Document:

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                                                                   Exhibit 10.54

                           IDERA PHARMACEUTICALS, INC.

                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into by and between
Robert Karr ("Executive") and Idera Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and is effective as of the 5th day of December,
2005 (the "Effective Date"). Executive and the Company are referred to herein
individually as a "Party", and collectively as the "Parties".

     WHEREAS, the Company desires to establish its right to the services of
Executive, in his capacity as President, on the terms and conditions hereinafter
set forth, and Executive is willing to accept such employment on such terms and
conditions; and

     WHEREAS, the Company and Executive desire to enter into this Agreement,
effective as of the Effective Date.

     NOW, THEREFORE, in consideration of the mutual agreements hereinafter set
forth, Executive and the Company have agreed and do hereby agree as follows:

     1. Definitions. The capitalized terms in this Agreement shall have the
meanings set forth in this Agreement or Appendix A attached hereto.

     2. Engagement. The Company hereby agrees to employ Executive as its
President, and Executive hereby accepts such employment on the terms and
conditions hereinafter set forth.

     3. Employment Period. Executive's employment with the Company under this
Agreement shall commence on the Effective Date and shall continue until the
second anniversary of the Effective Date (as such period may be extended as set
forth below, the "Employment Period"), unless such employment is sooner
terminated as hereinafter provided. The Employment Period shall automatically be
extended for an additional year on the second anniversary of the Effective Date
and on each anniversary of the Effective Date thereafter; provided however, that
the Employment Period shall not be extended if at least ninety (90) days prior
to the last day of the then-current Employment Period either Party provides
written notice to the other Party that the then-current Employment Period shall
not be extended.

     4. Duties and Responsibilities. During the Employment Period, Executive
shall perform his duties and responsibilities fully and faithfully as President,
subject to the direction and supervision of the Chief Executive Officer and the
terms and conditions of this Agreement. During such period,

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Executive shall report solely to the Chief Executive Officer. Executive shall
have the duties and responsibilities customarily assigned to the president of a
company having a chief executive officer, with such other duties not
inconsistent therewith as may from time to time be assigned to Executive by the
Chief Executive Officer. Executive agrees he shall devote substantially his full
business time and attention to, and exert his best efforts in, the performance
of his duties hereunder, so as to promote the business and best interests of the
Company and to comply with the Company's policies as in effect from time to
time. Notwithstanding the foregoing, the Company agrees that (i) Executive may
continue to serve as an outside director of the three companies for which he is
currently serving as a director, provided that the companies involved have no
direct competition or conflict with the Company and that the Executive's time
commitment to these companies does not become unreasonable, and (ii) Executive
may participate on other outside boards of directors, provided that the total
number of boards of directors of which he is a member does not exceed three and
that the Chief Executive Officer and the Chairman of the Board (or if the
Chairman of the Board is the Chief Executive Officer, the Chairman of the
Compensation Committee of the Board) mutually agree in advance. The Company also
recognizes and acknowledges that Executive may perform his services hereunder
from time to time from his permanent residence and not at the Company's offices.

     5. Compensation. For all services rendered by Executive pursuant to this
Agreement, the Company shall pay Executive, and Executive agrees to accept, the
salary, bonuses and other benefits described below in this Section 5.

          (a) Base Salary. During the Employment Period, the Company shall pay
Executive an annual base salary of $ 375,000.00 ("Base Salary") and such Base
Salary shall be payable at periodic intervals in accordance with the Company's
payroll practices for salaried employees. In accordance with Section 5(c) below,
the amount of Base Salary shall be reviewed and approved, if applicable, by the
Board of Directors of the Company (the "Board") or the Compensation Committee of
the Board (the "Compensation Committee") (it being agreed that, for purposes of
this Agreement, any action that may be taken by the Board under this Agreement
may be taken by the Compensation Committee instead of the Board, whether or not
expressly provided in this Agreement) on at least an annual basis, and any
increases in the amount of Base Salary shall be effective as of the date
determined by the Board or the Compensation Committee. Executive's Base Salary
may be increased for any reason, including to reflect inflation or such other
adjustments as the Board or the Compensation Committee may deem appropriate;
provided, however, that Executive's Base Salary, as in effect on the date hereof
or as increased in accordance with the terms of this

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Agreement, may not be subsequently decreased, except with the prior written
consent of Executive.

          (b) Bonus. In addition to Base Salary, Executive shall be eligible to
receive, for each fiscal year of the Company ending with or within the
Employment Period, an annual bonus ("Bonus"), whether pursuant to a formal bonus
or incentive plan or program of the Company or otherwise; provided, however,
that with respect to the fiscal year ending December 31, 2006, Executive shall
be eligible to receive a Bonus equal to between 10% and 50% of Executive's Base
Salary on the last day of such fiscal year. Subject to this Section 5(b) and
Section 5(c) below, such Bonus shall be based on criteria, and subject to the
achievement of milestones, determined by the Board or the Compensation
Committee, in its discretion. Any Bonus earned by Executive for service or
performance rendered in any fiscal year within the Employment Period shall be
paid to Executive in accordance with the applicable plan or program, if any, and
the Company's policies governing such matters.

          (c) Annual Compensation Review. Executive's compensation, consisting
of salary, equity incentive awards and bonuses, shall be reviewed annually by
the Board or the Compensation Committee.

          (d) Medical, Dental and Other Healthcare Benefits. During the
Employment Period, Executive shall be eligible to participate in and receive
benefits under the Company's medical, dental or other healthcare plans, as in
effect from time to time, that are available to officers and employees of the
Company.

          (e) Retirement Plan Benefits. Executive shall be entitled to
participate in the Company's tax-qualified and nonqualified retirement plans, as
in effect from time to time, that are available to officers and employees of the
Company and shall be entitled to receive the benefit of contributions to be
made, if any, by the Company for the benefit of Executive under the terms of the
applicable tax-qualified or nonqualified retirement plan.

          (f) Incentive Plans. During the Employment Period, Executive shall be
eligible to receive all benefits, including those under stock option, equity
participation or bonus programs, to which key employees are or become eligible
under such plans or programs as may be established by the Company from time to
time.

          (g) Other Benefits. During the Employment Period, in addition to the
benefit plans contemplated by Sections 5(d), 5(e) and 5(f), Executive shall be
entitled to participate in the other benefit and fringe benefit programs
afforded by the Company to its executives from time to time.

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Executive shall be entitled to paid vacation in accordance with the Company's
standard vacation policies in effect from time to time.

          (h) Options. The Company has agreed to grant Executive on the date
hereof stock options under the Company's 2005 Stock Incentive Plan to purchase
1,000,000 shares of the Company's common stock at an exercise price of $0.60 per
share. Such options shall vest quarterly over a four-year period with the first
installment vesting upon the end of the first quarterly period after the date
hereof. These options shall be evidenced by an option agreement that is
consistent with the form of option agreement generally used by the Company at
the time of the grant and the terms of this Agreement.

          (i) Housing and Relocation Reimbursement. During the initial
Employment Period (but not during any extended Employment Period, except as may
be agreed by the Company at that time), the Company shall reimburse Executive
for the documented cost of reasonable rent for housing; provided that such
reimbursement shall not exceed $2,500 per month. The Company shall also
reimburse Executive for documented relocation costs reasonably incurred in
connection with the moving of household goods to this new housing; provided that
such reimbursement shall not exceed $2,500 in the aggregate. The Company shall
classify the reimbursement of housing and relocation expenses as taxable income
to Executive.

     6. Termination of Employment. The remedies described in this Section 6 are
the exclusive remedies of the Executive in connection with the termination of
Executive's employment under this Agreement.

          (a) Death. If Executive's employment hereunder is terminated by reason
of Executive's death, the Company shall pay Executive's designated beneficiary
or beneficiaries any Unpaid Obligations; provided that such amounts shall be
paid in a lump sum cash payment within 30 days after the Company's receipt of
notification of Executive's death. Additionally, any stock options or other
equity incentive awards previously granted to Executive by the Company and held
by Executive on the date of his death shall vest as of such date to the extent
such options or equity incentive awards, as applicable, would have vested had
Executive continued to be an employee of the Company for a period ending on the
earlier of (i) the final day of the Employment Period in effect immediately
prior to Executive's death and (ii) the first anniversary of Executive's death.
Executive's designated beneficiary or beneficiaries shall be permitted to
exercise such stock options until the first anniversary of Executive's death;
provided that such provision shall not affect and shall be subject to (x) the
provisions of the applicable stock option agreement and/or equity incentive plan
relating to the termination of such stock options in connection with an
Acquisition Event, a

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Change of Control or a similar transaction involving the Company or (y) the
maximum term of any such stock option (the "Option Limitation Provisions").

          (b) Disability. The Company may terminate Executive's employment at
any time upon at least 30 days' prior written notice due to the Disability of
Executive. If Executive's employment hereunder is terminated due to Disability,
the Company shall pay Executive any Unpaid Obligations; provided that such
amounts shall be paid in a lump sum cash payment within 30 days after the
termination date. Additionally, any stock options or other equity incentive
awards previously granted to Executive by the Company and held by Executive on
the termination date shall vest as of such date to the extent such options or
equity incentive awards, as applicable, would have vested had Executive
continued to be an employee of the Company for a period ending on the earlier of
(i) the final day of the Employment Period in effect immediately prior to the
termination date and (ii) the first anniversary of such termination date.
Executive shall be permitted to exercise such stock options until the first
anniversary of the termination date; provided that such provision shall not
affect and shall be subject to the Option Limitation Provisions.

          (c) Termination by the Company for Cause. The Company may terminate
Executive's employment under this Agreement for Cause at any time. If
Executive's employment hereunder is terminated by the Company for Cause, the
Company shall pay Executive any Unpaid Obligations, provided that such amounts
shall be paid in a lump sum cash payment within 30 days after such termination
date. All options or other equity incentive awards (other than outstanding
common stock held by Executive), whether vested or unvested on the termination
date, shall expire and terminate on that date.

          (d) Termination by the Company Other than for Death, Disability or
Cause. The Company may, at its option and upon 30 days' prior written notice,
terminate Executive's employment under this Agreement without Cause at any time.
If Executive's employment is terminated by the Company other than on account of
Executive's death, Disability, or for Cause, then the Company shall pay
Executive any Unpaid Obligations in a lump sum cash payment within 30 days after
the termination date. In addition, subject to Section (h)(i) below, the Company
shall pay Executive (i) on the date six months and one day after the termination
date a lump sum payment in cash equal to six months of Executive's Base Salary
as in effect immediately prior to such termination and (ii) in accordance with
the Company's payroll practices applicable to salaried executives, Executive's
Base Salary as in effect immediately prior to such termination for a period
commencing on the date six months and one day after the termination date and
ending on the first anniversary of the termination date. Additionally,

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any stock options or other equity incentive awards previously granted to
Executive by the Company and held by Executive on the termination date shall
vest as of such date to the extent such options or equity incentive awards, as
applicable, would have vested had Executive continued to be an employee of the
Company for a period ending on the first anniversary of the termination date.
Executive shall be permitted to exercise such stock options until the first
anniversary of the termination date; provided that such provision shall not
affect and shall be subject to the Option Limitation Provisions.

          (e) Termination by Executive for Good Reason. Executive may, for Good
Reason, terminate this Agreement upon 30 days' prior written notice to the
Company. If Executive's employment is terminated by Executive for Good Reason,
the Company shall pay Executive any Unpaid Obligations in a lump sum cash
payment within 30 days after the termination date. In addition, subject to
Section (h)(i) below, the Company shall pay Executive (i) on the date six months
and one day after the termination date a lump sum payment in cash equal to six
months of Executive's Base Salary as in effect immediately prior to such
termination and (ii) in accordance with the Company's payroll practices
applicable to salaried executives, Executive's Base Salary as in effect
immediately prior to such termination for a period commencing on the date six
months and one day after the termination date and ending on the first
anniversary of the termination date. Additionally, any stock options or other
equity incentive awards previously granted to Executive by the Company and held
by Executive on the termination date shall vest as of such date to the extent
such options or equity incentive awards, as applicable, would have vested had
Executive continued to be an employee of the Company for a period ending on the
first anniversary of the termination date. Executive shall be permitted to
exercise such stock options until the first anniversary of the termination date;
provided that such provision shall not affect and shall be subject to the Option
Limitation Provisions.

          (f) Voluntary Termination by Executive. Executive may, without Good
Reason, terminate Executive's employment upon 30 days' prior written notice to
the Company. If Executive's employment is terminated by Executive without Good
Reason, the Company shall pay Executive any Unpaid Obligations, provided that
such amounts shall be paid in a lump sum cash payment within 30 days after such
termination date. All options that remain unvested on such termination date
shall expire and terminate as of that date. Executive shall be permitted to
exercise such stock options until the first anniversary of the termination date;
provided that such provision shall not affect and shall be subject to the Option
Limitation Provisions.

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          (g) No Offset. Any compensation derived by Executive from any
subsequent employment or self-employment shall not be offset against or reduce
any amounts to which Executive is entitled under this Agreement.

          (h) Change of Control.

               (i) Continuation of Salary. If Executive's employment with the
Company is terminated by Executive for Good Reason or by the Company other than
for death, Disability or Cause in connection with, or within one year after the
effective date of, a Change of Control, in lieu of the severance payments
provided for in the third sentence of Section 6(d) or the third sentence of
Section 6(e), as applicable, the Company shall pay Executive a lump sum cash
payment in an amount equal to Executive's Base Salary as in effect immediately
prior to the termination date. Such amount shall be paid to Executive within 10
days after the termination date.

               (ii) Parachute Payments. If all or any portion of the amounts
payable to Executive under this Agreement or otherwise are subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended or
a similar state tax or assessment, the Company shall pay to Executive an amount
necessary to place Executive in the same after-tax position as Executive would
have been had no such excise tax or assessment been imposed. The amount payable
pursuant to the preceding sentence shall be increased to the extent necessary to
pay income and excise taxes on such amounts. The determination of any amounts
payable under this Section 6(h)(ii) shall be made by an independent accounting
firm employed by the Company and such determination shall be final, binding and
conclusive on the Parties.

               (iii) Acceleration of Vesting. Any provisions of this Agreement
regarding vesting of stock options notwithstanding, the vesting of all stock
options held by Executive shall be accelerated in full and such stock options
shall become fully exercisable upon the consummation of a Change of Control.

               (iv) Continuation of Benefits. If Executive's employment with the
Company is terminated pursuant to Section 6(d) or 6(e) (irrespective of whether
such termination follows a Change of Control), the Company shall provide, for
the period ending on the earlier of (i) the final day of the Employment Period
in effect immediately prior to such termination and (ii) the first anniversary
of the termination date, and at its sole cost and expense, Executive and his
eligible dependents (if any) with healthcare, disability, and life insurance
benefits substantially similar to those benefits Executive and his eligible
dependents (if any) were receiving immediately prior to the termination date;
provided, however, that

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                    (A) the Company shall not be required to provide medical
coverage to the extent another employer of the Executive provides comparable
coverage,

                    (B) with respect to death and disability coverage, the
Company shall not be required to provide coverage to the extent another employer
of Executive provides comparable coverage; and shall pay the cost of
supplemental coverage if a new employer provides less than comparable coverage,
to allow Executive to purchase coverage to make total coverage comparable, and

                    (C) the coverage provided by the Company pursuant to this
Section 6(i) shall be in lieu of any other continued coverage for which
Executive or his dependents, if any, would otherwise be eligible pursuant to
COBRA.

     7. Proprietary Information; Company Documents and Materials.

          (a) Proprietary Information. Executive acknowledges that during his
employment with the Company, Executive will occupy a position of trust and
confidence with respect to Proprietary Information of the Company. Executive
understands that he possesses or will possess Proprietary Information that is
important to the Company's business and operation. Executive acknowledges that
such Proprietary Information is specialized, unique in nature and of great value
to the Company and its Affiliates, and that such information gives the Company
and its Affiliates a competitive advantage. Executive acknowledges that all
Proprietary Information is and shall remain the sole property of the Company or
any of its Affiliates. Executive shall not disclose to others or use, whether
directly or indirectly, any Proprietary Information, or anything relating to
such information, regarding the Company or any of its Affiliates, except in
performing the duties of Executive's employment; provided, however that
Executive's obligations under this Section 7 shall not apply to any information
that (i) is or becomes known to the general public under circumstances involving
no breach by Executive of the terms of this Section 7, (ii) is generally
disclosed to third parties by the Company without restriction on such third
parties, (iii) is approved for release by written authorization of the Board or
an authorized employee of the Company, (iv) is communicated to Executive by a
third party under no duty of confidentiality with respect to such information to
the Company or another party, or (v) is required to be disclosed by Executive to
comply with applicable laws, governmental regulations, or court order, provided
that Executive provides prior written notice of such disclosure to the Company
and an opportunity for the Company to object to such disclosure and further
provided that Executive cooperates with the Company and takes reasonable and
lawful actions requested by the Company (the out-of-pocket

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costs of which shall be paid by the Company) to avoid and/or minimize the extent
of such disclosure.

          (b) Company Documents and Materials. Executive agrees that during
Executive's employment by the Company, Executive will not remove any Company
documents or materials, including Proprietary Information, from the business
premises of the Company or deliver any such Company documents or materials to
any person or entity outside the Company, except as Executive is required to do
in connection with performing the duties of Executive's employment. Executive
agrees that, immediately upon the termination of Executive's employment by
Executive or by the Company for any reason, or during Executive's employment if
so requested by the Company, Executive will return all Company documents and
materials, computer tapes and disks, records, lists, data, drawings, prints,
notes and written information, apparatus, equipment and other physical property,
or any reproduction of such property, excepting only (i) Executive's personal
copies of records relating to Executive's compensation; (ii) Executive's
personal copies of any materials previously distributed generally to
stockholders of the Company; and (iii) Executive's copy of this Agreement.

     8. Non-solicitation and Non-competition.

          (a) Non-solicitation. Executive agrees that during his employment with
the Company and for a period of one year following the termination of his
employment with the Company, Executive shall not hire, attempt to hire, or
assist in or facilitate in any way the hiring of any person who, at the time of
any such action by Executive, is an employee of the Company (or any of its
Affiliates).

          (b) Non-competition. Executive agrees that if his employment with the
Company is terminated for any reason, including upon the expiration of the
Employment Period, for a period of one year from the date of such termination of
employment, Executive shall not, directly or indirectly, engage in any business
or enterprise (whether as owner, partner, officer, director, employee,
consultant, investor, lender or otherwise, except as the holder of not more than
1% of the outstanding stock of a publicly-held company) that develops,
manufactures, markets, licenses or sells any products developed using antisense
therapeutics or oligonucleotide-based immunostimulatory therapeutics or any
other technology or product developed, manufactured, marketed, licensed or sold
by the Company while the Executive is employed by the Company (the "Restricted
Business").

          (c) Notwithstanding the foregoing, Section 8(b) shall not preclude
Executive from becoming an employee of, or from otherwise providing services to,
a separate division or operating unit of a multi-divisional pharmaceutical
business or enterprise (a "Division") if: (i) the

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Division by which Executive is employed, or to which the Employee provides
services, is not competitive with the Restricted Business, (ii) Executive does
not provide services, directly or indirectly, to any other division or operating
unit of such multi-divisional pharmaceutical business or enterprise that is
competitive with the Restricted Business (individually, a "Competitive Division"
and collectively, the "Competitive Divisions") and (iii) the Competitive
Divisions, in the aggregate, accounted for less than one-third of the
multi-divisional pharmaceutical business or enterprises' consolidated revenues
for the fiscal year, and each subsequent quarterly period, prior to the
Executive's commencement of employment with the Division.

     9. Assignment of Rights. All inventions, discoveries, computer programs,
data, technology, designs, innovations and improvements (whether or not
patentable and whether or not copyrightable) related to the business of the
Company that are or have been made, conceived, reduced to practice, created,
written, designed or developed by Executive, solely or jointly with others and
whether during normal business hours or otherwise, during his employment by the
Company pursuant to this Agreement ("Inventions") shall be the sole property of
the Company. Executive hereby assigns to the Company all such Inventions and any
and all related patents, copyrights, trademarks, trade names, and other
industrial and intellectual property rights and applications therefor, in the
United States and elsewhere and appoints any officer of the Company as his duly
authorized attorney, but without any out-of-pocket expenses to Executive, to
execute, file, prosecute and protect the same before any government agency,
court or authority. Executive hereby waives all claims to moral rights in any
Invention. Upon the request of the Company and at the Company's expense,
Executive shall execute such further assignments, documents and other
instruments as may be necessary or desirable to fully and completely assign all
such Inventions to the Company and to assist the Company in applying for,
obtaining and enforcing patents or copyrights or other rights in the United
States and in any foreign country with respect to any such Invention. Executive
shall promptly disclose to the Company all such Inventions and will maintain
adequate and current written records (in the form of notes, sketches, drawings
and as may be reasonably specified by the Company) to document the conception
and/or first actual reduction to practice of any such Invention. Such written
records shall be available to and remain the sole property of the Company at all
times. Executive shall, upon the Company's request, whether during or after the
Employment Period, promptly execute and deliver to the Company all such
assignments, certificates and instruments, and shall promptly perform such other
acts, as the Company may from time to time in its discretion deem necessary or
desirable to evidence, establish, maintain, perfect, enforce or defend the
Company's rights in the inventions. These services (the "IP Services"), shall be
rendered by Executive without additional compensation during the Employment
Period, and at any time when the

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Company is paying Executive his Base Salary pursuant to Section 6(b), 6(d), 6(e)
or 6(f). Executive shall otherwise render the IP Services at the rate of
compensation provided in the last sentence of this paragraph. In addition,
Executive agrees, from time to time, and for as long as reasonably required, to
make himself available on a consulting basis to assist the Company in the
prosecution of patent applications or other filings or proceedings before the
Office of Patents and Trademarks and to advise with respect to issues arising in
the licensing of the Company's patents and the pursuit or defense of
infringement claims. The Company's requests under the preceding sentence shall
be made upon reasonable notice to Executive, and the Company shall pay Executive
for such services at the hourly rate of $300 per hour plus reasonable expenses.

     10. Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
or to all or substantially all of the Company's business and/or assets shall
assume the obligations under this Agreement and shall perform the obligations
under this Agreement in the same manner and to the same extent as the Company
would be required to perform such obligations in the absence of a succession.
The Company may assign this Agreement without Executive's consent to any company
that acquires all or substantially all of the Company's stock or assets.
Executive may not assign this Agreement and no person other than Executive (or
his estate) may assert Executive's rights under this Agreement.

     11. Notice. All notices, requests, consents and other communications
hereunder to any Party shall be contained in a written instrument addressed to
such Party at the address set forth below or such other address as may hereafter
be designated in writing by the addressee to the addressor listing all Parties
and shall be deemed given (a) when delivered in person or duly sent by fax
showing confirmation of receipt, (b) three days after being duly sent by first
class mail postage prepaid, or (c) two days after being duly sent by DHL,
Federal Express or other recognized express courier service:

          (a) if to the Company, to:

          Idera Pharmaceuticals, Inc.
          345 Vassar Street
          Cambridge, MA 02139
          fax: (617) 679-5582

          (b) if to Executive, to:

          Robert Karr
          30 Ox Bow Lane
          Essex, CT 06426

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     12. Company Plans. To the extent any provision of this Agreement conflicts
with or is inconsistent with any awards made to Executive under any Company
compensation or benefit plan, program, or arrangement, the provisions of this
Agreement shall govern. Except to the extent otherwise explicitly provided by
this Agreement, any awards made to Executive under any Company compensation or
benefit plan, program, or arrangement shall be governed by the terms of that
plan, program, or arrangement and any applicable award agreement thereunder, as
in effect from time to time.

     13. Miscellaneous Provisions.

          (a) Entire Agreement. This Agreement constitutes the entire agreement
between the Parties and terminates and supersedes any and all prior agreements
and understandings (whether written or oral) between the Parties with respect to
the subject matter of this Agreement. Executive acknowledges and agrees that
neither the Company, nor anyone acting on its behalf has made, and in executing
this Agreement Executive has not relied upon, any representations, promises, or
inducements except to the extent the same is expressly set forth herein.

          (b) Waiver. No provision of this Agreement shall be modified, waived,
or discharged unless the modification, waiver, or discharge is agreed to in
writing and signed by Executive and by an authorized officer or representative
of the Company (other than Executive). No waiver by either Party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other Party shall be considered a waiver of any other condition or provision or
of the same condition or provision at a preceding or subsequent time.

          (c) Capacity. Executive represents and warrants to the Company that he
is not now under any obligation, of a contractual nature or otherwise, to any
person, firm, corporation, association or other entity that is inconsistent, or
in conflict, with this Agreement or that would prevent, limit or impair in any
way the performance by Executive of his obligations hereunder.

          (d) Consulting. Executive and the Company may, but are not required
to, enter into an agreement pursuant to which Executive will provide consulting
services to the Company after the date of Executive's retirement or termination
of employment with the Company. Any consulting fees paid to Executive will be in
addition to any retirement or severance payments Executive is entitled to
receive from the Company or under any plans, programs, or arrangements
maintained by the Company.

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          (e) Severability. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any law or
public policy, only the portion of this Agreement that violates such law or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give effect to the intentions of the
Parties to this Agreement, as expressed herein.

          (f) Survival of Provisions. The obligations contained in Sections 7, 8
and 9 above shall survive the termination or expiration of the Employment Period
or this Agreement, as applicable, and shall be fully enforceable thereafter in
accordance with the terms of this Agreement.

          (g) Withholding. Executive acknowledges that salary and all other
compensation payable under this Agreement shall be subject to withholding for
income and other applicable taxes to the extent required by law, as determined
by the Company in its sole discretion.

          (h) Headings. The headings or other captions contained in this
Agreement are for convenience of reference only and shall not be used in
interpreting, construing or enforcing any of the provisions of this Agreement.

          (i) Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts without giving effect to any conflict of law rules
that would require the application of the laws of any jurisdiction other than
the internal laws of the Commonwealth of Massachusetts to the rights and duties
of the Parties, except to the extent the laws of the Commonwealth of
Massachusetts are preempted by federal law.

          (j) Terms. Where appropriate in this Agreement, words used in the
singular shall include the plural, and words used in the masculine shall include
the feminine or neuter.

          (k) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one agreement binding on the Parties hereto.

                  [Remainder of page left blank intentionally.]

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement effective as
of the date first mentioned above.

IDERA PHARMACEUTICALS, INC.              ROBERT KARR

BY: /s/ Sudhir Agrawal                   /s/ Robert Karr
    ---------------------------------    ---------------------------------------
    Sudhir Agrawal
TITLE: Chief Executive Officer

DATE:  12-5-05                           DATE: 12-5-05
      -------------------------------         ----------------------------------

                                      -14-

<PAGE>

                                   APPENDIX A

                                   DEFINITIONS

     ACQUISITION EVENT means

               (i) any merger or consolidation that results in the voting
securities of the Company outstanding immediately prior thereto representing
(either by remaining outstanding or by being converted into voting securities of
the surviving or acquiring entity) less than 60% of the combined voting power of
the voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation;

               (ii) any sale of all or substantially all of the assets of the
Company;

               (iii) the complete liquidation or dissolution of the Company; or

               (iv) the acquisition of "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act) of securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
securities (other than through a merger or consolidation or an acquisition of
securities directly from the Company) by any "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act, other than the Company, any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportion as their ownership of stock
of the Company.

     AFFILIATE. "Affiliate" shall mean any person or entity that directly or
indirectly controls, is controlled by or is under common control with the
Company, including any entity directly or indirectly controlled by the Company
through the Company's ownership of 50% or more of the voting interests of such
entity.

     CAUSE. "Cause" shall mean Executive's (i) material breach of any material
term of this Agreement, (ii) plea of guilty or nolo contendere to, or conviction
of, the commission of a felony offense, (iii) repeated unexplained or
unjustified absence, or refusals to carry out the lawful directions of the Board
or (iv) material breach of a fiduciary duty owed to the Company under this
Agreement, provided that any action or inaction described by (i), (iii) or (iv),
above, shall not be the basis of a termination of Executive's employment with
the Company for "Cause" unless the Company provided Executive with at least 20
days advance written notice specifying in reasonable detail the

<PAGE>

conduct in need of being cured and such conduct was not cured within the notice
period or prior to termination.

     CHANGE OF CONTROL. "Change of Control" shall mean the occurrence of any of
the following events:

     (i) a change in the composition of the Board over a period of thirty-six
consecutive months or less such that a majority of the members of the Board
ceases to be comprised of individuals who are Continuing Members; for such
purpose, a "Continuing Member" shall mean an individual who is a member of the
Board on the date of this Agreement and any successor of a Continuing Member who
is elected to the Board or nominated for election by action of a majority of
Continuing Members then serving on the Board; or

     (ii) the consummation of an Acquisition Event.

     DISABILITY. "Disability" shall mean the inability of Executive to perform
all the material duties of Executive's position for a continuous period of at
least 90 days due to a permanent physical or mental impairment, as determined
and certified by a physician selected by Executive and with the concurrence of a
physician selected by the Company, provided that if the physician selected by
Executive and the physician selected by the Company do not agree regarding the
determination and certification, a determination and certification rendered by
an independent physician mutually agreed upon by Executive and the Company shall
be final and binding on the Parties with respect to this Agreement.

     GOOD REASON. "Good Reason" shall mean the occurrence of one or more of the
following: (i) any action by the Company that results in a material diminution
of Executive's position, title, annual base salary, authority, duties or
responsibilities or reporting structure; (ii) any material breach of this
Agreement by the Company that is not remedied by the Company within 30 days
after receipt by the Company of notice thereof given by Executive specifying in
reasonable detail the alleged breach; and (iii) failure to elect Executive to
serve on the Board during the Employment Period.

     PROPRIETARY INFORMATION. "Proprietary Information" shall mean information
that was developed, created, or discovered by or on behalf of the Company, or
that became or will become known by, or was or is conveyed to the Company;
including, but not limited to, trade secrets, designs, technology, know-how,
processes, data, ideas, techniques, inventions (whether patentable or not),
works of authorship, formulae, business and development plans, client or
customer lists, software programs and subroutines, source and object code,
algorithms, terms of compensation and performance levels of Company employees,
information about the Company or any of its Affiliates, and their clients and
customers that is not disclosed by the Company or any of its

                                       -2-

<PAGE>

Affiliates for financial reporting purposes and that was learned by Executive in
the course of employment by the Company or any of its Affiliates, other
information concerning the Company's actual or anticipated business, research or
development, or that is received in confidence by or for the Company from any
other person, and all papers, resumes, and records (including electronic or
computer-generated records) of the documents containing such Proprietary
Information. Proprietary Information shall not include information that is
publicly available or available through third party sources so long as it has
not become available through a breach of this Agreement by Executive.

     UNPAID OBLIGATIONS. "Unpaid Obligations" shall mean the sum of (i) any
salary earned but unpaid through the date of termination of employment, and (ii)
reimbursement of any reimbursable expense incurred by Executive through the date
of termination of employment.

                                       -3-<PAGE>

                                                                 EXHIBIT 10.13.4

                 THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT

            THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of March
29, 2006 (this "Third Amendment"), to the LOAN AND SECURITY AGREEMENT, dated as
of December 26, 2001, as amended by the FIRST AMENDMENT AND WAIVER TO LOAN AND
SECURITY AGREEMENT, dated as of November 18, 2003 and the SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT, dated as of December 22, 2004 (as hereafter
modified, amended and/or restated from time to time, the "Loan Agreement"), by
and among, on the one hand, the lenders identified on the signature pages
thereof (such lenders, together with their respective successors and assigns,
are referred to hereinafter each individually, a "Lender" and collectively, the
"Lenders") and WELLS FARGO FOOTHILL, INC., a California corporation, formerly
known as Foothill Capital Corporation ("Foothill"), as arranger and
administrative agent for the Lenders (in such capacity, together with its
successors and assigns, the "Agent") and, on the other hand, AMTROL HOLDINGS,
INC., a Delaware corporation (the "Parent"), and AMTROL INC., a Rhode Island
corporation (the "Administrative Borrower"), WATER SOFT INC., a Rhode Island
corporation ("Water Soft"), and AMTROL CANADA LTD., an Ontario corporation
(together with the Administrative Borrower and Water Soft, each individually a
"Borrower" and collectively, the "Borrowers").

                                    Preamble

            WHEREAS, the Agent and the Lenders are willing to enter into this
Third Amendment, subject to (a) the execution and delivery of this Third
Amendment by the Borrowers, and (b) the other terms and conditions set forth in
this Third Amendment.

            NOW, THEREFORE, the Borrowers, the Guarantors, the Agent and the
Lenders hereby agree as follows:

      1. Definitions. All capitalized terms used herein which are defined in the
Loan Agreement and not otherwise defined herein are used herein as defined
therein.

      2. Amendment to Section 2.12(a). Clause (ii) of Section 2.12(a) is hereby
amended and restated in its entirety to read as follows:

                        "(ii) the Letter of Credit Usage would exceed
            $5,000,000, provided that Borrowers may not use more than $2,150,000
            of the aggregate amount of Letter of Credit Usage to support
            payments under retention agreements entered into among Parent, the
            Administrative Borrower and the individual senior managers of the
            Borrower"

      3. Amendment to Section 6.3(b). Clause (i) of Section 6.3(b) of the Loan
Agreement is hereby amended and restated in its entirety to read as follows:

                        "(i) consolidated financial statements of AMTROL and its
            Subsidiaries for each such fiscal year, audited by independent
            certified public accountants reasonably acceptable to Agent and
            certified, without any qualifications (other than, for the financial
            statements for fiscal year 2005, a going

<PAGE>

            concern qualification solely as a result of the maturity of the
            Obligations and the Senior Subordinated Notes within 12 months of
            the end of fiscal year 2005), by such accountants to have been
            prepared in accordance with GAAP (such audited financial statements
            to include a balance sheet, income statement, and statement of cash
            flow and, if prepared, such accountants' letter to management),"

      4. Amendment to Section 7.20(a). Clause (i) of Section 7.20(a) of the Loan
Agreement is hereby amended and restated in its entirety to read as follows:

                        "(i) Minimum EBITDA.

                              A. North American EBITDA, measured on a fiscal
            month-end or quarterly basis (as the case may be), of not less than
            the required amount set forth in the following table for the
            applicable period set forth opposite thereto:

<TABLE>
<CAPTION>
APPLICABLE AMOUNT            APPLICABLE PERIOD
-----------------            --------------------------------------------------
<S>                          <C>
    $2,500,000               Four months ended on or near January 31, 2002
    $3,360,000               Five months ended on or near February 28, 2002
    $5,110,000               Six months ended on or near March 31, 2002
    $5,740,000               Seven months ended on or near April 30, 2002
    $7,540,000               Eight months ended on or near May 31, 2002
    $9,780,000               Nine months ended on or near June 30, 2002
   $10,590,000               Ten months ended on or near July 31, 2002
   $11,550,000               Eleven months ended on or near August 31, 2002
   $13,990,000               Twelve months ended on or near September 30, 2002
   $14,480,000               Twelve months ended on or near October 31, 2002
   $14,700,000               Twelve months ended on or near November 30, 2002
   $14,900,000               Twelve months ended on or near December 31, 2002
   $13,300,000               Twelve months ended on or near December 31, 2003
   $13,700,000               Twelve months ended on or near March 31, 2004
   $12,500,000               Twelve months ended on or near June 30, 2004
   $13,100,000               Twelve months ended on or near September 30, 2004
   $12,600,000               Twelve months ended on or near December 31, 2004
   $12,600,000               Twelve months ended on or near March 31, 2005
   $12,800,000               Twelve months ended on or near June 30, 2005
   $13,000,000               Twelve months ended on or near September 30, 2005
   $13,200,000               Twelve months ended on or near December 31, 2005
   $15,525,000               Twelve months ended on or near March 31, 2006
   $15,135,000               Twelve months ended on or  near June 30, 2006
   $14,501,000               Twelve months ended on or near September 30, 2006
   $13,420,000               Twelve months ended on or near December 31, 2006
</TABLE>

                                     - 2 -
<PAGE>

                              B. Consolidated EBITDA, measured on a fiscal
            month-end or quarterly basis (as the case may be), of not less than
            the required amount set forth in the following table for the
            applicable period set forth opposite thereto:

<TABLE>
<CAPTION>
APPLICABLE AMOUNT           APPLICABLE PERIOD
-----------------           -------------------------------------------------
<S>                         <C>
    $4,020,000              Four months ended on or near January 31, 2002
    $5,440,000              Five months ended on or near February 28, 2002
    $7,840,000              Six months ended on or near March 31, 2002
    $9,040,000              Seven months ended on or near April 30, 2002
   $11,600,000              Eight months ended on or near May 31, 2002
   $14,630,000              Nine months ended on or near June 30, 2002
   $16,150,000              Ten months ended on or near July 31, 2002
   $17,370,000              Eleven months ended on or near August 31, 2002
   $20,630,000              Twelve months ended on or near September 30, 2002
   $21,340,000              Twelve months ended on or near October 31, 2002
   $21,750,000              Twelve months ended on or near November 30, 2002
   $22,180,000              Twelve months ended on or near December 31, 2002
   $19,500,000              Twelve months ended on or near December 31, 2003
   $19,000,000              Twelve months ended on or near March 31, 2004
   $18,000,000              Twelve months ended on or near June 30, 2004
   $18,600,000              Twelve months ended on or near September 30, 2004
   $18,600,000              Twelve months ended on or near December 31, 2004
   $19,000,000              Twelve months ended on or near March 31, 2005
   $19,300,000              Twelve months ended on or near June 30, 2005
   $19,500,000              Twelve months ended on or near September 30, 2005
   $19,700,000              Twelve months ended on or near December 31, 2005
   $25,006,000              Twelve months ended on or near March 31, 2006
   $24,688,000              Twelve months ended on or  near June 30, 2006
   $23,315,000              Twelve months ended on or near September 30, 2006
   $20,828,000              Twelve months ended on or near December 31, 2006"
</TABLE>

      5. Conditions and Covenants. This Third Amendment shall become effective
only upon satisfaction in full of the following conditions precedent (the first
date upon which all such conditions have been satisfied being herein referred to
as the "Effective Date"):

            (a) immediately before and after giving effect to this Third
Amendment, the representations and warranties contained in this Third Amendment
and in Section 5 of the Loan Agreement and each other Loan Document shall be
true and correct on and as of the Effective Date as though made on and as of
such date (except where such representations and warranties relate to an earlier
date in which case such representations and warranties shall be true and correct
as of such earlier date);

                                     - 3 -
<PAGE>

            (b) no Default or Event of Default shall have occurred and be
continuing on the Effective Date or would result from this Third Amendment
becoming effective in accordance with its terms;

            (c) Agent shall have received all counterparts of this Third
Amendment, duly executed by the Lenders, the Borrowers and the Guarantors; and

            (d) all legal matters incident to this Third Amendment shall be
reasonably satisfactory to Agent and its counsel.

      6. Continued Effectiveness of the Loan Agreement and the other Loan
Documents. Each Borrower and Guarantor hereby (i) confirms and agrees that each
Loan Document to which it is a party is, and shall continue to be, in full force
and effect and is hereby ratified and confirmed in all respects except that on
and after the Effective Date all references in any such Loan Document to the
"Loan Agreement", "the Loan and Security Agreement", the "Agreement", "thereto",
"thereof", "therein", "thereunder", "hereunder", "herein", "hereof" or words of
like import referring to the Loan Agreement shall mean the Loan Agreement as
modified by this Third Amendment and (ii) confirms and agrees that to the extent
that any such Loan Document purports to assign or pledge to the Agent for the
benefit of the Lenders, or to grant a security interest in or Lien on, any
collateral as security for the obligations of the Borrowers or the Guarantors
from time to time existing in respect of the Loan Agreement and the other Loan
Documents, such pledge, assignment and/or grant of the security interest or Lien
is hereby ratified and confirmed in all respects.

      7. Miscellaneous.

            (a) This Third Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of
this Third Amendment by telefacsimile shall be equally as effective as delivery
of an original executed counterpart of this Third Amendment. Any party
delivering an executed counterpart of this Third Amendment by telefacsimile also
shall deliver an original executed counterpart of this Third Amendment, but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability and binding effect of this Third Amendment.

            (b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Third
Amendment for any other purpose.

            (c) This Third Amendment shall be governed by and construed in
accordance with, the laws of the State of New York.

            (d) Borrowers will pay on demand all reasonable fees, costs and
expenses of the Agent in connection with the preparation, execution and delivery
of this Third Amendment including, without limitation, reasonable fees
disbursements and other charges of Schulte Roth & Zabel LLP, counsel to Agent.

                                     - 4 -
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment, to be executed and delivered as of the date set forth on the first
page hereof.

                          WELLS FARGO FOOTHILL, INC.,
                          a California corporation, formerly known as
                          Foothill Capital Corporation, as Agent and Lender

                          By: /s/ Andrew T. Furlong III
                              ----------------------------------------------
                              Name: Andrew T. Furlong III
                              Title: Vice President

                          ABLECO FINANCE LLC,
                          a Delaware limited liability company, as Lender, for
                          itself and on behalf of its affiliate assignees

                          By: /s/ Kevin Genda
                              ----------------------------------------------
                              Name: Kevin Genda
                              Title: Senior Vice President

<PAGE>

                          AMTROL INC.,
                              a Rhode Island corporation, as BorrowerBy:

                          By: /s/ Joseph L. DePaula
                              ----------------------------------------------
                              Name: Joseph L. DePaula
                              Title:   Executive Vice President, Chief
                              Financial Officer, Treasurer & Secretary

                          WATER SOFT INC.,
                              a Rhode Island corporation, as Borrower

                          By: /s/ Joseph L. DePaula
                              ----------------------------------------------
                              Name: Joseph L. DePaula
                              Title:   Executive Vice President, Chief
                              Financial Officer, Treasurer & Secretary

                          AMTROL CANADA LTD.,
                              an Ontario corporation, as Borrower

                          By: /s/ Joseph L. DePaula
                              ----------------------------------------------
                              Name: Joseph L. DePaula
                              Title:   Executive Vice President, Chief
                              Financial Officer, Treasurer & Secretary

                          AMTROL HOLDINGS, INC.,
                          a Delaware corporation, as Guarantor

                          By: /s/ Joseph L. DePaula
                              ----------------------------------------------
                              Name: Joseph L. DePaula
                              Title:   Executive Vice President, Chief
                              Financial Officer, Treasurer & Secretary

<PAGE>

                          AMTROL INTERNATIONAL INVESTMENTS, INC.,
                          a Rhode Island corporation, as Guarantor

                          By: /s/ Joseph L. DePaula
                              ----------------------------------------------
                              Name: Joseph L. DePaula
                              Title: Executive Vice President, Chief
                                     Financial Officer, Treasurer and Secretary

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