AMENDED AND RESTATED STRATEGIC ALLIANCE AGREEMENT

Page

DEFINITIONS

1

GRANTS

8

DILIGENCE

10

PAYMENTS TO MEMORY

13

ROYALTIES

13

PAYMENT, REPORTING, AUDITING

18

GOVERNANCE; STRATEGIC ALLIANCE

20

INTENTIONALLY OMITTED

24

CLINICAL DEVELOPMENT AND REGULATORY MATTERS

24

MANUFACTURE AND SUPPLY

26

COMMERCIALIZATION

26

TRADEMARKS

26

OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS

26

REPRESENTATIONS AND WARRANTIES

33

CONFIDENTIAL INFORMATION

35

TERM AND TERMINATION

38

ARBITRATION

43

MISCELLANEOUS

43

COMPOUND 3454 DATA AND REPORTS

INTENTIONALLY OMITTED

[*] GUIDELINES FOR COMPOUNDS

END OF PHASE I CRITERIA

WORKPLAN

PAYMENTS WITH RESPECT TO 3454 PRODUCTS

PAYMENTS WITH RESPECT TO MEMORY PRODUCTS

PAYMENTS WITH RESPECT TO COLLABORATION PRODUCTS

ROYALTIES WITH RESPECT TO 3454 PRODUCTS

ROYALTIES WITH RESPECT TO MEMORY PRODUCTS

ROYALTIES WITH RESPECT TO COLLABORATION PRODUCTS

INTENTIONALLY OMITTED

MEMORY PATENT RIGHTS

MEMORY PATENT RIGHTS PRIMARILY APPLICABLE TO MEMORY SCREENING TECHNOLOGY

HEADS OF AGREEMENT FOR CO-PROMOTION OF 3454 PRODUCT

INCLUDED ROCHE COMPOUNDS

1.

Memory has a research and development program relating to the neuronal nicotinic alpha-7 receptor (“ Memory’s Program ”), and owns related intellectual property rights.

2.

Roche has a research and development program relating to the neuronal nicotinic alpha-7 receptor, and owns related intellectual property rights (“ Roche’s Program ” and together with Memory’s Program, the “ Program ”).

3.

Roche has expertise in the research, development, manufacture and commercialization of pharmaceutical products.

4.

Memory and Roche previously entered into a Strategic Alliance Agreement dated August 19, 2003 with respect to Memory’s Program (the “ Original Strategic Alliance Agreement ”) and Memory and Roche desire to amend and restate the Original Strategic Alliance Agreement in its entirety.

5.

In consideration of the mutual covenants and promises contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Memory and Roche hereby amend and restate the Original Strategic Alliance Agreement in its entirety and agree as follows:

1.1

“ Affiliate ” means (a) a business entity which owns, directly or indirectly, at least fifty percent (50%) of the voting shares or other means of control of a Party; or (b) a business entity in which at least fifty percent (50%) of the voting shares or other means of control are owned by a Party, either directly or indirectly; or (c) a business entity, the majority ownership of which is directly or indirectly common to the majority ownership of a Party. Anything to the contrary in this paragraph notwithstanding, [*] a Delaware corporation, shall not be deemed an Affiliate of Roche unless Roche provides written notice to Memory of its desire to include [*] as an Affiliate of Roche. Notwithstanding

the preceding provisions, once an entity ceases to be an Affiliate, then such entity shall, without any further action, cease to have any rights, including license and sublicense rights, under this Agreement that it has by reason of being an Affiliate.

If [*] does not agree to be bound by the terms and conditions of this Agreement, then [*] shall have none of the rights and obligations of an Affiliate of Roche under this Agreement, and [*] shall be treated as a Third Party under this Agreement and, accordingly, Roche may not grant a sublicense to [*] except as provided in Section 2.4 hereof.

1.2

“ Agreement Term ” means the term of this Agreement, more fully described in Section 16.2.

1.3

“ Bioequivalent Product ” means, with respect to a given Product sold in a given country of the Territory by Roche, its Affiliate or sublicensee, a product sold by a Third Party in such country containing the same or similar compound (or an acid, salt or ester thereof) as such Product.

1.4

“ Change of Control ” means (i) the sale, lease, exchange, transfer or other disposition (including, without limitation, by merger, consolidation or otherwise) of assets constituting all or substantially all of the assets of the company and its subsidiaries, taken as a whole, to a person (or entity) or group of persons (or entities) acting together, (ii) any merger, consolidation or other business combination or refinancing or recapitalization of the company as a result of which the voting securities of the continuing or surviving entity issued in respect of the company’s voting securities outstanding immediately prior to the transaction represent less than [*] % of the total issued and outstanding voting securities of the continuing or surviving entity immediately following such transaction, (iii) any transaction or series of transactions in or as a result of which any “person” (as that term is defined in Sections 3(a)(9) or 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) becomes the “beneficial owner” (as that term is defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the company representing [*] % or more of the total voting power represented by the company’s then outstanding voting securities, and (iv) whether by virtue of an actual or threatened proxy contest (including a consent solicitation) or any merger, reorganization, consolidation or similar transaction persons who are directors of the company immediately prior to such proxy contest or the execution of the agreement pursuant to which such transaction is consummated (other than a director whose initial assumption of office was in connection with a prior actual or threatened proxy contest) cease to constitute [*] of the Board of Directors of the company or any successor entity immediately following such proxy contest or the consummation of such transaction.

1.5

“ Collaboration Compound ” means (a) a compound (or a prodrug or metabolite thereof) other than a Memory Compound or Compound 3454, which is: (i) a nicotinic alpha-7 agonist [*] that is conceived, acquired or Controlled by either Party prior to the date hereof and (ii) has previously been demonstrated by either Party to have Threshold Activity prior to the Effective Date or during the Extended Period [*] or (b) a compound (or a prodrug or metabolite thereof), other than a Memory Compound or Compound

3454, which is: (i) a nicotinic alpha-7 agonist [*] is conceived, acquired or Controlled by either party after the date hereof and prior to the end of the Extended Period and (ii) demonstrated by either Party to have Threshold Activity prior to the end of the Extended Period.

1.6

“ Collaboration Patent Rights ” means all Patent Rights other than Memory Patent Rights that Memory and/or Roche owns or Controls during the Agreement Term that Cover any Collaboration Compound and/or relating to any other invention conceived, acquired or Controlled by either Party during the Extended Period.

1.7

“ Collaboration Product ” means any pharmaceutical product that includes, in whole or as a component, a Collaboration Compound as an active ingredient thereof.

1.8

“ Combination Product ” means any product containing both a pharmaceutically active agent which causes it to be considered a Product and one or more other pharmaceutically active agents which are not Products.

1.9

“ Composition of Matter Claim ” means, for a given Product in a given country of the Territory, a Valid Claim of a Memory Patent Right and/or a Collaboration Patent Right that Covers the molecule per se of any compound that is included in such Product, in whole or as a component thereof, as an active ingredient of such Product.

1.10

“ Compound ” means any Memory Compound, Collaboration Compound or, from and after the date that Roche obtains a License to Compound 3454 pursuant to Section 2.1 hereof, Compound 3454.

1.11

“ Compound 3454 ” means the compound developed by Memory, designated as “compound 3454” [*].

1.12

“ Control ” (including the variations such as “Controls” or “Controlled”) means with respect to a Party and as to any material, data, information or intellectual property right, that such Party owns, co-owns or has a license to such material, data, information or intellectual property right and has the ability to grant access a license, or a sublicense to such material, data, information or intellectual property right to the other Party and its Affiliates and Sublicensees for use or application as provided herein, without violating an agreement with, or infringing any rights of, a Third Party.

1.13

“ Cover ” (including the variations such as “Covered”, “Coverage” or “Covering”) shall mean that the making, using, offering for sale, selling, importing or exporting of a given product would infringe a claim of a Patent Right in the absence of a License under such Patent Right. The determination of whether a product is Covered by a particular Patent Right shall be made on a country-by-country basis.

1.14

“ Effective Date ” means the date that all conditions subsequent under Section 16.1 have occurred provided that if Section 16.1 is inapplicable, Effective Date means the date on which this Agreement was last executed by Memory or Roche.

1.15

“ End of Phase I ” means the date that all Phase I clinical trials have been completed.

1.16

“ End of Phase IIa ” means the date that all Phase IIa clinical trials have been completed.

1.17

“ Europe ” means the United Kingdom, Germany, Italy, France and Spain.

1.18

“ Event ” means any of the events listed in Section 5.9 hereof and Exhibits B through G hereto with respect to which payments are required to be made by Roche to Memory as provided therein.

1.19

“ Extended Period ” means the period commencing on the Effective Date and ending on the later of (a) the date that is six (6) months after the end of the Strategic Alliance Term and (b) March 31, 2008.

1.20

“ Field ” means prophylaxis and treatment of diseases, in all indications, for either human or veterinary use.

1.21

“ FTE ” means a full-time equivalent scientific person year, consisting of a total of 1840 hours per year of scientific work on an annualized basis, in the conduct of the Program.

1.22

“ Included Roche Compounds ” means the compounds listed on Exhibit L [*] .

1.23

“ IND ” means an Investigational New Drug Application filed with the US Food and Drug Administration (“ FDA” ) for human clinical testing of a drug.

1.24

“ Indication ” means a Neurological Indication, a Psychiatric Indication or an Other Indication.

1.25

“ Initiation of Phase I ” means the date that a human is first dosed with a Product in a Phase I clinical trial.

1.26

“ Initiation of Phase IIa ” means the date that a patient is first dosed with a Product in a Phase IIa clinical trial.

1.27

“ Initiation of Phase III ” means the date that a patient is first dosed with a Product in a Phase III clinical trial.

1.28

“ Invention ” means an invention that is made in the conduct of the Strategic Alliance.

1.29

“ Joint Patent Rights ” means all Patent Rights that Memory and Roche jointly own, or otherwise jointly have the right to grant the licenses herein, during the Agreement Term.

1.30

“ JSC ” means the committee organized and operating as provided in Article 7.

1.31

“ Know-How ” means data, knowledge and information, including materials, samples, chemical manufacturing data, toxicological data, pharmacological data, preclinical data, assays, platforms, formulations, specifications, quality control testing data, that are necessary or useful for the discovery, manufacture, development or commercialization of Product in the Territory.

1.32

“ Launch ” means, with respect to a Product in a country of the Territory, the date of the first commercial sale by Roche, its Affiliate or its sublicensee of the given Product in the given country after Regulatory Approval, if any, in such country.

1.33

“ License Exercise Period ” means, with respect to Compound 3454, the sixty (60) day period immediately following the later of the End of Phase IIa or the date of delivery by Memory to Roche of the data and reports specified in Schedule 1 related to such Compound 3454.

1.34

“ License Rights Maintenance Fees ” means, with respect to any Product, the payments by Roche to Memory pursuant to Section 4.4 hereof.

1.35

“ Major Market Countries ” means the US, Canada, Japan and Europe.

1.36

“ Memory Compound ” means any compound which is a nicotinic alpha-7 agonist [*] (a) (i) the composition of matter of which is Covered in the United States by any of the Memory Patent Rights as of the Effective Date or (ii) that is listed in a letter of even date from Memory to Roche and (b) demonstrated by either Party to have Threshold Activity prior to the Effective Date or during the Extended Period provided that Compound 3454 is not a Memory Compound.

1.37

“ Memory Know-How ” means all Know-How that Memory owns or Controls during the Extended Period and thereafter, to the extent necessary for the discovery, manufacture, development, making use, sale or commercialization of Product in the Territory, during the Agreement Term.

1.38

“ Memory Patent Rights ” means all Patent Rights that Memory owns, or otherwise has the right to grant the licenses herein, (a) as of the Effective Date, and listed in Exhibit I hereto, (b) that Covers a Memory Compound during the Agreement Term or (c) if Roche exercises the License to Compound 3454, that Covers Compound 3454 during the Agreement Term.

1.39

“ Memory Product ” means any pharmaceutical product that includes, in whole or as a component, any Memory Compound as an active ingredient thereof.

1.40

“ NDA ” means a New Drug Application filed with the FDA, or its foreign equivalent, for a drug.

1.41

“ NDA Filing ” means for a given Product, the date that an NDA is filed for the Product.

1.42

“ Net Sales ” and the related term “Adjusted Gross Sales” mean:

“Adjusted Gross Sales” means the amount of gross sales of the Product invoiced by Roche, its Affiliates and its sub-licensees to independent third parties less deductions of returns and return reserves (such reserves consistent with Generally Accepted Accounting Principles) (including allowances actually given for spoiled, damaged, out-dated, rejected, returned Product sold, withdrawals and recalls), rebates to the extent consistently applied by Roche to its products (price reductions, rebates to social and

welfare systems, charge backs and charge back reserves (such reserves consistent with Generally Accepted Accounting Principles), cash sales incentives (but only to the extent it is a sales related deduction which is accounted for within Roche on a product-by-product basis)), government mandated rebates and similar types of rebates (e.g., P.P.R.S, Medicaid, each as consistently applied by Roche to its products), volume (quantity) discounts, each as consistently applied by Roche to its products, taxes (value added or sales taxes, government mandated exceptional taxes and other taxes directly linked to the gross sales amount), it being understood that income and capital gains taxes are not the type of taxes contemplated as a deduction in this definition of Adjusted Gross Sales.

“Net Sales” means, for the US, the amount calculated by subtracting from the amount of Adjusted Gross Sales a lump sum deduction of [*] percent ( [*] %) of Adjusted Gross Sales in lieu of those sales related deductions which are not accounted for within Roche on a product by product basis (e.g. outward freights, postage charges, transportation insurance, packaging materials for dispatch of goods, custom duties, bad debt, discounts granted later than at the time of invoicing, and cash discounts).

“Net Sales” means, for the ROW Territory, the amount calculated by subtracting from the amount of Adjusted Gross Sales a lump sum deduction of [*] percent ( [*] %) of Adjusted Gross Sales in lieu of those sales related deductions which are not accounted for within Roche on a product by product basis (e.g. outward freights, postage charges, transportation insurance, packaging materials for dispatch of goods, custom duties, bad debt, discounts granted later than at the time of invoicing, and cash discounts).

Notwithstanding the foregoing, amounts received by Roche, its Affiliates and sublicensees for the sale of Product among Roche, its Affiliates or sublicensees for resale shall not be included in the computation of Adjusted Gross Sales and Net Sales.

1.43

“ Neurological Indication ” means prophylaxis or treatment of Alzheimer’s disease (including management of psychotic symptoms of Alzheimer’s disease), prophylaxis or treatment of mild cognitive impairment (“ MCI ”) or treatment of vascular dementia.

1.44

“ Other Indication ” means any indication other than a Neurological Indication or a Psychiatric Indication.

1.45

“ Party ” means Roche and/or Memory.

1.46

“ Patent Right ” means all rights under any patent or patent application in any country of the Territory, including any substitution, extension or supplementary protection certificate, reissue, reexamination, renewal, division, continuation or continuations-in-part thereof, relating to the discovery, manufacture, development or commercialization of nicotinic alpha-7 agonist [*] compounds in the Territory.

1.47

“ Phase I ” means the first phase of human clinical trials of a drug required by the US FDA to gain evidence of safety in volunteers, as described in 21 CFR Part 312, as it may be amended.

1.48

“ Phase II ” means the second phase of human clinical trials of a drug required by the US FDA to gain evidence of efficacy in the target population, determine optimal dosage, and obtain expanded evidence of safety for Product(s), as described in 21 CFR Part 312, as it may be amended.

1.49

“ Phase IIa ” means one or more Phase IIa trials (at least one of which is conducted in a Major Market Country) collectively designed to demonstrate preliminary proof of clinical efficacy using medically recognized surrogate markers or end points.

1.50

“ Phase IIb ” means one or more Phase IIb trials (at least one of which trials was conducted in a Major Market Country) collectively designed to demonstrate efficacy of a pharmaceutical product in a target population and/or to establish the optimal dosing regimen for such product.

1.51

“ Phase III ” means the third phase of human clinical trials of a drug required by the US FDA to gain evidence of efficacy in the target population, and obtain expanded evidence of safety for Product(s), as described in 21 CFR Part 312, as it may be amended.

1.52

“ Product ” means any and all products that include, in whole or as a component thereof, a Memory Compound, Collaboration Compound or, after Roche obtains a License to Compound 3454 pursuant to Section 2.1 hereof, Compound 3454, as an active ingredient thereof.

1.53

“ Psychiatric Indication ” means schizophrenia (including management of the manifestations of symptoms of schizophrenia), depression, bipolar disorders, anxiety and ADHD.

1.54

[*] means, with respect to any Compound, [*].

1.55

[*] means, with respect to any Compound , [*].

1.56

“ Regulatory Approval ” means any approvals (including pricing and reimbursement approvals), licenses, registrations or authorizations of any national or international or local regulatory agency, department, bureau or other governmental entity, necessary for the manufacture and sale of a Product in the Field in a regulatory jurisdiction in the Territory.

1.57

“ Roche Patent Rights ” means all Patent Rights that Roche owns, or otherwise has the right to grant the licenses herein, during the Agreement Term.

1.58

“ ROW Territory ” means all countries and territories other than the US.

1.59

“ Strategic Alliance ” means discovery and development by Memory and/or Roche and its Affiliates of pharmaceuticals acting against nicotinic alpha-7 receptor and development and commercialization of such pharmaceuticals by Roche and/or Memory, as provided for in this Agreement.

1.60

“ Strategic Alliance Term ” means the period commencing on the Effective Date and ending on December 31, 2007, as such period may be extended by mutual agreement of the Parties in writing.

1.61

“ Territory ” means all countries and territories in the world.

1.62

“ Third Party ” means a person or entity other than (i) Memory or any of its Affiliates, or (ii) Roche or any of its Affiliates.

1.63

“ Threshold Activity ” means [*] .

1.64

“ 3454 Product ” means any pharmaceutical product that includes, in whole or as a component, the Compound 3454 as an active ingredient thereof.

1.65

“ US ” means the United States of America and its possessions and territories, including Puerto Rico.

1.66

“ Valid Claim ” means a claim in any (i) unexpired and issued Memory Patent Right or Collaboration Patent Right that has not been disclaimed, revoked or held invalid by a final unappealable decision of a court of competent jurisdiction or government agency or (ii) pending patent application that is a Memory Patent Right or Collaboration Patent Right, which application has been on file with the applicable patent office for no more than ten (10) years and for which there has been reasonably consistent activity to advance to issuance of a patent.

2.1

Grants . Subject to the terms and conditions of this Agreement, Memory hereby grants to Roche a sole and exclusive license, including the right to grant sublicenses pursuant to Section 2.4, under the Memory Patent Rights and Memory’s interest in the Collaboration Patent Rights and to use the Memory Know-How, to make, use, offer for sale, sell, import and export all Products other than Compound 3454 in the Territory for use in the Field. Subject to the terms and conditions of this Agreement, during the License Exercise Period, Roche shall have the right with respect to Compound 3454 to obtain a sole and exclusive license, including the right to grant sublicenses pursuant to Section 2.3, under the Memory Patent Rights and Memory’s interest in the Collaboration Patent Rights and to use the Memory Know-How, to make, use, offer for sale, sell, import and export such Compound 3454 and 3454 Products in the Territory for use in the Field (a “ License ”). In addition, subject to the terms and conditions of this Agreement, Memory hereby grants to Roche a non-exclusive license, including the right to grant sublicenses pursuant to Section 2.4, under any additional patent rights that Memory Controls to the extent necessary to make, use, offer for sale, sell, import and export (i) all Products other than Compound 3454 in the Territory for use in the Field and (ii) if Roche exercises the right to obtain the license for Compound 3454, Compound 3454. The right of Roche to obtain a License to Compound 3454 as provided in this Section 2.1 shall be exercisable by Roche giving written notice to Memory and making or having made payment to Memory of all License Rights Maintenance Fees for such Product under Section 4.4 with respect to a License for a Product for an Indication. If Roche exercises such right as provided

herein, Memory shall be deemed to have granted such License hereunder without any requirement for further action by or on behalf of either Party.

Nothing in this Agreement grants to Roche any right or license to use Memory Know-How for any purpose other than to make, use, offer for sale, sell, import and export Products in the Territory for use in the Field. Further, nothing in this Agreement shall limit the right of Memory to use Memory Know-How for any purpose other than the making, using, offering for sale, selling, importing or exporting Products in the Territory for use in the Field.

2.2

Intentionally Omitted .

2.3

Restrictions on Third Party Rights . Memory shall not grant any license or rights to a Third Party with respect to Compound 3454 or itself commercialize Compound 3454 unless and until Roche has declined or failed to exercise its right to obtain a License to such compound pursuant to Sections 2.1 and 16.4(a) hereof. In the event that Roche so declines or fails to exercise its right to obtain a License to such compound, Memory shall be free to license or grant any rights to a Third Party with respect Compound 3454 and/or itself commercialize Compound 3454.

2.4

Sublicense Rights . The rights and licenses granted to Roche under Section 2.1 shall include the right to grant sublicenses to its Affiliates and Third Parties under such rights and licenses, in whole or in part, solely to the extent necessary to make, use, offer for sale, sell, import or export Products in the Territory for use in the Field. If Roche grants such a sublicense, Roche shall ensure that all of the applicable terms and conditions of this Agreement shall apply to the Affiliate or Third Party sublicensee to the same extent as they apply to Roche for all purposes. Roche assumes full responsibility for the performance of all obligations and observance of all terms so imposed on such Affiliate or Third Party sublicensee and will itself account to Memory for all payments due under this Agreement by reason of such sublicense.

Roche shall not sublicense its rights to offer a Memory Product for sale or sell a Memory Product in a Major Market Country [*] without the prior written consent of Memory which shall not be unreasonably withheld. With respect to any 3454 Product, Roche shall not have the right to sublicense the rights granted to Roche under Section 2.1 to any Third Party with respect to any 3454 Product, except upon the prior written approval of Memory, which approval Memory shall not unreasonably withhold.

Any sublicense may, at the written election of Memory, continue in full force and effect after the termination of any of the underlying licenses granted herein to Roche (the foregoing shall apply to a termination in whole or in part of such underlying licenses). Upon the licenses granted herein to Roche becoming fully paid up pursuant to Section 16.1(b), any and all sublicenses granted by Roche similarly shall become fully paid up as to Memory.

2.5

Memory Co-Promotion Right . Memory shall have the right to co-promote in the US each Product containing Compound 3454, in accordance with the provisions of Exhibit K

hereto. Within forty-five (45) days after the end of Phase II with respect to any such Product, Roche shall provide Memory with (i) the results and analysis of Phase II studies, and (ii) Roche’s then final, approved Phase III development plan (including budget). Memory shall exercise its co-promotion right with respect to any such Product by (a) giving written notice thereof to Roche within forty-five (45) days after receipt of the items described in the immediately preceding sentence, and (b) making a one-time payment to Roche in the amount of [*] percent ( [*] %) of Roche’s budgeted Phase III global development costs for such Product as set forth in Roche’s then final, approved Phase III development plan (including budget). If Memory exercises its right to co-promote any such Product in the US, the royalties otherwise payable by Roche to Memory hereunder with respect to the Net Sales of such Product in the US shall be reduced by [*] percent ( [*] %). Upon Memory’s exercise of its co-promotion right with respect to any such Product, the Parties shall negotiate in good faith and enter into a Co-Promotion Agreement consistent with terms set forth in Exhibit K hereto.

2.6

Requirement to Divest . If Roche is required by a relevant government authority in a given country of the Territory to divest rights to a Memory Compound, Compound 3454, 3454 Product, and/or a Memory Product with respect to which Roche has not commenced the Initiation of Phase III, then Roche shall use its reasonable best efforts to obtain authority to fulfill such requirement by returning rights to Memory to the Memory Compound, Compound 3454, 3454 Product and/or Memory Product, as the case may be, in accordance with Section 16.5.

3.1

Diligence . Memory shall use reasonable diligence in proceeding with the development of Compound 3454 through the End of Phase IIa. Roche shall use reasonable diligence in proceeding in the Major Market Countries with the development [*] of at least one Compound [*] .

Reasonable diligence as used in this Agreement shall mean the same standard of effort as used by the Parties, or in any case not less than common in the industry taken as a whole for similarly situated companies for the activities to be undertaken pursuant to this Agreement, including, in the case of Roche, the development, clinical testing, manufacturing, marketing and sale of a product which (i) must receive regulatory approval in Major Market Countries and (ii) has similar potential for an Indication as the compounds for which Roche has obtained a license hereunder, taking into account scientific, business and marketing and return on investment considerations. It is understood that such compound potential may change from time to time based upon changing scientific, business and marketing and return on investment considerations. The Parties also acknowledge that, even within the Major Market Countries, Roche and its Affiliates do not always seek to market their own products in every such country or seek to obtain regulatory approval in every such country or for every potential indication or every compound that has potential for an indication. As a result, the exercise by Roche of reasonable diligence is to be determined by judging its efforts taken as a whole.

If either Party believes in good faith that the other Party has failed to utilize reasonable diligence as required by this Section 3.1, then such Party may give the other Party written notice of such alleged failure, identifying the nicotinic alpha-7 agonist [*] compound or Product (if known) and giving specific detailed reasons of such allegation. Within sixty (60) days following the other Party’s receipt of any such notice (“ Response Period ”), the other Party shall have the right to provide such Party with a written response specifying, in reasonable detail, how it has used reasonable diligence as required hereby.

If the other Party has failed to provide within the Response Period a written response, in reasonable detail, indicating the manner in which it is in compliance with its obligations under this Section 3.1 or in which it has remedied any breach thereof, or the other Party has failed within the Response Period to remedy any breach of its obligations under this Section 3.1, then the non-defaulting Party shall have the right to terminate this Agreement, in whole or in part, as described in this Section 3.1, upon written notice to such Party effective as of the end of the Response Period.

In the event of a dispute between the Parties with respect to whether either Party has complied with its obligation under this Section 3.1, then such dispute shall be resolved in accordance with Article 17. The consequences of any termination under this Section 3.1 are set forth in Section 16.5 and Article 17.

3.2

Effect of Merger on Diligence .

commercialization of Products has not failed to progress solely because of the Transaction or in which it has remedied any such failure, or Roche has failed within the Status Response Period to remedy any such failure to progress, then Memory shall have the right to terminate this Agreement, in whole or in part, as described below in this Section 3.2, upon written notice to Roche effective as of the end of the Status Response Period. Memory shall have the right to terminate this Agreement as to any region described in Section 16.4(b) if development and commercialization of the Products has failed to progress solely because of the Transaction with respect to the Products (taken as a whole) in such region. Memory shall have the right to terminate this Agreement in the Territory with respect to any Product if development and commercialization of such Product has failed to progress solely because of the Transaction in at least two of the three regions described in Section 16.4(b). Memory shall have the right to terminate this Agreement in its entirety if development and commercialization of the Products (taken as a whole) has failed to progress solely because of the Transaction in at least two of the three regions described in Section 16.4(b). The Parties confirm and agree that nothing in this Section 3.2 limits the obligations of Roche or the rights of Memory under Section 3.1.

(b)

Change of Control of Memory . Upon a Change of Control of Memory, Roche shall have the right to terminate Memory’s participation in the Strategic Alliance, as provided in Section 7.5(g) hereof provided that any such termination shall not in any manner terminate, reduce or otherwise modify any of Memory’s rights to royalty and event payments hereunder. In addition, upon a Change of Control of Memory, Roche shall have the right to terminate Memory’s participation in Phase I studies and all other work or activities pursuant to Articles 7 and 9 of this Agreement; provided that (i) any such termination shall not in any manner terminate, reduce or otherwise modify any of Memory’s rights to royalty and milestone payments hereunder and (ii) Roche shall complete any Phase I studies then in process.

4.1

Intentionally Omitted .

4.2

Intentionally Omitted .

4.3

Intentionally Omitted .

4.4

Payments With Respect to Certain Events . Roche shall pay to Memory, in order to maintain its License rights pursuant to Section 2.1 and the other provisions of this Agreement with respect to Compound 3454 and to reimburse Memory for previously incurred research expenditures, and with respect to certain development based Events, the non-refundable and non-creditable payments set forth in Exhibit B hereto upon the first occurrence of the Events relating to Compound 3454 described therein. With respect to each Memory Product and each Collaboration Product, Roche shall pay to Memory, the

non-refundable and non-creditable payments set forth in Exhibit C and Exhibit D hereto, respectively, upon the first occurrence of the Events listed therein for such Product.

Each payment required pursuant to this Section 4.4 shall be due and payable by Roche within sixty (60) days after occurrence of the applicable Event. Roche will make each of such payments only once for each Product, regardless of the number of Indications for which such Product may be developed or the subject of any Regulatory Approvals.

For the avoidance of doubt, the Parties confirm and agree that no amount payable under this Article 4 shall reduce any royalties payable under Article 5.

5.1

Royalties . Roche shall pay to Memory the percentage of Net Sales of any 3454 Products, Memory Products and Collaboration Products as set forth in Exhibit E, Exhibit F and Exhibit G hereto, respectively. Such royalty payments shall be calculated by multiplying the percentages set forth in such Exhibit by the annual Net Sales of such Product (all Net Sales amounts in $ US million) set forth in such Exhibit and shall be subject to adjustment as provided in this Article 5.

5.2

Intentionally Omitted .

5.3

Adjustment Related to Other Indications of 3454 Products . Roche shall pay to Memory royalties for a given 3454 Product having a Regulatory Approval for an Other Indication, in an amount equal to [*] of the royalties otherwise payable for such 3454 Product having a Regulatory Approval for a Neurological Indication based upon the Net Sales of such Product, which royalty rate shall be subject to adjustment as provided in this Article 5.

5.4

Adjustment Related to Multiple Indications of 3454 Products . Notwithstanding anything to the contrary contained in Sections 5.1 or 5.2 hereof, in the event that a given 3454 Product has a Regulatory Approval for more than one indication, Roche shall pay royalties to Memory based upon the royalty schedule providing the highest applicable royalty rates for which a Regulatory Approval has been obtained in a Major Market Country. Specifically, if any such 3454 Product is approved for (i) a Neurological Indication in a Major Market Country and for another indication other than a Psychiatric Indication, the royalties payable by Roche to Memory shall be based upon Net Sales of such 3454 Product in the Territory as if all of such Net Sales occurred for such Neurological Indication; (ii) a Psychiatric Indication in a Major Market Country and for an Other Indication, the royalties otherwise payable by Roche shall be based upon Net Sales of such 3454 Product in the Territory as if all of such Net Sales occurred for the Psychiatric Indication; and (iii) multiple Other Indications only, then the royalties payable by Roche to Memory shall be equal to [*] of the royalties otherwise payable under the royalty schedule for a 3454 Product approved for a Neurological Indication.

5.5

Term of Royalty Payments . Roche shall calculate and make royalty payments to Memory under this Article 5 commencing on Launch in any country. The Net Sales of a given country shall be included for purposes of calculating royalties under this Section until the later of (a) expiration of the last to expire of Composition of Matter Claim in

such country and (b) ten (10) years from the Launch of such Product in such country. With respect to the ten (10) year period, the EU will be considered as one country.

5.6

Adjustments Related to Valid Claims . For a given Product, if in, or with respect to, a country of the Territory no Valid Claim Covers such Product, then Roche may calculate royalties for such Product using [*] percent ( [*] %) of the amount Roche would have used for such country to calculate royalties for such Product if a Valid Claim Covered such Product in such country unless prior to ten years from the Launch of such Product in, or with respect to, such country (EU considered as one country) a Valid Claim Covering such Product exists in, or with respect to, such country in which case Roche shall resume calculating royalties using [*] percent ( [*] %) of such amount.

5.7

Adjustments Related to Third Party Competition . For a given Product in a given calendar quarter, if in a country of the Territory (a) a Third Party is selling Bioequivalent Product, and (b) Roche has an obligation to make payments under this Agreement with respect to Net Sales of the given Product in such country, and (c) a Valid Claim Covers the given Product in such country and (d) in such country, sales of units of Bioequivalent Products in aggregate total at least [*] percent ( [*] %) of the aggregate sales of units of Bioequivalent Products and Products as measured at the end of such calendar quarter, and (e) Roche has, if it is reasonable under the circumstances, brought in the country and continued to diligently prosecute a patent infringement suit under any relevant Composition of Matter Claims against the Third Party or another in privity, then Roche shall have the right to calculate royalties with respect to such calendar quarter by including [*] percent ( [*] %) of the amount Roche would have otherwise included for such country to calculate sales-based payments if no Bioequivalent Product existed in such country.

5.8

Adjustments Related to Third Party Payments . Roche or its Affiliate shall pay and be responsible for the entire consideration owed to any Third Party pursuant to the terms of any existing or future patent licensing agreement relating to a Product. Roche shall have the right to deduct a maximum of [*] percent ( [*] %) of the consideration actually paid by Roche or its Affiliate to a Third Party (other than [*] ) with respect to any license under a patent which Covers the molecule per se of the compound which is the nicotinic alpha-7 agonist [*] that is included in a given Product, from payments otherwise due and payable by Roche to Memory under this Agreement. In no event as a result of this Section 5.8 shall Roche reduce the royalties owed to Memory under this Article 5 such that the royalties payable pursuant to this Article 5 for such Product are less than [*] percent ( [*] %)of Net Sales in the Territory for a given calendar quarter (and Roche shall be entitled to accumulate amounts not permitted to be deducted in a prior period and deduct such amounts in a future period).

Notwithstanding the above, (i) any payment owed under an agreement between Memory and The Trustees of Columbia University dated July 22, 1998, as it may be amended, shall be the sole responsibility of Memory, and (ii) any payment owed under any agreement between Roche or its Affiliate and any Third Party entered into prior to the Effective Date shall be the sole responsibility of Roche, for which Roche shall not be

entitled to any deduction from payments due and payable to Memory under this Agreement.

5.9

Bonus Payment .

Event

Payment (US$)

[*]

[*]

Roche shall pay to Memory a one-time, non-refundable and non-creditable amount after the first occurrence of the following event with respect to the 3454 Product if it receives Regulatory Approval for a Psychiatric Indication:

Event

Payment (US$)

[*]

[*]

Each payment in this Section 5.9(a) shall be due and payable by Roche within sixty (60) days after occurrence of the applicable Event. If a 3454 Product receives Regulatory Approval for both a Neurological Indication and a Psychiatric Indication, then bonus payments will be due and payable only once for the first Indication for which a bonus Event in this Section 5.9(a) is achieved. [*].

(b)

With Respect to Memory Products . Roche shall pay to Memory a one-time, non-refundable and non-creditable amount after the first occurrence of the following Event with respect to each Memory Product having Regulatory Approval for any Indication:

Event

Payment (US$)

[*]

Each payment in this Section 5.9(b) shall be due and payable by Roche within sixty (60) days after occurrence of the applicable Event.

(c)

With Respect to Collaboration Products . Roche shall pay to Memory a one-time, non-refundable and non-creditable amount after the first occurrence of the following Event with respect to each Collaboration Product having Regulatory Approval for any Indication:

Event

Payment (US$)

[*]

Each payment in this Section 5.9(c) shall be due and payable by Roche within sixty (60) days after occurrence of the applicable Event.

6.1

Currency and Conversion .

(b)

Whenever calculation of Net Sales or any other payment pursuant to this Agreement requires conversion from any foreign currency, Roche shall convert the amount of Net Sales or any other payment pursuant to this Agreement in foreign currencies as computed in Roche’s central Swiss Francs Sales Statistics for the countries concerned, using for internal foreign currency translation Roche’s then current standard practices actually used on a consistent basis in preparing its audited financial statements.

(c)

For sublicensees in a country, when calculating the Net Sales, the sublicensee shall report to Roche the amount of such sales within thirty (30) days from the end of the reporting period, after having converted each applicable monthly sales in foreign currency into Swiss Francs using the average rate of exchange published in the Wall Street Journal (or some other source agreed upon by the Parties for any particular country) for each respective month of the reporting period.

(a)

Adjusted Gross Sales for each Product;

(b)

Net Sales for each Product;

(c)

the royalty payments due to Memory for the reporting period;

(a)

Memory shall pay all applicable taxes levied on Memory under this Agreement.

(b)

If provision is made in law or regulation of any country for withholding of taxes of any type, levies on Memory or other charges against Memory with respect to any amounts payable under this Agreement to Memory, Roche shall promptly pay such tax, levy or charge for and on behalf of Memory to the proper governmental authority, and shall promptly furnish Memory with receipt of such payment. Roche shall have the right to deduct any such tax, levy or charge actually paid from payment due Memory or be promptly reimbursed by Memory if no further payments are due Memory. Each Party agrees to assist the other Party in claiming exemption from such deductions or withholdings under double taxation or similar agreement or treaty from time to time in force and in minimizing the amount required to be so withheld or deducted.

(a)

Roche shall maintain and cause its Affiliates and sublicensees to maintain books of account containing all particulars that may be necessary for the purpose of calculating all payments under this Agreement. Such books of account shall be kept at their principal place of business. Memory shall have the right to engage Roche’s independent, certified public accountant to perform, on behalf of Memory, an audit of such books and records of Roche and its Affiliates and sublicensees as is necessary to confirm any amounts payable to Memory under this Agreement for the period or periods requested by Memory and the correctness of any report or payments made under this Agreement.

(b)

Such audits shall be conducted during normal business hours upon reasonable prior written notice from Memory (minimum of thirty (30) days) in such a manner as to not unnecessarily interfere with Roche’s normal business activities, and shall include results of no more than three (3) preceding calendar years prior to audit notification.

(c)

Such audit shall not occur more frequently than once per calendar year nor more frequently than once with respect to records covering any specific period of time. Notwithstanding the preceding, if Memory reasonably believes, after reviewing information received from Roche’s independent public accountant, that an additional audit is appropriate to address an apparent discrepancy between Roche’s returns and other information as is necessary for reporting hereunder, Memory shall have the right, by an audit specialty firm reasonably acceptable to Roche and employed by Memory and at Memory’s own expense, to perform such appropriate audit procedures.

(d)

The use of all information, data, documents and abstracts referred above shall be for the sole purpose of verifying statements or compliance with this Agreement, shall be treated as Roche Confidential Information subject to Article 15 of this Agreement and, except in the event of a dispute between the Parties regarding amounts payable hereunder or the results of any audit, need not be retained more than three (3) years from the end of the calendar year to which each shall pertain. Audit results shall be shared by Roche and Memory.

(e)

If any audit hereunder reveals an underpayment, Roche shall promptly make up such underpayment. If any audit hereunder reveals an overpayment, Memory shall promptly reimburse such overpayment. Memory shall bear the full cost of any audit under this Section 6.5, unless such audit discloses an underpayment by Roche of more than [*] percent ( [*] %) of the amount owed hereunder if Net Sales exceeds [*] dollars ($ [*] ) in the Territory for the calendar year, or [*] percent ( [*] %) of the amount owed hereunder if Net Sales are equal to or less than [*] dollars ($ [*]) in the Territory for the calendar year, in which case Roche shall bear the full cost of such audit as performed by Roche’s independent, certified public accountant and any audit specialty firm employed by Memory, together with interest on any such underpayment from the date otherwise due through the date of payment at the rate set forth in Section 6.2.

(f)

The failure of Memory to request verification of any payment calculation during which corresponding records are required to be retained under this Section 6.5 shall be considered acceptance of such reporting by Memory.

7.1

The Strategic Alliance . The Parties hereby continue their Strategic Alliance with respect to the development of Products and the determination of licensing rights with respect thereto.

7.2

Joint Steering Committee . Subject to Section 7.2(e), a Joint Steering Committee (“ JSC ”) shall govern the research and development of Products, including prioritization of compounds for research and development, approving research plans and development plans (and updates and modifications thereof), supervising ongoing research and development activities, recommending actions in response to unforeseen events, supervising the transition of development, manufacturing and regulatory activities from Memory to Roche and development of preclinical and clinical strategies (including clinical candidate selection, the commencement of the Initiation of Phase I and the Initiation of Phase IIa). Neither Party shall conduct activities with respect to Compounds outside the scope of the Workplan pursuant to Exhibit A unless approved by the JSC. On a quarterly basis during the Strategic Alliance Term and promptly after the end of the Extended Period, the JSC shall specify what Compounds have met the Threshold Activity.

Party may add additional members to the JSC. At least one (1) of each Party’s three (3) members of the JSC shall not be members of such Party’s Working Team, as defined pursuant to Section 7.2(b). A JSC member may not be a member of more than one Working Team. As appropriate, other employee representatives of the Parties may attend JSC meetings, subject to the reasonable approval of the other Party. Each Party shall notify the other Party of the member(s) designated by such Party, in writing, within thirty (30) days after the Effective Date. Any Party may withdraw the designation of any of its members of the JSC and designate a replacement at any time by giving prior written notice of the withdrawal and identifying the replacement to the other Party. [*]. The JSC is authorized to establish separate subcommittees from time to time, provided that the decision-making process established in Section 7.2(d) shall continue to apply.

(b)

Working Teams . Each Party shall appoint members to working teams (“ Working Teams ”), such as a research team and a development team. The Working Teams will be responsible for delivering a plan for research and/or development activities to the JSC for their review, modification and approval pursuant and subject to Section 7.2(d). Further, any issues that are not resolved by the Working Teams shall be submitted to the JSC for resolution pursuant and subject to Section 7.2(d). The Working Teams shall be cooperative bodies that will work together and have meetings as appropriate.

(c)

Meetings . The JSC shall hold quarterly meetings during the Extended Period and there