent Indemnified Party in respect thereof, to the extent that such reduction is permitted without
reduction of the amount of such proceeds payable under the applicable insurance policy, and (ii) shall also be reduced to the extent of any offsets taken pursuant to Sections 2.7(d) or
2.7(f) hereof. 

        9.7    Limitations of Liability of Parent.    

        (a)    Threshold.    There shall be no liability for any claim for indemnification under Section 9.3 hereof
unless and until the aggregate amount of Damages in connection with all claims for indemnification under Section 9.3 hereof by any Company Indemnified Party and all other Company Indemnified
Parties (including, without limitation, prior claims for indemnification regardless of whether or not they are still pending) exceeds the Threshold Amount, whereupon each Company Indemnified Party
shall be entitled to be paid the full amount of all Damages in connection with all claims for indemnification under this Article 9 by such Company Indemnified Party irrespective of such
Threshold Amount; provided, however that, notwithstanding the foregoing, the liability for any claim for
indemnification under Section 9.3 shall not apply to any Fraud Claim or with respect to a breach by Parent, Merger Sub or the Surviving Corporation in the performance of any covenant,
agreement, obligation or undertaking made by it or them in this Agreement. 

        (b)    Time Limit.    Subject to Section 9.10 below and except with respect to any Fraud Claim or claim based
on intentional misconduct, there shall be no liability in connection with any claim for indemnification under Section 9.3 hereof by any applicable Company Indemnified Party hereby, unless
(x) in the case of any such claim for indemnification resulting from a breach of a representation or warranty made by Parent, such claim for indemnification is made in writing by the Holders
Representative on or prior to the second anniversary of the Closing Date, (y) in the case of any such claim for indemnification resulting from a breach of a covenant or agreement made by Parent
(other than a breach of a covenant or agreement made by Parent in Sections 2.7, 6.9, 6.10, 6.18 or 11.3(b) hereof), such claim for indemnification is made in writing by the Holders
Representative on or prior to the one year anniversary of such breach, and (z) in the case of any such claim for indemnification resulting from a breach of a covenant or agreement made by
Parent in Sections 2.7, 6.9, 6.10, 6.18 or 11.3(b) hereof, such claim for indemnification is made in writing by the Holders Representative on or prior to the later of the one year anniversary
of such breach or the expiration of one year after the Holders Representative acquires actual knowledge of previously undisclosed material facts that provide a basis for a claim against Parent under
any of Sections 2.7, 6.9, 6.10, 6.18 or 11.3(b) hereof; provided, however, that in no event shall
any claim for indemnification under this clause (z) be made at any time after the one year anniversary of the date of the final Contingent Payment payable pursuant to the terms of
Section 2.7 hereof. 

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        (c)    Reduction of Indemnification Amounts.    The amount of any Damages otherwise payable to any Company Indemnified
Party hereunder will be reduced by any insurance proceeds actually received by such Company Indemnified Party in respect thereof, to the extent that such reduction is permitted without reduction of
the amount of such proceeds payable under the applicable insurance policy. 

        9.8    Insurance Collection.    The Indemnified Party shall use commercially reasonable efforts to pursue, and to
cause its Affiliates to use commercially reasonable efforts to pursue, all insurance claims to which it may be entitled in connection with any Damages it incurs for which it makes a claim for
indemnification pursuant to this Article 9, provided that (i) the foregoing provisions of this Section 9.8 shall not be a condition
precedent for any Indemnified Party to make any claim for indemnification pursuant to this Article 9 and (ii) the foregoing provisions of this Section 9.8 shall not apply to any
Fraud Claim. The parties shall cooperate with each other in pursuing any such insurance claims. If any Indemnified Party recovers any amount from any insurer after payment to such Indemnified Party of
all Damages suffered or incurred by such Indemnified Party in respect of the matters to which such insurance payment relates, then such Indemnified Party will promptly pay over to the Indemnifying
Party the amount so recovered, to the extent not in excess of the amount previously paid to such Indemnified Party in respect of such matter. 

        9.9    Subrogation.    In the event that a Indemnified Party is indefeasibly indemnified in full pursuant to this
Article 9 with respect to any matter, the Indemnifying Party shall be subrogated, to the extent of the amount of indemnification received by such Indemnified Party, to the rights of such
Indemnified Party against all other persons in respect of the matter for which such indemnification was received by such Indemnified Party, to the extent permitted by applicable insurance policies of
such Indemnified Party, and, upon such subrogation, the Indemnifying Party may assert such rights against such other persons. 

        9.10    Exclusive Remedies.    The parties hereby acknowledge and agree that, if the Merger is consummated, the sole
and exclusive remedies of any and all Indemnified Parties in respect of any and all claims (except any Fraud Claim) relating to any breach or purported breach of any representation, warranty,
covenant, agreement, obligation, or undertaking that is contained in this Agreement or otherwise relating thereto will be pursuant to the indemnification provisions of this Article 9;  provided,
however, that the foregoing provisions of this Section 9.10 shall not apply to limit
the exercise of any remedy seeking specific performance or injunctive relief or the exercise by the Holders Representative of its rights under Sections 6.10(d) and 6.10(e) to obtain the
Non-Compliance Grantback). Notwithstanding anything to the contrary in this Agreement, including but not limited to the provisions of this Section 9.10 or any other provisions of
this Article 9, in the event that the Holders Representative obtains, or elects to require, the license of the Grantback Assets pursuant to Section 6.10 above, then such license shall be
the sole and exclusive remedy with respect to any breach by Parent of its obligations under Section 6.9 hereof. 

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ARTICLE 10

TERMINATION  

        10.1    Termination.    This Agreement may be terminated and the Merger abandoned at any time prior to the Effective
Time (whether before or after approval of the Merger by the shareholders of the Company or by Parent as sole stockholder of Merger Sub) only as follows: 

        (a)   at
any time by mutual written agreement of Parent, Merger Sub and the Company; 

        (b)   by
the Company, upon written notice to Parent and Merger Sub if there has been a material breach by Parent or Merger Sub of any representation, warranty, covenant or
agreement set forth in this Agreement and such material breach is not curable, or, if curable, is not cured within thirty (30) days after written notice of such breach is given by the Company
to Parent and Merger Sub; 

        (c)   by
Parent, upon written notice to the Company and the Holders Representative if there has been a material breach by the Company of any representation, warranty, covenant
or agreement set forth in this Agreement and such material breach is not curable, or, if curable, is not cured within thirty (30) days after written notice of such breach is given by Parent to
the Company and the Holders Representative; 

        (d)   by
Parent, if Company or any of its directors or officers shall participate in discussions or negotiations in breach of, or otherwise breach, Section 7.24; 

        (e)   by
Parent if the Company Board or any committee thereof makes an Adverse Recommendation; 

        (f)    by
the Company or Parent, upon written notice to the other parties to this Agreement if a court of competent jurisdiction or Governmental Authority have issued a
non-appealable final and permanent injunction, or other binding legal restraint or prohibition, having the effect of permanently preventing the consummation of the Merger or the other
transactions contemplated hereby; 

        (g)   by
the Company or Parent, upon written notice to the other parties to this Agreement if the Merger has not been consummated on or before the thirtieth (30th) day
following the date of this Agreement or on or before any later date that the Company and Parent shall mutually determine (such thirtieth (30th) day following the date of this Agreement or such later
date, as the case may be, being referred to herein as the "Outside Date"), provided,  however, that the right
to terminate this Agreement pursuant to this Section 10.1(g) shall not be available to any party whose material breach of
a representation or warranty or failure to fulfill any covenant or other agreement under this Agreement has been the cause of, or resulted in the failure of, the Merger to occur on or before the
Outside Date, and shall not be available to the Company if the Required Shareholder Approval has not been obtained prior to the Outside Date; or 

        (h)   by
the Company if (i) the Company has not breached Section 7.24, (ii) the Required Shareholder Approval has not been obtained and the Company has
not breached any of its obligations under Section 6.4 and (iii) concurrently with such termination the Company enters into a definitive agreement with respect to a Superior Proposal. 

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        (i)    by
Parent if the Required Stockholder Approval is not obtained within one day following the Agreement Date. 

        10.2    Effect of Termination.    If this Agreement is terminated pursuant to Section 10.1 hereof, then
(a) the provisions of this Section 10.2, Section 10.3 and Article 11 shall survive any such termination, (b) such termination shall not relieve any party hereto from
liability arising from any breach by such party of any provision of this Agreement if such breach occurred prior to such termination, (c) each party will redeliver all documents, work papers
and other material of the other party or parties relating to the transactions contemplated hereby including such memoranda, notes, lists, records or other documents compiled or derived from such
material, whether so obtained before or after the execution hereof, to the party furnishing the same and (d) all information received by any party hereto with respect to the business of the
other parties or their affiliated companies shall remain subject to the terms of the Confidentiality Agreement. 

        10.3    Costs and Expenses.    

        (a)   If
(i) this Agreement is validly terminated pursuant to Section 10.1(h) hereof, and (ii) neither Parent nor Merger Sub shall have materially
breached any of their representations, warranties or covenants under this Agreement, then the Company shall pay to Parent, in cash, a fee in the amount equal to the sum of (x) one million five
hundred thousand dollars ($1,500,000) plus all costs and expenses incurred by Parent and Merger Sub in connection with the transactions contemplated by
this Agreement. Any fee due under this Section 10.3(a) shall be paid by wire transfer of same-day funds on the date of termination of this Agreement. 

        (b)   Except
as otherwise provided in this Agreement and whether or not the transactions contemplated by this Agreement are consummated, all costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall be borne by the party incurring such expenses. The fees and expenses of the Escrow Agent shall be borne and paid by Parent. Parent
acknowledges and agrees that Company has disclosed that it is obligated and will become further obligated for Transaction Expenses incurred by the Company in connection with the Merger and the
transactions contemplated hereby (including fees and expenses of its legal counsel and other advisors). It is understood and agreed that all of such Transactions Expenses (including amounts reasonably
expected to be incurred through the Closing Date and thereafter for post-Closing services related to the Merger) shall to the extent practicable be paid and pre-paid by the
Company prior to the Closing, but that all Transaction Expenses (including estimated prepayments) not paid by the Company prior to Closing shall be paid by Parent at the Closing,  provided that all of
such Transaction Expenses shall have been disclosed to Parent prior to Closing and shall be deducted from the Closing Consideration
as a Closing Liability pursuant to the definition of "Closing Consideration" set forth herein. 

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ARTICLE 11

GENERAL  

        11.1    Cooperation.    Each of the parties will cooperate with the others and use commercially reasonable efforts to
prepare all necessary documentation, to effect all necessary filings, and to obtain all necessary permits, consents, approvals, and authorizations of all governmental bodies and other third parties
necessary to consummate the transactions contemplated by this Agreement. 

        11.2    Survival of Provisions.    The provisions of this Agreement, including without limitation the representations
and warranties of the parties, and the provisions of the other documents executed and delivered in connection with this Agreement, the Merger, and the other transactions contemplated hereby will be
deemed material, and, notwithstanding any investigation by or on behalf of any party or any knowledge that any party has or should have as a result of such investigation, will be deemed to have been
relied on by each party, and will survive the Closing and the consummation of the Merger and the other transactions contemplated hereby, subject to all of the limitations set forth in Article 9
hereof, including, without limitation, the limitations set forth in Section 9.5(c) hereof. 

        11.3    Benefits of Agreement; No Assignments; No Third-Party Beneficiaries.    

        (a)   This
Agreement will bind and inure to the benefit of the parties hereto and their respective heirs, successors, and permitted assigns. 

        (b)   Except
to the extent otherwise provided or permitted elsewhere in this Agreement, Parent shall not sell or license the rights to develop, make, use and sell any
Contingent Payment Product without the consent of the Holders Representative (which consent shall not be unreasonably withheld or delayed); provided,  however, that the consent of the Holders Representative shall not be required (i) in the case of any such sale, license or other transfer to any
of Parent's Affiliates or Subsidiaries, provided such Affiliate or Subsidiary signs an instrument of accession hereto in which it agrees to be bound by
and adhere to all of Parent's obligations hereunder with respect to the rights so transferred, (ii) in connection with (x) a merger or consolidation of Parent or sale of all or
substantially all of the assets of Parent (provided that the acquiror agrees in writing to be bound by the obligations of Parent under this Agreement), (y) a merger or consolidation of any
Affiliate or Subsidiary of Parent referred to in the foregoing clause (i) of this Section 11.3(b) (provided that the acquiror agrees in
writing to be bound by the obligations of such Affiliate or Subsidiary under this Agreement, and further provided that if such Affiliate or Subsidiary
is the licensee or transferee of all of Parent's rights to develop, make, use and sell all Contingent Payment Products, []*) or (z) a sale, license or other transfer of
all of Parent's rights to develop, make, use and sell all Contingent Payment Products, provided that []*, and must agree in
writing to be bound by the obligations of Parent under this Agreement with respect to such Contingent Payment Product, (iii) a sale, license or other transfer of Parent's right to develop,
make, use or sell any Section 6.9 Contingent Payment Product, provided that []*, (iv) a sale or assignment of
Parent's right to develop, make, use or sell any Contingent Payment Product that is not a Section 6.9 Contingent Payment Product, provided that
[]*, or (v) a license of Parent's rights to develop, use and sell any Contingent Payment Product for the treatment of a Non-HCV Indication,  provided that (1) []*, and (2) if such
Contingent Payment Product is also being developed or commercialized by
Parent for the treatment of infections caused by HCV, []*; and further provided, that (A) in the event of any sale or
assignment described in clauses (iii) and (iv) above, the buyer or assignee shall have agreed in writing to be bound by all of the obligations of Parent under this Agreement with respect
to the Contingent Payment Product sold or assigned, and (B) in the event of any license described in clauses (iii) and (v), []*. Parent shall not sell or license
the rights to develop, make, use and sell any Contingent Payment Product except in strict compliance with the foregoing restrictions, and any attempt to do so will be void. Any license by Parent of
the rights to develop, make, use and sell any Contingent Payment Product shall not release Parent from any of its obligations under this Agreement with respect to such Contingent Payment Product. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

90

 

        (c)   None
of the Company, the Holders Representative or the Participating Holders, shall have the right to assign any rights or delegate any obligations under this Agreement
without the consent of the Parent; provided, however, that the consent of the Parent shall not be
required other than, in the case of the Holders Representative and the Participating Holders, any assignment or delegation by (i) the Holders Representative to any of the Participating Holders
of any rights or obligations of the Holders Representative under this Agreement (other than any assignment or delegation by the Holders Representative or any Participating Holder of any rights or
obligations under Section 6.10 hereof) or (ii) any of the Participating Holders as permitted under Section 3.3(b). Parent shall have the right to assign any rights or delegate any
obligations under this Agreement without the consent of the Holders Representatives or the Participating Holders, provided that (x) any such
assignment or delegation does not violate or breach any of the provisions of Section 11.3(b) and (y) any such assignment or delegation shall not release Parent from its obligations under
this Agreement. 

        (d)   Nothing
in this Agreement is intended to or will confer any rights or remedies on any person other than the parties hereto and their respective heirs, successors, and
permitted assigns; provided however, that, if, but only if, the Merger is consummated, the provisions in Section 3 hereof concerning the payment
of the Merger Consideration for the Company Stock, Company Options and Common Warrants are intended, and shall be, for the benefit of the Participating Holders as third party beneficiaries,  provided
further that Participating Holder rights shall only be exercised by the Holders Representative on behalf of such Participating Holders. 

        11.4    Notices.    All notices, requests, payments, instructions, or other documents to be given hereunder will be in
writing or by written telecommunication, and will be deemed to have been duly given if (i) delivered personally (effective upon delivery), (ii) mailed by registered or certified mail,
return receipt requested, postage prepaid (effective five (5) business days after dispatch), (iii) sent by a reputable, established courier service that guarantees next business day
delivery (effective the next business day), or (iv) sent by telecopier followed within 24 hours by confirmation by one of the foregoing methods (effective upon receipt of the telecopy in
complete, readable form), addressed as follows (or to such other address as the recipient party may have furnished to the sending party for the purpose pursuant to this section): 

        (a)   If
to Parent, Merger Sub, and/or (after the Effective Time), the Surviving Corporation to: 

	 	 	Cubist Pharmaceuticals, Inc.

65 Hayden Avenue

Lexington, Massachusetts 02421

Attention:    Chief Executive Officer

Telecopier No.: 781-861-0566

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

91

 

with
a copy sent at the same time and by the same means to:

	 	 	Cubist Pharmaceuticals, Inc.

65 Hayden Avenue

Lexington, Massachusetts 02421

Attention:    General Counsel

Telecopier No.: 781-861-0566
	

 	
 	

and	

 
	

 	
 	

Bingham McCutchen LLP

150 Federal Street

Boston, Massachusetts 02110
	 	 	Attention:	Julio E. Vega, Esq.
	 	 	 	Matthew J. Cushing, Esq.
	 	 	Telecopier No.: (617) 951-8736

        (b)   If
to the Company (before the Effective Time) to: 

	 	 	Illumigen Biosciences Inc.

201 Elliott Ave. West, Suite 500

Seattle, Washington 98119

Attention:    Charles Magness

Telecopier No.: (206) 378-0408

        (c)   If
to the Company (after the Effective Time) or to the Holders Representative to: 

	 	 	IB Securityholders, LLC,

Attn: Donald J. Elmer c/o Pacific Horizon Ventures

701 Fifth Avenue, Suite 4970

Seattle, Washington 98104

Telecopier No.: (206) 682 1181

with
a copy sent at the same time and by the same means to:

	 	 	DLA Piper US LLP

701 Fifth Avenue, Suite 7000

Seattle, Washington 98104-7044

Attention:    John M. Steel

Telecopier No.: (206) 839-4801
	

 	
 	

Heller Ehrman LLP

701 Fifth Avenue, Suite 6100

Seattle, Washington 98104-7098

Attention:    Greg Papciak

Telecopier No. (206) 515-8885

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

92

 

  
        11.5    Disclosure in Schedules.    For purposes of this Agreement, with respect to any matter that is clearly
disclosed on any Schedule of the Parent Disclosure Schedule or the Company Disclosure Schedule, as the case may be, in such a way as to make its relevance to the information called for by another
Section of this Agreement or another Schedule of Parent Disclosure Schedule or the Company Disclosure Schedule, as the case may be, readily apparent, such matter shall be deemed to have been disclosed
in response to such other Section, notwithstanding the omission of any appropriate cross-reference thereto; provided,  however, that each of Parent and the
Company hereby covenants to make a good faith diligent effort to make all appropriate cross-references within and
to any and all Schedules of Parent Disclosure Schedule and the Company Disclosure Schedule, respectively. 

        11.6    Counterparts.    This Agreement may be executed by the parties in separate counterparts, each of which when so
executed and delivered will be an original, but all of which together will constitute one and the same agreement. In pleading or proving this Agreement, it will not be necessary to produce or account
for more than one such counterpart. 

        11.7    Captions.    The captions of sections or subsections of this Agreement are for reference only and will not
affect the interpretation or construction of this Agreement. 

        11.8    Equitable Relief.    Each of the parties hereby acknowledges that any breach by it of its obligations under
this Agreement would cause substantial and irreparable damage to the parties, and that money damages would be an inadequate remedy therefor, and accordingly, acknowledges and agrees that each other
party will be entitled to an injunction, specific performance, and/or other equitable relief to prevent the breach of such obligations. 

        11.9    Construction.    The language used in this Agreement is the language chosen by the parties to express their
mutual intent, and no rule of strict construction will be applied against any party. 

        11.10    Waivers.    No waiver of any breach or default hereunder will be valid unless in a writing signed by the
waiving party. No failure or other delay by any party exercising any right, power, or privilege hereunder will be or operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. 

        11.11    Entire Agreement.    This Agreement, together with the exhibits and schedules hereto and the other
agreements, instruments, certificates, and other documents referred to herein as having been or to be executed and delivered in connection with the transactions contemplated hereby (including, without
limitation, the Confidentiality Agreement, the
Escrow Agreement and the LLC Agreement), contains the entire understanding and agreement among the parties, and supersedes any prior understandings or agreements among them, or between or among
any of them, with respect to the subject matter hereof. 

        11.12    Governing Law.    This Agreement will be governed by and interpreted and construed in accordance with the
internal laws of Commonwealth of Massachusetts, as applied to contracts under seal made, and entirely to be performed, within the Commonwealth of Massachusetts, and without reference to principles of
conflicts or choice of laws, except as to matters concerning the internal affairs of any of the corporation or entity parties hereto which shall be governed by the corporate laws of their respective
jurisdictions of incorporation or organization. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

93

 

        11.13    Mediation and Arbitration.    

        (a)   In
the event of any dispute, controversy, or claim arising out of, relating to, or in connection with this Agreement, or the breach, termination, or validity thereof,
other than a dispute subject to appraisal under Section 2.7(k) or litigation under 11.14 hereof, a party wishing to commence arbitration shall first serve notice on the proposed respondent that
a dispute has arisen and demand that mediation commence. The mediation shall last no longer than sixty (60) days and shall be conducted pursuant to the CPR Mediation Procedure then in effect.
Each party shall pay its own expenses incurred in connection with such mediation, and the fees and expenses of the mediator shall be divided evenly between the parties. Notwithstanding anything else
contained herein, any party to such mediation shall have the right to commence arbitration at any time after the expiration of sixty (60) days after service of such demand for mediation under
this subsection. Any disputes concerning compliance with or a party's right to commence arbitration under this Section 11.13(a) shall be finally settled by arbitration pursuant to
Section 11.13(b) below. 

        (b)   Any
dispute, controversy, or claim arising out of, relating to, or in connection with this Agreement, or the breach, termination, or validity thereof, other than a
dispute subject to appraisal under Section 2.7(k) or litigation under Section 11.14 hereof, if not settled by mediation pursuant to Section 11.13(a) above, shall be finally
settled by arbitration conducted in accordance with the CPR Rules for Non-Administered Arbitration in effect at the time of the arbitration, except as they may be modified herein or by
mutual agreement of the parties. The arbitration shall be conducted by three arbitrators, and the seat shall be Boston, Massachusetts. 

        (c)   In
such arbitration, the arbitration tribunal shall have the authority to order such production of documents as may reasonably be requested by either party or by the
tribunal itself, taking into account the needs of the parties and the desirability of making discovery efficient and cost-effective. 

        (d)   During
such arbitration, a party may request a reasonable number of depositions of party witnesses, not exceeding three depositions per side. Each deposition shall be
limited to one day of seven hours unless otherwise agreed by the parties or ordered by the tribunal for good cause. 

        (e)   This
agreement to arbitrate and any proceedings hereunder shall be governed by Title 9, United States Code. Any proceeding to confirm, enforce, vacate or modify the
award may be brought only in a federal or state court located in Suffolk County, Massachusetts; each party submits to the jurisdiction of any such court in such proceeding and irrevocably waives any
objection to venue in such court and any objection that such court is an inconvenient forum; and judgment on the award may be entered by such court. In any such proceeding brought in such court, each
party irrevocably consents to service of process by the mailing of copies thereof by certified mail, postage prepaid, to such party's addresses for notices pursuant to Section 11.4 hereof. The
judgment of such court may be enforced by any court of competent jurisdiction. 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

94

 

        (f)    A
request by a party to a court of competent jurisdiction for interim measures necessary to preserve the party's rights, including attachments or injunctions, shall not
be deemed incompatible with, or a waiver of, the agreement to mediate or arbitrate contained in this Section 11.13. 

        (g)   If
the arbitration relates to Damages the amount of which is in pending litigation with a third party, the arbitration shall be stayed until (i) such amount is
ascertained in the litigation with the third party or (ii) both of the parties to the arbitration agree to proceed with the arbitration notwithstanding the pendency of the litigation with the
third party. 

        11.14    Jurisdiction and Venue of Suits Arising From Section 6.9 or 6.10 or Breach Thereof.    Notwithstanding
any other provision of this Agreement, any dispute, controversy or claim arising from or under Section 6.9 or 6.10 of this Agreement or from the breach of either of those sections shall not be
subject to arbitration under this Agreement. The parties hereto agree that any action or proceeding arising from Section 6.9 or 6.10 of this Agreement or from the breach of either of those
sections shall be instituted only in a state or federal court located in Suffolk County, Massachusetts. Each party hereby irrevocably submits to the jurisdiction of such court and irrevocably waives
any objection to venue in such court and any objection that such court is an inconvenient forum. 

        11.15    Publicity.    Upon the execution and delivery of this Agreement by all parties hereto, Parent and Company
shall each issue a press release in the form of the joint press release attached hereto as Exhibit K (the "Initial Press
Release"). From the date of this Agreement through the Effective Time, no public release or announcement following the Initial Press Release concerning the transactions
contemplated by this Agreement shall be issued by a party without the prior consent of the other party (which consent shall not be unreasonably withheld or delayed), except as such release or
announcement as may be required by law or the rules or regulations of any applicable securities exchange, in which case the party required to make the release or announcement shall allow the other
party reasonable time to comment on such release or announcement in advance of such issuance; provided,  however, that each of the parties may make internal
announcements to their respective employees that are consistent with the parties' prior public
disclosures regarding the transactions contemplated by this Agreement; provided, further, that the
Company may communicate with the holders of Company Common Stock, Company Preferred Stock, Company Options and Common Warrants, as well as certain third parties, to the extent necessary to obtain the
consents and approvals contemplated by this Agreement. 

        11.16    Use of Illumigen Name.    Parent agrees that the Holders Representative shall be permitted to use of the word
"Illumigen" in its legal name immediately after the Effective Time. 

        11.17    Amendment.    This Agreement may not be amended, modified, changed, waived or supplemented except by a
writing duly executed by Parent, Merger Sub and the Company; provided however, that any amendment, modification, change, waiver or supplement to any
provision or provisions of this Agreement at any time subsequent to the time the Company Shareholders approve this Agreement may be effected and implemented if, but only if, such amendment,
modification, change, waiver or supplement is set forth in a written instrument or agreement duly executed by Parent and the Holders Representative. 

[Signature Page Follows]

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

95

  
        IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement and Plan of Merger under seal as of the date first above written. 

	PARENT:	 	CUBIST PHARMACEUTICALS, INC.
	

 	
 	

By:	
 	

/s/ Michael W. Bonney

	 	 	 	 	Name:	Michael W. Bonney
	 	 	 	 	Title:	President and Chief Executive Officer
	
MERGER SUB:	
 	

EDISON MERGER CORP.
	

 	
 	

By:	
 	

/s/ Michael W. Bonney

	 	 	 	 	Name:	Michael W. Bonney
	 	 	 	 	Title:	President
	
COMPANY:	
 	

ILLUMIGEN BIOSCIENCES, INC.
	

 	
 	

By:	
 	

/s/ Donald J. Elmer

	 	 	 	 	Name:	Donald J. Elmer
	 	 	 	 	Title:	Chief Executive Officer
	
HOLDERS REPRESENTATIVE:	
 	

IB SECURITYHOLDERS, LLC
	

 	
 	

By:	
 	

/s/ Donald J. Elmer

	 	 	 	 	Name:	Donald J. Elmer
	 	 	 	 	Title:	Manager
	

 	
 	

By:	
 	

/s/ Charles L. Magness

	 	 	 	 	Name:	Charles L. Magness
	 	 	 	 	Title:	Manager

[Signature Page to Merger Agreement] 

	*
	Confidential
Treatment Requested. Omitted portions filed with the Commission. 

QuickLinks

Exhibit 10.37Exhibit 10.37

 

[NOTE: CERTAIN PORTIONS OF THIS
DOCUMENT HAVE BEEN MARKED TO INDICATE THAT CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR SUCH PORTIONS BY IMCLONE SYSTEMS INCORPORATED. THESE PORTIONS
HAVE BEEN MARKED WITH TWO ASTERISKS ENCLOSED IN BRACKETS (i.e., [**]).  THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

 

 

AMENDED AND RESTATED

CO-DEVELOPMENT AND CO-COMMERCIALIZATION AGREEMENT FOR

ERBITUX ® IN JAPAN

 

 

AMONG

 

 

1.         BRISTOL-MYERS SQUIBB COMPANY

2.         E.R. SQUIBB & SONS, LLC

3.         BRISTOL-MYERS K.K.

4.         MERCK KGAA

5.         MERCK SERONO JAPAN COMPANY, LIMITED

           AND

6.         IMCLONE SYSTEMS INCORPORATED

 

 

DATED AS OF

 

October 12, 2007

 

 

Table of Contents

 

	
  1.

  	
  DEFINITIONS

  	
  2

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1 Defined
  Terms

  	
  2

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2
  Additional Defined Terms

  	
  19

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  MANAGEMENT
  OF COLLABORATION

  	
  20

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1 General

  	
  20

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2 Steering
  Committee Japan

  	
  21

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3
  Subcommittees

  	
  24

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4
  Membership and Meetings of the Committees

  	
  31

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.5
  Decision-making

  	
  32

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.6 Minutes

  	
  33

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.7 Term

  	
  34

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.8 Certain
  Committees and Boards

  	
  34

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.9 Alliance
  Managers

  	
  35

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.10
  Cooperation

  	
  35

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  DEVELOPMENT

  	
  36

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1 The
  Long-Term Development Plan

  	
  36

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2
  Allocation of Development Responsibilities

  	
  39

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3
  Interactions with Japanese Regulatory Authorities and Ethics Committees

  	
  41

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4 Conduct
  of the Co-Development

  	
  42

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.5 Process
  Flows and Study Instructions

  	
  43

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.6
  Databases and Ownership of Results

  	
  43

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.7
  Reporting of Safety Information

  	
  44

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  PAYMENT
  COSTS, AND REPORTING FOR DEVELOPMENT AND 

  COMMERCIALIZATION PURPOSES

  	
  45

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1 General
  Obligations of the Parties

  	
  45

  	
   

  

 

Confidential Treatment has been requested by
ImClone Systems Incorporated for portions of this document.

 

ii

 

	
   

  	
  4.2
  Development Costs

  	
  47

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3 Equal
  Sharing of Non-Sales Force Commercialization Activities Costs

  	
  49

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.4
  Reporting

  	
  50

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.5
  Reimbursements of Costs and Payment of Profit Or Loss

  	
  51

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.6 Mode of
  Payment

  	
  53

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.7 Records
  Retention

  	
  53

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.8 Payment
  Audits

  	
  53

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.9 Taxes

  	
  54

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5. 

  	
  OWNERSHIP OF
  INVENTIONS; USE OF RESULTS; PATENTS

  	
  54

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1
  Ownership of Inventions made by the Parties

  	
  54

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2
  Ownership of Inventions made by Third Parties

  	
  55

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3 Use of
  Inventions and Results

  	
  55

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4 Patent Enforcement, Patent Maintenance and Infringement

  	
  55

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  COMMERCIALIZATION

  	
  56

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1
  Generally

  	
  56

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2
  Commercialization Plans and Budgets

  	
  56

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3 Equal
  Sharing of Sales Force Commercialization Efforts

  	
  60

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4 Diligent
  Efforts; Sales Efforts and Sales Representative Deployment

  	
  61

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5 Sales
  Force Capabilities; Training

  	
  66

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.6
  Co-Promotion Advertising and Promotional Materials

  	
  67

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.7 Sales
  and Distribution in Japan

  	
  69

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.8
  Incentive Plans for Sales Representatives

  	
  69

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.9 Sales
  Representatives

  	
  70

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.10
  Government, Group Purchasing and Other Accounts

  	
  72

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7. 

  	
  SHARING OF
  PROFIT OR LOSS

  	
  72

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1 Profit
  Or Loss

  	
  72

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.2
  Copromotion Term

  	
  72

  	
   

  

 

Confidential Treatment has been requested by
ImClone Systems Incorporated for portions of this document.

 

iii

 

	
   

  	
  7.3
  Profit-Sharing Adjustment

  	
  72

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.4 Payments
  to our Reports by Affiliates

  	
  75

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.5 Non-Cash
  Considerations

  	
  75

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8. 

  	
  MANUFACTURE
  AND SUPPLY

  	
  75

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1 General
  Manufacturing Structure: Manufacturing Plan and Budget

  	
  75

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2
  Manufacturing Responsibilities

  	
  79

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3
  Specifications, Forecasts, and Terms of Supply

  	
  80

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.4 Shortage
  of Supply

  	
  81

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.5
  Inventory

  	
  82

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.6
  Manufacturing Costs and Fees

  	
  82

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.7 Product
  Recall

  	
  83

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.8
  Post-Termination Manufacturing

  	
  83

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.9 Other
  Covenants

  	
  86

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9. 

  	
  TRADEMARKS;
  PRODUCT MARKING

  	
  86

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1 Product
  Trademarks

  	
  86

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2 Other
  Proprietary Trademarks

  	
  87

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.3 Product
  Trademark Infringement

  	
  88

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.4 Patent
  Marking

  	
  89

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   SUBLICENSING; COMMERCIALIZATION OF A
  COMPETING PRODUCT

  	
  89

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1 No
  Effect on Existing Agreements

  	
  89

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2 Effect
  of Commercialization of a Competing Product

  	
  89

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3
  Sublicensing

  	
  91

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.4
  Maintenance of Third Party Agreements

  	
  92

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11. 

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  93

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1
  Representations and Warranties of the Parties

  	
  93

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.2
  Disclaimer

  	
  94

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12. 

  	
  PUBLICATION;
  CONFIDENTIALITY

  	
  94

  	
   

  

 

Confidential Treatment has been requested by
ImClone Systems Incorporated for portions of this document.

 

iv

 

	
   

  	
  12.1
  Notification

  	
  94

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.2 Review

  	
  94

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.3
  Confidentiality; Exceptions

  	
  95

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.4
  Exceptions to Obligation

  	
  96

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.5 Limitations
  on Use

  	
  96

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.6
  Remedies

  	
  96

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  13. 

  	
  INDEMNIFICATION;
  LIABILITY

  	
  96

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1 Mutual
  Indemnification

  	
  96

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.2 Shared
  Liability Claims

  	
  96

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.3
  Procedure

  	
  98

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  14. 

  	
  TERM;
  TERMINATION

  	
  99

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.1 Term

  	
  99

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.2 Termination
  of BMS-ImClone Agreement

  	
  100

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.3
  Termination of Merck-ImClone Agreement

  	
  102

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.4
  Termination of this Agreement for Cause

  	
  104

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.5
  Termination by Merck or BMS without Cause

  	
  105

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.6 Effect
  of Expiration of Agreement or Termination Prior to First Approval

  	
  105

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.7 Other
  Consequences of Termination

  	
  106

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.8 Accrued
  Rights; Surviving Obligations

  	
  111

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  15. 

  	
  FORCE
  MAJEURE

  	
  111

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  16. 

  	
  MISCELLANEOUS

  	
  111

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.1
  Relationship of Parties

  	
  111

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.2
  Assignment

  	
  111

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.3
  Affiliates of the Parties

  	
  112

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.4 Books
  and Records

  	
  112

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.5 Further
  Actions

  	
  112

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.6 Notice

  	
  112

  	
   

  

 

Confidential Treatment has been requested by
ImClone Systems Incorporated for portions of this document.

 

v

 

	
   

  	
  16.7 Use of
  Name

  	
  114

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.8 Public
  Announcements

  	
  114

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.9 Waiver

  	
  114

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.10
  Severability

  	
  114

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.11
  Amendment

  	
  114

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.12
  Governing Law; Submission to Jurisdiction

  	
  114

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.13
  Arbitration

  	
  115

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.14 Entire
  Agreement

  	
  117

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.15
  Parties in Interest

  	
  117

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.16
  Descriptive Headings; Construction

  	
  117

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.17
  Counterparts

  	
  118

  	
   

  

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

vi

 

THIS AMENDED AND RESTATED CO-DEVELOPMENT AND CO-COMMERCIALIZATION
AGREEMENT FOR ERBITUX® IN JAPAN (this “Agreement”),
effective as of October 12, 2007 (the “Restatement
Effective Date”), is entered into by and among Bristol-Myers
Squibb Company, a corporation organized and existing under the laws of the
State of Delaware, having offices located at Route 206 & Province Line
Road, Princeton, New Jersey (“Bristol”),
E.R. Squibb & Sons, LLC, a limited liability company organized and
existing under the laws of the State of Delaware, having offices located at
Route 206 & Province Line Road, Princeton, New Jersey (“ERS”) (Bristol and ERS,
collectively, “BMS”),
Bristol-Myers K. K., a Japanese corporation, with its principal place of
business at Shinjuku I-Land Tower, 5-1, Nishi-Shinjuku 6-chome, shinjuku-ku,
Tokyo, 163-1328, Japan (“BMKK”),
Merck KGaA, a German corporation with general partners organized and existing
under the laws of the Federal Republic of Germany, having offices located at
Frankfurter Straße 250, 64293 Darmstadt, Federal Republic of Germany (“Merck”), Merck Serono Japan Company,
Limited, a Japanese corporation, with its principal place of business at 6F
Meguro Tokyu Bldg., 2-13-17 Kamiosaki, Meguro-ku, Tokyo, 141-0021, Japan (“MJ”), and ImClone Systems
Incorporated, a corporation organized under the laws of the State of Delaware,
having offices located at 180 Varick Street, New York, New York 10014 (“ImClone”).

 

PRELIMINARY STATEMENTS

 

WHEREAS, ImClone and Merck entered into that certain Development and
License Agreement, dated December 14, 1998 (and, as amended heretofore or
hereafter, hereinafter referred to as the “Merck-ImClone
Agreement”), with respect to the development and marketing of
ImClone’s chimerized monoclonal antibody to EGFR, known as C-225 (IMC-225,
cetuximab), which is the active pharmaceutical ingredient in the product sold
under the Erbitux® trademark;

 

WHEREAS, ImClone has granted to Merck under such Merck-ImClone
Agreement worldwide outside of Canada, Japan and the United States of America
(including all territories and possessions thereof) exclusive rights to develop
and market Cetuximab;

 

WHEREAS, with respect to Japan, the Merck-ImClone Agreement provides
that ImClone and Merck have co-exclusive rights to develop and market, with
certain rights to sublicense, Cetuximab in Japan;

 

WHEREAS, ImClone, BMS and ERS entered into that certain Development,
Promotion, Distribution and Supply Agreement, dated September 19, 2001 and
as heretofore amended, pursuant to which, among other things, ImClone and BMS
shall (i) co-develop and co-promote Cetuximab in the United States of
America and Canada, and (ii) co-develop and co-promote Final Product in
Japan, together with Merck (such agreement, as amended heretofore or hereafter,
and hereinafter referred to as the “BMS-ImClone
Agreement” and collectively with the Merck-ImClone Agreement,
the Merck-ImClone Japan Agreement and the BMS-ImClone Japan Agreement, the “Existing Agreements”);

 

WHEREAS, MJ, a fully owned subsidiary of Merck, has expertise, amongst
other fields, in the development and marketing of drugs in Japan;

 

WHEREAS, BMKK, a fully owned subsidiary of BMS, has expertise, amongst
other fields, in the development and marketing of drugs in Japan and has a
substantial presence in Japan with which to do so;

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

 

WHEREAS, the Parties (as hereinafter defined), recognizing that
drafting, negotiating and concluding the terms and conditions of a full and
complete co-development and co-commercialization agreement for Final Product in
Japan would be time consuming, entered into a Co-Development Agreement for
Cetuximab in Japan effective as of December 15, 2004 (the “Co-Development Agreement”), which the
Parties acknowledge and agree remained in full force and effect until amended
and restated by this Agreement; and

 

WHEREAS, the Parties would like to amend and restate the Co-Development
Agreement in order to provide for co-commercialization by the Parties of Final
Product in Japan on the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the foregoing Preliminary
Statements and the mutual agreements and covenants set forth herein, the
Parties hereby agree as follows:

 

1.             DEFINITIONS.

 

1.1           Defined Terms.  As used in this Agreement, the following
terms shall have the meanings set forth in this Article 1 unless context
clearly and unambiguously dictates otherwise:

 

“Affiliate” with respect
to any Party, shall mean any Person directly or indirectly controlling,
controlled by or under common control with, such Party, for only so long as
such control exists; provided that for purposes of this Agreement, neither
ImClone nor any of its subsidiaries shall be deemed an Affiliate of BMS or its
subsidiaries.  For the purposes of this
definition, “control” when used
with respect to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms “controlling”
and “controlled” have meanings
correlative to the foregoing.

 

“Allowable Expenses” means, subject to
the terms and conditions of this Agreement (including Section 3.1(c)), the
following expenses that are specifically identifiable or reasonably allocable
to the Commercialization of the Final Product in Japan:

[**]

 

“Alternative Final Product” means a
product that incorporates the drug IMC-C225 (C225, cetuximab), in all forms,
dosages, and presentations, and that is formulated, packaged, finished,
labeled, and released for commercial sale and distribution in Japan under the
Alternative Trademark.

 

“Antibody” means any
antibody, or fragment thereof, whether human, humanized, chimeric, murine or
from any other source (and including bispecific antibodies, single chain
antibodies, and immunoconjugated antibodies), that (a) has been raised,
engineered or otherwise optimized to bind specifically and directly to the
Target (whether exclusively or in addition to any other target to which such
Antibody may directly bind), and (b) once bound to the Target,
competitively inhibits the binding of epidermal growth factor (EGF) (and other
ligands, such as transforming growth factor-alpha) to the Target.  For clarification, any fusion protein
comprised of a fragment of an Antibody and that uses such fragment in order to
bind to the Target shall be considered an Antibody for purposes of this
Agreement.  For sake of clarity and
avoidance of doubt, Merck’s EMD72000 antibody and ImClone’s IMC-11F8 antibody
are Antibodies within the meaning of this definition.

 

“API” means bulk cetuximab drug
substance.

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

2

 

“Applicable Law” means
the applicable laws, rules and regulations, including any rules,
regulations, guidelines, or other requirements of the Japanese Regulatory Authorities
or other Regulatory Authorities, that may be in effect from time to time and
apply to the activities contemplated under this Agreement.

 

“Approval” means receipt
from the Japanese Regulatory Authorities of any and all approvals, licenses,
registrations or authorizations necessary to market Final Product, including
receipt of pricing/reimbursement approval, where applicable.

 

“Approved Commercialization Plan” means
the then current Annual Commercialization Plan and Budget and the then current
Long-Term Commercialization Plan and Budget, in each case as adopted or
approved hereunder, as the case may be.

 

“Approved
Indications” means those indications for which
Final Product has received Approval in Japan.

 

“Approved Plan” means any of the then
current Annual Commercialization Plan and Budget, the Long-Term
Commercialization Plan and Budget, the Japan Manufacturing Plan and Budget, the
Long-Term Development Plan, and the Annual Development Plan and Budget, in each
case as adopted or approved by the SCJ hereunder, as the case may be and as the
context may require. “Approved Plans”
means all of the foregoing.  Where
references in this Agreement refer to the conduct or performance of activities
in accordance with an Approved Plan, such references shall be deemed not to
refer to those non-binding components of the Long-Term Development Plan.

 

“Bad Debts” means amounts actually
written off by MJ by reason of uncollectible Net Sales.  Should a Bad Debt which was written off be
collected, such amount shall be included in Net Sales in the Quarter in which
received.

 

“BMS-ImClone Japan Agreement”
means that separate agreement executed between ImClone, BMKK and BMS dated as
of the Restatement Effective Date, as the same may be amended or supplemented
hereafter.

 

 “Business Day” means a day that is not a Saturday,
Sunday or a day on which banking institutions in Tokyo, Japan are required by
law to remain closed.

 

“Call Center”
means the customer support center established in Japan by the Parties under the
direction of the SCJ.

 

“Canada” shall mean
Canada, including its possessions and territories.

 

“Cetuximab” shall mean a product that
incorporates the chimeric antibody IMC-C225 (C225, cetuximab), in all forms of
administration, dosages, and presentations. 
For clarity, Cetuximab does not include humanized or human forms of
C225.

 

“Change of Control” means, with respect
to a Party, any of the following transactions with a Third Party (a “Third Party Acquirer”):  (a) a merger or consolidation of such Party
(or of any of its Affiliates) with the Third Party Acquirer which results in
the holders of the voting securities of such Party outstanding immediately
prior thereto (other than the Third Party Acquirer, its “affiliates” and
“associates” (as such terms are used in the Securities Exchange Act of 1934, as
amended)) ceasing to represent, directly or indirectly, at least fifty percent
(50%) of the combined voting power of the surviving entity (or, if applicable,
its parent company) immediately after such merger or consolidation; (b) the
sale to the Third Party Acquirer of all or substantially all of the business of
such Party to which this Agreement relates 

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

3

 

(whether by merger, consolidation, sale of stock, sale of assets or
other similar transaction); or (c) the Third Party Acquirer (which shall
not be any trustee or other fiduciary holding securities under an employee benefit
plan of such Party, or any corporation owned directly or indirectly by the
stockholders of such Party, in substantially the same proportion as their
ownership of stock of such Party), together with any of the Third Party
Acquirer’s “affiliates” or “associates”, as such terms are used in the
Securities Exchange Act of 1934, as amended, becoming the beneficial owner of
fifty percent (50%) or more of the combined voting power of the outstanding
securities of such Party (or, if applicable, its parent company.  For purposes of this definition only, a Third
Party, (i) with respect to BMS or BMKK, includes Merck, ImClone and their
respective Affiliates, (ii) with respect to Merck or MJ, includes BMS,
ImClone and their respective Affiliates, and (iii) with respect to
ImClone, includes BMS, Merck and their respective Affiliates.

 

“Clinical Trial” means, with respect to
Cetuximab or Final Product, a Phase I Clinical Trial, a Phase II Clinical
Trial, a Phase III Clinical Trial (including a Phase IIIb Clinical Trial), or a
Phase IV Clinical Trial, as the case may be, that (x) is conducted in
Japan pursuant to an Annual Development Plan and Budget or (y) is
conducted outside of Japan pursuant to an Annual Development Plan and Budget in
support of registration of Cetuximab or Final Product in Japan and whose
principal objective is to support registration in Japan as opposed to other
geographies.  A Clinical Trial involving
study subjects shall be deemed to have commenced when the first patient in such
study has been enrolled.

 

“Commercialize”
means to promote, market, distribute, sell (and offer for sale or contract to
sell), import, provide product support for Final Product, or otherwise
commercially exploit or use Final Product in Japan, including by way of
example:

 

(a)          detailing and other promotional activities in
support of Final Product;

 

(b)         advertising and public relations in support of
Final Product, including market research, development and distribution of
selling, advertising and promotional materials, field literature,
direct-to-consumer advertising campaigns, media/journal advertising, and
exhibiting at seminars and conventions;

 

(c)          developing reimbursement programs and
information and data specifically intended for national accounts, large health
care organizations, governmental agencies (e.g.,
federal, state and local), and other group purchasing organizations, including
pull-through activities;

 

(d)         Co-Promotion activities not included in the
above; and

 

(e)          conducting journal advertising.

 

“Commercializing”, “Commercialization”
and “Commercial” shall be interpreted
accordingly.  To “Commercialize” is
exclusive of manufacturing activities.

 

“Competing Product” means any pharmaceutical product (other
than Final Product) for which marketing authorization has been filed with the
Japanese Regulatory Authorities for an oncology Indication that is the same as
any oncology Indication for which a marketing authorization is or has been
filed or received for Final Product in Japan, and wherein such pharmaceutical product
is comprised in whole or in part of any (i) Antibody or (ii) any compound or
other substance that (A) has been developed, synthesized, engineered or
optimized to bind specifically and directly to the Target and (B) once bound to
the Target, competitively inhibits the binding of epidermal growth factor (EGF)
(and other ligands, such as transforming growth factor-alpha) to the
Target.  For sake of clarity and
avoidance of doubt, (1) 

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

4

 

the conduct of preclinical research and clinical development are not
activities that, for purposes of this definition and this Agreement only, would
cause a product to be treated as a Competing Product; and (2) the
determination of whether a product is a Competing Product shall be made without
regard to the timing of the filing or Approval of such Competing Product and
the Final Product (i.e., it shall not be affected by whether the Competing
Product or the Final Product was the first to file or receive approval for an
overlapping oncology Indication).

 

“Co-Promote” means to perform jointly
those activities normally undertaken by a pharmaceutical company’s sales force
to implement marketing plans and strategies aimed at encouraging the
appropriate use of a product under such product’s Trademark.  It is agreed that this definition is not
intended to alter the Diligent Efforts obligations that a Party is or may be
required to devote under this Agreement or any Existing Agreement.  “Co-Promotion” shall be interpreted
accordingly.

 

 “Corporate Names” means (a) in the case of
ImClone, the Trademark ImClone® and the ImClone corporate logo or such other
names and logos as ImClone may designate in writing from time to time, and (b) in
the case of BMS, the Trademarks Bristol-Myers Squibb®, E.R. Squibb®, and the
BMS corporate logo or such other names and logos as BMS may designate in
writing from time to time, and (c) in the case of Merck, the Trademark
Merck® and the Merck corporate logo or such other names and logos as Merck may
designate in writing from time to time, and, in each case ((a), (b) and
(c)), together with any variations and derivatives thereof.

 

“CRO” means a Third Party clinical
research organization.

 

“Detail” means, with respect to Final
Product, a face-to-face contact (including a live video presentation or a group
presentation, if in accordance with an Annual Commercialization Plan and
Budget) between a Sales Representative and a physician or other medical
professional licensed in Japan to prescribe drugs, during which a Primary
Position Detail or Secondary Position Detail is made to such person, in each
case as measured by each Party’s internal recording of such activity in
accordance with Section 6.4(e); provided, that
such meeting is in compliance with Applicable Law and this Agreement.  When used as a verb, “Detail”
shall mean to engage in a Detail.  For
the avoidance of doubt, any contact or presentation between a Sales
Representative and a large health care organization (as distinguished from
calls on individual physicians or other medical professionals licensed to
prescribe drugs who may be affiliated with a large health care organization, in
connection with their professional prescribing decisions (but not with respect
to the large health care organization’s formulary)) shall not be considered a
Detail for purposes of this Agreement.

 

“Develop” means, with respect to
Cetuximab or Final Product, those activities that, in general, are necessary
for the development of Cetuximab and Final Product for registration in Japan
(including as encompassed by the definition of Clinical Trials under this
Agreement), to obtain and maintain Approval(s) for Final Product in Japan
(including to support pricing/reimbursement), and to support appropriate usage
for Final Product in Japan, including analysis, testing, any necessary
pre-clinical studies required by Japanese Regulatory Authorities, and
development activities pertaining to lifecycle management (including the
conduct of Phase IIIb Clinical Trials and Phase IV Clinical Trials
not explicitly for registrational purposes), new indications, and, if
applicable, new formulations developed specifically for the Japan market,
including, by way of example, the activities listed in the definition of
Development Costs below.  “Developing” and “Development”
shall have correlative meanings.

 

“Development Costs” has the meaning set
forth in Section 4.2(a).

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

5

 

“Diligent Efforts” means, for a Party, the performance of obligations in a
sustained manner consistent with the efforts such Party devotes to a product of
similar market potential  resulting from
its own research efforts, based on conditions then prevailing and taking into
account the terms of this Agreement, but without regard to whether such Party
is also developing a potential Competing Product or commercializing a Competing
Product; provided, however, if, with respect to the
Commercialization or manufacture of Final Product, a Party does not have any
such product of similar market potential, such Party shall use commercially
reasonable efforts in the performance of its obligations hereunder.  Notwithstanding the forgoing, the applicable
Diligent Efforts that a Party is required to apply under this Agreement shall
not alter or supersede, or modify the interpretation of, the Diligent Efforts
that a Party may be required to exercise under the Existing Agreements.  For emphasis, the diligence obligation owed
to ImClone under this Agreement by Merck, on the one hand, and by BMS, on the
other, shall be determined by the diligence obligations owed to ImClone by
Merck and BMS, respectively, under the Existing Agreements.

 

“Distribution Costs” means the [**] as an expense by a Party or any of its Affiliates
after the Restatement Effective Date that are specifically identifiable or
reasonably allocable to the Commercial distribution of Final Product in Japan
by a Party during the Co-Promotion Term, including: [**].

 

“Existing
Committees” shall mean the Joint Executive Committee established
under the BMS-ImClone Agreement and the Merck/ImClone Steering Committee
established pursuant to the Merck-ImClone Agreement.

 

“Experienced Arbitrator” means a mutually
acceptable, disinterested, conflict-of-interest-free individual not affiliated
with any of the Parties or their Affiliates who (a) with respect to
disputes of a primarily legal, scientific, technical or regulatory nature
hereunder shall be an individual with appropriate legal, scientific, technical
or regulatory expertise to resolve such disputes, or (b) with respect to
disputes of a primarily business or financial nature (e.g.,
disputes referred for resolution pursuant to “baseball arbitration” under Section 16.13(a))
shall be an individual who possesses appropriate expertise to resolve such
disputes.  The arbitrator shall not be or
have been at any time an Affiliate, employee, officer or director of any of the
Parties or any of their respective Affiliates, or, at any time within the five
years preceding the arbitration, a consultant of any of the Parties or any of
their respective Affiliates.

 

“FDA”
shall mean the United States Food and Drug Administration, or any successor
thereto.

 

“Final Product” means a product that incorporates Cetuximab, in all forms,
dosages, and presentations, and that is formulated, packaged, finished,
labeled, and released for commercial sale and distribution in Japan under the
Erbitux® Trademark.

 

“Fully Burdened Manufacturing Costs” for any component or item comprising
API or Final Product means 100% of a Party’s fully burdened manufacturing cost
(as defined in the Party’s generally accepted accounting policies consistently
applied) that is (x) supplied by a Third Party and/or (y) directly manufactured
or supplied by a Party or an Affiliate of such Party, determined as follows:

 

In the case of clause (x) above, Fully
Burdened Manufacturing Costs means those amounts that are payable to a Third
Party and incurred by a Party or its Affiliates in connection with the
manufacture or supply of API or Final Product, including [**].

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

6

 

Fully-Burdened Manufacturing Costs incurred
by a Party or its Affiliates (other than Fully-Burdened Manufacturing Costs
that are payable to a Third Party, as discussed above) shall comprise the sum
of:

 

(a)          For API:

 

Cost of Raw Materials

 

The purchase unit cost of raw materials
multiplied by [**].

 

Direct Labor and Allocable Overhead Costs:

 

The cost of direct labor and manufacturing
overhead resources consumed in the production process [**].

 

Costs will include any efficiency, activity
and spending variances from standards as well as any underabsorbed overhead
expenses incurred during the startup of the biologic operation for the Final
Product or caused by subsequent evolution of the Final Product’s volumes sold
in Japan, [**].

 

Manufacturing overhead includes the following costs:

 

-               Normal depreciation of building,
machinery and equipment

-               Plant management

-               Plant services and utilities

-               Plant maintenance

-               Quality control at all stages

-               Freight and storage costs at all stages

-               Cost accounting and data processing
services

-               Any taxes and duties other than VAT and
income tax

 

(b)          For the Processing of
API into Final Product:

 

Cost of Raw Materials

 

The purchase unit cost of any materials and
packaging components necessary to make the finished goods (including the API)
[**].

 

Direct Labor and Overhead Costs

 

The cost of direct labor and overhead
resources consumed in the manufacturing process, [**].

 

[**]

 

The manufacturing overhead will include:

 

-               Normal depreciation of fixed assets

-               Plant management

-               Plant common services and utilities

-               Plant maintenance

-               Quality control at all stages

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

7

 

-               Subject to Section 8.6(b),
reasonable manufacturing plant capacity reservation fees to the extent
reasonably allocable to binding forecasts of production of Final Product for
sale or use in Japan

-               Freight and storage costs at all stages

-               Cost accounting and data processing
services

-               Any taxes and duties other than VAT and
income tax.

 

For the avoidance of doubt, Fully Burdened Manufacturing Cost shall in
both cases described in subsections (a) and (b) above (as well as for
purposes of item (x) in the first paragraph of this definition of Fully
Burdened Manufacturing Cost), [**].

 

“FTE”
means the equivalent of the work of one (1) employee full time for one (1) year
(consisting of at least a total of [*] hours per year, or such other number as
may be agreed by the SCJ) of work directly related to the Commercialization of
Final Product or any other activities contemplated under this Agreement.  No additional payment shall be made with
respect to any person who works more than [*] hours per year (or such other
number as may be agreed by the SCJ), and any person who devotes less than [*]
hours per year (or such other number as may be agreed by the SCJ) shall be
treated as an FTE on a pro-rata basis, to be calculated upon the actual number
of hours worked divided by [*] (or such other number as may be agreed by the
SCJ).

 

“FTE Cost”, for a given employee performing services under this Agreement,
means the FTE Rate for such category of employee as established under Section 4.1(e) and
as adjusted subsequently in accordance with Section 4.1(e), multiplied by
the percentage of time devoted by such employee to the applicable task.

 

“GAAP”
shall mean generally accepted accounting principles in the United States,
consistently applied by ImClone or BMS, as the case may be.

 

“Good Manufacturing Practices” or “cGMP” means current good manufacturing
practices for biological and other pharmaceutical products (and components
thereof) as described in regulations promulgated by the Japanese Regulatory
Authorities or other Regulatory Authorities (such as FDA), as updated and
applicable  from time to time.

 

“IFRS”
shall mean International Financial Reporting Standards, consistently applied by
Merck.

 

“Indication”
shall mean a specific disease indication and which, in the case of oncology,
shall be differentiated by tumor type (e.g., colorectal cancer, non-small cell
lung cancer and the like are separate Indications).  Any lines of therapy within a given tumor
type shall not be deemed separate Indications. 
For the sake of clarity, approval of new lines of therapy within a given
tumor type (e.g., 1st line, 2nd line, 3rd line
or adjuvant) shall not be considered as new Indications for purposes of this
Agreement, including for purposes of Section 3.1(c) and Article 6
of this Agreement (including Section 6.4(b)(i)).

 

“Invention”
shall mean any new or useful process, compound, composition of matter,
improvements, discoveries, claims, formulae, processes, trade secrets,
technologies and know-how (including confidential data and Confidential
Information), to the extent relating to, derived from and useful for the
manufacture, use or sale of Final Product (including the formulation, delivery
or use thereof in pharmaceutical applications for human health), including
synthesis, preparation, recovery and purification processes and techniques,
control methods and assays, chemical data, toxicological and pharmacological
data and techniques, clinical data, medical uses, product forms and product
formulations and specifications, whether 

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

8

 

patentable or unpatentable; and in each case, limited to those
Inventions conceived or first reduced to practice or demonstrated to have
utility in the performance of activities undertaken under, and in direct
connection with the co-development and/or co-commercialization activities
undertaken by or on behalf of a Party or two or more Parties pursuant to and
during the term of, this Agreement, as contemplated herein.

 

“Japan”
shall mean Japan, including its possessions and territories.

 

“Japanese
Regulatory Authorities” shall mean the health regulatory
authority(ies) in Japan, and any successor(s) thereto.

 

“JNDA”
means a regulatory filing made with the Japanese Regulatory Authorities that
seeks Approval to market and sell a Final Product in Japan for a given
Indication.

 

“Launch” means the first commercial sale of a Final Product to the
general public in Japan after Approval for the marketing and sale of such Final
Product has been obtained for its first Indication in Japan.

 

“Long-Term Development Plan” means the written Development
plan then approved by the SCJ for Development in Japan, which plan shall
include:

 

(A)          a binding section, which shall indicate those
specific Clinical Trials that the Parties have agreed to conduct under this
Agreement with respect to Japan, and which shall include, where agreed
upon:  (i) a budget for such
Clinical Trials (or a good faith estimate if a firm budget is not reasonably
practicable), (ii) any plans
involving a CRO for such Clinical Trials, (iii) to the extent known, estimated timelines for the initiation
and completion of such Clinical Trials, (iv) to the extent known, key
endpoints for such Clinical Trials, (v) to the extent known, any specific
allocation of responsibilities among the Parties with respect to the
implementation of such Clinical Trials, (vi) if applicable, any go/no-go
criteria for a given study, and (vii) if applicable, any clinical studies
being conducted outside the Development Plan (and which will not be shared as
Development Costs under this Agreement) that will be used to bridge to or
support the Clinical Trials; and

 

(B)           a non-binding section, which shall indicate those
Indication(s), new line(s) of therapy within an Indication, preclinical
studies and/or Clinical Trials that the Parties are contemplating but have not
yet agreed to conduct with respect to Japan, which section may include (i) a
good faith estimate of the budget for the Development of the Indications, lines
of therapy, and/or conduct of those studies, (ii) any other or related
significant Development related activities contemplated for Japan, (iii) any
plans involving a CRO, (iv) to the extent known, estimated timelines,
(v) to the extent known, key regulatory activities and any material
regulatory strategies relating to such Indications, lines of therapy, and/or
studies, and (vi) any contemplated allocation of responsibilities among
the Parties with respect to the implementation of the Long-Term Development
Plan.

 

Where references in this Agreement refer to the implementation of, or
the conduct or performance of activities in accordance with, or subject to, an
Approved Plan or a Long-Term Development Plan, such references shall be deemed
to refer only to the binding components of the Long-Term Development Plan and
not to those non-binding components of the Long-Term Development Plan.

 

“Marketing Costs” means, subject to Sections 4.1, 4.3(a) and 4.3(b), [**].

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

9

 

“Medical Education Activities” means activities designed to ensure
or improve appropriate medical use of, conduct medical education of, or further
research regarding, Final Product sold in Japan, including by way of example:

 

[**]

 

“Medical Education Costs” means, subject to Sections 4.1, 4.3(a) and
4.3(c), [**] an expense by BMKK, MJ or any of their Affiliates after the
Restatement Effective Date that are approved by the SCJ or incurred in
accordance with an Annual Commercialization Plan and Budget and that are
specifically identifiable or reasonably allocable to Medical Education
Activities with respect to Final Product Commercialization efforts of MJ and
BMKK in Japan during the Co-Promotion Term, together with any such costs
incurred in excess of the budget set forth in the Annual Commercialization Plan
and Budget for same that are approved by the JJCC or SCJ.

 

“Merck-ImClone Japan
Agreement” means that separate agreement executed
between ImClone and Merck, dated as of the Restatement Effective Date, as the
same may be amended or supplemented hereafter.

 

“Net Sales” means the amount billed or otherwise charged by the final
billing Party, an Affiliate or any permitted (sub)licensee for sales or other
dispositions of Final Product to a Third Party, less (to the extent not
reimbursed or refunded to the final billing Party):

 

(a)           normal and customary
discounts (including cash discounts and quantity discounts), retroactive price
reductions, charge-back payments (or their equivalent) and rebates allowed,
paid, or granted to managed health care organizations or to national,
state/provincial, local and other governments in Japan, their agencies, and
purchasers and reimbursers or to trade customers as accrued by such Party in
accordance with its customary practices in accordance with GAAP or IFRS, as
applicable to such Party;

 

(b)           credits or allowances
accrued for claims, damaged goods, rejections or returns of such Final Product,
including Final Product returns in connection with recalls or withdrawals (to
the extent the recall or withdrawal is not attributable to the negligence of
the Party booking the Net Sale);

 

(c)           freight out, postage,
shipping and insurance charges for delivery of Final Product (excluding such
charges that are included in Distribution Costs), to the extent that such items
are included in the gross amount billed; and

 

(d)           taxes or duties levied
on, absorbed or otherwise imposed on sale of such Final Product, including
value-added taxes, tariffs, excise taxes, or other governmental charges
otherwise imposed upon the billed amount, as adjusted for rebates and refunds,
to the extent not paid by the Third Party or otherwise reimbursed (but not
including taxes assessed against the income derived from such sale.

 

Net Sales shall not include sales between a
Party and its Affiliates, but shall arise upon the sale by a Party or its
Affiliates to unrelated Third Parties, such as end users, wholesalers and
retailers.  Net Sales, as set forth in
this definition, shall be calculated applying, in accordance with GAAP or IFRS,
as applicable to such Party, the standard accounting practices that a Party
customarily applies to other products sold by it.  [**].

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

10

 

“Other Operating Expenses” means other operating costs recorded as an expense by BMKK, MJ or any of their
Affiliates after the Restatement Effective Date that relate to the manufacture or Commercialization of Final Product by a Party
in Japan, that fall within the following cost categories, and that are specifically
identifiable to or reasonably allocable to the manufacture of Final Product by
a Party for use or sale in Japan or to Final Product Commercialization
efforts of a Party in Japan:

 

[**]

 

The methodology used to determine the amount
of each item set forth above shall be developed by the JJFC and approved by the
SCJ.

 

“Packaging and Release” means those activities undertaken in
connection with this Agreement to place a label on filled vials, package (both
primary and secondary packaging) such vials, conduct QA/QC, and release
Cetuximab or Final Product for use or sale in Japan.  Packaging and Release also includes the conduct of a market life
stability program, whether performed in or outside of Japan, including, without
limitation, the timely preparation and delivery of summary tables and reports
to support regulatory filing submissions for Finished Product for
Commercialization in Japan according to stability protocols and other
requirements that are agreed to by the JJMC and as may be modified by the JJMC
from time to time.

 

“Party” shall mean, as applicable, Merck,
MJ, ImClone, BMS, or BMKK and, when used in the plural, shall mean Merck, MJ,
ImClone, BMS, and BMKK.

 

“Party Group” shall mean either (i) Merck
and MJ, or (ii) ImClone, BMS, and BMKK.

 

“PDC” shall mean the Product Development
Committee established pursuant to the BMS-ImClone Agreement.

 

“PDE” or “Primary Detail Equivalent” means a primary Detail equivalent
where (a) a Primary Position Detail has a value of [**] PDE, and (b) a
Secondary Position Detail has the value of [**] PDE.  The procedures for determining PDEs in a
group presentation are set forth on Exhibit 1.1(b) hereto.

 

“PDE
Rate” means the fully-burdened cost of providing an
oncology PDE in Japan, as initially established and thereafter adjusted in
accordance with Section 6.3(b).

 

“Person”  shall
mean an individual or a corporation, partnership, association, trust, or any
other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.

 

“Phase
IIIB Clinical Trial” means (a) a product support
human clinical trial of Final Product (i.e.,
a clinical trial that is not required for receipt of Approval for an Indication in Japan or new line of therapy within an Indication, but which may be useful in providing additional drug
profile data in support of such Approval in Japan for such Indication or new line of therapy) that is commenced before receipt of Approval for
such Indication (or new line of therapy) in Japan, or (b) a clinical
trial that is required or advised by a Japanese Regulatory Authorities as a
condition of or in connection with obtaining or maintaining a regulatory
approval for an Indication  or new line
of therapy (and that is commenced after receipt of such regulatory
approval).

 

“Phase
IV Clinical Trial” means (a) a human clinical
trial, or other test or study, of Final Product commenced after receipt of initial Approval for an Indication (or for a
new line of therapy within an Indication) in Japan that is conducted within the
parameters of the labeling 

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

11

 

approved for the Final Product, other than Phase IIIB Clinical Trials, and (b) investigator sponsored clinical trials
of Final Product that are not set forth
in the Annual Development Plan.  Phase IV
Studies may include clinical trials, or other tests and studies, conducted in
support of pricing/reimbursement for an initial Approval, epidemiological studies, modeling and pharmacoeconomic studies,
and post-marketing surveillance studies. 
For clarity, the funding, the design, and the scientific integrity (and
related matters) of any Phase IV studies are to be approved by the JJDC and not
the JJCC.

 

“Primary
Position Detail” means a Detail in which [**].

 

“Profit
Or Loss” means, subject to Sections 3.1(c), 6.4(f), 7.2 and
7.3, Net Sales of Final Product in
Japan, less Allowable Expenses in Japan. 
For sake of clarity, Profit Or
Loss shall be determined prior to application of any income taxes, and if such
terms are used individually, “Profit” shall mean a positive Profit Or Loss, and “Loss” shall mean a negative Profit Or Loss.

 

“QA” means quality assurance activities conducted in
accordance with Good Manufacturing Practices.

 

“QC” means quality control activities conducted in
accordance with Good Manufacturing Practices.

 

“Quarter” means each of the three (3) month periods
ending on March 31, June 30, September 30 and December 31;  provided
that the first Quarter during the term of this Agreement shall commence on the
Restatement Effective Date and end on December 31, 2007.

 

“Regulatory  Authority” means any national (for example, the FDA in
the United States) or supra-national (for example, the European Agency for the
Evaluation of Medicinal Products) agency or other governmental entity
authorized and empowered to grant regulatory approvals necessary to market
Cetuximab outside of Japan.

 

“Regulatory
Costs” means [**] an expense by a Party or any of its
Affiliates after the Restatement Effective Date (including filing, user,
maintenance and other fees paid to Japanese Regulatory Authorities) (i) that
are incurred in accordance with an Approved Commercialization Plan, the Japan
Manufacturing Plan and Budget, or an Approved Annual Development Plan and
Budget, or are otherwise approved by the SCJ, and (ii) that are
specifically identifiable or reasonably allocable to the preparation of
regulatory submissions for, and the obtaining and maintenance of any Approval
of, any Final Product in Japan,
including [**].  Such Regulatory
Costs shall be appropriately allocated between the Approved Commercialization
Plan and the Approved Development Plan. 
For sake of clarity, Regulatory Costs relating to Development activities
for the purpose of obtaining regulatory Approval for an Indication (or new line
of therapy within an existing approved Indication) for Cetuximab or Final
Product in Japan to be considered Development Costs, while Regulatory Costs
incurred in connection with obtaining pricing or reimbursement approval,
maintenance of Approvals, or Phase IV Clinical Trials to be considered
Allowable Expenses.

 

“Representative” means such individual as a Party is entitled to
and has appointed to the SCJ, a Subcommittee or Working Group from time to time
in accordance with this Agreement.  Each
Party will endeavor to appoint individuals who are appropriate to, and have
pertinent experience with respect to, the functions of the SCJ, Subcommittee or
Working Group.  For clarity, the
appointment or qualifications of a Party’s Representatives are not subject to
approval by the other Parties.

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

12

 

“Results” shall mean all data and
information discovered or developed under or in connection with a Study, the
Annual Development Plan and Budget, and/or the Development activities
contemplated under this Agreement.

 

“Sales
Costs” means [**] an expense by a Party or any of its
Affiliates after the Restatement Effective Date that are approved by the SCJ or
incurred in accordance with the then Approved Commercialization Plan and Budget
and that are specifically identifiable or reasonably allocable to the sales
efforts during the Co-Promotion Term for Final Product to all markets in Japan, together with any
such costs incurred in excess of the budget set forth in the Annual
Commercialization Plan and Budget for same that are approved by the JJCC or SCJ.  Subject to
the foregoing, for sake of clarity, Sales Costs shall include the following
costs paid or incurred by a Party associated with the following:

 

[**]

 

“Sales
Representative” of a Party means (a) an
employee of such Party or an Affiliate of such Party or (b) an individual
independent contractor engaged by such Party or Affiliate (but only to the extent expressly permitted by Section 6.9(b) of this
Agreement or by agreement of the BMKK/BMS and MJ/Merck members of the JJCC) to
Co-Promote Final Product on behalf of
such Party, in either case (i) who is responsible for meeting in person
with customers and others who can buy or prescribe (or influence the buying or
prescribing process and decisions regarding buying or prescribing) the
Final Product in Japan, and (ii) whose
success at such activities is a significant factor in the ongoing employment or
engagement, and compensation, of the individual, excluding in each case (x) those
employees or independent contractors of either Party or such an Affiliate that
are solely engaged in telemarketing, professional education or other indirect
activities in support of direct selling and (y) Medical Liaisons.

 

“Secondary
Position Detail” means a Detail in which [**].

 

“Semi-Annual
Period” means any period consisting of two (2) consecutive
Quarters; provided that each
Semi-Annual Period shall begin on the day following the last day of a previous
Semi-Annual Period.

 

“Specifications” means the specifications for the manufacture, labeling,
packaging, storage, shipment, and release of the Final Product, as set forth in an applicable JNDA or other
regulatory filing (e.g., a drug
master file (as defined in the Code of Federal Regulations)) or Approval then
in effect from time to time.

 

“Target” means the extracellular domain of
the human epidermal growth factor receptor (EGFR, HER1, c-ErbB-1).

 

“Third Party” shall mean any Person who or
which is neither a Party nor an Affiliate of a Party.

 

“Third
Party Milestone Payments” means up-front fees (including
any fees paid in installments) and milestones and other payments  payable to a Third Party in consideration for
rights necessary or useful for (i) the Commercialization or use of the
Final Product in Japan, or (ii) the
manufacture of the API or Final Product
anywhere in the world for the purpose of, but only to the extent fairly and reasonably allocable to, the Commercialization or use of the Final Product in Japan, but excluding amounts paid in the
form of Third Party Royalties.

 

“Third
Party Payments” means Third Party Milestone
Payments and Third Party Royalties.  The
Third Party Payments as of the Restatement Effective Date are listed on Exhibit 1.1(a).

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

13

 

“Third
Party Royalties” means royalties (but excluding
any royalties or other payments that are not tied to sales of Final
Product) payable to a Third Party in
consideration for rights necessary or useful for (i) the Commercialization
or use of the Final Product in Japan, or
(ii) the manufacture of Final Product anywhere in the world for the purpose of, and to the extent fairly and
reasonably allocable to, the Commercialization or use of the Final Product in Japan.

 

“Trademark” shall include any word, name, symbol, color,
designation or device or any combination thereof, including any trademark,
trade dress, service mark, service name, brand mark, trade name, brand name,
logo or business symbol, that is used in connection with distribution,
marketing, promotion and sale of the Final Product in Japan, but excluding the
Corporate Names of any Party and its Affiliates and variants thereof.

 

“United States” or “U.S.” shall mean the United States of
America, including its possessions and territories.

 

1.2           Additional Defined Terms.  The
following additional defined terms shall have the meanings set forth in the
sections of this Agreement listed below:

 

	
  Defined Term

  	
   

  	
  Section Where
  Defined

  
	
   

  	
   

  	
   

  
	
  “Agreement”

  	
   

  	
  Preliminary Statement

  
	
  “Alliance Manager”

  	
   

  	
  2.9

  
	
  “Alternative Trademark”

  	
   

  	
  3.2(c)(iv)

  
	
  “Annual Commercialization Plan and Budget”

  	
   

  	
  6.1(a)

  
	
  “Annual Development Plan and
  Budget”

  	
   

  	
  3.1(a)

  
	
  “Audited Party(ies)”

  	
   

  	
  4.8(b)

  
	
  “Auditing Party(ies)”

  	
   

  	
  4.8(b)

  
	
  “Bankrupt Party”

  	
   

  	
  4.9(a)

  
	
  “Benefit Plans”

  	
   

  	
  6.9(h)

  
	
  “BMKK”

  	
   

  	
  Preliminary Statement

  
	
  “BMKK/MJ NSF Commercialization
  Activities Costs”

  	
   

  	
  4.3(a)

  
	
  “BMS”

  	
   

  	
  Preliminary Statement

  
	
  “BMS-ImClone Agreement”

  	
   

  	
  Preliminary Statement

  
	
  “BMS Manufactured
  Component”

  	
   

  	
  8.8(b)

  
	
  “Breaching
  Party(ies)”

  	
   

  	
  14.2

  
	
  “Claims”

  	
   

  	
  13.2

  
	
  “Clinical Trial Expense Overrun”

  	
   

  	
  4.2(c)

  
	
  “Co-Development Agreement”

  	
   

  	
  Preliminary Statement

  
	
  “Collaboration”

  	
   

  	
  2.1(b)

  
	
  “Company Invention”

  	
   

  	
  5.1

  
	
  “Competing Product Party”

  	
   

  	
  10.2(a)

  
	
  “Confidential Information”

  	
   

  	
  12.3

  
	
  “Co-Promotion Term”

  	
   

  	
  7.2

  
	
  “Courts”

  	
   

  	
  16.12(b)

  
	
  “CSO”

  	
   

  	
  6.9(b)

  
	
  “CTNs”

  	
   

  	
  3.2(c)(ii)

  
	
  “Declining Party”

  	
   

  	
  7.3(a)(ii)

  
	
  “Duplicate Database”

  	
   

  	
  3.6(a)

  
	
  “Existing Agreements”

  	
   

  	
  Preliminary Statement

  
	
  “fill/finish”

  	
   

  	
  8.2(c)(i)

  
	
  “FM Shortage”

  	
   

  	
  8.4

  
	
  “FTE Rate”

  	
   

  	
  4.1(e)

  

 

Confidential Treatment has been requested by
ImClone Systems Incorporated for portions of this document.

 

14

 

	
  Defined Term

  	
   

  	
  Section Where
  Defined

  
	
   

  	
   

  	
   

  
	
  “General Invention”

  	
   

  	
  5.2

  
	
  “Good Faith Challenge”

  	
   

  	
  10.4

  
	
  “Hiring Party”

  	
   

  	
  6.9(h)

  
	
  “ImClone”

  	
   

  	
  Preliminary Statement

  
	
  “ImClone
  Manufactured Component”

  	
   

  	
  8.8(c)

  
	
  “Indemnifying
  Party”

  	
   

  	
  13.3(c)

  
	
  “Indemnifying
  Party”

  	
   

  	
  13.3(c)

  
	
  “Initial Training
  Period”

  	
   

  	
  6.5(c)(i)

  
	
  “Interested Party”

  	
   

  	
  3.1(c)

  
	
  “Japan Agency
  Agreement”

  	
   

  	
  3.2(b)

  
	
  “Japan
  Manufacturing Plan and Budget”

  	
   

  	
  8.1(a)

  
	
  “Joint Japan
  Commercialization Committee” or “JJCC”

  	
   

  	
  2.1(b)

  
	
  “Joint Japan
  Development Committee” or “JJDC”

  	
   

  	
  2.1(b)

  
	
  “Joint Japan
  Finance Committee” or “JJFC”

  	
   

  	
  2.1(b)

  
	
  “Joint Japan
  Manufacturing Committee” or “JJMC”

  	
   

  	
  2.1(b)

  
	
  “Long-Term
  Commercialization Plan and
  Budget”

  	
   

  	
  6.1(a)

  
	
  “Losses”

  	
   

  	
  13.1

  
	
  “Manufacturing
  Cost Worksheet”

  	
   

  	
  8.1(c)(iii)

  
	
  “Marketing Expense
  Overrun”

  	
   

  	
  4.3(b)

  
	
  “Marketing
  Materials”

  	
   

  	
  6.6(a)

  
	
  “Master Database”

  	
   

  	
  3.6(a)

  
	
  “Medical Education
  Expense  Overrun”

  	
   

  	
  4.3(c)

  
	
  “Merck”

  	
   

  	
  Preliminary
  Statement

  
	
  “Merck-ImClone
  Agreement”

  	
   

  	
  Preliminary
  Statement

  
	
  “Merck
  Manufactured Component”

  	
   

  	
  8.8(a)

  
	
  “MJ”

  	
   

  	
  Preliminary
  Statement

  
	
  “Non-breaching
  Party(ies)”

  	
   

  	
  14.2

  
	
  “Non-Interested
  Party”

  	
   

  	
  3.1(c)

  
	
  “Non-Qualifying Details”

  	
   

  	
  6.4(b)(ii)

  
	
  “Party” or “Parties”

  	
   

  	
  Preliminary Statement

  
	
  “Product Trademark”

  	
   

  	
  9.1(a)

  
	
  “Promotional Data”

  	
   

  	
  6.4(e)

  
	
  “Providing Party”

  	
   

  	
  6.2(b)(v)(1)

  
	
  “Quarterly PDE Amount”

  	
   

  	
  6.4(b)(i)

  
	
  “Reassigned”

  	
   

  	
  6.2(b)v)(3)

  
	
  “Recall”

  	
   

  	
  8.7(a)

  
	
  “Related Invention”

  	
   

  	
  5.2

  
	
  “Requesting Party”

  	
   

  	
  6.2(b)(v)(1)

  
	
  “Restatement Effective Date”

  	
   

  	
  Preliminary Statement

  
	
  “Shortfall Party”

  	
   

  	
  6.4(f)(iii)

  
	
  “Steering
  Committee Japan” or “SCJ”

  	
   

  	
  2.1(b)

  
	
  “Subcommittee”

  	
   

  	
  2.1(b)

  
	
  “Sublicense Proposing Party”

  	
   

  	
  10.3(c)

  
	
  “Sublicensee”

  	
   

  	
  10.3(c)

  
	
  “Third Party Acquirer”

  	
   

  	
  Definition of Change of Control

  
	
  “Trademark Infringement Claims”

  	
   

  	
  9.3(a)

  

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

15

 

	
  Defined Term

  	
   

  	
  Section Where
  Defined

  
	
   

  	
   

  	
   

  
	
  “Uncured Material Default”

  	
   

  	
  14.4(a)

  
	
  “Working Group”

  	
   

  	
  2.8(a)

  

 

2.             MANAGEMENT OF COLLABORATION.

 

2.1           General

 

(a)           General Scope.  The collaboration among the Parties set forth
in this Agreement shall be composed of and limited to:

 

(i)            the co-Development
and regulatory activities of the Parties undertaken with the intention to
obtain marketing authorizations for Final Product in Japan.  The Clinical Trials
described in detail in the Annual Development Plan and Budget and the binding
portion of the Long-Term Development Plan attached as Exhibit 3.1(a) hereto
are those Clinical Trials with respect to which the Parties have currently
agreed to pursue for Final Product in
Japan;

 

(ii)           the co-Commercialization by BMKK and MJ of Final Product in Japan; and

 

(iii)          the manufacture and supply of Cetuximab for co-development, and of Final
Product for co-Commercialization, in Japan.

 

(b)                            Committees and Subcommittees.  Subject to the terms and conditions of this
Agreement, the Parties have established or shall establish (i) a joint
steering committee (the “Steering Committee Japan” or “SCJ”) that will oversee the Parties’ activities under this Agreement
(the “Collaboration”) and facilitate
communications between the Parties with respect to the Development, Approval,
manufacturing and Commercialization of the Final Products hereunder, and (ii) four
(4) specialized joint subcommittees (“Subcommittees”)
consisting of one to focus on each of the following areas:  Development and Approval and other regulatory
matters (such Subcommittee, the “Joint Japan Development and Regulatory Committee” or “JJDC”), Commercialization (such committee, the “Joint Japan Commercialization Committee” or “JJCC”), manufacturing (such committee, the “Joint Japan Manufacturing Committee” or “JJMC”), and financial (such committee, the
“Joint
Japan Financial Committee”
or “JJFC”), respectively, arising out of the
Collaboration.  Each Committee shall have
the responsibilities and authority allocated to it in this Article 2 and
elsewhere in this Agreement.  The Parties
intend that their respective organizations will work together to assure the
success of the Collaboration.

 

(c)                             Reservation of Rights in a Party. 
Notwithstanding the Committee structure established pursuant
to Section 2.1(b) to oversee the Collaboration, each Party shall
retain the rights, powers and discretion granted to it under this Agreement,
and no such rights, powers, or discretion shall be delegated to or vested in
the SCJ or a Subcommittee unless such delegation or vesting of rights is
expressly provided for in this Agreement or the Parties expressly so agree in
writing.  The Parties hereby agree that
the following matters are outside the jurisdiction and authority of the SCJ and
the Subcommittees:  (i) the
amendment, modification or waiver of compliance with this Agreement, which
shall require mutual written agreement of the Parties, and (ii) such other
matters as are expressly reserved to the consent, approval, agreement or other
decision-making authority of any one or more Parties in this Agreement, whether
or not required by this Agreement to be considered by the SCJ one or more
Subcommittees prior to the exercise of such consent, approval or other
decision-making authority.

 

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ImClone Systems Incorporated for portions of this document.

 

16

 

(d)                   No Effect on Existing
Agreements.  Except as
provided in Section 16.14(c), no decision by the SCJ or any Subcommittee
may affect, alter or modify a Party’s obligations under any of the Existing
Agreements, as amended by this Agreement.

 

2.2           Steering Committee Japan.  The Steering
Committee Japan shall be responsible for overseeing
and coordinating each Party’s co-Development and co-Commercialization
activities as set forth in, and subject to the terms of, this Agreement.
Subject to the terms of this Agreement, the SCJ shall have overall
responsibility for the success of the Collaboration, and its general areas of
responsibility shall be: (i) to determine the Development, regulatory,
Commercialization, and manufacturing strategy for the Collaboration, (ii) to
coordinate the Parties’ activities hereunder, and (iii) as applicable, to
review, comment on, approve, and resolve disputes with respect to, plans and
budgets for, and the implementation of, the Collaboration, including the
specific responsibilities of the SCJ outlined below.  The SCJ shall have the membership and shall
operate by the procedures set forth in Sections 2.4, 2.5 and 2.6.  In
particular, and subject to
Sections 3.1(c) and 10.2 and to Article 14 of this Agreement, the SCJ shall have the following specific
responsibilities:

 

(a)                   Development
and Regulatory Responsibilities.  Subject to Section 3.1(c),
the SCJ shall:  (1) approve the
Development and regulatory strategy for the Final Product, (2) provide a forum for coordination of the
Parties’ Development and regulatory activities under this Agreement, and (3) as
applicable, review, comment on, approve, and
seek to resolve disputes with respect to, Development plans and budgets for,
and the implementation of, the Development and regulatory strategy for,
the Final Product.  The Long-Term Development Plan, as of the Restatement
Effective Date, is as set forth in Exhibit 3.1(a) hereto. 
The SCJ may amend or supplement the
Long-Term Development Plan, and make any decision necessary to fulfill the Long-Term
Development Plan in accordance with this Agreement.  In particular, the SCJ shall have the following
specific responsibilities with respect to the Development and registration of
the Final Product in Japan:

 

(i)            subject to Section 3.1(c), review and
approve all Annual Development Plans and Budgets, and all updates, amendments
and modifications to, and waivers of provisions of, each Annual Development
Plan and Budget and the Long-Term Development Plan, including whether to
pursue the Development of an additional Indication (or a new line of therapy
within an existing approved Indication), the termination of an Indication (or
line of therapy) then being developed, or the initiation or cessation of other
additional Development activities;

 

(ii)           review and approve
each Annual Development Plan and Budget or any changes thereto approved by the
JJDC, and resolve any disputes at the JJDC with respect to the Annual
Development Plan and Budget or any changes thereto;

 

(iii)          monitor progress of
the ongoing Clinical Trials and any future Clinical Trials added to the binding
and non-binding sections of the Long-Term Development Plan, identify issues and
provide necessary resources, tools and ideas to solve such issues;

 

(iv)          establish and develop
common working structures (e.g., use of common databases, investigator
brochures, exchange of safety information);

 

(v)           review and comment
upon interactions with the Japanese Regulatory Authorities pursuant to Article 3
hereof;

 

(vi)          review, modify and
approve, and ensure consistency between, draft JNDAs for Cetuximab proposed by BMKK,
as agent for ImClone, and MJ;

 

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17

 

(vii)         create,
monitor, oversee and direct working groups as necessary or useful to carry out
the implementation of the binding portions of 
the Long-Term Development Plan;

 

(viii)        determine
a publication strategy and oversee publications pursuant to Sections 12.1 and
12.2;

 

(ix)           review
and approve all key regulatory and key clinical Development strategies;

 

(x)            review,
modify and approve (including funding for) compassionate use and early access
programs; and

 

(xi)           approve Final Product labeling and all changes
thereto.

 

(b)                            Commercialization
and Manufacturing Responsibilities.  The SCJ
shall:  (1) determine the
Commercialization, and manufacturing, quality control and product release
strategy for Final
Product, (2) provide a forum for coordination of the Parties’
Commercialization activities under this Agreement, and (3) as applicable,
review, comment on, approve, and seek to
resolve disputes with respect to, plans and budgets for, and the implementation
of, the Commercialization, manufacturing, quality control and product
release aspects of and strategy for Final Product.  The Long-Term
Commercialization Plan and Budget as of the Restatement Effective Date is as
set forth in Exhibit 6.2(a) hereto,
and has been approved by the
SCJ.  The manufacturing plan portion of the Manufacturing Plan and Budget as of
the Restatement Effective Date is as set forth in Exhibit 8.1(a) hereto, and has been approved
by the SCJ.  Subject to applicable terms of this
Agreement, the SCJ may amend or supplement the
Long-Term Commercialization Plan and Budget and the Manufacturing Plan and
Budget, and make any decision necessary to fulfill or implement same in
accordance with this Agreement.   In particular,
the SCJ shall have the following specific responsibilities with respect
to the Commercialization of Final Product and the manufacture of API and Final
Product for sale in Japan:

 

(i)            review and approve (1) each
Long-Term Commercialization Plan and Budget, (2) each Annual
Commercialization Plan and Budget, and (3) all updates, amendments
and modifications thereto, and waivers of provisions thereof;

 

(ii)           review and approve (1) each Japan Manufacturing Plan and Budget, and (2) all updates, amendments and
modifications thereto, and waivers of provisions thereof);

 

(iii)          determine whether to recall or withdraw Final
Product in the circumstances set forth in Section 8.7;

 

(iv)          review and approve
long-term (i.e., for the ensuing
three-to-five years)
Commercial strategy for Final Product;

 

(v)           subject to the
Existing Agreements and this Agreement, review and approve strategies for
obtaining and maintaining patent
and Trademark protection, enforcing such patents
and Trademarks, and defending Third Party
claims  relating to patents and Trademarks;

 

(vi)          determine and approve
pricing/reimbursement strategy with respect to large health care providers, governmental agencies (e.g., national, state, regional, and
local), and other group purchasing accounts;

 

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18

 

(vii)         review and approve the parameters of any terms
and conditions relating to or affecting the price at which Final Product will be sold in Japan, including discounts available to
large health care providers, governmental agencies (e.g., federal, state and local), and other group purchasing
accounts; discounts attributable to payments on receivables; and credits, price
adjustments, other discounts and allowances to be granted or refused;

 

(viii)        subject to Section 10.2(a), review and
approve the specific terms and conditions with
respect to which MJ may offer Final Product for sale in Japan.

 

(ix)           approve the methodology used to determine the amount
of each item of Operating Expenses;

 

(x)            resolve any disputes at the JJFC regarding the
calculation of Profit and Loss or any other amount due a Party under this
Agreement or the reconciliation of payments between the Parties;

 

(xi)           evaluate performance
of the Parties under this Agreement;

 

(xii)          coordinate and
oversee the activities of the Parties and Committees hereunder and resolve any
disputes at the JJMC, JJDC and JJCC; and

 

(xiii)         review
recommendations submitted by the JJCC concerning, and approve, patient
assistance and indigent access programs and any changes thereto.

 

(c)                            Generally. 
The SCJ shall also:

 

(i)            provide guidance to the JJDC, the JJCC, JJFC
and the JJMC with respect to any other Development, Commercialization,
financial, and manufacturing activities, strategies, plans and budgets (or
portions thereof);

 

(ii)           review any matter
that falls within the responsibilities of the JJDC, JJCC JJFC, or JJMC,
if any Party’s members of such Subcommittee believe that a matter should
be reviewed by the SCJ following review by such Subcommittee;

 

(iii)          perform such other
responsibilities related to the Parties’ co-Development and
co-Commercialization activities contemplated
hereunder as have been or may be assigned to the SCJ pursuant to this Agreement
or as may be mutually agreed upon by the Parties from time to time;

 

(iv)          periodically, as a Party may request,
evaluate the performance of the Development, manufacturing and
Commercialization activities against its related Plan goals;

 

(v)           coordinate the activities of the Parties
hereunder, including oversight of the JJDC, JJCC, and JJMC as provided herein;

 

(vi)          seek to resolve any disputes or disagreements
within or between the JJDC, JJCC, JJFC or JJMC;

 

(vii)         approve winning bids to manufacture Final
Product (or any component thereof) pursuant to Section 8.1(c); and

 

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19

 

(viii)        review any matter that falls within the
responsibilities of the JJDC, JJCC, JJFC or JJMC if a Party’s members of such
Subcommittee (where such Party has a vote on such Subcommittee) believe that a
matter should be reviewed by the SCJ following review by such Subcommittee.

 

2.3           Subcommittees. 
Unless already established, the following Subcommittees shall also be
established by the Parties within thirty (30) days after the Restatement
Effective Date, each of which shall have, subject to Sections 3.1(c) and
10.2 and to Article 14, the following specific responsibilities:

 

(a)                             Joint Japan Commercialization
Committee (JJCC).  The JJCC shall be responsible for preparing
and submitting to the SCJ for its approval, on an annual basis consistent with Article 6
hereof, each Annual Commercialization Plan and Budget and each Long-Term Commercialization
Plan and Budget.   Each such Plan shall
be consistent with applicable terms of this Agreement.  The JJCC shall be charged with taking any
action and making any decision necessary to implement each such Annual
Commercialization Plan and Budget approved by the SCJ.  In particular, the JJCC
shall be responsible for the following Commercialization activities with
respect to Final Product in Japan:

 

(i)            establish a strategy for Commercialization of Final
Product in Japan, including product positioning,
consistent where achievable with the Parties’ respective strategies in other
major market countries in which they Commercialize ERBITUX;

 

(ii)           make recommendations to the SCJ with respect to the SCJ’s review and approval of each Long-Term Commercialization
Plan and Budget, and all updates, amendments and modifications to, and waivers
of provisions of, each such Long-Term
Commercialization Plan and Budget;

 

(iii)          developing and recommending for approval by the SCJ
each Annual Commercialization Plan and Budget, and all updates, amendments and
modifications thereto, and waivers of provisions thereof, in each case
consistent with the Long-Term Commercialization Plan and Budget;

 

(iv)          develop and
provide to the JJMC market, unit sales, and Net Sales forecasts for Final
Product, broken down by approved Indication and
updated quarterly, in sufficient detail and length of time as to enable the
JJMC to determine its own forecasts under Section 8.3(b);

 

(v)           determine
and approve the allocation of responsibilities among the Parties applicable to
the Development activities contemplated under this Agreement in a manner
consistent with this Agreement and the Annual Commercialization Plan and
Budget;

 

(vi)          monitor progress and compliance under, and oversee
the implementation of, each Long-Term Commercialization Plan and Budget and
each Annual Commercialization Plan and Budget;

 

(vii)         monitor, review and comment on costs incurred by the
Parties in connection with their respective Commercialization activities, to
the extent practicable, on an Indication-by-Indication basis;

 

(viii)        review and recommend for approval by the SCJ
packaging designs and provide input to the SCJ regarding Product labeling;

 

Confidential Treatment has been requested by
ImClone Systems Incorporated for portions of this document.

 

20

 

(ix)           review and approve Final Product marketing, advertising and promotional strategies and
materials, including all Marketing Materials, developed by the Parties for the
Parties’ Sales Representatives, for compliance with this Agreement and
applicable Law;

 

(x)            endeavor to coordinate Final Product marketing, advertising and promotional activities, where
practicable, on a worldwide basis;

 

(xi)           approve the selection of major or key marketing
vendors (e.g., public relations agencies, advertising agencies and/or medical education agencies);

 

(xii)          recommend reimbursement strategies for approval by
the SCJ;

 

(xiii)         review and approve strategies for, and key specific,
market research plans and journal advertising, in each case in accordance with
this Agreement, the applicable Annual Commercialization Plan and Budget and the
Long-Term Commercialization Plan and Budget, and approve and assign
responsibilities for implementation of same;

 

(xiv)        review and approve, assign responsibilities for, and
coordinate all sales force activities,
including Sales Representative training, the number of Sales Representatives to
be assigned to Final Product promotion,
the number of PDEs to be devoted to Final Product promotion, and the territory alignment of Sales
Representatives, in each case in accordance with this Agreement, the applicable
Annual Commercialization Plan and Budget and the Long-Term Commercialization
Plan and Budget;

 

(xv)         plan and oversee promotional programs, including
speaker and peer-to-peer activity programs, and the funding of educational and
professional symposia, in each case in accordance with this Agreement, the
applicable Annual Commercialization Plan and Budget and the Long-Term
Commercialization Plan and Budget;

 

(xvi)        discuss and recommend to the SCJ for its approval a
range of suggested prices and discount strategies for the sale of Final
Product to unaffiliated Third Parties;

 

(xvii)       receive and review each Party’s sales, pricing, and
financial reports pertaining to Sales Costs, Marketing Costs and other
Allowable Expenses;

 

(xviii)      make recommendations to the SCJ with respect to
patient assistance and indigent access programs, and provide input to the SCJ
with respect to early access and compassionate use programs;

 

(xix)         review and approve any significant agreements
(including any agreement or series or group of related agreements with an
aggregate expense of more than one hundred thousand dollars ($100,000)) with
Third Parties to be entered into by a Party with respect to the
Commercialization of Final Product in
Japan;

 

(xx)          facilitate the flow of Commercialization information;

 

(xxi)         review MJ’s or BMKK’s plans for detailing a
product to be detailed in the third position, where Final Product is detailed
in the first or second position;

 

(xxii)        coordinate with the Existing Committees and the JJDC,
JJFC and JJMC as appropriate; and

 

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21

 

(xxiii)       provide updates to the SCJ on its activities no less
frequently than once each Quarter after the Restatement Effective Date and during the term of this Agreement.

 

Except as otherwise provided in Article 6, the JJCC shall, in allocating responsibilities
between the Parties with respect to Commercialization activities:  (A) endeavor to take advantage of the
respective resources, capabilities and expertise of MJ and BMKK, and (B) endeavor
to (i) maintain, to the extent reasonably practical and commercially
appropriate, continuity in functions and commitments of personnel and physical
resources of MJ and BMKK, (ii) avoid duplication of efforts by the
Parties, and (iii) foster efficient use by the Parties of resources and
personnel, consistent with this Agreement, the applicable Annual
Commercialization Plan and Budget and the Long-Term Commercialization Plan and
Budget.

 

(b)                           Joint Japan Development and
Regulatory Committee (JJDC).  Subject to the terms of this Agreement, the
JJDC shall be responsible, in consultation with the JJCC and the JJMC, as
applicable, for preparing and submitting to the SCJ for its approval any key
regulatory strategies for the Development and Commercialization of Final Product in Japan, for proposing amendments to the Long-Term Development Plan for
review and approval by the SCJ, for approving an Annual Development Plan and
Budget for review and/or modification by the SCJ, for overseeing and
coordinating the Development of, and the
making of regulatory filings for, Final Product in Japan, for facilitating the flow of information with respect to Development activities, for overseeing the conduct of Phase
I-IIIA Clinical Trials, and, where necessary or appropriate, for collaborating
with the JJCC  to oversee any Phase IIIB
Clinical Trials and Phase IV Clinical Trials. 
Subject to the terms of this Agreement, the JJDC shall be charged with
taking any action and making any decision necessary to implement the binding portion
of the Long-Term Development Plan and each approved strategy in cooperation
with the Existing Committees, the JJCC, JJFC, and the JJMC, as applicable.  In particular, subject to the terms of this
Agreement, the JJDC shall be responsible
for the following Development and
regulatory activities with respect to Final Product in Japan:

 

(i)            recommending a strategy for the Development and Approval of Final Product in Japan, on an Indication-by-Indication basis, for
review and approval by the SCJ;

 

(ii)           making recommendations to the SCJ with respect to its
review and approval of the Long-Term Development Plan and all updates,
amendments and modifications thereto, and waivers of provisions thereof;

 

(iii)          preparing and recommending each Annual Development Plan
and Budget for review and approval by the SCJ, and all updates, amendments and
modifications thereto, and waivers of provisions thereof, in each case
consistent with the binding portion of the Long-Term Development Plan;

 

(iv)          determine and
approve the allocation of responsibilities among the Parties applicable to the
Development activities contemplated under this Agreement in a manner consistent
with this Agreement, the Annual Development Plan and Budget, and the binding
portion of the Long-Term Development Plan;

 

(v)           overseeing the implementation of, and monitoring the
progress of, the clinical and regulatory program, consistent with the Long-Term
Development Plan, including making proposals to the SCJ whether to conduct,
cease or suspend any Phase I-IIIA Clinical Trials;

 

(vi)          reviewing and
approving the scientific integrity and protocols of all Clinical Trials
included in the Annual Development Plan and Budget, and the binding 

 

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22

 

portion of the Long-Term
Development Plan, and supervising the use and dissemination of the resulting
data;

 

(vii)         recommend for approval by the SCJ a budget for all Clinical
Trials that is consistent with the binding
portion of the Long-Term Development Plan and the Annual Development Plan and
Budget;

 

(viii)        formulating and proposing for inclusion in the
Long-Term Development Plan, a regulatory strategy, schedule, and plan for
filing and obtaining Approvals, on an Indication-by-Indication basis (it being
understood that any such inclusion shall not control or affect a Party’s
decision as to whether it will agree (or not agree) to include a given Clinical
Trial in the Annual Development Plan and Budget or the binding portion of the
Long-Term Development Plan);

 

(ix)           overseeing and monitoring regulatory aspects of the Development with respect to obtaining Approval, including all
regulatory actions, communications and filings and submissions (including
filings and submissions of supplements and amendments to Approvals) to or with
the Japanese Regulatory Authorities;

 

(x)            overseeing and making recommendations to the SCJ and
JJCC with respect to Final Product
labeling;

 

(xi)           coordinating preparation for and attendance at
meetings of Japanese Regulatory Authorities with respect to Final
Product;

 

(xii)          coordinating responses to additional requirements and
inquiries of Japanese Regulatory Authorities with respect to Final
Product;

 

(xiii)         drafting, or having drafted, the contents of the Chemistry, Manufacturing and
Controls section of any JNDA with respect to Final Product;

 

(xiv)        facilitating the exchange of all critical Final
Product regulatory information and data between the Parties, as well as ensuring
that significant issues concerning Final Product adverse event information and safety issues are addressed in a timely
manner, consistent where practicable, to the manner in which such issues are
addressed by the Parties with Regulatory Authorities in other countries;

 

(xv)         reviewing and
approving the content, strategies for, and other aspects (other than level of
funding) for (A) Product labeling, (B) early access and compassionate
use programs for a given Indication or line of therapy (prior to launch in
Japan for such Indication or line of therapy), and (C) Medical Education
Activities, as well as approve and assign
responsibilities for implementation of same; and

 

(xvi)        providing updates at least quarterly on its
activities to the SCJ, JJCC, and Existing Committees.

 

(c)                            Joint Japan Manufacturing Committee
(JJMC).  The JJMC shall
be responsible for preparing and submitting the Japan Manufacturing Plan and Budget annually to the SCJ for its approval.  The JJMC shall be charged with taking any
action and making any decision necessary to implement each such Japan Manufacturing Plan and Budget approved by the
SCJ.  As soon as practicable after the Restatement
Effective Date, the first annual Japan Manufacturing Plan and Budget shall be prepared by the
JJMC consistent with the long-term Japan Manufacturing Plan and Budget and
forwarded to the SCJ for review, comment and approval.  In
particular, subject to the terms of this Agreement and the Existing 

 

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23

 

Agreements, the JJMC shall be
responsible for the following manufacturing and supply activities with respect to Final Product in Japan:

 

(i)            delineate requirements and responsibilities for
development and licensure of manufacturing processes and facilities for the
supply of Final Product in Japan;

 

(ii)           develop a manufacturing strategy for the Long-Term
Development Plan, the Long-Term Commercialization
Plan and Budget and the Annual
Commercialization Plan and Budget, to enable development and licensure of manufacturing
processes and facilities for Final Product in Japan that includes all aspects of manufacture and release, including
bulk drug substance (API), intermediate(s), dosage form (formulations), devices, product characterization studies,
stability studies and manufacturing plans and forecasts;

 

(iii)          prepare and submit to the SCJ annually a long-term
and annual Japan Manufacturing Plan and Budget,
and allocate responsibilities for and oversee the implementation thereof;

 

(iv)          prepare and submit to the SCJ on a quarterly basis
updated forecasts for requirements of API, Cetuximab, and Final Product for Commercialization in Japan in
the manner set forth in Section 8.3;

 

(v)           oversee and approve process development plans prior
to the manufacture of registration batches;

 

(vi)          review quality assurance efforts, including those
efforts with respect to the establishment of Specifications and quality
standards;

 

(vii)         approve the terms of any supply or quality agreement
involving any Party or its Affiliates that affects (or may affect) the supply of bulk drug substance (API) , any
intermediates or Final Product;

 

(viii)        approve the Chemistry, Manufacturing and Controls
(CMC) section of each JNDA and any revisions to same, and coordinate with the
JJDC the drafting and contents of the CMC section of each JNDA and any
revisions to same;

 

(ix)           review and approve technology transfer plans for any
changes in manufacturing sites, testing sites, and responsibilities in the bulk
drug substance (API), intermediates, or Final Product supply chain, it being understood that decisions
regarding the selection of which of a Party’s own manufacturing and testing sites
shall be used to manufacture any component of Final Product, if a Party manufactures any component of Final
Product pursuant to this Agreement or any
related supply agreement, shall remain in the sole control of such Party;

 

(x)            prepare for regulatory inspections and ensure
adherence to compliance standards;

 

(xi)           ensure that future logistical strategies and capacity
planning for bulk drug substance (API), intermediates, fill/finish, QC/QA and
Final Product are consistent with applicable forecasts, as well as determine
inventory levels that an applicable Party or Third Party contract manufacturers
should maintain for bulk drug substance (API), intermediates, Final Product and
any components used in connection therewith;

 

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24

 

(xii)          review quality-related issues pertaining to bulk drug substance (API), intermediates, fill/finish, QC/QA and Final
Product;

 

(xiii)         provide updates on its activities to the SCJ, as
appropriate;

 

(xiv)        review and approve each Party’s Fully-Burdened
Manufacturing Cost that is used in the determination of Profit and Loss;

 

(xv)         initiate and review all bids for Final Product
(or any component thereof) as provided in Section 8.1(c), and recommend
bidders to be selected for approval by the SCJ; and

 

(xvi)        review and approve any significant agreements,
purchase orders or amendments with Third Parties to be entered into by any
Party that cover the manufacture of bulk drug substance (API), any
intermediates, or Final Product for sale and use in Japan.

 

The JJMC shall meet at such times
and in such manner as is necessary to perform its responsibilities.

 

(d)                           Joint Japan Finance Committee (JJFC).  The JJFC shall provide
support to the SCJ and all other Subcommittees and Working Groups with respect
to accounting and financial matters relating to the importation, use and sale
of Final Product in Japan and the manufacture of the Cetuximab and Final
Product for use and sale in Japan.  In particular, subject to the terms of this Agreement
and the Existing Agreements, the JJMC shall be responsible for the following
activities with respect to Final Product in Japan:

 

(i)            work with the SCJ and other (sub)committees
to assist in financial, budgeting and planning matters as required, including
assisting in the preparation of budgets and annual and long-term plans;

 

(ii)           recommend for approval by the SCJ
procedures, formats and timelines consistent with this Agreement for reporting
financial data and assist in resolving differences that relate to the financial
terms of this Agreement;

 

(iii)          recommend for approval by the SCJ a procedure
for monitoring and reporting to the SCJ and the other applicable Subcommittees
the rate of spending compared to budget under the applicable Development Plan
and Budget, Japan Manufacturing Plan and Budget and Annual Commercialization
Plan and Budget, as the case may be, and report such performance to the SCJ or
such other Subcommittees as directed;

 

(iv)          review MJ reporting of Net Sales, and the
Parties’ reporting of BMKK/MJ NSF Commercialization Costs and Development Costs
under this Agreement, and recommend, for approval by the SCJ, any changes to
reporting procedures;

 

(v)           compute adjustments to the FTE rates and PDE
Rates in accordance with this Agreement, evaluate the methodology for
determining and accounting for FTEs and associated costs used by each Party,
and seek to resolve any differences between the Parties in connection with the
performance of , and subject to the terms of, this Agreement;

 

(vi)          recommend, for approval by the SCJ,
additional or alternative reporting procedures concerning financial aspects of
the Collaboration including templates and timing, and develop a format for
reports required by this Agreement or otherwise requested by the SCJ for the
implementation of the financial aspects of the Collaboration;

 

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25

 

(vii)         review the appropriate allocation of costs and
expenses under this Agreement;

 

(viii)        make recommendations to the SCJ, if necessary,
concerning the exchange of information between the Parties on a Quarterly (or
more frequent) basis with respect to Development Costs, Allowable Expenses, BMKK/MJ NSF
Commercialization Activities Costs (but only when and to the extent each Party
is required to do so under this Agreement), Profit and Loss, and Net
Sales in furtherance of a Party’s obligations under this Agreement or pursuant
to applicable law (such as SEC or stock exchange reporting obligations);

 

(ix)           recommend, for approval by the SCJ, a means
of reconciling, one to the other, the internal reporting and accounting
standards of each of the Parties where necessary and methods of charging costs
and expenses of each of the Parties;

 

(x)            review and approve the calculations of the
amount of any payments to be made by the Parties (or their Affiliates) hereunder
and review and approve the reconciliation of payments;

 

(xi)           coordinate audits of data where appropriate
and required or allowed by this Agreement;

 

(xii)          perform such other finance-related functions
as the SCJ may request from time to time; and

 

(xiii)         provide Quarterly updates on the JJFC’s
activities and achievements to the SCJ.

 

2.4           Membership
and Meetings of the SCJ and Subcommittees.

 

(a)                            SCJ. 
Subject to the terms of this Agreement, the SCJ shall consist of six members, with one Representative designated by each
of Merck, MJ, BMS and BMKK and two Representatives designated by ImClone.  The Representatives of the SCJ and its
current chairperson as of the Restatement Effective Date are set forth on Exhibit 2.4(a) hereto.

 

(b)                            Subcommittees.  Subject to the terms of this Agreement, the
JJDC, JJCC, JJFC and JJMC shall each consist of up to two Representatives from each of
BMS/BMKK, ImClone, and Merck/MJ.  The Representatives on each such Subcommittee and the
current chairs of each such Subcommittee, to the extent known as of the
Restatement Effective Date, are set forth on Exhibit 2.4(a) hereto.

 

(c)                            Representative
Replacement; Non-Member Representatives.  Each Party
may replace any or all of its Representatives on the SCJ or any Subcommittee at any time upon written notice to the
other Parties in accordance with Section 16.6 of this Agreement.  Any Representative of the SCJ or any
Subcommittee may designate an appropriate substitute to attend and perform the
functions of that Representative, as applicable, at any meeting of such
committee.  Each Party may, in its
discretion, invite a reasonable number of non-member
representatives from such Party to attend meetings of the SCJ or any
Subcommittee; provided that
any such non-member representatives who are not employed by a Party are under
obligations of confidentiality and non-use applicable to the Confidential
Information of each Party that are at least as stringent as those set forth in Article 12,
and subject in the case of non-employees of a Party to the consent of the other
Parties, which shall not be unreasonably withheld or delayed.

 

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26

 

(d)           Chairperson.  The chair function of the SCJ and each Subcommittee will be rotated
among the Parties every twelve months for the first four years following the
Restatement Effective Date, as follows: for first twelve months following the
Restatement Effective Date: Merck/MJ; for months 13-24 following the
Restatement Effective Date: BMS/BMKK; for months 25-36 following the
Restatement Effective Date: Merck/MJ; and for months 37-48 following the
Restatement Effective Date: ImClone.  In
each four year period thereafter, the chair function of the SCJ and each
Subcommittee will continue to be rotated every twelve months among the Parties
in the same manner as it was rotated for the
initial 48-month period following the Restatement Effective Date. The chair of
the SCJ and of each Subcommittee shall be appointed by the applicable Party
from one of its Representatives to the SCJ or such Subcommittee.  The chairpersons of the SCJ and
of each Subcommittee shall be responsible for calling meetings, preparing an
agenda in advance of each meeting of such Committee, and sending written notice of all meetings of such
committee to all of its members together with the agenda for the meeting (such
notice of the meeting to be given, where practicable, no less than 30 days before
the date of each meeting and the agenda to be provided no less than seven days
before the date of each meeting).  The
chairperson shall also be responsible for the preparation of meeting minutes as
set forth in Section 2.6 below.

 

(e)           Meetings
of the SCJ.  Commencing upon the Restatement
Effective Date and thereafter while Development and Commercialization activities under this Agreement are ongoing, the
SCJ shall meet in person at least once each calendar year and by means of
telecommunications or video conferences at least once each Quarter, and more frequently as the SCJ deems appropriate,
on such dates, and at such places and times, as the SCJ shall agree.  Meetings of the SCJ that are held in person
shall take place in Japan, or such other place as the SCJ may agree.

 

(f)            Meetings
of Subcommittees.  Commencing upon the
Restatement Effective Date and thereafter while Development and regulatory,
manufacturing, finance, and
Commercialization activities under this Agreement are ongoing, the JJDC, JJCC,
JJFC, and JJMC, as the case may be, shall meet in person at least once each
calendar year and by means of telecommunications or video conferences at least
once each Quarter, and more frequently as such
Subcommittee deems appropriate, on such dates, and at such places and times, as
such Subcommittee may agree.  Meetings of
any such Subcommittee shall take place in Japan or such other place as any such
Subcommittee may agree.

 

(g)           Expenses.  Each Party shall be
responsible for all travel and related costs and other expenses for its Representatives and its invitees to attend meetings of, and otherwise participate on, the
SCJ and each Subcommittee.

 

(h)           Teleconferences. 
Meetings of the SCJ and any Subcommittee may be held by audio or video
teleconference with the consent of each Party, which shall not be unreasonably
withheld or delayed; provided that
at least one (1) meeting per year of the SCJ and such Subcommittee shall
be held in person.

 

2.5           Decision-making.  Subject to Sections 3.1(c) and
10.2 and to Article 14:

 

(a)           Authority.  The SCJ and each Subcommittee may make
decisions with respect to any subject matter that is within such committee’s
decision-making authority under this Agreement, provided,
(i) that such decision does not conflict with the Section 2.1 and any
other provisions of this Agreement; and (ii) each Subcommittee’s decisions
are consistent with any applicable guidance or directives of the SCJ.

 

(b)           Consensus.  Decisions made by the SCJ and any
Subcommittee shall be made by unanimous consensus of the Representatives
entitled to vote on the SCJ or

 

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27

 

such Subcommittee who are present
(in person or otherwise) at the meeting.  No
action taken at any meeting of the SCJ or any Subcommittee shall be effective
unless a voting Representative of each Party entitled to vote is participating.

 

(c)           Disagreements on Subcommittees.  Except for matters outside the jurisdiction
and authority of the Subcommittees as provided in Section 2.1, and in any event without limiting
the other rights and obligations of the Parties under this Agreement, any
disagreement between the Representatives of the Parties on the JJDC, JJCC,
JJFC, or JJMC as to matters within such Subcommittee’s jurisdiction shall, at
the election of any Party having voting rights on such Subcommittee, be
addressed, first, with the Alliance Managers, and, if the dispute is not
resolved within ten (10) Business Days after such referral to the Alliance
Managers, then it shall, upon written notice by such Party to the other
Parties, be submitted to the SCJ for resolution.  The SCJ, in consultation with the Alliance Managers,
shall endeavor to resolve any such matter submitted to it for resolution within
twenty (20) Business Days after such submission.

 

(d)           Dispute.  If, with respect to a matter (i) that is
subject to the SCJ’s jurisdiction under Section 2.2 as to
which the SCJ cannot reach a decision or (ii) that is otherwise referred
to it for resolution pursuant to Section 2.5(c), the SCJ cannot reach a
decision within twenty (20) Business Days after such submission
of such matter to it, then, in each case (i) and (ii), the matter shall be resolved in
accordance with Section 2.5(f); provided, that
if the BMS/BMKK and Merck/MJ members of the SCJ wish to implement (x) an
increase to a budget item (not tied to a decrease in any other item) and the
dispute involves the absolute amount of the increase, then the JJCC and SCJ
will immediately implement the undisputed amount of the increase during the
period that the dispute over the disputed amount of the increase that is
desired by the one, but not the other, Party may be resolved or (y) a
decrease to a budget item (not tied to a increase in any other item) and the
dispute involves the absolute amount of the decrease, then JJCC and SCJ will
immediately implement the undisputed amount of the decrease during the period
that the dispute over the disputed amount of the decrease that is desired by
the one, but not the other, Party may be resolved.

 

(e)           Referral
to Existing Committees.  At any time, any
member of the SCJ may refer any matter on which there is significant
disagreement at the SCJ for discussion by the Existing Committees for a period
not to exceed sixty (60) days after such referral, after which the matter shall
return to the SCJ for resolution.

 

(f)            Unresolved Dispute at SCJ.  In the event
a dispute at the SCJ cannot be resolved by agreement of the SCJ and the matter
has been previously referred to the Existing Committees for discussion or if
all Parties agree not to refer the matter to the Existing Committees for
discussion, then such dispute shall be referred to the following senior
management of the Parties for resolution:

 

	
   

  	
  For BMS and BMKK:

  	
   

  	
  BMS President - International or a direct report

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  For Merck and MJ:

  	
   

  	
  Merck President of Pharma Ethicals or a direct report

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  For ImClone:

  	
   

  	
  ImClone CEO or a direct report

  

 

In the event that such dispute is not resolved within 20
Business Days by such senior management of the Parties, then, subject to
Sections 3.1(c) and 10.2(a), any Party may, subject to the terms and
conditions of Section 16.13, submit the matter to arbitration pursuant to Section 16.13
of this Agreement.

 

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28

 

2.6           Minutes.

 

(a)                           Preparation.  Definitive minutes of all meetings of the SCJ
and of each Subcommittee shall be finalized promptly following the meeting to
which the minutes pertain, as follows:

 

(i)            After the committee
meeting, the chairperson of the committee shall promptly prepare and distribute
to all Representatives of the committee draft minutes of the meeting.  Such minutes shall record all
determinations and other matters acted upon and approved or disapproved by the
committee, and any matters the committee failed to resolve (with a description, in
reasonable detail, of each Party’s differences with respect to such unresolved
matter).

 

(ii)           The chairperson of
the committee shall promptly collect comments thereon from the Representatives representing each Party on such committee.

 

(iii)          The committee shall
then promptly discuss the comments of all of the Parties and finalize the
minutes; provided, that such minutes will
not be deemed finalized until at least one voting Representative from each
Party on such committee confirms in writing the accuracy of such minutes.

 

(b)                           Dispute.  If at any time during the preparation and
finalization of the meeting minutes of the JJDC, JJCC, JJFC or JJMC, as
applicable, a Representative of a Party entitled to vote at such Subcommittee
does not agree on the content of any decision made by such Subcommittee to be
reflected in such minutes, such issue shall be resolved by a decision of the
SCJ.  If the SCJ cannot resolve such
dispute, or if at any time during the preparation and finalization of a SCJ’s
meeting minutes, any such Party does not agree on any content of any decision
to be reflected in the minutes, such issue shall be resolved in accordance with
Section 2.5(d).

 

2.7           Term.  The SCJ and the JJDC, JJMC, JJFC and JJCC
shall each exist throughout the term of this Agreement.

 

2.8           Certain Committees and Boards.

 

(a)                           Working Groups.  From time to
time, the SCJ, the JJCC, JJFC, JJDC and/or JJMC may establish and
delegate duties to other committees, sub-committees or directed teams, including data safety monitoring boards, radiology
review boards (each, a “Working Group”),
on an “as-needed” basis to oversee particular projects or activities, which
delegation shall be reflected in the minutes of the meetings of the applicable
Subcommittee.  Each such Working Group
shall be constituted and shall operate as the SCJ, JJDC, JJCC, JJFC, or JJMC,
as the case may be, determines; provided
that each Working Group shall have equal representation from each Party
entitled to vote on the applicable delegating committee.  Working Groups may be established on an ad
hoc basis for purposes of a specific project, for the life of a Product, or on
such other basis as the applicable committee may determine.  Each Working Group and its activities shall
be subject to the oversight, review and approval of, and shall report to, the
committee that established such Working Group. 
In no event shall the authority of the Working Group exceed that
specified for the relevant committee in this Article 2.  Any disagreement between the designees on a
Working Group shall be referred to the applicable committee for resolution.

 

(b)                           Interactions Between Committees and Internal Teams.  The Parties recognize that each Party
possesses an internal structure (including various committees, teams and review
boards) that will be involved in administering such Party’s activities under

 

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this
Agreement.  Each Subcommittee (and
Working Group) shall establish procedures to facilitate communications between
such Subcommittee (and Working Group) and the relevant internal committee, team
or board of each of the Parties in order to maximize the efficiency of the
Collaboration, including by requiring appropriate members of such Subcommittee
(or Working Group) to be available at reasonable times and places and upon
reasonable prior notice for making appropriate oral reports to, and responding
to reasonable inquiries from, the relevant internal committee, team or board.

 

(c)           Costs.  The costs of creating and operating such
Working Groups shall be part of [**].  The costs of creating and operating the SCJ, JJCC, JJDC and JJMC shall not be
shared among the Parties (it being understood and agreed that each Party shall
bear its own costs for operating, and participating as a member of, the SCJ,
JJCC, JJDC, JJFC, and JJMC), except that the costs of non-employees of any
Party or its Affiliates from whom the applicable Subcommittee has agreed to
seek advice shall be shared.

 

2.9           Alliance
Managers.   Each of ImClone, BMS and BMKK
collectively, and MJ and Merck collectively, shall appoint one senior
representative who possesses a general understanding of clinical, regulatory,
manufacturing and marketing issues to act as its respective alliance manager
for this relationship (each, an “Alliance
Manager”).  The Alliance
Managers as of the Restatement Effective Date are set forth on Exhibit 2.4(a) hereto.  A Party may replace its respective Alliance
Manager at any time upon written notice to the other Parties in accordance with
Section 16.6 of this Agreement.  Any
Alliance Manager may designate a qualified substitute to temporarily
perform the functions of that Alliance Manager. 
Each Alliance Manager shall be charged with creating and maintaining a
collaborative work environment within and among the SCJ and its
Subcommittees.  Each Alliance Manager,
in conjunction with that Party’s project team leader, will also be responsible for:

 

(a)           coordinating
the relevant functional representatives of the Parties, in developing and
executing strategies and plans for Cetuximab in an effort to ensure consistency
and efficiency within Japan, and if practicable, with the Parties territories
in other parts of the world;

 

(b)           providing a single
point of communication for seeking consensus both internally within the
respective Party’s organizations and together regarding key strategy and plan
issues;

 

(c)           identifying and
raising cross-country, cross-Party and/or cross-function disputes relating to Final
Product and Japan to the appropriate committee
in a timely manner; and

 

(d)           planning and
coordinating: (i) cooperative efforts in Japan for Final Product; and (ii) internal and external communications.

 

The Alliance Managers shall be entitled to attend meetings of the SCJ
and its Subcommittees, but shall not have, or be deemed to have, any rights or
responsibilities of a member of any such committee.  Each Alliance Manager may bring any matter to
the attention of the SCJ and any of its Subcommittees, where such Alliance Manager reasonably believes that such matter requires
such attention.

 

2.10         Cooperation.

 

(a)           Global Development Cooperation.  BMKK and MJ
expressly understand and agree that the Development activities under this
Agreement shall be closely

 

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30

 

coordinated and in line, to the maximum practical extent, with the
global development efforts of BMS and Merck in their respective territories
under the Existing Agreements.

 

(b)           Global Commercialization and
Manufacturing Cooperation.  BMKK and MJ understand and agree that the
Commercialization activities under this Agreement shall be closely coordinated
and in line, to the maximum practical extent, with the Commercialization
efforts of BMS/ImClone and Merck in their respective territories pursuant to
the Existing Agreements.  Each Party
expressly understands and agrees that the manufacturing activities under this
Agreement shall be closely coordinated, to the maximum practical extent, with
the global manufacturing efforts for Cetuximab of ImClone, BMS and Merck (and
their respective Affiliates).  Each Party
agrees that any and all material Commercialization and manufacturing activities
undertaken by it or its Affiliates pursuant to this Agreement shall be subject
to review by applicable Existing Committees as and to the extent provided for
under the Existing Agreements.

 

3.             DEVELOPMENT.

 

3.1           The Long-Term Development Plan.

 

(a)           Current Long-Term Development Plan.  The Long-Term Development Plan as
of the Restatement Effective Date is attached to this Agreement as Exhibit 3.1(a), and may be
revised or modified  from time to time as
provided in this Agreement.

 

(b)           Annual Development Plan and Budget.

 

(i)            In General.  The Development of the Final Product in Japan
for a given calendar year shall be governed by a detailed and specific annual
development plan and budget covering all material Development and regulatory
activities to be performed for such year, as well as budgets covering all
Development Costs for those Development activities, by Indication, to be
conducted in support of Approvals in Japan (each such plan, when approved by
the SCJ and/or JJDC, an “Annual Development Plan
and Budget”).  Each Annual
Development Plan and Budget shall be initially prepared by either MJ or BMKK,
as designated by the JJDC, in consultation with the other Party, for approval
by the JJDC. Each Annual Development Plan and Budget for an Indication, and any
modifications thereto, shall cover, and be consistent in all material respects
with, all the Development and regulatory activities and budgets in the
then-current Development Plan for such Indication that are to be performed in
that particular calendar year.  The
Parties will endeavor to prepare and propose each Annual Development Plan and
Budget for a calendar year to the JJDC for its review, comment and approval by
not later than September 30 of the immediately preceding calendar year
with a goal of having the Annual Development Plan and Budget approved, and any
disputes resolved, by October 31 of such immediately preceding calendar
year.

 

(c)           Continuation of Development

 

(i)            New Lines of Therapy.  Subject to Section 3.1(c)(i)(3) below,
in the event that BMS/BMKK (as one party) or Merck/MJ (as the other party) (the
“Interested Party”) wishes to
initiate a Clinical Trial program, and thereafter seek Approval, for a new line
of therapy within either a new, or an existing approved (for example, second
line therapy once third line therapy has been approved), Indication for Final
Product in Japan, and the other Party (BMS/BMKK or Merck/MJ) does not, subject
to Section 3.1(c)(i)(3), wish to amend the Long-Term Development Plan to
include the activities necessary to seek Approval in Japan for such new line of
therapy in Japan (the “Non-Interested Party”),
then the Interested Party shall have the right, but not the obligation, to
conduct such Clinical Trial program and to perform all other

 

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31

 

necessary activities to seek and obtain Approval for such specific new
line of therapy for Final Product in Japan, at the Interested Party’s sole cost
and expense, provided that if the SCJ by
majority vote reasonably determines that there are good grounds to believe that
the proposed course of activities are reasonably likely to be significantly
detrimental to the product profile or marketing of Final Product for any one or
more Indications or lines of therapy that have been previously approved (or
that have been previously filed and are awaiting regulatory approval) in Japan
(by way of example, and without limitation, because the proposed protocol is
poorly designed or is likely to yield poor results), or to materially adversely
impact the Commercialization of Final Product in the EU or the U.S., or that
the proposed course of activities presents a medical risk/benefit that is so
unfavorable as to be incompatible with the welfare of patients, then the
Interested Party shall not proceed.  The
Interested Party shall be entitled to cross-reference any data generated or
controlled by a Non-Interested Party anywhere in the world in support of such
new line of therapy for Development and registration of same in Japan.

 

(1)           Subject
to Section 3.1(c)(i)(4), in the event the Interested Party obtains
Approval for such additional line of therapy within a given Indication, and
there are no other lines of therapy within such Indication that (x) have
been approved by the Japanese Regulatory Authorities and (y) BMKK and MJ
are then Co-Promoting, then the Interested Party, but not the Non-Interested Party,
shall (A) be solely responsible for the Commercialization of Final Product
for such Indication (it being understood that, if BMS or BMKK is the Interested
Party, then MJ shall continue to provide the services set forth in Section 6.7
with respect to Final Product for such Indication), (B) [**], (C) be
solely entitled to develop the Annual Commercialization Plan and Budget for
such Indication, provided, that such Annual Commercialization Plan and Budget
for such Indication must be consistent in all key respects (including product
positioning, reimbursement strategies, and pricing and discount strategies)
with the Annual Commercialization Plan and Budget approved by the SCJ for other
Indications that BMKK and MJ are Co-Promoting; (D) if Merck/MJ is the Interested
Party, reimburse the other Parties quarterly for any Allowable Expense incurred
by any of them in connection with, and that is attributable to, such additional
Indication that is not otherwise reimbursed under other sections of this
Agreement, (E) [**].  If the
Interested Party is BMKK/BMS, then Merck/MJ shall pay such Profit, and BMKK/BMS
shall pay Merck/MJ for any Loss, attributable to such Indication on a quarterly
basis (with an annual reconciliation of same). 
[**].

 

(2)           In
the event the Interested Party obtains Approval for such a new line of therapy
within an existing approved Indication in Japan where at least one of the
approved lines of therapy within such existing approved Indication had been
co-Developed and co-funded by BMKK and MJ and is then being Co-Promoted by BMKK
and MJ, then (A) the Interested Party and the Non-Interested Party shall
both Co-Promote and provide PDEs such Final Product for such new line of
therapy within such existing Indication as though it had been developed by both
the Interested and Non-Interested Parties, (B) the determination of which
Party shall be responsible for the performance of Marketing Activities, Medical
Education Activities, sales activities (other than the provision of PDEs) and
regulatory activities attributable to such new line of therapy shall be
determined in the same manner as though such new line of therapy within such
existing Indication had been developed by both the Interested and
Non-Interested Parties, (C) the Annual Commercialization Plan and Budget
for such new line of therapy shall be approved in the same manner as the Annual
Commercialization Plan and Budget for all other approved lines of therapy; (D) [**].  Such Profit Or Loss percentage for such new
line of therapy within such Indication shall be determined by the SCJ, [**] by
taking in account, among other pertinent factors that may be considered: [**].

 

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32

 

(3)           This
Section 3.1(c)(i) shall only apply where a Non-Interested Party
(i.e., BMS/BMKK or Merck/MJ, as the case may be) has agreed in writing that it
will not Develop a new line of therapy or, based on objective facts and circumstances,
it is reasonably certain that such Party is not willing to Develop such new
line of therapy.  For clarity, this Section 3.1(c)(i) shall
not apply (x) if such Party is willing to Develop the new line of therapy
subject to specific go/no criteria applicable to same (and the Parties cannot
agree on same) or to successful Development of a lower line (e.g., third line
prior to second line) of therapy, or (y) if there is a significant
difference of opinion between BMS/BMKK and Merck/MJ, if both Parties would
otherwise wish to Develop such new line of therapy, as to the nature, cost,
trial design, and/or extent of any studies that would be required to Develop
such new line of therapy, or (z) if a Party wishes to await the outcome of
bridging studies before making a determination whether to proceed with the
Development of a new line of therapy.

 

(4)           In
the event that Section 3.1(c)(i)(1) should apply, but Merck/MJ and
BMS/BMKK thereafter co-fund and co-develop, and receive Approval for, another
line of therapy within the same Indication as that within which an Interested
Party had previously developed and obtained Approval for a line of therapy
pursuant to Section 3.1(c)(i)(1), then Section 3.1(c)(1) shall
no longer apply to such Indication and Section 3.1(c)(i)(2) shall
apply to such Indication thereafter as though the timing of the receipt of the
Approvals for said lines of therapy within such Indication had been reversed.

 

(ii)           Continuation of
Development of Indications that do not Meet Go Criteria.  No Party may continue a Clinical Trial
program for a new line of therapy being developed for a Final Product in Japan
pursuant to the Long-Term Development Plan for which one or more pertinent
go/no-go studies set forth in the Long-Term Development Plan for such new line
of therapy have not met specific go criteria that either are set forth in the
Long-Term Development Plan or have otherwise been agreed to in writing by
BMS/BMKK and Merck/MJ, without the prior written consent of the other Parties
(to be given or withheld in such Party’s sole discretion).

 

(d)           CROs.  Any agreement(s) with a CRO for the conduct of a Clinical Trial in Japan shall be agreed
upon and signed jointly by the CRO on the one side and by BMKK, in its own capacity and as agent for ImClone pursuant
to Section 3.2(b) below, and MJ on the other, but only after
consultation, review and approval of such CRO agreement by the SCJ; provided, that BMKK may also enter into a CRO agreement
without MJ and without the consent of the other Parties, and vice-versa, (x) in
order to perform Development obligations undertaken by MJ or BMKK under Section 3.1(c) or
(y) if and to the extent needed to cure a breach of such other Party’s
Development obligations under this Agreement. 
Further, except where a CRO is used, BMKK, in its own capacity and as
agent for ImClone pursuant to Section 3.2(b) below, and MJ shall both
sign all Clinical Trial agreements with each Clinical Trial site for studies
conducted in Japan under the Annual Development Plan and Budget, unless agreed
to otherwise by the JJDC or SCJ or unless and to the extent necessary in order
to cure a breach of this Agreement by the other Party.

 

3.2           Allocation of Development
Responsibilities.

 

(a)           Allocation of Responsibilities.  Subject to the remainder of this Section 3.2,
the allocation of certain responsibilities of each of the Parties as of the Restatement Effective Date shall be set forth in the Long-Term Development Plan
as amended from time to time.  To the
extent not expressly delegated to certain Parties or otherwise provided for in
this Agreement or the Long-Term Development Plan, the JJDC shall determine and
approve the allocation of responsibilities applicable to the Development
activities contemplated under this Agreement in a manner consistent with this
Agreement and the Long-Term Development Plan.

 

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For the avoidance of doubt, in the event of any conflict between this
Agreement and the Long-Term Development Plan, this Agreement shall govern.

 

(b)                           Japan Agency Agreement.  Under a
separate agreement (the “Japan Agency
Agreement”), ImClone has appointed BMKK as its agent for the
sole purpose of undertaking the specific Development activities expressly set
forth in this Agreement which relate to the Development of Cetuximab and
Alternative Final Product containing same under the Alternative Trademark in
Japan.  Unless terminated early by
ImClone or BMKK pursuant to the Japan Agency Agreement, such agency shall
continue during the term of this Agreement.

 

(c)                           Joint Preparation of Regulatory Filings for
Final Product.  Subject to the binding portion of the
Long-Term Development Plan and decisions of the JJDC and SCJ, BMKK, as agent
for ImClone, and MJ shall, with respect to Final Product:

 

(i)            jointly prepare for consultations with the Japanese
Regulatory Authorities relating to the Clinical Trials to be performed according to the binding portion of the Long-Term Development
Plan;

 

(ii)           jointly sponsor all Clinical Trials which are made
part of binding section of the Long-Term Development Plan, and jointly apply
for all Clinical Trial notifications (“CTNs”),
except where the JJDC agrees that it would be more efficient for one Party to
be the sponsor and/or contracting party with an academic institution or
physician with respect to a given Clinical Trial;

 

(iii)          subject to Section 3.2(d)(vii), jointly prepare
the JNDA for Final Product
for each new Indication or new line of therapy
within an existing Indication and all regulatory submissions thereafter to each
such JNDA, with MJ to submit such jointly prepared JNDA in its (or an Affiliate’s)
name;

 

(d)                           Notification. 
MJ shall duly inform the Japanese Regulatory Authorities that Final
Product branded with the Trademark Erbitux® is licensed from ImClone, and where
appropriate, that the Parties are co-Developing and co-Commercializing such
Final Product in Japan.  BMKK shall duly inform the Japanese Regulatory Authorities that
Alternative Final Product branded with the Alternative Trademark is licensed
from ImClone, and where appropriate, that the Parties are co-Developing and
co-Commercializing such Final Product under the ERBITUX® Trademark in Japan pursuant to the JNDA filed by MJ.

 

(e)                           Alternative Final Product JNDA Submissions.  The Parties
acknowledge that MJ has filed a JNDA for Final Product and that BMKK, as agent
for ImClone, has filed a JNDA for Alternative Final Product using the BRICETUX
trademark.  BMKK may use any Trademark for Alternative Final Product (the “Alternative
Trademark”) that
is clearly distinguishable from the Trademark Erbitux® and the Trademarks
ONCERB, XETUXA, and ERBLOC, and that is agreed to by ImClone (it being agreed that the Alternative Trademark
BRICETUX is acceptable to all Parties).  
At any time, BMS and ImClone may agree to withdraw such Alternative
Final Product JNDA.  Unless and until BMS
and ImClone so withdraw such Alternative Final Product JNDA:

 

(i)            BMKK, as agent for ImClone, shall be entitled to
submit filings to such Alternative Final Product JNDA that mirrors in all
material respects the filings made for the Final Product JNDA and shall be
entitled to seek a marketing authorization for the same Indication for Alternative Final
Product as for Final Product, unless the Parties agree otherwise.  The
Parties agree that new data developed under this Agreement that is filed to the
JNDA for Final Product may also be filed concurrently to the JNDA for
Alternative Final Product.  BMKK will
endeavor to assure that any related information provided by it to the Japanese

 

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Regulatory Authorities, as well as any
responses, discussions and interactions that it has with the Japanese
Regulatory Authorities regarding such Alternative Final Product JNDA, are
consistent in all material respects with the Final Product JNDA and the responses,
discussions and interactions had with respect to the Final Product JNDA.

 

(ii)           Neither
BMKK nor ImClone nor their respective Affiliates will apply for price listing
and reimbursement for the Alternative Final Product, unless notice of
termination of the Co-Promotion Term is given by a Party in accordance with
this Agreement.  During the Co-Promotion
Term, the Alternative Final Product will not be launched; and

 

(iii)          BMKK shall be the primary point of contact for all
communications with the Japanese Regulatory Authorities regarding the
development of Alternative Final Product in Japan, all regulatory filings, and
any pricing/reimbursement discussions in connection therewith.

 

(iv)          BMKK shall promptly
forward to the other Parties copies of all documents, filings and
correspondence with the Japanese Regulatory Authorities regarding the
development of Alternative Final Product in Japan.

 

Any filing or other regulatory
costs for Alternative Final Product incurred by BMKK/BMS/ImClone shall be borne
solely by BMKK/BMS/ImClone and shall not be deemed Allowable Expenses or
Development Costs under this Agreement

 

3.3           Interactions
with Japanese Regulatory Authorities and Ethics Committees.

 

(a)                           MJ, subject to the direction of the SCJ, will apply
for and obtain price listing and reimbursement for the Final Product branded with the
Erbitux® Trademark.  BMKK and MJ will
jointly Commercialize Final Product in Japan pursuant to this Agreement.  MJ shall use, and will permit BMKK (as agent
for ImClone) and its Affiliates to use, the Trademark Erbitux® exclusively on
the Final Product (i) pursuant to Article 9 hereof during the Co-Promotion Term to the extent
permitted by Applicable Law or as provided in Section 6.6(a), without the
addition or use of any other trademarks other than BMKK’s Corporate Name, and (ii) upon
termination of this Agreement as set forth in Article 14.

 

(b)                           The Parties agree to
assist one another in responding to and otherwise communicating with the
Japanese Regulatory Authorities and ethics committees in connection with the
Development activities contemplated hereunder during the term of this Agreement
and for an additional period of five years after the termination of this
Agreement, so long as the Existing Agreements to which such Party is a party
has not been terminated in accordance with their terms.

 

(c)                           Subject to the
Long-Term Development Plan and the Annual Development Plan and Budget, to the
Long-Term Commercialization Plan and Annual Commercialization Plan and Budget,
and to decisions of the SCJ, JJCC and/or JJDC, as applicable, from and after
the Restatement Effective Date, MJ shall be the primary point of contact for
all communications with the Japanese Regulatory Authorities regarding the
Development of Final
Product in Japan, all regulatory filings, and
all pricing/reimbursement discussions. 
Any attendees of a Party at such meetings shall be restricted to
those employees of a Party who are expected to make a meaningful contribution
to such meetings, plus a minimal number of observers, as reasonably determined
by the JJDC or SCJ.

 

(d)                           Each Party shall
promptly forward to the other Parties copies of all documents, filings and
correspondence with the Japanese Regulatory Authorities regarding the
Development of Final
Product in Japan.  All Parties agree to assist in the
preparation for

 

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any meetings with the Japanese Regulatory
Authorities.  BMKK, as
agent for ImClone, and MJ shall each be responsible for all communications with
the Clinical Trial sites and ethics committees regarding the Development of Final
Product in Japan depending upon which Party is
designated by the JJDC as the lead Party for a given Clinical Trial protocol.  Without
limiting the generality of the foregoing, BMKK, as agent for ImClone, and MJ
shall (i) provide each of the Parties, whether through the JJDC or
otherwise, a reasonable opportunity to review and comment on all communications
with Japanese Regulatory Authorities and pricing/reimbursement authorities
regarding the Development of Final Product in Japan prior to it initiating such communications (provided that this Section 3.3(d) shall
not prohibit or otherwise act to prevent BMKK and MJ from promptly responding to
the Japanese Regulatory Authorities’ requests for immediate information or otherwise in
responding to Japanese Regulatory Authorities in circumstances where it would
be unreasonable to expect BMKK and/or MJ to provide the Parties a reasonable
opportunity to review and comment), and (ii) take
into good faith consideration all such comments of the Parties when undertaking
communications with Japanese Regulatory Authorities.  In any event, all such communications with
Japanese Regulatory Authorities regarding the Development of Final
Product in Japan shall be undertaken in a
manner consistent with this Agreement, the Long-Term Development Plan and the
Annual Development Plan and Budget, the Long-Term and Annual Commercialization
Plans, and decisions of the SCJ, JJCC and/or JJDC, as applicable.

 

3.4           Conduct
of the Co-Development.  The Parties, acting
in accordance with this Article 3 and the decisions made by the SCJ and/or JJDC,
shall use Diligent Efforts to undertake the Development activities contemplated
hereunder.  Without limiting the
generality of the foregoing, each Party shall:

 

(a)                           Cooperate with the
other Parties to execute the Long-Term Development Plan and complete the
Developmental goals under the Long-Term Development Plan, including using
Diligent Efforts to achieve marketing authorizations in Japan based on the
Clinical Trials that the Parties have agreed to conduct under the Long-Term
Development Plan;

 

(b)                           Use Diligent Efforts
to perform the Development work (and related regulatory and manufacturing
activities) required of each such Party in connection with each Approved Plan
and this Agreement;

 

(c)                           Conduct Development
activities (including the manufacture of Cetuximab and Final Product in
connection therewith) in a good scientific manner, and in compliance in all
material respects with all requirements of Applicable Laws, as well as all
requirements of any applicable, definitive guidance document or guideline
promulgated by the Japanese Regulatory Authorities (including MHW Ordinance No. 28 dated March 27,
1997 and any successor standards applicable to sponsoring, managing and
implementing clinical studies in Japan, any current Good Manufacturing
Practices, current Good Laboratory Practices and current Good Clinical
Practices promulgated by the Japanese Regulatory Authorities), using Diligent Efforts to attempt to achieve the
binding objectives of the Long-Term Development Plan efficiently and
expeditiously;

 

(d)                           Maintain records, in
sufficient detail and in good scientific manner, which shall be complete and
accurate and shall fully and properly reflect all work done by such Party and
results achieved by such Party in connection with the Development and
manufacturing activities required of such Party under an Approved Plan in the
form required under all Applicable
Laws. 
The other Parties shall have the right, during normal business hours and
upon reasonable prior written notice, in no event, however, upon less than ten (10) Business
Days prior written notice, to inspect and copy all such records at its own
expense, so long as doing so is not unreasonably disruptive.  The other Parties shall maintain such records

 

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and information contained therein in
confidence in accordance with Article 12 and shall not use such records or
information except to the extent otherwise permitted by this Agreement; and

 

(e)                           Allow representatives
of the other Parties, upon reasonable prior written notice and during normal
business hours, to visit such Party’s facilities where any clinical or
regulatory activities contemplated hereunder are being conducted, and consult,
during such visits and by telephone, with such Party’s personnel performing
such clinical or regulatory work on Clinical Trial activities being conducted
under the Annual Development Plan and Budget or the binding portion of the
Long-Term Development Plan, so long as such visits and consultations are not
unreasonably disruptive.  The other
Parties shall maintain any information received (whether by observation or
otherwise) during such visit in confidence in accordance with Article 12
and shall not use such information except to the extent otherwise permitted by
this Agreement.

 

3.5           Process Flows and Study Instructions.

 

The SCJ shall determine and approve the strategic
development related process flows and
Clinical Trial instructions, including those relating to bulk drug substance
and Final Product supply shipment, handling, testing, data query generation,
resolution and Master Database (defined in Section 3.6(a) below) for
each Clinical Trial required to be conducted under the Long-Term Development
Plan or Annual Development Plan and Budget. 
Consistent with such strategic direction, each Party to whom certain
Development responsibility has been assigned shall follow its own internal
standard operating procedures in carrying out such Development responsibilities
consistent with local clinical practice, the SCJ-approved monitoring plans and
Applicable Law, and shall develop detailed process flows and Clinical Trial
instructions consistent with the foregoing, using such standard operating
procedures to carry out each such Clinical Trial.  Critical functions such as, for example and
not by way of limitation, Clinical Trial monitoring, analysis or results and
statistical analysis plan shall be done in accordance with the detail set forth
in the Long-Term Development Plan and the Annual Development Plan and Budget.

 

3.6           Databases and Ownership of Results.   Subject to Section 3.2(c):

 

(a)                           During the conduct of the Development activities
contemplated hereunder the Annual Development Plan and Budget and binding
portion of the Long-Term Development Plan, the SCJ shall agree on the creation
and the primary location for the database for each Clinical Trial that the Parties have agreed to conduct (the “Master Database”), which Master Database may reside with any of the Parties, or at a CRO.  The Master Database for each such Clinical Trial shall contain all of the
data collected as part of the Development activities for such Clinical Trial
which is intended to be included in or otherwise directly reflected in the
cleaned and locked copy of the Master Database.  Copies of the Master Database shall
be transferred from the Party or CRO, where the primary Master Database is
located, to the other Parties on a regular basis, but no less frequently than
monthly (“Duplicate Database”).

 

(b)                           The Master Database for each such Clinical Trial will be created by and reside with such Party or the
CRO until the Master
Database is clean and locked.  After the Master Database has been cleaned
and locked, a copy of the Master
Database will then be transferred to a Party designated by the SCJ for
analysis according to an analysis plan determined and approved by the SCJ, with
a copy to the other Parties at the same time. 
The Party designated by the SCJ to conduct the analysis shall transfer
such analysis to the other Party promptly upon its completion and sufficiently
prior to any submission for publication as to enable the other Parties
reasonable opportunity to comment thereon.

 

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(c)           Analysis and reporting of the results of any such Clinical Trial, e.g., the generation and review of statistical
analysis plans, the lock of the Master Database, the performance of interim or
final analysis, Clinical Trial report writing and review, publication writing
and review, performed under this Agreement shall be a joint effort of the two
Party Groups (unless otherwise expressly set forth herein or otherwise
mutually agreed by the Party Groups), and shall be determined and approved by
the SCJ.

 

(d)           Each Party shall have equal access to all Master Databases, which access shall survive any termination or
expiration of this Agreement until all Parties in good faith certify that each
of the Duplicate Databases is an exact duplicate of any Master Database(s).

 

(e)           The Parties shall facilitate electronic data transfer of all Clinical Trial and Development related data hereunder in an industry standard format, and shall endeavor to ensure that such format is compatible with the data management
systems of all of the Parties.

 

(f)            The SCJ shall determine and approve a process flow
for query handling with the aid of the data cleaning work group which shall be
composed of one or more representatives of each Party Group.

 

(g)           All Results shall be jointly owned by ImClone and Merck, and may be freely
used by Merck for regulatory filings outside Japan that are in the Merck
Territory (as determined by the Merck-ImClone Agreement) and by ImClone for
regulatory filings in countries outside the Merck Territory (e.g., the U.S. and
Canada).

 

(h)           The Parties shall each have the right to use any and all Results in
accordance with the Existing Agreements to which they are a party and this
Agreement.

 

(i)            The retention time of all data pertaining to Clinical
Trials in the Master Database shall be consistent with 1st Clause of Article 26-2-3
of the Japanese Implementation Rules for the Pharmaceutical Affairs
Law.  Without limiting the foregoing:

 

(i)            Data which will be
the basis for data submitted with any application for Approval relating to Final Product in Japan (or approval of Cetuximab outside of Japan) shall be preserved in the
Master Database until the completion of all reexaminations by the Japanese
Regulatory Authorities relating to such applications.

 

(ii)           Data which will be
the basis for data submitted with any application for reexamination of Final Product shall be preserved in the Master Database for 5 years following the date
of the completion of all reexaminations of Final Product by the Japanese Regulatory Authorities.

 

(j)

 

(i)            ImClone and BMS/BMKK covenant that they
will not, without the consent of Merck, change the BMS-ImClone Agreement in a
way that would change Merck/MJ’s ability (whether directly or through ImClone)
under Section 4.1(c) thereof to obtain and use such data in Japan for
Development, regulatory and Commercialization purposes in accordance with this
Agreement and the Existing Agreements, and covenant that, if such section does
not survive termination or expiration of said Agreement, BMS/BMKK and ImClone
will continue to observe the requirements of such section following any such
termination (so that Merck/MJ obtains the benefits thereof).

 

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(ii)           ImClone and Merck/MJ covenant that they
will not, without the consent of BMS, change the Merck-ImClone Agreement in a
way that would change BMS/BMKK’s ability (whether directly or through ImClone) under
Section 3.6 thereof to obtain and use such data in Japan for Development,
regulatory and Commercialization purposes in accordance with this Agreement and
the Existing Agreements and covenant that, if such section does not survive
termination of said Agreement, MJ/Merck and ImClone will continue to observe
the requirements of such section following any such termination (so that
BMS/BMKK obtains the benefits thereof).

 

3.7           Reporting
of Safety Information.  Any and all adverse
events shall be handled and reported consistent with the applicable provisions
of the Pharmacovigilance Data Exchange Agreement entered into by and among
ImClone, BMS and Merck as of November 1, 2006, as amended from time to
time.

 

4.             PAYMENT,
COSTS, AND REPORTING FOR DEVELOPMENT AND COMMERCIALIZATION PURPOSES.

 

4.1           General
Obligations of the Parties.

 

(a)           Cost Bearing.  Except as expressly provided in this
Agreement or in the Existing Agreements, each Party shall bear all internal
costs and expenses it incurs in undertaking activities relating to or as part
of this Agreement.

 

(b)           General
Principles Regarding Equal Contribution of Internal FTEs.  Except as set forth in Section 3.1(c) or Article 14,
each Party Group will contribute substantially equal internal personnel
resources (FTEs) to Development and related regulatory activities under this
Agreement.  Except as set forth in Section 3.1(c) or
Article 14, BMKK and MJ shall use Diligent Efforts to equally
contribute, as nearly as practicable, substantially equal internal FTEs (other than Sales
Representative detailing activities) to Commercialization activities for the
Final Product in Japan.  The SCJ and the Subcommittees shall
apply this principle when allocating Development and Commercialization
responsibilities  under the Annual Development
Plan and Budget and the Annual Commercialization Plan and Budget.  The substantially equal FTE determination
shall be allocated and determined separately for each Party Group for each of (x) Development
and related regulatory activities and (y) such Commercialization (other
than Sales Representative Detailing activities) and related regulatory activities, and not in the aggregate for (x) and
(y) combined.

 

(c)           Internal FTE Budgeting.  As part of the process of
producing the Annual Commercialization Plan and Budget and the Annual
Development Plan and Budget, the Parties may determine, but shall not be
obligated (except as may be required pursuant to an Existing Agreement) to
provide one another with their estimate of, internal FTE resources required for
(1) all Development and related regulatory activities under the Annual
Development Plan and Budget and (2) all non-Sales Force Commercialization
and related regulatory activities under the Annual Commercialization Plan and
Budget, for Final Product for such year.

 

If the JJDC agrees that the internal FTE efforts in the aggregate to be
expended by each Party Group (including by any Affiliates of the Parties within
such Party Group) for (A) for Clinical Trials conducted pursuant to
the Annual Development Plan and Budget and (B) for regulatory activities
reasonably allocable to the Development of Cetuximab or Final Product in Japan
are expected to be essentially equivalent, then, except as provided in Section 4.1(c)(i) and
4.1(c)(ii) below, the Parties need not express any Development or related
regulatory activity (whether individually or in the aggregate) in the Annual
Development Plan and Budget in terms of FTEs, but shall designate within such
Annual Development Plan and 

 

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Budget those Development and related
regulatory activities that will be performed by the relevant Party Group.

 

If the JJCC agrees that the internal FTE efforts in the aggregate to be
expended by each Party Group (including by any Affiliates of the Parties within
such Party Group) for all Commercialization (but not taking into account for
this purpose Sales Representative Detailing activities) activities, any related
regulatory activities and all Medical Education Activities are expected to be
essentially equivalent (with ImClone’s FTEs to be taken into account for such
purposes only with respect to those regulatory activities, if any, related to
Commercialization that are to be performed by ImClone under the Annual
Commercialization Plan and Budget), then, except as provided in Section 4.1(c)(i) and
4.1(c)(ii) below, the Parties need not express any individual
Commercialization activities, Medical Education Activities, or related
regulatory activity (whether individually or in the aggregate) in the Annual
Commercialization Plan and Budget in terms of FTEs, but shall designate within
such Annual Commercialization Plan and Budget those Commercialization and
related regulatory activities that will be performed by the relevant Party.

 

Neither Party Group shall be required by this Agreement to record the
actual FTE hours worked under this Agreement, except as follows:

 

(i)            If
the JJDC or JJCC, as the case may be, does not agree that the internal FTE
efforts expected to be expended by each Party Group (including by any
Affiliates of the Parties within such Party Group) for (x) Clinical Trials
conducted pursuant to the Annual Development Plan and Budget and for regulatory
activities reasonably allocable to the Development of Cetuximab or Final
Product in Japan to be approved for the immediately succeeding year
and/or (y) Commercialization activities (but not taking into account for
this purpose Sales Force activities), Medical Education Activities, and related
regulatory activities under the proposed Annual Commercialization Plan and
Budget to be approved for the immediately succeeding year are expected to be
essentially equivalent (as determined separately for each of (x) and (y),
and not in the aggregate), then all internal personnel costs required to be
taken into account under the applicable Plan and Budget (with the exception of
Sales Representatives) for (x) and/or (y), as the case may be, will be
tracked using actual FTEs used by a Party for such activities for such year,
and the internal personnel costs will be calculated and charged either as
Development Costs or as BMKK/MJ NSF Commercialization Activities Costs (based
on the applicable category into which such costs fall), as the case may be, for
such year using such actual FTEs and using the same FTE Rate for all Parties
for a given activity.

 

(ii)           In
the event that any Party that is a member of a Party Group believes that the
other Party Group is not fulfilling its obligations to complete the Development
or Commercialization activities (other than Sales Representative Detailing
activities) allocated to it under a given Annual Development Plan and Budget or
Annual Commercialization Plan and Budget, as applicable, then such Party may
notify the JJDC or JJCC, as the case may be. 
If the JJDC or JJCC agrees that the activity is not being completed in
accordance with the agreed Annual Development Plan and Budget or Annual
Commercialization Plan and Budget, as applicable, then either (1) BMKK, if
its Party Group has been fulfilling its obligation and the MJ/Merck Party Group
has not or (2) MJ, if its Party Group has been fulfilling its obligation
and the BMS/BMKK/ImClone Party Group has not, will have the right to step in
and complete the activity not then being performed and charge the associated
incremental internal personnel costs to either Development Costs or to BMKK/MJ
NSF Commercialization Activities Costs (based on the applicable category into
which such costs fall), as the case may be (using the actual FTE costs incurred
and the applicable FTE Rate) through the end of such year (provided, that if
the non-performing Party Group can reasonably demonstrate that is capable of
resuming its obligations prior to the end of such year, it may do so and the
Party Group that had stepped 

 

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in to perform shall not charge any
incremental costs after the date that the non-performing Party resumes
performance of its obligations); provided, however,
that if there is a dispute at the JJDC or JJCC as to whether an activity is
being completed or the amount of the FTE costs that should be charged,  then the dispute will be elevated to the SCJ
for resolution, and if the SCJ cannot agree, then BMKK or MJ may submit such
dispute to submitted for baseball arbitration pursuant to Section 16.13(a),
and only BMKK and MJ shall be entitled to provide offers for consideration by
the arbitrator in connection with such baseball arbitration.

 

(d)           Records.  If required in accordance with Section 4.1(c), each Party shall track, record and account for its internal FTE efforts as provided therein
(and only from the point forward from when it becomes required to track such
FTE efforts), and shall report such internal
FTE efforts to the JJDC or JJCC, as applicable, on a Quarterly basis.  Except to the extent expressly provided
otherwise in this Agreement, each Party shall calculate and maintain such
records of FTE efforts incurred by it in
the same manner as used for other products commercialized or developed by such Party in Japan, unless
instructed by the SCJ to employ other procedures, in which case such other
procedures shall be applied equally to all Parties.  The SCJ shall facilitate
any reporting under this Section 4.1(d).

 

(e)           FTE
Rate Determination.  If required in accordance with Section 4.1(c),
each Party’s FTE Rates shall be determined in
accordance with the rates and categories set forth in Exhibit 4.1(e),
as determined by the JJFC and approved by the SCJ.  Such rates shall be adjusted annually, with
each annual adjustment effective as of January 1 of each year, with the first such annual adjustment to be made as
of January 1, 2008, based the
average of each Party’s change in the fully absorbed cost of a full-time
employee in the applicable functional area in Japan from the previous January 1
(or as otherwise determined by the JJFC). 
Such determination shall be approved by the SCJ.

 

4.2           Development
Costs.

 

(a)           Determination
of Development Costs.  The “Development Costs” under this Agreement shall include and be limited to:

 

[**]

 

As used in (i) and (v) above,
the phrase “external costs” shall mean costs
charged by unrelated, non-Affiliate
Third Parties to a Party.  If
any cost or expense is directly attributable or reasonably allocable to more
than one activity or category within Development Costs, such cost or expense
shall be counted as a Development Cost with respect to only one of such
activities.

 

(b)           Equal Sharing.  Except as set forth in Sections 3.1(c) and
4.2(c) and Article 14, and
excluding, for purposes of determining the Development Costs to be shared under
this Section 4.2(b), the Parties’ internal FTE Costs incurred in any
Development activities (except either (x) where and to the extent such internal FTE costs
are required to be taken into account pursuant to Section 4.1(c)(i) and 4.1(c)(ii) or
(y) if and as otherwise agreed to by the SCJ), BMKK and Merck/MJ shall, commencing effective as of
the Restatement Effective Date, share all Development Costs equally.  The Parties shall use commercially reasonable
efforts to structure and effect any such Development Cost reimbursement
payments in a manner that eliminates, to the maximum extent lawful, the need
for any tax withholdings with respect to such payments.  The
JJDC shall review the actual Development Costs
incurred against budget not less than quarterly.  ImClone’s share (whatever it may be) of any such
Development Costs shall be allocated and borne as between ImClone and BMS/BMKK
as and to the extent provided in the BMS-ImClone Japan Agreement.

 

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(c)           Clinical
Trial/Phase IV Clinical Trial Expense Overrun.  If the Development Costs (exclusive of
internal FTEs) of any given Clinical Trial identified in the Long-Term
Development Plan or Annual Development Plan and Budget should, following
conclusion of such Study, exceed the amounts that had been originally budgeted
(under the Long-Term Development Plan for Phase I-III trials and under the
applicable Annual Development Plan and Budget for Phase IV Clinical Trials for
the completion of such Clinical Trial from start to finish (and taking into
account any subsequent amendments to the protocol for such Clinical Trial that
would have affected the budget for same) by more than [**], such excess
expenses (each a “Clinical Trial Expense
Overrun”) shall be borne solely by that Party who (or whose
Affiliates or Third Party contractors) was responsible for performing or
managing or causing to be performed the Study, but only if, and only to the
extent, that any such Clinical Trial Expense Overrun was attributable to the
negligence of such Party (or its Affiliates or Third Party contractors);
otherwise, the entire Clinical Trial Expense Overrun shall be treated as any other
Development Cost and shared as provided in Section 4.2(b).  This Section 4.2(c) shall
represent the exclusive remedy under this Agreement and the Existing Agreements
with respect to the sharing of any cost overruns arising out of the conduct of
a Clinical Trial.

 

4.3           Equal Sharing of Non-Sales Force
Commercialization Activities Costs.

 

(a)           Equal Sharing of Costs.   Subject to
Sections 3.1(c), 4.3(b), 4.3(c) and 4.3(d) and Article 14, and
excluding, for purposes of determining the costs to be shared under this Section 4.3(a),
the costs incurred by a Party (using the applicable PDE Rate) to provide its
budgeted PDEs in a given year, BMKK and MJ shall, commencing as of the
Restatement Effective Date, equally bear all Marketing Costs, Sales Costs,
Medical Education Costs and Regulatory Costs (to the extent such Regulatory
Costs are reasonably related to Commercialization activities) contemplated by
the Annual Commercialization Plan and Budget or otherwise agreed to by the JJCC
or the SCJ (all of the foregoing, collectively, the “BMKK/MJ NSF Commercialization Activities Costs”).  The JJCC shall review the actual  BMKK/MJ NSF Commercialization Activities Costs incurred against
the budget set forth in the applicable Annual Commercialization Plan and Budget
not less than quarterly. Any non-Sales Force internal FTE Costs shall
not be taken into account in determining BMKK/MJ NSF Commercialization Activities Costs,
except either where and to the extent such internal FTE costs are
required to be taken into account pursuant to Sections 4.1(c)(i) or 4.1(c)(ii) or
if and as otherwise agreed to by the SCJ.

 

(b)           Marketing Expense
Overrun.  If actual Marketing Costs (excluding Internal
FTE costs) for all Marketing Activities delegated for performance or
supervision by a given Party (either MJ or BMKK, as the case may be) in a given
calendar year should  exceed in the aggregate the
total amount that had been budgeted in the Annual Commercialization Plan and Budget for all such Marketing
Activities delegated to MJ or BMKK (and taking into account any subsequent
amendments to Annual Commercialization Plan and Budget approved for such year)
by more than [**] in such year, such excess expenses (each a “Marketing Expense Overrun”) shall be borne
solely by that Party who was responsible for performing or managing or causing
to be performed such Marketing Activities, but only if, and only to the extent,
that any such Marketing Expense Overrun was attributable to the negligence of
such Party (or its Affiliates or Third Party contractors); otherwise, the
entire Marketing Expense Overrun shall be treated as any other BMKK/MJ NSF
Commercialization Activities Cost and shared as provided in Section 4.3(a).  This Section 4.3(b) shall
represent the exclusive remedy under this Agreement and the Existing Agreements
with respect to the sharing of any Marketing Expense Overruns.

 

(c)           Medical Education Expense
Overrun.  If actual Medical Education Costs (excluding
Internal FTE costs) for all Medical Education Activities delegated

 

Confidential
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this document.

 

42

 

for
performance or supervision by a given Party (either MJ or BMKK, as the case may
be) in a given calendar year should  exceed in the
aggregate the total amount that had been budgeted for such Medical Education
Activities delegated to MJ or BMKK (and taking into account any subsequent
amendments to Annual Commercialization Plan and Budget approved for such year)
by more than [**] in such year, such excess expenses (each a “Medical Education Expense
Overrun”) shall be borne solely by Party who was responsible for performing or
managing or causing to be performed such Medical Education Activities, but only
if, and only to the extent, that any such Medical Education Expense Overrun was
attributable to the negligence of such Party (or its Affiliates or Third Party
contractors); otherwise, the entire Medical Education Expense Overrun shall be
treated as any other BMKK/MJ NSF Commercialization Activities Cost and shared
as provided in Section 4.3(a).  This Section 4.3(c) shall represent
the exclusive remedy under this Agreement and the Existing Agreements with
respect to the sharing of any Medical Expense Overruns.

 

4.4           Reporting.

 

(a)           Each Party shall
report any Development Costs that it (or any of its Affiliates) shall have
incurred in a given Quarter to the JJFC, to the JJDC, to BMKK (who will
report same to BMS and ImClone), and to MJ (who will report same to Merck)
within thirty (30) days following the end of each such Quarter (or for the last Quarter
in a year, sixty (60) days after the end of such Quarter).  Such reports shall be a reasonably detailed
account of such Development Costs setting forth the reasons for such costs and
expenses.  Such reports shall be
accompanied by copies of the applicable invoices or other appropriate supporting documentation for any payments to Third
Parties (including CROs) that individually exceed $50,000 or such other amount
as may be determined by the SCJ that qualify as Development Costs under or involve
activities performed pursuant to the Annual Development Plan and Budget.  Each
Party shall also provide a more detailed report of such Development Costs as
may be required by Applicable Law, as
may be requested by the JJFC and/or the
SCJ, or as may be reasonably requested by any Party to comply with its
applicable reporting and accounting requirements.  The JJFC shall be responsible for preparing a
report comparing actual Development Costs incurred against budget.

 

(b)           Each Party shall report any Allowable Expenses and BMKK/MJ NSF
Commercialization Activities Costs that it (or its Affiliates) shall have incurred in
a given Quarter to the JJFC, to the JJCC, to BMKK (who will report same to BMS and ImClone),
and to MJ (who will report same to Merck) within thirty (30) days after the
end of each Quarter (or for the last Quarter in a year, sixty (60) days
after the end of such Quarter) and in a manner
sufficient to enable the other Party to comply with its governmental and
regulatory reporting requirements.  Such
report shall specify in reasonable detail all deductions and expenses included:
(i) in Allowable Expenses for the applicable Quarter and shall be
accompanied by invoices or other appropriate supporting documentation for any
payments to Third Parties that individually exceed [**] or such other amount as
may be determined by the SCJ; and (ii) in
BMKK/MJ NSF Commercialization Activities Costs. 
Each Party shall also provide a more detailed report of such expenses as
may be required by Applicable Law, as
may be requested by the JJFC and/or the
SCJ, or as may be reasonably requested by any Party to comply with its
applicable reporting and accounting requirements.  Allowable Expense shall also be estimated and
reported on a monthly basis within 30 days after the end of each of the first
two months in a Quarter.  The first such
report for the period from and after the Restatement Effective Date shall be
due at the end of the first Quarter following the Restatement Effective Date
and shall cover the period from the Restatement Effective Date through the end
of such Quarter.  Thereafter, reports
shall be made as provided in Section 4.4(a) and this Section 4.4(b).

 

(c)           MJ shall report to the JJCC and the other Parties within thirty (30) days
after the end of each Quarter with regard to Net Sales reported by MJ during
such

 

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43

 

Quarter in Japan and in a manner
sufficient to enable each other Party to comply with its reporting requirements
under this Agreement.  MJ shall also estimate and report Net Sales
on a monthly basis within 30 days after the end of each of the first two months
in a Quarter.

 

(d)           Each Party shall also provide a more detailed report
of such expenses under Sections 4.4(a) and 4.4(b) or Net Sales under Section 4.4(c) as
may be required by Applicable Law, or as
may be requested by the JJFC and/or the
SCJ, or as may be reasonably requested by any Party to comply with its
applicable reporting and accounting requirements.

 

(e)           Within forty-five (45)
days after the end of each Quarter (or for the last Quarter in a year, sixty
(60) days after the end of such Quarter), the JJFC shall review and serve as a
forum for resolving and reconciling any disputes or issues arising among the
Parties as to the calculation of Development Costs, Net Sales, Allowable
Expenses and BMKK/MJ NSF Commercialization Activities Costs incurred or accrued
in such Quarter, and shall also ascertain the Profit Or Loss for such Quarter.

 

(f)            Development Costs and BMKK/MJ NSF Commercialization
Activities Costs incurred by an Affiliate of any of BMKK, MJ, or ImClone, as
the case may be, shall be deemed incurred by BMKK, MJ, or ImClone,
respectively, as the case may be, for accounting purposes under this Agreement
and the BMS-ImClone Japan Agreement.

 

(g)           For purposes of
determining Development Costs, BMKK/MJ
NSF Commercialization Activities Costs and Profit Or Loss under this Agreement, any
Allowable Expenses, Development Costs, and BMKK/MJ NSF Commercialization Activities Costs incurred by ImClone
shall be deemed incurred by BMS/BMKK for purposes of such reconciliation, but
shall not otherwise affect the sharing of such costs and expenses by BMS and
ImClone pursuant to the BMS-ImClone Agreement and the BMS-ImClone Japan
Agreement.

 

4.5           Reimbursements
of Costs and Payment of Profit Or Loss.

 

(a)           Once BMKK, MJ and
ImClone have all reviewed a Party’s cost report provided pursuant to Section 4.4(a) above,
BMS/BMKK, on the one hand, and Merck/MJ, on the other, with the oversight,
review and approval of the JJFC (and, in the event of a dispute at the JJFC,
approval by the SCJ), shall net out the amounts
due with respect to Development Costs and calculate the net balancing payments due one another
such that the reported and approved Development Costs are allocated in a manner
consistent with Section 4.2(b).  For purposes of the
foregoing, Development Costs incurred by ImClone shall be deemed incurred by
BMS/BMKK for purposes of such reconciliation, but shall not otherwise affect
the sharing of such Development Costs by BMS and ImClone pursuant to the
BMS-ImClone Agreement and the BMS-ImClone Japan Agreement. The Party
(BMKK or MJ) that has borne less than one-half of the aggregate pertinent
Development Costs shall make an adjusting payment to the other Party to assure that each such Party bears its equal share
of same.  Such payments shall be made within sixty (60) days
following the end of each Quarter
(ninety (90)
days after the end of the last Quarter in a calendar year), provided any disputed amounts shall
instead be due to be paid within thirty (30) days following the resolution of
the dispute (with any undisputed or uncontested amounts shall be paid within
the applicable 60- or 90-day period).  Each Party shall also provide a more detailed report
of such expenses as may be required by Applicable Law, as may be requested by the JJFC and/or the SCJ, or as may be reasonably requested by
another Party to comply with its applicable external reporting and accounting
requirements.

 

Confidential
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this document.

 

44

 

(b)           Once BMKK, MJ and ImClone have all reviewed a Party’s
cost report provided pursuant to Section 4.4(b) above, BMS/BMKK, on
the one hand, and Merck/MJ, on the other, with the oversight and review of the
JJFC and the SCJ, shall net out the amounts
due with respect to BMKK/MJ NSF Commercialization Activities Costs, and calculate the net
balancing payments due one another such that the reported and approved BMKK/MJ NSF
Commercialization Activities Costs are allocated and shared evenly between BMKK
and MJ in a manner consistent with Section 4.3(a)   The Party (BMKK or MJ) that has borne
less than one-half of the aggregate pertinent BMKK/MJ
NSF Commercialization Activities Costs shall make an adjusting payment
to the other Party to assure that each Party
bears its equal share of same.  Such payments shall
be made within sixty (60) days following the end of each Quarter
of the
year (ninety (90) days after the end of the last Quarter in a calendar year), provided any disputed amounts shall
instead be due to be paid within thirty (30) days following the resolution of
the dispute (with any undisputed or uncontested amounts shall be paid within
the applicable 60- or 90-day period).  Each Party shall also provide a more detailed report
of such expenses as may be required by Applicable Law, or as may be requested by the JJFC and/or the SCJ, or as may be reasonably requested by
another Party to comply with its applicable external reporting and accounting
requirements.

 

(c)           Subject
to Section 3.1(c) and Article 14, Profit Or Loss shall be paid
as follows:

 

(i)            Within
sixty (60) days after the end of each Quarter (or for the last Quarter in a
year, ninety (90) days after the end of such Quarter), Merck will reimburse ERS, BMKK and/or BMS (and/or any of their Affiliates,
in each case to such entity as BMS may direct) for any Allowable Expense
(which shall then be deemed an Allowable Expense of MJ for purposes of  determining Profit Or Loss) incurred by BMKK,
ImClone or BMS (or their Affiliates) in respect of such Quarter.

 

(ii)           If there is a Profit for such Quarter, Merck (or any of its Affiliates)
shall pay to ERS, BMKK and/or BMS (and/or to any of their Affiliates, as BMS
may direct) an amount equal to fifty percent (50%) of the Profits for such
Quarter attributable to Commercialization of Final Product in Japan, less any
payments on account of Profit received previously in respect of such Quarter.

 

(iii)          If there is a Loss in such Quarter, then ERS, BMKK and/or BMS (and/or any
of their Affiliates, as BMS may direct) shall pay to Merck (and/or to any of
its Affiliates, as Merck may direct) an amount equal to fifty percent (50%) of
the Loss for such Quarter attributable to Commercialization of Final Product in
Japan, less any payments on account of Loss made previously in respect
of such Quarter.

 

The payments required under subsections (i)-(iii) of
this section 4.5(c) may be netted for a given Quarter as agreed to by BMS
and Merck.

 

(d)           No separate payments shall be made with respect to the
last Quarter per se in any calendar year.  Instead, at the end of each such year, a final reconciliation payment for the entire year shall be made by the Party or Parties owing same
within ninety (90) days after the end of the calendar year with respect to
amounts due under Sections 4.4(a), 4.4(b) and 4.4(c) after taking
into account all amounts (if any) previously paid to or by, or retained by,
such Party for prior Quarters during such year. 
The JJFC may also request that each Party provide such additional
information or data as may be reasonably necessary to ensure a proper
accounting and reconciliation.

 

(e)           [**]  If a Party enters into an agreement with a
Third Party for the provision of materials or services pursuant to this
Agreement, and if such Party possesses a [**]

 

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45

 

or more ownership interest in such Third
Party, then, for purposes of determining Profit and Loss only or with respect
to determining Development Costs Allowable Expenses, or BMKK/MJ NSF Commercialization Activities Costs,
all costs incurred for the provision of such materials or services by such
Third Party that are shared by the Parties under this Agreement shall be
accounted for on the basis of (i) the transfer price in effect under the
agreement between such Party and such Third Party, if such transfer price is
comparable to that which such Third Party agrees to with other Third Parties in
the ordinary course of business, or (ii) otherwise, [**].  Nothing in this Section 4.5(e) or
elsewhere in this Agreement is intended to modify or affect, or shall be
interpreted to modify or affect, the actual transfer price imposed in transactions
for the purchase and supply of services, materials or Products between (x) a
Party (or any of its Affiliates) with one of its Affiliates, (y) a Party
(or any of its Affiliates) with another Party or any of its Affiliates, or (z) a
Party or any of its Affiliates with any Third Party, [**] or more of which
Third Party’s voting securities are owned by a Party or its Affiliates.

 

4.6           Mode
of Payment.

 

(a)           Each of BMKK and MJ
shall make all payments required under Sections 4.5(a) and 4.5(b) of
this Agreement in Japanese Yen, via wire transfer of immediately available
funds as directed by the other Party from time to time, net of any
out-of-pocket transfer costs or fees. 
Accounting for payments and reimbursement amounts due under this
Agreement shall be in Japanese Yen.  To
the extent that payments are made between the other Parties to this Agreement, such shall be made pursuant to either: (a) the Existing Agreements;
or (b) as has been otherwise established as a course of business conduct between such Parties.

 

(b)           All payments of Profit Or Loss under
Section 4.5(c) shall be in Japanese Yen.

 

(c)            For the purpose of determining Allowable Expenses incurred by a Party,
BMKK/MJ NSF Commercialization Activities Costs, Development Costs or other
shared expenses under this Agreement which are incurred by a Party in a currency other than in Japanese Yen, such
Allowable Expense, BMKK/MJ NSF Commercialization Activities Costs,
Development Costs or other shared expense
amounts shall be converted into Japanese Yen on a quarterly basis based on currency exchange rates quoted by the
European Central Bank at the following website:

www.ecb.int/stats/exchange/eurofxref/html/index.en.html, at 5:00 p.m. EST on the last business day in an applicable calendar
quarter.

 

4.7           Records
Retention.  Each of the Parties shall keep
complete and accurate records pertaining to the Development Costs, Allowable
Expenses, and the BMKK/MJ NSF Commercialization Activities Costs incurred by it
as part of the activities contemplated hereunder, for a period of three
calendar years after the year in which such activities occurred.

 

4.8           Payment
Audits.

 

(a)           Any Party shall have
the right to request that another Party’s independent, certified accounting
firm perform an audit or interim review of the other Party’s books in order to
express an opinion regarding such Party’s compliance with GAAP (in the case of
ImClone, BMS and BMKK), and with IFRS (in the case of Merck and MJ).  Such audits or review shall be conducted at
the expense of the requesting Party.

 

(b)           During the term of
this Agreement and for a period of three years thereafter, at the request and
expense of the requesting Party(ies) (“Auditing
Party(ies)”), the other Party(ies) (“Audited Party(ies)”) shall permit an
independent, certified public accountant appointed by the Auditing Party(ies)
and reasonably acceptable to the Audited Party(ies), at reasonable times and
upon reasonable written notice, to examine such records as may be

 

Confidential
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this document.

 

46

 

necessary to
determine the correctness of any report or payment made under this Agreement; provided, however, that such accountant shall sign a
confidentiality agreement in a form reasonably satisfactory to the Audited
Party(ies), and, provided further, that such examination shall not be permitted
more than once in any 12-month period. 
Said accountant shall not disclose to the Auditing Party(ies) or any
other person any information, except that such accountant may disclose to the
Auditing Party the fact of a deficiency, the lack of a deficiency or any
overpayment, and the degree thereof, as well as the dollar amount (and the equivalent amount in Japanese
Yen).  All
results of any such examination shall be made available to the Audited
Party(ies).

 

(c)           In the event that any
audit reveals a deficiency in the amount that should have been paid by one
Party to another Party, then the underpaid amount shall be paid within
forty-five (45) days after the Party(ies) who is owed payment makes a demand
therefor, plus interest thereon if such deficiency is in excess of [**] of the
amount that actually should have been paid. 
Such interest shall be calculated from the date such underpaid amount
was due until the date such underpaid amount is actually paid, at a
simple interest rate equal to the lesser of (x) the three (3) month
LIBOR rate of the respective currency in which the payments was due as
published by Citibank, N.A., New York, New York, or any successor thereto, at
12:01 a.m. on the first day of each Quarter in which such payments are
overdue, plus [**], and (y) the maximum rate permitted by Applicable Law,
calculated on the number of days such payment is delinquent.  In addition, if such underpaid amount is in
excess of [**] of the amount that actually should have been paid, then the
Auditing Party(ies) shall be reimbursed by the Audited Party(ies) for the
reasonable cost of such audit unless this [**]
underpayment threshold would not have been crossed other than as the result of
the misstatement of financial data by another Party.  In the event of an overpayment, such amounts
shall be deducted from future amounts due. 
If such overpaid amounts have not been settled by such future deductions
within one (1) year from the date originally overpaid, the Party who is
owed such overpayment shall invoice the owing Party for such amounts.  Interest payments shall be made in the same
currency as the underlying obligation.

 

4.9           Taxes.

 

(a)           In the event that a
Party(ies) is mandated under the laws of a country to withhold any tax to the
tax or revenue authorities in such country in connection with any payment to
the other Party(ies), such amount shall be deducted from the payment to be made
by such withholding Party(ies), provided that the withholding Party(ies) shall
take reasonable and lawful actions to avoid and minimize such withholding and
promptly notify the other Party(ies) so that the other Party(ies) may take
lawful actions to avoid and minimize such withholding.

 

(b)           The withholding
Party(ies) shall promptly furnish the other Party(ies) with copies of any tax
certificate or other documentation evidencing such withholding as necessary to
satisfy the requirements of the United States Internal Revenue Service or any
other competent tax authority related to any application by such other
Party(ies) for foreign tax credit for such payment.

 

(c)           Each Party agrees to
reasonably cooperate with the other Parties in claiming exemptions from such
deductions or withholdings under any agreement or treaty from time to time in
effect, and, so long as the same does not prejudice or adversely affect a Party’s
own tax position, obtaining the release of any withheld amounts.

 

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47

 

5.             OWNERSHIP
OF INVENTIONS; USE OF RESULTS; PATENTS.

 

5.1           Ownership
of Inventions made by the Parties.  In the
event that any Party or any of its Affiliates, alone or jointly with one or
more other Parties and their respective Affiliates, makes an Invention (a “Company Invention”), ImClone and Merck
shall jointly own such Company Invention. 
In such case, ImClone and Merck shall be joint applicants and shall
mutually determine whether, how and in which countries to file for patent
protection, consistent with the Existing Agreements.  Inventorship in such Company Inventions shall be determined
in accordance with U.S. patent law.  In
the event that Merck or ImClone intend to file an application in a country
where the other does not want to maintain a patent right, the Party intending
to so file may file an application on a sole basis in such a country and must
bear all costs associated therewith.  In
the case of joint filings, the costs will be shared equally.  Notwithstanding the foregoing, if the
BMS-ImClone Agreement provides that, as between ImClone and BMS, a given
Company Invention is owned by BMS, then all of ImClone’s rights and obligations
with respect to such Company Invention pursuant to the foregoing four sentences
shall instead be assigned to BMS with respect to such Company Invention; for
the avoidance of doubt, this means, among other things, that BMS and Merck would
jointly own such Company Invention.  To
the extent necessary to effectuate the foregoing, each Party shall take any
action reasonably necessary to effectuate ownership of Company Inventions
pursuant to the foregoing.

 

5.2           Ownership
of Inventions made by Third Parties.    All
Inventions made by a CRO and/or any Third
Party (such as, without limitation, a clinical investigator) to the extent
solely relating to Final Product (“Related
Inventions”) shall be owned by ImClone, while Inventions so made
that have general utility in connection with other products and/or compounds in
addition to Final Product (“General Inventions”) shall be jointly
owned by ImClone, BMS and Merck. 
Inventorship in such Related Inventions and General Inventions shall be determined in accordance with
U.S. patent law.  Any invention report
submitted by a CRO or any Third Party to
one of the Parties shall be forwarded by the receiving Party to the other
Parties without delay.  With respect to
Related Inventions, ImClone shall determine whether, how and in which country
to file for patent protection, consistent with the Existing Agreements.  With respect to General Inventions, ImClone
and Merck shall mutually determine whether, how and in which countries to file
for patent protection.  In the event that
Merck or ImClone intend to file an application in a country where the other
Party does not want to maintain a patent right, the Party intending to so file
may file an application on a sole basis in such a country and must bear all
costs associated therewith.  In the case
of joint filings, the costs will be shared equally.  To the extent necessary to effectuate the
foregoing, each Party shall take any action reasonably necessary to effectuate
ownership of Related Inventions and General Inventions pursuant to the
foregoing.

 

5.3           Use of Inventions and Results.   Each Party
shall have the right to use the Company Inventions and Related Inventions as
provided for in the Existing Agreements to which it is a party.  Each Party shall have the right to use
General Inventions as it deems appropriate, including the use of same for other
products and/or compounds without compensating the other Parties, and including
the grant of licenses to Third Parties. 
A Party’s grant of such license to a Third Parties shall not require
consent of the other Parties if the license is granted for the manufacture, use
or sale of a specific compound or other product developed, owned, or controlled
by a Party or its Affiliates that is not a Competing Product.  Otherwise, a Party’s grant of such license to
a Third Party shall require the other Parties’ prior written consent.  Each Party shall have the right to use
Results as it deems appropriate, so long as such use is consistent with the
Existing Agreements and all other provisions of this Agreement.

 

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48

 

5.4           Patent
Enforcement, Patent Maintenance and Infringement.  Subject
to Sections 7.3(a)(ii) and 13.2 hereof, patent enforcement, patent
prosecution and maintenance, and Third Party patent infringement defense shall
be governed by the provisions of the Existing Agreements applicable to the
Parties that are a party to such agreements.

 

6.             COMMERCIALIZATION.

 

6.1           Commercialization Plans and Budgets.

 

(a)           In General.  The
Commercialization of Final Product in
Japan shall be governed by a comprehensive, three-year, Commercialization plan
and budget for Final Product (the “Long-Term
Commercialization Plan and Budget”), and by detailed
Commercialization plans and budgets covering the Commercialization activities
to be performed for a particular calendar year (each, an “Annual Commercialization Plan and Budget”).

 

(b)           Limitations. 
Notwithstanding anything contained in this Agreement, the Long-Term Commercialization Plan and Budget or any Annual Commercialization Plan
and Budget adopted hereunder to the contrary, unless otherwise agreed to in
writing by each Party to this Agreement, ImClone shall have no obligation to
perform under this Agreement any Commercialization activities in Japan, but
shall be responsible for such manufacturing activities and funding such Development
activities with respect to Japan that it is obligated to perform under this
Agreement and the Existing Agreements.

 

6.2           Commercialization Plans and
Budgets.  Subject to Section 10.2
and to applicable terms in Article 14 of this Agreement:

 

(a)           Adoption and Content.  Each
Long-Term Commercialization Plan and Budget shall set forth the performance and
funding obligations for the Commercialization of Final Product in Japan,
on an Indication-by-Indication basis to the
extent reasonably practicable, but which shall include in any event (i) subject
to Sections 3.1(c), 6.2(b)(iv), and other applicable terms of this Agreement, a
non-binding estimate of the maximum and minimum number of Sales Representative
FTEs required of BMKK and of MJ for the Commercialization of all Indications in
Japan for each calendar year covered by such Long-Term Commercialization
Plan and Budget, and (ii) subject to Section 3.1(c), a non-binding
estimate of PDEs and call positions in Japan for each year covered by such
Long-Term Commercialization Plan and Budget, (iii) a non-binding estimate
of BMKK/MJ NSF Commercialization Activities Costs for each year covered by such
Long-Term Commercialization Plan and Budget, and (iv) any additional
information determined by the SCJ (and which shall be non-binding upon the
Parties).  Following the adoption of the
initial Long-Term Commercialization Plan and Budget, the JJCC shall thereafter
prepare, during the first Quarter of each calendar year thereafter, the
Long-Term Commercialization Plan and Budget for the year of adoption and for
the ensuing two calendar years, using a process
determined by the JJCC that will allow the SCJ a reasonable opportunity to
review and comment on same before such Long-Term Commercialization Plan and
Budget is adopted by the JJCC and the SCJ.

 

(i)            Initial Long-Term Commercialization
Plan and Budget.  The initial Long-Term Commercialization Plan and
Budget shall cover the period from the date that is one year prior to expected
Launch of Final Product in Japan through the end of the second (2nd)
full calendar year following the expected Launch of Final Product in Japan, and
is (or shall be) attached as Exhibit 6.2(a) hereto.

 

(b)           Annual Commercialization Plans and
Budgets.

 

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49

 

(i)            In General.  The
Commercialization of Final Product in
Japan in a given calendar year shall be governed by an Annual Commercialization
Plan and Budget.  The first Annual
Commercialization Plan and Budget is included in Exhibit 6.2(a) hereto
and covers the period from the Restatement Effective Date through December 31,
2008.  Subject to Section 3.1(c) and
applicable sections of Articles 4 and 6, each Annual Commercialization Plan and
Budget shall set forth the Commercialization activities to be performed in
Japan for an applicable calendar year, and shall be consistent, to the extent practicable, with the most recent
Long-Term Commercialization Plan and Budget covering such year.

 

(ii)           Adoption of Annual Commercialization
Plans and Budgets.   The JJCC shall prepare the Annual
Commercialization Plan and Budget annually, according to a schedule and using a
process determined by the JJCC, which will provide the SCJ a reasonable
opportunity to review and comment on same before such Annual Commercialization
Plan and Budget is adopted by the SCJ. 
Each Annual Commercialization Plan and Budget shall describe the plan
and budget for Commercialization of Final Product for the calendar year covered by such plan and budget,
broken down, where practical, on an Indication-by-Indication basis and
Quarterly basis, including, as applicable:

 

(1)           general strategies for the Commercialization of Final Product in
Japan, consistent to the maximum practical
extent with the Parties’ key product positioning strategies for the other
countries in which Cetuximab is Commercialized;

 

(2)           subject to Sections 3.1(c), 4.1 and 4.3, allocation of responsibilities
between BMKK and MJ for all significant Commercialization activities (other
than Sales Force activities).  Unless
otherwise agreed to by the BMKK and MJ Representatives of the JJCC, the foregoing matters will be allocated evenly
between BMKK and MJ to the maximum practical extent or in such other fair and
equitable manner as may be approved by the JJCC (taking into account all
relevant factors, including  the target
audience and geography) and in a manner that (A) seeks
to achieve, where practicable, reasonable consistency in the allocation of such
responsibilities from year to year, and (B) seeks to avoid duplication of
FTE effort to the maximum practical extent;

 

(3)           subject to Sections 3.1(c), 6.2(b)(iv), 6.2(b)(v), 6.3(a) and other
applicable terms of this Agreement:  (A) the
number of Sales Representative FTEs of MJ and BMKK to be used in Detailing
Final Product for such year; (B) the
number of PDEs to be delivered for Final Product each year by such Party (broken out
by quarter and, where practicable, by month), (C) subject to Section 6.4(b),
the position of such Details, call schedule and frequency of Details, target
prescriber list (whether by categories of medical professionals (e.g.,
office-based physicians), medical care segments (e.g., primary care), specialists,
and/or specific target prescriber lists); and (D) the
nature of any other key promotional activities to be provided by a Party’s
Sales Representatives;

 

(4)           a general plan and strategy for the marketing, promotion and sale of Final
Product to large health care providers,
governmental agencies (whether national, regional, federal, state or local),
and other group purchasing organizations, including contracting strategy, with
the JJCC to review and discuss contract creation, government reporting, rebate
processing, pricing schedules, contract compliance, monitoring and audits, and
contract administration and claims processing to the extent reasonably relating
thereto;

 

(5)           market, unit sales, and Net Sales forecasts for Final Product, broken down by approved Indication and updated
quarterly, in sufficient detail and length of time as to enable the JJMC to
determine its own forecasts under Section 8.3(b);

 

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50

 

(6)           plans for developing and deploying all Final Product marketing and promotional materials;

 

(7)           subject to Sections 4.1 and 4.3, Medical Education Activities to be
conducted by each of BMKK and MJ (and the budgeted spend in the aggregate for
such activities for each of BMKK and MJ);

 

(8)           subject to Sections 4.1 and 4.3, any Marketing Activities (including
advertising, public relations and other promotional programs regarding
Final Product and including speaker and
peer-to-peer activity programs) to be conducted by each of BMKK and MJ (and the
budgeted spending in the aggregate for such activities for each of BMKK and
MJ); and

 

(9)           forecast Profit Or Loss statement for Final Product for the relevant time period covered by each Annual
Commercialization Plan and Budget.

 

(iii)          Amendments.  In the event
that a material event occurs that has not been adequately and/or foreseeably anticipated
in a given Annual Commercialization Plan and Budget, or if any event occurs that materially affects the assumptions that were
used to develop a given Annual Commercialization Plan and Budget (such as the failure to achieve Approval for an Indication
or new line of therapy, a request by the Japanese Regulatory Authorities for additional Clinical Trials before it will approve an Indication or new line of
therapy, an unanticipated delay in the Japanese Regulatory Authorities’ review and approval of Final Product, the failure of Phase III Clinical Trial data to support an anticipated JNDA filing, failure of the Japanese Regulatory Authorities to approve a label for Final Product that supports the Commercial Detailing levels that
had been planned for an Indication or new line of therapy within an existing
Indication, a material adverse change in the label (such as a black box
warning) for Final Product, a material
change in Applicable Law, a material delay in the launch of a new Indication
or new line of therapy, or unexpected efficacy
or safety data from a competing product), the JJCC will propose for review and
approval by the SCJ such amendment(s) to the then current Long-Term Commercialization
Plan and Budget and/or Annual Commercialization Plan and Budget to reflect the impact of same as promptly as
practicable.

 

(iv)          Number of Sales Representative FTEs.

 

(1)           The total number of such Sales Representative FTEs required of each of MJ
and BMKK for the first [**] months post-Launch in any Long-Term Commercialization
Plan and Budget or any Annual Commercialization
Plan and Budget shall not, unless otherwise agreed to by BMKK and MJ in
writing, be less than [**] nor greater than [**] Sales
Representative FTEs on average for each Quarter during such period.  It is generally anticipated that the number of
Sales Representative FTEs to be provided by a
BMKK or MJ thereafter will increase as additional Indications are approved for Final Product and that the number of Sales Representative FTEs
will generally decline for a given Indication over the life cycle of such
Indication, and the Long-Term Commercialization Plan and Budget shall set forth
such additional Sales Representative FTEs and Medical Liaisons contemplated by
reason of any new Indication expected to be approved for the Final Product
during the period covered by the then current Long-Term Commercialization Plan
and Budget.  MJ and BMKK agree to have
such number of Sales Representative FTEs required of it fully trained and ready
to commence Final Product promotion at
Launch or at such time of Approval of a new Indication.

 

(2)           Amendments to a Long-Term Commercialization Plan and Budget may also be
proposed by a Party at any time to
reflect material developments, and

 

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51

 

such amendments shall be subject to review and approval by the JJCC,
and final review and approval of the SCJ.

 

(v)           Borrowing of PDEs; Continuity of Sales
Representatives.

 

(1)           Borrowing of Sales Representatives.  In the event
that either Party anticipates that it will have insufficient Sales
Representative employees available at a given point in time to satisfy its PDE
obligations for a given Quarter, it may request that the other Party provide
additional PDEs to meet the PDE obligations that the requesting Party
anticipates that it will be unable to provide, subject to the following terms
and conditions:

 

(A)          BMKK agrees that it will
provide any insufficiency requested by MJ from the date of initial Launch of
the Final Product in Japan through [**] (at which point, BMS will have no
further obligation to assist MJ by making up any such insufficiency), provided, that (i) BMS shall not be obligated to
provide [**] of MJ’s required PDEs in a given Quarter during such period,
unless BMKK otherwise agrees to provide a higher percentage in its sole and
absolute discretion; (ii) MJ gives BMS not less than [**] notice prior to
Launch of the number of PDEs that it believes it will not be able to provide
and the time frame for same, and (iii) the JJCC agrees on such amendments
to the Annual Commercialization Plan and Budget to reflect same (e.g., the
additional territories and physician groups to be called on by the BMS Sales
Representatives).

 

(B)           after [**], either
Party (a “Requesting Party”) may
request the other (the “Providing Party”)
to provide such Sales Representatives and PDEs on a temporary basis (not to
exceed three months in any twelve (12) month period) to reflect reasonably
unforeseeable events warranting same; provided, that (i) the
Providing Party shall not be under any obligation, express or implied, to agree
to make up any portion or all of the insufficiency, and (ii) the JJCC
agrees on such amendments to the Annual Commercialization Plan and Budget to
reflect same (e.g., the additional territories and physician groups to be
called on by the Providing Party’s Sales Representatives).

 

In each case (A) and
(B) under this subparagraph 6.2(b)(v)(1):

 

(C)           a Providing Party shall, subject to the terms of this
Agreement and the Annual Commercialization Plan and Budget, retain the same
control over the provision of such PDEs in the same manner as any other PDEs to
be provided by it;

 

(D)          any such additional Sale Representatives used by the
Providing Party shall remain the employee of the Providing Party and the
Providing Party shall be solely responsible for all compensation and benefits
due such individual; and

 

(E)           any failure of the
Providing Party to provide the agreed upon PDEs shall not be considered a
failure of either Party for purposes of section 6.4(f), and such non-provided
FTEs shall simply reduce the total annual or quarterly PDEs, as the case may
be, to be provided by both Parties for purposes of such Section 6.4(f);

 

(F)           the Requesting Party shall reimburse the Providing
Party for [**] (1) all PDEs that both such Parties agreed would be
provided by the Providing Party or (2) the actual additional PDEs provided
by the Providing Party, in

 

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52

 

each case (1) or
(2) at [**] the then prevailing PDE Rate, but the provision of such PDEs
by the Providing Party at the request of the Requesting Party shall not, in and
of itself, effect any change in the applicable percentage for sharing Profit Or
Loss.

 

(2)           Continuity.  The Long-Term Commercialization Plan and
Budget and the Annual Commercial Plan and Budget also shall set forth any
limitations with respect to yearly and Quarterly variances from each Party’s
number of Sales Representatives and, unless otherwise consented to by the other
Party’s members of the JJCC, which consent will not be unreasonably withheld or
delayed: (x) during any twelve-month period during the first [**] months
following the Launch of Final Product in Japan for its first Indication, no
more than [**] of such Party’s Sales Representatives that are assigned to sell
or promote the Final Product may be Reassigned by such Party in any such
twelve-month period, and (y) for any twelve-month period ending after [**]
following the Launch of Final Product in Japan for its first Indication, no
more than [**] of such Party’s Sales Representatives that are assigned to sell
or promote the Final Product may be Reassigned by such Party in any such
twelve-month period.  In the event either
Party fails in any year to comply with the restrictions regarding reassignment
of Sales Representatives as set forth in the immediately preceding sentence,
such Party shall pay to the other Party for such year an amount equal to the
product of (a) the remainder of (i) the actual percentage of Sales
Representatives reassigned by such Party in such year minus (ii) the maximum allowable
reassignment percentage for such year (as set forth in clause (x) or (y) above,
as applicable) multiplied by (b) the
Net Sales in Japan of the Final Product for such year.

 

(3)           For purposes of Section 6.2(b)(v)(2),
a Sales Representative is deemed “Reassigned”
if (1) he or she was previously Detailing the Final Product in Japan, (2) in
a given twelve month period, he or she does not provide at least [**] of the
Details that were required to be provided by him or her in the previous
twelve-month period (after taking into account any required proportionate
cutback in the Details to be provided by all Sales Representatives of a Party
in such period pursuant to the applicable Annual Commercialization Plans and
Budgets), and (3) such failure to provide such Details in such 12-month
period is not due to such individual being promoted to a district or regional
sales manager for the Final Product or to such individual’s employment being
terminated with a Party, whether involuntarily or voluntarily, during such
twelve-month period.

 

6.3           Equal Sharing of Sales Force
Commercialization Efforts.  Subject to the applicable provisions of Article 14:

 

(a)           Number of PDEs.

 

(i)            Except as provided in Section 3.1(c) and
6.3(a)(ii), BMKK and MJ shall contribute the same number of PDEs to be
delivered for Final Product for each year (broken out by month, where practicable), unless
otherwise agreed to in writing by the BMKK and MJ Representatives of the SCJ for a given Quarter (and which shall be
limited in force and effect to such Quarter only).

 

(ii)           In the case of a line of therapy for which BMKK or MJ
will be the sole Party under Section 3.1(c) who will provide PDEs for
such line of therapy: (A) the cost of providing such PDEs shall be borne
solely by the Party providing same (and, for clarity, such costs shall not be
taken into account as an Allowable Expense), (B) such PDEs for such line
of therapy shall be in addition to the PDEs for all other Indications and lines
of therapy that the Parties are equally providing, and (C) any shortfall
in the PDEs provided by such Party shall not be subject to any of the remedies
or payments provided in Section 6.4(f) for such lines of therapy that
BMKK and MJ are jointly co-Detailing.

 

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53

 

(b)           Sales Representative PDE Rate.  The PDE Rate shall be the [**].  As of the Restatement Effective Date, the applicable PDE Rate has been determined and is attached as Exhibit 6.3(b) hereto. The
PDE Rate may be adjusted subsequently from time to time by the joint agreement
of the BMKK and MJ Representatives on the JJCC, subject to approval by the SCJ, and
shall be adjusted whenever the FTE Rate changes.  Any amendments to such PDE Rate approved by
the SCJ shall be calculated using the same methodology as was used to calculate
such initial PDE Rate, as set forth on Exhibit 6.3(b).  If the SCJ cannot agree on the
applicable adjustment to the PDE Rate, then BMKK or MJ may submit such dispute
to submitted for baseball arbitration pursuant to section 16.13(a), and only
BMKK and MJ shall be entitled to provide offers for consideration by the
arbitrator in connection with such baseball arbitration.

 

6.4           Diligent Efforts; Sales Efforts and
Sales Representative Deployment.

 

(a)           Diligent Efforts.  Subject to
the terms of this Agreement, MJ and BMKK shall each use its Diligent Efforts to
Commercialize Final Product in Japan in
accordance with the Annual Commercialization Plan and Budget, and to perform the Commercialization activities
assigned to it under each Annual Commercialization Plan and Budget in
accordance with such Annual Commercialization Plan and Budget. 
Each Party shall perform all Commercialization activities assigned to it
under each Annual Commercialization Plan and Budget in accordance with the
terms of this Agreement.

 

(b)           Position of the Details to be
Provided.  During the first [**] months post Launch, each of BMKK and MJ will provide [**] Primary
Position Details for Final Product to
the relevant targeted doctors on its call list, unless otherwise decided by the
SCJ.  Additionally, unless otherwise
decided by the SCJ, each of BMKK and MJ will each thereafter provide (i) [**]
Primary Position Details for Final Product, for a period of twelve (12)
months following Approval of a new Indication,
to the relevant targeted doctors on its call list with respect to such
Indication; and (ii) [**] Primary Position Details for Final
Product, for a period of twelve (12) months following Approval of a new line of
therapy within an existing approved Indication, to the relevant targeted doctors on its call list with respect to such
tumor type.  Otherwise, except as may be
agreed upon and set forth in the Annual Commercialization Plan and Budget, BMKK
and MJ shall determine in their discretion their respective allocation of the required Annual PDEs between Primary Position
Details and Secondary Position Details. 
In addition and subject to the foregoing:

 

(i)            The Annual Commercialization Plan and Budget shall
also set forth how each such Party’s required annual PDEs shall be allocated on
a Quarterly basis (the “Quarterly PDE Amount”) and, in the
event that BMKK or MJ delivers in excess of [**] of such Party’s Quarterly PDE
Amount for a particular Quarter, then the number of such Party’s PDEs in excess
of such [**] threshold shall be excluded from the calculation in determining if
a Party’s obligations have been met with respect to such Party’s annual PDE
requirements under this Agreement (including for purposes of Sections 6.4(f)(i) and
6.4(f)(ii) below); and

 

(ii)           Unless
otherwise specified in the Annual Commercialization Plan and Budget or by the
JJCC, not less than (i) [**] of the Primary Position Details and (ii) [**]
of the total PDEs required to be provided by BMKK or MJ shall be presented to
such Party’s specific target prescriber list. 
If more than [**] of a Party’s required Primary Position Details or more
than [**] of a Party’s total required PDEs are presented to health care
professionals not included in the Party’s specific target prescriber list, such
excess Details (referred to herein as “Non-Qualifying Details”)
shall be excluded in determining whether a Party has satisfied its obligation
to provide a specified number of PDEs hereunder and for purposes of determining
whether there has been a shortfall in the number of PDEs provided by such Party
(including for purposes of Sections 6.4(f)(i) and
6.4(f)(ii) below).

 

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(c)           Detailing of Other Products by a
Party’s Sales Force Representatives.

 

(i)            Each of BMKK’s and MJ’s Sales
Representatives who Detail the Final Product shall not Detail the following
products without the consent of MJ or BMKK, respectively (such consent not to
be unreasonably withheld or delayed if the products do not compete with each
other or are likely to be used in combination or sequentially, as opposed to
being used as competitive substitutes):

 

(1)           any
product that is not an Antibody but is approved in Japan for any of the
Indications for which the Final Product is approved in Japan; and

 

(2)           any
product that is or contains an Antibody.

 

In the event that BMKK or MJ
does not provide such consent, the other Party shall (A) ensure that its
employees that have direct responsibility on a day-to-day basis for the
Detailing of Cetuximab and Final Product in Japan (but not such employees’
district managers or regional managers) shall be separate from those employees
that are responsible for the Detailing of the products set forth above, and (B) establish
appropriate firewalls to prevent leakage of key, nonpublic commercial
information from the Final Product Sales Representatives to the separate sales
force that is commercializing such product in (1) or (2) above.

 

(d)           Additional Commercialization
Expertise.  Each of MJ and BMKK will in a jointly
agreed approach, through its representatives and
Representatives to the JJCC and SCJ, respectively, use reasonable efforts to provide reasonable
assistance to each other relating to, and access to, its general
Commercialization expertise, as well as to provide one another with strategies
and tactics for establishing relationships with vendors, customers, prescribers
and key opinion leaders in the field of oncology in Japan; provided, that no
Party shall be obligated to provide any information, data or assistance where
it believes in good faith that to do so would conflict with Applicable Law.  Each such Party shall be responsible for its
own costs and expenses in performing its activities under this Section 6.4(d),
which shall not be included in the Allowable Expenses or otherwise shared or
reimbursed under this Agreement.

 

(e)           Records.  BMKK and MJ
shall each record the number of Sales Representatives assigned to promoting Final
Product in Japan, the proportion of their time
devoted to promotion of Final Product,
and the number of sales calls and PDEs made by its Sales Representatives in the
aggregate, during each calendar month for Final Product in Japan, and shall specify in such records the
position of such sales calls and such other information as the SCJ may
reasonably require (collectively, the “Promotional
Data”).  Such records
shall be maintained for at least two (2) years following the year in which such activities were
performed.  Within thirty (30) days after
the end of each Quarter, BMKK and MJ shall each report to the JJCC the
Promotional Data for such Quarter. 
Unless otherwise agreed by the JJCC, such internal reporting and record
keeping, including the calculation of sales force efforts and PDEs, shall be determined in accordance with applicable
self-reporting procedures customarily employed in Japan, (a) for other
similarly Detailed and similarly reported pharmaceutical products to the target
audience in Japan for Final Product as
customarily employed by it, consistently applied, or (b) if (a) does
not apply to such Party, for other similarly Detailed and similarly reported
pharmaceutical products to the target audience in Japan for Final
Product as customarily employed within the
Japan pharmaceutical industry, consistently applied.  Any other reports or record keeping required
by the JJCC relating to a Party’s sales activities under this Agreement shall
apply to BMKK and MJ equally and shall
not become effective for a reporting period unless the Parties have received
written notice of such other requirements at least one hundred eighty (180)
days (or such other period as BMS/BMKK and Merck/MJ may mutually agree
in writing) in advance of the start of such

 

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reporting period, provided that in no event shall BMKK or
MJ be required to make any unduly onerous
modification to its then-current policies, procedures or systems used for its
internal reporting and record keeping or otherwise engage in any reporting or
record keeping that is not reasonably supported by such policies, procedures
and systems.

 

Upon reasonable advance notice to the other Party but in
no event more frequently than once per calendar year, BMKK and MJ shall each be entitled, at its expense, to have access to the
other Party’s internal sales call
reporting system as it relates to Final Product in Japan, for the purpose of verifying such other Party’s determination of
the number of sales calls and Details and the accuracy of the Promotional Data reports for any period during the two year
period prior to the date of an audit.  Should a Party discover information
indicating, in its good faith opinion, an inaccuracy in the calculation of the
number of sales calls or Details, it shall so notify the other Parties in writing thereof (and shall set out its
preliminary conclusions in reasonable detail).  The audited Party shall
advise the auditing Party in writing within ten (10) Business Days after
receiving such notice, should the
audited Party disagree with the determination of the auditing Party.  If
the audited and auditing Parties cannot agree on a mutually acceptable
resolution of any such disagreement within twenty (20) Business Days of the
auditing Party’s receipt of such notice from the audited Party, then such
dispute shall be submitted for “baseball arbitration” pursuant to section
16.13(a), and only the audited Party and the auditing Party shall be entitled
to provide offers for consideration by the arbitrator in connection with such
baseball arbitration.

 

(f)            Failure to Provide Required PDEs.

 

(i)            Make-Up by a Party of Other Party’s
Required PDEs.  Subject to Section 6.4(f)(vi), if in any
calendar year either MJ or BMKK
(together with its permitted independent contractors, if any) provides less
than the number of PDEs required to be provided by it pursuant to the Annual
Commercialization Plan and Budget and the terms
of this Agreement, then

 

(1)           the other Party shall have the right, but shall be under no obligation, to
provide such additional PDEs as may be necessary to make up such shortfall and

 

(2)           the Party that fails to provide the requisite PDEs shall:

 

(x)            [**] (to the extent actually replaced, if at all, up
to the number of unprovided PDEs) calculated using the applicable PDE Rates; and

 

(y)           [**]:

 

	
  Percentage Range of Shortfall in
  the Party’s PDEs

  	
   

  	
  Additional Payment to the Other
  Party as a Percentage of the Applicable PDE Rate (whether or not such PDEs
  are replaced)  

   

  [**]

  

 

For example, if BMKK provided [**] of the PDEs it was
required to provide in a calendar year pursuant to the Annual
Commercialization Plan and Budget for such calendar year (which

 

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would
represent a [**] shortfall in BMKK’s PDEs for such calendar year), then BMKK
would be obligated to pay to MJ an amount equal to [**].

 

(i)            Continuous Shortfall Exceeding [**].  In addition
to the amounts payable under Section 6.4(f)(i) above, if the
shortfall in PDEs by either BMKK or MJ in any [**] exceeds [**] in each such
calendar year and is less than [**] in each such calendar year, then, the Profit  payable to the non-performing Party
for the [**] shall be decreased (and the Loss that it bears shall be increased)
by an amount equal to the product of [**].

 

(ii)           Shortfall Below [**].  The Parties
acknowledge and agree that, while the
remedies set forth in Sections 6.4(f)(i) and
6.4(f)(ii) provide an adequate
measure of damages for the failure of BMKK or MJ to provide more than [**] of
its required PDEs under an Annual Commercialization Plan and Budget for a given
year, it may not provide a full measure
of such damages for the failure of BMKK or MJ to provide less than [**] of its
required PDEs.  Accordingly, notwithstanding
the preceding sentence, if BMKK or MJ does not provide at least [**] of the
PDEs required of it under an Annual Commercialization Plan and Budget for a
given year (whichever Party that is, the “Shortfall Party”),
then, [**]:

 

	
  Year:

  	
   

  	
  Reduction In Profit:

  
	
   

  	
   

  	
   

  
	
  [**]

  	
   

  	
   

  

 

In the event that both Section 6.4(f)(ii) and
6.4(iii) apply in a given year, the damages set forth in this Section 6.4(f)(iii) shall
apply, and no damages shall be calculated for such year under Section 6.4(f)(ii).  Damages payable under Section 6.4(iii) in
a given year shall be in addition to any amounts payable under Section 6.4(f)(i) for
such year.

 

In no event shall the Shortfall
Party’s Profit in a given year under the above calculation fall below zero.

 

(iii)          Dispute.  Any dispute
as to the amount of any shortfall or any other figure required to be determined
under this Section 6.4(f) shall, if the SCJ cannot agree on
the applicable amount or figure, be submitted for “baseball arbitration”
pursuant to Section 16.13(a), and only BMKK and MJ shall be entitled to
provide offers for consideration by the arbitrator in connection with such
baseball arbitration.

 

(iv)          Exclusive Remedy.  All Parties
agree that Sections 6.4(f)(i), 6.4(f)(ii),
6.4(f)(iii) and 6.4(f)(iv) provide
and establish all Parties’ sole and exclusive remedies under this Agreement,
and represents full and complete liquidated damages, for BMKK’s or MJ’s failure
to deliver its PDE requirements in a given year (including any alleged
breach of Diligent Efforts based on the failure to provide such required PDEs).

 

(vi)          Coordination with Section 3.1(c).  This subsection 6.4(f) shall not apply
to a shortfall in PDEs arising with respect to an Indication where the
Indication is one that has been solely funded by such Party under Section 3.1(c) and
is solely Commercialized by such Party under Section 3.1(c)(i)(1).

 

6.5           Sales Force Capabilities; Training.

 

(a)                           Minimum Requirements.  All
decisions with respect to a Party’s Sales Representatives, including the
hiring, training, management, promotion and termination of such Sales
Representatives, shall be the sole responsibility and decision of such Party; provided, that all BMKK and MJ Sales
Representatives who Detail Final Product shall

 

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meet the minimum education, training, and experience requirements set
forth on Exhibit 6.5(a) hereto,
as modified as the JJCC may determine from time to time hereafter.

 

(b)           General Sales Training.  Each Party
shall be solely responsible, at its sole expense, for general sales training and for general oncology training of its Sales
Representatives.

 

(c)           Product-Specific Sales Training.  For Final
Product:

 

(i)            Initial Training.  Following the
first JNDA filing for Final Product, BMKK and MJ shall coordinate the provision of the
initial Final Product-specific sales
training to their respective Sales Representatives and sales trainers for a
period of [**] following such JNDA Approval (the “Initial Training Period”).  Such training program shall be subject to
revision from time to time by the JJCC. 
The Parties will reasonably cooperate to schedule training for its Sales
Representatives in sufficient time to ensure that the necessary Sales
Representatives are fully trained at least [**] prior to anticipated Launch
date for Final Product in Japan,
consistent with any requirements for such training as may be set forth in the
applicable Annual Commercialization Plan and Budget for Final Product.  All training
will be scheduled in an efficient and timely manner as determined by the
JJCC.  All such training shall also
include training on the proper handling and reporting of adverse drug
experiences encountered for Final Product and on timely reporting to the JNDA holder for Final Product in Japan of inquiries relating to Final
Product and other requests for information
related to Final Product in Japan.

 

(ii)           Product-Specific Initial Sales
Training Following Initial Training Period.  Except as provided in this Section 6.5,
each Party shall be responsible for providing its own Final Product-specific training to its Sales
Representatives following the Initial Training Period.  Each Party shall coordinate through the JJCC
with respect to any Final Product-specific training that such Party plans to provide
to its Sales Representatives.  Such Sales
Representative training provided by a Party shall be consistent with the
training provided during the Initial Training Period (as modified for any new
Indications or lines of therapy approved, and label changes made, since the end
of the Initial Training Period) and with Final Product-specific training materials and program developed by
both Parties for training their respective sales force.

 

(iii)          Subsequent Training on New
Indications.   As new Indications and lines of therapy are approved for Final
Product in Japan, MJ and BMKK shall update the Final
Product-specific training materials and
coordinate the training of their trainers and existing Sales Representatives
with respect to such new Indications and lines of therapy as promptly as practicable.

 

(iv)          Training Costs.  All Sales
Representative and Medical Liaison training costs incurred by MJ and BMKK shall
be solely the responsibility of such Party, and shall not be included in the
calculation of BMKK/MJ NSF Commercial Activities Costs.

 

(d)           Co-Promotion-Related Meetings.  If either
BMKK or MJ organizes Co-Promotion-related meetings of its employees (such as
periodic briefings of its Sales Representatives) for Final Product in Japan, it shall make reasonable efforts to keep Final
Product-related portions of such meetings
independent from other matters and to give the other Party advance written
notice of such meetings.  If requested by
the other Party and agreed to by the organizing Party, such agreement not to be
unreasonably withheld or delayed, the Party organizing such meeting shall
permit Sales Representatives of the other Party to attend and participate in
such meetings or such portions thereof that relate to the Co-Promotion of Final

 

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Product in
Japan. 
The Parties shall coordinate their respective pre-Launch meetings for Final
Product in Japan.

 

(e)           Training Materials.  The JJCC
shall determine the content that it wishes to include in Final Product-specific training materials (including Final Product sales orientation assessment tests and
refresher tests).  Subject to the
foregoing, one Party, as determined per the Annual Commercialization Plan and
Budget, shall be responsible for preparing all Final Product-specific training materials used in a given year, but all such materials shall be reviewed and approved by BMKK’s
and MJ’s medical, regulatory and legal teams,
and reviewed and approved by the JJCC, prior to use by either such Party.  The
JJCC shall review Final Product-specific
training materials from time to time and make recommendations for any revisions
and updates thereto as the JJCC may deem appropriate, subject to review by BMKK’s
and MJ’s medical, regulatory and legal teams,
with the goal of ensuring that each such Party is providing substantially the same quality and level of Final
Product-specific training to its Sales
Representatives.  At the initial Final
Product-specific training session for Sales
Representatives, MJ shall provide to BMKK reasonable quantities of all such
training materials (or provide BMKK with electronic copies that BMKK can use to
make copies for itself), and such costs shall be included in Sales Costs.  BMKK and MJ shall jointly own the copyright
in and to any Final Product-specific
training materials authored by either such Party that directly and specifically relate to the training of Sales
Representatives in the Commercialization of Final Product, and the Parties shall make such assignments to one
another as are necessary to effect the foregoing.

 

6.6           Co-Promotion Advertising and Promotional
Materials.

 

(a)           Marketing and Other Materials.  The Parties
shall utilize only promotional, advertising, communication, literature and
other Commercialization materials (collectively, “Marketing Materials”) relating to Final Product in Japan and only conduct Co-Promotional activities
for Final Product that, in each case,
have been included in the applicable Long-Term Commercialization Plan and
Budget or Annual Commercialization Plan and Budget, or that are otherwise
approved by the JJCC or SCJ.  BMKK
or MJ, as determined per the Annual
Commercialization Plan and Budget, shall prepare all Marketing Materials and
any other promotional materials used in a given year to support the use of Final Product in Japan, under the direction of, and in accordance
with the marketing and promotional strategy approved by the JJCC; provided, that all such materials shall be
reviewed and approved by BMKK’s and MJ’s medical, regulatory and legal teams, and reviewed and approved by the
JJCC, prior to use by BMKK or MJ; and provided, further, that the content of the
Marketing Materials, once approved, need not be
re-submitted for approval again prior to re-use within one (1) year of its
initial approval, unless the Final
Product labeling in the Approval applicable to
such Marketing Materials has been changed since such prior approval date.  The development of all Marketing Materials
relating to Final Product in Japan shall
be consistent with the applicable Long-Term Commercialization Plan and Budget
and Annual Commercialization Plan and Budget, with Applicable Law, and with Final
Product labeling approved by the Japanese
Regulatory Authorities.  In
Commercializing Final Product, BMKK and MJ will be identified and described as Co-Promoting Final Product, and all Marketing Materials and other
Commercialization activities, including oral presentations, direct-to-consumer
advertising, patient information materials and patient benefit programs, that
identify either such Party, shall identify both such Parties and shall display the MJ and BMKK Corporate
Names as promoters and/or marketers with equal prominence, as permitted by
Applicable Law.  In addition, as a
prominent part of each communication with customers and other Third Parties,
the Call Center and any patient information and benefit programs that the SCJ
establishes for Final Product shall
clearly identify Final Product as a
joint product of MJ and BMKK, developed under license from ImClone.  In the event of a shortfall in the quantity
of Marketing Materials, the available Marketing Materials shall be evenly
allocated between

 

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the Parties’ respective sales forces. 
MJ shall, in consultation with BMKK, take the lead in obtaining any
approvals from Japanese Regulatory Authorities required for the use of any
Marketing Materials, as well as submit all applicable Marketing Materials to
the Japanese Regulatory Authorities as required by Applicable Law.  BMKK and MJ shall jointly own the copyright
in any such Marketing Materials and the Parties shall make such assignments to
one another as are necessary to effect the foregoing.

 

(b)           Specific Responsibilities of the
Parties.  Each Party shall:

 

(i)            instruct its Sales Representatives to use, and shall
use Diligent Efforts to train and monitor its Sales Representatives so that
such Sales Representatives use, only Marketing Materials (without any addition,
deletion or other modification) approved for use under Section 6.6(a) for
the promotion of Final Product in Japan;

 

(ii)           instruct its Sales Representatives to do the
following, and shall use Diligent Efforts to train its Sales Representatives so
that such personnel do the following:

 

(1)           limit claims of efficacy and safety for Final Product to those that are consistent with Applicable Law and
with approved promotional claims in, and not add, delete or otherwise modify
claims of efficacy and safety in the promotion of Final Product in any respect from those claims of efficacy and
safety that are contained in, Final Product labeling approved by the Japanese Regulatory Authorities and approved
Marketing Materials;

 

(2)           use the Marketing Materials within Japan in a manner that is consistent
with the applicable Long-Term Commercialization Plan and Budget and Annual
Commercialization Plan and Budget, with Applicable Law, and with the Final
Product labeling approved by the Japanese
Regulatory Authorities;

 

(3)           Co-Promote Final Product in adherence
in all material respects with Applicable Law, and, to the extent not
inconsistent with the foregoing, such Party’s policies; and

 

(4)           not to, directly or
indirectly, pay, promise to pay, or authorize the payment of any money, or
give, promise to give, or authorize the giving of anything of value to any
official or employee of any  government,
or of any agency or instrumentality of any government or of any of its agencies
or instrumentalities), or to any political party, or official thereof, or to
any candidate for political office (including any party, official, or
candidate) for the purpose of promoting the sale or improper use of a Product
in Japan.

 

(c)           Approval of Materials Other Than
Marketing Materials.  All written, electronic and visual communications
provided by BMKK or MJ to a majority  of
its own Sales Representatives Detailing Final Product in Japan regarding Co-Promotion strategy,
positioning or selling messages shall be reviewed by both such Parties’ medical, regulatory and legal teams, and
reviewed and approved by the JJCC; provided
that a message, once approved, need not be re-submitted for approval again
prior to its re-use unless the Final Product labeling in the Approval applicable to such message has been changed since
such prior approval date.  MJ shall, in
consultation with BMKK, take the lead in obtaining any approvals from Japanese
Regulatory Authorities required for the use of any such materials.

 

(d)           Research Data.  After the Restatement
Effective Date and during the term of this
Agreement, each Party shall provide the other Parties with access to primary
and secondary (audited and non-audited) market research data for Final
Product in Japan

 

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reasonably promptly if and after the same are made available to a Party
and so long as such Party has the lawful right to provide same; provided that any such
receiving Party shall hold such provided information as Confidential Information of the
providing Party, and shall have executed such confidentiality agreement as may
be requested by any Third Party provider of such information with respect to
such disclosure of such provided information.

 

(e)           Medical Education Materials.  One Party,
as determined per the Annual Commercialization Plan and Budget, shall prepare
all Medical Education Materials used in a given year in connection with Final Product in Japan, under the direction of the JJCC; provided, that all such materials shall be
reviewed and approved by BMKK’s and MJ’s medical, regulatory and legal teams, and reviewed and approved by the JJCC
prior to use by either such Party.

 

6.7           Sales and Distribution in Japan.  MJ shall hold
title to Final Product in Japan until
sale to customers, and shall be responsible for invoicing and booking sales
for, and warehousing and distributing, Final Product in Japan and shall perform all related distribution
activities.  No other Party may accept
orders for Final Products or make sales
for its own account or for MJ’s account. 
If any such other Party receives
any orders for Final Product in Japan,
it shall refer such orders to MJ for acceptance or rejection.  MJ shall also be responsible for handling all
returns, recalls (subject to Section 8.7), order processing, invoicing and
collection, distribution, and inventory and receivables.  Subject to any applicable guidance,
parameters or other terms established by the JJCC and/or SCJ and subject to
each applicable Annual Commercialization Plan and Budget and the terms of this
Agreement, MJ shall have the right and responsibility for establishing and
modifying the terms and conditions with respect to the sale of Final
Product in Japan, including any terms and conditions relating to or affecting
the price at which Final Product will be sold;
discounts available to large health care providers, governmental agencies (e.g., federal, state and local), and other
group purchasing accounts; discounts attributable to payments on receivables;
distribution of Final Product; and
credits, price adjustments, other discounts and allowances to be granted or
refused.

 

6.8           Incentive Plans for Sales
Representatives.  MJ and BMKK shall each establish and
implement a target bonus or sales incentive program under which a Party’s Sales
Representatives are compensated for their efforts with respect to Final
Product in Japan with such Party’s other
programs for a similar nature product in Japan (and taking into consideration
the commercial life cycle of Final Product in Japan).  In any event, all such
programs shall be in compliance with all Applicable Law.  MJ and BMKK shall use good faith
efforts to align their target bonus or sales
incentive programs to the extent reasonably practicable under the
circumstances or otherwise ensure that their respective Sales Representatives are appropriately incentivized (but shall not
disclose to one another base salaries or benefits payable to its Sales Representatives or any other
compensation-related information other than the target bonus or sales incentive
programs); provided however, that
each Party shall retain final control over all
decisions relating to compensation and bonus incentives for its Sales
Representatives.  Each Party shall
utilize data provided by IMS International (or another recognized service
provider reasonably acceptable to the other Party) to determine the actual
performance of its Sales Representatives for purposes of establishing
compensation and bonuses.

 

6.9           Sales Representatives.  The following
provisions shall apply to each Party’s Sales Representatives in Japan:

 

(a)           Employees.  Except as
otherwise provided in this Section 6.9, each Party’s Sales Representatives
shall be full-time employees of such Party or its Affiliates or an individual
acting as an independent contractor as permitted below.  Each Party shall treat its Sales
Representatives employed by it or its
Affiliates as its (or its Affiliate’s) own employees for all purposes,
including national, federal, state and local tax and employment laws.

 

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(b)           Independent Contractors.  Neither BMKK
nor MJ shall use independent contractors,
including contracts sales organizations (“CSOs”) to
provide PDEs for Final Product in Japan
without prior written the consent of the other Party.  Each of BMKK and MJ shall (i) be responsible for any permitted CSOs
or independent contractors who serve as such Party’s Sales Representatives, (ii) use
Diligent Efforts to cause such independent contractors or CSOs to perform its,
his or her services as a Sales Representative in compliance with the Annual
Commercialization Plan and Budget and the provisions
of this Agreement, and (iii) indemnify and hold the other Party harmless
against any material breach of this
Agreement by such Party, or any Loss to the other Party, resulting from any material
failure of any such CSOs or independent
contractors to perform their services as a Sales Representatives in compliance
with the Annual Commercialization Plan and Budget and the provisions of this Agreement.  All compensation, reimbursement of costs and
other payments to be made to any such CSO or independent contractor shall be solely a matter between the Party engaging
such CSO or independent contractor and such CSO or independent contractor, and
such CSO or independent contractor shall
be treated as a Sales Representative of such Party for purposes of determining
Allowable Expenses under this Agreement.

 

(c)           Allocation; Turnover.  BMKK and MJ
shall each use Diligent Efforts to hire or otherwise allocate such number of
Sales Representatives as may be necessary to fulfill its duties under an
applicable Long-Term Commercialization Plan and Budget or Annual
Commercialization Plan and Budget, to provide full training (both general and Final
Product-specific training) to such Sales
Representatives, and, consistent with its normal business practices but always
subject to Section 6.2 (b)(v), to minimize turnover of such Sales
Representatives.

 

(d)           Inadequate Performance.  In the event
that information comes to BMKK’s or MJ’s attention that provides such Party
with a reasonable basis to believe that Sales Representatives of the other
Party used in Japan may have (i) violated any Applicable Law, or (ii) failed
to provide satisfactory service or to comply with the Annual
Commercialization Plan and Budget and/or the provisions of this Agreement, then, without limiting such Party’s
rights and remedies as may be available under this Agreement or under
Applicable Law, such Party shall have the right to request that the other Party
immediately assess the performance of such Sales Representative, and to exercise any other rights or remedies
available to such Party under this Agreement or at law or in equity.  The other Party shall promptly use Diligent
Efforts to evaluate and resolve such issue in accordance with its policies or
as it may otherwise deem appropriate, shall keep the requesting Party informed of the progress of, and information
learned during, such evaluation, and shall provide the requesting Party with a reasonably detailed written report
summarizing any steps taken toward resolution of the matter, within fifteen
(15) Business Days after the requesting
Party first brings such information to the other Party’s attention.

 

(e)           Compliance with Applicable Law.  Unless
exempted by law from such compliance, each of MJ and BMKK shall comply with all
Applicable Law with respect to the hiring, employment, and discharge of its
Sales Representatives, their managers, marketing personnel and Medical Liaisons. 
Each such Party represents to the other that such Party is an equal
opportunity employer and it is such Party’s corporate policy not to
discriminate against any person because of race, color, creed, age, sex, or
national origin.

 

(f)            Agreements with Sales
Representatives.  Each Party’s Sales Representatives shall
execute, or shall previously have executed, an agreement with such Party, that
includes, among other terms, terms requiring that the individual:

 

(i)            agrees to perform his/her obligations as a Sales
Representative as required by Applicable Law and the terms of this Agreement;
and

 

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(ii)           agrees to perform his/her duties as a Sales
Representative in accordance with such Party’s internal policies, a copy of
which is provided or made available by such Party to all its Sales
Representatives.

 

(g)           Employees of Hiring Party.  Each of BMKK
and MJ acknowledges and agrees that all of its respective Sales
Representatives, their managers, marketing personnel and Medical Liaisons are not, and are not intended to be treated
as, employees of the other Party or any of its Affiliates.  All matters of compensation, benefits and
other terms of employment for any such personnel shall be solely a matter
between BMKK or MJ (as the case may be) and its Sales Representatives, their
managers, marketing personnel, clinical development personnel and
Medical Liaisons.  Neither BMKK nor MJ
shall be responsible to the other Party (the “Hiring Party”),
or to any Sales Representatives, their managers, marketing personnel, clinical development personnel, and
Medical Liaisons used by the Hiring Party to promote or sell Final
Product, for any compensation, expense
reimbursements or benefits, payroll-related taxes or withholdings, or any
governmental charges or benefits that may be imposed on or be related to the
performance by the Hiring Party or its Sales Representatives, their managers, marketing personnel, clinical development personnel, and
Medical Liaisons of its obligations under this Agreement, all of which shall be
the sole responsibility of the Hiring Party.

 

Notwithstanding anything to the
contrary in this Section 6.9, a Hiring Party shall have no liability to
any other Party, under this Section 6.9, to the extent attributable to any
discriminatory, harassing or retaliatory acts of such other Party, or any
tortious acts (including acts constituting assault, battery or defamation) by
the such other Party, with respect to any Sales Representatives, their
managers, marketing personnel,
clinical development personnel, Medical Liaisons and/or other
employees/contractors of the Hiring Party, or any breach of this Agreement by
the such other Party.  Nothing contained
in this Section 6.9 is intended to affect or limit any Profit Or
Loss-sharing provided for in this Agreement.

 

(h)           Responsibility for Employees.  Each Party
shall be solely responsible for its acts and omissions and for those acts or
omissions of its Sales Representatives, their managers, marketing personnel and Medical Liaisons while performing any
of the services or activities to be
provided by such Party under this Agreement.

 

(i)            Responsibility for Employment Terms
and Policies.  Each Party shall be solely responsible and
liable for all probationary and termination actions taken by it with respect to
its Sales Representatives, as well as for the formulation, content, and for the
dissemination (including content) of all employment policies and rules (including
written probationary and termination policies) applicable to its Sales
Representatives.

 

6.10         Government, Group Purchasing and
Other Accounts.  MJ and BMKK shall be jointly responsible for
implementing the strategy for large health care providers, group purchasing and
other accounts for Final Product in
Japan in accordance with the Long-Term Commercialization Plan and Budget and
the applicable Annual Commercialization Plan and Budget and the parameters set
forth therein.  Each such Party shall
provide the JJCC with quarterly reports
regarding the implementation of the strategy and plans with respect to such
accounts, and shall furnish the JJCC with information regarding contracting and
formulary status and such other information relating to specific accounts as the
other Party may reasonably request; provided,
that a Party shall not be required to provide information that it does not
otherwise collect as part of its internal reporting system or that relates to
products other than Final Product.

 

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7.             SHARING OF PROFIT OR LOSS.

 

7.1           Sharing/Bearing of Profit Or Loss.

 

(a)           Subject to applicable terms of this Agreement
(including Section 3.1(c)), Merck/MJ and BMS/BMKK shall evenly share
Profit and evenly bear Loss with respect to the Commercialization of Final
Product in Japan.  Such Profit Or Loss
shall be determined and paid out, on a quarterly basis, as provided in Sections
4.5 and 4.6.

 

(b)           ImClone’s share of such Profit Or Loss shall be determined and paid to or by ImClone pursuant to the BMS-ImClone Japan Agreement.

 

(c)           Nothing in Agreement shall affect the determination
or payment of such royalties as Merck is obligated to pay to ImClone pursuant
to the Merck-ImClone Agreement,
which are attributable to Net Sales in Japan.

 

7.2           Term of Profit Sharing.  Subject to
the terms of this Agreement, the Parties shall share Profit Or Loss with respect to Final Product in Japan, commencing as of the Restatement Effective
Date until the date that this Agreement is terminated (the “Co-Promotion Term”).

 

7.3           Third Party Payments.

 

(a)           License from a Third Party.

 

(i)            If a Party believes that the manufacture of Final
Product (or any component thereof) for
Commercialization in Japan, the Development of Final Product or Cetuximab in
Japan, or the Commercialization of Final Product by BMKK or MJ in Japan in accordance with this Agreement, might infringe
or potentially infringe any Third Party patent right (other than a patent to which
a Party is granted a license or sublicense that avoids such potential
infringement pursuant to an Existing
Agreement or pursuant to a separate agreement existing as of the Restatement
Effective Date between such Party and such Third Party), or if a Party believes
it necessary or desirable to obtain a license under such Third Party’s patent rights to avoid any claims or litigation concerning a
potential allegation of infringement by a Third
Party against any Party with respect to Commercialization of Final
Product in Japan, the Development of Final
Product or Cetuximab in Japan, and/or the manufacture of Final Product for Japan, then such Party shall promptly bring such
matter to the attention of the other Parties, and the Parties shall discuss
same [**].  The Parties shall execute
such agreements in connection with such discussions as may be reasonably
necessary to preserve legal privileges and confidentiality.  If, following such discussions, a Party continues
to believe that it is necessary or desirable to obtain such a license, [**].

 

(ii)

 

(1)           If any one or two of BMKK/BMS, ImClone, or MJ/Merck,
but not the other Party or Parties, determines that it is necessary or desirable to obtain such a license described in Section 7.3(a)(i) to
avoid infringing or potentially infringing a Third Party’s patent rights, then, except as provided in Section 7.3(a)(ii)(2):  (i) no Party or its Affiliates shall
seek such license, (ii) [**].

 

(2)           If a Party
is manufacturing Cetuximab or Final Product (or a component thereof) for use or
Commercialization of same in Japan (or is obligated to bid on the manufacture
and supply of same for use or Commercialization in Japan) and (A) has
expressed to the other Parties that it desires to obtain a license from a Third
Party [**] and such

 

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Party shall not have received the consent of the other Parties pursuant
to Section 7.3(a)(i) above to pursue such a license from such Third
Party, or (B) wishes either to obtain a license from a Third Party to
settle patent infringement litigation brought by a Third Party against such
Party claiming infringement of patent rights controlled by such Third Party
that claim a manufacturing process (or the composition of an intermediate) used
in the manufacture of Cetuximab or Final Product by such Party (or by its
Affiliates or subcontractors), or to comply with a judgment in such litigation,
then such Party may, upon written notice to the other Parties and without the
consent of the other Parties, seek a license from such Third Party, on such
terms as it may negotiate in good faith and at arm’s length with such Third
Party; provided, that (i) such license
agreement (or such set of license agreements as it may enter into for such
patent rights for Japan and countries other Japan) does not inequitably,
unreasonably or unfairly allocate the consideration for such license (or such
set of license agreements) to Japan; and (ii) [**].  A final copy of such license agreement (or
set of license agreements) shall be provided to all the Parties.  Third Party Payments under such license
agreement (or such set of license agreements) that equitably, fairly and
reasonably relate to the manufacture of Final Product for Commercialization in
Japan shall be an Allowable Expense; provided, however, that if the Parties do not agree that
the license agreement (or such set of license
agreements) equitably, reasonably and fairly allocates the consideration for
such license to Japan, then a decision as to the proper allocation and amount
to be charged as an Allowable Expense shall be subject to arbitration under Section 16.13.  If requested by any other Party, the Party
entering into such license agreement (or such set of license agreements) shall
promptly provide such other Party with such financial information possessed by
it that reasonably relates to (x) the methodology used to allocate Third
Party Payments under such license agreement (or such set of license agreements)
to Japan and other markets, (y) the calculation of the Third Party
Payments allocable to Japan under such license agreement (or such set of
license agreements), and (z) the fairness and reasonableness of the such
allocation methodology and calculations.

 

(iii)          If BMKK/BMS, ImClone, and MJ/Merck all agree that it
is necessary or desirable to seek a
license to avoid infringing or potentially infringing a Third Party’s
patent rights with respect to the manufacture
of Final Product for Commercialization
in Japan, the Development of Final Product or Cetuximab in Japan, and/or the
Commercialization of Final Product by
BMKK or MJ in Japan in accordance with this Agreement, as the case may be, then
(except as provided in Section 7.3(a)(ii)(2)(B) with respect to a
license sought by a Party to settle patent infringement litigation brought by a
Third Party against such Party or to comply with a judgment in such litigation)
the three Parties shall cooperate in negotiating the terms of such license with
such Third Party and shall jointly agree in writing prior to making any
proposal to such Third Party regarding the terms of any such license.  Any Third Party payments payable to such Third Party under any such license
agreement approved by all the Parties that are reasonably allocable to the
manufacture of Final Product for
Commercialization in Japan, the Development of Final Product or Cetuximab in
Japan, or the Commercialization of Final Product by BMKK or MJ in Japan in accordance with this Agreement shall be taken in
to account in determining Allowable Expenses.

 

(1)           The SCJ shall determine which Party or Parties shall
enter into such a license for Japan, subject to the following guidelines:    If the license relates to a method of
manufacturing or an intermediate used in the manufacture of Cetuximab or Final
Product, then either or both of Merck/MJ and/or ImClone shall enter into one or
more licenses, as ImClone and Merck may agree best serves their respective
manufacturing interests. If the license relates to a method of use or other
patent not falling within the preceding sentence, then ImClone shall enter into
the license agreement unless otherwise agreed to by the SCJ.

 

(2)           If, notwithstanding agreement among all the Parties
as to the desirability or necessity of seeking such a license, the Parties are
unable to agree on the terms thereof, then, (x) section 7.3(a)(ii)(2) shall
apply if the license relates to a method of

 

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manufacturing or an intermediate used in the manufacture of Cetuximab
or Final Product that a Party believes it requires, and (y) section
7.3(a)(ii)(1) shall apply if the license relates to any method of use or
other patent, with the Party or Parties (BMKK/BMS, ImClone, or MJ/Merck, as the
case may be) that does not wish to agree to the Third Party’s terms to be
treated as the Declining Party for purposes of such Section 7.3(a)(ii)(1).

 

(b)           Except as expressly provided in this Agreement, no
Party shall seek or obtain a license from a Third Party after the Restatement
Effective Date of any patents or know-how
of such Third Party covering the manufacture of Final Product for Commercialization in Japan, the Development
Final Product or Cetuximab in Japan, or the Commercialization of Final
Product by BMKK or MJ in Japan in accordance
with this Agreement, without the prior written consent of the other Parties.

 

7.4           Payments to or Reports by
Affiliates.  Any payment required under any provision of
this Agreement to be made to any Party, or any report required to be made by any Party, shall be made to or by an Affiliate of that Party if
designated in writing by that Party as the appropriate recipient or reporting
entity.

 

7.5           Non-Cash Consideration.  MJ shall not
sell Final Product for any consideration
other than cash except on terms that are expressly specified in an Annual Commercialization Plan and Budget or
otherwise agreed to by the JJCC or SCJ. 
In the event MJ receives any non-monetary consideration in connection
with the sale of Final Product, the fair
market value of such other consideration shall be used to determine Net Sales,
and MJ shall disclose the terms of such arrangement to the other Parties.  For sake of clarity, the provision or use of Final
Product for Phase IIIB Clinical
Trials/Phase IV Clinical Trials or other
research purposes approved by the JJCC or SCJ to the extent permitted under
this Agreement or as samples for Commercial purposes in accordance with the Long-Term Commercialization Plan and
Budget or the applicable Annual Commercialization Plan and Budget shall not be
considered a sale for non-monetary consideration.

 

8.             MANUFACTURE AND SUPPLY.

 

8.1           General Manufacturing Structure;
Manufacturing Plan and Budget.

 

(a)           Manufacturing Plan and Budget.  The
manufacturing of Final Product for
Development and Commercial purposes shall be governed by a comprehensive annual
and a long-term Japan manufacturing plan and budget governing the manufacture and supply of bulk drug substance (API), the
fill/finish thereof, and the Packaging and Release of Cetuximab and Final
Product for use in Development and for
Commercialization in Japan (“the Japan Manufacturing
Plan and Budget”), which shall be submitted by the JJMC for
approval by the SCJ and implemented by the JJMC.  The manufacturing plan portion of the Japan
Manufacturing Plan and Budget in effect as of the Restatement Effective Date is
attached as Exhibit 8.1(a) hereto
and the budget portion of the Japan Manufacturing Plan and Budget shall be as
approved by the JJMC.  The Japan
Manufacturing Plan and Budget may be modified from time to time in accordance
with this Agreement.

 

(b)           JJMC.  The
JJMC shall oversee the arrangements for the manufacture and supply of Final
Product for Japan (including the manufacture, supply and/or conduct of API, fill/finish and the Packaging and Release of
Final Product), and the Parties shall keep the JJMC apprised in reasonable
detail of the status of their Final Product-related manufacturing activities for Japan, whether conducted internally or with Third Parties,
including prompt notification to the members of the JJMC of any significant
events that may impact the quality of Final Product or delivery schedules, or
the qualification of, or any audit of, a plant manufacturing or facility
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thereof (to the extent pertaining to or affecting the manufacture of
Cetuximab for Japan).  The JJMC will
propose for SCJ review and approval commercially reasonable and appropriate
arrangements for back up sources of supply of bulk drug substance
(API)
and Final Product and inventory levels of same to minimize the risk of supply
shortfalls, and will implement any decisions made by the SCJ.  The JJMC may also
propose for SCJ review and approval alternative arrangements to protect against
shortfalls in Final Product supply, such
as maintaining additional inventory beyond normal levels rather than engaging a
backup supply source.

 

(c)           General Structure of Manufacturing
Responsibilities.  Subject to the terms of the Manufacturing
Plan and Budget, this Agreement and relevant terms of the Existing Agreements,
the Parties shall enter into, or cause to be entered into, one or more definitive
manufacturing, supply and quality agreements between themselves (or
their Affiliates) and/or between one or
more of the Parties (or their Affiliates) and appropriate Third Parties with
respect to the manufacture and supply of API, and the fill/finish and Packaging
and Release of Cetuximab and Final Product; provided that the existing supply and
quality assurance arrangements between the Parties shall continue to apply to
the supply of Cetuximab and Final Product to Japan (as such arrangements may be
amended or renewed in accordance with this Agreement to address changes in the
Party manufacturing a given component of Cetuximab or Final Product or
providing services in connection with Cetuximab or Final Product).  The Parties shall cooperate closely to assure
a reliable supply of Cetuximab and Final
Product conforming to applicable Specifications.

 

(i)            Through End of First Year
Post-Launch.  Until the end of the first twelve (12) months
post-Launch, ImClone will supply all API for use in the manufacture of Cetuximab
and Final Product for all uses in Japan, at ImClone’s Fully Burdened
Manufacturing Cost.  During this period,
Merck/MJ will, at its Fully Burdened Manufacturing Cost, provide fill/finish
services (either in its own facilities and/or through [**]) using the API
supplied by ImClone, and provide Packaging and Release services for Final
Product supplied for use in Japan.  For
purposes of this Agreement, “fill/finish”
includes taking the API supplied and performing all remaining activities
thereafter (including purification and rebuffering to the extent API is not
supplied in “particulate free” condition) other than the performance of
Packaging and Release activities.

 

(ii)           After First Year Post-Launch.  Not later
than at Launch, the JJMC will seek separate API supply, fill/finish supply and,
if applicable, Packaging and Release bids for a three (3) year period that
will commence as of the beginning of the thirteenth (13th) month
post-Launch (and as of each three year anniversary date thereafter of such 13th
month during the term of this Agreement). 
Such bids will be sought on a timetable that takes into account the
reasonable amount of time that will be needed (A) for the SCJ to provide a
written request for, review of, and determination and approval of the winning
bid, as well as taking into account the reasonable amount of time a winning
bidder may require to plan for and supply the Collaboration’s API and/or
fill/finish requirements (with the Parties to use reasonable efforts to enable
the SCJ final decision to be made not later than the seventeenth (17th)
month prior to the beginning of a new three-year cycle) and (B) for the
negotiation and entry into an agreement approved by the SCJ (with the Parties
to use reasonable efforts to finalize and execute within three months after the
SCJ determination of the winning bidder and its bid).  In making its determination for a given
three-year period, the SCJ shall consider any recommendations of the JJMC,
shall consider which bidding entity has the most competitive cost (taking into
consideration the amount of any Third Party Payments that would need to be made
with respect to such Party’s or Third Party’s bid and the Parties’ relative
burdens thereof) for such three year period for the specific API formulation
selected by the JJMC and approved by the SCJ, shall consider the reliability
and accuracy of the forecasted, estimated 
Fully-Burdened Manufacturing Costs for the relevant three-year period
provided by a bidder, and

 

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shall consider any other customary manufacturer selection criteria
(e.g., quality control, risk factors, reliability, capacity, and timeliness of
supply).  The SCJ shall determine (or
advise the JJMC as to or delegate to the JJMC the determination of) the process
to be used for soliciting bids; provided, that
the bids for a round of bidding for a given component or service of Final
Product shall not be opened and reviewed by any other Party or its Affiliates
that is bidding on the API supply or fill/finish, as applicable, until the bid
deadline has passed for such round.  Each
bidding Party shall respond promptly, but in no event in later than five (5) Business
Days thereafter, to any reasonable request for additional information by any
member of the JJMC or SCJ with respect to the assumptions underlying, or any
facts and circumstances reasonably bearing upon, any cost component of such bid
or other considerations that may be taken into account as provided hereinabove
with respect to such bid.  If there is a
dispute at the SCJ as to which Party or Third Party should be the winning
bidder for API, fill/finish, and/or Packaging and Release within the time frame
targets described hereinabove, then the matter may be referred by any Party on
the SCJ for baseball arbitration under Section 16.13 as to which Party or
Third Party should be the winning bidder. 
In order to avoid undue delay, if the winning bidder has not been
selected and approved by the SCJ within thirty (30) days after receipt of the
first bid from all the Parties, any Party may refer such matter for a decision
by an arbitrator using baseball arbitration under Section 16.13(a) on
an expedited basis to pick the winning bidder based on the bids submitted in
the round of bidding immediately preceding referral of the dispute to
arbitration.  Subject to the foregoing
and to Sections 8.1(c)(iii)-(v), the following shall apply in connection with
the bidding process with respect to each such three year period:

 

(A)          For API.  ImClone shall be required to bid on
the supply of all API required under this Agreement for use in the manufacture
of Cetuximab and Final Product for use and/or sale in Japan at a price not
greater than its Fully Burdened Manufacturing Cost.  Any bid by Merck to supply such API
requirements (if it elects to do so) must be at a price not greater than its
Fully Burdened Manufacturing Cost.  For
clarification, no Party, any of its Affiliates, nor any Third Party
shall be entitled to bid for such API supply if, where a license or other right
is needed to so manufacture and supply API for use in making Cetuximab and
Final Product for use and sale in Japan, it does not have such a license or
other right, it being understood that no such right or license is granted in
this Agreement.  The Parties shall use commercially reasonable efforts to effect a smooth
transition of API manufacturing responsibilities (and associated
contractual relationships and responsibilities) as and when a change in API
supplier is determined by the JJMC and approved by the SCJ.

 

(B)           For
fill/finish.  Merck shall be required to bid on the supply of all
fill/finish services required under this Agreement needed to manufacture
Cetuximab and Final Product for use and/or sale in Japan at a price not greater
than its Fully Burdened Manufacturing Cost. 
Any bid by Bristol/BMKK or ImClone (if either elects to bid) to
provide such fill/finish requirements shall be at a price not greater than such
bidding Party’s Fully Burdened Manufacturing Cost.  For
clarification, no Party, any of its Affiliates, nor any Third Party
shall be entitled to bid for fill/finish supply if, where a license or other
right under a patent is needed to so fill/finish API for use in making
Cetuximab and Final Product for use and sale in Japan, it does not have such a
license or other right, it being understood that no such right or license is
granted in this Agreement.  The Parties shall use commercially reasonable efforts
to effect a smooth transition of fill/finish responsibilities (and
associated contractual relationships and responsibilities) as and when a change
in fill/finish supplier is determined by the JJMC and approved by the SCJ.

 

(C)           For Packaging and Release. 
Unless otherwise agreed to by the SCJ or the Parties, MJ/Merck will
provide at its Fully-Burdened Manufacturing Cost all Packaging and Release
services required under this Agreement needed
to manufacture Cetuximab and Final Product for use and/or sale in
Japan.  If MJ/Merck no longer wishes to
provide such services and if so agreed to by the SCJ or the Parties, then such
services will be

 

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subject to the
same bidding process thereafter (which may include BMKK and Third Parties as
possible bidders) as for API and fill/finish.

 

If there is a
dispute regarding the winning bidder for the component or services described in
any of items (A)-(C) above for a particular three-year cycle, then, at the
election of the members of the SCJ not Affiliated with any Party that is a
party in interest in such dispute, the Party or its Affiliate that is obligated
to provide such component or services during the three-year period during which
such bid dispute occurs shall continue to provide such services following the
end of such three-year period on the same terms as such Party provided such
component or services during such prior period for the length of time that it
takes to resolve such dispute (either until the SCJ ratifies the winning bidder
or the matter is resolved by arbitration as provided hereinabove); provided,
that if the winning bidder is able to assume its duties at the end of the
original three-year term or during the pendency of any such extended period
following the end of the original three-year term, the winning bidder may do so
upon written notice to the other Parties.

 

(iii)          Bidding
Requirements.  If only one Party is bidding to supply a
given component or service (API, fill/finish or Packaging and Release, as the
case may be) for a given three-year period, then no bidding process shall be
required of such Party for such three year term, but it shall provide all
information needed by the other Parties for budgeting and forecasting
purposes.  If the preceding sentence does
not apply to a given component or service (i.e., API, fill/finish or Packaging
and Release) for a given three year period, and if a Party is required to or
elects to bid under 8.1(c)(ii)(A)-(C) above, such Party shall provide a
good faith estimate of the Fully-Burdened Manufacturing Cost reasonably
expected by it for each year during such three (3) year period and the
assumptions made by it in determining such cost, and shall complete and submit
the “Manufacturing Cost Worksheet” in the
form approved by the JJMC in connection with its bid.  [**].

 

(iv)          Specific Responsibilities.  As of the
Restatement Effective Date, the Parties contemplate that, unless otherwise approved by the SCJ, API shall be
sold to Merck and its Affiliates (or to a Third Party under contract to Merck
and its Affiliates), and MJ and Merck shall be responsible for arranging
for the fill/finish and the Packaging and Release of Cetuximab and Final Product for use and sale in Japan; provided, that the Parties will seek to
qualify a back-up supplier at all times during the term of this Agreement in
order to minimize the risk of Cetuximab or Final Product shortage.  The Parties agree that [**] will be qualified
as a back-up supplier of API and of filled/finished Final Product for the
initial Launch supply.  In addition, the
Parties agree that Merck’s Japan manufacturing facility will be submitted as a
Final Product Packaging and Release facility, with Merck’s Darmstadt, Germany
facility as the back-up Packaging and Release facility.  Merck shall also be responsible for
performing Cetuximab and Final Product regulatory responsibilities consistent
with its ownership of the JNDA for Final Product and any related Approval for
Japan.  The Parties agree to implement
such responsibilities through written agreements that shall include other
customary terms and conditions consistent with this Agreement and applicable
Existing Agreements, which agreements must be approved by the SCJ.  A Party shall
be responsible for the due performance of any manufacturing obligations
(whether API, fill/finish, Packaging and Release) for Cetuximab or Final
Product that may be delegated by it to any of its Affiliates or to Third Party
contractors.

 

(v)           Supply or Capacity
Problems.  If ImClone is the
API supplier and is unable to furnish the quantity of API required under this
Agreement, then Merck shall use commercially reasonable efforts to supply the
shortfall of API, to the extent that Merck has available capacity, at a price
equal to the higher of (A) the then-existing ImClone supply price or (B) Merck’s
Fully Burdened Manufacturing Cost.  If
Merck is the API supplier and is unable to furnish the quantity of API required
under this Agreement, then ImClone shall use

 

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commercially reasonable
efforts to supply the shortfall of API, to the extent that ImClone has
available capacity, at a price equal to the higher of (A) the
then-existing Merck supply price or (B) ImClone’s Fully Burdened
Manufacturing Cost.  If ImClone or BMS is
the fill/finish supplier and is unable to furnish the quantity of fill/finish
required under this Agreement, then Merck shall use commercially reasonable
efforts to supply the shortfall of fill/finish to the extent that Merck has
available capacity and a facility that is qualified and/or approved by
applicable Regulatory Authorities to provide the specific fill/finish activity
for Cetuximab and Final Product to be used in Japan (and allowing for a
reasonable period of time to ramp up the necessary activities and support
structure), at a price equal to [*].  If
Merck is the fill/finish supplier and is unable to furnish the quantity of
fill/finish required under this Agreement, then ImClone or BMS (whichever is
then performing fill/finish, or has contracted with a Third Party to provide
fill/finish, for the U.S. market) shall use commercially reasonable efforts to
supply the shortfall of fill/finish to the extent that they have available
capacity and a facility that is qualified and/or approved by applicable Regulatory
Authorities to provide the specific fill/finish activity for Cetuximab and
Final Product to be used in Japan (and allowing for a reasonable period of time
to ramp up the necessary activities and support structure, at a price equal to [*].

 

(vi)          Particulate Free
Formulation.  Unless otherwise
agreed to by all of the Parties, the particulate free formulation will be used
in Japan.

 

8.2           Manufacturing Responsibilities.

 

(a)           Each Party manufacturing or formulating (or whose
Affiliates manufacture or formulate or who contracts itself or through its
Affiliates with Third Parties for the manufacture or formulation of) the Final
Product or any intermediates or
components thereof (including API), as well as any fill/finish or
Packaging and Release of Final Product, whether for Commercialization, sale or
Phase IV Clinical Development use in Japan, shall
be responsible for ensuring that, and represents, covenants, and warrants to
the other Parties that, such Final Product or any intermediates or components thereof (including API) so manufactured or
formulated by it or its Affiliates (or for it or its Affiliates by Third
Parties), and any fill/finish or Packaging and Release of Final Product
conducted by it or its Affiliates (or for it or its Affiliates by Third Parties),
will (i) be manufactured, formulated, fill/finished, and Packaged and
Released, as the case may be, in compliance with in all material respects with
cGMP and all other Applicable Laws and in
compliance with its own internal standards, policies, and procedures; (ii) conform
to applicable Specifications therefor; (iii) not be adulterated when under
the control of such Party or any of its Affiliates (or the control of a Third
Party with which such Party or its Affiliates have contracted) or, for Final
Product supplied by such Party or its Affiliates, be misbranded, and (iv) conform
in all material respects to the certificates of analysis supplied with the
shipment of the Product or components thereof by such Party (or by any of its
Affiliates or Third Party contract manufacturers).

 

(b)           Each Party manufacturing or formulating (or whose
Affiliates manufacture or formulate or who contracts itself or through its
Affiliates with Third Parties for the manufacture or formulation of) Cetuximab
or any intermediates or components thereof
(including API), as well as any fill/finishing or Packaging and Release
thereof, whether for Phase I-IIIB Clinical Development or other preclinical
study in Japan, shall be responsible for
ensuring that, and represents, covenants, and warrants to the other Parties
that, such Cetuximab or any
intermediates or components thereof (including API) so manufactured or
formulated by it or its Affiliates (or for it or its Affiliates by Third
Parties), and any fill/finishing or Packaging and Release of Cetuximab
conducted by it or its Affiliates (or for it or its Affiliates by Third
Parties), will (i) be manufactured, formulated, fill/finished, Packaged
and Released, as the case

 

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may be, in
compliance with in all material respects with cGMP and all other Applicable
Laws and in compliance with its own internal
standards, policies, and procedures; (ii) conform to applicable
Specifications therefor; and (iii) conform in all material respects to the
certificates of analysis supplied with the shipment of the Product or
components thereof by such Party (or by any of its Affiliates or Third Party
contract manufacturers).

 

(c)           In the event a Party desires at any time to
transfer any of the API supply, fill/finish, or Packaging and Release of Final
Product to one of its other sites from a site where such activity is then being
conducted, then, subject to any requirements under the Existing Agreements or
as may be imposed by Applicable Law, it may do so upon not less than six months’
written notice (or such shorter period to which the JJMC or SCJ may agree or as
may be necessary to comply with Applicable Law) to the other Parties; provided, that except where such site transfer change was
required by a change in Applicable Law that could not have been reasonably
anticipated at the time its bid was accepted, or where such site transfer was
contemplated and disclosed (together with the applicable Fully-Burdened
Manufacturing Cost adjustment of same) as part of its bid that was accepted for
the activities to be performed by it under Section 8.1(c)(ii)(A)-(C),
then, [**].

 

(d)           The
development of all packaging for Final Product in Japan shall be determined and approved by the JJMC consistent with the
applicable Long-Term Commercialization Plan and Budget and Annual
Commercialization Plan and Budget, with the Manufacturing Plan and Budget, with
Applicable Law, and with Final Product
labeling approved by the Japanese Regulatory Authorities.  The Party or Parties manufacturing Final
Product shall also be identified on the packaging for the Final Product as
required by Applicable Law.  As of the
Restatement Effective Date, the current version of the packaging design for
launch of the 100 mg dose, which has not yet been finalized by the JJMC, is set
forth in Exhibit 8.2(d) hereto.

 

8.3           Specifications, Forecasts, and Terms
of Supply.

 

(a)           The JJMC shall review the Specifications from time to
time, and propose for SCJ review and approval such modifications to the extent
such modifications would directly affect the Development or Commercialization
of Cetuximab or Final Product in Japan; provided, that
if such modification is necessary to comply with required changes to Applicable
Law, then no Party’s members of the SCJ or any Subcommittee thereof will
unreasonably withhold or delay consent to such changes to the Specifications
that are needed to implement such change in Applicable Law, and a manufacturing
Party shall be entitled to proceed with implementation of such changes needed
to comply with Applicable Law pending final approval of the SCJ; and provided, further, that if any such modification to the
Specifications for Cetuximab or Final Product in Japan is proposed in order to
comply with a voluntary (i.e., one not required by a change in applicable Law)
change to the Specifications proposed by a Party that is responsible for the
manufacture or provision of the component or service with respect to which the
change in Specifications is proposed to made, and such change to the
specifications is necessary to make the Specifications consistent with changes
made or proposed to be made to Cetuximab or Final Product for commercial sale
in the EU or the US, then, if such change to the EU specifications is approved
by Merck (if made for the EU) or BMS (if such change is for the U.S.), then the
consent of the other Parties’ members of the SCJ or any Subcommittee thereof to
such change shall not be unreasonably withheld or delayed.  Any Party required to implement a required
change to the Specifications shall have a reasonable period of time in which to
implement such change.

 

(b)           The JJMC shall establish procedures regarding
forecasts for requirements of API, Cetuximab, and Final Product for Commercialization in Japan, and ordering procedures
to be followed by the Parties for securing such supplies.  At a minimum,

 

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the procedure must include provision of an eighteen month rolling
forecast, which forecast shall show: (i) for the first six months of such
forecast, the quantities that were firm ordered pursuant to the two immediately
prior forecasts, (ii) for months seven through nine of such forecast, the
amount that is being firm ordered to be delivered in the months seven through
nine of such forecast (with specific quantities and delivery dates by month if
applicable), and (iii) for months ten through eighteen of such forecast, a
good faith estimate of quarterly requirements only.  [**] 
Forecasts shall be updated every three months.  Any failure of a Party to supply API or
fill/finish requirements in excess of the binding forecast will not be a breach
of this Agreement.  The first such
forecast is attached as Exhibit 8.3
hereto, and indicates the quantities firm ordered for the next nine (9) months
after the Restatement Effective Date.

 

(c)           Each Party shall use Diligent Efforts to carry out
its responsibilities under this Article 8 and will ensure timely supply of
the Parties requirements for the Japan market in accordance with applicable
Specifications.

 

8.4           Shortage of Supply.  In the event
that sufficient quantities of either API or Final Product are not available
from a given Party (or its Affiliates) to meet the binding order set forth in Section 8.3(b) and
such other countries supplied by such Party, then, notwithstanding any contrary
terms that may apply in the Existing Agreements, the remaining available API or
Final Product (or components or services needed to supply Final Product) will
be allocated by the Party controlling the supply of API or Final Product (or
such components or services needed to supply Final Product) that is in short supply in proportion to the relative gross
unit volume sales levels of Final Product that are forecast for sale in Japan
compared to such forecast for such other countries to be supplied by such
manufacturer for the period during which such shortage is reasonably expected
to last, subject to any limitations imposed by applicable laws, rules and
regulatory requirements; provided,
that such Party will give priority in making such allocation to existing users
of the Final Product over new users, and further provided,
that to the extent that any such shortage shall have occurred for reasons
beyond the reasonable control of such Party and attributable to an event of
Force Majeure (such shortage, a “FM Shortage”),
[**] under this Agreement or any Existing Agreement for any allocation pursuant
to this Section 8.4 of such FM Shortage among Japan and all the other
territories under  the Existing
Agreements, [**].  The Parties will
provide all reasonable cooperation and information (including comparisons of
actual demand to prior forecasts for the affected countries) to the Party
determining such allocation.

 

8.5           Inventory.  The
JJMC shall determine appropriate levels of inventory of intermediates, API and Final
Product to meet the Parties’ anticipated needs
within Japan, but, in the event the JJMC fails to do so, the Party controlling
the bulk drug substance (API) or Final Product shall maintain a commercially
reasonable level of inventory of same.

 

8.6           Manufacturing Costs and Fees.

 

(a)           Subject to Section 4.5(e):  (i)(A) a Party or its Affiliate that is
the API supplier shall contract with a Party (or its Affiliate) that is
fill/finish supplier to supply API in accordance with this Agreement, and (B) a
Party or its Affiliate that is the fill/finish supplier shall contract with a
Party (or its Affiliate) that is the Packaging and Release supplier to provide
the relevant fill/finish services in accordance with this Agreement, and (ii) [**].  The costs incurred by any Party for
manufacturing or purchasing from a Third Party quantities of any intermediate
or other component, any API, fill/finish
services, Packaging and Release services, Cetuximab or Final Product for use in Japan shall be treated as Fully-Burdened Manufacturing
Costs (to the extent included in such defined term).

 

(b)           [**],
and shall be included as a Manufacturing Cost for such API, Cetuximab or Final
Product, as applicable.

 

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(c)                                                                                  For clarity, to the extent solely necessary
for Japan:

 

(i)                                     Fully-Burdened Manufacturing Costs incurred for (A) long
term stability testing batches to meet specific Japan regulatory requirements
and (B) activities conducted prior to the production of successful
validation batches for Final Product for
Japan shall be included in Development Costs for Japan.  Also, the Fully-Burdened Manufacturing Costs
of any validation batches for Japan which are not used for Commercial sale shall be included in Development Costs for
Japan.

 

(ii)                                  Fully-Burdened Manufacturing Costs incurred for
activities connected with validation batches which are used for Commercial sale in Japan and all subsequent manufacture of Final
Product for Commercial sale in Japan shall be included in Fully-Burdened
Manufacturing Costs for the commercial supply of Final Product in Japan and included as an element of Allowable Expenses.

 

8.7                                 Product Recall.

 

(a)                                                                                  In
the event that a Party obtains information that Final Product or any portion
thereof should be alleged or proven not to meet the Specifications therefor,
the labeling requirements applicable thereto, the Regulatory Approval for such
Final Product or to be otherwise defective in the Territory, such Party shall
notify the other Parties immediately and all Parties shall cooperate fully
regarding the investigation and disposition of any such matter, including with
respect to any recall or withdrawal of such Final Product, as appropriate
(collectively, a “Recall”).  Each Party shall maintain such traceability
records as are sufficient and as may be necessary to permit a recall or field
correction of any Final Products.  If: (i) any
applicable Japan Regulatory Authority should issue a request, directive or
order that a Final Product be recalled, (ii) a court of competent
jurisdiction orders such a Recall in Japan, (iii) the SCJ determines
(where circumstances permit an SCJ determination) that a Recall of such Final
Product is appropriate in Japan, or (iv) circumstances do not permit an
SCJ determination for time and patient safety reasons such that MJ must make
the determination (but only after such telephonic consultation with each Party’s
members of the SCJ as circumstances permit) that a Recall of such Final Product
is appropriate in Japan, then, in each case (i)-(iv), MJ shall give telephonic
notice (to be confirmed in writing) to the other Parties within two (2) Business
Days of the occurrence of such event.

 

(b)                                                                                 Once
a decision to make a Recall has been made under Section 8.7(a), Merck
shall consult with the other Parties through the JJCC, but Merck shall have
sole responsibility for determining all corrective action to be taken, and for
carrying out any Recall, in Japan, unless the Regulatory Approvals and dossiers
for Final Product have been assigned to ImClone, BMS or BMKK, in which case
such assignee shall have the responsibility. 
Each Party will provide full cooperation and assistance to Merck or such
other Party in connection therewith as may be requested by Merck of such other
Party.  The costs of any such Recall
shall be a Regulatory Expense, except to the extent that the recall or
withdrawal is attributable to the negligence of a Party or failure of a Party
or its contractors to manufacture Final Product or any component thereof or conduct
fill/finish or Packaging and Release in accordance with Specifications in which
event (x) such Party shall bear such costs and (y) such costs shall
not be included in Regulatory Costs or Allowable Expenses.  Under no circumstances shall a Party unreasonably
object to a recall or withdrawal requested by a Party, and no Party shall have
any right to object to a recall or withdrawal requested by another Party for
failure of a Final Product to meet applicable Specifications or for material
safety concerns.

 

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8.8                                 Post-Termination Manufacturing.

 

(a)                                  By Merck.  In the event of the termination of
this Agreement pursuant to Sections 14.2, 14.3, 14.4 or 14.5 and to the extent
that the Final Product, any procedure in the manufacture thereof, any API
or other component used for formulation of Final Product, any fill/finish or packaging, or any QC/QA or release
activities is, at the time of such termination, manufactured, performed or
conducted by Merck or any of its Affiliates with respect to Japan (or by Third
Parties contracted to do so by or on behalf of Merck or any of its Affiliates)
(collectively, “Merck Manufactured
Components”), then,
notwithstanding any provision to the contrary in the Existing Agreements, Merck
shall use commercially reasonable efforts to manufacture and supply, perform or
conduct same to or for the benefit of ImClone (for its own benefit and for the
benefit of BMS) and/or BMS/BMKK, with such Merck Manufactured Components,
solely for Development and Commercialization purposes in Japan of
Cetuximab and Final Product (as may required by BMS/BMKK and ImClone for the
Japan market during such period), for a period of not more than [**] months
post-termination, at a price equal to the sum of (i) [**] of Merck’s Fully
Burdened Manufacturing Costs, plus (ii) any [**] that are fairly and
reasonably allocable to the manufacture by it, its Affiliates or contractors of
Final Product, API or any component of the foregoing and supplied by it under
this Section 8.8 for use or Commercialization in Japan on or after such
termination date (other than Third Party Payments to the extent that the same
would otherwise fall within Merck’s indemnification obligations under Section 13.1
or within an exclusion for which Merck is responsible under any of Sections
13.2(a)-(h)); provided,
that, subject to Section 8.3: (A) Merck shall not be obligated to so
supply ImClone (except where and to the extent that ImClone is obligated to
supply or manufacture same for BMS/BMKK for the Japan market) if the basis for
termination pursuant to Section 14.2, 14.3, or 14.4 was a material breach
by ImClone or its Affiliates of this Agreement or the Merck-ImClone Agreement;
and (B) Merck shall not be obligated to so supply BMS (except where and to
the extent BMS or its Affiliates are obligated to supply or manufacture same
for ImClone for the Japan market) if the basis for termination pursuant to Section 14.2,
14.3, or 14.4 was a material breach by BMS or its Affiliates of this Agreement
or of the BMS-ImClone Agreement.  During this [**]-month period, (iii) the Parties
shall, subject to Section 8.3, coordinate their forecasts in a manner such
that Merck shall have reasonable advance notice of such requirements and such
that ImClone and BMS/BMKK shall be assured of obtaining timely supply, and (iv) ImClone
and/or BMS shall use commercially reasonable efforts to transition, and to provide
and share such know-how and information on a timely basis as is needed in order
to so transition, the manufacture or performance of such Merck Manufactured
Components as promptly as reasonably practicable (not to exceed [**] months) to
a facility approved by the applicable Regulatory Authorities (and that is owned
or leased by BMS, ImClone or their Affiliates, or contractors under contract to
any of them, including contractors who may have been supplying or performing
such Merck Manufactured Component for Merck previously) for the manufacture of
such Merck Manufactured Component for Commercial use of Final Product in Japan and,
upon procurement of such approval and written acknowledgement by BMS and/or
ImClone, as the case may be, that it can assume its own supply of such Merck
Manufactured Component, this obligation of Merck shall cease.

 

(b)                                 By ImClone.  In the event of the termination of
this Agreement pursuant to Sections 14.2, 14.3, or 14.4 and to the extent that
the Final Product, any procedure in the manufacture thereof, any API or
other component used for formulation of Final Product, any fill/finish or packaging, or any QC/QA or release activities is, at
the time of such termination, manufactured, performed or conducted by ImClone
or any of its Affiliates with respect to Japan (or by Third Parties contracted to do
so by or on behalf of ImClone or any of its Affiliates) (collectively, “ImClone Manufactured Components”), then, notwithstanding any provision to the
contrary under the Existing Agreements, ImClone shall use commercially reasonable efforts to
manufacture and supply, perform or conduct same to or for the benefit of
Merck/MJ and BMS/BMKK with such ImClone Manufactured Components, solely for
Development and Commercialization purposes in Japan of Cetuximab and
Final Product (as may required by

 

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BMS/BMKK and Merck/MJ for the Japan market during
such period), for a period of not more than [**] months post-termination, at a
price equal to the sum of (i) [**] of ImClone’s Fully Burdened
Manufacturing Costs, plus (ii) any [**] that are fairly and reasonably
allocable to the manufacture by it, its Affiliates or contractors of Final
Product, API or any component of the foregoing and supplied by it under this Section 8.8
for use or Commercialization in Japan on or after such termination date (other
than Third Party Payments to the extent that the same would otherwise fall
within ImClone’s indemnification obligations under Section 13.1 or within
an exclusion for which ImClone is responsible under any of Sections
13.2(a)-(h)); provided,
that, subject to Section 8.3: (A) ImClone shall not be obligated to
so supply Merck (except where and to the extent that Merck or its Affiliates
are obligated to supply or manufacture same for BMS/BMKK for the Japan market)
if the basis for termination pursuant to Section 14.2, 14.3, or 14.4 was a
material breach by Merck or its Affiliates of this Agreement or the
Merck-ImClone Agreement; and (B) ImClone shall not be obligated to so
supply BMS (except where and to the extent that BMS or its Affiliates are
obligated to supply or manufacture same for Merck/MJ for the Japan market) if
the basis for termination pursuant to Section 14.2, 14.3, or 14.4 was a
material breach by BMS or its Affiliates of this Agreement or of the
BMS-ImClone Agreement.  During this time, (iii) the Parties shall,
subject to Section 8.3, coordinate their forecasts in a manner such that
ImClone shall have reasonable advance notice of such requirements and such that
Merck and BMS shall be assured of obtaining timely supply, and (iv) Merck
and/or BMS shall use commercially reasonable efforts to transition, and to
provide and share such know-how and information on a timely basis as is needed
in order to so transition, the manufacture or performance of such ImClone
Manufactured Components as promptly as reasonably practicable (not to exceed
[**] months) to a facility approved by the applicable Regulatory Authorities
(and that is owned or leased by BMS, Merck or their Affiliates, or contractors
under contract to any of them, including contractors who may have been
supplying or performing such ImClone Manufactured Component for ImClone
previously) for the manufacture of such ImClone Manufactured Component for Commercial use of Final Product in Japan and, upon procurement of such approval and
written acknowledgement by BMS and/or Merck, as the case may be, that it can
assume its own supply of such ImClone Manufactured Component, this obligation
of ImClone shall cease.

 

(c)                                  By BMS.  In the event of the termination of
this Agreement pursuant to Sections 14.2, 14.3, 14.4 or 14.5, and to the extent
that the Final Product, any procedure in the manufacture thereof, any API
or other component used for formulation of Final Product, any fill/finish or packaging, or any QC/QA or
release activities is, at the time of such termination, manufactured, performed
or conducted by BMS or any of its Affiliates with respect to Japan (or by Third
Parties contracted to do so by or on behalf of BMS or any of its Affiliates)
(collectively, “BMS Manufactured
Components”), then,
notwithstanding any provision to the contrary in the Existing Agreements, BMS
shall use commercially reasonable efforts to manufacture and supply, perform or
conduct same to or for the benefit of ImClone (for its own benefit and for the
benefit of Merck/MJ) and/or MJ/Merck, with such BMS Manufactured Components,
solely for Development and Commercialization purposes in Japan of
Cetuximab and Final Product (as may
required by MJ/Merck and ImClone for the Japan market during such period), for
a period of not more than [**] months post-termination, at a price equal to the
sum of (i) [**] of BMS’ Fully Burdened Manufacturing Costs, plus (ii) any
[**] that are fairly and reasonably allocable to the manufacture by it, its
Affiliates or contractors of Final Product, API or any component of the
foregoing and supplied by it under this Section 8.8 for use or
Commercialization in Japan on or after such termination date (other than Third
Party Payments to the extent that the same would otherwise fall within BMS’s
indemnification obligations under Section 13.1 or within an exclusion for
which BMS is responsible under any of Sections 13.2(a)-(h)); provided, that,
subject to Section 8.3: (A) BMS shall not be obligated to so supply
ImClone (except where and to the extent that ImClone or its Affiliates are
obligated to supply or manufacture same for Merck/MJ for the Japan market) if
the basis for termination pursuant to Section 14.2, 14.3, or 14.4 was a
material breach by ImClone or its Affiliates of this

 

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Agreement, the BMS-ImClone
Agreement, or the Merck-ImClone Agreement; and (B) BMS shall not be
obligated to so supply Merck (except where and to the extent that Merck or its
Affiliates are obligated to supply or manufacture same for ImClone for the
Japan market) if the basis for termination pursuant to Section 14.2, 14.3,
or 14.4 was a material breach by Merck or its Affiliates of this Agreement or
of the Merck-ImClone Agreement. 
During this time, (iii) the Parties
shall, subject to Section 8.3, coordinate their forecasts in a manner such
that BMS shall have reasonable advance notice of such requirements and such
that ImClone and Merck shall be assured of obtaining timely supply, and (iv) ImClone
and/or Merck or their Affiliates shall use commercially reasonable efforts to
transition, and to provide and share such know-how and information on a timely
basis as is needed in order to so transition, the manufacture or performance of
such BMS Manufactured Components as promptly as reasonably practicable (not to
exceed [**] months) to a facility approved by the applicable Regulatory
Authorities (and that is owned or leased by Merck, ImClone or their Affiliates,
or contractors under contract to any of them, including contractors who may
have been supplying or performing such BMS Manufactured Component for BMS
previously) for the manufacture of such BMS Manufactured Component for Commercial use of Final Product in Japan and, upon procurement of such approval and
written acknowledgement by Merck and/or ImClone, as the case may be, that it
can assume its own supply of such BMS Manufactured Component, this obligation
of BMS shall cease.

 

(d)                                                                                 Additional Obligations.  The Party
who, pursuant to Section 8.8(a), 8.8(b) or 8.8(c) remains
obligated to provide such Manufactured Components for up to [**] months,: (i) shall
continue to use commercially reasonable efforts during such [**] month period
to maintain, and to perform its obligations under, any separate
manufacturing agreements relating to or covering the Japan market for Cetuximab
and Final Product as it may have entered into prior to the termination of this
Agreement (whether with the Parties hereto (or their Affiliates) or with Third
Parties) in accordance with the terms thereof and shall remain entitled to any
rights, benefits and compensation under such agreements; and (ii) shall
continue to comply with, and abide by its obligations under, Sections 8.2,
8.3(c), 8.4 through 8.7, and 8.9 of this Agreement during such [**]
period.  Nothing in Section 8.8(a)(ii),
8.8(b)(ii) or 8.8(c)(ii) is intended to alter any royalty-sharing
arrangements that the Parties may have under their respective Existing
Agreements.

 

8.9                                 Other Covenants.

 

(a)                                                                                  During the period that any
Party is responsible under this Agreement for
manufacturing of API or Final Product, or conducting
fill/finish, Packaging and Release or Distribution activities of Cetuximab or
Final Product for use or sale in Japan, except as permitted under Section 10.4,
such party shall not breach or terminate any existing agreement with a Third
Party that would have a material adverse effect upon the supply, price or
quality of, or timeliness of delivery of, any API, Cetuximab, or Final Product
or the performance of such activities, or enter into a new agreement with a
Third Party that is not consistent with the terms of such Party’s manufacturing
responsibilities under this Agreement.

 

(b)                                                                                 Appropriate
Manufacturing Quality and Audit agreements shall be maintained by each Party
for all key steps in the manufacture of API and Final Product and the Packaging
and Release and storage of same, whether supplied or purchased by it, at all
times during the terms this Agreement, which agreements shall cover customary terms
and conditions included in such agreements. 
Any Party may request to review any such agreements at any time, and the
Party who is required to have entered into same shall provide the requesting
Party promptly with a copy thereof.

 

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9.                                      TRADEMARKS; PRODUCT MARKING.

 

9.1                                 Product Trademarks.

 

(a)                                  Ownership of Product Trademarks.  The Parties shall use the ERBITUX® Trademark (the “Product
Trademark”) on the Final Product during the Co-Promotion Term
without the addition or use of any other trademarks other than a Corporate Name
to the extent required by
Applicable Law, or any of the Existing
Agreements (and which in no event shall be joined to the Product Trademark in a
manner that creates a new mark involving such Corporate Name).  Merck, MJ and ImClone acknowledge and agree
that ImClone shall own all right, title and interest in and to said Product
Trademark in Japan.   During the period
commencing on the Restatement Effective Date and until the date that is ten (10) years
after termination of the Co-Promotion Term: (i) BMS, BMKK and their
Affiliates shall not attack, dispute or
contest the validity of or ownership of such Product Trademark in Japan, and
agree that no ownership rights are vested or created in any of them in such
Product Trademark in Japan by virtue of any licenses and other rights granted
to BMS or BMKK under this Agreement; (ii) MJ, Merck and their Affiliates shall not attack, dispute or contest the validity of or
ownership of such Product Trademark in Japan, and agree that no ownership
rights are vested or created in any of them in such Product Trademark in Japan
by virtue of any licenses and other rights granted to MJ or Merck under this
Agreement; and (iii) subject to Section 14.4(a), all uses of such Product Trademark on Final Product in Japan during the Co-Promotion Term, whether in combination
with or apart from BMS’ Corporate Names and/or the Merck Corporate Names, including any goodwill generated in connection
therewith, inures to the benefit of ImClone, and ImClone may call for a
confirmatory assignment thereof.

 

(b)                                 Use of Product Trademarks.  During the period
commencing on the Restatement Effective Date and ending upon termination of the
Co-Promotion Term: (i) Merck, BMKK, BMS and MJ agree that the Product Trademark will be affixed to Final Product and will be used exclusively in furtherance of the objectives
of this Agreement and the Existing Agreements; (ii) MJ
and BMKK shall have the co-exclusive right and license to use the Product
Trademark in Japan as required and/or permitted by this Agreement; and (iii) the
Parties shall comply with this Section 9.1(b) in connection with such
use of the Product Trademark on Final Product in Japan.  Each Party
shall use commercially reasonable efforts after the Restatement Effective Date
until notice of termination is provided by any Party as to termination of the
Co-Promotion Term not to do any act which endangers, destroys or similarly
affects, in any material respect, the value of the goodwill pertaining to the
Product Trademark.  Further, except when
used in accordance with any usage guidelines agreed to by the SCJ or any
applicable Subcommittee under this Agreement, or except when a use is otherwise approved in accordance with other
provisions of this Agreement, BMKK and MJ shall submit to each other any
materials bearing the Product Trademark for review and approval prior to the
use thereof.

 

(c)                                  Costs.  All costs of
prosecuting and maintaining the Product Trademark in Japan shall be paid by
ImClone, subject to such reimbursement by Merck as may be provided in the Merck-ImClone Agreements; provided that
any such reimbursement paid by Merck shall be included in Sales Costs hereunder.

 

9.2                                 Other Proprietary Trademarks.

 

(a)                                  Ownership of Corporate Names.  Each Party
shall retain all right, title and interest in and to its Corporate Names, and
agrees that it shall not attack, dispute or contest the validity of or
ownership of such other Party’s Corporate Names, or any registrations issued or
issuing with respect thereto.  Each Party
expressly acknowledges and agrees that no ownership rights are vested or
created by the limited rights of use granted under this Agreement, and that all
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goodwill generated in connection
therewith, inures to the benefit of the respective owner of the Corporate Names
and the owner of such Corporate Names may call for a confirmatory assignment
thereof.

 

(b)                                 Use of Corporate Names.  With respect
to any Corporate Names licensed to a Party under or in connection with this
Agreement, such Party agrees to conform to the customary guidelines of the
granting Party with respect to manner of use (as provided in writing by the
owner of the Corporate Name), and to maintain the quality standards of such
granting Party with respect to the goods sold and services provided in
connection with such Party’s Corporate Names. 
Each Party shall use commercially reasonable efforts not to do any act
which endangers, destroys or similarly affects the value of the goodwill
pertaining to the other Parties’
Corporate Names.  Further, except when
used in accordance with any usage guidelines provided by the owner of a
Corporate Name or a use is otherwise approved in accordance with other
provisions of this Agreement, each Party shall submit to another Party any materials bearing that other Party’s Corporate Name for review and approval
prior to the use thereof and shall make no use of such Corporate Name of that other Party without that other Party’s written consent.  Neither Party shall use, or allow any of
their Affiliates to use, in connection with the Final Product any other Trademark that is similar to or substantially similar to or so
nearly resembles another Party’s
Corporate Names as to be likely to cause deception or confusion.

 

(c)                                  Cooperation.  Each Party
shall execute any documents required in the reasonable opinion of another Party to be entered as a “registered user” or
recorded licensee of that other Party’s
Corporate Names, or to be removed as registered user or licensee thereof.

 

9.3                                 Product Trademark Infringement.

 

(a)                                  Trademark Infringement Asserted by
Third Parties in Japan.  Each Party shall notify the other Parties
through the JJCC promptly upon learning of any actual or alleged infringement
of any Trademark or of any unfair trade
practices, trade dress imitation, passing off of counterfeit goods, or like
offenses, or any such claims (hereinafter “Trademark
Infringement Claims”) brought by a Third Party against a Party
in connection with a Final Product in
Japan.  Upon learning of such Trademark
Infringement Claim, ImClone shall take all reasonable and appropriate steps to
resolve the Trademark Infringement Claim in accordance with the terms of the
Existing Agreements, with the reasonable cooperation and assistance of BMKK and
MJ.  All of the reasonable costs of
in-house counsel, the reasonable fees
and expenses paid to outside counsel, and other reasonable direct costs incurred in bringing, maintaining and
prosecuting any action described in this Section 9.3(a) shall be paid
by ImClone, subject to such
reimbursement by MJ or Merck as is provided in the Merck-ImClone Agreement
and/or by BMS or BMKK as provided in the BMS-ImClone Agreement.  No Party may
settle any such Trademark Infringement Claim without the prior written consent of the other Party(ies) if and where such
settlement may or would adversely affect
or diminish the rights and benefits of the other Party(ies) under this
Agreement, the exclusive use of the Product Trademark on Final Product
in Japan, or the value of the Product Trademark
in Japan, or would impose any new obligations on, or adversely affect any
obligations of, such other Party(ies)
under this Agreement.

 

(b)                                 Product Trademark Infringement by Third
Parties.  Each Party shall notify the other Parties in
writing promptly upon learning of any actual or alleged infringement by a Third
Party of the Product Trademark of which it becomes aware.  Upon learning of such
infringement, ImClone shall take all reasonable and appropriate steps to
resolve the infringement in accordance with the terms of the Existing
Agreements, with the reasonable cooperation and assistance of MJ and BMKK.  No Party or its Affiliates may settle any
such alleged infringement of the Product Trademark by a Third Party without the prior written

 

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consent of the other Party(ies), if such settlement would adversely affect or
diminish the rights and benefits of any Party(ies) under this Agreement, the exclusive use of the
Product Trademark on Final Product in Japan, or the value of the Product Trademark in Japan, or would impose any new
obligations on, or adversely affect any obligations of, such other Party(ies)
under this Agreement.  The expenses of
defense, settlement and judgments in actions governed by this Section 9.3(b) shall
be paid by ImClone, subject to reimbursement as provided in the Merck-ImClone
Agreement and/or by BMS or BMKK as provided in the BMS-ImClone Agreement.  The costs
and expenses of the Parties incurred in resolving any infringement of
the Product Trademark by a Third Party under
this Section 9.3(b) shall be reimbursed first out of any damages or
other monetary awards recovered (if such recovery is less than the Parties’
aggregate costs and expenses incurred in such action, such recovery shall be
allocated between the Parties on a pro rata basis based on their relative costs
and expenses incurred in such action). 
Any remaining damages shall be included in Net Sales in the year in
which recovered if during the Co-Promotion Term; otherwise, it shall be deemed
to have been recovered during the last year of the Co-Promotion Term and net
Profit Or Loss shall be recomputed with
adjusting payments to be made by the Parties based on such recomputation.

 

(c)                                  Consent of Each Party to Settlements. 
The consent of any Party to a settlement under Section 9.3(a) or
9.3(b) shall not be unreasonably withheld or delayed if and where such settlement (i) would not
materially adversely affect or materially diminish the rights and benefits of such
Party under this Agreement, the exclusive use
of the Product Trademark on Final Product in Japan, or the value of the Product Trademark in Japan, or (ii) would
not impose any material new obligations on, or materially adversely affect any
obligations of, such Party under this Agreement.

 

9.4                                 Patent Marking.  Any Final
Product marketed and sold in Japan by
the Parties hereunder shall be marked with appropriate patent numbers and
Trademarks, as approved by the JJCC.

 

10.                               SUBLICENSING; COMMERCIALIZATION
OF A COMPETING PRODUCT.

 

10.1                           No Effect on Existing Agreements.  Nothing in
this Article 10 is intended to (a) alter any obligation that a Party
and its Affiliates may have to any other Party or its Affiliates under any
Existing Agreement (including any obligation to obtain another Party’s consent
to Develop or commercialize a Competing Product in Japan or to
sublicense or assign a Party’s rights to Develop or Commercialize Final Product
under this Agreement), (b) alter, or imply any additional, license rights
under a Party’s patent rights, Trademarks copyrights or other intellectual
property rights that are granted to a Party under any Existing Agreement,
except as expressly provided in this Agreement, or (c) except as provided
in Sections 10.2 and 10.3, alter or restrict any Party’s or its Affiliates’
rights regarding any acquisition or commercialization of a Competing Product by
a Party in Japan or for any proposed or actual sublicensing or assignment of a
Party’s rights to Develop or Commercialize Final Product under this
Agreement.  The Parties acknowledge that
the Existing Agreements may impose additional obligations on one or more of the
Parties.

 

10.2                           Effect of Commercialization of a Competing Product.

 

(a)                                  By BMKK or MJ.  Should
BMS/BMKK or Merck/MJ Develop (after the date that a product became a Competing
Product), promote or otherwise commercialize a Competing Product in Japan
(whether by itself, through an Affiliate, through co-promotion or co-marketing,
or through the grant of a license or sublicense to a Third Party to manufacture
or Commercialize a Competing Product), the other Parties to this Agreement
shall have no right to terminate the rights granted to such Party (a “Competing Product Party”) under this
Agreement with respect to Cetuximab or Final Product, provided that such
Competing Product Party

 

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continues thereafter to fulfill its
obligations and to discharge its responsibilities under this Agreement
(including using its Diligent Efforts to co-Develop and co-Commercialize Final
Product hereunder); provided, that (i) the
foregoing shall not change or affect any
obligations of a Party under, or any remedies that may be available to a Party
under, the Existing Agreements with respect to such Competing Product and (ii) shall
not, subject to the foregoing, affect any other rights or remedies that are
otherwise available to a Party at law or in equity.

 

(i)                                     Such
Competing Product Party shall take immediate steps to abide by its obligations
under Section 6.4(c), if it has not already done so, and further, shall (A) ensure
that its clinical development employees that have direct responsibility on a
day-to-day basis for the Development of Final Product (but not such employees’
managers who spend the majority of their time on products other than Final
Product) shall be separate from those employees that are responsible thereafter
for the development of the Competing Product (it being understood that, if
Merck/MJ is the Competing Product Party, then MJ shall continue to provide the
services set forth in Section 6.7 with respect to Final Product for such
Indication), and (B) establish appropriate firewalls to prevent leakage of
key, nonpublic Development information and strategies from such Final Product
clinical development employees to the separate clinical development employees
that thereafter Develop the Competing Product. 
However, in the event of any dispute between the Competing Product Party
and either Merck/MJ or BMS/BMKK (whichever one that is not the Competing
Product Party), and if such dispute relates to the Development (other than
matters relating to additional funding or resources for Development purposes to
be provided by the Party with the Competing Product) or Commercialization of
Final Product hereunder, then whichever of Merck/MJ or BMS/BMKK that is not the
Competing Product Party shall have final decision-making authority with respect
to such dispute, but only after escalation of such dispute for resolution to
the senior executives of Merck/MJ and BMS/BMKK set forth in Section 2.5(f) and
such executives’ failure to resolve such dispute in good faith; provided, that (1) whichever of Merck/MJ or BMS/BMKK
that is not the Competing Product Party shall be entitled, if there is a dispute,
to determine the terms and conditions of sale of Final Product in Japan at the
SCJ without need for escalation to said senior executives of BMS/BMKK or
Merck/MJ; (2) if both Merck/MJ and BMS/BMKK are Developing or
Commercializing a Competing Product, this sentence shall not apply, and (3) once
the Competing Product Party permanently ceases to promote or otherwise
commercialize the Competing Product, this sentence shall no longer apply.

 

(b)                                 By ImClone.  If
ImClone, any of its Affiliates, or its or their licensees or sublicensees
(other than BMS, Merck, or their respective Affiliates) acting under the
authority of such license or sublicense should Develop (after the date that a
product became a Competing Product), promote or otherwise commercialize a Competing
Product in Japan (whether by itself, through an Affiliate, through co-promotion
or co-marketing, or through the grant of a license or sublicense to a Third
Party to manufacture or Commercialize a Competing Product), then the other
Parties to this Agreement shall have no right to terminate the rights granted
to ImClone under this Agreement with respect to Cetuximab or Final Product so
long as ImClone continues thereafter to fulfill its obligations and to
discharge its responsibilities under this Agreement; provided,
that (x) the foregoing shall not change or affect any obligations of a Party under, or any remedies that may be available to
a Party under, the Existing Agreements with respect to such Competing Product, (y) shall
not, subject to the foregoing, affect any other rights or remedies that are
otherwise available to a Party at law or in equity, and (z) the following
shall apply:

 

(i)                                     ImClone shall be removed from the JJCC and JJMC (and
any other subcommittees or working groups reporting to the aforesaid
Subcommittees) and shall not receive any reports or other information provided
to Representatives of such Subcommittees; provided, that
if ImClone is then manufacturing bulk drug substance (API) or Final Product for

 

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sale in Japan, ImClone shall not be
removed from the JJMC and its Representatives shall continue to be entitled to
vote on the JJMC for so long as it continues to so manufacture; and further provided that if it has not already
done so, ImClone shall establish appropriate firewalls to prevent leakage of
material nonpublic information from its representatives on the Committees, Subcommittees,
and Working Groups to personnel that are involved with development and
commercialization of such Competing Product.

 

(ii)                                  All manufacturing agreements between the Parties and
their Affiliates shall not terminate by operation of this Agreement but shall
remain in place in accordance with their terms, and, if ImClone is then
manufacturing API or Final Product, in
whole or in part, for the Japan market, then, unless otherwise mutually agreed
upon in writing by the Parties, ImClone shall continue to do so under the terms
and conditions then existing at the time of such termination or expiration and
shall continue to have the obligation to bid on manufacturing opportunities as
provided in Article 8 of this Agreement.

 

(c)                                  Clarification.  This section
10.2 shall not apply to the Development of a product prior to the time that
such product becomes a Competing Product.

 

10.3                           Sublicensing.  Subject to Section 10.2
and/or the Existing Agreements, in the event that any Party would like to sublicense all of its rights and
obligations under this Agreement to a Third Party, the following conditions
shall apply to any such proposed
sublicense or assignment:

 

(a)                                  No such sublicense may be made until the date that is
at least [**] after Launch of Final Product in Japan.

 

(b)                                 No such sublicense may be made in part, but only as a
sublicense of all of such Party’s rights and obligations under this
Agreement.  Any such sublicense shall
terminate upon the termination or expiration of such Party’s rights under this
Agreement.

 

(c)                                  The Party proposing to sublicense (the “Sublicense Proposing Party”) shall
obtain the consent of the other Parties to the proposed sublicensee (“Sublicensee”) or assignee, which
consent shall not be unreasonably withheld or delayed if such proposed sublicensee is an entity [**], or otherwise possesses substantial oncology
commercialization experience, sufficient resources, trained employees in
oncology, and other necessary capabilities to effectively Develop (to the
extent then called for by the Annual Development Plan and Budget or the
Long-Term Development Plan) and Commercialize Final Product in Japan.

 

(d)                                 The Sublicense Proposing Party, the proposed
Sublicensee, and the other Parties shall have agreed upon any necessary changes
to this Agreement and any Existing Agreements required to effect such
sublicense, including the terms and conditions of or relating to governance
among the remaining Parties and such proposed Sublicensee.

 

(e)                                  The Sublicense Proposing Party hereby guarantees the
performance of this Agreement by its Affiliates and permitted Sublicensees as permitted in this Section 10.3, and the
grant of any such sublicense of the Sublicense Proposing Party’s rights and
obligations under this Agreement shall not relieve the Sublicense Proposing
Party of its obligations under this Agreement, except to the extent they are
satisfactorily performed by such Sublicensee.  Any such permitted sublicense
shall be consistent with and subject to the terms and conditions of this
Agreement.  A copy of any sublicense
agreement executed by a Sublicense Proposing Party shall be provided to the
other Parties within fourteen (14) days of its execution; provided that the financial terms of any
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pertinent to an understanding of a
Party’s obligations or benefits under this Agreement (e.g., consideration paid
to a Party for the sublicense by the Sublicensee may be redacted).

 

(f)                                    Except for the foregoing, [**].

 

(g)                                 Each Party acknowledges that a Party that grants a
Sublicense in violation of the foregoing will cause the non-breaching Parties
irreparable harm, for which monetary damages will not be an adequate remedy.  Therefore, in the event of
any such breach of this Section 10.3, any non-breaching Party shall be entitled, in addition to any other remedy
available to it under this Agreement, at law or in equity, to injunctive relief
to prevent the grant of such Sublicense.

 

(h)                                 BMS
shall obtain consent from ImClone to any such Sublicense by BMS in accordance
with the BMS-ImClone Japan Agreement.

 

10.4                           Maintenance of Third Party Agreements.  After the Restatement Effective Date and
during the term of this Agreement, and except as expressly permitted by this
Agreement, each Party covenants that it will not, and will cause its Affiliates
not to:

 

(a)                                                                                  encumber
or diminish the rights under any patents or know-how owned by, or licensed by
any Third Party, to it or any of its Affiliates that are reasonably necessary
for the manufacture (anywhere in the world) of API or Final Product for use or
sale in Japan or for the use, sale or importation of a Product for Development
or Commercialization purposes of Cetuximab and Final Product in Japan in
accordance with the Approved Plans, provided, that
a Party may contest or challenge the validity or enforceability of such rights
in good faith and if, in the reasonable business judgment of such Party, so
long as such Party remains responsible for (i) any damages (other than
royalties) owed to the Third Party as a result of any termination, encumbrance
or diminishment of rights with respect to Japan as a result of such challenge
and (ii) any royalties owing in the future to such Third Party (on account
of such breach or by reason of entry into a new agreement to re-license such
terminated rights) with respect to Japan to the
extent that such royalties exceed the royalties that would otherwise have been (I) payable
by such Party with respect to Japan under the license or other agreement or in
respect of the rights that are the subject of such Good Faith Challenge and (II) included
in Allowable Expenses);

 

(b)                                                                                 commit
or permit any acts or omissions that would cause the material breach or
termination of any agreements between itself and Third Parties under which such
Party obtains a license or other right under such patents or know-how for use
in furtherance of the Development or Commercialization purposes of Cetuximab
and Final Product in Japan in accordance with the Approved Plans, provided, that a Party may commit or permit acts or
omissions in furtherance of either (x) a good faith dispute under any such
agreement, or (y) a good faith dispute by a Party of the patent or other
intellectual property rights that are the subject of a license or grant or
rights under any such agreement, so long as such Party remains responsible for (i) any
damages (other than royalties) owed to the Third Party with respect to Japan as
a result of any such material breach or termination as a result of such
challenge, and (ii) any royalties owing in the future to such Third Party
(on account of such breach or by reason of entry into a new agreement to
re-license such terminated rights) with respect to Japan to the extent that such royalties exceed the
royalties that would otherwise have been (I) payable by such Party with
respect to Japan under the license or other agreement or in respect of the
rights that are the subject of such Good Faith Challenge and (II) included
in Allowable Expenses);

 

(c)                                                                                  grant
any right or license to any Third Party that would conflict to any material
extent with the terms of this Agreement;

 

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(d)                                                                                 except
as set forth in the provisos to clause (a) or (b) above of this Section 10.4
(collectively, “Good Faith Challenges”), breach,
or fail to take any actions that would be required to prevent a breach of, any
Third Party agreements (including supply agreements) necessary to perform its
obligations hereunder or under which patent rights or know-how are licensed to
it or any of its Affiliates and that are used in connection with the
manufacture, Development, use or Commercialization of the Cetuximab and Final
Product under this Agreement;

 

(e)                                                                                  fail
to make any regulatory or governmental filings (including Patent and Trademark
filings) required of it under this Agreement; and

 

(f)                                                                                    permit
a lien, security interest or other encumbrance (excluding any licenses or
sublicenses permitted by this Agreement and excluding liens, security interest
and encumbrances that may attach by reason of a financing agreement entered
into by ImClone) to attach to such rights to patents or know-how.

 

For greater clarity, the ability of a Party to make Good Faith
Challenges under this Section 10.4 will not relieve such Party of its
obligations under other provisions of this Agreement nor will it affect the
rights and remedies of the other Parties with respect to any failure of such
Party to fulfill such obligations.

 

11.                               REPRESENTATIONS AND WARRANTIES.

 

11.1                           Representations and Warranties of
the Parties.  Except as set forth on Exhibit 11.1, each Party represents and warrants to the other
Parties, as of the Restatement Effective Date, that:

 

(a)                                  Such Party is duly organized and validly existing
under the laws of the jurisdiction of its incorporation and has full corporate
power and authority to enter into this Agreement and to carry out the
provisions hereof, and the person executing this Agreement on its behalf
has been duly authorized to do so by all requisite corporate action;

 

(b)                                 This
Agreement is legally binding on it, and enforceable in accordance with its
terms.  The execution, delivery and
performance of this Agreement by it does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a party or by
which it may be bound, nor violate any Applicable Law or any order of any
court, governmental body or administrative or other agency having jurisdiction
over it;

 

(c)                                  Such Party has taken all corporate action necessary
to authorize the execution and delivery of this Agreement and the performance
of its obligations under this Agreement;

 

(d)                                 Such
Party and its Affiliates has received no written notice of any pending law suit
or legal action that, if decided against such Party or its Affiliates, would
have a material adverse effect upon (1) its ability (A) to grant the
rights or licenses granted by such other Party or its Affiliates to the other
Parties under this Agreement or (B) to use the patents and know-how owned
by it or licensed by a Third Party to it that are reasonably necessary to
develop, manufacture or commercialize Cetuximab or Final Product for use and
sale in Japan, but only to the extent contemplated under the Approved Plans as
of the Restatement Effective Date, or (2) such Party’s right to enter into
and perform its obligations under this Agreement.

 

(e)                                  Such
Party and its Affiliates have not received written notice of any threatened
claims or litigation seeking to invalidate or alleging the invalidity or
unenforceability of any patents and know-how owned by it or licensed by a Third
Party to it as

 

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of the Restatement Effective Date that, as
contemplated by the Approved Plans as of the Restatement Effective Date, are
reasonably necessary to develop, manufacture or commercialize Cetuximab or
Final Product for use and sale in Japan in accordance with such Approved Plans.

 

(f)                                    Except
for the license by Merck/MJ to Takeda with respect to EMD72000 in Japan and
except for the Existing Agreements, neither such Party nor its Affiliates have
previously entered into any agreement, whether written or oral, with respect
to, or otherwise assigned, transferred, licensed, or conveyed its right, title
or interest in or to, any patents or know-how owned or licensed to it that
would reasonably enable, or grant any right (including by granting any covenant
not to sue with respect thereto) to, a Third Party to Develop or commercialize
Cetuximab, Final Product, or any Competing Product in Japan.

 

(g)                                 All
manufacturing, fill/finish, QA/QC and storage conducted by such Party and its
Affiliates, and to its actual knowledge, by its suppliers/contractors, to the
extent relating to Cetuximab and Final Product for use in Japan, have been and
are currently conducted in compliance in all material respects with the JNDA
for Final Product and Applicable Law.

 

11.2                           Disclaimer.  EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE EXISTING AGREEMENTS TO WHICH
SUCH PARTY IS A PARTY, NO PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND EACH PARTY EXPRESSLY
DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A
PARTICULAR PURPOSE OR USE, WITH RESPECT TO THE SUBJECT MATTER OF THIS
AGREEMENT.

 

12.                               PUBLICATION; CONFIDENTIALITY.

 

12.1                           Notification.

 

(a)                                  The Parties recognize that each may wish to publish
the Results to a Third Party.  However,
the Parties also recognize the importance of acquiring patent protection and of
directing the flow of information regarding Development activities.  Consequently, subject to any Applicable Laws
obligating any Party to do otherwise, any proposed publication by any Party
relating to a Clinical Trial, the
Long-Term Development Plan  and/or the
Development activities contemplated under this Agreement shall comply with this
Article 12.

 

(b)                                 All such publications, whether written or oral, must
be prepared: (i)  in accordance with the joint publication strategy
pursuant to the publication plan established under Subsection 3.2(a)(vi), and (ii) as approved by the SCJ.

 

(i)                                     At least 45 days before a manuscript is to be
submitted to any Third Party, the publishing Party will provide the SCJ with a
copy of the manuscript, which the SCJ shall promptly disseminate to each Party’s
members on the JJDC and JJCC.

 

(ii)                                  If the publishing Party wishes to make an oral
presentation, it will provide the SCJ with a summary of such presentation at
least 30 days before such oral presentation and, if an abstract is to be
published, 30 days before such abstract is to be submitted.

 

(iii)                               Any oral presentation, including any question period,
shall not include any Confidential Information unless the Party(ies) whose
Confidential Information would be disclosed agrees in writing in advance of
such oral presentation.

 

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12.2                           Review.

 

(a)                                  The SCJ will review the manuscript, abstract, text or
any other material provided to it under Section 12.1 to the SCJ determine
whether patentable subject matter is disclosed. 
Within 30 days of receipt of the proposed publication, (1) the SCJ
will notify the publishing Party if the SCJ, in good faith, determines that
patentable subject matter is or may be disclosed, and (2) any Party may
notify the publishing Party if, in good faith, it believes its Confidential
Information is or may be disclosed (in which event the publishing Party and the
objecting Party shall endeavor to reach an accommodation and if not so reached,
the publishing Party shall delete the Confidential Information of the objecting
Party).  Notwithstanding the foregoing, any
Party may request that the SCJ undertake such review on an expedited basis in
order to aid the Party that wishes to make the disclosure that wishes to make a
timely submission of a proposed publication that otherwise may not be possible.

 

(b)                                 If it is determined by the SCJ that patent
applications should be filed, the publishing Party shall delay its publication
or presentation for a period not to exceed 60 days from the SCJ’s receipt of
the proposed publication or presentation to allow time for the filing of patent
applications covering patentable subject matter.  In the event that the delay needed to
complete the filing of any necessary patent application will exceed the 60-day
period, the SCJ will discuss the need for obtaining an extension of the publication
delay beyond the 60-day period.

 

(c)                                  If it is determined in good faith by the SCJ that
Confidential Information or proprietary information is being disclosed, the
Parties will consult in good faith to arrive at an agreement on mutually
acceptable modifications to the proposed publication or presentation to avoid
such disclosure.

 

12.3                           Confidentiality; Exceptions.

 

(a)                                  Except to the extent expressly authorized by this
Agreement, the Existing Agreements or otherwise agreed to by the Parties in
writing, the Parties agree that, during the term of this Agreement and for ten (10) years
thereafter, the receiving Party, its Affiliates and its licensees shall, and
shall ensure that their respective employees, officers, directors and other
representatives shall, keep completely confidential and not publish or
otherwise disclose and not use for any purpose any information furnished to it
or them by the disclosing Party, its Affiliates or its licensees in connection
with this Agreement relating to the Development, manufacturing or commercial
activities conducted pursuant to this Agreement or developed under or in
connection with this Agreement by any Party or Third Party (including  the Results), except to the extent that it
can be established by the receiving Party by competent proof that such
information:

 

(i)                                     was already known to the receiving Party, other than
under an obligation of confidentiality, at the time of disclosure by the
disclosing Party;

 

(ii)                                  was generally available to the public or otherwise
part of the public domain at the time of its disclosure to the receiving Party;

 

(iii)                               became generally available to the public or was
otherwise part of the public domain after its disclosure and other than through
any act or omission of the receiving Party in breach of this Agreement;

 

(iv)                              was disclosed to the receiving Party, other than
under an obligation of confidentiality, by a Third Party who had no obligation
to the disclosing Party not to disclose such information to others; or

 

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(v)                                 was independently developed by persons in its employ
or otherwise who had no contact with and were not made aware of the content of
such information.

 

All such
information to which none of the foregoing exceptions applies shall be deemed “Confidential Information” of the
disclosing Party.  Confidential
Information co-developed by two or more Parties shall be deemed Confidential
Information of all such Parties and shall not be disclosed to a Third Party
without the consent of all such co-developing Parties, which consent will not
be unreasonably withheld or delayed.

 

12.4                           Exceptions to Obligation.  The
restrictions contained in Section 12.3 shall not apply to Confidential
Information that:

 

(a)                                  is submitted by the receiving Party to governmental
authorities to facilitate the issuance of registrations for Cetuximab pursuant
to the Existing Agreements or the registration of Alternative Final Product,
provided that reasonable measures shall be taken to assure confidential
treatment of such information;

 

(b)                                 is provided by the receiving Party to Third Parties
under confidentiality provisions at least as stringent as those in this
Agreement (or under binding ethical rules of confidentiality applicable to
attorneys), for consulting, for assistance with clinical studies or external testing in connection with
Cetuximab, Final Product, or Alternative Final Product or in connection with
due diligence as part of a commercial transaction or equity/debt financing; or

 

(c)                                  is otherwise required to be disclosed in compliance
with Applicable Law or order by a court
or other regulatory body having competent jurisdiction; provided that if a Party
is required to make any such disclosure of disclosing Party’s Confidential
Information such Party will, except where impracticable for necessary
disclosures (for example, to physicians conducting a Clinical Trial of the Final Product or to relevant health authorities),
give reasonable advance notice to the disclosing Party of such disclosure
requirement and, except to the extent inappropriate (e.g., in the case of
patent applications), will use its Diligent Efforts to secure confidential treatment of such Confidential Information
required to be disclosed.

 

12.5                           Limitations on Use.  Each Party
shall use, and cause each of its Affiliates and its licensees to use, any
Confidential Information obtained by such Party from the disclosing Party, its
Affiliates or its licensees, pursuant to this Agreement or otherwise, solely in
connection with the activities or transactions contemplated under this
Agreement or the Existing Agreements.

 

12.6                           Remedies.  Each Party
shall be entitled, in addition to any other right or remedy it may have, at law
or in equity, to seek an injunction
enjoining or restraining the disclosing Party, its Affiliates and/or its
licensees from any violation or threatened violation of this Article 12.

 

13.                               INDEMNIFICATION; LIABILITY.

 

13.1                           Mutual Indemnification.  Subject to Section 7.3(a)(ii),
in addition to the indemnification obligations set forth in the Existing
Agreements, each Party shall indemnify, defend and hold harmless the other
Parties and their respective Affiliates, and their respective directors,
officers, employees, contractors (other than the Parties to this Agreement),
and agents, from and against any and all liabilities, damages, losses, costs
and expenses (including the reasonable fees of attorneys and other
professionals) paid or payable to Third Parties (collectively, the “Losses”) to the extent arising out of or
resulting from: (a) negligence,

 

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recklessness or willful misconduct of the indemnifying Party or its
Affiliates, and their respective directors, officers, employees and agents, in
connection with the activities contemplated under this Agreement; or (b) any
breach of any representation or warranty made by the indemnifying Party
pursuant to Sections 8.2 and/or 11.1.

 

13.2                           Shared Liability Claims.  In the event
that any claim, action, lawsuit, or other proceeding (collectively, “Claim(s)”) is brought against any of MJ,
Merck, BMS, BMKK, ImClone or any of their respective Affiliates by a Third
Party claiming injury (including death), damage or Losses, including damages resulting from intellectual
property infringement, resulting directly or indirectly from the manufacture of
Cetuximab or Final Product anywhere in
the world for use or Commercialization in Japan, the Development of Cetuximab
or Final Product in Japan, and/or the use, handling, storage, Commercialization
or other disposition of Final Product in
Japan, then any resulting (or remaining) Losses (after such Losses have been
offset by any insurance proceeds under a joint insurance policy, if any, that
may have been collectively purchased by the Parties) incurred by any Party and
arising from such Claims shall be included in Allowable Expenses, or if
no Profit and Loss sharing exists at such time (e.g., post-termination of the
Agreement where and to the extent that this clause survives), then, except
where and to the extent such percentages shall have been adjusted pursuant to Section 3.1(c),
14.2(a)(vi) or 14.3(a)(vi),  [**]; provided,
that, notwithstanding anything in this Section 13.2 or otherwise in this
Agreement expressly providing that any Losses are to be included in Allowable
Expenses or otherwise shared by the Parties, the following Losses shall be
borne by the applicable Party without contribution from the other Parties:

 

(a)                                  to the extent any such Losses resulting from such Claims fall within a Party’s
indemnification obligations under Section 13.1(b), such Party shall bear such Losses; or

 

(b)                                 to the extent any such Losses exceed a reasonable
royalty rate equitably, reasonably and fairly applied to (i) the use or
commercialization of Cetuximab or Final Product in Japan after the Restatement
Effective Date or (ii) the manufacture (whether prior to or after the
Restatement Effective Date) of API, Cetuximab or Final Product (including any
intermediate step in the manufacture of Cetuximab or Final Product) for use or
commercialization in Japan under this Agreement (for greater clarity, such
reasonable royalty rate shall not include, reflect or be in lieu of treble or
other special or punitive damages) and such Losses are based on alleged
infringement of a Third Party’s patent by a Party in connection with (x) the
use or commercialization of Cetuximab or Final Product in Japan or (y) to
such Party’s manufacture of API, Cetuximab or Final Product (including any intermediate step in the
manufacture of Cetuximab or Final Product) for use or commercialization in Japan,
in each case (x) and (y) to the extent that such alleged infringement
is the subject of litigation against such Party that is pending on the
Restatement Effective Date, such Party shall bear such Losses; or

 

(c)                                  to the extent that any Losses result from a Good
Faith Challenge by a Party, to the extent that such Losses exceed the royalties
that would otherwise have been (i) payable by such Party under the license
or other agreement or in respect of the rights that are the subject of such
Good Faith Challenge and (ii) included in Allowable Expenses, such Party shall bear such Losses; or

 

(d)                                 to the extent that any such Losses are attributable
to negligence, recklessness or willful misconduct of a Party or any of its
Affiliates, or any of its or their respective directors, officers, employees,
contractors (other than the Parties to this Agreement), and agents, in
connection with the activities contemplated under or in connection with this
Agreement, such Party shall bear such Losses to the extent they are attributable
to such negligence, recklessness or willful misconduct (for greater clarity,
none of (i) the infringement that is the subject of the litigation
described in Section 13.2(b), (ii) the conduct of such

 

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litigation, or (iii) the institution or conduct of any Good Faith
Challenge, shall be considered negligence, recklessness or willful misconduct
for purposes of Section 13.1 or this Section 13.2(d)); or

 

(e)                                  to the extent that any such Losses are attributable
to a breach of this Agreement or any Existing Agreement by a Party or any of
its Affiliates, or any of its or their respective directors, officers,
employees, contractors (other than the Parties to this Agreement),  and agents, in connection with the activities
contemplated under or in connection with this Agreement or any Existing
Agreement, such Party shall bear such Losses that are attributable to such
breach; or

 

(f)                                    to the extent that any such Losses are attributable
to a failure to comply with Applicable Law by a Party or any of its Affiliates,
or any of its or their respective directors, officers, employees, contractors
(other than the Parties to this Agreement), and agents, in connection with the
activities contemplated under or in connection with this Agreement or any
Existing Agreement, such Party shall bear such Losses that are attributable to
such failure; or

 

(g)                                 to the extent that any such Losses are attributable
to a failure by a Party, its Affiliates or its or their Third Party contractors
to manufacture, package, fill, finish, label, store or handle the Final
Product, bulk drug substance (API) or any component of Final Product for use or
sale in Japan in accordance with the CMC section of the JNDA, with such Party’s
internal release procedures and specifications, or Applicable Law, such Party
shall bear such Losses that are attributable to such failure; or

 

(h)                                 to the extent that a Party is responsible for a Loss
under Section 7.3(a)(ii)(1), such Party shall bear same.

 

The Parties shall confer through the SCJ how to respond to any such
Claim and how to handle the Claim in an efficient manner.  In the absence of such an agreement, subject
to this Section 13.2 and to Section 13.3, each Party shall have the
right to take such action as it deems appropriate.

 

13.3                           Procedure

 

(a)                                  Notices of Claims.  In the event
that a Party receives notice of a potential Loss or a Claim under Section 13.1 or 13.2, such Party
shall inform the other Parties as soon as reasonably practicable.

 

(b)                                 For Claims Falling Within Section 13.2.  For claims
falling within Section 13.2, the Parties
shall confer through the SCJ as to how
to respond to the Claim and how to handle the Claim in an efficient
manner.  No matter which Party or Parties
are required to respond to the Claim, no Party shall settle or compromise any
Claim in any manner that involves the payment of any money to such Third Party
claimant or any admission of liability or wrongdoing on the part of any Party or any of its Affiliates, or that has or
may have any adverse effect on any Party’s rights and benefits under this Agreement,
without the prior written consent of the other Parties; provided,
that such consent shall not be unreasonably withheld or delayed if such
settlement or compromise would not involve the payment of any material amount
of money to such Third Party claimant or any admission of material liability or
material wrongdoing on the part of any
Party or any of its Affiliates, or that has or may have any material adverse effect on any Party’s rights and benefits under this Agreement.

 

(c)                                  Claims for Indemnification Under Section 13.1.  A
Party believing that it is entitled to indemnification under Section 13.1 (an “Indemnified
Party”) shall give

 

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prompt written notification to the other Parties (the “Indemnifying
Party(ies)”) of the commencement of any Claim for which
indemnification may be sought or, if earlier, upon the assertion of any such
Claim by a Third Party (it being understood and agreed, however, that the
failure by an Indemnified Party to give notice of a Third-Party Claim as
provided in this Section 13.3(c) shall not relieve the Indemnifying Party(ies) of its/their indemnification
obligation under this Agreement except and only to the extent that such
Indemnifying Party(ies) is/are actually materially prejudiced as a result of such
failure to give notice).  Within thirty
(30) days after delivery of such notification, the Indemnifying Party(ies) shall, upon written notice thereof to the
Indemnified Party, assume control of the defense of such Claim with counsel
reasonably satisfactory to the Indemnified Party.  If a Party(ies) believe(s) that a Claim presented to it for indemnification is
one as to which the Party seeking indemnification is not entitled to
indemnification under Section 13.1, it/they shall so notify the Party seeking indemnification.  In such event, or if the Indemnifying Party(ies) otherwise fail(s) or refuse(s) to assume control of the defense of a Claim within such thirty (30)-day
period, the Indemnified Party shall have the right to immediately assume
control of the defense.  With respect to
any Claim for which the Indemnifying Party(ies) has/have assumed control of the
defense, Sections 13.3(d) through 13.3(f) shall apply.

 

(d)                                 The Indemnified Party may participate in such defense
at its own expense; provided that
if the Indemnified Party reasonably concludes, based on advice from counsel,
that the Indemnifying Party(ies) and the
Indemnified Party have conflicting interests with respect to such Claim, the Indemnifying
Party(ies) shall be responsible for the
reasonable fees and expenses of counsel to the Indemnified Party solely in
connection therewith.

 

(e)                                  The Indemnifying Party(ies) shall keep the Indemnified Party advised of the
status of such Claim and the defense thereof and shall consider recommendations
made by the Indemnified Party with respect thereto.  The Indemnified Party shall, and shall cause
each other indemnitee to, at the request
and expense of any Indemnifying Party,
cooperate in the defense or prosecution of each such Claim and shall furnish
such records, information and testimony, provide such witnesses and attend such
conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested in connection therewith. 
Such cooperation shall include access during normal business hours
afforded to the Indemnifying Party(ies)
to, and reasonable retention by the Indemnified Party of, records and
information that are reasonably relevant to such Claim, and making indemnitees and other employees and agents available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder.

 

(f)                                    If the Indemnifying Party(ies) has/have
acknowledged in writing its responsibility to indemnify the Indemnified Party
with respect to a Claim, the Indemnified Party shall not settle such Claim
without the prior written consent of the Indemnifying Party(ies), not to be unreasonably withheld or delayed.  The Indemnifying Party(ies) shall not agree to any settlement of such Claim or
consent to any judgment in respect thereof that does not include a complete and
unconditional release of the Indemnified Party from all liability with respect
thereto or that imposes any liability or obligation on the Indemnified Party or
adversely affects the Indemnified Party without the prior written consent of
the Indemnified Party, not to be unreasonably withheld or delayed.

 

14.                               TERM; TERMINATION.

 

14.1                           Term.

 

(a)                                  This Agreement shall become effective as of the
Restatement Effective Date, and, unless sooner terminated in accordance with
any other sections of Article 14 of this Agreement, shall continue until
the date that is the twenty-fifty (25th) anniversary of the

 

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Restatement
Effective Date.  To the extent that the Existing Agreements are in conflict with the
foregoing sentence, this Section 14.1 shall be deemed to amend and control
same solely with respect to Japan, and expiration (as opposed to any other
termination) of those agreements in accordance with their terms shall not be
deemed a termination for purposes of Sections 14.2 or 14.3 hereof.  For greater clarity, any termination
of either Merck or MJ pursuant to this Section 14 shall have the effect of
terminating both Merck and MJ as parties to this Agreement and any termination
of either BMS or BMKK pursuant to this Section 14 shall have the effect of
terminating both BMS and BMKK as parties to this Agreement.

 

(b)                                 No Effect on Existing Agreements.  For clarity
only, any expiration or termination of
this Agreement pursuant to Section 14.1
shall not affect the unexpired and non-terminated Existing Agreements, and each of the Parties shall
have the rights and obligations as described therein.

 

14.2                           Termination of BMS-ImClone Agreement.

 

(a)                                  In
the event that the BMS-ImClone Agreement is terminated for any reason during
the term of this Agreement (other than as provided in Section 14.2(b)), or
that BMS or BMKK is terminated under Section 14.4(a) for an Uncured
Material Default, then:

 

(i)                                     (1) BMS/BMKK
shall no longer be a Party to this Agreement, and shall have no obligations or
rights under this Agreement except with respect to its manufacturing
obligations under Section 8.8 and except as provided in Sections 14.7(b) and
14.8, (2) except for the removal of BMS/BMKK as a Party to this Agreement
and the removal of BMS/BMKK from the SCJ and all Subcommittees and Working
Groups (whether as a non-voting or voting member) under this Agreement, this
Agreement shall not be affected and shall continue until the earliest to occur
of the date that (A) it expires, (B) Merck/MJ and ImClone agree to
terminate same, (C) it is terminated by either Merck/MJ or ImClone as
provided in Section 14.4(a) or 14.5 or (D) the Merck-ImClone
Agreement (as amended and/or supplemented by the Merck-ImClone Japan Agreement)
should thereafter be terminated or expire; (3) BMS/BMKK shall not be entitled
to any compensation from ImClone relating to, or based on, Net Sales accruing
under this Agreement following the date that such BMS-ImClone Agreement is
terminated; and (4) BMS/BMKK shall neither license any rights regarding
Final Product or Cetuximab in Japan to any Third Party or any BMS/BMKK
Affiliate nor distribute, sell, promote or commercialize Alternative Final
Product or Cetuximab itself or through any of its Affiliates in Japan, without
Merck’s and ImClone’s prior written consent.

 

(ii)                                  Merck/MJ and ImClone
shall promptly begin good faith negotiations to revise this Agreement to
reflect the termination of BMS/BMKK, taking into account such terms and
conditions as Merck/MJ and ImClone may have agreed to in the Merck-ImClone
Japan Agreement and/or the Merck-ImClone Agreement.  Pending such revision, and subject to the
performance by BMS/BMKK of its obligations under Section 8.8 and to
Sections 14.2(a)(vi), 14.7 and 14.8, Merck/MJ undertakes to ImClone that it
will assume, accept, discharge and perform all of BMS’ and BMKK’s obligations
that may arise under this Agreement, and that arise and are to be discharged or
performed, after the date of such termination; provided,
that  Merck/MJ shall have no
responsibility to discharge any payment obligations that may survive and be
owed by BMS under this Agreement.

 

(iii)                               Merck shall be
responsible following such termination for all compensation due thereafter to
ImClone with respect to Japan based solely on what it would otherwise have paid
to ImClone under the Merck-ImClone Agreement, as the same may be modified by
the Merck-ImClone Japan Agreement (based on a 100% share by Merck/MJ of the
applicable Net Sales, Net Profits, and/or Allowable Expenses arising and
accruing thereafter under this Agreement).

 

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(iv)                              Merck/MJ shall have a
reasonable time (not to exceed six (6) months without good cause) in which
to ramp up Sales Force personnel and other internal FTE requirements in order
to perform the assumed Commercialization and Development obligations that would
otherwise have been performed by BMKK/BMS.

 

(v)                                 Merck/MJ shall not
have any obligation to assume any manufacturing responsibilities of BMS/BMKK.

 

(vi)                              (1) Each Party,
including BMS/BMKK, shall remain liable for any obligation owed by it to the
other Parties under Section 13.1, (2) each Party, including BMS/BMKK,
shall remain responsible for its share of any Losses arising under Section 13.2
prior to such termination date, (3) each Party, including BMS/BMKK, shall
remain responsible for its share of any Losses arising under Section 13.2
after such termination date resulting from the
sale of Cetuximab or Final Product to a
Third Party end user in Japan prior to termination under this Section 14.2(a) or
from the use of Cetuximab or Final Product in Clinical Trials in Japan prior to
termination under this Section 14.2(a), (4) except as provided in
subparagraph 14.2(a)(vi)(3), BMS/BMKK shall not 
be liable for any such Losses arising under Section 13.2 after the
termination date, except to the extent it would otherwise be obligated to bear
any such Losses under Section 13.1 or subsections (a)-(h) of Section 13.2;
and (5) except as provided in subparagraphs 14.2(a)(vi)(3) and
14.2(a)(vi)(4) and except as Merck/MJ may have agreed in the Merck-ImClone
Agreement and/or the Merck-ImClone Japan Agreement, Merck/MJ and ImClone shall
share all Losses arising under Section 13.2 (where that such Losses
otherwise would be allocated among the Parties according to percentages set
forth therein) following such termination date as follows: [**].

 

(vii)                           Termination shall not
affect, and Merck/MJ shall retain, all rights and benefits separately granted
to Merck/MJ under this Agreement.

 

(viii)                        Nothing in this section 14.2(a) shall
relieve ImClone of any obligations that it may have, and ImClone shall continue
to perform its obligations, with respect to Japan under this Agreement, the
Merck-ImClone Agreement, the Merck-ImClone Japan Agreement and any other
agreement (including manufacturing agreements) that ImClone may at such time
have entered into with a Party or its Affiliates or with Third Parties relating
to Japan.

 

(ix)                                ImClone shall have the
same rights that BMS/BMKK had under Section 10.2(a)(i) in the event
that Merck launches a Competing Product.

 

(x)                                   Merck shall now
report to ImClone the information previously reported to BMS under Sections 4.4
and 7.2 of this Agreement.

 

(b)                                 In
the event that the BMS-ImClone Agreement is terminated during the term of this
Agreement with respect to Japan by reason of the acquisition by BMS of all of
ImClone’s rights and obligations with respect to Japan under the BMS-ImClone
Agreement or as a result of a Change of Control in which BMS (or one of its
Affiliates) is the Third Party Acquirer, then (i) BMS shall succeed to all
of ImClone’s rights under this Agreement after the date of such termination, (ii) BMS
undertakes to Merck/MJ (A) that it will discharge or cause to be
discharged all of ImClone’s liabilities arising out of the performance of this
Agreement after the date of such termination, and (B) that it will perform
or cause to be performed all of ImClone’s obligations arising under this
Agreement, and that are to be discharged or performed, after the date of such
termination; provided, that, in the event that
BMS acquires all of ImClone’s rights and obligations with respect to Japan
under the BMS-ImClone Agreement, BMS and ImClone may agree that ImClone shall
continue to manufacture the ImClone Manufactured Components pursuant to Section 8.8(b) after
the date of such termination and, if

 

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BMS and
ImClone so agree, BMS shall not be obligated to undertake to perform such
manufacturing obligations of ImClone or any of its Affiliates; (iii) Sections
10.2(b), 14.2(a) and 14.3 shall be of no further force and effect, (iv) this
Agreement shall not otherwise be affected and shall continue until BMS/BMKK and
Merck/MJ agree to terminate same, unless sooner terminated by BMS/BMKK or
Merck/MJ as provided in Section 14.3(a), 14.4(a) or 14.5, and (v) BMS
shall be entitled to receive any compensation (including royalties) following
such termination of the BMS-ImClone Agreement that would otherwise have been
due to ImClone from Merck and its Affiliates based on Final Product Sales (or,
alternatively, on gross margin or net profits or similar financial indicia) in
Japan based on the Existing Agreements, and (vi) following the date of
such termination, Merck/MJ and BMS/BMKK shall [**].  For the sake of clarity, the foregoing shall
not affect any rights or benefits separately granted to, or any separate
obligations of, Merck/MJ and BMS/BMKK under this Agreement.

 

14.3                           Termination of Merck-ImClone Agreement.

 

(a)                                  In
the event that the Merck-ImClone Agreement is terminated for any reason during
the term of this Agreement (other than as provided in Section 14.3(b)), or
that Merck or MJ is terminated under Section 14.4(a) for an Uncured
Material Default, then:

 

(i)                                     (1) Merck/MJ
shall no longer be a Party to this Agreement, and shall have no obligations or
rights under this Agreement except with respect to its manufacturing
obligations under Section 8.8 and except as provided in Sections 14.7(a) and
14.8, (2) except for the removal of Merck/MJ as a Party to this Agreement
and the removal of Merck/MJ from the SCJ and all Subcommittees and Working
Groups (whether as a non-voting or voting member) under this Agreement, this
Agreement shall not be affected and shall continue until the earliest to occur
of the date that (A) it expires, (B) BMS/BMKK and ImClone agree to
terminate it, (C) it is terminated by BMS/BMKK or ImClone as provided in Section 14.4(a) or
14.5, or (D) the BMS-ImClone Agreement (as amended or supplemented by the
BMS-ImClone Japan Agreement) should thereafter be terminated or expire; (3) Merck/MJ
shall not be entitled to any compensation from ImClone relating to, or based
on, Net Sales accruing under this Agreement following the date that such
Merck-ImClone Agreement is terminated; and (4) Merck/MJ shall neither
license any rights regarding Final Product or Cetuximab in Japan to any Third
Party or any Merck/MJ Affiliate nor distribute, sell, promote or commercialize
Alternative Final Product or Cetuximab itself or through any of its Affiliates
in Japan, without BMS’s and ImClone’s prior written consent.

 

(ii)                                  BMS/BMKK and ImClone
shall promptly begin good faith negotiations to revise this Agreement to
reflect the termination of Merck/MJ, taking into account such terms and
conditions as BMS/BMKK and ImClone may have agreed to in the BMS-ImClone Japan
Agreement and/or the BMS-ImClone Agreement. 
Pending such revision, and subject to the performance by Merck/MJ of its
obligations under Section 8.8 and to Section 14.3(a)(vi), 14.7 and
14.8, BMS/BMKK undertakes to ImClone that it will assume, accept, discharge and
perform all of Merck’ and MJ’s obligations that may arise under this Agreement,
and that arise and are to be discharged or performed, after the termination
date; provided, that  BMS/BMKK shall have
no responsibility to discharge any payment obligations that may survive and be
owed by Merck under this Agreement.

 

(iii)                               BMS shall be responsible
following such termination for all compensation due thereafter to ImClone with
respect to Japan based solely on what it would otherwise have paid to ImClone
under the BMS-ImClone Agreement, as the same may be modified by the BMS-ImClone
Japan Agreement (based on a 100% share by BMS/BMKK of the applicable Net Sales,
Net Profits, and/or Allowable Expenses arising and accruing thereafter under
this Agreement).

 

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(iv)                              BMS/BMKK
shall have a reasonable time (not to exceed six (6) months without good
cause) in which to ramp up Sales Force personnel and other internal FTE
requirements in order to perform the assumed Commercialization and Development
obligations that would otherwise have been performed by MJ/Merck.

 

(v)                                 BMS/BMKK
shall not have any obligation to assume any manufacturing responsibilities of
Merck/MJ.

 

(vi)                              (1) Each
Party, including Merck/MJ, shall remain liable for any obligation owed by it to
the other Parties under Section 13.1, (2) each Party, including
Merck/MJ, shall remain responsible for its share of any Losses arising under Section 13.2
prior to such termination date, (3) each Party, including Merck/MJ, shall
remain responsible for its share of any Losses arising under Section 13.2
after such termination date resulting from the
sale of Cetuximab or Final Product to a
Third Party end user in Japan prior to termination under this Section 14.3(a) or
from the use of Cetuximab or Final Product in Clinical Trials in Japan prior to
termination under this Section 14.3(a), (4) except as provided in
subparagraph 14.3(a)(vi)(3), Merck/MJ shall not 
be liable for any such Losses arising under Section 13.2 after the
termination date, except to the extent it would otherwise be obligated to bear
any such Losses under Section 13.1 or subsections (a)-(h) of Section 13.2;
and (5) except as provided in subparagraphs 14.3(a)(vi)(3) and
14.3(a)(vi)(4) and except as BMS/BMKK may have agreed in the BMS-ImClone
Agreement and/or the BMS-ImClone Japan Agreement, BMS/BMKK and ImClone shall
share all Losses arising under Section 13.2 (where that such Losses
otherwise would be allocated among the Parties according to percentages set
forth therein) following such termination date as follows: [**].

 

(vii)                           Termination
shall not affect, and BMS/BMKK shall retain, all rights and benefits separately
granted to BMS/BMKK under this Agreement.

 

(viii)                        Nothing in
this section 14.3(a) shall relieve ImClone of any obligations that it may
have, and ImClone shall continue to perform its obligations, with respect to
Japan under this Agreement, the BMS-ImClone Agreement, the BMS-ImClone Japan
Agreement and any other agreement (including manufacturing agreements) that
ImClone may at such time have entered into with a Party or its Affiliates or
with Third Parties relating to Japan.

 

(ix)                                ImClone
shall have the same rights that Merck/MJ had under Section 10.2(a)(i) in
the event that BMS launches a Competing Product.

 

(x)                                   BMS
shall now report to ImClone the information previously reported to Merck under
Sections 4.4 and 7.2 of this Agreement.

 

(b)                                                                                 In
the event that the Merck-ImClone Agreement is terminated during the term of
this Agreement with respect to Japan by reason of the acquisition by Merck of
all of ImClone’s rights and obligations with respect to Japan under such
Merck-ImClone Agreement or as a result of a Change of Control of ImClone where
Merck (or one of its Affiliates) is the Third Party Acquirer, then (i) Merck
shall succeed to all of ImClone’s rights under this Agreement after the date of
such termination, (ii) Merck undertakes to BMS/BMKK and ImClone (A) that
it will discharge or cause to be discharged all of ImClone’s liabilities
arising out of the performance of this Agreement after the date of such
termination, and (B) that it will perform or cause to be performed all of
ImClone’s obligations arising under this Agreement, and that are to be
discharged or performed, after the termination date; provided,
that, in the event that Merck acquires all of ImClone’s rights and obligations
with respect to Japan under such Merck-ImClone Agreement, Merck and ImClone may
agree that ImClone shall continue to manufacture the ImClone Manufactured
Components pursuant to Section

 

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8.8(b) after the date of such
termination and, if Merck and ImClone so agree, Merck shall not be obligated to
undertake to perform such manufacturing obligations of ImClone or any of its
Affiliates; (iii) Sections 10.2(b), 14.2 and 14.3(a) shall be of no
further force and effect, (iv) this Agreement shall not otherwise be
affected and shall continue until Merck/MJ and BMS/BMKK agree to terminate
same, unless sooner terminated by Merck/MJ or BMS/BMKK as provided in Section 14.4(a) or
14.5, (v) Merck shall be entitled to receive any compensation (including
royalties) following such termination of the Merck-ImClone Agreement that would
otherwise have been due to ImClone from BMS and its Affiliates based on Final
Product Sales (or, alternatively, on gross margin or net profits or similar
financial indicia) in Japan based on the Existing Agreements or the BMS-ImClone
Japan Agreement, as amended, between ImClone and BMS, and (vi) following
the date of such termination, Merck/MJ and BMS/BMKK shall share all Losses
arising under Section 13.2 that otherwise would be allocated among the
Parties according to percentages set forth therein as follows:  [**]. 
For the sake of clarity, the foregoing shall not affect any rights or
benefits separately granted to, or any separate obligations of, BMS/BMKK and
Merck/MJ under this Agreement.

 

14.4                           Termination of this Agreement for
Cause.

 

(a)                                                                                  Subject to Sections 4.2(c), 4.3(b) and
6.4(f)(v), the Party(ies) that is/are
not in material breach of its (their) respective obligations under this
Agreement (and that are not Affiliates of the breaching Party) (the “Non-breaching Party(ies)”) shall have
the right to terminate this Agreement in its entirety, in the event that any
Party or Parties (the “Breaching
Party(ies)”) shall have materially breached or defaulted in the
performance of any of its material obligations hereunder and such breach or
default shall have continued for 60 days after written notice thereof was
provided to the Breaching Party(ies) by the Non-breaching Party(ies) (or, if
such default cannot be cured within such 60-day period, if the Breaching
Party(ies) does not commence and diligently continue actions to cure such
default during such 60-day period and continue such actions thereafter until
cured) (any such uncured default, an “Uncured Material Default”);
provided, that if the material
breach relates to (a) MJ or BMKK’s Development or Commercialization
obligations under this Agreement and MJ and BMKK are not both in material
breach of their Development or Commercialization obligations under this
Agreement, only BMKK or MJ (whichever is a Non-breaching Party) shall be
entitled to terminate this Agreement (this item (a) shall only apply if at
the time of such Uncured Material Default, neither BMKK nor MJ has previously
been terminated pursuant to this Section 14), and (b) a Party’s
manufacturing obligations under this Agreement, termination shall not be an
available remedy, but the Non-breaching Party(ies) shall be entitled to obtain
such damages as may be awarded by an arbitrator pursuant to Section 16.13.  Any such termination shall become effective
at the end of such 60-day period unless the Breaching Party(ies) has cured any
such breach or default prior to the expiration of such 60-day period (or, if
such default cannot be cured within such 60-day period, if the Breaching
Party(ies) has commenced within such 60-day period, and thereafter diligently
continued until cured, actions to cure such default).  The right of any Party to terminate this
Agreement as provided in this Section 14.4 shall not be affected in any way by its waiver or failure to take action
with respect to any previous default. 
For clarity, any dispute as to whether a material breach shall have
occurred shall be submitted to arbitration under Section 16.13, and, if
the issue of whether a material breach has occurred is submitted to arbitration
as provided in Section 16.13, then the 60-day cure period shall be tolled
during the pendency of any arbitration proceedings and shall not commence until
the arbitrators have rendered their decision in writing.  Notwithstanding the foregoing language
in this Section 14.4(a), neither BMS/BMKK nor Merck/MJ shall terminate
ImClone pursuant to this Section 14.4(a) unless both BMS/BMKK and
Merck/MJ agree as to same.

 

(b)                                                                                 In
the event that BMS/BMKK and Merck/MJ terminate ImClone’s rights under this
Agreement pursuant to Section 14.4(a), then

 

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(i)                                     (1) ImClone
shall not be entitled to any compensation from Merck or MJ relating to, or
based on, the performance of this Agreement or, with respect to Japan, under
the Merck-ImClone Agreement following the termination of the Merck-ImClone
Agreement; and (2) ImClone shall not be entitled to any compensation from
BMS or BMKK relating to, or based on, the performance of this Agreement or,
with respect to Japan, under the BMS-ImClone Agreement following the
termination of the BMS-ImClone Agreement;

 

(ii)                                  ImClone
shall neither license any rights regarding Final Product, Alternative Final
Product or Cetuximab in Japan to any Third Party or any ImClone Affiliate nor
distribute, sell, promote or commercialize Final Product, Alternative Final
Product or Cetuximab itself or through any of its Affiliates in Japan, without
Merck’s and BMS’ prior written consent;

 

(iii)                               Section 3.6(j) shall
survive;

 

(iv)                              (1) Each
Party, including ImClone, shall remain liable for any obligation owed by it to
the other Parties under Section 13.1 arising prior to such termination, (2) each
Party, including ImClone, shall remain responsible for its share of any Losses
arising under Section 13.2 prior to such termination, (3) each Party,
including ImClone, shall remain responsible for its share of any Losses arising
under Section 13.2 after such termination date resulting from the sale of Cetuximab or Final Product to a Third Party end user in Japan prior to
termination under Section 14.4(a) or from the use of Cetuximab or
Final Product in Clinical Trials in Japan prior to termination under Section 14.4(a),
(4) except as provided in subparagraph 14.4(b)(iv)(3), ImClone shall not
be liable for any such Losses arising under Section 13.2 after the
termination date, except to the extent it would otherwise be obligated to bear
any such Losses under subsections 13.2(a)-(h); and (5) except as provided
in subparagraphs 14.4(b)(iv)(3) and 14.4(b)(iv)(4), and except as ImClone
may have agreed in the BMS-ImClone Agreement and/or the BMS-ImClone Japan
Agreement, BMS/BMKK and Merck/MJ shall share all Losses arising under Section 13.2
following such termination date as follows: [**].

 

14.5                           Termination
by Merck or BMS without Cause.  BMS/BMKK or Merck/MJ shall be
entitled to terminate this Agreement without cause, upon (a) three months
prior written notice in the event that Final Product has not Launched in Japan
by December 31, 2009, or (b) six months prior written notice (such
notice not to be given earlier than the occurrence of a triggering event that
follows) at any time beginning on or after the earlier of:  (i) the tenth anniversary of the date of
this Agreement or (ii) the date that a product that is biosimilar
or bioequivalent to Final Product or that contains Cetuximab is approved by the
Japanese Regulatory Authorities and launches in Japan.  In the
event of any termination pursuant to this Section 14.5, the rights and
obligations of the Parties shall be determined thereafter in the same manner as
though the Party terminating this Agreement had had its rights terminated in
accordance with Section 14.2 or 14.3, as the case may be.

 

14.6                           Effect of Expiration of Agreement or
Termination Prior to First Approval.

 

(a)                                                                                  Termination Prior to First Approval.  If this
Agreement expires or is terminated by mutual written consent of all the Parties
prior to the first Approval of a Final Product:  (i) all
non-cancelable obligations of the Parties which are Development Costs that have
not yet accrued shall be shared and reimbursed by the Parties in accordance
with Article 4; (ii) a final accounting of Profit Or Loss
shall be made and payments made to reflect the sharing/bearing of same in
accordance with this Agreement; and (iii) each
Party shall promptly return to each other Party all relevant records and
materials in such  Party’s possession or
control containing Confidential Information of such other Party(ies) to the
extent practicable given any continued operation of an Existing Agreement
relating to such

 

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Confidential Information, provided, that a Party may keep one copy
of such Confidential Information for archival purposes only); and provided, further, notwithstanding the
foregoing, each Party shall continue to own, and have the right to use, the
Results (including the right to cross-reference the CTN under the Long-Term
Development Plan), the Company Inventions, the Related Inventions, the
Inventions and the General Inventions in accordance with Sections 5.1, 5.2 and
5.3, subject to the obligations set forth in Sections 12.3 through 12.6
(inclusive); (iv) BMKK, as agent for ImClone, shall be entitled to pursue the JNDA for Alternative Final Product, and Merck shall be
entitled to submit its JNDA for Final Product.

 

(b)                                                                                 Exclusive Remedy.  A Party may seek any remedies available to it at law
or in equity for a breach by a Party under this Agreement; provided,
however, that in the event that a non-breaching Party terminates a
breaching Party’s rights under this Agreement pursuant to Sections 14.2(a),
14.3(a), or 14.4, such termination remedy (and the consequences thereof set
forth in Sections 14.5 and 14.7, as applicable) shall, except for payments due
to a Party under this Agreement that have accrued up to and only through the
date of termination and except for breaches of Sections 10.2, 12.3 and those
terms and conditions under this Agreement that continue to apply to such
breaching Party pursuant to this Article 14 thereafter, be the exclusive
remedies available to such  Party with
respect to such material breach of this Agreement by the breaching Party and,
except for breaches of Section 10.2 and 12.3, such breaching Party may not
seek other damages as a result of such breach.

 

14.7                           Other Consequences of Termination.

 

(a)                                                                                  Termination of MJ, Merck or any of
their Affiliates.  If Merck’s and MJ’s rights under this
Agreement are terminated by reason of any of Section 14.3(a), 14.4(a) or
14.5 (where Merck/MJ provides the notice of termination under Section 14.5),
then:

 

(i)                                     BMKK shall be responsible for making and booking
sales of Final Product in Japan
following such effective date of termination;

 

(ii)                                  Merck and MJ shall as soon as is reasonably possible
assign all their rights, title and interest in and to the any Japanese
regulatory filings (including the JNDA) for Final Product to BMKK, as agent for ImClone;

 

(iii)                               Merck and MJ shall, and shall cause their applicable
Affiliates to, cease to use, and assign all their rights and interest in and
to, the ERBITUX® Trademark in Japan; and
ImClone shall, in turn, grant to BMS an exclusive, royalty-free and fully
paid-up, sublicensable license to such Trademark for use in connection with the Commercialization of Cetuximab and Final
Product in Japan under this Agreement;

 

(iv)                              Subject to Section 8.8, all manufacturing
agreements between any of the Parties and their Affiliates and any other Party
(or its Affiliates) shall not terminate but shall remain in place until such
agreements terminate or expire in accordance with their terms;

 

(v)                                 MJ and Merck shall effect, and shall cause their
Affiliates to effect, a smooth transition of the Commercialization
responsibilities to BMS/BMKK; provided, that
the foregoing shall not require any Sales Force Detailing efforts to be
expended by MJ following the termination date;

 

(vi)                              An accounting, reconciliation and payment of the
Parties’ respective financial obligations and benefits with respect to
sharing/bearing costs (including Development Costs, Allowable Expenses and
BMKK/MJ NSF Commercialization Activities

 

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Costs and other cost that the
Parties share, either directly or through a joint Profit and Loss calculation)
and Profits and Losses under the Agreement as of said termination date shall
take place promptly;

 

(vii)                           MJ and Merck shall remain entitled to receive any
compensation or expense reimbursement due to either of them, and shall remain
obligated to pay to BMKK, ImClone and BMS any compensation or expense
reimbursement due to any of them, under or with respect to this Agreement with
respect to any accounting periods ending on or prior to the termination date;

 

(viii)                        All agreements specifically relating to the Commercialization
of Final Product in Japan between MJ and any
Third Party shall, where assignable and at BMKK’s request, be assigned to BMKK
from and after such termination date; provided, that
MJ shall remain responsible for the performance of and payment of any amounts
due under any such agreement with respect to all periods prior to the
termination date; and

 

(ix)                                All rights granted to Merck, MJ and their Affiliates
to sell, promote, market and otherwise Commercialize Final Product in Japan, whether granted under this Agreement or
under any Existing Agreement with ImClone, shall terminate;

 

(x)                                   BMKK shall have the exclusive right to sell, promote,
market and Commercialize Final Product
in Japan, subject to the terms of this Agreement and its Existing Agreements with
ImClone;

 

(xi)                                MJ and Merck shall have no obligation to fund Development activities in Japan that occur or arise after such
termination date (but shall remain responsible for their share of Development
costs incurred prior to such termination date and noncancelable Development
costs existing as of the termination date that arise after such termination
date), and shall effect, and shall cause their Affiliates to effect, a smooth
transition of any Japan Development
responsibilities then being controlled, monitored or conducted by any of them
to BMKK;

 

(xii)                             MJ and Merck shall effect, and shall cause their
Affiliates to effect, reasonable access to, and/or sharing of, any then
existing adverse event database maintained by them for Final Product as used for reporting purposes in Japan so that BMS,
BMKK and their Affiliates may continue to fulfill their regulatory
responsibilities in Japan relating to same;

 

(xiii)                          At MJ’s expense, Merck and MJ shall promptly return
to the other Parties all relevant records and materials in Merck/MJ’s
possession or control containing Confidential Information of such other Parties
to the extent relating to Japan and to the extent practicable given any
continued operation of an Existing Agreement relating to such Confidential Information;
provided that Merck/MJ may keep
one copy of such Confidential Information for archival purposes only, and shall
otherwise continue to abide by its confidentiality obligations under this
Agreement as to same; and

 

(xiv)                         (1)  MJ shall assign to ImClone, and shall
itself not have the right to use, the Results (including not having the right
to cross-reference the CTN under the Long-Term Development Plan), the Company
Inventions, and the Related Inventions; (2) Sections 5.1, 5.2 and 5.3
shall cease to apply to the extent that such Sections grant licenses to MJ and
its Affiliates; (3) the obligations set forth in Sections 12.3 through
12.6 (inclusive) shall continue to apply to all Parties; (4) Merck and its
Affiliates shall have [**] license to use and practice the Company Inventions
and the Related General Inventions for products other than Final Product or
Alternative Final Product; and (5) at the discretion of each of the other

 

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Parties, MJ’s, Merck’s and their
Affiliate’s rights under Section 3.3(b) shall survive such expiration
of this Agreement with respect to each of the other Parties.

 

(b)                                                                                 Termination of BMKK, BMS or any of
their Affiliates.    If BMS’ and BMKK’s rights under this
Agreement are terminated by reason of any Sections 14.2(a), 14.4(a) or
14.5 (where BMS/BMKK provides the notice of termination under Section 14.5),
then:

 

(i)                                     BMS
and BMKK shall assign all its/their rights in and to the Alternative Trademarks to ImClone,
and shall assign to ImClone the JNDA previously held by it as agent for
ImClone;

 

(ii)                                  BMS and BMKK shall cease to use, and shall cause
their applicable Affiliates to cease to use, the ERBITUX® Trademark in Japan;

 

(iii)                               Subject to Section 8.8, all manufacturing
agreements between any of the Parties and their Affiliates and any other Party
(or its Affiliates) shall not terminate but shall remain in place until such agreements
terminate or expire in accordance with their terms;

 

(iv)                              BMS and BMKK shall effect, and shall cause their
Affiliates to effect, a smooth transition of the Commercialization
responsibilities to Merck/MJ; provided, that
the foregoing shall not require any Sales Force Detailing efforts to be
expended by BMKK following the termination date;

 

(v)                                 An accounting, reconciliation and payment of the
Parties’ respective financial obligations and benefits with respect to
sharing/bearing costs (including Development Costs, Allowable Expenses and
BMKK/MJ NSF Commercialization Activities Costs and other cost that the Parties
share, either directly or through a joint Profit and Loss calculation) and
Profits and Losses under the Agreement as of said termination date shall take
place promptly;

 

(vi)                              BMKK shall remain entitled to receive any
compensation due it, and to pay to MJ any expense reimbursement due it and to
pay to ImClone any compensation or expense reimbursement due it, under or with
respect to this Agreement with respect to any accounting periods ending on or
prior to the termination date;

 

(vii)                           All agreements specifically relating to the Commercialization
of Final Product in Japan between BMKK and any
Third Party shall, where assignable and at MJ’s request, be assigned to MJ from
and after such termination date; provided, that
BMKK shall remain responsible for the performance of and payment of any amounts
due under any such agreement with respect to all periods prior to the
termination date; and

 

(viii)                        All rights granted to BMS, BMKK and their Affiliates
to sell, promote, market and otherwise Commercialize Final Product in Japan, whether granted under this Agreement or
under any Existing Agreement with ImClone, shall terminate;

 

(ix)                                MJ shall have the co-exclusive right to sell,
promote, market and Commercialize Final Product in Japan, subject to the terms of this Agreement and its Existing
Agreements with ImClone;

 

(x)                                   BMS and BMKK shall have no obligation to fund Development activities in Japan that occur or arise after such
termination date (but shall remain responsible for their share of Development
costs incurred prior to such termination date and noncancelable

 

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98

 

Development costs existing as of
the termination date that arise after such termination date), and shall effect,
and shall cause their Affiliates to effect, a smooth transition of any Japan Development responsibilities then being controlled, monitored or
conducted by any of them to BMKK;

 

(xi)                                BMS and BMKK shall effect, and shall cause their
Affiliates to effect, reasonable access to, and/or sharing of, any then
existing adverse event database maintained by them for Final Product as used for reporting purposes in Japan so that
Merck, MJ and their Affiliates may continue to fulfill their regulatory
responsibilities in Japan relating to same;

 

(xii)                             At BMS’s expense, BMS/BMKK shall promptly return to
the other Parties all relevant records and materials in BMS/BMKK’s possession
or control containing Confidential Information of such other Parties to the
extent relating to Japan and to the extent practicable given any continued
operation of an Existing Agreement relating to such Confidential Information; provided that BMS/BMKK may keep one copy
of such Confidential Information for archival purposes only and shall otherwise
continue to abide by its confidentiality obligations under this Agreement as to
same.

 

(xiii)                          (1)  BMKK shall assign to ImClone, and itself
shall not have the right to use, the Results (including not having the right to
cross-reference the CTN under the Long-Term Development Plan), the Company
Inventions, and the Related Inventions; (2) Sections 5.1, 5.2 and 5.3
shall cease to apply to the extent that such Sections grant licenses to BMKK
and its Affiliates; (3) the obligations set forth in Sections 12.3 through
12.6 (inclusive) shall continue to apply to all Parties; (4) BMS and its
Affiliates shall have the [**] license to use and practice the Company
Inventions and General Inventions for products other than Final Product and
Alternative Final Product; and (5) at the discretion of each of the other
Parties, BMS’s, BMKK’s and their Affiliate’s rights under Section 3.3(b) shall
survive such expiration of this Agreement with respect to each of the other
Parties.

 

(c)                                  Termination for Material Breach by
ImClone or any of its Affiliates.  If ImClone’s rights under this Agreement are
terminated by reason of Sections 14.2(b), 14.2(c), 14.3(b), or 14.4, then:

 

(i)                                     ImClone shall be immediately removed from the SCJ and
all Subcommittees and Working Groups established under this Agreement (whether
as a voting member or non-voting member), including the SCJ, the JJCC, the
JJFC, JJDC and the JJMC.  ;ImClone shall
not thereafter vote in any committee under an Existing Agreement in a manner
that would contradict or thwart any decision mutually agreed upon by BMKK/BMS
and MJ/Merck with respect to the Development and Commercialization of Final
Product in Japan;

 

(ii)                                  ImClone
shall no longer be a Party to this Agreement except with respect to its
manufacturing obligations under Section 8.8 and except as provided in
Sections  14.4(b), 14.7(c)  and
14.8; provided, that except for the removal of ImClone as a Party to this
Agreement as provided herein and except for the removal of ImClone from the SCJ
and all Subcommittees and Working Groups (whether as a non-voting or voting
member) under this Agreement, this Agreement shall not be affected and shall
continue until BMS/BMKK and Merck/MJ agree to terminate this Agreement, unless
sooner terminated by BMS/BMKK or Merck/MJ as provided in sections 14.4 or 14.5;

 

(iii)                               ImClone may not thereafter exercise any termination
right or remedy for damages that would otherwise have been available to it
under this Agreement, provided, that nothing in this Section 14.7(c)(iii) shall
restrict ImClone from pursuing any

 

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99

 

remedies or rights available to it
at any time prior to or following such termination under an Existing Agreement;

 

(iv)                              Subject to Section 8.8 and to the terms of the
Existing Agreements, all manufacturing agreements between the Parties and their
Affiliates shall not terminate but shall remain in place until such agreements
terminate or expire in accordance with their terms;

 

(v)                                 ImClone shall effect, and shall cause its Affiliates
to effect, a smooth transition of any Development or Commercialization
responsibilities it may then have under this Agreement in Japan to BMKK and/or
MJ, as they may direct, but shall continue to use Diligent Efforts to perform
such regulatory matters and filings with respect to Japan (and be reimbursed
for its cost of doing so) as BMKK and/or MJ may direct;

 

(vi)                              Except where ImClone’s rights were terminated
pursuant to Section 14.4, then, at ImClone’s expense, ImClone shall
promptly return to the other Parties all relevant records and materials in
ImClone’s possession or control containing Confidential Information of such
other Parties to the extent relating to Japan; provided
that ImClone may keep one copy of such Confidential Information for archival
purposes only and shall otherwise continue to abide by its confidentiality
obligations under this Agreement as to same;

 

(vii)                           An accounting, reconciliation and payment of the
Parties’ respective financial obligations and benefits with respect to
sharing/bearing costs (including Development Costs, Allowable Expenses and
BMKK/MJ NSF Commercialization Activities Costs and other cost that the Parties
share, either directly or through a joint Profit and Loss calculation) and
Profits and Losses under the Agreement as of said termination date shall take
place promptly; and

 

(viii)                        ImClone shall assign to BMS and Merck, and itself
shall not have the right to use, the Results (including not having the right to
cross-reference the CTN under the Long-Term Development Plan), the Company
Inventions, and the Related Inventions; (2) Sections 5.1, 5.2 and 5.3
shall cease to apply to the extent that such Sections grant licenses to ImClone
and its Affiliates; (3) the obligations set forth in Sections 12.3 through
12.6 (inclusive) shall continue to apply to all Parties; (4) ImClone and
its Affiliates shall have the [**] license to use and practice the Company
Inventions and the General Inventions for compounds and products other than
Final Product and Alternative Final Product; and (5) at the discretion of
each of the other Parties, BMS’s, BMKK’s and their Affiliate’s rights under Section 3.3(b) shall
survive such expiration of this Agreement with respect to each of the other
Parties.

 

(d)                                                                                 Upon any termination
of this Agreement entitling MJ/Merck (under the ERBITUX Trademark) and/or
entitling BMKK/BMS or ImClone (under the Alternative Trademark) to separately
Develop Cetuximab for Commercialization in Japan, each of BMS and Merck (i) will, and
will cause their Affiliates to, permit
the other Party(ies) that remain entitled to Commercialize Cetuximab in Japan to have prompt access to any databases
controlled by such Party or its Affiliates for use in connection with the
development and registration by such other Party of Cetuximab for any
Indication or line of therapy (A) anywhere in the world (other than Japan)
according to the Existing Agreements, or (B) that was pursued jointly
under this Agreement for Japan, including, in
each case (A) and (B), rights of reference to such database for
Development purposes and for regulatory filings in Japan pertaining to
Cetuximab (and whether for Alternative Trademark Product or  Final Product, as the case may), and (ii) if requested by the other Party
remaining so entitled to Commercialize Cetuximab in Japan, will, and will cause their Affiliates to, promptly provide an
electronic copy of the database and/or right of electronic access, as reasonably
required by such Party

 

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100

 

remaining so
entitled to Develop Cetuximab and Commercialize Final Product and/or Alternative Final
Product,  in Japan.

 

14.8                           Accrued Rights; Surviving
Obligations.  Termination or expiration of this Agreement,
or termination of the rights of any Party under this Agreement, for any reason
shall be without prejudice to any rights that shall have accrued to the benefit
of any of the Parties prior to such termination or expiration.  Such termination or expiration shall not
relieve any of the Parties from any obligation which is expressly indicated to
survive termination or expiration of this Agreement.  All of the Parties’ rights and obligations
under Articles and Sections 3.4(d), 3.6(d), 3.6(g), 3.6(i), 3.6(j), 3.7,
4.7-4.9 (inclusive), 5.1, 5.2, 5.3, 6.4(f)(v), 6.9 (solely with respect to each
Party’s responsibility for its own or other Persons’ compliance with Section 6.9
prior to the date of such termination or expiration), 6.9(g) through (i) (inclusive),
the last sentence of 8.1(c)(iv) (solely with respect to actions by Party’s
Affiliates or Third Party contractors prior to the date of such termination of
expiration), 8.4 (solely with respect to binding orders for API or Final
Product that are in place as of the date of such termination or expiration),
8.2(a) and (b) (solely with respect to API, Final Product or any
intermediates or components thereof that are manufactured prior to the date of
such termination or expiration), 8.7 (solely with respect to Final Product
delivered to customers pursuant to this Agreement), 9.1(a), 9.2(a), 10.3(e) (with
respect to breaches by a Sublicensee prior to the date of such termination or
expiration), 12.3 through 12.6 (inclusive), 13, 14, and 16, shall survive
termination or expiration of this Agreement, or termination of the rights of
any Party under this Agreement.

 

15.                               FORCE MAJEURE.

 

No Party shall be held liable or
responsible to the other Parties nor be deemed to be in default under, or in
breach of any provision of, this Agreement for failure or delay in fulfilling
or performing any obligation of this Agreement when such failure or delay is
due to force majeure, and without the fault or negligence of the Party so failing
or delaying.  For purposes of this
Agreement, force majeure is defined as causes beyond the control of the Party,
including acts of God; acts, regulations, or laws of any government; war; civil
commotion; destruction of production facilities or materials by fire, flood,
earthquake, explosion or storm; labor disturbances; epidemic; and failure of
public utilities or common carriers.  In
such event Merck, MJ, ImClone, BMS, or BMKK, as the case may be, shall immediately
notify the other Parties, with written notice to follow, of such inability and
of the period for which such inability is expected to continue.  The Party giving such notice shall thereupon
be excused from such of its obligations under this Agreement as it is thereby
disabled from performing for so long as it is so disabled and for 30 days
thereafter.  To the extent possible, each
Party shall use reasonable efforts to minimize the duration of any force
majeure.

 

16.                               MISCELLANEOUS.

 

16.1                           Relationship of Parties.  Nothing in
this Agreement is intended or shall be deemed to constitute a partnership,
agency, employer-employee or joint venture relationship among the Parties.  No Party shall incur any debts or make any
commitments for the other, except to the extent, if at all, specifically provided
herein.

 

16.2                           Assignment.  This
Agreement shall be assignable by a Party, if at all, (x) only to the
extent that the such Party’s rights and obligations with respect to Japan under
the Existing Agreements to which such Party is a party are assigned and (y) only
if the consent of the other Parties to this Agreement (who are not party to
such Existing Agreement) shall have been obtained as well; provided, that a
Party may assign or transfer this Agreement
without such prior written consent of the other Parties to (i) any of its
Affiliates (but only for so long as such entity is and remains an Affiliate of
such Party, it being agreed that such Party shall cause

 

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101

 

such
assignment to terminate prior to such time, if any, as such entity ceases to be
an Affiliate of such Party), or (ii) any successor to all or substantially
all of the business and assets of such Party, whether in a merger,
consolidation, sale of stock, sale of all or substantially all of its assets or
other similar transaction.  A copy of the
document (from which the financial terms of the assignment may be redacted)
between the assigning Party and the Affiliate or Third Party to whom such
assigning Party’s rights and obligations are assigned shall be provided by the
assigning Party to the other Parties. 
Any permitted successor or assignee of rights and/or obligations
hereunder shall, in a writing delivered to the other Parties, expressly assume
performance of such rights and/or obligations. 
In the event of an assignment or transfer to an entity other than an
Affiliate, the assigning or transferring Party and its Affiliates shall have no
further obligations, and shall be released from any and all further
obligations, under Section 10.2. 
Except as set forth in the immediately preceding sentence, in the event
of an assignment or transfer as permitted above in this Section 16.2, (A) if
this Agreement is assigned or transferred to an Affiliate, the assigning or
transferring Party shall remain responsible (jointly and severally) with such
Affiliate for the performance of such assigned or transferred obligations, (B) if
such assignment is pursuant to a sale of the transferring Party’s interest in
the Collaboration to the another Party, then, subject to Article 14, the
transferring Party shall be released from all of its obligations hereunder, and
(C) if such assignment or transfer is to a Third Party, then, subject to Article 14,
the transferring Party shall be released only to the extent such obligations
are assumed by the transferee of such interest. 
Any assignment or transfer, or attempted assignment or transfer, by
either Party in violation of the terms of this Section 16.2 shall be null
and void and of no legal effect.  This
Agreement shall be binding on, and inure to the benefit of, each Party, its
successors and permitted assigns.

 

16.3                           Affiliates of the Parties.  Each Party
shall cause its applicable Affiliates to take such actions as are necessary for
such Party to fulfill its obligations under this Agreement.

 

16.4                           Books and Records.  Any books
and records to be maintained under this Agreement by a Party shall be
maintained in accordance with GAAP, in the case of ImClone, BMS and BMKK, and
IFRS, in the case of Merck and MJ.

 

16.5                           Further Actions.  Each Party
shall execute, acknowledge and deliver such further instruments, and do all
such other acts, as may be necessary or appropriate in order to carry out the
purposes and intent of this Agreement.

 

16.6                           Notice.  Any notice
or request required or permitted to be given under or in connection with this
Agreement shall be deemed to have been sufficiently given if in writing and
personally delivered or sent by facsimile transmission (receipt verified) or
overnight express courier service (signature required), prepaid, to the Party
for which such notice is intended, at the address set forth for such Party
below:

 

	
  (i)

  	
   

  	
  in the case of Merck, to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Frankfurter Straße 250

  
	
   

  	
   

  	
  D-64293 Darmstadt

  
	
   

  	
   

  	
  Federal Republic of Germany

  
	
   

  	
   

  	
  Attention:

  	
       

  	
  Jens Eckhardt, Corporate Legal Department

  
	
   

  	
   

  	
  Facsimile:

  	
       

  	
  +49-6151-72-2373

  

 

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102

 

(ii)           in
the case of MJ, to:

 

Merck Serono
Japan Company, Limited

6F Meguro
Tokyu Bldg.

2-13-17
Kamiosaki, Meguro-ku

Tokyo,
141-0021

Japan

	
  Attention:

  	
   

  	
  Wayne Paterson

  
	
  Facsimile:

  	
   

  	
  +81-3-5434-4712

  
	
  Telephone:

  	
   

  	
  +81-3-5434-4704

  

 

(iii)          in
the case of ImClone, to:

 

ImClone
Systems Incorporated

180 Varick
Street

New York, New
York 10014  USA

	
  Attention:

  	
   

  	
  General
  Counsel

  
	
  Facsimile:

  	
   

  	
  (1 212)
  645-2770

  
	
  Telephone:

  	
   

  	
  (1 646)
  638-5027

  

 

with a copy
sent to the same address, to:

	
  Attention:

  	
   

  	
  Senior Vice
  President Regulatory Affairs,

  Biostatistics and Quality Assurance

  
	
  Facsimile:

  	
   

  	
  (1 908)
  218-0555

  
	
  Telephone:

  	
   

  	
  (1 908)
  541-2250

  

 

(iv)          in
the case of BMS, to:

 

Bristol-Myers
Squibb Company

P.O.  Box
 4000

Route 206 &
Province Line Road

Princeton, New
Jersey 08543-4000  USA

	
  Attention:

  	
   

  	
  Vice
  President and Senior Counsel,

  
	
   

  	
   

  	
  Worldwide
  Licensing and

  
	
   

  	
   

  	
  Business
  Development

  
	
  Facsimile:

  	
   

  	
  (1 609)
  252-6019

  

 

with a copy sent
to the same address, to:

	
  Attention:

  	
   

  	
  Vice
  President, Alliance Management

  
	
  Facsimile:

  	
   

  	
  (1 609)
  252-7235

  

 

(v)           in
the case of BMKK, to:

 

Bristol-Myers
K. K.

Shinjuku
I-Land Tower

5-1,
Nishi-Shinjuku 6-chome, shinjuku-ku

Tokyo,
163-1328

Japan

	
  Attention:

  	
   

  	
  President

  
	
  Facsimile:

  	
   

  	
  813-5323-8311

  
	
  Telephone:

  	
   

  	
  813-5323-8318

  

 

or to such
other address for such Party as it shall have specified by like notice to the
other Parties, provided that
notices of a change of address shall be effective only upon receipt thereof. With
respect to notices given pursuant to this Section 15.6, (i) if
delivered personally

 

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103

 

or by
facsimile transmission, the date of delivery shall be deemed to be the date on
which such notice or request was given; and (ii) if sent by overnight
express courier service, the date of delivery shall be deemed to be the next
business day after such notice or request was deposited with such service.

 

All material correspondence, notices and other communications related
to this Agreement shall be promptly provided to the other Parties.

 

16.7         Use
of Name. Except as otherwise provided herein or in an Existing
Agreement, none of the Parties shall have any right, express or implied, to use
in any manner the name or other designation of the other Parties or any other
trade name, Trademark, Corporate Name or logo of the other Parties for any
purpose in connection with the performance of this Agreement.

 

16.8         Public
Announcements. Except as required by law (including disclosure
requirements of the U.S. Securities and Exchange Commission, Nasdaq or any
other stock exchange on which securities issued by a Party are traded), none of
the Parties shall make any public announcement concerning this Agreement or the
subject matter hereof without the prior written consent of the other Parties,
which shall not be unreasonably withheld or delayed; provided that it shall not be unreasonable for a Party to
withhold consent with respect to any public announcement containing any financial
terms or any of such Party’s Confidential Information. In the event of a
required public announcement, to the extent practicable under the
circumstances, the Party making such announcement shall provide the other
Parties with a copy of the proposed text prior to such announcement
sufficiently in advance of the scheduled release of such announcement to afford
the other Parties a reasonable opportunity to review and comment upon the
proposed text.

 

16.9         Waiver.
A waiver by any of the Parties of any of the terms and conditions of this
Agreement in any instance shall not be deemed or construed to be a waiver of
such term or condition for the future, or of any subsequent breach hereof. All
rights, remedies, undertakings, obligations and agreements contained in this
Agreement shall be cumulative and none of them shall be in limitation of any
other remedy, right, undertaking, obligation or agreement of any of the
Parties.

 

16.10       Severability.
When possible, each provision of this Agreement will be interpreted in such
manner as to be effective and valid under Applicable Law, but if any provision
of this Agreement is held to be prohibited by or invalid under Applicable Law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.

 

16.11       Amendment.
No amendment, modification or supplement of any provisions of this Agreement
shall be valid or effective unless made in writing and signed by a duly
authorized officer of each of the Parties.

 

16.12       Governing
Law; Submission to Jurisdiction.

 

(a)           This Agreement shall be governed by
and interpreted in accordance with the laws of the United States and the State
of New York without regard to conflict of law principles.

 

(b)           Each Party, for the purpose of
enforcing an award under Section 16.13(a) or for seeking injunctive
or other equitable relief or legal remedies as permitted by Section 16.13(b),
irrevocably submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of New York and the Supreme Court of
the State of New York,

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

104

 

New York County (collectively, the “Courts”),
for purposes of any action, suit or other proceeding arising out of this
Agreement or such award (other than appeals therefrom). Each Party further
agrees that service or any process, summons, notice or document by U.S.
registered mail to such Party’s notice address provided for in this Agreement
shall be effective service of process for any action, suit or proceeding in New
York with respect to any matters to which it has submitted to jurisdiction in
this Section 16.12(b).

 

(c)           The English original of this
Agreement shall prevail over any translation hereof.

 

16.13       Arbitration.

 

(a)          Except as expressly otherwise provided
in this Agreement, any dispute as to the validity or construction of, or the
interpretation of, any provision of this Agreement or as to the failure of any
Party to perform or comply with any obligations or conditions applicable to
such Party pursuant to this Agreement, or any dispute as to a matter that is
specifically and expressly referred to for arbitration under this Section,
shall be finally settled by binding arbitration in accordance with the terms
set forth in this Section 16.13:

 

(i)            The place of arbitration of any
dispute shall be London, England, except that the place of arbitration for
matters to be resolved by “baseball” arbitration shall be Tokyo, Japan. The
Parties to the dispute may agree to another location. The arbitration
proceedings shall be conducted, and the award shall be rendered, in the English
language. If the dispute is between any one Party, on the one hand, and the
other Parties, on the other hand, each side of such dispute shall select one Experienced
Arbitrator. If the dispute is between only two of the five Parties, each of the
two disputing Parties shall promptly select one Experienced Arbitrator. In each
such case, the two arbitrators selected by the Parties shall promptly select a
third Experienced Arbitrator from among arbitrators designated by the London
Court of International Arbitration (unless the dispute is to be resolved in Tokyo,
in which event ICC rules and policies shall apply). If the dispute is
among all five Parties or the Parties cannot agree on which Parties are a party
to the dispute, the London Court of International Arbitration (unless the
dispute is to be resolved in Tokyo, in which event the Tokyo ICC) shall
promptly select three Experienced Arbitrators). Subject to Section 16.13(a)(iii),
the Parties shall instruct the arbitrators to render a final determination of
such dispute within 30 days after the appointment of the third arbitrator.

 

(ii)           Any award rendered by the arbitrators
shall be final and binding upon the Parties, unless modified or reversed in
accordance with applicable law. Judgment upon any award rendered may be entered
in any court having jurisdiction, or application may be made to such court for
a judicial acceptance of the award and an order of enforcement, as the case may
be. Each Party shall pay its own expenses of arbitration, and the expenses of
the designated arbitrators shall be equally shared between the disputing
Parties unless the arbitrators assess as part of their award all or any part of
the arbitration expenses of a Party or the Parties (including reasonable
attorneys’ fees) against the another Party or Parties, as the case may be.

 

(iii)          The Parties agree that certain
arbitrable matters, as more fully set forth in the last sentence of the
definition of Net Sales and in sections 3.1(c), 4.1(c)(ii), 6.3(b), 6.4(e),
6.4(f)(iv) and 8.1(c)(ii), will be resolved and determined by “baseball”
arbitration. Except where otherwise indicated, such baseball arbitration shall be
limited to MJ/Merck on the one hand and BMS/BMKK on the other.

 

Where baseball
arbitration applies, the arbitration shall be conducted and determinations
made, as follows:  Within ten (10) Business
Days after the appointment of the

 

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105

 

third arbitrator under Section 16.13(a)(i), each Party to the
arbitration (MJ/Merck on the one hand, and BMS/BMKK on the other, and, where
provided under the applicable provision, ImClone) shall submit to the
arbitrators and to the other Party such Party’s offer to the other Party to
resolve the matter at issue, as well as any other information that it deems
appropriate for the arbitrators to consider. Within fifteen (15) Business Days
after the designation of the third arbitrator, the disputing Parties shall each
simultaneously submit to the arbitrators and one another a written statement of
their respective positions on such disagreement and a reasonably detailed
proposed resolution. Each such Party shall have ten (10) Business Days
from receipt of the other Party’s submission to submit a written response
thereto, which shall include any scientific, business and/or technical
information in support thereof (but not a modification of the proposed
resolution). The arbitrators shall have the right to meet with the disputing
Parties as necessary to make a determination, but shall not communicate with
any disputing Party unless the other disputing Party(ies) is(are) present. The
Parties shall request the arbitrators to make a determination not later than
fifteen (15) days after submission of the response(s) to the arbitrators,
although the arbitrators may take a longer period of time as they make require
to make a decision. The arbitrators shall make a determination by selecting the
resolution proposed by one of the disputing Parties that, as a whole, is the
most nearly consistent with this Agreement and the most fair and reasonable to
such Parties in light of the totality of the circumstances and the terms of
this Agreement. The arbitrators shall provide the disputing Parties with a
written statement setting forth the basis of the determination in connection
therewith. The decision of the arbitrators shall be final and conclusive, unless
modified or reversed in accordance with applicable law.

 

(b)           This Section 16.13 nor any other
provision of this Agreement shall not prohibit a Party from (x) seeking
injunctive or other equitable relief in the event of a breach or prospective
breach of this Agreement as may be necessary to avoid irreparable harm to such
Party, to maintain the status quo, to preserve the subject matter of the
arbitration, to avoid or to collect damages for breach or threatened breach of
Sections 10.2, 12.3 or 12.5 hereof or (y) subject to Section 16.12,
seeking a remedy in a court of competent jurisdiction for matters not
specifically reserved to arbitration under Section 16.13 of this Agreement.

 

(c)           The Parties agree
that the following matters shall not be arbitrable matters:

 

(i)            For any dispute involving a
Commercialization matter on which BMKK and MJ agree, the BMKK/MJ position shall
control without resort to arbitration;

 

(ii)           Subject to Section 10.2(a), any
dispute involving the determination of the Long-Term Commercialization Plan and
Budget and/or the next year’s Annual Commercialization Plan and Budget, the
next year’s sales force effort, the PDE Rate, or the number and/or position of
the PDEs to be provided for a given next year on which BMKK and MJ do not
agree, and in any such dispute occurs, the Annual Commercialization Plan and
Budget for the calendar year with respect to which the disputed item occurs
shall be the then current year’s agreed upon determination for such item, and
such matter shall not be submitted to arbitration; provided,
that, subject to Section 6.4(b), a Party may satisfy its obligations with
respect to any dispute as to the position of the PDEs for any year after the
first two years after Launch in Japan by providing Primary Position or
Secondary Position details, so long as it meets its overall PDE requirements;
and

 

(iii)          Decisions whether to pursue a new Indication
or a new line of therapy within an existing Indication, as well as the
determination of each Development Plan and Annual Development Plan and Budget
for such new Indication or new line of therapy within an existing Indication, which,
subject to Section 3.1(c), must be agreed upon by BMS/BMKK and Merck/MJ;

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

106

 

(iv)          subject to Section 10.2(a), (A) increases
or decreases in budgets and (B) decisions which would require BMS/BMKK or
Merck/MJ or any of their Affiliates to change physical, financial, or personnel
resources beyond those required for the applicable period in the then-current
Approved Plans in order for such Party to perform its obligations under this
Agreement under the then applicable year; and each such Party shall have final
decision-making authority under this Agreement with respect to same;

 

(v)           the arbitration procedure in Section 16.13
shall not apply to any matter that a Party is expressly entitled to pursue in a
court of competent jurisdiction under this Agreement, or to any matters for
which an exclusive remedy is provided for under this Agreement;

 

(vi)          any decision whether to include,
delete or modify the specific terms (A) for calculating an item of cost or
expense (including changes to the definition of reasonable manufacturing
capacity charges) used to determine Allowable Expenses or to expense capital
equipment purchases under Section 8.6(c) or (B) for calculating
Net Sales or Profit Or Loss under this Agreement.

 

16.14      Entire Agreement.

 

(a)           This Agreement, together with the
Existing Agreements to which each Party is a party, all exhibits, schedules or
amendments attached thereto, set forth the entire agreement and understanding
between the Parties as to the subject matter hereof and merges all prior
discussions and negotiations among them, and none of the Parties shall be bound
by any conditions, definitions, warranties, understandings or representations
with respect to such subject matter other than as expressly provided herein or
therein or as duly set forth on or subsequent to the date hereof in writing and
signed by a proper and duly authorized officer or representative of the Parties
to be bound thereby.

 

(b)           This Agreement shall, from the Restatement
Effective Date, replace the Co-Development Agreement such that the
Co-Development Agreement shall have no further force and effect after the Restatement
Effective Date.

 

(c)           For the avoidance of doubt, as
between: (i) ImClone and BMS and/or BMKK; and (ii) ImClone and Merck
and/or MJ, unless expressly provided otherwise in this Agreement, the terms of this
Agreement shall prevail over any conflict with the Existing Agreements. The
Parties agree that this Agreement is intended to supplement and modify the
Existing Agreements with respect to Japan only, and this Agreement is not
intended to and shall not in any way change or amend any other provisions of
the Existing Agreements applicable to other countries within a Party’s
territory.

 

(d)           Each Party agrees not to amend the
Existing Agreements to which it is a party in any manner that is inconsistent
with, or would prevent it from fully performing, its obligations under this
Agreement.

 

16.15      Parties
in Interest. All of the terms and provisions of this Agreement shall
be binding upon, inure to the benefit of and be enforceable by the Parties
hereto and their respective permitted successors and assigns.

 

16.16      Descriptive
Headings; Construction.

 

(a)           The
descriptive headings of this Agreement are for convenience only, and shall be
of no force or effect in construing or interpreting any of the provisions of
this Agreement. Each of the Parties acknowledges and agrees that this
Agreement has been

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

107

 

diligently reviewed by and
negotiated by and between them, that in such negotiations each of them has been
represented by competent counsel and that the final agreement contained herein,
including the language whereby it has been expressed, represents the joint
efforts of the Parties hereto and their counsel. Accordingly, in interpreting
this Agreement or any provision hereof, no presumption shall apply against any
Party hereto as being responsible for the wording or drafting of this Agreement
or any such provision, and ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.

 

(b)           Except
where the context otherwise requires, wherever used, the singular shall include
the plural, the plural the singular, and the use of any gender shall be applicable
to all genders. Unless otherwise stated, references to days shall mean calendar
days. The terms “include” and “including” as used herein shall mean include or
including, without limiting the generality of any description preceding such
term. Unless otherwise specified, (a) references in this Agreement to any
Article, Section or Exhibit shall mean references to such Article, Section or
Exhibit of this Agreement and to all Sections within such Article and
subsections within such Section, (b) references in any section to any
clause are references to such clause of such section, and (c) references
to any agreement, instrument or other document in this Agreement refer to such
agreement, instrument or other document as originally executed or, if subsequently
varied, replaced or supplemented from time to time, as so varied, replaced or
supplemented and in effect at the relevant time of reference thereto. If the
consent of any Party is required under any provision of this Agreement, such
consent may be given or withheld by such Party in the sole discretion of such
Party unless otherwise explicitly indicated in such provision.

 

16.17       Counterparts.
This Agreement may be executed simultaneously in any number of identical
counterparts, any one of which need not contain the signature of more than one
Party, but all such counterparts taken together shall constitute one and the
same agreement.

 

Confidential
Treatment has been requested by ImClone Systems Incorporated for portions of
this document.

 

[the next page is
the signature page]

 

108

 

IN WITNESS WHEREOF, each of the
Parties has caused this Agreement to be executed by its duly authorized
representative as of the date first above written.

 

 

	
  BRISTOL-MYERS SQUIBB COMPANY

  	
   

  	
  BRISTOL-MYERS K.K.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  E.R. SQUIBB & SONS, LLC

  	
   

  	
  MERCK SERONO JAPAN COMPANY,

  
	
   

  	
   

  	
  LIMITED

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  IMCLONE SYSTEMS INCORPORATED

  	
   

  	
  MERCK KGAA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Confidential Treatment has been requested by ImClone Systems
Incorporated for portions of this document.

 

109

 

APPENDICES

 

	
  Exhibit 1.1(a):

  	
   

  	
  Third Party
  Payments Known as of the Restatement Effective Date

  
	
   

  	
   

  	
   

  
	
  Exhibit 1.1(b):

  	
   

  	
  Detail
  Allocation Guidelines in Group Settings

  
	
   

  	
   

  	
   

  
	
  Exhibit 2.4(a):

  	
   

  	
  Committee
  Representatives Known as of the Restatement Effective Date

  
	
   

  	
   

  	
   

  
	
  Exhibit 3.1(a):

  	
   

  	
  Long-Term
  Development Plan as of the Restatement Effective Date

  
	
   

  	
   

  	
   

  
	
  Exhibit 4.1(e):

  	
   

  	
  Applicable
  FTE Rates

  
	
   

  	
   

  	
   

  
	
  Exhibit 6.2(a):

  	
   

  	
  Initial
  Long-Term Commercialization Plan and Budget

  
	
   

  	
   

  	
   

  
	
  Exhibit 6.3(b):

  	
   

  	
  PDE Rates as
  of Restatement Effective Date

  
	
   

  	
   

  	
   

  
	
  Exhibit 6.5(a):

  	
   

  	
  Sales
  Representative Qualifications

  
	
   

  	
   

  	
   

  
	
  Exhibit 8.1(a):

  	
   

  	
  Initial
  Japan Manufacturing Plan

  
	
   

  	
   

  	
   

  
	
  Exhibit 8.2(d):

  	
   

  	
  Current
  Version of Initial Packaging for 100 mg Dose

  
	
   

  	
   

  	
   

  
	
  Exhibit 8.3:

  	
   

  	
  Initial
  Manufacturing Forecast

  
	
   

  	
   

  	
   

  
	
  Exhibit 11.1:

  	
   

  	
  Exceptions
  to Representations and Warranties

  

 

Confidential Treatment has been requested by
ImClone Systems Incorporated for portions of this document.

 

110

 

Exhibit 1.1(a)

 

THIRD
PARTY PAYMENTS KNOWN AS OF

THE RESTATEMENT EFFECTIVE DATE

 

The royalty rates shown below
are based on ImClone’s reading of the respective agreements, and are provided
in this Exhibit as an estimate and for convenience. In the event an actual
royalty rate differs based on terms or interpretation of the particular
agreement, the rate on this Exhibit shall be deemed amended to reflect the
actual royalty rate.

 

Nothing in this Exhibit shall
be construed to alter the terms of, or obligations under, the agreements listed
below.

 

[**]

 

Confidential Treatment has been requested by
ImClone Systems Incorporated for portions of this document.

 

111

 

Exhibit 1.1(b)

 

DETAIL ALLOCATION GUIDELINES IN
GROUP SETTINGS

 

Final Product
presentations by MJ and BMKK personnel, as the case may be, devoted primarily
to a Final Product, may be made to
physicians or other medical professionals licensed to prescribe drugs
(collectively, “Prescribing Professionals”)
in group situations.  Such presentations
may be through speaker programs, dinner and lunch programs, symposia and other
programs that are approved by the JJCC. 
In calculating the number of PDEs resulting from such group
presentations, each Prescribing Professional participating in such
presentations will be considered as one (1) Primary Detail Equivalent
(PDE). It is understood that for presentations held by multiple personnel of MJ
or BMKK, as the case may be, or jointly by MJ and BMKK personnel, the total
number of PDEs credited to each Party shall be calculated as follows:  [**] 
It is understood that for symposia and other group presentations that
contain full presentations on a Final Product
together with other products, the number of PDEs for such presentations shall
be accounted for as provided above.

 

Confidential Treatment has
been requested by ImClone Systems Incorporated for portions of this document.

 

112

 

Exhibit 2.4(a)

 

KNOWN
COMMITTEE REPRESENTATIVES AND ALLIANCE MANAGERS

AS OF
THE RESTATEMENT EFFECTIVE DATE

 

SCJ:

 

	
  (ImClone Representative)

  	
   

  	
  Margaret
  Dalesandro, VP Proj/Alliance Mgmt & BD

  
	
  (ImClone Representative)

  	
   

  	
  Eric
  Rowinsky, CMO, SVP

  
	
  (BMS Representative)

  	
   

  	
  Martin Birkhofer, VP, Global Medical Affairs -
  Oncology

  
	
  (BMKK Representative)

  	
   

  	
  Mark Wright, President, BMS Japan

  
	
  (Merck Representative)

  	
   

  	
  Wolfgang Wein

  
	
  (MJ Representative)

  	
   

  	
  Mark
  Smith

  
	
   

  	
   

  	
   

  
	
  JJDC:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (ImClone Representative)

  	
   

  	
  Eric
  Rowinsky, CMO, SVP

  
	
  (ImClone Representative)

  	
   

  	
  Richard
  Crowley, SVP Biopharmaceutical Ops

  
	
  (BMS Representative)

  	
   

  	
  Maurizio Voi, M.D., Executive Director, Global
  Medical Affairs—Oncology

  
	
  (BMKK Representative)

  	
   

  	
  Ruiping Dong, VP, BMSPRI Japan

  
	
  (Merck Representative)

  	
   

  	
  Peter Mertins

  
	
  (MJ Representative)

  	
   

  	
  Yoshiteru Ishikawa

  
	
   

  	
   

  	
   

  
	
  JJCC:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (ImClone Representative)

  	
   

  	
  Michael
  Bailey, SVP, Commercial Ops

  
	
  (ImClone Representative)

  	
   

  	
  TBD,
  WW VP of Strategic Marketing

  
	
  (BMS Representative)

  	
   

  	
  Ron Gimbel, Finance Director, BMS Japan

  
	
  (BMKK Representative)

  	
   

  	
  Masaki Onoue, BMS Japan

  
	
  (Merck Representative)

  	
   

  	
  Petra Maier

  
	
  (MJ Representative)

  	
   

  	
  Mitsuko
  Shinagawa

  
	
   

  	
   

  	
   

  
	
  JJFC:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (ImClone Representative)

  	
   

  	
  Brian
  Batchelder, AVP, Finance

  
	
  (ImClone Representative)

  	
   

  	
  Peter
  Borzilleri, VP Finance (Acting)

  
	
  (BMS Representative)

  	
   

  	
  V. Michael Moran, Director, BMS Alliance
  Accounting

  
	
  (BMKK Representative)

  	
   

  	
  Ron Gimbel, Finance Director, BMS Japan

  
	
  (Merck Representative)

  	
   

  	
  Holger Piekenbrock, Sr Manager Controlling Pharm
  Ethicals

  
	
  (MJ Representative)

  	
   

  	
  Roiko Fukunaga

  
	
   

  	
   

  	
   

  
	
  JJMC:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (ImClone Representative)

  	
   

  	
  Richard
  Crowley, SVP Biopharmaceutical Ops

  
	
  (ImClone Representative)

  	
   

  	
  Elizabeth
  Yamashita, VP CMC Regulatory

  
	
  (BMS Representative)

  	
   

  	
  Shawn Knipple, Contract
  Manufacturing

  
	
  (BMKK Representative)

  	
   

  	
  Tetsuo Suzuki, Director, Technical Operations,
  Japan

  
	
  (Merck Representative)

  	
   

  	
  Ludwig Pfeuffer

  
	
  (MJ Representative)

  	
   

  	
  Akio
  Yamaguchi

  
	
   

  	
   

  	
   

  
	
  Alliance Managers:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (BMS/BMKK
  Representative)

  	
   

  	
  Nancy
  Forrest, Senior Director, Alliance Management

  
	
  Merck/MJ
  Representatives)

  	
   

  	
  Steve
  Axon

  
	
  (ImClone
  Representative)

  	
   

  	
  Robert Schinagl, AVP Proj/Alliance Management

  

 

Confidential Treatment has
been requested by ImClone Systems Incorporated for portions of this document.

 

113

 

Exhibit 3.1(a)

 

LONG-TERM DEVELOPMENT PLAN AS OF

THE RESTATEMENT EFFECTIVE DATE

 

[**]

 

Confidential Treatment has
been requested by ImClone Systems Incorporated for portions of this document.

 

114

 

Exhibit 4.1(e)

 

APPLICABLE FTE
RATES – 2007 Budget*

 

	
  FTE Rate

  	
   

  	
  Category

  	
   

  	
  Classification

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [**]

  	
   

  	
  A

  	
   

  	
  Clinical/Technical/Research

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [**]

  	
   

  	
  B

  	
   

  	
  Market Research

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [**]

  	
   

  	
  C

  	
   

  	
  Medical Affairs

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [**]

  	
   

  	
  D

  	
   

  	
  Oncology Product Manager

  

 

	
  Type of
  Employee

  	
   

  	
  Category

  
	
   

  	
   

  	
   

  
	
  Clinical scientist and technicians

  	
   

  	
  A

  
	
   

  	
   

  	
   

  
	
  Clinical Medical directors

  	
   

  	
  A

  
	
   

  	
   

  	
   

  
	
  Patent / Trademark Counsel

  	
   

  	
  A

  
	
   

  	
   

  	
   

  
	
  Marketing Product Managers

  	
   

  	
  B and / or D

  
	
   

  	
   

  	
   

  
	
  Market Research

  	
   

  	
  B and / or D

  
	
   

  	
   

  	
   

  
	
  Medical Affairs

  	
   

  	
  C

  
	
   

  	
   

  	
   

  
	
  Final Product Safety / AEs

  	
   

  	
  A

  
	
   

  	
   

  	
   

  
	
  Professional Services

  	
   

  	
  B and / or D

  

 

Notes:

 

* [**]

 

** 
The JJCC will approve the appropriate category of staff to execute the
job functions necessary to undertake commercialization in Japan, and the
applicable FTE rates will be revised and included as part of the applicable
Annual Development Plan and Budget or Commercialization Plan and Budget

 

Confidential Treatment has
been requested by ImClone Systems Incorporated for portions of this document.

 

115

 

Exhibit 6.2(a)

 

INITIAL LONG-TERM COMMERCIALIZATION PLAN AND
BUDGET – JAPAN

 

From Restatement Effective Date until End of Second Calendar
Year Post-Launch

 

This Exhibit represents a plan that, as of the date of execution of this Agreement, estimates an appropriate level and
allocation of sales force for successful commercialization of Final Product in Japan.  It
is the intent of the Parties to update this schedule closer to the Launch as additional information becomes available, on  an as-needed basis, and in any case as part
of the determination of any Annual Commercialization Plan and Budget.

 

Overview

 

The objective of this commercialization plan is to provide
an outline of activities required to successfully launch Cetuximab in Japan. It
will encompass the time from the Effective Date of the collaboration through
two years post Launch and will serve to highlight key areas of work, their
required timing and associated costs as well as distribute potential
responsibility evenly between the BMKK and Merck Japan teams

 

[**]

 

Confidential Treatment has
been requested by ImClone Systems Incorporated for portions of this document.

 

116

 

Exhibit 6.3(b)

 

PDE RATES AS OF RESTATEMENT EFFECTIVE DATE

 

The following represents the process for determining
the PDE Rate for the initial year of the Long-Term Commercialization Plan,
which shall apply to both Parties Sales Representatives:

 

[**]

 

Confidential Treatment has
been requested by ImClone Systems Incorporated for portions of this document.

 

117

 

Exhibit 6.5(a)

 

SALES REPRESENTATIVES HIRING PROFILE

 

[**]

 

Confidential Treatment has
been requested by ImClone Systems Incorporated for portions of this document.

 

118

 

Exhibit 8.1(a)

 

MANUFACTURING PLAN AS OF RESTATEMENT
EFFECTIVE DATE

 

[**]

 

Confidential Treatment has
been requested by ImClone Systems Incorporated for portions of this document.

 

119

 

Exhibit 8.2(d)

 

CURRENT VERSION OF INITIAL PACKAGING FOR 100
MG VIAL

 

[**]

 

Confidential Treatment has
been requested by ImClone Systems Incorporated for portions of this document.

 

120

 

Exhibit 8.3

 

INITIAL MANUFACTURING FORECAST IN VIALS

 

[**]

 

Confidential Treatment has
been requested by ImClone Systems Incorporated for portions of this document.

 

121

 

Exhibit 11.1

 

EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES

 

None.

 

Confidential Treatment has
been requested by ImClone Systems Incorporated for portions of this document.

 

122

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