Document:

exv10w31

 

Exhibit 10.31

CONSULTING AGREEMENT

     THIS CONSULTING AGREEMENT (the “Agreement”), made this 1st day of January, 2008
(“Effective Date”) is entered into by Idera Pharmaceuticals, Inc., a Delaware corporation with its
principal place of business at 167 Sidney Street, Cambridge, MA 02139
(the “Company”), and Karr
Pharma Consulting, LLC, having a place of business located at 30 Ox Bow Lane, Essex, Connecticut
06426 (the “Consultant”). Company and Consultant may be referred to herein individually as a
“Party” and collectively as the “Parties.”

INTRODUCTION

     The Company desires to retain the services of the Consultant and the Consultant desires to
perform certain Services, as defined below, for the Company. In consideration of the mutual
covenants and promises contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the Parties, the Parties agree as follows:

     1.      Services. The Consultant agrees to perform such consulting, advisory and related
services to and for the Company as may be reasonably requested from time to time by the Company
(“Service”). Such Services shall be performed at such location, on such days, and at such times as
may be reasonably agreed by the Company and the Consultant. Such Services, if any, shall be
performed on an as needed basis.

     2.      Term. This Agreement shall commence on the Effective Date and shall continue until
December 31, 2008 (such period, as it may be extended, being referred to as the “Consultation
Period”), unless sooner terminated in accordance with the provisions of Section 4.

     3.      Compensation.

               3.1    Consulting Fees. The Consultant shall be entitled to $375 per hour, not to exceed
$3,000 per day, of Service actually performed by the Consultant hereunder. The Consultant shall
submit to the Company monthly statements, in a form satisfactory to the Company, detailing Services
performed for the Company in the previous month. The Company shall pay to the Consultant
consulting fees with respect to all Services actually performed and invoiced within 30 days after
Company’s receipt of each monthly invoice.

               3.2    Reimbursement of Expenses. The Company shall reimburse the Consultant for all
reasonable and necessary expenses incurred or paid by the Consultant in connection with, or related
to, the performance of his Services under this Agreement. The Consultant shall submit to the
Company itemized monthly statements, in a form satisfactory to the Company, of such expenses
incurred in the previous month. The Company shall pay to the Consultant amounts shown on each such
statement within 30 days after Company’s receipt thereof. Notwithstanding the foregoing, the
Consultant shall not incur total expenses in excess of $ 1,000 per month without the prior
written approval of the Company.

               3.3    Benefits. The Consultant shall not be entitled to any benefits, coverages or
privileges made available to employees of the Company, including, without limitation, social
security, unemployment, medical or pension payments.

 

 

     4.      Termination. Each of the Company and the Consultant may terminate the Consultation
Period upon 30 days’ prior written notice to the other Party. In the event of such termination,
the Consultant shall be entitled to payment for Services performed and expenses paid or incurred
prior to the effective date of termination, subject to the limitation on reimbursement of expenses
set forth in Section 3.2. Notwithstanding the foregoing, the Company may terminate the
Consultation Period, effective immediately upon receipt of written notice, if the Consultant
breaches or threatens to breach any provision of this Agreement or Section 7, 8 or 9 of the
Employment Agreement (as defined below).

     5.      Cooperation. The Consultant shall use his best efforts in the performance of his
obligations under this Agreement. The Company shall provide such access to its information and
property as may be reasonably required in order to permit the Consultant to perform his obligations
hereunder. The Consultant shall cooperate with the Company’s personnel, shall not interfere with
the conduct of the Company’s business and shall observe all rules, regulations and security
requirements of the Company concerning the safety of persons and property.

     6.      Employment Agreements.

                    (a)      The Company and the Consultant acknowledge and agree that this Consulting Agreement shall
take effect immediately following the effectiveness of the Consultant’s resignation as an officer
and employee of the Company and the termination of the Employment Period (as defined in the
Employment Agreement dated as of December 5, 2005 between the Company and the Consultant (the
“Employment Agreement”)).

                    (b)      The Consultant hereby agrees that during the Consulting Period he shall continue to be
bound by and subject to the provisions of Sections 7, 8 and 9 of the Employment Agreement, as if he
continued to be an employee of the Company during the Consultation Period and that references in
such Sections to the termination or cessation of employment shall be deemed to mean the termination
or cessation of the Consultation Period hereunder. For example, as a result of this Section 6(b),
the Consultant shall be subject to and bound by the non-competition and non-solicitation
obligations set forth in Section 8 of the Employment Agreement during the Consultation Period and
for a period of one year after the termination or cessation of the Consultation Period for any
reason.

     7.      Independent Contractor Status. The Consultant shall perform all Services under
this Agreement as an “independent contractor” and not as an employee or agent of the Company. The
Consultant is not authorized to assume or create any obligation or responsibility, express or
implied, on behalf of, or in the name of, the Company or to bind the Company in any manner.

     8.      Notices. All notices required or permitted under this Agreement shall be in
writing and shall be deemed effective upon personal delivery or upon deposit in the United States
Post Office, by registered or certified mail, postage prepaid, addressed to the other Party at the
address shown above, or at such other address or addresses as either Party shall designate to the
other in accordance with this Section 8.

2

 

     9.      Pronouns. Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the singular forms of
nouns and pronouns shall include the plural, and vice versa.

     10.     Entire Agreement. This Agreement constitutes the entire agreement between the
Parties and supersedes all prior agreements and understandings, whether written or oral, relating
to the subject matter of this Agreement.

     11.     Amendment. This Agreement may be amended or modified only by a written instrument
executed by both the Company and the Consultant.

     12.     Governing Law. This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the Commonwealth of Massachusetts.

     13.     Successors and Assigns. This Agreement shall be binding upon, and inure to the
benefit of, both Parties and their respective successors and assigns, including any corporation
with which, or into which, the Company may be merged or which may succeed to its assets or
business, provided, however, that the obligations of the Consultant are personal and shall not be
assigned by him.

     14.     Miscellaneous.

               14.1    No delay or omission by the Company in exercising any right under this Agreement shall
operate as a waiver of that or any other right. A waiver or consent given by the Company on any
one occasion shall be effective only in that instance and shall not be construed as a bar or waiver
of any right on any other occasion.

               14.2    The captions of the sections of this Agreement are for convenience of reference only and
in no way define, limit or affect the scope or substance of any section of this Agreement.

               14.3    In the event that any provision of this Agreement shall be invalid, illegal or otherwise
unenforceable, the validity, legality and enforceability of the remaining provisions shall in no
way be affected or impaired thereby.

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

	 	 	 	 	 	 	 	 	 
	IDERA PHARMACEUTICALS, INC.	 	 	 	KARR PHARMA CONSULTING,
LLC

	By:

	 	 /s/ Lou Arcudi	 	 
	 	By:
	 	 /s/ Robert W. Karr
	 

	 	 
	 	 
	 	 	 	 
	Lou Arcudi	 	 	 	Robert W. Karr, M.D.
	CFO
	 	 	 	 	 	 	 	 
	Date:

	 	 1-2-08	 	 	 	Date:
	 	 1-2-08
	 

	 	 
	 	 	 	 	 	 

3exv10w45

 

Exhibit 10.45

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

LICENSE AGREEMENT

Dated December 18, 2007

By and Between

Idera Pharmaceuticals, Inc.

And

Merck KGaA

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	ARTICLE 1

	 	DEFINITIONS
	 	 	1	 
	 
	 	 	 	 	 	 
	ARTICLE 2

	 	LICENSES AND OTHER RIGHTS
	 	 	12	 
	2.1

	 	GRANT OF LICENSE TO MERCK
	 	 	12	 
	2.2

	 	GRANT OF SUBLICENSE TO MERCK
	 	 	12	 
	2.3

	 	GRANT OF SUBLICENSE BY MERCK
	 	 	12	 
	2.4

	 	TECHNOLOGY TRANSFER
	 	 	13	 
	2.5

	 	MANUFACTURING TECHNOLOGY TRANSFER
	 	 	13	 
	2.6

	 	PROCEDURES FOR TECHNOLOGY TRANSFER
	 	 	13	 
	2.7

	 	MERCK EXCLUSIVITY
	 	 	14	 
	2.8

	 	LIMITATIONS ON USE OF COMPOUNDS AND

FOLLOW-ON COMPOUNDS
	 	 	14	 
	 
	 	 	 	 	 	 
	ARTICLE 3

	 	PRODUCT DEVELOPMENT AND COMMERCIALIZATION; REGULATORY MATTERS
	 	 	14	 
	3.1

	 	DEVELOPMENT OF THE LICENSED PRODUCT BY MERCK
	 	 	14	 
	3.2

	 	CLINICAL TRIAL ON-GOING AS OF EFFECTIVE DATE
	 	 	14	 
	3.3

	 	REIMBURSEMENT OF DEVELOPMENT COSTS
	 	 	15	 
	3.4

	 	LICENSOR SUPPORT IN THE DEVELOPMENT
	 	 	15	 
	3.5

	 	JOINT RESEARCH COMMITTEE
	 	 	16	 
	3.6

	 	FOLLOW-ON COMPOUNDS
	 	 	16	 
	3.7

	 	COMMERCIALIZATION
	 	 	17	 
	3.8

	 	MANUFACTURING AND SUPPLY
	 	 	17	 
	3.9

	 	DILIGENCE BY MERCK
	 	 	17	 
	3.10

	 	ANNUAL REPORTING
	 	 	18	 
	3.11

	 	TRADEMARKS
	 	 	18	 
	 
	 	 	 	 	 	 
	ARTICLE 4

	 	REGULATORY MATTERS
	 	 	18	 
	4.1

	 	REGULATORY FILINGS
	 	 	18	 
	4.2

	 	COMMUNICATIONS WITH AUTHORITIES
	 	 	18	 
	4.3

	 	ADVERSE EVENT REPORTING
	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE 5

	 	FINANCIAL PROVISIONS
	 	 	20	 
	5.1

	 	INITIAL FEE
	 	 	20	 
	5.2

	 	MILESTONE PAYMENTS
	 	 	20	 
	5.3

	 	COMMERCIAL EVENT PAYMENTS
	 	 	22	 
	5.4

	 	ROYALTY PAYMENTS FOR LICENSED PRODUCTS
	 	 	22	 
	5.5

	 	REDUCTIONS AND REIMBURSEMENTS
	 	 	23	 
	5.6

	 	TIMING OF PAYMENT
	 	 	25	 
	5.7

	 	MODE OF PAYMENT, CURRENCY AND INVOICING
	 	 	25	 
	5.8

	 	ROYALTY REPORTS AND RECORDS RETENTION
	 	 	25	 
	5.9

	 	LEGAL RESTRICTIONS
	 	 	25	 
	5.10

	 	LATE PAYMENTS
	 	 	25	 
	5.11

	 	AUDITS
	 	 	26	 
	5.12

	 	COMPULSORY LICENSE
	 	 	26	 
	5.13

	 	TAXES
	 	 	27	 

 

 

	 	 	 	 	 	 	 
	ARTICLE 6

	 	INVENTIONS AND PATENTS
	 	 	27	 
	6.1

	 	CERTIFICATION UNDER DRUG PRICE COMPETITION AND PATENT RESTORATION ACT
	 	 	27	 
	6.2

	 	LISTING OF PATENTS
	 	 	27	 
	6.3

	 	TITLE TO INVENTIONS
	 	 	27	 
	6.4

	 	FURTHER ASSURANCES
	 	 	28	 
	6.5

	 	PATENT PROSECUTION AND MAINTENANCE
	 	 	28	 
	6.6

	 	ENFORCEMENT OF PATENTS
	 	 	29	 
	6.7

	 	THIRD PARTY ACTIONS CLAIMING INFRINGEMENT
	 	 	31	 
	 
	 	 	 	 	 	 
	ARTICLE 7

	 	CONFIDENTIALITY
	 	 	31	 
	7.1

	 	CONFIDENTIALITY OBLIGATIONS
	 	 	31	 
	7.2

	 	PUBLICATIONS
	 	 	32	 
	7.3

	 	PRESS RELEASES AND DISCLOSURE
	 	 	33	 
	 
	 	 	 	 	 	 
	ARTICLE 8

	 	REPRESENTATIONS, WARRANTIES AND COVENANTS
	 	 	33	 
	8.1

	 	REPRESENTATIONS AND WARRANTIES
	 	 	33	 
	8.2

	 	ADDITIONAL REPRESENTATIONS AND WARRANTIES OF LICENSOR	 	 	34	 
	8.3

	 	NO WARRANTY
	 	 	35	 
	 
	 	 	 	 	 	 
	ARTICLE 9

	 	INDEMNIFICATION AND INSURANCE
	 	 	36	 
	9.1

	 	INDEMNIFICATION BY MERCK
	 	 	36	 
	9.2

	 	INDEMNIFICATION BY LICENSOR
	 	 	36	 
	9.3

	 	NO CONSEQUENTIAL DAMAGES
	 	 	36	 
	9.4

	 	NOTIFICATION OF CLAIMS; CONDITIONS TO INDEMNIFICATION OBLIGATIONS
	 	 	36	 
	9.5

	 	INSURANCE
	 	 	37	 
	 
	 	 	 	 	 	 
	ARTICLE 10

	 	TERM AND TERMINATION
	 	 	37	 
	10.1

	 	TERM AND EXPIRATION
	 	 	37	 
	10.2

	 	TERMINATION OF THE AGREEMENT BY MERCK FOR CONVENIENCE
	 	 	37	 
	10.3

	 	TERMINATION UPON MATERIAL BREACH
	 	 	38	 
	10.4

	 	EFFECTS OF TERMINATION
	 	 	38	 
	10.5

	 	BANKRUPTCY
	 	 	39	 
	 
	 	 	 	 	 	 
	ARTICLE 11

	 	DISPUTE RESOLUTION
	 	 	40	 
	11.1

	 	DISPUTES
	 	 	40	 
	11.2

	 	ESCALATION TO EXECUTIVE OFFICERS
	 	 	40	 
	 
	 	 	 	 	 	 
	ARTICLE 12

	 	HSR MATTERS
	 	 	40	 
	12.1

	 	HSR FILINGS
	 	 	40	 
	12.2

	 	HSR COOPERATION; FURTHER ASSURANCES
	 	 	40	 
	12.3

	 	HSR-RELATED DEFINED TERMS
	 	 	41	 
	12.4

	 	TERMINATION BASED ON FAILURE TO OBTAIN HSR CLEARANCE
	 	 	41	 

 

 

	 	 	 	 	 	 	 
	ARTICLE 13

	 	MISCELLANEOUS PROVISIONS
	 	 	41	 
	13.1

	 	RELATIONSHIP OF THE PARTIES
	 	 	41	 
	13.2

	 	ASSIGNMENT
	 	 	42	 
	13.3

	 	PERFORMANCE BY AFFILIATES
	 	 	42	 
	13.4

	 	CHANGE OF CONTROL
	 	 	42	 
	13.5

	 	FURTHER ACTIONS
	 	 	43	 
	13.6

	 	ACCOUNTING PROCEDURES
	 	 	43	 
	13.7

	 	FORCE MAJEURE
	 	 	43	 
	13.8

	 	NO TRADEMARK RIGHTS
	 	 	43	 
	13.9

	 	ENTIRE AGREEMENT OF THE PARTIES; AMENDMENTS
	 	 	43	 
	13.10

	 	CAPTIONS
	 	 	43	 
	13.11

	 	GOVERNING LAW; JURISDICTION
	 	 	43	 
	13.12

	 	NOTICES AND DELIVERIES
	 	 	44	 
	13.13

	 	WAIVER
	 	 	44	 
	13.14

	 	RIGTHS OF THIRD PARTIES
	 	 	45	 
	13.15

	 	SEVERABILITY
	 	 	45	 
	13.16

	 	COUNTERPARTS
	 	 	45	 

 

 

LICENSE AGREEMENT

     THIS LICENSE AGREEMENT (the “Agreement”) is dated as of December 18, 2007 (the “Signing Date")
by and between Idera Pharmaceuticals, Inc., a corporation organized under the laws of Delaware
having its place of business at 167 Sidney Street, Cambridge, MA 02139, United States (“Licensor”),
and Merck KGaA, a general partnership limited by shares organized under German law having a place
of business at Frankfurter Strasse 250, 64293 Darmstadt, Germany (“Merck”). Licensor and Merck may
be referred to herein as a “Party” or, collectively, as “Parties.”

RECITALS:

     Whereas, Licensor is a pharmaceutical company engaged in the discovery and
development of modulators of toll-like receptors (“TLRs”), including the Compounds (as hereinafter
defined);

     Whereas, Merck, through its division Merck Serono for innovative pharmaceuticals, and
its Affiliates (as hereinafter defined) are engaged in the research, development and
commercialization of pharmaceuticals products, and Merck is interested in developing and
commercializing products comprising the Compounds; and

     Whereas, Merck desires to license from Licensor and Licensor wishes to license to
Merck, on an exclusive, worldwide basis, the right to develop and commercialize products comprising
the Compounds for certain Indications (as hereinafter defined) and therapeutic areas.

     Now, Therefore, in consideration of the various promises and undertakings set forth
herein, the Parties agree as follows:

Article 1

DEFINITIONS

     Unless otherwise specifically provided herein, the following terms shall have the following
meanings:

     1.1 “Adverse Event” means any serious untoward medical occurrence in a patient or subject who
is administered a Licensed Product, but only if and to the extent that such serious untoward
medical occurrence is required under applicable Laws to be reported to the FDA or any other
Regulatory Authority.

     1.2 “Affiliate” shall mean, in relation to any Party: (a) any company or other entity in which
more than fifty percent (50%) of the voting rights, shares or other equity interest are owned and
controlled directly or indirectly by that Party; and/or (b) any individual, company or other entity
which owns and controls directly or indirectly more than fifty percent (50%) of the voting rights,
shares or other equity interest of that Party; and/or (c) any individual, company or other entity
which has the power to direct or cause direction of the management and policies of that Party
(whether through ownership of securities or partnership or other ownership interests, by contract
or otherwise); and/or (d) any company or other entity in which more than fifty

 

 

percent (50%) of the voting rights, shares or other equity interest are owned and controlled
directly or indirectly by an individual or entity responding to the definition of (c) above.

     1.3 “Calendar Quarter” means each three (3) month period commencing January 1, April 1, July 1
or October 1.

     1.4 “Calendar Year” means the period beginning on the 1st of January and ending on the 31st of
December of the same year.

     1.5 “Clinical Trial” means a clinical trial in human subjects that has been approved by a
Regulatory Authority and is designed to measure the safety and/or efficacy of a Licensed Product.
Clinical Trials shall include Phase I Trials, Phase I/II Trials, Phase II Trials and Phase III
Trials.

     1.6 “Change of Control” means (a) a transaction or series of related transactions that results
in the sale or other disposition of all or substantially all of a Party’s assets; or (b) a merger
or consolidation in which a Party is not the surviving corporation or in which, if a Party is the
surviving corporation, the shareholders of such Party immediately prior to the consummation of such
merger or consolidation do not, immediately after consummation of such merger or consolidation, own
stock or other securities of the Party that possess a majority of the voting power of all of the
Party’s outstanding stock and other securities and the power to elect a majority of the members of
the Party’s board of directors; or (c) a transaction or series of related transactions (which may
include without limitation a tender offer for a Party’s stock or the issuance, sale or exchange of
stock of a Party) if the shareholders of such Party immediately prior to the initial such
transaction do not, immediately after consummation of such transaction or any of such related
transactions, own stock or other securities of the Party that possess a majority of the voting
power of all of the Party’s outstanding stock and other securities and the power to elect a
majority of the members of the Party’s board of directors.

     1.7 “Combination Product” means a Licensed Product containing one or more Compounds and/or
Follow-On Compounds together, in one package or formulated into one product, with one or more other
active ingredients.

     1.8 “Commercialization” or “Commercialize” means any and all activities undertaken after
Regulatory Approval of an NDA for a particular Licensed Product and that relate to the marketing,
promoting, distributing, importing for sale, offering for sale, and selling of the Licensed
Product, and interacting with Regulatory Authorities regarding the foregoing. Commercialization
shall also include Phase IV Studies.

     1.9 “Commercially Reasonable Efforts” means, (a) with respect to the efforts to be expended by
any Party with respect to any objective, such reasonable, diligent, and good faith efforts as such
Party would normally use to accomplish a similar objective under similar circumstances, and (b)
with respect to any objective relating to Development or Commercialization of a Licensed Product by
Merck, the application by Merck of diligent efforts and resources to fulfill the obligation in
issue where it is commercially viable to do so, consistent with the usual practice followed by
Merck for a product at a similar stage in its product life as the Licensed Product and having
profit potential and strategic value comparable to that of the

 

 

Licensed Product, taking into account, without limitation, scientific, development, technical,
commercial and regulatory factors, target product profiles, product labeling, past performance, the
regulatory environment and competitive market conditions in the therapeutic area, safety and
efficacy of a subject product, the strength of its proprietary position and such other factors as
Merck may reasonably consider, all based on conditions then prevailing. Commercially Reasonable
Efforts will not mean that Merck commits that it will actually accomplish the applicable task.

     1.10 “Competing Product” means any TLR-9 agonist compound developed by Licensor for use in the
Field that (a) stimulates TLR-9, or (b) stimulates the TLR-9-mediated immune response through
direct interaction with proteins that are primarily involved in the TLR-9 intracellular signaling
pathway.

     1.11 “Compound(s)” means (a) the TLR-9 agonist known as IMO-2055, (b) the TLR-9 agonist known
as IMO-2125, (c) any [**] (all described together in this clause (c) hereinafter “Compound
Improvements”), (d) any [**]. The molecular structures of IMO-2055 and IMO-2125 are set forth on
Schedule 1.11.

     1.12 “Compulsory License” means a compulsory license under Licensor Technology obtained by a
Third Party through the order, decree, or grant of a competent Governmental Body or court,
authorizing such Third Party to develop, make, have made, use, sell, offer to sell or import a
Licensed Product in any country in the Field in the Territory.

     1.13 “Confidential Information” of a Party means such Party’s confidential information
relating to its business, operations and products, including but not limited to, any technical
information, Know-How, trade secrets, or inventions (whether patentable or not) that it discloses
to the other Party under this Agreement.

     1.14 “Controlled” means, with respect to (a) Patent Rights, (b) Know-How or (c) biological,
chemical or physical material, that the Party or one of its Owned Affiliates owns or has a license
or sublicense to such right, item, or material (or in the case of material, has the right to
physical possession of such material) and has the ability to grant a license or sublicense to, or
assign its right, title and interest in and to, such right, item or material as provided for in
this Agreement without violating the terms of any agreement or other arrangement with any Third
Party. For purposes of this Agreement, inventions or discoveries (whether or not patentable) made
jointly by employees or others acting on behalf of Licensor together with employees or others
acting on behalf of Merck shall be deemed to be Controlled by both Parties. As used in this
Section 1.14 “Owned Affiliate” means any Affiliate as to which (i) the relevant Party is the
beneficial owner of at least fifty percent (50%) of the voting share capital, and/or (ii) the
relevant Party has the ability to control the policies of (or to control the hiring and firing of
the management who determine the policies of) through a voting agreement or other contract.

     1.15 “Cover”, “Covering” or “Covered” means, with respect to a Licensed Product, that the
making or having made, using, selling, offering for sale or importing of such Licensed Product
would, but for ownership of, or a license granted to, the relevant Patent Rights, infringe a Valid
Claim of the relevant Patent Rights in the country in which the activity occurs.

 

 

     1.16 “Development” or “Develop” means, with respect to a Licensed Product, the performance of
all pre-clinical and clinical development (including, without limitation, toxicology, pharmacology,
test method development and stability testing, process development, formulation development,
quality control development, statistical analysis, Clinical Trials (excluding post-Regulatory
Approval of an NDA Clinical Trials), manufacturing and regulatory activities that are required to
obtain Regulatory Approval of such Licensed Product in the Field in the Territory under this
Agreement.

     1.17 “Development Costs” means those Out-Of-Pocket Expenses incurred by Licensor after the
Effective Date that are directly and solely attributable to the achievement of work or activities
performed by or on behalf of Licensor after the Effective Date toward the completion of the
On-Going Trials.

     1.18 “Effective Date” means, (a) if HSR Filings are not required under the HSR Act with
respect to the transactions contemplated by this Agreement, the Signing Date or (b) if HSR Filings
are required under the HSR Act with respect to the transactions contemplated by this Agreement, the
HSR Clearance Date.

     1.19 “Euros” or “€” means the lawful currency of the Member States of the European Union that
adopt the single currency in accordance with the relevant European Union Treaties.

     1.20 “EMEA” means the European Medicines Agency or any successor agency.

     1.21 “FDA” means the United States Food and Drug Administration, or a successor federal agency
thereto.

     1.22 “Field” means prevention, treatment, cure and/or delay of the onset or progression of
cancer in humans. The Field shall specifically include the use of Licensed Product as a monotherapy
product or as a Combination Product, whereby the latter shall include, but not be limited to, the
combination of the Licensed Product with therapeutic monoclonal antibodies, including those labeled
or tagged, other therapeutic recombinant proteins, other biologically active nucleic acids or
derivatives thereof (excluding DNA vaccines), small molecule chemical entities and irradiation.
The Field excludes the use of any Compound, Follow-On Compound and/or Licensed Product as an
adjuvant contained in or administered in conjunction with any prophylactic and/or therapeutic
vaccine for the prevention and/or treatment of any type of cancer, including (for purposes of
clarity) the prevention and/or treatment of viruses that are considered precursors to cancer (a
“Cancer Vaccine”); provided that [**].

     1.23 “First Commercial Sale” means, with respect to a Licensed Product in any country, the
first commercial transfer or disposition for value of such Licensed Product giving rise to Net
Sales in such country to a Third Party by Merck, an Affiliate of Merck or a Sublicensee.

     1.24 “Follow-On Compound(s)” means (a) any of the [**] TLR-9 agonists Covered by the Licensor
Patents that Licensor shall offer to Merck pursuant to Section 3.6 below, (b) any [**], (all
described together in this clause (b) hereinafter
“Follow-On Compound Improvements”), and (c) any
[**]. Notwithstanding the foregoing, for purposes of Sections 1.58 and 5.4, a Follow-On Compound
shall not cease to be a Follow-On Compound upon

 

 

expiration of the last Licensor Patent Covering such Follow-On Compound. The [**] TLR-9
agonists identified in clause (a) shall meet the criteria identified on Schedule 1.24.

     1.25 “Governmental Body” means any: (a) nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of
any nature (including any governmental division, subdivision, department, agency, bureau, branch,
office, commission, council, board, instrumentality, officer, official, representative,
organization, unit, body or entity and any court or other tribunal); (d) multi-national or
supranational organization or body; or (e) individual, entity, or body exercising, or entitled to
exercise, any executive, legislative, judicial, administrative, regulatory, police, military or
taxing authority or power of any nature.

     1.26 “Improvement(s)” means Compound Improvement(s) and Follow-On Compound Improvement(s).

     1.27 “Indication” means a generally acknowledged disease or condition, a significant
manifestation of a disease or condition, or symptoms associated with a disease or condition or a
risk for a disease or condition. For the avoidance of doubt, all variants of a single disease or
condition (whether classified by severity or otherwise) shall be treated as the same Indication.

     1.28 “Initiation” of a Clinical Trial means the first dosing of the first patient or subject
in such Clinical Trial.

     1.29 “IND” means an investigational new drug application filed with the FDA or the equivalent
application or filing filed with any equivalent agency or Governmental Body outside the United
States (including any supra-national entity such as in the European Union) for approval to
commence Clinical Trials in such jurisdiction, and including all regulations at 21 CFR §312 et seq.
and equivalent foreign regulations.

     1.30 “Joint Patent(s)” means any Patent Right describing or claiming a Joint Invention.

     1.31 “Know-How” means any scientific or technical information, results and data of any type
whatsoever, in any tangible or intangible form whatsoever, that is not in the public domain or
otherwise publicly known, including, without limitation, discoveries, inventions, trade secrets,
databases, practices, protocols, regulatory filings, methods, processes, techniques, biological and
other materials, reagents, specifications, formulations, formulae, data (including pharmacological,
biological, chemical, toxicological and clinical information) analytical, quality control, and
stability data, studies and procedures), and manufacturing process and development information,
results and data, whether or not patentable.

     1.32 “Knowledge” means, with respect to a matter that is the subject of a given
representation, or warranty of Licensor, the knowledge, information or belief that any officer or
director level employee (other than a member of the board of directors) of Licensor, or such other
employee of Licensor who would reasonably be expected to have knowledge of the matter in question,
has, or should reasonably be expected to have, after making reasonable inquiry into the relevant
subject matter. “Knowingly” means with Knowledge.

 

 

     1.33 “Label” means the specific label approved by the Regulatory Authority or pursued in
clinical Development with respect to a Compound, Follow-On Compound or Licensed Product, whether
within an Indication or a separate Indication.

     1.34 “Law” or “Laws” means all applicable laws, statutes, rules, regulations, ordinances and
other pronouncements having the binding effect of law of any Governmental Body.

     1.35 “Licensed Product” means any pharmaceutical product, including any formulation thereof,
containing or comprising any Compound or Follow-On Compound.

     1.36 “Licensor Know-How” means all Know-How that is Controlled by Licensor as of the Signing
Date or thereafter during the Term and is necessary or useful for the research, Development,
manufacture, use, or Commercialization of any Compound or Follow-On Compound in the Field.

     1.37 “Licensor Materials” means the quantities of Compounds and Follow-On Compounds identified
on Schedule 1.37.

     1.38 “Licensor Patents” means all Patent Rights, including but not limited to the Patent
Rights set forth on Schedule 1.38 and Licensor’s interest in Joint Patents, that are
Controlled by Licensor as of the Execution Date or during the Term and that are necessary or
useful (but with respect to the “usefulness of Licensor Patents” only those that are not licensed
in by Licensor after the Signing Date, unless the Licensor agrees otherwise) for the research,
Development, manufacture, use, or Commercialization of Compounds or Follow-On Compounds in the
Field. Schedule 1.38 shall be updated from time to time during the Term.

     1.39 “Licensor Technology” means the Licensor Patents, Licensor’s interest in Joint Patents,
the Licensor Know-How and the Licensor Materials.

     1.40 “Major EU Country(ies)” means France, Germany, Italy, Spain and/or the United Kingdom.

     1.41 “Merck Patents” means all Patent Rights, that are Controlled by Merck as of the Signing
Date or during the Term, and, for greater certainty, shall include Patent Rights claiming Merck’s
Sole Inventions.

     1.42 “Merck Competitor” means any company that (itself or through an Affiliate) markets, sells
or is developing, a product that is, or could reasonably be expected to be, in competition with any
product that Merck (itself or through an Affiliate) markets, sells or is developing.

     1.43 “Merck & Co. Agreement” means the Exclusive License and Research Collaboration Agreement
by and between Merck & Co., Inc. and Idera Pharmaceuticals, Inc. dated December 8, 2006, as amended
from time to time.

     1.44 “NDA” means a New Drug Application filed pursuant to the requirements of the FDA, as more
fully defined in U.S. statutory provisions 21 CFR §314.3 et seq., a Biologics

 

 

License Application filed pursuant to the requirements of the FDA, as more fully defined in
U.S. statutory provision 21 CFR §601, and any equivalent application filed in any country in the
Territory, together, in each case, with all additions, deletions, supplements or variations
thereto.

     1.45 “NDA Acceptance” means acceptance for filing by the relevant Regulatory Authority of an
NDA for the Licensed Product.

     1.46 “Net Sales” means the gross amounts invoiced by Merck, its Affiliates and Sublicensees
for sales of a Licensed Product to independent or unaffiliated Third Party purchasers of such
Licensed Product, less the following deductions with respect to such sales to the extent that such
amounts are either included in the billing as a line item as part of the gross amount invoiced, or
otherwise documented in accordance with IFRS to be specifically attributable to actual sales of a
Licensed Product, and incurred by Merck, its Affiliates and Sublicensees consistent with usual and
customary practices for their products generally: (i) trade discounts, including trade, cash and
quantity discounts, or rebates, credits or refunds; (ii) allowances or credits actually granted
upon claims, returns or rejections of products, including recalls, regardless of the party
requesting such recall; (iii) credits and allowances for wastage replacement and bad debts; (iv)
charges included in the gross sales price for freight, insurance, transportation, postage,
handling, insurance and any other charges relating to the sale, transportation delivery or return
of the Licensed Product; (v) customs duties, sales, excise and use taxes and any other governmental
charges (including value added tax) actually paid in connection with the transportation,
distribution, use or sale of the Licensed Product (but excluding what is commonly known as income
taxes); (vi) rebates and chargebacks or retroactive price reductions made to federal, state, or
local governments (or their agencies), or any Third Party payor, administrator or contractee,
including managed health organizations; (vii) payments to Third Party wholesalers pursuant to
inventory management agreements; and (viii) the actual cost of goods of the delivery device that is
included in the invoiced amount and is used for administration of the Licensed Product.

     If a Licensed Product is sold in the form of a Combination Product, then for the purpose of
calculating royalties owed under this Agreement on sales of the Combination Product, Net Sales
shall be calculated on a country-by-country basis as follows:

          (a) first, Merck shall determine the actual Net Sales of such Combination Product (calculated
using the above described deductions) and then such amount shall be multiplied by the fraction
A/(A+B), where A equals the invoice price of such Licensed Product sold separately in finished form
and B equals the invoice price of the relevant other product(s) sold separately in finished form,
in each case in the relevant country in which sales were made, or, if separate sales were not made
for both such Licensed Product and such other product(s) in such country but were made in the US
and/or a Major EU Country(-ies), in the US and/or such Major EU Country(-ies) in which both such
Licensed Product and such other product(s) were sold separately during the same royalty reporting
period;

          (b) In the event that the Licensed Product is sold separately in finished form and the
relevant other product(s) is not, and subsection (a) above does not apply, then Net Sales shall be
determined by multiplying the Net Sales of the Combination Product in the applicable country by the
fraction (A/C), where A is the invoice price of the Licensed Product

 

 

when sold separately in finished form and C equals the invoice price of such Combination
Product in the applicable country;

          (c) In the event that the relevant other product(s) is sold separately in finished form and
the Licensed Product is not, and neither subsection (a) nor subsection (b) above applies, then Net
Sales shall be determined by multiplying the Net Sales of the Combination Product in the applicable
country by the fraction (D/(D+E)), where D is the actual cost of goods incurred by Merck or any of
its Affiliates or Sublicensees, as applicable, in connection with the Licensed Product in the
applicable country and E is the actual costs of goods incurred by Merck or any of its Affiliates or
Sublicensees, as applicable in connection with such Combination Product in the applicable country;
and

          (d) In the event that no separate sale of either Licensed Product or the relevant other
product(s) is made during the applicable royalty reporting period in the relevant country in which
the sale of the Combination Product was made, and neither subsection (a) nor subsection (b) above
applies, then Net Sales shall be determined by multiplying the Net Sales of the Combination Product
in the applicable country by a fraction (D/(D+E)), where D is the actual cost of goods incurred by
Merck or any of its Affiliates or Sublicensees, as applicable, in connection with the Licensed
Product in the applicable country and E is the actual costs of goods incurred by Merck or any of
its Affiliates or Sublicensees, as applicable in connection with such Combination Product in the
applicable country.

     For clarification, sale of Licensed Products by Merck, its Affiliates or Sublicensees to
another of these entities for resale by such entity to a Third Party shall not be deemed a sale for
purposes of “Net Sales” hereunder. Further, transfers or dispositions of the Licensed Products (i)
in connection with patient assistance programs, (ii) for charitable or promotional purposes, (iii)
for preclinical, clinical, regulatory or governmental purposes or under so-called “named patient”
or other limited access programs, (iv) for use in any tests or studies reasonably necessary to
comply with any Law, regulation or request by a regulatory or Regulatory Authority shall not, in
each case, be deemed “Net Sales.”

     1.47 “Out-of-Pocket Expenses” means expenses actually paid by a Party to any Third Party which
is either (i) not an Affiliate of such Party, or (ii) is an Affiliate of such Party where such
payment is limited to reimbursing such Affiliate with such expenses actually paid by such Affiliate
to a Third Party which is not an Affiliate.

     1.48 “Patent Right” means: (a) an issued or granted patent, including any extension,
supplemental protection certificate, registration, confirmation, reissue, reexamination, extension
or renewal thereof; (b) a pending patent application, including any continuation, divisional,
continuation-in-part, substitute or provisional application thereof; and (c) all counterparts or
foreign equivalents of any of the foregoing issued by or filed in any country or other
jurisdiction.

     1.49 “Person” means any natural person, corporation, firm, business trust, joint venture,
association, organization, company, partnership or other business entity, or any government or
agency or political subdivision thereof.

 

 

     1.50 “Phase I Trial” means a clinical trial in which the Licensed Product is administered to
human subjects in the United States that would satisfy the requirements of U.S. statutory provision
21 CFR §312.21(a), or an equivalent clinical trial in any country outside the United States that
would satisfy the requirements applicable to such clinical trial in such country.

     1.51 “Phase I/II Trial” means (a) a Phase I Clinical Trial and a Phase II Clinical Trial,
collectively or (b) a single Clinical Trial meeting the requirements of a Phase I Clinical Trial
and a Phase II Clinical Trial.

     1.52 “Phase II Trial” means a clinical trial of the Licensed Product in human patients in the
United States that would satisfy the requirements of U.S. statutory provision 21 CFR §312.21(b) or
an equivalent clinical trial in any country outside the United States that would satisfy the
requirements applicable to such clinical trial in such country.

     1.53 “Phase III Trial” means a human clinical trial of the Licensed Product in the United
States that would satisfy the requirements of U.S. statutory provision 21 CFR §312.21(c) or an
equivalent clinical trial in any country outside the United States that would satisfy the
requirements applicable to such clinical trial in such country.

     1.54 “Phase IV Studies” means a study or data collection effort for the Licensed Product that
is initiated in the Territory after receipt of Regulatory Approval for the Licensed Product.

     1.55 “Price Approvals” means in those countries in the Territory where Regulatory Authorities
approve or determine pricing and/or pricing reimbursement for pharmaceutical products, such
approval or determination.

     1.56 “Regulatory Authority” means (a) the FDA, (b) the EMEA or the European Commission, or (c)
any regulatory body with similar regulatory authority over pharmaceutical or biotechnology products
in any other jurisdiction anywhere in the world.

     1.57 “Regulatory Approval” means any and all approvals, licenses, registrations, or
authorizations of the relevant Regulatory Authority, including Price Approvals, legally necessary
for the Development, manufacture, use, storage, import, transport or Commercialization of the
Licensed Product in a particular country or jurisdiction.

     1.58 “Royalty Term” means, on a Licensed Product-by-Licensed Product and country-by-country
basis, the period from the First Commercial Sale of a Licensed Product in such country until the
later of (a) the last date on which the Licensed Product is Covered by a Valid Claim within the
Licensor Patents in such country, and (b) ten (10) years after the First Commercial Sale of such
Licensed Product in such country.

     1.59 “Sublicensee” means a Person other than an Affiliate of Merck to which Merck (or its
Affiliate) has, pursuant to Section 2.2, granted sublicense rights under any of the license rights
granted under Section 2.1.

     1.60 “Territory” means all countries of the world.

 

 

     1.61 “Third Party” means any Person other than Licensor, Merck or Affiliates of either of
them.

     1.62 “Third Party License Agreement” means any agreement entered into with a Third Party, by
Merck or its Affiliates or Sublicensees, or any amendment or supplement thereto, whereby royalties,
fees or other payments are to be made to the Third Party in connection with the grant of rights
under intellectual property rights owned or controlled by such Third Party that Cover in the Field
(i) the composition of matter, (ii) method of use, or (iii) manufacture of a Compound or Follow-On
Compound, but with regard to (iii) only those techniques and processes that are used in
manufacturing of the Compound or Follow-On Compound as of the Signing Date.

     1.63 “TLR-9” means the human toll-like receptor 9, as described in [**].

     1.64 “Valid Claim” means a claim of an issued and unexpired patent which has not lapsed or
been revoked, abandoned or held unenforceable or invalid by a final decision of a court or
governmental or supra-governmental agency of competent jurisdiction, unappealable or unappealed
within the time allowed for appeal, and which has not been disclaimed, denied or admitted to be
invalid or unenforceable through reissue, reexamination or disclaimer or otherwise.

     1.65 Other Terms. The definition of each of the following terms is set forth in the section
of the Agreement indicated below:

     “Act” has the meaning set forth in Section 4.3(b).

     “Action” has the meaning set forth in Section 6.6(b).

     “Cancer Vaccine” has the meaning set forth in Section 1.22.

     “Compound Improvements” has the meaning set forth in Section 1.11.

     "Development Plan” has the meaning set forth in Section 3.1.

     "Development Support” has the meaning set forth in Section 3.4.

     “DOJ” has the meaning set forth in Section 12.3(a).

     "Executive Officers” has the meaning set forth in Section 11.2.

     “Follow-On Compound Improvements” has the meaning set forth in Section 1.24(b).

     “FTC” has the meaning set forth in Section 12.3(b).

     “HSR Act” has the meaning set forth in Section 12.3(c).

     “HSR Clearance” has the meaning set forth in Section 12.3(d).

     “HSR Clearance Date” has the meaning set forth in Section 12.3(e).

 

 

     “HSR Filings” has the meaning set forth in Section 12.3(f).

     “IFRS” has the meaning set forth in Section 13.6.

     “Joint Inventions” has the meaning set forth in Section 6.3.

     “JRC” has the meaning set forth in Section 3.5(a).

     “Licensor Indemnitees” has the meaning set forth in Section 9.1.

     “Manufacturing Support” has the meaning set forth in Section 3.8.

     “Manufacturing Technology Transfer” has the meaning set forth in Section 2.4.

     “Merck Indemnitees” has the meaning set forth in Section 9.2.

     “Merck Trial Monitor” has the meaning set forth in Section 3.2.

     “On-Going Trials” has the meaning set forth in Section 3.2.

     “Owned Affiliate” has the meaning set forth in Section 1.14.

     “Sole Invention(s)” has the meaning set forth in Section 6.3.

     “Term” has the meaning set forth in Section 10.1.

     “Termination Date” has the meaning set forth in Section 10.1.

     “TLR(s)” has the meaning set forth in the Preamble.

     “Third Party Action” has the meaning set forth in Section 6.7(a).

Article 2

LICENSES AND OTHER RIGHTS

     2.1 Grant of License to Merck. Subject to the terms and conditions of this Agreement,
Licensor hereby grants to Merck an exclusive (even as to Licensor), worldwide, royalty-bearing
right and license (with the right to sublicense subject to the provisions of Section 2.2) under the
Licensor Technology to research, Develop, make, have made, import, export, use and Commercialize
the Licensed Products in the Field in the Territory and create Improvements; provided that
Merck, its Affiliates and Sublicensees shall have no right to, and Merck, its Affiliates and
Sublicensees shall not, (a) alter the core structure of any Compound or Follow-On Compound, or (b)
use the Licensor Technology to create any immunomodulatory oligonucleotide that is the same or
substantially structurally equivalent to any Compound or Follow-On Compound or that is Covered by
the Licensor Patents. For purposes of clarity, the license granted herein shall in no event
include any right or license to, and Merck and its Affiliates and Sublicensees shall not, research,
Develop, make or have made, import, export, use or Commercialize any Compound, Follow-On Compound
or Licensed Product outside the Field,

 

 

including for any use of a Compound, Follow-On Compound or Licensed Product as an adjuvant
contained in or administered in conjunction with any Cancer Vaccine.

     2.2 Grant of Sublicense by Merck. Merck shall have the right to grant sublicenses under the
licenses granted in Sections 2.1 and 2.2 subject to the following conditions:

          (a) the granting by Merck of a sublicense shall not relieve Merck of any of its obligations
hereunder;

          (b) the Sublicensee agrees to be bound by all the relevant terms of this Agreement, including
Sections 2.7, 2.8, 3.9, 5.7, 5.8, 5.9 and 5.11;

          (c) Merck shall provide Licensor with a copy of the executed sublicense agreement within ten
(10) days after execution thereof; provided that all such terms of such sublicense
agreement that are not material to Licensor’s assessment of whether the sublicense complies with
the terms of this Section 2.2 may be redacted by Merck;

          (d) Merck shall procure that each of its Sublicensees complies with, and Merck additionally
guarantees to Licensor the compliance by each of its Sublicensees with, all relevant restrictions
and limitations in this Agreement; and

          (e) in the event of a material default by any Sublicensee under a sublicense agreement Merck
will promptly inform Licensor and take such action, after consultation with Licensor, that in
Merck’s reasonable business judgment will address such default.

     2.3 Technology Transfer. As soon as reasonably practicable after the Effective Date, and in
any event within thirty (30) days after the Effective Date, (a) Licensor will transfer to Merck, at
Licensor’s cost and expense, the Licensor Know-How set forth on Schedule 2.3, and (b) Merck and
Licensor shall use Commercially Reasonable Efforts to establish mechanisms to allow Merck to obtain
the benefit of all applications and filings made by Licensor with any Regulatory Authority with
respect to the Compounds and Licensed Products containing Compounds, including any IND and orphan
drug designations, in each case that are related to the rights and licenses granted hereunder to
Merck in the Field (it being understood that such mechanisms may involve Licensor continuing to
hold any such IND, subject to the provisions of the pharmacovigilance agreement to be negotiated
pursuant to Section 4.3(a)); provided that Idera shall assign to Merck all
applications and filings made by Licensor with any Regulatory Authority with respect to Follow-On
Compounds and Licensed Products containing Follow-On Compounds, including any IND and orphan drug
designations.

     2.4 Manufacturing Technology Transfer. As soon as reasonably practicable after the Effective
Date, but in no event later than thirty (30) days following the Effective Date, Licensor will
transfer to Merck, at Licensor’s cost and expense, a copy of the Licensor Know-How and the Licensor
Materials set forth in item I of Schedule 2.4. The Parties will use Commercially Reasonable
Efforts to generate and transfer to Merck, as soon as reasonably practicable after the Effective
Date, a copy of the Licensor Know-How and the Licensor Materials set forth in Item II of
Schedule 2.4. The technology transfer described in this Section 2.4 shall be referred to
as the “Manufacturing Technology Transfer”.

 

 

     2.5 Procedures for Technology Transfer. The technology transfers set forth in Section 2.3 and
Section 2.4 shall occur in an orderly fashion and in a manner such that the value, usefulness and
confidentiality of the transferred Licensor Know-How and Licensor Materials are preserved in all
material respects.

     2.6 Merck Exclusivity. During the Term of this Agreement, Licensor and its Affiliates shall
not develop, make, have made, sell, or have sold, any Competing Product for use in the Field nor
enter into any relationship with any Third Party granting such Third Party any such rights;
provided that, with respect to Affiliates other than Owned Affiliates, the
foregoing restriction shall be limited as follows: (a) the definition of Competing Product shall
be limited to agonist compounds that stimulate TLR-9 and are developed for use in the Field, (b)
such restriction shall not apply to non-clinical research activities conducted by such Affiliates
that are not Owned Affiliates, and (c) such restriction shall only apply from the Effective Date
through the fifth (5th) anniversary of the Effective Date. In addition, during the Term
of this Agreement, Licensor and its Affiliates shall not develop, make, have made, sell, or have
sold, IMO-2055, whether as monotherapy or as combination therapy, for use in or outside the Field,
nor enter into any relationship with any Third Party granting such Third Party any such rights,
provided however that the rights granted to Merck & Co. under the Merck & Co. Agreement at the
Signing Date and Licensor’s performance under the Merck & Co. Agreement shall not constitute a
violation of this Section 2.6, and nothing in this Section 2.6 shall prevent Licensor from
exploiting such rights or granting such rights to another Third Party within the same scope
provided therein should the Merck & Co. Agreement expire or terminate. Further, during the Term of
this Agreement, Licensor and its Affiliates shall not conduct a Phase III Trial of IMO-2125 as
monotherapy, or Commercialize IMO-2125 as monotherapy, in or outside the Field, nor enter into any
relationship with any Third Party granting such Third Party any such rights. The aforementioned
restrictions shall remain in effect in the event of a Change of Control of Licensor involving a
Merck Competitor, and, subject to the proviso in the first sentence of this Section 2.6, shall
apply to the Merck Competitor who is the successor to, or assignee of, Licensor as a result of such
Change of Control.

     2.7 No Implied Licenses; Retained Rights. Except as specifically set forth in this Agreement,
neither Party shall acquire any license or other intellectual property interest, by implication or
otherwise, in any information or materials disclosed to it under this Agreement or under any patent
applications, patents or other intellectual property rights Controlled by the other Party or its
Affiliates. Merck acknowledges that Licensor has (a) retained the right to research, Develop, make
and have made, import, export, use and Commercialize Compounds outside the Field, and to grant such
rights to others, and (b) prior to the Signing Date Licensor has granted certain rights to Merck &
Co., Inc. to research, Develop, make and have made, import, export, use and Commercialize Compounds
outside the Field.

     2.8 Limitations on Use of Compounds and Follow-On Compounds. Merck understands and agrees
that the Compounds and Follow-on Compounds are only to be used for the research, Development,
manufacture or Commercialization of Compounds, Follow-On Compounds and Licensed Products in the
Field in accordance with this Agreement.

 

 

Article 3

PRODUCT DEVELOPMENT AND COMMERCIALIZATION;

REGULATORY MATTERS

     3.1 Development of the Licensed Products by Merck. Merck shall have the exclusive right, at
its own cost, to research and Develop the Licensed Products and to conduct (either itself or
through its Affiliates, agents, subcontractors and/or Sublicensees) all Clinical Trials and
non-clinical studies Merck believes appropriate to obtain Regulatory Approval for the Licensed
Products in any Indication in the Field. The Development of each Licensed Product in the Field
shall be governed by a development plan that describes the proposed overall program of Development
(the “Development Plan”), which Development Plan will be updated by Merck at least [**]. Subject
to the terms of this Agreement, including Section 3.9, Merck shall have the sole right and
responsibility for preparing the Development Plan for each Licensed Product in the Field, and shall
in all events have the sole decision-making authority regarding each Development Plan and the
Development of each Licensed Product in the Field, including the determination of which Indications
in the Field to pursue with respect to each such Licensed Product.

     3.2 Clinical Trials On-Going as of Signing Date. Following the Effective Date (a) Licensor
shall continue, and shall use Commercially Reasonable Efforts to complete, (i)
[**], and (ii) [**]; and (b) the Parties shall use Commercially Reasonable Efforts to transfer
to Merck as soon as is reasonably practicable responsibility for the conduct of (i) [**]; and (ii)
[**] (all of the Clinical Trials in (a) and
(b), collectively, the “Ongoing Trials”). Each Party
shall, in conducting its respective activities with respect to the On-Going Trials, conduct its
activities in a good scientific manner and in compliance with all applicable Laws, and cGCP and
cGLP standards, as applicable. Merck shall, within thirty (30) days after the Effective Date,
appoint a representative that shall be an active member of the Licensor team responsible for the
conduct or transfer to Merck of the On-Going Trials (the “Merck Trial Monitor”) and Licensor hereby
accepts that the Merck Trial Monitor shall have such role in the conduct or transfer to Merck of
the On-Going Trials. The Merck Trial Monitor shall in particular: (A) be informed by Licensor, on a
periodic basis as required by the Merck Trial Monitor, of all events and activities related to
the On-Going Trials, (B) take part in discussions and interactions with the sites and the
Regulatory Authorities for the On-Going Trials and shall have the right to make direct contact with
such sites and Authorities, provided it informs Licensor thereof; and (C) take part in all
decisions related to the On-Going Trials and Licensor hereby accepts that no material decisions
relating to the On-Going Trials shall be taken without the prior written consent of the Merck Trial
Monitor (which consent, if given, shall be provided in a timely manner so as not to delay the
conduct or transfer of the On-Going Trials). Licensor shall, within thirty (30) days after the
Effective Date, deliver to the Merck Trial Monitor copies of all relevant materials, data and
regulatory information (including all INDs) related to the On-Going Trials, whether written or
electronic, including all relevant clinical safety and efficacy data and all regulatory data and
information related to the use and sale of the Licensed Product in the Field. Within thirty (30)
days after the end of each Calendar Quarter during the conduct or transfer of the On-Going Trials,
Licensor shall deliver to the Merck Trial Monitor new materials, data and information in its
possession relating to the On-Going Trials, in an orderly fashion and in a manner such that
confidentiality in the delivered information is preserved in all material respects.

 

 

     3.3 Reimbursement of Development Costs. All Development Costs incurred by Licensor after the
Effective Date relating to the On-Going Trials shall be paid by Merck in accordance with the budget
set forth in Schedule 3.3 (the “Budget”). Within forty-five (45) days after the end of each
Calendar Quarter during the conduct of the On-Going Trials by Licensor, Licensor shall submit an
invoice to Merck for the budgeted and approved Development Costs relating to the On-Going Trials it
incurred during such Calendar Quarter, setting forth in reasonable detail such Development Costs.
Following receipt of such written invoice, Merck shall, within thirty (30) days after receipt of
such written report, reimburse Licensor those budgeted and approved Development Costs incurred by
Licensor relating to the On-Going Trials during such Calendar Quarter. For the avoidance of doubt,
Merck shall have no obligation to reimburse any Development Costs not set forth in the Budget or
otherwise approved in writing by Merck.

     3.4 Licensor Support in the Development. For a period of [**] starting from Effective Date,
Licensor shall make its employees that are knowledgeable on the Compound or Follow-On Compound, its
properties and functions, reasonably available to Merck, at Licensor’s facilities, for scientific
and technical explanations, advice and support, that may reasonably be required by Merck, relating
to the Development and registration of the Compound, Follow-On Compound and the Licensed Products
(the “Development Support”). The Development Support shall be provided by Licensor [**] during such
first [**] following the Effective Date. Thereafter, during the remaining [**] period, Merck shall
reimburse Licensor for Licensor’s reasonable Out-of-Pocket Expenses incurred in providing the
Development Support should Merck require any of such Development Support, subject however to
Licensor providing Merck with documented evidence of such Out-of-Pocket Expenses having been
incurred.

     3.5 Joint Research Committee.

          (a) Composition of the Joint Research Committee. The Parties shall form a joint research
committee (the “JRC”) comprised of two (2) representatives of Merck and two (2) representatives of
Licensor. Each Party shall name its JRC representatives and notify the other Party of its JRC
representatives promptly following the Effective Date. Each Party may change its representatives
to the JRC from time to time, in its sole discretion, effective upon notice to the other Party of
such change. These representatives shall have appropriate technical credentials, experience and
knowledge. Additional representatives or consultants may from time to time, by mutual consent of
the Parties, be invited to attend JRC meetings. The JRC shall be chaired by a representative of
Licensor, but shall function solely as a forum for exchanging certain information and not as a
decision-making body. Each Party shall bear its own expenses related to the attendance at such
meetings by its representatives.

          (b) Role of JRC. The JRC’s role as a forum for exchanging information shall consist of (a)
conferring regularly regarding Licensor Know-How relating to Compounds or Follow-On Compounds, (b)
conferring regularly regarding the status of preclinical testing of Follow-On Compounds, (c)
reviewing data regarding Follow-On Compounds, and considering and advising on any technical issues
that arise with respect to Follow-On Compounds and (d) addressing such other matters relating to
Licensor’s provision of Follow-On Compounds pursuant to Section 3.6 and Merck’s testing thereof as
either Party may bring before the JRC. The JRC shall not have any supervisory or decision making
authority. Licensor shall use

 

 

Commercially Reasonable Efforts to incorporate guidance provided by Merck’s JRC
representatives regarding the desired properties of Follow-On Compounds in synthesizing or
otherwise identifying Follow-On Compounds to be delivered by Licensor pursuant to Section 3.6 after
such time as Licensor receives such guidance.

          (c) Meetings. The JRC shall meet in accordance with a schedule established by mutual written
agreement of the Parties, but no less frequently than [**] per Calendar Quarter during any period
in which Licensor remains obligated to provide Follow-On Compounds pursuant to Section 3.6, or in
the period thereafter, no less than [**] a year for as long as Merck is clinically developing
Compounds or Follow-On Compounds (including Phase IV Studies), with the location for such meetings
alternating between Licensor and Merck facilities (or such other location as may be determined by
the JRC). Alternatively, the JRC may meet by means of teleconference, videoconference or other
similar communications equipment. Unless otherwise mutually agreed by the Parties, the JRC shall
disband and cease to meet once Merck no longer clinically develops Compounds or Follow-On Compounds
(including Phase IV Studies).

     3.6 Follow-On Compounds. Licensor shall provide Merck with [**] TLR-9 agonists for evaluation
purposes within a period of [**] after the Effective Date in accordance with the following
schedule: (a) [**] of such Follow-On Compounds will be provided by Licensor within [**] after the
Effective Date, (b) an additional [**] Follow-On Compounds shall be provided on or before [**]
after the Effective Date, (c) an additional [**] Follow-On Compounds shall be provided on or before
[**] after the Effective Date and (d) an additional [**] Follow-On Compounds shall be provided on
or before [**] after the Effective Date. Merck shall have the right, for a period commencing on
the Effective Date and ending [**] after the last batch of Follow-On Compounds is delivered to
Merck pursuant to this Section 3.6, to select up to [**] of the [**] Follow-On Compounds for
further Development and Commercialization. Licensor shall transfer to Merck, at Licensor’s
reasonable cost and expense, data relating to such Follow-On Compounds as set forth in Schedule
1.24. Merck shall make its election in writing, and upon such election, (a) the Follow-On
Compounds shall be made part of Licensed Products, and be subject to the terms and conditions
applying to Licensed Products under this Agreement, and (b) the remaining [**] compounds not
selected by Merck shall no longer be considered Follow-On Compounds hereunder. In addition,
Licensor agrees that it shall not, either by itself, through any of its Affiliates or through any
Third Party, Develop and/or Commercialize any of the Follow-On Compounds selected by Merck outside
the Field.

     3.7 Commercialization. Subject to the terms and conditions of this Agreement, including
Merck’s obligations under Section 3.9, Merck shall have the sole authority and the exclusive right
to Commercialize the Licensed Products in the Field, itself or through one or more Affiliates or
Third Parties selected by Merck, and shall have the sole authority and responsibility in all
matters relating to the Commercialization of the Licensed Products in the Field.

     3.8 Manufacturing and Supply. Subject to the terms and conditions of this Agreement, Merck
shall have the exclusive right to manufacture the Compounds, the Follow-On Compounds and the
Licensed Products in the Field, itself or through one or more Third Parties selected by Merck.
Starting from the Effective Date and for [**] thereafter, Licensor shall make

 

 

its employees that are knowledgeable on the manufacture of the Compound, the Follow-On
Compound and the Licensed Product reasonably available to Merck, at Licensor’s facilities, for
scientific and technical explanations, advice and support, that may reasonably be required by
Merck, relating to the manufacture of the Compound, the Follow-On Compound and the Licensed
Products and the Manufacturing Technology Transfer (the “Manufacturing Support”). The Manufacturing
Support shall be provided by Licensor [**] during the [**] period following Effective Date. Merck
shall reimburse Licensor for Licensor’s Out-of-Pocket Expenses incurred in providing the
Manufacturing Support during the [**] period thereafter, subject to Licensor providing Merck with
documented evidence of such Out-of-Pocket Expenses having been incurred.

     3.9 Diligence by Merck. Subject to Licensor’s fulfillment of its obligations under this
Agreement, Merck shall use Commercially Reasonable Efforts to Develop and, upon receipt of
Regulatory Approval, Commercialize a Licensed Product in the Field. Merck shall have the exclusive
right to determine, in its sole discretion, the launch strategy for such Licensed Products, based
on its exercise of Commercially Reasonable Efforts and the availability of any necessary Third
Party licenses or other rights. Activities by Merck’s Affiliates and Sublicensees will be
considered as Merck’s activities under this Agreement for purposes of determining whether Merck has
complied with any obligation to use Commercially Reasonably Efforts.

     3.10 Annual Reporting. Merck shall, on each anniversary of the Signing Date, provide Licensor
with a written report summarizing in reasonable detail its Development and, as applicable,
Commercialization activities conducted during the prior Calendar Year.

     3.11 Trademarks. As between Licensor and Merck, Merck shall have the sole authority to select
trademarks for the Licensed Products in the Field, and shall own all such trademarks. Licensor
hereby assigns to Merck all of its rights, title and interest in and to the trademark IMOxine and
agrees to transfer to Merck any registrations therefor held by Licensor. Licensor shall execute
any confirmatory assignment necessary or desirable to further effect such assignment and transfer
upon request by Merck.

Article 4

REGULATORY MATTERS

     4.1 Regulatory Filings. As between Merck and Licensor, Merck shall own and maintain all
regulatory filings and Regulatory Approvals for the Licensed Products in the Field, including all
INDs and NDAs, except the [**] for [**] and [**] for [**] which will be owned and maintained by
Licensor. Licensor shall provide reasonable assistance to Merck, its Affiliates and any Merck
Sublicensee in the preparation of and filing for any INDs, IND amendments or NDAs with respect to
Licensed Products for use in the Field. Such assistance shall include, in particular, Licensor
providing Merck with a complete electronic copy of all relevant documentation submitted to the FDA
in the context of [**] for [**] and [**] for [**] necessary to enable Merck to submit its own IND
for IMO-2055 and IMO-2125 in the Field, and to allow Merck to cross-reference such INDs held by
Licensor.

 

 

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

 

 

     4.3
Adverse Event Reporting.

          (a) The Parties agree to meet within [**] after the Effective Date to commence negotiations of
a more detailed pharmacovigilance agreement. Such pharmacovigilance agreement shall provide for
the exchange by the Parties of any information of which a Party becomes aware in the Territory
concerning any side effect, injury, toxicity or sensitivity reaction, or any unexpected incident,
in or involving a subject or, in the case of non-clinical studies, an animal in a toxicology study,
and the seriousness thereof, whether or not determined to be attributable to any Licensed Product,
Compound or Follow-On-Compound (hereinafter “Adverse
Experience”), including information regarding
Adverse Experiences received by either Party from Third Parties. The Parties contemplate that
initially Licensor will be responsible for receiving and providing information regarding Adverse
Experiences from and to both Merck and Merck & Co. relating to Compounds, subject to
confidentiality and other legal obligations.

          (b) With respect to Adverse Experiences that are serious and associated with the use of any
Licensed Product, whether or not determined to be attributable to any such Licensed Product
(hereinafter “Serious Adverse Experience”), (i) in the event Licensor receives a Serious Adverse
Experience report from any Third Party, Licensor shall notify Merck in writing within two (2)
calendar days of receipt of such report, and (ii) in the event a Serious Adverse Experience report
is to be generated by either Party, such Party shall provide its report to the other within four
(4) calendar days for death and life threatening, and seven (7) calendar days for all other Serious
Adverse Experience reports.

          (c) With respect to INDs filed by Merck, Merck shall be responsible for reporting to
Regulatory Authorities any Adverse Events, whether in non-clinical or clinical studies for or
during commercialization of any Licensed Product in the Field in compliance with the requirements
of the United States Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 321 et seq., the regulations
promulgated thereunder, and equivalent foreign Laws. It is understood that these adverse
experience reporting requirement provisions are based on the policies and procedures of Merck and
regulatory requirements.

          (d) The relevant information can be transmitted by e-mail, facsimile, overnight courier or any
other means the Parties agree in the separate pharmacovigilance agreement.

	 	 	 
	Transmission
to Licensor:

	 	Drug Safety
	 

	 	c/o VP of Development Programs
	 

	 	167 Sidney Street
	 

	 	Cambridge, MA 02139
	 

	 	Drug Safety Mailbox: [**]
	 

	 	Facsimile: 617-679-5582

 

 

	 	 	 
	Transmission
to Merck:

	 	Global Drug Safety
	 

	 	Frankfurter Straße 250
	 

	 	64271 Darmstadt, Germany
	 

	 	Drug Safety Mailbox: [**]
	 

	 	Facsimile: 49-6151-72- 6914

Article 5

FINANCIAL PROVISIONS

     5.1 Initial Fee. In partial consideration of Licensor’s grant of the rights and licenses to
Merck under this Agreement, Merck shall make, or cause to be made, to Licensor, not later than (a)
thirty (30) days after the Effective Date in the event that no HSR Filing is to be made, or fifteen
(15) days after the Effective Date in the event that an HSR Filing is made, a one time payment in
an amount expressed in Euros that is the equivalent to US Dollars forty million (USD
40,000,000.00), with the conversion of US Dollars into Euros to be made using the US Dollar/Euros
exchange rate of the European Central Bank on the Effective Date, as set forth on the website of
the European Central Bank (http://www.ecb.int/stats/exchange/eurofxref/html/index.en.html).

     5.2 Milestone Payments.

          (a) As further partial consideration for Licensor’s grant of the rights and licenses to Merck
under this Agreement, Merck shall pay, or cause to be paid to Licensor, the following milestone
payments with respect to the first [**] Labels, irrespective of the number of Licensed Products.
Such milestone payments shall accrue on the achievement of the applicable milestone event and,
except as otherwise provided in Section 10.4(a)(ii), shall be paid by Merck on the later of: (i)
[**] days after the achievement of each of the listed milestone events, and (ii) [**] months after
the Effective Date. Merck shall promptly notify Licensor in writing of the occurrence of any such
milestone event.

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

	 	Euros [**]

(€ [**])
	 	Euros [**]

(€ [**])

 

 

	 	 	 	 	 
	Milestone Event for	 	Milestone Payment (€)	 	Milestone Payments (€)
	Licensed Products	 	Per Label	 	for first [**] Labels
	(2) Initiation of
first Phase III Trial,
for each of the first
[**] Labels

	 	Euros [**]

(€ [**])
	 	Euros [**]

(€ [**])
	 
	 	 	 	 
	(3) NDA Acceptance,
for each of the first
[**] Labels

	 	Euros [**]

(€ [**])
	 	Euros [**]

(€ [**])
	 
	 	 	 	 
	(4) Regulatory
Approval in the United
States, for each of the first [**]
Labels

	 	Euros [**]

(€ [**])
	 	Euros [**]

(€ [**])
	 
	 	 	 	 
	(5) Regulatory
Approval in the
European Union, for
each of the first [**]
Labels

	 	Euros [**]

(€ [**])
	 	Euros [**]

(€ [**])
	 
	 	 	 	 
	(6) Regulatory
Approval in Japan, for
each of the first [**]
Labels

	 	Euros [**]

(€ [**])
	 	Euros [**]

(€ [**])

          (b) With respect to the milestone payments set forth in Sections 5.2(a)(1), the first of such
milestones achieved by a given Compound or Follow-On Compound may be achieved through a Phase I
Clinical Trial of such Compound or Follow-On Compound, even if such Clinical Trial is (i) directed
solely to the safety of such Compound or Follow-On Compound and/or (ii) is not directed to the use
of such Compound or Follow-On Compound for any particular Indication in the Field; provided
that in the case of such a trial that is the first Clinical Trial of a Compound or Follow-On
Compound but is not specifically directed to a particular Label, the initiation of the second Phase
I, Phase I/II or Phase II Clinical Trial with respect to the same Compound or Follow-On Compound
shall not count as the “second Label” with respect to such Compound or Follow-On Compound.

          (c) A milestone event that occurs in or with respect to the “European Union” shall mean any
such event in or with respect to a milestone event relating to Regulatory Approval, in any three of
the Major EU Countries.

          (d) For purposes of this Section 5.2, Regulatory Approval for any Licensed Product in the
United States or Japan, if not earlier achieved, shall be deemed to have been achieved upon the
First Commercial Sale of such Licensed Product in the United States or Japan (as the case may be),
and Regulatory Approval in the European Union, if not earlier achieved, shall be deemed to have
been achieved upon the First Commercial Sale of a Licensed Product in at least [**] Major EU
Countries.

          (e) The milestone payments to be made under Section 5.2(a) shall be due and payable only once
for the first [**] Labels to achieve the applicable milestone event, regardless of the number of
Compounds, Follow-On Compounds and/or Licensed Products Developed, or the number of Indications
pursued or approved or whether a Compound, Follow-

 

 

On Compound or Licensed Product is discontinued after a milestone payment has been made;
provided that, if, after [**] or more of the Regulatory Approval milestone events
set forth in Sections 5.2(a)(4), 5.2(a)(5) and 5.2(a)(6) has been achieved by [**] or more Licensed
Products containing, as active ingredients, different Compound(s) or Follow-On Compound(s) (i.e.,
at least one of such Licensed Products must contain at least [**] Compound or Follow-On Compound
that is not contained in at least [**] of such other Licensed Products), a milestone event set
forth in Section 5.2(a)(1) or Section 5.2(a)(2) that has previously been achieved for at least [**]
previous Labels is achieved for a [**] Label with a Licensed Product that contains a [**] or
subsequent compound (i.e., a Compound or Follow-On Compound that is not contained in the Licensed
Products described above that previously achieved a Regulatory Approval), then Merck shall not be
obligated to pay Licensor the milestone payment amount otherwise payable under Section 5.2(a)(1) or
Section 5.2(a)(2) for the achievement of such [**] Label milestone event by any Licensed Product
containing such [**] or subsequent compound (but, again for greater certainty, shall continue to be
obligated to pay to Licensor the milestone payments under Section 5.2(a)(3) through 5.2(a)(6) upon
achievement of each such milestone).

          (f) Subject to the proviso in Section 5.2(e) above, in the event that a milestone payment is
made for one of the first [**] Labels (for purposes hereof,
the “Current Milestone Payment”), and
the preceding milestone payment for that same Label has not been made, then such preceding
milestone payment shall be made concurrently with the Current Milestone Payment.

     5.3
Commercial Event Payments.

     As further partial consideration for Licensor’s grant of rights and licenses to Merck under
this Agreement, Merck shall pay Licensor the following amounts for the achievement of the following
commercial event milestones:

[**] Euros (€ [**]) upon the first achievement of cumulative Net Sales for all Licensed
Products greater than [**] Euros (€[**]) in a Calendar Year during the Royalty Term;

Such commercial event payment shall be made by Merck only once within ninety (90) days of the
end of the Calendar Year in which the commercial event occurs.

     5.4
Royalty Payments for Licensed Products. As further consideration for Licensor’s grant of
the rights and licenses to Merck hereunder, Merck shall, during the Royalty Term, pay to Licensor a
royalty on Net Sales of the Licensed Products at the percentage rates set forth below (subject to
Sections 5.5(a) and 5.5(b) below):

	 	 	 
	Annual Worldwide Licensed Product	 	 
	Net
Sales (in €)
per Calendar Year	 	Incremental
Royalty Rate
	For Net Sales of all Licensed
Products from €[**]up to and
including €[**]

	 	[**]%
	 
	 	 
	For that portion of Net Sales of all
Licensed Products that is greater
than €[**] and less than or equal to
€[**]

	 	[**]%
	 
	 	 
	For that portion of Net Sales of all
Licensed Products that is greater
than €[**] and less than or equal to
€[**]

	 	[**]%

 

 

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

	 	[**]%

By way of illustration, assume in a Calendar Year that (i) Net Sales of all Licensed Products in
Euros total €[**]and (ii) no adjustments or deductions to payments under this Article 5 apply. The
total royalties due and payable by Merck to Licensor for such Net Sales would be € [**] Euros
(€[**]), calculated as follows:

          [**]

               Total Royalty      = €[**]

     For purposes of determining whether a royalty threshold, or the commercial event milestone
described in Section 5.3 above, has been attained, only Net Sales that are subject to a royalty
payment shall be included in the total amount of Net Sales and any Net Sales of Licensed Products
for which the applicable Royalty Term has expired shall be excluded. In addition, in no event
shall the manufacture of a Licensed Product give rise to a royalty obligation. For clarity,
Merck’s obligation to pay royalties to Licensor under this Article 5 is imposed only once with
respect to the same unit of Licensed Product regardless of the number of Licensor Patents
pertaining thereto.

     5.5
Reductions and Reimbursements.

          (a) Subject to the terms herein, if Merck, its Affiliates or Sublicensees enter into a Third
Party License Agreement(s), the royalties due to Licensor under Section 5.4 (as adjusted (where
applicable) pursuant to Section 5.5(b)) with respect to such Calendar Quarter shall be reduced, on
a Licensed Product-by-Licensed Product and country-by-country basis, by [**] percent ([**]%) of any
amounts paid by Merck, its Affiliates or Sublicensees pursuant to such Third Party License
Agreement(s) with respect to a given Calendar Quarter, to the extent allocable to the applicable
Licensed Product in the applicable country. To the extent any such Third Party License Agreement
includes license rights as to which amounts paid are not eligible for offset pursuant to this
Section 5.5(a), the aforementioned reduction shall be made by Merck in good faith using an
allocation method reasonably determined by Merck. The foregoing provisions of this Section 5.5(a)
notwithstanding, in no event shall the royalty payments with respect to a Licensed Product in a
country due to Licensor by Merck at the then-applicable royalty rates be reduced by more than [**]
percent ([**]%) as a result of the operation of this Section 5.5(a). In the event that Merck is
not able to take the full amount of its permitted deductions under this Section 5.5(a) with respect
to any Licensed Product in a country due to the operation of the [**] percent ([**]%) royalty
reduction limitation provided for in this Section 5.5(a) with respect to the Licensed Product in
such country (including due to there being no royalty obligations against which Merck can credit
amounts paid by Merck, its Affiliates or Sublicensees pursuant to such Third Party License
Agreement(s)), Merck shall be entitled to deduct any undeducted excess amounts against royalties
due to Licensor under Section 5.4 pertaining to such Licensed Product in such country in subsequent
Calendar Quarters until fully

 

 

deducted, but the [**] percent ([**]%) royalty reduction limitation shall apply to such
subsequent Calendar Quarters.

          (b) The royalty rates then in effect set forth in Section 5.4 applicable to the sale of a
Licensed Product in a country will be reduced by [**] percent ([**]%) during any portion of the
Royalty Term when there is no Valid Claim of a Licensor Patent Covering such Licensed Product in
such country.

          (c) In the event that in any Calendar Year during the Royalty Term, off-label sales by
Licensor, its Affiliates or licensees (or their successors) of products containing [**] in the
Field are detected through marketing databases (such as, without limitation IMS Health) reach or
exceed the lesser of (i) [**] percent ([**]%) of annual worldwide Net Sales of all Compounds made
by Merck, its Affiliates or Sublicensees, or (ii) USD [**] ($[**]) (where such off-label sales in
the Field are calculated by reference to Merck’s relevant average selling price(s), adjusted for
different dosages), then the royalty rates then in effect under Section 5.4 (as adjusted (where
applicable) pursuant to Sections 5.5(a) and 5.5(b)) applicable to the sale of all Licensed Product
will be reduced by [**] percent ([**]%) of the otherwise applicable royalty rate during any such
Calendar Year. Should the effect of off-label sales of [**] in the Field thereafter fall below
both of the thresholds described in the sentence before, then the royalty rate in effect under
Section 5.4 (as adjusted (where applicable) pursuant to Sections 5.5(a) and 5.5(b)) shall be
reinstated.

          (d) If Merck, its Affiliates or Sublicensees incur any liability, damage, loss, cost or
expense (including reasonable attorney fees) arising out of Third Party claims or suits in
connection with Licensed Product(s) related to the matters set forth in [**], then Merck shall be
entitled to deduct [**] percent ([**]%) of such amounts from the royalties otherwise due to
Licensor under Section 5.4 (as adjusted (where applicable) pursuant to Sections 5.5(a), 5.5(b) and
5.5(c)). For the avoidance of doubt, such amounts shall be deducted from royalty payments for
worldwide Net Sales achieved, even if such Third Party claims relate to certain countries in the
world only. If the royalties otherwise due to Licensor in any Calendar Quarter are less than [**]
percent ([**]%) of the liability, damage, loss, cost or expense (including reasonable attorney
fees) that Merck is permitted to deduct pursuant to the immediately preceding sentence, Merck shall
be entitled to carry forward any undeducted excess for deduction against royalties otherwise
payable to Licensor in future periods. Each Party shall (a) promptly notify the other Party as
soon as it becomes aware of a claim or suit for which the foregoing deduction applies and (b)
cooperate with the other Party in the defense, settlement or compromise of such claim or suit. In
no event, however, shall Merck settle or compromise any such claim or suit in a manner that admits
any liability for the subject matter of such claim or suit or involves making any payment to a
Third Party in consideration for such settlement or compromise without the prior written consent of
Licensor, not to be unreasonably withheld, delayed or conditioned.

     5.6
Timing of Payment. Royalties payable under Section 5.4 shall accrue at the time the
invoice for the sale of the Licensed Product is delivered and royalty obligations that have accrued
during a particular Calendar Quarter shall be paid, on a Calendar Quarter basis, within sixty (60)
days after the end of the Calendar Quarter during which the royalty obligation accrued.

 

 

     5.7
Mode of Payment, Currency and Invoicing. All payments to Licensor hereunder shall be made
by deposit of Euros in the requisite amount to such bank account as Licensor may from time to time
designate by written notice to Merck. With respect to Net Sales not denominated in Euros, Merck
shall convert each applicable monthly sales in foreign currency into Euro by using the then current
and standard exchange rate methodology applied by Merck in its external reporting. For accounting
and documentation purposes, Licensor shall provide to Merck an invoice for the upfront and
milestone payments that are payable. The Parties may vary the method of payment set forth herein
at any time upon mutual agreement, and any change shall be consistent with the local Law at the
place of payment or remittance. Merck agrees that Merck and its Affiliates shall make all of their
payments under this Agreement from Germany; and in case that payments under this Agreement are to
be made by an assignee of Merck, then Licensor and Merck shall agree in good faith on a mode of
payment by such assignee that does not disadvantage Licensor if compared with a situation in which
Licensor and Merck would benefit from the application of the Double Taxation Convention existing
between Germany and the United States of America, as such convention is in effect at the time of
assignment and thereafter.

     5.8
Royalty Reports and Records Retention. Within sixty (60) days after the end of each
Calendar Quarter during which the Licensed Products have been sold, Merck shall deliver to
Licensor, together with the applicable royalty payment due, a written report, on a Licensed
Product-by-Licensed Product and a country-by-country basis showing (a) the Net Sales in Euros of
each Licensed Product by type of Licensed Product and country in the Territory, (b) the applicable
royalty rates for such Licensed Product, (c) the exchange rates used in calculating any of the
foregoing, and (f) a calculation of the amount of royalty due Licensor in Euros. In addition to
the foregoing, within sixty (60) days after the end of each Calendar Year during which Licensed
Products have been sold, Merck shall deliver to Licensor a written report showing the gross sales
in Euros of each Licensed Product by type of Licensed Product and country for the United States,
the Major EU Countries and Japan. Such reports shall be deemed “Confidential Information” of Merck
subject to the obligations of Article 7 of this Agreement. For the current Calendar Year and the
[**] most recently completed Calendar Years, Merck shall keep (and shall ensure that its Affiliates
and Sublicensees shall keep) complete and accurate records of such sales in sufficient detail to
confirm the accuracy of the gross sales, Net Sales, royalty and currency conversion calculations
hereunder.

     5.9
Legal Restrictions. If at any time legal restrictions prevent the remittance by Merck of
all or any part of royalties on Net Sales in any country, Merck shall have the right and option to
make such payment by depositing the amount thereof in local currency to an account in the name of
Licensor in a bank or other depository selected by Licensor in such country.

     5.10
Late Payments. All payments under this Agreement shall earn interest from the date due
until paid at a per annum rate equal to the lesser of (a) the rate provided for at the relevant
time pursuant to the Late Payments of Commercial Debt (Interest) Act of 1998, and (b) [**] percent
([**]%). Interest will be calculated on a 365/360 basis.

     5.11
Audits.

 

 

          (a) During the Term and for one Calendar Year thereafter, upon the written request of
Licensor, and not more than [**] in each Calendar Year, Merck shall permit, and shall cause its
Affiliates and Sublicensees to permit, an independent accounting firm of internationally recognized
standing selected by Licensor, and reasonably acceptable to Merck or such Affiliate or Sublicensee,
to have access to and to review, during normal business hours upon reasonable prior written notice,
the applicable records of Merck and its Affiliates and Sublicensees to verify the accuracy of the
royalty reports, any deductions taken in calculating Net Sales, and payments under this Article 5.
Such review may cover the records for sales made in the current Calendar Year and any Calendar Year
ending not more than [**] prior to the date of such request. The accounting firm shall disclose to
Licensor and Merck only whether the royalty reports are correct or incorrect and the specific
details concerning any discrepancies. No other information shall be provided to Licensor.

          (b) If such accounting firm concludes that additional royalties were owed during such period,
Merck shall pay the additional amounts, together with interest accrued thereon in accordance with
Section 5.10, within thirty (30) days after the date Licensor delivers to Merck such accounting
firm’s written report. If such accounting firm concludes that an overpayment was made, such
overpayment shall be fully creditable against amounts payable in subsequent payment periods.
Licensor shall pay for the cost of such audit, unless the underpayment of royalties is greater than
[**] percent ([**]%) of the amount due for the applicable period, in which case Merck shall pay the
cost of such audit.

          (c) Each Party shall treat all information that it receives under this Section 5.11 in
accordance with the confidentiality provisions of Article 7 of this Agreement, and shall cause its
accounting firm to enter into a written confidentiality agreement with the other Party having terms
substantially the same as the confidentiality obligations set forth in this Agreement and
obligating such firm to retain all such financial information in confidence pursuant to such
confidentiality agreement, except to the extent necessary for such Party to enforce its rights
under this Agreement.

     5.12
Compulsory License. In the event that Licensor or Merck receives a request for a
Compulsory License anywhere in the world, it shall promptly notify the other Party. If any Third
Party obtains a Compulsory License in the Field in the Territory, then Licensor or Merck (whoever
has first notice) shall promptly notify the other Party. For purposes of calculating the royalties
due Licensor under Section 5.4 with respect to sales of the Licensed Product by any compulsory
licensee, Merck shall pay Licensor the lesser of (a) the amounts otherwise due to Licensor pursuant
to Section 5.4, and (b) [**] percent ([**]%) of any amounts payable (including up-front license
fees, milestones and other non-royalty consideration as well as royalty consideration) by such
compulsory licensee to Merck.

 

 

     5.13 Taxes.

          (a) Licensor shall be responsible for the payment of any and all taxes levied on account of
royalties and other payments paid to Licensor by Merck or its Affiliates or Sublicensees under this
Agreement, other than any value added tax or similar tax. If applicable Law requires that taxes be
deducted and withheld from royalties or other payments paid under this Agreement, Merck shall (a)
deduct those taxes from the payment; (b) pay the taxes to the proper Governmental Body; (c) send
evidence of the obligation together with proof of payment to Licensor within one hundred (100) days
following such payment, such evidence and proof to be reasonably satisfactory to Licensor; (d)
remit to Licensor the net amount, after deductions or withholding made under this Section 5.13(a),
and (e) cooperate with Licensor in any way reasonably requested by Licensor, to obtain available
reductions, credits or refunds of such taxes Notwithstanding the foregoing, if Licensor shall
provide Merck with a written confirmation from the competent U.S. tax authority that Licensor has
its tax residence in the United States and any other documents necessary for the application of the
tax rate set forth in the Double Taxation Convention existing between Germany and the United States
of America. Merck shall not withhold any German tax from royalties paid or payments for rights to
Licensor under this Agreement so long as the exemption from withholding tax set forth in such
Double Taxation Convention remains in effect. For purposes hereof, the Parties assume that
Licensor shall be the beneficial owner of both the royalty payments and the payments for the
rights.

          (b) It is understood and agreed between the Parties that any payments described in this
Agreement are expressed exclusive of any value added tax or similar tax imposed upon such payments.
Value added tax shall be added to all such payments where applicable.

Article 6

Inventions and Patents

     6.1 Certification Under Drug Price Competition and Patent Restoration Act. Each Party shall
immediately give written notice to the other Party of any certification of which they become aware
filed pursuant to 21 U.S.C. Section 355(b)(2)(A) (or any amendment or successor statute thereto)
claiming that any Licensor Patents Covering a Compound, Follow-On Compound or Licensed Product, or
the use of each of the foregoing, are invalid or unenforceable, or that infringement will not arise
from the manufacture, use or sale of a Licensed Product in or outside the Field by a Third Party.

     6.2 Listing of Patents. Merck shall have the sole right to determine which of the Licensor
Patents, if any, shall be listed for inclusion in the Approved Drug Products with Therapeutic
Equivalence Evaluations pursuant to 21 U.S.C. Section 355, or any successor Law in the United
States, together with any comparable Laws in any other country in the Territory.

     6.3 Title to Inventions. All inventions having as inventors solely employees or independent
contractors of one Party in the course of the Parties’ performance under this Agreement and all
intellectual property rights therein (“Sole Inventions”), shall be the property of such Party. All
inventions having as inventors one or more employees or independent

 

 

contractors of each of the Parties in the course of the Parties’ performance under this
Agreement and all intellectual property rights therein (“Joint Inventions”) shall be jointly owned
both Parties.

     6.4 Further Assurances. Licensor shall require all of its employees, and use Commercially
Reasonable Efforts to require its contractors and agents, and any Affiliates and Third Parties
working on its behalf under this Agreement (and their respective employees, contractors and
agents), to assign to Licensor any Licensor Technology.

     6.5 Patent Prosecution and Maintenance.

          (a) Merck. Merck shall have the right to file, prosecute and maintain Merck Patents. Merck
shall bear all costs and expenses of filing, prosecuting and maintaining Merck Patents in the
Territory.

          (b) Licensor Patents. Licensor shall have the first right to file, prosecute and maintain
Licensor Patents in the Territory; provided that Licensor shall file, prosecute and maintain
Licensor Patents in the countries listed in the patent country list attached hereto as Schedule
6.5 (the “Patent Countries”), it being acknowledged that with respect to Licensor Patents filed
prior to the Signing Date it may no longer be possible to file patent applications in certain of
the Patent Countries. Prosecution in the Patent Countries shall be at Licensor’s sole discretion
and control. Licensor shall bear all costs and expenses of filing, prosecuting and maintaining
Licensor Patents in the Patent Countries. Licensor shall update Merck as to the course of filing
and prosecution of Licensor Patents or related proceedings (e.g. interferences, oppositions,
reexaminations, reissues, revocations or nullifications) in the Patent Countries from time to time.
Merck may provide comments on such filings and proceedings and Licensor may take into
consideration the advice and recommendations of Merck. At Licensor’s request, Merck will provide
Licensor with reasonable assistance in prosecuting Licensor Patents to the extent possible,
including providing such data in Merck’s Control that is, in Licensor’s reasonable judgment, needed
to support the prosecution of a Licensor Patent; provided, however, that Licensor shall reimburse
Merck for Merck’s Out-of-Pocket Expenses incurred in providing such assistance. Licensor shall
provide Merck with a routine annual update of the complete patent status of the Licensor Patents in
all countries in the Territory.

          (c) Joint Patents. Licensor and Merck will promptly disclose all Joint Inventions to each
other. Each Party shall execute such further assignments, documents and other instruments as may
be necessary or desirable to fully and completely assign all Joint Inventions to Licensor and Merck
and will assist each other in applying for, obtaining and enforcing patents with respect to any
Joint Inventions, including equal sharing of the expenses associated therewith. Questions of
inventorship shall be resolved in accordance with United States patent laws. In the event that one
of the Parties is not interested in filing, prosecuting or maintaining a patent or patent
application covering a Joint Invention in any particular country, then such Party agrees to
transfer its interest in such patent right or patent application to the other Party, and the other
Party shall have the right to assume the filing, prosecuting or maintenance of such patent or
patent application in such country, at such other Party’s expense. In the event of a dispute
regarding such questions, if the Parties are unable to resolve the dispute, mutually acceptable
independent United States patent counsel not regularly employed or otherwise

 

 

associated with either Party shall resolve such dispute and the parties shall be bound by the
decision of such counsel. The Parties shall reasonably discuss the disposition of Joint Patents
that disclose or claim inventions with applicability outside the Field.

          (d) Election Not to File and Prosecute Licensor Patents Not Included in Patent Countries List.
Licensor and Merck recognize that with regard to certain patents and patent applications for
Compounds and Compound Improvements (but not for Follow-On Compounds, Follow-On Compound
Improvements, or patent applications or patents filed on Joint Inventions) included in Licensor
Patents, if Licensor elects to discontinue prosecution or maintenance, [**] has the right, in its
sole discretion, to prosecute and maintain such patents or patent applications. Subject to
Licensor’s obligations under Section 6.5(b) with respect to Licensor Patents in the Patent
Countries, in the event Licensor chooses not to file, continue prosecution or maintain a patent or
patent application within the Licensor Patents, except in the case of filing a related continuation
application, and [**] chooses not to continue such prosecution or maintenance for Compounds and
Compound Improvements (but not for Follow-On Compounds, Follow-On Compound Improvements, or patent
applications or patents filed on Joint Inventions), Licensor shall promptly notify Merck in
writing, and Merck shall have the right, but not the obligation, to pursue the filing or support
the continued prosecution or maintenance of such patent or patent application in the corresponding
country. If Merck does elect to take such action in a country in the Territory, then it shall
promptly notify Licensor in writing of such election, and Licensor shall reasonably cooperate with
Merck in this regard. Merck shall update Licensor as to the course of filing and prosecution of
Licensor Patents or related proceedings (e.g. interferences, oppositions, reexaminations, reissues,
revocations or nullifications) in such countries from time to time. If Merck elects to continue
such prosecution or maintenance of such Licensor Patents, such patents or patent applications shall
no longer constitute Licensor Patents for purposes of determining Merck’s royalty obligations under
this Agreement.

          (e) Patent Term Extensions. Licensor agrees to use reasonable effort to seek patent term
extensions wherever available for Licensor Patents that Cover a Licensed Product. The Parties
agree to cooperate and to take reasonable actions to maximize the protections available under the
provisions of 35 U.S.C. §156 for U.S. patents/patent applications. Merck shall provide Licensor
with all relevant information, documentation and assistance in this respect. Any such assistance,
supply of information and consultation shall be provided promptly and in a manner that will ensure
that all patent term extensions that are sought for Licensed Products may be obtained wherever
legally permissible, and to the maximum extent available.

     6.6 Enforcement of Patents.

          (a) Notice. If either Party believes that a Licensor Patent is being infringed by a Third
Party, the Party possessing such knowledge or belief shall notify the other Party and provide it
with details of such infringement that are known by such Party.

          (b) Right to bring an Action. Licensor shall have the first right to attempt to resolve such
infringement in and outside the Field, including by filing an infringement suit or taking other
similar action (each, an “Action”) and to compromise or settle such infringement. If Licensor does
not intend to prosecute or defend an Action, Licensor shall promptly inform

 

 

Merck. The Parties recognize that [**] has certain rights to initiate, prosecute and defend
against an infringement of the Licensor Patents. If both Licensor and [**] decide not to initiate,
prosecute or defend against an infringement of the Licensor Patents inside or outside the Field,
then Licensor shall promptly notify Merck and Merck, at its sole expense, shall have the right to
initiate or prosecute such infringement. Licensor’s notice to Merck shall not be unreasonably
delayed and shall be provided as far in advance of any filing deadline as possible. Merck shall
promptly inform Licensor in writing of its decision on initiating or prosecuting such infringement.
In the event Merck decides not to initiate or prosecute such infringement, such rights shall
revert to Licensor. In any Action initiated or prosecuted by Merck, Licensor shall have the right
to control the defense of all claims for revocation, of invalidity and/or of unenforceability of
Licensor Patents. The Party initiating such Action shall have the sole and exclusive right to
select counsel for any suit initiated by it pursuant to this Section 6.6(b). For any case that
Merck initiates, prosecutes or defends, (i) Licensor and [**], at their expense, shall have the
right to be represented by counsel of their choosing, and (ii) Merck shall reasonably consider the
rights and interests of Licensor.

          (c) Costs of an Action. The Party taking an Action under Section 6.6(b) shall pay all costs
associated with such Action, other than (subject to Section 6.6(e)) the expenses of the other Party
if the other Party elects to join such Action. Each Party shall have the right to be represented by
its own counsel in an Action relating to a Licensor Patent taken by the other Party, at its own
expense.

          (d) Settlement. In settling an Action, each Party shall have a reasonable opportunity for
meaningful participation in the decision making and in settling the Action. When one Party’s
settlement of an Action will obligate the other Party to pay any amount, then the Party settling
the Action shall seek and obtain the other Party’s written consent prior to settling such Action.
In any settlement, each Party shall reasonably consider the rights and interests of the other
Party.

          (e) Reasonable Assistance. The Party not enforcing or defending Licensor Patents shall (i)
provide reasonable assistance to the other Party, including providing access to relevant documents
and other evidence and making its employees available, subject to the other Party’s reimbursement
of any Out-Of-Pocket expenses incurred by the non-enforcing or non-defending Party in providing
such assistance; and (ii) join the Action as a named party if it is required to file or maintain
the Action.

          (f) Distribution of Amounts Recovered. Any amounts recovered by the Party taking an Action
pursuant to this Section 6.6, whether by settlement or judgment, shall be allocated in the
following order: (i) to reimburse the Party initiating such Action for any documented,
Out-of-Pocket Expenses incurred in litigating the Action; (ii) to reimburse the Party not
initiating such Action, for any documented, Out-of-Pocket Expenses incurred in litigating such
Action, and (iii) the remaining amount of such recovery shall be allocated between the Parties
[**].

 

 

     6.7 Third Party Actions Claiming Infringement.

          (a) Notice. If a Party is notified of any action by a Third Party against either Party that
claims that the Compound or Follow-on Compound, or its use, Development, manufacture or sale in the
Field infringes such Third Party’s intellectual property rights (each, a “Third Party Action”),
such Party shall promptly notify the other Party in writing of such action.

          (b) Consultation. Following delivery of the written notice of the Third Party Action, the
Parties shall consult with each other on all material aspects of the defense. Each Party shall have
a reasonable opportunity for meaningful participation in decision-making and formulation of defense
strategy. The Parties shall reasonably cooperate with each other in all such actions or
proceedings.

Article 7

CONFIDENTIALITY

     7.1 Confidentiality Obligations. Each Party agrees that, for the Term and for [**] years
thereafter, such Party shall, and shall ensure that its officers, directors, employees and agents
shall, keep completely confidential and not publish or otherwise disclose and not use for any
purpose except as expressly permitted hereunder any Confidential Information disclosed to it by the
other Party pursuant to this Agreement. The foregoing obligations shall not apply to any
Confidential Information disclosed by a Party hereunder to the extent that the receiving Party can
demonstrate that such Confidential Information:

          (a) was already known to the receiving Party or its Affiliates, other than under an obligation
of confidentiality, at the time of disclosure;

          (b) was generally available to the public or otherwise part of the public domain at the time
of its disclosure to the receiving Party;

          (c) became generally available to the public or otherwise part of the public domain after its
disclosure and other than through any act or omission of the receiving Party in breach of this
Agreement;

          (d) was subsequently lawfully disclosed to the receiving Party or its Affiliates by a Third
Party without an obligation of confidentiality other than in contravention of a confidentiality
obligation of such Third Party to the disclosing Party; or

          (e) was developed or discovered by employees or agents of the receiving Party or its
Affiliates who had no access to the Confidential Information of the disclosing Party.

     Notwithstanding the above obligations of confidentiality and non-use, a Party may disclose
information to the extent that such disclosure is reasonably necessary in connection with:

 

 

               (i) filing or prosecuting patent applications, subject to the terms of Section 6.3;

               (ii) prosecuting or defending litigation;

               (iii) conducting pre-clinical studies or Clinical Trials;

               (iv) seeking Regulatory Approval of the Licensed Product in the Field;

               (v) seeking advice from business, legal and financial advisors, on the condition that such
business, legal and financial advisors agree to be bound by confidentiality and non-use obligations
at least as strict as those contained in this Agreement; or

               (vi) complying with applicable Law, including securities Law and the rules of any securities
exchange or market on which a Party’s securities are listed or traded.

     In making any disclosures set forth in clauses (i) through (vi) above, the disclosing Party
shall, where reasonably practicable, give such advance notice to the other Party of such disclosure
requirement as is reasonable under the circumstances and will use its reasonable efforts to
cooperate with the other Party in order to secure confidential treatment of such Confidential
Information required to be disclosed. In addition, in connection with any permitted filing by
either Party of this Agreement with any Governmental Body, including but not limited to the U.S.
Securities and Exchange Commission, the filing Party shall endeavor to obtain confidential
treatment of economic, trade secret information and such other information as may be requested by
the other Party, and shall provide the other Party with the proposed confidential treatment request
with reasonable time for such other Party to provide comments, and shall include in such
confidential treatment request all reasonable comments of the other Party.

     7.2 Publications. Merck and Licensor each acknowledge the other Party’s interest in
publishing the results of its research in order to obtain recognition within the scientific
community and to advance the state of scientific knowledge. Each Party also recognizes the mutual
interest in obtaining valid patent protection and in protecting business interests and trade secret
information. Consequently, except for disclosures permitted pursuant to Section 7.1, either Party,
its employees or consultants wishing to make a publication regarding a Compound, Follow-On Compound
or Licensed Product shall comply with the provisions set forth in this Section 7.2.

          (a) Merck shall have the right to publish the results of its research with respect to
Compounds, Follow-On Compounds and Licensed Products inside the Field, without notice to, or the
prior consent of, Licensor.

          (b) Licensor shall have the right to publish the results of its research with the Compounds
outside the Field, without notice to, or the prior consent of, Merck.

          (c) Licensor shall have the right to publish the results of Clinical Trials Initiated by or on
behalf of Licensor prior to the Signing Date, provided that Licensor delivers to Merck a copy of
the proposed written publication or an outline of an oral disclosure at least thirty (30) days
prior to submission for publication or presentation. Merck shall have the right (i) to

 

 

propose modifications to the publication or presentation for patent reasons, trade secret
reasons or business reasons or (ii) to request a reasonable delay in publication or presentation in
order to protect patentable information. If Merck requests a delay, Licensor shall delay
submission or presentation for a period of up to an additional forty-five (45) days to enable
patent applications protecting Licensor’s rights in such information to be filed in accordance with
Article 6. Upon expiration of such additional forty-five (45) day period, Licensor shall be free
to proceed with the publication or presentation. If Merck requests modifications to the
publication or presentation, Licensor shall edit such publication to prevent disclosure of trade
secret or proprietary business information prior to submission of the publication or presentation.

          (d) The foregoing provisions of this Section 7.2 notwithstanding, a Party may disclose
scientific information or results regarding a Compound, Follow-On Compound or Licensed Product to
the extent necessary to comply with applicable Law, including securities Laws and the rules of any
securities exchange or market on which such Party’s securities are listed or traded.

     7.3 Press Releases and Disclosure. Upon execution of this Agreement, each Party shall have
the right to issue a press release in the form attached hereto as Schedule 7.3.1 or 
Schedule 7.3.2, as applicable. Subject to the foregoing sentence, no disclosure of the
existence, or the terms, of this Agreement may be made by either Party, and neither Party shall use
the name, trademark, trade name or logo of the other Party, its Affiliates or their respective
employees in any publicity, promotion, news release or disclosure relating to this Agreement or its
subject matter, without the prior express written permission of the other Party, except as may be
required by Law; provided that either Party may disclose the terms of this Agreement to its
business, legal and financial advisors and to any Third Party that has provided such Party with a
bona fide written offer to purchase all or substantially all of the assets of such Party or to
acquire fifty percent (50%) or more of the voting equity securities or management control of such
Party, on the condition that such Third Party and its attorneys, independent accountants and
financial advisors agree to be bound by confidentiality and non-use obligations at least as strict
as those contained in this Agreement. With respect to the achievement of milestones set forth in
Sections 5.2 and 5.3, Licensor may issue a press release regarding any such achievement, provided
that Merck is given five (5) business days to review and comment on the proposed press release or
public disclosure.

Article 8

REPRESENTATIONS, WARRANTIES AND COVENANTS

     8.1 Representations and Warranties. Each Party represents and warrants to the other Party
that, as of the Signing Date:

          (a) such Party is duly organized and validly existing under the Laws of the jurisdiction of
its incorporation or organization;

          (b) such Party has taken all action necessary to authorize the execution and delivery of this
Agreement and the performance of its obligations under this Agreement;

 

 

          (c) this Agreement is a legal and valid obligation of such Party, binding upon such Party and
enforceable against such Party in accordance with the terms of this Agreement, except as
enforcement may be limited by applicable bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other Laws relating to or affecting creditors’ rights generally and
by general equitable principles. The execution, delivery and performance of this Agreement by such
Party does not conflict with, breach or create in any Third Party the right to accelerate,
terminate or modify any agreement or instrument to which such Party is a party or by which such
Party is bound, and does not violate any Law of any Governmental Body having authority over such
Party;

          (d) such Party has all right, power and authority to enter into this Agreement, to perform its
obligations under this Agreement; and

          (e) no consent by any Third Party or Governmental Body (subject to obtaining any necessary HSR
Clearance) is required with respect to the execution and delivery of this Agreement by such Party
or the consummation by such Party of the transactions contemplated hereby.

     8.2 Additional Representations and Warranties of Licensor. Licensor represents and warrants
to Merck, as of the Signing Date, that:

          (a) [**];

          (b) to the Knowledge of Licensor, there is no unauthorized use, infringement or
misappropriation of any of Licensor Technology by any employee or former employee of Licensor, or
any other Third Party;

          (c) to the Knowledge of Licensor, the Licensor Patents are subsisting and are not the subject
of any litigation procedure, discovery process, interference, reissue, reexamination, opposition,
appeal proceedings or any other legal dispute;

          (d) The Licensor Patents constitute all Patent Rights Controlled by Licensor as of the Signing
Date that are necessary or useful for the research, Development, manufacture, use or
Commercialization of Compounds and Follow-On Compounds in the Field;

          (e) The Compounds provided hereunder contain the molecular structures described in Section
1.11;

          (f) Licensor has not licensed to a Third Party the right to perform research, Develop,
manufacture, use or Commercialize (i) a Compound for use in the Field, or (ii) a Follow-On Compound
for use in or outside the Field;

          (g) Licensor has not granted rights to Compounds or Follow-On Compounds in or outside the
Field to (i) [**], or (ii) [**];

          (h) the Licensor Know-How constitutes all Know-How Controlled by Licensor as of the Signing
Date that is necessary for the research, Development, manufacture, use or Commercialization of the
Compounds and Follow-On Compounds in the Field;

 

 

          (i) to Licensor’s Knowledge, the exercise of the licenses granted to Merck with respect to the
Compounds and Follow-On Compounds in the Field will not infringe any intellectual property rights
owned or possessed by any Third Party Covering the composition of matter or method of use in the
Field of such Compound or Follow-On Compound;

          (j) the Compounds and Follow-On Compounds can be manufactured without infringing any Third
Party manufacturing process intellectual property rights;

          (k) it has the full right to provide the Licensor Materials to Merck and to transfer to Merck
all right, title and interest in and to the Licensor Material to be provided to Merck pursuant to
this Agreement;

          (l) all employees of Licensor who have performed any activities on its behalf in connection
with research regarding the Compounds and the Follow-On Compounds, and all other inventors of
Licensor Patents, have assigned to Licensor the whole of their rights in any intellectual property
made, discovered or developed by them as a result of such research, and no Third Party has any
rights to any such intellectual property in the Field; and

          (m) to its Knowledge, all tangible information and data provided by or on behalf of Licensor
to Merck on or before the Signing Date in contemplation of this Agreement was and is true, accurate
and complete in all material respects, and to its Knowledge, Licensor has not failed to disclose,
or cause to be disclosed, any Licensor Know-How that would cause the information and data that has
been disclosed to be misleading in any material respect.

     8.3 No Warranty. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER
PARTY HERETO MAKES ANY REPRESENTATION AND EXTENDS NO WARRANTY OF ANY KIND, EITHER EXPRESS OR
IMPLIED. IN PARTICULAR, BUT WITHOUT LIMITATION, LICENSOR MAKES NO REPRESENTATION AND EXTENDS NO
WARRANTY CONCERNING WHETHER ANY OF THE COMPOUNDS, FOLLOW-ON COMPOUNDS OR LICENSED PRODUCTS ARE FIT
FOR ANY PARTICULAR PURPOSE OR SAFE FOR HUMAN CONSUMPTION, OR THAT THE USE OF THE LICENSOR
TECHNOLOGY WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY.

Article 9

INDEMNIFICATION AND INSURANCE

     9.1 Indemnification by Merck. Merck shall indemnify, defend and hold Licensor and its
Affiliates and each of their respective employees, officers, directors and agents (the “Licensor
Indemnitees”) harmless from and against any and all liability, damage, loss, cost or expense
(including reasonable attorneys’ fees) to the extent arising out of Third Party claims or suits
related to (a) the Development, manufacture, use or Commercialization of a Compound, Follow-On
Compound or Licensed Product by or on behalf of Merck, its Affiliates or Sublicensees, (b) the use,
handling or storage of any Licensor Materials by or on behalf of Merck, its Affiliates or
Sublicensees, (c) Merck’s performance of its obligations under this Agreement, or (d) breach by
Merck of its representations, warranties or covenants set forth in

 

 

this Agreement; provided, however, that Merck’s obligations pursuant to this Section 9.1 shall
not apply to the extent such claims or suits (i) result from the negligence or willful misconduct
of any of the Licensor Indemnitees, or (ii) arise out of breach by Licensor of its representations,
warranties or covenants set forth in this Agreement.

     9.2 Indemnification by Licensor. Licensor shall indemnify, defend and hold Merck and its
Affiliates and each of their respective agents, employees, officers and directors (the “Merck
Indemnitees”) harmless from and against any and all liability, damage, loss, cost or expense
(including reasonable attorney’s fees) to the extent arising out of Third Party claims or suits
related to (a) Licensor’s performance of the On-Going Trials, whether prior or subsequent to the
Effective Date; (b) the Development, manufacture, use or Commercialization of Compounds or
Follow-On Compounds by or on behalf of Licensor, its Affiliates or licensees, or (c) Licensor’s
performance of its obligations under this Agreement; (d) breach by Licensor of its
representations, warranties or covenants set forth in this Agreement; or (e) the matters set forth
in [**]; provided, however, that Licensor’s obligations pursuant to this Section 9.2 shall not
apply to the extent such claims or suits (i) result from the negligence or willful misconduct of
any of the Merck Indemnitees or (ii) arise out of a breach by Merck of its representations,
warranties or covenants set forth in this Agreement.

     9.3 No Consequential Damages. IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS AFFILIATES BE
LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES OR THEIR RESPECTIVE EMPLOYEES, OFFICERS,
DIRECTORS OR AGENTS FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER
IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY BREACH THEREOF; PROVIDED HOWEVER THAT THIS LIMITATION SHALL NOT LIMIT THE
INDEMNIFICATION OBLIGATIONS OF THE PARTIES WITH RESPECT TO THIRD PARTY CLAIMS.

     9.4 Notification of Claims; Conditions to Indemnification Obligations. As a condition to a
Party’s right to receive indemnification under this Article 9, it shall (a) promptly notify the
other Party as soon as it becomes aware of a claim or suit for which indemnification may be sought
pursuant hereto; provided that the failure or delay to so notify the indemnifying Party
shall not relieve the indemnifying Party of any obligation or liability that it may have to the
Indemnified Party, except to the extent that the indemnifying Party demonstrates that its ability
to defend or resolve such claim is adversely affected thereby, (b) cooperate, and cause the
individual indemnitees to cooperate, with the indemnifying Party in the defense, settlement or
compromise of such claim or suit, and (c) permit the indemnifying Party to control the defense,
settlement or compromise of such claim or suit, including the right to select defense counsel. In
no event, however, may the indemnifying Party compromise or settle any claim or suit in a manner
which admits fault or negligence on the part of the indemnified Party or any indemnitee without the
prior written consent of the indemnified Party, such consent not to be unreasonably withheld,
delayed or conditioned, it being understood that it would be reasonable for an indemnified Party to
withhold such consent to any proposed settlement that leads to liability or imposes any financial
obligation on the indemnified Party or any indemnitee for which such indemnified Party (or any
indemnitee) is not entitled to indemnification hereunder, imposes any other obligation or
restriction on the indemnified Party (or any indemnitee), or which includes an

 

 

admission of wrongdoing or responsibility for the claim by the indemnified Party (or
indemnitee). The indemnifying Party shall have no liability under this Article 9 with respect to
claims or suits settled or compromised without its prior written consent.

     9.5 Insurance. During the Term, each Party shall obtain and maintain, at its sole cost and
expense, product liability insurance (including any self-insured arrangements) in amounts, that are
reasonable and customary in the United States pharmaceutical and biotechnology industry for
companies engaged in comparable activities. It is understood and agreed that this insurance shall
not be construed to limit either Party’s liability with respect to its indemnification obligations
hereunder. Each Party will, except to the extent self insured, provide to the other Party upon
request a certificate evidencing the insurance such Party is required to obtain and keep in force
under this Section 9.5. Each Party will notify the other Party at least thirty (30) days’ prior to
the expiration or cancellation of such insurance, or any reduction in coverage thereunder.

Article 10

TERM AND TERMINATION

     10.1 Term and Expiration. The term of this Agreement (the “Term”) shall commence on the
Effective Date and, unless earlier terminated as provided in this Article 10 (the date of any such
termination, the “Termination Date”), shall continue in full force and effect, on a
country-by-country and Licensed Product-by-Licensed Product basis until there is no remaining
royalty or other payment obligation in such country with respect to such Licensed Product, at which
time this Agreement shall expire in its entirety with respect to such Licensed Product in such
country.

     10.2 Termination of the Agreement by Merck for convenience. During the Term, Merck may, at
its convenience, terminate this Agreement in its entirety upon ninety (90) days’ prior written
notice to Licensor.

 

 

     10.3 Termination upon Material Breach.

          (a) If a Party breaches any of its material obligations under the Agreement, the Party not in
default may give to the breaching Party a written notice specifying the nature of the default,
requiring it to cure such breach, and stating its intention to terminate this Agreement if such
breach is not cured within [**] (or, in the case of a payment breach, within [**])). If such breach
is not cured within [**] (or [**] in the case of a payment breach) after the receipt of such
notice, the Party not in default shall be entitled to terminate this Agreement by written notice to
the other Party.

          (b) In the event Merck fails to fulfill its obligations under Section 3.9 (and does not cure
such failure as provided in Section 10.3(a)), Licensor’s sole and exclusive remedy shall be to
terminate this Agreement as provided in Section 10.3(a).

          (c) Any dispute regarding an alleged material breach of this Agreement shall be resolved in
accordance with Article 11 hereof.

          (d) If Merck has the right to terminate this Agreement under Section 10.3(a) and it has been
determined in a final judgment from which no appeal can be taken, or that is unappealed within the
time allowed for appeal, that Licensor has breached a material obligation of this Agreement, Merck
may elect not to terminate this Agreement, and Merck may (i) offset against its financial
obligations hereunder the amount of any damages resulting from such material breach by Licensor
that are awarded to Merck pursuant to such final judgment, and (ii) in the case of Licensor’s
material breach of its obligations under Section 2.6, reduce by [**] percent ([**]%) any milestone
and royalty payments that may become due and owing.

     10.4 Effects of termination.

          (a) Survival.

               (i) Without limiting the foregoing, Articles 1, 9 and 10, and Sections 5.8, 5.9, 5.10, 5.11,
5.12, 5.13, 7.1, 7.3 and 13.11 hereof shall survive the expiration or termination of this Agreement
for any reason.

               (ii) Termination of this Agreement shall not relieve the Parties of any liability that accrued
hereunder prior to the effective date of such termination. In addition, any milestone payments for
milestone events set forth in Section 5.2 and accrued prior to the effective date of any
termination of this Agreement, but not paid prior to the effective date of termination, shall be
due and payable by Merck on the effective date of termination, whether or not such termination
occurs prior to [**] months after the Effective Date. In addition, subject to Section 10.3(b),
termination of this Agreement shall not preclude either Party from pursuing all rights and remedies
it may have hereunder or at Law or in equity with respect to any breach of this Agreement nor
prejudice either Party’s right to obtain performance of any obligation.

          (b) Expiration of Royalty Term. Upon expiration of the Royalty Term with respect to any
Licensed Product, then as of the effective date of such expiration and on a Licensed
Product-by-Licensed Product and a country-by-country basis, the license from Licensor to Merck
under Section 2.1 shall convert to a fully paid, royalty free, irrevocable, perpetual,

 

 

exclusive, sublicensable license under the Licensor Technology to make, have made, use,
import, export, offer for sale and sell such Licensed Product in the Field in the Territory.

          (c) Other Effects of Termination.

               Upon termination of this Agreement (i) pursuant to Section 10.2 or 10.3 by Merck (excluding,
for the avoidance of doubt, any election by Merck under Section 10.3(d) not to terminate this
Agreement), or (ii) pursuant to Section 10.3 by Licensor, provided that in the event Merck disputes
any such termination by Licensor, the following shall only apply from and after such time as such
termination has been upheld in a final judgment from which no appeal can be taken, or that is
unappealed within the time allowed for appeal, or such time as Merck is no longer disputing such
termination:

                    (1) all licenses granted to Merck under Section 2.1 shall terminate;

                    (2) Merck, its Affiliates and Sublicensees shall, upon written request by Licensor, transfer
to Licensor all regulatory documentation, applications for Regulatory Approval and Regulatory
Approvals prepared or obtained by or on behalf of Merck, its Affiliates or Sublicensees prior to
the date of such termination, to the extent related to Licensed Products and transferable, and
Licensor shall reimburse Merck for its reasonable Out-of-Pocket Expenses incurred with respect to
such transfer, and Merck, its Affiliates and Sublicensees shall, in addition, promptly after the
receipt of a written request by Licensor, take the additional actions and provide Licensor with the
additional information, materials, access and rights set forth on Schedule 10.4(c); and

                    (3) Merck, its Affiliates and Sublicensees shall promptly return to Licensor all relevant
records in its possession or control containing or comprising the Licensor Know-How and the
Licensor Materials, or such other Confidential Information of Licensor.

          (d) Licensed Product Inventory. In the event Licensor terminates this Agreement pursuant to
Section 10.3, or Merck terminates this Agreement pursuant to Section 10.2 or 10.3 (excluding, for
the avoidance of doubt, any election by Merck under Section 10.3(d) not to terminate this
Agreement), Merck and its Affiliates and Sublicensees shall, at Licensor’s election, either (i) be
entitled, during the [**] month period after the effective date of such termination, to sell any
inventory of Licensed Products which remains on hand as of the effective date of termination, so
long as Merck pays to Licensor the royalties applicable to said subsequent sales in accordance with
the terms and conditions set forth in this Agreement, or (ii) sell to Licensor any inventory of
Licensed Products then remaining at a price equal to [**].

     10.5 Bankruptcy. All rights and licenses granted under or pursuant to this Agreement by
Licensor are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses of right to “intellectual property” as defined under Section 101 of the
U.S. Bankruptcy Code. The Parties agree that Merck, as licensee of such rights under this
Agreement, shall retain and may fully exercise all of its rights and elections under the U.S.
Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcy
proceeding by or against Licensor under the U.S. Bankruptcy Code, Merck shall be

 

 

entitled to a complete duplicate of (or complete access to, as appropriate) any such
intellectual property and all embodiments of such intellectual property, which, if not already in
Merck’s possession, shall be promptly delivered to it (a) upon any such commencement of a
bankruptcy proceeding upon Merck’s written request therefor, unless Licensor elects to continue to
perform all of its obligations under this Agreement or (b) if not delivered under clause (a),
following the rejection of this Agreement by Licensor upon written request therefor by Merck.

Article 11

DISPUTE RESOLUTION

     11.1 Disputes. The Parties recognize that disputes as to certain matters may from time to
time arise during the Term which relate to either Party’s rights and/or obligations hereunder (a
“Dispute”). It is the objective of the Parties to resolve any such Dispute amicably, in an
expedient manner, by mutual cooperation and without resort to litigation. In the event that the
Parties are unable to resolve any Dispute with thirty (30) days (or fifteen (15) days in the case
of a payment Dispute) from the day that one Party had designated the issue as a Dispute in writing
to the other Party, then either Party shall have the right to escalate such matter to senior
management as set forth in Section 11.2.

     11.2 Escalation to Executive Officers. Either Party may, by written notice to the other
Party, request that any Dispute that remained unresolved for a period of thirty (30) days (or
fifteen (15) days in the case of a payment Dispute) as set forth in Section 11.1 be referred to the
President of Merck’s Pharmaceutical business sector (or his designee) and the Chief Executive
Officer of Licensor (or his designee) (the “Executive Officers”) for resolution, within fifteen
(15) days after their first consideration of such Dispute. If the Executive Officers cannot
resolve such Dispute within fifteen (15) days after their first consideration of such Dispute,
then, at any time after such fifteen (15) days period, either Party may proceed to enforce any and
all of its rights with respect to such Dispute. Notwithstanding the foregoing, nothing in this
Section 11.2 shall be construed as precluding a Party from bringing an action for interim relief
prior to the initiation or completion of the above procedure.

Article 12

HSR MATTERS

     12.1 HSR Filings. Each of Licensor and Merck shall as promptly as possible, and not later
than January 15, 2008 file with the FTC and the Antitrust Division of the DOJ, any HSR Filing
required of it under the HSR Act with respect to the transactions contemplated by this Agreement.
The Parties shall cooperate with one another to the extent necessary in the preparation of any HSR
Filing required to be filed under the HSR Act. Each Party shall be responsible for its own costs,
expenses, and filing fees associated with any HSR Filing.

     12.2 HSR Cooperation; Further Assurances. Licensor and Merck agree, and shall cause each of
their respective Affiliates, to cooperate and to use their respective commercially reasonable
efforts to obtain any HSR Clearance required for the consummation of the transactions contemplated
under this Agreement, to request early termination of the applicable

 

 

waiting period under the HSR Act (if HSR Clearance is required) and to respond to any
government requests for information under the HSR Act. The Parties will consult and cooperate with
one another, and consider in good faith the views of one another, in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted
by or on behalf of either Party in connection with proceedings under or relating to the HSR Act.

     12.3 HSR-Related Defined Terms.

          (a) “DOJ” means the United States Department of Justice.

          (b) “FTC” means the United States Federal Trade Commission.

          (c) “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (15
U.S.C. Sec. 18a), and the rules and regulations promulgated thereunder.

          (d) “HSR Clearance” means either (a) early termination of the applicable waiting period under
the HSR Act with respect to the HSR Filings or (b) expiration of the applicable waiting period
under the HSR Act with respect to the HSR Filings.

          (e) “HSR Clearance Date” means the earlier of (a) the date on which the FTC or DOJ shall
notify Licensor and Merck of early termination of the applicable waiting period under the HSR Act
or (b) the day after the date on which the applicable waiting period under the HSR Act expires.

          (f) “HSR Filings” means the filings by Merck and Licensor with the FTC and the Antitrust
Division of the DOJ of a Notification and Report Form for Certain Mergers and Acquisitions (as that
term is defined in the HSR Act) with respect to the matters set forth in this Agreement, together
with all required documentary attachments thereto.

     12.4 Termination Based on Failure to Obtain HSR Clearance. The Agreement shall immediately
terminate in the event that the FTC and/or the DOJ shall obtain a permanent injunction under the
HSR Act against Merck and Licensor to enjoin the transactions contemplated by this Agreement. In
addition, Licensor shall have the right to terminate this Agreement upon notice to Merck if the HSR
Clearance Date shall not have occurred on or prior to the date that is one hundred and eighty (180)
days after the Parties’ filing of any required HSR Filings.

Article 13

MISCELLANEOUS PROVISIONS

     13.1 Relationship of the Parties. Nothing in this Agreement is intended or shall be deemed to
constitute a partnership, agency, joint venture or employer-employee relationship between the
Parties.

     13.2 Assignment.

 

 

          (a) Except as expressly provided herein, neither this Agreement nor any interest hereunder
shall be assignable, nor any other obligation delegable, by Licensor without the prior written
consent of Merck (not to be unreasonably withheld or delayed). Notwithstanding the foregoing,
Licensor may assign this Agreement in whole without the consent of Merck to (a) any Affiliate or
(b) a successor to substantially all of the business of the assigning Party to which this Agreement
relates, in connection with any merger, sale of stock, sale of assets or other similar transaction;
provided that such assignment shall not provide Merck with rights or access to intellectual
property rights of any such successor.

          (b) Merck may assign this Agreement, in whole or in part, to any Affiliate or Third Party
without the consent of Licensor. Merck shall give written notice to Licensor promptly following any
such assignment.

          (c) No assignment under this Section 13.2 shall relieve the assigning party of any of its
responsibilities or obligations hereunder and provided, further, that as a condition of such
assignment, the assignee shall agree to be bound by all obligations of the assigning party
hereunder.

          (d) This Agreement shall be binding upon the successors and permitted assigns of the Parties.

          (e) Any assignment not in accordance with this Section 13.2 shall be void.

     13.3 Performance by Affiliates. Merck shall have the right to have any of its obligations
hereunder performed, or its rights hereunder exercised, by, any of its Affiliates and the
performance of such obligations by any such Affiliate(s) shall be deemed to be performance by
Merck; provided, however, Merck shall be responsible for ensuring the performance of its
obligations under this Agreement and that any failure of any Affiliate performing obligations of
Merck hereunder shall be deemed to be a failure by Merck to perform such obligations.

     13.4 Change of Control. In the event of a Change of Control of Licensor involving a Merck
Competitor, then from and after the date of such Change of Control, (a) Merck shall cease to have
any reporting obligations hereunder toward Licensor or its successor entity, except for the royalty
reports required under Section 5.8; (b) require Licensor, including the Change of Control party,
to adopt reasonable procedures to be agreed upon in writing with Merck to prevent the disclosure of
all Confidential Information of Merck and its Affiliates and other information with respect to the
Development of Compounds, Follow-On Compounds and Licensed Products (collectively “Sensitive
Information”) beyond Licensor personnel having access to and knowledge of Sensitive Information
prior to the Change of Control and to control the dissemination of Sensitive Information disclosed
after the Change of Control. The purposes of such procedures shall be to strictly limit such
disclosures to only those personnel having a need to know Sensitive Information in order for
Licensor to perform its obligations under this Agreement and to prohibit the use of Sensitive
Information for competitive reasons against Merck and its Affiliates, including the use of
Sensitive Information for the development or commercialization of Competing Products.

 

 

     13.5 Further Actions. Each Party agrees to execute, acknowledge and deliver such further
instruments and to do all such other acts as may be necessary or appropriate in order to carry out
the purposes and intent of this Agreement.

     13.6 Accounting Procedures. Each Party shall calculate all amounts hereunder and perform
other accounting procedures required hereunder and applicable to it in accordance with either, as
applicable (a) United States generally accepted accounting principles (US GAAP) or (b)
International Financial Reporting Standards (IFRS), whichever is normally used by such Party to
calculate its financial position, and in each case consistently applied by such Party.

     13.7 Force Majeure. Neither Party shall be liable to the other for failure or delay in the
performance of any of its obligations under this Agreement for the time and to the extent such
failure or delay is caused by acts of God, earthquake, riot, civil commotion, terrorism, war,
strikes or other labor disputes, fire, flood, failure or delay of transportation, default by
suppliers or unavailability of raw materials, governmental acts or restrictions or any other reason
which is beyond the control of the respective Party. The Party affected by force majeure shall
provide the other Party with full particulars thereof as soon as it becomes aware of the same
(including its best estimate of the likely extent and duration of the interference with its
activities), and will use Commercially Reasonable Efforts to overcome the difficulties created
thereby and to resume performance of its obligations hereunder as soon as practicable.

     13.8 No Trademark Rights. Except to the extent set forth in Section 3.11 above, no right,
express or implied, is granted by this Agreement to a Party to use in any manner the name or any
other trade name or trademark of the other Party in connection with the performance of this
Agreement or otherwise.

     13.9 Entire Agreement of the Parties; Amendments. This Agreement and the schedules and
exhibits hereto constitute and contain the entire understanding and agreement of the Parties
respecting the subject matter hereof and cancel and supersede any and all prior negotiations,
correspondence, representations, assurances, promises, understandings and agreements between the
Parties, whether oral or written, regarding such subject matter (each a “Pre-Contractual
Statement”). Each Party acknowledges that it is not entering into this Agreement in reliance on
any Pre-Contractual Statement. Neither Party shall have any right of action against the other
Party arising out of or in connection with any Pre-Contractual Statement (except in the case of
fraud or fraudulent misrepresentation). Notwithstanding the foregoing, the [**], and the [**],
shall remain in full force and effect in accordance with its terms with respect to transfers of
materials and disclosures of information governed thereby prior to the Effective Date, but shall be
superseded by this Agreement with respect to such transfers and disclosures occurring on or after
the Effective Date. No waiver, modification or amendment of any provision of this Agreement shall
be valid or effective unless made in a writing referencing this Agreement and signed by a duly
authorized officer of each Party.

     13.10 Captions. The captions to this Agreement are for convenience only, and are to be of no
force or effect in construing or interpreting any of the provisions of this Agreement.

     13.11 Governing Law; Jurisdiction. This Agreement shall be governed by and interpreted in
accordance with English law, excluding application of any conflict of laws

 

 

principles that would require application of the Law of any other jurisdiction. Subject to
Article 11, the courts of England are to have exclusive jurisdiction to settle any dispute arising
out of or in connection with this Agreement. Any proceedings, suit or action arising out of or in
connection with this Agreement (“Proceedings”) shall therefore be brought in the English courts.
Each Party agrees that this jurisdiction agreement is irrevocable and that it is for the benefit of
the other Party. Each Party irrevocably waives (and irrevocably agrees not to raise) any
objection, on the ground of forum non conveniens or on any other ground, to the taking of
Proceedings in the English courts. Each Party also irrevocably agrees that a judgment against it
in Proceedings brought in the English courts shall (provided there is no appeal pending or open) be
conclusive and binding upon it and may be enforced in any other jurisdiction.

     13.12 Notices and Deliveries. Any notice, request, approval or consent required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have been sufficiently
given if delivered in person, transmitted by facsimile (receipt verified) or by express courier
service (signature required) to the Party to which it is directed at its address or facsimile
number shown below or such other address or facsimile number as such Party shall have last given by
notice to the other Party.

If to Merck, addressed to:

Merck KGaA

Frankfurter Strasse 250

64293 Darmstadt, Germany

Attn: Merck Serono Legal Department

Facsimile: 49-6151-72-2373

If to Licensor, addressed to:

Idera Pharmaceuticals, Inc.

167 Sidney Street

Cambridge, MA 02139

Attention: Chief Executive Officer

Facsimile: (617) 679-5592

With a copy to:

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, MA 02109

Attention: David E. Redlick, Esq.

Facsimile: (617) 526-5000

     13.13 Waiver. A waiver by either Party of any of the terms and conditions of this Agreement
in any instance shall not be deemed or construed to be a waiver of such term or condition for the
future, or of any other term or condition hereof. All rights, remedies, undertakings, obligations
and agreements contained in this Agreement shall be cumulative and

 

 

none of them shall be in limitation of any other remedy, right, undertaking, obligation or
agreement of either Party.

     13.14 Rights Of Third Parties. The Parties to this Agreement do not intend that any term of
this Agreement shall be enforceable by virtue of the Contract (Rights of Third Parties) Act 1999 or
otherwise by any Person who is not a Party to this Agreement.

     13.15 Severability. When possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable Law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable Law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement. The Parties shall make a good faith effort to replace the invalid or
unenforceable provision with a valid one which in its economic effect is most consistent with the
invalid or unenforceable provision.

     13.16 Counterparts. This Agreement may be executed in one or more counterparts, each of which
will be deemed an original, and all of which together will be deemed to be one and the same
instrument. A facsimile copy of this Agreement, including the signature pages, will be deemed an
original.

[Remainder of page intentionally left blank]

 

 

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

	 	 	 	 	 	 	 	 
	IDERA PHARMACEUTICALS, INC.
	 	MERCK KGaA

 	 
	By  	/s/ Sudhir Agrawal
 	 	By  	 /s/ Elmar Schnee
 	 
	 	Name:  	Sudhir Agrawal 	 	 	Name:  	Elmar Schnee 	 
	 	Title:  	CEO and CSO 	 	 	Title:  	General Partner

and Member of the Executive Board 	 
	 	  	 	 	 	  	 	 
	 
	 	 	 	 	 	i.V.

 	 
	By  	 	 	By  	/s/ Jens Eckhardt
 	 
	 	Name:  	 	 	 	Name:  	Jens Eckhardt 	 
	 	Title:  	 	 	 	Title:  	Legal Counsel 	 
	 

 

 

Schedule 1.11

Molecular Structures of Compounds

IMO-2055:

[**]

IMO-2125:

[**]

 

 

Schedule 1.24

Characteristics of Follow-On Compounds

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

[**]

 

 

Schedule 1.37

Licensor Materials

Compounds

Present Inventory:

Licensor will provide Merck with the Drug Product vials [**].

The bulk API will be provided to Merck against reimbursement by Merck of the costs which Idera had
incurred [**]. Merck will elect in writing within [**] days after Effective Date if and to what
extent bulk API shall be transferred to Merck. Such election shall be in [**] gram quantities.

	 	 	 	 	 
	[**]

	 	Approximately [**]

grams bulk API
	 	Approximately [**]

[**]mg Drug Product

vials

Follow-On Compounds

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

	 	 	 	 	 
	IDP Compound #	 	Sequence	 	Modifications
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]
	[**]

	 	[**]
	 	[**]

[**].

 

 

Schedule 1.38

Licensor Patents

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Idera Number:

	 	Docket #
	 	Continuation
	 	PCT

Nationalization

County
	 	Title:
	 	Status
	 	Application

Number
	 	Application

Date
	 	Patent /Publication

Number
	 	Grant

Date
	 

[**]

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

 

 

Schedule 2.3

Initial Technology Transfer

Technology Transfer Plan — IMO-2055 & IMO-2125

     [**]

 

 

Schedule 2.4

Manufacturing Technology Transfer

Manufacturing Technology Transfer Plan — IMO-2055 & IMO-2125

     [**]

 

 

Schedule 3.3

On-Going Trials Budget

Theradex® Study Budget — IDP 2055-200 (NSCLC) — Payment Schedule.

[**]

Confidential materials omitted and filed separately with the Securities and Exchange Commission. A
total of 17 pages have been omitted.

 

 

Schedule 6.5

Patent Countries

[**]

 

 

Schedule 7.3.1

Idera Press Release

Contacts:

	 	 	 
	Idera Pharmaceuticals, Inc.

	 	MacDougall Biomedical Communications
	Kelly Luethje

	 	Chris Erdman
	617-679-5519

	 	508-647-0209
	E-mail: kluethje@iderapharma.com

	 	E-mail: cerdman@macbiocom.com

Idera Pharmaceuticals and Merck KGaA to Collaborate

on Development of TLR9 Agonists for Treatment of Cancer

Cambridge, MA, December XX, 2007 — Idera Pharmaceuticals, Inc. (Nasdaq: IDRA) announced today that
it has entered into a worldwide licensing and collaboration agreement with Merck KGaA of Darmstadt,
Germany, for the research, development and commercialization of Idera’s Toll-like Receptor 9 (TLR9)
agonists for the treatment of cancer.

Under the agreement, Idera has agreed to exclusively license the therapeutic oncology applications,
excluding cancer vaccines, of its lead TLR9 agonists, IMO-2055 and IMO-2125. In addition, Idera and
Merck KGaA have agreed to engage in a research collaboration to identify a specified number of
novel, follow-on TLR9 agonists, which will be derived using Idera’s chemistry-based approach and
for which Merck will have the exclusive right to use in oncology applications other than cancer
vaccines.

“Merck is committed to the development of innovative approaches to cancer therapy on a global basis
and we expect that this collaboration with Idera will help us move toward that goal,” said Vincent
Aurentz, Executive Board Member and Head of Portfolio Management and Business Development for the
Merck Serono division. “We believe that TLR9 agonists represent a novel mechanism of action with
great potential and we look forward to advancing their development for various oncology
indications.”

Under the terms of the agreement, Merck KGaA has agreed to pay an upfront license fee of $40
million (about EUR 27 million based on current exchange rates) to Idera. In addition, Idera is
eligible to receive milestone payments of up to $389 million, based on current exchange rates, (EUR
264 million), depending on success in achieving clinical development and commercialization, as well
as royalties on sales of any products developed and commercialized by Merck KGaA using IMO-2055,
IMO-2125 or the follow-on TLR9 agonists. The contract will take effect and the upfront fee will be
paid

Page 2 of 18

 

following, and subject to, regulatory clearance under the Hart-Scott-Rodino Antitrust Improvements
Act.

“Idera has chosen to collaborate with Merck KGaA for the application of our TLR9 agonists in
oncology because of its proven capabilities and success in developing novel therapies for cancer
and their commitment to global research, development and commercialization in this area,” said
Sudhir Agrawal, D. Phil., Chief Executive Officer and Chief Scientific Officer of Idera. “This
collaboration adds Merck KGaA’s experience and resources to the development of our TLR9 agonists in
oncology and provides us with additional capital to advance our internal TLR-targeted drug
discovery and development programs. We look forward to working closely with Merck KGaA to realize
the potential of TLR9 agonists in cancer therapy.”

About IMO-2055

IMO-2055 is a novel DNA-based agonist of TLR9. IMO-2055 has been evaluated at multiple-dose levels
for safety and immunological activity in Phase 1 trials involving healthy volunteers and patients
with refractory solid tumors. IMO-2055 is currently in a Phase 1b trial in combination with
Tarceva® and Avastin® in patients with advanced non-small cell lung cancer
and is being evaluated at two dose levels in a Phase 2a trial in patients with renal cell
carcinoma. IMO-2055 also is being evaluated in combination with chemotherapy agents in a Phase 1
trial in patients with refractory solid tumors.

About IMO-2125

IMO-2125 is a second DNA-based TLR9 agonist and is of a class designed to induce high levels of
interferon-alpha and other cytokines and chemokines. IMO-2125 presently is being evaluated in a
Phase I trial in patients with chronic hepatitis C virus infection who have not responded to
standard treatment. This indication is not included in the agreement with Merck KGaA.

About TLRs

Toll-like Receptors (TLRs) function in human immune cells as the sensors of pathogens. They
recognize different microbial products present in pathogens such as bacteria, viruses and
parasites, and mount an appropriate immune response against the foreign invaders. TLRs have also
been shown to recognize endogenous ligands in autoimmune diseases. TLRs have become attractive
targets for developing immune modulators to treat a number of diseases, including cancers and
infectious, respiratory and autoimmune diseases, and for use as vaccine adjuvants.

About
Merck KGaA

Merck of Darmstadt, Germany, is a global pharmaceutical and chemical company with sales of EUR 6.3
billion in 2006, a history that began in 1668, and a future shaped by 30,962 employees in 61
countries. Its success is characterized by innovations from
entrepreneurial employees. Merck’s operating activities come under the umbrella of Merck KGaA, in
which the Merck family holds an approximately 70% interest and free shareholders own the remaining
approximately 30%. In 1917 the U.S. subsidiary Merck & Co. was expropriated and has been an
independent company ever since.

Page 3 of 18

 

About Idera Pharmaceuticals, Inc.

Idera Pharmaceuticals is a drug discovery and development company that is developing drug
candidates to treat cancer and infectious, respiratory, and autoimmune diseases, and for use as
vaccine adjuvants. Idera’s proprietary drug candidates are designed to modulate specific TLRs,
which are a family of immune system receptors. Idera’s pioneering DNA chemistry expertise enables
it to identify drug candidates for internal development and creates opportunities for multiple
collaborative alliances. Internal programs include IMO-2125, a lead candidate for treating
infectious diseases, and discovery-stage compounds for autoimmune diseases. Idera has identified
DNA-based compounds which have been shown to act as antagonists to TLRs 7 and 9 in preclinical
studies and are being evaluated in preclinical disease models of lupus, collagen-induced arthritis
and multiple sclerosis. Idera is collaborating with Novartis International Pharmaceutical, Ltd.
for the discovery, development, and commercialization of TLR9 agonists for the treatment of asthma
and allergy indications. Idera is also collaborating with Merck & Co., Inc. for the use of Idera’s
TLR7, 8 and 9 agonists in combination with Merck & Co.’s therapeutic and prophylactic vaccines in
the areas of oncology, infectious diseases, and Alzheimer’s disease. Merck & Co. of the U.S. is not
related to Merck KGaA of Germany. For more information, visit
www.iderapharma.com.

Idera Forward Looking Statements

This press release contains forward-looking statements concerning Idera Pharmaceuticals, Inc. that
involve a number of risks and uncertainties. For this purpose, any statements contained herein that
are not statements of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “estimates,”
“intends,” “should,” “could,” “will,” “may,” and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could cause Idera’s actual
results to differ materially from those indicated by such forward-looking statements, including
whether the collaboration with Merck KGaA will be successful and whether the Company will receive
any of the milestone payments provided for under the collaboration; whether products based on
Idera’s technology will advance into or through the clinical trial process on a timely basis or at
all and receive approval from the United States Food and Drug Administration or equivalent foreign
regulatory agencies; whether, if the Company’s products receive approval, they will be successfully
distributed and marketed; whether the results of preclinical studies will be indicative of results
that may be obtained in clinical trials; whether the Company’s collaborations with Novartis and
Merck & Co. will be successful; whether Idera’s cash resources will be sufficient to fund the
Company’s operations, including product development and clinical trials; and such other important
factors as are set forth under the caption “Risk Factors”
in Idera’s Quarterly Report on Form 10-Q filed on November 13, 2007, which important factors are
incorporated herein by reference. Idera disclaims any intention or obligation to update any
forward-looking statements.

# # #

Page 4 of 18

 

Schedule 7.3.2

Merck Press Release

	 	 	 
	 

	 	Your Contact
	 
	 

	 	Phyllis Carter
	News Release

	 	Phone +49 6151-72 7144

December xx, 2007

Merck KGaA and Idera Pharmaceuticals to Collaborate

on Development of TLR9 Agonists for Treatment of Cancer

Darmstadt, December xx, 2007 — Merck KGaA announced today that it has entered into a worldwide
licensing and collaboration agreement on behalf of its Merck Serono division with Idera
Pharmaceuticals, Inc. of Cambridge, Massachusetts, USA (Nasdaq: IDRA) for the research,
development, and commercialization of Idera’s Toll-like Receptor 9 (TLR9) agonists for the
treatment of cancer.

Under the agreement, Idera has agreed to exclusively license the therapeutic oncology applications,
excluding their use with cancer vaccines, of its lead TLR9 agonists, IMO-2055 and IMO-2125. In
addition, Merck and Idera have agreed to engage in a research collaboration to identify a specified
number of novel, follow-on TLR9 agonists, which will be derived using Idera’s chemistry-based
approach and for which Merck will have the exclusive right to use in oncology applications other
than cancer vaccines.

“Merck is committed to the development of innovative approaches to cancer therapies on a global
basis and we expect that this collaboration with Idera will help us move toward that goal,” said
Vincent Aurentz, Executive Board Member and Head of Portfolio Management and Business Development
for the Merck Serono division. “We believe that TLR9 agonists represent a novel mechanism of action
with great potential and we look forward to advancing their development for various oncology
indications.”

Under the terms of the agreement, Merck has agreed to pay an up-front license fee of $40 million
(about EUR 27 million based on current exchange rates) to Idera. In addition, Idera is eligible to
receive milestone payments of up to $389 million based on current exchange rates (EUR 264 million),
depending on success in achieving clinical development and commercialization, as well as royalties
on sales of any products developed and commercialized by Merck based on IMO-2055, IMO-2125 or the
follow-on TLR9 agonists. The contract will take effect and the upfront fee will be paid following
regulatory clearance under the Hart-Scott-Rodino Antitrust Improvements Act.

“Idera has chosen to collaborate with Merck KGaA for the application of our TLR9 agonists in
oncology because of its proven capabilities and success in developing novel therapies for cancer
and its commitment to global research, development and

Page 5 of 18

 

commercialization in this area,” said Sudhir Agrawal, D. Phil., Chief Executive Officer and Chief
Scientific Officer of Idera.

About IMO-2055

IMO-2055 is a novel DNA-based agonist of TLR9. It has been evaluated at multiple dose levels for
safety and immunological activity in Phase I trials involving healthy volunteers and patients with
refractory solid tumors. IMO-2055 is currently in a Phase 1b trial in combination with
Tarceva® and Avastin® in patients with advanced non-small cell lung cancer
and is being evaluated at two dose levels in a Phase IIa trial in patients with renal-cell
carcinoma (kidney cancer). It also is being evaluated in combination with chemotherapy agents in a
Phase I trial in patients with refractory solid tumors.

About IMO-2125

IMO-2125 is a second DNA-based TLR9 agonist and is of a class designed to induce high levels of
interferon-alpha and other cytokines and chemokines. IMO-2125 currently is being evaluated in a
Phase I trial in patients with chronic hepatitis C virus infection who have not responded to
standard treatment. This indication is not included in the agreement with Merck.

About TLRs

Toll-like Receptors (TLRs) function in human immune cells as the sensors of pathogens. They
recognize different microbial products present in pathogens such as bacteria, viruses and
parasites, and mount an appropriate immune response against the foreign invaders. TLRs have also
been shown to recognize endogenous ligands in autoimmune diseases. TLRs have become attractive
targets for developing immune modulators to treat a number of illnesses, including cancers and
infectious, respiratory and autoimmune diseases, and for use as vaccine adjuvants.

About Idera Pharmaceuticals, Inc.

Idera Pharmaceuticals is a drug discovery and development company that is developing drug
candidates to treat cancer and infectious, respiratory, and autoimmune diseases, and for use as
vaccine adjuvants. Idera’s proprietary drug candidates are designed to modulate specific TLRs,
which are a family of immune system receptors. Idera’s pioneering DNA chemistry expertise enables
it to identify drug candidates for internal development and creates opportunities for multiple
collaborative alliances. For more information, visit www.iderapharma.com.

All Merck Press Releases are distributed by e-mail at the same time they become available on the
Merck Website. Please go to http://www.subscribe.merck.de to register online, change your selection
or discontinue this service.

Merck is a global pharmaceutical and chemical company with sales of EUR 6.3 billion in 2006, a
history that began in 1668, and a future shaped by 30,962 employees in 61 countries. Its success is
characterized by innovations from entrepreneurial employees. Merck’s operating activities come
under the umbrella of Merck KGaA, in which the Merck family holds an approximately 70% interest and
free shareholders own the remaining approximately 30%. In 1917 the U.S. subsidiary Merck & Co. was
expropriated and has been an independent company ever since.

Page 6 of 18

 

Schedule 10.4(c)

Other Effects of Termination

Part I: General

Pursuant to Section 10.4(c), Merck, its Affiliates and Sublicensees shall, at Licensor’s
request:

     (A) notify the applicable Regulatory Authorities relating to such regulatory documentation,
applications for Regulatory Approvals and Regulatory Approvals;

     (B) provide Licensor with copies of all correspondence between Merck and any Regulatory
Authorities relating to such regulatory filings, applications for Regulatory Approval and
Regulatory Approval;

     (C) assign (or cause its Affiliates to assign) to Licensor all agreements with any Third Party
with respect to the conduct of clinical trials for the terminated Compounds, Follow-On Compounds
and/or Licensed Products, including agreements with contract research organizations, clinical sites
and investigators, unless expressly prohibited by any such agreement (in which case Merck shall
cooperate, and shall cause its Affiliates and Sublicensees to cooperate, with Licensor in all
reasonable respects to secure the consent of such Third Party to such assignment);

     (D) provide Licensor with copies of all reports and data generated or obtained by or on behalf
of Merck or its Affiliates or Sublicensees pursuant to this Agreement that relate to any Compounds,
Follow-On Compounds and/or Licensed Products that have not previously been provided to Licensor;

     (E) if Merck, its Affiliates or Sublicensees have manufactured, are manufacturing or are
having manufactured any Compounds, Follow-On Compounds, Licensed Products and/or any intermediate
thereof: (x) Merck shall, if requested by Licensor, supply Licensor with requirements for all
such Compounds, Follow-On Compounds, Licensed Products and intermediates for up to [**] months
after such termination at a transfer price equal to [**], (y) within ninety (90) days after
Licensor’s written request, Merck shall provide to Licensor or its designee all information in its
possession with respect to the manufacture of each such Compound, Follow-On Compound, Licensed
Product or intermediate;

     (F) grant to Licensor a non-exclusive, world-wide, irrevocable, perpetual, royalty-bearing (as
set forth on this Schedule 10.4(c)), license, including the right to grant sublicenses, in,
to and under the Merck Patents, including Merck’s interest in any Joint Patents, and under any
other intellectual property rights of Merck claiming or disclosing subject matter conceived,
discovered, made or reduced to practice (in whole or in part) after the Effective Date by or on
behalf of Merck, its Affiliates or Sublicensees pursuant to the research, use, Development,
manufacture, or Commercialization of Compounds, Follow-On Compounds or Licensed Products, to
research, Develop, make, have made, import, export, use and Commercialize, Compounds, Follow-On
Compounds and Licensed Products in the Field; and

Page 7 of 18

 

     (G) grant to Licensor an exclusive, worldwide, irrevocable, perpetual, royalty-bearing (as set
forth on this Schedule 10.4(c)), license under all trademarks (if any) then being used by
Merck with respect to the applicable Compounds, Follow-On Compounds and/or Licensed Products;
provided that the foregoing shall not include any right or license in or to Merck’s
corporate tradenames, trademarks or logos.

Part II: “Reverse” Royalty

If Licensor elects to (a) use clinical data owned by Merck, its Affiliates or sublicensees and
provided to Licensor pursuant to Section 10.4(c) or this Schedule 10.4(c) (excluding safety
data and other data required by a Regulatory Authority to be submitted) to support an application
for Regulatory Approval for a Licensed Product that reverts to Licensor pursuant to Section
10.4(c), (b) obtain a non-exclusive license under Merck Patents solely owned by Merck pursuant to
Paragraph F, and/or (c) obtain an exclusive trademark license under Paragraph G, in consideration
of such rights and licenses, then if (and only if) Licensor’s notice of termination pursuant to
Section 10.3 or Merck’s notice of termination pursuant to Section 10.2 or 10.3 is given after
Merck’s completion of at least one Phase II Clinical Trial with respect to such Licensed Product,
the following provisions shall apply to such Licensed Product (but not to other Licensed Products):

A. License Fee for Licensed Products

Within thirty (30) days after the first commercial sale of such Licensed Product by Licensor, its
Affiliates or sublicensees (with first commercial sale to be determined by applying the definition
of First Commercial Sale to the sale of the Licensed Product by Licensor, its Affiliates and
sublicensees, a “Licensor First Commercial Sale”), Licensor shall pay to Merck a one-time payment
equal to [**] percent ([**]%) of all milestone payments actually paid by Merck to Licensor pursuant
to Section 5.2 with respect to such Licensed Product.

B. Royalty Payments for Licensed Products

In addition to A. above, Licensor shall pay Merck a royalty in the amount set forth below on net
sales of such Licensed Product by Licensor, its Affiliates or sublicensees after the effective date
of termination (with such net sales being determined by applying the definition of Net Sales
mutatis mutandis to any such sales of such Licensed Product by Licensor, its Affiliates or
sublicensees) (hereinafter, respectively, “Licensor Net
Sales” and the “Post-Termination Royalty”).

The applicable royalty rate shall be determined on a Licensed Product-by-Licensed Product and
country-by-country basis based on the annual worldwide Licensor Net Sales of such Licensed Product.

1. The use of clinical data owned by Merck, its Affiliates or sublicensees and provided to
Licensor pursuant to Section 10.4(c) or this Schedule 10.4(c) (excluding safety data and
other data required by a Regulatory Authority to be submitted) to support an application for
Regulatory Approval for a Licensed Product that reverts to Licensor pursuant to Section 10.4(c)
shall bear a royalty between [**] percent ([**]%) and [**] percent ([**]%) of Licensor Net Sales,
as determined in accordance with the royalty chart set forth below. For purposes of

Page 8 of 18

 

clarity, the provision of (a) safety data, and/or (b) data, information or documentation other than
clinical data, shall not, by itself, trigger a royalty obligation pursuant to this Paragraph 1.

2. In addition to Paragraph 1 above of this Part II, the grant of a non-exclusive license pursuant
to Paragraph (F) of this Schedule 10.4(c) shall bear a royalty between [**] percent ([**]%)
and [**] percent ([**]%) of Licensor Net Sales, as determined in accordance with the royalty chart
set forth below; provided that the royalty obligation set forth in this Paragraph 2 shall
apply solely with respect to a non-exclusive license elected under the Merck Patents solely owned
by Merck.

3. In addition to Paragraph 1 and/or 2 of this Part II, the grant of an exclusive license to the
trademark(s) pursuant to Paragraph (G) of this Schedule 10.4(c) shall bear a royalty
between [**] percent ([**]%) and [**] percent ([**]%) of Licensor Net Sales, as determined in
accordance with the royalty chart set forth below.

4. Except as expressly provided on this Schedule 10.4(c), Licensor shall have no
obligation to make any payments to Merck in consideration for the rights, licenses, information and
materials provided or to be provided to Licensor pursuant to Section 10.4(c) or this Schedule
10.4(c). 

	 	 	 
	Annual Worldwide Licensed Product Licensor Net Sales	 	Incremental Royalty
	(in €) per Calendar Year	 	Rate
	 
	 	 
	For Licensor Net Sales of all Licensed Products from
€[**]up to and including €[**]

	 	[**]%
	 
	 	 
	For that portion of Licensor Net Sales of all
Licensed Products that is greater than €[**]and less
than or equal to €[**]

	 	[**]%
	 
	 	 
	For that portion of Licensor Net Sales of all
Licensed Products that is greater than €[**]and less
than or equal to €[**]

	 	[**]%
	 
	 	 
	For that portion of Licensor Net Sales of all
Licensed Products that is greater than €[**]

	 	[**]%

By way of illustration, assume in a Calendar Year that Licensor Net Sales of all Licensed Products
in Euros total €[**], and that only one of Paragraphs 1, 2 or 3 above applies. The total
royalties due and payable by Licensor to Merck for such Licensor Net Sales would be [**] Euros
(€[**]), calculated as follows:

          [**]

               Total
Royalty      = €[**]

If two (2) of Paragraphs 1, 2 and 3 above apply, the total royalties due and payable by Licensor to
Merck would be €[**]. If all of Paragraphs 1, 2 and 3 above apply, the total royalties due and
payable by Licensor to Merck would be €[**].

For purposes of determining whether a royalty threshold described above has been attained, only
Licensor Net Sales that are subject to a royalty payment shall be included in the total amount of

Page 9 of 18

 

Licensor Net Sales and any Licensor Net Sales of Licensed Products for which the applicable
Post-Termination Royalty Term (as defined below) has expired shall be excluded.

The royalty obligations set forth on this Schedule 10.4(c) shall be determined on a
Licensed Product-by-Licensed Product and country-by-country basis and shall be payable for the
period commencing on the Licensor First Commercial Sale of such Licensed Product by Licensor, its
Affiliates or sublicensees in such country and ending ten (10) years thereafter, provided
however, that in the event Licensor elected to obtain a license to a Merck Patent under
Paragraph F of this Schedule 10.4(c), then such royalty shall be payable for the longer of (i) ten
10 years after the date of the Licensor First Commercial Sale of such Licensed Product by Licensor,
its Affiliates or sublicensees in such country, or (ii) the date on which the manufacture, use,
sale, offer for sale or importation of such Licensed Product in such country ceases to be Covered
by a Valid Claim of a Merck Patent solely owned by Merck (the
“Post-Termination Royalty Term”).
Upon the expiration of each Post-Termination Royalty Term, all rights and licenses with respect to
which the Post-Termination Royalty Term has expired shall become fully paid, royalty-free,
irrevocable, perpetual, transferable and sublicensable.

Except for the last sentence of Section 5.7, Sections 5.6 through 5.13 of the Agreement shall apply
mutatis mutandis to payments to be made by Licensor under this Part B of Schedule 10.4(c) as if
Licensor was Merck, and Merck was Licensor in any of these Sections.

Page 10 of 18

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