Document:

Exhibit 10.87

 

DATE:      30
June 2004

 

 

INSIGNIA
SOLUTIONS PLC

 

INSIGNIA
SOLUTIONS INTERNATIONAL LIMITED

 

INSIGNIA
SOLUTIONS, INC

 

INSIGNIA
SOLUTIONS SARL

 

ESMERTEC
AG

 

 

TERMINATION
AND WAIVER AGREEMENT

 

 

Macfarlanes

10
Norwich Street

London

EC4A
1BD

 

WGD/573886

 

 

DATE                                                               30 June 2004

 

PARTIES

 

1                                                                                          INSIGNIA SOLUTIONS PLC
whose registered office is at Insignia House, The Mercury Centre, Wycombe Lane,
Wooburn Green, High Wycombe, Bucks HP10 0HH (PLC)

 

2                                                                                          INSIGNIA SOLUTIONS INTERNATIONAL LIMITED whose registered office is at Insignia House, The Mercury Centre,
Wycombe Lane, Wooburn Green, High Wycombe, Bucks HP10 0HH (Limited)

 

3                                                                                          INSIGNIA SOLUTIONS, INC whose registered office is at 41300 Christy Street, Fremont CA94538
USA (Inc)

 

4                                                                                          INSIGNIA SOLUTIONS SARL whose registered office is at 24 Avenue du Centre, 78180 Montigny
le Bretonneux (SARL)

 

the
foregoing parties being referred to in this Agreement as the Insignia Parties; and

 

5                                                                                          ESMERTEC AG whose
registered office is at Lagerstrasse 14, CH-8600 Dubendorf, Switzerland (Esmertec)

 

RECITALS

 

A                                                                                      The parties are parties to an Asset Purchase Agreement dated 4
March 2003 (as amended, varied and supplemented) (the Main
Agreement) pursuant to which the Insignia Parties have sold and
Esmertec has purchased the Business, Assets and Deferred Assets (including
intellectual property rights) as therein defined, as the parties hereby
acknowledge.

 

B                                                                                        PLC and Esmertec are parties to a Master Distribution and Licence
Agreement and a Master Support and Maintenance Agreement (partially terminated
by a side letter from Esmertec to PLC dated 16 February 2004 (the Side Letter)) and an SSP Software Marketing
Agreement and Licence all dated 23 April 2003 (together, including the
Side Letter, referred to as the Ancillary  Agreements).

 

C                                                                                        Esmertec and PLC are parties to a Charge over Intellectual Property
dated 16 February 2004 (the Charge).

 

D                                                                                       The Insignia Parties (on the one hand) and Esmertec (on the other)
have agreed to terminate the foregoing agreements by mutual consent and to
release and waive all and any existing and future outstanding obligations,
claims and restrictions which may be owed by one to another under or in
connection with those agreements or any of them or the transactions to which
they relate, in each case on the terms set out in this Agreement, with the
intention of achieving a complete and irrevocable severance of any relationship
between them.

 

 

AGREEMENT

 

1                                                                                          Final payment

 

1.1                                                                                 Esmertec agrees to pay and PLC agrees to accept the sum of
US$185,000 in full and final satisfaction of (i) the deferred consideration and
(ii) any other consideration as may be due and payable pursuant to the Main
Agreement, any balance being waived.

 

1.2                                                                                 The payment referred to in Clause 1.1 shall be paid without setoff
or deduction of any kind for value no later than the date seven days after the
date of this Agreement in cleared funds to such account as PLC shall nominate.
Without prejudice to any other remedy, if such payment is not paid by that
date, interest shall accrue and be payable on the unpaid sum at the rate of 10%
per annum from that date to the date of payment calculated and accruing on a
daily basis and on the basis of a 360 day year.

 

1.3                                                                                 For the avoidance of doubt, payment of the sum referred to in Clause
1.1 above (being on account of the deferred consideration under the Main
Agreement) is secured by the Charge. With effect from payment in accordance
with Clause 1.1, the assets comprised in the Charge shall be released and
discharged from all mortgages, charges and other security interests created
thereby or pursuant thereto and Esmertec shall be released and discharged from
its obligations and liabilities (whether present or future, actual or
contingent) thereunder. Further, Insignia Parties shall (at Esmertec's request
and cost) execute any documents or otherwise do anything which may reasonably
be required to dismiss or otherwise annul the Charge itself within seven (7)
days after receipt of such payment.

 

2                                                                                          Termination of obligations

 

With effect
from the date of this Agreement, and subject as provided in Clause 1 above, the
Main Agreement and the Ancillary Agreements are terminated by mutual consent
and none of them shall be of any further force or effect for any purpose and
the parties are hereby released and discharged from the further performance or
observance of any obligations, restrictions or duties imposed thereby,
including but not limited to any obligation to pay or to repay money or to do
or refrain from doing any other act, whether any such obligation, restriction
or duty has accrued due at the date of this Agreement or not.

 

3                                                                                          Release and Waiver

 

Subject as provided in Clause 1 above, the Insignia Parties for
themselves, their shareholders, directors, successors and assigns (on the one
hand) and Esmertec for itself, its shareholders, directors, successors and
assigns (on the other) hereby release and waive all and any rights and claims,
whether in contract, tort, trust or otherwise which they may have or to which
they may be entitled as against the other, whether accrued at the date of this
Agreement or which might arise or accrue hereafter, under or otherwise in
connection with the Main Agreement, the Ancillary Agreements or the
transactions effected by any such agreements, and each of them covenants not to
sue or to take any other action against the other in connection with any such
agreement or transaction.

 

4                                                                                          Comprehensive intent

 

The parties declare that their intention is that the releases and
waivers contained in and effected by this Agreement
should be comprehensive and not limited in any respect and that each of them
has taken such professional legal advice in connection with this Agreement as
it considers necessary.

 

2

 

5                                                                                          Confidentiality

 

5.1                                                                                 Subject as provided in Clause 5.2, the parties shall keep the terms
of this Agreement and of the Main Agreement, the Ancillary Agreements and the
Charge and the subject matter thereof and the negotiations leading to their
execution confidential and shall make no public statement or disclosure to any
third party (excluding its professional advisers in connection with seeking
their professional advice) in connection therewith, without first obtaining the
written approval of the other parties.

 

5.2                                                                                 Clause 5.1 shall not prevent any party from making any disclosure
required by law or by any government, administrative or regulatory body of
competent jurisdiction provided that before making such disclosure the relevant
party shall make reasonable efforts to resist or limit the same and to seek
confidential status for such discourse, and shall in any event (unless
prohibited by law) notify the other parties of the obligation and extent of
such disclosure at the earliest reasonable opportunity.

 

6                                                                                          Law and Jurisdiction

 

This Agreement shall be governed by and construed in
accordance with English law and the parties irrevocably submit to the exclusive
jurisdiction of the English courts as regards any claim, dispute or matter
arising out of or in relation to this Agreement.

 

7                                                                                          General

 

This Agreement may be executed by facsimile and/or by
the parties on one or more counterparts (each in the same form) provided that
all the parties execute at least one counterpart. Such counterparts shall
together constitute a single instrument.

 

 

EXECUTED and delivered as a Deed by each of the parties on the date at the
top of page 1

 

3

 

	
  DULY EXECUTED by

  	
  )

  	
   

  
	
  INSIGNIA SOLUTIONS PLC)

  	
   

  	
   

  
	
  acting
  by two directors or other duly

  	
  )

  	
   

  
	
  authorised
  representatives

  	
  )

  	
  /s/
  Mark E. McMillan

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Richard M. Noling

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DULY EXECUTED by

  	
  )

  	
   

  
	
  INSIGNIA SOLUTIONS

  	
  )

  	
   

  
	
  INTERNATIONAL LIMITED)

  	
   

  	
   

  
	
  acting
  by two directors or other duly

  	
  )

  	
   

  
	
  authorised
  representatives

  	
  )

  	
  /s/
  Mark E. McMillan

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Richard
  M. Noling

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DULY EXECUTED by

  	
  )

  	
   

  
	
  INSIGNIA SOLUTIONS, INC)

  	
   

  	
   

  
	
  acting
  by two directors or other duly

  	
  )

  	
   

  
	
  authorised
  representatives

  	
  )

  	
  /s/
  Mark E. McMillan

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Richard M. Noling

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DULY EXECUTED by

  	
  )

  	
   

  
	
  INSIGNIA SOLUTIONS SARL

  	
  )

  	
   

  
	
  acting
  by two directors or other duly

  	
  )

  	
   

  
	
  authorised
  representatives

  	
  )

  	
  /s/
  Mark E. McMillan

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Richard M. Noling

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DULY EXECUTED by

  	
  )

  	
   

  
	
  ESMERTEC AG

  	
  )

  	
   

  
	
  acting
  by two directors or other duly

  	
  )

  	
   

  
	
  authorised
  representatives

  	
  )

  	
  /s/
  Edwin Douglass

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Daniel Diez

  	
   

  

 

4Exhibit 10.1

 

[Confidential Portions Omitted]

 

 

NON-EXCLUSIVE LICENSE AND RESEARCH

COLLABORATION AGREEMENT

 

by and between

 

MERCK & CO., INC.

 

and

 

GENETRONICS
BIOMEDICAL CORPORATION

 

and

 

GENETRONICS,
INC.

 

*Confidential portion omitted and filed separately with the Commission.

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  RESEARCH
  PROGRAM

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  General

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Conduct of Collaboration

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Use of Collaboration
  Funding

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  Joint Collaboration
  Committee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.5

  	
  Exchange of Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.6

  	
  Records
  and Reports

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.7

  	
  Collaboration
  Information and Inventions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.8

  	
  Collaboration
  Term

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.9

  	
  Materials

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  LICENSE;
  EXCHANGE OF INFORMATION; DEVELOPMENT AND COMMERCIALIZATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  License
  Grant

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Trademark
  License

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Supply of Genetronics
  Device

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  No
  Implied Licenses

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  CONFIDENTIALITY AND
  PUBLICATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Nondisclosure Obligation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Publication

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  Publicity/Use of Names

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  PAYMENTS; ROYALTIES AND
  REPORTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  License Fee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Collaboration Funding

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  Milestone
  Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
  Royalties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  Reports; Payment of Royalty

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.6.

  	
  Audits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.7

  	
  Payment Exchange Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.8

  	
  Income Tax Withholding

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  

 

 

	
   

  	
  6.1

  	
  Representations
  and Warranties of Genetronics

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Representations
  and Warranties of Merck

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
  Claims
  Procedures.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5

  	
  Limited
  Liability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  REGULATORY
  AFFAIRS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Regulatory Approvals

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.3

  	
  Medical
  Inquiries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.4

  	
  Adverse
  Experience and Reaction Reporting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  PATENT
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Filing, Prosecution
  and Maintenance of Patents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  Interference,
  Opposition, Reexamination and Reissue

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
  Enforcement and Defense

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.4

  	
  Patent Term Restoration

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  TERM
  AND TERMINATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Term
  and Expiration

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  Termination Without Cause

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.3

  	
  Termination for Cause

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.4

  	
  Effect
  of Expiration or Termination; Survival

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Force
  Majeure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2

  	
  Assignment/ Change of
  Control

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.4

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.5

  	
  Applicable
  Law

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.6

  	
  Dispute
  Resolution

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.7

  	
  Entire Agreement;
  Amendments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.8

  	
  Headings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.9

  	
  Independent Contractors

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.10

  	
  Waiver

  	
   

  

 

i

 

	
   

  	
  10.11

  	
  Cumulative Remedies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.12

  	
  Waiver of Rule of
  Construction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.13

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE 1.29

  	
  GENETRONICS PATENT RIGHTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE 3.3

  	
  SUPPLY OF GENETRONICS DEVICES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE 4.3

  	
  PRESS RELEASE

  	
   

  
					

 

ii

 

NON-EXCLUSIVE LICENSE AND
RESEARCH

COLLABORATION AGREEMENT

 

THIS
AGREEMENT, effective as of the date that the Agreement is last signed by both
Parties (the “Effective
Date”), by and between Merck & Co., Inc., a corporation organized and
existing under the laws of New Jersey, with an address at One Merck Drive,
Whitehouse Station, NJ 08889-0100 (“Merck”), on the one hand, and Genetronics
Biomedical Corporation, a corporation organized and existing under the laws of Delaware,
(“GBC”) and Genetronics, Inc., a corporation organized and existing under the
laws of the state of California (“GI”), on the other hand, each with an address
at 11199 Sorrento Valley Road, San Diego, CA 92121-1334, United States of
America (GEB and GI shall be known together as “Genetronics”).

 

RECITALS:

 

WHEREAS, Genetronics has developed or
otherwise Controls Genetronics Technology (as hereinafter defined) and has
rights to Genetronics Patent Rights (as hereinafter defined);

 

WHEREAS, Merck and Genetronics desire to enter
into a collaboration to develop Genetronics Device(s) and Merck Product(s) in
the Field upon the terms and conditions set forth herein;

 

WHEREAS, Merck desires to obtain a license
under the Genetronics Patent Rights and Genetronics Technology, upon the terms
and conditions set forth herein and Genetronics desires to grant such a
license;

 

NOW, THEREFORE, in consideration of the foregoing
premises and the mutual covenants herein contained, the Parties hereby agree as
follows:

 

1.                                      DEFINITIONS

 

Unless
specifically set forth to the contrary herein, the following terms, whether
used in the singular or plural, shall have the respective meanings set forth
below:

 

1.1                               “Act”  shall mean, as applicable, the United States Federal Food,
Drug and Cosmetic Act, 21 U.S.C. §§ 301 et seq., and/or the Public Health
Service Act, 42 U.S.C. §§ 262 et seq., as such may be amended from time to
time.

 

1.2                               “Additional Antigen” shall mean an Antigen other than
an Initial Antigen, and any Constructs thereof, in each case in the Field.

 

1.3                               “Affiliate” shall mean (i) any corporation or business entity of which
fifty percent (50%) or more of the securities or other ownership interests
representing the equity, the voting stock or general partnership interest are
owned, controlled or held, directly or indirectly, by Merck or Genetronics; or
(ii) any corporation or business entity which, directly or indirectly, owns, controls
or holds fifty percent (50%) (or the maximum ownership interest permitted by
law) or more of the

 

1

 

securities or
other ownership interests representing the equity, the voting stock or, if
applicable, the general partnership interest, of Merck or Genetronics.

 

1.4                               “Animal Indication” shall mean an Indication for the
treatment and/or prevention of disease(s) or medical condition(s) in animals
other than humans.

 

1.5                               “Antigen” shall mean a distinct and uniquely
identifiable macromolecular species that is capable, under appropriate
conditions, of inducing a specific immune response.

 

1.6                               “Calendar Quarter” shall mean the respective
periods of three (3) consecutive calendar months ending on March 31, June 30,
September 30 and December 31.

 

1.7                               “Calendar Year” shall mean each successive period of twelve (12) months
commencing on January 1 and ending on December 31.

 

1.8                               “Clinical Trial” shall mean a Phase I Clinical Trial, Phase II Clinical Trial
and/or Phase III Clinical Trial.

 

1.9                               “Collaboration Term” shall mean the duration of the
Collaboration, as described more fully in Section 2.8.

 

1.10                        “Collaboration” shall mean the research and development activities
undertaken by the Parties relating to the Genetronics Device as set forth in
Article 2.

 

1.11                        “Committee” shall mean the joint collaboration committee established to
facilitate the Collaboration, as more
fully described in Section 2.4.1.

 

1.12                        “Confidential  Information” shall mean any and all
information and data, including without limitation all Merck Know-How,
Genetronics Technology, and all other scientific, pre-clinical, clinical,
regulatory, manufacturing, marketing, financial and commercial information or
data, whether communicated in writing or orally or by any other method, which
is provided by one Party to the other Party in connection with this Agreement.

 

1.13                        “Constructs” shall mean any post-translational
modifications or variants of the Antigen, and any proteins, protein-constructs,
or other immunogens derived from an Antigen.

 

1.14                        “Control”, “Controls” or
“Controlled by” shall mean
with respect to any item of or right under Genetronics Patent Rights or
Genetronics Technology or Merck Know-How, the possession of (whether by
ownership or license, other than pursuant to this Agreement), or the
ability of a Party to grant access to, or a license or sublicense of, such item
or right as provided for herein without violating the terms of any agreement or
other arrangement with any Third Party existing at the time such Party would be
required hereunder to grant the other Party such access or license or
sublicense.  For avoidance of doubt,
patent rights and know-how Controlled by Genetronics Biomedical Corporation shall
be deemed to be Genetronics Patent Rights and Genetronics Technology
“Controlled” by Genetronics.

 

1.15                        “Derived” or “derived”
shall mean obtained, created, synthesized or otherwise generated from, or
discovered, designed or developed using.

 

2

 

1.16                        “Device  Custom
Know-How” shall mean
the Merck Specifications for the Genetronics Applicator and/or Genetronics
Custom Components, any materials used solely pursuant to Merck Specifications
to develop and/or manufacture the Genetronics Applicator and/or Genetronics
Custom Components (including blanks used for manufacture of the Genetronics
Applicator and/or Genetronics Custom Components), and any enhancements and/or
modifications to the Genetronics Applicator and/or Genetronics Custom
Components developed solely pursuant to Merck Specifications (and not used more
generally by Genetronics in any products for other customers), in each case for
which Genetronics’ design and development costs are funded by Merck as part of
the Collaboration

 

1.17        “Expiration”
of the Agreement shall have the meaning provided for in Section 9.1.

 

1.18                        “Field” shall mean the Genetronics Device-assisted delivery of a
DNA vaccine for prophylactic and/or therapeutic use in diseases or medical
conditions in animals or humans involving [*]. 
For avoidance of doubt, the Field does not include diseases or medical
conditions outside (i) or (ii) above, and would not, for example, include
prevention and/or treatment [*], but would include, for example, [*].

 

1.19                        “Filing” of an IND or NDA shall mean the acceptance by a Regulatory
Authority of an IND or NDA for filing.

 

1.20                        “First Commercial Sale” shall mean, with respect to any
Merck Product, the first sale for end use or consumption of such Merck Product
in a country, excluding, however, any sale or other distribution for use in a
Clinical Trial.

 

1.21                        “Full Time Equivalent” or “FTE” shall mean the equivalent of a
full-time scientist’s or consultant’s work time over a twelve-month period
(including an allocation for normal vacations, sick days and holidays).  The portion of an FTE year devoted by a
scientist or consultant to the Collaboration shall be determined by dividing
the total number of hours during any twelve-month period devoted by such employee
to the Collaboration by 1880.

 

1.22                        “Genetronics Applicator” shall mean a product for which
the design and development costs are funded by Merck as part of the
Collaboration (including any custom software designed for use with a Merck
Product), which product is designed for use solely with the Genetronics
Generator (and, if applicable the Genetronics Custom Components) and the Merck
Product, and which product is intended to be disposed of after one
administration to a patient of a Merck Product, or after a defined number of
such administrations of Merck Product.

 

1.23                        “Genetronics Custom Components” shall mean a product for which
the design and development costs are funded by Merck as part of the
Collaboration (including any custom software designed for use with a Merck
Product), which product is designed for use solely with the Genetronics
Generator, Genetronics Applicator and the Merck Product, which product is not
intended to be disposed of after one administration to a patient of a Merck
Product, or after a defined number of such administrations of Merck Product.

 

1.24                        “Genetronics Device” shall mean, the Genetronics
Applicator, Genetronics Custom Components, and/or Genetronics Generator (we
should check to be consistent throughout in use of the term device as the
collective equipment).

 

3

 

1.25                        “Genetronics
Generator” shall mean an electroporation device, including any software
that is not custom designed for use with a Merck Product, for which the manufacture and/or use with
Merck Products in the Field would
infringe the Genetronics Patent Rights or utilize the Genetronics Technology,
including but not limited to generation equipment.

 

1.26                        “Genetronics
Device Modification” shall mean any enhancement or modification, whether or
not patentable, in the design, manufacture and parameters  of
the Genetronics Device. Device Custom Know-How shall not be deemed to be
Genetronics Device Modifications to the extent that the same are designed and
developed solely pursuant to Merck Specifications, are for use solely with a
Merck Product, and the cost of design and development was funded by Merck as
part of the Collaboration.

 

1.27                        “Genetronics Information and
Inventions” shall mean all
protocols, formulas, data, Inventions, know-how and trade secrets, patentable
or otherwise, resulting from the Collaboration developed or invented solely by
employees of Genetronics or other persons not employed by Merck acting on
behalf of Genetronics, but not including any Target Antigen or Target Antigen
Modification.

 

1.28                        “Genetronics Intellectual Property” shall mean Genetronics Patent
Rights and Genetronics Technology.

 

1.29                        “Genetronics Patent Rights” shall mean any and all patents
and patent applications in the Territory (which for the purposes of this
Agreement shall be deemed to include certificates of invention and applications
for certificates of invention) which are Controlled by Genetronics during the
Term, including, but not limited to, those listed on Schedule 1.29, which: (i)
have been filed as of the Effective Date or are filed during the Collaboration
Term and contain applicable claims to
the Field, the practice of which would but for a license thereto comprise an
infringement, or otherwise claim administration of vaccines by means of or with
the assistance of electroporation; or (ii) claim or cover Genetronics
Device Modifications, Genetronics Information and Inventions or Joint
Information and Inventions; or (iii) are divisions, continuations,
continuations-in-part, reissues, renewals, extensions, supplementary protection
certificates, and the like of any such patents and patent applications, and any
foreign equivalents thereof.

 

1.30                        “Genetronics Technology” shall mean (a) Genetronics
Information and Inventions, Genetronics’ rights in Joint Information and
Inventions, the Genetronics Device, Device Modifications, and Device Custom
Know-How;  and (b) any and all
information and materials (including any Target Antigen Modifications provided
by Genetronics to Merck), discoveries, improvements, processes, methods,
protocols, formulas, data, inventions, know-how and trade secrets, patentable
or otherwise, which are (i) Controlled
by Genetronics as of the Effective Date and which are necessary or useful to
Merck in the administration of Merck Products by means of or with the
assistance of electroporation (including but not limited to all electroporation
equipment, designs thereof, and methods of use thereof, electroporation
parameters provided to Merck by Genetronics, and proprietary know-how of
Genetronics for gene delivery into tissues using Genetronics electroporation
equipment) and (ii) either trade secrets of Genetronics or comprise a parameter
claimed under Genetronics Patent Rights.

 

1.31                        “GLP” or “Good Laboratory Practice”
shall mean the applicable then-current standards for laboratory activities for
pharmaceuticals or biologicals, as set forth in the Act and any regulations or
guidance documents promulgated thereunder, as amended from time to time,
together with any

 

4

 

similar
standards of good laboratory practice as are required by any Regulatory
Authority in the Territory.

 

1.32                        “IND” shall mean an Investigational New Drug application, Clinical
Study Application, Clinical Trial Exemption, or similar application or
submission for approval to conduct human clinical investigations of a Merck
Product filed with or submitted to a Regulatory Authority in conformance with
the requirements of such Regulatory Authority.

 

1.33                        “Indication” shall mean the primary prophylactic and/or therapeutic
purpose for which the Merck Product is developed specifically directed towards
obtaining regulatory approval for use of such Merck Product pursuant to an
approved label claim.  A single Indication
shall include the primary disease and variants or sub-divisions or
sub-classifications within such primary disease.  For example, for purposes of the Agreement,
[*] is a single Indication; treatment of and first line treatment of [*] shall
be treated as sub-classifications within the single Indication of [*].  Treatment and prophylaxis of the same disease
(e.g. [*]) shall be treated as the same Indication.  However, treatment of any other type of [*],
shall be deemed a different Indication from a [*] Indication.  By analogy, a vaccine administered for
different Indications (e.g. [*] for [*]) would be treated as different
Indications.

 

1.34                        “Initial Antigen(s)” shall mean [*].

 

1.35                        “Invention” shall mean any process, method, composition of matter,
article of manufacture, discovery or finding that is conceived and/or reduced
to practice as a result of the Collaboration.

 

1.36                        “Joint Information and Inventions” shall mean all protocols,
formulas, data, Inventions, know-how and trade secrets, patentable or
otherwise, resulting from the Collaboration developed or invented jointly by
employees of Merck and Genetronics or others acting on behalf of Merck and
Genetronics, but not including Genetronics Device Modifications or Device
Custom Know-How, the Genetronics Generator, Genetronics Applicator, Genetronics
Custom Components or the Genetronics Device (which shall be owned by
Genetronics pursuant to Section 2.7(a)), or Target Antigens or Target Antigen
Modifications (which shall be owned by Merck pursuant to Section 2.7(b)).

 

1.37                        “Major Market” shall mean any one of the following countries: United
States, Japan, the United Kingdom, France, Germany, Italy or Spain, provided,
however, that where a milestone relates to a Filing with or Marketing
Authorization by a Major Market country governed by a supranational body, such
as the EMEA in the case of the European Union countries, the occurrence of said
milestone for that Major Market shall refer to the occurrence of the milestone
at the supranational level.

 

1.38                        “Marketing
Authorization” shall mean all approvals from the relevant Regulatory
Authority necessary to market and sell a Merck Product in any country
(including without limitation, all applicable pricing and governmental
reimbursement approvals even if not legally required to sell Merck Product in a
country).

 

1.39                        “Merck Information and Inventions” shall mean all protocols,
formulas, data, Inventions, know-how and trade secrets, patentable or
otherwise, resulting from the Collaboration developed or invented solely by
employees of Merck or other persons not employed by Genetronics acting on
behalf of Merck, but not including (i) Genetronics Device Modifications or
Device Custom Know-How or (ii) any Genetronics Intellectual Property falling
under subsection (b) of “Genetronics Technology,” as defined herein.

 

1.40                        “Merck Know-How” shall mean any information and materials, including but not
limited to discoveries, improvements, processes, methods, protocols, formulas,
data, inventions (including

 

5

 

without
limitation Merck’s Information and Inventions and Merck’s rights in Joint
Information and Inventions), know-how and trade secrets, patentable or
otherwise (but expressly excluding Genetronics Intellectual Property, including
but not limited to the Genetronics Device, Genetronics Device Modifications and
Device Custom Know-How), which, during the term of this Agreement, (i) are in
Merck’s possession or control and (ii) are not generally known.

 

1.41                        “Merck Product(s)”
shall mean any pharmaceutical or biological preparation which (i) contains a
nucleic acid sequence encoding a Target Antigen or Target Antigen Modification
or encoding any additional elements that facilitate an immune response to such
Target Antigen or Target Antigen Modification; and (ii) is utilized in
conjunction with a Genetronics Device, which preparation is either for sale by
prescription, over-the-counter or any other method, or for administration to
patients in Clinical Trials, or for administration to animals for the purpose
of developing such preparation for animal use, for any and all uses in the
Field.  Each Merck Product containing
nucleic acid sequences encoding for the same Target Antigen or unique
combination of Target Antigens shall be deemed to be the same Merck Product, regardless
of the formulation or other clinically active components contained in such
Merck Product.  By way of example,
a Merck Product containing nucleic acids encoding for both [*] and [*] shall be
deemed to be one Merck Product.

 

1.42                        “Merck Specifications” shall mean those particular Specifications
established pursuant to the Collaboration that are established by the Committee
and are designed to uniquely distinguish a feature of the Genetronics
Applicator and/or the Genetronics Custom Components from features similar in
design or function developed or used by Genetronics in products for other
Genetronics customers.

 

1.43                        “NDA” shall mean a New Drug Application, Biologics License
Application, Worldwide Marketing Application, Marketing Application Authorization,
or similar application or submission for Marketing Authorization of a Merck
Product filed with a Regulatory Authority to obtain marketing approval for a
biological or pharmaceutical product in that country or in that group of
countries.

 

1.44                        “Net Sales” shall mean, with respect to any subject
sale, the gross invoice price of Merck Product sold by Merck or its Related
Parties to the first Third Party after deducting, if not previously deducted,
from the amount invoiced or received:

 

(a)           trade and quantity discounts other
than early pay cash discounts;

 

(b)           returns, rebates, chargebacks and
other similar allowances;

 

(c)           retroactive price reductions that are
actually allowed or granted;

 

(d)           sales commissions paid to Third Party
distributors and/or selling agents;

 

(e)           a fixed amount equal to [*] of the
amount invoiced to cover bad debt, sales or excise taxes, early payment cash
discounts, transportation and insurance, custom duties, and other governmental
charges; and

 

(f)            the standard inventory cost of
devices or delivery systems used for dispensing or administering Merck Product,
other than the Genetronics Device.

 

6

 

1.45                        “Option” shall have the meaning set forth in Section 3.1.2.

 

1.46                        “Party” shall mean Merck and Genetronics, individually, and “Parties”
shall mean Merck and Genetronics, collectively.

 

1.47                        “Phase I Clinical Trial” shall mean a human clinical
trial in any country for a Merck Product that would satisfy the requirements of
21 CFR Part 312.21(a).

 

1.48                        “Phase II Clinical Trial” shall mean a human clinical
trial in any country for a Merck Product that would satisfy the requirements of
21 CFR Part 312.21(b).

 

1.49                        “Phase III Clinical Trial” shall mean a human clinical
trial in any country for a Merck Product that would satisfy the requirements of
21 CFR Part 312.21(c).

 

1.50                        “Regulatory Authority” shall mean any applicable
government regulatory authority involved in granting approvals for the
manufacturing, marketing, reimbursement and/or pricing of a Merck Product in
the Territory, including, in the United States, the United States Food and Drug
Administration and any successor governmental authority having substantially
the same function.

 

1.51                        “Related Party” shall mean each of Merck, its Affiliates, and their
respective sublicensees (which term does not include distributors), as
applicable.

 

1.52                        “Specifications” shall mean the specifications for the Genetronics Device,
generally, including electrical parameters.

 

1.53                        “Supply Agreement” shall mean an agreement for the
exclusive supply of Genetronics Generators, Genetronics Custom Components and
Genetronics Applicators by Genetronics to Merck during the Term, entered into
pursuant to procedures set forth in Section 3.3, and prior to the execution and
delivery of such separate agreement, shall mean the terms set forth in Schedule
3.3 and incorporated into this Agreement.

 

1.54                        “Target Antigen” shall mean, as applicable, an Initial Antigen or, upon
exercise of the Option by Merck for a particular Additional Antigen, an
Additional Antigen.

 

1.55                        “Target Antigen Modification” shall mean any enhancement or
modification, whether or not patentable, of a Target Antigen, including but not
limited to any Constructs thereof.

 

1.56                        “Term” shall have the meaning set forth in Section 9.1.

 

1.57                        “Territory” shall mean all of the countries in the world, and their
territories and possessions.

 

1.58                        “Third Party” shall mean an entity other than Merck and its Related
Parties, Genetronics and its Affiliates.

 

1.59                        “Valid Patent Claim” shall mean a claim of an issued
and unexpired patent included within the Genetronics Patent Rights (including
extensions and/or restorations thereof), which claim has not been revoked or
held unenforceable or invalid by a decision of a court or other governmental
agency of competent jurisdiction (which decision is not appealable or has not
been appealed within the time allowed for appeal), and which claim has not been
disclaimed, denied or admitted

 

7

 

to be invalid or unenforceable through
reissue, re-examination or disclaimer or otherwise.

 

2.                                      RESEARCH
PROGRAM

 

2.1                               General

 

Genetronics and Merck
shall engage in the Collaboration in order to develop a Genetronics Device for
use with Merck Product(s) upon the terms and conditions set forth in this
Agreement.  For avoidance of doubt, the
scope of the Collaboration shall not include research and development
activities focused on Merck Product(s). 
The activities to be undertaken in the course of the Collaboration shall
be established by the Committee, subject to the terms of this Agreement.

 

2.2                               Conduct of Collaboration

 

Genetronics and Merck
each shall proceed diligently with the work pursuant to the Collaboration by
using their respective commercially reasonable good faith efforts to allocate
sufficient time, effort, equipment and facilities to the Collaboration and to
use personnel with sufficient skills and experience as are reasonably required
to accomplish the Collaboration in accordance with the terms of this Agreement.

 

Genetronics and
Merck each shall conduct the Collaboration in compliance with all applicable
laws, rules and regulations.  In
addition, if animals are used in research hereunder, Merck encourages
Genetronics to use the highest standards, such as those set forth in the Guide
for the Care and Use of Laboratory Animals (NRC, 1996), for the humane
handling, care and treatment of such research animals.  Each Party hereby certifies that it has not,
and will not, employ or otherwise used in any capacity the services of any
person debarred under United States law, including but not limited to Section
21 USC §335a, in performing any portion of the Collaboration.

 

Either Party shall be
entitled to utilize the service of Third Parties to perform its Collaboration
activities, but only upon the other Party’s prior written consent.  Notwithstanding any such consent, each Party
shall remain at all times fully liable for its respective responsibilities
under the Collaboration.  In the event
that utilization of the services of a Third Party necessitates the disclosure
of Confidential Information, then the disclosing Party shall cause such Third
Party to enter into a confidentiality agreement with the disclosing Party at
least as restrictive as the confidentiality obligations binding the disclosing
Party hereunder.

 

2.3                               Use of Collaboration Funding

 

Genetronics shall apply
the collaboration funding it receives from Merck under Section 5.2 solely to
carry out its Collaboration activities in accordance with the terms and
conditions of this Agreement.

 

2.4                               Joint Collaboration Committee

 

The Parties hereby
establish a committee to facilitate the Collaboration as follows:

 

2.4.1                     Composition of the Joint Collaboration Committee.  The
Collaboration shall be conducted under the direction of a joint collaboration
committee (the “Committee”) comprised of three (3)

 

8

 

representatives of Merck and three (3) representatives
of Genetronics.  Each Party may change
its representatives to the Committee from time to time, in its sole discretion,
effective upon notice to the other Party of such change.  These representatives shall have appropriate
technical credentials, experience and knowledge, and ongoing familiarity with
the Collaboration.  Additional
representatives or consultants may from time to time, by mutual consent of the
Parties, be invited to attend Committee meetings, subject to such
representative’s or consultant’s written agreement to comply with the
requirements of Section 4.1.  Each Party
shall bear its own expenses related to the attendance of such meetings by its
representatives.  The Committee shall be
chaired by a representative of Merck. 
Decisions of the Committee shall be made unanimously by the
representatives.  In the event that the
Committee cannot or does not, after good faith efforts, reach agreement on an
issue, the resolution and/or course of conduct shall be determined by Merck, in
its sole discretion.  The foregoing
notwithstanding, in the event that the Committee is deadlocked as to:  (a) any proposed significant reorientation of
the Collaboration, or any request by Merck that Genetronics perform services
outside of Genetronics core areas of competency; or (b) any material change in
financial or other resources required to be expended by Genetronics in
connection with the Collaboration (each, a “Critical Issue”), then the
Parties shall refer the Critical Issue to Genetronics’ Chief Executive Officer
and Merck’s Executive Vice President, Worldwide Basic Research (or equivalent
position) for discussion and resolution.

 

2.4.2                     Meetings.  The Committee shall meet in accordance with a
schedule established by mutual written agreement of the Parties, but no less
frequently than four (4) times per year, with the location for such meetings
alternating between Genetronics and Merck facilities (or such other location as
may be determined by the Committee). 
Alternatively, the Committee may meet by means of teleconference,
videoconference or other similar communications equipment.  The Committee shall confer regarding the
status of the Collaboration, review relevant data, consider and advise on any
technical issues that arise, consider issues of priority, and review and advise
on any budgetary and economic matters relating to the Collaboration which may
be referred to the Committee.

 

2.4.3                     Project
Leaders. 
Merck and Genetronics each shall appoint a person (a “Project Leader”)
from the Committee to coordinate its part of the Collaboration.  The Project Leaders shall be the primary
contact between the Parties with respect to the Collaboration.  Each Party shall notify the other within
thirty (30) days of the Effective Date of the appointment of its Project Leader
and shall notify the other Party as soon as practicable upon changing this
appointment.

 

2.5                               Exchange of Information

 

Upon execution of
this Agreement, and on an ongoing basis during the Collaboration Term,
Genetronics shall disclose to Merck in English and in writing or in an
electronic format all Genetronics Technology not previously disclosed.  Merck shall promptly disclose to Genetronics
during the Collaboration Term such Merck Know-How which is in Merck’s opinion
necessary or useful to Genetronics in the performance of its obligations under
the Collaboration.

 

2.6                               Records and Reports

 

2.6.1                     Records.  Genetronics shall maintain records, in
sufficient detail and in good scientific manner appropriate for patent and
regulatory purposes, which shall fully and properly reflect all work done and
results achieved in the performance of the Collaboration by Genetronics.

 

9

 

2.6.2                     Copies and Inspection of Records.  During the
Collaboration Term, and thereafter until achievement of the milestone set forth
in Section 5.3.1(a)(iii), Merck
shall have the right, during normal business hours and upon reasonable notice,
to inspect and copy all such records of Genetronics referred to in Section
2.6.1.  Merck shall maintain such records
and the information disclosed therein in confidence in accordance with Section
4.1.  Merck shall have the right to
arrange for its employees and/or consultants involved in the activities
contemplated hereunder to visit the offices and laboratories of Genetronics and
any of its Third Party contractors as permitted under Section 2.2 during normal
business hours and upon reasonable prior written notice, and to discuss the
Collaboration work and its results in detail with the technical personnel and
consultants of Genetronics.  Upon request,
Genetronics shall provide copies of the records described in Section 2.6.1
above.

 

2.6.3                     Quarterly
Reports. 
Within thirty (30) days following the end of each Calendar Quarter
during the Term, Genetronics shall provide to Merck a written progress report in
English which shall describe the work performed to date on the Collaboration,
evaluate the work performed in relation to the goals of the Collaboration and
provide such other information as may be required by the Collaboration or
reasonably requested by Merck relating to the progress of the goals or
performance of the Collaboration.

 

2.6.4                     Periodic
Reports.  During the Collaboration Term, and
thereafter, in the case of each Merck Product, until the first achievement of
the milestone set forth in Section 5.3.1(a)(iii) with
respect to such Merck Product, upon Genetronics’ written request made no more
frequently than [*], Merck shall provide to Genetronics a written report on the status of all Merck Products
developed or under development, including but not limited to progress in
development, and status of regulatory filings and approvals.

 

2.7                               Collaboration Information and
Inventions

 

Subject to the
licenses granted herein, the entire right, title and interest in:

 

(a)                                  Genetronics Patents, Genetronics Technology,
Genetronics Information and Inventions, Genetronics Device Modifications and
Device Custom Know-How shall be owned solely by Genetronics;

 

(b)                                 Merck Know-How, Merck Information and
Inventions, Target Antigens, and Target Antigen Modifications shall be owned
solely by Merck; and

 

(c)                                  Joint Information and Inventions shall be
owned jointly by Genetronics and Merck.

 

Genetronics
shall promptly disclose to Merck in writing the development, making, conception
or reduction to practice by Genetronics of Joint Information and Inventions,
Device Custom Know-How and Target Antigen Modifications; Merck shall promptly
disclose to Genetronics in writing the development, making, conception or
reduction to practice by Merck of any Genetronics Device Modification, Device
Custom Know-How or Joint Information and Inventions.

 

2.8                               Collaboration Term

 

Except as
otherwise provided herein, the term of the Collaboration shall commence on the
Effective Date, and continue for a period of three (3) years (the “Collaboration Term”). 
The Parties may extend the Collaboration Term by mutual written
agreement of the authorized representative of the

 

10

 

Parties, and
shall, in such case, , among other things, agree upon any modified activities
to be performed pursuant to the Collaboration and continued funding of the
Collaboration at levels mutually acceptable to the Parties.

 

2.9                               Materials

 

Merck may provide
Genetronics with sufficient quantities of the Target Antigens, and other materials
agreed upon by the Parties’ representatives on the Committee (“Materials”) solely for the purpose of enabling Genetronics
to perform its activities under the Collaboration in accordance with the terms
of this Agreement.  Such Materials, if
provided, are not to be used in humans, nor shall any of the Materials, or any
derivatives, analogs, modifications or components thereof, be transferred,
delivered or disclosed to any Third Party without the prior written approval of
Merck.  Any unused Materials and any
derivatives, analogs, modifications or components thereof shall be, at Merck’s
option, either returned to Merck, or destroyed in accordance with instructions
by Merck.

 

3.                                      LICENSE; EXCHANGE OF INFORMATION; DEVELOPMENT AND COMMERCIALIZATION

 

3.1                               License Grant

 

3.1.1                     Initial Antigens.  Genetronics hereby grants to Merck a non-exclusive,
sublicensable license to Genetronics Intellectual Property in the Territory
solely (i) to use and import in the Field nucleic acid sequences encoding for
one or more of the Initial Antigens, and (ii) to make, have made, use, sell,
offer to sell and import Merck Product(s) in the Field containing a nucleic
acid sequence encoding for one or more of the Initial Antigens.

 

3.1.2                     Additional
Antigens

 

(a)           Upon exercise by
Merck of the Option pursuant to Section 3.1.2(b) for a particular Additional
Antigen, and subject to the terms and limitations set forth in this Section
3.1.2, Genetronics hereby grants to Merck a non-exclusive, sublicensable
license to Genetronics Intellectual Property in the Territory solely (i)to use
and import nucleic acid sequences encoding for such Additional Antigen in the
Field, and (ii) to make, have made, use, sell, offer to sell and import Merck
Product(s) containing a nucleic acid sequence encoding for such Additional
Antigen in the Field.

 

(b)           Merck shall have the
right to obtain a license pursuant to Section 3.1.2(a) for up to [*] Additional
Antigens by exercising the Option for such Antigens pursuant to this
3.1.2(b).  Merck may at any time during
the [*] following the Effective Date (the “Option Period”)
submit to Genetronics a written request to Genetronics requesting a license
pursuant to Section 3.1.2(a).  In
submitting such request, Merck shall supply to Genetronics the GenBank®
accession number for such Antigen, or the amino acid sequence of such Antigen,
or such other information sufficient to identify such Antigen.  Genetronics shall, unless an event described
in Section 3.1.2(c) has occurred, notify Merck within thirty (30) days that a
license pursuant to Section 3.1.2(a) for the requested Antigen is available and
that Merck’s exercise of the Option has been accepted.  The Option shall be deemed to be exercised
upon Genetronics providing such written notice to Merck, or if Genetronics
fails to notify Merck in writing within such thirty (30) day

 

11

 

period that an event described in Section 3.1.2(c) has occurred.  The foregoing notwithstanding, on up to two
occasions during the Option Period, Merck may inform Genetronics in writing
within ten (10) days of the written notice referred to in the previous sentence
(or absent such notice within ten (10) days of the end of such thirty (30) day
period) that it no longer wants a license for such Antigen.  Upon such exercise of the Option pursuant to
this Section 3.1.2(b), the Antigen for which such Option was exercised shall be
deemed to be an Additional Antigen.

 

(c)           Genetronics shall
not be obligated to accept Merck’s request to exercise the Option for a particular
Antigen only if, prior to submission of the written request by Merck, such
Antigen is the subject of an executed agreement with a Third Party granting
exclusive rights to such Antigen, or if such Antigen is the subject of active
negotiations with a Third Party for the grant of exclusive rights to such
Antigen; provided, however, that if such active negotiations with
a Third Party or such exclusive license shall terminate during the Option
Period, then Genetronics shall so notify Merck, and Merck shall have the
opportunity to renew its written request for a license for such Antigen.  In such an event, Merck’s request shall be
deemed to have been made on the date of the earlier request for purposes of
calculating the amount of the Option Fee pursuant to Section 3.1.2(d).

 

(d)           Within thirty (30)
days of the exercise of the Option pursuant to Section 3.1.2(b), Merck shall
pay to Genetronics an option fee (the “Option Fee”),
the amount of which shall be determined as follows:

 

(i)            If
Merck submits its written request for a license pursuant to Section 3.1.2(b) on
or before the [*] of the Effective Date, the Option Fee shall be $[*].

 

(ii)           If
Merck submits its written request for a license pursuant to Section 3.1.2(b)
after the [*] of the Effective Date, but on or before the [*] of the Effective
Date, the Option Fee shall be $[*].

 

(iii)          If
Merck submits its written request for a license pursuant to Section 3.1.2(b)
after the [*] of the Effective Date, but on or before the [*] of the Effective
Date, the Option Fee shall be $[*].

 

3.1.3                     Termination of License for a Target Antigen; Substitution of Additional
Antigens.  Merck may terminate its license pursuant to
Section 3.1.1 for either one or both of the Initial Antigens, or pursuant to
Section 3.1.2(a) for any one or all of the Additional Antigens by providing
written notice to Genetronics.  Such
license shall terminate for such Target Antigen immediately upon receipt of
such notice by Genetronics.  In the event
that Merck terminates a license for a Target Antigen pursuant to this Section
3.1.3, Merck may obtain a license pursuant to Section 3.1.2(a) for [*]
additional Antigens in addition to the [*] provided for in Section 3.1.2(a),
subject to the terms and limitations set forth in Section 3.1.2.  In the event Merck terminates a license for a
Target Antigen pursuant to this Section 3.1.3, all other terms and conditions
of this Agreement shall remain in full force and effect without modification.

 

3.1.4                     Genetronics Applicator; Genetronics Custom Components.  Genetronics
hereby grants to Merck an exclusive, royalty-free, sublicenseable license under
the Genetronics Patent Rights and Device Custom Know-How to use, sell, offer to
sell and import Genetronics Applicators and Genetronics Custom Components
solely for use with a Merck Product in the Field, provided that during
the Term, such Genetronics Applicators and Genetronics Custom Components shall
be supplied to Merck exclusively by Genetronics pursuant to the Supply
Agreement (and until the Parties enter into a separate Supply Agreement, then
pursuant to the terms incorporated herein as

 

12

 

Schedule 3.3). 
Such license shall become perpetual upon the Expiration of this
Agreement pursuant to Section 9.1 or upon termination of the Agreement by Merck
pursuant to Section 9.3.1(a) or (b), but shall terminate if this Agreement
should terminate for any other reason.

 

3.2                               Trademark
License

 

During the Term,
Genetronics grants to Merck a non-exclusive, sublicensable, royalty-free
license in the Field in the Territory to use such trademarks and/or trade names
Controlled by Genetronics, to the extent that such trademarks and/or trade
names relate to Genetronics Technology, solely in connection with the use,
sale, offer to sell and/or import of Merck Product.  The Parties agree to execute an appropriate
trademark license for the use by Merck, its Affiliates and/or their
sublicensee(s) of one or more Genetronics trademarks and/or trade names in
furtherance of and conformity with this Section 3.2, as requested by
Merck.  Merck, its Affiliates and their
respective sublicensees shall have no obligation to use any Genetronics
trademark and/or trade name.  Except as
may be limited by the foregoing, Merck, its Affiliates and their respective
sublicensees may develop one or more trademarks and/or trade names for use in
connection with Merck Product and all rights to such trademark(s) and/or trade
name(s) are retained by Merck, its Affiliates and their respective
sublicensees. Such license shall become perpetual upon the Expiration of this
Agreement pursuant to Section 9.1 or upon termination of the Agreement by Merck
pursuant to Section 9.3.1(a) or (b) but shall terminate if this Agreement
should terminate for any other reason. 
Upon the written request of Genetronics, Merck shall inform Genetronics
whether it is utilizing such trademarks and/or trade names Controlled by
Genetronics in connection with the use, sale, offer to sell and/or import of
Merck Product(s).  If Merck commences
utilizing such trademarks and/or trade names, Merck shall with reasonable
promptness thereafter inform Genetronics if Merck ceases to utilize such
trademarks and/or trade names in connection with the use, sale, offer to sell
and/or import of Merck Product(s).

 

3.3                               Supply of Genetronics Device

 

3.3.1                     The Parties have agreed upon key terms for
the exclusive clinical and commercial supply by Genetronics to Merck of
Genetronics Devices during the Term. 
Such key terms are attached hereto as Schedule 3.3, and unless and until
the Parties shall enter into a separate Supply Agreement pursuant to this
Section 3.3, the terms set forth on Schedule 3.3 shall be deemed incorporated
into this Agreement and shall be binding upon and enforceable against the
Parties as fully as if set forth herein. 
Subject to the limitations set forth in the Supply Agreement, during the
Term, Merck shall exclusively source all Genetronics Device(s) (including
Genetronics Applicators and Genetronics Custom Components) from Genetronics,
and Genetronics shall, subject to Merck’s compliance with the forecasting and
ordering provisions of the Supply Agreement, supply all of Merck’s requirements
of Genetronics Device(s) (including Genetronics Applicators and Genetronics
Custom Components).

 

3.3.2                     Six (6) months prior to the planned
initiation of Phase I Clinical
Trials by Merck, the Parties shall agree upon the detailed Specifications and supply terms on terms no
less favorable to either Party than those set forth in Schedule 3.3, for the
supply of the Genetronics Devices, including Genetronics Applicators and
Genetronics Custom Components, for the conduct of Phase I and Phase II Clinical
Trials.  Prior to execution of such a
Supply Agreement for Clinical Trial use, the Parties shall also
memorialize in writing the principal supply terms consistent with Schedule 3.3
for commercial supply of a Genetronics Device. 
Genetronics shall supply Merck’s requirements for Genetronics Devices
for pre-clinical use, and such supply shall be on the terms set forth in

 

13

 

Schedule 3.3.

 

3.3.3                     The Parties agree that supply of Genetronics
Device(s) for commercial use shall require execution of a definitive agreement
including customary terms and conditions, including but not limited to those
set forth in Schedule 3.3.  Prior to the
commencement of Phase III Clinical Trials, the Parties shall agree upon the detailed Specifications
and enter onto an
exclusive Supply Agreement, consistent with Schedule 3.3, for the exclusive
supply of Genetronics Device(s) during the Term
for use in Phase III Clinical Trials of any Merck Product and for the
commercial sale of any Merck Product.

 

3.4                               No Implied Licenses

 

Except as
specifically set forth in this Agreement, neither Party shall acquire any
license or other intellectual property interest, by implication or otherwise,
in any Confidential Information disclosed to it under this Agreement or under
any patents or patent applications owned or controlled by the other Party or
its Affiliates.

 

4.                                      CONFIDENTIALITY AND PUBLICATION

 

4.1                               Nondisclosure Obligation

 

All Confidential
Information disclosed by one Party to the other Party hereunder shall be
maintained in confidence by the receiving Party and shall not be disclosed to
any Third Party or used for any purpose except as set forth herein without the
prior written consent of the disclosing Party, except to the extent that such
Confidential Information:

 

(a)                                  is known by the receiving Party at the
time of its receipt, and not through a prior disclosure by the disclosing
Party, as documented by the receiving Party’s business records;

 

(b)                                 is in the public domain by use and/or
publication before its receipt from the disclosing Party, or thereafter enters
the public domain through no fault of the receiving Party;

 

(c)                                  is subsequently disclosed to the
receiving Party by a Third Party who may lawfully do so and is not under an
obligation of confidentiality to the disclosing Party;

 

(d)                                 is developed by the receiving Party
independently of Confidential Information received from the disclosing Party,
as documented by the receiving Party’s business records;

 

(e)                                  is disclosed to governmental or other
regulatory agencies in order to obtain patents or to gain or maintain approval
to conduct clinical trials or to market the Genetronics Device or Merck
Product, but such disclosure may be only to the extent reasonably necessary to
obtain patents or authorizations;

 

(f)                                    is deemed necessary by Merck to be
disclosed to Related Parties, agents, consultants, and/or other Third Parties
for the research and development, manufacturing and/or marketing of the Merck
Product (or for such entities to determine their interest in performing such
activities) in accordance with this Agreement on the condition that such 

 

14

 

Third Parties
agree to be bound by the confidentiality and non-use obligations contained in
this Agreement; provided, however, that the term of
confidentiality for such Third Parties shall be no less than ten (10) years; or

 

(g)                                 is deemed necessary by counsel to Merck
or Genetronics to be disclosed in connection with such Party’s disclosure
obligations under the Securities Exchange Act of 1934, as amended; provided,
however, that if requested by the other Party, the disclosing Party will
use commercially reasonably efforts to seek and obtain confidential treatment
for that portion of the disclosure deemed by such Party to be confidential.

 

(h)                                 is deemed necessary by counsel to Merck
or Genetronics to be disclosed to such Party’s attorneys or financial advisors
on the condition that such attorneys or financial advisors agree to be bound by
the confidentiality and non-use obligations contained in this Agreement; provided,
however, that the term of confidentiality for such attorneys or
financial advisors shall be no less than ten (10) years;

 

Any
combination of features or disclosures shall not be deemed to fall within the
foregoing exclusions merely because individual features are published or
available to the general public or in the rightful possession of the receiving
Party unless the combination itself and principle of operation are published or
available to the general public or in the rightful possession of the receiving
Party.

 

If a Party is required by
judicial or administrative process to disclose Confidential Information that is
subject to the non-disclosure provisions of this Section 4.1, such Party shall
promptly inform the other Party of the disclosure that is being sought in order
to provide the other Party an opportunity to challenge or limit the disclosure
obligations.  Confidential Information
that is disclosed by judicial or administrative process shall remain otherwise
subject to the confidentiality and non-use provisions of this Section 4.1, and
the Party disclosing Confidential Information pursuant to law or court order
shall take all steps reasonably necessary, including without limitation
obtaining an order of confidentiality, to ensure the continued confidential
treatment of such Confidential Information.

 

4.2                               Publication

 

Genetronics shall
not have the right to publish with regard to the Collaboration, the Merck
Product, Target Antigen Modifications, or Device Custom Know-How, except for
disclosures permitted pursuant to Section 4.1. 
Except for disclosures permitted pursuant to Section 4.1, if Merck, its
employees or consultants wishes to make a publication with regard to the
Collaboration, Merck shall deliver to Genetronics a copy of the proposed
written publication or an outline of an oral disclosure at least sixty (60)
days prior to submission for publication or presentation.  Genetronics Party shall have the right (a) to
propose modifications to the publication or presentation for patent reasons,
trade secret reasons or business reasons or (b) to request a reasonable delay
in publication or presentation in order to protect patentable information.  If Genetronics requests a delay, Merck shall
delay submission or presentation for a period of ninety (90) days to enable
patent applications protecting Genetronics’ rights in such information to be
filed in accordance with Article 8 below. 
Upon expiration of such ninety (90) days, Merck shall be free to proceed
with the publication or presentation.  If
Genetronics requests modifications to the publication or presentation, Merck
shall edit such publication to prevent disclosure of trade secret or
proprietary business information of Genetronics prior to submission of the
publication or presentation.

 

15

 

4.3                               Publicity/Use of Names

 

No disclosure of
the existence, or the terms, of this Agreement may be made by either Party, and
neither Party shall use the name, trademark, trade name or logo of the other
Party, its Affiliates or their respective employees in any publicity,
promotion, news release or disclosure relating to this Agreement or its subject
matter, without the prior express written permission of the other Party, except
as may be required by law.  On or soon
after the Effective Date, Genetronics may issue a press release, in the form
set forth on Schedule 4.3.

 

5.                                      PAYMENTS; ROYALTIES AND REPORTS

 

5.1                               License Fee

 

Merck shall pay to
Genetronics [*] within ten (10) business days after the Effective Date.

 

5.2                               Collaboration Funding

 

In consideration for
Genetronics’ performance of its obligations under the Collaboration, upon the
terms and conditions contained herein, Merck shall reimburse Genetronics as
approved by the Committee.  For any work
that the Parties agree shall be performed by Genetronics or a Third Party
contractor under the direction of Genetronics and paid for by Merck, the rate
per FTE shall be $[*].

 

5.3                               Milestone Payments 

 

5.3.1                     Milestone Payments for Development
of Merck Products for Human Use

 

Subject to the
terms and conditions of this Agreement, Merck shall pay to Genetronics the
following milestone payments relating to the development of Merck Products in
the Field for use in humans:

 

(a)                                  Merck shall make the following milestone payments for
the first Indication for which a Merck Product reaches the listed milestone:

 

	
  (i)

  	
  [*]

  	
   

  	
  $

  	
  [*]

  
	
  (ii)

  	
  [*]

  	
   

  	
  $

  	
  [*]

  
	
  (iii)

  	
  [*]

  	
   

  	
  $

  	
  [*]

  

 

(b)                                 For
the second Indication for which a Merck Product achieves a milestone listed in
Section 5.3.1(a), Merck shall pay to Genetronics an amount equal to [*] of the
milestones provided for in Section 5.3.1(a) (which shall be calculated based on
the aggregate of the milestone so achieved for such second Indication and all
prior milestones not yet paid with respect to such second Indication, whether
or not achieved separately from the first Indication).  For avoidance of doubt, and notwithstanding the remaining provisions
of this Section 5.3.1(b), only one milestone payment shall be made for
the first Filing of an IND pursuant to Section 5.3.1(a)(i), regardless of whether such IND may be applicable to more than
one Indication.  Upon achievement of

 

16

 

the milestone
set forth in Section 5.3.1(a)(ii)
for the second Indication for a Merck Product, Merck shall pay the milestone
payments set forth in both Sections 5.3.1(a)(i) and 5.3.1(a)(ii),
at the rate set forth in this Section 5.3.1(b).

 

(c)                                  For
the third and any subsequent Indication for which a Merck Product achieves a
milestone listed in Section 5.3.1(a), Merck shall pay to Genetronics an amount
equal to [*] of the milestones provided for in Section 5.3.1(a) (which shall be
calculated based on the aggregate of the milestone so achieved for such
subsequent Indication and all prior milestones not yet paid with respect to
such subsequent Indication, whether or not achieved separately from the earlier
Indication(s)). For avoidance of doubt, and
notwithstanding the remaining provisions of this Section 5.3.1(c), only
one milestone payment shall be made for the first Filing of an IND pursuant to
Section 5.3.1(a)(i), regardless
of the whether such IND may be applicable to more than one Indication.  Upon achievement of the milestone set forth
in Section 5.3.1(a)(ii) for the
third and any subsequent Indication for a Merck Product, Merck shall pay the
milestone payments set forth in both Sections 5.3.1(a)(i) and 5.3.1(a)(ii),
at the rate set forth in this Section 5.3.1(c).

 

(d)                                 The
following example of milestone payments pursuant to Sections 5.3.1(b) and (c)
is for illustrative purposes only, and shall not supersede the language of
Sections 5.3.1(b) and (c).  Upon the
first Filing of an IND for a Merck Product, Merck shall pay to Genetronics $[*]
pursuant to Section 5.3.1(a)(i),
regardless of whether such IND may be applicable to more than one Indication.  Thereafter, if Merck commences dosing of the
first patient in a Phase III Clinical Trial in a Major Market for such Merck
Product for lung cancer (for example), Merck shall pay to Genetronics $[*]
pursuant to Section 5.3.1(a)(ii).  If Merck thereafter commences a Phase III
Clinical Trial for the same Merck Product for [*] (for example), Merck shall
pay to Genetronics $[*].  If Merck
thereafter commences a Phase III Clinical Trial for the same Merck Product for
[*] (for example), Merck shall pay to Genetronics $[*].

 

5.3.2                     Milestone
Payments for Development of Merck Products for Animal Use

 

Subject to the
terms and conditions of this Agreement, Merck shall pay to Genetronics the
following milestone payments relating to the development of Merck Products in
the Field for use in animals for each Indication for such Merck Product:

 

	
  (i)

  	
  [*]

  	
   

  	
  $

  	
  [*]

  
	
  (ii)

  	
  [*]

  	
   

  	
  $

  	
  [*]

  

 

5.3.3                     Merck shall notify Genetronics in writing
within thirty (30) days following the achievement of each milestone, and shall
also make the appropriate milestone payment within thirty (30) days after the
achievement of such milestone.

 

5.4                               Royalties

 

5.4.1                     Royalties Payable By Merck. 
Subject to the terms and conditions of this Agreement, Merck

 

17

 

shall pay Genetronics royalties, calculated on a Merck
Product-by-Merck Product basis, as set forth in this Section 5.4.

 

5.4.1.1           Patent Royalties.  Subject to the
provisions of Section 5.4.1.2, Merck shall pay Genetronics royalties in an
amount equal to the following percentage of Net Sales of Merck Products by
Merck or its Related Parties, provided that the sale of Merck Product
would infringe a Valid Patent Claim in the country of sale: 

 

	
  Annual
  Net Sales by Merck Product

  	
   

  	
  Royalty Rate

  on Incremental

  Net Sales

  	
   

  
	
  Net Sales of the particular Merck Product
  in the Calendar Year, worldwide, which are less than or equal to $[*]

  	
   

  	
  [*]

  	
   

  
	
  The increment of Net Sales of the
  particular Merck Product in the Calendar Year, worldwide, which exceed $[*]
  but which are less than or equal to $[*]

  	
   

  	
  [*]

  	
   

  
	
  The increment of Net Sales of the
  particular Merck Product in the Calendar Year, worldwide, which exceed $[*]

  	
   

  	
  [*]

  	
   

  

 

5.4.1.2           Know-How Royalties. 
Notwithstanding the provisions of Section 5.4.1.1 above, in countries where
the sale of Merck Product by Merck or its Related Parties would not infringe a
Valid Patent Claim, Merck shall pay royalty rates that shall be set at [*] of
the applicable royalty rate determined according to 5.4.1.1, as applicable.  Such royalties shall be calculated after
first calculating royalties under Section 5.4.1.1 above.

 

5.4.1.3           Calculation of Royalties. 
Royalty tiers pursuant to 5.4.1.1 and 5.4.1.2 shall be calculated based
on aggregate worldwide Net Sales of each Merck Product, provided that the
determination of whether the royalty shall be calculated under 5.4.1.1 or
5.4.1.2 shall be determined on a country-by-country basis.  Royalties on each Merck Product at the
applicable rates set forth in Section 5.4.1.1 or 5.4.1.2 shall continue on a
country-by-country basis until the later of: (i) the last-to-expire Valid
Patent Claim; or (ii) for a period of [*] after First Commercial Sale of such
Merck Product in such country (the “Royalty
Period”).  All royalties are
subject to the following conditions:

 

(w)                               that only one royalty shall be due with
respect to the same unit of Merck Product;

 

(x)                                   that no royalties shall be due upon the
sale or other transfer among Merck or its Related Parties, but in such cases
the royalty shall be due and calculated upon Merck’s or its Related Party’s Net
Sales to the first independent Third Party;

 

(y)                                 no royalties shall accrue on the sale or
other disposition of Merck Product by Merck or its Related Parties for use in a
Clinical Trial; and

 

(z)                                   no royalties shall accrue on the
disposition of Merck Product in reasonable quantities by Merck or its Related
Parties as samples (promotion or otherwise) or as donations (for example, to
non-profit institutions or government agencies for a non-commercial purpose);

 

provided, however, that on any sale or transfer by Merck or a Related Party to an
entity in which

 

18

 

Merck has an ownership or other financial interest
of greater than five percent (5%) (an “Interested Party”), royalties shall be due and calculated based on the higher of Merck’s transfer price to the
Interested Party or the Interested Party’s Net Sales to the first independent Third Party.

 

5.4.2                     Royalties for Sale of
Unfinished Product.  In those cases where Merck
sells Merck Product in unfinished form to an independent Third Party, the
royalty obligations of this Section 5.4 shall be applicable to the sale of the
unfinished Merck Product.

 

5.4.3                     Compulsory Licenses. 
If Merck is compelled by a sovereign governmental authority of any
country in the Territory, as a condition of registration of a Merck Product for
sale in such country, to grant a compulsory license to a Third Party with
respect to such Merck Product with a royalty rate lower than the royalty rate
provided by Section 5.4.1, then the royalty rate to be paid by Merck on Net
Sales in that country under Section 5.4.1 shall be reduced to the rate paid by
the compulsory licensee, provided, always that the royalty payable to
Genetronics under 5.4.3 shall in no event be less then the royalty that would
be payable pursuant to 5.4.1.2.

 

5.4.4                     Third Party Licenses. 
In the event that one or more licenses of patents or trade secrets from
other Third Parties are required by Merck or its Related Parties in order to develop,
make, have made, use or sell Merck Product (hereinafter “Third Party Licenses”)
such that the total royalties payable by Merck in respect of such Merck Product
exceed [*] of Net Sales of such Merck Product then the royalties payable to
Genetronics under Section 5.4.1 shall be reduced on a country by country basis
according to the following formula:

 

A x [*] = B

 

where:

 

A =         the percentage royalty payable by Merck
in respect of such Merck Product which exceeds [*] of Net Sales; and

 

B =          the amount by which the royalty
payable to Genetronics under Section 5.4.1 will be reduced,

 

provided always that the royalty payable to
Genetronics under Section 5.4.1 shall in no event be less than the royalty that
would be payable pursuant to 5.4.1.2.  If
Merck reasonably concludes that the royalty reduction formula set out herein is
applicable, Merck shall inform Genetronics of the reduced royalty rate payable
in respect of such Merck Product.

 

If Merck
determines for reasons of material differences in tolerability and/or efficacy
that the Specifications for the Genetronics Device are required to be modified
for use with a Merck Product in a manner which would require Merck to obtain a
Third Party License, Merck shall discuss the need for such a license with
Genetronics during a Committee meeting or in another appropriate manner.  Royalties payable pursuant to such a Third
Party License shall be included in the calculation of royalties subject
abatement pursuant to this Section 5.4.4, unless Genetronics, based on a reasonable
scientific rationale, legitimately disagrees with Merck’s judgment on the
tolerability and/or efficacy reasons for such modification of the
Specifications for the Genetronics Device.

 

19

 

5.5                               Reports; Payment of Royalty

 

During the Term of
this Agreement following the First Commercial Sale of a Merck Product, Merck
shall furnish to Genetronics a quarterly written report for the Calendar
Quarter showing the Net Sales of all Merck Products subject to royalty payments
sold by Merck and its Related Parties in the Territory during the reporting
period and the royalties payable under this Agreement.  Reports shall be due on the sixtieth (60th) day
following the end of each Calendar Quarter. 
Royalties shown to have accrued by each royalty report shall be due and
payable on the date such royalty report is due. Merck shall keep complete and
accurate records in sufficient detail to enable the royalties payable hereunder
to be determined.

 

5.6.                            Audits

 

(a)           Upon the written request of either
Party and not more than once in each Calendar Year, the other Party shall
permit an independent certified public accounting firm of nationally recognized
standing selected by the auditing Party and reasonably acceptable to the audited
Party, at the auditing Party’s expense, to have access during normal business
hours to such of the records of the audited Party as may be reasonably
necessary to verify the accuracy of the royalty reports, or Product Cost or
expense reports hereunder for any year ending not more than twenty-four (24)
months prior to the date of such request. 
The accounting firm shall disclose to the auditing Party only whether
the audited reports are correct or incorrect and the amount of any
discrepancy.  No other information shall
be provided to the auditing Party.

 

(b)           If such accounting firm correctly
identifies a discrepancy made during such period, the appropriate Party shall
pay the other Party the amount of the discrepancy within thirty (30) days of
the date the auditing Party delivers to the audited Party such accounting
firm’s written report so correctly concluding, or as otherwise agreed upon by
the Parties.  The fees charged by such
accounting firm shall be paid by the auditing Party, unless the audit identifies
a material discrepancy exceeding five percent of the owed amount in the period
audited in which case the costs of the audit shall be paid by the Party that is
owed money further to such identified discrepancy.  If the analysis of the independent accountants
indicates a pattern of significant error or bad faith extending to periods
preceding the twenty-four (24) months covered by the audit, the audit may be
expanded to such earlier periods with respect to that specific discrepancy.

 

(c)           Merck shall include in each
sublicense granted by it pursuant to this Agreement a provision requiring the
sublicensee to make reports to Merck, to keep and maintain records of sales
made pursuant to such sublicense and to grant access to such records by
Genetronics’ independent accountant to the same extent required of Merck under
this Agreement.  Genetronics shall
include in each agreement for the supply of Genetronics Devices or components
thereof and any agreement with a Third Party contractor performing activities pursuant
to the Collaboration a provision requiring such entity to make reports to
Genetronics, to keep and maintain records of Product Cost and expenses charged
to Merck pursuant to this Agreement or the Supply Agreement, and to grant
access to such records by Merck’s independent accountant to the same extent
required of Genetronics under this Agreement.

 

(d)           The auditing Party shall treat all
information subject to review under this Section 5.6 (including pursuant to
Section 5.6(c)) in accordance with the confidentiality and non-use provisions
of this Agreement, and shall cause its accounting firm to enter into an
acceptable confidentiality agreement with the audited Party and/or the audited
Third Parties obligating it to 

 

20

 

retain all
such information in confidence pursuant to such confidentiality agreement.

 

5.7                               Payment Exchange Rate

 

All payments to be made
by Merck to Genetronics under this Agreement shall be made in United States
dollars and may be paid by check made to the order of Genetronics or bank wire
transfer in immediately available funds to such bank account in the United
States as may be designated in writing by Genetronics from time to time.  In the case of sales outside the United
States, the rate of exchange to be used in computing the monthly amount of
currency equivalent in United States dollars due Genetronics shall be made at
the monthly rate of exchange utilized by Merck in its worldwide accounting
system, prevailing on the third to the last business day of the month preceding
the month in which such sales are recorded by Merck.

 

5.8                               Income Tax Withholding

 

If laws, rules or
regulations require withholding of income taxes or other taxes imposed upon
payments set forth in this Article 5, Merck shall make such withholding
payments as may be required and shall subtract such withholding payments from
the payments set forth in this Article 5. 
Merck shall submit appropriate proof of payment of the withholding taxes
to Genetronics within a reasonable period of time.

 

6.                                      REPRESENTATIONS AND WARRANTIES

 

6.1                               Representations and Warranties of
Genetronics

 

Genetronics represents
and warrants to Merck that as of the date of this Agreement:

 

(a)           this Agreement has
been duly executed and delivered by Genetronics and constitutes the valid and
binding obligation of Genetronics, enforceable against Genetronics in
accordance with its terms except as enforceability may be limited by
bankruptcy, fraudulent conveyance, insolvency, bankruptcy, reorganization, moratorium
and other laws relating to or affecting creditors’ rights generally and by
general equitable principles;

 

(b)           the execution,
delivery and performance of this Agreement have been duly authorized by all
necessary action on the part of Genetronics, its officers and directors;

 

(c)           no provision of this
Agreement violates any other agreement that Genetronics may have with any other
person or company, and Genetronics acknowledges that Merck has relied on that
representation in entering into this Agreement;

 

(d)           to the best of Genetronics’
knowledge, the Genetronics Patent Rights and Genetronics Technology exist and
are not invalid or unenforceable, in whole or in part;

 

(e)           Genetronics has not previously assigned, transferred,
conveyed or otherwise encumbered its right, title and interest in Genetronics
Patent Rights or Genetronics Technology in a manner that would interfere with
the non-exclusive license granted pursuant to Article 3 hereof;

 

(f)            to the best of Genetronics’ knowledge, the exercise of
the license granted to Merck under the Genetronics Patent Rights and
Genetronics Technology does not interfere with or infringe any

 

21

 

intellectual property rights
owned or possessed by any Third Party; and

 

(g)           there are no claims, judgments or settlements against or
owed by Genetronics and no pending or threatened claims or litigation relating
to the Genetronics Patent Rights and Genetronics Technology.

 

6.2                               Representations and Warranties of
Merck

 

Merck represents and
warrants to Genetronics that as of the date of this Agreement:

 

(a)           this Agreement has
been duly executed and delivered by Merck and constitutes the valid and binding
obligation of Merck, enforceable against Merck in accordance with its terms except
as enforceability may be limited by bankruptcy, fraudulent conveyance,
insolvency, bankruptcy, reorganization, moratorium and other laws relating to
or affecting creditors’ rights generally and by general equitable principles;

 

(b)           the execution, delivery
and performance of this Agreement have been duly authorized by all necessary
action on the part of Merck, its officers and directors;

 

(c)           no provision of this
Agreement violates any other agreement that Merck may have with any other
person or company, and Merck acknowledges that Genetronics has relied on that
representation in entering into this Agreement;

 

(d)           to the best of
Merck’s knowledge, Merck owns or possesses adequate licenses or other rights to
perform its obligations herein.

 

6.3                               Indemnification

 

(a)                                  Genetronics will indemnify, defend, and
hold Merck and its Affiliates, their respective employees, shareholders,
officers and directors and the successors, heirs and assigns of each of them,
harmless against any loss, damages, action, suit, claim, demand, liability,
expense, bodily injury, death or property damage (a “Loss”), that may be
brought, instituted or arise against or be incurred by such persons to the
extent such Loss is based on or arises out of (i) the breach by Genetronics of
any of its covenants, representations or warranties set forth in this Agreement
or the Supply Agreement, or (ii) any material defect in the design, materials,
construction or quality control testing and release of the Genetronics Device
in accordance with this Agreement and/or the Supply Agreement, or (iii) any
failure of the Genetronics Device supplied by Genetronics to meet the
Specifications or otherwise failing to meet warranties as set forth in the
Supply Agreement ; provided that Genetronics shall not be liable for any such
Loss that would be the responsibility of Merck pursuant to Section 6.3(b) or is
otherwise caused by the negligent or reckless acts or omissions of Merck or
Merck’s Related Parties.

 

(b)           Merck will indemnify, defend, and
hold Genetronics, and its Affiliates, and their respective employees,
shareholders, officers and directors and the successors, heirs, and assigns of
each of them, harmless against any Loss that may be brought, instituted or
arise against or be incurred by such persons to the extent such Loss is based
on or arises out of (i) the breach by Merck of any of its covenants,
representations or warranties set forth in this Agreement or (ii)

 

22

 

Clinical Trials or
patient therapy, prophylaxis, or diagnosis utilizing a Merck Product, but
excluding any such Loss that would be the responsibility of Genetronics
pursuant to Section 6.3(a) or is otherwise caused by the negligent or reckless
acts or omissions of Genetronics.

 

6.4                               Claims Procedures.

 

Each Party
entitled to be indemnified by the other Party (an “Indemnified Party”)
pursuant to Section 6.3 hereof shall give notice to the other Party (an “Indemnifying
Party”) promptly after such Indemnified Party has actual knowledge of any
threatened or asserted claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the sole control of the defense of any
such claim or any litigation resulting therefrom; provided, however:
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld) and the
Indemnified Party may participate in such defense at such Party’s expense
(unless: (i) the employment of counsel by such Indemnified Party has been
authorized by the Indemnifying Party; or (ii) the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in the defense of such action, in
each of which cases the Indemnifying Party shall pay the reasonable fees and
expenses of one law firm serving as counsel for the Indemnified Party, which
law firm shall be subject to approval, not to be unreasonably withheld, by the
Indemnifying Party);

 

The failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement to the extent that the failure to give notice
did not result in harm to the Indemnifying Party or materially compromise the
defense of such claim;

 

No Indemnifying Party, in the defense of any
such claim or litigation, shall consent to entry of any judgment or enter into
any settlement, except with the approval of each Indemnified Party (which
approval shall not be unreasonably withheld), except a settlement which imposes
only a monetary obligation on the Indemnifying Party and which includes as an
unconditional term thereof the giving of a release from all liability in
respect to such claim or litigation by the claimant or plaintiff to the
Indemnified Party;

 

Each Indemnified Party shall furnish such
information or reasonable assistance regarding itself or the claim in question
as an Indemnifying Party may reasonably request in writing and shall be
reasonably required in connection with the defense of such claim and litigation
resulting therefrom; and

 

The Indemnifying Party’s obligation due to a
Loss shall be reduced dollar for dollar by the amount of insurance proceeds
actually received by the Indemnified Party for such Loss.

 

6.5          Limited
Liability

 

NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, NEITHER GENETRONICS NOR MERCK WILL BE LIABLE WITH RESPECT TO
ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT
LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST PROFITS OR (II) COST OF PROCUREMENT
OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES.

 

23

 

7.                                      REGULATORY AFFAIRS

 

7.1                               Regulatory Approvals

 

Merck will be
responsible for Filing of INDs and NDAs with Regulatory Authorities for Merck
Products, and shall maintain the NDA and the IND for Merck Products.  Merck shall have the right to cross-reference
to any IND and/or regulatory approval Controlled by Genetronics relating to the
use of the Genetronics Device with any Merck Product in the Field, or, if
applicable, to incorporate data contained in any such regulatory approval in an
NDA for any Merck Product in the Field, in the event and solely to the extent
the same is required or requested by a Regulatory Authority.

 

7.2                               Regulatory
Compliance

 

Merck shall,
within the time permitted under applicable regulations, file or cause to be
filed with, Regulatory Authorities, all notices, assignments, documents and/or
other materials required by Regulatory Authorities to be filed in connection
with any Merck Product.  Merck shall be
responsible for developing Merck Product labeling (including without limitation
NDC numbers), package inserts, imprinting and packaging data as appropriate,
for the Merck Product.  Merck shall be
responsible for all regulatory compliance activities with respect to such Merck
Product.  Genetronics shall provide any
information and assistance requested by Merck for any regulatory filing, Merck
Product labeling development, and all regulatory compliance activities with
respect to such Merck Product. 
Genetronics agrees that because of the time constraints associated with
such filings, Merck Product label development and regulatory compliance
activities that time is of the essence with regard to these matters and will
take all steps necessary to respond to Merck in a timely manner.

 

7.3                               Medical Inquiries

 

Merck shall
respond to questions and inquiries relating to any Merck Product raised by
health care professionals and customers throughout the Territory, and will
establish and implement effective procedures and mechanisms for responding to
such questions and inquiries, and shall be responsible for correspondence and
communication with physicians and other health care professionals in the
Territory relating to the Merck Product. 
Genetronics shall refer all questions regarding Merck Products to Merck
in a timely manner.

 

7.4                               Adverse Experience and Reaction
Reporting

 

7.4.1                        Each Party shall, and shall cause its
respective Affiliates to, furnish timely notice as required by applicable
worldwide regulations (i.e. currently seven (7) calendar days for deaths and
immediately life-threatening adverse reactions and fifteen calendar (15) days
for serious adverse reactions) to all competent governmental agencies in the Territory of all side
effects, drug interactions and other adverse effects identified or suspected
with respect to a Merck Product, the Genetronics Device, or both, for the
Indications administered, distributed, marketed and sold under authority of any
IND or NDAs issued by such Regulatory Authority. Each Party shall provide the
other Party hereto with all necessary assistance in complying with all adverse
reaction reporting requirements established by, or required under, any
applicable IND and/or NDAs in the Territory. 
Genetronics shall provide Merck with timely information, in accordance
with the time frames set forth in this Article 15.1 above, on any serious
adverse reactions relating to the Genetronics Device to the extent that such
serious adverse reactions could affect the NDA for the Merck Product in the
Territory, or relate to the safety, efficacy or potency of the Merck Product.

 

24

 

7.4.2                        Each Party shall, and shall cause its
Affiliates to, furnish the other Party within five (5) calendar days of “date
first learned” written notice of all such side effects, drug interactions and
other adverse effects reported to such Party or its Affiliates regarding Merck
Products or Genetronics Devices, pursuant to Section 7.4.1.  Each Party shall also use its best efforts to
obtain, and to furnish to the other Party hereto, such information, including,
but not limited to, patients, circumstances, consequences and sources of
information, reasonably sufficient to permit that other Party to evaluate such
side effects, drug interactions or other adverse effects of the Genetronics
Device and/or Merck Product for the Indications.  Each Party shall retain all documents,
reports, studies and other materials relating to any and all such side effects,
drug interactions, or other adverse effects, as the case may be.  Upon reasonable written notice, each Party
shall permit the other Party hereto to inspect, and to make copies of, all such
documents, reports, studies and other materials.

 

7.4.3                        Each Party shall provide the other Party
hereto with such assistance as the other Party shall reasonably request in
connection with the identification, analysis, mitigation and elimination of all
such side effects, drug interactions and other adverse effects with respect to
the Genetronics Device and/or Merck Products for the Indications.

 

7.4.4                        As soon as practicable after
the Effective Date, but in no event later than the commencement of Phase I
Clinical Trials, the Parties shall enter into a separate and more detailed
agreement concerning adverse event reporting.

 

8.                                      PATENT
PROVISIONS

 

8.1                               Filing, Prosecution and Maintenance of Patents

 

(a)           Subject to Section 8.1(b),
Genetronics shall have the sole right to file, prosecute and maintain in the
Territory the Genetronics Patent Rights licensed to Merck under this Agreement;
provided, however, that with respect to Joint Information and
Inventions, Merck shall have the first right to file, prosecute and maintain
patent applications on behalf of both Parties. 
Merck shall have the sole right to file, prosecute and maintain patent
applications with respect to Merck Information and Inventions.

 

(b)           With respect to Genetronics
Information and Inventions and Genetronics Patent Rights claiming the
Genetronics Applicator and/or Genetronics Custom Components, Genetronics may
elect not to file and if so, Genetronics shall notify Merck and Merck shall
have the right to file such patent applications on Genetronics’ behalf. With
respect to Joint Information and Inventions, Merck may elect not to file and if
so, Merck shall notify Genetronics and Genetronics shall have the right to file
such patent applications on both Parties’ behalf.  In such event, the non-filing Party shall
execute such documents and perform such acts at the non-filing Party’s expense
as may be reasonably necessary to allow the other Party to continue such
prosecution or maintenance on behalf of the non-filing Party.  In each case, the filing Party shall give the
non-filing Party an opportunity to review the text of the application before
filing, shall consult with the non-filing Party with respect thereto, and shall
supply the non-filing Party with a copy of the application as filed, together
with notice of its filing date and serial number.

 

(c)           With respect to Genetronics Patent
Rights and Joint Information and Inventions covered by Section 8.1(b), the
filing Party shall keep the non-filing Party advised of the status of the

 

25

 

actual and
prospective patent filings and, upon the non-filing Party’s request, shall
provide advance copies of any papers related to the filing, prosecution and
maintenance of such patent filings. 
Genetronics shall promptly give notice to Merck of the grant, lapse,
revocation, surrender, invalidation or abandonment of any Genetronics Patent
Rights licensed to Merck for which Genetronics is responsible for the filing,
prosecution and maintenance.  With
respect to all filings hereunder, the filing Party shall be responsible for
payment of all costs and expenses related to such filings.

 

8.2                               Interference, Opposition, Reexamination and
Reissue

 

(a)           Genetronics shall be solely
responsible for initiating any reexamination, interference or reissue
proceeding relating to Genetronics Patent Rights.  With regard to Genetronics Patent Rights
exclusively licensed to Merck, such reexamination, interference or reissue
proceeding shall require the prior written consent of Merck, which consent
shall not be unreasonably withheld.

 

(b)           In connection with any interference,
opposition, reissue, or reexamination proceeding relating to Genetronics Patent
Rights, Genetronics shall keep Merck informed of developments in any such
action or proceeding, including, to the extent permissible by law, consultation
on and approval of any settlement, the status of any settlement negotiations
and the terms of any offer related thereto.

 

(c)           Genetronics shall bear the expense of
any interference, opposition, reexamination, or reissue proceeding relating to
Genetronics Patent Rights.

 

8.3                               Enforcement and Defense

 

(a)           Genetronics shall be
solely responsible for enforcing Genetronics Intellectual Property Rights.

 

(b)           Genetronics shall inform Merck of any
certification regarding any Genetronics Patent Rights in the Field it has
received pursuant to either 21 U.S.C. §§355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV)
or its successor provisions, or any similar provisions in a country in the
Territory other than the United States, and shall provide Merck with a copy of
such certification within five (5) days of receipt. Genetronics’ and Merck’s
rights with respect to the initiation and prosecution of any legal action as a
result of such certification or any recovery obtained as a result of such legal
action shall be as defined in paragraphs 8.3(a)-(d) hereof; provided, however,
that Genetronics shall exercise its first right to initiate and prosecute any
action and shall inform Merck of such decision within ten (10) days of receipt
of the certification, after which time Merck shall have the right to initiate
and prosecute such action.  Regardless of
which Party has the right to initiate and prosecute such action, both Parties
shall, as soon as practicable after receiving notice of such certification,
convene and consult with each other regarding the appropriate course of conduct
for such action.  The non-initiating
Party shall have the right to be kept fully informed and participate in
decisions regarding the appropriate course of conduct for such action, and the
right to join and participate in such action.

 

8.4                               Patent Term Restoration

 

The Parties hereto shall
cooperate with each other, including without limitation to provide

 

26

 

necessary information and assistance as the other
Party may reasonably request, in obtaining patent term restoration or
supplemental protection certificates or their equivalents in any country in the
Territory where applicable to Genetronics Patent Rights in the Field.  In the event that elections with respect to
obtaining such patent term restoration are to be made, Merck shall have the
right to make the election and Genetronics agrees to abide by such election;
provided, however, that Merck shall not unreasonably refuse to elect patent
term restoration in a Major Market if its failure so to elect would have a
material effect on the royalties payable to Genetronics hereunder.

 

9.                                      TERM AND TERMINATION

 

9.1                               Term and Expiration

 

This Agreement
shall be effective as of the Effective Date and unless terminated earlier
pursuant to Sections 9.2 or 9.3 below, this Agreement shall continue in effect
until expiration (“Expiration”) of the Royalty Period pursuant to Section
5.4.1.3 (the “Term”).  Upon Expiration of
this Agreement and satisfaction of all royalty obligations hereunder, Merck’s
licenses pursuant to Section 3.1 and 3.2 shall become fully paid-up, perpetual
licenses.  Upon Expiration of the
Agreement, Genetronics shall, at Merck’s request, provide to Merck all Device
Custom Know-How not previously provided to Merck, and shall, at Merck’s
request, provide to Merck or destroy all tooling and equipment used under Merck
Specifications to make Genetronics Applicators and Genetronics Custom
Components (at which time any tooling and/or equipment provided to Merck shall
be owned by Merck).

 

9.2                               Termination Without Cause

 

(a)           Notwithstanding anything contained
herein to the contrary, Merck shall have the right to terminate this Agreement
at any time in its sole discretion by giving ninety (90) days’ advance written
notice to Genetronics.  No later than
thirty (30) days after the effective date of such termination, each Party shall
return or cause to be returned to the other Party all Confidential Information
in tangible form received from the other Party and all copies thereof;
provided, however, that each Party may retain one copy of Confidential
Information received from the other Party in its confidential files for record
purposes.  In the event of termination
under this Section 9.2(a): (i) Genetronics may, at Merck’s
option: (a) repurchase all rights in the tooling at a mutually agreed-upon
price or (b) destroy all such
tooling; (ii) each Party shall pay all amounts then due and owing as of the
termination date; and (iii) except for the surviving provisions set forth in
Section 9.4 hereof, the rights and obligations of the Parties hereunder shall
terminate as of the date of such termination; provided, however, that Merck
shall have a fully paid-up non-exclusive license to use Genetronics Information
and Inventions and Genetronics’ interest in Joint Information and Inventions
for research purposes only.  In the event
that this Agreement is terminated by Merck pursuant to this Section 9.2(a) at
any time during the first two (2) years of the Collaboration Term, then Merck
shall continue, for a six-month period beginning on the date of such written
notice, to make payments approved by the Committee in relation to FTE
scientists and outside contractors engaged by Genetronics in connection with
the Collaboration.

 

(b)           The Parties may terminate the
Agreement by mutual written agreement at any time during the Collaboration
Term.  Such termination shall become
effective ninety (90) days’ after the Parties have agreed in writing to
terminate the Agreement.  No later than
thirty (30) days after the effective date of such termination, each Party shall
return or cause to be returned to the other

 

27

 

Party all
Confidential Information in tangible form received from the other Party and all
copies thereof; provided, however, that each Party may retain one copy of
Confidential Information received from the other Party in its confidential
files for record purposes.  In the event
of termination under this Section 9.2(b): (i) Genetronics may, at Merck’s
option: (a) repurchase all rights in the tooling at a mutually agreed-upon
price or (b) destroy all such tooling; (ii) each Party shall pay all amounts
then due and owing as of the termination date; and (iii) except for the
surviving provisions set forth in Section 9.4 hereof, the rights and
obligations of the Parties hereunder shall terminate as of the date of such
termination; provided, however, that Merck shall have a fully paid-up
non-exclusive license to use Genetronics Information and Inventions and
Genetronics’ interest in Joint Information and Inventions for research purposes
only.

 

9.3                               Termination for Cause

 

9.3.1                     Cause for Termination. 
This Agreement may be terminated at any time during the term of this
Agreement:

 

(a)           upon written notice
by either Party if the other Party is in breach of its material obligations
hereunder by causes and reasons within its control and has not cured such
breach within ninety (90) days after written notice requesting cure of the
breach (provided, however, that for any breach of the provisions
of Article 5 by Merck, the cure period shall be reduced to thirty (30) days
after written notice requesting cure of the breach); provided, however,
that in the event of a good faith dispute with respect to the existence of a
material breach, the ninety (90) day cure period shall be tolled until such
time as the dispute is resolved pursuant to Section 10.6 hereof;

 

(b)           by either Party upon
the filing or institution of bankruptcy, reorganization, liquidation or
receivership proceedings, or upon an assignment of a substantial portion of the
assets for the benefit of creditors by the other Party; provided, however,
that in the case of any involuntary bankruptcy proceeding such right to
terminate shall only become effective if the Party consents to the involuntary
bankruptcy or such proceeding is not dismissed within ninety (90) days after
the filing thereof.

 

(c)           by Genetronics in
the event that during the Term the Supply Agreement (including, in the absence
of a definitive Supply Agreement, the supply of the Genetronics Applicators and
Genetronics Custom Components under the terms of Schedule 3.3) is terminated by
Merck (without cause and in the absence of a Genetronics Inability to Supply
(as defined in Schedule 3.3)) or by Genetronics (with cause).

 

9.3.2                     Effect of Termination for
Cause on License

 

(a)           If Merck terminates
this Agreement under Section 9.3.1(a), Merck’s licenses pursuant to Sections
3.1 and 3.2 shall continue in effect, provided that Merck’s obligations to pay
milestones and royalties under Section 5.4 hereof shall be reduced by [*].  In such case, Genetronics shall, within
thirty (30) days after the effective date of such termination, return or cause
to be returned to Merck all Materials (including Target Antigens), Merck
Products, all Confidential Information of Merck in tangible form, and all
substances or compositions delivered or provided by Merck, as well as any other
material provided by Merck in any medium. 
If Genetronics terminates this Agreement under Section 9.3.1(a), Merck’s
licenses pursuant to Sections 3.1 and 3.2 shall terminate as of such termination
date and Merck shall, within thirty (30) days after the effective date of such
termination, return or cause to be returned to Genetronics all Genetronics
Devices, all Confidential Information of Genetronics in tangible

 

28

 

form, and all
substances or compositions delivered or provided by Genetronics, as well as any
other material provided by Genetronics in any medium.

 

(b)           If this Agreement is
terminated by Merck pursuant to Section 9.3.1(b) due to the rejection of this
Agreement by or on behalf of Genetronics under Section 365 of the United States
Bankruptcy Code (the “Code”), all licenses and rights to licenses granted under
or pursuant to this Agreement by Genetronics to Merck are, and shall otherwise
be deemed to be, for purposes of Section 365(n) of the Code, licenses of rights
to “intellectual property” as defined under Section 101(35A) of the Code.  The Parties agree that Merck, as a licensee
of such rights under this Agreement, shall retain and may fully exercise all of
its rights and elections under the Code, and that upon commencement of a
bankruptcy proceeding by or against Genetronics under the Code, Merck shall be
entitled to a complete duplicate of, or complete access to (as Merck deems
appropriate), any such intellectual property and all embodiments of such
intellectual property.  Such intellectual
property and all embodiments thereof shall be promptly delivered to Merck (i)
upon any such commencement of a bankruptcy proceeding upon written request
therefor by Merck, unless Genetronics elects to continue to perform all of its
obligations under this Agreement or (ii) if not delivered under (i) above, upon
the rejection of this Agreement by or on behalf of Genetronics upon written
request therefor by Merck.

 

The foregoing
provisions of Section 9.3.2(b) are without prejudice to any rights Merck may
have arising under the Code or other applicable law.

 

9.4          Effect of Expiration or Termination;
Survival  

 

Expiration or termination
of this Agreement shall not relieve the Parties of any obligation accruing
prior to such Expiration or termination. 
Any Expiration or termination of this Agreement shall be without
prejudice to the rights of either Party against the other accrued or accruing
under this Agreement prior to Expiration or termination, including without
limitation the obligation to pay royalties for Merck Product(s) sold prior to
such expiration or termination. The provisions of Article 4 shall survive the
expiration or termination of this Agreement and shall continue in effect for
ten (10) years.  In addition, the
provisions of Articles 1, 6, and 9, and Sections 10.3 through 10.13 shall
survive any expiration or termination of this Agreement.

 

10.                               MISCELLANEOUS

 

10.1                        Force Majeure

 

Neither Party
shall be held liable to the other Party nor be deemed to have defaulted under
or breached this Agreement for failure or delay in performing any obligation
under this Agreement to the extent that such failure or delay is caused by or
results from causes beyond the reasonable control of the affected Party,
potentially including, but not limited to, embargoes, war, acts of war (whether
war be declared or not), insurrections, riots, civil commotions, strikes,
lockouts or other labor disturbances, fire, floods, or other acts of God, or
acts, omissions or delays in acting by any governmental authority or the other
Party.  The affected Party shall notify
the other Party of such force majeure circumstances as soon as reasonably
practical, and shall promptly undertake all reasonable efforts necessary to
cure such force majeure circumstances.

 

29

 

10.2                        Assignment/ Change of Control

 

Except as provided
in this Section 10.2, this Agreement may not be assigned or otherwise
transferred, nor may any right or obligation hereunder be assigned or
transferred, by either Party without the consent of the other Party.  Merck may, without Genetronics’ consent,
assign this Agreement and its rights and obligations hereunder in whole or in
part to a Merck Affiliate or in connection with a Change of Control (as defined
below).  Genetronics may, without Merck’s
consent, assign this Agreement and its rights and obligations hereunder (except
as specified below) in connection with a Change of Control; provided, however,
that in the event of a proposed Change of Control of Genetronics involving a
Competitor of Merck, Genetronics must notify Merck at least thirty (30) days
prior to completion of any such Change of Control, and Merck shall have the
right, at any time after receipt of such notice, to notify Genetronics of the
termination of the Collaboration, and further, in the event of such a Change of
Control involving a Competitor of Merck, and regardless of whether the
Collaboration is terminated, any provisions of Article 2 requiring Merck to
provide information to Genetronics or share decision making with Genetronics
shall be void.  For purposes of the
preceding proviso, a “Competitor” of Merck shall mean (i) any entity with
global pharmaceutical sales in excess of two billion dollars ($2 billion) in
the Calendar Year immediately preceding the Calendar Year in which such merger
or acquisition shall be completed or (ii) any entity that at the time of such
merger or acquisition is, through license or otherwise, in pre-clinical or
clinical development or is selling a product using electroporation-assisted
delivery of nucleic acid sequences encoding for any Antigen.  In the event of such a termination of the
Collaboration, Merck shall reimburse Genetronics for its pro-rata costs
incurred and any non-cancelable commitments made up to the date of termination,
but shall take credit for any fees paid by Merck pursuant to the
Collaboration.  Genetronics shall
reimburse Merck for any uncredited fees paid by Merck pursuant to the
Collaboration. Notwithstanding the foregoing, the rights and obligations of
Genetronics in Section 3.3 may not be assigned under any circumstances without
Merck’s prior written consent.  Any
permitted assignee shall assume all assigned obligations of its assignor under
this Agreement.  Any attempted assignment
not in accordance with this Section 10.2 shall be void.  For purposes of this Section 10.2, a “Change of Control” of a Party shall be deemed to
occur if such Party is involved in a merger, reorganization or consolidation,
or if there is a sale of all or substantially all of such Party’s assets or
business relating to this Agreement or if a person or group other than the
current controlling person or group shall effectively acquire control of the
management and policies of such Party.

 

10.3                        Severability

 

If any one or more
of the provisions contained in this Agreement is held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby, unless the absence of the invalidated provision(s) adversely affects
the substantive rights of the Parties. 
The Parties shall in such an instance use their best efforts to replace
the invalid, illegal or unenforceable provision(s) with valid, legal and
enforceable provision(s) which, insofar as practical, implement the purposes of
this Agreement.

 

10.4                        Notices

 

All notices which
are required or permitted hereunder shall be in writing and sufficient if
delivered personally, sent by facsimile (and promptly confirmed by personal
delivery, registered or certified mail or overnight courier), sent by
nationally-recognized overnight courier or sent by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:

 

30

 

	
  If to Genetronics, to:

  	
   

  	
  Genetronics
  Biomedical Corporation

  
	
   

  	
   

  	
  Genetronics,
  Inc.

  
	
   

  	
   

  	
  11199 Sorrento Valley Road

  
	
   

  	
   

  	
  San Diego, CA 92121-1334

  
	
   

  	
   

  	
  Attention:
  Bob Goodenow, Ph.D.

  
	
   

  	
   

  	
  Facsimile
  No.: (858) 597-0451

  
	
   

  	
   

  	
   

  
	
  and:

  	
   

  	
  Kirkpatrick & Lockhart LLP

  
	
   

  	
   

  	
  10100 Santa Monica Blvd.

  
	
   

  	
   

  	
  Seventh Floor

  
	
   

  	
   

  	
  Los Angeles, CA 90067

  
	
   

  	
   

  	
  Attention: Thomas Poletti,
  Esq.

  
	
   

  	
   

  	
  Facsimile
  No.: (310)
  552-5001

  
	
   

  	
   

  	
   

  
	
  If to Merck, to:

  	
   

  	
  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

  
	
   

  	
   

  	
   

  
	
  and

  	
   

  	
  Merck & Co., Inc.

  
	
   

  	
   

  	
  One Merck Drive

  
	
   

  	
   

  	
  Attention: Chief Licensing
  Officer

  
	
   

  	
   

  	
  P.O. Box 100, WS2A-30

  
	
   

  	
   

  	
  Whitehouse Station, NJ
  08889-0100

  
	
   

  	
   

  	
  Facsimile:
  (908)735-1214

  

 

or to such other address(es) as
the Party to whom notice is to be given may have furnished to the other Party
in writing in accordance herewith.  Any such
notice shall be deemed to have been given: (a) when delivered, if personally
delivered or sent by facsimile on a business day (or if delivered or sent on a
non-business day, then on the next business day); (b) on the business day after
dispatch, if sent by nationally-recognized overnight courier; or (c) on the
fifth (5th) business day following the date of mailing, if sent by
mail.

 

10.5                        Applicable Law

 

This Agreement
shall be governed by and construed in accordance with the laws of the State of
New Jersey and the patent laws of the United States, without reference to any
rules of conflict of laws or renvoi.

 

10.6                        Dispute Resolution

 

10.6.1                  The Parties shall negotiate in good faith
and use reasonable efforts to settle any dispute, controversy or claim arising
from or related to this Agreement or the breach thereof.  If the Parties do not fully settle, and a
Party wishes to pursue the matter, each such dispute, controversy or claim that
is not an “Excluded Claim” shall be finally resolved by binding arbitration in 

 

31

 

accordance with
the Commercial Arbitration Rules and Supplementary Procedures for Large Complex
Disputes of the American Arbitration Association (“AAA”), and judgment on the
arbitration award may be entered in any court having jurisdiction thereof.

 

10.6.2                  The arbitration shall be conducted by a
panel of three persons experienced in the pharmaceutical business: within
thirty (30) days after initiation of arbitration, each Party shall select one
person to act as arbitrator; and the two Party-selected arbitrators shall
select a third arbitrator within thirty (30) days of their appointment.  If the arbitrators selected by the Parties
are unable or fail to agree upon the third arbitrator, the third arbitrator
shall be appointed by the AAA.  The place
of arbitration shall be New York, New York, and all proceedings and
communications shall be in English.

 

10.6.3                  Either Party may apply to the arbitrators
for interim injunctive relief until the arbitration award is rendered or the
controversy is otherwise resolved. 
Either Party also may, without waiving any remedy under this Agreement,
seek from any court having jurisdiction any injunctive or provisional relief
necessary to protect the rights or property of that Party pending the
arbitration award.  The arbitrators shall
have no authority to award punitive or any other type of damages not measured
by a Party’s compensatory damages.  Each
Party shall bear its own costs and expenses and attorneys’ fees and an equal
share of the arbitrators’ fees and any administrative fees of arbitration.

 

10.6.4                  Except to the extent necessary to confirm
an award or as may be required by law, neither a Party nor an arbitrator may
disclose the existence, content, or results of an arbitration without the prior
written consent of both Parties.  In no
event shall an arbitration be initiated after the date when commencement of a
legal or equitable proceeding based on the dispute, controversy or claim would
be barred by the applicable New York statute of limitations.

 

10.6.5                  The Parties agree that, in the event of a
dispute over the nature or quality of performance under this Agreement, neither
Party may terminate this Agreement until final resolution of the dispute
through arbitration or other judicial determination.  The Parties further agree that any payments
made pursuant to this Agreement pending resolution of the dispute shall be
refunded if an arbitrator or court determines that such payments are not due.

 

10.6.6                  As used in this Section, the term “Excluded Claim” shall mean a dispute,
controversy or claim that concerns (a) the validity or infringement of a
patent, trademark or copyright; or (b) any antitrust, anti-monopoly or
competition law or regulation, whether or not statutory.

 

10.7                        Entire Agreement; Amendments

 

This Agreement
contains the entire understanding of the Parties with respect to the
Collaboration and the licenses granted hereunder.  Any other express or implied agreements and
understandings, either oral or written, with regard to the Collaboration or the
licenses granted hereunder are superseded by the terms of this Agreement.  This Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by authorized
representatives of both Parties hereto.

 

10.8                        Headings

 

The captions to
the several Articles and Sections hereof are not a part of this Agreement, but
are merely for convenience to assist in locating and reading the several
Articles and Sections hereof.

 

32

 

10.9                        Independent Contractors

 

It is expressly
agreed that Genetronics and Merck shall be independent contractors and that the
relationship between the Parties shall not constitute a partnership, joint
venture or agency.  Neither Genetronics
nor Merck shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on the
other Party, without the prior written consent of the other Party.

 

10.10                 Waiver

 

The waiver by
either Party hereto of any right hereunder, or of any failure of the other
Party to perform, or of any breach by the other Party, shall not be deemed a
waiver of any other right hereunder or of any other breach by or failure of
such other Party, whether of a similar nature or otherwise.

 

10.11                 Cumulative Remedies

 

No remedy referred
to in this Agreement is intended to be exclusive, but each shall be cumulative
and in addition to any other remedy referred to in this Agreement or otherwise
available under law.

 

10.12                 Waiver of Rule of Construction

 

Each Party has had
the opportunity to consult with counsel in connection with the review, drafting
and negotiation of this Agreement. 
Accordingly, the rule of construction that any ambiguity in this Agreement
shall be construed against the drafting Party shall not apply.

 

10.13                 Counterparts

 

This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument.

 

33

 

IN WITNESS WHEREOF, the Parties have executed
this Agreement as of the date first set forth above.

 

 

	
  MERCK
  & CO., INC.

  	
  GENETRONICS BIOMEDICAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY:

  	
  /s/  Peter S. Kim

  	
   

  	
  BY:

  	
  /s/  Peter D. Kies

  	
   

  
	
   

  	
  Peter S. Kim

  	
   

  	
   

  	
  Peter D.
  Kies

  	
   

  
	
   

  	
   

  
	
  TITLE:
       President, Merck Research Laboratories

  	
  TITLE: Chief
  Financial Officer

  
	
   

  	
   

  
	
  DATE: 

  	
  17 May 2004

  	
   

  	
  DATE: 

  	
  21 May 2004

  	
   

  
										

 

 

	
   

  	
  GENETRONICS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/  Douglas C. Murdock

  	
   

  
	
   

  	
   

  	
  Douglas C. Murdock, Esq.

  
	
   

  	
   

  
	
   

  	
  TITLE: Director,
  Intellectual Property

  
	
   

  	
   

  
	
   

  	
  DATE:

  	
  5/21/04

  	
   

  
						

 

34

 

SCHEDULES

 

	
  SCHEDULE 1.29

  	
   

  	
  GENETRONICS PATENT RIGHTS

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 3.3

  	
   

  	
  SUPPLY OF GENETRONICS DEVICES

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 4.3

  	
   

  	
  PRESS RELEASE

  

 

35

 

SCHEDULE 1.29    GENETRONICS PATENT RIGHTS

 

U.S. Patents - Issued

 

[*]

 

1

SCHEDULE 1.29 (cont)

U.S. patent applications

 

[*]

 

Foreign equivalents

 

[*]

 

PCT International Applications

 

[*]

 

2

 

SCHEDULE 3.3    SUPPLY OF GENETRONICS DEVICES

 

	
  Parties

  	
   

  	
  Merck &
  Co., Inc. (“Merck”) or its Affiliate

  

  Genetronics Biomedical, Inc. (“Genetronics”)

  
	
   

  	
   

  	
   

  
	
  Purpose

  	
   

  	
  In addition
  to the purposes as set forth in the License Agreement, Merck and Genetronics
  wish to enter into a Supply Agreement for the supply to Merck of Genetronics
  Device(s) (as defined in the License Agreement).

  

 

1

 

	
  Term

  	
   

  	
  In general,
  the Supply Agreement shall have the same Term as the License Agreement;
  provided that:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •     expiration
  or permissive termination in whole of the License Agreement shall result in
  termination of the Supply Agreement, unless otherwise agreed in writing by
  the Parties; in such event, or in the event of expiration of the Supply
  Agreement occurring after termination or expiration of the License Agreement,
  the Supply Agreement shall provide for an orderly transition of supply,
  including, if applicable, a license of technology and ownership of tooling
  and transfer of such, to Merck .

  
	
   

  	
   

  	
  •     termination
  of the Supply Agreement by Merck without cause during the Term shall result
  in termination of the License Agreement, as provided in Section 9.3.1 of the
  License Agreement;

  
	
   

  	
   

  	
  •     in
  the case of termination of the License Agreement during the Term due to an
  uncured breach of the License Agreement by Merck, or in the case of Merck’s
  uncured breach of the Supply Agreement, the Supply Agreement shall terminate;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  •     in
  the case of an uncured breach by Genetronics of the License Agreement, the
  License Agreement shall provide specific remedies to Merck against
  Genetronics, but neither the License Agreement nor the Supply Agreement shall
  terminate;

  
	
   

  	
   

  	
  •     in
  the case of an uncured material breach by Genetronics of the Supply
  Agreement, Merck may terminate the Supply Agreement, and the provisions
  relating to “Genetronics Inability to Supply” below, shall apply.  In addition to Merck’s other remedies,
  Genetronics shall, at Merck’s request, provide to Merck all Device Custom
  Know-How not previously provided to Merck, and shall, at Merck’s request,
  provide to Merck or destroy all tooling and equipment used under Merck
  Specifications to make Genetronics Applicators and Genetronics Custom
  Components (at which time any tooling and/or equipment provided to Merck
  shall be owned by Merck).

  
	
   

  	
   

  	
  •     in
  the case of a “Genetronics Inability to Supply,” as defined below, Merck may
  manufacture or have manufactured by an Affiliate or Third Party the
  Genetronics Device(s) (including Genetronics Applicators and Genetronics
  Custom Components), subject to the limitations of and applicable protections
  afforded Genetronics under Section 9.3.2 of the License Agreement.  The definitive Supply Agreement for
  commercial supply shall provide a mechanism requiring the Parties to meet and
  discuss reasonable alternative solutions prior to any transfer of
  manufacturing to Merck, an Affiliate or a Third Party if such Genetronics
  Inability to Supply is caused by force majeure.  Capacity constraints that are communicated
  by Genetronics to Merck as set forth under “Exclusivity of Supply (below)
  shall be considered a force majeure, and Genetronics shall have the first
  right to exercise reasonable steps to expand its capacity to meet Merck’s
  requirements before Merck may transfer manufacturing to Merck, an Affiliate
  or a Third Party.  The Supply Agreement
  will include provisions for an orderly transition of supply obligations to
  Merck, an Affiliate or a Third Party reasonably acceptable to Genetronics,
  such approval not to be unreasonably withheld (which shall include technical
  transfer as well as reasonable technical assistance) provided, however, that
  Genetronics shall oversee such transition; and provided, further, that all
  Genetronics Technology shall, subject to the remaining terms of the License
  Agreement, remain owned by Genetronics and shall only be disclosed to such
  supplier on a need-to-know basis and pursuant to a confidentiality agreement
  at least as restrictive as the terms of the confidentiality agreement and
  confidentiality provisions binding Merck.

  
	
   

  	
   

  	
  •     “Genetronics
  Inability to Supply” shall be defined as the following: (i) an uncured
  material breach (following reasonable written notice of the same) by
  Genetronics of its obligations under the Supply Agreement to deliver
  Genetronics Device(s) meeting the applicable warranties and Specifications
  and/or (ii) the failure to supply by Genetronics in any two consecutive Calendar
  Quarters at least eighty-five percent (85%) of the Firm Orders for such
  Calendar Quarters, provided that such failure to supply is not directly and
  solely caused by Merck, it being understood that the Parties shall agree upon
  a mutually acceptable change control procedure which shall include mutually
  agreeable time limits for changes in Specifications by Merck.

  

 

2

 

	
  Exclusivity
  of Supply

  	
   

  	
  During the
  term of the License Agreement, Merck shall exclusively source all Genetronics
  Device(s) (including Genetronics Applicators and Genetronics Custom
  Components) from Genetronics, and Genetronics shall, subject to Merck’s
  compliance with the forecasting and ordering provisions below, supply all of
  Merck’s requirements of Genetronics Device(s) (including Genetronics
  Applicators and Genetronics Custom Components)in accordance with the
  forecasting and ordering procedures set forth below unless otherwise provided
  in the applicable Supply Agreement. 
  Genetronics shall specify in the definitive Supply Agreement for
  commercial supply (or in the event that such definitive Supply Agreement has
  not yet been executed, and from time to time if and when capacity increases,
  by providing written notice to Merck) any capacity constraints which limit
  its ability to supply Merck’s requirements (it being understood that this
  provision does not limit the obligations of the Parties to enter into a
  definitive supply agreement pursuant to the provisions of Section 3.3 of the
  License Agreement).

  

  The definitive Supply Agreement for commercial supply shall provide for the
  allocation of Genetronics Device(s) and capacity as well as providing for a
  cure period of forty-five (45) days in the event of a short term supply
  interruption (i.e., less than two Calendar Quarters) in which Genetronics
  fails to supply Genetronics Devices in accordance with Merck’s Firm Orders),
  provided that such supply interruption is not directly and solely caused by
  Merck, it being understood that the Parties shall agree upon a mutually
  acceptable change control procedure which shall include mutually agreeable
  time limits for changes in Specifications by Merck.

  

  It is contemplated that Genetronics will utilize a Third Party contract
  manufacturer(s) for some or all of the Genetronics Device(s) and/or
  component(s) thereof.  In no event
  shall the terms of a Third Party supply or contract manufacturing agreement
  be in conflict with the terms of the License Agreement or the Supply
  Agreement.  The agreement with any
  Third Party contract manufacturer shall identify Merck as a third party
  beneficiary and shall afford Merck certain rights, such as the ability to
  audit, inspect, and other customary terms. The terms of any such agreement
  with a Third Party contract manufacturer shall contemplate that Merck shall
  have the right, but not the obligation, to assume third party obligations
  under such agreement in the event of a Genetronics Inability to Supply
  (subject to the limitations of and applicable protections afforded
  Genetronics under the License Agreement). 
  In all cases (other than the case of a Genetronics Inability to Supply
  in which Genetronics does not have the power to control Third Party contract
  manufacturers chosen by Merck), Genetronics shall retain the right to control
  and shall be obligated to take those actions necessary to ensure that the
  Genetronics Devices and/or components therefore supplied by a Third Party
  contract manufacturer(s) are manufactured in accordance with the licensed
  intellectual property under the License Agreement, the Specifications, cGMP,
  Genetronics’ quality assurance policies, applicable laws and any other
  regulatory requirements.

  

 

3

 

	
  Specification

  	
   

  	
  To be
  determined by Merck in consultation with Genetronics.  The definitive Supply Agreement for
  commercial supply shall provide for appropriate provisions relating to change
  control and the allocation of costs therefor. 
  In all cases, Merck shall provide reasonable notice of any such
  Specification change to Genetronics.Unless otherwise agreed by the Parties,
  in the event of a material change in Specifications, Merck shall nonetheless
  pay for (i) any Genetronics Device(s) already ordered under the old
  Specifications and (ii) any payments committed to Third Party suppliers for
  supply to Merck of Genetronics Device(s) under the old Specifications, in
  each case to the extent the same were pursuant to binding firm orders from
  Merck.  At Merck’s request, Genetronics
  shall destroy or deliver to Merck any Genetronics Device that was paid for by
  Merck.  Merck shall indemnify
  Genetronics to the extent that any change in Specifications requested by
  Merck would require a license under intellectual property held by a Third
  Party.  If Merck requests a change in
  Specifications that would not be required in order to comply with legal
  requirements (including cGMP), and such change in Specifications would
  require a substantial capital investment on the part of Genetronics, Merck
  and Genetronics shall negotiate in good faith and agree upon an appropriate
  mechanism for the equitable distribution of the financial burden of such a
  change in Specifications, and such mechanism shall be set forth in the
  definitive Supply Agreement for commercial supply.

  
	
   

  	
   

  	
   

  
	
  Consequences
  of Termination

  	
   

  	
  Merck shall
  have the right to terminate with ninety (90) days prior written notice prior
  to the first filing by Merck for Marketing Authorization in a Major Market,
  or thereafter with 180 days prior written notice. Merck shall pay for any
  Genetronics Device firm orders placed prior to receipt by Genetronics of any
  termination notice.  Merck shall
  reimburse Genetronics for (i) costs actually incurred by Genetronics pursuant
  to the License Agreement work plan prior to such termination, and (ii) any
  payments committed to Third Party suppliers for supply to Merck of
  Genetronics Device(s) pursuant to binding firm orders submitted by Merck.

  
	
   

  	
   

  	
   

  
	
  Tooling and
  Equipment

  	
   

  	
  Merck shall
  reimburse Genetronics for all tooling constructed specifically for Merck’s
  Product according to designs approved by Merck, such approval not to be
  unreasonably withheld.  Such tooling
  shall be the property of Genetronics, subject to Merck’s rights pursuant to
  the License Agreement and Supply Agreement. 
  All such tooling shall not be otherwise used for any other commercial
  purpose by Genetronics, or their Third Party suppliers, other than in direct
  support of supply of the Genetronics Device(s) to Merck.  Such tooling shall be maintained and
  insured by Genetronics during the term of this Supply Agreement.  Notwithstanding the foregoing, Genetronics
  shall be permitted with Merck’s prior written approval to use the tooling for
  limited Genetronics’ internal research purposes only in a manner which does not
  unreasonably interfere with Merck production runs.  Such use of tooling shall be permitted for
  Genetronics’ R&D only and only to the extent it does not cause
  appreciable wear and tear on Merck’s tooling.

  
	
   

  	
   

  	
   

  
	
  Distribution

  	
   

  	
  Merck to
  distribute all Genetronics Devices (including Genetronics Applicators and
  Genetronics Custom Components) for use in the Field, unless otherwise agreed
  by the Parties

  

 

4

 

	
  Indemnifications

  	
   

  	
  The Parties
  shall incorporate the indemnification language from the License Agreement
  into any definitive Supply Agreement.

  
	
   

  	
   

  	
   

  
	
  Regulatory

  	
   

  	
  Genetronics
  shall be responsible for all regulatory matters, including compliance,
  related to all manufacture of the Genetronics Device(s) except to the extent
  that the Genetronics Device is, pursuant to the request of a Regulatory
  Authority as set forth in Section 7.1 of the License Agreement, included in
  the NDA for a Merck Product, in which case the parties shall share regulatory
  responsibility for the Genetronics Device (and a mutually agreeable mechanism
  for sharing such responsibility shall be included in a definitive Supply
  Agreement for commercial supply), provided, however, that Genetronics shall
  keep Merck informed, and Merck shall have the opportunity to comment and be
  apprised of the appropriate resolution, with regard to any such regulatory
  matters.

  

  Genetronics shall negotiate terms for regulatory compliance, and supervision
  at any Third Party supplier, provided however, that at a minimum, such terms
  shall include compliance with cGMP, applicable laws and warranting product
  Specifications; provided, further that Merck shall have the right (i) to
  review, but not approve, such terms prior to execution of a supply agreement
  between Genetronics and such Third Party supplier, and may request reasonable
  changes in such terms, which reasonable changes will not be unreasonably
  denied by Genetronics and (ii) to audit any such facility, issue observations
  and agree on any appropriate corrective actions.

  

  Merck shall also have the right to audit, or have audited, the regulatory
  compliance of Genetronics and to issue observations and agree upon
  appropriate corrective actions.

  
	
   

  	
   

  	
   

  
	
  Pre-clinical
  and Clinical Supply

  	
   

  	
  At Total
  Cost (as defined in the next section of this schedule, below).

  

 

5

 

	
  Transfer
  Price for Commercial Supply of Disposable Applicator(s) and Custom Components

  	
   

  	
  The costs (“Cost”) of the Genetronics Applicator and Genetronics
  Custom Components shall be the cost from any Third Party supplier or contract
  manufacturer, Genetronics’ Product Cost actually incurred by it in connection
  with the supply of the Genetronics Device (such costs to be determined each
  year in accordance with the attached schedule) and the Product Cost actually
  incurred by Genetronics in packaging and sterilization of the Genetronics
  Applicator and Custom Components to the extent such costs are not included in
  the cost from the Third Party supplier or contract manufacturer.  For avoidance of doubt, “Product Cost”
  shall only include those costs actually incurred by Genetronics in supplying
  a sterilized and packaged Genetronics Device to Merck.

  

  The transfer price payable by Merck to Genetronics for the supply of the
  Genetronics Applicator, including packaging and sterilization shall be:

  

  (i)            If Cost for the
  Genetronics Applicator is < or = $[*] in any given year, the transfer
  price of the Applicator shall be the sum of the Applicator Cost plus $[*];

  

  (ii)           If Cost for the
  Genetronics Applicator in any given year is >$[*], the transfer price of
  the Genetronics Applicator shall be Total Cost multiplied by two; however in
  no circumstance shall the mark up on the Applicator Cost exceed $[*].

  

  Title shall transfer to Merck FCA (Incoterms 2000)
  Genetronics’ site of manufacture, and Merck shall pay all shipping and
  associated insurance costs once title has transferred to Merck.

  

  Any Genetronics Custom Components shall be supplied at Cost [*].

  

  Merck shall have the right to review (but not approve) agreements between
  Genetronics and Third Parties for the supply of Genetronics Devices
  (including components thereof). 
  Genetronics will negotiate in good faith for Third Party prices for
  Genetronics Applicators and Genetronics Custom Components that are
  competitive with those of similarly situated suppliers.

  
	
   

  	
   

  	
   

  
	
  Forecasting
  and Ordering

  	
   

  	
  Thirty days
  prior to the beginning of each Calendar Quarter, Merck shall provide to
  Genetronics rolling forecasts for its requirements for the next eight
  Calendar Quarters, with the last twelve months (and such longer period if
  practicable) showing Merck’s monthly requirements.  The first two Calendar Quarters of such
  rolling forecasts shall be binding firm orders, and the third Calendar
  Quarter shall not be subsequently increased nor decreased by more than twenty-five
  percent (25%), provided, however, that for pre-clinical and clinical supply
  and until eight Calendar Quarters after the First Commercial Sale of Product,
  the third Calendar Quarter shall not be subsequently increased nor decreased
  by more than fifty percent (50%).  Such
  forecasts shall include the number of Genetronics Generators, Genetronics
  Custom Components, and Genetronics Applicators that Merck forecasts as its
  requirements for delivery within each applicable Calendar Quarter.

  

 

6

 

	
  Transfer
  Price for Commercial Supply of Genetronics Generator

  	
   

  	
  $[*] for
  currently agreed upon Specifications for Genetronics Generator; or, if
  Genetronics Custom Components are contained in such Genetronics Generator,
  $[*] or Total Cost [*], whichever is greater

  

 

7

 

Product Cost

 

A.          The
Product Cost for the Genetronics Device shall be Standard Cost (defined in B,
below), plus Period Cost (including allocated depreciation of direct
manufacturing assets) (defined in C, below).

 

B.    Standard Cost
includes the following:

 

(i)    Raw materials

(ii)   Direct labor

(iii)  Factory overhead expenses

 

(a) Labor related (e.g., indirect hourly, salaried personnel, employee
benefits, OT)

(b) Utilities (e.g., electricity, water, steam, heat)

(c) Maintenance and installation (e.g., maintain and repair existing
equipment)

(d) Product quality control

(e) Other plant services (e.g., waste treatment)

(f) Production supplies and equipment related to production

 

The Standard Cost will be
established each year for the upcoming year according to the Merck forecast for
the Genetronics Device to be manufactured by Genetronics or Merck as the case
may be. Genetronics and Merck will follow internal accounting policies and
procedures consistent with their respective annual Profit Planning processes,
including incorporating production variances into the upcoming year’s Standard
Cost.

 

Preliminary
estimates of the projected Product Cost for the Genetronics Device will be
supplied on or about October 15th of each year; final, approved
Product Cost for the Genetronics Device will be communicated on or about
November 15th for the upcoming year.

 

Either Party
may appoint, at its cost, an internationally recognized independent CPA firm,
who shall be subject to customary confidentiality protections, to review that
Standard Costs conform to the above principles. Such inspecting firm shall not
use for any purpose or disclose to the other Party or its Affiliates, agents or
representatives or any other person or entity any information other than
information relating to the conformance of such Party’s Standard Cost to the
terms of this Agreement. The right of review in respect of any calendar year
will terminate at the end of the next succeeding calendar year.

 

C.            Period
Costs (including depreciation) shall include an allocation of Period Costs
from sites at which the Genetronics Device is manufactured. Each Party shall
only bear its “fair share” of the capacity, required to comply with the terms
of the Supply Agreement, utilized at a particular manufacturing site.

 

Period Costs include, but are not limited to, the following types of
expenses:

 

•      Building repairs

 

•      Plant administration

 

•      Plant services (e.g., plant maintenance,
environmental monitoring)

 

8

 

•      Materials management (e.g. requisitioning,
scheduling)

 

•      Technical services (e.g., process design,
process improvement)

 

•      Quality assurance (e.g., technical and
administrative)

 

•                  Allocated
depreciation based upon actual utilization of direct manufacturing assets used
to manufacture the Genetronics Device.

 

Guiding
principles for calculation of Period Costs

 

•                  The allocation
of Period Costs will be based only on the percentage of the facility dedicated
to manufacturing the Genetronics Device based on total available hours of
production, and shall not include any costs or charges associated with unused
or underutilized capacity or facility shutdown.

 

•                  Merck shall pay
for the portion of the total cost incurred which can be attributed to the
actual manufacture of the Genetronics Device, as the case may be, including
manufacturing variances.

 

D. Product Cost Principles.

 

•                  The Product Cost covers Genetronics’
or Merck’s cost of manufacturing, i.e., all relevant costs incurred at a
particular manufacturing site, to manufacture the Genetronics Device, as the
case may be. These costs include: Standard Cost and Period Costs (including
allocated depreciation for those direct manufacturing assets used to
manufacture the Genetronics Device, but not allocated capital costs).

 

•                  Each Party will use existing
accounting, cost and depreciation allocation methodologies resident at a
particular manufacturing site in determining Standard Cost and Period Cost. The
objective is for all allocations to be fair and equitable between Merck and
Genetronics.

 

E. Other Definitions

 

•                  Direct Assets: These assets (new or
existing) can generally be considered to be located “within the factory walls”
(i.e., assets within the building where manufacturing takes place AND directly
used in the manufacturing process.)

 

Examples of
assets included in this category are:

 

•                  For bulk
chemical manufacture: reactors, columns, condensers, extractors,
distributed process controls/instrumentation, factory buildings and HVAC
systems.

 

•                  For
pharmaceutical manufacture: granulators, tablet presses, material
dispensing systems, packaging and cartoning lines, distributed process
controls, and factory buildings and HVAC systems.

 

9

 

SCHEDULE 4.3    PRESS RELEASE

 

[attached separately]

 

1

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