Document:

Exhibit 10.1

                              CONSULTING AGREEMENT
                                     BETWEEN
                         FOUR OAKS BANK & TRUST COMPANY
                                       AND
                                 JOHN W. BULLARD

     THIS  CONSULTING  AGREEMENT  ("Agreement")  is made and entered into by and
between  JOHN W.  BULLARD  ("Consultant")  and FOUR  OAKS  BANK & TRUST  COMPANY
("Bank").

     The Bank, Four Oaks Fincorp.,  Inc. and Longleaf Community Bank are parties
to  a  Merger   Agreement  dated  April  17,  2008  (the  "Merger   Agreement").
Consultant's entry into this Agreement is a condition of the Merger Agreement.

     Additionally,  Consultant has experience beneficial to the Bank's business.
The Bank  desires to retain  Consultant's  consulting  services on the terms and
conditions set forth herein,  and Consultant  desires to provide such consulting
services as an  independent  contractor and is willing to do so on the terms and
conditions set forth herein.

     In  consideration  of the above and the mutual  promises  set forth  below,
Consultant and the Bank agree as follows:

     1. Consulting Services. During the term of this Agreement, Consultant shall
provide to the Bank such consulting  services as may be reasonably  requested by
the Bank upon reasonable notice to Consultant.

     2. Termination of Prior Agreement.  The Bank and Consultant acknowledge and
agree  that:  (i) the  Employment  Agreement  between  Consultant  and  Longleaf
Community Bank dated August 4, 2003 has been  involuntarily  terminated  without
Cause;  (ii) the Bank is not obligated to pay Consultant any "Base Salary" under
that  Employment  Agreement;  and,  (iii) the  "Restriction  Period"  under that
Employment Agreement has expired.

     3.  Term.  The term of this  Agreement  shall be for a period  of three (3)
years, beginning on the Closing, as defined in the Merger Agreement,  and ending
on the third  anniversary  of that date  unless  terminated  earlier as provided
herein.

     4. Consulting Retainer,  Fee and Expenses.  The Bank shall pay Consultant a
retainer in the amount of Fifty  Thousand and No/100  Dollars  ($50,000.00)  per
year for services rendered and obligations  under this Agreement.  Said retainer
shall be paid in substantially equal monthly  installments on the first business
day of each  month  of the  term of this  Agreement.  The  Bank  shall  also pay
expenses   reasonably   incurred  by  Consultant  in  rendering  such  services.
Consultant shall submit monthly invoices for his expenses  incurred in rendering
consulting  services to the Bank,  and the Bank shall pay such  invoices  within
thirty (30) days of receipt of the same.

     5. Independent  Contractor Status. The parties hereby acknowledge and agree
that Consultant's consulting services for the Bank shall be provided strictly as
an  independent  contractor.  Nothing in this  Agreement  shall be  construed to
render him an employee, co-venturer, agent, or other representative of the Bank.
Consultant  understands  that he must comply with all tax laws  applicable  to a
self-employed individual,  including the filing of any necessary tax returns and
the  payment  of all  income and  self-employment  taxes.  The Bank shall not be
required to withhold from the  consulting  fee any state or federal income taxes
or to make payments for Social Security ("FICA") tax, unemployment insurance, or
any other payroll taxes.  The Bank shall not be  responsible  for, and shall not
obtain,  worker's compensation,  disability benefits insurance,  or unemployment
security insurance coverage for Consultant.  Consultant is not eligible for, nor
entitled to, and shall not participate in, any of the Bank's pension, health, or
other benefit  plans,  if any such plans exist.  Consistent  with his duties and
obligations under this Agreement,  Consultant shall, at all times, maintain sole
and  exclusive  control  over the  manner and  method by which he  performs  his
consulting services.
<PAGE>

     6. Trade Secrets,  Confidential Information,  Bank Property and Competitive
Business Activities. Consultant acknowledges that by virtue of his position as a
consultant  with the Bank,  he (i) has or will have access to trade  secrets and
Confidential  Information  (as defined in Section  6.1.5) of the Bank  including
valuable  information  about its business  operations  and entities with whom it
does  business in various  locations,  and (ii) has  developed  or will  develop
relationships  with  parties  with whom it does  business in various  locations.
Consultant also  acknowledges that the Trade Secrets,  Confidential  Information
and Competitive  Business Activities  provisions set forth in this Agreement are
reasonably  necessary to protect the Bank's legitimate business  interests,  are
reasonable  as to  the  time,  territory  and  scope  of  activities  which  are
restricted,  do not  interfere  with public  policy or public  interest  and are
described with sufficient  accuracy and definiteness to enable him to understand
the scope of the restrictions imposed on him.

          6.1.   Trade   Secrets  and   Confidential   Information.   Consultant
acknowledges  that:  (i) the Bank will disclose to him certain trade secrets and
Confidential  Information;  (ii) trade secrets and Confidential  Information are
the sole and exclusive property of the Bank and the Bank owns all rights therein
under  patent,  copyright,  trade  secret,  confidential  information,  or other
property  right;  and (iii) the  disclosure  of trade  secrets and  Confidential
Information  to  Consultant  does not confer upon him any  license,  interest or
rights of any kind in or to the trade secrets or Confidential Information.

            6.1.1.  Consultant  may  use  the  trade  secrets  and  Confidential
Information  only in accordance with applicable Bank policies and procedures and
solely  for the  Bank's  benefit  while he is  retained  by the Bank.  Except as
authorized in the performance of services for the Bank,  Consultant will hold in
confidence and not directly or indirectly, in any form, by any means, or for any
purpose, disclose, reproduce, distribute, transmit, reverse engineer, decompile,
disassemble,  or  transfer  trade  secrets or  Confidential  Information  or any
portion  thereof.  Upon the Bank's request,  Consultant shall return to the Bank
all trade secrets and Confidential  Information and all related materials in his
possession, custody or control.

            6.1.2.  If  Consultant  becomes  subject  to a court  order or other
government  process that could reasonably be expected to require him to disclose
trade secrets or  Confidential  Information  or such  disclosure is necessary to
comply with  applicable law or defend against claims,  he shall:  (i) notify the
Bank promptly before any such disclosure is made; (ii) at the Bank's request and
expense  cooperate  reasonably  with steps the Bank takes to defend against such
disclosure,  including  defending  against the  enforcement  of the court order,
other  government  process or claims;  and (iii) permit the Bank to  participate
with counsel of its choice in any  proceeding  relating to any such court order,
other government process or claims.

            6.1.3.  Consultant's  obligations with regard to trade secrets shall
remain in effect for as long as such  information  shall  remain a trade  secret
under applicable law.

            6.1.4.   Consultant's   obligations   with  regard  to  Confidential
Information  shall  remain in effect  while he is  retained  by the Bank and for
three (3) years thereafter.

            6.1.5. As used in this Agreement,  "Confidential  Information" means
information  other  than  trade  secrets,  that is of  value  to the Bank and is
treated  by the  Bank as  confidential,  including,  but not  limited  to,  such
information  about  the  Bank's  lending  and  deposit  operations,   regulatory
examinations,   customer  identities,  future  business  plans,  pricing,  sales
manuals,  training manuals,  selling and pricing procedures,  financing methods,
financial  statements,  techniques  for  designing,  developing,  manufacturing,
testing or marketing advertising campaigns, and information regarding executives
and employees;  provided,  however,  Confidential  Information shall not include
information which is in the public domain or becomes public knowledge through no
fault of Consultant.
<PAGE>

          6.2.  Bank  Property.  Upon  the  termination  of his  retention  as a
consultant,  Consultant  shall: (i) deliver to the Bank all records,  memoranda,
data,  documents and other property of any description  which refer or relate in
any way to trade  secrets  or  Confidential  Information,  including  all copies
thereof,  which are in his possession,  custody or control;  (ii) deliver to the
Bank all Bank  property  (including,  but not limited to,  keys,  credit  cards,
client files, contracts,  proposals,  work in process,  manuals, forms, computer
stored work in process and other computer data, research materials,  other items
of business information  concerning any Bank customers,  or business or business
methods,  including all copies thereof) which is in his  possession,  custody or
control;  (iii)  cooperate  reasonably  with the Bank to bring all such records,
files and other  materials up to date,  wind up his work, and transfer that work
to other individuals designated by the Bank.

          6.3. Competitive Business Activities.  For a period of three (3) years
from the Closing, as defined in the Merger Agreement, regardless of whether this
Agreement  may  have  been  terminated  earlier  than  the end of  that  period,
Consultant will not engage in the following activities:

            (a) on his  own  or on  another's  behalf,  whether  as an  officer,
director,  stockholder,  partner,  associate,  owner,  employee,  consultant  or
otherwise,  directly or indirectly compete with the Bank within the geographical
areas set forth in Section 6.3.1;

            (b) within the  geographical  areas set forth in Section  6.3.1,  be
retained,  employed,  or otherwise engaged, in (i) a management  capacity,  (ii)
other capacity providing the same or similar services which Consultant  provided
to  the  Bank,  or  (iii)  any  capacity  connected  with  competitive  business
activities  by any person or entity that engages in  competition  with the Bank,
provided, Consultant's services as an independent contractor providing appraisal
or appraisal review services for lending institutions shall not be prohibited by
this Agreement; or

            (c) hire, offer  employment to, or otherwise  solicit for employment
any person  who is  employed  by the Bank at any time  during the three (3) year
period  following the Closing,  as defined in the Merger  Agreement,  or who was
employed by the Bank as of that date.

            6.3.1.  The  restrictions set forth in Sections 6.3(a) and (b) apply
to  Richmond  County,  North  Carolina;  any  county of North or South  Carolina
contiguous  thereto;  any other  county in which the Bank  maintains  a business
office on the date of termination of this Agreement.

            6.3.2.   Notwithstanding  the  foregoing,   Consultant's  ownership,
directly  or  indirectly,  of not  more  than  one  percent  of the  issued  and
outstanding  stock of any bank or  company  the  shares of which  are  regularly
traded on a national securities exchange or in the over-the-counter market shall
not violate Section 5.3.

          6.4.  Remedies.  Consultant  acknowledges that his failure to abide by
the Trade  Secrets,  Confidential  Information,  Bank  Property  or  Competitive
Business Activities provisions of this Agreement would cause irreparable harm to
the Bank for which legal remedies would be inadequate. Therefore, in addition to
any  legal or other  relief  to which  the Bank may be  entitled  by  virtue  of
Consultant's  failure to abide by these provisions:  (i) the Bank may seek legal
and equitable  relief,  including but not limited to  preliminary  and permanent
injunctive  relief,  for Consultant's  actual or threatened  failure to abide by
these  provisions;  and (ii) Consultant will indemnify the Bank for all expenses
including attorneys' fees in seeking to enforce these provisions.
<PAGE>

          6.5. Tolling. The period during which Consultant must refrain from the
activities  set forth in Sections 6.1 and 6.3 shall be tolled  during any period
in which he fails to abide by these provisions.

          6.6.  Other  Agreements.  Nothing in this Agreement  shall  terminate,
revoke or diminish Consultant's obligations to the Bank or the Bank's rights and
remedies  under law or any agreements  relating to trade  secrets,  confidential
information,  non-competition  and  intellectual  property which  Consultant has
executed in the past or may execute in the future or contemporaneously with this
Agreement.

     7.  Severability.  If a court  of  competent  jurisdiction  holds  that any
provision or sub-part thereof contained in this Agreement is invalid, illegal or
unenforceable,  that invalidity, illegality or unenforceability shall not affect
any other provision in this Agreement.  Additionally,  if any of the provisions,
clauses  or  phrases  in  the  Trade  Secrets,  Confidential  Information,  Bank
Property,  and  Competitive  Business  Activities  provisions  set forth in this
Agreement are held unenforceable by a court of competent jurisdiction,  then the
parties desire that such provisions,  clauses,  or phrases be "blue-penciled" or
rewritten by the court to the extent necessary to render them enforceable.

     8.  Termination.  Consultant  may terminate this Agreement upon thirty (30)
days' written  notice to the Bank. The Bank may terminate this Agreement only if
Consultant (i) materially breaches this Agreement;  such a breach would include,
but not be limited to, unreasonably  refusing,  failing to accept, or failing to
complete  consulting  assignments,  provided  that  the  Bank  first  has  given
reasonable  notice to Consultant and an opportunity to cure the breach;  or (ii)
engages  in  dishonesty,  fraud,  felonious  conduct or other  conduct  which is
materially injurious to the Bank. In the event of termination of this Agreement,
regardless of the reason for such  termination,  Consultant shall be entitled to
receive payment of the monthly retainer  amount,  prorated through the last date
he  performs  services,  and  reimbursement  of any then  outstanding  expenses;
Consultant  shall  not be  entitled  to any  other  payments  from the Bank upon
termination.

     9. Entire  Agreement.  This Agreement and any applicable  provisions of the
Merger Agreement: (i) supersede all other understandings and agreements, oral or
written,  between  the parties  with  respect to its  subject  matter;  and (ii)
constitute  the sole  agreement  between the parties with respect to its subject
matter.  Each party acknowledges that with respect to the matters herein: (i) no
representations, inducements, promises or agreements, oral or written, have been
made by any party or by anyone  acting  on  behalf of any  party,  which are not
embodied in this  Agreement;  and (ii) no  agreement,  statement  or promise not
contained in this Agreement  shall be valid.  No change or  modification of this
Agreement  shall be valid or binding  upon the  parties  unless  such  change or
modification is in writing and is signed by the parties.

     10.  Governing  Law.  This  Agreement  shall be governed by,  construed and
enforced in accordance with the laws of the State of North Carolina.

                            [signature page follows]
<PAGE>

     IN WITNESS  WHEREOF,  the parties have entered into this Agreement this the
17th day of April, 2008.

                               CONSULTANT:

                               By: /s/ John W. Bullard
                                   ---------------------------------------------
                                   John W. Bullard

                               FOUR OAKS BANK & TRUST COMPANY:

                               By: /s/ Ayden R. Lee, Jr.
                                   ---------------------------------------------
                                   Name:   Ayden R. Lee, Jr.
                                   Title:  President and Chief Executive Officera5752446ex10_2.htm

     

    EXHIBIT
10.2

     

     

    DEFOROLIMUS API AND TABLET
SUPPLY AGREEMENT

    

     

    THIS
DEFOROLIMUS API AND TABLET SUPPLY AGREEMENT (“Agreement”), is made
and entered into as of May 7, 2008 (the “Effective Date”) by
and among ARIAD Pharmaceuticals, Inc. and ARIAD Gene Therapeutics, Inc., both
Delaware corporations with a principal place of business at 26 Landsdowne
Street, Cambridge, Massachusetts 02139 (collectively, “ARIAD”), Merck &
Co., Inc., a company organized under the laws of New Jersey with offices at One
Merck Drive, Whitehouse Station, New Jersey, 08889-01000, (“MERCK Parent”) and
Merck and Company Incorporated, a company organized under the laws of Delaware
with offices at 5307 Limestone Road, Suite 200, Wilmington, Delaware 19808 ("MACI" and,
collectively with MERCK Parent, "MERCK").  ARIAD
and MERCK are each hereafter referred to individually as a “Party” and together
as the “Parties.”

     

    WHEREAS,
ARIAD has developed and controls certain technology and proprietary materials
related to mTOR inhibitor compounds, including, without limitation, its
proprietary compound, deforolimus (previously known as AP23573);

     

    WHEREAS,
MERCK is engaged in the research, development and commercialization of human
therapeutics;

     

    WHEREAS,
the Parties have entered into a Collaboration Agreement dated as of July 11,
2007 (the “Collaboration
Agreement”);

     

    WHEREAS,
ARIAD is currently Manufacturing Clinical Product and API for use in Clinical
Trials;

     

    WHEREAS,
ARIAD desires to sell and MERCK desires to purchase API to be used by MERCK in
the Manufacture of Clinical Product (after Clinical Product Transfer), Marketed
Product and MERCK Product;

     

    WHEREAS,
MERCK desires to sell and ARIAD desires to purchase Marketed Product for use,
sale and distribution by ARIAD in the Field in the ARIAD Territory;

     

     

     

     

     

    Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

    to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    WHEREAS,
ARIAD (prior to Clinical Product Transfer) and MERCK (after Clinical Product
Transfer) will supply Clinical Product for use by both Parties in Clinical
Trials under the Collaboration Agreement;

     

    WHEREAS,
ARIAD, pursuant to the terms of the Collaboration Agreement, has granted to
MERCK a license to use certain ARIAD Technology and ARIAD Patent Rights to
Manufacture Product;

     

    WHEREAS,
ARIAD and MERCK desire to enter into this Agreement which sets forth the terms
and conditions under which (i) ARIAD will supply MERCK with API and Clinical
Product (prior to the Clinical Product Transfer), and (ii) MERCK will supply
ARIAD with Clinical Product (after Clinical Product Transfer) and Marketed
Product, in each case to be used and or sold in the Field in the Territory
pursuant to the terms of the Collaboration Agreement, it being understood that
this Agreement only applies to API and to Clinical Product, Marketed Product and
MERCK Product in tablet form.

     

    NOW,
THEREFORE, in consideration of the mutual covenants contained herein, and for
other good and valuable consideration, the Parties hereto, intending to be
legally bound, hereby agree as follows:

     

    ARTICLE
I.

     

    DEFINITIONS

     

    Terms
defined in the Collaboration Agreement shall have the same meaning in this
Agreement unless otherwise provided.  The following additional terms,
shall have the respective meanings set forth below:

     

    1.1. “API” means the active
pharmaceutical ingredient known as AP23573 or deforolimus.

     

    1.2. "Approved
Manufacturer" shall mean any Third Party manufacturer, as the case may be
(i) with which ARIAD or any of its Affiliates contracts for the Manufacture of
Clinical API or Commercial API, any intermediate for API, or Clinical Product
(prior to the Clinical Product Transfer), or (ii) with which MERCK or any of its
Affiliates contracts for the Manufacture of Clinical Product (after the Clinical
Product Transfer), Marketed Product or MERCK Product, in each case (clause (i)
or (ii)) in order to fulfill its obligations under this Agreement, and which has
been approved as set forth in Section 2.5(b).

     

     

    
       

       

       

      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

     

     

    1.3. “ARIAD Decision” has
the meaning set forth in the Collaboration Agreement.

     

    1.4. “ARIAD Medical Device
Collaborator” means a Third Party to which ARIAD has granted or hereafter
grants a license to develop and commercialize Medical Devices delivering a
Collaboration Compound.

     

    1.5. "ARIAD Territory"
means the U.S. Territory unless a U.S. Commercialization Transfer has occurred
in which case there will no longer be an ARIAD Territory.

     

    1.6. “Batch” means a
specific quantity of API that is of uniform character and quality and is
produced during the same cycle of Manufacture using defined amounts of
Materials.

     

    1.7. “Batch Record” means,
as the case may be, documentation maintained, used and completed by (i) ARIAD
or  its Approved Manufacturer for a specific Batch of API or Lot of
Clinical Product (prior to Clinical Product Transfer) detailing, as the case may
be, the API or Clinical Product Manufacturing, or (ii) MERCK or its Approved
Manufacturer for a specific Lot of Clinical Product (after Clinical Product
Transfer) or Marketed Product detailing, as the case may be, the Clinical
Product or Marketed Product Manufacturing, in each case (i) or (ii) in
accordance with Article 8.

     

    1.8. “Bulk Packaging” means
packaging of Product in bulk drums as described in the
Specifications.

     

    1.9. "Business Day" means
any day other than Saturday, Sunday or a day on which banking institutions in
the Commonwealth of Massachusetts or the State of New Jersey are permitted or
obligated to close.

     

    1.10.  “Calendar Quarter”
means each quarterly period consisting of three consecutive Months ending on
March 31, June 30, September 30, or December 31, respectively.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

     

     

    1.11.  “Calendar Year” means
each successive period of twelve Months commencing on January 1 and ending on
December 31.

     

    1.12.  “Certificate of
Analysis” means, as the case may be, the certificate provided by (i)
ARIAD or its Approved Manufacturer with respect to API or Clinical Product
(prior to Clinical Product Transfer), or (ii) MERCK or its Approved Manufacturer
with respect to Clinical Product (after Clinical Product Transfer) or Marketed
Product, that in either case (i) or (ii) meets the requirements of Section
8.1(g) or 8.2(g) as applicable.

     

    1.13.  “Certificate of Manufacturing
Compliance” means, as the case may be, a document, signed by an
authorized representative of the Quality Unit of (i) ARIAD or its Approved
Manufacturer, attesting that a particular Lot of Clinical Product (prior to
Clinical Product Transfer) (including the API incorporated therein) or Batch of
API, or (ii) MERCK or its Approved Manufacturer, attesting that a particular Lot
of Clinical Product (after Clinical Product Transfer) or Marketed Product, in
each case (clauses (i) or (ii)) was Manufactured in accordance with the
Specified Regulatory Requirements.

     

    1.14.  “cGMP” means current
Good Manufacturing Practices that apply to the Manufacture of API, Clinical
Product,  Marketed Product and MERCK Product, as set forth in (i) the
United States regulations set forth under Title 21 of the United States Code of
Federal Regulations, parts 210, 211 and 600-680, as may amended from time to
time, as well as all applicable guidance published by the FDA from time to time,
(ii) good manufacturing practices set forth in the European Community directive
2003/94/EC, Directive 2001/83/EC, all relevant implementations of such
directives and relevant guidelines including Volume 4 of the Rules Governing
Medicinal Products in the European Union: Medicinal Products for Human and
Veterinary Use:  Good Manufacturing Practices, and (iii) all
applicable ICH guidelines.  In addition, for API or Product to be
Manufactured, used in Clinical Trials or sold in [***] in accordance with
Section 8.3, “cGMP” shall also include current Good Manufacturing Practices that
apply to the Manufacture of API or Product as set forth in all laws, rules,
regulations, guidelines or requirements pertaining to manufacturing practices
for API or Product of each of such jurisdictions in which such API or Product is
to be Manufactured, used for Clinical Trials or sold.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

    

     

     

    1.15.  "Clinical API" means
API (i) used to make Clinical Product or (ii) used for any other purpose in the
Development Program, whether intended for human use or not.

     

    1.16.  "Clinical Product"
means Product in Standard Delivered Form for use by MERCK and ARIAD and their
Affiliates and Sublicensees in Clinical Trials, the Development Program or for
other non-commercial uses.

     

    1.17.  "Clinical Quality
Agreement" means the written agreement (or agreements) to be agreed to by
the holder of the Clinical Regulatory Approval, the applicable Party supplying
Clinical Product (i.e., ARIAD prior to a Clinical Product Transfer and MERCK
after a Clinical Product Transfer) or supplying Clinical API, setting out the
quality assurance standards to be applicable to the Manufacturing process for
Clinical Product or Clinical API.

     

    1.18.  "Clinical Regulatory
Approval" means permission by the applicable Regulatory Authority to
conduct Clinical Trials of a Product in a country in the Territory and the
document indicating that such permission has been granted.

     

    1.19.  "Clinical Trial" has
the meaning set forth in the Collaboration Agreement.

     

    1.20.  “Commercial API”
means API used to make Marketed Product or MERCK Product.

     

    1.21.  “Commercialization
Expense” has the meaning set forth in the Collaboration
Agreement.

     

    1.22.  "Commercialization Regulatory
Approval" has the meaning set forth in the Collaboration
Agreement.

     

    1.23.  “Commercially Reasonable
Efforts” has the meaning set forth in the Collaboration
Agreement.  For clarity, when the words “commercially reasonable
efforts” appear in this Agreement without capital letters, the meaning in the
Collaboration Agreement shall not apply, and the words shall have their ordinary
meaning in the English language.

     

    1.24.  "Control" has the
meaning set forth in the Collaboration Agreement.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

    

     

    1.25.  "Delivery" means
delivery of API, Clinical Product or Marketed Product or MERCK Product (in the
event that ARIAD is supplying MERCK Product under Section 2.7), as the case may
be, in accordance with Section 5.7, and “Delivered” has a correlative
meaning.

     

    1.26.  “Development Cost” has
the meaning set forth in the Collaboration Agreement.

     

    1.27.  "Development Program"
has the meaning set forth in the Collaboration Agreement, but is limited to the
Product.

     

    1.28.  “DMF” has the meaning
set forth in the Collaboration Agreement.

     

    1.29.  “EMEA” means the
European Agency for the Evaluation of Medicinal Products, sometimes referred to
as the European Medicines Agency, or any successor agency.

     

    1.30.  “FDA” has the meaning
set forth in the Collaboration Agreement.

     

    1.31.  “FDCA” has the meaning
set forth in the Collaboration Agreement.

     

    1.32.  "Field" has the
meaning set forth in the Collaboration Agreement.

     

    1.33.  “Firm Order” means a
binding purchase order that complies with the requirements set forth in Section
5.3.

     

    1.34.  "First Commercial
Sale" means with respect to Product in the Territory, the first sale,
transfer or disposition for value by a Party, its Affiliates or Sublicensees to
a Third Party in the Territory; provided, however, that (i) any such sale to an
Affiliate or Sublicensee of a Party for its territory will not constitute a
First Commercial Sale unless the Affiliate or Sublicensee is the last entity in
the distribution chain of the Product, and (ii) any sale in a jurisdiction for
“compassionate use,” on a “named patient” basis or any similar sale for a
limited number of patients prior to Commercialization Regulatory Approval in
such jurisdiction will not constitute a First Commercial Sale.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

    

    1.35.  “ICH” means the
International Conference on Harmonization of Technical Requirements for
Registration of Pharmaceuticals for Human Use.

     

    1.36.  "Initial Period" means
(a) with respect to a particular MERCK Product in the MERCK Territory, the
period starting upon First Commercial Sale of such MERCK Product and lasting
until [***] ([***]) years thereafter and (b) with respect to a particular
Marketed Product in the ARIAD Territory, the period starting upon First
Commercial Sale of such Marketed Product and lasting until [***] ([***]) years
thereafter.

     

    1.37.  “Lot” means a specific
quantity of Product in tablet form that is of uniform character and quality and
is produced during the same cycle of Manufacture.

     

    1.38.  "Manufacture,”
”Manufacturing,” or “Manufactured" means (i) with respect to API, all
operations in the manufacture, receipt, incoming inspections, storage and
handling of Materials therefor, and the manufacturing, processing, fermentation,
purification, packaging, labeling, warehousing, quality control testing
(including in-process release and stability testing), and shipping thereof, and
(ii) with respect to Clinical Product, Marketed Product and MERCK Product, all
operations in the manufacture, receipt, incoming inspections, storage and
handling of Materials therefor, and the manufacturing, formulating, packaging,
labeling, warehousing, quality control testing (including in-process release and
stability testing), release and shipping thereof.

     

    1.39.  “Manufacturing Cost”
means, with respect to any API, Clinical Product, Marketed Product or any
intermediate of any of them, Manufactured by or on behalf of the Party
responsible for Manufacturing such item as set forth herein (the "Manufacturing
Party"), the Manufacturing Party's costs (including the costs associated
with product testing and release activities) of Manufacturing such API, Clinical
Product, Marketed Product (in Standard Delivered Form in the case of Clinical
Product or Marketed Product) or intermediate of any of them in accordance with
the terms of this Agreement, including the following components:

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

    

     

    I.    For API,
Clinical Product, Marketed Product or any intermediate of any of them
Manufactured at a Manufacturing Facility owned and operated by the Manufacturing
Party or its Affiliates:

     

    A.    Direct
Manufacturing Costs[***]

     

    (i)    [***]

     

    (ii)   [***]

     

    (iii)   [***] that can be
directly attributed to the [***], such as [***] and [***], and [***] on [***]
that can be directly attributed to the [***].[***]

     

    B.    Indirect
Factory Overhead and Manufacturing Support Costs

     

    
      	
              ·  

            	
              (i)           Allocations
      of indirect factory overhead and Manufacturing support costs, such as
      [***] and [***] and [***] and [***], and [***].[***]Indirect overhead
      costs shall be allocated to [***] such as [***], and [***].  It
      is the intention of the Parties that the[***] and [***] at a[***] be used
      for [***] and that cost allocations [***] shall be made based on [***] to
      a [***].

            

    

     

    II.    For API,
Clinical Product, Marketed Product or any intermediate of any of them outsourced
to an Approved Manufacturer:

     

    
      A.    External
manufacturing fees, including freight and duty

       

      
        B.    Internal
Manufacturing Support Costs

      

    

     

    (i)           Allocations
of the Manufacturing Party’s internal Manufacturing support costs, such as [***]
and [***] and [***], and [***].  It is the intention of the
Parties  that [***] and be based on [***] to [***] or any [***]of any
of [***] on the [***] manufacturing support costs.

     

    1.40.  “Manufacturing
Development” has the meaning set forth in the Collaboration
Agreement.

     

    1.41.  “Manufacturing Facility” or
"Facility" whether singular or plural, means, collectively and
individually, the manufacturing facility or facilities disclosed in a written
schedule prepared and signed by the ARIAD Co-Chair of the JMC and delivered to
MERCK with respect to ARIAD (an "ARIAD Facility" or
"ARIAD Manufacturing
Facility") and disclosed in a written schedule prepared and signed by the
MERCK Co-Chair of the JMC and delivered to ARIAD with respect to MERCK (a "MERCK Facility" or
"MERCK Manufacturing
Facility"), at which ARIAD or MERCK, as the case may be, Manufactures or
stores, or arranges to have Manufactured or stored, API, Clinical Product,
Marketed Product or MERCK Product or any intermediate thereof.  Each
Party may update such schedule of its Manufacturing Facilities from time-to-time
in accordance with the terms hereof.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

    

     

     

    1.42.  “Manufacturing
Know-How” means technology and documentation with respect to Manufacture
of Clinical API, Commercial API, Clinical Product or Marketed Product, as the
case may be, including but not limited to all Manufacturing know-how, such as
identities of Materials, suppliers, analytical methods, quality standards,
specifications, formulas, process chemistry, Manufacturing process descriptions,
process flows, cycle times, process parameters, process equipment type and
sizes, cleaning methods, samples, master safety data sheets, and stability
reports.

     

    1.43.  "Marketed Product"
means Product in such form of tablet as the JCC may determine pursuant to
Section 2.5, in Standard Delivered Form, which, if delivered in Bulk Packaging,
will be further packaged for commercial sale or distribution in the ARIAD
Territory by ARIAD, its Affiliates or Sublicensees.

     

    1.44.  “Materials” means all
raw materials, including without limitation, API, intermediates, excipients,
components, containers, labels, and packaging materials necessary for the
Manufacture of API, Clinical Product and Marketed Product.  For the
avoidance of doubt, API shall not be considered a “Material” with respect to the
Manufacture of API.

     

    1.45.  “Medical Device” has
the meaning set forth in the Collaboration Agreement.

     

    1.46.  “MERCK Decision” has
the meaning set forth in the Collaboration Agreement.

     

    1.47.  "MERCK Product" means
Product for commercial sale or distribution in the MERCK Territory by MERCK, its
Affiliates or Sublicensees.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

    

     

    1.48.  "MERCK Territory"
shall mean the ROW Territory except in the event of a U.S. Commercialization
Transfer, when it shall mean the Territory.

     

    1.49.  “Month” means a
calendar month.

     

    1.50.  "Ordering Party" means
the Party that submits a Firm Order pursuant to Section 5.3.

     

    1.51.  "Person" has the
meaning set forth in the Collaboration Agreement.

     

    1.52.  “Placebo” means any
inert dosage preparations for use in Clinical Trials in such form as the JDC
determines from time to time.

     

    1.53.  "Primary Packaged
Product" means Product in packaged form as described in the
Specifications.

     

    1.54.  “Primary Packaging”
means primary packaging of Product as described in the
Specifications.

     

    1.55.  “Product” has the
meaning set forth in the Collaboration Agreement; provided that in this
Agreement, Product shall only include products in which the Collaboration
Compound is deforolimus.

     

    1.56.  "Quality Agreement(s)"
means (i) the Clinical Quality Agreement(s) with respect to Clinical API and
Clinical Product, and (ii) the written agreements to be agreed upon by (a) MERCK
and ARIAD with respect to MERCK's Manufacture of Marketed Product and MERCK
Product, (other than with respect to Japan), (b) MERCK and ARIAD and any
Approved Manufacturer of Commercial API or rapamycin used to Manufacture
Commercial API, with respect to the Manufacture of rapamycin or Commercial API,
and (c) MERCK, ARIAD and Banyu Pharmaceutical Co., Ltd., a company organized and
existing under the laws of Japan and having its principal office at Kitanomaru
Square, 13-12, Kudankita 1-chome, Chiyoda-ku, Tokyo, Japan and any Approved
Manufacturer of Commercial API or rapamycin used to Manufacture Commercial
API, with respect to the
Manufacture of rapamycin, Commercial API, and MERCK Product (with respect to
Japan).

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

    

     

    1.57.  “Quality Assurance
Systems” means the procedures (i) established by ARIAD or an Approved
Manufacturer with respect to Clinical Product (prior to Clinical Product
Transfer) and API to ensure that such Clinical Product and API, as the case may
be, is Manufactured in compliance with the terms of this Agreement relating to
the quality of such API or Clinical Product (including conformity with Specified
Regulatory Requirements), any Materials, and applicable Specifications for
Manufacture of Clinical Product and API and conformity with the applicable
Quality Agreement(s), and (ii) established by MERCK or an Approved Manufacturer
with respect to Clinical Product (after Clinical Product Transfer) and Marketed
Product and MERCK Product to ensure that such Clinical Product, Marketed Product
or MERCK Product, as the case may be, is Manufactured in compliance with the
terms of this Agreement relating to the quality of such Product (including
conformity with Specified Regulatory Requirements), any Materials, and
conformity with applicable Specifications for Manufacture of Clinical Product,
Marketed Product and MERCK Product and the applicable Quality Agreement(s),
including, in both clauses (i) or (ii)  without limitation, processes,
test methods, sampling plans, Standard Operating Procedures, and specifications
for Materials.

     

    1.58.  “Quality Unit” means
the department within ARIAD, MERCK or their respective Approved Manufacturers’
organization that is responsible for implementation of the Quality Assurance
Systems.

     

    1.59.  “Regulatory Approval”
has the meaning set forth in the Collaboration Agreement.

     

    1.60.  “Regulatory
Authority” has the meaning set forth in the Collaboration
Agreement.

     

    1.61.  “Regulatory Filing”
has the meaning set forth in the Collaboration Agreement.

     

    1.62.  "Related Party (ies)"
means MERCK’s Affiliates, distributors and their respective Sublicensees, or
ARIAD’s Affiliates, distributors and their respective Sublicensees, as
applicable.

     

    1.63.  
“ROW Territory”
has the meaning set forth in the Collaboration Agreement.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

    

     

    1.64.  "Secondary Packaged
Product" means Primary Packaged Product that has been put in Secondary
Packaging as described in the Specifications.

     

    1.65.  "Secondary Packaging"
means secondary packaging of Product as described in the
Specifications.

     

    1.66.  “Specifications” means
the specifications for any Clinical API, Commercial API, Clinical Product,
Marketed Product or MERCK Product, as the case may be, including the Bulk
Packaging, Primary Packaging and Secondary Packaging thereof, determined as set
forth in Sections 4.1 and 4.2.  For clarity, the Specifications for
Clinical API may be different from the Specifications for Commercial API, the
Specifications for Marketed Product and MERCK Product may be different from the
Specifications for Clinical Product, and the Specifications for MERCK Product
may be different from the Specifications for Marketed Product.

     

    1.67.  “Specified Regulatory
Requirements” means (i) applicable cGMPs and all other applicable laws,
rules, regulations, guidelines or requirements of the FDA, the EMEA, the ICH,
and [***]; (ii) commencing at such time as MERCK is conducting any Clinical
Trial in [***], the applicable cGMPs and all other applicable laws, rules,
regulations, guidelines or requirements of [***], as appropriate, pertaining to
the use of Clinical Product in a Clinical Trial in such jurisdiction; and (iii)
commencing at such time as MERCK is selling MERCK Product in [***], the
applicable cGMPs and all other applicable laws, rules, regulations, guidelines
or requirements of [***], as appropriate, pertaining to the sale of MERCK
Product in such jurisdiction.

     

    1.68.  “Standard Delivered
Form” means Product in tablet form and packaged as set forth in Section
2.4 in accordance with the applicable Specifications.

     

    1.69.  “Standard Operating
Procedures” or “SOPs” means documented and controlled written procedures
established to standardize and inform personnel of accepted procedures for
conducting operations involved in Manufacturing, or any other defined cGMP
activity.

     

    1.70.  “Sublicensee” has the
meaning set forth in the Collaboration Agreement.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

    

     

    1.71.  "Territory" has the
meaning set forth in the Collaboration Agreement.

     

    1.72.  “Third Party” has the
meaning set forth in the Collaboration Agreement.

     

    1.73.     
“U.S.
Commercialization Transfer” has the meaning set forth in the
Collaboration Agreement.

     

    1.74.  “U.S. Territory” has
the meaning set forth in the Collaboration Agreement.

     

    Additional
Definitions.  In addition, each of the following terms has the
respective meaning set forth in the Section of this Agreement indicated
below:

     

    
      	 	 	
              Definition

            	
              Section

            
	 	 	 
	 	Added Regulatory
      Jurisdiction 	8.3 
	 	 	 
	 	API Safety
      Stock	3.5(a) 
	 	 	 
	 	Approved
      Solution 	2.6(a)(i) 
	 	 	 
	 	ARIAD
      Indemnitees	12.2 
	 	 	 
	 	ARIAD API
      Manufacturing Know-How 	2.6(b)(i) 
	 	 	 
	 	ARIAD API Safety
      Stock	3.5(a) 
	 	 	 
	 	ARIAD Safety
      Stock 	4.5(a) 
	 	 	 
	 	Auditing
      Party 	7.3(b) 
	 	 	 
	 	Claims 	12.1 
	 	 	 
	 	Clinical Delivery
      Time 	5.1 
	 	 	 
	 	Clinical Product
      Transfer 	3.1
	 	 	 
	 	Collaboration
      Agreement 	third
      recital 
	 	 	 
	 	Dispute
      Notice 	2.6(a)(iii) 
	 	 	 
	 	Disputed
      Product	6.4(a) 

    

     

     

     

    
       

       

      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

    

                                                                                       

    
    

     

    
      	 	Disputing
      Party 	6.4(a) 
	 	 	 
	 	Effective
    Date	introductory
      paragraph 
	 	 	 
	 	First Delivery
      Month	5.2
	 	 	 
	 	Indemnified
      Party	12.4
	 	 	 
	 	Indemnifying
      Party	12.4 
	 	 	 
	 	JMC	2.9 
	 	 	 
	 	Live Agent	8.1(m) 
	 	 	 
	 	Long Range
    Plan	5.4
	 	 	 
	 	Losses	12.1
	 	 	 
	 	Manufacturing
      Party	1.39
	 	 	 
	 	[***] Safety
      Stock	3.5(a)
	 	 	 
	 	MERCK
      Indemnitees	12.1
	 	 	 
	 	MERCK Product
      Manufacturing Know-How	2.6(b)(i)
	 	 	 
	 	MERCK API Safety
      Stock	3.5(a)
	 	 	 
	 	MERCK Safety
      Stock	3.5(a)
	 	 	 
	 	Notifying
    Party	2.6(a)
	 	 	 
	 	Ongoing
      Patients	2.12
	 	 	 
	 	Parties	introductory
      paragraph
	 	 	 
	 	Party	introductory
      paragraph
	 	 	 
	 	Proposed
      Solution	2.6(a)(iii)
	 	 	 
	 	[***] Delivery
      Failure 	2.6(d)
	 	 	 
	 	Registered Technical
      Parameter Change	8.4
	 	 	 
	 	Registered Technical
      Parameters	8.4
	 	 	 
	 	Release
      Condition	2.6(a)(iii)

    

     

     

     

     

     

    Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

    to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

      
      

       

      
        	 	Release
    Notice	2.6(a)(iii)
	 	 	 
	 	S&OP
    Team	2.5(c)
	 	 	 
	 	Second API
      Manufacturer	4.9
	 	 	 
	 	Standard
      Manufacturing Cost	7.1(b)(ii)
	 	 	 
	 	Supply
    Failure	2.6(d)
	 	 	 
	 	Supplying
    Party	2.6(a)(iii)
	 	 	 
	 	Term	10.1

      

       

       

    

    ARTICLE
II.

     

    OBLIGATIONS AND RIGHTS OF
THE PARTIES

     

    2.1.  Engagement of MERCK as
Manufacturer of Marketed Product; Manufacture of MERCK Product by
MERCK.  ARIAD and/or its Affiliates hereby agree to purchase
from MERCK, and MERCK agrees to supply to ARIAD or its Affiliates Marketed
Product for the ARIAD Territory in accordance with the terms and conditions set
forth herein.  ARIAD agrees that MERCK shall be the exclusive supplier
of Marketed Product to ARIAD, unless ARIAD exercises its rights under Section
2.6.  In addition, MERCK shall be obligated to supply all MERCK
Product required for sale by MERCK in the MERCK Territory pursuant to the
Collaboration Agreement in accordance with the terms and conditions set forth
herein.

     

    2.2.  Engagement of ARIAD as
Manufacturer of API; Manufacture of API by ARIAD.  MERCK and/or
its Affiliates hereby agree to purchase from ARIAD, and ARIAD agrees to supply
to MERCK or its Affiliates the Commercial API needed for MERCK, its Affiliates
and its Approved Manufacturers to Manufacture Marketed Product required by ARIAD
pursuant to Section 2.1, and the Commercial API required by MERCK, its
Affiliates and its Approved Manufacturers to Manufacture MERCK Product, in
accordance with the terms and conditions set forth herein.  MERCK
agrees that ARIAD shall be the exclusive supplier of Commercial API to MERCK,
its Affiliates and its Approved Manufacturers, unless MERCK exercises its rights
under Section 2.6.

     

     

     

    
       

       

      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

    

     

     

    2.3.  Supply of Clinical Product
and Clinical API.  ARIAD agrees to supply Clinical Product
before the Clinical Product Transfer to MERCK or its Affiliates for use by MERCK
in Clinical Trials and to supply Clinical API to MERCK for the Manufacture of
Clinical Product after Clinical Product Transfer, and MERCK agrees to supply
Clinical Product after the Clinical Product Transfer to ARIAD or its Affiliates
for use by ARIAD in Clinical Trials, in each case as set forth in Annual Global
Development Plans and Article V hereof. MERCK agrees that ARIAD shall be the
exclusive supplier of Clinical Product before the Clinical Product Transfer and
Clinical API for the Manufacture of Clinical Product before and after Clinical
Product Transfer.  ARIAD agrees that MERCK shall be the exclusive
supplier of Clinical Product after the Clinical Product Transfer.

     

    2.4.      Determination of Standard
Delivered Form; Product Labels.

     

    (a) The
determination of Standard Delivered Form for Clinical Product and Marketed
Product shall be made by the JDC (with input from the JMC in both cases and with
input from the JCC pursuant to Section 2.3.4(d) of the Collaboration Agreement
in the case of Marketed Product), as follows:

     

    (i)           Unless
otherwise determined by the JDC with input from the JMC, for Clinical Product,
Standard Delivered Form shall mean Product in tablet form as determined by the
JDC pursuant to Section 2.5 packaged in Primary Packaging.

     

    (ii)           MERCK
shall perform stability testing (in accordance with the Manufacturing
Development sections of the Annual Global Development Plan) on Product in tablet
form (as determined by the JDC pursuant to Section 2.5) stored in Bulk Packaging
and shall report the results of such stability testing to the JMC and
JDC

     

    (iii)           If
the JCC, with input from the JMC, determines that the results of such stability
testing demonstrate sufficient bulk hold time for Standard Delivered Form for
Marketed Product to be in Bulk Packaging, then for Marketed Product, Standard
Delivered Form shall mean Product in such tablet form packaged in Bulk
Packaging.  If the JCC, with input from the JMC, determines that the
results of such stability testing do not demonstrate sufficient bulk hold time
for Standard Delivered Form for Marketed Product to be in Bulk Packaging, then
for Marketed Product, Standard Delivered Form shall mean Secondary Packaged
Product as set forth in the Specifications for Marketed
Product.  Notwithstanding the foregoing, the JCC, with input from the
JMC, may determine that Standard Delivered form for some or all of Marketed
Product shall be in packaging other than Bulk Packaging or Secondary Packaging,
provided that such other packaging shall comply with the
Specifications.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

    

     

    (b) If
Standard Delivered Form for Marketed Product is determined to be Secondary
Packaged Product, MERCK will be responsible for procuring all packaging and
labeling materials.  The JCC, with input from the JMC, will determine
the timing and procedures for design of all labels for Marketed Product so that
such labels can be produced or acquired by MERCK in a timely
manner.

     

    2.5.    Decision Making Matters
under this Agreement.

     

    (a) The
determination of (i) the form of tablet of Clinical Product, MERCK Product or
Marketed Product, (ii) modifications to Standard Delivered Form, and (iii) the
Specifications of any API, MERCK Product, Marketed Product or Clinical Product
shall be made by the JDC (in the case of Clinical Product and Clinical API) or
the JCC (in the case of MERCK Product, Marketed Product and Commercial API), in
both cases with input from the JMC, all in accordance with the decision-making
and dispute resolution procedures in the Collaboration Agreement; provided,
however, that the determination of Specifications for Secondary Packaging for
MERCK Product and Primary Packaging for MERCK Product if Standard Delivered Form
is Bulk Packaging shall be made by MERCK and not by the JCC.  For the
avoidance of doubt, (i) matters reserved in this Agreement to a particular Party
(such as the right of consent) shall not be JMC, JSC, JDC, or JCC
decision-making matters, and (ii) no decision that is delegated to the JMC, JSC,
JDC or JCC hereunder shall be [***] or a [***].

     

    (b) ARIAD has
previously advised MERCK in writing of the Third Parties currently Manufacturing
rapamycin, API and Clinical Product under agreements with ARIAD.  The
Parties agree that such Third Parties are Approved Manufacturers.  If
either Party wishes to contract with a Third Party to Manufacture API, Clinical
Product, Marketed Product, MERCK Product or any intermediate of any of them, it
shall give written notice to the JMC which shall identify the Third Party, the
items to be Manufactured by the Third Party and the Third Party’s
qualifications.  The JMC shall review the information submitted and
consider the approval of the Manufacture of such item by the Third Party, such
approval not to be unreasonably withheld.  If the JMC does not give
written notice of any objection or referral of the matter to the JSC to the
proposing Party within [***] ([***]) days of receipt of written notice from the
proposing Party, the JMC shall be deemed to have approved the proposed Third
Party Manufacturer, which shall be an Approved Manufacturer.  If the
JMC gives a written objection to the proposed Third Party Manufacturer or is
unable to reach a decision within such [***] ([***]) day period, the matter
shall be referred to the JSC for resolution in accordance with Section 2.1.5 of
the Collaboration Agreement.  If the JSC approves the proposed Third
Party manufacturer, it shall be an Approved Manufacturer.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

    

     

     

    (c) MERCK and
ARIAD shall establish a Sales and Operations Planning Team (“S&OP Team”),
with an equal (but not less than two (2)) number of representatives from each
Party, who shall be persons with direct responsibility for aspects of the
Manufacture and supply of API, Clinical Product, Marketed Product and MERCK
Product.  Each Party shall have the right at any time to substitute
individuals, on a permanent or temporary basis, for its previously designated
representatives on the S&OP Team.  The S&OP Team shall meet
monthly and address day-to-day demand management and supply performance and
provide input for resolution of supply shortfalls or other supply
issues.  Without limiting the foregoing, MERCK Safety Stock and ARIAD
Safety Stock targets and levels shall be reviewed as part of the monthly
S&OP Team meeting.  Proposed changes to any safety stock target
will be submitted to the JCC for review and approval.  The S&OP
Team will notify the JMC and JCC of deviations of [***] percent ([***]%) or more
from target safety stock levels.  In the event of significant
deviations in safety stock levels from the target, plans shall be developed by
the S&OP Team to return to the target levels within [***] ([***])
days.  These plans and progress towards attainment will be
communicated to the JMC and the JCC.

     

    2.6.    Failure to Supply Commercial
API or Marketed Product.  This Section 2.6 and Section 2.7
shall apply to Commercial API and Marketed Product, and not to Clinical API and
Clinical Product, as set forth in Section 2.10.

     

    (a)           (i)           If
the Party being supplied (the “Notifying Party”) believes in good faith that a
[***] Delivery Failure (as defined in Section 2.6(d) below) has occurred, the
Notifying Party shall notify the JMC of the [***] Delivery
Failure.  The JMC shall promptly determine if a [***] Delivery Failure
has occurred, and if so, shall consider modifications in the Manufacture of
Commercial API or Marketed Product, as the case may be, to potentially eliminate
or mitigate the cause of the [***] Delivery Failure.  Each Party shall
propose to the JMC and the Supplying Party all such modifications of which it is
aware.  The JMC shall consider such modifications, and if (u) the JMC
determines that any of such modifications that can be implemented by the
Supplying Party (an “Approved Solution”) would potentially eliminate or mitigate
the cause of the [***] Delivery Failure, (v) the Supplying Party agrees to
implement any of the Approved Solutions, and (w) the implementation of the
Approved Solution results in there being no [***] Delivery Failure as a result
of the problem that caused the [***] Delivery Failure addressed by the Approved
Solution in either of the [***] ([***]) Calendar Quarters following
implementation of the Approved Solution, then the [***] Delivery Failure in
question shall not be included in determining whether a Supply Failure has
occurred.  If (x) the JMC determines that no modifications have been
proposed which can be Approved Solutions, (y) the JMC determines there is one or
more Approved Solutions but the Supplying Party does not agree to adopt any
Approved Solution, or (z) the Supplying Party adopts an Approved Solution, but a
[***] Delivery Failure occurs in either of the next [***] ([***]) Calendar
Quarters as a result of the problem that caused the [***] Delivery Failure
addressed by the Approved Solution, then the [***] Delivery Failure in question
shall be included in determining if a Supply Failure has occurred.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

    

     

     

    (ii)           In
the event there have been [***] Delivery Failures that will be included in
determining if a Supply Failure has occurred (as set forth in Section 2.6(a)(i))
in any period of [***] ([***]) consecutive Calendar Quarters, and if the
Notifying Party notifies the Supplying Party in writing of  a Proposed
Solution (as defined below) which the Supplying Party (as defined below) does
not dispute (as described in Section 2.6(a)(iii)), then the Notifying Party may
begin discussions [***] or take other steps [***] the Proposed Solution, and
[***] from the Notifying Party, the Supplying Party [***] of all [***] by the
Supplying Party that [***] for the Notifying Party to [***] or
[***].

     

    (iii)           “Release
Condition” means either (x) the undisputed occurrence of a Supply Failure (as
defined in Section 2.6(d) below) and an undisputed Proposed Solution or (y) in
the event of a disputed occurrence of a Supply Failure and/or a disputed
Proposed Solution, a final decision (as set forth below in this Section 2.6(a))
that a Supply Failure has occurred and the Proposed Solution is
acceptable.  If the Notifying Party in good faith believes that a
Supply Failure has occurred, the Notifying Party shall provide written notice to
the other Party (the “Supplying Party”) within [***] ([***]) days of the
occurrence of the [***] Delivery Failure which is included in the determination
of the  Supply Failure (the “Release Notice”).  The Release
Notice shall set forth (i) the existence of such Supply Failure and (ii) a
proposed modification to the Manufacture of Commercial API or Marketed Product,
as the case may be, to eliminate the cause of the Supply Failure which [***] but
either (i) [***] or (ii) the [***] after it has been determined by the JMC to be
an Approved Solution (a “Proposed Solution”).  Upon receipt of said
Release Notice, the Supplying Party shall have [***] ([***]) days to notify the
Notifying Party in writing that it disputes either the Supply Failure or the
Proposed Solution (including, without limitation, a dispute as to
[***],  a dispute as to [***] or a dispute as to [***] is [***] that
the [***] has not [***]) (the “Dispute Notice”).  If the Supplying
Party delivers such Dispute Notice within the [***] ([***]) day period, the
matter shall be referred to the JSC for resolution as set forth in Section 2.1.5
of the Collaboration Agreement.  If the Supplying Party does not
deliver a Dispute Notice within such [***] ([***]) day period, or if the
Supplying Party notifies the Notifying Party that it does not dispute either the
Supply Failure or the Proposed Solution, the existence of a Release Condition
shall be deemed undisputed and Notifying Party shall be entitled to proceed
under Section 2.6(b).

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

    

     

     

    (b)           If
a Release Condition is determined to have occurred in accordance with Section
2.6(a), then, upon [***] ([***]) days prior written notice to the Supplying
Party given within [***] ([***]) days after the Release Condition is determined
to have occurred, the Notifying Party shall have the right to Manufacture
itself, through its Affiliates or by engaging an Approved Manufacturer, (i)
Commercial API in the case where MERCK is the Notifying Party, or (ii) Marketed
Product in the case where ARIAD is the Notifying Party, in each case in
accordance with this Section 2.6.  If a Notifying Party exercises its
right under this Section 2.6(b) to Manufacture Commercial API or Marketed
Product, the Supplying Party shall:

     

    (i)    (x)  If
ARIAD is the Supplying Party, grant to MERCK a non-exclusive, non-transferable,
non-sublicensable (except to Affiliates or Approved Manufacturers) license under
ARIAD’s interest in the Licensed Patent Rights and Licensed Technology and
transfer copies of all Manufacturing Know-How Controlled by ARIAD and embodying
such Licensed Technology and Licensed Patent Rights that are at the time of the
Release Notice being used by ARIAD, its Affiliates or its Approved Manufacturers
to Manufacture Commercial API, (the "ARIAD API Manufacturing
Know-How") solely to Manufacture or have Manufactured by MERCK, its
Affiliates or their or Approved Manufacturer(s), Commercial API for use in the
Manufacture of Marketed Product and MERCK Product or as otherwise permitted
hereunder or under the Collaboration Agreement, or (y) if MERCK is the Supplying
Party, grant to ARIAD a non-exclusive, non-transferable, non-sublicensable
(except to Affiliates or Approved Manufacturers) license under MERCK's interest
in the MERCK Technology and MERCK Patent rights and transfer copies of all
Manufacturing Know-How Controlled by MERCK and embodying such MERCK Technology
and MERCK Patent Rights that are at the time of the Release Notice being used by
MERCK, its Affiliates or its Approved Manufacturers to Manufacture Marketed
Product (to the extent set forth in Section 2.7) (the "MERCK Product Manufacturing
Know-How") solely to Manufacture or have Manufactured by ARIAD, its
Affiliates or their Approved Manufacturer(s), Marketed Product or as otherwise
permitted hereunder or under the Collaboration Agreement.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

         

         

        All
information and materials provided pursuant to this Section 2.6 and all ARIAD
API Manufacturing Know-How or MERCK Product Manufacturing Know-How, as the case
may be, in the possession of the Notifying Party, its Affiliates or their
Approved Manufacturer(s) shall be subject to the provisions of Article XI below,
and shall be used only by the Notifying Party, its Affiliates or its Approved
Manufacturers for the sole purpose of (x) Manufacturing Marketed Product (and
MERCK Product to the extent set forth in Section 2.7) when ARIAD is the
Notifying Party, or (y) Manufacturing Commercial API when MERCK is the Notifying
Party, in each case (x) or (y) for use and/or sale by the applicable Notifying
Party, its Affiliates and Approved Manufacturers as permitted hereunder or under
the Collaboration Agreement strictly in accordance with the terms and conditions
of the Collaboration Agreement and this Agreement.

      

    

     

    (ii)    At the
Notifying Party’s reasonable request, promptly make available to the Notifying
Party or any Approved Manufacturer(s) selected by the Notifying Party a
reasonable number of appropriately trained personnel to provide, on a mutually
convenient timetable, technical assistance in the transfer of ARIAD API
Manufacturing Know-How or MERCK Product Manufacturing Know-How, as the case may
be, to the applicable Notifying Party.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

    

     

     

    (iii)    Use
commercially reasonable efforts to promptly assist the Notifying Party in
obtaining all necessary Regulatory Approvals and/or modifying existing
Regulatory Approvals for the Manufacture of Marketed Product, MERCK Product to
the extent set forth in Section 2.7 or Commercial API, as the case may be, by
the Notifying Party, its Affiliates or such Approved
Manufacturer(s).

     

    (iv)    Cooperate
with the Notifying Party, cause its Affiliates to cooperate with the Notifying
Party and use commercially reasonable efforts to cause its Approved
Manufacturers to cooperate with the Notifying Party in order to accomplish the
transfer to the Notifying Party of similar rights as held by the Supplying Party
or its Affiliates under its Approved Manufacturer agreements.

     

    (v)    To the
extent permitted by applicable law and regulations, allow the Notifying Party,
its Affiliates or such Approved Manufacturer(s) to cross reference the Supplying
Party’s or its suppliers’ DMFs or such other regulatory submissions controlled
by the Supplying Party applicable to the applicable Materials, Commercial API,
Marketed Product or MERCK Product, as the case may be, if any; provide the
Notifying Party with the information with respect to such Commercial API,
Marketed Product, MERCK Product and Materials, to the extent necessary for
registering the Notifying Party’s Facility as an approved Manufacturing site for
Commercial API, Marketed Product, or MERCK Product, as the case may be, and to
otherwise reasonably enable the Notifying Party to exercise, as expeditiously as
possible, its Manufacturing rights under this Section 2.6; and, at the request
of the Notifying Party, use commercially reasonable efforts to cause its
suppliers to supply to the Notifying Party any applicable Materials required by
the Notifying Party to Manufacture Commercial API, Marketed Product, or MERCK
Product, as the case may be, on substantially the same terms and conditions as
are applicable to the supply of such Materials to the Supplying
Party.  The Notifying Party’s exercise of its rights under this
Section 2.6 shall be the sole remedy of the Notifying Party at law or in equity
in the event of any failure to supply Commercial API or Marketed Product, as the
case may be, hereunder.

     

    (vi)    [***]
costs incurred by the [***] to [***] or by the [***] to [***], other than (in
either case) the cost of building or acquiring facilities and the cost of
building or acquiring capital equipment (it being understood that [***] or [***]
of such facilities and capital equipment may be included in Manufacturing Costs
as set forth in Section 1.39), shall be [***] under the [***].

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

    

     

    (c)    Notwithstanding the
Notifying Party’s exercise of its rights to Manufacture the Commercial API or
Marketed Product, as the case may be, pursuant to Section 2.6(b) (i) the
Supplying Party shall continue to have the right (including under licenses from
the Notifying Party) to Manufacture any Commercial API or Marketed Product, as
the case may be, and to the extent the Supplying Party is able to Manufacture
any Commercial API or Marketed Product, as the case may be, the Notifying Party
may, in its discretion, purchase from Supplying Party Commercial API or Marketed
Product, as the case may be, in accordance with the terms and conditions of this
Agreement until such time as the Notifying Party or the Approved Manufacturer(s)
selected by Notifying Party is able to Manufacture all of its requirements of
Commercial API or Marketed Product in accordance with Specified Regulatory
Requirements and the Specifications. In such event, the Notifying Party shall
pay the Manufacturing Cost for the quantities of Commercial API or Marketed
Product purchased from the Supplying Party on the terms set forth
herein.  For the avoidance of doubt, in the event Notifying Party
elects to Manufacture or have Manufactured the Commercial API or Marketed
Product, as the case may be, pursuant to this Section 2.6, Notifying Party shall
not be obligated to pay to the Supplying Party any consideration under this
Agreement with respect to the Commercial API or Marketed Product, as the case
may be, so Manufactured by Notifying Party, its Affiliates or its Approved
Manufacturer(s).

     

    (d)     A “Supply
Failure” shall occur if the Supplying Party fails to supply by  the
specified delivery dates set forth in Firm Orders at least [***] percent
([***]%) of the aggregate quantity (not including any excess quantities
requested by the Notifying Party) of  Commercial API or Marketed
Product, as the case may be,  specified in all such Firm Orders
submitted by the Notifying Party in accordance with Section 5.3 during a [***],
meeting the warranties set forth in Section 6.1 (when ARIAD is the Manufacturing
Party) or Section 6.2 (when MERCK is the Manufacturing Party) in any [***]
([***]) out of [***] ([***]) consecutive Calendar Quarters (such failure in any
[***] being referred to herein as a “[***] Delivery
Failure”).   For clarity, any [***] Delivery Failure caused by a
shortage of any Materials normally purchased by the Supplying Party from a Third
Party, or because an Approved Manufacturer is not supplying API or Marketed
Product or any intermediate thereof in conformity with the requirements of this
Agreement, shall be included in determining whether a Supply Failure has
occurred unless  such [***] Delivery Failure is excluded pursuant to
Section 2.6(a)(i).

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

    

     

    (e)    In the event that
MERCK initiates the Manufacture of Commercial API pursuant to this Section 2.6
and makes any improvements to the Manufacture of Commercial API and such
improvements would be treated as Product Technology under the Collaboration
Agreement, then MERCK shall transfer all right, title and interest in such
improvements to ARIAD and such improvements shall be subject to the licenses
granted to MERCK under the Collaboration Agreement.  If such
improvements would not be treated as Product Technology under the Collaboration
Agreement, MERCK shall grant to ARIAD a perpetual, non-exclusive, royalty-fee,
worldwide license with the right to grant sublicenses to such improvements that
are made by MERCK during the term of this Agreement and during the [***] ([***])
year period following termination of this Agreement.

     

    2.7.    Sale of Commercial API or
Marketed Product by the Notifying Party to the Supplying
Party.

     

    (a)           If
the Notifying Party exercises the right to Manufacture Commercial API or
Marketed Product, as the case may be, or have Commercial API or Marketed Product
Manufactured pursuant to Section 2.6, then the Supplying Party shall have the
right to purchase from the Notifying Party Commercial API or Marketed Product,
as applicable, at the Manufacturing Cost thereof (i) in the case of the purchase
of Commercial API by ARIAD, for use and sale in the Field in the ARIAD Territory
and for sale by ARIAD to any ARIAD Medical Device Collaborators for use and sale
in the field of Medical Devices (it being understood that, at ARIAD’s request,
MERCK will ship Commercial API purchased by ARIAD directly to ARIAD’s Medical
Device Collaborators) (for clarity, if MERCK exercises the right to Manufacture
Commercial API then API supplied by MERCK to ARIAD for use in the Development
Program shall be treated as Clinical API hereunder and Commercial API supplied
by MERCK shall only be used for sale by ARIAD to ARIAD Medical Device
Collaborators), or (ii) in the case of the purchase of Marketed Product by
MERCK, for use and sale in the Field in the MERCK Territory, in each case
pursuant to, or as permitted by, the Collaboration Agreement; provided, however,
that the Notifying Party shall not be obligated to supply Commercial API or
Marketed Product to the Supplying Party until the Notifying Party is able to
Manufacture all of the Notifying Party's requirements of Commercial API or
Marketed Product in accordance with the Specifications and the Specified
Regulatory Requirements, and the Notifying Party shall be obligated to supply
Commercial API or Marketed Product only to the extent the Notifying Party has
the capacity to supply the Supplying Party and, if the Notifying Party agrees to
increase capacity to supply the Supplying Party, any costs incurred by the
Notifying Party to increase its capacity shall be treated as a Development
Cost.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

         

         

        If the
Supplying Party wishes to so purchase Commercial API or Marketed Product, as the
case may be, the Supplying Party shall give [***] days ([***]) days advance
written notice of such desire to the Notifying Party, whereupon to the extent
the Notifying Party has the capacity to supply the Supplying Party, the terms of
this Agreement and the applicable Quality Agreement(s) shall apply to the
Parties with their roles reversed; in such case the words “MERCK” and “ARIAD”
shall be deemed to be interchanged, (except for such references in Section 2.7
(a) (i) to the Sale of Commercial API to ARIAD's Medical Device Collaborators in
which case such references to ARIAD shall not be interchanged with references to
MERCK) and all rights and obligations of Supplying Party shall become rights and
obligations of the Notifying Party, and all rights and obligations of the
Notifying Party shall become rights and obligations of the Supplying Party under
both this Agreement and the applicable Quality Agreement(s) (i.e., MERCK shall
be the supplier of Commercial API, or ARIAD shall be the supplier of Marketed
Product); provided, however, that the exclusivity commitments in Sections 2.1
and 2.2 shall not apply to the Parties with their roles reversed.  For
the avoidance of doubt, “Marketed Product” supplied to MERCK by ARIAD pursuant
to this Section 2.7 shall be “MERCK Product” for sale in the MERCK Territory and
accordingly, if ARIAD supplies Product to MERCK for sale in the MERCK Territory,
references in such case to “Marketed Product” (including without limitation
references to “Marketed Product” with respect to warranties and warranty claims
in Article VI)   shall be deemed to be references to MERCK
Product, provided that ARIAD shall have no obligation to supply MERCK Product
except in such form of tablet for Marketed Product as the JCC may determine
pursuant to Section 2.5, in Standard Delivered Form, which, if delivered in Bulk
Packaging, will be further Primary Packaged and Secondary Packaged by MERCK, its
Affiliates or Approved Manufacturers.

         

         

         

         

         

        
          Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

          to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

           

          
            
              
              

            

            
              25

              
                

              

            

            
              
              

            

          

        

      

    

     

    (b)           If
ARIAD is the Supplying Party, and ARIAD desires to purchase from MERCK
Commercial API for sale to any ARIAD Medical Device Collaborator(s) for use and
sale in the field of Medical Devices after MERCK exercises its right to
Manufacture Commercial API pursuant to Section 2.6, then (i) if MERCK outsources
the Manufacture of Commercial API or key intermediates for Manufacture of
Commercial API to an Approved Manufacturer, MERCK shall use commercially
reasonable efforts to cause such Approved Manufacturer, to agree with ARIAD to
sell Commercial API or such key intermediates for Manufacture of Commercial API
(meeting the same Specifications as the Commercial API or key intermediates sold
to MERCK for use in Marketed Product and MERCK Product) to ARIAD at [***] price
[***] Commercial API or key intermediates for Manufacture of Commercial API to
MERCK or at such other price as ARIAD and such Approved Manufacturer may agree
upon, and (ii) if (a) MERCK or its Affiliates Manufactures Commercial API, or
(b) ARIAD and the Approved Manufacturer do not agree on the sale to ARIAD of
Commercial API or key intermediates for the Manufacture of Commercial API, then,
subject to ARIAD’s indemnification as set forth in Section 12.3, MERCK shall
supply Commercial API or such key intermediates to ARIAD at [***] for sale by
ARIAD to ARIAD Medical Device Collaborators; provided, that in no event will
MERCK be required to supply to ARIAD for sale to its Medical Device
Collaborators in any Calendar Year, more than [***] percent ([***]%) of the
total amount of Commercial API or such key intermediate Manufactured by MERCK or
purchased by MERCK from Approved Manufacturers in such Calendar
Year.  For clarity, any Commercial API supplied by MERCK to ARIAD for
sale to ARIAD’s Medical Device Collaborators shall be the same as the Commercial
API used in the Manufacture of Marketed Product and MERCK
Product.  MERCK shall have no obligation to modify Commercial API or
make any changes in the Manufacture of Commercial API to comply with
requirements of ARIAD’s Medical Device Collaborators.

     

    (c)           If
ARIAD purchases Commercial API from MERCK for sale by ARIAD to any ARIAD Medical
Device Collaborator(s), then if ARIAD becomes aware of any Adverse Event or
other safety issue reportable to any Regulatory Authority relating to the use of
any Medical Device Manufactured by any ARIAD Medical Device Collaborator
containing Commercial API, ARIAD shall notify the JDC and MERCK and furnish to
the JDC and MERCK, in accordance with the provisions applicable to [***] under
the [***] approved by the JDC, as amended from time-to-time, such information
with respect thereto as (i) ARIAD  possesses and can properly disclose
to MERCK and the JDC; provided however that in the event that ARIAD cannot
properly disclose (due to confidentiality and/or privacy issues with third
parties) that ARIAD will use commercially reasonable efforts to obtain consent
from such third party for such disclosure; or (ii) is required by applicable law
to disclose.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

    

    2.8.    ARIAD Medical Device
Collaborators.  ARIAD has advised MERCK that ARIAD has granted
to the ARIAD Medical Device Collaborators, and may hereafter grant to future
ARIAD Medical Device Collaborators, (i) a right to reference all DMFs filed by
ARIAD or its collaborators (including MERCK, its Affiliates and its Approved
Manufacturers) relating to the use of API in cancer or other indications, and
(ii) in the event ARIAD fails to supply API to any such ARIAD Medical Device
Collaborator, a right to have access to, and a copy of, all such DMFs and a
right to use all technology included therein for the manufacture of API solely
for use in Medical Devices.  MERCK hereby agrees that, to the extent
permitted by applicable law and regulations, in the event MERCK or any Affiliate
or Approved Manufacturer of MERCK files any DMF for the Manufacture of API with
any regulatory authority, MERCK will [***] (and will [***] or [***] to [***]) to
such DMF to [***] and a [***] all [***] for the [***] solely for use of [***],
and that in the event ARIAD is [***] to [***], any such DMF to any of the [***],
MERCK will [***] of such DMF to [***] (if it has not already done so) and [***]
and [***] to [***] of such DMF to [***] and hereby [***]D (and will [***] and
[***] to [***]) to [***] to each of the [***].

     

    2.9.    Joint Manufacturing
Committee.  Pursuant to Section 2.4 of the Collaboration
Agreement the Parties have established a Joint Manufacturing Committee (“JMC”) for the
Collaboration.  For convenience, the provisions of Section 2.4 of the
Collaboration Agreement are set forth in Schedule 2.9 of this
Agreement, together with a list of additional responsibilities given to the JMC
in this Agreement, which schedule shall be automatically updated if any
amendments are made to Section 2.4 of the Collaboration Agreement to conform to
such amendments.

     

    2.10.    Supply of Clinical Product
and Clinical API.  The Parties shall use Commercially
Reasonable Efforts to supply Clinical API and Clinical Product in accordance
with this Agreement.  The supply of Clinical API and Clinical Product
shall be governed by this Agreement, except that the provisions of Sections 2.6
and 2.7 shall not apply to the Manufacture and supply of Clinical API and
Clinical Product.  The failure or inability to supply Clinical API or
Clinical Product (i) shall not be a breach of this Agreement and (ii) shall not
be a breach of the Collaboration Agreement.  In addition, unless
otherwise agreed to by the Parties, ARIAD shall be responsible for the
Manufacture of Product for use in Clinical Trials in any form other than tablets
pursuant to Section 3.6.1 of the Collaboration Agreement unless and until an
amendment to this Agreement or an additional supply agreement is negotiated and
executed.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

    

     

    2.11.    Manufacturing
Oversight.

     

    (a) Each Party
shall use its Commercially Reasonable Efforts to (i) in the case of MERCK,
maximize the Manufacturing yields with respect to Marketed Product and minimize
the loss of Marketed Product, (ii) in the case of ARIAD, to maximize the
Manufacturing yields with respect to API and key Materials and minimize the loss
of API and key Materials, and (iii) assist the other Party in such efforts to
maximize Manufacturing yields and minimize losses, including, without
limitation, by providing access to relevant expertise and
technology.  Further, at least annually, the JMC will review the
aggregate yield data with respect to the Manufacture of the API and Product and
key Materials, and discuss whether the Manufacturing yields with respect to API
and Product and key Materials are at levels reasonably expected by the JMC and
any other specific yield issues raised by the JMC.  If, in the JMC’s
determination, there is any yield-related issue with respect to the Manufacture
of API, key Materials or Product, as the case may be, that requires further
Development, the JMC shall (x) conduct an assessment to determine the factors
causing such Manufacturing yields to be less than reasonably expected; and (y)
communicate the outcome of such assessment to both Parties as soon as reasonably
possible; and the Manufacturing Party, with the assistance of the other Party
(including, without limitation, by providing access to relevant expertise and
technology licensed to the other Party pursuant to Section 6.1.1(c) or Section
6.1.2(c) of the Collaboration Agreement) shall implement a Manufacturing
Development program, as approved by the JMC, to attempt to improve such
Manufacturing yields.

     

    (b) Each Party
shall [***] to [***]in their [***] with their [***] that such [***] at least a
[***] of the [***] with [***] in the [***] by such [***].  Only those
costs that are [***] by the [***] and are [***] in the [***]by the [***] in
accordance with [***] shall be [***] by the[***] as part of the calculation of
the Manufacturing Cost.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

    

     

    2.12.    Territory-Wide
Shortage.  The Parties acknowledge that due to the nature of
the Product, in the event of a shortage of supply of Product or Materials needed
to Manufacture Product, it is important to endeavour to keep patients who are
being treated using Product for Cancer Indications (as defined in the
Collaboration Agreement) as of the date of the applicable shortage (the "Ongoing Patients") on
such Product during the shortage. Accordingly, the Parties agree that in the
event of a shortage of Product or Materials needed to Manufacture Product, the
available Product and Materials shall first be allocated, as determined by the
JCC, to satisfy the need for Product for the Ongoing Patients and thereafter
shall be allocated in accordance with Section 3.7 or Section 4.7, as
applicable.

     

    2.13.    Quality
Agreements.  The Parties will enter into applicable Quality
Agreement(s) (i) as soon as practicable after the Clinical Product Transfer with
respect to each of rapamycin for use in Clinical API, Clinical Product and
Commercial API, (ii) prior to commencement of validation runs for Marketed
Product or MERCK Product, with respect to applicable Quality Agreements for
Commercial API, Marketed Product and MERCK Product, and (iii) as soon as
practicable with respect to rapamycin for use in Commercial API, or in any case
(clauses (i) (ii) or (iii)), such other date mutually agreed to by the
Parties.

     

    2.14.    Use of API and
Product.  Except for sales of API by ARIAD to ARIAD Medical
Device Collaborators as set forth in Section 2.7, API, Clinical Product,
Marketed Product or MERCK Product supplied hereunder or Manufactured using API
supplied hereunder may only be used in Permitted Pre-clinical Research, for
Clinical Trials for Cancer Indications or for commercial sale for Cancer
Indications, all in accordance with the Collaboration Agreement.  If
the Parties agree to conduct Clinical Trials or permit commercial sale for a
Non-Cancer Indication pursuant to Section 3.1.2(c) of the Collaboration
Agreement then the parties shall negotiate and execute an amendment to this
Agreement containing any different or additional provisions relating
specifically to the supply of API and Product for use in Clinical Trials or
commercial sale for such Non-Cancer Indication.

     

    ARTICLE
III.

     

    SUPPLY AND MANUFACTURE OF
CLINICAL PRODUCT AND MARKETED PRODUCT BY
MERCK

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

    

     

    3.1.    MERCK's Obligation to
Manufacture Clinical Product.  As of the Effective Date, the
Parties recognize that ARIAD Manufactures the Territory's requirements of
Clinical Product, other forms of Product for use in Clinical Trials and
Placebo.  The Parties desire that MERCK assume the Manufacture of
Clinical Product and Placebo as soon as practicable and be ready to Manufacture
Marketed Product prior to receipt of the first Commercialization Regulatory
Approval for such Product.  ARIAD shall, within [***] ([***]) days of
the Effective Date or as otherwise agreed by the Parties, make available to
MERCK the Manufacturing Know-How Controlled by ARIAD for Clinical Product, as
well as any available Manufacturing Know-How Controlled by ARIAD for Marketed
Product and the support set forth in Section 2.6(b) in accordance with such
Section's terms, notwithstanding that a Release Condition which would require
ARIAD to do so has not occurred. MERCK and ARIAD shall use their commercially
reasonable efforts to expeditiously accomplish the transfer of Manufacturing
responsibility for Clinical Product to MERCK.  After (i) the JDC, with
input from the JMC, makes changes to the initial Specifications for Clinical
Product, (ii) the Parties agree that MERCK is capable and ready to Manufacture
Clinical Product, and (iii) all applicable regulatory filings have been made and
Regulatory Approvals, to the extent required, have been obtained, then MERCK
shall commence Manufacture and supply of Clinical Product and Placebo in
accordance with the terms of this Agreement ("Clinical Product
Transfer").  The Parties acknowledge that MERCK shall not be
responsible for Manufacturing Marketed Product, Clinical Product and Placebo
until a Clinical Product Transfer has occurred and the JDC, with input from the
JMC, has determined the Specifications for Clinical Product.  Failure
of ARIAD to provide Manufacturing Know-How Controlled by ARIAD with respect
to Clinical Product
shall release MERCK of its responsibilities to Manufacture and supply Clinical
Product and Marketed Product, as applicable under this Agreement, until MERCK
has received such Manufacturing Know-How, and the Parties have taken the
necessary actions in order to effect a Clinical Product
Transfer.  Costs affecting the Clinical Product Transfer shall be
Development Costs under the Collaboration Agreement and allocated as set
forth in Section 3.12.1 of the Collaboration Agreement.

     

    3.2.    Specifications.  The
JCC, with input from the JDC and JMC, shall develop the applicable
Specifications for Marketed Product and MERCK Product for the Territory prior to
filing of the first application for Commercialization Regulatory Approval for a
particular Product as set forth in Section 4.2; provided, however, that the
determination of Specifications for Secondary Packaging for MERCK Product and
Primary Packaging for MERCK Product if Standard Delivered Form is Bulk Packaging
shall be made by MERCK and not by the JCC.  Costs associated with the
development of the Specifications shall be treated as Development Costs and
allocated as set forth in Section 3.12.1 of the Collaboration
Agreement.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

    

     

    3.3.    Requirements.  Except
as otherwise provided herein, ARIAD shall purchase all of its requirements for
Marketed Product and acquire all its requirements for Clinical Product (after
Clinical Product Transfer) from MERCK during the Term.

     

    3.4.    Materials and Packaging
Components.  Subject to Section 8.4, MERCK, its Affiliates or
any Approved Manufacturer shall purchase all Materials and other items of any
nature whatsoever that MERCK, its Affiliates or such Approved Manufacturers may
use in Manufacturing Clinical Product or Marketed Product, as the case may be,
for supply to ARIAD hereunder.  All right, title and interest in and
to such items, and in and to all work-in-process incorporating such items, shall
remain the sole property of MERCK, its Affiliates or such Approved
Manufacturers; provided, however, that any Materials that contain the name of
ARIAD or its Affiliates, proprietary logos or trademarks of ARIAD or its
Affiliates or anything similar shall not be used other than for Clinical Product
or Marketed Product supplied by MERCK to ARIAD under this Agreement or for MERCK
Product in accordance with the Collaboration Agreement.

     

    3.5.    Safety
Stock.

     

    (a) Subject to
Section 2.5(c), starting with the date of Launch of a Marketed Product or a
MERCK Product, as the case may be, during the Term of this Agreement, MERCK
agrees to maintain (or cause any of its Approved Manufacturers to maintain) at
all times (i) [***] ([***]) Months of MERCK Product necessary to fulfill MERCK's
and its Related Parties requirements of MERCK Product based upon MERCK’s most
recently updated Forecast for MERCK Product, (ii) [***] ([***]) Months of
Commercial API necessary to fulfill MERCK's requirements to Manufacture MERCK
Product for the MERCK Territory (“MERCK API Safety
Stock”) based upon MERCK’s most recently updated Forecast for Commercial
API and MERCK Product, (iii) [***] ([***]) Months of Commercial API necessary to
fulfill MERCK’s requirements to Manufacture ARIAD’s and its Related Parties’
requirements of Marketed Product for the ARIAD Territory (“ARIAD API Safety
Stock”) based upon ARIAD’s most recently updated Forecast for Marketed
Product provided pursuant to Section 5.2, and (iv) in addition, if MERCK is
supplying Commercial API to ARIAD for sale to any [***] pursuant to Section
2.7(b)(ii), then starting with the launch of the first [***] by an [***], MERCK
will maintain [***] ([***]) Months of Commercial API necessary to fulfill
ARIAD’s requirements to supply Commercial API to [***] based on ARIAD’s most
recently updated Forecast for Commercial API for supply to [***] (“[***] Safety
Stock”), (the MERCK API Safety Stock, the ARIAD API Safety Stock and the [***]
Safety Stock being collectively referred to herein as the “API Safety Stock” and
the API Safety Stock and the safety stock of MERCK Product in clause (i) being
referred to herein collectively as the "MERCK Safety
Stock”).

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

       

       

      MERCK may,
upon written notice to ARIAD, if approved by the JCC (with input from the
S&OP Team and the JMC) in the case of MERCK Product or Commercial API for
Manufacture of MERCK Product, elect to hold a lesser or greater amount of MERCK
Safety Stock after due consideration by the JCC of market demand and the
existing supply chain.  The cost of maintaining the safety stock of
MERCK Product and MERCK API Safety Stock shall be borne by MERCK, and the cost
of maintaining the ARIAD API Safety Stock shall be a [***] in the ARIAD
Territory.  ARIAD shall bear the risk of loss of the ARIAD API Safety
Stock, it being understood that any cost resulting from a loss of ARIAD API
Safety Stock shall be a [***] in the ARIAD Territory and shall be included in
the determination of Operating Income (Loss) in the ARIAD
Territory.  The cost of maintaining the [***] Safety Stock shall be
borne by ARIAD and ARIAD shall bear the risk of loss of the [***] Safety
Stock.  The MERCK API Safety Stock, the ARIAD API Safety Stock and the
[***] Safety Stock may be commingled by MERCK, in which event (i) MERCK shall
bear the cost and risk of loss of the pro-rata portion of the commingled API
Safety Stock determined by dividing the amount of MERCK API Safety Stock by the
amount of the total API Safety Stock, (ii) ARIAD shall bear the cost and risk of
loss of the pro-rata portion of the commingled API Safety Stock determined by
dividing the amount of ARIAD API Safety Stock by the amount of the total API
Safety Stock, which shall be a [***] in the ARIAD Territory and be included in
the determination of Operating Income (Loss), and (iii) ARIAD shall bear the
cost and risk of loss of the pro-rata portion of the commingled API Safety Stock
determined by dividing the amount of [***] Safety Stock by the total API Safety
Stock.

       

       

       

       

       

      
        Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

        to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

         

        
          
            
            

          

          
            32

            
              

            

          

          
            
            

          

        

      

    

     

    (b) The MERCK
Safety Stock shall be stored in accordance with the Specified Regulatory
Requirements at one or more MERCK Facilities.  MERCK shall rotate the
API Safety Stock and the safety stock of MERCK Product on a "First Expiry-First
Out" basis for routine fulfillment of its requirements for MERCK Product in the
MERCK Territory and for Manufacture of MERCK Product and Marketed Product and
supply of Commercial API to ARIAD for sale to ARIAD’s Medical Device
Collaborators.  MERCK shall not be obligated to use MERCK Safety Stock
of MERCK Product to supply the ARIAD Territory.

     

    (c) In the
event ARIAD is not able to supply Commercial API to fill any Firm Order for any
reason, MERCK shall draw upon the API Safety Stock to make up for any
shortfall.  No later than [***] ([***]) days after the end of each
Calendar Quarter, MERCK shall deliver a report to ARIAD describing the
quantities of each category of API Safety Stock and the Safety Stock of MERCK
Product remaining as of the end of such Calendar Quarter, the retest date for
such API Safety Stock and the shelf life of such MERCK Safety
Stock.

     

    3.6.    Manufacturing
Capacity. During the Term of this Agreement, MERCK shall allocate (or use
commercially reasonable efforts to cause its Approved Manufacturers to allocate)
sufficient Manufacturing resources of MERCK, its Affiliates and its Approved
Manufacturers in order to meet ARIAD's requirements of Clinical Product (after
Clinical Product Transfer) and Marketed Product in accordance with Article V of
this Agreement.

     

    3.7.    Shortage of
Supply.  In the event that at any time, MERCK foresees that it
will be unable to supply in whole or in part, the quantity of Clinical Product
as determined by the JDC (after Clinical Product Transfer) or the quantity of
Marketed Product in a Firm Order, in either case by the applicable delivery
date, for any reason, including as a result of a Force Majeure event, MERCK
shall notify ARIAD and the S&OP Team of such inability to supply as soon as
possible, the reasons therefor and the date such inability is expected to end,
and the quantities of Clinical Product and Marketed Product available during
such period.  The S&OP Team shall consider the shortfall and
solutions for remedying the shortfall.  Prior to first
Commercialization Regulatory Approval in the United States for a Product, the
JDC, with input from the JMC, shall determine the amount of the Materials and/or
resources to be allocated to Clinical Product.  Thereafter, the JCC,
with input from the JMC, shall determine the amount of the Materials and/or
resources to be allocated to Clinical Product.  The JDC shall, at all
times, determine the use of available Clinical Product.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      MERCK
shall notify ARIAD of the proposed amount of the Materials and/or resources to
be allocated to Marketed Product in the event such inability is caused by a
shortage of Materials and/or resources required for the Manufacture of Marketed
Product and MERCK Product.  The calculation and basis for the
allocation of Materials and/or resources to Marketed Product shall be included
in the notice to ARIAD.  Subject to Section 2.12, such allocation
shall be no less than ARIAD’s pro rata share of the amount of Materials and/or
resources available to MERCK for Manufacture of Marketed Product and MERCK
Product, based on (i) in the case of Marketed Product required during the
Initial Period of such Marketed Product, the prospective volume forecasts of
ARIAD for  Marketed Product for the upcoming [***] ([***]) Month
period and forecasted volume of sales  by MERCK for MERCK Product, and
(ii) in the case of Marketed Product required after the Initial Period of such
Marketed Product, the past ([***]) Month volume of sales  of Marketed
Product to ARIAD, and the past ([***]) Month volume of sales by MERCK of MERCK
Product. In making any such allocation, MERCK shall not give any priority to its
own requirements or those of its Affiliates, Related Parties or other
customers.

    

     

    3.8.    Product
Expiry.  MERCK shall Deliver to ARIAD Marketed Product that, at
the time of Delivery to ARIAD, has a minimum of [***] percent ([***]%) of shelf
life as set forth in the applicable Specifications at the time of its
Manufacture remaining; provided, that if MERCK has quantities of Marketed
Product with less than [***] percent ([***]%) of such shelf life remaining,
MERCK may notify ARIAD and the Parties will discuss the possible use of such
Marketed Product.  Neither Party will unreasonably withhold consent
for a commercially reasonable use proposed by the other Party that complies with
all Specified Regulatory Requirements in the jurisdiction in which the Marketed
Product is proposed to be used.  Furthermore, MERCK will use
commercially reasonable efforts to perform studies intended to extend shelf life
as determined by the JMC.  The Development Cost of these studies shall
be borne equally by the Parties unless they are specifically required for the
MERCK Territory, in which event they shall be borne by MERCK.

     

    ARTICLE
IV.

     

    SUPPLY AND MANUFACTURE OF
API BY ARIAD AND CLINICAL PRODUCT BY ARIAD (BEFORE CLINICAL PRODUCT
TRANSFER)

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

    

     

    4.1.    Specifications for Clinical
API and Clinical Product.  The initial Specifications for
Clinical API and Clinical Product shall be agreed upon by the Parties and set
forth in writing signed by the Co-Chairs of the JDC.  Any proposed
changes to the Specifications for Clinical API or Clinical Product shall be
presented to the JDC for review and approval by the JDC with input from the JMC;
provided, that no changes may be made to the Specifications for Clinical Product
for use in the ongoing Phase 3 SUCCEED Clinical Trial being conducted by
ARIAD.  The approved Specifications incorporating such changes shall
be set forth in writing and signed by the Co-Chairs of the JDC.

     

    4.2.    Specifications for
Commercial API and Commercial Product.  Any proposed changes to
the Specifications for Clinical API or Clinical Product to adapt them to be the
specifications for Commercial API and for Marketed Product and MERCK Product
shall be presented to the JCC for review and approval by the JCC with input from
the JMC.  The JCC will use commercially reasonable efforts to cause
the Specifications to comply with all applicable cGMPs, laws, rules,
regulations, guidelines and requirements of [***].  The approved [***]
for [***] and for [***] and [***] incorporating such [***] shall be set forth in
writing and signed by the Co-Chairs of the JCC.  Any [***] to the
[***] for [***], [***] or [***] shall be presented to the JCC for review and
approval by the JCC with input from the JMC.  The approved [***] such
[***] shall be set forth in writing and signed by the Co-Chairs of the
JCC.  Notwithstanding the foregoing, the determination of
Specifications for Secondary Packaging for MERCK Product and Primary Packaging
for MERCK Product if Standard Delivered Form is Bulk Packaging shall be made by
MERCK and not by the JCC.

     

    Costs
associated with the development of the Specifications shall be treated as
Development Costs and allocated as set forth in Section 3.12.1 of the
Collaboration Agreement.

     

    4.3.    Requirements.  Except
as otherwise provided herein, MERCK shall, during the Term, (i) acquire from
ARIAD all of the Clinical API needed by MERCK to Manufacture and supply Clinical
Product (after Clinical Product Transfer), (ii) acquire from ARIAD all its
requirements of Clinical Product (prior to Clinical Product Transfer), and (iii)
purchase from ARIAD all Commercial API needed to Manufacture and supply all
Marketed Product ordered by ARIAD and to Manufacture all MERCK Product for sale
in the MERCK Territory, in each case pursuant to the terms of this
Agreement.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

    

     

    4.4.    Materials and Packaging
Components.

     

    (a) Subject to
Section 8.4, ARIAD, its Affiliates or any Approved Manufacturer shall purchase
all Materials and other items of any nature whatsoever that ARIAD, its
Affiliates or such Approved Manufacturer may use in Manufacturing API or
Clinical Product (prior to Clinical Product Transfer), as the case may be, for
supply to MERCK hereunder.  All right, title and interest in and to
such items, and in and to all work-in-process incorporating such items, shall
remain the sole property of ARIAD, its Affiliates or such Approved Manufacturer;
provided, however, that any Materials that contain the name of MERCK or its
Affiliates, proprietary logos or trademarks of MERCK or its Affiliates or
anything similar shall not be used other than for Clinical Product supplied by
ARIAD to MERCK under this Agreement or for Marketed Product in accordance with
the Collaboration Agreement.

     

    (b) Without
limiting the generality of Section 4.4(a), ARIAD shall purchase all of the key
intermediate, rapamycin, used by ARIAD or its Approved Manufacturers in
Manufacturing API.  In the case of rapamycin used to Manufacture
Clinical API, the Manufacturing Cost of such rapamycin shall be reported as
Development Costs under the Collaboration Agreement in accordance with Section
3.12 thereof at the time it is incurred.  In the case of rapamycin
used to Manufacture Commercial API, the Manufacturing Cost thereof will be a
[***] at the time it is incurred and will be allocated between the U.S.
Territory and the ROW Territory based on the intended use thereof to Manufacture
Marketed Product and/or MERCK Product.  If the Commercial API
Manufactured with such rapamycin is actually used to Manufacture Marketed
Product and/or MERCK Product in different proportions than reflected in such
allocation, an adjustment will be reflected in [***] for the period or periods
in which the Marketed Product and/or MERCK Product is Delivered.

     

    4.5.    Safety
Stock.

     

    (a) Subject to
Section 2.5(c), starting with the date of Launch of a Marketed Product, during
the term of this Agreement, ARIAD agrees to maintain at all times [***] ([***])
Months of Marketed Product necessary to fulfill ARIAD's requirements of Marketed
Product for the ARIAD Territory ("ARIAD Safety Stock')
based upon ARIAD’s most recently updated Forecast for Marketed Product provided
by ARIAD to MERCK pursuant to Section 5.2.  The cost of
maintaining the ARIAD Safety Stock shall be [***] in the ARIAD
Territory.  ARIAD may, upon written notice to MERCK, if approved by
the JCC (with input from the S&OP Team and the JMC) elect to hold a lesser
or greater amount of ARIAD Safety Stock after due consideration by the JCC of
market demand and the existing supply chain.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    (b) The ARIAD
Safety Stock shall be stored in accordance with the Specified Regulatory
Requirement at one or more ARIAD Facilities.  ARIAD shall rotate the
ARIAD Safety Stock on a "First Expiry-First Out" basis for routine fulfillment
of its requirements for Marketed Product in the ARIAD
Territory.  ARIAD shall not be obligated to provide ARIAD Safety Stock
to MERCK to supply the MERCK Territory.

     

    (c) In the
event MERCK is not able to supply Marketed Product to fill any Firm Order for
any reason, ARIAD shall draw upon the ARIAD Safety Stock to make up for any
shortfall in the ARIAD Territory.  No later than [***] ([***]) days
after the end of each Calendar Quarter, ARIAD shall deliver a report to MERCK
describing the quantities of ARIAD Safety Stock remaining as of the end of such
Calendar Quarter, and the shelf life of such ARIAD Safety Stock.

     

    4.6.    Manufacturing
Capacity.  During the Term of this Agreement, ARIAD shall
allocate (or use commercially reasonable efforts to cause its Approved
Manufacturers to allocate) sufficient Manufacturing resources of ARIAD, its
Affiliates and its Approved Manufacturers in order to meet MERCK's requirements
of API and Clinical Product (prior to Clinical Product Transfer) in accordance
with Article V of this Agreement.

     

    4.7.    Shortage of
Supply.  In the event that at any time ARIAD foresees that it
will be unable to supply in whole or in part the quantity of Clinical API or
Clinical Product (prior to Clinical Product Transfer) as determined by the JDC
or the quantity of Commercial API specified in a Firm Order, in either case by
the applicable delivery date, for any reason, including as a result of a Force
Majeure event, ARIAD shall notify MERCK and the S&OP Team of such inability
to supply as soon as possible, the reasons therefor and the date such inability
is expected to end, the quantities of Clinical API, Commercial API and Clinical
Product available during such period.  The S&OP Team shall
consider the shortfall and solutions for remedying the
shortfall.  Prior to first Commercialization Regulatory Approval in
the United States for a Product, the JDC, with input from the JMC, shall
determine the amount of the Materials and/or resources to be allocated to
Clinical Product.  Thereafter, the JCC, with input from the JMC, shall
determine the amount of the Materials and/or resources to be allocated to
Clinical Product. The JDC shall, at all times, determine the use of available
Clinical Product.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

       

      ARIAD
shall notify MERCK of the proposed amount of the Materials and/or resources to
be allocated to Commercial API in the event such inability is caused by a
shortage of Materials and/or resources required for the Manufacture of
Commercial API.  The calculation and basis for the allocation of
Materials and/or resources to Commercial API shall be included in the notice to
MERCK.  Subject to Section 2.12, such allocation shall be no less than
MERCK’s pro rata share of the amount of Materials and/or resources available to
ARIAD for Commercial API based on (i) in the case of Commercial API required to
Manufacture Product required during the Initial Period, the prospective
forecasts of MERCK for quantities (kilograms) of Commercial API for the upcoming
[***] ([***]) Month period and forecasted usage of Commercial API by ARIAD as
well as volume of sales of Commercial API and products containing Commercial API
to ARIAD customers and (ii) in the case of Commercial API required to
Manufacture Product  after the Initial Period the past ([***]) Month
volume of sales of Commercial API to MERCK and the actual usage by ARIAD in the
last [***] ([***]) Months of Commercial API, as well as volume of sales of
products containing Commercial API to ARIAD customers.  In making any
such allocation, ARIAD shall not give any priority to its own requirements or
those of its Affiliates, Related Parties or other customers, provided that ARIAD
may supply Commercial API to ARIAD Medical Device Collaborators in accordance
with their projections and firm orders as long as the amount of Commercial API
supplied to them does not exceed [***] percent ([***]%) of the available
quantity.  If the projections and firm orders of ARIAD’s Medical
Device Collaborators exceed [***] percent ([***]%) of the available quantity,
then the allocation to ARIAD’s Medical Device Collaborators shall be included in
the calculation and basis for allocation set forth in the second preceding
sentence.

    

     

    4.8.    API Retest
Date.  ARIAD shall Deliver to MERCK for use in Marketed Product
and MERCK Product, Commercial API that, at the time of Delivery to MERCK, has a
minimum [***] percent ([***]%) remaining of the period from completion of the
Manufacture of the Batch from which it came until the initial retest date
therefor as set forth in the applicable Specifications at the time of its
Manufacture (the “Retest Period”); provided, that if ARIAD has quantities of
Commercial API with less than [***] percent ([***]%) of the Retest Period
remaining, ARIAD may notify MERCK and the Parties will discuss the possible use
of such Commercial API.  Neither Party will unreasonably withhold
consent for a commercially reasonable use proposed by the other Party that
complies with all Specified Regulatory Requirements in the jurisdiction in which
the Commercial API is proposed to be used.  Furthermore, ARIAD will
use commercially reasonable efforts to perform studies intended to extend the
Commercial API Retest Period as determined by the JMC.  The
Development Cost of these studies shall be borne equally by the Parties unless
they are specifically required for the ROW Territory, in which event they shall
be borne by MERCK.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

    

     

    4.9.    Second Source of
Supply.  Notwithstanding anything to the contrary herein, in
order to insure continued supply of Marketed Product and MERCK Product, ARIAD
shall develop, qualify and maintain, on a time table to be agreed upon by the
Parties,  a second source of supply for Commercial API (the "Second API
Manufacturer") in addition to its current Approved Manufacturer for API;
provided that ARIAD shall in no event be required to have obtained a qualified
Second API Manufacturer prior to [***] ([***]) years after first
Commercialization Regulatory Approval in the United States for a Product;
provided, further, that the Second API Manufacturer is approved in advance in
accordance with Section 2.5(b).  Upon such approval by MERCK, the
Second API Manufacturer shall be treated as an Approved Manufacturer under this
Agreement and its manufacturing facilities shall be "Facilities".

     

    ARTICLE
V.

     

    FORECASTS, ORDERS AND
DELIVERY

     

    5.1.    Clinical
Product.  The JDC shall, from time to time, determine and
advise the Parties of (i) the quantity of Clinical API needed for uses other
than for Manufacturing Clinical Product, (ii) the quantity and form of Product
and Placebo for use in each Clinical Trial that MERCK or ARIAD (depending on
whether a Clinical Product Transfer has occurred and whether the Product to be
used in a particular Clinical Trial will be in tablet form) shall supply under
this Agreement or the Collaboration Agreement, and, (iii) in the event a
Clinical Product Transfer has occurred, the amount of Clinical API MERCK will
require from ARIAD to Manufacture any such Clinical Product, all as needed to
conduct Development in accordance with the then-current Annual Global
Development Plan. ARIAD or MERCK, depending on which Party is the Manufacturing
Party, shall advise the other Party and the JDC of the time (“Clinical Delivery
Time”) required to Manufacture and Deliver such quantities of Clinical API
Clinical Product and other forms of Product for use in Clinical Trials and
Placebo.  The JDC shall provide the Manufacturing Party with a [***]
([***]) Month rolling forecast (updated quarterly) of MERCK’s and ARIAD's
requirements, as the case may be, for Clinical API, Clinical Product and other
forms of Product for use in Clinical Trials and Placebo, and shall notify the
Manufacturing Party of actual Monthly requirements for Clinical API, Clinical
Product and other forms of Product for use in Clinical Trials and Placebo in
advance of the need therefor by [***] ([***]) days longer than the applicable
Clinical Delivery Time.  MERCK or ARIAD, as the case may be, shall use
Commercially Reasonable Efforts to Manufacture and Deliver, in accordance with
the terms of this Agreement or the Collaboration Agreement, as applicable, such
quantities of Clinical Product and other forms of Product for use in Clinical
Trials, Placebo or Clinical API, as the case may be, to the other Party in
accordance with the notice of the JDC.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          39

          
            

          

        

        
          
          

        

      

    

     

     

    5.2.    Commercial
Forecasts.  Subject to Section 5.6, (i) on or before the first
day of the [***] Month prior to the Month of the anticipated First Commercial
Sale of a Product in the Territory as determined by the JCC (the “Target Launch
Month”), ARIAD shall submit to MERCK a single combined forecast, as determined
by the JCC, for the ARIAD Territory of its Monthly requirements of Marketed
Product, and (ii) on or before the last day of the [***] Month prior to the
Target Launch Month, MERCK shall submit to ARIAD a single combined forecast for
all parts of the MERCK Territory and the ARIAD Territory of its Monthly
requirements of Commercial API for Manufacture of both Marketed Product and
MERCK Product, and its Monthly requirement for MERCK Product (for information
purposes only), in each case (i) or (ii) for the [***] ([***]) Month-period
beginning with the first month at which it anticipates requiring delivery
thereof (“Anticipated First Delivery Month”).  Each Party shall
provide an update to its initial forecast on the first (for ARIAD) or last (for
MERCK) day of the Months that are [***] ([***]) and [***] ([***]) Months prior
to the Target Launch Month, and each Month thereafter until the Anticipated
First Delivery Month.  Starting with the Anticipated First Delivery
Month, such forecast shall cover the [***] Months beginning with the Month in
which the forecast is required to be delivered in the case of ARIAD and
beginning with the month following the Month in which the forecast is required
to be delivered in the case of MERCK.  It is understood and agreed,
subject to Section 5.3, that forecasts shall be non-binding and shall be used by
the Manufacturing Party for planning purposes only.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          40

          
            

          

        

        
          
          

        

      

    

     

    5.3.    Firm Orders for
Product.

     

    (a) Subject to
Section 5.6, (i) at least [***] ([***]) days prior to the beginning of each
Month (the “Delivery Month”) during the Term, commencing with the Delivery Month
that is no later than [***] ([***]) Months before the Target Launch Month, MERCK
shall submit to ARIAD a Firm Order for its requirements of Commercial API for
Delivery in the Delivery Month, and (ii) at least [***] ([***]) days prior to
the beginning of each Delivery Month, commencing with the Delivery Month that is
no later than [***] ([***]) Months before the Target Launch Month, ARIAD shall
submit to MERCK a Firm Order for its requirements of Marketed Product for Delivery in
the Delivery Month. Each Firm Order for Commercial API or Marketed Product, as
the case may be, shall specify dates and locations for Delivery and shall be for
no more than [***] ([***]%) percent and no less than [***] percent ([***]%), in
each case, of (x) the amount of Commercial API that was forecasted for the
Delivery Month when such Month was the [***] Month in the rolling forecast
delivered by MERCK pursuant to Section 5.2, or (y) the amount of Marketed
Product that was forecasted for the Delivery Month when such Month was the [***]
Month in the rolling forecast delivered by ARIAD pursuant to Section
5.2.  For example, (x) if the Delivery Month for Commercial API is
[***], then Firm Orders for Delivery in [***] would be submitted on [***], and
would be required to be between [***] percent ([***]%) and [***] percent
([***]%) of the quantities projected for [***] in the forecast delivered on or
before [***] and (y) if the Delivery Month for Marketed Product is [***], then
Firm Orders for Delivery in [***] would be submitted on [***], and would be
required to be between [***] percent ([***]%) and [***] percent ([***]%) of the
quantities projected for [***] in the forecast delivered on or before
[***].

     

    (b) The
Manufacturing Party shall notify the Ordering Party, within [***] ([***]) days
after receipt by the Manufacturing Party of each Firm Order, that the
Manufacturing Party has received the Firm Order.  The Manufacturing
Party shall be obligated to Manufacture and Deliver, and the Ordering Party
shall be obligated to purchase, the specified quantity of Commercial API or
Marketed Product, as the case may be, that is properly ordered in compliance
with this Section 5.3 in accordance with the delivery schedule set forth in such
Firm Order.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          41

          
            

          

        

        
          
          

        

      

    

     

    (c) No
Delivery shall be made more than [***] ([***]) business days in advance of the
date specified for Delivery in a Firm Order without the Ordering Party's
approval.  The site(s) of Manufacture shall be indicated on documents
accompanying each shipment.

     

    (d) A Firm
Order shall be made on such form of purchase order or document as the Ordering
Party may specify from time to time in writing (which may include electronic
ordering). ANY TERMS OR CONDITIONS OF ANY PURCHASE ORDER, ACKNOWLEDGMENT OR
SIMILAR STANDARDIZED FORM GIVEN OR RECEIVED PURSUANT TO THIS AGREEMENT THAT ARE
IN ADDITION TO, OR INCONSISTENT WITH, THE TERMS OF THIS AGREEMENT SHALL HAVE NO
EFFECT AND SUCH TERMS AND CONDITIONS ARE HEREBY EXCLUDED.

     

    5.4.    Long Range
Forecast.  In addition to the rolling forecast set forth in
Section 5.2, no later than [***] ([***]) Months prior to the Target Launch
Month, and thereafter, in the [***] quarter of  the Calendar Year
prior to the date of the Target Launch Month and in the [***] quarter of each
subsequent Calendar Year, (i) MERCK shall submit to ARIAD and
(ii)  ARIAD shall submit to MERCK, in each case a long range plan
containing a non-binding good faith estimate of annual requirements of MERCK
Product in the case of MERCK and Marketed Product in the case of ARIAD (as
determined by the JCC)  for the following [***] ([***]) Calendar Years
(each a “Long Range
Plan”).  If at any time, either Party reasonably believes that
a Long Range Plan reasonably suggests any supply issue, particularly as it
relates to production capacity, ARIAD and MERCK shall discuss a plan to address
the potential shortage.

     

    5.5.    Changes in
Orders.  The Manufacturing Party shall use commercially
reasonable efforts to comply with changes to Delivery dates and locations in
Firm Orders, as well as requests for Commercial API or Marketed Product, as the
case may be, in excess of [***]% of the forecasted amount for a Delivery Month
when such Delivery Month was the [***] Month prior to the Delivery Month in the
rolling forecast delivered pursuant to Section 5.2, but shall not be obligated
to do so.

     

    5.6.    Terms of Approved
Manufacturer Agreements.  The Parties acknowledge that neither
MERCK nor ARIAD has negotiated a manufacturing agreement with any Approved
Manufacturer for Commercial API or any Material used in the Manufacture of API
with respect to ARIAD and Marketed Product or MERCK Product with respect to
MERCK. The Parties will each use their commercially reasonable efforts to
negotiate terms in any agreements with any Approved Manufacturers for Commercial
API, Materials for API, Marketed Product or MERCK Product that will allow for
Firm Orders and forecasts to be placed in accordance with the terms of this
Agreement. If [***] such Party’s [***] such Party [***] such [***] in its [***]
with such [***], then MERCK and ARIAD shall [***] an [***] to the [***] and
[***] of this Agreement to [***] the Party was [***] in such [***].

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          42

          
            

          

        

        
          
          

        

      

    

     

    5.7.    Delivery and Risk of
Loss.

     

    (a) Shipments by
ARIAD.  ARIAD shall Deliver the quantities of API or Clinical
Product on the delivery date specified by the JDC or the Firm Order, as the case
may be, to the destination indicated in the applicable determination of the JDC
or the Firm Order, as the case may be.  Delivery terms shall be Free
Carrier (FCA) site of manufacture (INCO TERMS 2000).  Title and risk
of loss shall pass from ARIAD to MERCK upon delivery to the
carrier.  MERCK shall have the option, to be exercised in writing at
the time the Firm Order is placed by MERCK or within ten (10) days after the JDC
notifies ARIAD of  the required quantities and destination, to (i)
arrange for transportation of each shipment by common carrier and the insurance
for each shipment, or (ii) allow ARIAD to arrange for transportation and
insurance for each shipment, in which event (clause (ii)), ARIAD shall pay the
selected providers for transportation and insurance services.  MERCK
shall reimburse ARIAD for the cost of transportation and insurance (if paid by
ARIAD) promptly after Delivery.  ARIAD shall delineate charges for
transportation and insurance as separate line items on invoices submitted to
MERCK.  ARIAD shall ship all API or Clinical Product to MERCK in
accordance with the Specified Regulatory Requirements.

     

    (b) Shipments by
MERCK.  MERCK shall Deliver the quantities of Clinical Product
or Marketed Product on the delivery date specified by the JDC or the Firm Order,
as the case may be, to the destination indicated in the applicable determination
of the JDC or Firm Order, as the case may be.  Delivery terms shall be
Free Carrier (FCA) site of manufacture (INCO TERMS 2000).  Title and
risk of loss shall pass from MERCK to ARIAD upon delivery to the
carrier.  ARIAD shall have the option, to be exercised in writing at
the time the Firm Order is placed by ARIAD or within ten (10) days after the JDC
notifies MERCK of the required quantities and destination, to (i) arrange for
transportation of each shipment by common carrier and to arrange insurance for
each shipment, or (ii) allow MERCK to arrange for transportation and insurance
for each shipment, in which event (clause (ii))  MERCK shall pay the
selected providers for transportation and insurance services.  ARIAD
shall reimburse MERCK for the cost of transportation and insurance (if paid by
MERCK) promptly after Delivery.  MERCK shall delineate charges for
transportation and insurance as separate line items on invoices submitted to
ARIAD.  MERCK shall package and ship Clinical Product and Marketed
Product for shipment to ARIAD in accordance with the Specified Regulatory
Requirements.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          43

          
            

          

        

        
          
          

        

      

    

     

    (c) Certificates of Analysis and
Manufacturing Compliance.  Each Delivery of Clinical Product,
Marketed Product or API shall be accompanied by a Certificate of Analysis and a
Certificate of Manufacturing Compliance, if required by applicable law,
pertaining to the Clinical Product, Marketed Product or API in such
shipment.

     

    (d) Transfer of
Manufacturing.  The delivery terms in Section 5.7(b) shall
apply to MERCK if MERCK supplies Commercial API to ARIAD pursuant to Sections
2.6 and 2.7 and the delivery terms in Section 5.7(a) shall apply to ARIAD if
ARIAD supplies Marketed Product to MERCK pursuant to Sections 2.6 and
2.7.

     

    5.8.    Delay or Failure to
Supply.

     

    (a) If the
Manufacturing Party has reason to believe that it (i) cannot Deliver to the
Ordering Party the full quantity of Commercial API or Marketed Product specified
in a Firm Order submitted by the Ordering Party in accordance with Section 5.3,
by the delivery date specified therein, or (ii) may be unable to supply the
quantities set forth for the first [***] ([***]) Months of the then-current
forecast, the Manufacturing Party shall give prompt written notice, but no later
than [***] ([***]) business days after receipt of the Firm Order or the
then-current forecast, as the case may be, to the Ordering Party and the
S&OP Team of such anticipated non-delivery, in which event, subject to
Sections 3.7 and 4.7, as applicable, ARIAD and MERCK shall confer within [***]
([***]) business days to agree upon a plan to address the anticipated shortfall
and the S&OP Team shall consider the shortfall and solutions for remedying
the shortfall.

     

    (b) If the
Manufacturing Party shall fail to Deliver to the Ordering Party the full
quantity of Commercial API or Marketed Product as specified in a Firm Order
submitted by the Ordering Party in accordance with Section 5.3 by the delivery
date specified therein, then, at the Ordering Party’s election: (i) the
Manufacturing Party shall be relieved of any obligation to Deliver the
non-delivered quantity of Commercial API or Marketed Product, as the case may
be, such quantity to be deducted from the Firm Order, provided, however, that
the Manufacturing Party has complied with Section 3.7 or Section 4.7, as
applicable, or (ii) the Manufacturing Party shall Deliver the non-delivered
quantity of Commercial API or Marketed Product as soon as possible after the
date Ordering Party notifies the Manufacturing Party of such
election.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          44

          
            

          

        

        
          
          

        

      

    

     

     

    ARTICLE
VI.                                

     

    WARRANTY; QUALITY CONTROL
TESTING

     

    6.1.    ARIAD
Warranty.  ARIAD warrants and represents to MERCK that, (a) at
the time of Delivery to MERCK, Clinical Product, API and Marketed Product (in
the event of the supply of Marketed Product by ARIAD under Section 2.7)
Delivered hereunder, and (b) at the time of sale by ARIAD, Marketed Product
Manufactured by ARIAD under Section 2.6 for sale by ARIAD: (i) will have been
Manufactured and shipped in accordance with the Specified Regulatory
Requirements and the applicable Specifications; (ii) will meet the applicable
Specifications and will conform with the information shown on the Certificate of
Analysis and Certificate of Manufacturing Compliance provided for the particular
shipment of Clinical Product or API; and (iii) will not be adulterated or
misbranded within the meaning of the FDCA, or other applicable laws and
regulations of the FDA, the EMEA, the ICH, [***] in effect at the time of
Delivery of the API or Clinical Product or Marketed  Product (in the
event of the supply of Marketed Product by ARIAD to MERCK under Section 2.7) and
may be introduced into interstate commerce under the provisions of the
FDCA.

     

    6.2.    MERCK
Warranty.  MERCK warrants and represents to ARIAD that, (a) at
the time of Delivery to ARIAD, Clinical Product, Marketed Product and API (in
the event of the supply of API by MERCK under Section 2.7) Delivered hereunder,
and (b) at the time of sale by MERCK, MERCK Product Manufactured by MERCK for
sale by MERCK: (i) will have been Manufactured and shipped in accordance with
the Specified Regulatory Requirements and the applicable Specifications; (ii)
will meet the applicable Specifications and will conform with the information
shown on the Certificate of Analysis and Certificate of Manufacturing Compliance
provided for the particular shipment of Clinical Product or Marketed Product;
and (iii) will not be adulterated or misbranded within the meaning of the FDCA
or other applicable laws and regulations of the FDA, the EMEA or the ICH in
effect at the time of Delivery of the Clinical Product or Marketed Product and
may be introduced into interstate commerce under the provisions of the
FDCA.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          45

          
            

          

        

        
          
          

        

      

    

     

    6.3.    Claims Relating to Clinical
API and Clinical Product.  If either Party believes that
Clinical API or Clinical Product Delivered hereunder does not meet the
warranties set forth in Section 6.1 or 6.2, such Party shall notify the other
Party and the JDC.  The JDC shall resolve the matter pursuant to
Section 2.2.5 of the Collaboration Agreement.  The delivery of
Clinical API or Clinical Product that does not meet the warranties set forth in
Section 6.1 or Section 6.2 (i) shall not be a breach of this Agreement, and (ii)
shall not be a breach of the Collaboration Agreement.

     

    6.4.    Warranty
Claims.

     

    (a) Except as
set forth in Section 6.4(b), claims by MERCK that Commercial API or
Marketed  Product (in the event of the supply of Marketed Product by
ARIAD to MERCK under Section 2.7) did not meet the warranties set forth in 6.1
or claims by ARIAD that Marketed Product did not meet the warranties set forth
in 6.2 above (each a "Disputed Product" and
each Party making a warranty claim under this Section 6.4 a "Disputing Party")
shall be made within sixty (60) days following Delivery of such Disputed Product
and must be in writing specifying in reasonable detail the nature and basis of
the claim and citing the relevant control number or other information to enable
identification of the Disputed Product in question.

     

    (b) In the
case of latent defects that are not readily ascertainable upon Delivery by
reasonable and customary analysis, the Disputing Party shall have five (5)
Business Days from the earlier of (i) the date of discovery of such latent
defect, (ii) the date that is [***] ([***]) Months prior to the expiration of
the shelf life of the Delivered Marketed Product (whether supplied by MERCK to
ARIAD or supplied by ARIAD to MERCK under Section 2.7) or in the case of
Delivered Commercial API, the Marketed Product or MERCK Product incorporating
such Commercial API, or (iii) in the case of Delivered Commercial API that is
not incorporated into a Marketed Product or a MERCK Product, [***] ([***])
months prior to the end of the Retest Period of such Commercial API to make a
claim that such Commercial API or Marketed Product (whether supplied by MERCK to
ARIAD or supplied by ARIAD to MERCK under Section 2.7) did not meet the
warranties set forth in Section 6.1 (in the case of Commercial API) or Section
6.2 (in the case of Marketed Product).  Subject to Section 6.4(c) and
6.4(d), such Disputed Product shall be treated as non-conforming Commercial API
or Marketed Product (whether supplied by MERCK to ARIAD or supplied by ARIAD to
MERCK under Section 2.7).

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          46

          
            

          

        

        
          
          

        

      

    

     

    (c) If MERCK
and ARIAD are unable to agree as to whether the Disputed Product met the
applicable warranty set forth in Section 6.1(ii) or Section 6.2(ii), as the case
may be, the Parties shall cooperate to have the Disputed Product analyzed by an
independent testing laboratory of recognized repute selected by the Disputing
Party and approved by the other Party, which approval shall not be unreasonably
withheld.  The results of such laboratory testing shall be final and
binding on the Parties on the issue of compliance of the Disputed Product with
such warranty.  If the Disputed Product is determined to meet such
warranty, then the Disputing Party shall bear the cost of the independent
laboratory testing and pay for the Disputed Product in accordance with this
Agreement.  If the Disputed Product is determined not to have met such
warranty, then (i) the Manufacturing Party shall bear the cost of laboratory
testing, (ii) at the Disputing Party's election shall replace the rejected
Commercial API or Marketed Product (whether supplied by MERCK to ARIAD or
supplied by ARIAD to MERCK under Section 2.7), within a commercially reasonable
time of the date of such determination, at no cost to the Disputing Party, or
refund to the Disputing Party the price paid for such Commercial API or Marketed
Product, plus any applicable delivery charge paid by the Disputing Party, (iii)
if the Disputed Product is Commercial API that has been incorporated into MERCK
Product or Marketed Product that has not yet been delivered to ARIAD or has been
delivered to ARIAD but not yet paid for, ARIAD shall reimburse MERCK for the
Manufacturing Cost of such MERCK Product or Marketed Product (but in the case of
Marketed Product that has been delivered but not yet paid for, ARIAD shall not
be required to pay the invoice for such Marketed Product if ARIAD reimburses
MERCK for the Manufacturing Cost of such Marketed Product), and (iv) if the
Disputed Product is Marketed Product and it has been delivered in Bulk
Packaging, MERCK shall reimburse ARIAD for the cost of placing the Marketed
Product in Primary or Secondary Packaging.  If it is not determined
that the Disputed Product failed to meet such warranty as a result of the
failure of the Supplying Party to Manufacture and ship the Disputed Product in
accordance with the Specified Regulatory Requirements and the applicable
Specifications, then the cost of the Disputed Product shall be a [***], which,
in the case of Disputed Product that is Commercial API, shall be allocated by
the JCC between [***] in the ARIAD Territory and the MERCK Territory based on
the intended use thereof.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          47

          
            

          

        

        
          
          

        

      

    

     

     

    (d) If the
Disputing Party claims that any shipment of Disputed Product did not meet the
warranties specified in (i) Section 6.1(i) or (iii) with respect to Commercial
API Delivered by ARIAD, or (ii) Section 6.2(i) or (iii) with respect to Marketed
Product Delivered by MERCK, if MERCK and ARIAD are unable to agree as to whether
or not such Disputed Product met such warranties, the dispute shall be settled
in accordance with the arbitration provisions set forth in Section 12.1 of the
Collaboration Agreement.  If the Disputed Product is determined to
meet such warranty, then the Disputing Party shall pay for the Disputed Product
in accordance with this Agreement.  If the Disputed Product is
determined not to have met the  warranty in Section 6.1(i) or is
determined not to have met the warranty in Section 6.1(iii) as a result of a
failure of the Supplying Party to Manufacture and ship the Disputed Product in
accordance with the Specified Regulatory Requirements and the applicable
Specifications, then (i) the Manufacturing Party at the Disputing Party's
election shall replace the rejected Commercial API or Marketed Product (whether
supplied by MERCK to ARIAD or supplied by ARIAD to MERCK under Section 2.7),
within a commercially reasonable time from the date of such determination, at no
cost to the Disputing Party, or refund to the Disputing Party the price paid for
such Commercial API or Marketed Product (whether supplied by MERCK to ARIAD or
supplied by ARIAD to MERCK under Section 2.7), plus any applicable delivery
charge paid by the Disputing Party, (ii) if the Disputed Product is Commercial
API that has been incorporated into MERCK Product or Marketed Product that has
not yet been delivered to ARIAD, ARIAD shall reimburse MERCK for the
Manufacturing Cost of such MERCK Product or Marketed Product, and (iii) if the
Disputed Product is Marketed Product and it has been delivered in Bulk
Packaging, MERCK shall reimburse ARIAD for the cost of placing the Marketed
Product in Primary or Secondary Packaging.  If it is not determined
that the Disputed Product failed to meet the warranty in Section 6.1(i) or
failed to meet the warranty in Section 6.1(iii) as a result of the failure of
the Supplying Party to Manufacture and ship the Disputed Product in accordance
with the Specified Regulatory Requirements and the applicable Specifications,
then the cost of the Disputed Product shall be a [***], which, in the case of
Disputed Product that is Commercial API, shall be allocated by the JCC between
[***] in the ARIAD Territory and the MERCK Territory based on the intended use
thereof.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          48

          
            

          

        

        
          
          

        

      

    

     

    (e) Any
Commercial API or Marketed Product which fails to meet the warranties under
Sections 6.1 or 6.2 as applicable and which is in the Disputing Party's control
shall, at the Manufacturing Party’s option, either be returned to the
Manufacturing Party at the Manufacturing Party's expense, or shall be destroyed
pursuant to the Manufacturing Party's instructions and with the Disputing
Party's approval, which approval shall not be unreasonably withheld, at the
Manufacturing Party's expense.

     

    (f) For the
avoidance of doubt, the Manufacturing Party of the Disputed Product in question
shall not be obligated to replace the Disputed Product or credit the Disputing
Party if at the time of discovery of the alleged failure to meet a warranty, the
Disputed Product in question has less than [***] ([***]) Months of remaining
shelf life or, in the case where Commercial API is the Disputed Product, [***]
([***]) Months until the end of its Retest Period, or if the Commercial API has
been incorporated in a Disputed Product, [***] ([***]) Months of remaining shelf
life on the  Marketed Product or MERCK Product incorporating such
Commercial API.

     

    ARTICLE
VII.

     

    PRICE AND
PAYMENTS

     

    7.1.    Transfer
Price.

     

    (a) The price
of (i) Commercial API, Clinical API and Clinical Product supplied by ARIAD to
MERCK pursuant to this Agreement shall be ARIAD’s Manufacturing Cost for such
Commercial API, Clinical API or Clinical Product, and (ii) Clinical Product or
Marketed Product supplied by MERCK to ARIAD pursuant to this Agreement shall be
MERCK’s Manufacturing Cost for such Clinical Product or Marketed
Product.  Manufacturing Cost shall [***] the cost of any Batch of API
or Lot of Clinical Product or Marketed Product which is [***] to meet the
Specifications or which [***] with the Specifications because of changes
required by any Regulatory Authority or changes recommended by any Regulatory
Authority that are approved and adopted by the JMC (a “Failed Batch” or “Failed
Lot”).  If the cost of a [***] is not [***], such cost will [***] as a
[***] and [***]in the [***] the [***] is [***].  The cost of any [***]
of [***] of [***] will be allocated by the [***]in the [***] and the [***] as
set forth in [***] of the[***].  The cost of any [***] of [***] will
be allocated by the [***] in the [***] and the [***] based on the
[***].

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          49

          
            

          

        

        
          
          

        

      

    

     

    (b) Each of
ARIAD and MERCK will establish a good faith estimate of such Party's
Manufacturing Cost for the upcoming Calendar Year (based on forecasts provided
by the JDC for Clinical Product and by the Ordering Party for Commercial API or
Marketed Product and such Manufacturing Party's requirements in the
Manufacturing Party's markets) (i.e., MERCK's requirements of MERCK Product in
the MERCK Territory and ARIAD's requirements for Marketed Product in the ARIAD
Territory (including Commercial API to supply to MERCK for Manufacture of
Marketed Product for the ARIAD Territory) and ARIAD’s [***] for [***] for [***]
to [***]) as follows:

     

    (i)    On or before August 1
in each Calendar Year, ARIAD will provide to MERCK for business planning
purposes an initial estimate of the Manufacturing Cost for API for the
subsequent Calendar Year.

     

    (ii)    On or before
September 15 in each Calendar Year, ARIAD will provide to MERCK a final estimate
of the Manufacturing Cost for API for the subsequent Calendar Year, which shall
be the “Standard Manufacturing Cost” for API for the subsequent Calendar
Year.

     

    (iii)    On or before October
31 in each Calendar Year, MERCK will provide to ARIAD for business planning
purposes an initial estimate of the Manufacturing Cost for Marketed Product for
the subsequent Calendar Year.

     

    (iv)    On or before November
15 in each Calendar Year, MERCK will provide to ARIAD a final estimate of the
Manufacturing Cost for Marketed Product for the subsequent Calendar Year, which
shall be the “Standard Manufacturing Cost” for Marketed Product for the
subsequent Calendar Year.

     

    7.2.    Invoices and Development
Cost Charges.  Upon Delivery of each shipment of (a) Commercial
API by ARIAD, or (b) Marketed Product by MERCK, the Party making such Delivery
shall promptly invoice the other Party for the Standard Manufacturing Cost
thereof, less in the case of Commercial API Delivered by ARIAD, the
Manufacturing cost of the key intermediate, rapamycin, used to Manufacture such
Commercial API previously included in [***] pursuant to Section
4.4(b).  Payment shall be due thirty (30) days after receipt by the
applicable Party of such invoice.   Standard Manufacturing Cost
for Clinical API supplied by ARIAD (less the Manufacturing Cost of rapamycin
used to Manufacture such Clinical API previously reported as Development Costs
pursuant to Section 4.4(b)) and Standard Manufacturing Cost for Clinical Product
supplied by either Party shall be reported as Development Costs under the
Collaboration Agreement in accordance with Section 3.12 thereof.

     

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

      
        
          
          

        

        
          50

          
            

          

        

        
          
          

        

      

    

     

    7.3. True-Up of Actual
Manufacturing Cost.

     

    (a)           On
or before the dates set forth below, ARIAD shall submit to MERCK a calculation
of the actual Manufacturing Cost for Commercial API Delivered to MERCK during
the preceding period set forth below opposite such date together with a
calculation of the difference between the Standard Manufacturing Cost invoiced
and such actual Manufacturing Cost, and MERCK shall submit to ARIAD a
calculation of the actual Manufacturing Cost for Marketed Product Delivered to
ARIAD (which shall not include any costs of compliance with Specified Regulatory
Requirements in the MERCK Territory) during the preceding period set forth below
opposite such date together with a calculation of the difference between the
Standard Manufacturing Cost invoiced and such actual Manufacturing
Cost:

     

    
      
        	 	
                Date

              	
                Period
      Covered

              
	 	
                April
      15

              	
                January
      and February

              
	 	
                July
      15

              	
                March
      through May

              
	 	
                October
      15

              	
                June
      through August

              
	 	
                February
      15

              	
                September
      through December

              

      

    

     

    If ARIAD’s calculation shows (i) an
excess of Standard Manufacturing Cost invoiced over actual Manufacturing Cost,
ARIAD shall pay such amount to MERCK within thirty (30) days after delivery of
the calculation or (ii) an excess of actual Manufacturing Cost over Standard
Manufacturing Cost invoiced, MERCK shall pay such amount to ARIAD within thirty
(30) days after the delivery of the calculation.

     

    If MERCK’s calculation shows (i) an
excess of Standard Manufacturing Cost invoiced over actual Manufacturing Cost,
MERCK shall pay such amount to ARIAD within thirty (30) days after delivery of
the calculation or (ii) an excess of actual Manufacturing Cost over Standard
Manufacturing Cost invoiced, ARIAD shall pay such amount to MERCK within thirty
(30) days after the delivery of the calculation.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        51

        
          

        

      

      
        
        

      

       

    

    Any payment by either Party under the
two preceding paragraphs shall be included in the calculation of Operating
Income (Loss) in the U.S. Territory under the Collaboration
Agreement.

     

    If the Parties determine that periodic
calculations and payments on the schedule set forth above are not necessary, the
Parties may agree upon an annual or other schedule for adjustments between
Standard Manufacturing Cost and actual Manufacturing Cost.

     

    (b)           Pursuant
to this Section 7.3(b), each Party shall be permitted to audit (the "Auditing Party") the
other Party's Manufacturing Cost. Upon the written request of the Auditing
Party, the Manufacturing Party shall permit an independent certified public
accounting firm of nationally recognized standing selected by and retained at
the expense of the Auditing Party and reasonably acceptable to the Manufacturing
Party, to have access during normal working hours and upon reasonable advance
notice, to the relevant books and records kept by the Manufacturing Party to the
extent reasonably necessary to verify the accuracy of the Manufacturing Cost
invoices prepared by Manufacturing Party.  Such examination shall not
be more often than once each Calendar Year and shall cover Manufacturing Cost
invoices for any Calendar Year ending not more than [***] ([***]) Months prior
to the date of such request.  MERCK and ARIAD agree that the report of
the above examination by the certified public accounting firm to the Auditing
Party shall disclose only whether the Manufacturing Cost invoices are correct or
incorrect and the amount of any discrepancy and shall be delivered to both
Parties simultaneously.  If such certified public accounting firm
identifies a discrepancy in an invoice for a Manufacturing Cost during such
period, the appropriate Party shall pay the other Party the amount of the
discrepancy within [***] ([***]) days of the date the Auditing Party delivers to
the Parties such certified public accounting firm’s written report so
concluding, or as otherwise agreed upon by the Parties. The fees charged by such
certified public accounting firm shall be paid by Auditing Party, provided, however, that if such
audit uncovers an overpayment of Manufacturing Cost by the Auditing Party that
exceeds the lesser of (i) [***] US dollars ($[***]) or (ii) [***] percent
([***]%) of the total Manufacturing Cost owed by such Auditing Party for any
Calendar Year, then the fees of such certified public accounting firm shall be
paid by the Manufacturing Party.  Unless the Auditing Party institutes
an audit with respect to any Calendar Year in accordance with this Section
7.3(b), within [***] ([***]) Months following the end of such Calendar Year, the
calculation of the Manufacturing Cost for such Calendar Year shall be binding
upon Auditing Party, and the Manufacturing Party shall be released from any
liability or accountability with respect to such Manufacturing Cost for such
Calendar Year.  The Auditing Party shall treat all financial
information subject to review under this Article 7 in accordance with the
confidentiality and non-use provisions of this Agreement and shall cause its
certified public accounting firm to enter into a reasonable and customary
confidentiality agreement with the Manufacturing Party obligating it to retain
all such information in confidence pursuant to such confidentiality
agreement.

     

     

     

     

    
      Confidential
Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        52

        
          

        

      

      
        
        

      

       

    

    7.4. Costs Associated with
Performance Under this Agreement.  Unless otherwise provided in
this Agreement, costs incurred by a Party to achieve compliance with the
Specified Regulatory Requirements and other quality and regulatory requirements
hereunder shall be treated as Development Costs and shall be reported as
Development Costs under the Collaboration Agreement in accordance with Section
3.12 thereof, such that costs of achieving such compliance when such compliance
is specific only to the MERCK Territory (other than compliance with the
Specified Regulatory Requirements) shall be borne by MERCK, and costs of
achieving compliance in the ARIAD Territory and of achieving compliance with the
Specified Regulatory Requirements shall be borne equally by the
Parties.

     

    7.5. Manner of
Payment.  The Party from whom payment is due shall make
payments pursuant to this Article VII by check or wire transfer to a bank
account designated in writing by the invoicing Party.  All payments
hereunder shall be made in United States Dollars.  Payments not
received on or before the due date shall bear interest at a rate  per
annum equal to [***] percent ([***]%) over the prime rate as reported in The Wall Street Journal on the
date payment was due or the maximum rate allowable by law, if
lower.

     

    7.6. Maintenance of
Records.  The Manufacturing Party shall keep accurate records
of all shipments of API, Clinical Product and/or Marketed Product and all
invoice and Development Cost calculations hereunder and, upon the request of the
other Party, shall permit the other Party to examine such records during normal
business hours for the purpose of verifying the correctness of all such
calculations.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        53

        
          

        

      

      
        
        

      

       

    

    7.7. Taxes.  Any
duty, sales, use or excise or other taxes imposed by any governmental entity
that apply to the purchase or import of the Commercial API or Marketed Product
shall be for the account of the Party receiving Delivery of such Commercial API
or Marketed Product.  The Party receiving Delivery shall provide to
the Manufacturing Party any applicable sales, use or resale tax exemption
certificates prior to shipment of such Commercial API or Marketed Product
hereunder.

     

    ARTICLE
VIII.

     

    MANUFACTURING QUALITY
COMPLIANCE; AUDITS

     

    8.1. Quality Provisions Governing
Manufacture of Clinical Product, Marketed Product and MERCK Product by
MERCK.

     

    (a) Compliance with Laws and
Regulations.  MERCK agrees to (or cause its Affiliates or
Approved Manufacturers to) Manufacture and supply Clinical Product, (after
Clinical Product Transfer), Marketed Product and MERCK Product in accordance
with the applicable Specifications and in accordance with the Specified
Regulatory Requirements applicable to Manufacturing the Clinical Product or
Marketed Product for supply to ARIAD hereunder and Clinical Product and MERCK
Product for use or sale by MERCK.

     

    (b) Debarment.  MERCK
represents and warrants that it has not been debarred and is not subject to a
pending debarment and that MERCK will not use in any capacity, in connection
with the services to be performed by MERCK under this Agreement, any Person
including an Approved Manufacturer who has been debarred pursuant to Section 306
of the FDCA or similar law, rule, regulation, guideline or requirement of the
FDA, the EMEA or the ICH or who is the subject of a conviction described in such
section.  MERCK agrees to inform ARIAD in writing immediately if it or
any Person who is performing services hereunder is debarred or is the subject of
a conviction described in Section 306 of the FDCA or similar law, rule
regulation, guideline or requirement of the FDA, the EMEA or the ICH, or if any
action, suit, claim, investigation, or legal or administrative proceeding is
pending or, to the best of MERCK’s Knowledge, is threatened, relating to the
debarment or conviction of MERCK or any Person performing services
hereunder.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        54

        
          

        

      

      
        
        

      

       

    

    (c) Manufacturing
Facilities.  MERCK shall Manufacture or arrange for the
Manufacture of Clinical Product (after Clinical Product Transfer) and Marketed
Product and MERCK Product at MERCK's Manufacturing
Facilities.  Subject to this Section 8.1(c) and Section 8.1(b), ARIAD
understands that MERCK may use the services of the Approved Manufacturers to
Manufacture Clinical Product, Marketed Product or MERCK Product at MERCK's
Facilities.  Manufacturing of Clinical Product, Marketed Product or
MERCK Product may not be relocated without ARIAD's prior written consent, which
shall not be unreasonably withheld.  Manufacturing of Clinical
Product, Marketed Product or MERCK Product at any relocated Facility shall
comply with the Specified Regulatory Requirements.

    
       

       

       

       

      
        Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

        to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

      

       

      
        
          
          

        

        
          55

          
            

          

        

        
          
          

        

         

      

    

    (d) Manufacturing and Quality
Audits.  MERCK shall, and shall cause its Affiliates and
Approved Manufacturers to, permit the FDA, the EMEA and other Regulatory
Authorities to conduct such inspections of the MERCK Manufacturing Facilities as
the FDA, EMEA or such other Regulatory Authorities may request, and shall
cooperate with such Regulatory Authorities with respect to such inspections and
any related matters, in each case related to Clinical Product, Marketed Product
or MERCK Product.  MERCK agrees to notify ARIAD immediately (and, in
any event within [***] ([***]) hours of becoming aware thereof) of any proposed
or unannounced quality visits or quality inspections by any Regulatory Authority
to a MERCK Manufacturing Facility (whether owned by MERCK, an Affiliate or an
Approved Manufacturer) and, if such inspection is directly related to (i)
Clinical Product,  Marketed Product or MERCK Product or (ii) equipment
or systems used in the Manufacture of Clinical Product, Marketed Product or
MERCK Product, agrees to keep ARIAD fully informed about the results and
conclusions of each such regulatory inspection, including actions taken by
MERCK, its Affiliates and Approved Manufacturers to remedy conditions cited in
such inspections.  If such visit or inspection is reasonably related
to Clinical Product,  Marketed Product or MERCK Product or its
Manufacture, MERCK shall, and shall cause its Affiliates to (and shall use
commercially reasonable efforts to cause its Approved Manufacturers to) permit
one or more qualified representative(s) of ARIAD to be present if requested by
ARIAD.  MERCK shall promptly, and in no event later than [***] ([***])
business days of receipt thereof, provide ARIAD with copies of any written
inspection reports issued by such Regulatory Authorities, as well as any
reports, documents or correspondence with respect to any Regulatory Authority
requests or inspections of a MERCK Manufacturing Facility if such reports,
documents or correspondence are directly related to (i) Clinical Product,
Marketed Product or MERCK Product or (ii) equipment or systems used in the
Manufacture of Clinical Product, Marketed Product or MERCK Product, including,
but not limited to, FDA Form 483, Notice of Observation, Establishment
Inspection Report, and all correspondence relating thereto; provided that MERCK
may redact any information from such reports, documents or correspondence that
is not reasonably related to Clinical Product, Marketed Product or MERCK Product
or (ii) equipment or systems used in the Manufacture of Clinical Product,
Marketed Product or MERCK Product.  MERCK, its Affiliates or the
applicable Approved Manufacturer will be responsible for the development of
responses that are required by any Regulatory Authority and related to the
Manufacture of Clinical Product, Marketed Product or MERCK Product, and MERCK
shall, and shall cause its Affiliates to, and shall use commercially reasonable
efforts to cause its Approved Manufacturers to, furnish copies to ARIAD and
consult with ARIAD and in good faith consider any timely input from ARIAD in
preparing any submissions.  Nothing contained in this Article shall
restrict the right of either Party, its Affiliates or Approved Manufacturers to
make a timely report of any matter to any Regulatory Authority or take other
action that it deems appropriate or required by applicable law. MERCK shall
allow, and shall use commercially reasonable efforts to cause its Approved
Manufacturers to allow, ARIAD to have access to all quality assurance
inspections and audits of MERCK’s or its Affiliates or such Approved
Manufacturer related to the Manufacture of Clinical Product, Marketed Product or
MERCK Product and to the buildings, records and areas of the MERCK Manufacturing
Facility related to the Manufacture of Clinical Product, Marketed Product or
MERCK Product.  Additionally, upon notice by ARIAD, MERCK shall, and
shall cause its Affiliates to, (and shall use commercially reasonable efforts to
cause its Approved Manufacturers to) allow one or more technical specialists
from ARIAD or ARIAD’s designees, to conduct quality audits of the MERCK
Manufacturing Facilities, any other facility which is proposed to Manufacture
Clinical Product, Marketed Product or MERCK Product and Quality Assurance
Systems with respect to Clinical Product, Marketed Product or MERCK
Product.  Observations and conclusions of ARIAD's audits will be
issued to, and promptly discussed with MERCK, and corrective action required by
the Specified Regulatory Requirements shall be implemented by MERCK and its
Affiliates (and MERCK shall use commercially reasonable efforts to cause its
Approved Manufacturers to cause to be implemented such corrective action) prior
to Manufacturing additional Clinical Product, Marketed Product or MERCK Product
to the extent practicable.  ARIAD shall have the right to review all
relevant documentation pertinent to the corrective actions implemented by MERCK
and its Affiliates and MERCK shall use commercially reasonable efforts to cause
its Approved Manufacturers to permit ARIAD to review all relevant documentation
pertinent to the corrective actions implemented by its Approved
Manufacturer.  The cost of all such corrective actions required in the
processes or documentation for the Manufacture of Clinical Product, Marketed
Product or MERCK Product shall be a Development Cost and shall be allocated by
the JDC between the U.S. Territory and the ROW Territory based on the
jurisdiction imposing the requirement in question.  For clarity, the
cost of corrective actions required to be made to any Manufacturing Facility,
equipment or general processes and procedures not directly attributable to the
manufacture of Clinical Product, Marketed Product or MERCK Product shall not be
a Development Cost.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        56

        
          

        

      

      
        
        

      

    

     

    (e) Maintenance;
Validation.  MERCK agrees to operate and maintain (and cause
its Affiliates and Approved Manufacturers to operate and maintain) the MERCK
Manufacturing Facilities and all equipment used, directly or indirectly, to
Manufacture Clinical Product, Marketed Product or MERCK Product in accordance
with the Specified Regulatory Requirements, and to maintain (and cause its
Affiliates and Approved Manufacturers to maintain) said Facilities and equipment
in an acceptable state of repair and operating efficiency so as to meet the
applicable Specifications and comply with the Specified Regulatory
Requirements.  MERCK shall validate and maintain the validation of (or
cause its Affiliates and Approved Manufacturers to validate and maintain) the
Facilities, the equipment (including without limitation conducting installation,
operational and performance qualification), production, cleaning, packaging,
process and any other appropriate steps performed at the
MERCK  Manufacturing Facilities.

     

    (f) Costs of
Compliance.  Activities related to bringing processes or
documentation for the Manufacture of Clinical Product, Marketed Product or MERCK
Product in a MERCK Manufacturing Facility into compliance with the Specified
Regulatory Requirements at any time shall be Manufacturing Development and the
Development Cost thereof shall be allocated by the JDC between the ARIAD.
Territory and the MERCK Territory based
on the Territory or Territories for which compliance is required. Costs of
activities related to bringing physical plant and equipment in a MERCK
Manufacturing Facility into compliance with the Specified Regulatory
Requirements [***].

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        57

        
          

        

      

      
        
        

      

    

    (g) Certificate of
Analysis.  MERCK shall provide ARIAD with certificates of
analysis related to Clinical Product and Marketed Product for each Lot released
for Delivery hereunder.  These certificates will document that each
Lot of Clinical Product or Marketed Product received by ARIAD conforms to the
applicable Specifications.  These certificates shall include the date
of Manufacture and an expiry date for the applicable Clinical Product or
Marketed Product, as appropriate, and shall be signed by an authorized
representative of the Quality Unit of MERCK or its applicable Affiliate or
Approved Manufacturer.  A copy of each certificate shall be included
with each Lot Delivered to ARIAD, and one copy shall be faxed at the same time
to the ARIAD representative specified in the applicable Quality
Agreement.  MERCK shall also provide ARIAD with Regulatory Authority
certification, for those countries in which the applicable Regulatory Authority
is in the practice of requiring any such certifications.

     

    (h) Marketed Product
Release.  ARIAD shall be responsible for final release of each
lot of Marketed Product supplied hereunder for sale within the ARIAD Territory
in accordance with ARIAD’s standard practices.  MERCK is responsible
for providing, in support of ARIAD’s responsibility for its final release
decision, a copy of all Manufacturing records required by ARIAD to release
Marketed Product, including but not limited to, a Certificate of Manufacturing
Compliance, Certificate of Analysis, Batch Records and information as further
specified in the Quality Agreement, for each Lot of Marketed Product
Manufactured hereunder.

     

    (i) Stability
Testing.  MERCK shall perform an on-going program of annual
stability testing (including temperature and humidity) for MERCK Product in
Primary Packaged Form, in accordance with a protocol approved by the JDC and in
compliance with the Specified Regulatory Requirements, on samples from [***]
([***]) production Lots of MERCK Product during the first year in which MERCK
Product is Manufactured, and at least [***] of MERCK Product each year
thereafter.  MERCK shall perform any additional stability testing
programs if required by changes made to the MERCK Product.  Such
stability testing shall be stability-indicating (i.e., the test shall be a
validated analytical method capable of distinguishing actives from degradates
and which reliably quantifies degradates).  If Standard Delivered Form
for Marketed Product is in Secondary Packaging, then this Section 8.1(i) shall
also apply to Marketed Product and MERCK shall perform such program of stability
testing on both MERCK Product and Marketed Product in Primary
Packaging.  In the event that MERCK detects any instability and/or
degradation in excess of limits set forth in the Specifications in connection
with such testing, MERCK shall promptly notify the JMC, and MERCK will follow
its normal procedures for investigation and process modifications with respect
to such instability and/or degradation and will keep the JMC regularly informed
of progress and results.  In addition, MERCK shall place [***] of
MERCK Product (and Marketed Product if applicable) on stability testing
following the implementation of any change described in Section
8.4.  Prior to First Commercial Sale of Product, the activities in
this Section 8.1(i) shall be Manufacturing Development, and the Development Cost
thereof shall be allocated by the JDC between the ARIAD Territory and the MERCK
Territory based on the territory or territories imposing the
requirement.  After First Commercial Sale of Product, the activities
in this Section 8.1(i) shall be part of Commercialization, and the [***] thereof
shall be allocated by the JDC between the ARIAD Territory and the MERCK
Territory based on the territory or territories imposing the requirement.   

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        58

        
          

        

      

      
        
        

      

       

    

    (j) Testing
Requirements.  MERCK shall be responsible for compliance with
all Clinical Product (after Clinical Product Transfer), Marketed Product or
MERCK Product quality control testing and other testing requirements set forth
in the applicable Specifications, the Specified Regulatory
Requirements and the Quality Agreements.  MERCK shall make the results
of its quality control tests available to ARIAD on or before the date of
Delivery of the corresponding Lots of Clinical Product or Marketed
Product.  MERCK agrees to implement and maintain validation protocols,
processing control procedures, and process change procedures, including, without
limitation, the assignment of identification numbers to each Lot of Clinical
Product, Marketed Product and MERCK Product and the maintenance of production
records, quality control records, Batch Records, and related
information.  MERCK shall perform all testing of Clinical Product,
Marketed Product and MERCK Product in accordance with established analytical
test methods and procedures set forth or referenced in the Quality Agreements
and/or the Specifications.  No Lot of Clinical Product or Marketed
Product shall be released for Delivery unless MERCK's tests show the Clinical
Product or Marketed Product meets the applicable
Specifications.  Should any production Lot fail to meet the standards
set forth in the applicable Specifications, MERCK shall, and ARIAD may, at its
option investigate the cause of such failure and provide ARIAD with a written
report summarizing the results of MERCK's investigations.  ARIAD shall
perform such confirmatory testing of Clinical Product or Marketed Product
Delivered to ARIAD as ARIAD may deem appropriate, which may include, but is not
limited to, the recommended procedures set forth in the applicable
Specifications. ARIAD shall advise MERCK of any failure of such Clinical Product
or Marketed Product to meet the standards set forth in the Specifications in
accordance with Section 6.3.  MERCK shall supply ARIAD with analytical
test methods, reference methods and other testing know-how, including method
validation, required to perform confirmation testing as may be required by the
FDA or the ICH, and, upon request, with appropriate quantities of reference
standards related to Clinical Product or Marketed Product, free of charge, in
order to facilitate ARIAD's testing.  In the event ARIAD exercises the
right to Manufacture Marketed Product pursuant to Section 2.6, the preceding
sentence shall also apply to the EMEA, [***].

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have
been filed separately with the Secretary of the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        59

        
          

        

      

      
        
        

      

       

    

    (k) Assay
Procedure.  MERCK shall take and retain, for [***] ([***])
years (or such longer period as required by the Specified Regulatory
Requirements) following Manufacture, samples of Materials, Clinical Product,
Marketed Product and MERCK Product from each Lot, in an amount equal to [***]
([***])  times the amount needed to perform full quality control
testing (such testing to include at least that described in the applicable
Specifications), and shall specify the identifiable and traceable information
regarding the Material, and dates of Manufacture thereof.

     

    (l) Annual
Review.  As part of the Development Program, MERCK agrees to
implement and perform an annual review program for Marketed Product and MERCK
Product including, but not limited to, a review of production related and
quality control testing, related investigations of any failure of Marketed
Product or MERCK Product to meet the applicable Specifications.  The
cost of activities in this Section 8.1(l) shall be [***] and shall be allocated
by the JDC between the ARIAD Territory and the MERCK Territory based on the
Territory or Territories requiring the investigations.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        60

        
          

        

      

      
        
        

      

       

    

    (m)  Cross
Contamination.  If MERCK wishes to have a Third Party that is
not an Approved Manufacturer as of the Effective Date become an Approved
Manufacturer of Marketed Product or MERCK  Product or any intermediate
of Marketed Product or MERCK Product as set forth in Section 2.5(b), MERCK shall
either (a) advise the JMC that such Third Party is not producing, packaging,
labeling, warehousing, quality control testing (including in-process, release
and stability testing), releasing or shipping any chemical entity classified as
“Restricted Category" at the facility at which it will Manufacture Marketed
Product or MERCK Product or any intermediate of Marketed Product or MERCK
Product, or (b) if "Restricted Category" chemical entities are used to produce,
package, label, warehouse, quality control test (including in-process, release
and stability testing), release or ship at the Facility at which it will
Manufacture Marketed Product or MERCK Product or any intermediate of Marketed
Product or MERCK Product, notify the JMC in writing and provide a declaration
from the Third Party that such use (i) complies with all applicable cGMP
requirements, (ii) will cause no potential problem of cross-contamination with
Marketed Product or MERCK Product, and (iii) will not violate any
applicable Specified Regulatory Requirements that would prohibit such use in
such facility.  If requested, MERCK will obtain from the Third Party
and will provide to the JMC a summary of the Third Party’s procedures, controls,
and cleaning methods that will be implemented to address any cross-contamination
issues, as well as such other reasonable information (excluding any third party
confidential information which the Third Party is not permitted to disclose
after it has used reasonable efforts to obtain such permission) to allow the JMC
to also assess whether the use at such facility of any chemical entity
classified within the Restricted Category will potentially present any
cross-contamination issue for the Marketed Product or MERCK Product and could be
in violation of Specified Regulatory Requirements.  In the event the
JMC identifies a potential problem of cross-contamination or with
Regulatory Authority requirements that would prohibit the activity, the JMC will
meet to implement further measures (procedural or segregation) that may be
necessary to address potential cross-contamination issues. Notwithstanding the
foregoing, neither MERCK nor its Approved Manufacturers shall manufacture,
formulate or package Marketed Product or MERCK Product in any facility that the
JMC reasonably determines to present cross-contamination problems for Marketed
Product or MERCK Product.  Any planned changes regarding the use of
"Restricted Category" chemical entities within any Facility will be notified to
ARIAD through the agreed change control processes set forth in Section
8.4.  "Restricted Categories" means any [***] or other [***] such as
[***], or other [***] in the Facilities.  The term “Live Agent” means
a [***] a [***] that [***], including, but not limited to, [***], and
[***].

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
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    (n) Batch Records. All
Batch Records, quality control records, batch release records, product stability
records, deviation reports, excursion records, out-of-specification reports, and
master production and control records required by the Specified Regulatory
Requirements relating to the Manufacture of each Lot of Clinical Product,
Marketed Product or MERCK Product shall be retained by MERCK or its Approved
Manufacturers for a period of not less than [***] ([***]) years from the date of
Manufacture of each Lot of Clinical Product, Marketed Product or MERCK Product
to which said records pertain or for such longer period as may be required by
the Specified Regulatory Requirements.  Thereafter, MERCK shall notify
ARIAD of any intention to destroy such records and shall afford ARIAD the
opportunity to obtain such records at ARIAD’s expense, whether from MERCK or its
Approved Manufacturers.  MERCK shall provide (or cause its Approved
Manufacturers to provide) ARIAD with complete and accurate copies of the
foregoing documents for each production Lot and costs associated therewith shall
be Development Costs and shall be allocated by the JDC between the ARIAD.
Territory and the MERCK Territory based on the countries in the Territory
requiring the record retention.

     

    8.2.   Quality Provisions Governing
Manufacture of Clinical Product and API by ARIAD.

     

    (a) Compliance with Laws and
Regulations.   ARIAD agrees to (or cause its Affiliates or
Approved Manufacturers to) Manufacture and supply API and Clinical Product in
accordance with the applicable Specifications and in accordance with the
Specified Regulatory Requirements applicable to Manufacturing API or Clinical
Product for supply to MERCK hereunder and Clinical Product for use by
ARIAD.

     

    (b) Debarment.  ARIAD
represents and warrants that it has not been debarred and is not subject to a
pending debarment and that ARIAD will not use in any capacity, in connection
with the services to be performed by ARIAD under this Agreement, any Person
including an Approved Manufacturer who has been debarred pursuant to Section 306
of the FDCA, or similar law, rule, regulation, guideline or requirement of the
FDA, the EMEA or the ICH or who is the subject of a conviction described in such
section.  ARIAD agrees to inform MERCK in writing immediately if it or
any Person who is performing services hereunder is debarred or is the subject of
a conviction described in Section 306 of the FDCA, or similar law, rule,
regulation, guideline or requirement of the FDA, the EMEA or the ICH, or if any
action, suit, claim, investigation, or legal or administrative proceeding is
pending or, to the best of ARIAD’s Knowledge, is threatened, relating to the
debarment or conviction of ARIAD or any Person performing services
hereunder.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
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    (c) Manufacturing
Facilities.  ARIAD shall Manufacture or arrange for the
Manufacture of Clinical Product (prior to clinical Product Transfer) and API at
ARIAD's Manufacturing Facilities.  Subject to this Section 8.2(c) and
Section 8.2(b), MERCK understands that ARIAD may use the services of the
Approved Manufacturers to Manufacture API and Clinical Product at ARIAD's
Facilities.  Manufacturing of API or Clinical Product may not be
relocated without MERCK's prior written consent, which shall not be unreasonably
withheld.  Manufacturing of Clinical Product or API at any relocated
Facility shall comply with the Specified Regulatory Requirements.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
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    (d) Manufacturing and Quality
Audits.  ARIAD shall, and shall cause its Affiliates and
Approved Manufacturers to, permit the FDA, the EMEA and other Regulatory
Authorities to conduct such inspections of the ARIAD Manufacturing Facilities as
the FDA, EMEA or such other Regulatory Authorities may request, and shall
cooperate with such Regulatory Authorities with respect to such inspections and
any related matters, in each case related to API and Clinical
Product.  ARIAD agrees to notify MERCK immediately (and, in any event
within [***] ([***]) hours of becoming aware thereof) of any proposed or
unannounced quality visit or quality inspections by any Regulatory Authority to
an ARIAD Manufacturing Facility (whether owned by ARIAD, an Affiliate or a
Approved Manufacturer) and if such inspection is reasonably related to (i) API
or Clinical Product or (ii) equipment or systems used in the Manufacture of API
or Clinical Product, agrees to keep MERCK fully informed about the results and
conclusions of each such regulatory inspection, including actions taken by
ARIAD, its Affiliates and Approved Manufacturers to remedy conditions cited in
such inspections.  If such visit or inspection is directly related to
the API or Clinical Product or its Manufacture, ARIAD shall, and shall cause its
Affiliates to (and shall use commercially reasonable efforts to cause its
Approved Manufacturers to) permit one or more qualified representative(s) of
MERCK to be present if requested by MERCK. ARIAD shall promptly, and in no event
later than [***] ([***]) business days of receipt thereof, provide MERCK with
copies of any written inspection reports issued by such Regulatory Authorities
as well as any reports, documents or correspondence with respect to any
Regulatory Authority requests or inspections of a ARIAD Manufacturing Facility
if such reports, documents or correspondence are directly related to (i) API or
Clinical Product or (ii) equipment or systems used in the Manufacture of API or
Clinical Product, including, but not limited to, FDA Form 483, Notice of
Observation, Establishment Inspection Report, and all correspondence relating
thereto; provided that ARIAD may redact any information from such reports,
documents or correspondence that is not reasonably related to API or Clinical
Product or (ii) equipment or systems used in the Manufacture of API or Clinical
Product.   ARIAD, its Affiliates or the applicable Approved
Manufacturer will be responsible for the development of responses that are
required by any Regulatory Authority and related to the Manufacture of Clinical
Product or API and ARIAD shall, and shall cause its Affiliates to, and shall use
commercially reasonable efforts to cause its Approved Manufacturers to, furnish
copies to MERCK and consult with MERCK, and in good faith consider any timely
input from MERCK, in preparing any submissions.  Nothing contained in
this Article shall restrict the right of either Party, its Affiliates or
Approved Manufacturers to make a timely report of any matter to any Regulatory
Authority or take other action that it deems appropriate or required by
applicable law. ARIAD shall allow, and shall use commercially reasonable efforts
to cause its Approved Manufacturers to allow, MERCK to have access to all
quality assurance inspections and audits of ARIAD or its Affiliates or such
Approved Manufacturers related to the Manufacture of API and Clinical Product
and to the buildings, records and areas of the ARIAD Manufacturing Facility
related to the Manufacture of Clinical Product and API.  Additionally,
upon notice by MERCK, ARIAD shall, and shall cause its Affiliates to (and shall
use commercially reasonable efforts to cause its Approved Manufacturers to)
allow one or more technical specialists from MERCK or MERCK’s designees, to
conduct quality audits of the ARIAD Manufacturing Facilities, any other facility
which is proposed to Manufacture API or Clinical Product and Quality Assurance
Systems with respect to Clinical Product or API.  Observations and
conclusions of MERCK's audits will be issued to, and promptly discussed with
ARIAD, and corrective action required by the Specified Regulatory Requirements
shall be implemented by ARIAD and its Affiliates (and ARIAD shall use
commercially reasonable efforts to cause its Approved Manufacturers to cause to
be implemented such corrective action) prior to Manufacturing additional API or
Clinical Product to the extent practicable.  MERCK shall have the
right to review all relevant documentation pertinent to the corrective actions
implemented by ARIAD and its Affiliates and ARIAD shall use commercially
reasonable efforts to cause its Approved Manufacturers to permit MERCK to review
all relevant documentation pertinent to the corrective actions implemented by
its Approved Manufacturer.  The cost of all such corrective actions
required in the processes or documentation for the Manufacture, of Clinical
Product or API shall be a Development Cost and shall be allocated by the JDC
between the ARIAD Territory and the MERCK Territory based on the jurisdiction
imposing the requirement in question.  For clarity, the cost of
corrective actions required to be made to any Manufacturing Facility, equipment
or general processes and procedures not directly attributable to the manufacture
of Clinical Product or API shall not be a Development Cost.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
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    (e) Maintenance;
Validation.  ARIAD agrees to operate and maintain (or cause its
Affiliates and Approved Manufacturers to operate and maintain) the ARIAD
Manufacturing Facilities and all equipment used, directly or indirectly, to
Manufacture API and Clinical Product in accordance with the Specified Regulatory
Requirements, and to maintain (and cause its Affiliates and Approved
Manufacturers to maintain) said Facilities and equipment in an acceptable state
of repair and operating efficiency so as to meet the applicable Specifications
and comply with the Specified Regulatory Requirements.  ARIAD shall
validate and maintain the validation of (or cause its Affiliates and Approved
Manufacturers to validate and maintain) the Facilities, the equipment
(including, without limitation, conducting installation, operational and
performance qualification), production, cleaning, packaging, process and any
other appropriate steps performed at the ARIAD  Manufacturing
Facilities.

     

    (f) Costs of
Compliance.  Activities related to bringing processes or
documentation for the Manufacture of Clinical Product or API in an ARIAD
Manufacturing Facility into compliance with the Specified Regulatory
Requirements at any time shall be Manufacturing Development, and the Development
Cost thereof shall be allocated by the JDC between the ARIAD Territory and the
MERCK Territory based
on the Territory or Territories for which compliance is required. Costs of
activities related to bringing physical plant and equipment in an ARIAD
Manufacturing Facility into compliance with the Specified Regulatory
Requirements [***].

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
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    (g) Certificate of
Analysis.  ARIAD shall provide MERCK with certificates of
analysis related to API and Clinical Product for each Lot or Batch, as
applicable, released for Delivery hereunder.  These certificates will
document that each Batch of API or Lot of Clinical Product received by MERCK
conforms to the applicable Specifications.  These certificates shall
include the date of Manufacture and either a retest date or expiry date for the
applicable API or Clinical Product, as appropriate and shall be signed by an
authorized representative of the Quality Unit of ARIAD or its applicable
Affiliate or Approved Manufacturer.  A copy of each certificate shall
be included with each Lot or Batch Delivered to MERCK, and one copy shall be
faxed at the same time to the MERCK representative specified in the applicable
Quality Agreement.  ARIAD shall also provide MERCK with Regulatory
Authority certification, for those countries in which the applicable Regulatory
Authority is in the practice of requiring any such certifications.

     

    (h) MERCK Product Release and
Acceptance of API.  MERCK shall be responsible for acceptance
of API supplied hereunder and final release of MERCK Product for sale in the
MERCK Territory, in each case in accordance with MERCK’s standard
practices.  ARIAD is responsible for providing, in support of MERCK’s
responsibility for the final release decision or acceptance of API, a copy of
all Manufacturing records required by MERCK to accept API and release MERCK
Product, including but not limited to a Certificate of Manufacturing Compliance,
Certificate of Analysis, Batch Records and information as further specified in
the Quality Agreement, for each Batch of API Manufactured
hereunder.

     

    (i) Stability
Testing.  (A)  ARIAD shall perform an on-going
program of annual stability testing (including temperature and humidity) for
Commercial API, in accordance with a protocol approved by the JDC and in
compliance with the Specified Regulatory Requirements on samples from [***]
([***]) production Lots of Commercial API during the first year in which
Commercial API is Manufactured, and at least [***] of Batch of Commercial API
each year thereafter.  ARIAD shall perform any additional stability
testing programs if required by changes made to the Commercial
API.  Such stability testing shall be stability indicating (i.e., the
test shall be a validated analytical method capable of distinguishing actives
from degradates and which reliably quantifies degradates). In the event that ARIAD
detects any instability and/or degradation in excess of limits set forth in the
Specifications in connection with such testing, ARIAD shall promptly notify the
JMC, and ARIAD will follow its normal procedures for investigation and process
modifications with respect to such instability and/or degradation and will keep
the JMC regularly informed of progress and results.  In addition,
ARIAD shall place one Batch of Commercial API on stability testing following the
implementation of any change described in Section 8.4.  Prior to First
Commercial Sale of Product, the activities in this Section 8.2(i)(A) shall be
Manufacturing Development and the Development Cost thereof shall be allocated by
the JDC between the ARIAD Territory and the MERCK Territory based on the
territory or territories imposing the requirement.  After First
Commercial Sale of Product, the activities in this Section 8.2(i)(A) shall be
part of Commercialization, and the [***] thereof shall be allocated by the JDC
between the ARIAD Territory and the MERCK Territory based on the territory or
territories imposing the requirement.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
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    (B)           If
Standard Delivered Form is Bulk Packaging, ARIAD shall perform an on-going
program of annual stability testing (including temperature and humidity) for
Marketed Product in Primary Packaged Form, in accordance with a protocol
approved by the JDC and in compliance with the Specified Regulatory
Requirements, on samples from [***] ([***]) production Lots of Marketed Product
during the first year in which Marketed Product is Manufactured, and at least
[***] of Marketed Product each year thereafter.  ARIAD shall perform
any additional stability testing programs if required by changes made to the
Marketed Product.  Such stability testing shall be
stability-indicating (i.e., the test shall be a validated analytical method
capable of distinguishing actives from degradates and which reliably quantified
degradates).  In the event ARIAD detects any instability and/or
degradation in excess of limits set forth in the Specifications in connection
with such testing, ARIAD shall promptly notify the JMC, and ARIAD will follow
its normal procedures for investigation and process modifications with respect
to such instability and/or degradation and will keep the JMC regularly informed
of progress and results.  In addition, ARIAD shall place one (1) Lot
of Marketed Product on stability testing following the implementation of any
change described in Section 8.4.  Prior to First Commercial Sale of
Marketed Product, the activities in this Section 8.2(i)(B) shall be
Manufacturing Development, and the Development Cost thereof shall be allocated
by the JDC to the ARIAD Territory.  After First Commercial Sale of
Marketed Product, the activities in this Section 8.2(i)(B) shall be part of
Commercialization, and the [***] thereof shall be allocated by the JDC to the
ARIAD Territory.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
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    (j) Testing
Requirements.  ARIAD shall be responsible for compliance with
all API and Clinical Product (before Clinical Product Transfer) quality control
testing and other testing requirements set forth in the applicable
Specifications, the Specified Regulatory Requirements and the Quality
Agreements.  ARIAD shall make the results of its quality control tests
available to MERCK on or before the date of Delivery of the corresponding
Batches of API or Lots of Clinical Product.  ARIAD agrees to implement
and maintain validation protocols, processing control procedures, and process
change procedures, including, without limitation, the assignment of
identification numbers to each Batch of the API and Lot of Clinical Product and
the maintenance of production records, quality control records, Batch Records,
and related information.  ARIAD shall perform all testing of API and
Clinical Product in accordance with established analytical test methods and
procedures set forth or referenced in the Quality Agreements and/or the
Specifications.  No Batch of API or Lot of Clinical Product shall be
released for Delivery unless ARIAD's tests show the API or Clinical Product
meets the applicable Specifications.  Should any production Batch or
Lot fail to meet the standards set forth in the Specifications, ARIAD shall, and
MERCK may, at its option, investigate the cause of such failure and provide
MERCK with a written report summarizing the results of ARIAD's
investigations.  MERCK shall perform such confirmatory testing of API
and Clinical Product released for Delivery to MERCK as MERCK may deem
appropriate, which may include, but is not limited to, the recommended
procedures set forth in the applicable Specifications.  MERCK shall
advise ARIAD of any failure of such API or Clinical Product to meet the
standards set forth in the applicable Specifications in accordance with Section
6.3.  ARIAD shall supply MERCK with analytical test methods, reference
methods and other testing know-how, including method validation, required to
perform confirmation testing as may be required by the FDA, the EMEA, the ICH,
[***] and, upon request, with appropriate quantities of reference standards
related to API and Clinical Product, free of charge, in order to facilitate
MERCK's testing.  

     

    (k) Assay
Procedure.  ARIAD shall take and retain, for [***] ([***])
years (or such longer period as required by the Specified Regulatory
Requirements) following Manufacture samples of API, Materials and Clinical
Product from each Batch or Lot, as applicable, in an amount equal to [***]
([***]) times the amount needed to perform full quality control testing (such
testing to include at least that described in the applicable Specifications),
and shall specify the identifiable and traceable information regarding the
Material, and dates of Manufacture thereof.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
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    (l) Annual
Review.  As part of the Development Program, ARIAD agrees to
implement and perform an annual review program for API including, but not
limited to, a review of production related and quality control testing related
investigations of any failure of API to meet the applicable
Specifications.  The cost of activities in this Section 8.2(l) shall
be [***] and shall
be allocated by the JDC between the ARIAD Territory and the MERCK Territory
based on the Territory or Territories requiring the investigations.

     

    (m)  Cross
Contamination.  If ARIAD wishes to have a Third Party that is
not an Approved Manufacturer as of the Effective Date become an Approved
Manufacturer of API or Clinical Product or any intermediate of API or Clinical
Product as set forth in Section 2.5(b), ARIAD shall either (a) advise the JMC
that  such Third Party is not producing, packaging, labeling,
warehousing, quality control testing (including in-process, release and
stability testing), releasing or shipping any chemical entity classified as
“Restricted Category" at the facility at which it will Manufacture API or
Clinical Product or any intermediate of API or Clinical Product, or (b) if
"Restricted Category" chemical entities are used to produce, package, label,
warehouse, quality control test (including in-process, release and stability
testing), release or ship at the Facility at which it will Manufacture API or
Clinical Product or any intermediate of API or Clinical Product, notify the JMC
in writing and provide a declaration from the Third Party that such use (i)
complies with all applicable cGMP requirements, (ii) will cause no potential
problem of cross-contamination with API or Clinical Product, and (iii) will
not violate any applicable Specified Regulatory Requirements that would prohibit
such use in such facility.  If requested, ARIAD will obtain from the
Third Party and will provide to the JMC a summary of the Third Party’s
procedures, controls, and cleaning methods that will be implemented to address
any cross-contamination issues, as well as such other reasonable information
(excluding any third party confidential information which the Third Party is not
permitted to disclose after it has used reasonable efforts to obtain such
permission) to allow the JMC to also assess whether the use at such facility of
any chemical entity classified within the Restricted Category will potentially
present any cross-contamination issue for the API or Clinical Product and could
be in violation of Specified Regulatory Requirements.  In the event
the JMC identifies a potential problem of cross-contamination or with
Specified Regulatory Requirements that would prohibit the activity, the JMC will
meet to implement further measures (procedural or segregation) that may be
necessary to address potential cross-contamination
issues.  Notwithstanding the foregoing, neither ARIAD nor its Approved
Manufacturers shall manufacture, formulate or package API or Clinical Product in
any facility that the JMC reasonably determines to present cross-contamination
problems for API or Clinical Product.  Any planned changes regarding
the use of "Restricted Category" chemical entities within any Facility will be
notified to MERCK through the agreed change control processes set forth in
Section 8.4.  "Restricted Categories" means any [***] or other [***]
such as [***], or other [***] in the Facilities.  The term “Live
Agent” means a [***] a [***] that [***], including, but not limited to,
[***].

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        69

        
          

        

      

      
        
        

      

       

    

    (n) Batch Records. All
Batch Records, quality control records, batch release records, product stability
records, deviation reports, excursion reports, out-of-specification reports, and
master production and control records required by the Specified Regulatory
Requirements relating to the Manufacture of each Batch of API or Lot of Clinical
Product shall be retained by ARIAD or its Approved Manufacturers for a period of
not less than (i) [***] ([***]) years from
the date of Manufacture of each Lot of Clinical Product to which said records
pertain, or (ii) [***] ([***]) years from date of Manufacture of each Batch of
API to which said records pertain, or (iii) in the case of clauses (i) or (ii)
for such longer period as may be required by the Specified Regulatory
Requirements.  Thereafter, ARIAD shall notify MERCK of any intention
to destroy such records and shall afford MERCK the opportunity to obtain such
records at MERCK’s expense, whether from ARIAD or its Approved
Manufacturers.  ARIAD shall provide (or cause its Approved
Manufacturers to provide) MERCK with complete and accurate copies of the
foregoing documents for each production batch and costs associated therewith
shall be Development Costs and shall be allocated by the JDC between the U.S.
Territory and the ROW Territory based on the countries in the Territory
requiring the record retention. 

     

    8.3.           Additional Regulatory
Requirements.  If either Party believes that compliance with
cGMPs or other laws, rules, guidelines or regulations of a Regulatory Authority
of any jurisdiction other than the FDA, the EMEA, the ICH, [***] is required to
comply with the Specified Regulatory Requirements are required, it will notify
the other Party.  The JMC shall promptly meet to review the matter and
shall develop a plan to achieve compliance therewith in the relevant
jurisdiction.  Each Party will contribute expertise and technology to
the development and implementation of such plan.  All expenses of
compliance with laws, rules, guidelines or regulations of a Regulatory Authority
[***] and all [***] under this Section 8.3 shall be allocated to the MERCK
Territory as incremental Development Costs.  When such plan has been
developed and implemented for any jurisdiction other than the United States, the
European Union, [***], the definitions of cGMP and Specified Regulatory
Requirements shall be deemed amended to include such jurisdiction and such
jurisdiction shall be referred to herein as an “Added Regulatory
Jurisdiction.”

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        70

        
          

        

      

      
        
        

      

    

    8.4           Changes to Registered
Technical Parameters.  Notwithstanding anything in this
Agreement to the contrary, neither Party shall amend, change or supplement any
of the following parameters, as specified in any Commercialization Regulatory
Approval, in connection with the Manufacture of Commercial API, Marketed Product
or MERCK Product without giving written notice to the other
Party:  (a) the Facilities used for Manufacturing as they are
specified and approved in any applicable Commercialization Regulatory Approval
and subject to approval as set forth in Section 8.1(c) or 8.2(c), (b) the source
of Materials; (c) the equipment used for Manufacturing; (d) the test methods
used in connection with Manufacturing; and (e) the processes used for
Manufacturing (clauses (a)-(e), collectively the “Registered Technical
Parameters”).  For clarity, the Specifications may only be changed in
accordance with Section 4.2, and neither Party may otherwise change the
Specifications.

     

    If either Party provides notice of a
change in any Registered Technical Parameter (each, a “Registered Technical
Parameter Change”), the other Party shall promptly advise as to whether it
believes such Registered Technical Parameter Change requires Regulatory Approval
in the ARIAD Territory in the case of ARIAD or the MERCK Territory in the case
of MERCK.  Any disagreement as to whether any Registered Technical
Parameter Change requires Regulatory Approval shall be referred to the JMC for
resolution in accordance with Section 2.4.5 of the Collaboration
Agreement.

     

    If any such Regulatory Approval is
required,

     

    (i)           MERCK
and ARIAD shall each furnish to the other any data or information in its Control
requested by the other Party for use in seeking such Regulatory
Approval;

     

     

     

     

    
      Confidential Portions of this Exhibit were omitted and have been filed
separately with the Secretary of the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        71

        
          

        

      

      
        
        

      

       

    

    (ii)          MERCK
or ARIAD, as the case may be, shall as soon as practicable make any Regulatory
Filings necessary for such Regulatory Approval, subject to its receipt of any
required supporting data and information;

     

    (iii)         MERCK
or ARIAD, as the case may be, shall use Commercially Reasonable Efforts to
pursue such Regulatory Approval;

     

    (iv)         Until
such Regulatory Approval is received, the Manufacturing Party shall continue to
supply Commercial API, Marketed Product or MERCK Product in accordance with this
Agreement meeting the Registered Technical Parameters consistent with the
existing Regulatory Approval.

     

    If no Regulatory Approval is required,
the Party proposing the change shall notify the JDC and the JMC of such change
in the event that such change may impact the critical quality attributes or
parameters of Commercial API, Marketed Product or MERCK Product as further
specified in the Quality Agreements.

     

    ARTICLE
IX.

     

    REGULATORY
MATTERS

     

    9.1. Recalls.

     

    (a)           In
the event that MERCK Product in the MERCK Territory or Marketed Product in the
ARIAD Territory is recalled or withdrawn (or other corrective action is taken
with respect thereto), each Party shall reasonably cooperate with other Party in
connection with such recall or withdrawal (or corrective
action).  Notwithstanding anything to the contrary in the
Collaboration Agreement, if such recall or withdrawal (or corrective action) is
caused by breach of any of the warranties set forth in Section 6.1 or Section
6.2, as applicable, the breaching Party shall reimburse the non-breaching Party
for (i) all recalled or withdrawn Marketed Product and MERCK Product, (ii) all
costs associated with shipping and distributing the recalled or withdrawn
Marketed Product and MERCK Product, and (iii) all expenses of such recall or
withdrawal (or corrective action).

     

    (b)           All
decisions to recall or withdraw Product in the MERCK Territory or in the
ARIAD Territory shall be governed by Section 3.11 of the Collaboration
Agreement.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        72

        
          

        

      

      
        
        

      

       

      9.2. Safety.  Each
Party shall immediately (and, in any event, within sufficient time to allow the
other Party to comply with applicable law or regulations) notify the other Party
of Adverse Events or any other information concerning API, Clinical Product,
MERCK Product or Marketed Product, as the case may be, supplied by such Party
which the Senior Management of its Quality Unit believes is likely to affect the
approved claims made for the Product or the continued use of the Clinical
Product or marketing of Marketed Product or MERCK Product.  Any such
notification will include all related information in detail.  Upon
receipt of any such information, the Parties shall immediately consult with each
other in an effort to arrive at a mutually acceptable procedure for taking
appropriate action as set forth in Section 3.10.6 of the Collaboration
Agreement; provided, however, that nothing contained herein shall be construed
as restricting the right of either Party to take any action permitted by Section
3.10.6 of the Collaboration Agreement or to make a timely report of such matter
to any Regulatory Authority or take other action that it deems to be appropriate
or required by applicable law, rules, regulations or regulatory requirements,
including, without limitation, in the case of ARIAD, delivery of any safety or
adverse event information to ARIAD Medical Device Collaborators.  Each
Party will notify the other immediately of any health hazards with respect to
API, Clinical Product, Marketed Product and MERCK Product which may impact
employees involved in the Manufacture of API, Clinical Product, Marketed Product
and MERCK Product.

    

     

    ARTICLE
X.

     

    TERM AND
TERMINATION

     

    10.1. Term.  The term of this
Agreement (the “Term”) shall begin as
of the Effective Date and, unless earlier terminated pursuant to this Article,
shall continue until the termination or expiration of the Collaboration
Agreement in accordance with the terms thereof.  This Agreement shall
terminate immediately without requiring any action by either Party upon any
termination of the Collaboration Agreement or its expiration in both the ARIAD
Territory and the MERCK Territory.

     

    10.2. Termination by Mutual
Consent.  This Agreement may be terminated by written agreement
of the Parties.

     

    10.3. Termination for
Breach.  Except as set
forth herein, (i) either Party may terminate this Agreement, effective
immediately upon written notice to the other Party, for a material breach by the
other Party of any term of this Agreement that remains uncured [***] ([***])
days ([***] ([***]) days in the event that the breach is a failure of a Party to
make any payment required hereunder) after the non-breaching Party first gives
written notice to the other Party of such breach and its intent to terminate
this Agreement if such breach is not cured.  A failure to supply API,
Clinical Product or Marketed Product hereunder shall not be a breach of this
Agreement, and the sole remedy of a Party in such a case shall be as set forth
in Section 2.6 or Section 2.10, as applicable.  For clarity, a breach
of this Agreement shall not be a breach of the Collaboration Agreement and shall
not be a basis for termination of the Collaboration Agreement.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        73

        
          

        

      

      
        
        

      

       

    

    10.4. Termination for
Insolvency.  In the event that ARIAD Pharmaceuticals, Inc. or
MERCK Parent makes an assignment for the benefit of creditors, appoints or
suffers appointment of a receiver or trustee over all or substantially all of
its property, files a petition under any bankruptcy or insolvency act or has any
such petition filed against it which is not discharged within [***] ([***]) days
of the filing thereof, then the other Party may terminate this Agreement
effective immediately upon written notice to the Party of which such entity is a
part.

     

    10.5. Effect of Termination of
Supply Agreement by ARIAD or by Mutual Consent.

     

    (a)           If
this Agreement is terminated as a result of (i) termination of this Agreement
pursuant to Section 10.2, (ii) a termination of the Collaboration Agreement by
ARIAD pursuant to Section 9.2.1(d), 9.2.2 or 9.2.3 of the Collaboration
Agreement or pursuant to Section 10.3 or 10.4 of this Agreement, or (iii)
termination of the Collaboration Agreement by MERCK pursuant to Section 9.2.1(a)
of the Collaboration Agreement, then MERCK shall, at ARIAD's election, continue
to supply Marketed Product, API (in the event MERCK is supplying ARIAD, at the
time of termination, with API pursuant to Section 2.7 of this Agreement) and
Clinical Product (if Clinical Product Transfer has occurred) to ARIAD on the
terms set forth herein until the earlier of (x) such time as ARIAD notifies
MERCK that ARIAD has achieved alternative manufacturing arrangements which are
presently capable of Manufacturing API (if applicable), Clinical Product and
Marketed Product in accordance with ARIAD's quality standards and in compliance
with the Specified Regulatory Requirements, or (y) [***] years.  For
clarity, if this Agreement is terminated as a result of the termination of the
Collaboration Agreement by MERCK in accordance with Section 9.2.1(b) and Section
9.2.1(c) of the Collaboration Agreement, MERCK shall not have the obligation to
supply Marketed Product, API or Clinical Product to ARIAD pursuant to the
preceding sentence.  If this Agreement is terminated by ARIAD pursuant
to Section 10.3 or 10.4 of this Agreement, at MERCK's election, but subject to
Section 10.9, ARIAD shall continue to supply MERCK with API or MERCK Product (in
the event ARIAD is supplying MERCK, at the time of termination, with MERCK
Product pursuant to Section 2.7 of this Agreement) on the terms set forth herein
until earlier of (x) such time as MERCK notified ARIAD that MERCK has achieved
alternate manufacturing arrangements which are presently capable of
Manufacturing API or MERCK Product (if applicable) in accordance with MERCK's
quality standards and in compliance with the Specified Regulatory Requirements,
or (y) [***] years.  In addition, MERCK shall grant to ARIAD a
non-exclusive royalty-free, sublicensable license to use all Manufacturing
Know-How Controlled by MERCK to the extent necessary or useful for ARIAD or its
Affiliates to make or have made API, Clinical Product and
Marketed  Product for the ARIAD Territory and shall provide ARIAD and
its Affiliates with all Manufacturing Know-How Controlled by MERCK and
assistance necessary for ARIAD to Manufacture Marketed Product and API (if ARIAD
is not at the time of termination Manufacturing API) which assistance and
Manufacturing Know-How transfer shall be provided in accordance with 2.6(b) for
a period of time not to exceed [***] ([***]) Months.  The license
granted under this Section 10.5 shall continue in accordance with Section
9.3.2(a) of the Collaboration Agreement.  The costs associated with
such assistance and Manufacturing Know-How transfer shall be borne by the party
incurring the expense.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        74

        
          

        

      

      
        
        

      

       

    

    (b)           In
the event this Agreement is terminated by ARIAD pursuant to Section 10.3 of this
Agreement (i) ARIAD shall have the right to require MERCK to purchase all MERCK
Product or Commercial API, covered by Firm Orders and all Materials specifically
related to Manufacture of Commercial API or MERCK Product, or (ii) ARIAD may in
its sole discretion, cancel any outstanding Firm Orders which have not been
Delivered to MERCK.

     

    (c)           In
the event this Agreement expires, is terminated by ARIAD pursuant to Section
10.3 of this Agreement or by reason of the termination of the Collaboration
Agreement by ARIAD in accordance with Section 9.2.1(d), 9.2.2 or 9.2.3 of the
Collaboration Agreement or by MERCK pursuant to Section 9.2.1 of the
Collaboration Agreement, or is terminated by mutual agreement of the Parties
pursuant to Section 10.2, ARIAD and its Related Parties shall have the right to
continue to sell or use, as the case may be,  all Clinical Product and
Marketed Product remaining in their possession at the time of expiration or
termination, in accordance with the terms of the Collaboration
Agreement.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        75

        
          

        

      

      
        
        

      

    

    10.6. Effect Termination of Supply
Agreement by MERCK or by Mutual Consent.

     

    (a)           If
this Agreement is terminated as a result of (i) a termination of this Agreement
pursuant to Section 10.2 or (ii) a termination of the Collaboration Agreement by
MERCK pursuant to Section 9.2.2 or 9.2.3 of the Collaboration Agreement or
pursuant to Section 10.3 or 10.4 of this Agreement (i)  ARIAD shall at
MERCK's election continue to supply Clinical API (if Clinical Product Transfer
has occurred), Clinical Product (if Clinical Product Transfer has not occurred)
Commercial API, and MERCK  Product (in the event ARIAD is supplying
MERCK with MERCK Product at the time of termination pursuant to Section 2.7 of
this Agreement) to MERCK on the terms set forth herein until the earlier of (x)
such time as MERCK notifies ARIAD that MERCK has achieved alternative
manufacturing arrangements which are presently capable of Manufacturing Clinical
Product, Clinical API, Commercial API and MERCK Product (each as applicable) in
accordance with MERCK’s quality standards and in compliance with the Specified
Regulatory Requirements, or (y) [***] years.  If this Agreement is
terminated by MERCK pursuant to Section 10.3 or 10.4 of this Agreement, at
ARIAD's election, but subject to Section 10.9, MERCK shall continue to supply
ARIAD with Marketed Product or API (if MERCK is supplying ARIAD, at the time of
termination, with API  pursuant to Section 2.7) on the terms set forth
herein until earlier of (x) such time as ARIAD notifies MERCK that ARIAD has
achieved alternate manufacturing arrangements which are presently capable of
Manufacturing Marketed Product or API (if applicable) in accordance with ARIAD's
quality standards and in compliance with the Specified Regulatory Requirements,
or (y) [***] years.  In addition, ARIAD shall grant to MERCK a
non-exclusive royalty-free, sublicensable license to use all Manufacturing
Know-How Controlled by ARIAD to the extent necessary or useful for MERCK or its
Affiliates to make or have made API, Clinical Product and MERCK Product for the
MERCK Territory and shall provide MERCK and  its Affiliates with the
Manufacturing Know-How Controlled by ARIAD and assistance necessary for MERCK to
Manufacture API and MERCK Product (if ARIAD is at the time of termination
Manufacturing MERCK Product) which assistance and Manufacturing Know-How
transfer shall be provided in accordance with 2.6(a) for a period of time not to
exceed [***] ([***]) Months.  The costs associated with such
assistance and Manufacturing Know-How transfer shall be borne by the party
incurring the expense.  The license granted under this Section 10.6
shall continue in accordance with Section 9.3.2(a) of the Collaboration
Agreement.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        76

        
          

        

      

      
        
        

      

       

    

    (b)           In
the event this Agreement expires, is terminated by MERCK pursuant to 10.3 of
this Agreement or by reason of the termination of the Collaboration Agreement by
MERCK in accordance with Section 9.2.2 or 9.2.3 of the Collaboration Agreement,
or is terminated by mutual agreement of the Parties pursuant to Section 10.2,
MERCK, and its Related Parties shall have the right to continue use the API to
Manufacture Product and to sell or use all Clinical Product, or MERCK Product
remaining in their possession at the time of expiration or termination, in
accordance with the terms of the Collaboration Agreement.

     

    (c)           In
the event this Agreement is terminated by MERCK pursuant to Section 10.3 of this
Agreement (i) MERCK shall have the right to require ARIAD to purchase all
Marketed Product or Commercial API covered by Firm Orders and all Materials
specifically related to Manufacture of Marketed Product or Commercial API (in
the event MERCK is supplying ARIAD Commercial API pursuant to Section 2.6) for
the ARIAD Territory, or (ii) MERCK may in its sole discretion, cancel any
outstanding Firm Orders which have not been Delivered to ARIAD.

     

    10.7. Improvements to Manufacture
of Commercial API.  In the event that MERCK initiates the
Manufacture of Commercial API upon termination of this Agreement and makes any
improvements to the Manufacture of Commercial API and such improvements would be
treated as Product Technology under the Collaboration Agreement, then MERCK
shall transfer all right, title and interest in such improvements to ARIAD and
such improvements shall be subject to all licenses granted to MERCK hereunder
and under the Collaboration Agreement.  If such improvements would not
be treated as Product Technology under the Collaboration Agreement, MERCK shall
grant to ARIAD a perpetual, non-exclusive, royalty-free, worldwide license with
the right to grant sublicenses to such improvements that are made by MERCK
[***].

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        77

        
          

        

      

      
        
        

      

       

    

    10.8. Expiration of this Agreement
or the Collaboration Agreement.  With respect to expiration of
this Agreement or the Collaboration Agreement, each Party agrees that the other
Party may Manufacture or have Manufactured Clinical Product, MERCK Product,
Marketed Product or API under the rights granted to the Other Party under
Section 10.5 or Section 10.6 (which grant of rights shall apply in the event of
expiration of this Agreement or the Collaboration Agreement) starting [***]
([***]) Months prior to expiration of the Term of this Agreement or the
Collaboration Agreement for the purpose of enabling each Party or its designee
to obtain the necessary Regulatory Approvals for its Manufacture of API and
Product after the expiration of this Agreement or the Collaboration
Agreement.  Such rights set forth in Section 10.5 and Section 10.6 and
granted under this Section 10.8 shall continue in accordance with Section
9.3.2(a) of the Collaboration Agreement.  The JSC shall determine the
date on which such [***] ([***]) month period shall commence.

     

    10.9. Payment of Outstanding
Debts.  Upon expiration or termination of this Agreement for
whatever reason, either Party shall settle all outstanding invoices or monies
owed to the other Party or its Affiliates pursuant to their stated terms;
provided however, that in the event the termination is the result of a breach by
a Party, all amounts owed to the other Party under this Agreement shall become
immediately due and payable.  In the event of termination of this
Agreement by either Party pursuant to Section 10.4, the terminating Party shall
have no obligation to supply API, Marketed Product or MERCK Product to the
terminated Party unless all amounts due to the terminating Party at the time of
termination are paid in accordance with the preceding sentence.

     

    10.10. Return of
Information.  Unless otherwise permitted under this Agreement
or the Collaboration Agreement, within [***] ([***]) days subsequent to the
expiration or termination of this Agreement, either Party shall return to the
other Party all confidential information received from the other Party,
including all copies thereof, and forward to the other Party all documents or
materials created from such confidential information; provided, however, that
each Party shall have the right to retain information subject to a continuing
license or right of use of hereunder and one copy of information in its
confidential files to the extent retention of such information is required by
applicable laws and regulations.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        78

        
          

        

      

      
        
        

      

       

    

    10.11. Effect of
Acquisition.  (a) In the event of an Acquisition of ARIAD
Pharmaceuticals, Inc. in which this Agreement is assigned to an entity other
than ARIAD, if the surviving entity to which this Agreement is assigned does not
have knowledge and experience in operating under FDA and EMEA regulations at
least equivalent to the knowledge and experience of ARIAD, or then a Release
Condition will be deemed to have occurred, and MERCK shall have the right to
Manufacture Commercial API as set forth in Section 2.6(b).  If MERCK
exercises such right within thirty (30) days after the consummation of the
Acquisition, Sections 2.6(b), (c) and (e) and Section 2.7 shall apply, as well
as any other provision of this Agreement that applies to the Manufacture of
Commercial API by MERCK.  For clarity, the exercise of MERCK of the
right to Manufacture Commercial API as the result of an Acquisition shall have
the same consequences and results as the exercise by MERCK of the right to
Manufacture Commercial API as the result of a Supply Failure.

     

    (b)           In the event of an
Acquisition of ARIAD Pharmaceuticals, Inc. in which this Agreement is
assigned to another entity other than ARIAD, if the surviving entity to which
this Agreement is assigned  appears on the Entity List administered by
the Bureau of Industry and Security, U.S. Department of Commerce or the
Specifically Designated Nationals and Blocked Persons List administered by the
Office of Foreign Assets Control, U.S. Department of Treasury, then MERCK shall
have the right to terminate this Agreement.

     

    10.12. Survival.  Notwithstanding
any provision herein to the contrary, the rights and obligations of the Parties
set forth in Articles I, VI, VIII, IX, X, XI, XII, and XIII, as well as any rights or
obligations accrued hereunder (including any accrued payment obligations), prior
to expiration or termination, shall survive the expiration or termination of the
Term.

     

    ARTICLE
XI.

     

    CONFIDENTIALITY

     

    11.1. The terms
and conditions of Section 5 of the Collaboration Agreement are hereby
incorporated herein by reference mutatis mutandis.

     

    ARTICLE
XII.

     

    INDEMNIFICATION

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        79

        
          

        

      

      
        
        

      

       

    

    12.1. Indemnification
of MERCK by ARIAD.  ARIAD shall
indemnify, defend and hold harmless MERCK, its Affiliates, their respective
directors, officers, employees and agents, and their respective successors,
heirs and assigns (collectively, the “MERCK Indemnitees”),
against all liabilities, damages, losses and expenses (including, without
limitation, reasonable attorneys’ fees and expenses of litigation)
(collectively, “Losses”) incurred by
or imposed upon the MERCK Indemnitees, or any of them, as a direct result of
claims, suits, actions, demands or judgments of Third Parties, including,
without limitation, personal injury and product liability claims (collectively,
“Claims”),
arising out of (i) the failure of API, Clinical Product or Marketed Product (in
the event of supply of Marketed Product by ARIAD to MERCK  under
Section 2.7) provided by ARIAD to MERCK hereunder  or Marketed Product
Manufactured by ARIAD under Section 2.6 for sale by ARIAD to meet the warranties
set forth in Section 6.1 or (ii) the gross negligence or willful misconduct of
ARIAD in the supply of API, Clinical Product or Marketed Product (in the event
of supply of Marketed Product by ARIAD under Section 2.7), as the case may be,
hereunder, except with respect to any Claim or Losses that result from a breach
of this Agreement by, or the gross negligence or willful misconduct of, MERCK;
provided that, with respect to any Claim for which ARIAD has an obligation to
any MERCK Indemnitee pursuant to this Section 12.1 and MERCK has an obligation
to any ARIAD Indemnitee pursuant to Section 12.2, each Party shall indemnify
each of the other Party’s Indemnitees for its Losses to the extent of its
responsibility, relative to the other Party, for the facts underlying the
Claim.

     

    12.2. Indemnification
of ARIAD by MERCK.  MERCK shall
indemnify, defend and hold harmless ARIAD, its Affiliates, their respective
directors, officers, employees and agents, and their respective successors,
heirs and assigns (collectively, the “ARIAD Indemnitees”), against all Losses
incurred by or imposed upon the ARIAD Indemnitees, or any of them, as a direct
result of Claims arising out of (i) the failure of Clinical Product, Marketed
Product, or API (in the event of supply of API  by MERCK under Section
2.7) provided by MERCK to ARIAD hereunder or MERCK Product Manufactured by MERCK
for sale by MERCK to meet the warranties set forth in Section 6.2, or (ii) the
gross negligence or willful misconduct of MERCK in the supply of API (in the
event of supply of API by MERCK under Section 2.7), Clinical Product, Marketed
Product or MERCK Product, as the case may be, hereunder, except with respect to
any Claim or Losses that result from a breach of this Agreement by, or the gross
negligence or willful misconduct of, ARIAD; provided that with respect to any
Claim for which ARIAD has an obligation to any MERCK Indemnitee pursuant to
Section 12.1 and MERCK has an obligation to any ARIAD Indemnitee pursuant to
this Section 12.2, each Party shall indemnify each of the other Party’s
Indemnitees for its Losses to the extent of its responsibility, relative to the
other Party, for the facts underlying the Claim.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        80

        
          

        

      

      
        
        

      

       

    

    12.3. Indemnification
of MERCK by ARIAD and ARIAD’s Medical Device Collaborators.  In
the event of supply of API by MERCK under Section 2.7 to ARIAD for sale to
ARIAD’s Medical Device Collaborators, ARIAD shall, and shall require its Medical
Device Collaborators to enter into an agreement with MERCK pursuant to which
such Medical Device Collaborators shall, indemnify, defend and hold harmless the
MERCK Indemnitees, against all Losses incurred by or imposed upon the MERCK
Indemnitees, or any of them, as a direct result of Claims by an ARIAD Medical
Device Collaborator or a purchaser or user of a Medical Device manufactured or
sold by an ARIAD Medical Device Collaborator other than any Claim or Loss based
on the failure of API provided by MERCK hereunder to meet the warranties set
forth in Section 6.2, or any Claim or Loss that results from a breach of this
Agreement by, or the gross negligence or willful misconduct of,
MERCK.

     

    12.4. Conditions
to Indemnification.  A Person seeking
recovery under this Article 12 (the “Indemnified Party”)
in respect of a Claim shall give prompt notice of such Claim to the Party from
which indemnification is sought (the “Indemnifying Party”)
and, provided that the Indemnifying Party is not contesting its obligation under
this Article 12, shall permit the Indemnifying Party to control any litigation
relating to such Claim and the disposition of such Claim; provided that the
Indemnifying Party shall (a) act reasonably and in good faith with respect to
all matters relating to the settlement or disposition of such Claim as the
settlement or disposition relates to such Indemnified Party and (b) not settle
or otherwise resolve such claim without the prior written consent of such
Indemnified Party (which consent shall not be unreasonably withheld, conditioned
or delayed).  Each Indemnified Party shall cooperate with the
Indemnifying Party in its defense of any such Claim in all reasonable respects
and shall have the right to be present in person or through counsel at all legal
proceedings with respect to such Claim.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        81

        
          

        

      

      
        
        

      

       

    

    12.5. Warranty
Disclaimer.  EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY
WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER
OF THIS AGREEMENT AND EACH PARTY HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.

     

    12.6. Liability
Cap.  The total
aggregate liability of one Party to the other under this Article 12 (other than
Section 12.3) or Section 9.1 or any other basis of action (including without
limitation common law, contract, tort and indemnity law) arising out of this
Agreement and/or the Collaboration Agreement, shall not exceed [***] ($[***]);
provided, however, failure of either Party to pay the applicable Manufacturing
Cost or any other payment due hereunder or under the Collaboration Agreement
shall not be subject to the limitation of liability contained in this Section
12.6.

     

    12.7. Limited
Liability.  NOTWITHSTANDING
ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY OR ANY OF ITS AFFILIATES FOR (I) ANY SPECIAL, PUNITIVE, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST PROFITS
OR LOST REVENUES, OR (II) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR
SERVICES, WHETHER UNDER ANY CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR
OTHER LEGAL OR EQUITABLE THEORY.

     

    ARTICLE
XIII.

     

    MISCELLANEOUS

     

    13.1. Generally. The terms
and conditions of Section 12 of the Collaboration Agreement other than Sections
12.2 and 12.11 are hereby incorporated herein by reference as if set forth
herein in full.

     

    13.2. Dispute Resolution.
The Parties recognize that a bona fide dispute as to
certain matters may from time to time arise during the term of this Agreement
which relates to either Party’s rights and/or obligations
hereunder.  The Parties agree that such disputes shall be resolved
according to the procedure set forth in Section 12.1 of the Collaboration
Agreement.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        82

        
          

        

      

      
        
        

      

       

    

    13.3. Notices.  All
notices and communications shall be in writing and delivered personally or by
internationally-recognized overnight express courier providing evidence of
delivery or mailed via certified mail, return receipt requested, addressed as
follows, or to such other address as may be designated from time to
time:

     

    
      
        
          	 	If to
  MERCK:
	 	 
	 	
                  Merck
      & Co., Inc.

                  One
      Merck Drive

                  P.O.
      Box 100, WS3A-65

                  Whitehouse
      Station, NJ 08889-0100

                  Attention:
      Office of Secretary

                  Facsimile
      No.: (908)735-1246 

                
	 	 
	 	
                  
                    Merck
      & Co., Inc.

                    Two
      Merck Drive

                    Attention:
      Vice President of Supply Chain  Management, Merck Manufacturing
      Division

                    P.O.
      Box 200

                    Whitehouse
      Station, NJ 08889-0200

                    Facsimile:
      908-423-1174

                    If
      to ARIAD 

                  

                
	 	 
	 	
                  ARIAD
      Pharmaceuticals, Inc.

                  26
      Landsdowne Street

                  Cambridge,
      MA  02139

                  Tel:  (617)
      494-0400

                  Fax:  (617)
      494-1828

                  Attention:  Chief
      Executive Officer

                  and
      Chief Legal Officer

                
	 	 
	 	
                  ARIAD
      Gene Therapeutics, Inc.

                  26
      Landsdowne Street

                  Cambridge,
      MA  02139

                  Tel:  (617)
      494-0400

                  Fax:  (617)
      494-1828

                  Attention:  Chief
      Executive Officer 

                

        

         

         

        
          Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

          to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

        

         

        
          
            
            

          

          
            83

            
              

            

          

          
            
            

          

           

        

        
          	 	With a copy
    to:
	 	 
	 	
                  Mintz,
      Levin, Cohn, Ferris, Glovsky

                  and
      Popeo, P.C.

                  One
      Financial Center

                  Boston,
      Massachusetts  02111

                  Attention:  Jeffrey
      M. Wiesen, Esq.

                  Tel:  (617)
      542-6000

                  Fax:  (617)
      542-2241

                

        

         

      

    

    Except as
otherwise expressly provided in this Agreement or mutually agreed in writing,
any notice, communication or document (excluding payment) required to be given
or made shall be deemed given or made and effective upon actual receipt or, if
earlier, (a) three (3) business days after deposit with an
internationally-recognized overnight express courier with charges prepaid, or
(b) five (5) business days after mailed by certified, registered or regular
mail, postage prepaid, in each case addressed to a Parties at its address stated
above or to such other address as such Party may designate by written notice
given in accordance with this Section 13.3.

     

    13.4. Insurance.  ARIAD
and MERCK each agree to maintain, commencing at the time of the first Firm Order
hereunder, and thereafter during the Term and for [***] ([***]) years
thereafter, at its own expense, commercial general liability and blanket
umbrella liability insurance, with a minimum coverage limitation of U.S.$[***]
per occurrence and U.S.$[***] annual aggregate, and products liability and
products completed operations insurance with a minimum coverage limitation of
U.S.$[***] per occurrence and U.S.$[***] annual aggregate.  Each Party
shall submit to the other Party, from an insurer with an A.M. Best rating of A-
or better or otherwise acceptable to the other Party, a certificate of insurance
evidencing that the required insurance is in force and effect.  Such
certificate shall provide that not less than [***] ([***]) days’ advance notice,
in writing, shall be given to the other Party of any cancellation, termination
or material alteration of such insurance coverages.  Such insurance
shall name the other Party as an additional insured.  In addition,
ARIAD’s insurers shall waive all rights of subrogation against MERCK and its
subsidiaries, Affiliates, officers, directors and employees solely with respect
to Claims by a purchaser or user of a Medical Device manufactured or sold by an
ARIAD Medical Device Collaborator other than any Claim or Loss based on the
failure of API provided by MERCK hereunder to meet the warranties set forth in
Section 6.2, or any Claim or Loss that results from a breach of this Agreement
by, or the gross negligence or willful misconduct of,
MERCK.  Notwithstanding the foregoing, (i) MERCK may elect to
self-insure with respect to such insurance requirements as part of a
comprehensive self-insurance program adopted by MERCK and (ii) ARIAD or any
permitted assignee of ARIAD may elect to self-insure with respect to such
insurance requirements as part of comprehensive self-insurance program adopted
by ARIAD or such assignee, provided that either (a) ARIAD or such assignee has
annual revenues of at least [***] dollars ($[***]) and has a debt rating by
Standard and Poor’s of [***] (or an equivalent rating by Moody’s or an
equivalent rating service) or (b) in the case of an assignee,  if such
assignee does not have a debt rating as described in clause (a), with the
consent of MERCK, not to be unreasonably withheld.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        84

        
          

        

      

      
        
        

      

       

    

    13.5. Force
Majeure.  (a) Neither Party shall be liable for the failure or
delay in performing any obligation under this Agreement (except for the payment
of money) affecting MERCK, ARIAD, its Affiliates or any Approved Manufacturers,
nor shall any Party have the right to terminate this Agreement or exercise its
rights under Section 2.6 if and to the extent such failure or delay is due to
any of the following causes beyond the reasonable control of the other Party (a)
acts of God; (b) unusually severe weather, fire or explosion; (c) war, invasion,
riot or other civil unrest; (d) governmental laws, orders, restrictions,
actions, embargoes or blockades (other than actions taken as a result of a
breach of this Agreement by the affected Party); (e) action by any Regulatory
Authority (other than actions taken as a result of a breach of this Agreement by
the affected Party); (f) national or regional emergency; (g) strikes, lockouts,
labor trouble or other industrial disturbances; (h) shortage of adequate fuel,
power or transportation facilities; or (i) any other event which is beyond the
reasonable control of the affected Party; provided that the Party affected shall
promptly notify the other of the Force Majeure condition and shall exert all
reasonable efforts to eliminate, cure or overcome any such causes and to resume
performance of its obligations as soon as reasonably possible.

     

    (b)           During
the duration of any Force Majeure affecting it, ARIAD shall allocate Materials
and/or resources required for the Manufacture of API and Clinical Product in the
manner set forth in Section 4.7 and MERCK shall allocate Materials and/or
resources required for the Manufacture of Clinical Product and Marketed Product
in the manner set forth in Section 3.7.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        85

        
          

        

      

      
        
        

      

       

    

    13.6. Delegation. Neither
this Agreement nor any right or obligation hereunder may be assigned, delegated
(other than to an Approved Manufacturer) or otherwise transferred, in whole or
part, by either Party without the prior written consent of the other party, such
consent not to be unreasonably withheld, except that either party may, without
the Party's consent, assign this Agreement and its rights and obligations
hereunder in whole or in part to an Affiliate of the assigning party or to a
Third Party to which such Party assigns the Collaboration Agreement in
accordance with the terms thereof.  Each Party agrees that, in the
event of any such assignment of the Collaboration Agreement, it will assign this
Agreement to the assignee of the Collaboration Agreement and require such
assignee to accept such assignment and agree to be bound by the terms
hereof.  The terms and conditions of this Agreement shall be binding
upon and inure to the benefit of the permitted successors and assigns of the
Parties.

     

    13.7. Termination of Section 3.6.3
of the Collaboration Agreement.  Section 3.6.3 of the
Collaboration Agreement is hereby terminated with respect to Clinical
Product.  Supply of Clinical Product shall be governed by this
Agreement and not by Section 3.6.3 of the Collaboration
Agreement.  For clarity, Section 3.6.3 of the Collaboration Agreement
shall continue to apply to the supply of forms of product in use in Clinical
Trials other than Clinical Product.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        86

        
          

        

      

      
        
        

      

       

    

    IN WITNESS
WHEREOF, the Parties hereto have caused this Agreement to be executed by their
duly authorized representatives as of the date first above written.

     

    
      	
              MERCK
      & CO., INC.

               

               

              By:    /s/ Willie A.
      Deese                                       

              Name:__Willie A.
      Deese___________________

              Title:__President, Merck Manufacturing
      Division

            	
              ARIAD
      PHARMACEUTICALS, INC.

               

               

              By:             /s/ Harvey J. Berger,
      M.D.

              Name: Harvey
      J. Berger, M.D.

              Title: Chairman
      and Chief Executive Officer

            
	
              MERCK
      AND COMPANY INCORPORATED

               

               

              
                By:    /s/ Willie A.
      Deese                                       

                Name:__Willie A.
      Deese___________________

                Title:__President, Merck Manufacturing
      Division

              

            	
              ARIAD
      GENE THERAPEUTICS, INC.

               

               

              By:             /s/ Harvey J. Berger,
      M.D.

              Name: Harvey
      J. Berger, M.D.

              Title: Chairman
      and Chief Executive Officer

            

    

    

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        87

        
          

        

      

      
        
        

      

       

    

    SCHEDULE
2.9

     

    I.      Section
2.4 of the Collaboration Agreement is as follows:

    

    
      	
              
                2.4

              

            	
              
                Joint
      Manufacturing Committee.

              

            	
               

            

    

    

    (a) Establishment.  ARIAD and MERCK
hereby establish the Joint Manufacturing Committee, which shall report to the
JSC.  The JMC shall have and perform the responsibilities set forth in
the Supply Agreement.  Unless otherwise agreed by the Parties, the
term for the JMC shall commence at such time as the JSC determines and shall
continue as long as the Supply Agreement remains in effect.

    

    (b) Membership.  Each of ARIAD and
MERCK shall designate in writing an equal (not less than two (2)) number of
representatives to the JMC.  Unless otherwise agreed by the Parties,
one representative of each Party shall be designated as Co-Chairs of the
JMC.  Each Party shall have the right at any time to substitute
individuals, on a permanent or temporary basis, for any of its previously
designated representatives to the JMC by giving written notice to the other
Party.

    

    (c) Meetings.

    

    (i) Schedule of Meetings;
Agenda.  The JMC shall establish a schedule of times for
regular meetings, taking into account, without limitation, the planning needs
for the Manufacture of Products and the responsibilities of the
JMC.  Special meetings of the JMC may be convened by any member upon
not less than thirty (30) days (or, if such meeting is proposed to be conducted
by teleconference, upon not less than ten (10) days) written notice to the other
members; provided that (i) notice of any such special meeting may be waived at
any time, either before or after such meeting and (ii) attendance of any member
at a special meeting shall constitute a valid waiver of notice from such
member.  In no event shall the JMC meet less frequently than
quarterly.  Regular and special meetings of the JMC may be held in
person or by teleconference or videoconference; provided that meetings held in
person shall alternate between the respective offices of the Parties in
Cambridge, Massachusetts and Whitehouse Station, New Jersey or at other
locations mutually agreeable to the JMC members.  The Co-Chairs shall
alternate the responsibility for preparing and circulating to each JMC member an
agenda for each JMC meeting not later than one (1) week prior to such
meeting.

     

    (ii) Quorum; Voting;
Decisions.  At each JMC meeting, (i) the presence in person of
at least one (1)
member designated by each Party shall constitute a quorum and (ii) each member
who is present shall have one vote on all matters before the JMC at such
meeting.  All decisions of the JMC, shall be made by majority vote;
provided, that, any member designated by a Party shall have the right to cast
the votes of any of such Party’s members on the JMC who are absent from the
meeting.  Alternatively, the JMC may act by written consent signed by
at least one (1) member designated by each
Party.  Whenever any action by the JMC is called for hereunder during
a time period in which the JMC is not scheduled to meet, either Co-Chair shall
cause the JMC to take the action in the requested time period by calling a
special meeting or by circulating a written consent.  Representatives
of each Party or of its Affiliates who are not members of the JMC may attend JMC
meetings as non-voting observers.  In the event that the JMC is unable
to resolve any matter before it, such matter shall be resolved in accordance
with Section 2.4.5.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    (iii) Minutes.  The
JMC shall keep minutes of its meetings that record all decisions and all actions
recommended or taken in reasonable detail.  Drafts of the minutes
shall be prepared and circulated to the members of the JMC within a reasonable
time after the meeting, not to exceed thirty (30) business days, and the Parties
shall alternate responsibility for the preparation and circulation of draft
minutes.  Each member of the JMC shall have the opportunity to provide
comments on the draft minutes.  Draft minutes shall be approved,
disapproved and revised as necessary at the next JMC meeting.  Upon
approval, final minutes of each meeting shall be circulated to the members of
the JMC by the Co-Chair with responsibility for preparing such
minutes.

    

     

    (iv) Expenses.  ARIAD
and MERCK shall each bear all expenses of their respective JMC representatives
related to their participation on the JMC and attendance at JMC
meetings.

    

     

    (d) Responsibilities.  The JMC shall be
responsible for overseeing the Manufacture of Products.  Without
limiting the generality of the foregoing, the JMC shall have the following
responsibilities, which responsibilities shall be subject to revisions set forth
in the Supply Agreement:

    

    (i) providing
input relating to the Specifications for Product to the JDC or JCC;

    (ii) reviewing
issues relating to quality standards for Product;

    (iii) reviewing
issues relating to, and monitoring the progress of, Manufacturing Development of
Product and providing a forum for consensual decision making with respect to
Manufacturing of Product;

    (iv) reviewing
issues relating to supply (e.g., quantity forecast of
Product, shortage, and regulatory information regarding Product) of Product by
ARIAD to MERCK;

    (v) providing
CMC input to the JCC with respect to Product.

    

     

    (e) Dispute
Resolution.  The JMC members shall use reasonable efforts to
reach agreement on any and all matters.  In the event that, despite
such reasonable efforts, agreement on a particular matter cannot be reached by
the JMC within ten (10) days after the JMC first meets to consider such matter,
then the matter shall be referred to the JSC for resolution pursuant to Section
2.1.5.

     

     

     

     

    
      Confidential Portions of
this Exhibit were omitted and have been filed separately with the Secretary of
the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    II.           Additional
Responsibilities given to JMC by this Supply Agreement:

    

    1.           Provide
input to the JDC and the JCC on the form of Clinical Product, the determination
of Standard Delivered Form, timing and procedures for design of labels for
Marketed Product, modifications to the Standard Delivered Form and the
Specifications pursuant to Sections 2.4, 2.5, 3.1, 3.2, 4.1 and
4.2.

    

    2.           Determination
of [***] Delivery Failure and determination of Approved Solutions pursuant to
Section 2.6.

    

    3.           Review
and confer with Manufacturing Parties with respect to Manufacturing yields
pursuant to Section 2.11.

    

    4.           Provide
input to the JCC on allocation of resources and Materials in the event of
shortage pursuant to Sections 3.7 and 4.7.

    

    5.           Determine
studies to extend shelf life and re-test date pursuant to Sections 3.8 and
4.8.

    

    6.           Provide
input to the JMC on amount of Safety Stock pursuant to Sections 3.5 and
4.5.

    

    7.           Approve
Manufacturing changes pursuant to Sections 8.1(c) and 8.2.(c).

    

    8.           Discuss
plans to improve stability pursuant to Sections 8.1(i) and 8.2(i).

    

    9.           Review
need for compliance with proposed additional regulatory requirements pursuant to
Section 8.3.

    

    10.           Determination
of need for Regulatory Approval of Registered Technical parameter changes
pursuant to Section 8.4.

    

     

     

     

    
      Confidential Portions of this Exhibit were omitted and have been
filed separately with the Secretary of the Commission pursuant

      to the
Company's application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.

       

    

    3

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