Merus Annual Report 2017

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 20-F (Mark One) ☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934OR ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to OR ☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company report Commission file number 001-37773 MERUS N.V.(Exact name of Registrant as specified in its charter and translation of Registrant’s name into English) N/A(Translation of Registrant’s name into English) The Netherlands(Jurisdiction of incorporation or organization)Yalelaan 623584 CM UtrechtThe Netherlands(Address of principal executive offices)Ton LogtenbergChief Executive OfficerMerus N.V.Yalelaan 623584 CM UtrechtThe NetherlandsTel: +31 30 253 8800(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b) of the Act. Title of each class Name of each exchange on which registeredCommon shares, nominal value €0.09 per share The Nasdaq Stock Market LLCSecurities registered or to be registered pursuant to Section 12(g) of the Act. NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act. NoneIndicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.Common shares, nominal value €0.09 per share: 19,429,848 as of December 31, 2017 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ NoIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities ExchangeAct of 1934. ☐ Yes ☒ NoIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90days ☒ Yes ☐ NoIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submitand post such files). ☒ Yes ☐ NoIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “largeaccelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Emerging growth company ☒If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extendedtransition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codificationafter April 5, 2012.Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP ☐ International Financial Reporting Standards as issuedby the International Accounting Standards Board ☒ Other ☐If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected tofollow. ☐ Item 17 ☐ Item 18If this is an Annual Report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No Table of ContentsTABLE OF CONTENTS PART I 3 Item 1 Identity of Directors, Senior Management and Advisers. 3 Item 2 Offer Statistics and Expected Timetable. 3 Item 3 Key Information. 3 A. Selected Financial Data. 3 B. Capitalization and Indebtedness. 4 C. Reasons for the Offer and Use of Proceeds. 4 D. Risk Factors. 5 Item 4 Information on the Company. 51 A. History and Development of the Company 51 B. Business Overview 51 C. Organizational Structure. 89 D. Property, Plant and Equipment. 89 E. Unresolved Staff Comments. 89 Item 5 Operating and Financial Review and Prospects. 90 A. Operating Results 90 B. Liquidity and Capital Resources 109 C. Research and Development, Patent and Licenses, etc. 112 D. Trend Information. 112 E. Off-Balance Sheet Arrangements. 112 F. Tabular Disclosure of Contractual Obligations 113 G. Safe Harbor. 113 Item 6 Directors, Senior Management and Employees. 114 A. Directors and Senior Management. 114 B. Compensation. 117 C. Board Practices. 123 D. Employees. 125 E. Share Ownership. 125 Item 7 Major Shareholders and Related Party Transactions. 125 A. Major Shareholders. 125 B. Related Party Transactions. 129 C. Interests of Experts and Counsel. 130 Item 8 Financial Information 130 A. Consolidated Statements and Other Financial Information. 130 B. Significant Changes. 132 Item 9 The Offer and Listing. 133 A. Offer and Listing Details. 133 B. Plan of Distribution. 133 C. Markets. 133 D. Selling Shareholders. 133 E. Dilution. 133 F. Expenses of the Issue. 133 Item 10 Additional Information. 134 A. Share Capital. 134 B. Memorandum and Articles of Association. 134 C. Material Contracts. 134 D. Exchange Controls. 135 E. Taxation. 135 F. Dividends and Paying Agents. 138 G. Statement by Experts. 138 iTable of Contents H. Documents on Display. 138 I. Subsidiary Information. 139 Item 11 Quantitative and Qualitative Disclosures About Market Risk. 139 Item 12 Description of Securities Other than Equity Securities. 139 A. Debt Securities. 139 B. Warrants and Rights. 139 C. Other Securities. 139 D. American Depositary Shares. 139PART II 140 Item 13 Defaults, Dividend Arrearages and Delinquencies. 140 Item 14 Material Modifications to the Rights of Security Holders and Use of Proceeds. 140 A. Use of Proceeds 140 Item 15 Controls and Procedures. 140 Item 16A. Audit Committees Financial Expert. 142 Item 16B. Code of Ethics. 142 Item 16C. Principal Accountant Fees and Services. 142 Item 16D. Exemptions from the Listing Standards for Audit Committees. 143 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers. 143 Item 16F. Change in Registrant’s Certifying Accountant. 143 Item 16G. Corporate Governance. 143 Item 16H. Mine Safety Disclosure. 144PART III 145 Item 17 Financial Statements. 145 Item 18 Financial Statements. 145 Item 19 Exhibits. 145 iiTable of ContentsGENERAL INFORMATIONAll references in this Annual Report on Form 20-F, or the Annual Report, to “Merus,” the “Company,” “we,” “us” and “our” refer to Merus N.V.and its consolidated subsidiary.PRESENTATION OF FINANCIAL AND OTHER DATAWe report under International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or the IASB.None of the financial statements in this Annual Report were prepared in accordance with generally accepted accounting principles in the United States.We present our financial statements in euros and in accordance with IFRS. We have made rounding adjustments to some of the figures included in thisAnnual Report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.All references in this Annual Report to “$,” “US$,” and “U.S. dollars” mean U.S. dollars and all references to “€” and “euros” mean euros, unlessotherwise noted.CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report contains statements that constitute forward-looking statements. All statements other than statements of historical factscontained in this Annual Report, including statements regarding our future results of operations and financial position, business strategy, prospectiveproducts, product approvals, research and development costs, timing and likelihood of success, plans and objectives of management for futureoperations and future results of anticipated products, are forward-looking statements. We make such forward-looking statements pursuant to the safeharbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These statements involve known andunknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different fromany future results, performance or achievements expressed or implied by the forward-looking statements.In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,”“intend,” “target,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similarexpressions. The forward-looking statements in this Annual Report are only predictions. We have based these forward-looking statements largely onour current expectations and projections about future events and financial trends that we believe may affect our business, financial condition andresults of operations. These forward-looking statements speak only as of the date of this report and are subject to a number of risks, uncertainties andassumptions described under the sections in this report titled “Risk Factors” and “Operating and Financial Review and Prospects” and elsewhere in thisreport. These forward-looking statements are subject to numerous risks, including, without limitation, the following: • our operations as a clinical-stage company with a limited operating history and a history of operating losses; • uncertainty about the initiation, timing, progress and results of clinical trials of our bispecific antibody candidates, including regardingwhen results of such trials will be made public; • our expectations related to payments and clinical development under our collaboration agreement with Incyte Corporation, or Incyte; • clinical development for MCLA-128 as part of a combination therapy for metastatic breast cancer and in other solid tumor cancers,MCLA-117 for the treatment of patients with acute myeloid leukemia, or AML, and MCLA-158 having an initial focus on the treatment ofmetastatic colorectal cancer; • research and development for MCLA-145, which is being co-developed with Incyte, and for other bispecific antibody candidates; 1Table of Contents • the timing or likelihood of regulatory filings and approvals for any of our bispecific antibody candidates; • our ability to establish sales, marketing and distribution capabilities for any of our bispecific antibody candidates for which we may obtainregulatory approval; • our ability to establish and maintain manufacturing arrangements for our bispecific antibody candidates; • the scope of protection we are able to establish and maintain for intellectual property rights covering our bispecific antibody candidatesand related technology; • our ability to defend against any claims by third parties that we are infringing upon their intellectual property rights, including claims andopposition proceedings initiated by Regeneron Pharmaceuticals, Inc.; • our estimates regarding expenses, future revenues, capital requirements and our need for additional financing; • the rate and degree of market acceptance of our bispecific antibody candidates; • the impact of government laws and regulations on our business; • our competitive position; and • other risk factors discussed in this Annual Report.This Annual Report contains market data and industry forecasts that were obtained from industry publications. These data involve a number ofassumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified any third-partyinformation. While we believe the market position, market opportunity and market size information included in this Annual Report is generallyreliable, such information is inherently imprecise. 2Table of ContentsPART IItem 1 Identity of Directors, Senior Management and Advisers.Not applicable.Item 2 Offer Statistics and Expected Timetable.Not applicable. Item 3 Key Information.A. Selected Financial Data.The following selected consolidated financial data should be read in conjunction with “Operating and Financial Review and Prospects,” ourconsolidated financial statements and related notes, and other financial information included in this Annual Report. We have derived the consolidatedstatement of profit or loss and comprehensive loss data and the statement of financial position data as of December 31, 2017, 2016, and 2015 from ouraudited financial statements included elsewhere in this Annual Report. Our historical results are not necessarily indicative of the results that should beexpected in the future. Year Ended December 31, 2017 2016 2015 (euros in thousands, exceptshare and per share data) Statement of Profit or Loss and Comprehensive Loss Data: Revenue €13,600 €2,719 €1,977 Research and development costs (34,125) (18,424) (16,181) Management and administration costs (13,697) (4,258) (768) Other expenses (9,395) (7,709) (8,067) Operating result (43,617) (27,672) (23,039) Finance income (expenses) (29,223) (19,556) (145) Result before tax (72,840) (47,228) (23,184) Income tax expense (249) — — Other comprehensive income 89 8 — Total comprehensive loss for the year €(73,000) €(47,220) €(23,184) Basic (and diluted) loss per share(1) €(3.80) €(3.57) €(3.95) Weighted average shares outstanding, basic and diluted(2) 19,196,440 13,236,649 5,871,237 (1)Basic loss per share and diluted loss per share are the same because outstanding options would be anti-dilutive due to our net losses in theseperiods.(2)Includes preferred shares issued and outstanding as of December 31, 2015. As of December 31, 2017 2016 2015 (euros in thousands) Statement of Financial Position Data: Cash and cash equivalents €149,678 €56,917 €32,851 Total assets 196,803 72,310 35,494 Total liabilities 148,916 38,279 7,192 Accumulated loss (167,480) (107,295) (63,382) Total equity (deficit) 47,887 34,031 28,302 3Table of ContentsExchange Rate InformationOur business is primarily conducted in the European Union, and we maintain our books and records in euros. We have presented our results ofoperations in euros. In this Annual Report, translations from euros to U.S. dollars were made at the rate of €0.885 to $1.00, the official exchange ratequoted as of April 27, 2018 by the European Central Bank. Such U.S. dollar amounts are not necessarily indicative of the amount of U.S. dollars thatcould actually have been purchased upon exchange of euros at the dates indicated.The following table presents information on the exchange rates between the euro and the U.S. dollar for the periods indicated: Periodend Averageforperiod Low High (euros per U.S. dollar) Year Ended December 31: 2013 0.725 0.753 0.724 0.783 2014 0.824 0.754 0.717 0.824 2015 0.917 0.901 0.826 0.954 2016 0.949 0.907 0.864 0.965 2017 0.834 0.885 0.829 0.963 Low High (euros per U.S. dollar) Month Ended: October 31, 2017 0.8435 0.8617 November 30, 2017 0.8367 0.8649 December 31, 2017 0.8338 0.8521 January 31, 2018 0.8028 0.8381 February 28, 2018 0.8004 0.8162 March 31, 2018 0.8051 0.8216 April 2018 (through April 27) 0.8072 0.8285 B. Capitalization and Indebtedness.Not applicable.C. Reasons for the Offer and Use of Proceeds.Not applicable. 4Table of ContentsD. Risk Factors.You should carefully consider the risks and uncertainties described below and the other information in this Annual Report. Our business,financial condition or results of operations could be materially and adversely affected if any of these risks occur.Risks Related to Our Business and IndustryWe are a clinical-stage company and have incurred significant losses since our inception. We expect to incur losses for the foreseeable futureand may never achieve or maintain profitability.We are a clinical-stage immuno-oncology company with a limited operating history. We have incurred net losses of €73.0 million, €47.2 million,and €23.2 million for the years ended December 31, 2017, 2016, and 2015, respectively. As of December 31, 2017, we had an accumulated loss of€167.5 million. Our losses have resulted principally from expenses incurred in research and development of our bispecific antibody candidates andfrom management and administrative costs and other expenses that we have incurred while building our business infrastructure. We expect to continueto incur significant operating losses for the foreseeable future as we continue our research and development efforts and seek to obtain regulatoryapproval and commercialization of our bispecific antibody candidates. We anticipate that our expenses will increase substantially as we: • conduct our ongoing Phase 2 clinical trial of MCLA-128, our most advanced bispecific antibody candidate, for the treatment of metastaticbreast cancer in combination with other therapies and our ongoing, single agent, Phase 1/2 clinical trial for the treatment of gastric,ovarian, endometrial and non-small cell lung cancers; • conduct our ongoing Phase 1 clinical trial of MCLA-117, our second most advanced bispecific antibody candidate, for the treatment ofacute myeloid leukemia; • initiate a Phase 1 clinical trial of MCLA-158 for the treatment of colorectal cancer; • continue the research and development of our other bispecific antibody candidates, including completing pre-clinical studies andcommencing clinical trials for MCLA-145, which is being co-developed with Incyte Corporation, or Incyte; • expand the clinical programs to explore new potential combination therapies or indications; • seek to enhance our technology platform, which generates our pipeline of product candidates, and discover and develop additionalantibody candidates; • seek regulatory approvals for any antibody candidates that successfully complete clinical trials; • potentially establish a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize anyproducts for which we may obtain regulatory approvals; • maintain, expand and protect our intellectual property portfolio; • secure, maintain and/or obtain freedom to operate for our technologies and products; • add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support ourproduct development and potential future commercialization efforts and to support our operation as a public company; and • experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results,manufacturing challenges, safety issues or other regulatory challenges.We have financed our operations primarily through (i) the initial public offering of our common shares, (ii) a placement of equity securities withIncyte Corporation, or Incyte, (iii) an upfront milestone payment received from Incyte under a collaboration and license agreement, or theCollaboration Agreement and (iv) a private placement of common shares in February 2018. We have devoted a significant portion of our financialresources and efforts to developing our full-length human bispecific antibody therapeutics, which we refer to as Biclonics®, our technology platform,identifying potential bispecific antibody candidates, conducting pre-clinical studies of a variety of candidates, including MCLA-145 and conductingour clinical trials of MCLA-128, 5Table of ContentsMCLA-117 and preparing to initiate clinical trials for MCLA-158. We are in the early stages of development of our bispecific antibody candidates, andwe have not completed development of any Biclonics® or any other drugs or biologics.To become and remain profitable, we must succeed in developing and eventually commercializing products that generate significant revenue.This will require us to be successful in a range of challenging activities, including completing pre-clinical testing and clinical trials of our bispecificantibody candidates, discovering and developing additional bispecific antibody candidates, obtaining regulatory approval for any bispecific antibodycandidates that successfully complete clinical trials, establishing manufacturing and marketing capabilities and ultimately selling any products forwhich we may obtain regulatory approval. We are only in the preliminary stages of most of these activities. We may never succeed in these activitiesand, even if we do, may never generate revenue that is significant enough to achieve profitability.Because of the numerous risks and uncertainties associated with pharmaceutical product and biological development, we are unable toaccurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. If we are required by the U.S. Foodand Drug Administration, or the FDA, or the European Medicines Agency, or EMA, or other regulatory authorities to perform studies in addition tothose we currently anticipate, or if there are any delays in completing our clinical trials or the development of any of our bispecific antibodycandidates, our expenses could increase and commercial revenue could be further delayed.Even if we do generate product royalties or product sales, we may never achieve or sustain profitability on a quarterly or annual basis. Our failureto sustain profitability would depress the market price of our common shares and could impair our ability to raise capital, expand our business,diversify our product offerings or continue our operations.We will need additional funding in order to complete development of our bispecific antibody candidates and commercialize our products, ifapproved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs orcommercialization efforts.We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct our ongoing clinical trials ofMCLA-128 and MCLA-117, initiate our Phase 1 clinical trial of MCLA-158 and continue to research, develop and conduct pre-clinical studies ofMCLA-145 and our other bispecific antibody candidates. In addition, if we obtain regulatory approval for any of our bispecific antibody candidates,we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, wecontinue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional fundingin connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduceor eliminate our research and development programs or any future commercialization efforts.Based on our current operating plan, we expect our existing cash balances, including proceeds we received from our private placement offeringthat closed in February 2018, to last through the end of 2020. We have based this estimate on assumptions that may prove to be wrong, and we coulduse our capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including: • the cost, progress and results of our ongoing clinical trials of MCLA-128 and the Phase 1 clinical trial of MCLA-117 and initiation of ourPhase 1 clinical trial for MCLA-158; • the success of our collaboration with Incyte to develop bispecific antibodies candidates, including research and development and clinicaltrials for MCLA-145; • the cost of manufacturing clinical supplies of our bispecific antibody candidates; • the scope, progress, results and costs of pre-clinical development, laboratory testing and clinical trials for our other antibody candidates; • the costs, timing and outcome of regulatory review of any of our antibody candidates; 6Table of Contents • the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of ourantibody candidates for which we receive marketing approval; • the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rightsand defending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectualproperty rights; • the costs and timing of securing, maintaining and/or obtaining freedom to operate for our technologies and products; • the revenue, if any, received from commercial sales of our bispecific antibody candidates for which we receive marketing approval; • the effect of competing technological and market developments; and • the extent to which we acquire or invest in businesses, products and technologies, including our collaboration with Incyte and any otherlicensing or collaboration arrangements for any of our bispecific antibody candidates.We depend heavily on the success of our bispecific antibody candidates, and we cannot give any assurance that any of our bispecific antibodycandidates will receive regulatory approval, which is necessary before they can be commercialized. If we, Incyte, or any other strategic partners wemay enter into collaboration agreements with for the development and commercialization of our bispecific antibody candidates, are unable tocommercialize our bispecific antibody candidates, or experience significant delays in doing so, our business, financial condition and results ofoperations will be materially adversely affected.We have invested a significant portion of our efforts and financial resources in the development of bispecific antibody candidates using ourBiclonics® technology platform. Our ability to generate royalty and product revenues, which we do not expect will occur for at least the next severalyears, if ever, will depend heavily on the successful development and eventual commercialization of these bispecific antibody candidates, which maynever occur. We currently generate no revenues from sales of any products, and we may never be able to develop or commercialize a marketableproduct. Each of our bispecific antibody candidates will require additional clinical development, management of clinical, pre-clinical andmanufacturing activities, regulatory approval in multiple jurisdictions, obtaining manufacturing supply, including commercial manufacturing supply,building of a commercial organization, substantial investment and significant marketing efforts before we generate any revenues from product sales.We are not permitted to market or promote any of our bispecific antibody candidates before we receive regulatory approval from the FDA, the EMA orcomparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our bispecific antibody candidates. Thesuccess of our bispecific antibody candidates will depend on several factors, including the following: • for bispecific antibody candidates which we may license to others, such as to Incyte, the successful efforts of those parties in completingclinical trials of, receipt of regulatory approval for and commercialization of such bispecific antibody candidates; • for the bispecific antibody candidates to which we retain rights, completion of pre-clinical studies and clinical trials of, receipt ofmarketing approvals for, establishment of commercial manufacturing supplies of and successful commercialization of such bispecificantibody candidates; and • for all of our bispecific antibody candidates, if and when approved, acceptance of our bispecific antibody candidates by patients, themedical community and third-party payors, effectively competing with other therapies, a continued acceptable safety profile followingapproval and qualifying for, maintaining, enforcing and defending our intellectual property rights and claims.If we or our collaborators, as applicable, do not achieve one or more of these factors in a timely manner or at all, we could experience significantdelays or an inability to successfully commercialize our bispecific antibody candidates, which would materially adversely affect our business, financialcondition and results of operations. 7Table of ContentsWe have not previously submitted a Biologics License Application, or BLA, to the FDA, a Marketing Authorisation Application, or MAA, to theEMA, or similar regulatory approval filings to comparable foreign authorities, for any bispecific antibody candidate, and we cannot be certain that anyof our bispecific antibody candidates will be successful in clinical trials or receive regulatory approval. Further, our bispecific antibody candidatesmay not receive regulatory approval even if they are successful in clinical trials. If we do not receive regulatory approvals for our bispecific antibodycandidates, we may not be able to continue our operations. Even if we successfully obtain regulatory approvals to market one or more of our bispecificantibody candidates, our revenues will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval andhave commercial rights. If the markets for patient subsets that we are targeting are not as significant as we estimate, we may not generate significantrevenues from sales of such products, if approved.We plan to seek regulatory approval to commercialize our bispecific antibody candidates both in the United States and the EU, and potentiallyin additional foreign countries. While the scope of regulatory approval is similar in other countries, to obtain separate regulatory approval in manyother countries we must comply with the numerous and varying regulatory requirements of such countries regarding safety and efficacy and governing,among other things, clinical trials and commercial sales, pricing and distribution of our bispecific antibody candidates, and we cannot predict successin these jurisdictions.The Biclonics® technology platform is an unproven, novel approach to the production of molecules for therapeutic intervention.We have not received regulatory approval for a therapeutic based on a full-length human bispecific IgG approach. We cannot be certain that ourapproach will lead to the development of approvable or marketable products. In addition, our Biclonics® may have different effectiveness rates invarious indications and in different geographical areas. Finally, the FDA, the EMA or other regulatory agencies may lack experience in evaluating thesafety and efficacy of products based on Biclonics® therapeutics, which could result in a longer than expected regulatory review process, increase ourexpected development costs and delay or prevent commercialization of our bispecific antibody candidates.Our Biclonics® technology platform relies on third parties for biological materials. Some biological materials have not always met ourexpectations or requirements, and any disruption in the supply of these biological materials could materially adversely affect our business. Althoughwe have control processes and screening procedures, biological materials are susceptible to damage and contamination and may contain activepathogens. Improper storage of these materials, by us or any third-party suppliers, may require us to destroy some of our biological raw materials orproduct candidates.Failure to successfully validate, develop and obtain regulatory approval for companion diagnostics could harm our development strategy.We may seek to identify patient subsets within a disease category that may derive selective and meaningful benefit from the bispecific antibodycandidates we are developing. Through collaborations, we may develop companion diagnostics to help us to more accurately identify patients within aparticular subset, both during our clinical trials and in connection with the commercialization of our bispecific antibody candidates. Companiondiagnostics are subject to regulation by the FDA, the EU legislative bodies, and comparable foreign regulatory authorities as companion diagnosticmedical devices and typically require separate regulatory approval prior to commercialization. If needed, we intend to develop companion diagnosticsin collaboration with third parties and are dependent on the scientific insights and sustained cooperation and effort of any third-party collaborators indeveloping and obtaining approval for companion diagnostics. We and our collaborators may encounter difficulties in developing and obtainingapproval for any companion diagnostics, including issues relating to selectivity/specificity, analytical validation, reproducibility or clinicalvalidation. Any delay or failure by us or our collaborators to develop or obtain regulatory approval of companion diagnostics could delay or preventapproval of our bispecific antibody candidates. In addition, our collaborators may encounter production difficulties that could constrain the supply ofthe companion diagnostics, and both they and we may have 8Table of Contentsdifficulties gaining acceptance of the use of the companion diagnostics in the clinical community. If such companion diagnostics fail to gain marketacceptance, it would have an adverse effect on our ability to derive revenues from sales of our products. In addition, the diagnostic company withwhom we contract may decide to discontinue selling or manufacturing the companion diagnostic that we anticipate using in connection withdevelopment and commercialization of our bispecific antibody candidates or our relationship with such diagnostic company may otherwise terminate.We may not be able to enter into arrangements with another diagnostic company to obtain supplies of an alternative companion diagnostic test for usein connection with the development and commercialization of our bispecific antibody candidates or do so on commercially reasonable terms, whichcould adversely affect and/or delay the development or commercialization of our bispecific antibody candidates.Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.Since our inception in 2003, we have devoted a significant portion of our resources to developing MCLA-128, MCLA-117, MCLA-158 and ourother antibody candidates, building our intellectual property portfolio, developing our clinical manufacturing supply chain, planning our business,raising capital and providing general and administrative support for these operations. While we have ongoing clinical trials for MCLA-128 andMCLA-117 and intend to initiate a Phase 1 clinical trial for MCLA-158, we have not completed any clinical trials for any bispecific antibodycandidate. We have not yet demonstrated our ability to successfully complete any Phase 2 clinical trial or any Phase 3 or other pivotal clinical trials,obtain regulatory approvals, manufacture a commercial scale product or arrange for a third party to do so on our behalf or conduct sales and marketingactivities necessary for successful product commercialization. Additionally, we expect our financial condition and operating results to continue tofluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond our control. Consequently, anypredictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.Raising additional capital may cause dilution to our holders, restrict our operations or require us to relinquish rights to our technologies orbispecific antibody candidates.Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through equity or debt financingsand upfront and milestone payments, if any, received under our collaboration with Incyte and any other future licenses or collaborations, together withour existing cash and cash equivalents. In order to accomplish our business objectives and further develop our product pipeline, we will, however, needto seek additional funds. If we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted,and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our common shares. Inaddition, the possibility of such issuance may cause the market price of our common shares to decline. Debt financing, if available, may result inincreased fixed payment obligations and involve agreements that include covenants limiting or restricting our ability to take specific actions, such asincurring additional debt, making capital expenditures, declaring dividends, or acquiring, selling or licensing intellectual property rights, which couldadversely impact our ability to conduct our business.If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, wemay have to relinquish valuable rights to our intellectual property, technologies, future revenue streams or bispecific antibody candidates or grantlicenses on terms that may not be favorable to us. We could also be required to seek funds through arrangements with collaborators or others at anearlier stage than otherwise would be desirable. Any of these occurrences may have a material adverse effect on our business, operating results andprospects.Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to developand commercialize our bispecific antibody candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts oron terms acceptable to us, if at 9Table of Contentsall. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research ordevelopment programs or the commercialization of any of our bispecific antibody candidates, or be unable to expand our operations or otherwisecapitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.Our business may become subject to economic, political, regulatory and other risks associated with international operationsAs a company based in the Netherlands, our business is subject to risks associated with conducting business internationally. Many of oursuppliers and collaborative and clinical trial relationships are located outside the United States. Accordingly, our future results could be harmed by avariety of factors, including: • economic weakness, including inflation, or political instability, in particular, in non-U.S. economies and markets; • differing regulatory requirements for drug approvals in non-U.S. countries; • differing jurisdictions could present different issues for securing, maintaining and/or obtaining freedom to operate in such jurisdictions; • potentially reduced protection for intellectual property rights; • difficulties in compliance with non-U.S. laws and regulations; • changes in non-U.S. regulations and customs, tariffs and trade barriers; • changes in non-U.S. currency exchange rates of the euro and currency controls; • changes in a specific country’s or region’s political or economic environment; • trade protection measures, import or export licensing requirements or other restrictive actions by U.S. or non-U.S. governments; • differing reimbursement regimes and price controls in certain non-U.S. markets; • negative consequences from changes in tax laws; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • workforce uncertainty in countries where labor unrest is more common than in the United States; • difficulties associated with staffing and managing international operations, including differing labor relations; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including earthquakes,typhoons, floods and fires.Exchange rate fluctuations or abandonment of the euro currency may materially affect our results of operations and financial condition.Due to the international scope of our operations, fluctuations in exchange rates, particularly between the euro and the U.S. dollar, may adverselyaffect us. Although we are based in the Netherlands, we source research and development, manufacturing, consulting and other services from severalcountries. Further, potential future revenue may be derived from abroad, particularly from the United States. Additionally, our funding has mainlycome from investors and collaborators mainly in the United States. As a result, our business and share price may be affected by fluctuations in foreignexchange rates between the euro and these other currencies, which may also have a significant impact on our reported results of operations and cashflows from period to period. Currently, we do not have any exchange rate hedging arrangements in place. 10Table of ContentsIn addition, the possible abandonment of the euro by one or more members of the EU could materially affect our business in the future. Despitemeasures taken by the EU to provide funding to certain EU member states in financial difficulties and by a number of European countries to stabilizetheir economies and reduce their debt burdens, it is possible that the euro could be abandoned in the future as a currency by countries that haveadopted its use. This could lead to the re-introduction of individual currencies in one or more EU member states, or in more extreme circumstances, thedissolution of the EU. The effects on our business of a potential dissolution of the EU, the exit of one or more EU member states from the EU or theabandonment of the euro as a currency, are impossible to predict with certainty, and any such events could have a material adverse effect on ourbusiness, financial condition and results of operations.Risks from improper conduct by our employees, agents, contractors, or collaborators could adversely affect our reputation, business, prospects,operating results, and financial condition.We cannot ensure that our compliance controls, policies, and procedures will in every instance protect us from acts committed by our employees,agents, contractors, or collaborators that would violate the laws or regulations of the jurisdictions in which we operate, including, without limitation,health care, employment, foreign corrupt practices, trade restrictions and sanctions, environmental, competition, and patient privacy and other privacylaws and regulations. Such improper actions could subject us to civil or criminal investigations, and monetary and injunctive penalties, and couldadversely impact our ability to conduct business, operating results, and reputation.We are subject to a number of anti-corruption laws, including the Foreign Corrupt Practices Act, or FCPA, in the United States, the Bribery Act inthe United Kingdom and the anti-corruption provisions of the Dutch Criminal Code in the Netherlands. Our failure to comply with anti-corruption lawsapplicable to us could result in penalties, which could harm our reputation and harm our business, financial condition, results of operations, cash flowsor prospects. The FCPA generally prohibits companies and their intermediaries from making improper payments to foreign officials for the purpose ofobtaining or keeping business and/or other benefits. The FCPA also requires public companies to maintain accurate books and records and devise asystem of sufficient internal accounting controls. We regularly review and update our policies and procedures and internal controls designed toprovide reasonable assurance that we, our employees, distributors and other intermediaries comply with the anti-corruption laws to which we aresubject. However, there are inherent limitations to the effectiveness of any policies, procedures and internal controls, including the possibility ofhuman error and the circumvention or overriding of the policies, procedures and internal controls. There can be no assurance that such policies orprocedures or internal controls will work effectively at all times or protect us against liability under these or other laws for actions taken by ouremployees, distributors and other intermediaries with respect to our business.The SEC and Department of Justice continue to view FCPA enforcement activities as a high priority. There is no certainty that all of ouremployees, agents, contractors, or collaborators, or those of our affiliates, will comply with all applicable laws and regulations, particularly given thehigh level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers, or ouremployees, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs,and prohibitions on the conduct of our business. Any such violations could materially damage our reputation, our brand, our international operations,our ability to attract and retain employees, and our business, prospects, operating results, and financial condition. 11Table of ContentsRisks Related to the Development and Clinical Testing of Our Bispecific Antibody CandidatesAll of our bispecific antibody candidates are in pre-clinical or early-stage clinical development. Clinical drug development is a lengthy andexpensive process with uncertain timelines and uncertain outcomes. If clinical trials of our bispecific antibody candidates, particularly MCLA-128,MCLA-117 or MCLA-158, are prolonged or delayed, we or any collaborators may be unable to obtain required regulatory approvals, and thereforebe unable to commercialize our bispecific antibody candidates on a timely basis or at all.To obtain the requisite regulatory approvals to market and sell any of our bispecific antibody candidates, we or any collaborator for suchcandidates must demonstrate through extensive pre-clinical studies and clinical trials that our products are safe and effective in humans. Clinicaltesting is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trialprocess. The results of pre-clinical studies and early-stage clinical trials of our bispecific antibody candidates may not be predictive of the results oflater-stage clinical trials. Bispecific antibody candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despitehaving progressed through pre-clinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have sufferedsignificant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Ourfuture clinical trial results may not be successful.To date, we have not completed any clinical trials required for the approval of any of our bispecific antibody candidates. Although we areconducting ongoing clinical trials for MCLA-128 and MCLA-117, plan to initiate a Phase 1 clinical trial for MCLA-158, and are conductingpre-clinical studies for other bispecific antibody candidates, we may experience delays in our ongoing clinical trials and we do not know whetherplanned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. Clinical trials can bedelayed, suspended, or terminated for a variety of reasons, including the following: • delays in or failure to reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trialsites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • delays in establishing the appropriate dosage levels in clinical trials; • delays in or failure to recruit suitable patients to participate in a trial; • the difficulty in certain countries in identifying the sub-populations that we are trying to treat in a particular trial, which may delayenrollment and reduce the power of a clinical trial to detect statistically significant results; • lower than anticipated retention rates of patients in clinical trials; • failure to have patients complete a trial or return for post-treatment follow-up; • clinical sites deviating from trial protocol or dropping out of a trial; • adding new clinical trial sites; • safety or tolerability concerns could cause us or our collaborators or Health Authorities, as applicable, to suspend or terminate a trial if weor our collaborators or Health Authorities, find that the participants are being exposed to unacceptable health risks; • delays in or failure to obtain regulatory approval to commence a trial; • delays in or failure to obtain institutional review board, or IRB, approval at each site; • our third-party research contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timelymanner, or at all; • changes in regulatory requirements, policies and guidelines; • manufacturing sufficient quantities of bispecific antibody candidate for use in clinical trials; 12Table of Contents • the quality or stability of a bispecific antibody candidate falling below acceptable standards; • changes in the treatment landscape for our target indications that may make our bispecific antibody candidates no longer relevant; • third party actions claiming infringement by our bispecific antibody candidates in clinical trials outside of the United States and obtaininginjunctions interfering with our progress; and • business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including earthquakes,typhoons, floods and fires.We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs or Ethics Committees of the institutions in which suchtrials are being conducted, by the Data Review Committee or Data Safety Monitoring Board for such trial or by the FDA, the Competent Authorities ofthe EEA Member States (the 28 EU Member States plus Iceland, Liechtenstein and Norway) or other regulatory authorities. Such authorities mayimpose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatoryrequirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA, EEA Competent Authorities or otherregulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefitfrom using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. If weexperience delays in the completion of, or termination of, any clinical trial of our bispecific antibody candidates, the commercial prospects of ourbispecific antibody candidates will be harmed, and our ability to generate product revenues from any of these bispecific antibody candidates will bedelayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our bispecific antibody candidate development andapproval process and jeopardize our ability to commence product sales and generate revenues. Significant clinical trial delays could also allow ourcompetitors to bring products to market before we do or shorten any periods during which we have the exclusive right to commercialize our bispecificantibody candidates and impair our ability to commercialize our bispecific antibody candidates and may harm our business and results of operations.Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, orlead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our bispecificantibody candidates.Clinical trials must be conducted in accordance with the FDA, the EU and other applicable regulatory authorities’ legal requirements, regulationsor guidelines, and are subject to oversight by these governmental agencies and Ethics Committees or IRBs at the medical institutions where theclinical trials are conducted. In addition, clinical trials must be conducted with supplies of our bispecific antibody candidates produced under currentgood manufacturing practice, or cGMP, requirements and other regulations. Furthermore, we rely on CROs and clinical trial sites to ensure the properand timely conduct of our clinical trials and while we have agreements governing their committed activities, we have limited influence over theiractual performance. We depend on our collaborators and on medical institutions and CROs to conduct our clinical trials in compliance with goodclinical practice, or GCP, requirements. To the extent our collaborators or the CROs fail to enroll participants for our clinical trials, fail to conduct thestudy to GCP standards or are delayed for a significant time in the execution of trials, including achieving full enrollment, we may be affected byincreased costs, program delays or both, which may harm our business. In addition, clinical trials that are conducted in countries outside the EU and theUnited States may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory requirements and theengagement of non-EU and non-U.S. CROs, as well as expose us to risks associated with clinical investigators who are unknown to the FDA or theEMA, and different standards of diagnosis, screening and medical care. 13Table of ContentsOur bispecific antibody candidates may have serious adverse, undesirable or unacceptable side effects which may delay or prevent marketingapproval. If such side effects are identified during the development of our bispecific antibody candidates or following approval, if any, we may needto abandon our development of such bispecific antibody candidates, the commercial profile of any approved label may be limited, or we may besubject to other significant negative consequences following marketing approval, if any.Undesirable side effects that may be caused by our bispecific antibody candidates could cause us or regulatory authorities to interrupt, delay orhalt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, the EMA or other comparableforeign authorities. In February 2015, we commenced a Phase 1/2 clinical trial in Europe of our most advanced bispecific antibody candidate,MCLA-128, for the treatment of various solid tumors. Additionally, in January 2018 we commenced a Phase 2 clinical trial in Europe and the UnitedStates exploring MCLA-128, in combination with other agents, in patients with metastatic breast cancer. To date, patients treated with MCLA-128have experienced adverse reactions that may be related to the treatment, including infusion-related reactions, diarrhea, vomiting, fatigue, skin rash,sore mouth and shortness of breath. In May 2016, we commenced a Phase 1 clinical trial in Europe of our bispecific antibody MCLA-117. To date,patients treated with MCLA-117 have experienced adverse reactions that may be related to the treatment, most commonly infusion-related reactions.Results of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our trials could besuspended or terminated and the FDA, the EMA, EEA Competent Authorities, or comparable foreign regulatory authorities could order us to ceasefurther development of or deny approval of our bispecific antibody candidates for any or all targeted indications. The drug-related side effects couldaffect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrencesmay harm our business, financial condition and prospects significantly. Additionally, if any of our bispecific antibody candidates receives marketingapproval and we or others later identify undesirable or unacceptable side effects caused by such products, a number of potentially significant negativeconsequences could result, including: • regulatory authorities may withdraw approvals of such products and require us to take our approved product off the market; • regulatory authorities may require the addition of labeling statements, specific warnings, a contraindication or field alerts to physicians andpharmacies; • regulatory authorities may require a medication guide outlining the risks of such side effects for distribution to patients, or that weimplement a risk evaluation and mitigation strategy, or REMS, plan to ensure that the benefits of the product outweigh its risks; • we may be required to change the dose or the way the product is administered, conduct additional clinical trials or change the labeling ofthe product; • we may be subject to limitations on how we may promote the product; • sales of the product may decrease significantly; • we may be subject to litigation or product liability claims; and • our reputation may suffer.Any of these events could prevent us, our collaborators or our potential future partners from achieving or maintaining market acceptance of theaffected product or could substantially increase commercialization costs and expenses, which in turn could delay or prevent us from generatingsignificant revenue from the sale of our products.Adverse events in the field of oncology could damage public perception of our bispecific antibody candidates and negatively affect ourbusiness.The commercial success of our products will depend in part on public acceptance of the use of cancer immunotherapies. Adverse events inclinical trials of our bispecific antibody candidates or in clinical trials of 14Table of Contentsothers developing similar products and the resulting publicity, as well as any other adverse events in the field of oncology that may occur in the future,could result in a decrease in demand for any products that we may develop.Future adverse events in immuno-oncology or the biopharmaceutical industry could also result in greater governmental regulation, stricterlabeling requirements and potential regulatory delays in the testing or approvals of our products. Any increased scrutiny could delay or increase thecosts of obtaining regulatory approval for our bispecific antibody candidates.We depend on enrollment of patients in our clinical trials for our bispecific antibody candidates. If we are unable to enroll patients in ourclinical trials, our research and development efforts and business, financial condition and results of operations could be materially adverselyaffected.Successful and timely completion of clinical trials will require that we enroll a sufficient number of patient candidates. For the MCLA-128 Phase2 clinical trial, we plan to enroll approximately 120 patients with metastatic breast cancer in the United States and Europe. In the Phase 1 clinical trialof MCLA-117, we plan to enroll approximately 50 adult patients with AML. These trials and other trials we conduct may be subject to delays as aresult of patient enrollment taking longer than anticipated or patient withdrawal.Our clinical trials will likely compete with other clinical trials for antibody candidates that are in the same therapeutic areas as our bispecificantibody candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted toenroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified clinicalinvestigators and clinical trial sites is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of ourcompetitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites.Patient enrollment depends on many factors, including the size and nature of the patient population, eligibility criteria for the trial, the proximityof patients to clinical sites, the design of the clinical protocol, the availability of competing clinical trials, the availability of new drugs approved forthe indication the clinical trial is investigating, and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied inrelation to other available therapies. These factors may make it difficult for us to enroll enough patients to complete our clinical trials in a timely andcost-effective manner. Delays in the completion of any clinical trial of our bispecific antibody candidates will increase our costs, slow down ourbispecific antibody candidate development and approval process and delay or potentially jeopardize our ability to commence product sales andgenerate revenue. In addition, some of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may alsoultimately lead to the denial of regulatory approval of our bispecific antibody candidates.We may become exposed to costly and damaging liability claims, either when testing our bispecific antibody candidates in the clinic or at thecommercial stage; and our product liability insurance may not cover all damages from such claims.We are exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing,marketing and use of pharmaceutical products. Currently, we have no products that have been approved for commercial sale; however, the current andfuture use of bispecific antibody candidates by us and our corporate collaborators in clinical trials, and the sale of any approved products in the future,may expose us to liability claims. These claims might be made by patients that use the product, healthcare providers, pharmaceutical companies, ourcorporate collaborators or others selling such products. Any claims against us, regardless of their merit, could be difficult and costly to defend andcould materially adversely affect the market for our bispecific antibody candidates or any prospects for commercialization of our bispecific antibodycandidates. 15Table of ContentsAlthough the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatoryapproval, may exhibit unforeseen side effects. If any of our bispecific antibody candidates were to cause adverse side effects during clinical trials orafter approval of the bispecific antibody candidate, we may be exposed to substantial liabilities. Physicians and patients may not comply with anywarnings that identify known potential adverse effects and patients who should not use our bispecific antibody candidates.Although we maintain adequate product liability insurance for our bispecific antibody candidates, it is possible that our liabilities could exceedour insurance coverage. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval forany of our bispecific antibody candidates. However, we may not be able to maintain insurance coverage at a reasonable cost or obtain insurancecoverage that will be adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims is brought against us foruninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could beimpaired.Should any of the events described above occur, this could have a material adverse effect on our business, financial condition and results ofoperations.The regulatory approval processes of the FDA, the EMA and comparable foreign authorities are lengthy, time consuming and inherentlyunpredictable, and if we are ultimately unable to obtain regulatory approval for our bispecific antibody candidates, our business will besubstantially harmed.The time required to obtain approval by the FDA, the EMA and comparable foreign authorities is unpredictable but typically takes many yearsfollowing the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. Inaddition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of abispecific antibody candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any bispecificantibody candidate and it is possible that none of our existing bispecific antibody candidates or any bispecific antibody candidates we may seek todevelop in the future will ever obtain regulatory approval.Our bispecific antibody candidates could fail to receive regulatory approval for many reasons, including the following: • the FDA, the EMA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials; • we may be unable to demonstrate to the satisfaction of the FDA, the EMA or comparable foreign regulatory authorities that a bispecificantibody candidate is safe and effective for its proposed indication; • the results of clinical trials may not meet the level of statistical significance required by the FDA, the EMA or comparable foreignregulatory authorities for approval; • we may be unable to demonstrate that a bispecific antibody candidate’s clinical and other benefits outweigh its safety risks; • the FDA, the EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from pre-clinical studies orclinical trials; • the data collected from clinical trials of our bispecific antibody candidates may not be sufficient to support the submission of a BLA orother submission or to obtain regulatory approval in the United States, the EU or elsewhere; • the FDA, the EMA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-partymanufacturers with which we contract for clinical and commercial supplies; 16Table of Contents • the FDA, the EMA or comparable foreign regulatory authorities may fail to approve the companion diagnostics we contemplate developingwith collaborators; and • the approval policies or regulations of the FDA, the EMA or comparable foreign regulatory authorities may significantly change in amanner rendering our clinical data insufficient for approval.This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approvalto market any of our bispecific antibody candidates, which would significantly harm our business, results of operations and prospects. The FDA, theEMA and other regulatory authorities have substantial discretion in the approval process, and determining when or whether regulatory approval will beobtained for any of our bispecific antibody candidates. Even if we believe the data collected from clinical trials of our bispecific antibody candidatesare promising, such data may not be sufficient to support approval by the FDA, the EMA or any other regulatory authority.In addition, even if we were to obtain approval, regulatory authorities may approve any of our bispecific antibody candidates for fewer or morelimited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performanceof costly post-marketing clinical trials, or may approve a bispecific antibody candidate with a label that does not include the labeling claims necessaryor desirable for the successful commercialization of that bispecific antibody candidate. Any of the foregoing scenarios could materially harm thecommercial prospects for our bispecific antibody candidates.Even if our bispecific antibody candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatoryreview, which may result in significant additional expense. Additionally, our bispecific antibody candidates, if approved, could be subject tolabeling and other restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements orexperience unanticipated problems with our products.If the FDA, the EMA or a comparable foreign regulatory authority approves any of our bispecific antibody candidates, the manufacturingprocesses, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subjectto extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports,registration, as well as continued compliance with cGMPs and GCPs for any clinical trials that we conduct post-approval, all of which may result insignificant expense and limit our ability to commercialize such products. In addition, any regulatory approvals that we receive for our bispecificantibody candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions ofapproval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safetyand efficacy of the bispecific antibody candidate.If there are changes in the application of legislation or regulatory policies, or if problems are discovered with a product or our manufacture of aproduct, or if we or one of our distributors, licensees or co-marketers fails to comply with regulatory requirements, the regulators could take variousactions. These include imposing fines on us, imposing restrictions on the product or its manufacture and requiring us to recall or remove the productfrom the market. The regulators could also suspend or withdraw our marketing authorizations, requiring us to conduct additional clinical trials, changeour product labeling or submit additional applications for marketing authorization. If any of these events occurs, our ability to sell such product maybe impaired, and we may incur substantial additional expense to comply with regulatory requirements, which could materially adversely affect ourbusiness, financial condition and results of operations.We may not be successful in our efforts to use and expand our technology platform to build a pipeline of antibody candidates.A key element of our strategy is to use and expand our Biclonics® technology platform to build a pipeline of antibody candidates and progressthese antibody candidates through clinical development for the treatment of a 17Table of Contentsvariety of different types of diseases. Although our research and development efforts to date have resulted in a pipeline of bispecific antibodycandidates directed at various cancers, we may not be able to develop bispecific antibody candidates that are safe and effective. Even if we aresuccessful in continuing to build our pipeline, the potential antibody candidates that we identify may not be suitable for clinical development,including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that willreceive marketing approval and achieve market acceptance. If we do not continue to successfully develop and begin to commercialize antibodycandidates, we will face difficulty in obtaining product revenues in future periods, which could result in significant harm to our financial position andadversely affect our share price.Even if we obtain marketing approval of any of our bispecific antibody candidates in a major pharmaceutical market such as the United Statesor the EU, we may never obtain approval or commercialize our products in other major markets, which would limit our ability to realize their fullmarket potential.In order to market any products in a country or territory, we must establish and comply with numerous and varying regulatory requirements ofsuch countries or territories regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities inother countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approvalprocedures vary among countries and can involve additional product testing and validation and additional administrative review periods. Seekingregulatory approvals in all major markets could result in significant delays, difficulties and costs for us and may require additional pre-clinical studiesor clinical trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay orprevent the introduction of our products in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain andsubject to unanticipated delays. In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the processfor regulatory approval in other countries. We currently do not have any bispecific antibody candidates approved for sale in any jurisdiction, whetherin the Netherlands, the United States or any other international markets, and we do not have experience in obtaining regulatory approval ininternational markets. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, ourtarget market will be reduced and our ability to realize the full market potential of our products will be harmed.Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain bispecificantibody candidates over other potential candidates. These decisions may prove to have been wrong and may adversely affect our revenues.Because we have limited resources and access to capital to fund our operations, we must decide which antibody candidates to pursue and theamount of resources to allocate to each. Our decisions concerning the allocation of research, collaboration, management and financial resources towardparticular compounds, bispecific antibody candidates or therapeutic areas may not lead to the development of viable commercial products and maydivert resources away from better opportunities. Similarly, our decisions to delay, terminate or collaborate with third parties in respect of certainproduct development programs may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrectdeterminations regarding the market potential of our bispecific antibody candidates or misread trends in the biopharmaceutical industry, in particularfor our lead bispecific antibody candidates, our business, financial condition and results of operations could be materially adversely affected.Because we are subject to environmental, health and safety laws and regulations, we may become exposed to liability and substantial expensesin connection with environmental compliance or remediation activities which may adversely affect our business and financial condition.Our operations, including our research, development, testing and manufacturing activities, are subject to numerous environmental, health andsafety laws and regulations. These laws and regulations govern, among 18Table of Contentsother things, the controlled use, handling, release and disposal of, and the maintenance of a registry for, hazardous materials and biological materials,such as chemical solvents, human cells, carcinogenic compounds, mutagenic compounds and compounds that have a toxic effect on reproduction,laboratory procedures and exposure to blood-borne pathogens. If we fail to comply with such laws and regulations, we could be subject to fines orother sanctions.As with other companies engaged in activities similar to ours, we face a risk of environmental liability inherent in our current and historicalactivities, including liability relating to releases of or exposure to hazardous or biological materials. Environmental, health and safety laws andregulations are becoming more stringent. We may be required to incur substantial expenses in connection with future environmental compliance orremediation activities, in which case, our production and development efforts may be interrupted or delayed and our financial condition and results ofoperations may be materially adversely affected.Our employees, independent contractors, principal investigators, CROs, consultants, vendors and collaborators may engage in misconduct orother improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on ourbusiness.We are exposed to the risk that our employees, independent contractors, principal investigators, CROs, consultants, vendors and collaboratorsmay engage in fraudulent conduct or other illegal activities. Misconduct by these parties could include intentional, reckless and/or negligent conductor unauthorized activities that violate: (i) the regulations of the FDA, the EMA and other regulatory authorities, including those laws that require thereporting of true, complete and accurate information to such authorities; (ii) manufacturing standards; (iii) federal and state data privacy, security, fraudand abuse and other healthcare laws and regulations in the United States and abroad; or (iv) laws that require the reporting of true, complete andaccurate financial information and data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensivelaws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations mayrestrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other businessarrangements. Activities subject to these laws could also involve the improper use or misrepresentation of information obtained in the course ofclinical trials or creating fraudulent data in our pre-clinical studies or clinical trials, which could result in regulatory sanctions and cause serious harmto our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detectand prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmentalinvestigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk thata person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are notsuccessful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations,including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgements, possible exclusion fromparticipation in Medicare, Medicaid and other U.S. federal healthcare programs, individual imprisonment, other sanctions, contractual damages,reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operateour business and our results of operations.Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing.Certain laws and regulations require us to test our bispecific antibody candidates on animals before initiating clinical trials involving humans.Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individualshave attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities throughprotests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted,delayed or become more expensive. 19Table of ContentsRisks Related to Regulatory Approval of Our Bispecific Antibody CandidatesEnacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our bispecificantibody candidates and may affect the prices we may set. The successful commercialization of our bispecific antibody candidates will depend inpart on the extent to which governmental authorities and health insurers establish adequate coverage and reimbursement levels and pricing policies.In the United States, the EU, and other foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative andregulatory changes and proposed changes to the healthcare system that could affect our future results of operations. In particular, there have been andcontinue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs and improve the quality ofhealthcare. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education ReconciliationAct, or collectively the ACA, was enacted, which substantially changes the way healthcare is financed by both governmental and private insurers.Among the provisions of the ACA, those of greatest importance to the pharmaceutical and biotechnology industries include the following: • an annual, non-deductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, which isapportioned among these entities according to their market share in certain government healthcare programs; • a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts offnegotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’soutpatient drugs to be covered under Medicare Part D; • new requirements to report certain financial arrangements with physicians and certain others, including reporting “transfers of value” madeor distributed to prescribers and other healthcare providers and reporting investment interests held by physicians and their immediatefamily members; • an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of theaverage manufacturer price for branded and generic drugs, respectively; • a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that areinhaled, infused, instilled, implanted or injected; • extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managedcare organizations; • expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certainindividuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebateliability; • expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; • a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectivenessresearch, along with funding for such research; • creation of the Independent Payment Advisory Board which has authority to recommend certain changes to the Medicare program thatcould result in reduced payments for prescription drugs and those recommendations could have the effect of law unless overruled by asupermajority vote of Congress; and • establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services, or CMS, to test innovative paymentand service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. 20Table of ContentsWe expect that the current presidential administration and U.S. Congress will likely continue to seek to modify, repeal, or otherwise invalidateall, or certain provisions of, the ACA. However, we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or theimpact of potential legislation on us.In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, theBudget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on DeficitReduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reachrequired goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions ofMedicare payments to providers of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent legislativeamendments to the statute will remain in effect through 2025 unless additional Congressional action is taken. On January 2, 2013, the AmericanTaxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers,including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recoveroverpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other health care funding,which could have a material adverse effect on our customers and accordingly, our financial operations.Moreover, payment methodologies, including payment for companion diagnostics, may be subject to changes in healthcare legislation andregulatory initiatives. For example, CMS began bundling the Medicare payments for certain laboratory tests ordered while a patient received servicesin a hospital outpatient setting and, beginning in 2018, CMS began paying for clinical laboratory services based on a weighted average of reportedprices that private payors, Medicare Advantage plans, and Medicaid Managed Care plans pay for laboratory services. In addition, recently there hasbeen heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in severalCongressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationshipbetween pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example,the 21st Century Cures Act, or Cures Act, changed the reimbursement methodology for infusion drugs and biologics furnished through durable medicalequipment in an attempt to remedy over- and underpayment of certain products. We expect that additional U.S. federal healthcare reform measures willbe adopted in the future, any of which could limit the amounts that the U.S. federal government will pay for healthcare products and services, whichcould result in reduced demand for our bispecific antibody candidates or additional pricing pressures.Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed tocontrol pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain productaccess and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulkpurchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results ofoperations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using biddingprocedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.This could reduce the ultimate demand for our products or put pressure on our product pricing, which could negatively affect our business, results ofoperations, financial condition and prospects.In the EU, similar political, economic and regulatory developments may affect our ability to profitably commercialize our current or any futureproducts. In addition to continuing pressure on prices and cost containment measures, legislative developments at the EU or member state level mayresult in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the EU, including theestablishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather thanEU, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and thepricing and 21Table of Contentsreimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU member states have resulted inrestrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and nationalregulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our bispecific antibodycandidates, restrict or regulate post-approval activities and affect our ability to commercialize any products for which we obtain marketing approval. Ininternational markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilingson specific products and therapies.We cannot predict how the policies of changing political administrations could impact, impose significant burdens on, or otherwise materiallydelay, FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance,and review and approval of marketing applications. For example, certain policies of the current presidential administration may impact our businessand industry. Namely, the current presidential administration has taken several executive actions, including the issuance if a number of ExecutiveOrders. It is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise itsregulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normalcourse, our business may be negatively impacted.Finally, policies of the individual government agencies, including the FDA or similar regulatory authorities, may change and additionalgovernment regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. For example, the Cures Act,among other things, which is intended to modernize the regulation of drugs and biologics and spur innovation, has not yet been implemented and itsultimate implementation is unclear. If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of newrequirements or policies, or if we or our collaborators are not able to maintain regulatory compliance, our bispecific antibody candidates may lose anyregulatory approval that may have been obtained and we may not achieve or sustain profitability, which would adversely affect our business.We may be subject to healthcare laws, regulation and enforcement; our failure to comply with these laws could harm our results of operationsand financial conditions.Although we do not currently have any products on the market, if we obtain FDA approval for any of our bispecific antibody candidates andbegin commercializing those products in the United States, our operations may be directly, or indirectly through our customers and third-party payors,subject to various U.S. federal and state healthcare laws and regulations, including, without limitation, the U.S. federal Anti-Kickback Statute.Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any products for which we obtain marketingapproval. These laws may impact, among other things, our proposed sales, marketing and education programs and constrain the business of financialarrangements and relationships with healthcare providers, physicians and other parties through which we market, sell and distribute our products forwhich we obtain marketing approval. In addition, we may be subject to patient data privacy and security regulation by both the U.S. federalgovernment and the states in which we conduct our business. Finally, we may be subject to additional healthcare, statutory and regulatoryrequirements and enforcement by foreign regulatory authorities in jurisdictions in which we conduct our business. The laws that may affect our abilityto operate include: • the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting,offering, receiving or paying any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly,in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order or recommendation of, any good,facility, item or service, for which payment may be made, in whole or in part, under U.S. federal and state healthcare programs such asMedicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order tohave committed a violation; 22Table of Contents • the U.S. federal false claims and civil monetary penalties laws, including the civil False Claims Act, which, among other things, imposecriminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among otherthings, knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false orfraudulent , knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, orfrom knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. Inaddition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-KickbackStatute constitutes a false or fraudulent claim for purposes of the False Claims Act; • the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for,among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, orknowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection withthe delivery of, or payment for, healthcare benefits, items or services; similar to the U.S. federal Anti-Kickback Statute, a person or entitydoes not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and itsimplementing regulations, and as amended again by the Final HIPAA Omnibus Rule, Modifications to the HIPAA Privacy, Security,Enforcement and Breach Notification Rules Under HITECH and the Genetic Information Nondiscrimination Act; Other Modifications tothe HIPAA Rules, published in January 2013, which imposes certain obligations, including mandatory contractual terms, with respect tosafeguarding the privacy, security and transmission of individually identifiable health information without appropriate authorization bycovered entities subject to the rule, such as health plans, healthcare clearinghouses and healthcare providers as well as their businessassociates that perform certain services involving the use or disclosure of individually identifiable health information; • the U.S. federal Food, Drug and Cosmetic Act, or FDCA, which prohibits, among other things, the adulteration or misbranding of drugs,biologics and medical devices; • the U.S. federal legislation commonly referred to as Physician Payments Sunshine Act, enacted as part of the ACA, and its implementingregulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare,Medicaid, or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments and othertransfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, aswell as ownership and investment interests held by the physicians described above and their immediate family members; • analogous state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices,including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or servicesreimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with thepharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federalgovernment, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws andregulations that require drug manufacturers to file reports relating to pricing and marketing information, and that requires the tracking andreporting of gifts and other remuneration and items of value provided to healthcare professionals and entities; and state laws governing theprivacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often arenot preempted by HIPAA, thus complicating compliance efforts; and • European and other foreign law equivalents of each of the laws, including reporting requirements detailing interactions with and paymentsto healthcare providers. 23Table of ContentsEnsuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulationscould involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current orfuture statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If ouroperations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, wemay be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from U.S. government fundedhealthcare programs, such as Medicare and Medicaid, disgorgement, individual imprisonment, contractual damages, reputational harm, diminishedprofits, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do businessis found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions fromgovernment funded healthcare programs and imprisonment. If any of the above occur, it could adversely affect our ability to operate our business andour results of operations. Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources.Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.We face potential liability related to the privacy of health information we obtain from clinical trials sponsored by us or our collaborators,from research institutions and our collaborators, and directly from individuals.Most health care providers, including research institutions from which we or our collaborators obtain patient health information, are subject toprivacy and security regulations promulgated under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by theHealth Information Technology for Economic and Clinical Health Act. Any person may be prosecuted under HIPAA’s criminal provisions eitherdirectly or under aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, we could face substantialcriminal penalties if we knowingly receive individually identifiable health information from a HIPAA-covered health care provider or researchinstitution that has not satisfied HIPAA’s requirements for disclosure of individually identifiable health information. In addition, we may maintainsensitive personally identifiable information, including health information, that we receive throughout the clinical trial process, in the course of ourresearch collaborations, and directly from individuals (or their healthcare providers) who enroll in our patient assistance programs. As such, we may besubject to state laws requiring notification of affected individuals and state regulators in the event of a breach of personal information, which is abroader class of information than the health information protected by HIPAA.Our clinical trial programs and research collaborations outside the U.S. may implicate international data protection laws, including, in Europe,the EU Data Protection Directive and, beginning on May 25, 2018, the General Data Protection Regulation, or the GDPR, that is replacing it. TheGDPR will implement more stringent operational requirements for processors and controllers of personal data. It also significantly increases penaltiesfor non-compliance. If our privacy or data security measures fail to comply with the GDPR requirements, we may be subject to litigation, regulatoryinvestigations, enforcement notices requiring us to change the way we use personal data and/or fines of up to 20.0 million Euros or up to 4% of thetotal worldwide annual turnover of the preceding financial year, whichever is higher. In addition to statutory enforcement, a personal data breach canlead to negative publicity and a potential loss of business.We are also subject to evolving EU laws on data export, as we may transfer personal data from the EU to other jurisdictions. There is currentlylitigation challenging EU mechanisms for adequate data transfer. It is uncertain whether these mechanisms will be invalidated by the EU courts. Wecould be impacted by changes in law as a result of the current challenges to these mechanisms, which may lead to governmental enforcement actions,litigation, fines and penalties or adverse publicity that could have an adverse effect on our business.We are likely to be required to expend significant capital and other resources to ensure ongoing compliance with applicable privacy and datasecurity laws both inside and outside the United States. Claims that we have violated individuals’ privacy rights or breached our contractualobligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harmour business. 24Table of ContentsIf we or any collaborators fail to comply with applicable federal, state, or local regulatory requirements, we could be subject to a range ofregulatory actions that could affect our or any collaborators’ ability to seek to commercialize our clinical candidates. Any threatened or actualgovernment enforcement action could also generate adverse publicity and require that we devote substantial resources that could otherwise be used inother aspects of our business.Risks Related to Commercialization of Our Bispecific Antibody CandidatesWe operate in highly competitive and rapidly changing industries, which may result in others discovering, developing or commercializingcompeting products before or more successfully than we do.The biopharmaceutical and pharmaceutical industries are highly competitive and subject to significant and rapid technological change. Oursuccess is highly dependent on our ability to discover, develop and obtain marketing approval for new and innovative products on a cost-effectivebasis and to market them successfully. In doing so, we face and will continue to face intense competition from a variety of businesses, including large,fully integrated pharmaceutical companies, specialty pharmaceutical companies and biopharmaceutical companies, academic institutions, governmentagencies and other private and public research institutions in Europe, the United States and other jurisdictions. These organizations may havesignificantly greater resources than we do and conduct similar research, seek patent protection and establish collaborative arrangements for research,development, manufacturing and marketing of products that compete with our bispecific antibody candidates.With the proliferation of new drugs and therapies into oncology, we expect to face increasingly intense competition as new technologies becomeavailable. If we fail to stay at the forefront of technological change, we may be unable to compete effectively. Any bispecific antibody candidates thatwe successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. Thehighly competitive nature of and rapid technological changes in the biotechnology and pharmaceutical industries could render our bispecific antibodycandidates or our technology obsolete, less competitive or uneconomical. Our competitors may, among other things: • have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do; • develop and commercialize products that are safer, more effective, less expensive, more convenient or easier to administer, or have fewer orless severe side effects; • obtain quicker regulatory approval; • establish superior proprietary positions covering our products and technologies; • implement more effective approaches to sales and marketing; or • form more advantageous strategic alliances.Should any of these factors occur, our business, financial condition and results of operations could be materially adversely affected.In addition, any collaborators may decide to market and sell products that compete with the bispecific antibody candidates that we have agreedto license to them, and any competition by our collaborators could also have a material adverse effect on our future business, financial condition andresults of operations.Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with largeand established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishingclinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. 25Table of ContentsIf we fail to obtain orphan drug designation or obtain or maintain orphan drug exclusivity for our products, our competitors may sell productsto treat the same conditions and our revenue will be reduced.Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as apatient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is noreasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the EU, the EMA’s Committee forOrphan Medicinal Products, or COMP, grants orphan drug designation to promote the development of products that are intended for the diagnosis,prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the EU.Additionally, designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating orserious and chronic condition when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessaryinvestment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention or treatment, or, if such amethod exists, the medicine must be of significant benefit to those affected by the condition.In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trialcosts, tax advantages and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphandesignation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drugfor the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product withorphan exclusivity or where the manufacturer is unable to assure sufficient product quantity. In the EU, orphan drug designation entitles a party tofinancial incentives such as reduction of fees or fee waivers and ten years of market exclusivity following drug or biological product approval. Thisperiod may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficientlyprofitable not to justify maintenance of market exclusivity.We plan to seek orphan drug designation from the FDA and the EMA for our assets in clinical development, including MCLA-128 orMCLA-117, where supported by data in the appropriate indications that meet the criteria for orphan status. Even if we are able to obtain orphandesignation in the United States and/or the EU, we may not be the first to obtain marketing approval for any particular orphan indication due to theuncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the United States may be limited if weseek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request fordesignation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with therare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product fromcompetition because different drugs with different active moieties can be approved for the same condition. Even after an orphan drug is approved, theFDA or the EMA can subsequently approve the same drug with the same active moiety for the same condition if the FDA or the EMA concludes thatthe later drug is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time orregulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition, while we intend to seekorphan drug designation, when appropriate, we may not receive such designation.The successful commercialization of our bispecific antibody candidates will depend in part on the extent to which governmental authoritiesand health insurers establish adequate coverage, reimbursement levels and pricing policies. Failure to obtain or maintain adequate coverage andreimbursement for our bispecific antibody candidates, if approved, could limit our ability to market those products and decrease our ability togenerate revenue.The availability and adequacy of coverage and reimbursement by governmental healthcare programs such as Medicare and Medicaid, privatehealth insurers and other third-party payors are essential for most patients to be 26Table of Contentsable to afford products such as our bispecific antibody candidates, assuming approval. Our ability to achieve acceptable levels of coverage andreimbursement for products by governmental authorities, private health insurers and other organizations will have an effect on our ability tosuccessfully commercialize and attract additional collaboration partners to invest in the development of our bispecific antibody candidates. Assumingwe obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may requireco-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the EU or elsewhere willbe available for any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse toprovide coverage and reimbursement for particular drugs when an equivalent generic drug or a less expensive therapy is available. It is possible that athird-party payor may consider our bispecific antibody candidate and other therapies as substitutable and only offer to reimburse patients for the lessexpensive product. Even if we show improved efficacy or improved convenience of administration with our bispecific antibody candidate, pricing ofexisting drugs may limit the amount we will be able to charge for our bispecific antibody candidate. These payors may deny or revoke thereimbursement status of a given drug product or establish prices for new or existing marketed products at levels that are too low to enable us to realizean appropriate return on our investment in product development. If reimbursement is not available or is available only at limited levels, we may not beable to successfully commercialize our bispecific antibody candidates and may not be able to obtain a satisfactory financial return on products that wemay develop.There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining theextent to which new drugs and biologics will be covered. The Medicare and Medicaid programs increasingly are used as models for how private payorsand other governmental payors develop their coverage and reimbursement policies for drugs and biologics. Some third-party payors may requirepre-approval of coverage for new or innovative devices or drug therapies before they will reimburse health care providers who use such therapies. It isdifficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our bispecific antibodycandidates.Obtaining and maintaining reimbursement status is time-consuming and costly. No uniform policy for coverage and reimbursement for drugproducts exists among third-party payors in the United States. Therefore, coverage and reimbursement for drug products can differ significantly frompayor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientificand clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be appliedconsistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at shortnotice, and we believe that changes in these rules and regulations are likely.Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations,and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure onthe pricing and usage of our bispecific antibody candidates. In many countries, the prices of medical products are subject to varying price controlmechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products, but monitor and controlcompany profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for ourbispecific antibody candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared withthe United States and may be insufficient to generate commercially reasonable revenue and profits.Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may causesuch organizations to limit both coverage and the level of reimbursement 27Table of Contentsfor newly approved products and, as a result, they may not cover or provide adequate payment for our bispecific antibody candidates. We expect toexperience pricing pressures in connection with the sale of any of our bispecific antibody candidates due to the trend toward managed healthcare, theincreasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general,particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are beingerected to the entry of new products.Our products may not gain market acceptance, in which case we may not be able to generate product revenues, which will materially adverselyaffect our business, financial condition and results of operations.Even if the FDA, the EMA or any other regulatory authority approves the marketing of any bispecific antibody candidates that we develop onour own or with a collaborator, physicians, healthcare providers, patients or the medical community may not accept or use them. If these products donot achieve an adequate level of acceptance, we may not generate significant product revenues or any profits from operations. The degree of marketacceptance of any of our bispecific antibody candidates will depend on a variety of factors, including: • the timing of market introduction; • the number and clinical profile of competing products; • our ability to provide acceptable evidence of safety and efficacy; • the prevalence and severity of any side effects; • relative convenience and ease of administration; • cost-effectiveness; • patient diagnostics and screening infrastructure in each market; • marketing and distribution support; • availability of adequate coverage, reimbursement and adequate payment from health maintenance organizations and other insurers, bothpublic and private; and • other potential advantages over alternative treatment methods.If our bispecific antibody candidates fail to gain market acceptance, this will have a material adverse impact on our ability to generate revenuesto provide a satisfactory, or any, return on our investments. Even if some products achieve market acceptance, the market may prove not to be largeenough to allow us to generate significant revenues.We currently have no marketing, sales or distribution infrastructure. If we are unable to develop sales, marketing and distribution capabilitieson our own or through collaborations, or if we fail to achieve adequate pricing and/or reimbursement we will not be successful in commercializingour bispecific antibody candidates.We currently have no marketing, sales and distribution capabilities because all of our bispecific antibody candidates are still in clinical orpre-clinical development. If any of our bispecific antibody candidates are approved, we intend either to establish a sales and marketing organizationwith technical expertise and supporting distribution capabilities to commercialize our bispecific antibody candidates, or to outsource this function to athird party. Either of these options would be expensive and time consuming. These costs may be incurred in advance of any approval of our bispecificantibody candidates. In addition, we may not be able to hire a sales force that is sufficient in size or has adequate expertise in the medical markets thatwe intend to target. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact thecommercialization of our products.To the extent that we enter into collaboration agreements with respect to marketing, sales or distribution, our product revenue may be lower thanif we directly marketed or sold any approved products. In addition, any 28Table of Contentsrevenue we receive will depend in whole or in part upon the efforts of these third-party collaborators, which may not be successful and are generallynot within our control. If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully commercializeany approved products. If we are not successful in commercializing any approved products, either on our own or through collaborations with one ormore third parties, our future product revenue will suffer and we may incur significant additional losses.We have never commercialized a bispecific antibody candidate before and may lack the necessary expertise, personnel and resources tosuccessfully commercialize our products on our own or together with suitable collaborators.We have never commercialized a bispecific antibody candidate, and we currently have no sales force, marketing or distribution capabilities. Toachieve commercial success for the bispecific antibody candidates, which we may license to others, we will rely on the assistance and guidance ofthose collaborators. For bispecific antibody candidates for which we retain commercialization rights, we will have to develop our own sales, marketingand supply organization or outsource these activities to a third party.Factors that may affect our ability to commercialize our bispecific antibody candidates on our own include recruiting and retaining adequatenumbers of effective sales and marketing personnel, obtaining access to or persuading adequate numbers of physicians to prescribe our bispecificantibody candidates and other unforeseen costs associated with creating an independent sales and marketing organization. Developing a sales andmarketing organization will be expensive and time-consuming and could delay the launch of our bispecific antibody candidates. We may not be ableto build an effective sales and marketing organization. If we are unable to build our own distribution and marketing capabilities or to find suitablepartners for the commercialization of our bispecific antibody candidates, we may not generate revenues from them or be able to reach or sustainprofitability.Our bispecific antibody candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.The Patient Protection and Affordable Care Act, signed into law on March 23, 2010, includes a subtitle called the Biologics Price Competitionand Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to orinterchangeable with an FDA-licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted tothe FDA until four years following the date that the reference product was first approved by the FDA. In addition, the approval of a biosimilar productmay not be made effective by the FDA until 12 years from the date on which the reference product was first approved. During this 12-year period ofexclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing productcontaining the sponsor’s own pre-clinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potencyof their product. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, andmeaning are subject to uncertainty.We believe that any of our bispecific antibody candidates approved as a biological product under a BLA should qualify for the 12-year period ofexclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise. Other aspects of the BPCIA,some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which abiosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution fornon-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.Jurisdictions in addition to the United States have established abbreviated pathways for regulatory approval of biological products that arebiosimilar to earlier approved reference products. For example, the EU has had an established regulatory pathway for biosimilars since 2005. 29Table of ContentsThe increased likelihood of biosimilar competition has increased the risk of loss of innovators’ market exclusivity. Due to this risk, anduncertainties regarding patent protection, if our clinical candidates are approved for marketing, it is not possible to predict the length of marketexclusivity for any particular product with certainty based solely on the expiration of the relevant patent(s) or the current forms of regulatoryexclusivity. It is also not possible to predict changes in United States regulatory law that might reduce biological product regulatory exclusivity. Theloss of market exclusivity for a product would likely materially and negatively affect revenues and we may not generate adequate or sufficientrevenues from them or be able to reach or sustain profitability.Risks Related to Our Dependence on Third PartiesWe rely, and expect to continue to rely, on third parties, including independent clinical investigators and CROs, to conduct our pre-clinicalstudies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be ableto obtain regulatory approval for or commercialize our bispecific antibody candidates and our business could be substantially harmed.We have relied upon and plan to continue to rely upon third parties, including independent clinical investigators and third-party CROs, toconduct our pre-clinical studies and clinical trials and to monitor and manage data for our ongoing pre-clinical and clinical programs. We rely on theseparties for execution of our pre-clinical studies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsiblefor ensuring that each of our studies and trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, andour reliance on these third parties does not relieve us of our regulatory responsibilities. We and our third-party contractors and CROs are required tocomply with good clinical practice, or GCP, requirements, which are regulations and guidelines enforced by the FDA, the Competent Authorities of theMember States of the EEA, and comparable foreign regulatory authorities for all of our products in clinical development. Regulatory authoritiesenforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply withapplicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the EMA or comparable foreign regulatoryauthorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspectionby a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, ourclinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeatclinical trials, which would delay the regulatory approval process.Further, these investigators and CROs are not our employees and we will not be able to control, other than by contract, the amount of resources,including time, which they devote to our bispecific antibody candidates and clinical trials. If independent investigators or CROs fail to devotesufficient resources to the development of our bispecific antibody candidates, or if their performance is substandard, it may delay or compromise theprospects for approval and commercialization of any bispecific antibody candidates that we develop. In addition, the use of third-party serviceproviders may require us to disclose our proprietary information to these parties, which could increase the risk that this information will bemisappropriated.Our CROs have the right to terminate their agreements with us in the event of an uncured material breach. In addition, some of our CROs have anability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of the subjects participating in our clinicaltrials warrants such termination, if we make a general assignment for the benefit of our creditors or if we are liquidated.If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do soon commercially reasonable terms. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if theyneed to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols,regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated 30Table of Contentsand we may not be able to obtain regulatory approval for or successfully commercialize our bispecific antibody candidates. As a result, our results ofoperations and the commercial prospects for our bispecific antibody candidates would be harmed, our costs could increase and our ability to generaterevenues could be delayed.Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transitionperiod when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical developmenttimelines. Additionally, CROs may lack the capacity to absorb higher workloads or take on additional capacity to support our needs. Though wecarefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future orthat these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.The collaboration and license agreement, or the Collaboration Agreement, with Incyte Corporation, or Incyte, is important to our business. Ifsuitable bispecific antibody candidates are not identified for further development and commercialization activities under the CollaborationAgreement, or if we or Incyte fail to adequately perform under the Collaboration Agreement, or if we or Incyte terminate the CollaborationAgreement, the development and commercialization of our bispecific antibody candidates would be delayed or terminated and our business wouldbe adversely affected.The Collaboration Agreement may be terminated: • in its entirety or on a program-by-program basis by Incyte for convenience; • in its entirety or on a program-by-program basis by either party due to a material breach of the Collaboration Agreement, or any one ormore programs under the Collaboration Agreement, as applicable; and • on a program-by-program basis (but not in its entirety), by either party if the other party challenges the terminating party’s patents for suchprogram, and such challenge is not withdrawn within 30 days.If the Collaboration Agreement is terminated with respect to one or more programs, all rights in the terminated programs revert to us, subject topayment to Incyte of a reverse royalty of between 0% and 4% on sales of future products, depending on the stage of development as of the date oftermination, if we elect to pursue development and commercialization of bispecific antibody products arising from the terminated programs.Termination of the Collaboration Agreement could cause significant delays in our product candidate development and commercializationefforts, which could prevent us from commercializing our bispecific antibody candidates without first expanding our internal capabilities or enteringinto another agreement with a third party. Any suitable alternative collaboration or license agreement would take considerable time to negotiate andcould also be on less favorable terms to us. In addition, under the Collaboration Agreement, Incyte agreed to conduct certain clinical developmentactivities. If the Collaboration Agreement were to be terminated, and whether or not we identify another suitable collaborator, we may need to seekadditional financing to support the research and development of any terminated product candidates so that we may continue development activities, orwe may be forced to discontinue development of terminated product candidates, each of which could have a material adverse effect on our business.Under the Collaboration Agreement, with the exception of MCLA-145 where we retain full US rights, we are dependent upon Incyte tosuccessfully develop and commercialize bispecific antibody candidates that are identified for further development under the Collaboration Agreement.With the exception of those programs where we retain certain co-development rights, we have limited ability to influence or control Incyte’sdevelopment and commercialization activities or the resources it allocates to development of bispecific antibody product candidates identified underthe Collaboration Agreement. Our interests and Incyte’s interests may differ 31Table of Contentsor conflict from time to time, or we may disagree with Incyte’s level of effort or resource allocation. Incyte may internally prioritize programs underdevelopment within the collaboration differently than we would, or it may not allocate sufficient resources to effectively or optimally develop orcommercialize bispecific antibody candidates arising from such programs. If these events were to occur, our ability to receive revenue from thecommercialization of products arising from such programs would be reduced, and our business would be adversely affected.If we fail to enter into new strategic relationships our business, financial condition, commercialization prospects and results of operations maybe materially adversely affected.Our product development programs and the potential commercialization of our bispecific antibody candidates will require substantial additionalcash to fund expenses. Therefore, for some of our bispecific antibody candidates, we may decide to enter into new collaborations with pharmaceuticalor biopharmaceutical companies for the development and potential commercialization of those bispecific antibody candidates. For instance, we havelicense and collaboration agreements with ONO, Incyte and Simcere Pharmaceutical Group which we have licensed the development andcommercialization of certain of our bispecific antibody candidates.We face significant competition in seeking appropriate collaborators. Collaborations are complex and time-consuming to negotiate anddocument. We may also be restricted under existing and future collaboration agreements from entering into agreements on certain terms with otherpotential collaborators. We may not be able to negotiate collaborations on acceptable terms, or at all. If that were to occur, we may have to curtail thedevelopment of a particular bispecific antibody candidate, reduce or delay its development program or one or more of our other developmentprograms, delay its potential commercialization or reduce the scope of our sales or marketing activities, or increase our expenditures and undertakedevelopment or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercializationactivities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not havesufficient funds, we will not be able to bring our bispecific antibody candidates to market and generate product revenue. If we do enter into a newcollaboration agreement, we could be subject to the following risks, each of which may materially harm our business, commercialization prospects andfinancial condition: • we may not be able to control the amount and timing of resources that the collaboration partner devotes to the product developmentprogram; • the collaboration partner may experience financial difficulties; • we may be required to relinquish important rights such as marketing, distribution and intellectual property rights; • a collaborator could move forward with a competing product developed either independently or in collaboration with third parties,including our competitors; or • business combinations or significant changes in a collaborator’s business strategy may adversely affect our willingness to complete ourobligations under any arrangement.We currently rely on third-party suppliers and other third parties for production of our bispecific antibody candidates and our dependence onthese third parties may impair the advancement of our research and development programs and the development of our bispecific antibodycandidates. Moreover, we intend to rely on third parties to produce commercial supplies of any approved bispecific antibody candidate and ourcommercialization of any of our bispecific antibody candidates could be stopped, delayed or made less profitable if those third parties fail to obtainapproval of the FDA or comparable regulatory authorities, fail to provide us with sufficient quantities of bispecific antibody product or fail to do soat acceptable quality levels or prices or fail to otherwise complete their duties in compliance with their obligations to us or other parties.We rely on and expect to continue to rely on third-party contract manufacturing organizations, or CMOs, for the supply of current goodmanufacturing practice-grade, or cGMP-grade, clinical trial materials and commercial 32Table of Contentsquantities of our bispecific antibody candidates and products, if approved. Reliance on third-party providers may expose us to more risk than if wewere to manufacture bispecific antibody candidates ourselves. The facilities used by our contract manufacturers to manufacture our bispecific antibodycandidates must be approved by the FDA pursuant to inspections that will be conducted after we submit our BLA to the FDA. We have limited controlover the manufacturing process of, and beyond contractual terms, we are completely dependent on our contract manufacturing partners for compliancewith cGMP for the manufacture of our bispecific antibody candidates. If our contract manufacturers cannot successfully manufacture material thatconforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatoryapproval for their manufacturing facilities. In addition, we have limited control over the ability of our contract manufacturers to maintain adequatequality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities forthe manufacture of our bispecific antibody candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturingfacilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our bispecific antibody candidates, ifapproved. In addition, any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that wemay have to suspend the manufacturing of our bispecific antibody candidates or that obtained approvals could be revoked, which would adverselyaffect our business and reputation. Furthermore, third-party providers may breach existing agreements they have with us because of factors beyond ourcontrol. They may also terminate or refuse to renew their agreement because of their own financial difficulties or business priorities, at a time that iscostly or otherwise inconvenient for us. If we were unable to find an adequate replacement or another acceptable solution in time, our clinical trialscould be delayed or our commercial activities could be harmed. In addition, the fact that we are dependent on our collaborators, our suppliers and otherthird parties for the manufacture, filling, storage and distribution of our bispecific antibody candidates means that we are subject to the risk that theproducts may have manufacturing defects that we have limited ability to prevent or control. The sale of products containing such defects couldadversely affect our business, financial condition and results of operations.Growth in the costs and expenses of components or raw materials may also adversely influence our business, financial condition and results ofoperations. Supply sources could be interrupted from time to time and, if interrupted, there is no guarantee that supplies could be resumed (whether inpart or in whole) within a reasonable timeframe and at an acceptable cost or at all.We rely on our manufacturers to purchase from third-party suppliers the materials necessary to produce our bispecific antibody candidates for ourclinical trials. There are a limited number of suppliers for raw materials that we use to manufacture our drugs and there may be a need to assess alternatesuppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our bispecific antibody candidates for our clinicaltrials, and if approved, ultimately for commercial sale. We do not have any control over the process or timing of the acquisition of these raw materialsby our manufacturers. Moreover, we currently do not have any agreements for the commercial production of these raw materials. Although we generallydo not begin a clinical trial unless we believe we have a sufficient supply of a bispecific antibody candidate to complete the clinical trial, anysignificant delay in the supply of a bispecific antibody candidate, or the raw material components thereof, for an ongoing clinical trial due to the needto replace a third-party manufacturer could considerably delay completion of our clinical trials, product testing and potential regulatory approval ofour bispecific antibody candidates. If our manufacturers or we are unable to purchase these raw materials after regulatory approval has been obtainedfor our bispecific antibody candidates, the commercial launch of our bispecific antibody candidates would be delayed or there would be a shortage insupply, which would impair our ability to generate revenues from the sale of our bispecific antibody candidates.We rely on our manufacturers and other subcontractors to comply with and respect the proprietary rights of others in conducting their contractualobligations for us. If our manufacturers or other subcontractors fail to acquire the proper licenses or otherwise infringe third party proprietary rights inthe course of completing their contractual obligations to us, we may have to find alternative manufacturers or defend against claims of 33Table of Contentsinfringement, either of which would significantly impact our ability to develop, obtain regulatory approval for or market our bispecific antibodycandidates, if approved.Risks Related to Intellectual Property and Information TechnologyWe rely on patents and other intellectual property rights to protect our technology, including bispecific antibody candidates and ourBiclonics® technology platform, the enforcement, defense and maintenance of which may be challenging and costly. Failure to enforce or protectthese rights adequately could harm our ability to compete and impair our business.Our commercial success depends in part on obtaining and maintaining patents and other forms of intellectual property rights for technology,including our bispecific antibody and antibody candidates, products and methods used to manufacture those antibody and antibody candidates, themethods for treating patients using those products, among other aspects of our technology or on licensing-in such rights. Failure to protect or to obtain,maintain or extend adequate patent and other intellectual property rights could materially adversely affect our ability to develop and market ourproducts and bispecific antibody candidates.The patent prosecution process is expensive and time-consuming, and we and our current or future licensors, licensees or collaborators may notbe able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that weor our licensors, licensees or collaborators will fail to identify patentable aspects of inventions made in the course of development andcommercialization activities before it is too late to obtain patent protection on them. Further, the issuance, scope, validity, enforceability andcommercial value of our and our current or future licensors’, licensees’ or collaborators’ patent rights are highly uncertain. Our and our licensors’pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or whicheffectively prevent others from commercializing competitive technologies and products. The patent examination process may require us or ourlicensors, licensees or collaborators to narrow the scope of the claims of our or our licensors’, licensees’ or collaborators’ pending and future patentapplications, which may limit the scope of patent protection that may be obtained. We cannot assure you that all of the potentially relevant prior artrelating to our patents and patent applications has been found. If such prior art exists, it can invalidate a patent or prevent a patent from issuing from apending patent application. Even if patents do successfully issue and even if such patents cover our bispecific antibody candidates, third parties mayinitiate opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patentoffices, or similar proceedings challenging the validity, enforceability or scope of such patents, which may result in the patent claims being narrowedor invalidated. Our and our licensors’, licensees’ or collaborators’ patent applications cannot be enforced against third parties practicing thetechnology claimed in such applications unless and until a patent issues from such applications, and then only to the extent the issued claims cover thetechnology.Because patent applications are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we or ourlicensors were the first to file any patent application related to our technology, including a bispecific antibody candidate. Furthermore, if third partieshave filed such patent applications on or before March 15, 2013, an interference proceeding can be initiated by such third parties to determine who wasthe first to invent any of the subject matter covered by the patent claims of our applications. If third parties have filed such applications after March 15,2013, a derivation proceeding can be initiated by such third parties to determine whether our invention was derived from theirs. Even where we have avalid and enforceable patent, we may not be able to exclude others from practicing our invention where the other party can show that they used theinvention in commerce before our filing date or the other party benefits from a compulsory license. 34Table of ContentsIssued patents covering one or more of our products or the Biclonics® technology platform could be found invalid or unenforceable ifchallenged in court.To protect our competitive position, we may from time to time need to resort to litigation to enforce or defend any patents or other intellectualproperty rights owned by or licensed to us, or to determine or challenge the scope or validity of patents or other intellectual property rights of thirdparties. As enforcement of intellectual property rights is difficult, unpredictable and expensive, we may fail in enforcing our rights—in which case ourcompetitors may be permitted to use our technology without being required to pay us any license fees. In addition, litigation involving our patentscarries the risk that one or more of our patents will be held invalid (in whole or in part, on a claim-by-claim basis) or held unenforceable. Such anadverse court ruling could allow third parties to commercialize our product candidates or methods, or our Biclonics® technology platform, and thencompete directly with us, without payment to us.If we were to initiate legal proceedings against a third party to enforce a patent covering one of our products or methods, the defendant couldcounterclaim that our patent is invalid and/or unenforceable. In patent litigation in the United States or in certain jurisdictions in Europe, defendantcounterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet anyof several statutory requirements, for example, lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be anallegation that someone connected with prosecution of the patent withheld relevant information from the U.S. Patent and Trademark Office, or made amisleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation isunpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patentexaminer were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose atleast part, and perhaps all, of the patent protection on one or more of our technologies, products, methods or certain aspects of our Biclonics®technology platform. Such a loss of patent protection could have a material adverse impact on our business. Patents and other intellectual propertyrights also will not protect our technology if competitors design around our protected technology without infringing our patents or other intellectualproperty rights.Intellectual property rights of third parties could adversely affect our ability to commercialize our bispecific antibody candidates, such that wecould be required to litigate or obtain licenses from third parties in order to develop or market our bispecific antibody candidates. Such litigation orlicenses could be costly or not available on commercially reasonable terms.Our competitive position may suffer if patents issued to third parties or other third-party intellectual property rights cover our methods or productcandidates or elements thereof, our manufacture or uses relevant to our development plans, our bispecific antibody candidates, or other attributes of ourbispecific antibody candidates or our Biclonics® technology platform. In such cases, we may not be in a position to develop or commercialize productsor bispecific antibody candidates unless we successfully pursue litigation to nullify or invalidate the third-party intellectual property right concerned,or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms. In addition, we are aware ofissued patents and pending patent applications held by third parties that may be construed as covering some of our bispecific antibody candidates. Webelieve that if such patents or patent applications (if issued as currently pending) were asserted against us, we would have counterclaims and defensesagainst such claims, including non-infringement, the affirmative defense of safe harbor designed to protect activity undertaken to obtain federalregulatory approval of a drug, including under 35 U.S.C. § 271(e) and similar foreign statutes, patent invalidity and/or unenforceability. However, ifsuch counterclaims and defenses were not successful and such patents were successfully asserted against us such that they are found to be valid andenforceable, and infringed by our bispecific antibody candidates, unless we obtain a license to such patents, which may not be available oncommercially reasonable terms or at all, we could be prevented from continuing to develop or commercialize our products. We could also be requiredto pay substantial damages. Similarly, the targets of our bispecific antibody candidates have also been the subject of research by many companies,which have filed patent applications or 35Table of Contentshave patents related to such targets and their uses. There can be no assurance any such patents will not be asserted against us or that we will not need toseek licenses from such third parties. We may not be able to secure such licenses on acceptable terms, if at all, and any such litigation would be costlyand time-consuming.It is also possible that we failed to identify relevant patents or applications. For example, U.S. applications filed before November 29, 2000 andcertain U.S. applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applicationsin the United States and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filingdate being commonly referred to as the priority date. Therefore, patent applications covering our products or platform technology could have beenfiled by others without our knowledge. Furthermore, we operate in a highly competitive field, and given our limited resources, it is unreasonable tomonitor all patent applications purporting to gain broad coverage in the areas in which we are active. Additionally, pending patent applications whichhave been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our methods, productcandidates or the use of our product candidates.Third party intellectual property right holders, including our competitors, may actively bring infringement claims against us. The granting oforphan drug status in respect of any of our bispecific antibody candidates does not guarantee our freedom to operate and is separate from our risk ofpossible infringement of third parties’ intellectual property rights. We may not be able to successfully settle or otherwise resolve such infringementclaims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage or continue costly, unpredictableand time-consuming litigation and may be prevented from or experience substantial delays in marketing our products.If we fail in any such dispute, in addition to being forced to pay damages, we or our licensees may be temporarily or permanently prohibited fromcommercializing any of our bispecific antibody candidates that are held to be infringing. We might, if possible, also be forced to redesign bispecificantibody candidates so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail,could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.In addition, if the breadth or strength of protection provided by our or our licensors’ or collaboration partners’ patents and patent applications isthreatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future bispecific antibodycandidates. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk thatsome of our confidential information could be compromised by disclosure during this type of litigation.Our ability to compete may be adversely affected if we are unsuccessful in defending against any claims by competitors or others that we areinfringing upon their intellectual property rights, such as if Regeneron Pharmaceuticals, Inc. is successful in an appeal of its lawsuit alleging thatwe are infringing its U.S. Patent No. 8,502,018.The various markets in which we plan to operate are subject to frequent and extensive litigation regarding patents and other intellectual propertyrights. In addition, many companies in intellectual property-dependent industries, including those producing therapeutics to treat and potentially curecancer, have employed intellectual property litigation as a means to gain an advantage over their competitors. As a result, we may be required todefend against claims of intellectual property infringement that may be asserted by our competitors against us and, if the outcome of any suchlitigation is adverse to us, it may affect our ability to compete effectively. For example, we are involved in litigation with Regeneron in whichRegeneron has alleged that we are infringing U.S. Patent No. 8,502,018 (‘018 patent). The trial court has entered judgment stating that we are notinfringing Regeneron’s ‘018 patent and that Regeneron’s ‘018 patent is invalid. Further, the trial court ruled and entered judgment that Regeneron’s‘018 patent was procured through inequitable conduct and is unenforceable. Regeneron appealed all three decisions. On February 13, 2017, the UnitedStates Court of Appeals for the 36Table of ContentsFederal Circuit held oral argument on these judgments. A decision was issued on July 27, 2017, wherein the Federal Circuit affirmed the judgment ofunenforceability. Regeneron filed a petition seeking rehearing and rehearing en banc, which the Federal Circuit denied on December 26, 2017. Thecase is currently before the trial court to adjudicate Merus’ motion to receive its attorneys’ fees and costs incurred in defending the litigation. OnMarch 26, 2018, the trial court ruled that Merus’ motion for attorney fees, expert fees, and costs is granted. Merus must next submit a detailedexplanation of those attorney fees, expert fees, and costs of such award in the following weeks. Regeneron has indicated that it may file a petitionseeking review by the Supreme Court of the United States. The European counterpart of this patent, previously revoked by the European OppositionDivision, was reinstated with amended claims by the Technical Board of Appeal for the European Patent Office, or EPO, after an appeal by Regeneronwith an appeal before the Technical Board of Appeal pending concerning whether the description of the patent is in alignment with the claims asallowed by the Technical Board of Appeal as required by Article 84 of the European Patent Convention. Regeneron also initiated a lawsuit against usin the Netherlands which has been stayed. For further descriptions of these legal proceedings, see “Business—Legal Proceedings.”Our involvement in litigation, and in any interferences, opposition proceedings or other intellectual property proceedings inside and outside ofthe United States may divert management from focusing on business operations, could cause us to spend significant amounts of money and may haveno guarantee of success. Any current and potential intellectual property litigation also could force us to do one or more of the following: • stop selling, incorporating, manufacturing or using our products in the United States and/or other jurisdictions that use the subjectintellectual property; • obtain from a third party asserting its intellectual property rights, a license to sell or use the relevant technology, which license may not beavailable on reasonable terms, or at all, or may be non-exclusive thereby giving our competitors access to the same technologies licensedto us; • redesign those products or processes that use any allegedly infringing or misappropriated technology, which may result in significant costor delay to us, or which redesign could be technically infeasible; or • pay damages, including the possibility of treble damages in a patent case if a court finds us to have willfully infringed certain intellectualproperty rights.We are aware that significant number of patents and patent applications may exist relating to aspects of therapeutic antibody technologies filedby, and issued to, third parties, including, but not limited to Regeneron.We cannot assure you that we will ultimately prevail if any of this third-party intellectual property is asserted against us, or in the current U.S. orDutch patent infringement lawsuits. Further, Regeneron has raised opposition proceedings against certain of our patents in jurisdictions includingEurope, Japan and Australia, including pertaining to Merus’ patent family related to “Antibody producing non-human animals”, which concernsfeatures of Merus’ Biclonics® technology platform. Such opposition proceedings have become increasingly common in the EU and are costly todefend. For example, an opposition to our European Patent 2147594, or the EP ‘594 patent, entitled “Antibody Producing Non-Human Mammals” wasfiled in the European Patent Office, or the EPO by Regeneron, as described in Part I, Item 3. “Legal Proceedings” of our Annual Report on Form 20-Ffor the year ended December 31, 2016 and in Note 16 to our Consolidated Financial Statements included in this report, respectively. As theseproceedings continue, we cannot assure you that we will ultimately prevail in these opposition proceedings brought by Regeneron against ourintellectual property.Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significantexpenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be publicannouncements of the results of hearings, motions or 37Table of Contentsother interim proceedings or developments and if securities analysts or investors perceive these results to be negative, we could have a substantialadverse effect on the price of our common shares. Such litigation or proceedings could substantially increase our operating losses and reduce ourresources available for development activities. We may not have sufficient financial or other resources to adequately conduct such litigation orproceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of theirsubstantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings couldhave a material adverse effect on our ability to compete in the marketplace.We may not be successful in obtaining or maintaining necessary rights to our bispecific antibody candidates through acquisitions andin-licenses.We currently have rights to the intellectual property, including patent applications relating to our bispecific antibody candidates. Because ourprograms may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire,in-license, maintain or use these proprietary rights. In addition, our bispecific antibody candidates may require specific formulations to workeffectively and efficiently and the rights to these formulations may be held by others. We may be unable to acquire or in-license any compositions,methods of use, processes, or other third-party intellectual property rights from third parties that we identify as necessary for our bispecific antibodycandidates. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companiesare also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companiesmay have a competitive advantage over us due to their size, cash resources, and greater clinical development and commercialization capabilities.For example, we sometimes collaborate with U.S. and non-U.S. academic institutions to accelerate our pre-clinical research or development underwritten agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’srights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specifiedtimeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties,potentially blocking our ability to pursue our applicable bispecific antibody candidate or program.In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license oracquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable tosuccessfully obtain a license to third-party intellectual property rights necessary for the development of a bispecific antibody candidate or program, wemay have to abandon development of that bispecific antibody candidate or program and our business and financial condition could suffer.If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interestand our business may be adversely affected.Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to beinfringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition bypotential collaborators, partners or customers in our markets of interest. Over the long term, if we are unable to establish name recognition based on ourtrademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. If other entities usetrademarks similar to ours in different jurisdictions, or have senior rights to ours, it could interfere with our use of our current trademarks throughout theworld. 38Table of ContentsIf we do not obtain protection under the Hatch-Waxman Amendments and similar non-U.S. legislation for extending the term of patentscovering each of our bispecific antibody candidates, our business may be materially harmed.Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, islimited. Even if patents covering our bispecific antibody candidates are obtained, once the patent life has expired for a product, we may be open tocompetition from competitive medications, including biosimilar or generic medications. Given the amount of time required for the development,testing and regulatory review of new bispecific antibody candidates, patents protecting such candidates might expire before or shortly after suchcandidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others fromcommercializing products similar or identical to ours.Depending upon the timing, duration and conditions of FDA marketing approval of our bispecific antibody candidates, one or more of our U.S.patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as theHatch-Waxman Amendments, and similar legislation in the EU. The Hatch-Waxman Amendments permit a patent term extension of up to five years fora patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory reviewprocess. However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patentsor otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtainpatent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for thatproduct will be shortened and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicableproducts could be reduced, possibly materially.We enjoy only limited geographical protection with respect to certain patents and may face difficulties in certain jurisdictions, which maydiminish the value of intellectual property rights in those jurisdictions.We generally file our first patent application (i.e., priority filing) at the EPO. International applications under the Patent Cooperation Treaty, orPCT, are usually filed within 12 months after the priority filing. Based on the PCT filing, national and regional patent applications may be filed inadditional jurisdictions where we believe our bispecific antibody candidates may be marketed. We have so far not filed for patent protection in allnational and regional jurisdictions where such protection may be available. In addition, we may decide to abandon national and regional patentapplications before grant. Finally, the grant proceeding of each national/regional patent is an independent proceeding which may lead to situations inwhich applications might in some jurisdictions be refused by the relevant patent offices, while granted by others. It is also quite common thatdepending on the country, the scope of patent protection may vary for the same bispecific antibody candidate and/or technology.Competitors may use our and our licensors’ or collaboration partners’ technologies in jurisdictions where we have not obtained patent protectionto develop their own products and, further, may export otherwise infringing products to territories where we and our licensors or collaboration partnershave patent protection, but enforcement is not as strong as that in the United States. These products may compete with our bispecific antibodycandidates, and our and our licensors’ or collaboration partners’ patents or other intellectual property rights may not be effective or sufficient toprevent them from competing.The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the United States and the EU, and manycompanies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. If we or our licensors encounterdifficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in 39Table of Contentssuch jurisdictions, the value of these rights may be diminished and we may face additional competition from others in those jurisdictions.Some countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition,some countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner mayhave limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third partieswith respect to any patents relevant to our business, our competitive position may be impaired and our business and results of operations may beadversely affected.Intellectual property rights do not necessarily address all potential threats to our competitive advantage.The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, andmay not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative: • others may be able to make compounds that are the same as or similar to our bispecific antibody candidates but that are not covered by theclaims of the patents that we own or have exclusively licensed. • the patents of third parties may have an adverse effect on our business. • we or our licensors or any future strategic partners might not have been the first to conceive or reduce to practice the inventions covered bythe issued patent or pending patent application that we own or have exclusively licensed. • we or our licensors or any future strategic partners might not have been the first to file patent applications covering certain of ourinventions. • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing ourintellectual property rights. • it is possible that our pending patent applications will not lead to issued patents. • issued patents that we own or have exclusively licensed may not provide us with any competitive advantage, or may be held invalid orunenforceable, as a result of legal challenges by our competitors. • our competitors might conduct research and development activities in countries where we do not have patent rights and then use theinformation learned from such activities to develop competitive products for sale in our major commercial markets. • third parties performing manufacturing or testing for us using our products or technologies could use the intellectual property of otherswithout obtaining a proper license. • we may not develop additional technologies that are patentable.Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect ourproducts.As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtainingand enforcing patents in the biopharmaceutical industry involve both technological complexity and legal complexity. Therefore, obtaining andenforcing biopharmaceutical patents is costly, time-consuming and inherently uncertain.In September 2011, the America Invents Act, or the AIA, was enacted in the United States, resulting in significant changes to the U.S. patentsystem. An important change introduced by the AIA was a transition to a “first-to-file” system for deciding which party should be granted a patentwhen two or more patent applications 40Table of Contentsare filed by different parties claiming the same invention, which went into effect on March 16, 2013. Therefore, a third party that now files a patentapplication in the USPTO before we do could be awarded a patent covering an invention of ours even if we created the invention before it was createdby the third party. While we are cognizant of the time from invention to filing of a patent application, circumstances could prevent us from promptlyfiling patent applications for our inventions.Among some of the other changes introduced by the AIA were changes that limit where a patentee may file a patent infringement suit andproviding opportunities for third parties to challenge any issued patent in the USPTO. This applies to all of our U.S. patents, even those issued beforeMarch 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessaryto invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalideven though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party mayattempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as adefendant in a district court action. The AIA and its continued implementation could increase the uncertainties and costs surrounding the prosecutionof our patent applications, and the patent applications of our collaborators or licensors, and the enforcement or defense of our issued patents.Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change inunpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in thefuture. Similarly, there is complexity and uncertainty related to European patent laws. For example, the European Patent Convention was amended inApril 2010 to limit the time permitted for filing divisional applications. In addition, the EP patent system is relatively stringent in the type ofamendments that are allowed during prosecution. These limitations and requirements could adversely affect our ability to obtain new patents in thefuture that may be important for our business.Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and protect other proprietaryinformation.We consider proprietary trade secrets and/or confidential know-how and unpatented know-how to be important to our business. We may rely ontrade secrets and/or confidential know-how to protect our technology, especially where patent protection is believed to be of limited value. However,trade secrets and/or confidential know-how are difficult to maintain as confidential.To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants,contractors and advisors to enter into confidentiality agreements with us. However, current or former employees, consultants, contractors and advisersmay unintentionally or willfully disclose our confidential information to competitors, and confidentiality agreements may not provide an adequateremedy in the event of unauthorized disclosure of confidential information. Enforcing a claim that a third party obtained illegally and is using tradesecrets and/or confidential know-how is expensive, time consuming and unpredictable. The enforceability of confidentiality agreements may vary fromjurisdiction to jurisdiction. Furthermore, if a competitor lawfully obtained or independently developed any of our trade secrets, we would have no rightto prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. Additionally, ifthe steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating thetrade secret.Failure to obtain or maintain trade secrets and/or confidential know-how trade protection could adversely affect our competitive position.Moreover, our competitors may independently develop substantially equivalent proprietary information and may even apply for patent protection inrespect of the same. If successful in obtaining such patent protection, our competitors could limit our use of our trade secrets and/or confidentialknow-how. 41Table of ContentsUnder certain circumstances and to guarantee our freedom to operate, we may also decide to publish some know-how to prevent others fromobtaining patent rights covering such know-how.We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claimingownership of what we regard as our own intellectual property.Many of our employees, including our senior management, were previously employed at universities or at other biopharmaceutical companies,including our competitors or potential competitors. Some of these employees executed proprietary rights, non-disclosure and non-competitionagreements in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information orknow-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed confidential information orintellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. Litigation may be necessary todefend against these claims.If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rightsor personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license fromsuch third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even ifwe successfully prosecute or defend against such claims, litigation could result in substantial costs and distract management.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment andother requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance withthese requirements.Periodic maintenance and annuity fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages overthe lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural,documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be curedby payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result inabandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions withinprescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or our licensors or collaborators fail tomaintain the patents and patent applications covering our bispecific antibody candidates, our competitors might be able to enter the market, whichwould have an adverse effect on our business.Use of social media could give rise to liability, breaches of data security, or reputational harm.We and our employees use social media to communicate internally and externally. There is risk that the use of social media by us or ouremployees to communicate about our products or business may give rise to liability, lead to the loss of trade secrets or other intellectual property, orresult in public exposure of personal information of our employees, clinical trial patients, customers, and others. Furthermore, negative posts orcomments about us or our products in social media could seriously damage our reputation, brand image, and goodwill. Any of these events could havea material adverse effect on our business, prospects, operating results, and financial condition and could adversely affect the price of our CommonStock.Our computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches, which couldadversely affect our business.Despite the implementation of security measures, our computer systems and data and those of our current or future CROs or other contractors andconsultants are vulnerable to compromise or damage from computer 42Table of Contentshacking, malicious software, fraudulent activity, employee misconduct, human error, telecommunication and electrical failures, natural disasters, orother cybersecurity attacks or accidents. Future acquisitions could expose us to additional cybersecurity risks and vulnerabilities from any newlyacquired information technology infrastructure. Cybersecurity attacks are constantly increasing in sophistication and are made by groups andindividuals with a wide range of motives (including industrial espionage) and expertise, including by organized criminal groups, “hacktivists,” nationstates, and others. As a company with an increasingly global presence, our systems are subject to frequent attacks. Due to the nature of some of theseattacks, there is a risk that an attack may remain undetected for a period of time. While we continue to make investments to improve the protection ofdata and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches.Any cybersecurity incident could adversely affect our business, by leading to, for example, the loss of trade secrets or other intellectual property,demands for ransom or other forms of blackmail, or the unauthorized disclosure of personal or other sensitive information of our employees, clinicaltrial patients, customers, and others. Although to our knowledge we have not experienced any material cybersecurity incident to date, if such an eventwere to occur, it could seriously harm our development programs and our business operations. We could be subject to regulatory actions taken bygovernmental authorities, litigation under laws that protect the privacy of personal information, or other forms of legal proceedings, which could resultin significant liabilities or penalties. Further, a cybersecurity incident may disrupt our business or damage our reputation, which could have a materialadverse effect on our business, prospects, operating results, share price and shareholder value, and financial condition. We could also incursubstantial remediation costs, including the costs of investigating the incident, repairing or replacing damaged systems, restoring normal businessoperations, implementing increased cybersecurity protections, and paying increased insurance premiums.Risks Related to Employee Matters and Managing GrowthOur future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.Our success depends upon the continued contributions of our key management, scientific and technical personnel, many of whom have beeninstrumental for us and have substantial experience with our therapies and related technologies. These key management individuals include themembers of our board of directors. For example, our founder and Chief Executive Officer, Ton Logtenberg, holds a Ph.D. in medical biology, was aprofessor in the Department of Immunology at Utrecht University and co-founded the Dutch biotechnology company, Crucell N.V.The loss of key managers and senior scientists could delay our research and development activities. In addition, the competition for qualifiedpersonnel in the biopharmaceutical and pharmaceutical field is intense, and our future success depends upon our ability to attract, retain and motivatehighly-skilled scientific, technical and managerial employees. We face competition for personnel from other companies, universities, public andprivate research institutions and other organizations. If our recruitment and retention efforts are unsuccessful in the future, it may be difficult for us toimplement business strategy, which could have a material adverse effect on our business.We expect to expand our development, regulatory and sales and marketing capabilities, and as a result, we may encounter difficulties inmanaging our growth, which could disrupt our operations.We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drugdevelopment, regulatory affairs and sales and marketing. To manage our anticipated future growth, we must continue to implement and improve ourmanagerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limitedfinancial resources and the limited experience of our management team in managing a company with such 43Table of Contentsanticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. Theexpansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability tomanage growth could delay the execution of our business plans or disrupt our operations.Risks Related to Our Common SharesThe price of our common shares may be volatile and may fluctuate due to factors beyond our control.The share price of publicly traded emerging biopharmaceutical and drug discovery and development companies has been highly volatile and islikely to remain highly volatile in the future. The market price of our common shares may fluctuate significantly due to a variety of factors, including: • positive or negative results of testing and clinical trials by us, strategic partners or competitors; • delays in entering into strategic relationships with respect to development and/or commercialization of our bispecific antibody candidatesor entry into strategic relationships on terms that are not deemed to be favorable to us; • technological innovations or commercial product introductions by us or competitors; • changes in government regulations; • developments concerning proprietary rights, including patents and litigation matters; • public concern relating to the commercial value or safety of any of our bispecific antibody candidates; • financing or other corporate transactions; • publication of research reports or comments by securities or industry analysts; • general market conditions in the pharmaceutical industry or in the economy as a whole; or • other events and factors, many of which are beyond our control.These and other market and industry factors may cause the market price and demand for our securities to fluctuate substantially, regardless of ouractual operating performance, which may limit or prevent investors from readily selling their common shares and may otherwise negatively affect theliquidity of our common shares. In addition, the stock market in general, and biopharmaceutical companies in particular, have experienced extremeprice and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.We will continue to incur increased costs as a result of operating as a public company with limited liability (naamloze vennootschap), and ourmanagement team will be required to devote substantial time to new compliance initiatives and corporate governance practices.As a public company, and particularly after we no longer qualify as an emerging growth company, we will continue to incur significant legal,accounting and other expenses related to our operation as a public company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform andConsumer Protection Act, the listing requirements of The Nasdaq Global Market, or Nasdaq, and other applicable securities rules and regulationsimpose various requirements on non-U.S. reporting public companies, including the establishment and maintenance of effective disclosure andfinancial controls and corporate governance practices. Our Board of Directors and other personnel will need to continue to devote a substantial amountof time to these compliance initiatives. Moreover, these rules and regulations have and will continue to increase our legal and financial compliancecosts and will make some activities more time-consuming and costly.These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, theirapplication in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuinguncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. 44Table of ContentsPursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish a report by our management on our internalcontrol over financial reporting with our Annual Report on Form 20-F. While we remain an emerging growth company, we will not be required toinclude an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To maintaincompliance with Section 404, we engage in a process to document and evaluate our internal control over financial reporting, which is both costly andchallenging. In this regard, we continue to dedicate internal resources and have engaged outside consultants and adopted a detailed work plan to assessand document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate throughtesting that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financialreporting. Despite our efforts, there is a risk that we will not be able to maintain effective internal control over financial reporting as required bySection 404. If we identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence inthe reliability of our financial statements.We have identified material weaknesses in our internal control over financial reporting that could, if not remediated, result in materialmisstatements in our financial statements and cause shareholders to lose confidence in our financial and other public reporting, which would harmour business and the trading price of our common shares.As a public reporting company, we are subject to the rules and regulations established from time to time by the SEC and Nasdaq. These rules andregulations require, among other things, that we have, and periodically evaluate, procedures with respect to our internal control over financialreporting. Reporting obligations as a public company are likely to continue to place a considerable strain on our financial and management systems,processes and controls, as well as on our personnel.In addition, as a public company, we are required to document and test our internal control over financial reporting pursuant to Section 404 sothat our management can certify as to the effectiveness of our internal control over financial reporting, which requires us to document and makesignificant changes to our internal control over financial reporting. While we are an “emerging growth company,” our independent registered publicaccounting firm will not be required to test the effectiveness of our internal control over financial reporting in connection with an auditor attestationpursuant to Section 404.In its review of our internal control over financial reporting in connection with the annual audit for 2017, management has identified a materialweakness associated with a lack of adequate cut-off procedures to ensure the timely recognition, measurement and classification of operating expensesand recording of certain period-end accruals. Specifically, we did not design and maintain effective internal control over the assessment of theaccounting for significant contractual arrangements related to our clinical research and manufacturing agreements and the classification of operatingexpenses. In its review of our internal control over financial reporting in connection with the annual audit for the year ended December 31, 2016,management identified the following material weaknesses: insufficient accounting resources required to fulfill IFRS and SEC reporting requirementsand the absence of comprehensive IFRS accounting policies and financial reporting procedures. As of December 31, 2017, these material weaknesseswere not remediated. As a result of these material weaknesses, our management concluded that our internal control over financial reporting was noteffective as of December 31, 2017. Notwithstanding these material weaknesses, our management, based on the substantial work performed, concludedthat our consolidated financial statements for the periods covered by and included in this Annual Report are fairly stated in all material respects inaccordance with IFRS for each of the periods presented in this Annual Report.As described in “Item 15 Controls and Procedures,” we have taken and plan to take additional steps intended to address the underlying causes ofthe material weakness. There can be no assurance that any measures we take will remediate the material weaknesses identified, nor can there by anyassurance as to how quickly we will be able to remediate these material weaknesses. In addition, we may encounter problems or delays in 45Table of Contentscompleting the implementation of these measures. If these material weaknesses are not remediated, or if other undetected material weaknesses in ourinternal controls exist, it could result in material misstatements in our financial statements requiring us to restate previously issued financialstatements. In addition, material weaknesses, and any resulting restatements, could cause investors to lose confidence in our reported financialinformation, and could subject us to regulatory scrutiny and to litigation from shareholders, which could have a material adverse effect on our businessand the price of our common shares.Furthermore, the correction of any such material weaknesses, including the ones noted above, could require additional remedial measuresincluding additional personnel, which could be costly and time-consuming. If we do not maintain adequate financial and management personnel,processes and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, whichcould cause a decline in our common share price and adversely affect our results of operations and financial condition. Failure to comply with theSarbanes-Oxley Act of 2002 could potentially subject us to sanctions or investigations by the SEC, Nasdaq or other regulatory authorities, whichwould require additional financial and management resources.Members of our management, members of our board of directors, and certain shareholders affiliated with members of our board of directorsmay be able to exercise significant control over us, and the interests of our other shareholders may conflict with the interests of our existingshareholders.As of December 31, 2017, members of our management, our board of directors and shareholders affiliated with members of our board of directors,in the aggregate, owned approximately 20% of our common shares. Depending on the level of attendance at our general meetings of shareholders,these shareholders may be in a position to determine the outcome of decisions taken at any such general meeting. Any shareholder or group ofshareholders controlling more than 50% of the share capital present and voting at our general meetings of shareholders may control any shareholderresolution requiring a simple majority, including the appointment of board members, certain decisions relating to our capital structure, the approval ofcertain significant corporate transactions and amendments to our Articles of Association. Among other consequences, this concentration of ownershipmay have the effect of delaying or preventing a change in control and might therefore negatively affect the market price of our common shares.In addition, in the event we receive an offer from a third party to acquire us or prior to our soliciting an offer from, or negotiating terms with, anythird party, with respect to a sale or license of two of our undisclosed product candidates in pre-clinical development, we must first notify one of ourexisting shareholders of such opportunity and negotiate in good faith with such shareholder the terms of a purchase or license agreement for suchproduct candidates. This obligation may have the effect of delaying or preventing a change in control of us that shareholders may consider favorable,including transactions in which shareholders might otherwise receive a premium for your shares.Future sales, or the possibility of future sales, of a substantial number of our common shares could adversely affect the price of the shares.We have entered into a registration rights agreement pursuant to which we agreed, under certain circumstances, to file a registration statement toregister the resale of the shares held by certain of our existing shareholders, as well as to cooperate in certain public offerings of such shares. Inaddition, we have registered and intend to continue to register all common shares that we may issue under our equity compensation plans. Onceregistered, these common shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates who holdsuch shares. In addition, in connection with entering into the Collaboration Agreement, we entered into a Share Subscription Agreement with Incyte,pursuant to which we issued and sold to Incyte 3,200,000 of our common shares. Incyte’s ability to sell these common shares is subject to certainlimitations, including a lock-up agreement and limitations on the volume of shares that may be sold during a given time period. However, future salesof a substantial number of our common shares, or the perception that such sales will occur, could cause a decline in the market price of our commonshares. 46Table of ContentsProvisions of our Articles of Association or Dutch corporate law might deter acquisition bids for us that might be considered favorable andprevent or frustrate any attempt to replace or remove the then board of directors.Provisions of our Articles of Association may make it more difficult for a third party to acquire control of us or effect a change in our board ofdirectors. These provisions include: • the authorization of a class of preferred shares that may be issued to a friendly party; • staggered four-year terms of our board members, whereby reappointment is limited to two times; • a provision that our board members may only be removed by the general meeting of shareholders by a two-thirds majority of votes castrepresenting more than 50% of our outstanding share capital (unless the removal was proposed by the board of directors); and • a requirement that certain matters, including an amendment of our Articles of Association, may only be brought to our shareholders for avote upon a proposal by our board of directors.Our anti-takeover provision may prevent a beneficial change of control.We adopted an anti-takeover measure pursuant to which our board of directors may, subject to Board of Directors approval but withoutshareholder approval, issue (or grant the right to acquire) cumulative preferred shares. We may issue an amount of cumulative preferred shares up to100% of our issued capital immediately prior to the issuance of such cumulative preferred shares. In such event, the cumulative preferred shares (orright to acquire cumulative preferred shares) will be issued to a separate, special purpose foundation, which will be structured to operate independentlyof us. We have granted a right to acquire such number of cumulative preferred shares as we may issue to such special purpose foundation.The cumulative preferred shares will be issued to the foundation for their nominal value, of which only 25% will be due upon issuance. Thevoting rights of our shares are based on nominal value and as we expect our shares to continue to trade substantially in excess of nominal value,cumulative preferred shares issued at nominal value can obtain significant voting power for a substantially reduced price and thus be used as adefensive measure. These cumulative preferred shares will have both a liquidation and dividend preference over our common shares and will accruecash dividends at a fixed rate. The board may issue these cumulative preferred shares to protect us from influences that do not serve our best interestsand threaten to undermine our continuity, independence and identity. These influences may include a third-party acquiring a significant percentage ofour common shares, the announcement of a public offer for our common shares, other concentration of control over our common shares or any otherform of pressure on us to alter our strategic policies. If the board determines to issue the cumulative preferred shares to such a foundation, thefoundation’s articles of association provide that it will act to serve the best interests of us, our associated business and all parties connected to us, byopposing any influences that conflict with these interests and threaten to undermine our continuity, independence and identity. This foundation isstructured to operate independently of us.We do not expect to pay cash dividends in the foreseeable future.We have not paid any cash dividends since our incorporation. Even if future operations lead to significant levels of distributable profits, wecurrently intend that any earnings will be reinvested in our business and that cash dividends will not be paid until we have an established revenuestream to support continuing cash dividends. Payment of any future dividends to shareholders will in addition effectively be at the discretion of thegeneral meeting, upon proposal of the board of directors, which proposal is subject to the approval of the board of directors after taking into accountvarious factors including our business prospects, cash requirements, financial performance and new product development. In addition, payment offuture cash dividends may be made only if our shareholders’ equity exceeds the sum of our paid-in and called-up share capital plus the reservesrequired to be maintained by Dutch law or by our Articles of Association. Accordingly, investors cannot rely on cash dividend income from ourcommon shares and any returns on an investment in our common shares will likely depend entirely upon any future appreciation in the price of ourcommon shares. 47Table of ContentsHolders of our common shares outside the Netherlands may not be able to exercise preemptive rights.In the event of an increase in our share capital, holders of our common shares are generally entitled under Dutch law to full preemptive rights,unless these rights are excluded either by a resolution of the general meeting of shareholders, or by a resolution of the board (if the board has beendesignated by the general meeting of shareholders for this purpose). Certain holders of our common shares outside the Netherlands, in particular U.S.holders of our common shares, may not be able to exercise preemptive rights unless a registration statement under the Securities Act is declaredeffective with respect to our common shares issuable upon exercise of such rights or an exemption from the registration requirements is available.The rights of our shareholders may be different from the rights of shareholders in companies governed by the laws of U.S. jurisdictions.We are a Dutch public company with limited liability (naamloze vennootschap). Our corporate affairs are governed by our Articles of Associationand by the laws governing companies incorporated in the Netherlands. The rights of shareholders and the responsibilities of members of our board maybe different from the rights and obligations of shareholders in companies governed by the laws of U.S. jurisdictions. In the performance of its duties,our board is required by Dutch law to consider the interests of our company, its shareholders, its employees and other stakeholders, in all cases with dueobservation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or inaddition to, the interests of our shareholders.We are not obligated to and do not comply with all the best practice provisions of the Dutch Corporate Governance Code. This may affect therights of our shareholders.We are subject to the Dutch Corporate Governance Code, or the DCGC. The DCGC contains both principles and best practice provisions forboard of directors, shareholders and general meetings of shareholders, financial reporting, auditors, disclosure, compliance and enforcement standards.The DCGC applies to all Dutch companies listed on a government-recognized stock exchange, whether in the Netherlands or elsewhere, includingNasdaq. The principles and best practice provisions apply to our board (in relation to role and composition, conflicts of interest and independencerequirements, board committees and remuneration), shareholders and the general meeting of shareholders (for example, regarding anti-takeoverprotection and our obligations to provide information to our shareholders) and financial reporting (such as external auditor and internal auditrequirements). We do not comply with all the best practice provisions of the DCGC. As a result, the rights of our shareholders may be affected and ourshareholders may not have the same level of protection as a shareholder in another Dutch public company with limited liability (naamlozevennootschap) listed in the Netherlands that fully complies with the DCGC.Claims of U.S. civil liabilities may not be enforceable against us.We are incorporated under the laws of the Netherlands. Most of our assets are located outside the United States. The majority of our boardmembers reside outside the United States. The United States and the Netherlands currently do not have a treaty providing for the reciprocal recognitionand enforcement of judgments, other than arbitration awards, in civil and commercial matters. With respect to choice of court agreements in civil orcommercial matters, we note that the Hague Convention on Choice of Court Agreements entered into force for the Netherlands, but has not entered intoforce for the United States. Consequently, a final judgment for payment given by a court in the United States, whether or not predicated solely uponU.S. securities laws, would not automatically be recognized or enforceable in the Netherlands. In order to obtain a judgment which is enforceable in theNetherlands, the party in whose favor a final and conclusive judgment of the U.S. court has been rendered will be required to file its claim with a courtof competent jurisdiction in the Netherlands. Such party may submit to the Dutch court the final judgment rendered by the U.S. court. If and to theextent that the Dutch court finds that the jurisdiction of the U.S. court has been based on grounds which are 48Table of Contentsinternationally acceptable and that proper legal procedures have been observed, the court of the Netherlands will, in principle, give binding effect tothe judgment of the U.S. court, unless such judgment contravenes principles of public policy of the Netherlands or is irreconcilable with a judgementof a Dutch court or foreign court that is acknowledged in the Netherlands. Dutch courts may deny the recognition and enforcement of punitivedamages or other awards. Moreover, a Dutch court may reduce the amount of damages granted by a U.S. court and recognize damages only to theextent that they are necessary to compensate actual losses or damages. Enforcement and recognition of judgments of U.S. courts in the Netherlands aresolely governed by the provisions of the Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering). As a result of the above, it maynot be possible for investors to effect service of process within the United States upon us or members of our board or certain experts named herein whoare residents of the Netherlands or countries other than the United States or to enforce any judgments against the same obtained in U.S. courts in civiland commercial matters, including judgments under the U.S. federal securities laws.We are a foreign private issuer and, as a result, we will not be subject to U.S. proxy rules and will be subject to Exchange Act reportingobligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.We report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status.Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicableto U.S. domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations inrespect of a security registered under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stockownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the ExchangeAct requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or currentreports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers are not required to file their annual reporton Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annualreport on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimedat preventing issuers from making selective disclosures of material information. As a result of the above, our shareholders may not have the sameprotections afforded to shareholders of companies that are not foreign private issuers. However, we are subject to Dutch laws and regulations withregard to such matters and voluntarily furnish quarterly unaudited financial information to the SEC on Form 6-K.As a foreign private issuer and as permitted by the listing requirements of Nasdaq, we rely on certain home country governance practicesrather than the corporate governance requirements of Nasdaq.We qualify as a foreign private issuer. As a result, in accordance with the listing requirements of Nasdaq, we rely on home country governancerequirements and certain exemptions thereunder rather than relying on the corporate governance requirements of Nasdaq. In accordance with Dutch lawand generally accepted business practices, our Articles of Association do not provide quorum requirements generally applicable to general meetings ofshareholders. To this extent, our practice varies from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylawsfor a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting stock. Although we must provideshareholders with an agenda and other relevant documents for the general meeting of shareholders, Dutch law does not have a regulatory regime for thesolicitation of proxies and the solicitation of proxies is not a generally accepted business practice in the Netherlands, thus our practice will vary fromthe requirement of Nasdaq Listing Rule 5620(b). In addition, we have opted out of certain Dutch shareholder approval requirements for the issuance ofsecurities in connection with certain events such as the acquisition of stock or assets of another company, the establishment of or amendments toequity-based compensation plans for employees, a change of control of us and certain private placements. To this extent, our practice varies from therequirements of Nasdaq Rule 5635, 49Table of Contentswhich generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events. Accordingly, ourshareholders may not have the same protections afforded to shareholders of companies that are subject to these Nasdaq requirements.We may lose our foreign private issuer status which would then require us to comply with the Exchange Act’s domestic reporting regime andcause us to incur significant legal, accounting and other expenses.We are a foreign private issuer and therefore we are not required to comply with all of the periodic disclosure and current reporting requirementsof the Exchange Act applicable to U.S. domestic issuers. If we no longer qualify as a foreign private issuer as of end of the second quarter of a fiscalyear, we would be required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S.domestic issuers as of the start of the following fiscal year. In order to maintain our current status as a foreign private issuer, (a) a majority of ourcommon shares must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our executive officersor directors may not be United States citizens or residents, (ii) more than 50 percent of our assets cannot be located in the United States and (iii) ourbusiness must be administered principally outside the United States. If we lost this status, we would be required to comply with the Exchange Actreporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign privateissuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. Theregulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S.domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign privateissuer status would increase our legal and financial compliance costs and would make some activities highly time consuming and costly. We alsoexpect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult andexpensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially highercosts to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board.We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to “emerging growthcompanies” will make our common shares less attractive to investors.We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an “emerging growth company,” we maytake advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growthcompanies,” including not being required to comply with the auditor attestation requirements of Section 404, exemptions from the requirements ofholding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.As an “emerging growth company,” we are not required to report selected financial data for periods prior to the earliest audited financial statementspresented in the registration statement for the initial public offering of our common shares. As a result, we only have to present selected financial datafor periods starting with the year ended December 31, 2014. Public companies that are not emerging growth companies must present selected financialdata for a five-year period. We may take advantage of these exemptions until we are no longer an “emerging growth company.” We could be an“emerging growth company” for up to five years, although circumstances could cause us to lose that status earlier, including if the aggregate marketvalue of our common shares held by non-affiliates exceeds $700 million as of the end of our second fiscal quarter, in which case we would no longer bean “emerging growth company” as of the fiscal year-end. We cannot predict if investors will find our common shares less attractive because we mayrely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our commonshares and the price of our common shares may be more volatile. 50Table of ContentsIf securities or industry analysts publish inaccurate or unfavorable research about our business, the price of our common shares and ourtrading volume could decline.The trading market for our common shares depends in part on the research and reports that securities or industry analysts publish about us or ourbusiness. If one or more of the analysts who cover us downgrade our common shares or publish inaccurate or unfavorable research about our business,the price of our common shares would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly,demand for our common shares could decrease, which might cause the price of our common shares and trading volume to decline.We may be classified as a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federalincome tax consequences to U.S. investors in the common shares.Based on the current and anticipated value of our assets, including goodwill, and the composition of our income, assets and operations, we donot believe we were a “passive foreign investment company,” or PFIC, for the current taxable year and for our taxable year ended December 31, 2017.However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you that the U.S. Internal RevenueService, or the IRS, will not take a contrary position. A non-U.S. company will be considered a PFIC for any taxable year if (i) at least 75% of its grossincome is passive income, or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) isattributable to assets that produce or are held for the production of passive income. The value of our assets generally is determined by reference to themarket price of our common shares, which may fluctuate considerably. In addition, the composition of our income and assets is affected by how, andhow quickly, we spend the cash we raise. If we were to be treated as a PFIC for any taxable year during which a U.S. Holder (as defined below under“Item 10.E Taxation”) holds a common share, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See “Item 10.ETaxation.”Item 4 Information on the Company.A. History and Development of the CompanyWe were incorporated as Merus B.V. under the laws of the Netherlands on June 16, 2003. Our principal executive offices are located at Yalelaan62, 3584 CM Utrecht, The Netherlands. Our telephone number at the Utrecht address is +31 30 253 8800. Our website address is www.merus.nl.Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report. We have included our websiteaddress in this Annual Report solely as an inactive textual reference.Our agent for service of process in the United States is Cogency Global Inc., whose address is 10 E. 40th Street, 10th floor, New York, New York10016.Our capital expenditures primarily consist of laboratory equipment and leasehold improvements. For the years ended December 31, 2017, 2016,and 2015, the amount of our principal capital expenditures was €0.7 million, €0.5 million and €0.1 million, respectively. Our current capitalexpenditures are distributed between the United States and Europe with most of our capital expenditures made in the Netherlands. We expect tofinance our current capital expenditures from the cash flows from operating activities, proceeds of our initial public offering, our collaboration withIncyte Corporation, and our private placement closed on February 15, 2018. We expect our capital expenditures to increase in absolute terms in thenear term as we continue to advance our research and development programs and grow our operations. For more information on our capitalexpenditures, see the section of this Annual Report titled “Item 5.B.—Liquidity and Capital Resources—Capital Expenditures.”B. Business OverviewWe are a clinical-stage immuno-oncology company developing innovative bispecific antibody therapeutics. Our pipeline of full-length humanbispecific antibody candidates, which we refer to as Biclonics®, are generated 51Table of Contentsfrom our Biclonics® technology platform, which is able to generate a diverse array of antibody-heavy chains against virtually any target, paired with acommon light chain. Two heavy chains paired with a common light chain can be combined to produce novel bispecific antibodies that bind a diversearray of targets and display differentiated biology. By binding to two different targets, Biclonics® can provide a variety of mechanisms of action. Forexample, Merus Biclonics® can be designed to simultaneously block receptors that drive tumor cell growth and survival and to mobilize the patient’simmune response by engaging T-cells and/or activating various killer cells to eradicate tumors. In our pre-clinical studies, our bispecific antibodycandidates were effective in killing tumor cells, a result that we believe supports their potential efficacy in the treatment of cancer. In February 2015,we commenced a Phase 1/2 clinical trial of our most advanced bispecific antibody candidate, MCLA-128, for the treatment of HER2-expressing solidtumors. In January 2018, we dosed the first patient in a Phase 2, open-label, multi-center international clinical trial to evaluate MCLA-128 in twometastatic breast cancer, or MBC, populations including HER2-positive MBC patients and hormone receptor positive/HER2-low MBC patients.MCLA-128 is a full-length IgG bispecific antibody with enhanced antibody-dependent cellular cytotoxicity, or ADCC, targeting HER2 and HER3receptors. MCLA-128 blocks the HER3 signaling pathway by employing a Dock & Block™ mechanism. MCLA-128 is designed to dock onto aspecific region of the HER2 receptor to orientate MCLA-128’s HER3 binding arm to block HER2:HER3 heterodimerization. Oncogenic signalingthrough the HER3 pathway, even in the presence of high heregulin concentrations, may thus be effectively blocked. The Phase 2 clinical trial isdesigned to observe the activity of this HER2/HER3-targeted candidate in combination with current standards of care in areas of unmet need.Concurrently, our Phase 1/2 clinical trial evaluating single agent activity for MCLA-128 in gastric, ovarian, endometrial and non-small cell lung, orNSCL, cancers is ongoing and we anticipate defining a clinical plan for MCLA-128 in solid tumors beyond metastatic breast cancer thereafter.In May 2016, we commenced a Phase 1 clinical trial of our second bispecific antibody candidate, MCLA-117, for the treatment of acute myeloidleukemia, or AML, and we announced the filing of the IND in the US for MCLA-117 in 2018 and its subsequent approval by the FDA. AML generallyhas a poor prognosis and limited progress has been made in disease outcomes despite a growing AML patient population. Clinical and pre-clinicalstudies suggest that treatment-resistant leukemic stem cells are a potential cause of disease relapse. MCLA-117 binds to CD3, a cell-surface moleculepresent on all T-cells, and to CLEC12A, a cell surface molecule present on approximately 90 to 95% of AML tumor cells and stem cells in newlydiagnosed and relapsed patients. MCLA-117 is designed to recruit and activate T-cells to kill AML tumor cells and stem cells. In our pre-clinicalstudies, MCLA-117 killed tumor cells in blood samples of AML patients. We plan to seek orphan drug designation for MCLA-117 for the treatment ofAML from the U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA. We are continuing our dose escalation ofthe Phase 1 clinical trial for MCLA-117 in Europe and we plan to open sites for the Phase 1 trial in the United States. Safety and potential early activitydata is expected in 2018. We also intend to evaluate MCLA-117 for the treatment of myelodysplastic syndrome, or MDS.In addition to MCLA-128 and MCLA-117, we are also developing MCLA-158, a bispecific antibody candidate that is designed to bind to cancerstem cells expressing leucine-rich repeat-containing G protein-coupled receptor 5, or Lgr5, and epidermal growth factor receptors, or EGFR, for thepotential treatment of colorectal cancer, and the first Clinical Trials Application, or CTA, to the European Medicines Agency, or EMA, was approvedto initiate a Phase 1 clinical trial in Europe in January 2018. We have also filed an IND for MCLA-158 with the FDA in the first quarter of 2018, whichreceived acceptance from the FDA in April 2018, and we plan to open trial sites in the U.S. in the second quarter of 2018. MCLA-158 is designed tokill cancer stem cells using two different mechanisms of action. The first mechanism of action involves blocking growth and survival pathways intumor stem cells. The second mechanism of action involves the recruitment and enhancement of immune effector cells.Additionally, we also have a pipeline of proprietary antibody candidates in preclinical development, including the bispecific antibody candidateMCLA-145, which is being developed in collaboration with Incyte Corporation and is designed to bind to PD-L1 and a non-disclosed secondimmunomodulatory target. We also 52Table of Contentshave several other antibody candidates in pre-clinical development that bind to other target combinations. Each of our antibody candidates in ourpreclinical and clinical pipeline are designed to bind to targets believed to be useful in the treatment of cancer with an intention to establish efficacyand obtain information for submission to the FDA.Our Biclonics® technology platform employs an array of proprietary technologies and techniques to generate bispecific human antibodies. Weutilize our patented MeMo® mouse harboring a common light chain in its germline that is capable of producing an array of antibodies with diverseheavy chains that are capable of binding virtually any antigen, the information from which can then be utilized to generate bispecific antibodycandidates. We also employ methods from which to efficiently screen panels of common light chain antibodies, designed to allow Merus to rapidlyidentify and generate Biclonics® therapeutic candidates with differentiated modes of action. The Biclonics® technology also includes use ofproprietary host cells and dimerization technology useful to produce bispecific antibodies efficiently. The Biclonics® format retains the IgG format ofconventional mAbs and is designed to preserve the format’s key features, including stability, long half-life and low immunogenicity, when developingour bispecific antibody candidates. We leverage industry-standard manufacturing processes and infrastructure to efficiently produce Biclonics®.Our StrategyOur goal is to become a leading immuno-oncology company developing innovative bispecific antibodies to treat and potentially cure varioustypes of cancer. Our business strategy comprises the following components: • Successfully develop our most advanced bispecific antibody candidate, MCLA-128, for the treatment of solid tumors. We are developingMCLA-128 for the treatment of patients with HER2-expressing and other solid tumors, including breast, ovarian, endometrial, gastric andnon-small cell lung cancer. We commenced a Phase 1/2 clinical trial of MCLA-128 in Europe in February 2015. In the dose escalationphase of the trial, the recommended dose of MCLA-128 was established. In this ongoing study, preliminary data showed that MCLA-128 iswell tolerated with a very good safety profile. Preliminary efficacy data suggests consistent antitumor activity in heavily pretreatedmetastatic breast cancer patients progressing on HER2 therapies. In January 2018, we commenced a combination Phase 2 clinical trial inthe United States for MCLA-128. We believe that if MCLA-128 is successfully developed and obtains regulatory approval, it has thepotential to address disease-specific challenges that are not currently being met by existing therapies. • Successfully develop our second most advanced bispecific antibody candidate, MCLA-117, for the treatment of AML. We are developingMCLA-117 for the treatment of patients with AML. We commenced a Phase 1 clinical trial of MCLA-117 in Europe in May 2016 for thetreatment of patients with AML to assess its safety, tolerability and anti-tumor activity and filed an IND in the US in January 2018, forwhich we obtained acceptance by the FDA in February 2018. We are continuing our dose escalation of the Phase 1 clinical trial for MCLA-117 in Europe and we plan to open sites for the Phase I clinical trial in the United States. Safety and potential early activity data isexpected in 2018. If the results of this clinical trial are favorable, we plan to seek orphan drug designation from the FDA and the EMA forMCLA-117 for the treatment of AML. We believe that if MCLA-117 is successfully developed and obtains regulatory approval, it has thepotential to transform the treatment of AML. We also intend to evaluate MCLA-117 for the treatment of MDS. • Successfully develop our third bispecific antibody candidate, MCLA-158, for the treatment of metastatic colorectal cancer and othersolid tumors. We are developing MCLA-158 with an initial focus on the treatment of metastatic colorectal cancer. MCLA-158 has receivedapproval of a CTA in several European countries for the potential treatment of metastatic colorectal cancer, including patients with theRAS-mutation, which represent a substantial unmet need. We expect to dose the first patient in the second quarter of 2018. We have alsofiled an IND for MCLA-158 with the U.S. FDA in the first quarter of 2018, which received acceptance from the FDA in April, 2018, and weplan to open 53Table of Contents trial sites in the U.S. in the second quarter of 2018. MCLA-158 is an ADCC-enhanced Biclonics® designed to bind to cancer stem cellsexpressing leucine-rich repeat-containing G protein-coupled receptor 5, or Lgr5, and epidermal growth factor receptors, or EGFR. Webelieve that if MCLA-158 is successfully developed and obtains regulatory approval, it has the potential to address and transform thetreatment of metastatic colorectal cancer and other solid tumors. • Accelerate the internal discovery and development of additional immunotherapeutic antibody candidates. We believe we are wellpositioned to expand our pipeline of Biclonics® for the treatment of other forms of cancer. Our platform employs our proprietary commonlight chain transgenic MeMo® for the production of diverse human heavy chains that can be paired to generate bispecific antibodies,coupled with our Spleen to ScreenTM technology that is designed to allow us to rapidly identify and generate Biclonics® therapeuticcandidates with differentiated modes of action that have the potential to kill tumor cells with high potency. We are conducting pre-clinicalstudies of MCLA-145 in collaboration with Incyte, as well as an array of proprietary preclinical candidates binding to other targetcombinations that are the subject of our internal programs. • Seek strategic collaborative relationships. We intend to continue to seek strategic collaborations to facilitate the capital-efficientdevelopment of our Biclonics® technology platform and to identify potential target combinations in immuno-oncology and othertherapeutic areas. We have entered into collaborations with Incyte, ONO Pharmaceutical Co., Ltd., and Simcere Pharmaceutical Group, todevelop bispecific antibody candidates based on our Biclonics® technology platform and plan to work with other collaborators to validateand expand the use of our Biclonics® platform and the development of bispecific antibody candidates. We believe these collaborationscould potentially provide significant funding to advance our bispecific antibody candidate pipeline while allowing us to benefit from thedevelopment expertise of our collaborators.Our Product PipelineWe intend to use our technology platform to develop Biclonics® for the treatment of various types of cancer. The following table summarizes ourbispecific antibody candidate pipeline: Overview of Existing ImmunotherapeuticsDespite a number of advances in the past decade, a significant unmet need in cancer still exists. While targeted antibody therapeutics have beensuccessful in treating some cancers, the therapeutic effects of almost all such therapies are transient. Cancer cells are able to adapt in order to escaperecognition and elimination by the 54Table of Contentsimmune system, thereby contributing to tumor growth and progression. Acquired resistance to cancer therapies remains a significant clinical problemwith patients frequently relapsing and the tumors metastasizing to other organs.Immunotherapy is a new class of cancer treatment that works to harness the intrinsic powers of the immune system to fight tumor cells. There are anumber of immunotherapies that engage various aspects of the immune system, for example: (1) monoclonal antibodies with enhanced ADCC,(2) bispecific T-cell engaging molecules, (3) immunomodulatory monoclonal antibodies and (4) CAR-T and TCR therapies. While these therapies varyin mechanism of action, they rely on specific components of the innate or adaptive immune system to kill tumor cells or counteract signals producedby cancer cells that suppress immune responses. The potential of immunotherapeutic approaches is best demonstrated by the long durable remissions,exceeding 10 years, observed after checkpoint inhibitor treatment in a subset of patients with advanced melanoma. More recent evidence from clinicaltrials suggests that a growing list of cancers will respond to checkpoint inhibitors.Monoclonal Antibodies with Enhanced ADCC. Monoclonal antibodies bind to a single target expressed by tumor cells and have been modifiedto more efficiently attract immune effector cells, such as NK cells and macrophages, to effectively kill tumor cells. Several mAbs with enhanced ADCCfor the treatment of solid and leukemic tumors have yielded promising results in clinical trials.By binding to a single target, mAbs with enhanced ADCC depend on the varying levels of expression of that target on the tumor and normaltissues to leverage the advantage of enhanced tumor cell-killing while minimizing toxicity. Ideal targets for antibodies would be solely expressed bythe diseased cell and not by normal cells. Unfortunately, many of these targets are also expressed by healthy tissues. By binding to a single target,mAbs with enhanced ADCC potentially can induce autoimmune toxicity, so-called “on-target, off-tumor” toxicity.Bispecific T-Cell Engaging Molecules. Bispecific T-cell engaging molecules enhance a patient’s immune response to tumors by re-targetingT-cells to tumor cells. These molecules have been developed for a variety of both hematological and solid tumors and are currently in clinical trials.We are aware of a bispecific T-cell engaging molecule therapeutic that has received regulatory approval for the treatment of acute lymphoblasticleukemia as well as additional bispecific T-cell engaging molecules that are currently in clinical development.Most T-cell engaging molecules in development are currently based on antibody fragments connected by a flexible linker and, unlikeBiclonics®, do not utilize the advantages of the full-length IgG format. These molecules may have shorter half-lives than conventional mAbs, whichcould require continuous infusion of the molecule or could pose manufacturing and immunogenicity challenges.Immunomodulatory mAbs. Immunotherapeutic strategies have been shown in clinical trials to increase the ability of the immune system torecognize and eradicate tumor cells. Among these treatment strategies, immunomodulatory mAbs that enhance the function of T-cells have achievednoteworthy results for multiple types of cancers. Immunomodulatory mAbs that bind to molecules involved in T-cell inhibition are called checkpointinhibitors because they block normally negative regulators of T-cell immunity. These checkpoint inhibitors target molecules such as the cytotoxicT-lymphocyte antigen 4, or CTLA-4, and PD-1. Additionally, immunomodulatory mAbs that bind to co-stimulatory molecules involved in T-cellactivation, such as the tumor necrosis factor receptors OX40 and CD137, have shown tumor cell-killing activity in pre-clinical animal models of cancerand are currently being evaluated in early-stage clinical trials. Combinations of immunomodulatory mAbs have been observed to enhance the anti-cancer response in pre-clinical studies and in clinical trials of patients with various tumor types, but have also been observed to result in morepronounced toxicities. We believe that Biclonics® have the potential to capture the benefits of combinations of immunomodulatory mAbs, combinedwith more specific targeting to tumor-specific T-cells and tumor cells, thereby potentially diminishing the toxic side effects and providing a cost-effective two-in-one therapeutic for the treatment of cancer patients.CAR-T and TCR Therapies. T-cells recognize diseased cells by receptors engaging with antigens that are present on cancer cells. CAR-T therapyentails genetically engineering T-cells to express synthetic chimeric 55Program targets indication/drug combination pre- IND/CTA Phase 1 Phase 2 partner Merus rights MCLA-128 HER2,HER3 Breast (HER2+)+Herceptin + chemo worldwide Breast (ER+) + hormone therapy worldwide Solid tumors (monotherapy)* worldwide MCLA-117 CD3,CLEC12A AML worldwide MCLA-158 EGFR,Lgr5 Colorectal Cancer worldwide MCLA-145 PD-L1,undiscl Solid tumors Incyte Corp. US Undisclosed Autoimmune disease Ono Pharm. Roytalies on Net SalesTable of Contentsantigen receptors, or CARs, that direct T-cells to antigens on the surface of cancer cells. The T-cell receptor, or TCR, modifies T-cells to express high-affinity tumor specific TCRs that recognize intra-cellular antigens present on the surface of target cells. In clinical trials, CAR-T and TCR therapieshave been observed to have anti-tumor activity in a narrow spectrum of hematologic cancers.We believe a key limitation of CAR-T and TCR therapies is the need to retrieve non-compromised immune effector cells from a cancer patient,which requires a complex and costly individualized process to develop the therapy. These challenges limit their potential and use in a variety ofindications, including the treatment of solid tumors.To address patient populations not responding to single-antibody based drugs, there is an increased focus on synergistically combiningimmunotherapeutics in the scientific community and from biopharmaceutical companies. Opportunities to create innovative antibody-basedtherapeutics lie in several technology advances, including bispecific antibodies that bind to multiple targets, Fc-optimization, which enhances thebody’s immune system to mediate the killing of cancer cells, and antibody drug conjugates, or ADCs.Background on AntibodiesThe conventional antibody is a Y-shaped molecule that consists of two identical heavy chains and two identical light chains, as shown in thefigure below. These four chains pair to form two variable regions that bind to antigens, or targets, and a constant region, which includes a region knownas the Fc, that binds to receptors present on effector cells in the immune system. In conventional mAbs, the variable regions are identical and bind tothe same targets. In bispecific antibodies, the variable regions can be modified to bind to two different targets. To achieve this in the full-length IgG format, twodifferent heavy chains and two identical light chains, also referred to as the common light chain, are combined.In both conventional mAbs and IgG bispecific antibodies, the Fc region can bind to Fc receptors present on effector cells. This binding results inthe recruitment and activation of immune effector cells and amplifies the immune system’s response to antigens bound by the variable region of theantibody. This process is called ADCC. The Fc region can be modified to enhance ADCC so as to generate a more potent immune response against aparticular target.Our Biclonics® PlatformWe have a pipeline of Biclonics® generated from our patented technology platform. Our platform enables the rapid identification ofimmunotherapeutics with the potential to produce tumor cell-killing activity and/or to 56Table of Contentsmodulate the tumor microenvironment to promote more effective anti-tumor immune responses, and allows for the flexible and rapid generation ofBiclonics® against any particular target pair.By binding to two different targets, Biclonics® can be designed to block receptors that drive tumor cell growth and survival and to mobilize thepatient’s immune response by activating various killer cells to eradicate tumors. We believe our Biclonics® platform allows us to approach cancertreatment through multiple modes of action: • Blocking combinations of growth factor receptors that drive tumor cell growth and relapse while simultaneously recruiting immuneeffector cells through enhanced ADCC. Biclonics® may be generated for various combinations of growth factor receptors that play a role intumors with different molecular profiles, while a modification in the Fc region of the Biclonics® facilitates the enhanced recruitment ofimmune effector cells, such as NK cells and macrophages, to directly kill tumor cells through ADCC. • Activating T-cells to kill tumor cells by binding to CD3 expressed on T-cells and a tumor-associated target. CD3 is a cell-surfacemolecule present on all T-cells. We create Biclonics® that are designed to simultaneously bind to CD3 and a tumor-associated target,which allows for T-cell recruitment and engagement to selectively kill tumor cells. • Blocking two checkpoint inhibitory pathways for more efficient T-cell activation. Cancer cells are able to block the tumor-killingfunction of T-cells through the expression of inhibitory molecules. Scientific research has shown that combinations of mAbs are morepotent than single mAbs when used against these inhibitory molecules to unblock and revive this mechanism of T-cells which kills tumorcell targets. Biclonics® can be designed to prevent the blocking of T-cells by cancer cells while retaining the advantages of specifictargeting in the tumor environment. • Achieving a Dock and BlockTM mechanism of action to favorably impact hard-to-target receptors that can may drive tumor growth orescape. Biclonics® are designed to be capable of binding a tumor associated target prevalent on cancer cells, which then permits the otherarm of the Biclonics® to be proximate to bind and block, lesser expressed targets that have ligand or enzymatic functions that may tend todrive tumor growth or escape. • Blocking a checkpoint inhibitory pathway while simultaneously providing a co-stimulatory signal for more efficient activation ofT-cells. In addition to being blocked by inhibitory molecules, tumor specific T-cells may simultaneously require an activation signal toengage in tumor cell-killing. Biclonics can be designed to concurrently alleviate the blocking of T-cells and deliver the signals required toactivate the killing potential of T-cells. • Simultaneously targeting a growth factor receptor expressed by tumor cells and an immunomodulatory molecule involved in blockingtumor-specific T-cells. Growth factor receptors like epidermal growth factor receptors, or EGFR, and HER2 are expressed on many tumors.Biclonics can be designed to target such growth factor receptors while delivering an activation signal or de-blocking signal to T-cells.Our process to select lead Biclonics® for clinical development takes approximately 12 months and is illustrated below. We use our patentedMeMo® and Spleen to ScreenTM human antibody generation and Biclonics® production technologies to rapidly build large collections of Biclonics®directed against particular target pairs. We then test these collections in cell-based functional assays to identify Biclonics® that have differentiatedmodes of action. We select the most potent or efficacious Biclonics® and evaluate them in multiple in vitro and in vivo assays to identify leadcandidates for clinical development. 57Table of ContentsSelection of Lead Biclonics® Our Biclonics® technology platform includes the following: • Human antibody generation. Our platform for generating human antibodies is comprised of transgenic mice, which we refer to as MeMo®,which harbors a common light chain in its germline. The antibody sequence information obtained from MeMo® can be used to generatehuman antibodies and phage display for the generation of panels of common light chain human mAbs. MeMo® harnesses the power of thein vivo immune system to yield human antibodies with high potency, specificity, solubility and low immunogenicity. Using thistechnology, we produce large and diverse panels of high-affinity antibodies against a broad variety of targets. We believe this approachenhances the discovery and development of high-quality human antibodies that, through the common light chain, generates sequences thatare ready to be converted into the Biclonics® format. • The full-length Immunoglobulin G format. The Biclonics® format retains several of the favorable attributes of conventional human IgGmAbs, including their stability and predictability during manufacturing as well as their long half-life and low immunogenicity duringtreatment of patients. Biclonics® consist of two different heavy chains that need to stably form, or heterodimerize, inside a manufacturingcell line. Using Merus’ patented technology, we insert amino acids with opposite charges in each of these heavy chains to efficiently drivethis process. The use of a single, or common, light chain in our human Biclonics® antibodies is designed to have the heavy chains pair withthe correct, common light chain to form functional antigen binding regions. The combination of these approaches prevents the need foradditional, more artificial techniques, such as the use of linkers or chemical reactions, to force the pairing of different parts of the bispecificantibody. The resulting Biclonics® are bispecific heterodimeric IgG antibodies that closely mimic IgG antibodies that are producednaturally by the immune system.The Biclonics® format also permits us to make modifications to the Fc region of the IgG antibody in order to enhance or limit effectorfunctions associated with this part of the molecule. This strategy has been successfully executed with conventional therapeutic mAbs. Inorder to enhance efficacy and promote immunotherapeutic activity, we can use genetically altered cell lines used in production to generateBiclonics® that are enhanced for ADCC, resulting in the improved ability to recruit NK cells and macrophages. This ADCC enhancementhas been made to our most advanced bispecific antibody candidate, MCLA-128, and another of our antibody candidates, MCLA-158. Inorder to improve safety and tolerability, we can modify our Biclonics® to prevent the excessive release of signaling proteins calledcytokines, which can overstimulate the immune system. This process is called Fc-silencing as it blocks the ability of our Biclonics® tobind to certain protein receptors on cells, known as Fc receptors, which are associated with cytokine release. We utilize Fc silencing in thedesign of our bispecific antibody candidate, MCLA-117. 58Table of Contents • High-throughput functional screening. Merus employs its Spleen to ScreenTM technology to rapidly screen panels of target-specificcommon light chain antibodies. Subsequently, DNA constructs are generated and introduced into mammalian cells that encode panels oftarget-specific human antibodies. The common light chain format and modified Fc region of the IgG antibody ensure the secretion ofvirtually pure Biclonics® into the cell culture medium. The medium of thousands of cell cultures is harvested and individually used in cell-and tissue-based functional assays to permit the identification of Biclonics® with differentiated modes of action.For example, the chart below shows the results of a pre-clinical study in which 495 different Biclonics targeting HER2 and HER3 werefunctionally screened against tumor cell samples, with and without heregulin present. Of the antibody candidates depicted in the chart, 40 exhibitedsuperior inhibition of cell growth compared to trastuzumab, a drug commonly prescribed for the treatment of breast cancer, and were selected in theprocess leading to identification of MCLA-128. Benefits of Biclonics®We believe our Biclonics® technology platform provides the following benefits: • Rapid generation of human IgG antibodies having diversity at the heavy chain targeting an array of antigens, that ready to be paired toproduce our Biclonics®, bispecific antibodies. Use of our patented MeMo®, Spleen to ScreenTM, and Fc modification technologies,permits us to rapidly generate bispecific antibodies capable of targeting an array of antigen combinations. • Biclonics® are stable, bispecific, full-length human IgG antibodies with no linkers or fusion proteins. Biclonics® retain the IgG format ofantibodies that are produced naturally by the immune system. Additionally, in contrast to many other bispecific antibody formats,Biclonics® do not require linkers to force the correct pairing of heavy and light chains or exploit fusion proteins to add functionality to themolecule. These qualities minimize time-consuming engineering efforts and allow us to create Biclonics® with predictable behavior duringpre-clinical development. • Biclonics® preserve the stability, behavior and adaptability of normal IgG antibodies. Biclonics® are based on the robust and commonlyused IgG format to yield the favorable in vivo qualities associated with conventional mAbs, such as stability, long half-life and lowimmunogenicity. As a result, our 59Selection of Lead Biclonics Human Antibody Generation Biclonics Production (lgG Format) High-Throughput Functional Screening Select Lead Biclonics McMo transgenic mice Phage display Common light chain human mAbs Full length lgG format >99% pure Biclonics with Fc-Silencing and enhanced ADCC Large collections of Biclonics for “in format” functional screens Rapid in vitro functional screening in cell-based assays identifies a small number of Biclonics with superior functional activity Expression of lead variants for functional/ biophysical / potency / stability / specificity analysisTable of Contents Biclonics® format provides attractive options for dosage schedules and methods of administration, rendering them compatible withmultiple modes of action for the efficient killing of tumor cells. Further, the IgG format allows us to apply previously establishedtechnologies to further optimize our Biclonics® for therapeutic use. • Biclonics® can be reliably manufactured with high yields. Because our Biclonics® retain the IgG format of antibodies, our Biclonics® aremanufactured using the large-scale industry-standard processes that are also used for the production of conventional mAbs, and the yieldsof Biclonics® we obtain are comparable to those of normal IgG antibodies. In stable cell lines, we are able to obtain over 90% of bispecificantibody formation using these processes and the IgG-based purification process results in up to greater than 98% purity for ourBiclonics®. • Our Biclonics® technology platform allows for functional evaluation of Biclonics® in the relevant therapeutic format leading to thediscovery of therapeutic candidates with differentiated properties. Our Biclonics® technology platform enables rapid functional screeningof large collections of bispecific antibodies which allows us to identify lead candidates with multiple mechanisms of action that have thepotential to effectively kill tumor cells with high potency. This is an important step in the identification of lead bispecific antibodycandidates with functionalities that compare favorably against other forms of immunotherapeutics, such as conventional mAbs as well astheir combinations.Our Bispecific Antibody Candidate PortfolioOur most advanced bispecific antibody candidate, MCLA-128, commenced a Phase 2 clinical trial for the treatment of patients with MBC inJanuary 2018, while our Phase 1/2 study of MCLA-128 in gastric, ovarian, endometrial, and non-small cell lung cancers is ongoing. Additionally, wecommenced a Phase 1 clinical trial of our second bispecific antibody candidate, MCLA-117, for the treatment of patients with AML in May 2016, andfiled an IND for MCLA-117 in January 2017. We plan to initiate a Phase 1 clinical trial of MCLA-158, focused on metastatic colorectal cancer, forwhich we have received CTA approvals in several European countries. In addition, we have several other bispecific antibody candidates in pre-clinicaldevelopment, including MCLA-145, which binds PD-L1 and an undisclosed target, which we are collaborating with Incyte, among other preclinicalcandidates in various stages of development.MCLA-128MCLA-128 is an ADCC-enhanced Biclonics® that is designed to dock on HER2 to effectively block the HER3 signaling pathway. HER3-mediated inherent and acquired resistance to HER2-targeted therapies has been implicated in various solid tumors, including breast, gastric, ovarian,endometrial and non-small cell lung cancer tumor cells. The scientific rationale for targeting HER2, or human epidermal growth factor receptor 2, andHER3, or human epidermal growth factor receptor 3, is that HER2 is amplified in many solid tumors and is associated with poor prognosis and theactivation of HER3 causes cancer cells to be or to become resistant to treatment. On the surface of tumor cells, HER2 preferably pairs, or dimerizes, withHER3, and the resulting pair drives malignant progression of HER2-expressing cancer cells. Heregulin, which is the ligand for HER3, causes cancercells to grow and become resistant to treatment with HER2-targeted therapies.We have designed MCLA-128 to overcome the inherent and acquired resistance of tumor cells using two different mechanisms. The firstmechanism blocks growth and survival pathways to stop tumor expansion, while preventing tumor cells from escaping through activation of theHER3/heregulin pathway. The second mechanism, enhanced ADCC, involves the recruitment and enhancement of immune effector cells, such as NKcells and macrophages, to directly kill the tumor through a modification of the Fc region. This dual mechanism of action is illustrated in the graphicbelow. MCLA-128 blocks the HER3 signaling pathway by employing a Dock & Block™ mechanism. MCLA-128 is designed to dock onto a specificregion of the HER2 receptor to orientate MCLA-128’s HER3 binding arm to block HER2:HER3 heterodimerization. Oncogenic signaling 60Functional Screening of a Large HER2Xher3 Biclonics CollectionTable of Contentsthrough the HER3 pathway, even in the presence of high heregulin concentrations, may thus be effectively blocked.MCLA-128 Mechanism of Action Pre-Clinical StudiesIn our pre-clinical studies of HER2-expressing tumor cell lines, we measured the impact of MCLA-128 on heregulin-driven growth and cellularchanges, characterized by a metastatic phenotype. In these studies, we observed that both growth and metastatic characteristics were poorly blocked bytherapeutic mAbs targeting HER2 and HER3, while the application of MCLA-128 resulted in the inhibition of heregulin induced changes in culturesof cancer cells. MCLA-128 also blocked activation of two key signaling pathways for the growth and survival of tumor cells more effectively than thecombination of the currently approved therapeutic HER2 mAbs, Herceptin (trastuzumab) and Perjeta (pertuzumab). 61Table of ContentsAs shown in the chart below, the administration of MCLA-128 reduced heregulin-driven tumor growth at significantly lower concentrations thanmAbs targeting HER2 or HER3 and the combination of Herceptin and Perjeta. MCLA-128 also blocked phosphorylation and activation of key proteins in the signaling pathways for the cell growth and survival of cancer celllines, a result that was not observed with the combination of HER2 mAbs, Herceptin and Perjeta.We also studied the ADCC activity of MCLA-128 in cell lines expressing different types of Fc receptors. As shown in the two charts below,because MCLA-128 is ADCC enhanced, it was able to bind and activate Fc receptors required for the recruitment of immune killer cells regardless ofthe receptor affinity of the patient. Studies have estimated that more than 50% of the patient population carry Fc receptors that are of low affinity andare poorly activated by therapeutic antibodies such as Herceptin. We have observed in our pre-clinical studies that MCLA-128 was also more potentthan Herceptin in activating immune killer cells carrying low affinity Fc receptors. 62Table of ContentsFc Receptor Activation by MCLA-128 (FcgR Subtype) 63HER2-Amplified Cell Line Stimulated with HeregulinTable of ContentsIn the pre-clinical studies, we also compared the ability of MCLA-128 to inhibit the in vivo growth of cell lines such as JIMT-1, which is anaggressive breast cancer line resistant to HER2-targeted therapies. In these studies, we administered four doses of MCLA-128 at 2.5 mg/kg. TheMCLA-128-treated mice experienced as high as a 58% reduction of their tumor size during the 21-day treatment period, compared to a less than 11%reduction after administration of a combination of Herceptin and Perjeta. Regrowth of the tumor was observed after treatment was halted on day 21.This result is illustrated in the chart below. 64HIGH AFFINITY FcyR expressing cells (Herceptin responders) Low affinity FcyR expressing cells (Herceptin non-responders)Table of ContentsAnalysis of tumors taken from mice at day 21 showed that HER3 signaling was effectively blocked when treated with MCLA-128 whereas noeffect was observed with the combination of Herceptin and Perjeta. Pre-clinical studies have been conducted to evaluate whether tumor suppressioncan be sustained by continuing treatment over the 60-day observation period. The result was that tumor suppression was not sustained. However, ahigher percentage (60%) of mice treated with MCLA-128 survived beyond 60 days than mice receiving either the vehicle or the combination ofHerceptin and Perjeta. This result is illustrated in the chart below. Clinical Development of MCLA-128In February 2015, we commenced an open-label Phase 1/2 clinical trial of MCLA-128 in Europe for the treatment of HER2-expressing solidtumors. The first part of the trial, the dose escalation phase, is complete. In Part 1 of this trial, MCLA-128 was well-tolerated up to the highest testeddose of 900 mg and we observed a favorable safety profile and early positive data of efficacy. No dose limiting toxicities were observed. Thecumulative safety and available pharmacokinetic, or PK, data, along with the aid of a PK simulation study, were used to support a recommended dosefor a Phase 2 clinical trial of 750 mg, administered over 120 minutes, which we are using in Part 2 of this trial. The Part 2 is ongoing, and is designed tofurther study the safety, tolerability and clinical efficacy of MCLA-128 in patients with solid tumors that are relapsed or refractory to availablestandard treatment or for whom no curative therapy is available.For this Phase 1/2 trial, we have implemented an exploratory biomarker investigation using tumor tissue and blood samples from patients. Thebiomarkers we are evaluating include heregulin expression, HER2 and HER3 receptor expression and PI3K/AKT pathway activation status, whichrefers to an intracellular pathway regulating processes such as cell survival, cell proliferation and cell growth. We believe this approach, in conjunctionwith genetic profiling, will allow for the validation of biomarker assays and will provide guidance for enrolling additional patients based on relevantbiomarkers.As of April 23, 2018, we have enrolled a total of 130 patients in the trial, including 28 patients in Part 1 and 102 in Part 2. In this ongoing study,preliminary data has shown that MCLA-128 is well tolerated. The most frequent adverse events observed have been infusion related reactions, whichwere mild or moderate in severity and well managed with premedication or symptomatic medication. No severe GI events or symptomatic cardiacevents have been reported. 65MCLA-128: Reduction in Tumor SizeTable of ContentsThe Phase 2 portion of the study is ongoing and designed to explore selected metastatic indications including breast, endometrial, ovarian,gastric and non-small cell lung cancers. In May 2017, we announced the results of our first-in-human Phase 1/2 study of MCLA-128 in solid tumors,including final Phase 1 data and promising preliminary activity in patients with HER2-positive MBC from the Phase 2 portion of the trial.As part of the ongoing study, a cohort of 11 HER2-positive MBC patients has been treated with single agent MCLA-128 (9 patients at RP2D andtwo patients at 480 mg q3 weeks from part 1). These MBC patients were all heavily pretreated, having received a median of 6 prior lines of metastatictherapy, all having 2-5 prior HER2 inhibitor therapies, and some of the patients with outright disease progression to the last line of therapy. One MBCpatient achieved a confirmed partial response (>8+ months) and 7 had stable disease (including 4 sustained stabilizations lasting greater than 5months). The clinical benefit rate (complete and partial responses plus stable disease lasting at least 12 weeks) among the cohort of MBC patients was64% or 7 of 11 patients. We believe the antitumor activity reported as single agent and extensive preclinical evidence support further development ofMCLA-128 in combination in MBC.In January 2018, we commenced a Phase 2, open-label, multi-center international clinical trial to evaluate MCLA-128 in two MBC populationsincluding HER2-positive MBC patients and hormone receptor positive/HER2-low MBC patients. The MCLA-128 Phase 2 clinical trial is expected toenroll approximately 120 patients in total across the United States and Europe. The first cohort, HER2-positive MBC patients who are progressing onanti-HER2 therapies including trastuzumab, pertuzumab and TDM-1, will receive MCLA-128 in combination with trastuzumab and chemotherapy.The second cohort, MBC patients with confirmed hormone receptor positive status and HER2-low (immuno-histo-chemistry (IHC) HER2 1+ or 2+ andfluorescent in-situ hybridization (FISH) negative for HER2 amplification) who are progressing on hormone therapies and CDK4/6 inhibitors, willreceive MCLA-128 in combination with endocrine therapy. The primary endpoint for both cohorts is the clinical benefit rate at 24 weeks.MCLA-117MCLA-117 for AMLMCLA-117 is a Biclonics® that is designed to bind to CD3, a cell-surface molecule present on all T-cells, and to CLEC12A, a cell surfacemolecule present on AML tumor cells and stem cells. CLEC12A is not found on normal blood stem cells nor on cells that give rise to red blood cellsand platelets nor is it present on other non-hematopoietic cells in the body. This is in contrast to the expression patterns of CD123 and CD33, whichare present on normal blood stem cells, and in the case of CD33, also the cells that give rise to red blood cells and platelets. Both CD123 and CD33 arebeing explored by others as targets for AML therapy. We believe that the expression pattern of CLEC12A makes it an attractive and differentiatedmolecule for targeted therapy in cancer patients. Moreover, CLEC12A is expressed on approximately 90 to 95% of newly diagnosed and relapsed casesof AML, and we believe that many patients with AML could potentially benefit from treatment with MCLA-117.By binding to CD3 and CLEC12A, MCLA-117 is designed to recruit and activate T-cells to kill CLEC12A-expressing AML tumor cells andstem cells. AML tumor stem cells are thought to be resistant to current chemotherapeutic treatment regimens, and the inability to eliminate these cellswith conventional therapies is thought to significantly contribute to disease relapse in AML patients. We believe that elimination of this leukemicstem cell population by treatment with MCLA-117 may prevent recurrence of the tumor. The mechanism of action of MCLA-117 is illustrated in thegraphic below. 66MCLA-128: Survival After 60 DaysTable of ContentsMCLA-117 Mechanism of Action Unlike some other bispecific antibody formats, the full-length IgG format of MCLA-117 and its associated longer half-life is designed to keep itfrom having to be administered through continuous infusion using infusion pumps. In addition, through Fc-silencing, MCLA-117 is designed to avoidbinding to Fc receptors present on macrophages and other blood cells that could result in toxicity.We believe that MCLA-117 could be developed as induction therapy, as consolidation therapy to treat minimal residual disease and as rescuetherapy for patients with relapsed or refractory AML. We intend to explore its use both as a single agent and in combination with commonly usedchemotherapy agents and other treatment regimens of AML. We expect the safety profile of MCLA-117 to be favorable based on the restrictedexpression of CLEC12A in human tissues which is anticipated to result in manageable neutropenia. We also expect infusion related reactions based onthe observed level of cytokine release upon co-culture with blood cells, which can be mitigated by gradual dose increments and by providingco-medication when required. As CLEC12A is not expressed on megakaryocyte and erythroid progenitor cells, we expect the application ofMCLA-117 would not result in a decrease of platelet counts or red blood cells.In our pre-clinical studies, MCLA-117 specifically targeted and killed AML tumor cells mediated by a high affinity of the Biclonics forCLEC12A and a relatively low affinity for CD3. In these studies, MCLA-117 recruits T-cells to selectively kill tumor cells in blood samples of AMLpatients containing an unfavorable ratio of T-cells to AML tumor cells. We observed that 1,000 ng/ml of MCLA-117 was sufficient to induce theelimination of tumor cells.As shown in the figure below, treatment of an AML patient’s blood samples with MCLA-117 resulted in the efficient killing of AML tumor cellsin our pre-clinical studies. An unmanipulated primary blood sample containing both CLEC12A positive patient tumor cells and T-cells was culturedfor 10 days with either a dosage of 1,000 ng/ml of MCLA-117 or a dosage of a control Biclonics® that does not bind to CLEC12A but retains CD3binding activity. On day 10, the percentage of AML tumor cells in the culture dish dosed with MCLA-117 had decreased from 93% to 1% while theproportion of T-cells had increased from 5% to 95%, indicating that CD3 positive T-cells had been effectively activated to proliferate, engage and killthe AML tumor cells by MCLA-117. In contrast, the percentage of AML tumor cells in the culture dish dosed with a control Biclonics had slightlydecreased from 93% to 81% while the proportion of T-cells had only increased from 5% to 16%, indicating that binding to CLEC12A by MCLA-117was required to result in the efficient killing of AML tumor cells. 67Table of ContentsWe commenced a Phase 1 clinical trial in Europe of MCLA-117 in May 2016 for the treatment of patients with AML to assess its safety,tolerability and anti-tumor activity. The study is designed to enroll adult patients with all AML subtypes. Patients with relapsed or refractory diseaseand newly diagnosed, untreated AML patients who are older than 65 years and are usually not eligible as candidates for intensive or conventionalapproved treatments would all be eligible for enrollment in the trial. We expect to enroll approximately 50 patients in this trial.The primary endpoint of the Phase 1 trial is the assessment of the safety and tolerability of MCLA-117 in order to determine the maximumtolerated dose and frequency of administration.In January of 2018, we submitted an IND application to the FDA for MCLA-117 for the potential treatment of AML, which was accepted by theFDA in February 2018. We are continuing our dose escalation of the Phase 1 clinical trial for MCLA-117 in Europe and we plan to open sites for thePhase 1 trial in the United States. Safety and potential early activity data is expected in 2018.If the results of the clinical trial are favorable, we believe MCLA-117 may qualify for orphan drug designation in the United States and in Europefor the treatment of AML, and we plan to seek orphan drug designation from the FDA and the EMA for the treatment of AML.MCLA-117 for MDSWe also intend to evaluate MCLA-117 for the treatment of MDS. MDS is a disease that occurs when the blood-forming cells in the bone marrowlose the ability to develop normally. Patients with MDS have lower numbers of one or more types of cells in the blood such as red blood cells andplatelets and are at higher risk to develop AML. Similar to AML, we believe that the expression pattern of CLEC12A makes it an attractive anddifferentiated molecule for targeted therapy in patients with MDS. CLEC12A is expressed on approximately 89% of patients with MDS, and we believethat many patients with MDS could potentially benefit from treatment with MCLA-117.MCLA-158MCLA-158 is an ADCC-enhanced Biclonics that is designed to bind to Lgr5 and EGFR-expressing cancer stem cells for the treatment of solidtumors, including colorectal cancer. Cancer stem cells are a subpopulation of long-lived and chemo-resistant cells that contribute to the growth andmetastatic potential of a tumor. Cancer stem cells have the capacity to divide and give rise to new cancer stem cells via a process called self-renewal,the 68Table of Contentscapacity to differentiate or change into the other cells that form the bulk of the tumor and an ability to withstand chemotherapy and radiation exposure.We believe these features make cancer stem cells an attractive therapeutic target to overcome the inherent and acquired resistance of tumors toconventional therapies.In 2012, colorectal cancer was the third most common cancer worldwide. Patients with metastatic disease have a mean survival time of less thantwo years. Approximately 90% of all colorectal cancers display mutational activation of the Wnt pathway. The Wnt pathway is critical for themaintenance of stem cells and has been linked to cancer. Lgr5 is an amplifying receptor of the Wnt pathway, is over-expressed in approximately 70%of advanced colorectal cancers and is correlated with lymph node metastases. Lgr5 expression is higher in metastatic tumors and associated with tumor-initiating cells or cancer stem cells. Lgr5 positive cells are highly mitotically active and are expected to be particularly dependent on growth andsurvival factors that activate EGFR.We have designed MCLA-158 to target cancer stem cells expressing Lgr5 and EGFR using two different mechanisms of action. The firstmechanism of action blocks growth and survival pathways in cancer stem cells. The second mechanism of action, enhanced ADCC, involves therecruitment and enhancement of immune effector cells to directly kill cancer stem cells that persist in solid tumors, such as colorectal cancer, and causerelapse and metastasis.In our pre-clinical studies, we used our proprietary technology combined with high content imaging to identify MCLA-158 after screening morethan 500 bispecific antibodies for activity in more than 20 patient-derived colorectal cancer organoids. Organoids are cell cultures based on cancercells from patients that mimic the physiology of tumor growth and depend on the presence of cancer stem cells for their maintenance. In ourpre-clinical studies, MCLA-158 was significantly more potent than an EGFR-targeting mAb, cetuximab, in inhibiting the growth of patient-derivedcolorectal cancer organoids. In our ex-vivo organoid studies, MCLA-158 selectively blocked the ability of colorectal cancer organoids to regrow afterserial passaging, suggesting that MCLA-158 has the potential to eliminate stem cells in vitro.In our pre-clinical studies MCLA-158 has been observed to be selectively more active in human tumor-derived organoids than in organoidsderived from normal human colon. The activity of MCLA-158 on the tumor organoid size was more than 100 times greater than on the normal colonorganoids. In contrast, the activity of cetuximab was similar to the activity of MCLA-158 on normal colon organoids and 20 to 100 times less than theactivity of MCLA-158 on tumor organoids. We observed this result on three additional normal colon organoids and four tumor organoids, three ofwhich were derived from metastatic lesions.Based on our pre-clinical studies to date and the expression pattern of Lgr5 and EGFR and their known roles in tumor progression, we believethat MCLA-158 has the potential to improve the survival outcome of patients with metastatic colorectal cancer, non-small cell lung cancer, ovariancancer and potentially other solid tumors.We plan to continue to conduct pre-clinical studies on MCLA-158.We have received approval of CTAs in several European countries for MCLA-158 for the potential treatment of metastatic colorectal cancer,including patients with the RAS-mutation, which represent a substantial unmet need. We expect to dose the first patient in the second quarter of 2018.We filed an IND for MCLA-158 with the U.S. FDA in the first quarter of 2018, which received acceptance from the FDA in April, 2018, and we plan toopen trial sites in the U.S. in the second quarter of 2018.Other Bispecific Antibody CandidatesMCLA-145MCLA-145 is a Biclonics® that is designed to bind to PD-L1 and a second immunomodulatory target. MCLA-145 is designed to enhance theactivation of tumor specific tumor infiltrating lymphocytes. MCLA-145 is being developed under our collaboration with Incyte Corporation. 69MCLA-117 Mediated Killing of AML TUMOR Cells and T-CellsTable of ContentsPre-Clinical Discovery ProgramsWe intend to leverage our Biclonics® technology platform to identify multiple additional antibody candidates and advance them to clinicaldevelopment. Each of these antibody candidates are designed to bind to targets believed to be useful in the treatment of cancer with an intention toestablish efficacy and obtain information for submission to the FDA. Our current focus is on a number of immunotherapeutic targets and pathways thathave demonstrated promising tumor killing ability in early-stage clinical trials and scientific literature. Using our platform, we will continue toevaluate new targets and combinations to identify potential candidates with the highest immunotherapeutic potential and select those candidates to beadvanced into clinical trials.Collaboration AgreementsAs part of our business strategy, we intend to continue to seek research collaborations in order to derive further value from our Biclonics®platform and more fully exploit its potential.Incyte CorporationWe have entered into a collaboration and license agreement, or the Collaboration Agreement, with Incyte Corporation, or Incyte. Under the termsof the Collaboration Agreement, we and Incyte have agreed to collaborate with respect to the research, discovery and development of bispecificantibodies utilizing our proprietary bispecific technology platform. The collaboration encompasses up to 11 independent programs, including some ofour current preclinical immuno-oncology discovery programs. For one of the current preclinical programs, concerning MCLA-145, we retain theexclusive right to develop and commercialize products and product candidates in the United States, while Incyte has the exclusive right to developand commercialize products and product candidates arising from such program outside the United States. For MCLA-145, we and Incyte will conductand share equally the costs of mutually agreed global development activities and will be solely responsible for independent development activities inour respective territories. We have the option to co-fund development of products arising from one specified program, and subject to certainconditions, to a second specified program, in each case exchange for a share of profits in the United States, as well as the right to participate in aspecified proportion of detailing activities in the United States for one of such programs. In addition, if MCLA-145 fails to complete IND-enablingtoxicology studies successfully, we will be granted an additional option to co-fund development of a specified program other than MCLA-145 inexchange for a share of profits in the United States. If we exercise our co-funding option for a program, we would be responsible for funding 35% of theassociated future global development costs and, for certain of such programs, would be responsible for reimbursing Incyte for certain developmentcosts incurred prior to the option exercise. All products as to which we have exercised our option to co-fund development would be subject to jointdevelopment plans and overseen by a joint development committee, with Incyte having final determination as to such plans in cases of dispute.For each program other than MCLA-145, where we have not elected to co-fund development or where we do not have such a co-funding option,Incyte is solely responsible for all costs of global development and commercialization activities. We retain the rights to our bispecific technologyplatform as well as clinical and pre-clinical candidates and future programs emerging from our platform that are outside the scope of the CollaborationAgreement.In January 2017, upon the Collaboration Agreement becoming effective, Incyte made an upfront non-refundable payment to us of $120 millionfor the rights granted under the Collaboration Agreement. For each program as to which we do not have commercialization or co-development rights,we are eligible to receive up to $100 million in future contingent development and regulatory milestones and up to $250 million in commercializationmilestones, as well as tiered royalties ranging from 6% to 10% of global net sales. For each program as to which we have exercised our option toco-fund development, we are eligible to receive a 50% 70Table of Contentsshare of profits (or sustain 50% of any losses) in the United States and tiered royalties ranging from 6% to 10% of net sales of products outside of theUnited States. If we opt to cease co-funding a program as to which we exercised our co-development option, then we will no longer receive a share ofprofits in the United States but will be eligible to receive the same milestones from the co-funding termination date and the same tiered royaltiesdescribed above with respect to non-co-developed programs and, depending on the stage at which we choose to cease co-funding development costs,additional royalties ranging up to 4% of net sales in the United States. For MCLA-145, for which we retain all commercial rights in the United States,we and Incyte are each eligible to receive tiered royalties on net sales in the other’s territory at rates ranging from 6% to 10%.The Collaboration Agreement will continue on a program-by-program basis until we have no royalty payment obligations with respect to suchprogram or, if earlier, the termination of the Collaboration Agreement or any program in accordance with the terms of the Collaboration Agreement.The Collaboration Agreement may be terminated in its entirety, or on a program-by-program basis, by Incyte for convenience. The CollaborationAgreement may also be terminated by either party under certain other circumstances, including material breach, or on a program-by-program basis forpatent challenge of patents under the applicable program, in each case as set forth in the Collaboration Agreement. If the Collaboration Agreement isterminated in its entirety or with respect to one or more programs, all rights in the terminated programs revert to us, subject to payment to Incyte of areverse royalty of up to 4% on sales of future products, if we elect to pursue development and commercialization of products arising from theterminated programs.In connection with the Collaboration Agreement, we entered into a Share Subscription Agreement with Incyte, pursuant to which, in January2017, we issued and sold to Incyte 3,200,000 common shares for an aggregate purchase price of $80.0 million.ONO PharmaceuticalIn April 2014, we entered into a strategic research and license agreement with ONO, under which we granted ONO an exclusive, worldwide,royalty-bearing license to research, test, make, use and market a limited set of bispecific antibody candidates, if approved, based on our Biclonics®technology platform, directed to two undisclosed targets.ONO paid us a non-refundable upfront fee of €1.0 million, and we are eligible to receive up to an aggregate of €34.0 million in milestonepayments upon achievement of specified research and clinical development milestones. To date, we have achieved three of the specified pre-clinicalmilestones under this research and license agreement and have received an aggregate of €1.8 million in milestone payments. For productscommercialized under this agreement, if any, we are also eligible to receive a mid-single digit royalty on net sales. For a designated period, which mayinclude limited time periods following termination of this agreement, in certain circumstances we and our affiliates are prohibited from researching,developing or commercializing bispecific antibodies against the undisclosed target combination that are the subject of this agreement. ONO alsoprovides funding for our research and development activities under an agreed-upon plan. This research and license agreement will expire after allmilestone payments have been received and all related patent rights have expired, unless terminated earlier. ONO has the right to terminate thisagreement at any time for any reason, with or without cause. The licenses granted to ONO may convert to royalty-free, fully-paid, perpetual licenses ifONO terminates the agreement for uncured material breach.On March 14, 2018, we entered into a second contract research and license agreement with ONO. Pursuant to an exclusive option granted to ONOin a prior agreement executed in April 2014, ONO exercised its option to enter into the March 2018 agreement. We granted ONO an exclusive,worldwide, royalty-bearing license, with the right to sublicense, research, test, make, use and market bispecific antibody candidates based on ourBiclonics® technology platform against two undisclosed targets directed to a particular undisclosed target combination. ONO identifies and selects thelicensed bispecific antibodies for which it is responsible for conducting further non-clinical and clinical development activities for such licensedbispecific antibodies and 71Table of Contentspharmaceutical products containing such antibodies, including manufacture and process development. ONO controls and has exclusive rights over theworldwide commercialization of any approved products, including worldwide supply, and is solely responsible for all costs and expenses related tocommercialization. ONO has agreed to fund our research and development activities and be responsible for the payment of all costs and expenses for itsown research and development activities, which are set out in a mutually agreed upon research plan. We retain all rights to use and commercialize anyantibodies that are generated under the collaborative research program, excluding the up to five lead and/or selected antibodies against the targetsONO is pursuing, provided that the use and commercialization is not with respect to the particular target combination.ONO has agreed to pay an upfront non-refundable payment of €700,000 for the rights granted and we are also eligible to receive an aggregate of€33.7 million in milestone payments upon achievement of specified research and clinical development milestones. For products commercialized underthe License Agreement, if any, the Company is eligible to receive a mid-single digit royalty on net sales.For a designated period, which may include limited time periods following termination of this agreement, in certain circumstances we areprohibited from researching, developing or commercializing bispecific antibodies against the undisclosed target combination that are the subject ofthis agreement. ONO also provides funding for Merus’ research and development activities under an agreed-upon plan. This research and licenseagreement will expire after all milestone payments have been received and all related patent rights have expired, unless terminated earlier. ONO has theright to terminate this agreement at any time for any reason, with or without cause. The licenses granted to ONO may convert to royalty-free, fully-paid,perpetual licenses if ONO terminates the agreement for uncured material breach.Simcere Pharmaceutical GroupOn January 8, 2018, we entered into an agreement with Simcere Pharmaceutical Group, or Simcere, granting Simcere an exclusive license todevelop and commercialize in China three bispecific antibodies utilizing our proprietary Biclonics® technology platform in the area of immuno-oncology. We retain all rights outside of China.We have agreed to lead research and discovery activities while Simcere has agreed to be responsible for the Investigational New Drug (IND)enabling studies, clinical development, regulatory filings and commercialization of these product candidates in China. We received an upfrontpayment, and are eligible to receive milestone payments contingent upon Simcere achieving certain specified development and commercial goals. Weare eligible to receive tiered royalty payments on sales of any products resulting from the collaboration in China from Simcere. Simcere is eligible toreceive tiered royalty payments on sales outside of China from us.ManufacturingOur Biclonics® technology platform relies on third parties for biological materials. We rely on and expect to continue to rely on third-partycontract manufacturing organizations, or CMOs, for the supply of current good manufacturing practice-grade, or cGMP-grade, clinical trial materialsand commercial quantities of our bispecific antibody candidates and products, if approved. We currently do not have any agreements for thecommercial production of bispecific product candidates, but we have contracted several biopharmaceutical CMOs for the clinical manufacturing ofMCLA-128, MCLA-117, MCLA-158 and MCLA-145. We believe that the standardized Biclonics® manufacturing process can be transferred toadditional CMOs and potential future co-development or co-commercialization collaborations or partnerships for the production of clinical andcommercial supplies of our Biclonics® in the ordinary course of business.Sales and MarketingWe have not yet defined our sales, marketing or product distribution strategy for MCLA-128, MCLA-117, MCLA-158 or any of our otherbispecific antibody candidates because our bispecific antibody candidates are still 72Table of Contentsin pre-clinical or early-stage clinical development. Our commercial strategy may include the use of strategic partners, distributors, a contract sale force,or the establishment of our own commercial and specialty sales force. We plan to further evaluate these alternatives as we approach approval for one ofour bispecific antibody candidates.CompetitionWe compete directly with companies that focus on immuno-oncology and companies dedicating their resources to cancer therapies. We also facecompetition from academic research institutions, governmental agencies and other various public and private research institutions. With theproliferation of new drugs and therapies into oncology, we expect to face increasingly intense competition as new technologies become available. Anybispecific antibody candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that maybecome available in the future.Many of our competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources thanwe do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentratedamong a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly throughcollaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining top qualifiedscientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologiescomplementary to, or necessary for, our programs.The key competitive factors affecting the success of all of our therapeutic bispecific antibody candidates, if approved, are likely to be theirefficacy, safety, dosing convenience, price, the effectiveness of companion diagnostics in guiding the use of related therapeutics, the level of genericcompetition and the availability of reimbursement from government and other third-party payors.Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective,less expensive, more convenient or easier to administer, or have fewer or less severe effects than any products that we may develop. Our competitorsalso may obtain FDA, EMA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result inour competitors establishing a strong market position before we are able to enter the market. Even if our bispecific antibody candidates achievemarketing approval, they may be priced at a significant premium over competitive products if any have been approved by then.In addition to currently marketed therapies, there are also a number of products in late-stage clinical development to treat cancer, including otherbispecific antibodies or similar molecules. Our closest competitors in this area include Affimed N.V., OncoMed Pharmaceuticals, Inc., Genmab A/S,MacroGenics, Inc., Merrimack Pharmaceuticals, Inc., Regeneron Pharmaceuticals, Inc. and Xencor, Inc. The bispecific antibody candidates indevelopment by competitors may provide efficacy, safety, dosing convenience and other benefits that are not provided by currently marketedtherapies. As a result, they may provide significant competition for any of our bispecific antibody candidates for which we obtain marketing approval.Intellectual PropertyWe strive to protect and enhance the proprietary technologies, inventions, and improvements that we believe are important to our business,including seeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties. Our policy is to seek toprotect our proprietary position by, among other methods, pursuing and obtaining patent protection in the United States and in jurisdictions outside ofthe United States related to our proprietary technology, inventions, improvements, platforms and bispecific antibody candidates that are important tothe development and implementation of our business. 73Table of ContentsAs of April 24, 2018, our patent portfolio related to our bispecific antibody candidate MCLA-128 consists of one PCT application, filed onFebruary 27, 2015 which entered national phases in the United States, Europe and 17 other foreign countries with an expected expiry not earlier thanFebruary 27, 2035. Claims are directed to MCLA-128 composition of matter and methods of using MCLA-128 to treat subjects having or at risk ofhaving a ErbB-2 and/or ErbB3 positive tumor. In addition, four priority patent application filings covering further methods of using MCLA-128,including in combination therapies, to treat patients, three of which have been filed on March 31, 2017 and one filed on May 17, 2017.As of April 24, 2018, our patent portfolio related to our bispecific antibody candidate MCLA-117 consists of a first PCT application, filed onSeptember 27, 2013, which entered national phases in the United States, Europe and 13 foreign countries with an expected expiry not earlier thanSeptember 27, 2033. There is currently, one pending US application, 14 pending foreign applications, and three issued patents in several foreignjurisdictions. In addition, we filed a second PCT application related to MCLA-117 on July 10, 2016, which has entered national phases in the UnitedStates, Europe and 13 foreign countries with an expected expiry not earlier than July 10, 2036. There is currently, one issued U.S. patent and onepending U.S. application, 2 pending EP applications, and 13 pending foreign applications. Claims are directed to the MCLA-117 composition ofmatter and methods of using MCLA-117 in the treatment or prevention of MDS, chronic myelogenous leukemia, or CML, or AML.As of April 24, 2018, our patent portfolio related to our bispecific antibody candidate MCLA-158 consists of one PCT filed on October 21, 2016,which entered or will enter national phases in the United States, Europe and 14 other foreign countries with an expiry no earlier than October 21, 2036.Claims are directed to the MCLA-158 composition of matter and methods of using MCLA-158 in the treatment or prevention of various solid tumors.As of April 24, 2018, our patent portfolio related to our MeMo® mouse consists of three issued U.S. patents, eight pending U.S. applications, 12issued foreign patents including one issued European patent that has been validated in many countries, and 11 pending foreign applications, all withan expected expiry not earlier than June 29, 2029. Claims are directed to a common light chain mouse and methods of producing antibodies byexposing the mouse to an antigen. For a discussion concerning opposition proceedings against this patent family see Part I, Item 8. “LegalProceedings” of our Annual Report on Form 20-F for the year ended December 31, 2016 and in Note 16 to our Consolidated Financial Statementsincluded in this Annual Report, respectively.As of April 24, 2018, our patent portfolio related to our Spleen to ScreenTM technology consists of two issued U.S. patents, one pending U.S.application, one issued European Patent, and one issued foreign patent, with five foreign pending applications, all with an expected expiry not earlierthan September 16, 2035. For a discussion concerning opposition proceedings against this patent family see Part I, Item 8 included in this AnnualReport.As of April 24, 2018, our patent portfolio related to recombinant production of mixtures of antibodies, and includes claims directed to host cellsgenerating multi-specific antibodies consists of 5 issued U.S. patents, and 4 pending U.S. applications, 2 issued European patents, 14 issued foreignpatents, and four 5 pending foreign applications, all with an expected expiry not earlier than July 18, 2022. For a discussion concerning oppositionproceedings against this patent family see Note 16 to our Consolidated Financial Statements included in this Annual Report.We plan to continue to expand our intellectual property estate by filing patent applications directed to dosage forms, methods of treatment andadditional compositions created or identified from our Biclonics® technology platform, improvements to our Biclonics® technology platform andongoing development of our antibody candidates. Specifically, we seek patent protection in the United States and internationally for novelcompositions of matter directed to aspects of the molecules, basic structures and processes for manufacturing these molecules and the use of thesemolecules in a variety of therapies.Our patent portfolio is intended to cover, but is not limited to, the composition of matter of our bispecific antibody candidates, their methods ofuse, the Biclonics® technology platform used to generate them, related 74Table of Contentstechnologies and/or other aspects of the inventions that are important to our business, including our MeMo® mouse, Spleen to ScreenTM technology,and recombinant host cells capable of producing our antibody candidates. We also rely on trademarks, trade secrets and careful monitoring of ourproprietary information to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.We also rely on know-how, continuing technological innovation and in-licensing opportunities to develop, strengthen, and maintain ourproprietary positions.Our success will depend on our ability to obtain and maintain patent and other proprietary protection for commercially important technology,inventions and know-how related to our business, defend and enforce our patents, maintain our licenses to use intellectual property owned by thirdparties, preserve the confidentiality of our trade secrets and operate without infringing the valid and enforceable patents and other proprietary rights ofthird parties. For important factors related to our proprietary technology, inventions, improvements, platforms and bispecific antibody candidates,please see the section entitled “Risk Factors—Risks Related to Intellectual Property and Information Technology.”Government RegulationWe are subject to extensive regulation. We expect our bispecific antibody candidates to be regulated as biologics. Biological products aresubject to regulation under the Federal Food, Drug, and Cosmetic Act, or FD&C Act, and the Public Health Service Act, or PHS Act, and other federal,state, local and foreign statutes and regulations. Both the FD&C Act and the PHS Act and their corresponding regulations govern, among other things,the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record keeping, distribution, reporting, advertising and other promotionalpractices involving biological products.U.S. Biological Products Development ProcessThe process required by the FDA before a biologic may be marketed in the United States generally involves the following: • completion of extensive nonclinical, sometimes referred to as pre-clinical laboratory tests, and pre-clinical animal trials and applicablerequirements for the humane use of laboratory animals and formulation studies in accordance with applicable regulations, including goodlaboratory practices, or GLPs; • submission to the FDA of an investigational new drug, or IND, application, which must become effective before human clinical trials maybegin; • performance of adequate and well-controlled human clinical trials according to the FDA’s regulations, commonly referred to as goodclinical practice, or GCP, regulations and any additional requirements for the protection of human research subjects and their healthinformation, to establish the safety and efficacy of the proposed biological product for its intended use; • submission to the FDA of a BLA for marketing approval that includes substantive evidence of safety, purity, and potency from results ofnonclinical testing and clinical trials; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assesscompliance with current Good Manufacturing Practice, or cGMP, requirements to assure that the facilities, methods and controls areadequate to preserve the biological product’s identity, strength, quality and purity; • potential FDA audit of the nonclinical and clinical trial sites that generated the data in support of the BLA; and • FDA review and approval, or licensure, of the BLA. 75Table of ContentsBefore testing any biological bispecific antibody candidate in humans, the bispecific antibody candidate enters the pre-clinical testing stage.Pre-clinical tests, also referred to as nonclinical trials, generally include laboratory evaluations of product chemistry, toxicity and formulation, as wellas animal studies to assess the potential safety and activity of the bispecific antibody candidate. The conduct of the pre-clinical tests must comply withfederal regulations and requirements including GLPs.The clinical trial sponsor must submit the results of the pre-clinical tests, together with manufacturing information, analytical data, any availableclinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some pre-clinical testing may continue even after the IND issubmitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical trial on a clinical hold withinthat 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. TheFDA may also impose clinical holds on a biological bispecific antibody candidate at any time before or during clinical trials due to safety concerns ornon-compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under terms authorized bythe FDA.Clinical trials involve the administration of the biological bispecific antibody candidate to healthy volunteers or patients under the supervisionof qualified investigators, generally physicians not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocolsdetailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to beused to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events should occur. Each protocoland any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordancewith the FDA’s regulations comprising the GCP requirements, including the requirement that all research subjects provide informed consent. Further,each clinical trial must be reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which theclinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether therisks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves theform and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and must monitor theclinical trial until completed.Human clinical trials are typically conducted in three sequential phases that may overlap or be combined: • Phase 1. The biological bispecific antibody candidate is initially introduced into healthy human subjects and tested for safety. In the caseof some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer tohealthy volunteers, the initial human testing is often conducted in patients. • Phase 2. The biological bispecific antibody candidate is evaluated in a limited patient population to identify possible adverse effects andsafety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimaldosage and dosing schedule. • Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient populationat geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product andprovide an adequate basis for product labeling.Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinicaltrials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safetyfollow-up.During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data,and clinical trial investigators. Annual progress reports detailing the results of 76Table of Contentsthe clinical trials must be submitted to the FDA. Written IND safety reports must be promptly submitted to the FDA and the investigators for seriousand unexpected adverse events, any findings from other trials, tests in laboratory animals or in vitro testing that suggest a significant risk for humansubjects, or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.The sponsor must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting. Thesponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar days after the sponsor’sinitial receipt of the information. The FDA or the sponsor or its data safety monitoring board may suspend a clinical trial at any time on variousgrounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend orterminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if thebiological bispecific antibody candidate has been associated with unexpected serious harm to patients.There are also requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries. Sponsors ofclinical trials of FDA-regulated products, including biologics, are required to register and disclose certain clinical trial information, which is publiclyavailable at www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, trial sites and investigators, andother aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to discuss the results of their clinical trialsafter completion. Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved.Concurrent with clinical trials, companies usually complete additional animal trials and must also develop additional information about thephysical characteristics of the biological bispecific antibody candidate as well as finalize a process for manufacturing the product in commercialquantities in accordance with cGMP requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products,the PHS Act emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. The manufacturing processmust be capable of consistently producing quality batches of the bispecific antibody candidate and, among other things, the sponsor must developmethods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must beselected and tested and stability studies must be conducted to demonstrate that the biological bispecific antibody candidate does not undergounacceptable deterioration over its shelf life.U.S. Review and Approval ProcessesAfter the completion of clinical trials of a biological bispecific antibody candidate, FDA approval of a BLA must be obtained before commercialmarketing of the biological product. The BLA must include results of product development, laboratory and animal trials, human trials, information onthe manufacture and composition of the product, proposed labeling and other relevant information. In addition, under the Pediatric Research EquityAct, or PREA, a BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the biological bispecific antibody candidatefor the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation forwhich the product is safe and effective. A sponsor who is planning to submit a marketing application for a drug or biological product that includes anew active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan, orPSP, within sixty days after an end-of-Phase 2 meeting or as may be agreed between the sponsor and FDA. Unless otherwise required by regulation,PREA does not apply to any biological product for an indication for which orphan designation has been granted.Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a user fee. The FDA adjusts the PDUFAuser fees on an annual basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the firstapplication filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the product alsoincludes a non-orphan indication. 77Table of ContentsWithin 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before theagency accepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and mayrequest additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subjectto review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA.The FDA reviews the BLA to determine, among other things, whether the proposed product is safe and potent, or effective, for its intended use, and hasan acceptable purity profile, and whether the product is being manufactured in accordance with cGMP requirements to assure and preserve theproduct’s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel biological products or biological productsthat present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review,evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by therecommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the biological productapproval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of thebiological bispecific antibody candidate. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the FDAwill not approve the BLA without a REMS, if required.Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless itdetermines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production ofthe product within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites to assurethat the clinical trials were conducted in compliance with IND trial requirements and GCP requirements.Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatorycriteria for approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than theapplicant interprets the same data. If the FDA decides not to approve the BLA in its present form, the FDA will issue a complete response letter thatusually describes all of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiringlabeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommendedactions that the applicant might take to place the application in a condition for approval. If a complete response letter is issued, the applicant mayeither resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw the application.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for usemay otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications,warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, ordispensing in the form of a REMS, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials,sometimes referred to as Phase IV clinical trials, designed to further assess a biological product’s safety and effectiveness, and testing and surveillanceprograms to monitor the safety of approved products that have been commercialized.One of the performance goals agreed to by the FDA under the PDUFA is to review 90% of standard BLAs in 10 months from the filing date and90% of priority BLAs in six months from the filing date, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goaldates for standard and priority BLAs and its review goals are subject to change from time to time. The review process and the PDUFA goal date may beextended by three months if the FDA requests or the BLA sponsor otherwise provides additional information or clarification regarding informationalready provided in the submission within the last three months before the PDUFA goal date. 78Table of ContentsOrphan Drug DesignationThe FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals inthe United States, or if it affects more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing andmarketing the drug for this type of disease or condition will be recovered from sales in the United States. Orphan product designation must berequested before submitting a BLA. After the FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan useare disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review andapproval process.In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trialcosts, tax advantages and user-fee waivers. In addition, if a product receives the first FDA approval for the indication for which it has orphandesignation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drugfor the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product withorphan exclusivity or where the manufacturer with orphan exclusivity is unable to assure sufficient quantities of the approved orphan designatedproduct. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtainapproval for the same product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could blockthe approval of one of our products for seven years if a competitor obtains approval of the same biological product as defined by the FDA or if ourbispecific antibody candidate is determined to be contained within the competitor’s product for the same indication or disease. If a drug or biologicalproduct designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled toorphan product exclusivity.Expedited Development and Review ProgramsThe FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new biological products that meet certaincriteria. Specifically, new biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening disease orcondition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast Track designation applies to thecombination of the product and the specific indication for which it is being studied. The sponsor of a new biologic may request that the FDA designatethe biologic as a Fast Track product at any time during the clinical development of the product. Unique to a Fast Track product, the FDA may considerfor review sections of the marketing application on a rolling basis before the complete application is submitted, if the sponsor provides a schedule forthe submission of the sections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable,and the sponsor pays any required user fees upon submission of the first section of the application.Any product submitted to the FDA for marketing, including under a Fast Track program, may be eligible for other types of FDA programsintended to expedite development and review, such as priority review and accelerated approval. Any product is eligible for priority review if it has thepotential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosisor prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for anew biological product designated for priority review in an effort to facilitate the review. Additionally, a product may be eligible for acceleratedapproval. Biological products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningfultherapeutic benefit over existing treatments may be eligible for accelerated approval, which means that they may be approved on the basis of adequateand well-controlled clinical trials establishing that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinicalbenefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity or mortality or other clinical benefit, taking intoaccount the severity, rarity, or prevalence of the condition and the availability or lack of 79Table of Contentsalternative treatments. As a condition of approval, the FDA may require that a sponsor of a biological product subject to accelerated approval performadequate and well-controlled post-marketing clinical trials. In addition, the FDA currently requires as a condition for accelerated approval pre-approvalof promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Track designation, priority reviewand accelerated approval do not change the standards for approval but may expedite the development or approval process.In addition, under the provisions of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, the FDAestablished a Breakthrough Therapy Designation which is intended to expedite the development and review of products that treat serious or life-threatening diseases or conditions. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs,to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantialimprovement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinicaldevelopment. The designation includes all of the features of Fast Track designation, as well as more intensive FDA interaction and guidance. TheBreakthrough Therapy Designation is a distinct status from both accelerated approval and priority review, but these can also be granted to the samebispecific antibody candidate if the relevant criteria are met. The FDA must take certain actions, such as holding timely meetings and providingadvice, intended to expedite the development and review of an application for approval of a breakthrough therapy. All requests for breakthroughtherapy designation will be reviewed within 60 days of receipt, and FDA will either grant or deny the request.Fast Track designation, priority review, accelerated approval and breakthrough therapy designation do not change the standards for approval butmay expedite the development or approval process. Even if we receive one of these designations for our bispecific antibody candidates, the FDA maylater decide that our bispecific antibody candidates no longer meet the conditions for qualification. In addition, these designations may not provide uswith a material commercial advantage.Post-Approval RequirementsMaintaining substantial compliance with applicable federal, state, and local statutes and regulations requires the expenditure of substantial timeand financial resources. Rigorous and extensive FDA regulation of biological products continues after approval, particularly with respect to cGMPrequirements. We will rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of any products thatwe may commercialize. Manufacturers of our products are required to comply with applicable requirements in the cGMP regulations, including qualitycontrol and quality assurance and maintenance of records and documentation. Other post-approval requirements applicable to biological productsinclude record-keeping requirements, reporting of adverse effects, and reporting updated safety and efficacy information.We also must comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, theprohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-labeluse”), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of previously unknownproblems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal ofthe product from the market as well as possible civil or criminal sanctions. Failure to comply with the applicable U.S. requirements at any time duringthe product development process, approval process or after approval, may subject an applicant or manufacturer to administrative or judicial civil orcriminal sanctions and adverse publicity. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinicalhold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals ofgovernment contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil orcriminal penalties. 80Table of ContentsBiological product manufacturers and other entities involved in the manufacture and distribution of approved biological products are required toregister their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain stateagencies for compliance with cGMP requirements and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in thearea of production and quality control to maintain cGMP compliance. In addition, changes to the manufacturing process or facility generally requireprior FDA approval before being implemented and other types of changes to the approved product, such as adding new indications and additionallabeling claims, are also subject to further FDA review and approval.U.S. Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of the FDA approval of the use of our bispecific antibody candidates, some of our U.S. patentsmay be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to asthe Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent termlost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of apatent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between theeffective date of an IND and the submission date of a BLA plus the time between the submission date of a BLA and the approval of that application,except that the review period is reduced by any time during which the applicant failed to exercise due diligence. Only one patent applicable to anapproved biological product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patentand within a 60-day period from the date the product is first approved for commercial marketing. The U.S. PTO, in consultation with the FDA, reviewsand approves the application for any patent term extension or restoration. In the future, we may apply for restoration of patent term for one of ourcurrently owned patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factorsinvolved in the filing of the relevant BLA; however, there can be no assurance that any such extension will be granted to us.Biosimilars and ExclusivityThe Biologics Price Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological productsthat are biosimilar to or interchangeable with an FDA-licensed reference biological product. The FDA has issued several guidance documents outliningan approach to review and approve biosimilars.Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in termsof safety, purity, and potency, can be shown through analytical studies, animal studies, and a clinical trial or studies. Interchangeability requires that aproduct is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as thereference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologicmay be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative toexclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products, aswell as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval pathway thatare still being worked out by the FDA. For example, in January 2017 the FDA issued draft guidance outlining considerations for sponsors seekingdemonstrate interchangeability with a reference biologic. However, to date the FDA has not approved a BLA for an interchangeable biological product.Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the referenceproduct was first licensed by the FDA. In addition, the approval of a 81Table of Contentsbiosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for thecompeting product containing the sponsor’s own pre-clinical data and data from adequate and well-controlled clinical trials to demonstrate the safety,purity and potency of their product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At thisjuncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governedby state pharmacy law.A biological product can also obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months toexisting exclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, maybe granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, recent government proposals have sought toreduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions,have also been the subject of recent litigation. As a result, the ultimate impact, implementation, and meaning of the BPCIA remain subject tosignificant uncertainty.FDA Regulation of Companion DiagnosticsWe expect that our bispecific antibody candidates may require use of an in vitro diagnostic to identify appropriate patient populations for ourproducts. These diagnostics, often referred to as companion diagnostics, are regulated as medical devices. In the United States, the FD&C Act and itsimplementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development,pre-clinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion,sales and distribution, export and import, and post-market surveillance. Unless an exemption applies, diagnostic tests require marketing clearance orapproval from the FDA prior to commercial distribution. The two primary types of FDA marketing authorization applicable to a medical device arepremarket notification, also called 510(k) clearance, and premarket approval, or PMA approval. We expect that any companion diagnostic developedfor our bispecific antibody candidates will utilize the PMA pathway.If use of companion diagnostic is essential to safe and effective use of a drug or biologic product, then the FDA generally will require approval orclearance of the diagnostic contemporaneously with the approval of the therapeutic product. On August 6, 2014, the FDA issued a final guidancedocument addressing the development and approval process for “In Vitro Companion Diagnostic Devices.” According to the guidance, for novelcandidates such as our bispecific antibody candidates, a companion diagnostic device and its corresponding drug or biologic candidate should beapproved or cleared contemporaneously by FDA for the use indicated in the therapeutic product labeling. The guidance also explains that acompanion diagnostic device used to make treatment decisions in clinical trials of a drug generally will be considered an investigational device,unless it is employed for an intended use for which the device is already approved or cleared. If used to make critical treatment decisions, such aspatient selection, the diagnostic device generally will be considered a significant risk device under the FDA’s Investigational Device Exemption, orIDE, regulations. Thus, the sponsor of the diagnostic device will be required to comply with the IDE regulations. According to the guidance, if adiagnostic device and a drug are to be studied together to support their respective approvals, both products can be studied in the same investigationalstudy, if the study meets both the requirements of the IDE regulations and the IND regulations. The guidance provides that depending on the details ofthe study plan and subjects, a sponsor may seek to submit an IND alone, or both an IND and an IDE. In July 2016, the FDA issued a draft guidancedocument intended to further assist sponsors of therapeutic products and sponsors of in vitro companion diagnostic devices on issues related toco-development of these products. 82Table of ContentsThe FDA generally requires companion diagnostics intended to select the patients who will respond to cancer treatment to obtain approval of aPMA for that diagnostic contemporaneously with approval of the therapeutic. The review of these in vitro companion diagnostics in conjunction withthe review of a cancer therapeutic involves coordination of review by the FDA’s Center for Biologics Evaluation and Research and by the FDA’sCenter for Devices and Radiological Health. The PMA process, including the gathering of clinical and pre-clinical data and the submission to andreview by the FDA, can take several years or longer. It involves a rigorous premarket review during which the applicant must prepare and provide theFDA with reasonable assurance of the device’s safety and effectiveness and information about the device and its components regarding, among otherthings, device design, manufacturing and labeling. PMA applications are subject to an application fee. In addition, PMAs for certain devices mustgenerally include the results from extensive pre-clinical and adequate and well-controlled clinical trials to establish the safety and effectiveness of thedevice for each indication for which FDA approval is sought. In particular, for a diagnostic, the applicant must demonstrate that the diagnosticproduces reproducible results when the same sample is tested multiple times by multiple users at multiple laboratories. As part of the PMA review, theFDA will typically inspect the manufacturer’s facilities for compliance with the Quality System Regulation, or QSR, which imposes elaborate testing,control, documentation and other quality assurance requirements.If the FDA evaluations of both the PMA application and the manufacturing facilities are favorable, the FDA will either issue an approval letter oran approvable letter, which usually contains a number of conditions that must be met in order to secure the final approval of the PMA, such as changesin labeling, or specific additional information, such as submission of final labeling, in order to secure final approval of the PMA. If the FDA concludesthat the applicable criteria have been met, the FDA will issue a PMA for the approved indications, which can be more limited than those originallysought by the applicant. The PMA can include post-approval conditions that the FDA believes necessary to ensure the safety and effectiveness of thedevice, including, among other things, restrictions on labeling, promotion, sale and distribution.If the FDA’s evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvableletter. A not approvable letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the PMAapprovable. The FDA may also determine that additional clinical trials are necessary, in which case the PMA approval may be delayed for severalmonths or years while the trials are conducted and then the data submitted in an amendment to the PMA. Once granted, PMA approval may bewithdrawn by the FDA if compliance with post approval requirements, conditions of approval or other regulatory standards is not maintained orproblems are identified following initial marketing. PMA approval is not guaranteed, and the FDA may ultimately respond to a PMA submission with anot approvable determination based on deficiencies in the application and require additional clinical trial or other data that may be expensive andtime-consuming to generate and that can substantially delay approval.After a device is placed on the market, it remains subject to significant regulatory requirements. Medical devices may be marketed only for theuses and indications for which they are cleared or approved. Device manufacturers must also establish registration and device listings with the FDA. Amedical device manufacturer’s manufacturing processes and those of its suppliers are required to comply with the applicable portions of the QSR,which cover the methods and documentation of the design, testing, production, processes, controls, quality assurance, labeling, packaging andshipping of medical devices. Domestic facility records and manufacturing processes are subject to periodic unscheduled inspections by the FDA. TheFDA also may inspect foreign facilities that export products to the United States.Government Regulation Outside of the United StatesIn addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things,clinical trials and any commercial sales and distribution of our products. Because biologically sourced raw materials are subject to uniquecontamination risks, their use may be restricted in some countries. 83Table of ContentsWhether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countriesprior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similarprocess that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. In theEuropean Union, for example, a CTA must be submitted to each country’s national health authority and an independent ethics committee, much likethe FDA and the IRB, respectively. Once the CTA is approved in accordance with a country’s requirements, clinical trial development may proceed.The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country tocountry. In all cases, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles thathave their origin in the Declaration of Helsinki.To obtain regulatory approval of an investigational biological product under European Union regulatory systems, we must submit a marketingauthorization application. The application used to file the BLA in the United States is similar to that required in the European Union, with theexception of, among other things, country-specific document requirements. The European Union also provides opportunities for market exclusivity.For example, in the European Union, upon receiving marketing authorization, new chemical entities generally receive eight years of data exclusivityand an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in the European Union from referencingthe innovator’s data to assess a generic application. During the additional two-year period of market exclusivity, a generic marketing authorization canbe submitted, and the innovator’s data may be referenced, but no generic product can be marketed until the expiration of the market exclusivity.However, there is no guarantee that a product will be considered by the European Union’s regulatory authorities to be a new chemical entity, andproducts may not qualify for data exclusivity. Products receiving orphan designation in the European Union can receive ten years of marketexclusivity, during this period, no marketing authorization application may be accepted and no marketing authorization may be granted for a similarmedicinal product for the same indication. An orphan product can also obtain an additional two years of market exclusivity in the European Union forpediatric studies. No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications.The criteria for designating an “orphan medicinal product” in the European Union are similar in principle to those in the United States. UnderArticle 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatmentof a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the EuropeanUnion when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in theEuropean Union to justify investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorizedfor marketing in the European Union, or if such a method exists, the product will be of significant benefit to those affected by the condition, as definedin Regulation (EC) 847/2000. Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upongrant of a marketing authorization, entitled to ten years of market exclusivity for the approved therapeutic indication. The application for orphan drugdesignation must be submitted before the application for marketing authorization. The applicant will receive a fee reduction for the marketingauthorization application if the orphan drug designation has been granted, but not if the designation is still pending at the time the marketingauthorization is submitted. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approvalprocess. 84Table of ContentsThe 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets thecriteria for orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally,marketing authorization may be granted to a similar product for the same indication at any time if: • the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; • the applicant consents to a second orphan medicinal product application; or • the applicant cannot supply enough orphan medicinal product.For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing theconduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials areconducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration ofHelsinki.If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawalof regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.Other Healthcare LawsIn addition to FDA restrictions on marketing of pharmaceutical and biological products, other U.S. federal and state healthcare regulatory lawsrestrict business practices in the biopharmaceutical industry, which include, but are not limited to, state and federal anti-kickback, false claims, dataprivacy and security, and physician payment and drug pricing transparency laws.The federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting,receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering, or arrangingfor or recommending the purchase, lease, or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federalhealthcare programs. The term “remuneration” has been broadly interpreted to include anything of value. The Anti-Kickback Statute has beeninterpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers onthe other. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, theexceptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing,purchases, or recommendations may be subject to scrutiny if they do not meet the requirements of a statutory or regulatory exception or safe harbor.Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegalunder the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of allits facts and circumstances. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangementinvolving remuneration is to induce referrals of federal healthcare covered business, the statute has been violated.Additionally, the intent standard under the Anti-Kickback Statute was amended by the ACA to a stricter standard such that a person or entitydoes not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the ACAcodified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false orfraudulent claim for purposes of the federal civil False Claims Act. The majority of states also have anti-kickback laws, which establish similarprohibitions and in some cases may apply to items or services reimbursed by any third-party payor, including commercial insurers.The federal false claims and civil monetary penalties laws, including the civil False Claims Act, prohibit any person or entity from, among otherthings, knowingly presenting, or causing to be presented, a false, fictitious or 85Table of Contentsfraudulent claim for payment to, or approval by, the federal government, knowingly making, using, or causing to be made or used a false record orstatement material to a false or fraudulent claim to the federal government, or from knowingly making a false statement to avoid, decrease or conceal anobligation to pay money to the U.S. federal government. A claim includes “any request or demand” for money or property presented to the U.S.government. Actions under the civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in thename of the government. Violations of the civil False Claims Act can result in very significant monetary penalties and treble damages. Severalpharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly providing free product tocustomers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing falseclaims to be submitted because of the companies’ marketing of products for unapproved (e.g., off-label) uses. In addition, the civil monetary penaltiesstatute imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that theperson knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. Many states also have similar fraud andabuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardlessof the payor. Given the significant size of actual and potential settlements, it is expected that the government authorities will continue to devotesubstantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws.The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit,among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, includingprivate third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminalinvestigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false,fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the U.S. federalAnti-Kickback Statute, the ACA broadened the reach of certain criminal healthcare fraud statutes created under HIPAA by amending the intentrequirement such that a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committeda violation.In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and certain other healthcareproviders. The ACA imposed, among other things, new annual reporting requirements through the Physician Payments Sunshine Act for coveredmanufacturers for certain payments and “transfers of value” provided to physicians and teaching hospitals, as well as ownership and investmentinterests held by physicians and their immediate family members. Failure to submit timely, accurately and completely the required information for allpayments, transfers of value and ownership or investment interests may result in civil monetary penalties of up to an aggregate of $150,000 per yearand up to an aggregate of $1 million per year for “knowing failures.” Covered manufacturers must submit reports by the 90th day of each subsequentcalendar year. In addition, certain states require implementation of compliance programs and compliance with the pharmaceutical industry’s voluntarycompliance guidelines and the relevant compliance guidance promulgated by the federal government, impose restrictions on marketing practices,and/or tracking and reporting of pricing and marketing information as well as gifts, compensation and other remuneration or items of value provided tophysicians and other healthcare professionals and entities.We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementingregulations, including the Final HIPAA Omnibus Rule published on January 25, 2013, impose specified requirements relating to the privacy, securityand transmission of individually identifiable health information held by covered entities and their business associates. Among other things, HITECHmade HIPAA’s security standards directly applicable to “business associates,” defined as independent contractors or agents of covered entities thatcreate, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a 86Table of Contentscovered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possiblyother persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federalHIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security ofhealth information in certain circumstances, many of which differ from each other in significant ways and may not have the same requirements, thuscomplicating compliance efforts.If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject topenalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputationalharm, diminished profits and future earnings, the curtailment or restructuring of our operations, exclusion from participation in federal and statehealthcare programs and individual imprisonment, any of which could adversely affect our ability to operate our business and our financial results.To the extent that any of our bispecific antibody candidates, once approved, are sold in a foreign country, we may be subject to similar foreignlaws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuselaws, and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.Coverage and ReimbursementSignificant uncertainty exists as to the coverage and reimbursement status of any pharmaceutical or biological products for which we obtainregulatory approval. In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providersperforming the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikelyto use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Sales of anyproducts for which we receive regulatory approval for commercial sale will therefore depend, in part, on the availability of coverage and adequatereimbursement from third-party payors. Third-party payors include government authorities, managed care plans, private health insurers and otherorganizations.In the United States, the process for determining whether a third-party payor will provide coverage for a pharmaceutical or biological producttypically is separate from the process for setting the price of such product or for establishing the reimbursement rate that the payor will pay for theproduct once coverage is approved. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, whichmight not include all of the FDA-approved products for a particular indication. A decision by a third-party payor not to cover our bispecific antibodycandidates could reduce physician utilization of our products once approved and have a material adverse effect on our sales, results of operations andfinancial condition. Moreover, a third-party payor’s decision to provide coverage for a pharmaceutical or biological product does not imply that anadequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levelssufficient to realize an appropriate return on our investment in product development. Additionally, coverage and reimbursement for new products candiffer significantly from payor to payor. One third-party payor’s decision to cover a particular medical product or service does not ensure that otherpayors will also provide coverage for the medical product or service, or will provide coverage at an adequate reimbursement rate. As a result, thecoverage determination process will require us to provide scientific and clinical support for the use of our products to each payor separately and will bea time-consuming process.In the European Union, governments influence the price of products through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under whichproducts may only be marketed once a reimbursement price has been agreed to by the government. To obtain reimbursement or pricing approval, someof these countries may require the completion of clinical trials that compare the cost 87Table of Contentseffectiveness of a particular product candidate to currently available therapies. Other member states allow companies to fix their own prices formedicines, but monitor and control company profits. The downward pressure on health care costs in general, particularly prescription products, hasbecome very intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, in some countries, cross borderimports from low-priced markets exert a commercial pressure on pricing within a country.The containment of healthcare costs has become a priority of federal, state and foreign governments, and the prices of pharmaceutical orbiological products have been a focus in this effort. Third-party payors are increasingly challenging the prices charged for medical products andservices, examining the medical necessity and reviewing the cost-effectiveness of pharmaceutical or biological products, medical devices and medicalservices, in addition to questioning safety and efficacy. If these third-party payors do not consider our products to be cost-effective compared to otheravailable therapies, they may not cover our products after FDA approval or, if they do, the level of payment may not be sufficient to allow us to sell ourproducts at a profit.Healthcare ReformA primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors haveattempted to control costs by limiting coverage and the amount of reimbursement for particular medical products. For example, in March 2010, theACA was enacted, which, among other things, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug RebateProgram; introduced a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugsthat are inhaled, infused, instilled, implanted or injected; extended the Medicaid Drug Rebate Program to utilization of prescriptions of individualsenrolled in Medicaid managed care plans; imposed mandatory discounts for certain Medicare Part D beneficiaries as a condition for manufacturers’outpatient drugs coverage under Medicare Part D; subjected drug manufacturers to new annual fees based on pharmaceutical companies’ share of salesto federal healthcare programs; and created a new Patient Centered Outcomes Research Institute to oversee, identify priorities in, and conductcomparative clinical effectiveness research, along with funding for such research. The current presidential administration and U.S. Congress will likelycontinue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the ACA. However, the ultimate content, timing or effect of anyhealthcare reform legislation on the U.S. healthcare industry is unclear.We expect that other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and otherhealthcare funding, more rigorous coverage criteria and lower reimbursement, new payment methodologies and additional downward pressure on theprice that we receive for any approved product. Any reduction in reimbursement from Medicare or other government-funded programs may result in asimilar reduction in payments from private payors. Moreover, recently there has been heightened governmental scrutiny over the manner in whichmanufacturers set prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed bills designed to,among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, andreform government program reimbursement methodologies for pharmaceutical and biological products. Individual states in the United States have alsobecome increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing,including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparencymeasures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. The implementation of cost containmentmeasures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.Additionally, on August 2, 2011, the Budget Control Act of 2011 was enacted, which, among other things, included aggregate reductions ofMedicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to thestatute will stay in effect through 2025 unless additional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act was 88Table of Contentssigned into law, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancertreatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts thatfederal and state governments will pay for healthcare products and services, which could result in reduced demand for our products once approved oradditional pricing pressures.C. Organizational Structure.We have one wholly-owned subsidiary, Merus US, Inc., which is incorporated in the United States in the State of Delaware.D. Property, Plant and Equipment.We lease approximately 11,125 square meters of office and laboratory space in Utrecht, the Netherlands. This facility serves as our corporateheadquarters and central laboratory facility. The lease for this space expires on October 31, 2021.Environmental IssuesFor information on environmental issues that may affect our utilization of our Dutch facility, please see the section of this Annual Report titled“Item 3.D. Risk Factors—Risks Related to Our Business and Industry—Because we are subject to environmental, health and safety laws andregulations, we may become exposed to liability and substantial expenses in connection with environmental compliance or remediation activitieswhich may adversely affect our business and financial condition.” Item 4E. Unresolved Staff Comments.Not applicable. 89Table of ContentsItem 5 Operating and Financial Review and Prospects.A. Operating ResultsOverviewWe are a clinical-stage immuno-oncology company developing innovative bispecific antibody therapeutics. Our pipeline of full-length humanbispecific antibody candidates, which we refer to as Biclonics®, are generated from our technology platform. By binding to two different antigens, ortargets, Biclonics® can provide a variety of mechanisms of action. For example, our Biclonics® can be designed to simultaneously block receptors thatdrive tumor cell growth and survival and to mobilize the patient’s immune response by engaging T-cells and/or activating various killer cells toeradicate tumors. In our pre-clinical studies, our bispecific antibody candidates were effective in killing tumor cells, a result that we believe supportstheir potential efficacy in the treatment of cancer.We commenced a Phase 1/2 clinical trial of our most advanced bispecific antibody candidate, MCLA-128, for the treatment of HER2-expressingsolid tumors in February 2015. In May 2017, Merus presented an update entitled, “First in human phase 1/2 study of MCLA-128, a full length IgG1bispecific antibody targeting HER2 and HER3; final phase 1 data and preliminary activity in Her2+ metastatic breast cancer (MBC),” which detailedclinical results from our Phase 1/2 clinical trial of MCLA-128 in solid tumors, including final Phase 1 data in patients with HER2+ MBC. Part 1 of thePhase 1/2 clinical trial showed that MCLA-128 was safe and well-tolerated and established the Phase 2 recommended dose of MCLA-128 in a cohort of28 advanced solid tumor patients. In Part 2 of the Phase 1/2 MCLA-128 study in solid tumors, treatment was completed for a cohort of heavilypre-treated HER2+ MBC patients (n=11) using MCLA-128 as a single agent which resulted in an overall clinical benefit rate (defined as completeresponse plus partial response plus stable disease lasting at least 12 weeks) of 64%.With single agent activity established in MBC, the initiation of a Phase 2 clinical trial with the first patient being dosed began in January 2018.This Phase 2, open-label, multi-center international clinical trial will evaluate MCLA-128 in two MBC populations, including HER2-positive MBCpatients and hormone receptor positive/HER2-low MBC patients. MCLA-128 was advanced into Phase 2 following the single agent activity observedin the Phase 1/2 trial disclosed in 2017 which showed a clinical benefit rate (including a partial response and stable disease lasting at least 12 weeks)among the cohort of MBC patients of 64% (7 patients out of a total of 11). The Phase 1/2 study evaluating single agent activity for MCLA-128 ingastric, ovarian, endometrial and non-small cell lung, or NSCL, is ongoing and we expect to formulate our clinical development plans in the secondhalf of 2018.In May 2016, we commenced a Phase 1 clinical trial of our second most-advanced bispecific antibody candidate, MCLA-117, for the treatment ofacute myeloid leukemia, or AML. During 2017, we have continued our dose escalation of the Phase 1 clinical trial for MCLA-117 in Europe. InFebruary of 2018, we received U.S. FDA acceptance of our Investigational New Drug (IND) application for MCLA-117, which we filed in January 2018.With this acceptance, we intend to open trial sites in the U.S. for our ongoing Phase 1 trial in patients with AML in 2018.We are also developing MCLA-158, which is designed to bind to cancer stem cells expressing leucine-rich repeat-containing G protein-coupledreceptor 5, or Lgr5, and epidermal growth factor receptors, or EGFR. MCLA-158 is being developed as a potential treatment for colorectal cancer andother solid tumors. We have received approval of CTAs in several European countries for MCLA-158 for the potential treatment of metastaticcolorectal cancer, including patients with the RAS-mutation, which represent a substantial unmet need. We expect to dose the first patient in thesecond quarter of 2018. We also filed an IND for MCLA-158 with the U.S. FDA in the first quarter of 2018, which has received FDA acceptance in April2018, and we plan to open trial sites in the U.S. in the second quarter of 2018.Additionally, we have several other bispecific antibody candidates in pre-clinical development that bind to combinations of immunomodulatorymolecules. For example, IND-enabling studies for MCLA-145, our first 90Table of Contentsdrug candidate under our collaboration and license agreement with Incyte Corporation, are ongoing. We maintain full rights to develop andcommercialize MCLA-145 in the U.S. and Incyte is responsible for its development and commercialization outside the U.S.Since our inception in June 2003, our initial operations were focused on organizing and staffing our company, business planning, raising capital,and establishing our proprietary Biclonics® platform technology, bispecific antibody candidates, and our intellectual property portfolio. In morerecent periods, we have devoted a significant portion of our financial resources and efforts to continued development of our Biclonics® technologyplatform, identifying potential bispecific antibody candidates and conducting pre-clinical studies and initiating and conducting our clinical trials ofMCLA-128 and MCLA-117. We do not currently have any approved products and have never generated any revenue from product sales.We have financed our operations primarily through (i) the initial public offering of our common shares, (ii) a public placement of equitysecurities with Incyte Corporation, or Incyte, (iii) an upfront milestone payment received from Incyte under a collaboration and license agreement, orthe Collaboration Agreement and (iv) a private placement of common shares on February 15, 2018. Commencing on May 9, 2016, we raised netproceeds of €51.1 million from the IPO of our common shares, received net proceeds of €74.4 million from placements of equity securities with Incyteand received aggregate net proceeds of €112.0 million from a license payment from Incyte in February of 2017. As of December 31, 2017, we held cashand cash equivalents of €149.7 million.In February 2018, we issued and sold an aggregate of 3,099,997 of our common shares to certain new and existing investors for aggregate grossproceeds of approximately $55.8 million, at a purchase price of $18.00 per share.In December 2016, we entered into a collaboration and license agreement, or the Collaboration Agreement, with Incyte Corporation, or Incyte.Under the terms of the Collaboration Agreement, we and Incyte agreed to collaborate with respect to the research, discovery and development ofbispecific antibodies utilizing our proprietary bispecific technology platform. The collaboration encompasses up to 11 independent programs,including two of our current preclinical immuno-oncology discovery programs. In January 2017, upon the Collaboration Agreement becomingeffective, Incyte made an upfront non-refundable payment to us of $120 million. For more on the Collaboration Agreement, see “CollaborationAgreements” below. In connection with the Collaboration Agreement, we entered into a Share Subscription Agreement, pursuant to which, in January2017, we issued and sold to Incyte 3,200,000 common shares for an aggregate purchase price of $80.0 million.On May 6, 2016, the general meeting of our shareholders resolved to approve and effect a capital reorganization, based on a reverse share split.The effect of the reverse share split was a 1-for-1.8 reverse share split of the outstanding common and preferred shares held by our shareholders. Thisreverse share split became effective on May 6, 2016. All share, per-share and related information presented in the financial statements andcorresponding disclosure notes have been retrospectively adjusted, where applicable, to reflect the impact of the reverse share split.In May 2016, we completed the initial public offering of our common shares and issued 6,139,926 common shares, including 639,926 commonshares issued upon the partial exercise of the underwriters of their option to purchase additional shares, for net proceeds to us, after deductingunderwriting discounts and commissions and offering expenses, of $53.3 million.We are a clinical-stage company and have not generated any revenue from product sales. We expect to incur significant expenses and operatinglosses for the foreseeable future as we advance our bispecific antibody candidates from discovery through pre-clinical development and into clinicaltrials, and seek regulatory approval and pursue commercialization of any approved bispecific antibody candidate. In addition, if we obtain regulatory 91Table of Contentsapproval for any of our bispecific antibody candidates, we expect to incur significant commercialization expenses related to product manufacturing,marketing, sales and distribution. We expect to incur expenses in connection with the in-license or acquisition of additional bispecific antibodycandidates.We anticipate that we will require additional financing to support our continuing operations. Until such time as we can generate significantrevenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or othersources, which may include collaborations and business development opportunities with third parties. Adequate additional financing may not beavailable to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial conditionand our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.Based on our current operating plan, we expect our existing cash balances, including proceeds received from our private placement offering thatclosed in February 2018, to last through the end of 2020. For this assessment we have taken into consideration our existing cash and cash equivalentsof €149.7 million and investments of €41.1 million at December 31, 2017, together with the $55.8 million of proceeds received from our privateplacement offering that closed in February 2018. See “Item 5.B—Liquidity and Capital Resources.”Collaboration AgreementsAs part of our business strategy, we intend to continue to seek strategic collaborations to facilitate the capital-efficient development of ourBiclonics® technology platform and to identify potential target combinations in immuno-oncology and other therapeutic areas. We believe that thesecollaborations could potentially provide significant funding to advance our bispecific antibody candidate pipeline while allowing us to benefit fromthe development expertise of our collaborators.Incyte CorporationWe have entered into a collaboration and license agreement, or the Collaboration Agreement, with Incyte Corporation, or Incyte. Under the termsof the Collaboration Agreement, we and Incyte have agreed to collaborate with respect to the research, discovery and development of bispecificantibodies utilizing our proprietary bispecific technology platform. The collaboration encompasses up to 11 independent programs, including some ofour current preclinical immuno-oncology discovery programs. For one of the current preclinical programs concerning MCLA-145, we retain theexclusive right to develop and commercialize products and product candidates in the United States, while Incyte has the exclusive right to developand commercialize products and product candidates arising from such program outside the United States. For MCLA-145, we and Incyte will conductand share equally the costs of mutually agreed global development activities and will be solely responsible for independent development activities inour respective territories. We have the option to co-fund development of products arising from one specified program, and subject to certainconditions, to a second specified program, in each case exchange for a share of profits in the United States, as well as the right to participate in aspecified proportion of detailing activities in the United States for one of such programs. In addition, if MCLA-145 fails to complete IND-enablingtoxicology studies successfully, we will be granted an additional option to co-fund development of a specified program other than MCLA-145 inexchange for a share of profits in the United States. If we exercise our co-funding option for a program, we would be responsible for funding 35% of theassociated future global development costs and, for certain of such programs, would be responsible for reimbursing Incyte for certain developmentcosts incurred prior to the option exercise. All products as to which we have exercised our option to co-fund development would be subject to jointdevelopment plans and overseen by a joint development committee, with Incyte having final determination as to such plans in cases of dispute.For each program other than MCLA-145, where we have not elected to co-fund development or where we do not have such a co-funding option,Incyte is solely responsible for all costs of global development and 92Table of Contentscommercialization activities. We retain the rights to our technology platform as well as clinical and pre-clinical candidates and future programsemerging from our platform that are outside the scope of the Collaboration Agreement.In January 2017, upon the Collaboration Agreement becoming effective, Incyte made an upfront non-refundable payment to us of $120 millionfor the rights granted under the Collaboration Agreement. For each program as to which we do not have commercialization or co-development rights,we are eligible to receive up to $100 million in future contingent development and regulatory milestones and up to $250 million in commercializationmilestones, as well as tiered royalties ranging from 6% to 10% of global net sales. For each program as to which we have exercised our option toco-fund development, we are eligible to receive a 50% share of profits (or sustain 50% of any losses) in the United States and tiered royalties rangingfrom 6% to 10% of net sales of products outside of the United States. If we opt to cease co-funding a program as to which we exercised ourco-development option, then we will no longer receive a share of profits in the United States but will be eligible to receive the same milestones fromthe co-funding termination date and the same tiered royalties described above with respect to non-co-developed programs and, depending on the stageat which we choose to cease co-funding development costs, additional royalties ranging up to 4% of net sales in the United States. For MCLA-145, forwhich we retain all commercial rights in the United States, we and Incyte are each eligible to receive tiered royalties on net sales in the other’s territoryat rates ranging from 6% to 10%.The Collaboration Agreement will continue on a program-by-program basis until we have no royalty payment obligations with respect to suchprogram or, if earlier, the termination of the Collaboration Agreement or any program in accordance with the terms of the Collaboration Agreement.The Collaboration Agreement may be terminated in its entirety, or on a program-by-program basis, by Incyte for convenience. The CollaborationAgreement may also be terminated by either party under certain other circumstances, including material breach, or on a program-by-program basis forpatent challenge of patents under the applicable program, in each case as set forth in the Collaboration Agreement. If the Collaboration Agreement isterminated in its entirety or with respect to one or more programs, all rights in the terminated programs revert to us, subject to payment to Incyte of areverse royalty of up to 4% on sales of future products, if we elect to pursue development and commercialization of products arising from theterminated programs.In connection with the Collaboration Agreement, we entered into a Share Subscription Agreement with Incyte, pursuant to which, in January2017, we issued and sold to Incyte 3,200,000 common shares for an aggregate purchase price of $80.0 million.ONO PharmaceuticalIn April 2014, we entered into a strategic research and license agreement with ONO Pharmaceutical Co., Ltd., or ONO, under which we grantedONO an exclusive, worldwide, royalty-bearing license to research, test, make, use and market bispecific antibody candidates based on our Biclonics®technology platform with undisclosed targets.ONO paid us a non-refundable upfront fee of €1.0 million. We are eligible to receive up to an aggregate of €34.0 million in milestone paymentsupon achievement of specified research and clinical development milestones. To date, we have achieved two of the specified pre-clinical milestonesunder this research and license agreement and have received an aggregate of €1.8 million in milestone payments. For products commercialized underthis agreement, if any, we are also eligible to receive a mid-single digit royalty on net sales. For a designated period, which may include limited timeperiods following termination of this agreement, in certain circumstances we and our affiliates are prohibited from researching, developing orcommercializing bispecific antibodies against the undisclosed target combinations that are the subject of this agreement. This research and licenseagreement will expire after all milestone payments have been received and all related patent rights have expired, unless terminated earlier. ONO alsoprovides funding for our research and development activities under an agreed-upon plan. ONO has the right to terminate this agreement at any time forany reason, with or without 93Table of Contentscause. The licenses granted to ONO may convert to royalty-free, fully-paid, perpetual licenses if ONO terminates the agreement for uncured materialbreach.On March 14, 2018, we entered into a second contract research and license agreement with ONO. Pursuant to an exclusive option granted to ONOin a prior agreement executed in April 2014, ONO exercised its option to enter into the March 2018 agreement. We granted ONO an exclusive,worldwide, royalty-bearing license, with the right to sublicense, research, test, make, use and market bispecific antibody candidates based on ourBiclonics® technology platform against two undisclosed targets directed to a particular undisclosed target combination. ONO identifies and selects thelicensed bispecific antibodies for which it is responsible for conducting further non-clinical and clinical development activities for such licensedbispecific antibodies and pharmaceutical products containing such antibodies, including manufacture and process development. ONO controls and hasexclusive rights over the worldwide commercialization of any approved products, including worldwide supply, and is solely responsible for all costsand expenses related to commercialization. ONO has agreed to fund our research and development activities and be responsible for the payment of allcosts and expenses for its own research and development activities, which are set out in a mutually agreed upon research plan. We retain all rights touse and commercialize any antibodies that are generated under the collaborative research program, excluding the up to five lead and/or selectedantibodies against the targets ONO is pursuing, provided that the use and commercialization is not with respect to the particular target combination.ONO has agreed to pay an upfront non-refundable payment of €700,000 for the rights granted and we are also eligible to receive an aggregate of€33.7 million in milestone payments upon achievement of specified research and clinical development milestones. For products commercialized underthe License Agreement, if any, the Company is eligible to receive a mid-single digit royalty on net sales.For a designated period, which may include limited time periods following termination of this agreement, in certain circumstances we areprohibited from researching, developing or commercializing bispecific antibodies against the undisclosed target combination that are the subject ofthis agreement. ONO also provides funding for Merus’ research and development activities under an agreed-upon plan. This research and licenseagreement will expire after all milestone payments have been received and all related patent rights have expired, unless terminated earlier. ONO has theright to terminate this agreement at any time for any reason, with or without cause. The licenses granted to ONO may convert to royalty-free, fully-paid,perpetual licenses if ONO terminates the agreement for uncured material breach.Simcere Pharmaceutical GroupOn, January 8, 2018, we entered into an agreement with Simcere Pharmaceutical Group granting Simcere an exclusive license to develop andcommercialize in China three bispecific antibodies utilizing Merus’ proprietary Biclonics® technology platform in the area of immuno-oncology.Merus will retain all rights outside of China.Under the terms of the agreement, Merus has agreed to lead research and discovery activities while Simcere has agreed to be responsible for theInvestigational New Drug (IND) enabling studies, clinical development, regulatory filings and commercialization of these product candidates in China.As a key strategic component of the collaboration, Simcere will be responsible for IND enabling studies and manufacturing of clinical trial materials inChina, which Merus intends to use to assist regulatory filing and early stage clinical development in the rest of the world. Merus shall receive anupfront payment, and will be eligible to receive milestone payments contingent upon Simcere achieving certain specified development andcommercial goals. Merus will be eligible to receive tiered royalty payments on sales of any products resulting from the collaboration in China fromSimcere. Simcere will be eligible to receive tiered royalty payments on sales outside of China from Merus. 94Table of ContentsFinancial Operations OverviewRevenueTo date, our revenue has consisted principally of the amortization of up-front payments, milestones and cost reimbursements in support of ourlicense and collaboration agreements and revenue from several government grants, primarily with respect to research and development activitiesrelated to the use of our Biclonics® technology in various indication areas. We have no products approved for sale. We do not expect to receive anyrevenue from any bispecific antibody candidates that we develop, including MCLA-128 and MCLA-117 and our pre-clinical bispecific antibodycandidates, until we obtain regulatory approval and commercialize such products, or until we potentially enter into collaborative agreements with thirdparties for the development and commercialization of such candidates.Revenue is recognized to the extent that it is probable that the economic benefits will flow to us and the revenue can be reliably measured. Werecord revenue from our collaboration and license agreements with Incyte and ONO. Under each agreement, we have received upfront licensepayments, which were initially recorded in deferred revenue. These up-front license payments are recognized as revenue on a straight-line basis overthe period of the performance obligation or the contractual term of the arrangement.We incur various external expenses under our research and license agreements for material and services consumed in the development ofbispecific antibody candidates subject to our licenses and collaboration agreements. Under our agreements, Incyte and ONO reimburse us for theseexternal expenses and compensate us for time spent on the project by our employees. We recognize these reimbursements and compensation ascollaboration income. In addition, we record collaboration income in the same quarter of the recorded cost they are intended to compensate.Government grants are recognized when there is reasonable assurance that the conditions underlying the grant have been met and that the grantwill be received. Government grants to cover research and development expenses incurred are recognized as revenue proportionally over the periodsduring which the related research and development expenses are incurred. For these grants, we have reporting obligations at the end of the grantcontract term. The unconditional receipt of the grant allowances is dependent on the final review of the reporting provided by us at the end of thecontract term.Research and Development CostsResearch and development costs consist principally of the costs associated with our research and development activities, conducting preclinicalstudies and clinical trials and activities related to our regulatory filings. Our research and development expenses consist of: • expenses incurred under agreements with contract research organizations, or CROs, contract manufacturing organizations, and consultantsthat conduct and support clinical trials and preclinical studies • salaries for research and development staff and related expenses, including share-based compensation expenses; • costs of related facilities, materials and equipment; • costs associated with obtaining and maintaining patents and other intellectual property; and • amortization and depreciation of tangible and intangible fixed assets used to develop our product candidates.We expense research and development costs when we incur them. We record costs for certain development activities, such as clinical trials, basedon an evaluation of the progress to completion of specific tasks using data 95Table of Contentssuch as subject enrollment, clinical site activations or information our vendors provide to us. We expense the manufacturing costs of our internally-developed product candidates that are used in clinical trials as they are incurred, as research and development expense. We do not allocate employee-related costs, depreciation, rental and other indirect costs to specific research and development programs because these costs are deployed acrossmultiple programs under research and development and, as such, are separately classified as unallocated research and development expenses.Research and development expenses are expected to increase as we advance the clinical development of MCLA-128, MCLA-117 andMCLA-158 and further advance the research and development of our pre-clinical bispecific antibody candidates and other earlier stage products.IND-enabling studies for MCLA-145, our most advanced drug candidate in our collaboration and license agreement with Incyte Corporation, areongoing. The successful development of our bispecific antibody candidates is highly uncertain. At this time, we cannot reasonably estimate the nature,timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflowsmay commence from, any of our bispecific antibody candidates. This is due to numerous risks and uncertainties associated with developing drugs,including the uncertainty of: • the scope, rate of progress and expense of our research and development activities; • clinical trials and early-stage results; • the terms and timing of regulatory approvals; • the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; and • the ability to market, commercialize and achieve market acceptance for MCLA-128, MCLA-117, MCLA-158 and MCLA-145 or any otherbispecific antibody candidate that we may develop in the future.A change in the outcome of any of these variables with respect to the development of any of our antibody candidates would significantly changethe costs, timing and viability associated with the development of that antibody candidate. For example, if the FDA, the EMA or other regulatoryauthority were to require us to conduct pre-clinical and clinical studies beyond those which we currently anticipate will be required for the completionof clinical development or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significant additionalfinancial resources and time on the completion of our clinical development programs.Research and development activities are central to our business model. We expect research and development costs to increase significantly forthe foreseeable future as our development programs progress, as we continue to support the clinical trials of our bispecific antibody candidates astreatments for various cancers and as we move these candidates into additional clinical trials. There are numerous factors associated with the successfulcommercialization of any of our bispecific antibody candidates, including future trial design and various regulatory requirements, many of whichcannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond ourcontrol may impact our clinical development programs and plans.Management and Administration CostsOur management and administration costs consist principally of salaries and related expenses for employees other than research and developmentstaff, including share-based compensation expenses. We expect that our management and administration costs will increase in the future as ourbusiness expands and we increase our headcount to support the expected growth in our operating activities. 96Table of ContentsOther ExpensesOther expenses consist principally of: • professional fees for auditing and tax services and consulting expenses not related to research and development activities; • professional fees for legal services, including litigation costs, not related to the protection and maintenance of our intellectual property; • cost of facilities, communication and office expenses; • board of director fees and corresponding share-based compensation expenses; • information technology services; and • amortization and depreciation of tangible and intangible fixed assets not related to research and development activities.We expect our other expenses will increase in the future as we expand our operating activities and we continue to incur additional costsassociated with operating as a public company. We expect other expenses to increase in future periods to support our research and development efforts,including the continuation of the clinical trials of our bispecific antibody candidates as treatments for various cancers and the initiation of clinicaltrials for potential new antibody candidates. These cost increases will likely be due to increased headcount, increased share-based compensationexpenses, expanded infrastructure and increased costs for insurance. Public company-related expense increases will include costs of additional legalfees, accounting and audit fees, consulting fees, director and officer liability insurance premiums and costs related to investor relations.Finance Income (Expenses)Finance income consists of interest earned on our cash and cash equivalents held on account and accretion of investment earnings. Financeexpenses consist of foreign exchange losses on our U.S. dollar denominated cash, cash equivalents and investments, interest and related expenses forthe settlement of our forward contract for the Share Subscription Agreement with Incyte, interest accrued on our formerly outstanding indebtedness andfinancing costs associated with our registration statements.Results of OperationsComparison of Years Ended December 31, 2017 and 2016The below table summarizes our results of operations for the years ended December 31, 2017 and 2016. Year EndedDecember 31 Change 2017 2016 € % (euros in thousands) Revenue €13,600 €2,719 €10,881 400% Research and development costs (34,125) (18,424) 15,701 85% Management and administration costs (13,697) (4,258) 9,439 222% Other expenses (9,395) (7,709) 1,686 22% Operating result (43,617) (27,672) 15,945 58% Finance income (expenses) (29,223) (19,556) 9,667 49% Income tax expense (249) — 249 — % Result after taxation (73,089) (47,228) 25,861 55% Other comprehensive income 89 8 81 10,125% Total comprehensive loss for the year €(73,000) €(47,220) 25,780 55% 97Table of ContentsRevenueTotal revenue increased by €10.9 million to €13.6 million for the year ended December 31, 2017, from €2.7 million for the year endedDecember 31, 2016. The increase was primarily attributable to our license and collaboration agreement with Incyte, or the Incyte Agreement, whichbecame effective during the first quarter of 2017 and for which we recognized revenue throughout 2017. The following table summarizes ourcomponents of revenue for the years ended December 31, 2017 and 2016, respectively: Year EndedDecember 31 Change 2017 2016 € % (euros in thousands) Up-front payment amortization €6,616 €223 €6,393 2,867% Collaboration income 5,789 1,109 4,680 422% Income from grants on research projects 1,195 1,387 (192) -14% Revenue €13,600 €2,719 10,881 400% For the year ended December 31, 2017, up-front payment amortization increased €6.4 million and related entirely to the amortization relating toour Incyte agreements. For the years ended December 31, 2017 and 2016, we recognized €0.2 million, respectively, of amortization of the up-frontpayment related to our April 2014 ONO agreement.Collaboration income for the year ended December 31, 2017 was €5.8 million and consisted of cost reimbursements in support of our researchand license agreements with Incyte and ONO. We did not recognize any research milestones during 2017. During 2016, we recognized one researchmilestone reached by our agreement with ONO which amounted to €0.7 million. Additionally, we received an amount of €0.4 million revenue from anew consultancy agreement that was signed with ONO on March 7, 2016.During 2017, we had two active grants consisting of cash allowances for specific research and development projects. For the years endedDecember 31, 2017 and 2016, we recognized €1.2 million and €1.4 million in grant income, respectively.Research and Development Costs Year EndedDecember 31 Change 2017 2016 € % (euros in thousands) Research and development costs €34,125 €18,424 15,701 85% Research and development costs increased €15.7 million, or 85%, to €34.1 million for the year ended December 31, 2017, from €18.4 million forthe year ended December 31, 2016. The increase was primarily due to the following: • €9.1 million increase in expenses in connection with our pre-clinical and discovery programs in support of ongoing development activitiesfor MCLA-158 (€3.5 million) and MCLA-145 (€3.2 million) and other expenses for conducting research and development, preclinical,manufacturing and production design in connection with various pre-clinical and discovery programs (€2.4); • €2.0 million increase in spending for our MCLA-128 and €0.4 million increase in spending for MCLA-117 programs in support of ourongoing clinical trials expenses; • €2.6 million increase in employee salary and related benefits and €2.5 million increase in share compensation expenses, offset, in part, bythe receipt of an additional €1.8 million in subsidies under 98Table of Contents the WBSO Act, all of which were attributable to the hiring of more development personnel during the year ended December 31, 2017; and • €0.7 million increase related to higher spending on intellectual property and license costs for legal and professional services.Our research and development expenses may vary substantially from period to period based on the timing of our research and developmentactivities, including due to timing of initiation of clinical trials and enrollment of patients in clinical trials.Management and Administration CostsManagement and administrative costs consist of salaries and related expenses for employees in finance, legal, human resources and businessdevelopment functions. These costs include all salary, salary related expenses and share-based compensation expenses. Year EndedDecember 31 Change 2017 2016 € % (euros in thousands) Management and administration costs €13,697 €4,258 9,439 222% Management and administration costs increased €9.4 million, or 222%, during the year ended December 31, 2017 as compared to the year endedDecember 31, 2016. The increase was primarily attributable to the expansion of our headcount in finance, legal and business development functions tosupport the expansion of our operations and included increases in salary and related expenses of €2.5 million and share-based compensation expensesof €6.9 million.Other Expenses Year EndedDecember 31 Change 2017 2016 € % (euros in thousands) Other expenses €9,395 €7,709 1,686 22% Other expenses increased €1.7 million, or 22%, during the year ended December 31, 2017 as compared to the year ended December 31, 2016. Theincrease was due to higher consulting, accounting and professional fees of €1.7 million in support of maintaining public company status, higherfacilities expenses in support of higher headcount of €0.4 million which were offset in part, by lower litigation costs of €0.4 million. Year EndedDecember 31 Change 2017 2016 € % (euros in thousands) Interest and similar income €1,112 €88 €1,024 1,164% Net loss and foreign exchange (19,449) (409) 19,040 4,655% Interest expense (10,696) (19,235) (8,539) -44% Financing costs (190) — 190 — % Total finance income (expenses) €(29,223) €(19,556) 9,667 49% 99Table of ContentsFinance Income (Expenses)Finance expense increased €9.7 million, or 49%, during the year ended December 31, 2017 as compared to the year ended December 31, 2016.This increase was due to an increase in foreign exchange expense of €19.0 million, offset, in part, by an €8.5 million decrease in interest expense andhigher interest income of €1.0 million.Interest income primarily results from interest earned on cash held on account and accretion of investment earnings. Our current year increase incash, cash equivalents and investments was due primarily from the $200 million of funds received as part of the Incyte Agreements during the firstquarter of 2017.We experienced increased losses on our U.S. dollar denominated cash, cash equivalents and investments of approximately €19.1 million during2017. As of December 31, 2017, we held approximately $98.0 million and $49.4 million in U.S. dollar denominated cash and cash equivalent accountsand investment accounts, respectively, subject to the fluctuation in foreign currency between the euro and U.S. dollar.On December 20, 2016, we signed the Incyte Agreements whereas these contracts were denominated in U.S. dollars. We determined that thesubscription agreement to sell our own shares to which we became committed on December 20, 2016, should be accounted for as a forward contract or aderivative financial instrument which was recognized in the statement of financial position as of December 31, 2016. The interest expense and similarexpenses for the year ended December 31, 2017 include an amount of €10.7 million related to the effective settlement of the forward contract onJanuary 23, 2017, the date the shares were issued and the date through which the related expense was incurred.During 2017, we expensed €0.2 million of prepaid share issuance costs related to a potential future issuance of shares under our F-3 RegistrationStatement when the future issuance was no longer consider probable.Income Tax ExpenseIncome tax expenses were €0.2 million and zero for the years ended December 31, 2017 and 2016, respectively. Current-year income tax expensewas attributable to our U.S. operating subsidiary, which was established in February 2016 to provide general management services and strategicadvisory services to us.Comparison of Years Ended December 31, 2016 and 2015The below table summarizes our results of operations for the years ended December 31, 2016 and 2015. Year EndedDecember 31 Change 2016 2015 € % (euros in thousands) Revenue €2,719 €1,977 €742 38% Research and development costs (18,424) (16,181) 2,243 14% Management and administration costs (4,258) (768) 3,490 454% Other expenses (7,709) (8,067) (358) -4% Operating result (27,672) (23,039) 4,633 20% Finance income (expenses) (19,556) (145) 19,411 13,387% Result after taxation €(47,228) €(23,184) 24,044 104% RevenueTotal revenue increased by €0.7 million, or 38%, to €2.7 million for the year ended December 31, 2016, from €2.0 million for the year endedDecember 31, 2015. The increase was primarily attributable to the 100Table of Contents€0.7 million increase in grant revenue, mainly related due to additional research activities performed under the FP7 grant, a research grant provided bythe European Union.The following table summarizes our components of revenue: Year EndedDecember 31 Change 2016 2015 € % (euros in thousands) Up-front payment amortization €223 €223 €— — % Collaboration income 1,109 1,092 17 2% Income from grants on research projects 1,387 662 725 110% Total revenue €2,719 €1,977 742 38% For the years ended December 31, 2016 and 2015, up-front payment amortization related entirely to our ONO agreement. Collaboration incomefor the year ended December 31, 2016 was €1.1 million and consisted of one research milestone reached by our agreement with ONO which amountedto €0.7 million and cost reimbursements in support of our research and license agreement with ONO. We recognized one research milestone during2015 which amounted to €1.0 million. During 2016 and 2015, we had three and two active grants, respectively, consisting of cash allowances forspecific research and development projects.Research and Development Costs Year EndedDecember 31 Change 2016 2015 € % (euros in thousands) Research and development costs €18,424 €16,181 €2,243 14% Research and development costs increased €2.2 million, or 14%, to €18.4 million for the year ended December 31, 2016, from €16.2 million forthe year ended December 31, 2015. The increase was primarily due to the following: • €3.5 million increase in expenses in connection with the expansion of various pre-clinical and discovery programs during 2016; • €2.1 million increase in expenses related to our MCLA-128 program, due to higher contract manufacturing costs and costs associated withpre-clinical studies; • €1.3 million increase in employee salary and related benefits and €0.3 million increase in share compensation expenses, offset, in part, bythe receipt of an additional €1.4 million in subsidies under the WBSO Act, all of which were attributable to the hiring of more developmentpersonnel during the year ended December 31, 2016; offset, in part by • €3.8 million decrease in expenses related to our MCLA-117 program.Management and Administration Costs Year EndedDecember 31 Change 2016 2015 € % (euros in thousands) Management and administration costs €4,258 €768 €3,490 454% 101Table of ContentsManagement and administration costs increased €3.5 million, or 454%, during the year ended December 31, 2016 as compared to the year endedDecember 31, 2015. The increase was primarily attributable to an increase in employee headcount and compensation-related expenses of €1.5 millionfor non-research and development personnel and higher share-based compensation expenses of €2.0 million.Other Expenses Year EndedDecember 31 Change 2016 2015 € % (euros in thousands) Other expenses €7,709 €8,067 (358) -4% Other expenses decreased €0.4 million, or 4%, during the year ended December 31, 2016 as compared to the year ended December 31, 2015. Thedecrease was primarily attributable to a decrease of €2.9 million in lower litigation costs, offset by increases of €1.9 million for consulting, accountingand legal fees in support of our IPO and maintaining public company status and €0.6 million in Board fees and related share-based compensationexpenses.Finance Income (Expenses) Year EndedDecember 31 Change 2016 2015 € % (euros in thousands) Interest and similar income €88 €50 €38 76% Net loss and foreign exchange (409) — 409 — % Interest expense (19,235) (195) 19,040 9,764% Total finance income (expense) €(19,556) €(145) 19,411 13,387% Finance expense increased €19.4 million during the year ended December 31, 2016 as compared to the year ended December 31, 2015. Thisincrease was due to increases in interest expense of €19.0 million and foreign exchange losses of €0.4 million. We experienced losses on our U.S. dollardenominated cash and cash equivalents of approximately €0.4 million during 2016 on our U.S. dollar denominated cash and cash equivalent accountssubject to the fluctuation in foreign currency between the euro and U.S. dollar. The increase in cash during 2016 was primarily a result of the receipt ofnet proceeds of approximately $53.3 million from our IPO during 2016.The increase in interest expense of €19.0 million is primarily related to the accounting impact on the financial derivative recognized under theIncyte Agreement. The subscription agreement to sell our own shares in which we became committed on December 20, 2016, was accounted for as aforward contract or a derivative financial instrument. The change in fair value of the derivative financial instrument of approximately €19.2 millionwas recognized as interest expense for the year ended December 31, 2016.Critical Accounting Policies and Significant Judgments and EstimatesOur operating and financial review is based on our financial statements, which we have prepared in accordance with IFRS as issued by the IASB.The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilitiesand the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during thereporting periods. Actual results may differ from these estimates under different assumptions or conditions. There have been no material adjustments toprior period estimates for any of the periods included in this Annual Report on Form 20-F. 102Table of ContentsOur significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Reporton Form 20-F. We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financialcondition and results of operations.Revenue RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to us and the revenue can be reliably measured.We maintain research and license agreements with ONO and Incyte. In connection with these arrangements, we received upfront fees, which relateto the integrated package of deliverables under the contract (one single performance obligation) and are initially recorded in deferred revenue. Theapplicable period over which to recognize the upfront payment is a significant judgment. Up-front payments or similar non-refundable payments areinitially reported as deferred revenue on the consolidated balance sheets and are recognized as revenue on a straight-line basis over the period of theperformance obligation or the contractual term of the arrangement. The estimated period of the performance obligation is re-assessed at each balancesheet date.Collaboration income, which is typically related to reimbursements from collaborators for our performance of research and development servicesunder the respective agreements, are recognized on the basis of labor hours valued at a contractually agreed rate. Collaboration income includesreimbursements for related out-of-pocket expenses. Cost reimbursements to which we are entitled under agreements are recognized as revenues in thesame quarter of the recorded cost they are intended to compensate. We act as the principal and therefore record these reimbursements as collaborationincome.We receive certain government and regional grants, which support our research efforts in defined projects, and include contributions towards thecost of research and development. When there is reasonable assurance that we will comply with the conditions attached to a received grant, and whenthere is reasonable assurance that the grant will be received, government grants are recognized as revenue on a gross basis in the profit or loss accounton a systematic basis over the periods in which the entity recognizes expenses for the related costs for which the grants are intended to compensate. Inthe case of grants related to assets, the received grant will be deducted from the carrying amount of the asset.Research and DevelopmentWe incur research and development expenses related to our clinical and pre-clinical drug development programs. Expenditure on researchactivities is recognized as an expense in the period in which it is incurred.Research and development expenses (or from the development phase of an internal project) are capitalized if, and only if, all of the followinghave been demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or sale; • the intention to complete the intangible asset and use or sell it; • the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;and • the ability to measure reliably the expenditure attributable to the intangible asset during its development. 103Table of ContentsThe above criteria for capitalization of development costs have not been met and therefore, all development expenditures relating to internallygenerated intangible assets to date have been expensed when incurred.As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewingquotations and contracts, identifying services that have been performed on our behalf, estimating the level of service performed and the associated costincurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice usmonthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each statement offinancial position date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy ofour estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and developmentexpenses are related to fees paid to CROs in connection with research and development activities for which we have not yet been invoiced. We baseour expenses related to CROs on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conductresearch and development on our behalf.The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. Theremay be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research anddevelopment expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expendedin each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaymentexpense accordingly.Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing ofservices performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high ortoo low in any particular period.Share-Based CompensationWe maintain stock ownership programs that entitle key management personnel, staff and consultants providing similar services to purchase orreceive our common shares. Under these programs, holders of vested options are entitled to purchase our common shares at the exercise pricedetermined at the date of grant while holders of vested restricted stock units (“RSUs”) are entitled to the right to receive our common shares.The options granted under the share option programs vest in installments over a four-year period from the grant date. Twenty-five percent of theoptions vest on the first anniversary of the vesting commencement date, and the remaining 75% of the options vest in 36 monthly installments for eachfull month of continuous service provided by the option holder thereafter, such that 100% of the options shall become vested on the fourth anniversaryof the vesting commencement date. The options granted are exercisable once vested. Options will lapse on the eighth anniversary of the date of grantfor options granted under the Merus B.V. 2010 Employee Option Plan (the “2010 Plan”) and on the tenth anniversary of the date of grant for theoptions granted under the 2016 Incentive Award Plan (the “2016 Plan”).The option exercise price of each option is specified in the applicable notice of grant and equals either the fair market value per common share asdetermined at the date of grant or another price determined by our Board of Directors when granting the options. Each option is exercisable at suchtimes and subject to such terms and conditions as specified in the applicable notice of grant. We may, in the event of a change of control of ourcompany, decide to exchange, cancel and settle in cash and/or accelerate the vesting of the outstanding options or our Board of Directors may considerother appropriate steps with respect to the outstanding options.The RSUs granted under the 2016 Plan vest in installments over a four-year period from the grant date. Each RSU represents the right to receiveone common share of the Company.Share-based compensation reflects the compensation expense of our share option and RSU programs granted to employees or others providingsimilar services, which are measured at the grant date fair value of the options or RSU. 104Table of ContentsThe compensation expense is spread over the vesting period in accordance with each separate vesting tranche of the award granted, taking intoconsideration actual and expected forfeitures at each reporting date and at the respective vesting dates. The grant date fair value share-basedcompensation is recognized as an expense.Prior to the IPO, we estimated the fair value of each share option grant using the Black-Scholes option-pricing model for members of ourexecutive management team, which includes our board of directors and other key personnel, or the Hull & White option pricing model for otherparticipants, including board members. Service and non-market performance conditions attached to the transactions were not taken into account inmeasuring fair value. Following our IPO, we use the Hull & White option pricing model for all participants. The share option expenses have beenadjusted to reflect the use of the Hull & White option pricing model for all participants.The assumptions we used to determine the fair value of share options granted are as follows, presented on a weighted average basis: Year ended December 31, 2017 2016 2015 KeyManagementPersonnel All OtherEmployees KeyManagementPersonnel All OtherEmployees KeyManagementPersonnel All OtherEmployees Expected volatility (weighted-average) 95.05% 94.88% 95.30% 97.15% 94.85% 94.85% Expected life (weighted-average) 10 years 10 years 10 years 8-10 years 4 years 8 years Expected dividends 0% 0% 0% 0% 0% 0% Risk-free interest rate (based ongovernment bonds) 2.29%-2.51% 2.24%-2.62% 1.84%-1.86% 0.10%-1.87% 0.16%-0.70% 0.16%-0.70% These assumptions represented our best estimates, but the estimates involve inherent uncertainties and the application of our judgment.The options outstanding at December 31, 2017 had exercise prices in the range of €1.93 to €27.47 per share. On October 5, 2015, we amendedthe exercise price of all options granted under the 2010 Option Plan prior to January 2015 to be €1.93 per share to reflect the relative decrease inestimated fair value for each common share. As a result, we recognized an additional share option expense that was immaterial.Since we were a private company prior to the closing of the initial public offering of our common shares, company-specific historical and impliedvolatility information is not available. Expected volatility was therefore estimated based on the observed daily share price returns of publicly tradedpeer companies over a historic period equal to the period for which expected volatility was estimated. The group of comparable listed companies werepublicly traded entities active in the business of developing antibody-based therapeutics, treatments and drugs and were selected taking intoconsideration the availability of meaningful trading data history and market capitalization. We will continue to use this group for calculation ofexpected volatility data until sufficient historical market data is available for estimating the volatility of our common shares.Since the options are not transferable, the participants will tend to exercise the options prior to the maturity date. Expected early exercises havebeen incorporated in the option valuation by assuming that the participants will exercise the options if the share price increases to two times theexercise price at a future point in time.Valuation of Our Common SharesPrior to the initial public offering of our common shares, the fair value of our common shares was determined by our then management board andsupervisory board, and took into account our most recently 105Table of Contentsavailable valuation of common shares performed by an independent valuation firm and our assessment of additional objective and subjective factorswe believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant.Our then management board and supervisory board considered numerous objective and subjective factors to determine their best estimate of thefair value of our common shares as of each grant date, including: • the progress of our research and development programs; • achievement of enterprise milestones, including entering into collaboration and licensing agreements, as well as funding milestones; • contemporaneous third-party valuations of our common shares for our most recent share issuances; • our need for future financing to fund operations; • the prices at which we sold our preferred shares and the rights and preferences of our preferred shares and our preferred shares relative to ourcommon shares; • the likelihood of achieving a discrete liquidity event, such as a sale of our company or an initial public offering given prevailing marketconditions; • external market and economic conditions impacting our industry sector; and • the lack of an active public market for our common shares and our preferred shares.In determining the fair values of our common shares as of each grant date, three generally accepted approaches were considered: incomeapproach, market approach and cost approach. In addition, the guidance prescribed by the American Institute of Certified Public Accounts, or AICPA,Audit and Accounting Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation has been considered.The “prior sale of company stock” method, a form of the market approach, had been applied to estimate the total enterprise value. The prior saleof company stock method considers any prior arm’s length sales of our equity securities. Considerations factored into the analysis included: the typeand amount of equity sold, the estimated volatility, the estimated time to liquidity, the relationship of the parties involved, the risk-free rate, the timingcompared to the common shares valuation date and the financial condition and our structure at the time of the sale. As such, the value per share wasbenchmarked to the external transactions of our securities and external financing rounds. Throughout this period, a number of financing rounds wereheld, which resulted in the issuance of preferred shares. The preferred shares were transacted with numerous existing and new investors, and thereforethe pricing in these financing rounds was considered a strong indication of fair value.Given that there were multiple classes of equity, the hybrid method was applied in order to allocate equity to the various equity classes. Thehybrid method is a hybrid between the probability-weighted expected return method, or PWERM, and the Option Pricing Method, or OPM, whichestimates the probability weighted value across certain exit scenarios, but uses the OPM to estimate the remaining unknown potential exit scenarios.As a part of this analysis, we estimated cumulative probabilities of 65% and 35% of an initial public offering and for a sale of our company,respectively, from September 2014 onwards. Prior to this date, we estimated cumulative probabilities of 32.5% and 67.5% of an initial public offeringand for a sale of our company, respectively. A discount for lack of marketability, or DLOM, was applied, corresponding to the time to exit under thevarious scenarios to reflect the increased risk arising from the inability to readily sell the shares. When assessing the DLOM, the Black-Scholes optionpricing model was used. Under this method, the cost of the put option, which can hedge the price change before the privately held shares can be sold,was considered as the basis to determine the DLOM.Upon the commencement of public trading of our common shares in May 2016 in connection with the initial public offering of our commonshares, estimates by our board of directors are no longer necessary to determine the fair value of common shares. 106Table of ContentsIncome TaxesWe are subject to income taxes in the Netherlands and the United States. Significant judgment is required in determining the use of net operatingloss carry-forwards and taxation of upfront and milestone payments for income tax purposes. There are many transactions and calculations for whichthe ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from the amounts that were initially recorded, suchdifferences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.Federal and state income taxes were paid in the United States because of our United States subsidiary; however, no tax charge or income wasrecognized in our Dutch entity during the reporting periods since we are in a loss-making position and have a history of losses. We have tax loss carry-forwards of €149.2 million, €101.1 million, and €76.5 million as of December 31, 2017, 2016, and 2015, respectively. As a result of Dutch income taxlaw, tax loss carry-forwards are subject to a time limitation of nine years.Deferred income tax assets are recognized for tax losses and other temporary differences to the extent that the realization of the related tax benefitthrough future taxable profits is probable. We recognize deferred tax assets arising from unused tax losses or tax credits only to the extent the relevantfiscal unity has sufficient taxable temporary differences or if there is convincing other evidence that sufficient taxable profit will be available againstwhich the unused tax losses or unused tax credits can be utilized by the fiscal unity. Our judgment is that sufficient convincing other evidence is notavailable and therefore, a deferred tax asset is not recognized.In order to promote innovative technology development activities and investments in new technologies, a corporate income tax incentive hasbeen introduced in Dutch tax law called the “Innovation Box.” Based on the Innovations Box ruling, we would owe on the first 75% of qualifyingprofits under the Dutch jurisdiction effectively 5% for Dutch income taxes. The remaining profit would be taxed at the Dutch statutory tax rate of 25%.Taxable profits will only qualify for the Innovations Box once the tax losses carried forward are completely utilized. The agreement with the taxauthorities was originally signed for the tax years beginning in 2011 through 2015 and was subsequently extended through the year 2019. Since weare loss-making, no Dutch income tax is recognized in profit or loss.InvestmentsInvestments are classified as held-to-maturity and are initially measured at fair value. Subsequent to initial recognition, they are measured atamortized cost using the effective interest rate method. Investments are classified as held-to-maturity and carried at amortized cost as management hasthe positive intent and ability to hold them until maturity. Interest income from these securities is included in finance income.Recent Accounting PronouncementsA number of new standards, amendments to standards and interpretations are effective for annual periods beginning after January 1, 2017, and have notbeen applied in preparing these financial statements. Those which may be relevant to us are set out below. We do not plan to adopt these standardsearly.IFRS 9 Financial InstrumentsIFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includescontains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cashflow characteristics. IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, measured at fair valuethrough other comprehensive income and measured at fair value through profit or loss. The standard eliminates 107Table of Contentsthe existing IAS 39 categories of held to maturity, loans and receivables and available for sale. In addition, the revised guidance on the classificationand measurement of financial instruments includes a new expected credit loss model for calculating impairment on financial assets and the new generalhedge accounting requirements. Finally, IFRS 9 carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.IFRS 9 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. Based on its assessment, webelieve that adoption of IFRS 9’s new classification requirements, new credit loss model or the new general hedge accounting requirements are notexpected to have a material impact on our financial statements.IFRS 15 Revenue from Contracts with CustomersIn May 2014, the International Accounting Standards Board (IASB) issued IFRS 15 – Revenue from Contracts with Customers, which willreplace existing revenue recognition guidance. The new standard requires an entity to recognize the amount of revenue to which it expects to beentitled for the transfer of promised goods or services to customers. To achieve that core principle, an entity must identify the contract(s) with acustomer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performanceobligations in the contract, and recognize revenue when (or as) the entity satisfies the performance obligation. The new standard will be effective forannual and interim reporting periods beginning after December 15, 2017. In anticipation of IFRS 15, we performed an impact assessment whichconsisted of a review of all license and collaboration agreements and government grants. Further, we held discussions with key stakeholders andidentified and cataloged potential impacts of the new standard on our financial statements, accounting policies, financial controls and operations.The adoption of IFRS 15 will primarily impact the amortization of our up-front license payments. We recognize revenue from up-front licensepayments on a straight-line basis over the contractual term of the arrangements or the period of continuing involvement which is 21 years for the IncyteAgreement and 4.5 years for the ONO Agreement. In applying IFRS 15, we have evaluated the distinct performance obligations in each agreement. As aresult, the upfront license payments will be recognized over a shorter period of time consummate with the expected period of time to provide thedistinct performance obligations within each agreement. Applying the recognition criteria under the current standard, up-front license paymentsassociated with these agreements would have been deferred until the completion of the respective contractual period. As a result of the application ofthis guidance, we would have amortized additional revenue of approximately €8.3 million for the year ended December 31, 2017 and recorded acorresponding decrease in deferred revenue for the same amount. The new standard will not impact our revenue recognition practices for collaborationincome and government grants.We will adopt the standard using the full retrospective method, with the effect of initially applying this standard recognized at the beginning ofthe earliest period presented. As a result, the impact under this methodology to our previously reported revenues will be to restate prior reportedrevenues to conform to the new financial reporting commencing on January 1, 2018. We will report new disclosures required by this guidance withinour Form 6-K for the interim period ending March 31, 2018. As the adoption of this new standard is anticipated to have a material impact on ourrevenues and net income on an ongoing basis, we have implemented a controls process to identify and evaluate new revenue-generating contracts withthird-party customers. We will continue to monitor additional changes, modifications, clarifications or interpretations being undertaken by accountingregulatory bodies which may impact current conclusions. During 2018, we expect that the application of the standard to decrease deferred revenue byapproximately €8.9 million as reported in the consolidated balance sheet and increase revenues by the same amount within the consolidated statementof operations. However, it is not expected to impact cash used in operating, financing or investing activities in our consolidated cash flows statementupon adoption. 108Table of ContentsIFRS 16 LeasesThe IASB has issued a new standard on leases that will require lessees to recognize most leases on their balance sheets as lease liabilities with acorresponding right-of-use asset. The IASB has set an effective date to apply the new standard for periods beginning on or after January 1, 2019. Wehave identified known lease agreements and have started working on determining the impact on the financial statements. Additionally, we areassessing all effective agreements to determine whether there are embedded leases included under the definition as included under IFRS 16. Earlyadoption is permitted; however, we expect to adopt this standard in the first quarter of 2019. We are evaluating the impact that this guidance will haveon our financial statements, including related disclosures, and expect the new standard to impact our internal controls, systems, and processes.B. Liquidity and Capital ResourcesSources of FundsSince our inception in 2003, we have devoted substantially all of our resources to developing our platform technology, bispecific antibodycandidates, building our intellectual property portfolio, developing our supply chain, business planning, raising capital and providing for general andadministrative support for these operations. We do not currently have any approved products and have never generated any revenue from product sales.We have principally financed our operations through (i) the initial public offering of our common shares, (ii) a public placement of equity securitieswith Incyte Corporation, or Incyte, (iii) an upfront milestone payment received from Incyte under a collaboration and license agreement, or theCollaboration Agreement and (iv) a private placement of common shares on February 15, 2018.On May 24, 2016, we closed an initial public offering of 5,500,000 of our common shares and, on May 26, 2016, of an additional 639,926 of ourcommon shares, at a price to the public of $10 per share (the “IPO”). We received net proceeds, after deducting underwriting discounts andcommissions and offering expenses, of $53.3 million. On May 19, 2016, our common shares were listed on the Nasdaq and all of our preferred sharesconverted into common shares.In December 2016, we entered into a collaboration and license agreement, or the Collaboration Agreement, and a share subscription agreement,or the Share Subscription Agreement, with Incyte Corporation, or Incyte. In January 2017, we received an upfront payment of $120.0 million(€110.2 million) from Incyte pursuant to the Collaboration Agreement and $80.0 million (€73.5 million) upon the issuance and sale by us of3.2 million common shares to Incyte pursuant to the Share Subscription Agreement, for total cash proceeds to us of $200.0 million (€184.4 million).As of December 31, 2017, we had cash and cash equivalents of €149.7 million and investments of €41.1 million. Subsequently, on February 13,2018, we entered into a Purchase Agreement with the purchasers named therein (the “Investors”). Pursuant to the Purchase Agreement, we agreed to sellan aggregate of 3,099,997 of our common shares, nominal value €0.09 per share, to the Investors for aggregate gross proceeds of approximately$55.8 million, at a purchase price equal to $18.00 per share. The closing of the private placement occurred on February 15, 2018.We have no ongoing material financing commitments, such as lines of credit or guarantees that are expected to affect our liquidity over the nextfive years, other than leases. 109Table of ContentsCash FlowsThe table below summarizes our cash flows for each of the periods presented. Year Ended December 31, 2017 2016 2015 (euros in thousands) Net cash used in operating activities €(37,413) €(25,733) €(23,031) Net cash used in investing activities (41,625) (408) (53) Net cash from financing activities 186,222 50,201 54,367 Net increase in cash and cash equivalents €107,184 €24,060 €31,283 During 2017, we used €37.4 million of cash in operating activities, as compared to the use of €25.7 million in cash during 2016, an increase inthe use of cash of €11.7 million. This increase in net cash used in operating activities was the result of the increase in net loss adjusted for non-cashitems of €10.4 million and changes in working capital of €1.2 million. Our non-operating and non-cash charges during the year ended December 31,2017 primarily consisted of unrealized foreign exchange results of €15.8 million, share option expenses of €12.8 million and the change in fair valueof the derivative financial instrument of €10.7 million.During 2016, we used €25.7 million of cash in operating activities, as compared to the use of €23.0 million in cash during 2015, an increase inthe use of cash of €2.7 million. This increase in net cash used in operating activities was the result of the increase in net loss adjusted for non-cashitems of €1.9 million and changes in working capital of €1.0 million. Our non-cash charges during the year ended December 31, 2016 primarilyconsisted of the change in change in the fair value of the derivative financial instrument of €19.2 million and share option expenses of €3.3 million.Net cash used in investing activities for 2017 and 2016 was €41.6 million and €0.4 million, respectively. The increase in net cash used ininvesting activities during 2017 related primarily to €41.8 million for purchases of investments, offset, in part, by higher interest received of€0.8 million. The increase in net cash used in investing activities to €0.4 million for the year ended December 31, 2016 from €0.05 million for the yearended December 31, 2015 was primarily due to an increase in investments in laboratory and office equipment.Net cash provided by financing activities in 2017 was €186.2 million which was primarily due to receipt of €186.7 million from the IncyteAgreements, offset, in part, by the full repayment of the loan from Rabobank of €0.5 million. Net cash provided by financing activities in 2016 was€50.2 million which was primarily related to proceeds from our IPO in May of 2016.Net cash provided by financing activities in 2015 was €54.4 million and related to aggregate private placements resulting in gross cash proceedsof €46.5 million and the receipt of an €8.0 million convertible bridge loan granted by several shareholders in June 2015.Operating and Capital Expenditure RequirementsWe have not achieved profitability since our inception and, as of December 31, 2017, we had an accumulated loss of €167.5 million. We expectto continue to incur significant operating losses for the foreseeable future as we continue our research and development efforts and seek to obtainregulatory approval and commercialization of our bispecific antibody candidates.We expect our expenses to increase substantially in connection with our ongoing development activities related to MCLA-128, MCLA-117,MCLA-158 and our pre-clinical programs. In addition, we expect to continue 110Table of Contentsto incur additional costs associated with operating as a public company. We anticipate that our expenses will increase substantially if and as we: • conduct the clinical trials for MCLA-128, our most advanced bispecific antibody candidate in Phase 2 for metastatic breast cancerpopulations and Phase 1 in other solid tumors; • conduct the Phase 1 clinical trial of MCLA-117, our second most advanced bispecific antibody candidate; • continue the research and development of our other bispecific antibody candidates, including commencing clinical trials for our thirdbispecific antibody candidate, MCLA-158; • seek to enhance our technology platform, which generates our pipeline of Biclonics®, and discover and develop additional bispecificantibody candidates; • seek regulatory approvals for any bispecific antibody candidates that successfully completes clinical trials; • potentially establish a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize anyproducts for which we may obtain regulatory approval; • maintain, expand and protect our intellectual property portfolio, including litigation costs associated with defending against allegedpatent infringement claims or enforcing our intellectual property rights; • add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support ourproduct development and potential future commercialization efforts and to support our operation as a public company; and • experience any delays or encounter any issues any of the above, including but not limited to failed studies, complex results, safety issues orother regulatory challenges.Based on our current operating plan, we expect our existing cash balances, including the proceeds received from our private placement offeringthat closed in February 2018, to last through the end of 2020. For this assessment we have taken into consideration our existing cash and cashequivalents of €149.7 million and investments of €41.1 million at December 31, 2017, together with the $55.8 million of proceeds received from ourprivate placement offering that closed in February 2018.In our opinion, our working capital is sufficient for our present requirements. We have based this estimate on assumptions that may prove to bewrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associatedwith the development of MCLA-128, MCLA-117 and our pre-clinical programs and because the extent to which we may enter into collaborations withthird parties for development of these bispecific antibody candidates is unknown, we are unable to estimate the amounts of increased capital outlaysand operating expenses associated with completing the research and development of our bispecific antibody candidates. Our future capitalrequirements for MCLA-128, MCLA-117 or our pre-clinical programs, including MCLA-158 and MCLA-145, will depend on many factors, including: • the progress, timing and completion of pre-clinical testing and clinical trials for our current or any future bispecific antibody candidates; • the number of potential new bispecific antibody candidates we identify and decide to develop; • the costs involved in growing our organization to the size needed to allow for the research, development and potential commercializationof our current or any future bispecific antibody candidates; • the costs involved in filing patent applications and maintaining and enforcing patents or defending against claims or infringements raisedby third parties; 111Table of Contents • the time and costs involved in obtaining regulatory approval for our bispecific antibody candidates and any delays we may encounter as aresult of evolving regulatory requirements or adverse results with respect to any of these bispecific antibody candidates; • any licensing or milestone fees we might have to pay during future development of our current or any future bispecific antibodycandidates; • selling and marketing activities undertaken in connection with the anticipated commercialization of our current or any future bispecificantibody candidates and costs involved in the creation of an effective sales and marketing organization; and • the amount of revenues, if any, we may derive either directly or in the form of royalty payments from future sales of our bispecific antibodycandidates, if approved.Identifying potential bispecific antibody candidates and conducting pre-clinical testing and clinical trials is a time-consuming, expensive anduncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval andachieve product sales. In addition, our bispecific antibody candidates, if approved, may not achieve commercial success. Our commercial revenues, ifany, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need toobtain substantial additional funds to achieve our business objectives.Adequate additional funds may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the saleof equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or otherpreferences that adversely affect your rights as a shareholder. Additional debt financing and preferred equity financing, if available, may involveagreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capitalexpenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute your ownership interest.If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquishvaluable rights to our technologies, future revenue streams, research programs or bispecific antibody candidates or grant licenses on terms that may notbe favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduceor terminate our product development programs or any future commercialization efforts or grant rights to develop and market bispecific antibodycandidates that we would otherwise prefer to develop and market ourselves.C. Research and Development, Patent and Licenses, etc.For a discussion of our research and development activities, see “Item 4.B.—Business Overview” and “Item 5.A.—Operating Results.”D. Trend Information.Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events that arereasonably likely to have a material adverse effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources,or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. For moreinformation, see “Item 4.B.—Business Overview,” “Item 5.A.—Operating Results,” and “Item 5.B.—Liquidity and Capital Resources.”E. Off-Balance Sheet Arrangements.During the periods presented, we did not and do not currently have any off-balance sheet arrangements. 112Table of ContentsF. Tabular Disclosure of Contractual ObligationsContractual Obligations and CommitmentsThe table below summarizes our contractual obligations at December 31, 2017. Payments Due by Period Total Less than1 year 1-3 years 3-5 years More than5 years (euros in thousands) Operating lease obligations(1) €2,499 €602 €1,326 €571 € — Total €2,499 €602 €1,326 €571 €— (1)Amounts in the table reflect payments due for our office and laboratory facility in Utrecht, Netherlands.G. Safe Harbor.No disclosure required. 113Table of ContentsItem 6 Directors, Senior Management and Employees.A. Directors and Senior Management.The following table presents information about our senior management and board of directors, including their ages as of the date of this AnnualReport: Name Age PositionSenior Management Ton Logtenberg, Ph.D. 59 Chief Executive OfficerJohn Crowley 44 Chief Financial OfficerHui Liu, Ph.D. 45 Chief Business OfficerL. Andres Sirulnik, M.D, Ph.D 51 Chief Medical OfficerMark Throsby, Ph.D. 51 Chief Scientific OfficerLex Bakker, Ph.D. 51 Chief Development OfficerPeter B. Silverman 40 General CounselJohn de Kruif 54 Chief Technology OfficerBoard of Directors Ton Logtenberg, Ph.D 59 Chief Executive Officer (Executive Director)Mark Iwicki 51 Chairman of the Board (Non-Executive Director)Wolfgang Berthold, Ph.D. 71 Member (Non-Executive Director)Lionel Carnot 50 Member (Non-Executive Director)John de Koning, Ph.D. 49 Member (Non-Executive Director)Anand Mehra, M.D. 42 Member (Non-Executive Director)Gregory Perry 57 Member (Non-Executive Director)Senior ManagementTon Logtenberg, Ph.D. has served as our Chief Executive Officer and an executive board member since co-founding our company in June 2003.Prior to joining Merus, Dr. Logtenberg co-founded Crucell N.V., a biotechnology company specializing in vaccines and biopharmaceuticaltechnology, and served as its executive vice president and chief scientific officer from July 2000 until November 2003. Dr. Logtenberg has served as amember of the board of directors of the Jenner Foundation since 2008 and a member of the board of directors of Utrecht Science Park since November2014. Dr. Logtenberg holds a Ph.D. in medical biology from Utrecht University.John Crowley has served as our Chief Financial Officer since November 2016. His responsibilities include accounting, financial planning andanalysis, tax, treasury and investor relations. From September 2013 to November 2016, he served as Corporate Senior Vice President, CorporateController and Chief Accounting Officer of Charles River Laboratories, Inc., a pre-clinical and clinical service provider for the pharmaceutical industry.Prior to Charles River Laboratories, he was the Vice President, Corporate Controller and Chief Accounting Officer of Ironwood Pharmaceuticals, Inc.from March 2012 to September 2013, and held senior corporate finance positions at Vertex Pharmaceuticals, Inc. from April 2010 to March 2012, andSunovian Pharmaceuticals, Inc. from April 2008 to April 2010. Mr. Crowley holds B.S. degrees in both economics and accountancy from BabsonCollege and is a Certified Public Accountant.Hui Liu, Ph.D. has served as our Chief Business Officer since December 2015. His responsibilities include all aspects of business development,including in- and out- licensing, acquisitions and alliance management. Prior to joining Merus, Dr. Liu served as Vice President and Global Head,Business Development & Licensing, Oncology at Novartis AG, a pharmaceutical company, from 2013 to 2015, and as Vice President and Global Head,Business Development & Licensing, Vaccines & Diagnostics, from 2009 to 2012. Prior to Novartis, Dr. Liu held various management positions atPfizer, Inc., a pharmaceutical company, from 2004 to 2009 and at Pfizer, Inc. and its predecessor company Warner-Lambert from 1997 to 2001. From2001 to 2004, Dr. Liu was an 114Table of Contentsinvestment banker at Goldman Sachs and Citigroup. Dr. Liu holds a Ph.D. in molecular biology and an M.B.A. in finance from the University ofMichigan and a B.S. in biology from Peking University.Andres Sirulnik, M.D., Ph.D. has served as our Chief Medical Officer since October 2016. His responsibilities include clinical strategy anddevelopment. Prior to joining Merus, Dr. Sirulnik was at Novartis Pharmaceuticals from 2008 to 2016, most recently serving as Vice President – SeniorGlobal Clinical Program Head and Research Physician in Oncology Clinical Development. From 2003 to 2008, Dr. Sirulnik was an attendingphysician in the leukemia program at Dana Farber Cancer Institute and Instructor in Medicine at Harvard Medical School where he focused his researchand clinical work in rare hematologic malignancies. Dr. Sirulnik received his medical degree from the University of Buenos Aires, Argentina, and hisPh.D. in medicine and molecular biology at the University of Cambridge, England.Mark Throsby, Ph.D. has served as our Chief Scientific Officer since January 2013 and previously served as our Chief Operating Officer fromOctober 2008 to January 2013. His responsibilities include strategic scientific leadership, management of discovery, pre-clinical research andtranslational research, business development support, external collaborations and partnerships management. Before joining Merus, from October 2000to October 2008, he served as a senior scientist and then as director of antibody discovery for Crucell N.V., a biotechnology company specializing invaccines and biopharmaceutical technology. Dr. Throsby holds a Ph.D. in neuro-immunology from Monash University.Alexander (“Lex”) Berthold Hendirk Bakker, Ph.D. has served as our Chief Development Officer since October 2010. His responsibilitiesinclude strategic scientific leadership, management of preclinical and clinical development and manufacturing, business development support,external collaboration and partnership management. Prior to joining Merus, Dr. Bakker directed preclinical and clinical development at Crucell N.V., abiotechnology company. Mr. Bakker holds a Ph.D in Tumor Immunology from the University of Nijmegen and was a postdoctoral fellow at the DNAXResearch Institute.Peter B. Silverman, J.D. has served as our General Counsel since February 2018 and our Chief Intellectual Property Officer since February 2017.His responsibilities include management of the company’s legal strategy and overseeing all aspects of the company’s legal operations. Prior to joiningMerus, Mr. Silverman was a Partner at Kirkland & Ellis LLP, where he represented numerous life sciences companies concerning an array of legalmatters. Mr. Silverman also served as judicial law clerk to U.S. District Court Judge Anne E. Thompson of the District of New Jersey. He holds a J.Dfrom Fordham University School of Law. He is admitted to practice law in New York. Mr. Silverman also holds a B.A. in biology from the University ofRochester.John de Kruif, Ph.D. has served as our Chief Technology Officer since January 2013 and previously served as our Chief Scientific Officer fromApril 2007 to January 2013. His responsibilities include management of antibody discovery, antibody engineering, external collaborations,partnerships management and operational activities. Before joining Merus, from October 2000 to October 2006, he served as a director of antibodydiscovery for Crucell N.V., a biotechnology company specializing in vaccines and biopharmaceutical technology. Dr. De Kruif holds a PhD inAntibody Engineering from Utrecht University.Board of DirectorsMark Iwicki serves as Chairman of our board of directors and has been a non-executive member of our board of directors since June 2015.Mr. Iwicki also serves as the chief executive officer and chairman of the board of directors of Kala Pharmaceuticals, Inc. and as a member of the boardsof directors of Aimmune Therapeutics, Inc., Nimbus Therapeutics, TARIS Biomedical and Oxeia Biopharmaceuticals. In addition, Mr. Iwicki has servedon the board of the Wellesley Youth Hockey Association. Mr. Iwicki served as president and chief executive officer and a member of the board ofdirectors of Civitas Therapeutics, Inc. from January 2014 until its acquisition by Acorda Therapeutics, Inc. in October 2014. From December 2012 toJanuary 2014, Mr. Iwicki served as president and chief executive officer and director at Blend Therapeutics, Inc. From 2007 to June 2012, Mr. Iwickiwas president and chief executive officer and director of Sunovion Pharmaceuticals, Inc., formerly Sepracor, Inc. Mr. Iwicki holds an M.B.A. fromLoyola University. 115Table of ContentsWolfgang Berthold, Ph.D. has been a non-executive member of our board of directors since September 2010. Dr. Berthold has held seniorpositions at Boehringer Ingelheim, GMBH, and BiogenIdec International, CH (now Biogen, Inc.), where he was responsible for various aspects ofmanufacturing operations, process development and facilities and engineering. He has over 30 years of experience in the industry. Since 2011,Dr. Berthold has served as president of Berthold BioPharm Consulting GmbH, Switzerland, a biotechnology consulting company. From February 2000until March 2011, Dr. Berthold held positions of increasing seniority at BiogenIdec International, CH, including serving as its Chief TechnologyOfficer. During that time, Dr. Berthold also served on the executive board of BiogenIdec International GMBH from February 2009 until his retirementin March 2011. Dr. Berthold holds a Ph.D. in biochemistry from the University of London.Lionel Carnot was nominated to serve as a non-executive member of our board of directors by Bay City Capital Fund V, L.P., one of ourshareholders, and has been a member of our board of directors since January 2010. Mr. Carnot is a managing director at Bay City Capital LLC, a globallife sciences investment firm, a position he has held since March 2005. Mr. Carnot currently serves on the boards of directors of Oculis SA and iQoneHealthcare Group. Mr. Carnot holds an M.B.A. with distinction from INSEAD and an M.S. with honors in molecular biology from the University ofGeneva.John de Koning, Ph.D. was nominated to serve on our board of directors by Coöperatief LSP IV U.A., one of our shareholders, and has been anon-executive member of our board of directors since January 2010. Dr. De Koning has been a partner at LSP (Life Sciences Partners) since January2006. Dr. De Koning currently serves on the boards of the private companies GTX medical, eTheRNA and Aelin Therapeutics. Previously, he served onthe supervisory boards of BMEYE (acquired by Edwards Lifesciences), Prosensa (acquired by BioMarin) and Skyline Diagnostics, and as anon-executive director on the boards of argenx, Pronota (acquired by MyCartis) and Innovative Biosensors Inc. Dr. De Koning holds an M.Sc. inmedical biology from Utrecht University and a Ph.D. in oncology from the Erasmus University Rotterdam.Ton Logtenberg, Ph.D. has served as an executive director of our company since founding our company in June 2003. See “—SeniorManagement.”Anand Mehra, M.D. was nominated to serve on our board of directors by Sofinnova Venture Partners IX, L.P., one of our shareholders, and hasbeen a non-executive member of our board of directors since August 2015. Dr. Mehra has been with Sofinnova Ventures since 2007, most recentlyholding the position of a general partner where he focuses on working with entrepreneurs to build drug development companies. He has led the firm’sinvestments in Vicept Therapeutics (acquired by Allergan), Aerie Pharmaceuticals, Inc., Aclaris Therapeutics, Inc., and Prothena Corporation PLC. Hecurrently serves as a member of the boards of directors of Spark Therapeutics, Inc., Aclaris Therapeutics, Inc. and Marinus Pharmaceuticals Inc. as wellas on the boards of several private companies. Dr. Mehra holds his M.D. from Columbia University’s College of Physicians and Surgeons.Gregory D. Perry has been a non-executive member of our board of directors since May 2016. Mr. Perry served as Chief Financial andAdministrative Officer of Novelion Therapeutics Inc. or Novelion, a public company, from November 2016 to December 2017. Prior to this, Mr. Perrywas Chief Financial Officer of Aegerion Pharmaceuticals Inc, a public company, from July 2015 until its merger with Novelion in November 2016.Prior to that, he served as Chief Financial and Business Officer of Eleven Biotherapeutics, Inc., a public company, from January 2014 to June 2015.Before joining Eleven Biotherapeutics, Mr. Perry served as the Interim Chief Financial Officer of InVivo Therapeutics, a public company, fromSeptember 2013 to December 2013, and prior to that he served as the Senior Vice President and Chief Financial Officer of ImmunoGen, Inc., a publiccompany, from 2009 until he was promoted in 2011 to Executive Vice President and Chief Financial Officer, a role he held until 2013. Before that, hewas the Chief Financial Officer of Elixir Pharmaceuticals. Mr. Perry previously was Senior Vice President and Chief Financial Officer of TranskaryoticTherapies. He has also held various financial leadership roles within PerkinElmer Inc., Domantis Ltd., Honeywell and General Electric. Since February2018, Mr. Perry has served on the Board of Directors of Kala Pharmaceuticals, including as Chair of its Audit Committee. From December 2011 toFebruary 2016, Mr. Perry served on the Board of Directors of Ocata Therapeutics (a public biotechnology company), including as Chair of its Audit 116Table of ContentsCommittee and a member of its Compensation Committee, until it was acquired by Astellas Pharma Inc. Mr. Perry received a B.A. in Economics andPolitical Science from Amherst College.Family RelationshipsThere are no family relationships among any of the members of our board of directors or senior management.B. Compensation.Senior Management RemunerationThe following table sets forth the approximate remuneration paid during our 2017 fiscal year to our current senior management. Name and Principal Position Salary Bonus(1) EquityAwards(2) All OtherCompensation(3) Total Ton Logtenberg, Ph.D. €432,782 €337,945 €4,675,590 €51,528 €5,497,845 Chief Executive Officer John Crowley €320,882 €120,170 €874,795 €— €1,315,847 Executive Vice President, Chief Financial Officer Hui Liu €305,187 €114,369 €1,085,341 €— €1,504,897 Executive Vice President, Chief Business Officer Mark Throsby €305,792 €114,519 €1,270,960 €35,618 €1,726,889 Executive Vice President, Chief Scientific Officer L. Andres Sirulnik €389,484 €147,756 €1,144,148 €— €1,681,388 Executive Vice President, Chief Medical Officer Lex B.H. Bakker €266,612 €85,583 €206,097 €35,270 €593,563 Senior Vice President, Chief Development Officer Peter B. Silverman(4) €238,082 €86,238 €437,220 €— €761,540 Executive Vice President, General Counsel John de Kruif €237,944 €76,380 €152,672 €37,527 €504,523 Senior Vice President, Chief Technology Officer (1)Amount shown reflects bonuses awarded for achievement of performance goals in our 2017 fiscal year. (2)Amount shown represents the grant date fair value of option awards and restricted stock units, or RSUs, granted in 2017. Option awards aremeasured using the Hull & White option pricing model. For a description of the assumptions used in valuing these awards, see note 14 toour financial statements included elsewhere in this Annual Report. (3)Amount shown represents pension, retirement or other similar contributions made by us. (4)Mr. Silverman’s salary was prorated to reflect the start of his employment with the Company on February 15, 2017.Below is a brief description of the compensation plans and arrangements in which our senior management participate.Base CompensationWe pay our senior management a base salary to compensate them for the satisfactory performance of services rendered to our company. Basesalary is intended to provide a fixed component of compensation 117Table of Contentsreflecting the senior management’s level of responsibility and performance. Our senior management’s base salaries for 2017 are set forth in the tableabove entitled “Senior Management Remuneration.”Short-Term Incentive PlanWe maintain a short-term incentive plan pursuant to which we may grant our employees, including our senior management, incentive cashbonuses based upon corporate and/or individual performance. We generally pay annual cash bonuses based upon the achievement of set financialtargets, non-financial and personal goals and company milestones for the period. Achievement of the targets is measured following year-end and theactual bonus amounts paid to our senior management, including our executive officers, are determined by our board of directors.The corporate objectives set for 2017 pursuant to our short-term incentive plan accounted for 75% of the senior management’s bonusopportunity and were generally related to clinical developments, intellectual property, business developments and funding initiatives. Individualobjectives are established annually for each member of the senior management and, in 2017, accounted for 25% of the senior management’s bonusopportunity. The actual bonus amounts paid to our senior management for 2017 are set forth in the table above entitled “Senior ManagementRemuneration”.Long-Term Incentive PlanWe maintain the 2016 Plan under which we may grant cash and equity-based incentive awards to eligible service providers, including ourexecutive board members, in order to attract, retain and motivate the persons who make important contributions to our company. The planadministrator has the authority to take all actions and make all determinations under the 2016 Plan, to interpret the 2016 Plan and award agreementsand to adopt, amend and repeal rules for the administration of the 2016 Plan as it deems advisable. The plan administrator also has the authority todetermine which eligible service providers receive awards, grant awards and set the terms and conditions of all awards under the 2016 Plan, includingany vesting and vesting acceleration provisions, subject to the conditions and limitations in the 2016 Plan. The 2016 Plan provides for the grant ofstock options, stock appreciation rights, restricted stock, dividend equivalents, restricted stock units, and other stock or cash based awards. Inconnection with any spin-off, change in control, or change in any applicable laws or accounting principles, the plan administrator has broad discretionto take action under the 2016 Plan to prevent the dilution or enlargement of intended benefits, facilitate the transaction or event or give effect to thechange in applicable laws or accounting principles. The plan administrator may generally amend or terminate the 2016 Plan at any time.The following table summarizes the options that we granted to our senior management in 2017 under the 2016 Plan: Name Grant Date Number ofSharesSubject toOption(#)(1) ExercisePrice PerShare ($) ExpirationDate Restricted StockUnits Ton Logtenberg, CEO 1/1/2017 377,271 21.11 12/30/2026 123,745L. Andres Sirulnik, CMO — — — — — John Crowley, CFO — — — — — Hui Liu, CBO 1/1/2017 85,156 21.11 12/30/2026 27,931Mark Throsby, CSO 1/1/2017 103,484 21.11 12/30/2026 33,943Peter Silverman, CIPO 2/15/2017 50,000 25.90 2/14/2027 — Lex Bakker, CDO 1/1/2017 15,739 21.11 12/30/2026 5,162John de Kruif, CTO 1/1/2017 11,479 21.11 12/30/2026 3,765 (1)The options and RSUs vest as to 25% of the shares on the first anniversary of the grant date and as to the remaining 75% of the shares in equalmonthly installments for the 36 calendar months thereafter. 118Table of ContentsPension BenefitsWe offer some of our senior management the opportunity to participate in a post-retirement plan in order to provide competitive post-retirementbenefits. For 2017, we contributed a total of € 0.1 million to provide pension, retirement or similar benefits to our senior management.Employment AgreementsTon Logtenberg, Chief Executive Officer and Executive DirectorWe have entered into an employment agreement, as amended from time to time, with Ton Logtenberg pursuant to which Dr. Logtenberg serves asour Chief Executive Officer. The agreement is for an unspecified term and may be terminated by either Dr. Logtenberg or the company subject to theapplicable statutory notice periods; provided that, the agreement will automatically terminate without notice at the end of the month in whichDr. Logtenberg reaches the age at which he is entitled to pension under Dutch law. Pursuant to the employment agreement, Dr. Logtenberg is entitledto an annual base salary of no less than $463,000 USD, effective January 1, 2017, and may earn an annual cash incentive award based on performancewith a target value equal to 50% of his annual base salary. Dr. Logtenberg is also entitled to certain other benefits, including health and disabilitybenefits, reimbursement for commuting expenses and participation in the company’s pension plan.If Dr. Logtenberg’s employment is terminated by the company without cause or due to Dr. Logtenberg’s resignation for good reason, then subjectto his executing a general release of claims and continued compliance with the company’s proprietary information agreement, Dr. Logtenberg will beentitled to receive (i) base salary continuation payments for 6 months and (ii) potential accelerated vesting of any portion of his option awards that areunvested as of the date of his termination. If Dr. Logtenberg’s employment is terminated without cause or due to Dr. Logtenberg’s resignation for goodreason within 12 months following a change in control, then subject to his executing a general release of claims and continued compliance with theproprietary information agreement, Dr. Logtenberg will be entitled to receive (i) a lump sum payment equal to six months of his base salary and 50% ofhis target annual bonus and (ii) accelerated vesting of any portion of his unvested equity awards, except that performance based equity awards willonly vest subject to the attainment of the applicable performance goals.The agreement contains restrictive covenants which restrict Dr. Logtenberg’s ability to compete with us for a period of 24 months following histermination of employment or solicit our employees for a period of 12 months following termination. In the event Dr. Logtenberg violates theserestrictive covenants, he will be subject to a penalty of €25,000 for each violation and an additional penalty of €1,000 for each day the violationcontinues.The agreement also contains covenants regarding protection of our confidential information, violation of which subjects Dr. Logtenberg to thesame penalties as described above, and ownership of intellectual property.John Crowley, Chief Financial OfficerOn October 5, 2016, we and our wholly-owned subsidiary Merus US, Inc., which we refer to as Merus US, entered into an employment agreementwith John Crowley. Pursuant to the employment agreement, Mr. Crowley serves as Executive Vice President and Chief Financial Officer of us andMerus US. The employment agreement provides for an initial annual base salary of $362,500 and the opportunity to earn an annual cash incentiveaward based on performance with a target value equal to 35% of Mr. Crowley’s annual base salary. If Mr. Crowley’s employment is terminated byMerus US without cause or due to Mr. Crowley’s resignation for good reason, then subject to his executing a general release of claims and continuingcompliance with the Company’s proprietary information agreement, Mr. Crowley will be entitled to receive (i) base salary continuation payments for 6months and (ii) potential accelerated vesting of any portion of his initial option award that is unvested as of the date of his termination. IfMr. Crowley’s employment is terminated without cause or due to Mr. Crowley’s resignation for good reason within 12 months following a change incontrol of us, then subject to his executing a general release of claims and continuing compliance with the proprietary information agreement,Mr. Crowley 119Table of Contentswill be entitled to receive (i) a lump sum payment equal to six months of his base salary and 50% of his target annual bonus; (ii) direct payment of orreimbursement for continued medical, dental or vision coverage pursuant to COBRA for up to nine months, and (iii) accelerated vesting of any portionof his unvested equity awards, except that performance-based equity awards will only vest subject to the attainment of the applicable performancegoals.Hui Liu, Chief Business OfficerOn December 1, 2015, we and Merus US entered into an employment agreement with Hui Liu, which was amended and restated on March 2,2016, pursuant to which Mr. Liu serves as Executive Vice President and Chief Business Officer of us and Merus US. The employment agreementprovides for an initial annual base salary of $335,000 and the opportunity to earn an annual cash incentive award based on performance with a targetvalue equal to 35% of Mr. Liu’s annual base salary. If Mr. Liu’s employment is terminated by Merus US without cause or due to Mr. Liu’s resignationfor good reason, then subject to his executing a general release of claims and continuing compliance with the Company’s proprietary informationagreement, Mr. Liu will be entitled to receive (i) base salary continuation payments for 6 months and (ii) potential accelerated vesting of any portion ofhis initial option award that is unvested as of the date of his termination. If Mr. Liu’s employment is terminated without cause or due to Mr. Liu’sresignation for good reason within 12 months following a change in control of us, then subject to his executing a general release of claims andcontinuing compliance with the proprietary information agreement, Mr. Liu will be entitled to receive (i) a lump sum payment equal to six months ofhis base salary and 50% of his target annual bonus; (ii) direct payment of or reimbursement for continued medical, dental or vision coverage pursuantto COBRA for up to nine months, and (iii) accelerated vesting of any portion of his initial option award that is unvested as of his date of termination.Mark Throsby, Chief Science OfficerIn July 2008, we entered into an employment agreement with Mr. Throsby for an unspecified term, which agreement may be terminated at the endof a calendar month by either Mr. Throsby or the company subject to the applicable statutory notice periods. Pursuant to the employment agreement,Mr. Throsby is entitled to a base salary, an annual vacation allowance equal to 8% of his gross salary, participation in a pension scheme and, in theevent if his disability, certain continued payments of his base salary.The agreement contains restrictive covenants which restrict Mr. Throsby’s ability to compete with the company for a period of 12 monthsfollowing termination. Mr. Throsby is subject to a penalty of €10,000 for each violation of this covenant and an additional fine of €1,000 for each daythe violation continues. Mr. Throsby is also prohibited from performing work for another employer or client during the course of his employment withus and is subject to a per violation fine of €5,000 and per day fine of €1,000 for as long as the violation continues.The agreement also contains covenants regarding Mr. Throsby’s protection of our confidential information for a period of 5 years following histermination, violation of which subjects him to penalties of €50,000 for each violation and €1,000 for each day the violation continues. Mr. Throsbyhas also entered into a separate agreement with us regarding ownership of our intellectual property.L. Andres Sirulnik, Chief Medical OfficerOn November 1, 2016, we and Merus US entered into an employment agreement with L. Andres Sirulnik. Pursuant to the employment agreement,Mr. Sirulnik serves as Executive Vice President and Chief Medical Officer and of us and Merus US. The employment agreement provides for an initialannual base salary of $390,000 and the opportunity to earn an annual cash incentive award based on performance with a target value equal to 40% ofMr. Sirulnik’s annual base salary. In addition, the Company agreed to pay Mr. Sirulnik an amount equal to $50,000, within thirty (30) days followingeach of November 8, 2017 and November 8, 2018, subject to Mr. Sirulnik’s continued employment with the Company through each such date. 120Table of ContentsLex B.H. Bakker, Chief Development OfficerIn May 2010, we entered into an employment agreement with Mr. Bakker pursuant to which he serves as our Chief Development Officer. Theagreement is for an unspecified term and may be terminated at the end of a calendar month by either Mr. Bakker or the company, subject to theapplicable statutory notice periods. Pursuant to the employment agreement, Mr. Bakker is entitled to a base salary, an annual vacation allowance of 8%of his gross salary, participation in a pension scheme, reimbursement for certain commuting expenses and, in the event if his disability, certaincontinued payments of his base salary.The agreement contains restrictive covenants which restrict Mr. Bakker’s ability to compete with the company for a period of 12 monthsfollowing termination. Mr. Bakker is subject to a penalty of €10,000 for each violation of this covenant and an additional fine of €1,000 for each daythe violation continues. Mr. Bakker is also prohibited from performing work for another employer or client during the course of his employment withus and is subject to a per violation fine of €5,000 and per day fine of €1,000 for as long as the violation continues.The agreement also contains covenants regarding Mr. Bakker’s protection of our confidential information for a period of 5 years following histermination, violation of which subjects him to penalties of €50,000 for each violation and €1,000 for each day the violation continues, and regardingownership of our intellectual property.Peter B. Silverman, General CounselEffective February, 2017, we and Merus US entered into an employment agreement with Peter B. Silverman. The employment agreementprovides for an initial annual base salary of $315,000 and the opportunity to earn an annual cash incentive award based on performance with a targetvalue equal to 30% of Mr. Silverman’s annual base salary. If Mr. Silverman’s employment is terminated by Merus US without cause or due toMr. Silverman’s resignation for good reason, then subject to his executing a general release of claims and continuing compliance with our proprietaryinformation agreement, Mr. Silverman will be entitled to receive (i) an amount in cash equal to the sum of 0.5 times his annual base salary and (ii) apro-rata portion of his target annual bonus for the calendar year in which the date of termination occurs, which shall be paid in the form of salarycontinuation in regular installments over the six-month period following his termination in accordance with the Company’s customary payrollpractices. On February 21, 2018, Mr. Silverman was appointed Executive Vice President and General Counsel.John de Kruif, Chief Technology OfficerIn April 2007, we entered into an employment agreement with Dr. De Kruif for an unspecified term, which agreement may be terminated at theend of a calendar month by either Dr. De Kruif or the company subject to the applicable statutory notice periods. Pursuant to the employmentagreement, Dr. De Kruif is entitled to a base salary, an annual vacation allowance equal to 8% of his gross salary, participation in a pension schemeand, in the event if his disability, certain continued payments of his base salary.The agreement contains restrictive covenants which restrict Dr. De Kruif’s ability to compete with us for a period of 12 months followingtermination. Dr. De Kruif is subject to a penalty of €10,000 for each violation of this covenant and an additional fine of €1,000 for each day theviolation continues. Dr. De Kruif is also prohibited from performing work for another employer or client during the course of his employment with usand is subject to a per violation fine of €5,000 and per day fine of €1,000 for as long as the violation continues.The agreement also contains covenants regarding Dr. De Kruif’s protection of our confidential information for a period of five years followingtermination of his employment, violation of which subjects him to penalties of €50,000 for each violation and €1,000 for each day the violationcontinues. Dr. De Kruif has also entered into a separate agreement with us regarding ownership of our intellectual property. 121Table of ContentsCompensation of Board of DirectorsThe following table sets forth the remuneration paid during our 2017 fiscal year to members of our board of directors. Name Fees earnedor paid inCash OptionAwards(2) Total (in euros) Ton Logtenberg, Ph.D.(1) €822,255 €4,675,590 €5,497,845 Mark Iwicki €59,840 €120,956 €180,436 Wolfgang Berthold, Ph.D. €41,700 €90,944 €132,644 Lionel Carnot €35,445 €61,870 €97,315 John de Koning, Ph.D. €38,573 €113,613 €152,186 Anand Mehra, M.D. €42,743 €83,683 €126,426 Jack B. Nielsen(3) €— €— €— Gregory Perry €47,955 €103,169 €151,124 (1)Dr. Logtenberg did not receive any additional compensation for his service on our board during 2017. Amounts paid to Dr. Logtenberg for hisservice as an executive officer are set forth above in the section “Executive Officer Remuneration” above.(2)Amount shown represents the grant date fair value of option awards granted in 2017 measured using the Hull & White option pricing model. Fora description of the assumptions used in valuing these awards, see note 14 to our financial statements included elsewhere in this Annual Report.(3)Dr. Nielsen resigned from our board of directors on May 24, 2017 and did not receive any compensation for his service on our board during 2017.Remuneration of Board of DirectorsAlthough Dutch law does not require that we establish a remuneration program for our members of our board of directors, we have established aNon-Executive Director Compensation Program. Under this program, remuneration for the members of our board of directors consists of cash and initialand annual equity awards. Each board member is entitled to receive an annual retainer of $35,000. The chairman of the board is entitled to anadditional annual retainer of $28,000 and the chairman of the audit committee, compensation committee and nominating and corporate governancecommittee are each entitled to an additional annual retainer of $15,000, $10,000 and $7,500, respectively. A board member serving as a member of acommittee other than the chairman is entitled to receive an additional annual retainer of $7,500 for service on the audit committee, $5,000 for serviceon the compensation committee, and $3,750 for service on the nominating and corporate governance committee. Retainers under the program arepayable in arrears in four equal quarterly installments within 15 days following the end of each calendar quarter, provided, that the amount of eachpayment will be prorated for any portion of a quarter that a board member is not serving on our board. The remuneration program further provides foran automatic increase of the annual retainers on the first day of each calendar year by an amount equal to 3% of the value of such annual retainer ineffect as of the immediately preceding calendar year.Each board member who is initially elected or appointed to our board is eligible to receive an option to purchase the number of common sharesof our company having an aggregate grant date fair value of $200,000 on the date of grant. In addition, if a board member has served on the board for atleast six months as of the date of an annual meeting of shareholders and continue to serve as a board member following such annual meeting, suchboard member is eligible to receive, on the date of such annual meeting or as soon as practical thereafter, an option to purchase the number of commonshares of our company having an aggregate grant date fair value of $100,000 on the date of grant. Options granted to our board members under theprogram have an exercise price equal to the fair market value of our common shares on the date of grant and expire not later than ten years after the dateof grant. The options granted upon a board member’s initial election or appointment vest as to 33% of the shares subject to the award on the firstanniversary of the date of grant and in 24 substantially equal monthly installments thereafter. The options granted annually to board members vest in12 substantially equal monthly 122Table of Contentsinstallments following the date of grant. In addition, all unvested options vest in full upon the occurrence of a change in control. The grant date fairvalue of each initial award and annual award is, subject to approval by our shareholders, increased on the first day of each calendar year by an amountequal to 3% of the grant date fair value in effect as of the immediately preceding calendar year, provided, that in no event shall the number of sharesawarded pursuant to an initial award exceed 17,000 common shares and an annual award exceed 8,500 common shares, in each case, subject toadjustment as provided in the 2016 Plan.Each board member is entitled to be reimbursed for reasonable travel and other expenses incurred in connection with attending meetings of theboard and any committee of the board on which he or she serves.Board of Directors 2017 Fiscal Year Equity AwardsDuring fiscal 2017, members of our board of directors were granted options to purchase common shares under the 2016 Plan as follows: Name Grant Date Number ofSharesSubject toOption(#)(1) ExercisePrice PerShare ($) ExpirationDate Ton Logtenberg, Ph.D. 1/1/2017 377,271 21.11 12/30/2026Mark Iwicki 5/24/2017 5,650 19.12 5/24/2027Wolfgang Berthold, Ph.D. 5/24/2017 5,650 19.12 5/24/2027Lionel Carnot 5/24/2017 5,650 19.12 5/24/2027John de Koning, Ph.D. 5/24/2017 5,650 19.12 5/24/2027Anand Mehra, M.D. 5/24/2017 5,650 19.12 5/24/2027Jack B. Nielsen(2) — — — — Gregory Perry 5/24/2017 5,650 19.12 5/24/2027 (1)The options vest as to 33% of the shares subject to each award on the first anniversary of the date of grant and in 24 substantially equal monthlyinstallments thereafter, subject to accelerated vesting upon the occurrence of a change in control event.(2)Dr. Nielsen resigned from our board of directors on May 24, 2017.C. Board Practices.On May 29, 2017, upon approval by our shareholders, our corporate governance structure changed from a two-tier model with a managementboard under the supervision of a supervisory board to a one-tier model with a unitary board of directors. Our board of directors is comprised of sevenmembers. Each board member is elected for a term of up to four years. A board member may be re-appointed for up to two subsequent terms. Boardmembers must retire periodically in accordance with a rotation plan. Our board members do not have a retirement age requirement under our Articles ofAssociation. Our board members are elected, or re-appointed as the case may be, by our general meeting of shareholders in accordance with the Articlesof Association to serve until their successors are duly elected and qualified.The expiration of the current terms of the members of our Board of Directors and the period each member has served in that term are as follows: Name Year Current Term Began Year Current Term Expires Ton Logtenberg, Ph.D. 2017 2021 Mark Iwicki 2015 2020 Wolfgang Berthold, Ph.D. 2010 2017 Lionel Carnot 2010 2018 John de Koning, Ph.D. 2010 2017 Anand Mehra, M.D. 2015 2019 Gregory Perry 2016 2020 123Table of ContentsThere are no arrangements or understanding between us and any of the members of our board of directors providing for benefits upon terminationof their service.Committees of the Board of DirectorsOur board of directors has established an Audit Committee, Compensation Committee, and Nomination and Corporate Governance Committee,which operate pursuant to written charters adopted by our board of directors.Audit CommitteeThe audit committee, which consists of Gregory Perry, Lionel Carnot and John de Koning, assists our board of directors in overseeing ouraccounting and financial reporting processes and the audits of our financial statements. Mr. Perry serves as Chairman of the committee.The audit committee’s responsibilities include: • recommending the appointment of the independent auditor to the general meeting of shareholders; • the appointment, compensation, retention and oversight of any accounting firm engaged for the purpose of preparing or issuing an auditreport or performing other audit services; • pre-approving the audit services and non-audit services to be provided by our independent auditor before the auditor is engaged to rendersuch services; • evaluating the independent auditor’s qualifications, performance and independence, and presenting its conclusions to the board on at leastan annual basis; • reviewing and discussing with the board and the independent auditor our financial statements and our financial reporting process; and • approving or ratifying any related person transaction (as defined in our related person transaction policy) in accordance with our relatedperson transaction policy.The audit committee meets as often as one or more members of the audit committee deem necessary, but in any event, meets at least four times peryear. The audit committee meets at least once per year with our independent accountant, without our management being present.Compensation CommitteeThe compensation committee, which consists of Wolfgang Berthold, Mark Iwicki, and Anand Mehra, assists our board of directors in determiningmanagement compensation. Dr. Berthold serves as Chairman of the committee. The compensation committee prepares a proposal for the boardconcerning the compensation of each member of our management to be proposed for adoption by the general meeting of shareholders.The compensation committee’s responsibilities include: • identifying, reviewing and proposing policies relevant to management compensation; • evaluating each member of management’s performance in light of such policies and reporting to the board; • analyzing the possible outcomes of the variable remuneration components and how they may affect the remuneration of management; • recommending any equity long-term incentive component of each member of management’s compensation in line with the remunerationpolicy and reviewing our management compensation and benefits policies generally; and • reviewing and assessing risks arising from our compensation policies and practices. 124Table of ContentsNomination and Corporate Governance CommitteeThe nomination and corporate governance committee, which consists of Mark Iwicki, Anand Mehra and John de Koning, assists our board ofdirectors in identifying individuals qualified to become members of our board and part of our management consistent with criteria established by ourboard and in developing our corporate governance principles. Dr. Mehra serves as Chairman of the nomination and corporate governance committee.The nomination and corporate governance committee’s responsibilities include: • drawing up selection criteria and appointment procedures for board members and management; • reviewing and evaluating the size and composition of our board and management and making a proposal for a composition profile of theboard at least annually; • recommending nominees for election to our board and its corresponding committees; • assessing the functioning of individual members of the board and management and reporting the results of such assessment to the board;and • developing and recommending to the board our rules governing the board, reviewing and reassessing the adequacy of such rules governingthe board and recommending any proposed changes to the board.D. Employees.As of December 31, 2017, we had 83 employees, 48 of whom hold M.D. or Ph.D. degrees. 60 of our employees work in research and developmentand 23 work in management and administrative areas. All of our employees are located in the Netherlands except for 14 employees located in theUnited States. None of our employees is subject to a collective bargaining agreement or represented by a trade or labor union. We are in the process ofestablishing a workers’ council for our employees.E. Share Ownership.For information regarding the share ownership of members of our board of directors and senior management and arrangements involving ouremployees in our share capital, see “Item 6.B.—Compensation” and “Item 7.A.—Major Shareholders and Related Party Transactions.”Item 7 Major Shareholders and Related Party Transactions.A. Major Shareholders.The following table sets forth information relating to the beneficial ownership of our common shares as of March 31, 2018 by: • each person known to us who beneficially owns 5% or more of our outstanding common shares; • each member of our board of directors; and • each of our senior managers.The number of common shares beneficially owned by each entity, person, director or senior manager is determined in accordance with the rulesof the U.S. Securities and Exchange Commission, and the information is not necessarily indicative of beneficial ownership for any other purpose.Under such rules, beneficial ownership includes any shares over which the entity or individual has sole or shared voting power or investment power aswell as any shares that the entity or individual has the right to acquire within 60 days following March 31, 2018 through the exercise of any option,warrant or other right. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have solevoting and investment power with respect to all common shares held by that person, as applicable. 125Table of ContentsCommon shares that a person has the right to acquire within 60 days following March 31, 2018 are deemed outstanding for purposes ofcomputing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentageownership of any other person. As of March 31, 2018, we had 22,624,690 common shares outstanding. Unless otherwise indicated below, the addressfor each beneficial owner listed is c/o Merus N.V., at Yalelaan 62, 3584 CM Utrecht, The Netherlands. Shares beneficially owned Name of beneficial owner Number Percent 5% or Greater Shareholders Incyte Corporation(1) 3,200,000 14.1% BVF(2) 2,419,443 10.7% Sofinnova Venture Partners IX, L.P.(3) 1,738,817 7.7% Bay City Capital Coöperatief U.A.(4) 1,451,320 6.4% Novo A/S(5) 1,410,417 6.2% Cooperatief LSP IV UA(6) 1,225,661 5.4% Johnson & Johnson Innovation - JJDC, Inc.(7) 1,195,943 5.3% Wellington Management Group LLP(8) 1,181,946 5.2% Baker Brothers Life Sciences L.P.(9) 1,160,014 5.1% Senior Management and Board of Directors Ton Logtenberg, Ph.D.(10) 553,646 2.4% John Crowley(11) 68,715 * Hui Liu(12) 96,955 * L. Andres Sirulnik, M.D., Ph.D.(13) 87,040 * Mark Throsby, Ph.D.(14) 102,262 * Lex B.H. Bakker, Ph.D.(15) 23,303 * Peter B. Silverman(16) 15,625 * John de Kruif(17) 17,893 * Mark Iwicki(18) 53,535 * Wolfgang Berthold, Ph.D.(19) 8,214 * Lionel Carnot(4),(20) 1,461,233 6.5% John de Koning, Ph.D.(21) 9,913 * Anand Mehra, M.D(3),(22) 1,748,730 7.7% Gregory Perry(23) 9,913 * *Indicates beneficial ownership of less than 1% of the total outstanding common shares.(1)Consists of 3,200,000 common shares held directly by Incyte Corporation (“Incyte”). As of April 2017, the board of directors of Incyte iscomprised of the following individuals: Harvé Hoppenot, Julian C. Baker, Jean-Jacques Bienaimé, Paul A. Brooke, Paul J. Clancy, Wendy Dixon,PhD and Paul A. Friedman, MD. Incyte is a publicly-traded company. Beneficial ownership information is based on a Schedule 13G filed with theSEC on January 23, 2017. Incyte’s address is 1801 Augustine Cut-Off, Wilmington, DE 19803.(2)Consists of (a) 1,134,098 shares held directly by Biotechnology Value Fund, L.P. (“BVF”), (b) 756,033 shares held directly by BiotechnologyValue Fund II, L.P. (”BVF2”), (c) 329,030 shares held directly by certain partners managed accounts and (d) 200,282 shares held byBiotechnology Value Trading Fund OS LP (“Trading Fund OS”). BVF Partners OS Ltd. (“Partners OS”), as the general partner or Trading FundOS, may be deemed to beneficially own the 200,282 shares held by Trading Fund OS. BVF Partners L.P. (“Partners”), as the general partner ofBVF, BVF2, the investment manager of Trading Fund OS, and the sole member of Partners OS, may be deemed to beneficially own the 2,419,443shares beneficially owned in the aggregate by BVF, BVF2, Trading Fund OS, and certain Partners managed accounts (the “Partners ManagedAccounts”), including 329,030 shares held in the Partners Managed Accounts. BVF Inc., as the general partner of Partners, may be deemed tobeneficially own the 2,419,443 shares beneficially owned by Partners. Mr. Lampert, as a director and officer of BVF Inc., may be deemed tobeneficially own the 2,419,443 shares beneficially owned by BVF Inc. Beneficial ownership information is based on a Schedule 126Table of Contents 13G/A filed with the SEC on March 5, 2018. The address for each of these entities is 1 Sansome Street, 30th Floor, San Francisco, CA 94104.(3)Consists of 1,738,817 common shares held directly by Sofinnova Venture Partners IX, L.P. (“Sofinnova VP”). Sofinnova Management IX, L.L.C.(“Sofinnova Management”) is the general partner of Sofinnova VP and Anand Mehra, Michael Powell and James Healy are the managingmembers of Sofinnova Management. Sofinnova Management, Anand Mehra (a member of our board), Michael Powell and James Healy may bedeemed to have shared voting and dispositive power over the shares owned by Sofinnova VP. Such entities and individuals disclaim beneficialownership over all shares except to the extent of any pecuniary interest therein. Beneficial ownership information is based on a Schedule 13Dfiled with the SEC on September 27, 2017. The address for Sofinnova VP and Sofinnova Management is 3000 Sand Hill Road, Building 4, Suite250, Menlo Park, California 94025.(4)Consists of 1,451,320 common shares held directly by Bay City Capital Coöperatief U.A. (“COOP”). Bay City Capital Fund V, L.P. (“Fund V”)and Bay City Capital Fund V Co-Investment Fund, L.P. (“Fund V-SBS”) are the two sole investors of COOP. Bay City Capital Management VLLC (“BCCM V”) is the general partner of Fund V and Fund V-SBS. Bay City Capital LLC (“BCC LLC”, and together with COOP, Fund V, FundV-SBS, and BCCM V, “Bay City Capital”) is the adviser and manager of BCCM V. Because COOP requires two members, BCCM V and BCCLLC represent Fund V and Fund V-SBS, respectively, as members of COOP. Thus, BCCM V and BCC LLC share voting and investment powerover the shares held by COOP. Lionel Carnot, a member of our board, is a member of BCCM V and is employed as a managing director of BCCLLC together with Fred Craves, Carl Goldfischer, Dayton Misfeldt and Rob Hopfner. As such, each of these individuals may be deemed to sharevoting and investment power over these entities, and they disclaim beneficial ownership of all shares except to the extent of any pecuniaryinterest therein. Beneficial ownership information is based on a Schedule 13D filed with the SEC on May 27, 2016. Bay City Capital’s mailingaddress is De Boelelaan 7, 1083 HJ Amsterdam, Netherlands.(5)Consists of 1,410,417 common shares held directly by Novo A/S, a Danish limited liability company wholly owned by the Novo NordiskFoundation. Novo A/S, through its Board of Directors (the “Novo Board”), has the sole power to vote and dispose of the shares owned by NovoA/S. The Novo Board, which is comprised of Sten Scheibye, Göran Ando, Jeppe Christiansen, Steen Riisgaard and Per Wold-Olsen, may exercisevoting and dispositive control over the shares only with the support of a majority of the Novo Board. As such, no individual member of the NovoBoard is deemed to hold any beneficial ownership or reportable pecuniary interest in the Novo shares. Beneficial ownership information is basedon a Schedule 13D filed with the SEC on March 3, 2017. The address of Novo A/S is Tuborg Havnevej 19, 2900 Hellerup, Denmark.(6)Consists of 1,225,661 common shares held directly by Coöperatief LSP IV U.A. (“LSP”). LSP IV Management BV (“LSP Management”) is thesole director of LSP. The managing directors of LSP Management are Martijn Kleijwegt, Rene Kuijten and Joachim Rothe. As such, LSPManagement, Martijn Kleijwegt, Rene Kuijten and Joachim Rothe may be deemed to beneficially own and share voting power over these shares.LSP Management, Martijn Kleijwegt, Rene Kuijten and Joachim Rothe disclaim beneficial ownership of the shares. John de Koning, a member ofour supervisory board, is employed as a partner at LSP. Mr. de Koning has no beneficial ownership of these shares, but he has a pecuniary interestin these shares pursuant to his employment at LSP. Beneficial ownership information is based on a Schedule 13D/A filed with the SEC on June 3,2016. LSP’s mailing address is c/o LSP, Johannes Vermeerplein 9, 1071 DV Amsterdam, Netherlands.(7)Consists of 1,195,943 common shares held directly by Johnson & Johnson Innovation—JJDC, Inc. (“JJDC”). JJDC is a wholly-owned subsidiaryof Johnson & Johnson (“J&J”). JJDC and J&J have shared voting and dispositive power over the shares and J&J may be deemed to indirectlybeneficially own the shares. Beneficial ownership information is based on a Schedule 13G filed with the SEC on January 18, 2017. The addressof JJDC is One Johnson & Johnson Plaza, New Brunswick, NJ 08933.(8)The shares are held by Wellington Management Group LLP. Wellington Investment Advisors Holdings LLP which controls directly, or indirectlythrough Willington Management Global Holdings, Ltd., (“Wellington Investment Advisers”). Wellington Investment Advisors Holdings LLP isowned by Willington Group Holdings LLP, Wellington Group Holdings LLP is owned by Wellington management Group LLP. Beneficialownership information is based on a Schedule 13G filed with the SEC on 127Table of Contents February 8, 2018. The address for each of these entities is c/o Wellington Management Company LLP, 280 Congress Street, Boston, MA 02210.(9)Consists of (a) 1,054,257 common shares held directly by Baker Brothers Life Sciences, L.P. (“Life Sciences”) and (b) 105,757 common sharesheld directly by 667, L.P. (“667”, and together with Life Sciences, the “Baker Funds”). Baker Bros. Advisors LP (“Advisors”) is the InvestmentAdviser for the Baker Funds and has sole voting and investment power with respect to the shares held by the Baker Funds. Baker Bros. Advisors(GP) LLC is the sole general partner of Advisors. Baker Bros. Advisors (GP) LLC, Julian C. Baker and Felix J. Baker as principals of the BakerBros. Advisors (GP) LLC, and Advisors disclaim beneficial ownership of all shares. Beneficial ownership information is based on a Schedule 13Gfiled with the SEC on February 14, 2017. The address for each of these entities is 667 Madison Avenue, 21st Floor, New York, NY 10065.(10)Consists of (a) 160,814 common shares held by BioPhrase, B.V. (“BioPhrase”), Dr. Logtenberg’s personal holding company, (b) 45,272 commonshares held by Dr. Logtenberg, and (c) 347,560 options to purchase common shares held by Dr. Logtenberg that vest within 60 days followingMarch 31, 2018.(11)Consists of 68,715 options to purchase common shares that vest within 60 days following March 31, 2018.(12)Consists of 96,955 options to purchase common shares that vest within 60 days following March 31, 2018.(13)Consists of 87,040 options to purchase common shares that vest within 60 days following March 31, 2018.(14)Consists of 102,262 options to purchase common shares that vest within 60 days following March 31, 2018.(15)Consists of 23,303 options to purchase common shares that vest within 60 days following March 31, 2018.(16)Consists of 15,625 options to purchase common shares that vest within 60 days following March 31, 2018.(17)Consists of 17,893 options to purchase common shares that vest within 60 days following March 31, 2018.(18)Consists of 53,535 options to purchase common shares that vest within 60 days following March 31, 2018.(19)Consists of 8,214 options to purchase common shares that vest within 60 days following March 31, 2018.(20)Consists of 9,913 options to purchase common shares that vest within 60 days following March 31, 2018.(21)Consists of 9,913 options to purchase common shares that vest within 60 days following March 31, 2018.(22)Consists of 9,913 options to purchase common shares that vest within 60 days following March 31, 2018.(23)Consists of 9,913 options to purchase common shares that vest within 60 days following March 31, 2018.To our knowledge, there has been no significant change in the percentage ownership held by the major shareholders listed above since January 1,2017, except as discussed under Item 7.B “Related Party Transactions.” 128Table of ContentsB. Related Party Transactions.The following is a description of related party transactions we have entered into since January 1, 2017 or currently in effect with any member ofour board of directors or our executive officers and the holders of 5% or more of our common shares.Registration RightsRegistration Rights Agreement with IncyteIn connection with the Collaboration Agreement, we entered into a Share Subscription Agreement, or the Subscription Agreement, with Incytepursuant to which we agreed to register the common shares held by Incyte by June 1, 2017. We also agreed to use our reasonable best efforts to keepthe registration statement effective until the earlier of (a) all of the common shares held by Incyte having been sold pursuant to an effective registrationstatement or in compliance with Rule 144 promulgated under the Securities Act of 1933, as amended, or the Securities Act, (b) at such time when thecommon shares held by Incyte could, in the opinion of counsel satisfactory to us, be sold by Incyte in a single transaction under the terms of theSubscription Agreement and the volume and manner of sale limitations under Rule 144 of the Securities Act, and (c) at such time as the registrationstatement registering the common shares has been effective for 42 months following the lock-up period of the common shares as specified in theSubscription Agreement. On June 1, 2017, we filed a registration statement on Form F-3 (File No. 333-218432) with the U.S. Securities and ExchangeCommission registering the common shares held by Incyte, which was amended on June 14, 2017.Registration Rights Agreement with Certain InvestorsWe have entered into a registration rights agreement, or the Registration Rights Agreement, with certain of our shareholders, pursuant to whichsuch shareholders are entitled to the following rights with respect to the registration of their common shares for public resale under the Securities Act.The registration of common shares as a result of the following rights being exercised would enable their holders to trade these shares without restrictionunder the Securities Act when the applicable registration statement is declared effective.Demand Registration RightsIf the holders of, at least, 30% of the registrable securities then outstanding request that we effect a registration with respect to all or part of theirregistrable securities, we may be required to register all or part of the registrable securities then outstanding. We are obligated to effect at most tworegistrations in response to these demand registration rights. If the holders requesting registration intend to distribute their shares by means of anunderwriting, the managing underwriter of such offering has the right to limit the number of shares to be underwritten for reasons related to themarketing of the shares.Piggyback Registration RightsIf we propose to register any of our common shares under the Securities Act, subject to certain exceptions, the holders of registrable securities areentitled to notice of the registration and to include their registrable securities in the registration. If our proposed registration involves an underwriting,the managing underwriter of such offering has the right to limit the number of shares to be underwritten for reasons related to the marketing of theshares.Form S-3 Registration RightsIf the holders of our registrable securities then outstanding request that we effect a registration of some or all of their registrable securities and weare entitled under the Securities Act to register our common shares on a registration statement on Form F-3, we are obligated to effect such registration.We are not obligated to effect a 129Table of Contentsregistration pursuant to these F-3 registration rights if (i) the expected aggregate net proceeds from the sale of the registrable securities for whichregistration is requested is equal to or less than $1.0 million or (ii) if, within a given 12-month period, we have already effected two registrations onForm F-3 for the holders of registrable securities.ExpensesOrdinarily, other than underwriting discounts and commissions, we are required to pay all expenses incurred by us related to any registrationeffected pursuant to the exercise of these registration rights. These expenses may include all registration and filing fees, printing expenses, fees anddisbursements of our counsel, reasonable fees and disbursements of a counsel for the selling security holders and blue sky fees and expenses.Termination of Registration RightsThe registration rights terminate upon the earlier of May 24, 2020, or, with respect to the registration rights of an individual holder, when theholder can sell all of such holder’s registrable securities in a three-month period without restriction under Rule 144 under the Securities Act.Agreements with Executive OfficersFor a description of our agreements with our executive officers, see “Item 6.B.—Compensation.”Indemnification AgreementsWe have entered into agreements with members of our board of directors and our executive officers to indemnify them against expenses andliabilities to the fullest extent permitted by law. These agreements provide, subject to certain exceptions, for indemnification for related expensesincluding, among other expenses, attorneys’ fees, judgments, penalties, fines and settlement amounts incurred by any of these individuals in any actionor proceeding. In addition to such indemnification, we provide our board of directors and executive officers with directors’ and officers’ liabilityinsurance.C. Interests of Experts and Counsel.Not applicable.Item 8 Financial InformationA. Consolidated Statements and Other Financial Information.Consolidated Financial StatementsOur consolidated financial statements are appended at the end of this Annual Report, starting at page F-1, and are incorporated herein byreference.Legal ProceedingsOn March 11, 2014, Regeneron Pharmaceuticals, Inc., or Regeneron, filed a complaint in the United States District Court for the Southern Districtof New York, or the Court, alleging that we were infringing one or more claims in their U.S. Patent No. 8,502,018, entitled “Methods of ModifyingEukaryotic Cells.” On July 3, 2014, we filed a response to the complaint, denying Regeneron’s allegations of infringement and raising affirmativedefenses, and filed counterclaims seeking, among other things, a declaratory judgment that we did not infringe the patent and that the patent wasinvalid. We subsequently filed amended counterclaims during the period from August to December 2014, seeking a declaratory judgment ofunenforceability of the patent due to Regeneron’s commission of inequitable conduct. 130Table of ContentsOn November 21, 2014, the Court found that there was clear and convincing evidence that a claim term present in each of the patent claims wasindefinite and granted several of our proposed claim constructions. On February 24, 2015, the Court entered partial judgment in the proceeding, on thegrounds that we did not infringe each of the patent claims, and that each of the patent claims were invalid due to indefiniteness. On November 2, 2015,the Court found Regeneron had withheld material information from the USPTO during prosecution of the patent, and Regeneron had engaged ininequitable conduct and affirmative egregious misconduct in connection with the prosecution of the patent. On December 18, 2015, Regeneron filedan appeal of the Court’s decision. The appeal hearing at the Federal Circuit took place on February 13, 2017. On July 27, 2017, the U.S. Court ofAppeals for the Federal Circuit affirmed the trial court’s conclusion that Regeneron had engaged in inequitable conduct before the United States Patentand Trademark Office and affirmed that Regeneron’s ‘018 patent is unenforceable. Regeneron petitioned for a panel rehearing and rehearing en banc ofthis decision by the Federal Circuit on September 12, 2017, which the Company responded to and opposed on November 2, 2017. On December 26,2017, the full Federal Circuit denied Regeneron’s request to rehear the matter. The case is returned to the District Court to adjudicate the Company’smotion requesting that Regeneron pay Merus’ attorneys fees’ and costs’ incurred as a result of Regeneron filing suit. On March 26, 2018, the trial courtruled that Merus’ motion for attorney fees, expert fees, and costs is granted. Merus must next submit a detailed explanation of those attorney fees,expert fees, and costs of such award in the following weeks.On March 11, 2014, Regeneron served a writ in the Netherlands alleging that we were infringing one or more claims in their European patentEP 1 360 287 B1. We had opposed that patent in June 2014 and the Dutch litigation is currently stayed. On September 17, 2014, Regeneron’s patentEP 1 360 287 B1 was revoked in its entirety by the European Opposition Division of the European Patent Office, or the EPO. An appeal hearingoccurred in October and November 2015 at the Technical Board of Appeal for the EPO at which time the patent was reinstated to Regeneron withamended claims. We believe that our current business operations do not infringe the patent reinstated to Regeneron with amended claims because webelieve we have not used the technology or methods claimed under the amended claims.Regeneron has also raised opposition proceedings against certain of our patents in jurisdictions including Europe, Japan and Australia, includingpertaining to Merus’ patent family related to “Antibody producing non-human animals”, which concerns features of Merus’ Biclonics® technologyplatform. Such opposition proceedings have become increasingly common in the EU and are costly to defend. On August 11, 2014, a notice ofopposition against Merus’ EP 2147594 (the “EP ‘594 patent”), entitled “Antibody Producing Non-Human Mammals” was filed in the European PatentOffice (the “EPO”) by Regeneron. The notice asserted, as applicable, lack of novelty, lack of inventive step, and insufficiency. The Company’sresponse to the oppositions was filed on April 2, 2015. Following an oral hearing before the Opposition Division of the EPO on October 28, 2016, theOpposition Division upheld the EP ‘594 Patent without amendments. Regeneron filed grounds of appeal on July 19, 2017, and Merus responded onNovember 30, 2017. The appeal is currently pending.In Australia, Regeneron opposed Merus’ patent application 2009263082, entitled “Antibody producing non-human animals.” In a decisiondated May 5, 2017, the Australian Patent Office determined certain claims of the application were valid and others were not. Merus filed amendmentsto certain claims with the Australian Patent Office has found valid, with further proceedings to follow.On July 15, 2014, a notice of opposition against Merus’ EP 2314629 patent (the “EP ‘629 patent”), entitled “Recombinant Production ofMixtures of Antibodies” was filed in the European Patent Office (the “EPO”) by Regeneron. The notice asserted, as applicable, added subject matter,lack of novelty, lack of inventive step, and insufficiency. Merus responded on February 24, 2015. Following an oral hearing before the OppositionDivision of the EPO on June 22, 2016, the Opposition Division upheld the EP ‘629 Patent with amendments. Both Regeneron and Merus filed a noticeof appeal followed by grounds of appeal on December 1st and 4th, 2017 respectively, with further proceedings to follow.On April 5, 2017, a notice of opposition against Merus’ EP 2604625 patent (the “EP ‘625 patent”), entitled “Generation of Binding Molecules”was filed in the EPO by Regeneron and an unnamed third party. The notices 131Table of Contentsasserted, as applicable, added subject matter, lack of novelty, lack of inventive step, and insufficiency. Merus intends to timely respond to thesesubmissions with proceedings to be ongoing.As each of these proceedings continue, we cannot assure you that we will ultimately prevail in these opposition proceedings brought byRegeneron and an anonymous third party against our intellectual property.From time to time, we may be involved in various other claims and legal proceedings relating to claims arising out of our operations. We are notcurrently a party to any other material legal proceedings.Dividend Distribution PolicyWe have never paid or declared any cash dividends on our common shares, and we do not anticipate paying any cash dividends on our commonshares in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business.Under Dutch law, a Dutch public company with limited liability (naamloze vennootschap) may only pay dividends if the shareholders’ equity (eigenvermogen) exceeds the sum of the paid-up and called-up share capital plus the reserves required to be maintained by Dutch law or our Articles ofAssociation. Subject to such restrictions, any future determination to pay dividends will be at the discretion of our general meeting upon the proposalof our board of directors. Any future approval will depend upon the board’s review of a number of factors, including our results of operations, financialcondition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.B. Significant Changes.None. 132Table of ContentsItem 9 The Offer and Listing.A. Offer and Listing Details.Our common shares have been listed on The Nasdaq Global Market under the symbol “MRUS” since May 19, 2016. The following table setsforth for the periods indicated the high and low sales prices per common share as reported on The Nasdaq Global Market: Price Per CommonShare High Low Year Ended December 31, 2016 (beginning May 19) $22.19 $7.26 2017 $33.63 $13.23 Quarter Ended Second Quarter 2016 (beginning May 19) $10.89 $7.26 Third Quarter 2016 $16.98 $8.42 Fourth Quarter 2016 $22.19 $13.13 First Quarter 2017 $33.63 $20.55 Second Quarter 2017 $25.44 $13.23 Third Quarter 2017 $21.07 $13.30 Fourth Quarter 2017 $21.94 $14.05 First Quarter 2018 $20.50 $14.90 Second Quarter 2018 (through April 27, 2018) $18.98 $16.66 Month of October 2017 $21.94 $15.55 November 2017 $18.44 $14.05 December 2017 $19.40 $14.20 January 2018 $19.99 $14.90 February 2018 $19.50 $15.10 March 2018 $20.50 $17.17 April 2018 (through April 27) $18.98 $16.66 B. Plan of Distribution.Not applicable.C. Markets.Our common shares have been listed on The Nasdaq Global Market under the symbol “MRUS” since May 19, 2016.D. Selling Shareholders.Not applicable.E. Dilution.Not applicable.F. Expenses of the Issue.Not applicable. 133Table of ContentsItem 10. Additional Information.A. Share Capital.Not applicable.B. Memorandum and Articles of Association.The information in response to this item is contained under the caption “Description of Share Capital and Articles of Association” and“Comparison of Dutch Corporate Law and Our Articles of Association and U.S. Corporate Law” in our Form F-3 Registration Statement filed with theSecurities and Exchange Commission on June 1, 2017 and is incorporated herein by reference.C. Material Contracts.We have entered into the following material contracts since the period beginning two years prior to the date of this Annual Report.Underwriting AgreementWe entered into an underwriting agreement with Citigroup Global Markets, Inc. and Jefferies LLC, as representatives of the underwriters, onMay 18, 2016, for the initial public offering of our common shares. We have agreed to indemnify the underwriters against certain liabilities, includingliabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect of such liabilities.License and Collaboration AgreementsWe have entered into license and collaboration agreements with Incyte Corporation, ONO Pharmaceuticals, Inc. and Simcere PharmaceuticalGroup. Information on these agreements may be found in this Annual Report under “Item 4—Information on the Company—CollaborationAgreements” and is incorporated herein by reference.Employment AgreementsWe have entered into employment agreements with our executive officers. Information on these agreements may be found in this Annual Reportunder “Item 6—Directors, Senior Management and Employees—Compensation” and is incorporated herein by reference.Indemnification AgreementsWe have entered into indemnification agreements with members of our board of directors and our executive officers. Information on theindemnification agreements may be found in this Annual Report under “Item 7—Major Shareholders and Related Party Transactions—IndemnificationAgreements” and is incorporated herein by reference.Registration Rights AgreementsWe have entered into registration rights agreements with Incyte under the Share Subscription Agreement and with certain of our shareholdersunder a Registration Rights Agreement. Information on the registration rights agreements may be found in this Annual Report under “Item 7—MajorShareholders and Related Party Transactions—Registration Rights” and is incorporated herein by reference.We have entered into a stock purchase agreement and registration rights agreement concerning, wherein we received aggregate gross proceeds ofapproximately $55.8 million from a private placement offering closed on February 15, 2018 (see Note 2 and Note 24). 134Table of ContentsLeaseOn November 1, 2016, we entered into a lease agreement with Stichting Incubator Utrecht for approximately 11,125 square feet of office andlaboratory space in Utrecht, the Netherlands. The lease has a term of five years and expires on October 31, 2021. The agreed rental price is€402 thousand per year.D. Exchange Controls.Under the existing laws of the Netherlands, there are no exchange controls applicable to the transfer to persons outside of the Netherlands ofdividends or other distributions with respect to, or of the proceeds from the sale of, shares of a Dutch company.E. Taxation.Material U.S. Federal Income Tax Considerations for U.S. HoldersThe following is a description of the material U.S. federal income tax consequences to the U.S. Holders described below of owning and disposingof common shares. It is not a comprehensive description of all tax considerations that may be relevant to a particular person’s decision to acquiresecurities. This discussion applies only to a U.S. Holder that holds common shares as a capital asset for tax purposes (generally, property held forinvestment). In addition, it does not describe all of the tax consequences that may be relevant in light of a U.S. Holder’s particular circumstances,including state and local tax consequences, estate tax consequences, alternative minimum tax consequences, the potential application of theprovisions of the Code known as the Medicare contribution tax, and tax consequences applicable to U.S. Holders subject to special rules, such as: • certain financial institutions; • dealers or traders in securities who use a mark-to-market method of tax accounting; • persons holding common shares as part of a hedging transaction, “straddle,” wash sale, conversion transaction or integrated transaction orpersons entering into a constructive sale with respect to the common shares; • persons whose “functional currency” for U.S. federal income tax purposes is not the U.S. dollar; • tax exempt entities, including “individual retirement accounts” and “Roth IRAs”; • S corporations or entities classified as partnerships for U.S. federal income tax purposes; • regulated investment companies or real estate investment trusts; • persons who acquired our common shares pursuant to the exercise of an employee stock option or otherwise as compensation; • persons subject to special tax accounting rules as a result of any item of gross income with respect to the common shares being taken intoaccount in an applicable financial statement; • persons that own or are deemed to own ten percent or more of our shares by vote or value; and • persons holding common shares in connection with a trade or business conducted outside the United States.If an entity that is classified as a partnership for U.S. federal income tax purposes holds common shares, the U.S. federal income tax treatment of apartner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding common shares and partners in suchpartnerships are encouraged to consult their tax advisers as to the particular U.S. federal income tax consequences of holding and disposing of commonshares.The discussion is based on the Code, administrative pronouncements, judicial decisions, final, temporary and proposed Treasury Regulations,and the income tax treaty between the Netherlands and the United States (the 135Table of Contents“Treaty”) all as of the date hereof, changes to any of which may affect the tax consequences described herein—possibly with retroactive effect.A “U.S. Holder” is a holder who, for U.S. federal income tax purposes, is a beneficial owner of common shares who is eligible for the benefits ofthe Treaty and is: (1)a citizen or individual resident of the United States; (2)a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or theDistrict of Columbia; or (3)an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.U.S. Holders are encouraged to consult their tax advisers concerning the U.S. federal, state, local and foreign tax consequences of owning anddisposing of common shares in their particular circumstances.Taxation of DistributionsSubject to the discussion below under “Passive Foreign Investment Company Rules,” distributions paid on common shares, other than certainpro rata distributions of common shares, will generally be treated as dividends to the extent paid out of our current or accumulated earnings and profits(as determined under U.S. federal income tax principles). Because we do not calculate our earnings and profits under U.S. federal income tax principles,we expect that distributions generally will be reported to U.S. Holders as dividends. Subject to applicable limitations, dividends paid to certainnon-corporate U.S. Holders may be taxable at preferential rates applicable to “qualified dividend income.” The amount of a dividend will include anyamounts withheld by us in respect of Dutch income taxes. The amount of the dividend will be treated as foreign-source dividend income to U.S.Holders and will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code. Dividends will beincluded in a U.S. Holder’s income on the date of the U.S. Holder’s receipt of the dividend. The amount of any dividend income paid in foreigncurrency will be the U.S. dollar amount calculated by reference to the exchange rate in effect on the date of actual or constructive receipt, regardless ofwhether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should notbe required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if thedividend is converted into U.S. dollars after the date of receipt. Such gain or loss would generally be treated as U.S.-source ordinary income or loss. Theamount of any distribution of property other than cash (and other than certain pro rata distributions of common shares or rights to acquire commonshares) will be the fair market value of such property on the date of distribution.Subject to applicable limitations, some of which vary depending upon the U.S. Holder’s particular circumstances, Dutch income taxes withheldfrom dividends on common shares at a rate not exceeding the rate provided by the Treaty will be creditable against the U.S. Holder’s U.S. federalincome tax liability. The rules governing foreign tax credits are complex and U.S. Holders should consult their tax advisers regarding the creditabilityof foreign taxes in their particular circumstances. In lieu of claiming a foreign tax credit, U.S. Holders may, at their election, deduct foreign taxes,including any Dutch income tax, in computing their taxable income, subject to generally applicable limitations under U.S. law. An election to deductforeign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year.Sale or Other Taxable Disposition of Common SharesSubject to the discussion below under “Passive Foreign Investment Company Rules,” gain or loss realized on the sale or other taxabledisposition of common shares will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder held the common shares for morethan one year. The amount of the gain or loss will equal the difference between the U.S. Holder’s tax basis in the common shares disposed of and the 136Table of Contentsamount realized on the disposition, in each case as determined in U.S. dollars. This gain or loss will generally be U.S.-source gain or loss for foreign taxcredit purposes. The deductibility of capital losses is subject to limitations.Passive Foreign Investment Company RulesBased on the current and anticipated value of our assets, including goodwill, and the composition of our income, assets and operations, we donot believe we were a PFIC for our taxable year ended December 31, 2017. However, the application of the PFIC rules is subject to uncertainty inseveral respects, and we cannot assure holders of our common shares that the IRS will not take a contrary position. A non-U.S. corporation will beclassified as a PFIC for any taxable year in which, after applying certain look-through rules, either: • at least 75% of its gross income is passive income; or • at least 50% of its gross assets (determined on the basis of a quarterly average) is attributable to assets that produce passive income or areheld for the production of passive income.We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation inwhich we own, directly or indirectly, 25% or more (by value) of the equity.A separate determination must be made after the close of each taxable year as to whether we are a PFIC for that year. As a result, our PFIC statusmay change. In particular, the total value of our assets for purposes of the asset test generally will be calculated using the market price of our commonshares, which may fluctuate considerably. Fluctuations in the market price of our common shares may result in our being a PFIC for any taxable year. Inaddition, the composition of our income and assets is affected by how, and how quickly, we spend the cash we raise in any offering.If we are classified as a PFIC in any year with respect to which a U.S. Holder owns the common shares, we will continue to be treated as a PFICwith respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns the common shares, regardless of whether we continue tomeet the tests described above unless (1) we cease to be a PFIC and (2) the U.S. Holder has made a “deemed sale” election under the PFIC rules.If we are a PFIC for any taxable year, holders of our common shares will be subject to special tax rules with respect to any “excess distribution”that they receive and any gain they realize from a sale or other disposition (including a pledge) of common shares. Distributions holder of our commonshares receive in a taxable year that are greater than 125% of the average annual distributions they received during the shorter of the three precedingtaxable years or their holding period for the common shares will be treated as an excess distribution. Under these special tax rules: • the excess distribution or gain will be allocated ratably over their holding period for the common shares; • the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we became a PFIC, will betreated as ordinary income; and • the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generallyapplicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operatinglosses for such years, and gains (but not losses) realized on the sale of the common shares cannot be treated as capital, even if holders of our commonshares hold the common shares as capital assets. 137Table of ContentsCertain elections may be available that would result in alternative treatments (such as mark-to-market treatment of the common shares). Theadverse consequences of owning stock in a PFIC could be mitigated if a U.S. Holder makes a valid “qualified electing fund” election, or QEF election,which, among other things, would require a U.S. Holder to include currently in income its pro rata share of the PFIC’s net capital gain and ordinaryearnings, based on earnings and profits as determined for U.S. federal income tax purposes. Unless otherwise provided by the U.S. Treasury, each U.S.shareholder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require. A U.S. Holder’s failure to filethe annual report will cause the statute of limitations for such U.S. Holder’s U.S. federal income tax return to remain open with regard to the itemsrequired to be included in such report until three years after the U.S. Holder files the annual report, and, unless such failure is due to reasonable causeand not willful neglect, the statute of limitations for the U.S. Holder’s entire U.S. federal income tax return will remain open during such period.If we are or become a PFIC, holders of our common shares should consult their tax advisors regarding any reporting requirements that may applyto them. U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to the ownership and disposition of thecommon shares and the potential availability of a mark-to-market or QEF election.Information Reporting and Backup WithholdingPayments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediariesgenerally are subject to information reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation or other exemptrecipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subjectto backup withholding.Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a creditagainst the holder’s U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to theIRS.Information with Respect to Foreign Financial AssetsCertain U.S. Holders who are individuals (and, under proposed regulations, certain entities) may be required to report information relating to thecommon shares, subject to certain exceptions (including an exception for common shares held in accounts maintained by certain U.S. financialinstitutions). U.S. Holders should consult their tax advisers regarding their reporting obligations with respect to their ownership and disposition of thecommon shares.F. Dividends and Paying Agents.Not applicable.G. Statement by Experts.Not applicable.H. Documents on Display.We maintain a corporate website at www.merus.nl. We make available free of charge on our website our Reports on Form 6-K and our AnnualReports on Form 20-F, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and ExchangeCommission, or the SEC. Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report. Wehave included our website address in this Annual Report solely as an inactive textual reference. 138Table of ContentsYou may also review a copy of this Annual Report, including exhibits and any schedule filed herewith, and obtain copies of such materials atprescribed rates, at the SEC’s Public Reference Room in Room 1580, 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on theoperation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (www.sec.gov) that contains reports,proxy and information statements and other information regarding registrants that file electronically, such as us, with the SEC.References made in this Annual Report to any contract or other document of Merus N.V. are not necessarily complete and you should refer to theexhibits attached or incorporated by reference into this Annual Report for copies of the actual contract or document.I. Subsidiary Information.Not applicable.Item 11 Quantitative and Qualitative Disclosures About Market Risk.Our consolidated financial statements are appended at the end of this Annual Report, starting at page F-1, and are incorporated herein byreference.Item 12 Description of Securities Other than Equity Securities.A. Debt Securities.Not applicable.B. Warrants and Rights.Not applicable.C. Other Securities.Not applicable.D. American Depositary Shares.Not applicable. 139Table of ContentsPART IIItem 13 Defaults, Dividend Arrearages and Delinquencies.None.Item 14 Material Modifications to the Rights of Security Holders and Use of Proceeds.A. Use of ProceedsIn May 2016, we completed the initial public offering of our common shares, or IPO, and issued and sold 6,139,926 common shares at a publicoffering price of $10.00 per share, including 639,926 common shares pursuant to the underwriters’ partial exercise of their option to purchaseadditional common shares. We received aggregate gross proceeds from the IPO of approximately $61.4 million and aggregate net proceeds ofapproximately $53.3 million after deducting underwriting discounts and commissions of $3.9 million and offering expenses of $4.2 million. The offerand sale of all of the shares in the IPO was registered under the Securities Act of 1933, as amended, or the Securities Act, pursuant to a registrationstatement on Form F-1 (File No. 333-207490), which was declared effective by the Securities and Exchange Commission, or the SEC, on May 19, 2016.There has been no material change in our planned use of the net proceeds from the IPO as described in our final prospectus filed pursuant to Rule424(b)(4) under the Securities Act with the SEC on May 20, 2016. As of the date of the filing of this Annual Report on Form 20-F, we have used all ofthe net proceeds from the IPO.Item 15 Controls and Procedures.Limitations on Effectiveness of Controls and ProceduresIn designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosurecontrols and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating thebenefits of possible controls and procedures relative to their costs.Evaluation of Disclosure Controls and ProceduresOur management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosurecontrols and procedures as of December 31, 2017. Based on the evaluation of our disclosure controls and procedures as of December 31, 2017, ourchief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were not effective at thereasonable assurance level as a result of the material weaknesses in internal control over financial reporting described below.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f)and 15d-15(f) under the Exchange Act.Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. This assessment was performedunder the direction and supervision of our chief executive officer and chief financial officer and based on criteria set forth in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment,our management concluded that our internal control over financial reporting was not effective as of December 31, 2017 as a result of the materialweaknesses discussed below. 140Table of ContentsA material weakness is a control deficiency or a combination of control deficiencies in internal control over financial reporting, such that there isa reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.Management has identified control deficiencies associated with a lack of adequate cut-off procedures to ensure the proper and timely recognition,measurement and classification of operating expenses and certain period-end accruals. Specifically, we did not design and maintain effective internalcontrol over the assessment of the accounting for significant contractual arrangements related to our clinical research and manufacturing agreementsand the classification of operating expenses. There is a reasonable possibility that these deficiencies could result in a material misstatement of ourfinancial statements or in related disclosures in our annual or interim consolidated financial statements that we would not be able to prevent or detecton a timely basis. Accordingly, management has determined that these control deficiencies constitute a material weakness.As previously reported in our Annual Report on Form 20-F for the year ended December 31, 2016, we identified two material weaknesses relatedto insufficient accounting resources required to fulfill IFRS and SEC reporting requirements and insufficient comprehensive IFRS accounting policiesand financial reporting procedures. Due to the material weakness identified in management’s assessment of our internal control over financial reportingas of December 31, 2017, management determined that these material weaknesses were not remediated as of December 31, 2017.Management has implemented and continues to implement various measures to address its internal control deficiencies. These measures areoutlined below.Remediation MeasuresWith the oversight of management and our Audit Committee, we have taken and plan to take steps intended to address the underlying causes ofthe material weaknesses identified, primarily through the redesign of specific processes and controls associated with review of contractual agreements,including a quarterly identification and review of significant agreements with the management team to ensure that the relevant accountingimplications are identified and considered. Additionally, we are in the process of redesigning our controls over operating expenses, including therelated balance sheet accounts. We are also continuing the hiring of additional financial resources, enhancing our IFRS accounting policies andprocedures and developing review controls related to our financial close and reporting processes.Although we plan to complete this remediation process as quickly as possible, we cannot, at this time, estimate when such remediation mayoccur, and our initiatives may not prove successful in remediating the material weakness. Management may determine to enhance other existingcontrols and/or implement additional controls as the remediation process progresses. It will take time to determine whether the additional controls weare implementing will be sufficient to accomplish their intended purpose. Accordingly, the material weaknesses may continue for a period of time.Our Audit Committee and management are closely monitoring the remediation process. Until the remediation efforts discussed in this section,including any additional remediation efforts that our management identifies as necessary, are completed, tested and determined effective, we will notbe able to conclude that the material weaknesses have been remediated. In addition, we may need to incur incremental costs associated with thisremediation, primarily due to the hiring and training of finance and accounting personnel and the implementation and validation of improvedaccounting and financial reporting procedures.Notwithstanding the material weaknesses, our management, based on the substantial work performed, concluded that our consolidated financialstatements for the periods covered by and included in this Annual Report are fairly stated in all material respects in accordance with IFRS for each ofthe periods presented in this Annual Report. Because the remediation actions discussed above have not been fully implemented as of the date of thisreport, the material weaknesses were not considered remediated as of December 31, 2017. 141Table of ContentsThis Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control overfinancial reporting. We are not subject to the attestation requirement because we are an emerging growth company.Changes in Internal Control over Financial ReportingOther than as described in this Item 15, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) underthe Exchange Act) identified in connection with the evaluation of our internal control over financial reporting during the year ended December 31,2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Item 16 A. Audit Committees Financial Expert.Our board of directors has determined that Gregory Perry is an audit committee financial expert as defined by the rules of the U.S. Securities andExchange Commission and has the requisite financial sophistication under the applicable rules and regulations of Nasdaq. Mr. Perry is independent assuch term is defined in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and under the listing standards of Nasdaq.Item 16B. Code of Ethics.Code of Business Conduct and EthicsWe have adopted a Code of Business Conduct and Ethics, or the Code of Conduct, that is applicable to all of our employees, management,including our principal executive officer, principal financial officer and principal accounting officer, board of directors, consultants, and otherstemporarily assigned to perform work or services for us. The Code of Conduct is available on our website at www.merus.nl. We intend to satisfy thedisclosure requirement under Item 16B(e) of Form 20-F regarding amendment to, or waiver from, a provision of our Code of Business Conduct andEthics, as well as Nasdaq’s requirement to disclose waivers with respect to directors and executive officers, by posting such information on our websiteat the address and location specified above. Our board of directors is responsible for administering the Code of Conduct. The board of directors isallowed to amend, alter or terminate the Code of Conduct.Item 16C. Principal Accountant Fees and Services.The following table summarizes the fees of KPMG Accountants N.V., our independent registered public accounting firm, billed to us for each ofthe last two fiscal years for audit and other services: Fee Category 2017 2016 Audit Fees €1,234,000 €1,001,000 Audit-Related Fees 10,000 — Tax Fees — 10,000 All Other Fees — — Total Fees €1,244,000 €1,011,000 Audit FeesAudit fees consist of fees billed for the audit of our annual consolidated financial statements, the review of the interim consolidated financialstatements, and related services that are normally provided in connection with registration statements, including the registration statement for ourinitial public offering. Included in the 2016 audit-related fees is €498,000 of fees billed in connection with our initial public offering in May 2016. 142Table of ContentsAudit-Related FeesAudit related fees relate to an assurance engagement related to a specific research grant.Tax FeesTax fees consist of fees for professional services, including tax consulting and compliance performed by KPMG Accountants N.V for the yearended December 31, 2016.All Other FeesWe did not incur any other fees in 2017 or 2016.Audit Committee Pre-Approval Policy and ProceduresPursuant to the charter of the Audit Committee, the Audit Committee pre-approves audit and non-audit services before engaging our independentauditor to provide those services, unless the independent auditor is engaged under a pre-approval policy established by the Audit Committee or if theservices to be provided by the independent auditor fall within the available exceptions under the rules of the U.S. Securities and ExchangeCommission. The Audit Committee may delegate its authority to pre-approve services to one or more members of the Audit Committee, and thedesignee must present any such approvals to the full Audit Committee at the next Audit Committee meeting.Item 16D. Exemptions from the Listing Standards for Audit Committees.None.Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.None.Item 16F. Change in Registrant’s Certifying Accountant.There has been no change in our independent accountant during our two most recent fiscal years.Item 16G. Corporate Governance.We are a foreign private issuer. As a result, in accordance with the rules of the Nasdaq Stock Market LLC, we comply with Dutch governancerequirements and certain exemptions thereunder rather than complying with Nasdaq corporate governance standards.The following is a summary of the Nasdaq listing rules with which we do not comply: • Nasdaq Listing Rule 5620(c): In accordance with Dutch law and generally accepted business practices, our Articles of Association do notprovide quorum requirements generally applicable to general meetings of shareholders in the United States. To this extent, our practicevaries from the requirement of Nasdaq Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicablequorum, and that such quorum may not be less than one-third of the outstanding voting stock. • Nasdaq Listing Rule 5620(b): Although we must provide shareholders with an agenda and other relevant documents for the generalmeeting of shareholders, Dutch law does not have a regulatory regime for the solicitation of proxies and the solicitation of proxies is not agenerally accepted business practice in the Netherlands, thus our practice varies from the requirement of Nasdaq Listing Rule 5620(b). 143Table of Contents • Nasdaq Listing Rule 5605(d) and (e): As permitted by the listing requirements of Nasdaq, we have also opted out of the requirements ofNasdaq Listing Rule 5605(d), which requires an issuer to have a compensation committee that consists entirely of independent directors,and Nasdaq Listing Rule 5605(e), which requires an issuer to have independent director oversight of director nominations. Although wehave chosen not to comply with Nasdaq Rule 5605(d) regarding the independence of our compensation committee, all of the currentmembers of our compensation committee meet the heightened independence requirements under this rule. • Nasdaq Listing Rule 5635: We have opted out of shareholder approval requirements for the issuance of securities in connection withcertain events such as the acquisition of stock or assets of another company, the establishment of or amendments to equity-basedcompensation plans for employees, a change of control of us and certain private placements. To this extent, our practice varies from therequirements of Nasdaq Listing Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securitiesin connection with such events.Item 16H. Mine Safety Disclosure.None. 144Table of ContentsPART IIIItem 17 Financial Statements.This Annual Report does not contain financial statements and related information for our fiscal years ending before December 15, 2011.Item 18 Financial Statements.See pages F-1 through F-42 of this Annual Report.Item 19 Exhibits. Incorporated by Reference toFilings Indicated ExhibitNumber Exhibit Description Form File No. ExhibitNo. FilingDate Filed/Furnished 1.1 Articles of Association (English translation) * 2.1 Registration Rights Agreement, dated May 24, 2016, by and among theRegistrant and the shareholders party thereto 6-K 001-37773 4.1 5/27/16 4.1# Merus N.V. 2010 Employee Option Plan, as amended * 4.2# Merus N.V. 2016 Incentive Award Plan and forms of award agreementsthereunder, as amended * 4.3# Non-Executive Director Compensation Program * 4.4# Form of Board of Directors Indemnification Agreement F-1/A 333-207490 10.4 5/9/16 4.5# Employment Contract between the Registrant and Ton Logtenberg,dated January 21, 2010. F-1 333-207490 10.5 10/19/15 4.6# Employment Agreement, dated October 5, 2016, by and among MerusUS, Inc., the Registrant and John J. Crowley 6-K 001-37773 10.1 11/3/16 4.7# Employment Agreement, dated December 16, 2015, by and amongMerus US, Inc., the Registrant and Hui Liu, as amended on March 2,2016 * 4.8# Employment Agreement, dated November 1, 2016, by and among MerusUS, Inc., the Registrant and L. Andres Sirulnik * 4.9# English language translation of Employment Agreement, dated as ofJuly 19, 2008, by and between the Registrant and Mark Throsby, asamended on March 10, 2010 * 145Table of Contents Incorporated by Reference toFilings Indicated ExhibitNumber Exhibit Description Form File No. ExhibitNo. FilingDate Filed/Furnished 4.10# English language translation of Employment Agreement, dated asof August 5, 2010, by and between the Registrant and AlexanderBakker * 4.11# English language translation of Employment Agreement, dated asof April 2, 2007, by and between the Registrant and John de Kruif,as amended on March 10, 2010 * 4.12# Employment Agreement, dated as of December 24, 2016, by andbetween the Registrant and Peter Silverman, as amended February1, 2017 * 4.13 English language translation of Loan Agreement between theRegistrant and Coöperatieve Rabobank Utrechtse Heuvelrug U.A.,dated December 29, 2005. F-1 333-207490 10.8 10/19/15 4.14 English language translation of letter amendment, dated October 21, 2015, to Loan Agreement between the Registrant andCoöperatieve Rabobank Utrechtse Heuvelrug U.A. F-1/A 333-207490 10.9 1/21/16 4.14.1 English language translation of letter amendment, dated March 15,2016, to Loan Agreement between the Registrant and CoöperatieveRabobank Utrechtse Heuvelrug U.A. F-1/A 333-207490 10.9.1 5/9/16 4.14.2 English language translation of letter amendment, dated March 15,2016, to Loan Agreement between the Registrant and CoöperatieveRabobank Utrechtse Heuvelrug U.A. F-1/A 333-207490 10.9.2 5/9/16 4.15 English language translation of Lease Agreement between theRegistrant and Stichting Incubator Utrecht, dated April 22, 2016. F-1/A 333-207490 10.12 5/9/16 4.15.1 English language translation of Amendment to Lease Agreement,dated as of November 1, 2016 by and between the Registrant andStichting Incubator Utrecht * 4.16† Collaboration and License Agreement, dated December 20, 2016,by and between the Registrant and Incyte Corporation 20-F 001-3773 4.12 4/28/17 4.17† Share Subscription Agreement, dated December 20, 2016, by andbetween the Registrant and Incyte Corporation 20-F 001-3773 4.13 4/28/17 146Table of Contents Incorporated by Reference toFilings Indicated ExhibitNumber Exhibit Description Form File No. ExhibitNo. FilingDate Filed/Furnished 4.18† Contract Research and License Agreement and Addendum betweenthe Registrant and ONO Pharmaceutical Co., Ltd., dated April 8,2014. F-1 333-207490 10.9 10/19/15 4.19†† Contract Research and License Agreement by and between theRegistrant and Ono Pharmaceuticals Co., Ltd., dated March 14, 2018 * 4.20 Securities Purchase Agreement, dated February 13, 2018, by anamong the registrant and the Investors identified on Exhibit Aattached thereto 6-K 0001-3773 99.1 2/15/18 4.21 Registration Rights Agreement, dated February 13, 2018, by andamong the registrant and the Investors identified on Exhibit Aattached thereto 6-K 0001-3773 99.2 2/15/18 8.1 List of Subsidiaries F-1/A 333-207490 21.1 4/8/16 12.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer * 12.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer * 13.1 Section 1350 Certification of Chief Executive Officer ** 13.2 Section 1350 Certification of Chief Financial Officer ** 15.1 Consent of KPMG Accountants N.V. * 101.INS* XBRL Instance Document. 101.SCH* XBRL Taxonomy Extension Schema Document. 101.CAL* XBRL Taxonomy Calculation Linkbase Document. 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB* XBRL Taxonomy Label Linkbase Document. 101.PRE* XBRL Taxonomy Presentation Linkbase Document. *Filed herewith.**Furnished herewith.#Indicates management contract or compensatory plan.†Confidential treatment granted as to portions of the exhibit. Confidential materials omitted and filed separately with the Securities and ExchangeCommission.††Confidential treatment requested as to portions of the exhibit. Confidential materials omitted and filed separately with the Securities andExchange Commission. 147Table of ContentsIndex to Financial StatementsConsolidated Financial Statements as of December 31, 2017, 2016, and 2015 Report of Independent Registered Public Accounting Firm F-2 Consolidated Statement of Financial Position as of December 31, 2017 and 2016 F-3 Consolidated Statement of Profit or Loss and Comprehensive Loss for the Years Ended December 31, 2017, 2016, and 2015 F-4 Consolidated Statement of Changes in Equity for the Years Ended December 31, 2017, 2016, and 2015 F-5 Consolidated Statement of Cash Flows for the Years Ended December 31, 2017, 2016, and 2015 F-6 Notes to the Consolidated Financial Statements F-7 F-1Table of ContentsReport of Independent Registered Public Accounting FirmTo the Shareholders and Board of DirectorsMerus N.V.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated statements of financial position of Merus N.V. and subsidiary (together, the Company) as ofDecember 31, 2017 and 2016, and the related consolidated statements of profit or loss and comprehensive loss, changes in equity, and cash flows foreach of the years in the three-year period ended December 31, 2017, and the related notes (collectively, the consolidated financial statements). In ouropinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017and 2016, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2017, in conformity withInternational Financial Reporting Standards as issued by the International Accounting Standards Board.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theseconsolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting OversightBoard (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws andthe applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free of material misstatement , whether due to error or fraud. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we arerequired to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness ofthe Company’s internal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error orfraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts anddisclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates madeby management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonablebasis for our opinion./s/ KPMG Accountants N.V.We have served as the Company’s auditor since 2009.Amstelveen, the NetherlandsApril 30, 2018 F-2Table of ContentsConsolidated Statement of Financial Position as at December 31, 2017 Notes December 31,2017 December 31,2016 (euros in thousands) Non-current assets Property, plant and equipment 6 1,168 648 Intangible assets 7 312 374 Restricted cash 12 — 167 Non-current investments 9 7,060 — Other assets 129 109 8,669 1,298 Current assets Financial asset 9 — 11,847 Trade and other receivables 10 4,413 2,248 Current investments 9 34,043 — Cash and cash equivalents 149,678 56,917 188,134 71,012 Total assets 196,803 72,310 Shareholders’ equity 14 Issued and paid-in capital 1,749 1,448 Share premium account 213,618 139,878 Accumulated loss (167,480) (107,295) Total equity 47,887 34,031 Non-current liabilities Borrowings 12 — 319 Deferred revenue 13 130,195 30,206 Current liabilities Borrowings 12 — 167 Trade payables 2,855 2,298 Taxes and social security liabilities 243 29 Deferred revenue 13 6,996 1,610 Other liabilities and accruals 11 8,627 3,650 18,721 7,754 Total liabilities 148,916 38,279 Total equity and liabilities 196,803 72,310 The accompanying notes are an integral part of these consolidated financial statements. F-3Table of ContentsConsolidated Statement of Profit or Loss and Comprehensive Loss For the year endedDecember 31, Notes 2017 2016 2015 (Euros in thousands, except pershare data) Revenue 15 13,600 2,719 1,977 13,600 2,719 1,977 Research and development costs 16 (34,125) (18,424) (16,181) Management and administration costs 16 (13,697) (4,258) (768) Other expenses 16 (9,395) (7,709) (8,067) Total operating expenses (57,217) (30,391) (25,016) Operating result (43,617) (27,672) (23,039) Finance income 18 1,112 88 50 Finance expenses 18 (30,335) (19,644) (195) Total finance income (expenses) (29,223) (19,556) (145) Result before tax (72,840) (47,228) (23,184) Income tax expense 8 (249) — — Result after taxation (73,089) (47,228) (23,184) Exchange differences from translation of foreign operations 89 8 — Other comprehensive income 89 8 — Total comprehensive loss for the year (73,000) (47,220) (23,184) Basic (and diluted) loss per share(1)(2) 19 (3.80) (3.57) (3.95) The results and comprehensive losses for the years presented are fully attributable to the owners of the Company. (1)The basic (and diluted) loss per share is adjusted for the 2015 period based on the reverse share split with reference to note 14 regarding thecapital reorganization.(2)For the periods included in these financial statements, the share options are not included in the diluted loss per share calculation as the Companywas loss-making in all these periods. Due to the anti-dilutive nature of the outstanding options, basic and diluted loss per share is equal.The accompanying notes are an integral part of these consolidated financial statements. F-4Table of ContentsConsolidated Statement of Changes in Equity Note Commonsharecapital Class APref.sharecapital Class BPref.sharecapital Class CPref.sharecapital Commonsharepremium Class APref.sharepremium Class BPref.sharepremium Class CPref.sharepremium Accumulatedloss Totalequity (euros in thousands) Balance at January 1, 2015 30 21 231 — 1,564 1,334 34,026 — (40,765) (3,559) Result — — — — — — — — (23,184) (23,184) Other comprehensive income — — — — — — — — — — Total comprehensive loss — — — — — — — — (23,184) (23,184) Transactions with owners of the Company: Issuance of shares (net) 14 — — 120 373 — — 4,880 49,105 — 54,478 Equity settled shared-based payments 17 — — — — — — — — 567 567 Total contributions by and distributions toowners of the Company — — 120 373 — — 4,880 49,105 567 55,045 Balance at December 31, 2015 30 21 351 373 1,564 1,334 38,906 49,105 (63,382) (28,302) Balance at January 1, 2016 30 21 351 373 1,564 1,334 38,906 49,105 (63,382) (28,302) Result — — — — — — — — (47,228) (47,228) Other comprehensive income — — — — — — — — 8 8Total comprehensive loss — — — — — — — — (47,220) (47,220) Transactions with owners of the Company: Issuance of shares (net) 14 673 — — — 50,478 — — — — 51,151 IPO expenses — — — — (1,509) — — — — (1,509) Conversion of preference shares 745 (21) (351) (373) 89,345 (1,334) (38,906) (49,105) — — Equity settled shared-based payments 17 — — — — — — — — 3,307 3,307 Total contributions by and distributions toowners of the Company 1,418 (21) (351) (373) 138,314 (1,334) (38,906) (49,105) 3,307 52,949 Balance at December 31, 2016 1,448 — — — 139,878 — — — (107,295) 34,031 Balance at January 1, 2017 1,448 — — — 139,878 — — — (107,295) 34,031 Result — — — — — — — — (73,089) (73,089) Other comprehensive loss — — — — — — — — 89 89 Total comprehensive loss — — — — — — — — (73,000) (73,000) Transactions with owners of the Company: Issuance of shares (net) 14 301 — — — 73,740 — — — — 74,041 Equity settled shared-based payments 17 — — — — — — — — 12,815 12,815 Total contributions by and distributions toowners of the Company 301 — — — 73,740 — — — 12,815 86,856 Balance at December 31, 2017 1,749 — — — 213,618 — — — (167,480) 47,887 The accompanying notes are an integral part of these consolidated financial statements. F-5Table of ContentsConsolidated Statement of Cash flows for the year ended December 31 Note 2017 2016 2015 (euros in thousands) Cash flows from operating activities Result after taxation (73,089) (47,228) (23,184) Adjustments for: Change in fair value derivative 9, 18 10,667 19,213 — Unrealized foreign exchange results 18 15,767 365 — Depreciation and amortization 6, 7 318 234 193 Share-based payment expenses 17 12,815 3,307 567 Net finance (income) expenses (1,040) (33) 145 (34,562) (24,142) (22,279) Changes in working capital: Trade and other receivables 10 (1,837) (1,256) (816) Other assets (20) (109) — Trade payables 505 (121) 10 Other liabilities and accruals 11 4,977 286 461 Deferred revenue 13 (6,618) (223) (223) Tax and social security liabilities 214 (113) 11 Cash used in operating activities (37,341) (25,678) (22,836) Interest paid 18 (29) (55) (195) Taxes paid 8 (43) — — Net cash used in operating activities (37,413) (25,733) (23,031) Cash flows from investing activities Purchases of investments 9 (41,830) — — Acquisition of property, plant and equipment 6 (724) (496) (103) Interest received 10, 18 929 88 50 Net cash used in investing activities (41,625) (408) (53) Cash flows from financing activities Proceeds from issuing shares, net of issuance costs 14 74,738 50,547 46,478 Financing costs 18 (190) — — Prepaid share issuance costs 10 — (230) — Proceeds from collaboration agreement 14 111,993 — — Proceeds from borrowings — — 8,000 Repayment of borrowings 12 (486) (167) (166) Changes in restricted cash 167 51 55 Net cash from financing activities 186,222 50,201 54,367 Net increase in cash and cash equivalents 107,184 24,060 31,283 Effects of exchange rate changes on cash and cash equivalents (14,423) 6 — Cash and cash equivalents as at January 1 56,917 32,851 1,568 Cash and cash equivalents as at December 31 149,678 56,917 32,851 Supplemental disclosure of non-cash activities: Changes in accrued capital expenditures 52 — — The accompanying notes are an integral part of these consolidated financial statements. F-6Table of ContentsNotes to the consolidated financial statements 1.General InformationMerus N.V. is a clinical-stage immuno-oncology company developing innovative bispecific antibody therapeutics, headquartered in Utrecht, theNetherlands. Merus US, Inc. is a wholly-owned subsidiary of Merus N.V. located in Boston, Massachusetts, United States. These audited consolidatedfinancial statements as at and for the twelve-month period ended December 31, 2017 comprise Merus N.V. and Merus US, Inc. (collectively, the“Company”).Merus N.V. was incorporated in the Netherlands, with its statutory seat in Utrecht. In connection with becoming a listed company on the Nasdaq GlobalMarket (“Nasdaq”), on May 19, 2016, Merus N.V.’s legal structure under Dutch law was changed from a private company with limited liability (inDutch: besloten vennootschap met beperkte aansprakelijkheid) to a public company with limited liability (in Dutch: naamloze vennootschap) andMerus N.V.’s name changed from “Merus B.V.” to “Merus N.V.” The address of the Company’s registered office is Yalelaan 62, 3584 CM Utrecht, TheNetherlands.Nature of BusinessThe Company expects to incur significant expenses and operating losses for the foreseeable future as its bispecific antibody candidates advance fromdiscovery through preclinical development and into clinical trials, and it seeks regulatory approval and pursues commercialization of any approvedbispecific antibody candidate.As a result, the Company may need additional financing to support its continuing operations. Until the Company can generate significant revenuefrom product sales, if ever, the Company expects to finance its operations through public equity or debt financings or other sources, which may includecollaborations and business development opportunities with third parties. Adequate additional financing may not be available to the Company onacceptable terms, or at all. The Company’s inability to raise capital as and when needed would have a negative impact on the financial condition andability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability and may never do so.Based on the Company’s current operating plan, it expects its existing cash balances, including proceeds received from the private placement offeringthat closed in February 2018, to last through the end of 2020. For this assessment, we have taken into consideration our existing cash and cashequivalents of €149.7 million and investments of €41.1 million at December 31, 2017, together with the $55.8 million of proceeds received from ourprivate placement offering that closed in February 2018. (see Note 24). 2.Basis of PreparationThese consolidated financial statements have been authorized for issuance on April 30, 2018. Certain amounts were reclassified in the prior yearsconsolidated financial statements for consistency with the current year presentation. These changes in classification do not materially affect thepreviously reported Consolidated Statement of Financial Position, Consolidated Statement of Profit or Loss and Comprehensive Loss or ConsolidatedStatements of Cash Flows for any period.Statement of ComplianceThese consolidated financial statements (“the financial statements”) have been prepared in accordance with International Financial ReportingStandards (“IFRS”) as issued by the International Accounting Standards Board.The financial statements have been prepared under the historical cost convention unless otherwise stated in the below accounting policies. F-7Table of ContentsInitial Public OfferingOn May 6, 2016, the general meeting of our shareholders resolved to approve and effect a capital reorganization, based on a reverse share split. Theeffect of the reverse share split was a 1-for-1.8 reverse share split of the outstanding common and preferred shares held by our shareholders. This reverseshare split became effective on May 6, 2016. All share, per-share and related information presented in the financial statements and correspondingdisclosure notes for the year ended December 31, 2015 have been retrospectively adjusted, where applicable, to reflect the impact of the reverse sharesplit.On May 24, 2016, the Company closed the initial public offering of 5,500,000 of its common shares and, on May 26, 2016, of an additional 639,926 ofits common shares, at a price to the public of US $10 per share (the “IPO”). Net proceeds to the Company after deducting underwriting discounts andcommissions and offering expenses were $53.3 million. On May 19, 2016, the Company’s common shares were listed on the Nasdaq and all of theCompany’s preferred shares converted into common shares.Follow-on Public OfferingsOn June 1, 2017, the Company filed with the U.S. Securities and Exchange Commission a registration statement on Form F-3 (Registration Number333-218432) (the “F-3 Registration Statement”), under which it registered up to $250 million of its securities and 3,200,000 shares sold to IncyteCorporation (“Incyte”). The F-3 Registration Statement became effective on June 16, 2017. On June 1, 2017, the Company also entered into a salesagreement with Cowen and Company, LLC (“Cowen”), under which the Company may issue and sell from time to time up to $50.0 million of itscommon shares registered under the F-3 Registration Statement through Cowen as its sales agent. Sales of common shares, if any, will be made atmarket prices by any method that is deemed to be an “at the market” offering. The aggregate compensation payable to Cowen as sales agent equals3.0% of the gross sales price of the shares sold through it pursuant to the sales agreement. No sales have been made by the Company under the salesagreement.On February 13, 2018, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers named therein (the“Investors”). Pursuant to the Purchase Agreement, the Company agreed to sell an aggregate of 3,099,997 of its common shares, nominal value €0.09per share, to the Investors for aggregate gross proceeds of approximately $55.8 million, at a purchase price equal to $18.00 per share (the “PrivatePlacement”). The Purchase Agreement contains customary representations and warranties from the Company and the Investors and customary closingconditions. The closing of the Private Placement occurred on February 15, 2018.Functional and Presentation CurrencyThe financial statements are presented in euros, which is the Company’s functional and presentation currency. All amounts are rounded to the nearestthousands of euros, except as otherwise indicated.Use of Estimates, Judgements and AssumptionsIn the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions that affect thereported amounts of assets, liabilities, income and expenses that are not readily apparent from other sources. The estimates and associated assumptionsare based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively.The following are the critical judgments and assumptions that management has made in the process of applying the Company’s accounting policiesand that have the most significant effect on the amounts recognized in the financial statements. F-8Table of ContentsCapitalization of Development CostsThe criteria for capitalization of development costs have been considered by management and determined not to have been met in the twelve monthperiod ended December 31, 2017. Therefore, all development expenditures relating to internally generated intangible assets in the twelve monthperiod ended December 31, 2017 were expensed as incurred.Income TaxesThe criteria for the recognition of unused tax losses are disclosed in Note 3 “Significant accounting policies”. As of December 31, 2017, deferred taxassets have not been recognized in respect of tax losses, because the Company has no history of generating taxable profits and therefore, it is notprobable that sufficient taxable profit will be available against which the tax losses can be utilized. The amount of the unrecognized tax losses isdisclosed in Note 8.Deferred RevenueThe Company maintains certain research, collaboration and license agreements with ONO Pharmaceuticals Co., Ltd (“ONO”) and Incyte under whichthe Company has received upfront non-refundable payments for certain rights granted under the respective agreements. The applicable period overwhich to recognize these upfront payments requires significant judgment. Revenue related to these upfront payments is deferred and amortized on astraight-line basis over the contract period as to ONO, or the period of continuing involvement as to Incyte, as these are the periods over which theCompany provides its integrated service activities.Equity Settled Share-Based PaymentsShare options granted to employees, consultants and directors are measured at the grant date fair value of the equity instruments granted. The grantdate fair value is determined through the use of an option-pricing model considering the following variables: (a)the exercise price of the option; (b)the expected life of the option; (c)the current value of the underlying shares; (d)the expected volatility of the share price; (e)the dividends expected on the shares; and (f)the risk-free interest rate for the life of the option.Prior to the Company’s IPO, the estimated the fair value of each share option granted was determined utilizing the Black-Scholes option-pricing model.For the Company’s share option plans subsequent to its IPO, management’s judgment was that the Hull & White option pricing model is the mostappropriate method for determining the fair value of the Company’s share options considering the terms and conditions attached to the grants madeand reflective of exercise behavior. Since the Company was not listed on a national securities exchange until May 19, 2016, there was no publishedshare price information available until May 19, 2016. Consequently, the Company estimated the fair value of its shares and the expected volatility ofthat share value for the period up to May 19, 2016.As the Company’s shares have not been publicly traded for a sufficient amount of time, the expected volatility was set by considering the historic shareprice volatility of a set of peer companies.For pre-IPO valuations, the continuous yield on euro government bonds with a term to maturity comparable to the expected life of the options, aspublished by the European Central Bank, was applied. For post-IPO valuations, the continuous yield on U.S. Treasury Bills with a term to maturitycomparable to the expected life of the options, as published by the U.S. Department of Treasury, was applied. F-9Table of ContentsThe result of the share option valuations and the related compensation expense that is recognized for the respective vesting periods during whichservices are received, is dependent on the model and input parameters used. Even though management considers the fair values reasonable anddefensible based on the methodologies applied and the information available, others might derive a different fair value for the Company’s shareoptions. These assumptions and estimates are further discussed in Note 14 to the financial statements. 3.Significant Accounting PoliciesThe accounting policies set out below have been consistently applied to all periods presented in these financial statements.Income and expenses are accounted for on an accrual basis. Profit is only included when realized at the statement of financial position date. Lossesoriginating before the end of the financial year are taken into account if they have become known before preparation of the financial statements.Basis of consolidation(i) SubsidiariesSubsidiaries are entities controlled by the Company, consisting of Merus N.V. and its wholly owned subsidiary Merus US, Inc. The Company controlsan entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns throughits power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which controlcommences until the date on which control ceases.(ii) Loss of controlWhen the Company loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any non-controlling interests andother components of equity. Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fairvalue when control is lost.(iii) Transactions eliminated on consolidationIntra-company balances and transactions, and any unrealized income and expenses arising from intra-company transactions, are eliminated. Unrealizedgains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Company’s interest in theinvestee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.Foreign Currency TransactionsForeign currency transactions are translated using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting fromthe settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the exchange rate atthe reporting date are generally recognized in the statement of profit or loss and comprehensive loss as a component of finance costs.The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into thepresentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; • income and expenses for each statement of profit or loss and comprehensive income or loss are translated at average exchange rates (unlessthis is not a reasonable approximation of the cumulative F-10Table of Contents effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the exchange rates at the dates ofthe transactions); and • all resulting exchange differences are recognized in other comprehensive income.Property, Plant and EquipmentProperty, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses (if any). Cost includesexpenditure that is directly attributable to the acquisition of the items. Depreciation of property, plant and equipment is recognized in the consolidatedstatement of profit and loss and comprehensive loss on a straight-line basis over estimated useful lives of generally five years, taking residual valueinto account. If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (majorcomponents) of property, plant and equipment.Subsequent expenditure is capitalized only when the expenditure will increase the future economic benefit of the asset. All other expenditures areexpensed in the profit or loss and comprehensive loss.Depreciation rates are based on the following estimated economic useful lives of the tangible fixed assets concerned: • Plant and equipment: 5 years • Other fixed assets: 5 yearsIntangible AssetsIntangible assets are identifiable non-monetary assets without physical substance. An asset is a resource that is controlled by the enterprise as a result ofpast events (for example, purchase or self-creation) and from which future economic benefits (inflows of cash or other assets) are expected.The useful lives of intangible assets are assessed to be finite and amortized over the useful economic life and assessed for impairment whenever there isan indication that the intangible asset may be impaired. Amortization begins when the asset is available for use.PatentsPatents acquired separately by the Company are reported at cost less accumulated amortization and accumulated impairment losses. Amortization isrecognized in the consolidated statement of profit and loss and comprehensive loss on a straight-line basis over the shorter of their estimated economicor legal lives. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changesin estimates being accounted for on a prospective basis.Research and DevelopmentThe Company incurs research and development expenses related to its clinical trials and preclinical drug development programs. Developmentexpenses are defined as expenses incurred to achieve technical and commercial feasibility. Expenditure on research activities is recognized as anexpense in the period in which it is incurred.Development is capitalized if, and only if, all of the following have been demonstrated: • the technical feasibility of completing the intangible asset so that it will be available for use or sale; • the intention to complete the intangible asset and use or sell it; F-11Table of Contents • the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;and • the ability to measure reliably the expenditure.Financial InstrumentsThe Company classifies non-derivative financial assets as either financial assets at fair value through profit or loss, held to maturity financial assets orloans and receivables. The Company classifies non-derivative financial liabilities into either financial liabilities at fair value through profit or loss orthe other financial liabilities category.Non-Derivative Financial Assets and Financial LiabilitiesThe Company initially recognizes receivables and investments at fair value on the date when they are originated. Subsequent to initial recognition,they are measured at amortized cost using the effective interest rate method. All other financial assets and financial liabilities are initially recognizedon the trade date.The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive thecontractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred, or it neithertransfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in suchderecognized financial assets that is created or retained by the Company is recognized as a separate asset or liability.The Company derecognizes a financial liability when its contractual obligations are settled or cancelled, or expire. Financial assets and financialliabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offsetthe amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.InvestmentsInvestments are classified as held-to-maturity and are initially measured at fair value. Subsequent to initial recognition, they are measured at amortizedcost using the effective interest rate method. Investments are classified as held-to-maturity and carried at amortized cost as management has thepositive intent and ability to hold them until maturity. Interest income from these securities is included in finance income.ReceivablesThese assets are initially recognized at fair value plus any directly attributable transaction costs.Derivative Financial Assets and LiabilitiesDerivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequentlyremeasured at fair value with net changes in fair value presented as finance expenses (negative net changes in fair value) or finance income (positivenet changes in fair value) in the consolidated statement of profit or loss and comprehensive loss. Derivatives are carried as financial assets when the fairvalue is positive and as financial liabilities when the fair value is negative. F-12Table of ContentsDerivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risksare not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss.These embedded derivatives are measured at fair value with changes in fair value recognized in profit or loss. Reassessment only occurs if there iseither a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financialasset out of the fair value through profit or loss category.Non-Derivative Financial LiabilitiesNon-derivative financial liabilities are initially recognized at fair value less any directly attributable transaction costs. Subsequent to initialrecognition, these liabilities are measured at amortized cost using the effective interest method.Cash and Cash EquivalentsFor the purpose of presentation in the statement of cash flows as well as the statement of financial position, cash and cash equivalents includes depositsheld with financial institutions with original maturities of less than three months.Treatment of equity issuance costsCosts related to the issuance of new shares have been accounted for as follows: • Incremental costs that are directly attributable to issuing new shares are included as prepaid expenses and are deducted from equity on thedate the Company closes its new share transactions (net of any income tax benefit). Such as, for example, the date of the closing of its IPOor the share subscription agreement with Incyte; • Incremental costs directly associated with a probable, successful future offering of equity instruments are also deferred and deducted fromequity when the new shares are issued. During 2017, the Company expensed €0.2 million of prepaid share issuance costs related to apotential future issuance of shares under the Company’s F-3 Registration Statement when the future issuance was no longer considerprobable; • Costs that relate to listing on Nasdaq, or other new share transaction costs that are otherwise not incremental and directly attributable toissuing new shares, are recorded as an expense in the consolidated statement of profit or loss and comprehensive loss; and • Costs that relate to both share issuance and listing are allocated between those functions on a rational and consistent basis.ProvisionsA provision is recognized if the following applies: • the company has a legal or constructive obligation, arising from a past event; • the amount can be estimated reliably; and • it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.If all or part of the payments that are necessary to settle a provision are virtually certain to be fully or partially compensated by a third party uponsettlement of the provision, then the compensation amount is presented separately as an asset. F-13Table of ContentsProvisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value ofmoney and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.ImpairmentFinancial Assets Measured at Amortized CostThe Company considers evidence of impairment for these assets at both an individual asset and a collective level. All individually significant assetsare individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred butnot yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carriedout by grouping together assets with similar risk characteristics.In assessing collective impairment, the Company uses historical information on the timing of recoveries and the amount of loss incurred, and makes anadjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends.An impairment loss is calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flowsdiscounted at the asset’s original effective interest rate. Losses are recognized in the consolidated statement of profit or loss and comprehensive incomeand reflected in an allowance account. When the Company considers that there are no realistic prospects of recovery of the asset, the relevant amountsare written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after theimpairment was recognized, then the previously recognized impairment loss is reversed through profit or loss.Non-Financial AssetsAt each reporting date, the Company reviews the carrying amounts of its non-financial assets to determine whether there is any indication ofimpairment. If any such indication exists, then the asset’s recoverable amount is estimated.For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largelyindependent of the cash inflows of other assets or cash generating units (“CGU”).The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimatedfuture cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money andthe risks specific to the asset or CGU.An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, andthen to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have beendetermined, net of depreciation or amortization, if no impairment loss had been recognized.Revenue RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. F-14Table of ContentsUp-front License PaymentsThe Company maintains research and license agreements with ONO and Incyte. In connection with these arrangements, the Company received upfrontfees, which relate to the integrated package of deliverables under the contract (one single performance obligation) and are initially recorded in deferredrevenue. The applicable period over which to recognize the upfront payment is a significant judgment. Up-front payments or similar non-refundablepayments are initially reported as deferred revenue on the consolidated statements of financial position and are recognized as revenue on a straight-linebasis over the period of the related performance obligation or the contractual term of the arrangement. The estimated period of the performanceobligation is re-assessed at each consolidated statement of financial position date.Collaboration IncomeCollaboration income, which is typically related to reimbursements from collaborators for the Company’s performance of research and developmentservices under the respective agreements, is recognized on the basis of labor hours valued at a contractually agreed rate. Collaboration income includesreimbursements for related out-of-pocket expenses. Cost reimbursements to which the Company is entitled under agreements are recognized asrevenues in the same quarter of the recorded cost they are intended to compensate. The Company acts as the principal and therefore records thesereimbursements as collaboration income.Government GrantsThe Company receives certain government and regional grants, which support its research efforts in defined projects, and include contributionstowards the cost of research and development. When there is reasonable assurance that the Company will comply with the conditions attached to areceived grant, and when there is reasonable assurance that the grant will be received, government grants are recognized as revenue on a gross basis inthe consolidated statement of profit or loss and comprehensive loss on a systematic basis over the periods in which the entity recognizes expenses forthe related costs for which the grants are intended to compensate. In the case of grants related to assets, the received grant will be deducted from thecarrying amount of the asset.Research and development expensesResearch and development expenses represent costs which primarily include (i.) payroll and related costs (including share-based payment expenses)associated with research and development personnel, (ii.) costs related to clinical trials and preclinical testing of the Company’s technologies underdevelopment, (iii.) costs to develop product candidates, including raw materials and supplies, product testing, depreciation, and facility relatedexpenses, (iv.) expenses for research services provided by universities and contract laboratories, and (v.) other research and development expenses.Research and development expenses are recognized in the consolidated statement of profit or loss and comprehensive loss as incurred when theseexpenditures relate to the Company’s research and development services and have no alternative future uses.The Company has entered into various research and development contracts with research institutions and other companies. These agreements aregenerally cancelable. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, theCompany analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgmentsand estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’sestimates. The Company’s historical accrual estimates have not been materially different from the actual costs.WBSOThe WBSO (afdrachtvermindering speur- en ontwikkelingswerk) is a Dutch fiscal facility that provides subsidies to companies, knowledge centers andself-employed people who perform research and development activities (as F-15Table of Contentsdefined in the WBSO Act). Under this Act, a contribution is paid towards the labor costs of employees directly involved in research and developmentand other related expenditures. The contribution is in the form of a reduction of payroll taxes. Subsidies relating to labor costs are deferred andrecognized in the consolidated statement of profit or loss and comprehensive loss as negative labor costs over the period necessary to match them withthe labor costs that they are intended to compensate (see Note 17).Employee BenefitsShort-term Employee BenefitsShort-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if theCompany has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation canbe estimated reliably.Share-Based Payment TransactionsThe grant-date fair value of equity-settled share-based payment awards granted to employees including grants of employee options, restricted shareunits, and modifications to existing instruments, is recognized as an expense, net of an estimated forfeiture rate, with a corresponding increase in equity(accumulated loss), over the vesting period of the awards. Forfeitures of employee options are recognized as they occur. Service conditions andnon-market related conditions are not taken into account in determining the fair value. The amount recognized as an expense is adjusted to reflect thenumber of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimatelyrecognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For any share-based payment awards with market conditions or non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflectsuch conditions and there is no true-up for differences between expected and actual outcomes.Post-Employment Benefit PlansThe Company contributes to a post-employment benefit plan that entitles directors, executive officers and other staff members to retire at the age of 67and receive annual payments based upon the average salary earned during the service period. The Company has insured the liabilities from the post-employment benefit plan with an insurance company and has no other obligation than to pay the annual insurance premiums to the insurancecompany. The annual pension payments are conditional; the Company will have no further obligation (legal or constructive) to pay further amounts ifthe insurance fund has insufficient assets to pay all employee benefits relating to current and prior service. Based on its characteristics the Company’spost-employment benefit plan is classified as a defined contribution plan.Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognized as anasset.LeasesDetermining whether an Arrangement Contains a LeaseAt inception of an arrangement, the Company determines whether such an arrangement is or contains a lease.At inception or on reassessment of the arrangement, the Company separates payments and other consideration required by such an arrangement intothose for the lease and those for other elements on the basis of their relative fair values. If the Company concludes for a finance lease that it isimpracticable to separate the payments reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset.Subsequently the liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the Company’sincremental borrowing rate. F-16Table of ContentsLeased AssetsAssets held by the Company under leases that transfer to the Company substantially all of the risks and rewards of ownership are classified as financeleases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments.Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset.Assets held under other leases are classified as operating leases and are not recognized in the Company’s statement of financial position.Lease PaymentsPayments made under operating leases are recognized in the consolidated statement of profit or loss and comprehensive loss on a straight-line basisover the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. Thefinance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance ofthe liability.Finance Income and Finance ExpensesThe Company’s finance income and finance expenses include: • interest and related income; • interest expense and changes in fair value of the forward contract (derivative); • financing costs; and • the foreign currency gain or loss on financial assets and financial liabilities.Interest income or expense is recognized using the effective interest method.Income TaxIncome tax expense comprises current and deferred tax. It is recognized in the statement of profit or loss and comprehensive loss except to the extentthat it relates to a business combination, or items recognized directly in equity or in other comprehensive income. Current tax comprises the expectedtax payable or receivable on the taxable income or loss for the year and any adjustment to tax payable or receivable in respect of previous years. It ismeasured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends. Current taxassets and liabilities are offset only if certain criteria are met.Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposesand the amounts used for taxation purposes. Deferred tax is not recognized for: • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affectsneither accounting nor taxable profit or loss; • temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the group is able to controlthe timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and • taxable temporary differences arising on the initial recognition of goodwill. F-17Table of ContentsDeferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable thatfuture taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to theextent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxableprofits improves.Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxableprofits will be available against which they can be utilized.Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted orsubstantively enacted at the reporting date.The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date,to recover or settle the carrying amount of its assets and liabilities.Deferred tax assets and liabilities are offset only if certain criteria are met. 4.New Standards and Interpretations Not Yet AdoptedA number of new standards, amendments to standards and interpretations are effective for annual periods beginning after January 1, 2018, and have notbeen applied in preparing these financial statements. Those which may be relevant to the Company are set out below. The Company does not plan toadopt these standards early.IFRS 9 Financial InstrumentsIFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includescontains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cashflow characteristics. IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, measured at fair valuethrough other comprehensive income and measured at fair value through profit or loss. The standard eliminates the existing IAS 39 categories of heldto maturity, loans and receivables and available for sale. In addition, the revised guidance on the classification and measurement of financialinstruments includes a new expected credit loss model for calculating impairment on financial assets and the new general hedge accountingrequirements. Finally, IFRS 9 carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.IFRS 9 is effective for annual reporting periods beginning on or after January 1, 2018, with early adoption permitted. Based on its assessment, theCompany believes that adoption of IFRS 9’s new classification requirements, new credit loss model or the new general hedge accounting requirementsare not expected to have a material impact on the Company’s financial statements.IFRS 15 Revenue from Contracts with CustomersIn May 2014, the International Accounting Standards Board (IASB) issued IFRS 15—Revenue from Contracts with Customers, which will replaceexisting revenue recognition guidance. The new standard requires an entity to recognize the amount of revenue to which it expects to be entitled forthe transfer of promised goods or services to customers. To achieve that core principle, an entity must identify the contract(s) with a customer, identifythe performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in thecontract, and recognize revenue when (or as) the entity satisfies the performance obligation. The new standard will be effective for annual and interimreporting periods beginning on or after January 1, 2018. F-18Table of ContentsIn anticipation of IFRS 15, the Company performed an impact assessment which consisted of a review of all license and collaboration agreements andgovernment grants. Further, the Company held discussions with key stakeholders and identified and cataloged potential impacts of the new standardon the Company’s financial statements, accounting policies, financial controls and operations.Based on this assessment, the adoption of IFRS 15 will primarily impact the amortization of the Company’s up-front license payments. As more fullydescribed in Notes 13 and 15, the Company currently recognizes revenue from up-front license payments on a straight-line basis over the contractualterm of the arrangements or the period of continuing involvement which is 21 years for the Incyte Agreement and 4.5 years for the ONO Agreement. Inapplying IFRS 15, the Company has evaluated the distinct performance obligations in each agreement. Specifically, for Incyte, the total period forwhich the Company expects to provide access to its proprietary technology is currently estimated to be nine years, which is the research term initiallyagreed to in the collaboration agreement. Applying the recognition criteria under the current standard, up-front license payments associated with theseagreements would have been deferred until the completion of the respective contractual period. As a result of the application of this guidance, theCompany would have amortized additional revenue of approximately €8.3 million for the year ended December 31, 2017 and recorded acorresponding decrease in deferred revenue for the same amount. The estimated impact for 2016 is not material. The new standard will not impact theCompany’s revenue recognition practices for collaboration income and government grants.The Company will adopt the standard using the retrospective method, with the effect of initially applying this standard recognized at the beginning ofthe earliest period presented and will elect to apply the practical expedient to not apply this guidance to contracts which are completed before thebeginning of the earliest period presented or January 1, 2016, and the practical expedients for contract modifications (assessing the contracts incombination with any modifications before January 1, 2016). As a result, the impact under this methodology to the Company’s previously reportedrevenues will be to restate prior reported revenues to conform to the new financial reporting commencing on January 1, 2018. The Company will reportnew disclosures required by this guidance within the Company’s Form 6-K for the interim period ending March 31, 2018. As the adoption of this newstandard is anticipated to have a material impact on the Company’s revenues and net income on an ongoing basis, the Company has implemented acontrols process to identify and evaluate new revenue-generating contracts with third-party customers. The Company will continue to monitoradditional changes, modifications, clarifications or interpretations being undertaken by accounting regulatory bodies which may impact currentconclusions. During 2018, the Company expects that the application of the standard to decrease deferred revenue by approximately €8.9 million asreported in the consolidated balance sheet and increase revenues by the same amount within the consolidated statement of operations. However, it isnot expected to impact cash used in operating, financing or investing activities in the Company’s consolidated cash flows statement upon adoption.IFRS 16 LeasesThe IASB has issued a new standard on leases that will require lessees to recognize most leases on their balance sheets as lease liabilities with acorresponding right-of-use asset. The IASB has set an effective date to apply the new standard for periods beginning on or after January 1, 2019. TheCompany has identified known lease agreements and has started working on determining the impact on the financial statements. Additionally, theCompany is assessing all effective agreements to determine whether there are embedded leases included under the definition as included under IFRS16. Early adoption is permitted; however, the Company expects to adopt this standard in the first quarter of 2019. The Company is evaluating theimpact that this guidance will have on the Company’s financial statements, including related disclosures, and expects the new standard to impact itsinternal controls, systems, and processes. 5.Segment ReportingThe Company operates in one reportable segment, which comprises the discovery and development of innovative bispecific therapeutics. F-19Table of Contents6.Property, Plant and EquipmentMovements in property, plant and equipment were as follows: Plant andequipment Other fixedassets Total (euros in thousands) Balance as at January 1, 2016 Costs 325 1,220 1,545 Accumulated depreciation (171) (1,049) (1,220) Book value 154 171 325 Changes in book value Additions 330 166 496 Depreciation (56) (117) (173) Disposals (Cost) (6) — (6) Disposals (Accumulated depreciation) 6 — 6 Balance 274 49 323 Balance as at December 31, 2016 Costs 649 1,386 2,035 Accumulated depreciation (221) (1,166) (1,387) Book value 428 220 648 Changes in book value Additions 663 113 776 Depreciation (186) (70) (256) Disposals (Cost) (51) (1,086) (1,137) Disposals (Accumulated depreciation) 51 1,086 1,137 Balance 477 43 520 Balance as at December 31, 2017 Costs 1,261 413 1,674 Accumulated depreciation (356) (150) (506) Book value 905 263 1,168 F-20Table of Contents7.Intangible AssetsThe intangible assets relate to acquired intellectual property rights.The movements are as follows: 2017 2016 (euros in thousands) Balance as at January 1 Historical cost 860 860 Accumulated amortization (486) (425) Book value 374 435 Capital expenditures — — Amortization charge for the year (62) (61) Book value as at December 31 312 374 Balance as at December 31 Historical cost 860 860 Accumulated amortization (548) (486) Book value 312 374 On January 23, 2009, the Company purchased the family of patents and future filings based on those patents, entitled “Recombinant production ofmixtures of antibodies” from Crucell Holland B.V. The non-provisional filing date for this application was on July 15, 2003 and accordinglyapplications stemming from that patent family have an approximate economic life of 20 years from that date, not including patent term adjustment,extensions or any related doctrine. As a result, the Company is amortizing the cost over the approximate economic life of 14 years after acquisition ofthe patent family. 8.TaxationDeferred tax assets have not been recognized in respect of tax losses, because the Company has no history of generating taxable profits and at thebalance sheet date, there is no convincing evidence that sufficient taxable profit will be available against which the tax losses can be utilized. As ofDecember 31, 2017, the tax losses carried forward amounted to €149.2 million as compared to €101.1 million at December 31, 2016.In order to promote innovative technology development activities and investments in new technologies, a corporate income tax incentive has beenintroduced in Dutch tax law called the Innovations Box. Based on the Innovations Box ruling, the Company would owe on the first 75% of qualifyingprofits under the Dutch jurisdiction effectively 5% for Dutch income taxes. The remaining profit would be taxed at the Dutch statutory tax rate of 25%.Taxable profits will only qualify for the Innovations Box once the tax losses carried forward are completely utilized. The agreement with the taxauthorities was originally signed for the tax years beginning in 2011 through 2015 and was subsequently extended through the year 2019. Since theCompany is loss-making, no Dutch income tax is recognized in the consolidated statement of profit or loss and comprehensive loss.Merus US, Inc., which is incorporated in the United States in the State of Delaware, is subject to statutory U.S. Federal corporate income taxes and stateincome taxes for Massachusetts at a blended rate of 40% for the years ended December 31, 2017 and 2016. Current year income tax expense wasattributable entirely to Merus US, Inc. which was established on February 17, 2016 and provided general management services and strategic advisoryservices to the Company. Corporate income tax expenses were €0.2 million and zero for the years ended December 31, 2017 and 2016, respectively. F-21Table of Contents9.Financial assetsDerivativeOn December 20, 2016, the Company entered into a share subscription agreement with Incyte. As the contract is denominated in U.S. dollars, theCompany determined that the forward contract to sell its own shares at a future date to which the Company became committed on December 20, 2016represented a derivative financial instrument. The remaining fair value of the derivative recognized in the statement of financial position atDecember 31, 2016 was €11.8 million. The Company had determined the fair value of this derivative utilizing the Bloomberg Pricing System and theCompany’s closing stock prices at each valuation date which are significant Level 2 observable inputs.On January 23, 2017, the Company settled the forward contract by delivering shares to Incyte upon the closing of the share subscription agreement,thereby extinguishing the derivative financial asset. Upon the extinguishment of the financial asset, the Company recorded finance charges of€10.7 million relating to the change in fair value of the asset and a discount on the share subscription of €1.1 million representing the differencebetween the original subscription price and the actual price of the common stock on the date of settlement on January 23, 2017.InvestmentsHeld to maturity investments are investments in commercial paper, securities issued by several public corporations and the United States Treasury witha maturity date of greater than three months at the date of settlement. Investments with a maturity of 12 months or more from the original investmentdate are classified as non-current.Investments as of December 31, 2017 consist of the following: (euros inthousands) Commercial paper 15,527 U.S. Treasury securities 9,177 Corporate fixed income bonds 7,886 Agency bond 1,453 Investments, current portion 34,043Corporate fixed income bonds 7,060 Non-current investments 7,060 Total investments 41,103During the fourth quarter of 2017, the Company made purchases of investments totaling €41.8 million which are held and denominated in U.S. dollars.As a result of the fluctuation in foreign currency between the euro and U.S. dollar, the Company recorded unrealized exchanges losses of €0.8 millionin net loss on foreign exchange for the year ended December 31, 2017. F-22Table of Contents10.Trade and Other ReceivablesAll trade and other receivables are short-term and due within 1 year. Balance per December 31 2017 2016 (euros in thousands) Trade receivables 1,594 205 Unbilled receivables 710 — VAT receivable 582 782 Prepaid general expenses 427 382 Prepaid pension costs 838 463 Prepaid share issuance costs — 230 Interest bank 170 32 Other receivables 92 154 4,413 2,248 Trade and unbilled receivables relate primarily to invoicing for cost reimbursements relating to the Incyte collaboration and license agreement and theONO research and license agreement. VAT receivable relates to value added tax receivable from the Dutch tax authorities based on the tax applicationfor the fourth quarter of 2017.Prepaid expenses reflected above in the form of prepaid general expenses, prepaid pension costs and prepaid share issuance costs consist of expensesthat were paid during the reporting period, but are related to activities taking place in the subsequent year. 11.Other Liabilities and AccrualsAll amounts are short-term and payable within 1 year. Balance per December 31 2017 2016 (euros in thousands) Accrued auditor’s fee 96 282 Personnel 446 220 Research and development costs 5,272 1,256 IP—Legal fee 509 114 Bonuses 1,545 768 Subsidy advance received 224 224 Other accruals 535 786 8,627 3,650 The research and development costs relate to accrued expenses for costs of certain development activities, such as clinical trials, and are recorded basedon an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, and informationprovided the Company by vendors on their actual costs incurred. The increase in research and development cost accrued expenses reflect increasedenrollment in and support of the Company’s clinical trials and expanded pre-clinical research efforts to support its internal research programs andcollaboration and license agreement with Incyte.The bonuses relate to the employee bonuses for the financial year 2017, which are paid out annually in February. F-23Table of ContentsThe subsidy advances received relate to active grants where the Company has received cash in excess of allowances which is required to be repaid orrecognized as grant income when the relevant reimbursable costs are incurred as services are performed. 12.BorrowingsThe Company entered into a financing agreement with Rabobank Utrechtse Heuvelrug U.A. (“Rabobank”) on December 29, 2005, which provided fortotal borrowings of €1.5 million for the financing of its business activities. The duration of the agreement was 12 years. Under the agreement, the loanswere to be repaid in monthly installments of €14 thousand. The loans bore interest at an annual rate equal to 4.45% and were fixed until April 1, 2016.At that date, the interest rate was fixed at 3.55% until March 31, 2017.Movements in the Company’s borrowings with the Rabobank were as follows: (euros inthousands) Balance December 31, 2016 486 Short term portion December 31, 2016 167 Long term portion December 31, 2016 319 Balance January 1, 2017 486 Repayments (486) Balance December 31, 2017 — On March 31, 2017, the Company repaid, in full, the loan from Rabobank. At the repayment date, the total outstanding balance of the loan amountedto approximately €0.5 million. As a result of the repayment, the pledge associated with the loan was removed and the related cash was released fromrestriction. 13.Deferred RevenueDeferred revenue is as follows: Balance per December 31 (euros in thousands) 2017 2016 Deferred revenue—current portion 6,996 1,610 Deferred revenue 130,195 30,206 137,191 31,816 Of the total deferred revenue balance at December 31, 2017, €137.0 million was related to the Incyte Agreements while €0.2 million related to the ONOresearch and license agreement. Of the total deferred revenue balance at December 31, 2016, €31.4 million was related to the Incyte Agreements while€0.4 million related to the ONO research and license agreement.On April 8, 2014, the Company entered into a research and license agreement with ONO pursuant to which the Company receiveda non-refundable upfront payment of €1.0 million. This upfront payment is being amortized on a straight-line basis over the research term period whichis estimated to be 4.5 years. The Company is eligible to receive milestone payments upon achievement of specified research and clinical developmentmilestones. For products commercialized under this agreement, if any, the Company is also eligible to receive a mid-single digit royalty on net sales.ONO provides funding for the Company’s research and development activities under an agreed-upon plan. Subject to certain conditions, ONO has theright to terminate this agreement at any time for any reason, with or without cause. F-24Table of ContentsOn December 20, 2016, the Company entered into a collaboration and license agreement (the “collaboration and license agreement”) and a sharesubscription agreement (the “share subscription agreement”) with Incyte (together, the “Incyte Agreements”). Under the collaboration and licenseagreement, Incyte agreed to pay the Company a $120 million non-refundable upfront payment, and under the share subscription agreement, Incyteagreed to purchase 3.2 million common shares of the Company at price per share of $25, for an aggregate purchase price of $80 million. In January2017, the Company completed the sale of its common shares under the subscription agreement and received the $80 million aggregate purchase price.In February, 2017, the Company received the $120 million non-refundable upfront payment. As discussed in Note 9, the Company accounted for theforward to sell its own shares as a derivative financial asset. Both the upfront license payment and the derivative financial asset are recognized asdeferred revenue being amortized as revenue over the period of continuing involvement, which is estimated to be 21 years.The parties have agreed to collaborate on the development and commercialization of up to 11 bispecific antibody programs. For one current preclinicalprogram, the Company will retain all rights to develop and commercialize approved products in the United States, and Incyte will develop andcommercialize approved products arising from the program outside the United States. Following any regulatory approval of a product candidate forthis particular preclinical program, each company has agreed to pay the other tiered royalties ranging from 6% to 10% on net sales of products in theirrespective territories.The Company also has the option to co-fund development of product candidates arising from two other programs. For any program for which theCompany exercises its co-development option, the Company would be responsible for 35% of global development costs in exchange for a 50% shareof U.S. profits and losses and tiered royalties ranging from 6% to 10% on ex-U.S. sales by Incyte for these programs. The Company also has the right toelect to provide up to 50% of detailing activities for product candidates arising from one of these programs in the United States.For each of the other up to eight programs, Incyte has agreed to independently fund all development and commercialization activities. For theseprograms, the Company will be eligible to receive potential development, regulatory and sales milestone payments of up to $350 million per program,which could result in an aggregate milestone opportunity of approximately $2.8 billion if all development, regulatory and sales milestones areachieved across all such eight other programs in all territories. The Company will also be eligible to receive tiered royalties ranging from 6% to 10%on global sales of any approved products under these eight programs. The Company will retain rights to three of its clinical candidates (MCLA-128,MCLA-117 and MCLA-158), as well as its technology platform and existing and future preclinical programs based on the Company’s platform that areoutside the scope of the agreement. 14.Shareholders’ EquityShare subscription agreement with IncyteConcurrent with the collaboration and license agreement discussed above under Note 13, the Company entered into a share subscription agreementwith Incyte on December 20, 2016. On January 23, 2017, under the terms of the share subscription agreement, the Company issued 3,200,000 of itscommon shares to Incyte at a price per share of $25, for an aggregate purchase price of $80.0 million or €74.7 million, representing 19.9% of the“pre-transaction” issued and outstanding common shares of the Company. The Company received proceeds of €74.4 million, net of issuance costs of€0.2 million. A €1.1 million discount on the subscription stock price (see Note 9) combined with a €0.4 million foreign currency translationaccompanying the issuance of these shares, increased share capital by €0.3 million and share premium by €73.4 million.Issued and Paid-in Share CapitalAll issued shares have been fully paid in cash. F-25Table of ContentsCommon SharesFor year ended December 31, 2017, 136,666 options were exercised at a weighted average price of €2.24 per share and 7,331 Restricted Stock Units(“RSUs”) vested; as a consequence, 143,997 common shares were issued, share capital increased by €12,960 and share premium increased by€293,660. For the year ended December 31, 2016, 18,283 options were exercised at an exercise price of €1.93 per share. As a result, 18,283 commonshares were issued, share capital increased by €1,645 and share premium increased by €33,641. For the year ended December 31, 2015, no options wereexercised.As a result of the IPO, all issued and paid-in preferred shares were converted to common shares. The conversion ratio was a one-for-one conversion,taking into consideration the reverse share split that became effective on May 6, 2016. During the twelve month period ended December 31, 2016, atotal of €1.5 million was paid related to costs that are directly attributable to issuing the new shares. Of this amount, a total of €0.8 million was paid inprevious reporting periods.Situation as at December 31, 2017At December 31, 2017, a total of 19,429,848 common shares were issued and fully paid in cash.At December 31, 2016, a total of 16,085,851 common shares were issued and fully paid in cash.At December 31, 2015, a total of 4,149,884 Class C preferred shares, 3,899,104 Class B preferred shares, 229,055 Class A preferred shares and 337,562common shares with a nominal value of €0.09 each were issued and paid up.Share Premium ReserveThe share premium reserve relates to amounts contributed by shareholders at the issue of shares in excess of the par value of the shares issued.All share premium can be considered as free share premium as referred to in the Netherlands Income tax act.Share-based Payment ArrangementsIn 2010, the Company established the Merus B.V. 2010 Employee Option Plan (the “2010 Plan”) that entitled key management personnel, staff andconsultants providing similar services to purchase shares in the Company. Under the 2010 Plan, holders of vested options were entitled to purchasedepositary receipts for common shares at the exercise price determined at the date of grant. Upon exercise of the option, common shares were issued toa foundation established to facilitate administration of share-based compensation awards and pool the voting interests of the underlying shares, anddepositary receipts were issued by the foundation to the individual holders. In connection with the IPO, the 2010 Plan was amended to cancel thedepositary receipts and allow individual holders to directly hold the common shares obtained upon exercise of their options.Options granted under the 2010 Plan are exercisable once vested. The options granted under the 2010 Plan vest in installments over a four-year periodfrom the grant date. Twenty-five percent of the options vest on the first anniversary of the vesting commencement date, and the remaining 75% of theoptions vest in 36 monthly installments for each full month of continuous service provided by the option holder thereafter, such that 100% of theoptions become vested on the fourth anniversary of the vesting commencement date. Options lapse on the eighth anniversary of the date of grant.Prior to the IPO, participants that voluntarily left the Company, except for members of the former Supervisory Board, were required to offer to thefoundation the depositary receipts acquired from exercising options against F-26Table of Contentspayment of the exercise price or the lower fair market value of the underlying shares. This obligation for a participant to offer depositary receipts to thefoundation upon resignation within four years from exercising the options was treated as a non-market vesting condition. In connection with the IPO,the foundation was dissolved and the common shares underlying depositary receipts distributed. In addition, the 2010 Option Plan was amended suchthat a participant is no longer required to offer depositary receipts to the foundation upon resignation.The reduction of the vesting period has been accounted for, taking into consideration the modified vesting conditions, to reflect the best estimateavailable of the options that are expected to vest. At the modification date in 2016, the cumulative expense for the options has been trued-up to reflectthe reduced vesting period. This amendment of a non-market vesting (service) condition did not impact the fair value of the options granted.In connection with the IPO, the Company established the 2016 Incentive Award Plan (the “2016 Plan”). Following the IPO, the Company is no longermaking grants under the 2010 Plan; however, the terms of the 2010 Plan will continue to govern grants made under the 2010 Plan. All new incentiveaward grants since the IPO are being made under the 2016 Plan.Options granted under the 2016 Plan are exercisable once vested. The options granted under the 2016 Plan vest in installments over a four-year periodfrom the grant date. Twenty-five percent of the options vest on the first anniversary of the vesting commencement date, and the remaining seventy-fivepercent of the options vest in 36 monthly installments for each full month of continuous service provided by the option holder thereafter, such that100% of the options shall become vested on the fourth anniversary of the vesting commencement date. Options will lapse on the tenth anniversary ofthe date of grant.The Restricted Stock Units (“RSUs”) granted under the 2016 Plan also vest in installments over a four-year period from the grant date. Each RSUrepresents the right to receive one common share of the Company.As stated in the 2016 Plan, the Company also established the Supervisory Board Compensation Program, which was subsequently replaced by theNon-Executive Director Compensation Program to reflect the change in governance structure of the Company (see Note 2). As part of this program,Non-Executive Directors are entitled to cash compensation as well as equity compensation. The equity compensation consists of an initial option grantas well as annual awards.The initial awards granted under the Non-Executive Compensation Program vest in installments over a three year period. Thirty-three percent of theoptions vest on the first anniversary of the vesting commencement date, and the remaining 67% of the options in 24 substantially equal monthlyinstallments thereafter, such that the award shall be fully vested on the third anniversary of the vesting commencement date. Each subsequent awardshall vest and become exercisable in 12 substantially equal monthly installments following the vesting commencement date, such that the subsequentaward shall be fully vested on the first anniversary of the date of grant.Share-based payment expenses are recognized as from the IPO date for each subsequent award that a Non-Executive Director is entitled to over theirremaining term. Since subsequent awards are not subject to shareholder approval, the grant date is established and expenses are based on grant date fairvalue. The grant date fair value is not updated in each future reporting period and therefore the estimated fair value is not revised and expenserecognized is based on the actual grant date fair value of the awards granted.Measurement of Fair Value of the Equity-settled Share-based Payment ArrangementsThe fair value of the employee share options has been measured using a binomial option pricing model, including members of the Board of Directors.Service and non-market performance conditions attached to the transactions were not taken into account in measuring fair value. Key managementpersonnel include the Company’s executive management and the Board of Directors. F-27Table of ContentsThere were 2,213,985 outstanding share options at December 31, 2017 (December 31, 2016: 1,394,844; December 31, 2015: 953,689) with a weightedaverage exercise price of €13.99 (December 31, 2016: €8.69; December 31, 2015: €5.35).The number of options outstanding, by group of employees, was as follows: Group of employees entitled December 31,2017 December 31,2016 December 31,2015 Key management personnel 1,777,437 1,302,417 857,318 All other employees 436,548 92,427 96,371 Total 2,213,985 1,394,844 953,689 The inputs used in the measurement of the fair values and the related fair values at the grant dates for the options granted during the respective yearended December 31 were as follows: 2017 2016 2015 KeyManagementPersonnel All OtherEmployees KeyManagementPersonnel All OtherEmployees KeyManagementPersonnel All OtherEmployees € € € € € €Fair value at grant date 9.04 – 16.10 8.94 – 18.02 9.97 – 11.03 5.74 – 5.79 3.98 – 5.76 4.03 – 5.06Share price at grant date 17.08 – 24.54 13.71 – 27.47 15.24 – 16.85 8.46 – 8.87 6.12 – 7.20 5.94 – 7.20Exercise price 17.08 – 24.54 13.71 – 27.47 15.24 – 16.85 8.46 – 8.87 1.93 – 7.20 1.93 – 7.20Expected volatility (weighted-average) 95.05% 94.88% 95.30% 97.15% 94.85% 94.85%Expected life 10 years 10 years 10 years 8 – 10 years 4 years 8 yearsExpected dividends 0% 0% 0% 0% 0% 0%Risk-free interest rate (based ongovernment bonds) 2.29% – 2.51% 2.24% – 2.62% 1.84% – 1.86% 0.10% – 1.87% 0.16% – 0.70% 0.16% – 0.70%Reconciliation of outstanding share options and RSU’s 2017 2016 2015 Weightedaverageexerciseprice Number ofoptions Weightedaverageexerciseprice Number ofoptions Weightedaverageexerciseprice Number ofoptions (€) (€) (€) Outstanding at January 1 8.69 1,394,844 5.35 953,689 5.15 192,276 Forfeited during the year 17.27 (58,164) 6.07 (31,351) 1.93 (1,033) Expired during the year 8.67 (762) 11.95 (5,454) 4.18 (9,216) Exercised during the year 2.24 (136,666) 1.93 (18,283) — — Granted during the year 19.88 1,014,733 14.74 496,243 5.99 771,662 Outstanding at December 31 13.99 2,213,985 8.69 1,394,844 5.35 953,689 Exercisable at December 31 687,070 418,453 157,562 The options outstanding at December 31, 2017 had an exercise price in the range of €1.93 to €27.47 (2016: €1.93 to €16.85; 2015: €1.93 to €13.50)and a weighted-average remaining contractual life of 8.25 years (2016: 6.68 years; 2015: 3.63 years). On October 5, 2015, the Company amended theexercise price of options granted under the 2010 Option plan prior to January 2015, to be €1.93, which has been reflected in the weighted averageexercise price of the options outstanding at December 31, 2015.The weighted-average share price at the date of exercise for share options exercised in 2017 was €20.69.During 2017, the Company granted RSUs to Key Management Personnel. F-28Table of ContentsRSU’s are summarized as follows: 2017 Weightedaverageexerciseprice Number ofRSU’s (€) Outstanding at January 1 — — Forfeited during the year 20.03 (12,219) Expired during the year — — Vested during the year 20.03 (7,331) Granted during the year 20.03 214,096 Outstanding at December 31 20.03 194,546 Expense Recognized in Profit or LossFor details on the related option expenses recognized as employee benefit expenses, see Note 17. 15.Revenue (euros in thousands) 2017 2016 2015 Up-front payment amortization 6,616 223 223 Collaboration income 5,789 1,109 1,092 Income from grants on research projects 1,195 1,387 662 13,600 2,719 1,977 For the year ended December 31, 2017, the Company recognized amortization of €6.4 million and €0.2 million on up-front payments related to itsIncyte and ONO agreements, respectively. For the years ended December 31, 2016 and 2015, the Company recognized €0.2 million, respectively, ofamortization of the up-front payment related to its ONO agreement.Collaboration income for the year ended December 31, 2017 was €5.8 million and consisted of cost reimbursements in support of the Company’sresearch and license agreements with Incyte and ONO. The Company did not recognize any research milestones during 2017. During 2016, theCompany recognized one research milestone reached by the Company under its agreement with ONO which amounted to €0.7 million (2015: €1.1million). Additionally, the Company received an amount of €0.4 million revenue from a new consultancy agreement that was signed with ONO onMarch 7, 2016.The Company currently has two active grants consisting of cash allowances for specific research and development projects. For these grants, theCompany has reporting obligations at the end of the grant contract term. The unconditional receipt of the grant allowances is dependent on the finalreview of the reporting provided by Merus at the end of the contract term. For the years ended December 31, 2017, 2016, and 2015, the Companyrecognized €1.2 million, €1.4 million and €0.7 million in grant income, respectively.On June 12, 2017, the European Commission approved for reimbursement the final installment of the FP-7 grant and the Company subsequentlyrecognized the remaining €0.7 million to grant revenue. On October 16, 2017, the Company received notification from the European Commissionrequesting the Company to revise its final report and indicated that the remaining €0.4 million of funds were to remain with the Company anddistributed to the other beneficiaries to the program. In November 2017, the Company remitted €0.2 million to the other beneficiaries and recognizedan additional €0.2 million of grant revenue. F-29Table of Contents16.Total Operating Expenses 2017 2016 2015 (Euros in thousands) Manufacturing costs 13,567 3,162 5,878 IP and license costs 1,858 1,167 1,112 Personnel related R&D 6,673 3,285 2,997 Other research and development costs 12,027 10,810 6,194 Total research and development costs 34,125 18,424 16,181 Management and administration costs 13,697 4,258 768 Litigation costs 1,039 1,490 4,419 Other operating expenses 8,356 6,219 3,648 Total other expenses 9,395 7,709 8,067 Total operating expenses 57,217 30,391 25,016 Research and development costs were €34.1 million for the year ended December 31, 2017 as compared to €18.4 million for 2016. The increases inresearch and development costs is primarily attributable to the increase in manufacturing costs, higher research and development headcount andrelated costs, including share-based payment expenses, as well as additional spending in support of the Company’s preclinical and clinicaldevelopment programs for MCLA-128, MCLA-117, MCLA-158 and MCLA-145. The significant increase in manufacturing costs during 2017 relateprimarily to the expansion of the Company’s Phase 1 and Phase 1/2 clinical programs. Specifically, the Company incurred higher costs relating tooutsourced contract manufacturing for process development and drug delivery in support of the Company clinical development programs.Personnel related research and development expenses mainly increased due to higher headcount to support the expansion of clinical programs andadditional expenses resulting from the implementation of the new option plan in 2016 (see Note 14) whereas initial equity grants made in 2016 withhigher market valuations were expensed over a full year in 2017. Other research and development costs represent costs related to expenditures tocontract research organizations and related expenses in support of preclinical and clinical activities.Management and administrative costs consist of salaries and related expenses for employees in finance, legal, human resources and businessdevelopment functions. These costs include all salary, salary related expenses and share-based payment expenses. The large increase in managementand administrative costs during 2017 was due primarily to the expansion of the Company’s headcount in finance, legal and business developmentfunctions to support the expansion of the Company’s operations.Other operating expenses consist primarily of expenses related to professional fees for consulting, audit, and tax services of €4.0 million (2016:€1.7 million, 2015: €1.0 million) which support the finance function in maintaining and establishing public company status and general legal,insurance and facility related expenses amounting to €3.2 million (2016: €3.9 million, 2015: €2.2 million). The increase in these costs during 2017 isdue to the expansion of the Company’s operations to support ongoing growth and public company requirements.Litigation costs relate to ongoing legal proceedings which are more fully described under “Litigation”. The decline in 2017 when compared to 2016 isa result of lower litigation activity with regard to the Regeneron litigation as described below. F-30Table of ContentsA breakdown of other research and development costs is presented as follows: 2017 2016 2015 (Euros in thousands) Discovery and pre-clinical costs 2,473 5,185 2,534 Clinical costs 5,919 3,409 1,883 Consumables 2,149 1,055 979 Other research and development costs 1,486 1,161 798 Total other research and development costs 12,027 10,810 6,194 Other research and development costs consist mainly of consultancy expenses related to R&D activities, which cannot be specifically allocated to aresearch project.LitigationOn March 11, 2014 Regeneron Pharmaceuticals Inc. (“Regeneron”) filed a complaint in the United States District Court for the Southern District ofNew York (the “Court”), alleging that the Company was infringing on one or more claims in Regeneron’s U.S. Patent No. 8,502,018 (the “‘018patent”), entitled “Methods of Modifying Eukaryotic Cells.” On July 3, 2014, the Company filed a response to the complaint, denying Regeneron’sallegations of infringement and raising affirmative defenses, and filed counterclaims seeking, among other things, a declaratory judgment that theCompany did not infringe the patent and that the patent was invalid. The Company subsequently filed amended counterclaims during the period fromAugust to December 2014, seeking a declaratory judgment of unenforceability of the patent due to Regeneron’s commission of inequitable conduct.On November 21, 2014, the Court found that there was clear and convincing evidence that a claim term present in each of the patent claims wasindefinite and granted the Company’s proposed claim constructions. On February 24, 2015, the Court entered partial judgment in the proceeding, onthe grounds that the Company did not infringe each of the patent claims, and that each of the patent claims were invalid due to indefiniteness. OnNovember 2, 2015, the Court found Regeneron had withheld material information from the United States Patent and Trademark Office duringprosecution of the patent, and Regeneron had engaged in inequitable conduct and affirmative egregious misconduct in connection with theprosecution of the patent. On December 18, 2015, Regeneron filed an appeal of the Court’s decision. On July 27, 2017, the U.S. Court of Appeals forthe Federal Circuit affirmed the trial court’s conclusion that Regeneron had engaged in inequitable conduct before the United States Patent andTrademark Office and affirmed that Regeneron’s ‘018 patent is unenforceable. Regeneron petitioned for a panel rehearing and rehearing en banc of thisdecision by the Federal Circuit on September 12, 2017, which the Company responded to and opposed on November 2, 2017. On December 26, 2017,the full Federal Circuit denied Regeneron’s request to rehear the matter. The case is returned to the District Court to adjudicate the Company’s motionrequesting that Regeneron pay Merus’ attorney’s fees and costs incurred as a result of Regeneron filing suit.On March 11, 2014, Regeneron served a writ in the Netherlands alleging that the Company was infringing one or more claims in their European patentEP 1 360 287 B1. The Company opposed the patent in June 2014. On September 17, 2014, Regeneron’s patent EP 1 360 287 B1 was revoked in itsentirety by the European Opposition Division of the European Patent Office (the “EPO”). In Europe, an appeal hearing occurred in October andNovember 2015 at the Technical Board of Appeal for the EPO at which time the patent was reinstated to Regeneron with amended claims. TheCompany believes that its current business operations do not infringe the patent reinstated to Regeneron with amended claims because it believes ithas not used the technology or methods claimed under the amended claims. The Dutch litigation procedure is stayed.The costs incurred in the above litigation and opposition (€1.0 million in 2017; €1.5 million in 2016; €4.4 million in 2015) are included in theconsolidated statement of profit or loss and comprehensive loss for the period. F-31Table of ContentsOn July 15, 2014, a notice of opposition against Merus’ EP 2314629 patent (the “EP ‘629 patent”), entitled “Recombinant Production of Mixtures ofAntibodies” was filed in the European Patent Office (the “EPO”) by Regeneron. The notice asserted, as applicable, added subject matter, lack ofnovelty, lack of inventive step, and insufficiency. Merus responded on February 24, 2015. Following an oral hearing before the Opposition Division ofthe EPO on June 22, 2016, the Opposition Division upheld the EP ‘629 Patent with amendments. Both Regeneron and Merus filed a notice of appealfollowed by grounds of appeal on December 1st and 4th, 2017 respectively, with further proceedings to follow.On August 11, 2014, a notice of opposition against Merus’ EP 2147594 (the “EP ‘594 patent”), entitled “Antibody Producing Non-Human Mammals”was filed in the European Patent Office (the “EPO”) by Regeneron. The notice asserted, as applicable, lack of novelty, lack of inventive step, andinsufficiency. The Company’s response to the oppositions was filed on April 2, 2015. Following an oral hearing before the Opposition Division of theEPO on October 28, 2016, the Opposition Division upheld the EP ‘594 Patent without amendments. Regeneron filed grounds of appeal on July 19,2017, and Merus responded on November 30, 2017.Based on the current facts and circumstances no provision has been recognized under IAS 37 related to contingent liabilities.Operating expenses presented by nature are outlined below: 2017 2016 2015 (Euros in thousands) Contract manufacturing 13,567 3,162 5,878 Other external and outsourced costs 22,333 18,885 15,012 Employee costs & related benefits 20,999 8,110 3,933 Depreciation and amortization 318 234 193 Total operating expenses 57,217 30,391 25,016 The increases in costs of contract manufacturing and other external and outsourced costs are mainly due to the increase in the Company’s preclinicaland clinical operations in support of its programs for MCLA-128, MCLA-117, MCLA-158 and MCLA-145. The other external and outsourced costsconsist mainly of preclinical costs of €2.5 million (2016: €5.2 million, 2015: €2.5 million), clinical costs of €5.9 million (2016: €3.4 million, 2015:€1.9 million) and IP costs of €2.9 million (2016: €2.7 million, 2015: €5.5 million). 17.Employee BenefitsDetails of the employee benefits are as follows: 2017 2016 2015 (Euros in thousands) Salaries and wages 9,556 5,166 3,204 WBSO subsidy (3,523) (1,721) (348) Social security premiums 621 382 238 Health insurance 222 27 31 Pension costs 652 507 241 Share-based payment expenses 12,815 3,307 567 Other personnel expense 656 442 — 20,999 8,110 3,933 F-32Table of ContentsShare-based payment expenses (see Note 14) were recognized as employee benefit expenses as follows: (euros in thousands) 2017 2016 2015 Research and development costs 3,245 703 168 Management and administration costs 8,942 2,037 230 Other expenses 628 567 169 12,815 3,307 567 The WBSO (“afdrachtvermindering speur- en ontwikkelingswerk”) is a Dutch fiscal facility that provides subsidies to companies, knowledge centersand self-employed people who perform research and development activities (as defined in the WBSO Act). Under this Act, a contribution is paidtowards the labor costs of employees and other costs directly involved in research and development. The contribution is in the form of a reduction ofpayroll taxes and social security contributions. Subsidies relating to labor costs are deferred and recognized in the income statement as negative laborcosts over the period necessary to match them with the labor costs that they are expected to be incurred.The Company has received and recognized subsidies of €3.5 million (2016: €1.7 million; 2015: €0.3 million). The increases in subsidies for each yearare primarily attributable to the increase in the Company’s eligible research and development activities and the expansion of the Company’spreclinical and clinical development programs for MCLA-128, MCLA-117, MCLA-158 and MCLA-145.The average number of personnel during the year was approximately 69 (2016: 45; 2015: 32), with a majority employed in the Netherlands, with theexception of an average of ten (2016: two; 2015: nil) employees employed in the United States. Employees are principally employed in the area ofresearch and development. For the years ended December 31, 2017 and 2016, a total of 21 and 11 employees, respectively, which are devoted toactivities other than research and development, are included under management and administration costs. 18.Finance Income and Expense 2017 2016 2015 (Euros in thousands) Interest and related income 1,112 88 50 Net loss on foreign exchange (19,449) (409) — Interest and other expenses (10,696) (19,235) (195) Financing costs (190) — — (29,223) (19,556) (145) Interest income primarily results from interest earned on cash held on account and accretion of investment earnings. The Company’s current yearincrease in cash, cash equivalents and investments was due primarily from the $200 million of funds received as part of the Incyte Agreements duringthe first quarter of 2017. During 2017, the Company has held the $200 million of Incyte funds in short-term investments with a one month maturity,callable on demand, and later in the year, in short-term investments in securities issued by several public corporations and United States Treasury,denominated and held in U.S. dollars. In July and August 2017, the Company converted $50.3 million of U.S. dollars into euros from the accounteffectively realizing exchange losses of €4.4 million, included in net loss on foreign exchange for the year ended December 31, 2017.The Company experienced losses on its U.S. dollar denominated cash, cash equivalents and investments of approximately €19.4 million and€0.4 million for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, the Company held approximately $98.0 millionand $49.4 million in U.S. dollar denominated cash and cash equivalent accounts and investment accounts, respectively, subject to the fluctuation inforeign currency between the euro and U.S. dollar. F-33Table of ContentsOn December 20, 2016, the Company entered into the Incyte Agreements. As these contracts are denominated in U.S. dollars, the Company determinedthat the subscription agreement to sell its own shares to which the Company became committed on December 20, 2016, should be accounted for as aforward contract or a derivative financial instrument which was recognized in the consolidated statement of financial position as of December 31,2016. The interest expense and similar expenses for the year ended December 31, 2017 include an amount of €10.7 million related to the effectivesettlement of the forward contract on January 23, 2017, the date the shares were issued and the date through which the related expense was incurred.During 2017, the Company expensed €0.2 million of prepaid share issuance costs related to a potential future issuance of shares under the Company’sF-3 Registration Statement when the future issuance was no longer consider probable. 19.Loss per share (a)Basic and Diluted Loss per ShareBasic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average numbers of sharesoutstanding during the year. 2017 2016 2015 (Euros in thousands, except per share data) Loss attributable to equity holders of the Company (73,000) (47,220) (23,184) Weighted average number of shares 19,196,440 13,236,649 5,871,237 Basic (and diluted) loss per share (€ per share) (3.80) (3.57) (3.95) (b)Diluted Loss per ShareFor the periods included in these financial statements, the share options are not included in the diluted loss per share calculation as the Company wasloss-making in all these periods. Due to the anti-dilutive nature of the outstanding options, basic and diluted loss per share is equal. (c)Dividends per ShareThe Company did not declare dividends for any of the years presented in these financial statements. 20.Financial InstrumentsFinancial Risk ManagementThe Company is exposed to a variety of financial risks: credit risk, liquidity risk and market risk. The Company’s overall risk management programseeks to minimize potential adverse effects of these financial risk factors on the Company’s financial performance. Management is primarilyresponsible for the overall risk management approach and for the approval of risk strategies and principles of the Company. The Company’s AuditCommittee oversees these risk management activities. The Company’s management reviews and approves policies for managing each of these riskswhich are summarized below.Credit RiskCredit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations,and arises principally from the Company’s receivables from its collaborators and investments in debt securities and financial institutions. TheCompany’s principal financial assets are held to maturity investments, trade receivables, and cash and cash equivalents that are derived primarily fromfinancing F-34Table of Contentsactivities and, to a lesser extent, from its operations. The main purpose of these financial assets are to support the Company’s operations which consistprimarily of research and development, preclinical and clinical development and related manufacturing in support of the Company’s preclinical andclinical development programs for MCLA-128, MCLA-117, MCLA-158 and MCLA-145.The carrying amount of financial assets represents the maximum credit exposure. 2017 2016 (Euros in thousands) Financial Assets Financial asset (derivative) — 11,847 Trade and unbilled receivables 2,283 205 Investments 41,103 — Restricted cash — 167 Cash and cash equivalents 149,678 56,917 193,064 69,136 Cash and cash equivalents include deposits held with financial institutions with original maturities of less than three months. Investments, held tomaturity, include commercial paper, securities issued by several public corporations and the United States Treasury with a maturity date of greater thanthree months at the date of settlement. These investments were acquired in fourth quarter of 2017. Cash and cash equivalents are held at banks andfinancial institutions with credit ratings varying between A and AA while investments are in highly rated vehicles with identical credit ratings.As discussed in Note 9, the Company entered into a share subscription agreement with Incyte in December 2016. As the contract is denominated in U.S.dollars, the Company determined that the forward contract to sell its own shares at a future date represented a derivative financial instrument. Theremaining fair value of the derivative recognized in the statement of financial position at December 31, 2016 was €11.8 million. The Company haddetermined the fair value of this derivative utilizing the Bloomberg Pricing System and the Company’s closing stock prices at each valuation datewhich are significant Level 2 observable inputs. The settlement of the forward contract occurred through the delivery shares to Incyte upon the closingof the share subscription agreement during the first quarter of 2017 thereby extinguishing the derivative financial asset.The aging of trade and unbilled receivables was as follows: 2017 2016 Balance per December 31 in thousands of euros Neither past due nor impaired 2,283 205 Past due — — 2,283 205 There is no allowance for impairment.Liquidity RiskLiquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s core objective is tomaintain a balance between continuity of funding and flexibility through the monitoring of cash flows at varying levels to ensure that it has sufficientcash on demand to meet expected operational expenses. F-35Table of ContentsThe following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, andinclude estimated interest payments and excluding the impact of netting agreements:December 31, 2017 Carryingamount Total < 12months 1 - 2years 2 - 5years Morethan5 years (Euros in thousands) Non-derivative financial liabilities Trade payables 2,855 2,855 2,855 — — — Other liabilities and accruals 6,176 6,176 6,176 — — — 9,031 9,031 9,031 — — — December 31, 2016 Carryingamount Total < 12months 1 - 2years 2 - 5years Morethan5 years (Euros in thousands) Non-derivative financial liabilities Secured bank loans 486 526 190 181 155 — Trade payables 2,298 2,298 2,298 — — — Other liabilities and accruals 3,679 3,679 3,679 — — — 6,463 6,503 6,167 181 155 — The secured bank loan was paid in full on March 31, 2017.Market riskMarket risk is the risk that changes in market prices – such as foreign exchange rates and interest rates – will affect the Company’s income or the valueof its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptableparameters, while optimizing the return. The Company’s market risk relates to foreign exchange and to a lesser extent, interest risks.Foreign currency riskForeign exchange risk arises from future commercial transactions and recognized assets and liabilities in foreign currencies. With respect to monetaryassets and liabilities denominated in foreign currencies, the Company’s primary currency exposure is impacted by monetary assets and liabilitiesdenominated in U.S. Dollars (USD). Changes in sensitivity rates reflect various changes in the economy year-over-year. F-36Table of ContentsThe following table provides a sensitivity analysis for a change in the primary currency exposure for the Company relating to monetary assets andliabilities denominated in USD as of December 31, 2017. The analysis shows the impact that a change in the exchange rate at that date would have onthe Company’s total comprehensive loss: Financial Statement Line Item Exposure Balance (inthousands) Effect on profitbefore tax if USDstrengthens 5%(in thousands) Effect on profitbefore tax if USDweakens 5% (inthousands) Cash and cash equivalents 88,538 3,691 (3,691) Total investments 47,310 1,972 (1,972) Trade and other receivables 2,311 97 (97) Trade payables, other liabilities and accruals (1,420) (59) 59 Net Assets 136,739 5,701 (5,701) The closing exchange rates per the European Central Bank (ECB) utilized above for converting USD to EUR at December 31, 2017 was 0.834.Exposure to interest rate riskThe interest rate profile of the Company’s interest-bearing financial instruments is as follows: Carrying amount 2017 2016 Balance per December 31 in thousands of euros Fixed-rate instruments Investments 41,103 — Financial liabilities — (486) Variable rate instruments Cash and cash equivalents 149,678 56,917 Due to the limited impact of changes in interest rates on the Company no sensitivity data is provided.Accounting classifications and fair valuesThe Company classifies financial assets and financial liabilities into the loans and receivables and other financial liability categories except for thederivative recognized as a result of the Incyte collaboration and share Subscription agreement as more fully described in Note 9. The fair value of thefinancial assets and financial liabilities not measured at fair value is not disclosed, as the carrying amount of the financial assets and financialliabilities is a reasonable approximation of the fair value. Accordingly, information on the fair value hierarchy is omitted.The fair value of the derivative related to the Incyte collaboration and share Subscription agreement was recorded using Level 2 inputs. Fordetermining the fair value the Company has used as valuation technique the Bloomberg forward pricing model. In this valuation the inputs used arerelated to the foreign exchange component (spot prices of EUR and USD), closing stock prices of the Company, as well as discount rates to reflect thetime value of money (limited). On January 23, 2017, the Company settled the forward contract by delivering shares to Incyte upon the closing of theshare subscription agreement, thereby extinguishing the derivative financial asset. 21.Board Compensation and Key Management PersonnelOn May 29, 2017, the Company changed its governance structure from a two-tier model consisting of a Management Board acting under thesupervision of a separate Supervisory Board to a one-tier board model with F-37Table of Contentsa unitary Board of Directors consisting of an Executive Director and Non-Executive Directors. In the one-tier board model, the Board of Directors as acollective (i.e., the Executive Director and the Non-Executive Directors) are charged with both the management and monitoring functions of theCompany’s general course of affairs inclusive of the Company’s overall business strategy and financial policies. The Executive Director manages theday to-day business and operations of the Company and implements the Company’s strategy. The Non-Executive directors focus on the supervision ofpolicy and the performance of the duties of all directors, as well as the Company’s general state of affairs.Prior to May 29, 2017, the Company’s Management Board was in charge of managing the Company and consisted of Ton Logtenberg, Chief ExecutiveOfficer (CEO) and Shelly Margetson, the former Chief Operating Officer (COO). Ms. Margetson resigned as a statutory director of the Companyeffective as of May 24, 2017 and ended her employment with the Company effective as of August 1, 2017. The Supervisory Board was responsible forthe supervision of the Management Board and the general course of affairs of the Company. Subsequent to May 29, 2017, the members of theSupervisory Board are now Non-Executive Directors while Mr. Logtenberg remains as the lone Executive Director on the unitary Board of Directors.In addition to Board of Directors, the Company employs certain Key Management Personnel responsible for executing the day-to-day business andoperations of the Company. Key Management Personnel are those persons having authority and responsibility for planning, directing and controllingthe activities of the Company. The Company includes the following employees in this classification: John Crowley, Chief Financial Officer, Hui Liu,Ph.D., Chief Business Officer, Andres Sirulnik, M.D., Ph.D., Chief Medical Officer, Mark Throsby, Ph.D., Chief Scientific Officer and AlexanderBerthold Hendrik Bakker, Ph.D., Chief Development Officer.Executive DirectorsIn 2017, 2016, and 2015 the following amounts were charged to the consolidated statement of profit or loss and comprehensive loss for theremuneration of the statutory directors: December 31, Name Gross Salary Bonus Pension Option cost Total (Amounts in Euros) Ton Logtenberg, CEO 2017 432,782 337,945 51,528 4,675,590 5,497,845 2016 369,204 147,820 17,717 907,236 1,441,977 2015 236,032 89,072 18,591 1,910,204 2,253,899 Shelley Margetson(*), COO 2017 (**) 420,782 — 19,595 451,752 892,129 2016 198,987 84,000 6,152 164,547 453,686 2015 159,749 37,365 13,824 284,938 495,876 (*)Resigned as a statutory director of the Company effective as of May 24, 2017.(**)Gross salary includes severance payments totaling €257,260.During the year ended December 31, 2017, Mr. Logtenberg was granted 377,271 options and 123,745 RSU’s while Ms. Margetson was granted 59,605options and 19,550 RSU’s. In addition, upon her separation date, Ms. Margetson was entitled to an accelerated vesting of any unvested Companyoptions and restricted stock units held that would have vested during the 12-month period following her separation date.As of December 31, 2017, Mr. Logtenberg held 661,629 options (2016: 376,912; and 2015: 54,866) with a weighted average exercise price of €14.20(2016: €2.98; 2015: €5.35) and 123,745 RSU’s. F-38Table of ContentsKey Management PersonnelThe remainder of the key management personnel has received the following remuneration for the year 2017. Remuneration 2017 2016 2015 (Amounts in Euros) Short term employment benefits 2,808,998 1,139,763 190,763 Post-employment benefits 108,416 18,720 11,671 Other long term benefits — — — Termination benefits — — — Share based payments 5,171,233 1,195,876 57,065 Total 8,088,647 2,354,359 259,499 Some of the key management personnel have long term benefits in the form of life and long term disability insurance policies which have been affectedin their name as well as severance conditions in case of termination without cause or leave for good reason.A number of key management personnel, or their related parties, hold positions in other companies that result in them having control or significantinfluence over these companies. These companies did not enter into transactions with the Company during the year.On October 27, 2016, the Company appointed Andres Sirulnik as its Chief Medical Officer (CMO). A total 219,890 options over common shares weregranted to Dr. Sirulnik with an exercise price of €16.85 per option.On February 15, 2017, the Company appointed Peter Silverman as its Senior Vice President, Legal (SVP). A total 50,000 options over common shareswere granted to Mr. Silverman with an exercise price of €24.54 per option.On November 1, 2016, the Company appointed John Crowley as its Chief Financial Officer. A total of 183,241 options over common shares weregranted to Mr. Crowley with an exercise price of €15.24 per option.On October 5, 2015, the Company amended the exercise price of options granted under the 2010 Option plan prior to January 2015, to be €1.93. Thoseoption holders that had already exercised options under this plan were reimbursed the excess paid over €1.93 per share. This amounted in a totalreimbursement of €60,935.Non-Executive DirectorsIn May 2016, the Company established the Supervisory Board Remuneration Program, which was subsequently replaced by the Non-ExecutiveCompensation Program to reflect the change in governance structure of the Company. As part of this program, Non-Executive Directors are entitled tocash compensation as well as equity compensation. The equity compensation consists of an initial option grant as well as subsequent annual awards. F-39Table of ContentsThe following amounts were charged to the consolidated statement of profit or loss and comprehensive loss for the remuneration of the members of theBoard: December 31, 2017 December 31, 2016 December 31, 2015 Name Cashcompensation Optioncost Total Cashcompensation Optioncost Total Cashcompensation Optioncost Total (Amounts in Euros) (Amounts in Euros) (Amounts in Euros) Mark Iwicki 59,840 120,596 180,436 50,394 183,367 233,761 26,325 115,380 141,705 Wolfgang Berthold 37,530 90,944 128,474 19,850 50,928 70,778 — 15,475 15,475 Lionel Carnot 35,445 61,870 97,315 24,852 66,959 91,811 — — — John de Koning 38,573 113,613 152,186 26,230 37,000 63,230 — — — Anand Mehra 39,615 83,683 123,298 26,938 84,703 111,641 — — — Gregory Perry 41,700 103,169 144,869 28,356 97,365 125,721 — — — Gabriele Dallmann(*) — — — — — — 11,000 5,795 16,795 Gerard van Odijk(*) — — — — — — — 16,298 16,298 Total 252,703 573,875 826,578 176,620 520,322 696,942 37,235 152,948 190,273 (*)former board memberAs at December 31, members of the Board held the following number of options: December 31, 2017 December 31, 2016 December, 31 2015 Name Number Weightedaverageexerciseprice Number Weightedaverageexerciseprice Number Weightedaverageexerciseprice Mark Iwicki 79,226 €7.32 73,576 €6.57 73,576 €6.57 Wolfgang Berthold 24,040 €8.90 26,724 €3.02 14,168 €1.93 Lionel Carnot 22,650 €11.80 17,000 €8.87 — — John de Koning 22,650 €11.80 17,000 €8.87 — — Anand Mehra 22,650 €11.80 17,000 €8.87 — — Gregory Perry 22,650 €11.80 17,000 €8.87 — — Gabriele Dallmann(*) — — 16,828 €3.24 4,272 €1.93 Gerard van Odijk(*) — — — — 21,874 €1.93 Total 193,866 €9.61 185,128 €7.21 113,890 €4.93 (*)former board member 22.Related party disclosuresFor the years ended December 31, 2017, 2016, and 2015, certain Key Management Personnel and other senior management received regular salaries,bonuses and contributions to post-employment schemes as well as non-cash compensation as disclosed in Note 21. Additionally, members of the Boardof Directors received compensation for their services in the form of cash compensation as well as non-cash compensation, as disclosed in Note 21.On May 24, 2017, the Company entered into a settlement agreement with Shelley Margetson, the Company’s former Chief Operating Officer pursuantto which Ms. Margetson resigned as a statutory director of the Company effective as of May 24, 2017 and ended her employment with the Companyeffective as of August 1, 2017. As part of the terms of the settlement agreement, Ms. Margetson is entitled to a severance payment equal to 12 monthsof her annual base salary, 50% of which was paid in a lump sum in August 2017 and the remaining 50% F-40Table of Contentsis being paid in the form of salary continuation over the six-month period following August 1, 2017. In addition, Ms. Margetson was entitled to anaccelerated vesting of any unvested Company options and restricted stock units held by Ms. Margetson that would have vested during the 12-monthperiod following her separation date. As of December 31, 2017, the Company has a remaining accrual of less than €0.1 million related to thisagreement included in accrued personnel. As disclosed in Note 13 and Note 15, the Company entered into a collaboration and license agreement and ashare subscription agreement with Incyte in which the terms and transactional amounts incurred between Incyte and the Company are more fullydescribed.As of March 28, 2018, the following shareholders currently hold a position in the Board of Directors and have filed a form 13-D to reflect ownership inthe Company of greater than 5%: • Bay City Capital Coöperatief U.A. • Coöperatief LSP IV U.A. • Sofinnova Venture Partners IX, L.P.Additionally, Ton Logtenberg, the Company’s CEO) and Executive Director, is the sole the Director and owner of Biophrase BV (“Biophrase”). As ofMarch 28, 2018, Biophrase is a less than 1% shareholder. There were no transactions between the Company and Biophrase BV in 2017. 23.Operating leasesRentOn November 1, 2016, Merus N.V. closed a new lease agreement with Stichting Incubator Utrecht for a new office building. The agreement term is forfive years and expires in the fourth quarter of 2021. If the lease is not terminated by Merus, it will be automatically renewed for a period of two years.The agreed rental price is €434 thousand per year. The Company moved into the new office building in November 2016. For the years endedDecember 31, 2017, and 2016, the Company recognized an amount of €564 thousand and €270 thousand, respectively, for rent and service chargesrelated to the abovementioned buildings.Future minimum lease payments under this lease as at December 31, 2017 are payable as follows: Less than one year 602 Between one and five years 1,897 More than five years — Total 2,499 24.Subsequent eventsOn January 8, 2018, the Company and Simcere Pharmaceutical Group executed a collaboration and license agreement and agreed to grant Simcere anexclusive license to develop and commercialize in China three bispecific antibodies utilizing the Company’s Biclonics® technology platform in thearea of immuno-oncology. The Company will retain all rights outside of China. As part of the agreement, the Company has agreed to lead research anddiscovery activities while Simcere has agreed to be responsible for the Investigational New Drug (IND) enabling studies, clinical development,regulatory filings and commercialization of these product candidates in China. As a key strategic component of the collaboration, Simcere will beresponsible for IND enabling studies and manufacturing of clinical trial materials in China, which the Company intends to use to assist regulatoryfiling and early stage clinical development in the rest of the world. Finally, the Company will receive an upfront and be eligible to receive milestonepayments contingent upon Simcere achieving certain specified development and commercial goals. The Company will be eligible to receive tieredroyalty payments on sales of any products resulting from the collaboration in China from Simcere. Simcere will be eligible to receive tiered royaltypayments on sales outside of China from the Company. F-41Table of ContentsOn February 13, 2018, the Company entered into a Purchase Agreement with the purchasers named therein. Pursuant to the Purchase Agreement, theCompany agreed to sell an aggregate of 3,099,997 of its common shares, nominal value €0.09 per share, to the Investors for aggregate gross proceeds ofapproximately $55.8 million, at a purchase price equal to $18.00 per share. The Purchase Agreement contains customary representations and warrantiesfrom the Company and the Investors and customary closing conditions. The closing of the Private Placement occurred on February 15, 2018.On February 13, 2018, in connection with the Purchase Agreement, the Company entered into a Registration Rights Agreement with the Investors.Pursuant to the Registration Rights Agreement, the Company agreed to prepare and file a registration statement with the SEC no later than May 15,2018 for purposes of registering the resale of the Shares. As part of the terms of the Registration Rights Agreement, the Company agreed to use itsreasonable best efforts to cause this registration statement to be declared effective by the SEC prior to the 120th day after the Closing Date (or the150th day if the SEC reviews the registration statement).On March 14, 2018, we entered into a second contract research and license agreement with ONO. Pursuant to an exclusive option granted to ONO in aprior agreement executed in April 2014, ONO exercised its option to enter into the March 2018 agreement. We granted ONO an exclusive, worldwide,royalty-bearing license, with the right to sublicense, research, test, make, use and market bispecific antibody candidates based on our Biclonics®technology platform against two undisclosed targets directed to a particular undisclosed target combination. ONO identifies and selects the licensedbispecific antibodies for which it is responsible for conducting further non-clinical and clinical development activities for such licensed bispecificantibodies and pharmaceutical products containing such antibodies, including manufacture and process development. ONO controls and has exclusiverights over the worldwide commercialization of any approved products, including worldwide supply, and is solely responsible for all costs andexpenses related to commercialization. ONO has agreed to fund our research and development activities and be responsible for the payment of all costsand expenses for its own research and development activities, which are set out in a mutually agreed upon research plan. We retain all rights to use andcommercialize any antibodies that are generated under the collaborative research program, excluding the up to five lead and/or selected antibodiesagainst the targets ONO is pursuing, provided that the use and commercialization is not with respect to the particular target combination.ONO has agreed to pay an upfront non-refundable payment of €700,000 for the rights granted and we are also eligible to receive an aggregate of€33.7 million in milestone payments upon achievement of specified research and clinical development milestones. For products commercialized underthe License Agreement, if any, the Company is eligible to receive a mid-single digit royalty on net sales. F-42Table of ContentsSIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized theundersigned to sign this annual report on its behalf. MERUS N.V.By: /s/ Ton LogtenbergName: Ton LogtenbergTitle: Chief Executive OfficerBy: /s/ John J. CrowleyName: John J. CrowleyTitle: Chief Financial OfficerDate: April 30, 2018Exhibit 1.1This is a translation into English of the official Dutch version of the deed of amendment to the articles of association of a limited liability company underDutch law. Definitions included in Article 1 below appear in the English alphabetical order, but will appear in the Dutch alphabetical order in the officialDutch version. In the event of a conflict between the English and Dutch texts, the Dutch text shall prevail.DEED OF AMENDMENT TO THE ARTICLES OF ASSOCIATION MERUS N.V.On this day, the twenty-ninth day of May two thousand and seventeen, appeared before me, Wijnand Hendrik Bossenbroek, civil law notary at Amsterdam:Paul Cornelis Simon van der Bijl, employed at the offices of me, civil law notary, located at 1082 PR Amsterdam, Beethovenstraat 400, born inHaarlemmermeer on the twenty-sixth day of January nineteen hundred and eighty.The person appearing declared that the general meeting of shareholders of Merus N.V., a limited liability company, having its corporate seat in Utrecht(address: 3584 CM Utrecht, Yalelaan 62, trade register number: 30189136) (the “Company”), at the annual general meeting of shareholders held on thetwenty-fourth day of May two thousand and seventeen, decided, among other things, to amend the Company’s articles of association in their entirety.A copy of the minutes of the abovementioned meeting (the “Minutes”) will be attached to this Deed as an annex.The Company’s articles of association were most recently amended by a deed executed on the nineteenth day of May two thousand and sixteen before FreerkVolders, civil law notary at Rotterdam.In order to carry out the abovementioned decision to amend the articles of association, the person appearing declared that he was hereby amending theCompany’s articles of association in their entirety, as set out below:ARTICLES OF ASSOCIATIONDEFINITIONS AND INTERPRETATIONArticle 1 1.1In these articles of association the following definitions shall apply: Article An article of these articles of association.Board of Directors The Company’s board of directors.Board Rules The internal rules applicable to the Board of Directors, as drawn up by theBoard of Directors.CEO The Company’s chief executive officer.Chairman The chairman of the Board of Directors.Class Meeting The meeting of holders of shares of a certain class.Company The company to which these articles of association pertain.DCC The Dutch Civil Code. 1Director A member of the Board of Directors.EURIBOR The EURIBOR interest rate, as published by Thomson Reuters or anotherinstitution chosen by the Board of Directors, for loans with a maturity ofthree, six, nine or twelve months, whichever has had the highestmathematical average over the financial year (or the relevant part thereof) inrespect of which the relevant distribution is made, but in any event no lessthan zero percent.Executive Director An executive Director.General Meeting The Company’s general meeting of shareholders.Group Company An entity or partnership which is organisationally connected with the Company in an economic unit within the meaning of Section 2:24b DCC.Indemnified Officer A current or former Director and such other current or former officer or employee of the Company or its Group Companies as designated by the Board of Directors.Meeting Rights With respect to the Company, the rights attributed by law to the holders of depository receipts issued for shares with a company’s cooperation, including the right to attend and address a General Meeting.Non-Executive Director A non-executive Director.Person with Meeting Rights A shareholder, a usufructuary or pledgee with voting rights or a holder of depository receipts for shares issued with the Company’s cooperation.Preferred Distribution A distribution on the preferred shares for an amount equal to the Preferred Interest Rate calculated over the aggregate amount paid up on those preferred shares, whereby: a. any amount paid up on those preferred shares (including as a result of an issue of preferred shares) during the financial year (or the relevant part thereof) in respect of which the distribution is made shall only be taken into account proportionate to the number of days that elapsed during that financial year (or the relevant part thereof) after the payment was made on those preferred shares; b. any reduction of the aggregate amount paid up on preferred shares during the financial year (or the relevant part thereof) in respect of which the distribution is made shall be taken into account proportionate to the number of days that elapsed during that financial year (or the relevant part thereof) until such reduction was effected; and 2 c. if the distribution is made in respect of part of a financial year, the amount of the distribution shall be proportionate to the number of days that elapsed during that part of the financial year.Preferred Interest Rate The mathematical average, calculated over the financial year (or the relevant part thereof) in respect of which a distribution is made on preferred shares, of the relevant EURIBOR interest rate, plus a margin not exceeding five hundred basis points (500bps) to be determined by the Board of Directors each time when, or before, preferred shares are issued without preferred shares already forming part of the Company’s issued share capital.Registration Date The date of registration for a General Meeting as provided by law.Simple Majority More than half of the votes cast.Subsidiary A subsidiary of the Company within the meaning of Section 2:24a DCC, including: a. an entity in whose general meeting the Company or one or more of its Subsidiaries can exercise, whether or not by virtue of an agreement with other parties with voting rights, individually or collectively, more than half of the voting rights; and b. an entity of which the Company or one or more of its Subsidiaries are members or shareholders and can appoint or dismiss, whether or not by virtue of an agreement with other parties with voting rights, individually or collectively, more than half of the managing directors or of the supervisory directors, even if all parties with voting rights cast their votes. 1.2Unless the context requires otherwise, references to “shares” or “shareholders” without further specification are to any class of shares or to theholders thereof, respectively. 1.3References to statutory provisions are to those provisions as they are in force from time to time. 1.4Terms that are defined in the singular have a corresponding meaning in the plural. 1.5Words denoting a gender include each other gender. 1.6Except as otherwise required by law, the terms “written” and “in writing” include the use of electronic means of communication. 3NAME AND OFFICIAL SEATArticle 2 2.1The Company is a limited liability company (naamloze vennootschap) and its name is Merus N.V. 2.2The Company has its official seat in Utrecht.OBJECTSArticle 3The Company’s objects are: a.to develop products and services in the area of biotechnology; b.to finance Group Companies or other parties; c.to borrow, to lend to raise funds, including the issue of bonds, promissory notes or other financial instruments or evidence of indebtedness as well asto enter into agreements in connection with the aforementioned; d.to supply advice and to render services to Group Companies or other parties; e.to render guarantees, to bind the Company, to provide security, to warrant performance in any other way and to assume liability, whether jointly andseverally or otherwise, in respect of obligations of Group Companies or other parties; f.to incorporate, to participate in any way whatsoever in, to manage, to supervise and to hold any other interest in other entities, companies,partnerships and businesses; g.to obtain, alienate, encumber, manage and exploit registered property and items of property in general; h.to trade in currencies, securities and items of property in general; i.to develop and trade in patent, trademarks, licenses, know-how and other industrial property rights; and j.to perform any and all activity of industrial, financial or commercial nature and to do anything which, in the widest sense of the word, is connectedwith or may be conducive to the objects described above.SHARES - AUTHORISED SHARE CAPITAL AND DEPOSITORY RECEIPTSArticle 4 4.1The Company’s authorised share capital amounts to eight million one hundred thousand euro (EUR 8,100,000). 4.2The authorised share capital is divided into: a.forty-five million (45,000,000) common shares; and b.forty-five million (45,000,000) preferred shares, each having a nominal value of nine eurocents (EUR 0.09). 4.3The Board of Directors may resolve that one or more shares are divided into such number of fractional shares as may be determined by the Board ofDirectors. Unless specified differently, the provisions of these articles of association concerning shares and shareholders apply mutatis mutandis tofractional shares and the holders thereof, respectively. 4.4The Company may cooperate with the issue of depository receipts for shares in its capital. 4SHARES - FORM OF SHARES AND SHARE REGISTERArticle 5 5.1All shares are registered shares, provided that the Board of Directors may resolve that one or more common shares are bearer shares, represented byphysical share certificates. 5.2The Board of Directors is not required to comply with a request made by a shareholder to convert one or more of his registered shares into bearershares or vice versa. If the Board of Directors resolves to grant such a request, the shareholder concerned shall be charged for the costs of suchconversion. 5.3Registered shares shall be numbered consecutively, starting from 1 for each class of shares. 5.4The Board of Directors shall keep a register setting out the names and addresses of all holders of registered shares and all holders of a usufruct orpledge in respect of such shares. The register shall also set out any other particulars that must be included in the register pursuant to applicable law.Part of the register may be kept outside the Netherlands to comply with applicable local law or pursuant to stock exchange rules. 5.5Shareholders, usufructuaries and pledgees whose particulars must be set out in the register shall provide the Board of Directors with the necessaryparticulars in a timely fashion. Any consequences of not, or incorrectly, notifying such particulars shall be borne by the party concerned. 5.6All notifications may be sent to shareholders, usufructuaries and pledgees whose particulars must be set out in the register at their respectiveaddresses as set out in the register. 5.7If the Board of Directors has resolved that one or more common shares are bearer shares, share certificates shall be issued for such bearer shares insuch form as the Board of Directors may determine. Share certificates may represent one or more bearer shares. Each share certificate shall be signedby or on behalf of a Director. 5.8The holder of evidence of a bearer share may request the Company to provide him with a duplicate for a missing share certificate. The Companyshall only provide such duplicate: a.if the party making the request can demonstrate, to the satisfaction of the Board of Directors, that such party is indeed entitled to receive suchduplicate; and b.if a period of four weeks has elapsed after having published the request on the Company’s website, without any objection to such requesthaving been received by the Company within that period. 5.9If an objection as referred to in Article 5.8 paragraph b. has been received by the Company in a timely fashion, the Company shall only provide theduplicate to the party who requested such duplicate after having been provided with a copy of a binding advice or court order to provide suchduplicate, without the Company being required to investigate the competence of the relevant arbitrators or court, as the case may be, or the validityof such binding advice or judgment, as the case may be. 5.10Upon a duplicate of a share certificate for a bearer share having been provided by the Company, such duplicate shall replace the original sharecertificate and no rights can be derived any longer from the share certificate thus replaced. 5SHARES - ISSUEArticle 6 6.1Shares can be issued pursuant to a resolution of the General Meeting or of another body authorised by the General Meeting for this purpose for aspecified period not exceeding five years. When granting such authorisation, the number of shares that may be issued must be specified. Theauthorisation may be extended, in each case for a period not exceeding five years. Unless stipulated differently when granting the authorisation, theauthorisation cannot be revoked. For as long as and to the extent that another body has been authorised to resolve to issue shares, the GeneralMeeting shall not have this authority. 6.2Article 6.1 applies mutatis mutandis to the granting of rights to subscribe for shares, but does not apply in respect of issuing shares to a partyexercising a previously acquired right to subscribe for shares. 6.3The Company may not subscribe for shares in its own capital.SHARES - PRE-EMPTION RIGHTSArticle 7 7.1Upon an issue of shares, each holder of common shares shall have a pre-emption right in proportion to the aggregate nominal value of his commonshares. No pre-emption rights are attached to preferred shares. 7.2In deviation of Article 7.1, holders of common shares do not have pre-emption rights in respect of: a.preferred shares; b.shares issued against non-cash contribution; or c.shares issued to employees of the Company or of a Group Company. 7.3The Company shall announce an issue with pre-emption rights and the period during which those rights can be exercised in the State Gazette and ina daily newspaper with national distribution, unless all shares are registered shares and the announcement is sent in writing to all shareholders at theaddresses submitted by them. 7.4Pre-emption rights may be exercised for a period of at least two weeks after the date of announcement in the State Gazette or after the announcementwas sent to the shareholders. 7.5Pre-emption rights may be limited or excluded by a resolution of the General Meeting or of the body authorised as referred to in Article 6.1, if thatbody was authorised by the General Meeting for this purpose for a specified period not exceeding five years. The authorisation may be extended, ineach case for a period not exceeding five years. Unless stipulated differently when granting the authorisation, the authorisation cannot be revoked.For as long as and to the extent that another body has been authorised to resolve to limit or exclude pre-emption rights, the General Meeting shallnot have this authority. 7.6A resolution of the General Meeting to limit or exclude pre-emption rights, or to grant an authorisation as referred to in Article 7.5, shall require amajority of at least two thirds of the votes cast if less than half of the issued share capital is represented at the General Meeting. 7.7The preceding provisions of this Article 7 apply mutatis mutandis to the granting of rights to subscribe for shares, but do not apply in respect ofissuing shares to a party exercising a previously acquired right to subscribe for shares. 6SHARES - PAYMENTArticle 8 8.1Without prejudice to Article 8.2, the nominal value of a share and, if the share is subscribed for at a higher price, the difference between theseamounts must be paid up upon subscription for that share. However, it may be stipulated that part of the nominal value of a preferred share, notexceeding three quarters thereof, need not be paid up until the Company has called for payment. The Company shall observe a reasonable noticeperiod of at least one month with respect to any such call for payment. 8.2Parties who professionally place shares for their own account may be allowed by virtue of an agreement to pay up less than the nominal value of theshares subscribed for by them, provided that at least ninety-four percent (94%) of this amount is paid up in cash ultimately upon subscription forthose shares. 8.3Shares must be paid up in cash, except to the extent that payment by means of a contribution in another form has been agreed. 8.4Payment in a currency other than the euro may only be made with the Company’s consent. Where such a payment is made, the payment obligationis satisfied for the amount in euro for which the paid amount can be freely exchanged. Without prejudice to the last sentence of Section 2:80a(3)DCC, the date of the payment determines the exchange rate.SHARES - FINANCIAL ASSISTANCEArticle 9 9.1The Company may not provide security, give a price guarantee, warrant performance in any other way or commit itself jointly and severally orotherwise with or for others with a view to the subscription for or acquisition of shares or depository receipts for shares in its capital by others. Thisprohibition applies equally to Subsidiaries. 9.2The Company and its Subsidiaries may not provide loans with a view to the subscription for or acquisition of shares or depository receipts for sharesin the Company’s capital by others, unless the Board of Directors resolves to do so and Section 2:98c DCC is observed. 9.3The preceding provisions of this Article 9 do not apply if shares or depository receipts for shares are subscribed for or acquired by or for employeesof the Company or of a Group Company.SHARES - ACQUISITION OF OWN SHARESArticle 10 10.1The acquisition by the Company of shares in its own capital which have not been fully paid up shall be null and void. 10.2The Company may only acquire fully paid up shares in its own capital for no consideration or if and to the extent that the General Meeting hasauthorised the Board of Directors for this purpose and all other relevant statutory requirements of Section 2:98 DCC are observed. 10.3An authorisation as referred to in Article 10.2 remains valid for no longer than eighteen months. When granting such authorisation, the GeneralMeeting shall determine the number of shares that may be acquired, how they may be acquired and within which range 7 the acquisition price must be. An authorisation shall not be required for the Company to acquire common shares in its own capital in order totransfer them to employees of the Company or of a Group Company pursuant to an arrangement applicable to them, provided that these commonshares are included on the price list of a stock exchange. 10.4Without prejudice to Articles 10.1 through 10.3, the Company may acquire shares in its own capital for cash consideration or for considerationsatisfied in the form of assets. In the case of a consideration being satisfied in the form of assets, the value thereof, as determined by the Board ofDirectors, must be within the range stipulated by the General Meeting as referred to in Article 10.3. 10.5The previous provisions of this Article 10 do not apply to shares acquired by the Company under universal title of succession. 10.6In this Article 10, references to shares include depository receipts for shares.SHARES - REDUCTION OF ISSUED SHARE CAPITALArticle 11 11.1The General Meeting can resolve to reduce the Company’s issued share capital by cancelling shares or by reducing the nominal value of shares byvirtue of an amendment to these articles of association. The resolution must designate the shares to which the resolution relates and it must providefor the implementation of the resolution. 11.2A resolution to cancel shares may only relate to: a.shares held by the Company itself or in respect of which the Company holds the depository receipts; and b.all preferred shares, with repayment of the amounts paid up in respect thereof and provided that, to the extent allowed under Articles 30.1 and30.6, a distribution is made on those preferred shares, in proportion to the amounts paid up on those preferred shares, immediately prior tosuch cancellation becoming effective, for an aggregate amount of: i.the total of all Preferred Distributions (or parts thereof) in relation to financial years prior to the financial year in which thecancellation occurs, to the extent that these should have been distributed but have not yet been distributed as described in Article32.1; and ii.the Preferred Distribution calculated in respect of the part of the financial year in which the cancellation occurs, for the number ofdays that have elapsed during such part of the financial year. 11.3A resolution of the General Meeting to reduce the Company’s issued share capital shall require a majority of at least two thirds of the votes cast ifless than half of the issued share capital is represented at the General Meeting. 11.4If a resolution of the General Meeting to reduce the Company’s issued share capital relates to preferred shares, such resolution shall always requirethe prior or simultaneous approval of the Class Meeting of preferred shares.SHARES - ISSUE AND TRANSFER REQUIREMENTSArticle 12 12.1Except as otherwise provided or allowed by Dutch law, the issue or transfer of a share shall require a deed to that effect and, in the case of a transferand unless the Company itself is a party to the transaction, acknowledgement of the transfer by the Company. 812.2The acknowledgement shall be set out in the deed or shall be made in such other manner as prescribed by law. 12.3For as long as common shares are admitted to trading on the New York Stock Exchange, the NASDAQ Stock Market or on any other regulated stockexchange operating in the United States of America, the laws of the State of New York shall apply to the property law aspects of the common sharesreflected in the register administered by the relevant transfer agent.SHARES - USUFRUCT AND PLEDGEArticle 13 13.1Shares can be encumbered with a usufruct or pledge. The creation of a pledge on preferred shares shall require the prior approval of the Board ofDirectors. 13.2The voting rights attached to a share which is subject to a usufruct or pledge vest in the shareholder concerned. 13.3In deviation of Article 13.2: a.the holder of a usufruct or pledge on common shares shall have the voting rights attached thereto if this was provided when the usufruct orpledge was created; and b.the holder of a usufruct or pledge on preferred shares shall have the voting rights attached thereto if this was provided when the usufruct orpledge was created and this was approved by the Board of Directors. 13.4Shareholders without voting rights and usufructuaries and pledgees with voting rights will have Meeting Rights. Usufructuaries and pledgeeswithout voting rights shall not have Meeting Rights.SHARES - TRANSFER RESTRICTIONSArticle 14 14.1A transfer of preferred shares shall require the prior approval of the Board of Directors. A shareholder wishing to transfer preferred shares must firstrequest the Board of Directors to grant such approval. A transfer of common shares is not subject to transfer restrictions under these articles ofassociation. 14.2A transfer of the preferred shares to which the request for approval relates must take place within three months after the approval of the Board ofDirectors has been granted or is deemed to have been granted pursuant to Article 14.3. 14.3The approval of the Board of Directors shall be deemed to have been granted: a.if no resolution granting or denying the approval has been passed by the Board of Directors within three months after the Company hasreceived the request for approval; or b.if the Board of Directors, when denying the approval, does not notify the requesting shareholder of the identity of one or more interestedparties willing to purchase the relevant preferred shares. 914.4If the Board of Directors denies the approval and notifies the requesting shareholder of the identity of one or more interested parties, the requestingshareholder shall notify the Board of Directors within two weeks after having received such notice whether: a.he withdraws his request for approval, in which case the requesting shareholder cannot transfer the relevant preferred shares; or b.he accepts the interested party(ies), in which case the requesting shareholder shall promptly enter into negotiations with the interestedparty(ies) regarding the price to be paid for the relevant preferred shares.If the requesting shareholder does not notify the Board of Directors of his choice in a timely fashion, he shall be deemed to have withdrawn hisrequest for approval, in which case he cannot transfer the relevant preferred shares. 14.5If an agreement is reached in the negotiations referred to in Article 14.4 paragraph b. within two weeks after the end of the period referred to inArticle 14.4, the relevant preferred shares shall be transferred for the agreed price within three months after such agreement having been reached. Ifno agreement is reached in these negotiations in a timely fashion: a.the requesting shareholder shall promptly notify the Board of Directors thereof; and b.the price to be paid for the relevant preferred shares shall be equal to the value thereof, as determined by one or more independent experts tobe appointed by the requesting shareholder and the interested party(ies) by mutual agreement. 14.6If no agreement is reached on the appointment of the independent expert(s) as referred to in Article 14.5 paragraph b. within two weeks after the endof the period referred to in Article 14.5: a.the requesting shareholder shall promptly notify the Board of Directors thereof; and b.the requesting shareholder shall promptly request the president of the district court in whose district the Company has its official seat toappoint three independent experts to determine the value of the relevant preferred shares. 14.7If and when the value of the relevant preferred shares has been determined by the independent expert(s), irrespective of whether he/they was/wereappointed by mutual agreement or by the president of the relevant district court, the requesting shareholder shall promptly notify the Board ofDirectors of the value so determined. The Board of Directors shall then promptly inform the interested party(ies) of such value, following whichthe/each interested party may withdraw from the sale procedure by giving notice thereof the Board of Directors within two weeks. 14.8If any interested party withdraws from the sale procedure in accordance with Article 14.7, the Board of Directors: a.shall promptly inform the requesting shareholder and the other interested party(ies), if any, thereof; and b.shall give the opportunity to the/each other interested party, if any, to declare to the Board of Directors and the requesting shareholder, withintwo weeks, his willingness to acquire the preferred shares having become available as a result of the withdrawal, for the price determined bythe independent expert(s) (with the Board of Directors being entitled to determine the allocation of such preferred shares among any suchwilling interested party(ies) at its absolute discretion). 1014.9If it becomes apparent to the Board of Directors that all relevant preferred shares can be transferred to one or more interested parties for the pricedetermined by the independent expert(s), the Board of Directors shall promptly notify the requesting shareholder and such interested party(ies)thereof. Within three months after sending such notice the relevant preferred shares shall be transferred. 14.10If it becomes apparent to the Board of Directors that not all relevant preferred shares can be transferred to one or more interested parties for the pricedetermined by the independent expert(s): a.the Board of Directors shall promptly notify the requesting shareholder thereof; and b.the requesting shareholder shall be free to transfer all relevant preferred shares, provided that the transfer takes place within three months afterhaving received the notice referred to in paragraph a. 14.11The Company may only be an interested party under this Article 14 with the consent of the requesting shareholder. 14.12All notices given pursuant to this Article 14 shall be provided in writing. 14.13The preceding provisions of this Article 14 do not apply: a.to the extent that a shareholder is under a statutory obligation to transfer preferred shares to a previous holder thereof; b.if it concerns a transfer in connection with an enforcement of a pledge pursuant to Section 3:248 DCC in conjunction with Section 3:250 or3:251 DCC; or c.if it concerns a transfer to the Company, except in the case that the Company acts as an interested party pursuant to Article 14.11. 14.14This Article 14 applies mutatis mutandis in case of a transfer of rights to subscribe for preferred shares.BOARD OF DIRECTORS - COMPOSITIONArticle 15 15.1The Company has a Board of Directors consisting of: a.one or more Executive Directors, being primarily charged with the Company’s day-to-day operations; and b.one or more Non-Executive Directors, being primarily charged with the supervision of the performance of the duties of the Directors. TheBoard of Directors shall be composed of individuals. 15.2The Board of Directors shall determine the number of Executive Directors and the number of Non-Executive Directors. 15.3The Board of Directors shall elect an Executive Director to be the CEO. The Board of Directors may dismiss the CEO, provided that the CEO sodismissed shall subsequently continue his term of office as an Executive Director without having the title of CEO. 15.4The Board of Directors shall elect a Non-Executive Director to be the Chairman. The Board of Directors may dismiss the Chairman, provided thatthe Chairman so dismissed shall subsequently continue his term of office as a Non-Executive Director without having the title of Chairman. 1115.5If a Director is absent or incapacitated, he may be replaced temporarily by a person whom the Board of Directors has designated for that purposeand, until then, the other Director(s) shall be charged with the management of the Company. If all Directors are absent or incapacitated, themanagement of the Company shall be attributed to the person who most recently ceased to hold office as the CEO. If such former CEO is unwillingor unable to accept that position, the management of the Company shall be attributed to the person who most recently ceased to hold office as theChairman. If such former Chairman is also unwilling or unable to accept that position, the management of the Company shall be attributed to one ormore persons whom the General Meeting has designated for that purpose. The person(s) charged with the management of the Company in thismanner, may designate one or more persons to be charged with the management of the Company in addition to, or together with, such person(s). 15.6A Director shall be considered to be unable to act within the meaning of Article 15.5: a.in a period during which the Company has not been able to contact him (including as a result of illness), provided that such period lastedlonger than five consecutive days (or such other period as determined by the Board of Directors on the basis of the facts and circumstances athand); b.during his suspension; or c.in the deliberations and decision-making of the Board of Directors on matters in relation to which he has declared to have, or in relation towhich the Board of Directors has established that he has, a conflict of interests as described in Article 18.7.BOARD OF DIRECTORS - APPOINTMENT, SUSPENSION AND DISMISSALArticle 16 16.1The General Meeting shall appoint the Directors and may at any time suspend or dismiss any Director. In addition, the Board of Directors may atany time suspend an Executive Director. 16.2The General Meeting can only appoint Directors upon a nomination by the Board of Directors. The General Meeting may at any time resolve torender such nomination to be non-binding by a majority of at least two thirds of the votes cast representing more than half of the issued sharecapital. If a nomination is rendered non-binding, a new nomination shall be made by the Board of Directors. If the nomination comprises onecandidate for a vacancy, a resolution concerning the nomination shall result in the appointment of the candidate, unless the nomination is renderednon-binding. A second meeting as referred to in Section 2:120(3) DCC cannot be convened. 16.3At a General Meeting, a resolution to appoint a Director can only be passed in respect of candidates whose names are stated for that purpose in theagenda of that General Meeting or the explanatory notes thereto. 16.4Upon the appointment of a person as a Director, the General Meeting shall determine whether that person is appointed as Executive Director or asNon-Executive Director. 1216.5A resolution of the General Meeting to suspend or dismiss a Director shall require a majority of at least two thirds of the votes cast representing morethan half of the issued share capital, unless the resolution is passed at the proposal of the Board of Directors. A second meeting as referred to inSection 2:120(3) DCC cannot be convened. 16.6If a Director is suspended and the General Meeting does not resolve to dismiss him within three months from the date of such suspension, thesuspension shall lapse.BOARD OF DIRECTORS - DUTIES AND ORGANISATIONArticle 17 17.1The Board of Directors is charged with the management of the Company, subject to the restrictions contained in these articles of association. Inperforming their duties, Directors shall be guided by the interests of the Company and of the business connected with it. 17.2The Board of Directors shall draw up Board Rules concerning its organisation, decision-making and other internal matters, with due observance ofthese articles of association. In performing their duties, the Directors shall act in compliance with the Board Rules. 17.3The Directors may allocate their duties amongst themselves in or pursuant to the Board Rules or otherwise pursuant to resolutions adopted by theBoard of Directors, provided that: a.the Executive Directors shall be charged with the Company’s day-to-day operations; b.the task of supervising the performance of the duties of the Directors cannot be taken away from the Non-Executive Directors; c.the Chairman must be a Non-Executive Director; and d.the making of proposals for the appointment of a Director and the determination of the compensation of the Executive Directors cannot beallocated to an Executive Director. 17.4The Board of Directors may determine in writing, in or pursuant to the Board Rules or otherwise pursuant to resolutions adopted by the Board ofDirectors, that one or more Directors can validly pass resolutions in respect of matters which fall under his/their duties. 17.5The Board of Directors shall establish the committees which the Company is required to have and otherwise such committees as are deemed to beappropriate by the Board of Directors. The Board of Directors shall draw up (and/or include in the Board Rules) rules concerning the organisation,decision-making and other internal matters of its committees. 17.6The Board of Directors may perform the legal acts referred to in Section 2:94(1) DCC without the prior approval of the General Meeting.BOARD OF DIRECTORS - DECISION-MAKINGArticle 18 18.1Without prejudice to Article 18.5, each Director may cast one vote in the decision-making of the Board of Directors. 18.2A Director can be represented by another Director holding a written proxy for the purpose of the deliberations and the decision-making of the Boardof Directors. 18.3Resolutions of the Board of Directors and resolutions of the group of Non-Executive Directors shall be passed, irrespective of whether this occurs ata meeting or otherwise, by Simple Majority unless the Board Rules provide differently. 1318.4Invalid votes, blank votes and abstentions shall not be counted as votes cast. 18.5Where there is a tie in any vote of the Board of Directors, the Chairman shall have a casting vote, provided that there are at least three Directors inoffice. Otherwise, the relevant resolution shall not have been passed. 18.6The Executive Directors shall not participate in the decision-making concerning the determination of the compensation of Executive Directors. 18.7A Director shall not participate in the deliberations and decision-making of the Board of Directors on a matter in relation to which he has a direct orindirect personal interest which conflicts with the interests of the Company and of the business connected with it. If, as a result thereof, noresolution can be passed by the Board of Directors, the resolution may nevertheless be passed by the Board of Directors as if none of the Directorshas a conflict of interests as described in the previous sentence. 18.8Meetings of the Board of Directors can be held through audio-communication facilities, unless a Director objects thereto. 18.9Resolutions of the Board of Directors may, instead of at a meeting, be passed in writing, provided that all Directors are familiar with the resolutionto be passed and none of them objects to this decision-making process. Articles 18.1 through 18.7 apply mutatis mutandis. 18.10The approval of the General Meeting is required for resolutions of the Board of Directors concerning a material change to the identity or thecharacter of the Company or the business, including in any event: a.transferring the business or materially all of the business to a third party; b.entering into or terminating a long-lasting alliance of the Company or of a Subsidiary either with another entity or company, or as a fullyliable partner of a limited partnership or general partnership, if this alliance or termination is of significant importance for the Company; and c.acquiring or disposing of an interest in the capital of a company by the Company or by a Subsidiary with a value of at least one third of thevalue of the assets, according to the balance sheet with explanatory notes or, if the Company prepares a consolidated balance sheet, accordingto the consolidated balance sheet with explanatory notes in the Company’s most recently adopted annual accounts. 18.11The absence of the approval of the General Meeting of a resolution as referred to in Article 18.10 shall result in the relevant resolution being nulland void pursuant to Section 2:14(1) DCC but shall not affect the powers of representation of the Board of Directors or of the Directors.BOARD OF DIRECTORS - COMPENSATIONArticle 19 19.1The General Meeting shall determine the Company’s policy concerning the compensation of the Board of Directors with due observance of therelevant statutory requirements. 19.2The compensation of Directors shall be determined by the Board of Directors with due observance of the policy referred to in Article 19.1. 1419.3The Board of Directors shall submit proposals concerning arrangements in the form of shares or rights to subscribe for shares to the General Meetingfor approval. This proposal must at least include the number of shares or rights to subscribe for shares that may be awarded to the Board of Directorsand which criteria apply for such awards or changes thereto. The absence of the approval of the General Meeting shall not affect the powers ofrepresentation.BOARD OF DIRECTORS - REPRESENTATIONArticle 20 20.1The Board of Directors is entitled to represent the Company. 20.2The power to represent the Company also vests in the CEO individually, as well as in any other two Executive Directors acting jointly. 20.3The Company may grant powers of attorney to represent the Company and determine the scope of such powers of attorney. If a power of attorney isgranted to an individual, the Board of Directors may grant an appropriate title to such person.INDEMNITYArticle 21 21.1The Company shall indemnify and hold harmless each of its Indemnified Officers against: a.any financial losses or damages incurred by such Indemnified Officer; and b.any expense reasonably paid or incurred by such Indemnified Officer in connection with any threatened, pending or completed suit, claim,action or legal proceedings of a civil, criminal, administrative, investigative or other nature, formal or informal, in which he becomesinvolved,to the extent this relates to his current or former position with the Company and/or a Group Company and in each case to the fullest extentpermitted by applicable law. 21.2No indemnification shall be given to an Indemnified Officer: a.if a competent court or arbitral tribunal has established, without possibility for appeal, that the acts or omissions of such Indemnified Officerthat led to the financial losses, damages, expenses, suit, claim, action or legal proceedings as described in Article 21.1 result from either animproper performance of his duties as an officer of the Company or an unlawful or illegal act; b.to the extent that his financial losses, damages and expenses are covered under an insurance and the relevant insurer has settled, or hasprovided reimbursement for, these financial losses, damages and expenses (or has irrevocably undertaken to do so); or c.in relation to proceedings brought by such Indemnified Officer against the Company, except for proceedings brought to enforceindemnification to which he is entitled pursuant to these articles of association or an agreement between such Indemnified Officer and theCompany which has been approved by the Board of Directors. 21.3The Board of Directors may stipulate additional terms, conditions and restrictions in relation to the indemnification referred to in Article 21.1. 15GENERAL MEETING - CONVENING AND HOLDING MEETINGSArticle 22 22.1Annually, at least one General Meeting shall be held. This annual General Meeting shall be held within six months after the end of the Company’sfinancial year. 22.2A General Meeting shall also be held: a.within three months after the Board of Directors has considered it to be likely that the Company’s equity has decreased to an amount equal toor lower than half of its paid up and called up capital, in order to discuss the measures to be taken if so required; and b.whenever the Board of Directors so decides. 22.3General Meetings must be held in the place where the Company has its official seat or in Amsterdam, The Hague, Rotterdam or Schiphol(Haarlemmermeer). 22.4If the Board of Directors has failed to ensure that a General Meeting as referred to in Articles 22.1 or 22.2 paragraph a. is held, each Person withMeeting Rights may be authorised by the court in preliminary relief proceedings to do so. 22.5One or more Persons with Meeting Rights who collectively represent at least the part of the Company’s issued share capital prescribed by law forthis purpose may request the Board of Directors in writing to convene a General Meeting, setting out in detail the matters to be discussed. If theBoard of Directors has not taken the steps necessary to ensure that the General Meeting could be held within the relevant statutory period after therequest, the requesting Person(s) with Meeting Rights may be authorised, at his/their request, by the court in preliminary relief proceedings toconvene a General Meeting. 22.6Any matter of which the discussion has been requested in writing by one or more Persons with Meeting Rights who, individually or collectively,represent at least the part of the Company’s issued share capital prescribed by law for this purpose shall be included in the convening notice orannounced in the same manner, if the Company has received the substantiated request or a proposal for a resolution no later than on the sixtieth dayprior to that of the General Meeting. 22.7A General Meeting must be convened with due observance of the relevant statutory minimum convening period. 22.8All Persons with Meeting Rights must be convened for the General Meeting in accordance with applicable law. The holders of registered shares maybe convened for the General Meeting by means of convening letters sent to the addresses of those shareholders in accordance with Article 5.6. Theprevious sentence does not prejudice the possibility of sending a convening notice by electronic means in accordance with Section 2:113(4) DCC.GENERAL MEETING - PROCEDURAL RULESArticle 23 23.1The General Meeting shall be chaired by one of the following individuals, taking into account the following order of priority: a.by the Chairman, if there is a Chairman and he is present at the General Meeting; 16 b.by the CEO, if there is a CEO and he is present at the General Meeting; c.by another Director who is chosen by the Directors present at the General Meeting from their midst; or d.by another person appointed by the General Meeting.The person who should chair the General Meeting pursuant to paragraphs a. through d. may appoint another person to chair the General Meetinginstead of him. 23.2The chairman of the General Meeting shall appoint another person present at the General Meeting to act as secretary and to minute the proceedingsat the General Meeting. The minutes of a General Meeting shall be adopted by the chairman of that General Meeting or by the Board of Directors.Where an official report of the proceedings is drawn up by a civil law notary, no minutes need to be prepared. Every Director may instruct a civil lawnotary to draw up such an official report at the Company’s expense. 23.3The chairman of the General Meeting shall decide on the admittance to the General Meeting of persons other than: a.the persons who have Meeting Rights at that General Meeting, or their proxyholders; and b.those who have a statutory right to attend that General Meeting on other grounds. 23.4The holder of a written proxy from a Person with Meeting Rights who is entitled to attend a General Meeting shall only be admitted to that GeneralMeeting if the proxy is determined to be acceptable by the chairman of that General Meeting. 23.5The Company may direct that any person, before being admitted to a General Meeting, identify himself by means of a valid passport or driver’slicense and/or should be submitted to such security arrangements as the Company may consider to be appropriate under the given circumstances.Persons who do not comply with these requirements may be refused entry to the General Meeting. 23.6The chairman of the General Meeting has the right to eject any person from the General Meeting if he considers that person to disrupt the orderlyproceedings at the General Meeting. 23.7The General Meeting may be conducted in a language other than the Dutch language, if so determined by the chairman of the General Meeting. 23.8The chairman of the General Meeting may limit the amount of time that persons present at the General Meeting are allowed to take in addressing theGeneral Meeting and the number of questions they are allowed to raise, with a view to safeguarding the orderly proceedings at the General Meeting.The chairman of the General Meeting may also adjourn the meeting if he considers that this shall safeguard the orderly proceedings at the GeneralMeeting.GENERAL MEETING - EXERCISE OF MEETING AND VOTING RIGHTSArticle 24 24.1Each Person with Meeting Rights has the right to attend, address and, if applicable, vote at General Meetings, whether in person or represented bythe holder of a written proxy. Holders of fractional shares together constituting the nominal value of a share of the relevant class shall exercise theserights collectively, whether through one of them or through the holder of a written proxy. 1724.2The Board of Directors may decide that each Person with Meeting Rights is entitled, whether in person or represented by the holder of a writtenproxy, to participate in, address and, if applicable, vote at the General Meeting by electronic means of communication. For the purpose of applyingthe preceding sentence it must be possible, by electronic means of communication, for the Person with Meeting Rights to be identified, to observein real time the proceedings at the General Meeting and, if applicable, to vote. The Board of Directors may impose conditions on the use of theelectronic means of communication, provided that these conditions are reasonable and necessary for the identification of the Person with MeetingRights and the reliability and security of the communication. Such conditions must be announced in the convening notice. 24.3The Board of Directors can also decide that votes cast through electronic means of communication or by means of a letter prior to the GeneralMeeting are considered to be votes that are cast during the General Meeting. These votes shall not be cast prior to the Registration Date. 24.4For the purpose of Articles 24.1 through 24.3, those who have voting rights and/or Meeting Rights on the Registration Date and are recorded assuch in a register designated by the Board of Directors shall be considered to have those rights, irrespective of whoever is entitled to the shares ordepository receipts at the time of the General Meeting. Unless Dutch law requires otherwise, the Board of Directors is free to determine, whenconvening a General Meeting, whether the previous sentence applies. 24.5Each Person with Meeting Rights must notify the Company in writing of his identity and his intention to attend the General Meeting. This noticemust be received by the Company ultimately on the seventh day prior to the General Meeting, unless indicated otherwise when such GeneralMeeting is convened. Persons with Meeting Rights that have not complied with this requirement may be refused entry to the General Meeting.When a General Meeting is convened the Board of Directors may stipulate not to apply the previous provisions of this Article 24.5 in respect of theexercise of Meeting Rights and/or voting rights attached to preferred shares at such General Meeting.GENERAL MEETING - DECISION-MAKINGArticle 25 25.1Each share, irrespective of which class it concerns, shall give the right to cast one vote at the General Meeting. Fractional shares of a certain class, ifany, collectively constituting the nominal value of a share of that class shall be considered to be equivalent to such a share. 25.2No vote may be cast at a General Meeting in respect of a share belonging to the Company or a Subsidiary or in respect of a share for which any ofthem holds the depository receipts. Usufructuaries and pledgees of shares belonging to the Company or its Subsidiaries are not, however, precludedfrom exercising their voting rights if the usufruct or pledge was created before the relevant share belonged to the Company or a Subsidiary. Neitherthe Company nor a Subsidiary may vote shares in respect of which it holds a usufruct or a pledge. 1825.3Unless a greater majority is required by law or by these articles of association, all resolutions of the General Meeting shall be passed by SimpleMajority. 25.4Invalid votes, blank votes and abstentions shall not be counted as votes cast. Shares in respect of which an invalid or blank vote has been cast andshares in respect of which an abstention has been made shall be taken into account when determining the part of the issued share capital that isrepresented at a General Meeting. 25.5Where there is a tie in any vote of the General Meeting, the relevant resolution shall not have been passed. 25.6The chairman of the General Meeting shall decide on the method of voting and the voting procedure at the General Meeting. 25.7The determination during the General Meeting made by the chairman of that General Meeting with regard to the results of a vote shall be decisive.If the accuracy of the chairman’s determination is contested immediately after it has been made, a new vote shall take place if the majority of theGeneral Meeting so requires or, where the original vote did not take place by response to a roll call or in writing, if any party with voting rights whois present so requires. The legal consequences of the original vote shall lapse as a result of the new vote. 25.8The Board of Directors shall keep a record of the resolutions passed. The record shall be available at the Company’s office for inspection by Personswith Meeting Rights. Each of them shall, upon request, be provided with a copy of or extract from the record, at no more than the cost price. 25.9The Directors shall, in that capacity, have an advisory vote at the General Meetings.GENERAL MEETING - SPECIAL RESOLUTIONSArticle 26 26.1The following resolutions can only be passed by the General Meeting at the proposal of the Board of Directors: a.the issue of shares or the granting of rights to subscribe for shares; b.the limitation or exclusion of pre-emption rights; c.the designation or granting of an authorisation as referred to in Articles 6.1, 7.5 and 10.2, respectively; d.the reduction of the Company’s issued share capital; e.the granting of an approval as referred to in Article 18.10; f.the making of a distribution from the Company’s profits or reserves on the common shares; g.the making of a distribution in the form of shares in the Company’s capital or in the form of assets, instead of in cash; h.the amendment of these articles of association; i.the entering into of a merger or demerger; j.the instruction of the Board of Directors to apply for the Company’s bankruptcy; and k.the Company’s dissolution. 1926.2For purposes of Article 26.1, a resolution shall not be considered to have been proposed by the Board of Directors if such resolution has beenincluded in the convening notice or announced in the same manner by or at the request of one or more Persons with Meeting Rights pursuant toArticles 22.5 and/or 22.6, unless the Board of Directors has expressly indicated its support of such resolution in the agenda of the General Meetingconcerned or in the explanatory notes thereto.CLASS MEETINGSArticle 27 27.1A Class Meeting shall be held whenever a resolution of that Class Meeting is required by Dutch law or under these articles of association andotherwise whenever the Board of Directors so decides. 27.2Without prejudice to Article 27.1, for Class Meetings of common shares, the provisions concerning the convening of, drawing up of the agenda for,holding of and decision-making by the General Meeting apply mutatis mutandis. 27.3For Class Meetings of preferred shares, the following shall apply: a.Articles 22.3, 22.8, 23.3, 25.1, 25.2 through 25.9 apply mutatis mutandis; b.a Class Meeting must be convened no later than on the eighth day prior to that of the meeting; c.a Class Meeting shall appoint its own chairman; and d.where the rules laid down by these articles of association in relation to the convening, location of or drawing up of the agenda for a ClassMeeting have not been complied with, legally valid resolutions may still be passed by that Class Meeting by a unanimous vote at a meetingat which all shares of the relevant class are represented. 27.4Holders of preferred shares may pass resolutions in writing instead of at a meeting by a unanimous vote of all shareholders concerned. The votesmay be cast electronically.REPORTING - FINANCIAL YEAR, ANNUAL ACCOUNTS AND MANAGEMENT REPORTArticle 28 28.1The Company’s financial year shall coincide with the calendar year. 28.2Annually, within the relevant statutory period, the Board of Directors shall prepare the annual accounts and the management report and depositthem at the Company’s office for inspection by the shareholders. 28.3The annual accounts shall be signed by the Directors. If any of their signatures is missing, this shall be mentioned, stating the reasons. 28.4The Company shall ensure that the annual accounts, the management report and the particulars to be added pursuant to Section 2:392(1) DCC shallbe available at its offices as from the convening of the General Meeting at which they are to be discussed. The Persons with Meeting Rights areentitled to inspect such documents at that location and to obtain a copy at no cost. 28.5The annual accounts shall be adopted by the General Meeting. 20REPORTING - AUDITArticle 29 29.1The General Meeting shall instruct an auditor as referred to in Section 2:393 DCC to audit the annual accounts. Where the General Meeting fails todo so, the Board of Directors shall be authorised. 29.2The instruction may be revoked by the General Meeting and, if the Board of Directors has granted the instruction, by the Board of Directors. Theinstruction can only be revoked for well-founded reasons; a difference of opinion regarding the reporting or auditing methods shall not constitutesuch a reason.DISTRIBUTIONS - GENERALArticle 30 30.1A distribution can only be made to the extent that the Company’s equity exceeds the amount of the paid up and called up part of its capital plus thereserves which must be maintained by law. 30.2No entitlement to distributions is attached to preferred shares, other than as described in Articles 11.2, 32.1 and 33.3. 30.3Distributions shall be made in proportion to the aggregate nominal value of the shares . In deviation of the previous sentence, distributions onpreferred shares (or to the former holders of preferred shares) shall be made in proportion to the amounts paid up (or formerly paid up) on thosepreferred shares. 30.4The parties entitled to a distribution shall be the relevant shareholders, usufructuaries and pledgees, as the case may be, at a date to be determinedby the Board of Directors for that purpose. This date shall not be earlier than the date on which the distribution was announced. 30.5The General Meeting may resolve, subject to Article 26, that all or part of such distribution, instead of being made in cash, shall be made in the formof shares in the Company’s capital or in the form of the Company’s assets. 30.6The Board of Directors may resolve to make interim distributions, provided that it appears from interim accounts to be prepared in accordance withSection 2:105(4) DCC that the requirement referred to in Article 30.1 has been met and, if it concerns an interim distribution of profits, taking intoaccount the order of priority described in Article 32.1. 30.7A distribution shall be payable on such date and, if it concerns a distribution in cash, in such currency as determined by the Board of Directors. If itconcerns a distribution in the form of the Company’s assets, the Board of Directors shall determine the value attributed to such distribution forpurposes of recording the distribution in the Company’s accounts with due observance of applicable law (including the applicable accountingprinciples). 30.8A claim for payment of a distribution shall lapse after five years have expired after the distribution became payable. 30.9For the purpose of calculating the amount or allocation of any distribution, shares held by the Company in its own capital shall not be taken intoaccount. No distribution shall be made to the Company in respect of shares held by it in its own capital. 21DISTRIBUTIONS - RESERVESArticle 31 31.1All reserves maintained by the Company shall be attached exclusively to the common shares. 31.2Subject to Article 26, the General Meeting is authorised to resolve to make a distribution from the Company’s reserves. 31.3Without prejudice to Articles 31.4 and 32.2, distributions from a reserve shall be made exclusively on the class of shares to which such reserve isattached. 31.4The Board of Directors may resolve to charge amounts to be paid up on shares against the Company’s reserves, irrespective of whether those sharesare issued to existing shareholders.DISTRIBUTIONS - PROFITSArticle 32 32.1Subject to Article 30.1, the profits shown in the Company’s annual accounts in respect of a financial year shall be appropriated as follows, and inthe following order of priority: a.to the extent that any preferred shares have been cancelled without the distribution described in Article 11.2 paragraph b. having been paid infull and without any such deficit subsequently having been paid in full as described in this Article 32.1 or Article 32.2, an amount equal toany such (remaining) deficit shall be distributed to those who held those preferred shares at the moment of such cancellation becomingeffective; b.to the extent that any Preferred Distribution (or part thereof) in relation to previous financial years has not yet been paid in full as described inthis Article 32.1 or Article 32.2, an amount equal to any such (remaining) deficit shall be distributed on the preferred shares; c.the Preferred Distribution shall be distributed on the preferred shares in respect of the financial year to which the annual accounts pertain; d.the Board of Directors shall determine which part of the remaining profits shall be added to the Company’s reserves; and e.subject Article 26, the remaining profits shall be at the disposal of the General Meeting for distribution on the common shares. 32.2To the extent that the distributions described in Article 32.1 paragraphs a. through c. (or any part thereof) cannot be paid out of the profits shown inthe annual accounts, any such deficit shall be distributed from the Company’s reserves, subject to Articles 30.1 and 30.6. 32.3Without prejudice to Article 30.1, a distribution of profits shall be made after the adoption of the annual accounts that show that such distribution isallowed.DISSOLUTION AND LIQUIDATIONArticle 33 33.1In the event of the Company being dissolved, the liquidation shall be effected by the Board of Directors, unless the General Meeting decidesotherwise. 33.2To the extent possible, these articles of association shall remain in effect during the liquidation. 33.3To the extent that any assets remain after payment of all of the Company’s debts, those assets shall be distributed as follows, and in the followingorder of priority: 22 a.the amounts paid up on the preferred shares shall be repaid on such preferred shares; b.to the extent that any preferred shares have been cancelled without the distribution described in Article 11.2 paragraph b. having been paid infull and without any such deficit subsequently having been paid in full as described in Articles 32.1 and 32.2, an amount equal to any such(remaining) deficit shall be distributed to those who held those preferred shares at the moment of such cancellation becoming effective; c.to the extent that any Preferred Distribution (or part thereof) in relation to financial years prior to the financial year in which the distributionreferred to in paragraph a. occurs has not yet been paid in full as described in Articles 32.1 and 32.2, an amount equal to any such (remaining)deficit shall be distributed on the preferred shares; d.the Preferred Distribution shall be paid on the preferred shares calculated in respect of the part of the financial year in which the distributionreferred to in paragraph a. is made, for the number of days that have already elapsed during such part of the financial year; and e.any remaining assets shall be distributed to the holders of common shares. 33.4After the Company has ceased to exist, its books, records and other information carriers shall be kept for the period prescribed by law by the persondesignated for that purpose in the resolution of the General Meeting to dissolve the Company. Where the General Meeting has not designated sucha person, the liquidators shall do so.FINAL STATEMENTSFinally, the person appearing declared that: • as evidenced by the Minutes, he has been authorised to execute this Deed; and • upon the execution of this Deed, the Company’s issued share capital amounted to one million seven hundred forty-five thousand two hundredthirty-six euro and seventeen eurocents (EUR 1,745,236.17).The person appearing is known to me, civil law notary.This Deed was executed in Amsterdam on the date mentioned in its heading.After I, civil law notary, had conveyed and explained the contents of the Deed in substance to the person appearing, he declared that he had taken note of thecontents of the Deed, was in agreement with the contents and did not wish them to be read out in full. Following a partial reading, the Deed was signed by theperson appearing and by me, civil law notary. 23Exhibit 4.1MERUS N.V. 2010 EMPLOYEE OPTION PLANAs amended per May 29, 2017 1.DEFINITIONS AND INTERPRETATIONS 1.1.In this Plan, the following words and expressions shall have, where the context so admits, the meanings set forth below: Acquirer has the meaning given to it in Rule 4.1.Acquiring Company has the meaning given to it in Rule 4.5.Bad Leaver the Participant who is dismissed for (i) cause, as referred to in article 7:678 of the Dutch Civil Code(dringende reden voor de werkgever), or (ii) on grounds of termination or nonextension of the agreementfor reasons that can mainly be attributed to the relevant Participant concerned (as determined by adecision rendered in legal or arbitration proceedings that has become irrevocable, or a settlementagreement or another private extrajudicial agreement); or (iii) on grounds of the provisions of article7:685 or 6:265 and further of the Dutch Civil Code, where the reason for termination of the employmentagreement or the management agreement can mainly be attributed to the relevant Participant (asdetermined by a decision rendered in legal or arbitration proceedings that has become irrevocable).Board of Directors the board of directors (bestuur) of the Company from time to time. CEO means the member of the Board of Directors who is the chief executive officer of the Company.Company Merus N.V., a public limited liability company (naamloze vennootschap) incorporated under the laws ofthe Netherlands, having its corporate seat in Utrecht, the Netherlands, and its offices at Padualaan 8, 3584CH Utrecht, the Netherlands.Control the power of a company, directly or indirectly (i) to exercise more than 50% of the voting rights at ashareholders meeting of a company, or (ii) to appoint or dismiss more than 50% of the directors of themanagement board or of the members of the supervisory board of a company, or (iii) to direct themanagement of a company through the exercise of majority votes at directors’ meetings of suchcompany.Date of Grant the date on which an Option is granted.Date of Exercise the day on which an Option is exercised.Eligible Employee a person: • who is or has been employed by the Company (including functioning as a member of the Board ofDirectors); or • who is a third party (advisor/consultant or otherwise) with the prior written approval of the Board ofDirectors.Exercise Price the price per Share, as determined by the Grantor at the Date of Grant, at which an Eligible Employee mayacquire a Share upon the exercise of an Option granted to him, being not less than the nominal value ofthe underlying Share on the Date of Grant but subject to any adjustment pursuant to Rule 8 of this Plan.Fair Market Value means the value of the underlying Share of the Company as determined during the last valuation thattook place prior to the Termination Date.General Meeting of Shareholders the general meeting of shareholders (algemene vergadering van aandeelhouders) of the Company.Good Leaver a Participant whose employment or management agreement is terminated, either by himself or by theCompany, and who is not a Bad Leaver.Grantor the “Grantor” shall mean the Company.Insider Rules means the internal rules concerning the dealing in securities as determined and adopted by the Company.Legal Compliance Officer the legal compliance officer of the Company from time to time.Notice of Exercise a notice to the Legal Compliance Officer in a form to be determined by the Grantor whereby a Participantnotifies the Company of his wish to exercise an Option granted to him under this Plan.Option Agreement the Merus N.V. 2010 Employee Option Agreement; an agreement in a form to be determined by theGrantor whereby the Grantor grants Options under this Plan.Option subject to Rule 2.5 and the terms and conditions of the Plan, the non-transferable right of the Participantto, at the choice of the Grantor, acquire one Share.Participant any Eligible Employee to whom an Option has been granted, or where the context so admits, his legalsuccessor.Plan the Merus N.V. 2010 Employee Option Plan as amended from time to time.Retirement the cessation of employment in circumstances, which the Grantor regards as retirement (whether at normalretirement age or any other age).Rules the rules of the Plan as amended from time to time.Share a fully paid up common share in the capital of the Company.Tax Liability a liability, on the part of the Company, to account for any tax, social security or other levy in respect ofan Option for which the person entitled to the Option is liable, whether by reason of grant, Vesting,exercise or otherwise, including for the avoidance of doubt but without limitation any liability arisingafter termination of a Participant’s employment for whatever reason and which may arise or be incurred inany jurisdiction whatever, and by the law of the same jurisdiction may or shall be recovered from theperson entitled to the Option.Termination Date the date on which a Participant ceases to hold office or employment.Tranche the part of the number of Options granted under the Option Agreement that Vest in line with the vestingscheme as set out in the Option Agreement.Vest the point at which an Option becomes exercisable and “Vesting” and “Vested” shall be construedaccordingly.Vesting Commencement Date the date on which the Vesting commences, as stipulated in the Option Agreement.Vesting Date the date on which an Option or Tranches will become exercisable. 1.2.Where the context so admits or requires words importing the singular shall include the plural and vice versa and words importing the masculine shallinclude the feminine. 1.3.Reference in the Rules to any statutory provisions are to these provisions as amended, extended or re-enacted from time to time, and shall include anyregulations made thereunder. 1.4.The headings in the Rules are for the sake of convenience only and should be ignored when construing the Rules. 2.GRANT OF OPTIONS 2.1.Whether the Grantor will grant Options will be decided as follows: (a)with respect to Options to be granted to the non-executive directors of the Board of Directors, the Shareholders’ Meeting will decide. Anyresolution to that effect can only be adopted with a majority of two thirds of the votes cast in a meeting in which two third of the issued sharecapital of the Company is present or represented; (b)with respect to Options to the executive directors of the Board of Directors, the Board of Directors will decide provided that the non-executivedirectors will refrain from involvement in the decision making on the matter; (c)with respect to Options to Eligible Employees who are not members of the Board of Directors the Board of Directors will decide.In case the Grantor wishes to grant Options as referred to under (a) above, the Grantor shall request a Shareholders’ Meeting to be convened in order toadopt a resolution to that effect.Subject to (a), (b) and (c) of this Rule the Grantor has a discretionary power to grant Options to such Eligible Employees as it shall determine and todetermine the conditions under which such Options are granted.Subject to the Rules of this Plan a Participant shall receive Options granted with an Exercise Price as specified in the Option Agreement.Each and every grant of an Option is subject to the Insider Rules of the Company once these have been adopted. 2.2.The grant of an Option or the delivery of any Share following its exercise shall be subject to: (a)obtaining the required internal corporate approvals; and (b)obtaining any approval or consent required under any applicable laws, regulations of governmental authority and the requirements of anyrecognised stock exchange on which the Shares are traded. 2.3.The grant of an Option shall be evidenced by an Option Agreement, sent to the Eligible Employee on behalf of the Grantor by the chairman of theBoard of Directors or by the CEO, which document may relate to an individual Option or any number of Options granted at the same time. The OptionAgreement must at least state:the date of grant; (a)the number of Shares over which Options have been granted to the Participant; (b)the Exercise Price; (c)the Vesting Commencement Date and Vesting Date and/or Vesting Dates; (d)the date on which the Options will lapse pursuant to Rule 3.3(a) 2.4.Subject to Rule 6 of this Plan no payment by the Participant shall be required on the grant of Options. 2.5.Subject to the rights of exercise by the Participant’s legal successors in the event of a Participant’s death, every Option shall be personal to theParticipant to whom it is granted and shall not be transferable, in any way alienable or capable of being encumbered and may not be contributed to thenet wealth of an enterprise (vermogen van een onderneming).2.6.The Participant can accept a grant of Options only in whole. Acceptance takes place by returning a signed copy of the Option Agreement to the LegalCompliance Officer, which should be received ultimately on the latest moment of (1) sixty (60) days of the Date of Grant or (2) 30 Days of the date ofadoption of this Plan. Grants of Options that are not accepted in accordance with this Rule 2.6, will lapse automatically with immediate effect andwithout any consideration due. By accepting a grant of Options the Participant accepts the Rules of the Plan and all other regulations and documentsrelating to the granted Options. 3.RIGHTS OF EXERCISE AND LAPSE OF OPTIONS 3.1.Any Option granted to the Eligible Employee under this Plan, will Vest following the Vesting Scheme set out in the Option Agreement and furthermorein accordance with the conditions as set out in the Option Agreement. 3.2.If a Participant ceases to hold office or employment unvested Options shall lapse on the Termination Date, unless the Grantor, acting reasonably andgiven the specific circumstances of the Participant, determines otherwise, in which event the Grantor in its sole discretion and acting reasonably, shalldetermine the extent, and the terms, of the Participant’s continued participation in the Plan. 3.3.Vested Options shall lapse upon the occurrence of the earliest of the following events: (a)the eight (8th) anniversary of the Date of Grant; (b)the expiry of any of the periods specified in Rules 4.1, 4.3 and 4.4; (c)(for the Participant ceasing to hold an office or employment or giving or being given notice to terminate employment) on the first (1) anniversaryof the Termination Date; (d)subject to Rule 4.4, the passing of an effective resolution, or the making of an order by any court, for the winding-up of the Company; (e)subject to Rule 4.3, the Participant or his legal successor being deprived of the legal or beneficial ownership of the relevant Options by operationof law or being declared bankrupt or having applied for temporary suspension of payment (surséance van betaling), unless the Grantor in itsabsolute discretion determines otherwise; (f)the Participant purporting to transfer or dispose of the Options or any rights in respect of it other than as permitted under Rule 2.5; (g)On the Termination Date in the event the Participant becomes a Bad Leaver. 4.TAKEOVER, RECONSTRUCTION AND WINDING-UP 4.1.Subject to Rule 4.5, if any person or legal entity (the “Acquirer”) obtains Control of the Company as a result of making an offer to acquire the whole orpart of the issued share capital of the Company or through any other means, which is either made without any condition or which is made on acondition such that if it is satisfied the Acquirer will have Control of the Company, Options will Vest upon such acquisition of Control and may beexercised during a period of one (1) month thereafter (or such period as the Grantor may determine). The Legal Compliance Officer shall notifyParticipants in writing as soon as possible and in any event with sufficient time to exercise their Options. Such exercise of Options shall be done inaccordance with any procedure set down by the Grantor.4.2.For the purpose of Rule 4.1 a person or legal entity shall be deemed to have obtained Control of the Company if he and others acting in concert withhim have together obtained Control of it. For the purpose of this Rule 4.2 persons shall be treated as “acting in concert” if pursuant to an agreement orunderstanding (whether formal or informal) they actively cooperate through the acquisition by any of them of Shares to obtain Control of theCompany. 4.3.Subject to Rule 4.5, if the Company or its legal successor applies for temporary suspension of payments (surséance van betaling) or in the event of arestructuring of the Company aimed at restructuring the Company’s debts, at the sole discretion of the Grantor, the Grantor may decide that Optionswill immediately Vest and under what conditions. 4.4.If a resolution of the General Meeting of Shareholders to voluntarily wind-up the Company (ontbinden) has been duly adopted, the Company shallnotify all Participants. Subject to Rule 4.5, Options will Vest and may be exercised during a period of one (1) month thereafter (or such period as theGrantor otherwise determines) and in each case conditionally on the resolution being duly passed. 4.5.Rules 4.1, 4.3 and 4.4 above shall not apply where: (a)Control of the Company is obtained prior to the adoption of this Plan; (b)the events form part of a scheme or arrangement whereby Control of the Company is obtained by another person or company (the “AcquiringCompany”); (c)immediately after the Acquiring Company obtains Control, the issued share capital of the Acquiring Company is directly or indirectly ownedsubstantially by the same persons or companies (or their legal successors) who were shareholders of the Company immediately prior to theAcquiring Company obtaining Control; (d)the Acquiring Company has agreed to grant new options in consideration for the release of any Options which have not lapsed or for any optionson shares in the Company’s capital, and (e)the Acquiring Company obtains Control in connection to a financing of the Company, whether privately done of by means of an IPO. 4.6.If the Grantor becomes aware that the Company is expected to be, or has been, affected by any demerger, dividend, dividend in specie, super dividendor other transaction which, in the opinion of the Grantor could affect (or has affected) the current or future value of any Option, the Grantor has thediscretionary power, acting reasonably, to determine new, or replace the, conditions of Vesting, or any such other terms and conditions of the Optionsthat may be required. 4.7.Where Rules 4.1, 4.3 or 4.4 apply, Options shall lapse to the extent not already exercised following the expiry of any specified period.5.MANNER OF EXERCISE 5.1.An Option may only be exercised by a Participant in its entirety. 5.2.An Option may only be exercised to the extent Vested and in accordance with the conditions as set out in the Option Agreement. 5.3.Subject to the Rules of this Plan and the Option Agreement, Options may be exercised by the receipt of a Notice of Exercise by the Legal ComplianceOfficer, which is completed and signed by the Participant, covering at least all the Shares over which the Options are then to be exercised unless theGrantor determines that a different exercise procedure should apply. 5.4.Payment of the Exercise Price must be made by the Participant in such manner and at such moment prior to the issue or transfer of the Shares as theBoard of Directors shall direct. 5.5.Once such rules have been adopted in accordance with Rule 2. 1, each exercise of an Option is subject to the Insider Rules of the Company asapplicable from time to time. Where any exercise would temporarily be prohibited by law, securities regulations, or the dealing or insider trading rulesof or applicable to the Company, the exercise period shall be extended with the length of such period of prohibition provided that an Option may notbe exercised after the expiry of the Option in accordance with any Rule of this Plan. 6.TAX LIABILITY 6.1.The Participant shall be responsible for and shall indemnify the Company against any Tax Liability. Without prejudice to Rule 6.2 below, theCompany may withhold any amounts from the Participant’s net pay for the relevant pay period or make such arrangements as are necessary to satisfyany Tax Liability. 6.2.In the event that any Tax Liability becomes due on the exercise of Options, the Participant will be deemed to have given irrevocable instructions to theCompany (or any other person acceptable to the Company) for the sale of sufficient Shares acquired on the exercise of Options to realize an amountequal to the Tax Liability and the payment of the Tax Liability to the Company, unless: (a)the Company is able to deduct an amount equal to the whole of the Tax Liability from the Participants net pay for the relevant pay period; or (b)the Participant has paid to the Company an amount equal to the Tax Liability; or (c)the Grantor determines otherwise. 7.ISSUE OR TRANSFER OF SHARES 7.1.Subject to the Rules of this Plan, including but not limited to Rule 6, and to having received the Exercise Price, the Grantor, in its sole discretion, shalldecide whether the Company shall: (a)procure the issue or transfer of such number of Shares to be transferred to the Participant pursuant to the exercise of an Option; or (b)settle the Options specified in the Notice of Exercise in cash, it being understood that the default settlement mechanism will be settlementthrough the issue or transfer of Shares covered by the Options. 7.2.The issue or transfer of any Shares under the Plan shall be subject to obtaining any such approval or consent as is mentioned in Rule 2.2 and theParticipant signing all documents relevant for the issue of Shares to the Participant. 8.ADJUSTMENTS 8.1.The number of Shares over which Options are granted, the conditions of exercise and the Exercise Price thereof (and where Options have beenexercised, but no Shares have been issued or transferred pursuant to such exercise, the number of Shares which may be so issued or transferred and theprice at which they may be acquired) shall be adjusted in such manner as the Grantor shall in consultation with the CEO determine following anycapitalisation issue, merger, any offer or invitation made by way of rights, subdivision, consolidation, reduction, other variation in the share capital ofthe Company, demerger, dividend, dividend in specie, super dividend or other corporate event which in the reasonable opinion of the Grantor justifiessuch an adjustment. 8.2.The Grantor or the Legal Compliance Officer may take such steps as it or he may consider necessary to notify Participants of any adjustment madeunder this Rule 8. 9.ADMINISTRATION 9.1.The Plan shall be administered by the Board of Directors, assisted by the Legal Compliance Officer. The Board of Directors shall have full authority,consistent with the Plan, to administer the Plan, including authority to interpret and construe any provision of the Plan, to amend the Plan, to correctany errors or mistakes of procedure, and to adopt such regulations for administering the Plan and such forms of exercise as it may deem necessary orappropriate. Decisions of the Board of Directors shall be final and binding on all parties. The Legal Compliance Officer will keep a register showing thenumber of Options granted to each Participant, the Exercise Price related to such Options and the further conditions pursuant to which the Options aregranted. Furthermore, the Legal Compliance Officer will supervise that the Plan is administered in accordance with the applicable laws and regulations. 9.2.Any notice or other communication under or in connection with the Plan may be given by personal delivery or by sending the same by electronicmeans or mail, in the case of a company to its registered office, and in the case of an individual to his last known address, or, where he is a director oremployee of the Company, either to his last known address or to the address of the place of business at which he performs the whole or substantially thewhole of the duties of his office or employment, and where a notice or other communication is given by mail, it shall be deemed to have been received72 hours after it was put into the mail properly addressed and stamped, and if by electronic means, when the sender receives a non automaticallygenerated electronic confirmation of receipt. 9.3.The Company may distribute to Participants copies of any notice or document normally sent by the Company to the holders of Shares.9.4The costs of introducing and administering the Plan shall be borne by the Company. 10.ALTERATIONS 10.1.Subject to this Rule 10, the Board of Directors may at any time alter or add to all or any of the provisions of the Plan in any respect. Amendments otherthan the adjustments as set forth in Rules 4.6, 8.1 and 10.3 will require the prior approval of the General Meeting of Shareholders and any resolution tothat effect can only be adopted by two thirds of the votes cast in a meeting in which two third of the issued share capital is present or represented. 10.2.Subject to Rule 10.3 and without prejudice to Rule 10.1, the prior approval of the General Meeting of Shareholders shall in any event be required forthe following alterations or additions to the material advantage of Participants to: (a)the persons to whom Options may be granted under the Plan; (b)the principal terms of the Options; (c)the determination of the Exercise Price; (d)the rights of Participants in the event of a variation of the share capital; and (e)the terms of this Rule 10.2.Any resolution to this effect can only be adopted by the General Meeting of Shareholders with two thirds of the votes cast in a meeting in which twothird of the issued share capital is present or represented. 10.3.Approval by the General Meeting of Shareholders shall not be required for any minor alteration or addition, which is to benefit the administration ofthe Plan. 10.4.Except to the extent required by law, no alteration or addition shall be made under Rule 10.1 which would materially abrogate or adversely affect thesubsisting rights of a Participant unless it is made with the written consent of the Participant so adversely affected. 10.5.As soon as reasonably practicable after making any alteration or addition under Rule 10. 1, the Grantor or the Legal Compliance Officer shall givewritten notice thereof to any Participant materially affected thereby. 10.6.No alteration to the Plan under this Rule 10 shall require the consent of any person unless expressly provided by laws or regulations or in the Rules. 11.LEGAL ENTITLEMENT 11.1.The Plan shall not form part of a Participant’s employment contract or terms and conditions of employment. Furthermore, nothing in the Plan, or in anyregulations pursuant to it shall confer on any person any right to continue in employment, nor will it affect the right of any provider of any servicerelationship to terminate the employment of any person without liability at any time with or without cause, nor will it impose upon the Grantor or anyother person any duty or liability whatsoever (whether in contract, tort, or otherwise howsoever) in connection with: (A)the lapse of any Option pursuant to the Plan; (B)the failure or refusal to exercise any discretion under the Plan; and/or (C)a Participant ceasing to be a person who has a service relationship for any reason whatever. 11.2.Options shall not (except as may be required by taxation law) form part of the emoluments of individuals or count as wages or remuneration for pensionor other purposes. 11.3.Nothing in the Plan shall be deemed to give any employee of the Company any right to participate in the Plan. 11.4.Any person who ceases to have the status or relationship of an employee with the Company as a result of the termination of his employment for anyreason and however that termination occurs, whether lawfully or otherwise, shall not be entitled and shall be deemed irrevocably to have waived anyentitlement by way of damages for dismissal or by way of compensation for loss of office or employment or otherwise to any sum, damages or otherbenefits to compensate that person for the loss of alteration of any rights, benefits or expectations in relation to any Option, the Plan or any instrumentexecuted pursuant to it. 12.DATA PROTECTION 12.1.By participating in the Plan, the Participant consents to the holding and processing of personal data provided by the Participant to the Company for allpurposes relating to the operation of the Plan. These include, but are not limited to: (A)Administering and maintaining Participant records; (B)Providing information to trustees of any employee benefit trust, registrars, brokers savings carrier or other third party administrators of the Plan;and (C)Providing information to future purchasers of the Company or the business in which the Participant works. 12.2.By participating in the Plan, the Participant consents to the transfer of personal data to persons within the European Union and jurisdictions outside theEuropean Union, for all purposes relating to the operation of the Plan. 13.GENERAL 13.1.No Option may be granted, exercised, released or surrendered at a time when such grant, exercise, release or surrender would not be in accordance withapplicable laws and regulations as amended from time to time. 13.2.The Plan shall terminate at the date of the passing of a resolution by the General Meeting of Shareholders to this effect. Termination of the Plan will bewithout prejudice to the subsisting rights of Participants. 13.3.These Rules, any Option Agreement and all Options granted shall be governed by and construed in accordance with the laws of the Netherlands. Thecompetent court in Amsterdam, the Netherlands shall have exclusive jurisdiction to settle any dispute in connection with this Plan or OptionAgreement.Exhibit 4.2MERUS N.V.2016 INCENTIVE AWARD PLANARTICLE I.PURPOSEThe Plan’s purpose is to enhance the Company’s ability to attract, retain and motivate persons who make (or are expected to make) importantcontributions to the Company by providing these individuals with equity ownership opportunities. Capitalized terms used in the Plan are defined inArticle XI.ARTICLE II.ELIGIBILITYService Providers are eligible to be granted Awards under the Plan, subject to the limitations described herein.ARTICLE III.ADMINISTRATION AND DELEGATION3.1 Administration. The Plan is administered by the Administrator.3.2 Grant Authority. Subject to the conditions and limitations in the Plan and Applicable Laws, the Board of Directors has authority to grant Awardsand set Award terms and conditions for Service Providers. The non-executive directors of the Board of Directors will be granted Awards in accordance withthe Merus N.V. Non-Executive Directors Compensation Program.3.3 The Administrator has the authority to take all actions and make all determinations under the Plan, to interpret the Plan and Award Agreements onbehalf of the Company and to adopt, amend and repeal Plan administrative rules, guidelines and practices as it deems advisable. The Administrator maycorrect defects and ambiguities, supply omissions and reconcile inconsistencies in the Plan or any Award as it deems necessary or appropriate to administerthe Plan and any Awards. The Administrator’s determinations under the Plan are in its sole discretion. Notwithstanding anything in the Plan to the contrary,all actions taken by the Board of Directors under the Plan shall be subject to the conditions and limitations set forth in the Articles and the Board Rules.3.4 Appointment of Committees. To the extent the Articles and Applicable Laws permit, the Board of Directors may delegate any or all of its powersunder the Plan to one or more Committees or officers of the Company or any of its Subsidiaries. The Board of Directors, may abolish any Committee itestablished or re-vest in itself any previously delegated authority at any time.ARTICLE IV.SHARES AVAILABLE FOR AWARDS4.1 Number of Shares. Subject to adjustment under Article VIII and the terms of this Article IV, Awards may be made under the Plan covering up to theOverall Share Limit. As of the Plan’s effective date under Section 10.3, the Company will cease granting awards under the Prior Plans; however, Prior PlanAwards will remain subject to the terms of the applicable Prior Plan. Shares issued under the Plan may consist of authorized but unissued Shares, Sharespurchased on the open market or treasury Shares.4.2 Share Recycling. If all or any part of an Award expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled withouthaving been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award at a price not greaterthan the price (as adjusted to reflect any Equity Restructuring) paid by the Participant for such Shares or not issuing any Shares covered by the Award, theunused Shares covered by the Award will again be available for Award grants under the Plan. Further, Shares delivered (either by actual delivery orattestation) to the Company by a Participant to satisfy the applicable exercise or purchase price of an Award and/or to satisfy any applicable tax withholdingobligation (including Shares retained by the Company from the Award being exercised or purchased and/or creating the tax obligation) will again beavailable for Award grants under the Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not count againstthe Overall Share Limit.4.3 Substitute Awards. With due observance of the division of authority described in Section 3.2 hereof, in connection with an entity’s merger orconsolidation with the Company or the Company’s acquisition of an entity’s property or stock, the Administrator may grant Awards in substitution for anyoptions or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate. Substitute Awards may be granted onsuch terms as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan. Substitute Awards will not count against the OverallShare Limit (nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided above), except that Sharesacquired by exercise of substitute Incentive Stock Options will count against the maximum number of Shares that may be issued pursuant to the exercise ofIncentive Stock Options under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Companyor any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition orcombination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio orother adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of commonstock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grantunder the Plan (and Shares subject to such Awards shall not be added to the Shares available for Awards under the Plan as provided above); provided thatAwards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absentthe acquisition or combination, and shall only be made to individuals who were not Employees or members of the Board of Directors prior to suchacquisition or combination.ARTICLE V.STOCK OPTIONS AND STOCK APPRECIATION RIGHTS5.1 General. With due observance of the division of authority described in Section 3.2 hereof, the Administrator (i) may grant Options or StockAppreciation Rights to Service Providers subject to the limitations in the Plan, including any limitations in the Plan that apply to Incentive Stock Options,and (ii) will determine the number of Shares covered by each Option and Stock Appreciation Right, the exercise price of each Option and Stock AppreciationRight and the conditions and limitations applicable to the exercise of each Option and Stock Appreciation Right. A Stock Appreciation Right will entitle theParticipant (or other person entitled to exercise the Stock Appreciation Right) to receive from the Company upon exercise of the exercisable portion of theStock Appreciation Right an amount determined by multiplying the excess, if any, of the Fair Market Value of one Share on the date of exercise over theexercise price per Share of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right is exercised, subject toany limitations of the Plan or that the Administrator may impose and payable in cash, Shares valued at Fair Market Value or a combination of the two as theAdministrator may determine or provide in the Award Agreement.5.2 Exercise Price. The Administrator will establish each Option’s and Stock Appreciation Right’s exercise price and specify the exercise price in theAward Agreement. Unless otherwise determined by the Administrator, the exercise price will not be less than 100% of the Fair Market Value on the grant dateof the Option or Stock Appreciation Right. Notwithstanding the foregoing, if on the last day of the term of an Option or Stock Appreciation Right the FairMarket Value of one Share exceeds the applicable exercise or base price per Share, the Participant has not exercised the Option or Stock Appreciation Rightand remains employed by the Company or one of its Subsidiaries and the Option or Stock Appreciation Right has not expired, the Option or StockAppreciation Right shall be deemed to have been exercised by the Participant on such day with payment made by withholding Shares otherwise issuable inconnection with its exercise. In such event, the Company shall deliver to the Participant the number of Shares for which the Option or Stock AppreciationRight was deemed exercised, less the number of Shares required to be withheld for the payment of the total purchase price and required withholding taxes;provided, however, any fractional Share shall be settled in cash.5.3 Duration of Options. Each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, providedthat the term of an Option or Stock Appreciation Right will not exceed ten (10) years. Notwithstanding the foregoing and unless determined otherwise by theCompany, in the event that on the last business day of the term of an Option or Stock Appreciation Right (other than an Incentive Stock Option) (i) theexercise of the Option or Stock Appreciation Right is prohibited by Applicable Law, as determined by the Company, or (ii) Shares may not be purchased orsold by the applicable current or former Service Provider due to any Company insider trading policy (including blackout periods) or a “lock-up” agreementundertaken in connection with an issuance of securities by the Company, the term of the Option or Stock Appreciation Right shall be extended for a period ofthirty (30) days following the end of the legal prohibition, black-out period or lock-up agreement, as determined by the Company; provided, however, in noevent shall the extension last beyond the ten year term of the applicable Option or Stock Appreciation Right unless the exercise would violate an ApplicableLaw. Notwithstanding the foregoing, if the Participant, prior to the end of the term of an Option or Stock Appreciation Right, violates the non-competition,non-solicitation or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between theParticipant and the Company or any of its Subsidiaries, the right to exercise the Option or Stock Appreciation Right, as applicable, may, as determined by theAdministrator, terminate immediately upon such violation. In addition, if, prior to the end of the term of an Option or Stock Appreciation Right, theParticipant is given notice by the Company or any of its Subsidiaries of the termination of his or her employment or other service relationship, or theemployment or other service relationship is otherwise terminated for Cause, the right to exercise the Option or Stock Appreciation Right, as applicable, shallbe suspended from the time of the delivery of such notice or, in the event of other termination, as of the initiation thereof, until the earlier of (i) such time as itis determined or otherwise agreed that the Participant’s employment or other relationship shall not be terminated for Cause or (ii) the effective date of theinitiation of such termination of employment or other relationship (in which case the right to exercise the Option or Stock Appreciation Right, as applicable,shall terminate immediately upon the effective date of such termination of employment or other service relationship).5.4 Exercise. Options and Stock Appreciation Rights may be exercised by delivering to the Company a written notice of exercise, in a form theAdministrator approves (which may be electronic), signed by the person authorized to exercise the Option or Stock Appreciation Right, together with, asapplicable, payment in full (i) as specified in Section 5.5 for the number of Shares for which the Award is exercised and (ii) as specified in Section 9.4 for anyapplicable taxes. Unless the Administrator otherwise determines, an Option or Stock Appreciation Right may not be exercised for a fraction of a Share.5.5 Payment Upon Exercise. Subject to Section 10.7, any Company insider trading policy (including blackout periods) and Applicable Laws, theexercise price of an Option must be paid by:(a) cash, wire transfer of immediately available funds or by check payable to the order of the Company; provided, that, the Company may limitthe use of one of the foregoing exercise methods if one or more of the exercise methods below is permitted;(b) if there is a public market for Shares at the time of exercise, unless the Company otherwise determines, (A) delivery (including telephonicallyto the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to theCompany sufficient funds to pay the exercise price, or (B) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructionsto a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to pay the exercise price; provided that such amount ispaid to the Company at such time as may be required by the Administrator;(c) to the extent permitted by the Administrator, delivery (either by actual delivery or attestation) of Shares owned by the Participant valued attheir Fair Market Value;(d) to the extent permitted by the Administrator, surrendering Shares then issuable upon the Option’s exercise valued at their Fair Market Valueon the exercise date;(e) to the extent permitted by the Administrator, delivery of a promissory note or any other property that the Administrator determines is goodand valuable consideration; or(f) to the extent permitted by the Company, any combination of the above payment forms approved by the Administrator.ARTICLE VI.RESTRICTED STOCK; RESTRICTED STOCK UNITS6.1 General. With due observance of the division of authority described in Section 3.2 hereof, the Administrator may grant Restricted Stock, or theright to purchase Restricted Stock, to any Service Provider, subject to the Company’s right to repurchase all or part of such shares at their issue price or otherstated or formula price from the Participant (or to require forfeiture of such shares) if conditions the Administrator specifies in the Award Agreement are notsatisfied before the end of the applicable restriction period or periods that the Administrator establishes for such Award. In addition, the Administrator maygrant to Service Providers Restricted Stock Units, which may be subject to vesting and forfeiture conditions during the applicable restriction period orperiods, as set forth in an Award Agreement. The Administrator will determine and set forth in the Award Agreement the terms and conditions for eachRestricted Stock and Restricted Stock Unit Award, subject to the conditions and limitations contained in the Plan.6.2 Restricted Stock.(a) Dividends. Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such Shares,unless the Administrator provides otherwise in the Award Agreement. In addition, unless the Administrator provides otherwise, if any dividends ordistributions are paid in Shares, or consist of a dividend or distribution to holders of Common Stock of property other than an ordinary cash dividend, theShares or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which theywere paid.(b) Share Certificates. The Company may require that the Participant deposit in escrow with the Company (or its designee) any share certificatesissued in respect of shares of Restricted Stock, together with a share power endorsed in blank.6.3 Restricted Stock Units.(a) Settlement. The Administrator may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practicableafter the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’s election.(b) Shareholder Rights. A Participant will have no rights of a shareholder with respect to Shares subject to any Restricted Stock Unit unless anduntil the Shares are delivered in settlement of the Restricted Stock Unit.(c) Dividend Equivalents. If the Administrator provides, a grant of Restricted Stock Units may provide a Participant with the right to receiveDividend Equivalents. Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to thesame restrictions on transferability and forfeitability as the Restricted Stock Units with respect to which the Dividend Equivalents are granted and subject toother terms and conditions as set forth in the Award Agreement.ARTICLE VII.OTHER STOCK OR CASH BASED AWARDSOther Stock or Cash Based Awards may be granted to Participants, including Awards entitling Participants to receive Shares to be delivered in thefuture and including annual or other periodic or long-term cash bonus awards (whether based on specified Performance Criteria or otherwise), in each casesubject to any conditions and limitations in the Plan. Such Other Stock or Cash Based Awards will also be available as a payment form in the settlement ofother Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock or Cash Based Awardsmay be paid in Shares, cash or other property, as the Administrator determines. With due observance of the division of authority described in Section 3.2hereof and subject to the provisions of the Plan, the Administrator will determine the terms and conditions of each Other Stock or Cash Based Award,including any purchase price, performance goal (which may be based on the Performance Criteria), transfer restrictions, and vesting conditions, which will beset forth in the applicable Award Agreement.ARTICLE VIII.ADJUSTMENTS FOR CHANGES IN COMMON STOCKAND CERTAIN OTHER EVENTS8.1 Equity Restructuring. In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Article VIII, and with dueobservance of the division of authority described in Section 3.2 hereof, the Administrator will equitably adjust each outstanding Award as it deemsappropriate to reflect the Equity Restructuring, which may include adjusting the number and type of securities subject to each outstanding Award and/or theAward’s exercise price or grant price (if applicable), granting new Awards to Participants, and making a cash payment to Participants. The adjustmentsprovided under this Section 8.1 will be nondiscretionary and final and binding on the affected Participant and the Company; provided that the Administratorwill determine whether an adjustment is equitable.8.2 Corporate Transactions. In the event of any spin-off, Change in Control or any change in any Applicable Laws or accounting principles, theAdministrator, with due observance of the division of authority described in Section 3.2 hereof and on such terms and conditions as it deems appropriate,either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change inApplicable Law or accounting principles may be made within a reasonable period of time after such change) and either automatically or upon theParticipant’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action isappropriate in order to (x) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Planor with respect to any Award granted or issued under the Plan, (y) to facilitate such transaction or event or (z) give effect to such changes in Applicable Lawsor accounting principles:(a) To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to theamount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights under thevested portion of such Award, as applicable; provided that, if the amount that could have been obtained upon the exercise or settlement of the vested portionof such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then the Award may be terminated without payment;(b) To provide that such Award shall vest and, to the extent applicable, be exercisable as to all shares covered thereby, notwithstanding anythingto the contrary in the Plan or the provisions of such Award;(c) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted forby awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number andkind of shares and/or applicable exercise or purchase price, in all cases, as determined by the Administrator;(d) To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awardsand/or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article IV hereof on themaximum number and kind of shares which may be issued) and/or in the terms and conditions of (including the grant or exercise price), and the criteriaincluded in, outstanding Awards;(e) To replace such Award with other rights or property selected by the Administrator; and/or(f) To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.8.3 Administrative Stand Still. In the event of any pending share dividend, share split, combination or exchange of shares, merger, consolidation orother distribution (other than normal cash dividends) of Company assets to shareholders, or any other extraordinary transaction or change affecting the Sharesor the share price of Common Stock, including any Equity Restructuring or any securities offering or other similar transaction, for administrativeconvenience, the Administrator, with due observance of the division of authority described in Section 3.2 hereof, may refuse to permit the exercise of anyAward for up to sixty days before or after such transaction.8.4 General. Except as expressly provided in the Plan or the Administrator’s action under the Plan, no Participant will have any rights due to anysubdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation,merger, or consolidation of the Company or other corporation. Except as expressly provided with respect to an Equity Restructuring under Section 8.1 aboveor the Administrator’s action under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, will affect,and no adjustment will be made regarding, the number of Shares subject to an Award or the Award’s grant or exercise price. The existence of the Plan, anyAward Agreements and the Awards granted hereunder will not affect or restrict in any way the Company’s right or power to make or authorize (i) anyadjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger, consolidation dissolution orliquidation of the Company or sale of Company assets or (iii) any sale or issuance of securities, including securities with rights superior to those of the Sharesor securities convertible into or exchangeable for Shares. The Administrator may treat Participants and Awards (or portions thereof) differently under thisArticle VIII.ARTICLE IX.GENERAL PROVISIONS APPLICABLE TO AWARDS9.1 Transferability. Except as the Administrator may determine or provide in an Award Agreement or otherwise for Awards, Awards may not be sold,assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except by will or the laws of descent and distribution, or,subject to the Administrator’s consent, pursuant to a domestic relations order, and, during the life of the Participant, will be exercisable only by theParticipant. References to a Participant, to the extent relevant in the context, will include references to a Participant’s authorized transferee that theAdministrator specifically approves.9.2 Documentation. Each Award will be evidenced in an Award Agreement, which may be written or electronic, as the Administrator determines. EachAward may contain terms and conditions in addition to those set forth in the Plan.9.3 Discretion. Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms ofeach Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.9.4 Withholding. Each Participant must pay the Company, or make provision satisfactory to the Administrator for payment of, any taxes required bylaw to be withheld in connection with such Participant’s Awards by the date of the event creating the tax liability. The Company may deduct an amountsufficient to satisfy such tax obligations based on the minimum statutory withholding rates (or such other rate as may be determined by the Company afterconsidering any accounting consequences or costs) from any payment of any kind otherwise due to a Participant. Subject to Section 10.7 and any Companyinsider trading policy (including blackout periods), Participants may satisfy such tax obligations (i) in cash, by wire transfer of immediately available funds,by check made payable to the order of the Company; provided, that, the Company may limit the use of one of the foregoing methods if one or more of theexercise methods below is permitted, (ii) to the extent permitted by the Administrator, in whole or in part by delivery of Shares, including Shares retainedfrom the Award creating the tax obligation, valued at their Fair Market Value, (iii) if there is a public market for Shares at the time the tax obligations aresatisfied, unless the Company otherwise determines, (A) delivery (including telephonically to the extent permitted by the Company) of an irrevocable andunconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to satisfy the tax obligations, or(B) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliverpromptly to the Companycash or a check sufficient to satisfy the tax withholding; provided that such amount is paid to the Company at such time as may be required by theAdministrator, or (iv) to the extent permitted by the Company, any combination of the foregoing payment forms approved by the Administrator. If any taxwithholding obligation will be satisfied under clause (ii) of the immediately preceding sentence by the Company’s retention of Shares from the Awardcreating the tax obligation and there is a public market for Shares at the time the tax obligation is satisfied, the Company may elect to instruct any brokeragefirm determined acceptable to the Company for such purpose to sell on the applicable Participant’s behalf some or all of the Shares retained and to remit theproceeds of the sale to the Company or its designee, and each Participant’s acceptance of an Award under the Plan will constitute the Participant’sauthorization to the Company and instruction and authorization to such brokerage firm to complete the transactions described in this sentence.9.5 Amendment of Award; Repricing. With due observance of the division of authority described in Section 3.2 hereof, the Administrator may amend,modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, changing the exercise or settlementdate, and converting an Incentive Stock Option to a Non-Qualified Stock Option. The Participant’s consent to such action will be required unless (i) theaction, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Award, or (ii) the change is permittedunder Article VIII. Notwithstanding the foregoing or anything in the Plan to the contrary, the Administrator may not except pursuant to Article VIII, withoutthe approval of the shareholders of the Company, reduce the exercise price per share of outstanding Options or Stock Appreciation Rights or canceloutstanding Options or Stock Appreciation Rights in exchange for cash, other Awards or Options or Stock Appreciation Rights with an exercise price pershare that is less than the exercise price per share of the original Options or Stock Appreciation Rights.9.6 Conditions on Delivery of Shares. The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Sharespreviously delivered under the Plan until (i) all Award conditions have been met or removed to the Company’s satisfaction, (ii) as determined by theCompany, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including any applicable securities laws and stockexchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as theAdministrator deems necessary or appropriate to satisfy any Applicable Laws. The Company’s inability to obtain authority from any regulatory body havingjurisdiction, which the Administrator determines is necessary to the lawful issuance and sale of any securities, will relieve the Company of any liability forfailing to issue or sell such Shares as to which such requisite authority has not been obtained.9.7 Acceleration. The Administrator may at any time provide that any Award will become immediately vested and fully or partially exercisable, free ofsome or all restrictions or conditions, or otherwise fully or partially realizable.9.8 Cash Payments. Cash payments made to Participants under the Plan will be made in the currency the Participant is ordinarily paid in.ARTICLE X.MISCELLANEOUS10.1 No Right to Employment or Other Status. No person will have any claim or right to be granted an Award, and the grant of an Award will not beconstrued as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the rightat any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except asexpressly provided in an Award Agreement.10.2 No Rights as Shareholder; Certificates. Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as ashareholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares. Notwithstanding any otherprovision of the Plan, unless the Administrator otherwise determines or Applicable Laws require, the Company will not be required to deliver to anyParticipant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, asapplicable, its transfer agent or share plan administrator). The Company may place legends on share certificates issued under the Plan that the Administratordeems necessary or appropriate to comply with Applicable Laws.10.3 Effective Date and Term of Plan. Unless earlier terminated by the Board of Directors, the Plan has become effective on the day prior to the PublicTrading Date (the “Effective Date”) and will remain in effect until the tenth (10th) anniversary of the earlier of (i) the date the general meeting of shareholdersof the Company adopted the Plan or (ii) the date the Company’s shareholders approved the Plan, but Awards previously granted may extend beyond that datein accordance with the Plan. No Awards may be granted under the Plan during any suspension period or after Plan termination.10.4 Amendment of Plan. The Board of Directors, may amend, suspend or terminate the Plan at any time; provided that no amendment, other than anincrease to the Overall Share Limit, may materially and adversely affect any Award outstanding at the time of such amendment without the affectedParticipant’s consent. Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the AwardAgreement, as in effect before such suspension or termination. The Administrator will obtain shareholder approval of any Plan amendment to the extentnecessary to comply with the Articles or Applicable Laws.10.5 Provisions for Foreign Participants. The Administrator may modify Awards granted to Participants who are employed outside the Netherlands orestablish subplans or procedures under the Plan to address differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax,securities, currency, employee benefit or other matters.10.6 Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee or agent ofthe Company or any Subsidiary will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, orexpense incurred in connection with the Plan or any Award, and such individual will not be personally liable with respect to the Plan because of any contractor other instrument executed in his or her capacity as an Administrator, director, officer, other employee or agent of the Company or any Subsidiary. TheCompany will indemnify and hold harmless each director, officer, other employee and agent of the Company or any Subsidiary that has been or will begranted or delegated any duty or power relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) orliability (including any sum paid in settlement of a claim with the Administrator’s approval) arising from any act or omission concerning this Plan unlessarising from such person’s own fraud or bad faith.10.7 Lock-Up Period. The Company may, at the request of any underwriter representative or otherwise, in connection with registering the offering ofany Company securities under the Securities Act, prohibit Participants from, directly or indirectly, selling or otherwise transferring any Shares or otherCompany securities during a period of up to one hundred eighty days following the effective date of a Company registration statement filed under theSecurities Act, or such longer period as determined by the underwriter. During any such period and unless determined otherwise by the Administrator, aParticipant subject to tax in the Netherlands (i) shall not sell Shares under any circumstances and may not directly or indirectly assign, transfer, pledge orotherwise encumber any Shares or take any action to avoid the impact of such restriction, (ii) shall, at the Administrator’s request, represent to the Companythat the Participant has complied with these restrictions so that the Administrator may monitor Participant’s compliance and (iii) bear the risk of any potentialdecrease of the market value of the shares during the Lock-Up period.10.8 Data Privacy. As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer,in electronic or other form, of personal data as described in this section by and among the Company and its Subsidiaries and affiliates exclusively for, and tothe extent necessary, implementing, administering and managing the Participant’s participation in the Plan. To the extent necessary to execute andadminister the Plan, the Company and its Subsidiaries and affiliates may hold certain personal information about a Participant, including the Participant’sname, address and telephone number; birthdate; social security, insurance number or other identification number; salary; nationality; job title(s); any Sharesheld in the Company or its Subsidiaries and affiliates; and Award details, to implement, manage and administer the Plan and Awards (the “Data”). TheCompany and any Subsidiaries and/or affiliates may transfer the Data amongst themselves to the extent necessary to implement, administer and manage aParticipant’s participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company withPlan implementation, administration and management. These recipients may be located in the Participant’s country, or elsewhere, and the recipients’ countrymay be a country outside the European Union not offering adequate protection of personal data. By accepting an Award, each Participant authorizes suchrecipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participant’s participationin the Plan, including any required Data transfer to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares.The Data related to a Participant will be held only as long as necessary to implement, administer, and manage the Participant’s participation in the Plan, andin any event no longer than two (2) years thereafter, unless a longer storage period is required by law or governmental regulations or Company policy. AParticipant may, at any time, view the Data that the Company holds, or that was sent by the Company to a recipient, regarding such Participant, requestadditional information about the storage and processing of the Data regarding such Participant, request any necessary corrections to the Data regarding theParticipant or refuse or withdraw the consents in this Section 10.8 in writing, without cost, by contacting the local human resources representative. TheCompany may cancel Participant’s ability to participate in the Plan, including any forfeiture of any outstanding Awards, if the Participant refuses orwithdraws the consents in this Section 10.8 without any justified reason. For more information on the consequences of refusing or withdrawing consent,Participants may contact their local human resources representative.10.9 Severability. If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will notaffect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal orinvalid action will be null and void.10.10 Governing Documents. If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participantand the Company (or any Subsidiary) that the Administrator has approved, the Plan will govern, unless it is expressly specified in such Award Agreement orother written document that a specific provision of the Plan will not apply.10.11 Governing Law. The Plan and all Awards will be governed by and interpreted in accordance with the laws of the Netherlands, disregarding anystate’s choice-of-law principles requiring the application of a jurisdiction’s laws other than the Netherlands.10.12 Claw-back Provisions. All Awards (including any proceeds, gains or other economic benefit the Participant actually or constructively receivesupon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to any Company claw-back policy,including any claw-back policy adopted to comply with Applicable Laws (including the Corporate Governance Code, the Dodd-Frank Wall Street Reformand Consumer Protection Act and any rules or regulations promulgated thereunder) as set forth in such claw-back policy or as a clause in the AwardAgreement.10.13 Unilateral Amendment. The Administrator reserves the right to unilaterally amend the conditions of the Plan and/or of an Award, subject to therestrictions of the Articles or Applicable Law.10.14 Titles and Headings. The titles and headings in the Plan are for convenience of reference only and, if any conflict, the Plan’s text, rather thansuch titles or headings, will control.10.15 Conformity to Securities Laws. Participant acknowledges that the Plan is intended to conform to the extent necessary with Applicable Laws.Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in conformance with Applicable Laws. To the extentApplicable Laws permit, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Laws.10.16 Relationship to Other Benefits. No payment under the Plan will be taken into account in determining any benefits under any pension, retirement,savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except as expressly provided in writing in such otherplan or an agreement thereunder.10.17 Broker-Assisted Sales. In the event of a broker-assisted sale of Shares in connection with the payment of amounts owed by a Participant under orwith respect to the Plan or Awards, including amounts to be paid under the final sentence of Section 9.4: (a) any Shares to be sold through the broker-assistedsale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block trade with otherParticipants in the Plan in which all participants receive an average price; (c) the applicable Participant will be responsible for all broker’s fees and other costsof sale, and by accepting an Award, each Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expensesrelating to any such sale; (d) to the extent the Company or its designee receives proceeds of such sale that exceed the amount owed, the Company will paysuch excess in cash to the applicable Participant as soon as reasonably practicable; (e) the Company and its designees are under no obligation to arrange forsuch sale at any particular price; and (f) in the event the proceeds of such sale are insufficient to satisfy the Participant’s applicable obligation, the Participantmay be required to pay immediately upon demand to the Company or its designee an amount in cash sufficient to satisfy any remaining portion of theParticipant’s obligation.ARTICLE XI.DEFINITIONSAs used in the Plan, the following words and phrases will have the following meanings:11.1 “Administrator” means the Board of Directors.11.2 “Applicable Laws” means the requirements relating to the administration of equity incentive plans under the laws of the Netherlands, theapplicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreigncountry or other jurisdiction where Awards are granted.11.3 “Articles” means the Articles of Association of the Company, as amended from time to time.11.4 “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted StockUnits or Other Stock or Cash Based Awards.11.5 “Award Agreement” means a written agreement evidencing an Award, which may be electronic, that contains such terms and conditions as theAdministrator determines, consistent with and subject to the terms and conditions of the Plan.11.6 “Board of Directors” means the board of directors (bestuur) of the Company within the meaning of the Articles.11.7 “Board Rules” means the Merus N.V. Rules of Procedure for the Board of Directors.11.8 “Cause” means (a) if Participant is a party to a written employment, consulting or other agreement for service with the Company or any of itsSubsidiaries or an Award Agreement in which the term “cause” is defined (a “Relevant Agreement”), “Cause” as defined in the Relevant Agreement; plus(i) an urgent cause (dringende reden) within the meaning of Section 7:677 juncto 7:678 of the DCC; (ii) a reasonable ground within the meaning ofSection 7:669, subsections 3 d, e, f, g and h of the DCC; provided, however with respect to grounds pursuant to 7:669, subsections 3 g and h of the DCC, ifsuch ground(s) is (are) predominantly attributable to the Participant; and (iii) if the employment, consulting or other agreement for the service of theParticipant with the Company or any of its Subsidiaries is governed by Foreign Laws, grounds which are the same or similar to those mentioned under thepreceding (a)(i) and(a)(ii); or (b) if no Relevant Agreement exists, “Cause” means (i) an urgent cause (dringende reden) within the meaning of Section 7:677juncto 7:678 of the DCC; (ii) a reasonable ground within the meaning of Section 7:669, subsections 3 d, e, f, g and h of the DCC; provided, however withrespect to grounds pursuant to 7:669, subsections 3 g and h of the DCC, if such ground(s) is (are) predominantly attributable to the Participant; (iii) if theemployment, consulting or other agreement for the service of the Participant with the Company or any of its Subsidiaries is governed by Foreign Laws,grounds which are the same or similar to those mentioned under the preceding (b)(i) and (b)(ii); (iv) Participant’s failure to substantially perform Participant’sduties (other than a failure resulting from Participant’s Disability); (v) Participant’s failure to carry out, or comply with any lawful and reasonable directive ofthe Board of Directors or Participant’s immediate supervisor; (vi) the occurrence of any act or omission by Participant that could reasonably be expected toresult in (or has resulted in) Participant’s conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony orindictable offense or crime involving moral turpitude; (vii) Participant’s unlawful use (including being under the influence) or possession of illegal drugs onthe premises of the Company or any of its Subsidiaries or while performing Participant’s duties and responsibilities for the Company or any of itsSubsidiaries; or (viii) Participant’s commission of an act of fraud, embezzlement, misappropriation, misconduct, or breach of fiduciary duty against theCompany or any of its Subsidiaries.11.9 “Change in Control” means and includes each of the following:(a) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filedwith the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (i) and (ii) of subsection (b)below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than theCompany, any of its Subsidiaries, an employee benefit plan maintained by the Company or any of its Subsidiaries or a “person” that, prior to suchtransaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficialownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined votingpower of the Company’s securities outstanding immediately after such acquisition; or(b) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or moreintermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of theCompany’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than atransaction:(i) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either byremaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly orindirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company(the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’soutstanding voting securities immediately after the transaction, and(ii) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of theSuccessor Entity; provided, however, that no person or group shall be treated for purposes of this clause (ii) as beneficially owning 50% or more of thecombined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction.11.10 “Code” means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.11.11 “Committee” means one or more committees or subcommittees of the Board of Directors, which may include one or more members of the Boardof Directors or executive officers, to the extent Applicable Laws permit. To the extent required to comply with the provisions of Rule 16b-3, it is intendedthat each member of the Committee will be, at the time the Committee takes any action with respect to an Award that is subject to Rule 16b-3, a“non-employee director” within the meaning of Rule 16b-3; however, a Committee member’s failure to qualify as a “non-employee director” within themeaning of Rule 16b-3 will not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.11.12 “Common Stock” means the common shares of the Company within the meaning of the Articles.11.13 “Company” means Merus N.V., a Dutch public, limited liability company.11.14 “Consultant” means any person, other than an Employee, or a member of the Board of Directors, including any adviser, engaged directly orindirectly by the Company and/or any Subsidiary to render services to the Company and/or Subsidiary if such person: (i) renders bona fide services to theCompany; (ii) renders services not in connection with the offer or sale of securities in a capital-raising transaction and does not directly or indirectly promoteor maintain a market for the Company’s securities; and (iii) is a natural person.11.15 “DCC” means the Dutch Civil Code.11.16 “Designated Beneficiary” means the beneficiary or beneficiaries of the Participant designated pursuant to Applicable Laws, to receive amountsdue or exercise the Participant’s rights if the Participant dies or becomes incapacitated.11.17 “Disability” means disability to perform work due to sickness within the meaning of Section 7:629 subsection 1 of the DCC or if the relevantagreement of a Service Provider is governed by Foreign Laws, the equivalent of Section7:629 subsection 1 of the DCC under such Foreign Laws.11.18 “Dividend Equivalents” means a right granted to a Participant under the Plan to receive the equivalent value (in cash or Shares) of dividendspaid on Shares.11.19 “Employee” means any employee of the Company or its Subsidiaries within the meaning of Applicable Laws.11.20 “Equity Restructuring” means a nonreciprocal transaction between the Company and its shareholders, such as a share dividend, share split,spin-off or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other Company securities) or the shareprice of Common Stock (or other Company securities) and causes a change in the per share value of the Common Stock underlying outstanding Awards.11.21 “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.11.22 “Fair Market Value” means, as of any date, the value of Common Stock determined as follows: (i) if the Common Stock is listed on anyestablished stock exchange, its Fair Market Value will be the closing sales price for such Common Stock as quoted on such exchange for such date, or if nosale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source theAdministrator deems reliable; (ii) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, theclosing sales price on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported inThe Wall Street Journal or another source the Administrator deems reliable; or (iii) without an established market for the Common Stock, the Administratorwill determine the Fair Market Value in its discretion.11.23 “Foreign Laws” means the laws of any jurisdiction other than the laws of the Netherlands.11.24 “Incentive Stock Option” means an Option intended to qualify as an “incentive stock option” as defined in Section 422 of the Code.11.25 “Non-Qualified Stock Option” means an Option not intended or not qualifying as an Incentive Stock Option.11.26 “Option” means an option to purchase Shares.11.27 “Other Stock or Cash Based Awards” means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or areotherwise based on, Shares or other property.11.28 “Overall Share Limit” means the sum of (i) 1,277,778 Shares and (ii) an annual increase on the first day of each calendar year beginningJanuary 1, 2017 and ending on and including January 1, 2026, equal to the least of (A) 4% of the aggregate number of shares of Common Stock outstandingon the final day of the immediately preceding calendar year and (B) such smaller number of Shares as is determined by the Board of Directors.11.29 “Participant” means a Service Provider who has been granted an Award.11.30 “Performance Criteria” mean the criteria (and adjustments) that the Administrator may select for an Award to establish performance goals for aperformance period, which may include the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization,and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) oradjusted net income; profits (including but not limited to gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratiosor operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow(including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; returnon shareholders’ equity; total shareholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings orloss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends);regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial,or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals;customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management;supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity,profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity;investment sourcing activity; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase ordecrease. Such performance goals also may be based solely by reference to the Company’s performance or the performance of a Subsidiary, division, businesssegment or business unit of the Company or a Subsidiary, or based upon performance relative to performance of other companies or upon comparisons of anyof the indicators of performance relative to performance of other companies. The Committee may provide for exclusion of the impact of an event oroccurrence which the Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations, extraordinary items,and other unusual, infrequently occurring or non-recurring charges or events, (b) asset write-downs, (c) litigation or claim judgments or settlements,(d) acquisitions or divestitures, (e) reorganization or change in the corporate structure or capital structure of the Company, (f) an event either not directlyrelated to the operations of the Company, Subsidiary, division, business segment or business unit or not within the reasonable control of management,(g) foreign exchange gains and losses, (h) a change in the fiscal year of the Company, (i) the refinancing or repurchase of bank loans or debt securities,(j) unbudgeted capital expenditures, (k) the issuance or repurchase of equity securities and other changes in the number of outstanding shares, (l) conversionof some or all of convertible securities to Common Stock, (m) any business interruption event (n) the cumulative effects of tax or accounting changes inaccordance with U.S. generally accepted accounting principles, or (o) the effect of changes in other laws or regulatory rules affecting reported results.11.31 “Plan” means this 2016 Incentive Award Plan.11.32 “Prior Plans” means, collectively, the Merus B.V. 2010 Employee Option Plan and any prior equity incentive plans of the Company or itspredecessor.11.33 “Prior Plan Award” means an award outstanding under the Prior Plans as of the Plan’s effective date in Section 10.3.11.34 “Public Trading Date” means the first date upon which the Common Stock is listed (or approved for listing) upon notice of issuance on anysecurities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system, or,if earlier, the date on which the Company becomes a “publicly held corporation” for purposes of Treasury Regulation Section 1.162-27(c)(1).11.35 “Restricted Stock” means Shares awarded to a Participant under Article VI subject to certain vesting conditions and other restrictions.11.36 “Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash orother consideration determined by the Administrator to be of equal value as of such settlement date, subject to certain vesting conditions and otherrestrictions.11.37 “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act.11.38 “Securities Act” means the Securities Act of 1933, as amended.11.39 “Service Provider” means an Employee, Consultant or member of the Board of Directors.11.40 “Shares” means shares of Common Stock.11.41 “Stock Appreciation Right” means a stock appreciation right granted under Article V.11.42 “Subsidiary” means a subsidiary (dochtermaatschappij) within the meaning of Section 2:24a of the DCC.11.43 “Substitute Awards” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awardspreviously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any Subsidiary or with whichthe Company or any Subsidiary combines.11.44 “Termination of Service” means the date the Participant ceases to be a Service Provider.* * * * *ANNEXES: 1.UNITED STATES ADDENDUM 2.OPTION AGREEMENT 3.RESTRICTED STOCK AGREEMENT 4.RSU AGREEMENTMERUS N.V.2016 INCENTIVE AWARD PLANUNITED STATES ADDENDUMCapitalized terms not specifically defined in this United States Addendum (the “US Addendum”) have the meanings given to them in the 2016Incentive Award Plan (as amended from time to time, the “Plan”) of Merus N.V. (the “Company”).Pursuant to Section 10.5 of the Plan, the Administrator has adopted this US Addendum which contains additional terms and conditions of the Planapplicable to Participants residing in the United States. To the extent not impacted by this US Addendum, the Plan shall remain unchanged and in full forceand effect according to its terms.ARTICLE XII.INCENTIVE STOCK OPTIONS12.1 Incentive Stock Option Limitations. Notwithstanding anything to the contrary in the Plan, no more than 1,277,778 Shares may be issued pursuantto the exercise of Incentive Stock Options.12.2 Terms of Incentive Stock Options. The Administrator may grant Incentive Stock Options only to employees of the Company, any of its present orfuture parent or subsidiary corporations, as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which areeligible to receive Incentive Stock Options under the Code. If an Incentive Stock Option is granted to a Greater Than 10% Shareholder, the exercise price willnot be less than 110% of the Fair Market Value on the Option’s grant date, and the term of the Option will not exceed five years. All Incentive Stock Optionswill be subject to and construed consistently with Section 422 of the Code. By accepting an Incentive Stock Option, the Participant agrees to give promptnotice to the Company of dispositions or other transfers (other than in connection with a Change in Control) of Shares acquired under the Option madewithin (i) two years from the grant date of the Option or (ii) one year after the transfer of such Shares to the Participant, specifying the date of the dispositionor other transfer and the amount the Participant realized, in cash, other property, assumption of indebtedness or other consideration, in such disposition orother transfer. Neither the Company nor the Administrator will be liable to a Participant, or any other party, if an Incentive Stock Option fails or ceases toqualify as an “incentive stock option” under Section 422 of the Code. Any Incentive Stock Option or portion thereof that fails to qualify as an “incentivestock option” under Section 422 of the Code for any reason, including becoming exercisable with respect to Shares having a fair market value exceeding the$100,000 limitation under Treasury Regulation Section 1.422-4, will be a Non-Qualified Stock Option.ARTICLE XIII.SECTION 409A13.1 General. The Company intends that all Awards be structured to comply with, or be exempt from, Section 409A, such that no adverse taxconsequences, interest, or penalties under Section 409A apply. Notwithstanding anything in the Plan or any Award Agreement to the contrary, theAdministrator may, without a Participant’s consent, amend the Plan, this US Addendum or Awards, adopt policies and procedures, or take any other actions(including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards,including any such actions intended to (A) exempt the Plan, this US Addendum or any Award from Section 409A, or (B) comply with Section 409A,including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Award’s grant date. The Company makesno representations or warranties as to an Award’s tax treatment under Section 409A or otherwise. The Company will have no obligation under this Section 2.1or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any otherperson if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant “nonqualified deferred compensation” subjectto taxes, penalties or interest under Section 409A.13.2 Separation from Service. If an Award constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of suchAward upon a termination of a Participant’s Service Provider relationship will, to the extent necessary to avoid taxes under Section 409A, be made only uponthe Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or after the terminationof the Participant’s Service Provider relationship. For purposes of the Plan, this US Addendum or any Award Agreement relating to any such payments orbenefits, references to a “termination,” “termination of employment” or like terms means a “separation from service.”13.3 Payments to Specified Employees. Notwithstanding any contrary provision in the Plan, this US Addendum or any Award Agreement, anypayment(s) of “nonqualified deferred compensation” required to be made under an Award to a “specified employee” (as defined under Section 409A and asthe Administrator determines) due to his or her “separation from service” will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of theCode, be delayed for the six-month period immediately following such “separation from service” (or, if earlier, until the specified employee’s death) and willinstead be paid (as set forth in the Award Agreement) on the day immediately following such six-month period or as soon as administratively practicablethereafter (without interest). Any payments of “nonqualified deferred compensation” under such Award payable more than six months following theParticipant’s “separation from service” will be paid at the time or times the payments are otherwise scheduled to be made.13.4 Change in Control.(a) Notwithstanding the definition of “Change in Control” contained in Section 11.7 of the Plan, if a Change in Control constitutes a paymentevent with respect to any Award (or portion of any Award) that provides for the deferral of compensation that is subject to Section 409A, to the extentrequired to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a) or (b) of Section 11.7 of the Planwith respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if suchtransaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).(b) The Administrator shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Changein Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto;provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined inTreasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.13.5 Restricted Stock Units. Pursuant to Section 6.3(a) of the Plan, the Administrator may provide that settlement of Restricted Stock Units will occurupon or as soon as reasonably practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’selection; provided, that the Administrator shall make such determination in a manner intended to comply with Section 409A.ARTICLE XIV.DEFINITIONS14.1 “Greater Than 10% Shareholder” means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of thetotal combined voting power of all share classes of the Company or its parent or subsidiary corporation, as defined in Section 424(e) and (f) of the Code,respectively.14.2 “Section 409A” means Section 409A of the Code and all regulations, guidance, compliance programs and other interpretative authoritythereunder.* * * * *MERUS N.V.2016 INCENTIVE AWARD PLANSTOCK OPTION GRANT NOTICECapitalized terms not specifically defined in this Stock Option Grant Notice (the “Grant Notice”) have the meanings given to them in the 2016Incentive Award Plan (as amended from time to time, the “Plan”) of Merus N.V. (the “Company”).The Company has granted to the participant listed below (“Participant”) the stock option described in this Grant Notice (the “Option”), subject to theterms and conditions of the Plan and the Stock Option Agreement attached as Exhibit A (the “Agreement”), both of which are incorporated into this GrantNotice by reference. Participant: Grant Date: Exercise Price per Share: Shares Subject to the Option: Final Expiration Date: Vesting Commencement Date: Vesting Schedule: [To be specified in individual award agreements]By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant hasreviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this GrantNotice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive andfinal all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.PARTIES: MERUS N.V. PARTICIPANTBy: Name: [Participant Name]Title: STOCK OPTION AGREEMENTCapitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, inthe Plan.ARTICLE XV.GENERAL15.1 Grant of Option. The Company has granted to Participant the Option effective as of the grant date set forth in the Grant Notice (the “Grant Date”).15.2 Incorporation of Terms of Plan. The Option is subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporatedherein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.ARTICLE XVI.PERIOD OF EXERCISABILITY16.1 Commencement of Exercisability. The Option will vest and become exercisable according to the vesting schedule in the Grant Notice (the“Vesting Schedule”) except that any fraction of a Share as to which the Option would be vested or exercisable will be accumulated and will vest and becomeexercisable only when a whole Share has accumulated. Notwithstanding anything in the Grant Notice, the Plan or this Agreement to the contrary, unless theAdministrator otherwise determines, the Option will immediately expire and be forfeited as to any portion that is not vested and exercisable as ofParticipant’s Termination of Service for any reason.16.2 Duration of Exercisability. The Vesting Schedule is cumulative. Any portion of the Option which vests and becomes exercisable will remainvested and exercisable until the Option expires. The Option will be forfeited immediately upon its expiration.16.3 Expiration of Option. The Option may not be exercised to any extent by anyone after, and will expire on, the first of the following to occur:(a) The final expiration date in the Grant Notice;(b) Except as the Administrator may otherwise approve, the expiration of three (3) months from the date of Participant’s Termination of Service,unless Participant’s Termination of Service is for Cause or by reason of Participant’s death or Disability;(c) Except as the Administrator may otherwise approve, the expiration of one (1) year from the date of Participant’s Termination of Service byreason of Participant’s death or Disability; and(d) Except as the Administrator may otherwise approve, Participant’s Termination of Service for Cause or the initiation of such Termination ofService by giving notice of termination, by requesting termination by the court or otherwise (e.g. a written proposal for termination by mutual consent).ARTICLE XVII.EXERCISE OF OPTION17.1 Person Eligible to Exercise. During Participant’s lifetime, only Participant may exercise the Option. After Participant’s death, any exercisableportion of the Option may, prior to the time the Option expires, be exercised by Participant’s Designated Beneficiary as provided in the Plan.17.2 Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised, in whole or in part,according to the procedures in the Plan at any time prior to the time the Option or portion thereof expires, except that the Option may only be exercised forwhole Shares.17.3 Tax Withholding.(a) The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with thePlan of any withholding tax arising in connection with the Option as Participant’s election to satisfy all or any portion of the withholding tax by requestingthe Company retain Shares otherwise issuable under the Option.(b) Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the Option, regardless ofany action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the Option. Neither theCompany nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding,vesting or exercise of the Option or the subsequent sale of Shares. The Company and the Subsidiaries do not commit and are under no obligation to structurethe Option to reduce or eliminate Participant’s tax liability.ARTICLE XVIII.OTHER PROVISIONS18.1 Adjustments. Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in thisAgreement and the Plan.18.2 Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of theCompany’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under theterms of this Agreement to Participant must be in writing and addressed to Participant (or, if Participant is then deceased, to the person entitled to exercise theOption) at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files. By a notice given pursuant to thisSection, either party may designate a different address for notices to be given to that party. Any notice will be deemed duly given when actually received,when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularlymaintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimiletransmission confirmation.18.3 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.18.4 Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extentnecessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.18.5 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement willinure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in the Plan, this Agreement will be bindingupon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.18.6 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject toSection 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Option will be subject to any additional limitations set forth in anyapplicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of suchexemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.18.7 Entire Agreement. The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties andsupersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.18.8 Agreement Severable. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will beseverable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice orthis Agreement.18.9 Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement createsonly a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor anyunderlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect toamounts credited and benefits payable, if any, with respect to the Option, and rights no greater than the right to receive the Shares as a general unsecuredcreditor with respect to the Option, as and when exercised pursuant to the terms hereof.18.10 Not a Contract of Employment. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in theemploy or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights arehereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to theextent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.18.11 Claw-back. The Administrator may, in its sole reasonable discretion, deem the outcome of a remuneration component granted to the Participantunder this Agreement unreasonable either because the same has been based on incorrect information (including but not limited to financial information) or inlight of special circumstances. In such cases, the Administrator is entitled to adjust such component up- or downwards. If, in the event of such downwardadjustment, the Options have already been exercised, the Company is entitled to reclaim what payments consequential to such downward adjustment wasunduly paid either in cash compensation or in Shares.18.12 Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject toApplicable Law, each of which will be deemed an original and all of which together will constitute one instrument.* * * * *MERUS N.V.2016 INCENTIVE AWARD PLANRESTRICTED STOCK GRANT NOTICECapitalized terms not specifically defined in this Restricted Stock Grant Notice (the “Grant Notice”) have the meanings given to them in the 2016Incentive Award Plan (as amended from time to time, the “Plan”) of Merus N.V. (the “Company”).The Company has granted to the participant listed below (“Participant”) the shares of Restricted Stock described in this Grant Notice (the “RestrictedShares”), subject to the terms and conditions of the Plan and the Restricted Stock Agreement attached as Exhibit A (the “Agreement”), both of which areincorporated into this Grant Notice by reference. Participant: Grant Date: Number of Restricted Shares: Vesting Commencement Date: Vesting Schedule: [To be specified in individual award agreements]By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant hasreviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this GrantNotice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive andfinal all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.PARTIES: MERUS N.V. PARTICIPANTBy: Name: [Participant Name]Title: RESTRICTED STOCK AGREEMENTCapitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, inthe Plan.ARTICLE XIX.GENERAL19.1 Issuance of Restricted Shares. The Company will issue the Restricted Shares to the Participant effective as of the grant date set forth in the GrantNotice and will cause (a) a stock certificate or certificates representing the Restricted Shares to be registered in Participant’s name or (b) the Restricted Sharesto be held in book-entry form. If a stock certificate is issued, the certificate will be delivered to, and held in accordance with this Agreement by, the Companyor its authorized representatives and will bear the restrictive legends required by this Agreement. If the Restricted Shares are held in book-entry form, then thebook-entry will indicate that the Restricted Shares are subject to the restrictions of this Agreement.19.2 Incorporation of Terms of Plan. The Restricted Shares are subject to the terms and conditions set forth in this Agreement and the Plan, which isincorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.ARTICLE XX.VESTING, FORFEITURE AND ESCROW20.1 Vesting. The Restricted Shares will become vested Shares (the “Vested Shares”) according to the vesting schedule in the Grant Notice except thatany fraction of a Share that would otherwise become a Vested Share will be accumulated and will become a Vested Share only when a whole Vested Share hasaccumulated.20.2 Forfeiture. In the event of Participant’s Termination of Service for any reason, Participant will immediately and automatically forfeit to theCompany any Shares that are not Vested Shares (the “Unvested Shares”) at the time of Participant’s Termination of Service, except as otherwise determinedby the Administrator or provided in a binding written agreement between Participant and the Company. Upon forfeiture of Unvested Shares, the Companywill become the legal and beneficial owner of the Unvested Shares and all related interests and Participant will have no further rights with respect to theUnvested Shares.20.3 Escrow.(a) Unvested Shares will be held by the Company or its authorized representatives until (i) they are forfeited, (ii) they become Vested Shares or(iii) this Agreement is no longer in effect. By accepting this Award, Participant appoints the Company and its authorized representatives as Participant’sattorney(s)-in-fact to take all actions necessary to effect any transfer of forfeited Unvested Shares (and Retained Distributions (as defined below), if any, paidon such forfeited Unvested Shares) to the Company as may be required pursuant to the Plan or this Agreement and to execute such representations or otherdocuments or assurances as the Company or such representatives deem necessary or advisable in connection with any such transfer. The Company, or itsauthorized representative, will not be liable for any good faith act or omission with respect to the holding in escrow or transfer of the Restricted Shares.(b) All cash dividends and other distributions made or declared with respect to Unvested Shares (“Retained Distributions”) will be held by theCompany until the time (if ever) when the Unvested Shares to which such Retained Distributions relate become Vested Shares. The Company will establish aseparate Retained Distribution bookkeeping account (“Retained Distribution Account”) for each Unvested Share with respect to which RetainedDistributions have been made or declared in cash and credit the Retained Distribution Account (without interest) on the date of payment with the amount ofsuch cash made or declared with respect to the Unvested Share. Retained Distributions (including any Retained Distribution Account balance) willimmediately and automatically be forfeited upon forfeiture of the Unvested Share with respect to which the Retained Distributions were paid or declared.(c) As soon as reasonably practicable following the date on which an Unvested Share becomes a Vested Share, the Company will (i) cause thecertificate (or a new certificate without the legend required by this Agreement, if Participant so requests) representing the Share to be delivered to Participantor, if the Share is held in book-entry form, cause the notations indicating the Share is subject to the restrictions of this Agreement to be removed and (ii) payto Participant the Retained Distributions relating to the Share.20.4 Rights as Stockholder. Except as otherwise provided in this Agreement or the Plan, upon issuance of the Restricted Shares by the Company,Participant will have all the rights of a stockholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and to receivedividends or other distributions paid or made with respect to the Restricted Shares.ARTICLE XXI.TAXATION AND TAX WITHHOLDING21.1 Representation. Participant represents to the Company that Participant has reviewed with Participant’s own tax advisors the tax consequences ofthe Restricted Shares and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on anystatements or representations of the Company or any of its agents.21.2 Tax Withholding.(a) The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with thePlan of any withholding tax arising in connection with the Restricted Shares as Participant’s election to satisfy all or any portion of the withholding tax byrequesting the Company retain Shares otherwise deliverable under the Award.(b) Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the Restricted Shares,regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the RestrictedShares. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection withthe awarding, vesting or payment of the Restricted Shares or the subsequent sale of the Restricted Shares. The Company and the Subsidiaries do not commitand are under no obligation to structure this Award to reduce or eliminate Participant’s tax liability.ARTICLE XXII.RESTRICTIVE LEGENDS AND TRANSFERABILITY22.1 Legends. Any certificate representing a Restricted Share will bear the following legend until the Restricted Share becomes a Vested Share:THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN FAVOR OF THE COMPANY AND MAY BETRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A RESTRICTED STOCK AGREEMENT BETWEEN THE COMPANY ANDTHE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.22.2 Transferability. The Restricted Shares and any Retained Distributions are subject to the restrictions on transfer in the Plan and may not be sold,assigned or transferred in any manner unless and until they become Vested Shares. Any attempted transfer or disposition of Unvested Shares or relatedRetained Distributions prior to the time the Unvested Shares become Vested Shares will be null and void. The Company will not be required to (a) transfer onits books any Restricted Share that has been sold or otherwise transferred in violation of this Agreement or (b) treat as owner of such Restricted Share oraccord the right to vote or pay dividends to any purchaser or other transferee to whom such Restricted Share has been so transferred. The Company may issueappropriate “stop transfer” instructions to its transfer agent, if any, or make appropriate notations to the same effect in its records.ARTICLE XXIII.OTHER PROVISIONS23.1 Adjustments. Participant acknowledges that the Restricted Shares are subject to adjustment, modification and termination in certain events asprovided in this Agreement and the Plan.23.2 Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of theCompany’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under theterms of this Agreement to Participant must be in writing and addressed to Participant at Participant’s last known mailing address, email address or facsimilenumber in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given tothat party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) anddeposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationallyrecognized express shipping company or upon receipt of a facsimile transmission confirmation.23.3 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.23.4 Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extentnecessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.23.5 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement willinure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in this Agreement or the Plan, this Agreementwill be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.23.6 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject toSection 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Restricted Shares will be subject to any additional limitations set forth inany applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application ofsuch exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptiverule.23.7 Entire Agreement. The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties andsupersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.23.8 Agreement Severable. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will beseverable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice orthis Agreement.23.9 Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement createsonly a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor anyunderlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect toamounts credited and benefits payable, if any, with respect to the Award.23.10 Not a Contract of Employment. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in theemploy or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights arehereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to theextent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.23.11 Claw-back. The Administrator may, in its sole reasonable discretion, deem the outcome of a remuneration component granted to the Participantunder this Agreement unreasonable either because the same has been based on incorrect information (including but not limited to financial information) or inlight of special circumstances. In such cases, the Administrator is entitled to adjust such component up- or downwards. If, in the event of such downwardadjustment, payment in Shares and/or in cash has already been made by the Company to the Participant, the Company is entitled to reclaim what paymentsconsequential to such downward adjustment was unduly paid.23.12 Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject toApplicable Law, each of which will be deemed an original and all of which together will constitute one instrument.* * * * *MERUS N.V.2016 INCENTIVE AWARD PLANRESTRICTED STOCK GRANT NOTICECapitalized terms not specifically defined in this Restricted Stock Grant Notice (the “Grant Notice”) have the meanings given to them in the 2016Incentive Award Plan (as amended from time to time, the “Plan”) of Merus N.V. (the “Company”).The Company has granted to the participant listed below (“Participant”) the shares of Restricted Stock described in this Grant Notice (the “RestrictedShares”), subject to the terms and conditions of the Plan and the Restricted Stock Agreement attached as Exhibit A (the “Agreement”), both of which areincorporated into this Grant Notice by reference. Participant: Grant Date: Number of Restricted Shares: Vesting Commencement Date: Vesting Schedule: [To be specified in individual award agreements]By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant hasreviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this GrantNotice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive andfinal all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.PARTIES: MERUS N.V. PARTICIPANTBy: Name: [Participant Name]Title: RESTRICTED STOCK AGREEMENTCapitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, inthe Plan.ARTICLE XXIV.GENERAL24.1 Issuance of Restricted Shares. The Company will issue the Restricted Shares to the Participant effective as of the grant date set forth in the GrantNotice and will cause (a) a stock certificate or certificates representing the Restricted Shares to be registered in Participant’s name or (b) the Restricted Sharesto be held in book-entry form. If a stock certificate is issued, the certificate will be delivered to, and held in accordance with this Agreement by, the Companyor its authorized representatives and will bear the restrictive legends required by this Agreement. If the Restricted Shares are held in book-entry form, then thebook-entry will indicate that the Restricted Shares are subject to the restrictions of this Agreement.24.2 Incorporation of Terms of Plan. The Restricted Shares are subject to the terms and conditions set forth in this Agreement and the Plan, which isincorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.ARTICLE XXV.VESTING, FORFEITURE AND ESCROW25.1 Vesting. The Restricted Shares will become vested Shares (the “Vested Shares”) according to the vesting schedule in the Grant Notice except thatany fraction of a Share that would otherwise become a Vested Share will be accumulated and will become a Vested Share only when a whole Vested Share hasaccumulated.25.2 Forfeiture. In the event of Participant’s Termination of Service for any reason, Participant will immediately and automatically forfeit to theCompany any Shares that are not Vested Shares (the “Unvested Shares”) at the time of Participant’s Termination of Service, except as otherwise determinedby the Administrator or provided in a binding written agreement between Participant and the Company. Upon forfeiture of Unvested Shares, the Companywill become the legal and beneficial owner of the Unvested Shares and all related interests and Participant will have no further rights with respect to theUnvested Shares.25.3 Escrow.(a) Unvested Shares will be held by the Company or its authorized representatives until (i) they are forfeited, (ii) they become Vested Shares or(iii) this Agreement is no longer in effect. By accepting this Award, Participant appoints the Company and its authorized representatives as Participant’sattorney(s)-in-fact to take all actions necessary to effect any transfer of forfeited Unvested Shares (and Retained Distributions (as defined below), if any, paidon such forfeited Unvested Shares) to the Company as may be required pursuant to the Plan or this Agreement and to execute such representations or otherdocuments or assurances as the Company or such representatives deem necessary or advisable in connection with any such transfer. The Company, or itsauthorized representative, will not be liable for any good faith act or omission with respect to the holding in escrow or transfer of the Restricted Shares.(b) All cash dividends and other distributions made or declared with respect to Unvested Shares (“Retained Distributions”) will be held by theCompany until the time (if ever) when the Unvested Shares to which such Retained Distributions relate become Vested Shares. The Company will establish aseparate Retained Distribution bookkeeping account (“Retained Distribution Account”) for each Unvested Share with respect to which RetainedDistributions have been made or declared in cash and credit the Retained Distribution Account (without interest) on the date of payment with the amount ofsuch cash made or declared with respect to the Unvested Share. Retained Distributions (including any Retained Distribution Account balance) willimmediately and automatically be forfeited upon forfeiture of the Unvested Share with respect to which the Retained Distributions were paid or declared.(c) As soon as reasonably practicable following the date on which an Unvested Share becomes a Vested Share, the Company will (i) cause thecertificate (or a new certificate without the legend required by this Agreement, if Participant so requests) representing the Share to be delivered to Participantor, if the Share is held in book-entry form, cause the notations indicating the Share is subject to the restrictions of this Agreement to be removed and (ii) payto Participant the Retained Distributions relating to the Share.25.4 Rights as Stockholder. Except as otherwise provided in this Agreement or the Plan, upon issuance of the Restricted Shares by the Company,Participant will have all the rights of a stockholder with respect to the Restricted Shares, including the right to vote the Restricted Shares and to receivedividends or other distributions paid or made with respect to the Restricted Shares.ARTICLE XXVI.TAXATION AND TAX WITHHOLDING26.1 Representation. Participant represents to the Company that Participant has reviewed with Participant’s own tax advisors the tax consequences ofthe Restricted Shares and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on anystatements or representations of the Company or any of its agents.26.2 Tax Withholding.(a) The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with thePlan of any withholding tax arising in connection with the Restricted Shares as Participant’s election to satisfy all or any portion of the withholding tax byrequesting the Company retain Shares otherwise deliverable under the Award.(b) Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the Restricted Shares,regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the RestrictedShares. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection withthe awarding, vesting or payment of the Restricted Shares or the subsequent sale of the Restricted Shares. The Company and the Subsidiaries do not commitand are under no obligation to structure this Award to reduce or eliminate Participant’s tax liability.ARTICLE XXVII.RESTRICTIVE LEGENDS AND TRANSFERABILITY27.1 Legends. Any certificate representing a Restricted Share will bear the following legend until the Restricted Share becomes a Vested Share:THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN FAVOR OF THE COMPANY AND MAYBE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A RESTRICTED STOCK AGREEMENT BETWEEN THECOMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.27.2 Transferability. The Restricted Shares and any Retained Distributions are subject to the restrictions on transfer in the Plan and may not be sold,assigned or transferred in any manner unless and until they become Vested Shares. Any attempted transfer or disposition of Unvested Shares or relatedRetained Distributions prior to the time the Unvested Shares become Vested Shares will be null and void. The Company will not be required to (a) transfer onits books any Restricted Share that has been sold or otherwise transferred in violation of this Agreement or (b) treat as owner of such Restricted Share oraccord the right to vote or pay dividends to any purchaser or other transferee to whom such Restricted Share has been so transferred. The Company may issueappropriate “stop transfer” instructions to its transfer agent, if any, or make appropriate notations to the same effect in its records.ARTICLE XXVIII.OTHER PROVISIONS28.1 Adjustments. Participant acknowledges that the Restricted Shares are subject to adjustment, modification and termination in certain events asprovided in this Agreement and the Plan.28.2 Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of theCompany’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under theterms of this Agreement to Participant must be in writing and addressed to Participant at Participant’s last known mailing address, email address or facsimilenumber in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given tothat party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) anddeposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationallyrecognized express shipping company or upon receipt of a facsimile transmission confirmation.28.3 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.28.4 Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extentnecessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.28.5 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement willinure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in this Agreement or the Plan, this Agreementwill be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.28.6 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject toSection 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Restricted Shares will be subject to any additional limitations set forth inany applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application ofsuch exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptiverule.28.7 Entire Agreement. The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties andsupersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.28.8 Agreement Severable. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will beseverable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice orthis Agreement.28.9 Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement createsonly a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor anyunderlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect toamounts credited and benefits payable, if any, with respect to the Award.28.10 Not a Contract of Employment. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in theemploy or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights arehereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to theextent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.28.11 Claw-back. The Administrator may, in its sole reasonable discretion, deem the outcome of a remuneration component granted to the Participantunder this Agreement unreasonable either because the same has been based on incorrect information (including but not limited to financial information) or inlight of special circumstances. In such cases, the Administrator is entitled to adjust such component up- or downwards. If, in the event of such downwardadjustment, payment in Shares and/or in cash has already been made by the Company to the Participant, the Company is entitled to reclaim what paymentsconsequential to such downward adjustment was unduly paid.28.12 Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject toApplicable Law, each of which will be deemed an original and all of which together will constitute one instrument.* * * * *MERUS N.V.2016 INCENTIVE AWARD PLANRESTRICTED STOCK UNIT GRANT NOTICECapitalized terms not specifically defined in this Restricted Stock Unit Grant Notice (the “Grant Notice”) have the meanings given to them in the 2016Incentive Award Plan (as amended from time to time, the “Plan”) of Merus N.V. (the “Company”).The Company has granted to the participant listed below (“Participant”) the Restricted Stock Units described in this Grant Notice (the “RSUs”),subject to the terms and conditions of the Plan and the Restricted Stock Unit Agreement attached as Exhibit A (the “Agreement”), both of which areincorporated into this Grant Notice by reference. Participant: Grant Date: Number of RSUs: Vesting Commencement Date: Vesting Schedule: [To be specified in individual award agreements]By Participant’s signature below, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement. Participant hasreviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this GrantNotice and fully understands all provisions of the Plan, this Grant Notice and the Agreement. Participant hereby agrees to accept as binding, conclusive andfinal all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.PARTIES: MERUS N.V. PARTICIPANTBy: Name: [Participant Name]Title: RESTRICTED STOCK UNIT AGREEMENTCapitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice or, if not defined in the Grant Notice, inthe Plan.ARTICLE XXIX.GENERAL29.1 Award of RSUs and Dividend Equivalents.(a) The Company has granted the RSUs to Participant effective as of the grant date set forth in the Grant Notice (the “Grant Date”). Each RSUrepresents the right to receive one Share or, at the option of the Company, an amount of cash, in either case, as set forth in this Agreement. Participant willhave no right to the distribution of any Shares or payment of any cash until the time (if ever) the RSUs have vested.(b) The Company hereby grants to Participant, with respect to each RSU, a Dividend Equivalent for ordinary cash dividends paid to substantiallyall holders of outstanding Shares with a record date after the Grant Date and prior to the date the applicable RSU is settled, forfeited or otherwise expires.Each Dividend Equivalent entitles Participant to receive the equivalent value of any such ordinary cash dividends paid on a single Share. The Company willestablish a separate Dividend Equivalent bookkeeping account (a “Dividend Equivalent Account”) for each Dividend Equivalent and credit the DividendEquivalent Account (without interest) on the applicable dividend payment date with the amount of any such cash paid.29.2 Incorporation of Terms of Plan. The RSUs are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporatedherein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.29.3 Unsecured Promise. The RSUs and Dividend Equivalents will at all times prior to settlement represent an unsecured Company obligation payableonly from the Company’s general assets.ARTICLE XXX.VESTING; FORFEITURE AND SETTLEMENT30.1 Vesting; Forfeiture. The RSUs will vest according to the vesting schedule in the Grant Notice except that any fraction of an RSU that wouldotherwise be vested will be accumulated and will vest only when a whole RSU has accumulated. In the event of Participant’s Termination of Service for anyreason, all unvested RSUs will immediately and automatically be cancelled and forfeited, except as otherwise determined by the Administrator or provided ina binding written agreement between Participant and the Company. Dividend Equivalents (including any Dividend Equivalent Account balance) will vest orbe forfeited, as applicable, upon the vesting or forfeiture of the RSU with respect to which the Dividend Equivalent (including the Dividend EquivalentAccount) relates.30.2 Settlement.(a) RSUs and Dividend Equivalents (including any Dividend Equivalent Account balance) will be paid in Shares or cash at the Company’soption as soon as administratively practicable after the vesting of the applicable RSU, but in no event more than sixty (60) days after the RSU’s vesting date.Notwithstanding the foregoing, the Company may delay any payment under this Agreement that the Company reasonably determines would violateApplicable Law until the earliest date the Company reasonably determines the making of the payment will not cause such a violation (in accordance withTreasury Regulation Section 1.409A-2(b)(7)(ii)), provided the Company reasonably believes the delay will not result in the imposition of excise taxes underSection 409A. 11(b) If an RSU is paid in cash, the amount of cash paid with respect to the RSU will equal the Fair Market Value of a Share on the day immediatelypreceding the payment date. If a Dividend Equivalent is paid in Shares, the number of Shares paid with respect to the Dividend Equivalent will equal thequotient, rounded down to the nearest whole Share, of the Dividend Equivalent Account balance divided by the Fair Market Value of a Share on the dayimmediately preceding the payment date.ARTICLE XXXI.TAXATION AND TAX WITHHOLDING31.1 Representation. Participant represents to the Company that Participant has reviewed with Participant’s own tax advisors the tax consequences ofthis Award and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on anystatements or representations of the Company or any of its agents.31.2 Tax Withholding.(a) The Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with thePlan of any withholding tax arising in connection with the RSUs or Dividend Equivalents as Participant’s election to satisfy all or any portion of thewithholding tax by requesting the Company retain Shares otherwise issuable under the Award.(b) Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the RSUs and theDividend Equivalents, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connectionwith the RSUs or Dividend Equivalents. Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any taxwithholding in connection with the awarding, vesting or payment of the RSUs or the Dividend Equivalents or the subsequent sale of Shares. The Companyand the Subsidiaries do not commit and are under no obligation to structure the RSUs or Dividend Equivalents to reduce or eliminate Participant’s taxliability.ARTICLE XXXII.OTHER PROVISIONS32.1 Adjustments. Participant acknowledges that the RSUs, the Shares subject to the RSUs and the Dividend Equivalents are subject to adjustment,modification and termination in certain events as provided in this Agreement and the Plan.32.2 Notices. Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of theCompany’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number. Any notice to be given under theterms of this Agreement to Participant must be in writing and addressed to Participant at Participant’s last known mailing address, email address or facsimilenumber in the Company’s personnel files. By a notice given pursuant to this Section, either party may designate a different address for notices to be given tothat party. Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) anddeposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationallyrecognized express shipping company or upon receipt of a facsimile transmission confirmation. 1232.3 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.32.4 Conformity to Securities Laws. Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extentnecessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.32.5 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement willinure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth in the Plan, this Agreement will be bindingupon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.32.6 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject toSection 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement, the RSUs and the Dividend Equivalents will be subject to any additionallimitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirementsfor the application of such exemptive rule. To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to suchapplicable exemptive rule.32.7 Entire Agreement. The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties andsupersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.32.8 Agreement Severable. In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will beseverable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice orthis Agreement.32.9 Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement createsonly a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust. Neither the Plan nor anyunderlying program, in and of itself, has any assets. Participant will have only the rights of a general unsecured creditor of the Company with respect toamounts credited and benefits payable, if any, with respect to the RSUs and Dividend Equivalents, and rights no greater than the right to receive cash or theShares as a general unsecured creditor with respect to the RSUs and Dividend Equivalents, as and when settled pursuant to the terms of this Agreement.32.10 Not a Contract of Employment. Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in theemploy or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights arehereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to theextent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.32.11 Claw-back. The Administrator may, in its sole reasonable discretion, deem the outcome of a remuneration component granted to the Participantunder this Agreement unreasonable either because the same has been based on incorrect information (including but not limited to financial information) or inlight of special circumstances. In such cases, the Administrator is entitled to adjust such component up- or downwards. If, in the event of such downwardadjustment, payment in Shares and/or in cash has already been made by the Company to the Participant, the Company is entitled to reclaim what paymentsconsequential to such downward adjustment was unduly paid. 1332.12 Counterparts. The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject toApplicable Law, each of which will be deemed an original and all of which together will constitute one instrument.* * * * * 14Exhibit 4.3MERUS N.V.NON-EXECUTIVE DIRECTOR COMPENSATION PROGRAMThe non-executive directors (the “Non-Executive Directors” and each, a “Non-Executive Director”) of Merus N.V. (the “Company”) shall receive cashand equity compensation as set forth in this Non-Executive Director Compensation Program (this “Program”). The compensation described in this Programshall be paid or be made, as applicable, automatically and without further action of the Board of Directors (the “Board”) or the general meeting ofshareholders (the “General Meeting”) of the Company, to each Non-Executive Director who is entitled to receive such cash or equity compensation, unlesssuch Non-Executive Director declines the receipt of such cash or equity compensation by written notice to the Company. This Program shall remain in effectuntil it is revised or rescinded by further action taken by the Board at the recommendation of the Compensation Committee. This Program may be amended,modified or terminated at any time by action taken by the Board at the recommendation of the Compensation Committee. The terms and conditions of thisProgram shall supersede any prior cash and/or equity compensation arrangements for service as a Non-Executive Director (or as a supervisory director)between the Company and any of its Non-Executive Directors.Time spent in office and service as a supervisory director of the Company prior to [date of implementation of governance change] shall, for purposesof this Program, be considered to be time spent in office and service as Non-Executive Director.I. CASH COMPENSATIONA. Annual Retainers. Each Non-Executive Director shall receive an annual retainer of $35,000 for service on the Board.B. Additional Annual Retainers. In addition, each Non-Executive Director shall receive the following annual retainers:1. Chairperson of the Board. A Non-Executive Director serving as Chairperson of the Board shall receive an additional annual retainer of$28,000 for such service.2. Audit Committee. A Non-Executive Director serving as Chairperson of the Audit Committee shall receive an additional annual retainerof $15,000 for such service. A Non-Executive Director serving as a member other than the Chairperson of the Audit Committee shall receive an additionalannual retainer of $7,500 for such service.3. Compensation Committee. A Non-Executive Director serving as Chairperson of the Compensation Committee shall receive anadditional annual retainer of $10,000 for such service. A Non-Executive Director serving as a member other than the Chairperson of the CompensationCommittee shall receive an additional annual retainer of $5,000 for such service.4. Nominating and Corporate Governance Committee. A Non-Executive Director serving as Chairperson of the Nominating andCorporate Governance Committee shall receive an additional annual retainer of $7,500 for such service. A Non-Executive Director serving as a member other than the Chairperson of the Nominating and Corporate Governance Committee shall receive an additionalannual retainer of $3,750 for such service. 1C. Payment of Retainers. The annual retainers described in Sections I(A) and I(B) shall be earned on a quarterly basis based on a calendar quarterand shall be paid in cash by the Company in arrears not later than the fifteenth day following the end of each calendar quarter. In the event a Non-ExecutiveDirector does not serve as a Non-Executive Director, or in the applicable positions described in Section I(B), for an entire calendar quarter, the retainer paid tosuch Non-Executive Director shall be prorated for the portion of such calendar quarter actually served as a Non-Executive Director, or in such position, asapplicable.D. Annual Increase. Each annual retainer described in Sections I(A) and I(B) shall, without further action taken by the Board or the GeneralMeeting, automatically increase on the first day of each calendar year beginning on January 1, 2017 by an amount equal to 3% of the value of such annualretainer in effect as of the immediately preceding calendar year.II. EQUITY COMPENSATIONNon-Executive Directors shall be eligible to be granted the equity awards described below. The awards described below shall be granted under andshall be subject to the terms and provisions of the Company’s 2016 Incentive Award Plan or any other applicable Company equity incentive plan then-maintained by the Company (the “Equity Plan”) and shall be granted subject to award agreements in substantially the form previously approved by theBoard. All applicable terms of the Equity Plan apply to this Program as if fully set forth herein, and all grants of stock options hereby are subject in allrespects to the terms of the Equity Plan and the applicable award agreement.A. Initial Awards. Each Non-Executive Director who is initially elected or appointed to the Board after the date of the effectiveness of theCompany’s Registration Statement on Form F-1 relating to the initial public offering of common shares (the “Effective Date”) shall be eligible to receive anoption to purchase the number of common shares of the Company having an aggregate Grant Date Fair Value (as defined below) of $200,000, with any partialshares that result being rounded down to the nearest whole share. The awards described in this Section II(A) shall be referred to as “Initial Awards.” NoNon-Executive Director shall be granted more than one Initial Award. “Grant Date Fair Value” shall mean the value of the option as of the date of grant,which value shall be determined using a Black-Scholes option pricing model and the valuation assumptions used by the Company in accounting for optionsas of such date; provided, that the fair market value of the common shares of the Company used in such calculation shall be based on the average tradingprice of the common shares of the Company over the preceding thirty day period.B. Subsequent Awards. A Non-Executive Director who (i) has been serving as a Non-Executive Director for at least six months as of the date ofany annual General Meeting after the Effective Date and (ii) will continue to serve as a Non-Executive Director immediately following such meeting, iseligible to be granted, at the occasion of or as soon as practically possible following such annual General Meeting an option to purchase the number ofcommon 2shares of the Company having an aggregate Grant Date Fair Value of $100,000, with any partial shares that result being rounded down to the nearest wholeshare. The awards described in this Section II(B) shall be referred to as “Subsequent Awards.” For the avoidance of doubt, a Non-Executive Director electedfor the first time to the Board at an annual General Meeting shall only receive an Initial Award in connection with such election, and shall not receive anySubsequent Award on the date of such meeting as well.For the avoidance of doubt, any grant of Initial Awards and Subsequent Awards under this Program will require a written notice of acceptance of therelevant Non-Executive Director, in the absence of which such Non-Executive Director will be deemed to have waived its rights to such a grant.C. Terms of Awards Granted to Non-Executive Directors1. Exercise Price. The per share exercise price of each option granted to a Non-Executive Director shall equal the Fair Market Value (asdefined in the Equity Plan) of a common share of the Company on the date the option is granted.2. Vesting. Each Initial Award shall vest and become exercisable as to 33% of the shares subject to such Initial Award on the firstanniversary of the date of grant and in 24 substantially equal monthly installments thereafter, such that the Initial Award shall be fully vested on the thirdanniversary of the date of grant, subject to the Non-Executive Director continuing in service as a Non-Executive Director through each such vesting date.Each Subsequent Award shall vest and become exercisable in 12 substantially equal monthly installments following the date of grant, such that theSubsequent Award shall be fully vested on the first anniversary of the date of grant, subject to the Non-Executive Director continuing in service on the Boardas a Non-Executive Director through each such vesting date. Any portion of an Initial Award or Subsequent Award which is unvested or unexercisable at thetime of a Non-Executive Director’s termination of service on the Board shall be immediately forfeited upon such termination of service and shall notthereafter become vested and exercisable. All of a Non-Executive Director’s Initial Awards and Subsequent Awards shall vest in full immediately prior to theoccurrence of a Change in Control (as defined in the Equity Plan), to the extent outstanding at such time.3. Term. The maximum term of each stock option granted to a Non-Executive Director hereunder shall be ten (10) years from the date theoption is granted.D. Annual Increase; Award Limit. The Grant Date Fair Value of each Initial Award and Subsequent Award described in Sections II(A) and II(B)shall, subject to approval by the Board, increase on the first day of each calendar year beginning on January 1, 2017 by an amount equal to 3% of the GrantDate Fair Value applicable to Initial Awards and Subsequent Awards in effect as of the immediately preceding calendar year; provided, that, in no event shallthe number of shares awarded pursuant to (i) an Initial Award exceed 17,000 common shares of the Company and (ii) a Subsequent Award exceed 8,500common shares of the Company, in each case, subject to adjustment as provided in the Equity Plan, including without limitation with respect to any sharedividend, share split, reverse share split or other similar event affecting the common shares of the Company that is effected prior to the Effective Date. 3E. Tax deductions. To the extent required to comply with applicable tax laws, the Company shall be allowed to make necessary deductions onany compensation payable under this Program, including (without limitation) for purposes of any payroll tax or income tax.F. Prevailing terms. In the event of any inconsistency between the terms of the Merus N.V. 2016 Incentive Award Plan and this Program, theterms of this Program shall prevail.* * * * * 4Exhibit 4.7EMPLOYMENT AGREEMENTThis Employment Agreement (this “Agreement”), dated as of December 16, 2015, is made by and between Merus B.V., a Dutch private, limited liabilitycompany (together with any successors or assigns, the “Company”), and Hui Liu (the “Executive”) (collectively referred to herein as the “Parties”).RECITALS (A)It is the desire of the Company to assure itself of the services of Executive beginning on and following December 16, 2015, or such earlier date as maybe determined by the Company and Executive (the “Effective Date”), by entering into this Agreement. (B)Executive and the Company mutually desire that Executive provide services to the Company on the terms herein provided.AGREEMENTNOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the Parties hereto agree asfollows:1. Employment.(a) General. Effective as of the Effective Date, the Company shall employ Executive and Executive shall remain in the employ of the Company, for theperiod and in the position set forth in this Section 1, and subject to the other terms and conditions herein provided.(b) At-Will Employment. The Company and Executive acknowledge that Executive’s employment is at-will, as defined under applicable law, and thatExecutive’s employment with the Company may be terminated by either Party at any time for any or no reason (subject to the notice requirements ofSection 3(b)). This “at-will” nature of Executive’s employment shall remain unchanged during Executive’s tenure as an employee and may not be changed,except in an express writing signed by Executive and a duly authorized officer of the Company. If Executive’s employment terminates for any reason,Executive shall not be entitled to any payments, benefits, damages, award or compensation other than as provided in this Agreement or otherwise agreed to inwriting by the Company or as provided by applicable law. The period of Executive’s employment by the Company shall be referred to herein as the “Term”.(c) Position; Duties and Location. Executive shall serve as Executive Vice President, Chief Business Officer of the Company, with suchresponsibilities, duties and authority normally associated with such positions and as may from time to time be assigned to Executive by the Chief ExecutiveOfficer of the Company or the Management Board or the Supervisory Board of the Company (either one, the “Board”). Executive’s normal place of workshall be at the Company’s office in the Boston, Massachusetts metropolitan area, which the Company expects to establish prior to or shortly following theEffective Date. Executive shall devote substantially all of Executive’s working time and efforts to the business and affairs of the Company (which shallinclude service to its affiliates, if applicable) and shall not engage in outside businessactivities (including serving on outside boards or committees) without the consent of the Board, provided that Executive shall be permitted to (i) manageExecutive’s personal, financial and legal affairs, (ii) participate in trade associations, and (iii) serve on the board of directors of not-for-profit or tax-exemptcharitable organizations, in each case, subject to compliance with this Agreement and provided that such activities do not materially interfere withExecutive’s performance of Executive’s duties and responsibilities hereunder. Executive agrees to observe and comply with the rules and policies of theCompany as adopted by the Company from time to time, in each case as amended from time to time, as set forth in writing, and as delivered or made availableto Executive (each, a “Policy”).2. Compensation and Related Matters.(a) Annual Base Salary. During the Term, Executive shall receive a base salary at a rate of $335,000 per annum, which shall be paid in accordance withthe customary payroll practices of the Company and shall be pro-rated for partial years of employment. Such Annual Base Salary shall be reviewed (and maybe adjusted) from time to time by the Board (such annual base salary, as it may be adjusted from time to time, the “Annual Base Salary”).(b) Bonus. During the Term, Executive will be eligible to participate in an annual incentive program established by the Board. Executive’s annualincentive compensation under such incentive program (the “Annual Bonus”) shall be targeted at 35% of his Annual Base Salary. The Annual Bonus payableunder the incentive program shall be based on the achievement of performance goals to be determined by the Board and may be pro-rated for Executive’s firstyear of employment with the Company. The payment of any Annual Bonus pursuant to the incentive program shall be subject to Executive’s continuedemployment with the Company through the date of payment.(c) Equity Award. Subject to Board approval, the Company will grant to Executive a stock option or similar equity award (the “Option”) under theCompany’s equity plan then in effect (the “Plan”) for the purchase of 176,553 common shares of the Company (the “Common Shares”), which currentlyequals 1% of the fully-diluted equity securities of the Company, at a price per share equal to the fair market value of such Common Shares, as determined bythe Board, at the time of grant. The current fair market value of a Common Share is €4.00. The Option will be subject to a four-year vesting schedule, underwhich the Option will vest as to twenty-five percent (25%) of the shares subject to the Option on first anniversary of the Effective Date and as to theremaining shares in substantially equal quarterly calendar instalments over the following three years, subject to Executive’s continued employment with theCompany on the applicable vesting date and potential accelerated vesting as set forth in Section 4(b) and Section 4(c). Notwithstanding the foregoing, theOption will in all events be subject to the terms and conditions of the Plan and a stock option agreement to be entered into between the Company andExecutive. Executive shall be eligible to receive additional equity awards at the discretion of the Board.(d) Benefits. During the Term, Executive shall be eligible to participate in employee benefit plans, programs and arrangements of the Company(including medical, dental, vision, life insurance, disability insurance and defined contribution 401(k) plan) made available to other similarly-situatedemployees of the Company, consistent with the terms thereof and as such 2plans, programs and arrangements may be amended from time to time. Notwithstanding the foregoing, if the Company does not maintain any “group healthplan” (within the meaning of Section 4980B of the Internal Revenue Code and the regulations thereunder (“COBRA”)) for its U.S. employees as of theEffective Date, then, subject to Executive’s valid election to receive COBRA benefits under the health plans of Executive’s prior employer, during the periodbeginning on the Effective Date and ending on the first to occur of: (i) the date on which the Company adopts or otherwise makes generally available to itsU.S. employees a group health plan or (ii) the date on which Executive terminates employment with the Company, the Company shall reimburse Executivefor the actual cost of healthcare premiums incurred by Executive under the group health plan of Executive’s prior employer pursuant to COBRA, subject toproper substantiation of such costs in accordance with applicable Company Policy no later than sixty (60) days after such costs are incurred; provided, that,in the event the period of time during which Executive is entitled to continuation coverage under the group health plan of Executive’s prior employerpursuant to COBRA expires prior to the Company adopting or otherwise making available a group health plan to its U.S. employees, the Company shallcontinue to pay Executive for healthcare costs in an amount equal to the cost of healthcare premiums incurred by Executive under the group health plan ofExecutive’s prior employer pursuant to COBRA based on the last month of the COBRA period. Such costs shall be reimbursed promptly, but in no event laterthan sixty (60) days following proper substantiation thereof.(e) Vacation. During the Term, Executive shall be entitled to no less than four (4) weeks of paid personal leave per calendar year in accordance with theCompany’s paid time off Policies. Any vacation shall be taken at the reasonable and mutual convenience of the Company and Executive.(f) Business Expenses. During the Term, the Company shall reimburse Executive for all reasonable travel and other business expenses incurred byExecutive in the performance of Executive’s duties to the Company in accordance with the Company’s expense reimbursement Policy.(g) Relocation.(i) Temporary Living Expenses. Beginning on the Effective Date and ending on the date in which Executive secures permanent housing in theBoston, Massachusetts metropolitan area, but in no event for a period greater than six (6) months following the Effective Date, the Company shall payExecutive $5,000 per month to help offset Executive’s temporary living expenses in the Boston, Massachusetts metropolitan area.(ii) Relocation Expenses. The Company shall reimburse Executive up to a maximum amount of $50,000 for reasonable, documented movingexpenses incurred prior to December 15, 2017 as a result of Executive’s relocation to the Boston, Massachusetts area, which relocation expensereimbursement will be paid (subject to all tax withholdings which the Company reasonably determines are required) in calendar year 2017, regardless ofwhen such expenses are actually incurred, and following Executive’s timely submission of documentation reasonably requested by the Company. 3(iii) Repayment. In the event Executive’s employment with the Company is terminated by the Company for Cause (as defined below) or by theExecutive for any reason, in either case, prior to the first anniversary of the date the applicable relocation expense was incurred, Executive shall immediatelyrepay to the Company a prorated portion of such relocation expense reimbursement in an amount determined by multiplying (x) the amount of any relocationexpense reimbursement paid to Executive pursuant to Section 2(g)(ii) within the one (1) year period prior to such termination by (x) a fraction, the numeratorof which is the number of calendar days remaining from the date of Executive’s termination to the first anniversary of the date the applicable relocationexpense was incurred and the denominator of which is 365.(h) Key Person Insurance. At any time during the Term, the Company shall have the right to insure the life of Executive for the Company’s sole benefit.The Company shall have the right to determine the amount of insurance and the type of policy. Executive shall reasonably cooperate with the Company inobtaining such insurance by submitting to physical examinations, by supplying all information reasonably required by any insurance carrier, and byexecuting all necessary documents reasonably required by any insurance carrier, provided that any information provided to an insurance company or brokershall not be provided to the Company without the prior written authorization of Executive. Executive shall incur no financial obligation by executing anyrequired document, and shall have no interest in any such policy.3. Termination.(a) Circumstances. Executive’s employment hereunder may be terminated by the Company or Executive, as applicable, without any breach of thisAgreement, at any time, under the following circumstances:(i) Death. Executive’s employment hereunder shall terminate upon Executive’s death.(ii) Disability. If Executive has incurred a Disability, as defined below, the Company may terminate Executive’s employment.(iii) Termination for Cause. The Company may terminate Executive’s employment for Cause, as defined below.(iv) Termination without Cause. The Company may terminate Executive’s employment without Cause.(v) Resignation from the Company for Good Reason. Executive may resign Executive’s employment with the Company for Good Reason, asdefined below.(vi) Resignation from the Company Without Good Reason. Executive may resign Executive’s employment with the Company for any reasonother than Good Reason or for no reason. 4(b) Notice of Termination. Any termination of Executive’s employment by the Company or by Executive under this Section 3 (other than terminationpursuant to Section 3(a)(i)) shall be communicated by a written notice to the other party hereto (i) indicating the specific termination provision in thisAgreement relied upon, (ii) setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’semployment under the provision so indicated, if applicable, and (iii) specifying a Date of Termination which, if submitted by Executive, shall be at leastthirty (30) days following the date of such notice (a “Notice of Termination”); provided, however, that in the event that Executive delivers a Notice ofTermination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date ofCompany’s receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination. A Notice of Termination submitted by theCompany may provide for a Date of Termination on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company inits sole discretion. The failure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showingof Cause or Good Reason shall not waive any right of such Party hereunder or preclude such Party from asserting such fact or circumstance in enforcing suchParty’s rights hereunder.(c) Company Obligations upon Termination. Upon termination of Executive’s employment pursuant to this Section 3, Executive (or Executive’sestate) shall be entitled to receive the sum of: (i) the portion of Executive’s Annual Base Salary earned through the Date of Termination, but not yet paid toExecutive; (ii) any expenses owed to Executive pursuant to Section 2(f); and (iii) any amount accrued and arising from Executive’s participation in, orbenefits accrued under any employee benefit plans, programs or arrangements, which amounts shall be payable in accordance with the terms and conditionsof such employee benefit plans, programs or arrangements (collectively, the “Company Arrangements”). Except as otherwise expressly required by law (e.g.,COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amounts hereunder (ifany) shall cease upon the termination of Executive’s employment hereunder. In the event that Executive’s employment is terminated by the Company for anyreason, Executive’s sole and exclusive remedy shall be to receive the payments and benefits described in this Section 3(c) or Section 4, as applicable(d) Deemed Resignation. Upon termination of Executive’s employment for any reason, Executive shall be deemed to have resigned from all offices anddirectorships, if any, then held with the Company or any of its affiliates.4. Severance Payments.(a) Termination for Cause, or Termination Upon Death, Disability or Resignation from the Company Without Good Reason. If Executive’s employmentshall terminate as a result of Executive’s death pursuant to Section 3(a)(i) or Disability pursuant to Section 3(a)(ii), pursuant to Section 3(a)(iii) for Cause, orpursuant to Section 3(a)(vi) for Executive’s resignation from the Company without Good Reason, then Executive shall not be entitled to any severancepayments or benefits, except as provided in Section 3(c). 5(b) Termination without Cause or Resignation from the Company for Good Reason. If Executive’s employment is terminated by the Company withoutCause pursuant to Section 3(a)(iv) or pursuant to Section 3(a)(v) due to Executive’s resignation for Good Reason, in either case, which termination does notoccur within one year following the date of a Change in Control, then, subject to Executive signing on or before the 2lst day following Executive’sSeparation from Service (as defined below), and not revoking, a release of claims in substantially the form attached hereto as Exhibit A (the “Release”), andExecutive’s continued compliance with the terms of the Proprietary Information Agreement (as defined below), Executive shall receive, in addition topayments and benefits set forth in Section 3(c), (i) an amount in cash equal to 0.5 times the Annual Base Salary, payable in the form of salary continuation inregular instalments over the six-month period following Executive’s Separation from Service in accordance with the Company’s customary payroll practicesand (ii) in the discretion of the Board, accelerated vesting (in whole or in part) of any portion of the Option that is unvested as of the Date of Termination.(c) Change in Control. Notwithstanding anything to the contrary in Section 4(b), in the event Executive’s employment is terminated by the Companywithout Cause pursuant to Section 3(a)(iv) or pursuant to Section 3(a)(v) due to Executive’s resignation for Good Reason, in either case, within one yearfollowing the date of a Change in Control, then, subject to Executive signing on or before the 21st day following Executive’s Separation from Service, andnot revoking, the Release, and Executive’s continued compliance with the terms of the Proprietary Information Agreement, Executive shall receive, inaddition to payments and benefits set forth in Section 3(c), the following:(i) an amount in cash equal to 0.5 times the sum of (A) the Annual Base Salary and (B) the Annual Bonus at the target amount, which amountshall be paid in a lump sum on the First Payment Date (as defined below);(ii) if Executive elects to receive continued medical, dental or vision coverage under one or more of the Company’s group healthcare planspursuant to COBRA, the Company shall directly pay, or reimburse Executive for, the COBRA premiums for Executive and Executive’s covered dependentsunder such plans during the period commencing on Executive’s Separation from Service and ending upon the earliest of (X) the date that is nine (9) monthsfollowing Executive’s Separation from Service, (Y) the date that Executive and/or Executive’s covered dependents become no longer eligible for COBRA or(Z) the date Executive becomes eligible to receive healthcare coverage from a subsequent employer. Notwithstanding the foregoing, if the Companydetermines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law or incurring an excise tax(including, without limitation, by reason of Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to Executive a taxablemonthly payment in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue Executive’s and Executive’scovered dependents’ group health coverage in effect on the Date of Termination (which amount shall be based on the premium for the first month of COBRAcoverage), less the amount the Executive would have had to pay to receive group health coverage for Executive and Executive’s covered dependents basedon the cost sharing levels in effect on the Date of Termination, which payments shall be made regardless of whether Executive elects COBRA continuationcoverage and shall commence in the month following the month in which the Date of Termination occurs and shall end on the earlier of (X) the last day of thenine (9) month period following Executive’s Separation from Service, (Y) the date that Executive and/or Executive’s covered dependents become no longereligible for COBRA or (Z) the date Executive becomes eligible to receive healthcare coverage from a subsequent employer; and 6(iii) accelerated vesting of any portion of the Option that is unvested as of the Date of Termination.5. Employee Proprietary Information and Inventions Assignment Agreement.Executive acknowledges and agrees that, contemporaneously with the execution of this Agreement, Executive shall execute and agree to be bound bythe terms of the Company’s Employee Proprietary Information and Inventions Assignment Agreement (the “Proprietary Information Agreement”), whichProprietary Information Agreement contains certain non-competition, non-solicitation, non-disclosure and assignment of inventions provisions in favor ofthe Company.6. Assignment and Successors.The Company may assign its rights and obligations under this Agreement to any of its affiliates, including, without limitation, any Company entityestablished in the United States, or to any successor to all or substantially all of the business or the assets of the Company (by merger or otherwise), and mayassign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its affiliates. Notwithstanding the foregoing, inthe event the Company assigns its rights and obligations under this Agreement to a Company entity established in the United States, the term “Board” shallcontinue to refer to either of the Management Board or Supervisory Board of Merus B.V. (or any successor thereto). This Agreement shall be binding uponand inure to the benefit of the Company, Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators,heirs, distributees, devisees, and legatees, as applicable. None of Executive’s rights or obligations may be assigned or transferred by Executive, other thanExecutive’s rights to payments hereunder, which may be transferred only by will or operation of law. Notwithstanding the foregoing, Executive shall beentitled, to the extent permitted under applicable law and applicable Company Arrangements, to select and change a beneficiary or beneficiaries to receivecompensation hereunder following Executive’s death by giving written notice thereof to the Company.7. Certain Definitions.(a) Cause. The Company shall have “Cause” to terminate Executive’s employment hereunder upon:(i) Executive’s failure to (A) substantially perform his duties with the Company (other than any such failure resulting from Executive’sDisability) or (B) comply with, in any material respect, any of the Company’s Policies;(ii) the Board’s determination that Executive failed in any material respect to carry out or comply with any lawful and reasonable directive of theBoard; 7(iii) Executive’s breach of a material provision of this Agreement or the Proprietary Information Agreement;(iv) Executive’s conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or crimeinvolving moral turpitude;(v) Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s (or any of its affiliate’s)premises or while performing Executive’s duties and responsibilities under this Agreement; or(vi) Executive’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against theCompany or any of its affiliates.(b) Change in Control. “Change in Control” shall mean and include each of the following:(i) A transaction or series of related transactions (other than an offering of Common Shares to the general public through a registration statementfiled with the Securities and Exchange Commission or a transaction or series of related transactions that meets the requirements of clauses (A) and (B) ofsubsection (ii) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities ExchangeAct of 1934 (the “Exchange Act”)) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of itssubsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company)directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessingmore than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or(ii) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or moreintermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of theCompany’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than atransaction:(A) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either byremaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls,directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to thebusiness of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined votingpower of the Successor Entity’s outstanding voting securities immediately after the transaction, and 8(B) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of theSuccessor Entity; provided, however, that no person or group shall be treated for purposes of this clause (B) as beneficially owning 50% or moreof the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation ofthe transaction.Notwithstanding the foregoing, in no event shall the transaction or event described in subsection (i) or (ii) constitute a Change in Control for purposesof this Agreement unless such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).(c) Date of Termination. “Date of Termination” shall mean (i) if Executive’s employment is terminated by Executive’s death, the date of Executive’sdeath; or (ii) if Executive’s employment is terminated pursuant to Section 3(a)(ii) – (vi) either the date indicated in the Notice of Termination or the datespecified by the Company pursuant to Section 3(b), whichever is earlier.(d) Disability. “Disability” shall mean, at any time the Company or any of its affiliates sponsors a long-term disability plan for the Company’semployees, “disability” as defined in such long-term disability plan for the purpose of determining a participant’s eligibility for benefits, provided, however,if the long-term disability plan contains multiple definitions of disability, “Disability” shall refer to that definition of disability which, if Executive qualifiedfor such disability benefits, would provide coverage for the longest period of time. The determination of whether Executive has a Disability shall be made bythe person or persons required to make disability determinations under the long-term disability plan. At any time the Company does not sponsor a long-termdisability plan for its employees, Disability shall mean Executive’s inability to perform, with or without reasonable accommodation, the essential functionsof Executive’s position hereunder for a total of three months during any six-month period as a result of incapacity due to mental or physical illness asdetermined by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative, with such agreement as toacceptability not to be unreasonably withheld or delayed. Any refusal by Executive to submit to a medical examination for the purpose of determiningDisability shall be deemed to constitute conclusive evidence of Executive’s Disability.(e) Good Reason. For the sole purpose of determining Executive’s right to severance payments as described above, Executive’s resignation will be for“Good Reason” if Executive resigns within ninety days after any of the following events, unless Executive consents to the applicable event: (i) a decrease inExecutive’s annual base salary, other than a reduction in annual base salary of less than 10% that is implemented in connection with a contemporaneousreduction in annual base salaries affecting other senior executives of the Company, (ii) a material decrease in Executive’s authority or areas of responsibilityas are commensurate with Executive’s title or position (other than decreases that occur when individuals are hired to replace departing executives or are hiredat a level below Executive Vice President and other than in connection with a corporate transaction where Executive continues to hold the positionreferenced in Section 1(c) above with respect to the Company’s business, substantially as such 9business exists prior to the date of consummation of such corporate transaction, but does not hold such position with respect to the successor corporation), or(iii) the relocation of Executive’s primary office to a location more than 50 miles from the Boston, Massachusetts metropolitan area. Notwithstanding theforegoing, no Good Reason will have occurred unless and until Executive has: (i) provided the Company, within 60 days of Executive’s knowledge of theoccurrence of the facts and circumstances underlying the Good Reason event, written-notice stating with specificity the applicable facts and circumstancesunderlying such finding of Good Reason; and (ii) provided the Company with an opportunity to cure the same within 30 days after the receipt of such notice.(f) Person. “Person” means any individual or any corporation, limited liability company, general partnership, limited partnership, venture, trust,business trust, unincorporated association, estate or other entity.8. Miscellaneous Provisions.(a) Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with its express terms, and otherwise inaccordance with the substantive laws of the Commonwealth of Massachusetts without reference to the principles of conflicts of law of the Commonwealth ofMassachusetts or any other jurisdiction, and where applicable, the laws of the United States.(b) Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of anyother provision of this Agreement, which shall remain in full force and effect.(c) Notices. Any notice, request, claim, demand, document and other communication hereunder to any Party shall be effective upon receipt (or refusalof receipt) and shall be in writing and delivered personally or sent by facsimile or certified or registered mail, postage prepaid, as follows:(i) If to the Company, the General Counsel at its headquarters,(ii) If to Executive, at the last address that the Company has in its personnel records for Executive, or(iii) At any other address as any Party shall have specified by notice in writing to the other Party.(d) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which togetherwill constitute one and the same Agreement. Signatures delivered by facsimile shall be deemed effective for all purposes.(e) Entire Agreement. The terms of this Agreement and the Proprietary Information Agreement are intended by the Parties to be the final expression oftheir agreement with respect to the subject matter hereof and thereof and supersede all prior understandings and agreements, whether written or oral,including, without limitation, that certain offer letter between Executive and the Company, dated as of December 1,2015. The Parties further intend that thisAgreement 10and the Proprietary Information Agreement shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoevermay be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement or the Proprietary Information Agreement.(f) Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by Executive and aduly authorized officer of Company. By an instrument in writing similarly executed, Executive or a duly authorized officer of the Company may waivecompliance by the other Party with any specifically identified provision of this Agreement that such other Party was or is obligated to comply with orperform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure toexercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power providedherein or by law or in equity.(g) No Inconsistent Actions. The Parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with theprovisions or essential intent of this Agreement. Furthermore, it is the intent of the Parties hereto to act in a fair and reasonable manner with respect to theinterpretation and application of the provisions of this Agreement.(h) Construction. This Agreement shall be deemed drafted equally by both the Parties. Its language shall be construed as a whole and according to itsfair meaning. Any presumption or principle that the language is to be construed against any Party shall not apply. The headings in this Agreement are onlyfor convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are tothose parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (a) the pluralincludes the singular and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or“every” means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” andother similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) allpronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or personsreferred to may require.(i) Arbitration. Any controversy, claim or dispute arising out of or relating to this Agreement, shall be settled solely and exclusively by a bindingarbitration process administered by JAMS/Endispute in Boston, Massachusetts. Such arbitration shall be conducted in accordance with the then-existingJAMS/Endispute Rules of Practice and Procedure, with the following exceptions if in conflict: (a) one arbitrator who is a retired judge shall be chosen byJAMS/Endispute; (b) each Party to the arbitration will pay one-half of the expenses and fees of the arbitrator, together with other expenses of the arbitrationincurred or approved by the arbitrator; and (c) arbitration may proceed in the absence of any Party if written notice (pursuant to the JAMS/Endispute rulesand regulations) of the proceedings has been given to such Party. Each Party shall bear its own attorneys’ fees and expenses; provided that the arbitrator mayassess the prevailing Party’s fees and costs against the non-prevailing Party as part of the arbitrator’s award. The Parties agree to abide by all decisions andawards rendered in such 11proceedings. Such decisions and awards rendered by the arbitrator shall be final and conclusive. All such controversies, claims or disputes shall be settled inthis manner in lieu of any action at law or equity; provided, however, that nothing in this subsection shall be construed as precluding the bringing an actionfor injunctive relief or specific performance as provided in this Agreement or the Proprietary Information Agreement. This dispute resolution process and anyarbitration hereunder shall be confidential and neither any Party nor the neutral arbitrator shall disclose the existence, contents or results of such processwithout the prior written consent of all Parties, except where necessary or compelled in a Court to enforce this arbitration provision or an award from sucharbitration or otherwise in a legal proceeding. If JAMS/Endispute no longer exists or is otherwise unavailable, the Parties agree that the American ArbitrationAssociation (“AAA”) shall administer the arbitration in accordance with its then-existing rules as modified by this subsection. In such event, all referencesherein to JAMS/Endispute shall mean AAA.(j) Enforcement. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the termof this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceableprovision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall notbe affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid orunenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceableprovision as may be possible and be legal, valid and enforceable.(k) Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreignwithholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if anyquestions as to the amount or requirement of withholding shall arise.(l) Survival. Notwithstanding anything to the contrary in this Agreement, the provisions of Sections 5 through 8 will survive the termination ofExecutive’s employment and the expiration or termination of the Term.(m) Section 409A.(i) General. The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of theInternal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, tothe maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.(ii) Separation from Service. Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under thisAgreement that are designated under this Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s“separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any suchcompensation or benefits described in Sections 4(b) and 4(c) shall not be paid, or, in the case of installments, shall not commence payment, until the 30th dayfollowing Executive’s Separation 12from Service (the “First Payment Date”). Any installment payments that would have been made to Executive during the 30-day period immediately followingExecutive’s Separation from Service but for the preceding sentence shall be paid to Executive on the First Payment Date and the remaining payments shall bemade as provided in this Agreement.(iii) Specified Employee. Notwithstanding anything in this Agreement to the contrary, if Executive is deemed by the Company at the time ofExecutive’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of thebenefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion ofExecutive’s benefits shall not be provided to Executive prior to the earlier of (i) the expiration of the 6-month period measured from the date of Executive’sSeparation from Service with the Company or (ii) the date of Executive’s death. Upon the first business day following the expiration of the applicableSection 409A period, all payments deferred pursuant to the preceding sentence shall be paid in a lump sum to Executive (or Executive’s estate orbeneficiaries), and any remaining payments due to Executive under this Agreement shall be paid as otherwise provided herein.(iv) Expense Reimbursements. To the extent that any reimbursements under this Agreement are subject to Section 409A, any suchreimbursements payable to Executive shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred,provided that Executive submits Executive’s reimbursement request promptly following the date the expense is incurred. The amount of expenses reimbursedin one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of theCode, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.(v) Installments. Executive’s right to receive any installment payments under this Agreement, including without limitation any continuation ofsalary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each suchinstallment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A. Except as otherwise permitted underSection 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interestpursuant to Section 409A.9. Executive Acknowledgement.Executive acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon anyrepresentations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based onExecutive’s own judgment.[Signature Page Follows] 13IN WITNESS WHEREOF, the Parties have executed this Agreement on the date and year first above written. COMPANYBy: /s/ Ton Logtenberg Ton Logtenberg Chief Executive OfficerBy: /s/ Shelley Margetson Shelley Margetson Chief Financial OfficerEXECUTIVEBy: /s/ Hui Liu Hui LiuEXHIBIT ASeparation Agreement and ReleaseThis Separation Agreement and Release (“Agreement”) is made by and between Hui Liu (“Executive”) and (the “Company”) (collectivelyreferred to as the “Parties” or individually referred to as a “Party”). Capitalized terms used but not defined in this Agreement shall have the meanings set forthin the Employment Agreement (as defined below).WHEREAS, the Parties have previously entered into that certain Employment Agreement, dated as of (the “Employment Agreement”);andWHEREAS, in connection with Executive’s termination of employment with the Company or a subsidiary or affiliate of the Company effective ,20 , the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that Executive may haveagainst the Company and any of the Releasees as defined below, including, but not limited to, any and all claims arising out of or in any way related toExecutive’s employment with or separation from the Company or its subsidiaries or affiliates but, for the avoidance of doubt, nothing herein will be deemedto release any rights or remedies in connection with Executive’s ownership of vested equity securities of the Company or Executive’s right toindemnification by the Company or any of its affiliates pursuant to contract or applicable law (collectively, the “Retained Claims”).NOW, THEREFORE, in consideration of the severance payments and benefits described in Section 4 of the Employment Agreement, which, pursuantto the Employment Agreement, are conditioned on Executive’s execution and non-revocation of this Agreement, and in consideration of the mutual promisesmade herein, the Company and Executive hereby agree as follows:1. Severance Payments; Salary and Benefits. The Company agrees to provide Executive with the severance payments and benefits described in Section4(b) or Section 4(c) of the Employment Agreement, payable at the times set forth in, and subject to the terms and conditions of, the Employment Agreement.In addition, to the extent not already paid, and subject to the terms and conditions of the Employment Agreement, the Company shall pay or provide toExecutive all other payments or benefits described in Section 3(c) of the Employment Agreement, subject to and in accordance with the terms thereof.2. Release of Claims. Executive agrees that, other than with respect to the Retained Claims, the foregoing consideration represents settlement in full ofall outstanding obligations owed to Executive by the Company, any of its direct or indirect subsidiaries and affiliates, and any of their current and formerofficers, directors, equity holders, managers, employees, agents, investors, attorneys, shareholders, administrators, affiliates, benefit plans, plan administrators,insurers, trustees, divisions, and subsidiaries and predecessor and successor corporations and assigns (collectively, the “Releasees”). Executive, onExecutive’s own behalf and on behalf of any of Executive’s affiliated companies or entities and any of their respective heirs, family members, executors,agents, and assigns, other than with respect to the Retained Claims, hereby and forever releases the Releasees from, and agrees not to sue concerning, or inany manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, or cause of action relating to any matters of any kind, whetherpresently known or unknown, suspected orunsuspected, that Executive may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have occurred up until andincluding the Effective Date of this Agreement (as defined in Section 7 below), including, without limitation:(a) any and all claims relating to or arising from Executive’s employment or service relationship with the Company or any of its direct or indirectsubsidiaries or affiliates and the termination of that relationship;(b) any and all claims relating to, or arising from, Executive’s right to purchase, or actual purchase of any shares of stock or other equity interestsof the Company or any of its affiliates, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty underapplicable state corporate law, and securities fraud under any state or federal law;(c) any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation;breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent orintentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract orprospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy;false imprisonment; conversion; and disability benefits;(d) any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of1964;the Civil Rights Act of 1991; the Rehabilitation Act of 1973;the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Credit ReportingAct; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974;the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; and the Sarbanes-Oxley Act of 2002;(e) any and all claims for violation of the federal or any state constitution;(f) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;(g) any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of theproceeds received by Executive as a result of this Agreement; and(h) any and all claims for attorneys’ fees and costs.Executive agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released.This release does not release claims that cannot be released as a matter of law, including, but not limited to, Executive’s right to report possible violations offederal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 2lF of the SecuritiesExchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or any other A-2whistleblower protection provisions of state or federal law or regulation, Executive’s right to file a charge with or participate in a charge by the EqualEmployment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce oradminister laws related to employment, against the Company (with the understanding that Executive’s release of claims herein bars Executive fromrecovering such monetary relief from the Company or any Releasee), claims for unemployment compensation or any state disability insurance benefitspursuant to the terms of applicable state law, claims to continued participation in certain of the Company’s group benefit plans pursuant to the terms andconditions of COBRA, claims to any benefit entitlements vested as the date of separation of Executive’s employment, pursuant to written terms of anyemployee benefit plan of the Company or its affiliates and Executive’s right under applicable law and any Retained Claims. This release further does notrelease claims for breach of Section 3(c), Section 4(b) or Section 4(c) of the Employment Agreement.3. Acknowledgment of Waiver of Claims under ADEA. Executive understands and acknowledges that Executive is waiving and releasing any rightsExecutive may have under the Age Discrimination in Employment Act of 1967 (“ADEA’’), and that this waiver and release is knowing and voluntary.Executive understands and agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date ofthis Agreement. Executive understands and acknowledges that the consideration given for this waiver and release is in addition to anything of value to whichExecutive was already entitled. Executive further understands and acknowledges that Executive has been advised by this writing that: (a) Executive shouldconsult with an attorney prior to executing this Agreement; (b) Executive has 21 days within which to consider this Agreement; (c) Executive has 7 daysfollowing Executive’s execution of this Agreement to revoke this Agreement pursuant to written notice to the General Counsel of the Company; (d) thisAgreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Executive fromchallenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, orcosts for doing so, unless specifically authorized by federal law. In the event Executive signs this Agreement and returns it to the Company in less than the 21day period identified above, Executive hereby acknowledges that Executive has freely and voluntarily chosen to waive the time period allotted forconsidering this Agreement.4. Severability. In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or isdeclared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect withoutsaid provision or portion of provision.5. No Oral Modification. This Agreement may only be amended in a writing signed by Executive and a duly authorized officer of the Company.6. Governing Law; Dispute Resolution. This Agreement shall be subject to the provisions of Sections 9(a), 9(c) and 9(i) of the Employment Agreement.7. Effective Date. If Executive has attained or is over the age of 40 as of the date of Executive’s termination of employment, then each Party has sevendays after that Party signs this Agreement to revoke it and this Agreement will become effective on the eighth day after A-3Executive signed this Agreement, so long as it has been signed by the Parties and has not been revoked by either Party before that date (the “Effective Date”).If Executive has not attained the age of 40 as of the date of Executive’s termination of employment, then the “Effective Date” shall be the date on whichExecutive signs this Agreement.8. Voluntary Execution of Agreement. Executive understands and agrees that Executive executed this Agreement voluntarily, without any duress orundue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of Executive’s claims against the Company andany of the other Releasees. Executive acknowledges that: (a) Executive has read this Agreement; (b) Executive has not relied upon any representations orstatements made by the Company that are not specifically set forth in this Agreement; (c) Executive has been represented in the preparation, negotiation, andexecution of this Agreement by legal counsel of Executive’s own choice or has elected not to retain legal counsel; (d) Executive understands the terms andconsequences of this Agreement and of the releases it contains; and (e) Executive is fully aware of the legal and binding effect of this Agreement.IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below. Dated: Hui Liu COMPANYDated: By: Name: Title: A-4AMENDED AND RESTATEDEMPLOYMENT AGREEMENTThis Amended and Restated Employment Agreement (this “Agreement”), dated as of March 2, 2016 (the “Effective Date”), is made by and betweenMerus US, Inc., a Delaware corporation (together with any successors or assigns, the “Company”), and Hui Liu (the “Executive”) (collectively referred toherein as the “Parties”).RECITALS (A)Merus B.V., a Dutch private limited company (together with any successors or assigns, the “Parent”) and Executive entered into an EmploymentAgreement dated December 16, 2015 (the “Original Employment Agreement”) pursuant to which he became an employee of Parent on December 16,2015 (the “Original Effective Date”). (B)It is the desire of the Company to continue to assure itself of the services of Executive beginning on and following the Effective Date, by entering intothis Agreement, which will supersede the Original Employment Agreement. (C)Executive and the Company mutually desire that Executive provide services to the Company on the terms herein provided.AGREEMENTNOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the Parties hereto agree asfollows:1. Employment.(a) General. Effective as of the Effective Date, the Company shall employ Executive and Executive shall remain in the employ of the Company, for theperiod and in the position set forth in this Section 1, and subject to the other terms and conditions herein provided.(b) At-Will Employment. The Company and Executive acknowledge that Executive’s employment is at-will, as defined under applicable law, and thatExecutive’s employment with the Company may be terminated by either Party at any time for any or no reason (subject to the notice requirements ofSection 3(b)). This “at-will” nature of Executive’s employment shall remain unchanged during Executive’s tenure as an employee and may not be changed,except in an express writing signed by Executive and a duly authorized officer of the Company or the Parent, as applicable. If Executive’s employmentterminates for any reason, Executive shall not be entitled to any payments, benefits, damages, award or compensation other than as provided in thisAgreement or otherwise agreed to in writing by a duly authorized officer of the Company, a duly authorized officer of the Parent or as provided by applicablelaw. The period of Executive’s employment by the Company shall be referred to herein as the “Term”.(c) Position; Duties and Location. Executive shall serve as Executive Vice President, Chief Business Officer of the Company and the Parent, with suchresponsibilities, duties and authority normally associated with such positions and as may from time to time be assigned to Executive by the Chief ExecutiveOfhcer of the Parent or the Management Board or the Supervisory Board of the Parent (either one, the “Board”). Executive’s normal place of work shall be atthe Company’s office in the Boston, Massachusetts metropolitan area. Executive shall devote substantially all of Executive’s working time and efforts to thebusiness and affairs of the Company (which shall include service to its affiliates, if applicable) and shall not engage in outside business activities (includingserving on outside boards or committees) without the consent of the Board, provided that Executive shall be permitted to (i) manage Executive’s personal,financial and legal affairs, (ii) participate in trade associations, and (iii) serve on the board of directors of not-for-profit or tax-exempt charitableorganizations, in each case, subject to compliance with this Agreement and provided that such activities do not materially interfere with Executive’sperformance of Executive’s duties and responsibilities hereunder. Executive agrees to observe and comply with the rules and policies of the Company and itsParent as adopted by the Company or its Parent, as applicable from time to time, in each case as amended from time to time, as set forth in writing, and asdelivered or made available to Executive (each, a “Policy”).2. Comnensation and Related Matters.(a) Annual Base Salary. During the Term, Executive shall receive a base salary at a rate of $335,000 per annum, which shall be paid in accordance withthe customary payroll practices of the Company and shall be pro-rated for partial years of employment. Such Annual Base Salary shall be reviewed (and maybe adjusted) from time to time by the Board (such annual base salary, as it may be adjusted from time to time, the “Annual Base Salary”).(b) Bonus. During the Term, Executive will be eligible to participate in an annual incentive program established by the Board. Executive’s annualincentive compensation under such incentive program (the “Annual Bonus”) shall be targeted at 35% of his Annual Base Salary. The Annual Bonus payableunder the incentive program shall be based on the achievement of performance goals to be determined by the Board and may be pro-rated for calendar year2016 performance based on the Original Effective Date. The payment of any Annual Bonus pursuant to the incentive program shall be subject to Executive’scontinued employment with the Company through the date of payment.(c) Equity Awards. Parent granted Executive an option on December 16, 2015 pursuant to the Parent’s 2010 Employee Option Plan with a per shareexercise price of €4.00 (the “Option”). Executive shall be eligible to receive additional equity awards at the discretion of the Board.(d) Benefits. During the Term, Executive shall be eligible to participate in employee benefit plans, programs and arrangements of the Company(including medical, dental, vision, life insurance, disability insurance and defined contribution 401(k) plan) made available to other similarly-situatedemployees of the Company, consistent with the terms thereof and as such plans, programs and arrangements may be amended from time to time.Notwithstanding the foregoing, if the Company does not maintain any “group health plan” (within the meaning of Section 4980B of the Internal RevenueCode and the regulations thereunder (“COBRA”)) for its U.S. employees as of the Effective Date, then, subject to Executive’s valid election to receive 2COBRA benefits under the health plans of Executive’s prior employer, during the period beginning on the Effective Date and ending on the first to occur of:(i) the date on which the Company adopts or otherwise makes generally available to its U.S. employees a group health plan or (ii) the date on whichExecutive terminates employment with the Company, the Company shall reimburse Executive for the actual cost of healthcare premiums incurred byExecutive under the group health plan of Executive’s prior employer pursuant to COBRA, subject to proper substantiation of such costs in accordance withapplicable Company Policy no later than sixty (60) days after such costs are incurred; provided, that, in the event the period of time during which Executiveis entitled to continuation coverage under the group health plan of Executive’s prior employer pursuant to COBRA expires prior to the Company adopting orotherwise making available a group health plan to its U.S. employees, the Company shall continue to pay Executive for healthcare costs in an amount equalto the cost of healthcare premiums incurred by Executive under the group health plan of Executive’s prior employer pursuant to COBRA based on the lastmonth of the COBRA period. Such costs shall be reimbursed promptly, but in no event later than sixty (60) days following proper substantiation thereof.(e) Vacation. During the Term, Executive shall be entitled to no less than four (4) weeks of paid personal leave per calendar year in accordance with theCompany’s paid time off Policies. Any vacation shall be taken at the reasonable and mutual convenience of the Company and Executive.(f) Business Expenses. During the Term, the Company shall reimburse Executive for all reasonable travel and other business expenses incurred byExecutive in the performance of Executive’s duties to the Company in accordance with the Company’s expense reimbursement Policy.(g) Relocation.(i) Temporary Living Expenses. Beginning on the Original Effective Date and ending on the date in which Executive secures permanent housingin the Boston, Massachusetts metropolitan area, but in no event for a period greater than six (6) months following the Original Effective Date, the Companyshall pay Executive $5,000 per month to help offset Executive’s temporary living expenses in the Boston, Massachusetts metropolitan area.(ii) Relocation Expenses. The Company shall reimburse Executive up to a maximum amount of $50,000 for reasonable, documented movingexpenses incurred prior to December 15, 2017 as a result of Executive’s relocation to the Boston, Massachusetts area, which relocation expensereimbursement will be paid (subject to all tax withholdings which the Company reasonably determines are required) in calendar year 2017, regardless ofwhen such expenses are actually incurred, and following Executive’s timely submission of documentation reasonably requested by the Company.(iii) Repayment. In the event Executive’s employment with the Company is terminated by the Company for Cause (as defined below) or by theExecutive for any reason, in either case, prior to the first anniversary of the date the applicable relocation expense was incurred, Executive shall immediatelyrepay to the Company a prorated portion of such 3relocation expense reimbursement in an amount determined by multiplying (x) the amount of any relocation expense reimbursement paid to Executivepursuant to Section 2(g)(ii) within the one (1) year period prior to such termination by (x) a fraction, the numerator of which is the number of calendar daysremaining from the date of Executive’s termination to the first anniversary of the date the applicable relocation expense was incurred and the denominator ofwhich is 365.(h) Key Person Insurance. At any time during the Term, the Company shall have the right to insure the life of Executive for the Company’s sole benefit.The Company shall have the right to determine the amount of insurance and the type of policy. Executive shall reasonably cooperate with the Company inobtaining such insurance by submitting to physical examinations, by supplying all information reasonably required by any insurance carrier, and byexecuting all necessary documents reasonably required by any insurance carrier, provided that any information provided to an insurance company or brokershall not be provided to the Company without the prior written authorization of Executive. Executive shall incur no financial obligation by executing anyrequired document, and shall have no interest in any such policy.3. Termination.(a) Circumstances. Executive’s employment hereunder may be terminated by the Company or Executive, as applicable, without any breach of thisAgreement, at any time, under the following circumstances:(i) Death. Executive’s employment hereunder shall terminate upon Executive’s death.(ii) Disability. If Executive has incurred a Disability, as defined below, the Company may terminate Executive’s employment.(iii) Termination for Cause. The Company may terminate Executive’s employment for Cause, as defined below.(iv) Termination without Cause. The Company may terminate Executive’s employment without Cause.(v) Resignation from the Company for Good Reason. Executive may resign Executive’s employment with the Company for Good Reason, asdefined below.(vi) Resignation from the Company Without Good Reason. Executive may resign Executive’s employment with the Company for any reasonother than Good Reason or for no reason.(b) Notice of Termination. Any termination of Executive’s employment by the Company or by Executive under this Section 3 (other than terminationpursuant to Section 3(a)(i)) shall be communicated by a written notice to the other party hereto (i) indicating the specific termination provision in thisAgreement relied upon, (ii) setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’semployment under the provision so indicated, if applicable, and (iii) specifying a Date of 4Termination which, if submitted by Executive, shall be at least thirty (30) days following the date of such notice (a “Notice of Termination”); provided,however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date ofTermination to any date that occurs following the date of Company’s receipt of such Notice of Termination and is prior to the date specified in such Notice ofTermination. A Notice of Termination submitted by the Company may provide for a Date of Termination on the date Executive receives the Notice ofTermination, or any date thereafter elected by the Company in its sole discretion. The failure by the Company or Executive to set forth in the Notice ofTermination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of such Party hereunder or precludesuch Party from asserting such fact or circumstance in enforcing such Party’s rights hereunder.(c) Company Obligations upon Termination. Upon termination of Executive’s employment pursuant to this Section 3, Executive (or Executive’sestate) shall be entitled to receive the sum of: (i) the portion of Executive’s Annual Base Salary earned through the Date of Termination, but not yet paid toExecutive; (ii) any expenses owed to Executive pursuant to Section 2(f); and (iii) any amount accrued and arising from Executive’s participation in, orbenefits accrued under any employee benefit plans, programs or arrangements, which amounts shall be payable in accordance with the terms and conditionsof such employee benefit plans, programs or arrangements (collectively, the “Company Arrangements”). Except as otherwise expressly required by law (e.g.,COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amounts hereunder (ifany) shall cease upon the termination of Executive’s employment hereunder. In the event that Executive’s employment is terminated by the Company for anyreason, Executive’s sole and exclusive remedy shall be to receive the payments and benefits described in this Section 3(c) or Section 4, as applicable(d) Deemed Resignation. Upon termination of Executive’s employment for any reason, Executive shall be deemed to have resigned from all offices anddirectorships, if any, then held with the Company or any of its affiliates.4. Severance Payments.(a) Termination for Cause, or Termination Upon Death, Disability or Resignation from the Company Without Good Reason. If Executive’s employmentshall terminate as a result of Executive’s death pursuant to Section 3(a)(i) or Disability pursuant to Section 3(a)(ii), pursuant to Section 3(a)(iii) for Cause, orpursuant to Section 3(a)(vi) for Executive’s resignation from the Company without Good Reason, then Executive shall not be entitled to any severancepayments or benefits, except as provided in Section 3(c).(b) Termination without Cause or Resignation from the Company for Good Reason. If Executive’s employment is terminated by the Company withoutCause pursuant to Section 3(a)(iv) or pursuant to Section 3(a)(v) due to Executive’s resignation for Good Reason, in either case, which termination does notoccur within one year following the date of a Change in Control, then, subject to Executive signing on or before the 21st day following Executive’sSeparation from Service (as defined below), and not revoking, a release of claims in substantially 5the form attached hereto as Exhibit A (the “Release”), and Executive’s continued compliance with the terms of the Proprietary Information Agreement (asdefined below), Executive shall receive, in addition to payments and benefits set forth in Section 3(c), (i) an amount in cash equal to 0.5 times the AnnualBase Salary, payable in the form of salary continuation in regular instalments over the six-month period following Executive’s Separation from Service inaccordance with the Company’s customary payroll practices and (ii) in the discretion of the Board, accelerated vesting (in whole or in part) of any portion ofthe Option that is unvested as of the Date of Termination.(c) Change in Control. Notwithstanding anything to the contrary in Section 4(b), in the event Executive’s employment is terminated by the Companywithout Cause pursuant to Section 3(a)(iv) or pursuant to Section 3(a)(v) due to Executive’s resignation for Good Reason, in either case, within one yearfollowing the date of a Change in Control, then, subject to Executive signing on or before the 21st day following Executive’s Separation from Service, andnot revoking, the Release, and Executive’s continued compliance with the terms of the Proprietary Information Agreement, Executive shall receive, inaddition to payments and benefits set forth in Section 3(c), the following:(i) an amount in cash equal to 0.5 times the sum of (A) the Annual Base Salary and (B) the Annual Bonus at the target amount, which amountshall be paid in a lump sum on the First Payment Date (as defined below);(ii) if Executive elects to receive continued medical, dental or vision coverage under one or more of the Company’s group healthcare planspursuant to COBRA, the Company shall directly pay, or reimburse Executive for, the COBRA premiums for Executive and Executive’s covered dependentsunder such plans during the period commencing on Executive’s Separation from Service and ending upon the earliest of (X) the date that is nine (9) monthsfollowing Executive’s Separation from Service, (Y) the date that Executive and/or Executive’s covered dependents become no longer eligible for COBRA or(Z) the date Executive becomes eligible to receive healthcare coverage from a subsequent employer. Notwithstanding the foregoing, if the Companydetermines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law or incurring an excise tax(including, without limitation, by reason of Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to Executive a taxablemonthly payment in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue Executive’s and Executive’scovered dependents’ group health coverage in effect on the Date of Termination (which amount shall be based on the premium for the first month of COBRAcoverage), less the amount the Executive would have had to pay to receive group health coverage for Executive and Executive’s covered dependents basedon the cost sharing levels in effect on the Date of Termination, which payments shall be made regardless of whether Executive elects COBRA continuationcoverage and shall commence in the month following the month in which the Date of Termination occurs and shall end on the earlier of (X) the last day of thenine (9) month period following Executive’s Separation from Service, (Y) the date that Executive and/or Executive’s covered dependents become no longereligible for COBRA or (Z) the date Executive becomes eligible to receive healthcare coverage from a subsequent employer; and 6(iii) accelerated vesting of any portion of the Option that is unvested as of the Date of Termination.5. Employee Proprietary Information and Inventions Assignment Agreement.Executive acknowledges and agrees that Executive continue to be bound by the terms of the Parent’s Employee Proprietary Information andInventions Assignment Agreement (the “Proprietary Information Agreement”), which Proprietary Information Agreement contains certain non-competition,non-solicitation, non-disclosure and assignment of inventions provisions in favor of the Parent.6. Assignment and Successors.The Company may assign its rights and obligations under this Agreement to any of its affiliates, including, without limitation, any successor to all orsubstantially all of the business or the assets of the Company (by merger or otherwise), and may assign or encumber this Agreement and its rights hereunder assecurity for indebtedness of the Company and its affiliates. This Agreement shall be binding upon and inure to the benefit of the Company, Executive andtheir respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.None of Executive’s rights or obligations may be assigned or transferred by Executive, other than Executive’s rights to payments hereunder, which may betransferred only by will or operation of law. Notwithstanding the foregoing, Executive shall be entitled, to the extent permitted under applicable law andapplicable Company Arrangements, to select and change a beneficiary or beneficiaries to receive compensation hereunder following Executive’s death bygiving written notice thereof to the Company.7. Certain Definitions.(a) Cause. The Company shall have “Cause” to terminate Executive’s employment hereunder upon:(i) Executive’s failure to (A) substantially perform his duties with the Company (other than any such failure resulting from Executive’sDisability) or (B) comply with, in any material respect, any of the Company’s Policies;(ii) the Board’s determination that Executive failed in any material respect to carry out or comply with any lawful and reasonable directive of theBoard;(iii) Executive’s breach of a material provision of this Agreement or the Proprietary Information Agreement;(iv) Executive’s conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or crimeinvolving moral turpitude;(v) Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s (or any of its affiliate’s)premises or while performing Executive’s duties and responsibilities under this Agreement; or 7(vi) Executive’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against theCompany or any of its affiliates.(b) Change in Control. “Change in Control” shall mean and include each of the following:(i) A transaction or series of related transactions (other than an offering of Common Shares to the general public through a registration statementfiled with the Securities and Exchange Commission or a transaction or series of related transactions that meets the requirements of clauses (A) and (B) ofsubsection (ii) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities ExchangeAct of 1934 (the “Exchange Act”)) (other than the Parent, any of its subsidiaries, an employee benefit plan maintained by the Parent or any of its subsidiariesor a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Parent) directly or indirectlyacquires beneficial ownership (within the meaning of Rule l3d-3 under the Exchange Act) of securities of the Parent possessing more than 50% of the totalcombined voting power of the Parent’s securities outstanding immediately after such acquisition; or(ii) The consummation by the Parent (whether directly involving the Parent or indirectly involving the Parent through one or moreintermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of theParent’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than atransaction:(A) which results in the Parent’s voting securities outstanding immediately before the transaction continuing to represent (either byremaining outstanding or by being converted into voting securities of the Parent or the person that, as a result of the transaction, controls,directly or indirectly, the Parent or owns, directly or indirectly, all or substantially all of the Parents assets or otherwise succeeds to the businessof the Parent (the Parent or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of theSuccessor Entity’s outstanding voting securities immediately after the transaction, and(B) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of theSuccessor Entity; provided, however, that no person or group shall be treated for purposes of this clause (B) as beneficially owning 50% or moreof the combined voting power of the Successor Entity solely as a result of the voting power held in the Parent prior to the consummation of thetransaction.Notwithstanding the foregoing, in no event shall the transaction or event described in subsection (i) or (ii) constitute a Change in Control for purposesof this Agreement unless such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5). 8(c) Date of Termination. “Date of Termination” shall mean (i) if Executive’s employment is terminated by Executive’s death, the date of Executive’sdeath; or (ii) if Executive’s employment is terminated pursuant to Section 3(a)(ii) - (vi) either the date indicated in the Notice of Termination or the datespecified by the Company pursuant to Section 3(b), whichever is earlier.(d) Disability. “Disability” shall mean, at any time the Company or any of its affiliates sponsors a long-term disability plan for the Company’semployees, “disability” as defined in such long-term disability plan for the purpose of determining a participant’s eligibility for benefits, provided, however,if the long-term disability plan contains multiple definitions of disability, “Disability” shall refer to that definition of disability which, if Executive qualifiedfor such disability benefits, would provide coverage for the longest period of time. The determination of whether Executive has a Disability shall be made bythe person or persons required to make disability determinations under the long-term disability plan. At any time the Company does not sponsor a long-termdisability plan for its employees, Disability shall mean Executive’s inability to perform, with or without reasonable accommodation, the essential functionsof Executive’s position hereunder for a total of three months during any six-month period as a result of incapacity due to mental or physical illness asdetermined by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative, with such agreement as toacceptability not to be unreasonably withheld or delayed. Any refusal by Executive to submit to a medical examination for the purpose of determiningDisability shall be deemed to constitute conclusive evidence of Executive’s Disability.(e) Good Reason. For the sole purpose of determining Executive’s right to severance payments as described above, Executive’s resignation will be for“Good Reason” if Executive resigns within ninety days after any of the following events, unless Executive consents to the applicable event: (i) a decrease inExecutive’s annual base salary, other than a reduction in annual base salary of less than 10% that is implemented in connection with a contemporaneousreduction in annual base salaries affecting other senior executives of the Company and the Parent, (ii) a material decrease in Executive’s authority or areas ofresponsibility as are commensurate with Executive’s title or position (other than decreases that occur when individuals are hired to replace departingexecutives or are hired at a level below Executive Vice President and other than in connection with a corporate transaction where Executive continues tohold the position referenced in Section l(c) above with respect to the Parent’s business, substantially as such business exists prior to the date ofconsummation of such corporate transaction, but does not hold such position with respect to the successor corporation), or (iii) the relocation of Executive’sprimary office to a location more than 50 miles from the Boston. Massachusetts metropolitan area. Notwithstanding the foregoing, no Good Reason will haveoccurred unless and until Executive has: (i) provided the Parent, within 60 days of Executive’s knowledge of the occurrence of the facts and circumstancesunderlying the Good Reason event, written-notice stating with specificity the applicable facts and circumstances underlying such finding of Good Reason;and (ii) provided the Parent with an opportunity to cure the same within 30 days after the receipt of such notice.(f) Person. “Person” means any individual or any corporation, limited liability company, general partnership, limited partnership, venture, trust,business trust, unincorporated association, estate or other entity. 98. Miscellaneous Provisions.(a) Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with its express terms, and otherwise inaccordance with the substantive laws of the Commonwealth of Massachusetts without reference to the principles of conflicts of law of the Commonwealth ofMassachusetts or any other jurisdiction, and where applicable, the laws of the United States.(b) Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of anyother provision of this Agreement, which shall remain in full force and effect.(c) Notices. Any notice, request, claim, demand, document and other communication hereunder to any Party shall be effective upon receipt (or refusalof receipt) and shall be in writing and delivered personally or sent by facsimile or certified or registered mail, postage prepaid, as follows:(i) If to the Company or the Parent, the General Counsel of the Parent at its headquarters,(ii) If to Executive, at the last address that the Company or the Parent has in its personnel records for Executive, or(iii) At any other address as any Party shall have specified by notice in writing to the other Party.(d) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which togetherwill constitute one and the same Agreement. Signatures delivered by facsimile shall be deemed effective for all purposes.(e) Entire Agreement. The terms of this Agreement and the Proprietary Information Agreement are intended by the Parties to be the final expression oftheir agreement with respect to the subject matter hereof and thereof and supersede all prior understandings and agreements, whether written or oral,including, without limitation, that certain offer letter between Executive and the Parent, dated as of December 1, 2015 and the Original EmploymentAgreement. The Parties further intend that this Agreement and the Proprietary Information Agreement shall constitute the complete and exclusive statementof their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of thisAgreement or the Proprietary Information Agreement.(f) Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by Executive and aduly authorized officer of the Parent or the Company. By an instrument in writing similarly executed, Executive or a duly authorized officer of the Companyor the Parent may waive compliance by the other Party with any specifically identified provision of this Agreement that such other Party was or is obligatedto comply with or perform; provided, however, that such waiver shall not operate as a 10waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunderpreclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.(g) No Inconsistent Actions. The Parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with theprovisions or essential intent of this Agreement. Furthermore, it is the intent of the Parties hereto to act in a fair and reasonable manner with respect to theinterpretation and application of the provisions of this Agreement.(h) Construction. This Agreement shall be deemed drafted equally by both the Parties. Its language shall be construed as a whole and according to itsfair meaning. Any presumption or principle that the language is to be construed against any Party shall not apply. The headings in this Agreement are onlyfor convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are tothose parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (a) the pluralincludes the singular and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any, “all,” “each,” or“every” means “any and all”, and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” andother similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) allpronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or personsreferred to may require.(i) Arbitration. Any controversy, claim or dispute arising out of or relating to this Agreement, shall be settled solely and exclusively by a bindingarbitration process administered by JAMS/Endispute in Boston, Massachusetts. Such arbitration shall be conducted in accordance with the then-existingJAMS/Endispute Rules of Practice and Procedure, with the following exceptions if in conflict: (a) one arbitrator who is a retired judge shall be chosen byJAMS/Endispute; (b) each Party to the arbitration will pay one-half of the expenses and fees of the arbitrator, together with other expenses of the arbitrationincurred or approved by the arbitrator; and (c) arbitration may proceed in the absence of any Party if written notice (pursuant to the JAMS/Endispute rulesand regulations) of the proceedings has been given to such Party. Each Party shall bear its own attorneys’ fees and expenses; provided that the arbitrator mayassess the prevailing Party’s fees and costs against the non-prevailing Party as part of the arbitrator’s award. The Parties agree to abide by all decisions andawards rendered in such proceedings. Such decisions and awards rendered by the arbitrator shall be final and conclusive. All such controversies, claims ordisputes shall be settled in this manner in lieu of any action at law or equity; provided, however, that nothing in this subsection shall be construed asprecluding the bringing an action for injunctive relief or specific performance as provided in this Agreement or the Proprietary Information Agreement. Thisdispute resolution process and any arbitration hereunder shall be confidential and neither any Party nor the neutral arbitrator shall disclose the existence,contents or results of such process without the prior written consent of all Parties, except where necessary or compelled in a Court to enforce this arbitrationprovision or an award from such arbitration or otherwise in a legal proceeding. If JAMS/Endispute no longer exists or is otherwise unavailable, the Partiesagree that the American Arbitration Association (“AAA”) shall administer the arbitration in accordance with its then-existing rules as modified by thissubsection. In such event, all references herein to JAMS/Endispute shall mean AAA. 11(j) Enforcement. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the termof this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceableprovision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall notbe affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid orunenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceableprovision as may be possible and be legal, valid and enforceable.(k) Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreignwithholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if anyquestions as to the amount or requirement of withholding shall arise.(l) Survival. Notwithstanding anything to the contrary in this Agreement, the provisions of Sections 5 through 8 will survive the termination ofExecutive’s employment and the expiration or termination of the Term.(m) Section 409A.(i) General. The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of theInternal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, tothe maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.(ii) Separation from Service. Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under thisAgreement that are designated under this Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s“separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any suchcompensation or benefits described in Sections 4(b) and 4(c) shall not be paid, or, in the case of installments, shall not commence payment, until the 30th dayfollowing Executive’s Separation from Service (the “First Payment Date”). Any installment payments that would have been made to Executive during the30-day period immediately following Executive’s Separation from Service but for the preceding sentence shall be paid to Executive on the First PaymentDate and the remaining payments shall be made as provided in this Agreement.(iii) Specified Employee. Notwithstanding anything in this Agreement to the contrary, if Executive is deemed by the Company at the time ofExecutive’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of thebenefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion ofExecutive’s benefits shall not be provided to Executive prior to the earlier of (i) the 12expiration of the 6-month period measured from the date of Executive’s Separation from Service with the Company or (ii) the date of Executive’s death. Uponthe first business day following the expiration of the applicable Section 409A period, all payments deferred pursuant to the preceding sentence shall be paidin a lump sum to Executive (or Executive’s estate or beneficiaries), and any remaining payments due to Executive under this Agreement shall be paid asotherwise provided herein.(iv) Expense Reimbursements. To the extent that any reimbursements under this Agreement are subject to Section 409A, any suchreimbursements payable to Executive shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred,provided that Executive submits Executive’s reimbursement request promptly following the date the expense is incurred. The amount of expenses reimbursedin one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of theCode, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.(v) Installments. Executive’s right to receive any installment payments under this Agreement, including without limitation any continuation ofsalary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each suchinstallment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A. Except as otherwise permitted underSection 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interestpursuant to Section 409A.9. Executive Acknowledgement.Executive acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon anyrepresentations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based onExecutive’s own judgment.10. Third Party Beneficiary Rights.The Parent has third party beneficiary rights to the terms of this Agreement applicable to the Company.[Signature Page Follows] 13IN WITNESS WHEREOF, the persons below have executed this Agreement on the date and year first above written. PARENTBy: /s/ Ton Logtenberg Ton Logtenberg Chief Executive OfficerBy: /s/ Shelley Margetson Shelley Margetson Chief Financial OfficerCOMPANYBy: /s/ Ton Logtenberg Ton Logtenberg Chief Executive OfficerBy: /s/ Shelley Margetson Shelley Margetson Chief Financial OfficerEXECUTIVEBy: /s/ Hui Liu Hui LiuEXHIBIT ASeparation Agreement and ReleaseThis Separation Agreement and Release (“Agreement”) is made by and between Hui Liu (“Executive”) and (the “Company”) (collectivelyreferred to as the “Parties” or individually referred to as a “Party”). Capitalized terms used but not defined in this Agreement shall have the meanings set forthin the Employment Agreement (as defined below).WHEREAS, the Parties have previously entered into that certain Employment Agreement, dated as of (the “Employment Agreement”); andWHEREAS, in connection with Executive’s termination of employment with the Company or a subsidiary or affiliate of the Company effective , 20 , the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that Executivemay have against the Company and any of the Releasees as defined below, including, but not limited to, any and all claims arising out of or in any wayrelated to Executive’s employment with or separation from the Company or its subsidiaries or affiliates but, for the avoidance of doubt, nothing herein will bedeemed to release any rights or remedies in connection with Executive’s ownership of vested equity securities of the Company or Executive’s right toindemnification by the Company or any of its affiliates pursuant to contract or applicable law (collectively, the “Retained Claims”).NOW, THEREFORE, in consideration of the severance payments and benefits described in Section 4 of the Employment Agreement, which, pursuantto the Employment Agreement, are conditioned on Executive’s execution and non-revocation of this Agreement, and in consideration of the mutual promisesmade herein, the Company and Executive hereby agree as follows:1. Severance Payments; Salary and Benefits. The Company agrees to provide Executive with the severance payments and benefits described inSection 4(b) or Section 4(c) of the Employment Agreement, payable at the times set forth in, and subject to the terms and conditions of, the EmploymentAgreement. In addition, to the extent not already paid, and subject to the terms and conditions of the Employment Agreement, the Company shall pay orprovide to Executive all other payments or benefits described in Section 3(c) of the Employment Agreement, subject to and in accordance with the termsthereof.2. Release of Claims. Executive agrees that, other than with respect to the Retained Claims, the foregoing consideration represents settlement in full ofall outstanding obligations owed to Executive by the Company, any of its direct or indirect parents, subsidiaries and affiliates, and any of their current andformer officers, directors, equity holders, managers, employees, agents, investors, attorneys, shareholders, administrators, affiliates, benefit plans, planadministrators, insurers, trustees, divisions, and subsidiaries and predecessor and successor corporations and assigns (collectively, the “Releasees”).Executive, on Executive’s own behalf and on behalf of any of Executive’s affiliated companies or entities and any of their respective heirs, family members,executors, agents, and assigns, other than with respect to the Retained Claims, hereby and forever releases the Releasees from, and agrees not to sueconcerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, or cause of action relating to any matters ofany kind, whether presently known or unknown,suspected or unsuspected, that Executive may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have occurred upuntil and including the Effective Date of this Agreement (as defined in Section 7 below), including, without limitation:(a) any and all claims relating to or arising from Executive’s employment or service relationship with the Company or any of its direct or indirectsubsidiaries or affiliates and the termination of that relationship;(b) any and all claims relating to, or arising from, Executive’s right to purchase, or actual purchase of any shares of stock or other equity interestsof the Company or any of its affiliates, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty underapplicable state corporate law, and securities fraud under any state or federal law;(c) any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation;breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent orintentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract orprospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy;false imprisonment; conversion; and disability benefits;(d) any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair CreditReporting Act; the Age Discrimination in Employment Act of 1967;the Older Workers Benefit Protection Act; the Employee Retirement Income Security Actof 1974; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; and the Sarbanes-Oxley Act of 2002;(e) any and all claims for violation of the federal or any state constitution;(f) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;(g) any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of theproceeds received by Executive as a result of this Agreement; and(h) any and all claims for attorneys’ fees and costs.Executive agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released.This release does not release claims that cannot be released as a matter of law, including, but not limited to, Executive’s right to report possible violations offederal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of theSecurities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or any other A-2whistleblower protection provisions of state or federal law or regulation, Executive’s right to file a charge with or participate in a charge by the EqualEmployment Opportunity Commission, or any other local, state, or federal administrative body or government agency that is authorized to enforce oradminister laws related to employment, against the Company (with the understanding that Executive’s release of claims herein bars Executive fromrecovering such monetary relief from the Company or any Releasee), claims for unemployment compensation or any state disability insurance benefitspursuant to the terms of applicable state law, claims to continued participation in certain of the Company’s group benefit plans pursuant to the terms andconditions of COBRA, claims to any benefit entitlements vested as the date of separation of Executive’s employment, pursuant to written terms of anyemployee benefit plan of the Company or its affiliates and Executive’s right under applicable law and any Retained Claims. This release further does notrelease claims for breach of Section 3(c), Section 4(b) or Section 4(c) of the Employment Agreement.3. Acknowledgment of Waiver of Claims under ADEA. Executive understands and acknowledges that Executive is waiving and releasing any rightsExecutive may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary.Executive understands and agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date ofthis Agreement. Executive understands and acknowledges that the consideration given for this waiver and release is in addition to anything of value to whichExecutive was already entitled. Executive further understands and acknowledges that Executive has been advised by this writing that: (a) Executive shouldconsult with an attorney prior to executing this Agreement; (b) Executive has 21 days within which to consider this Agreement; (c) Executive has 7 daysfollowing Executive’s execution of this Agreement to revoke this Agreement pursuant to written notice to the General Counsel of the Company; (d) thisAgreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Executive fromchallenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, orcosts for doing so, unless specifically authorized by federal law. In the event Executive signs this Agreement and returns it to the Company in less than the 21day period identified above, Executive hereby acknowledges that Executive has freely and voluntarily chosen to waive the time period allotted forconsidering this Agreement.4. Severability. In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or isdeclared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect withoutsaid provision or portion of provision.5. No Oral Modification. This Agreement may only be amended in a writing signed by Executive and a duly authorized officer of the Company.6. Governing Law; Dispute Resolution. This Agreement shall be subject to the provisions of Sections 9(a), 9(c) and 9(i) of the Employment Agreement.7. Effective Date. If Executive has attained or is over the age of 40 as of the date of Executive’s termination of employment, then each Party has sevendays after that Party signs this Agreement to revoke it and this Agreement will become effective on the eighth day after A-3Executive signed this Agreement, so long as it has been signed by the Parties and has not been revoked by either Party before that date (the “Effective Date”).If Executive has not attained the age of 40 as of the date of Executive’s termination of employment, then the “Effective Date” shall be the date on whichExecutive signs this Agreement.8. Voluntary Execution of Agreement. Executive understands and agrees that Executive executed this Agreement voluntarily, without any duress orundue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of Executive’s claims against the Company andany of the other Releasees. Executive acknowledges that: (a) Executive has read this Agreement; (b) Executive has not relied upon any representations orstatements made by the Company that are not specifically set forth in this Agreement; (c) Executive has been represented in the preparation, negotiation, andexecution of this Agreement by legal counsel of Executive’s own choice or has elected not to retain legal counsel; (d) Executive understands the terms andconsequences of this Agreement and of the releases it contains; and (e) Executive is fully aware of the legal and binding effect of this Agreement.IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below. Dated: Hui Liu COMPANYDated: By: Name: Title: A-4Exhibit 4.8EXECUTION VERSION EMPLOYMENT AGREEMENTThis Employment Agreement (this “Agreement”), dated as of October 2016 is made by and among Merus US, Inc., a Delaware corporation(together with any successors or assigns, the “Company”), Leonardes Andres Sirulnik (“Executive”) and, solely for purposes of Sections 1, 2(c), 6, 8 and 9(b),Merus N.V., a Dutch public limited liability company (“Parent”). The Company, Parent and Executive are collectively referred to herein as the “Parties” andindividually as a “Party.”RECITALS (A)It is the desire of the Company to assure itself of the services of Executive beginning on and following a date to be mutually agreed upon by theCompany and Executive, which date will be no later than November 1, 2016 by entering into this Agreement. The actual date on which Executivebegins his employment with the Company is referred to herein as the “Effective Date.” (B)Executive and the Company mutually desire that Executive provide services to the Company on the terms herein provided.AGREEMENTNOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the Parties hereto agree asfollows:1. Employment.(a) General. Effective as of the Effective Date, the Company shall employ Executive and Executive shall remain in the employ of the Company, for theperiod and in the position set forth in this Section 1, and subject to the other terms and conditions herein provided.(b) At-Will Employment. The Company and Executive acknowledge that Executive’s employment is at-will, as defined under applicable law, and thatExecutive’s employment with the Company may be terminated by the Company or Executive at any time for any or no reason (subject to the noticerequirements of Section 3(b)). This “at-will” nature of Executive’s employment shall remain unchanged during Executive’s tenure as an employee and maynot be changed, except in an express writing signed by Executive and a duly authorized officer of the Company. If Executive’s employment terminates forany reason, Executive shall not be entitled to any payments, benefits, damages, award or compensation other than as provided in this Agreement or otherwiseagreed to in writing by a duly authorized officer of the Company, a duly authorized officer of the Parent or as provided by applicable law. The period ofExecutive’s employment by the Company shall be referred to herein as the “Term”.(c) Position; Duties and Location. Executive shall serve as Executive Vice President, Chief Medical Officer of the Company and Parent, with suchresponsibilities, duties and authority normally associated with such positions and as may from time to time be assigned to Executive by the Chief ExecutiveOfficer of Parent or the Management Board or the Supervisory Board of the Parent (either one, the “Board”). Executive’s normal place of work shall be at theCompany’s office in the Boston, Massachusetts metropolitan area. Executive shall devote substantially all of Executive’s working time and efforts to thebusiness and affairs of the Company (which shall include service to its affiliates, including Parent as applicable) and shall not engage in outside businessactivities (including serving on outside boards or committees) without the consent of the Board, provided that Executive shall be permitted to (i) manageExecutive’s personal, financial and legal affairs, (ii) participate in trade associations, and (iii) serve on the board of directors and committees of not-for-profitor tax-exempt charitable organizations, in each case, subject to compliance with this Agreement and provided that such activities do not materially interferewith Executive’s performance of Executive’s duties and responsibilities hereunder. Executive agrees to observe and comply with the written rules andpolicies of the Company and Parent as adopted by the Company or Parent, as applicable from time to time, in each case as amended from time to time, as setforth in writing, and as delivered or made available to Executive (each, a “Policy”).2. Compensation and Related Matters.(a) Annual Base Salary. During the Term, Executive shall receive a base salary as adjusted from time to time, “Annual Base Salary” at a rate of no lessthan $390,000 per annum, which shall be paid in accordance with the customary payroll practices of the Company and shall be pro-rated for partial years ofemployment, The Annual Base Salary shall be reviewed from time to time (but no less than annually) by the Board and may be increased (but not decreased)from the annual rate then in effect.(b) Bonus.(i) Annual Bonus. During the Term, Executive will be eligible to participate in an annual incentive program established by the Board.Executive’s annual incentive compensation under such incentive program (the “Annual Bonus”) shall be targeted at 40% of his Annual Base Salary. TheAnnual Bonus payable under the incentive program shall be based on the achievement of performance goals to be determined by the Board and may bepro-rated for calendar year 2016 performance based on the Effective Date. The payment of any Annual Bonus pursuant to the incentive program shall besubject to Executive’s continued employment with the Company through the date of payment.(ii) Sign-On Bonus. Within thirty (30) days following the Effective Date, the Company will pay Executive a one-time lump sum cash payment of$125,000 (the “Sign-on Bonus”). In the event Executive resigns from Executive’s employment with the Company other than for Good Reason or isterminated by the Company for Cause prior to the one year anniversary of the Effective Date, Executive agrees to immediately repay 100% of the Sign-onBonus to the Company (and for the avoidance of doubt, Executive will retain the Sign-on Bonus if his employment with the Company terminates for anyother reason). In addition, the Company will pay Executive an additional amount of $50,000, within thirty (30) days following each of the first and secondanniversaries of the Effective Date, subject to Executive’s continued employment with the Company through each such date. 2(c) Equity Awards. On the Effective Date, Parent will grant Executive an option to purchase 219,890 common shares of Parent (equalling 1.2% on fullydiluted share basis) pursuant to Parent’s 2016 Incentive Award Plan and the Stock Option Grant Notice in the form attached hereto as Exhibit A (the “OptionGrant Notice”), which shall provide for a per share exercise price equal to the per share fair market value (closing price on Nasdaq Global Market) as per theEffective Date (the “Option”). Executive shall be eligible to receive additional equity awards at the discretion of the Board.(d) Benefits. During the Term, Executive shall be eligible to participate in employee benefit plans, programs and arrangements of the Company(including medical, dental, vision, life insurance, disability insurance and defined contribution 401(k) plan) made available to other similarly-situatedemployees of the Company, consistent with the terms thereof and as such plans, programs and arrangements may be amended from time to time.Notwithstanding the foregoing, if the Company does not maintain any “group health plan” (within the meaning of Section 4980B of the Internal RevenueCode and the regulations thereunder (“COBRA”)) for its U.S. employees as of the Effective Date, then, subject to Executive’s valid election to receiveCOBRA benefits under the health plans of Executive’s prior employer, during the period beginning on the Effective Date and ending on the first to occur of:(i) the date on which the Company adopts or otherwise makes generally available to its U.S. employees a group health plan or (ii) the date on whichExecutive terminates employment with the Company, the Company shall reimburse Executive for the actual cost of healthcare premiums incurred byExecutive under the group health plan of Executive’s prior employer pursuant to COBRA, subject to proper substantiation of such costs in accordance withapplicable Company Policy no later than sixty (60) days after such costs are incurred; provided, that, in the event the period of time during which Executiveis entitled to continuation coverage under the group health plan of Executive’s prior employer pursuant to COBRA expires prior to the Company adopting orotherwise making available a group health plan to its U.S. employees, the Company shall continue to pay Executive for healthcare costs in an amount equalto the cost of healthcare premiums incurred by Executive under the group health plan of Executive’s prior employer pursuant to COBRA based on the lastmonth of the COBRA period. Such costs shall be reimbursed promptly, but in no event later than sixty (60) days following proper substantiation thereof.(e) Vacation. During the Term, Executive shall be entitled to no less than four (4) weeks of paid personal leave per calendar year in accordance with theCompany’s paid time off Policies. Any vacation shall be taken at the reasonable and mutual convenience of the Company and Executive.(f) Business Expenses. During the Term, the Company shall reimburse Executive for all reasonable travel and other business expenses incurred byExecutive in the performance of Executive’s duties to the Company in accordance with the Company’s expense reimbursement Policy.(g) Key Person Insurance. At any time during the Term, the Company shall have the right to insure the life of Executive for the Company’s sole benefit.The Company shall have the right to determine the amount of insurance and the type of policy. Executive shall reasonably cooperate with the Company inobtaining such insurance by submitting to physical examinations, by supplying all information reasonably required by any insurance carrier, and byexecuting all 3necessary documents reasonably required by any insurance carrier, provided that any information provided to an insurance company or broker shall not beprovided to the Company or its affiliates without the prior written authorization of Executive. Executive shall incur no financial obligation by executing anyrequired document, and shall have no interest in any such policy.3. Termination.(a) Circumstances. Executive’s employment hereunder may be terminated by the Company or Executive, as applicable, without any breach of thisAgreement, at any time, under the following circumstances:(i) Death. Executive’s employment hereunder shall terminate upon Executive’s death.(ii) Disability. If Executive has incurred a Disability, as defined below, the Company may terminate Executive’s employment.(iii) Termination for Cause. The Company may terminate Executive’s employment for Cause, as defined below.(iv) Termination without Cause. The Company may terminate Executive’s employment without Cause.(v) Resignation from the Company for Good Reason. Executive may resign Executive’s employment with the Company for Good Reason, asdefined below.(vi) Resignation from the Company Without Good Reason. Executive may resign Executive’s employment with the Company for any reasonother than Good Reason or for no reason.(b) Notice of Termination. Any termination of Executive’s employment by the Company or by Executive under this Section 3 (other than terminationpursuant to Section 3(a)(i)) shall be communicated by a written notice to the other Party (i) indicating the specific termination provision in this Agreementrelied upon, (ii) setting forth in reasonable detail the facts and circumstances claimed to provide a basis for the termination of Executive’s employment underthe provision so indicated, if applicable, and (iii) specifying a Date of Termination which, if submitted by Executive, shall be at least thirty (30) daysfollowing the date of such notice (a “Notice of Termination”); provided, however, that in the event that Executive delivers a Notice of Termination to theCompany, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of Company’s receipt of suchNotice of Termination and is prior to the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may provide for aDate of Termination on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. Thefailure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or GoodReason shall not waive any right of such Party hereunder or preclude such Party from asserting such fact or circumstance in enforcing such Party’s rightshereunder. 4(c) Company Obligations upon Termination. Upon termination of Executive’s employment pursuant to this Section 3, Executive (or Executive’sestate) shall be entitled to receive the sum of; (i) the portion of Executive’s Annual Base Salary earned through the Date of Termination, but not yet paid toExecutive; (ii) any expenses owed to Executive pursuant to Section 2(f); and (iii) any amount accrued and arising from Executive’s participation in, orbenefits accrued under any employee benefit plans, programs or arrangements, which amounts shall be payable in accordance with the terms and conditionsof such employee benefit plans, programs or arrangements (collectively, the “Company Arrangements”). Except as otherwise expressly required by law (e.g.,COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatory amounts hereunder (ifany) shall cease upon the termination of Executive’s employment hereunder. In the event that Executive’s employment is terminated by the Company for anyreason, Executive’s sole and exclusive remedy hereunder shall be to receive the payments and benefits described in this Section 3(c) or Section 4, asapplicable. For the avoidance of doubt, nothing in this Agreement shall limit in any way any rights of Executive to receive compensation, reimbursement orother payments pursuant to any other agreement (including the Option Grant Notice) entered into between Executive and the Company, Parent and/or theirrespective affiliates, to the extent any such agreement provides for payment following the termination of Executive’s employment.(d) Deemed Resignation. Upon termination of Executive’s employment for any reason, Executive shall be deemed to have resigned from all offices anddirectorships, if any, then held with the Company or any of its affiliates, including Parent.4. Severance Payments.(a) Termination for Cause, or Termination Upon Death, Disability or Resignation from the Company Without Good Reason. If Executive’s employmentshall terminate as a result of Executive’s death pursuant to Section 3(a)(i) or Disability pursuant to Section 3(a)(ii), pursuant to Section 3(a)(iii) for Cause, orpursuant to Section 3(a)(vi) for Executive’s resignation from the Company without Good Reason, then Executive shall not be entitled to any severancepayments or benefits, except as provided in Section 3(c).(b) Termination without Cause or Resignation from the Company for Good Reason. If Executive’s employment is terminated by the Company withoutCause pursuant to Section 3(a)(iv) or pursuant to Section 3(a)(v) due to Executive’s resignation for Good Reason, in either case, which termination does notoccur within one year following the date of a Change in Control, then Executive shall receive the payments and benefits set forth in Section 3(c) and, inaddition to such payments and benefits, subject to Executive signing on or before the 21st day following Executive’s Separation from Service (as definedbelow), and not revoking, a release of claims in substantially the form attached hereto as Exhibit B (the “Release”), and Executive’s continued compliancewith the terms of the Proprietary Information Agreement (as defined below),, an amount in cash equal to 0.5 times the Annual Base Salary, payable in the formof salary continuation in regular instalments over the six-month period following Executive’s Separation from Service in accordance with the Company’scustomary payroll practices, (ii) payment, on the First Payment Date (or, if later, the date paid to active executives of the Company), of any unpaid and earnedAnnual Bonus for a completed bonus year, and (iii) in the discretion of the Board, accelerated vesting (in whole or in part) of any portion of the Option that isunvested as of the Date of Termination. 5(c) Change in Control. Notwithstanding anything to the contrary in Section 4(b), in the event Executive’s employment is terminated by the Companywithout Cause pursuant to Section 3(a)(iv) or pursuant to Section 3(a)(v) due to Executive’s resignation for Good Reason, in either case, within one yearfollowing the date of a Change in Control, then, Executive shall receive the payments and benefits set forth in Section 3(c) and, in addition to such paymentsand benefits, subject to Executive signing on or before the 21st day following Executive’s Separation from Service, and not revoking, the Release, andExecutive’s continued compliance with the terms of the Proprietary Information Agreement, Executive shall receive the following:(i) (x) an amount in cash equal to 0. 5 times the sum of (A) the Annual Base Salary and (B) the Annual Bonus at the target amount, which amountshall be paid in a lump sum on the First Payment Date (as defined below) and (y) payment on the First Payment Date (or, if later, the date paid to activeexecutives of the Company) of any unpaid and earned Annual Bonus for a completed bonus year;(ii) if Executive elects to receive continued medical, dental or vision coverage under one or more of the Company’s group healthcare planspursuant to COBRA, the Company shall directly pay, or reimburse Executive for, the COBRA premiums for Executive and Executive’s covered dependentsunder such plans during the period commencing on Executive’s Separation from Service and ending upon the earliest of (X) the date that is nine (9) monthsfollowing Executive’s Separation from Service, (Y) the date that Executive and/or Executive’s covered dependents become no longer eligible for COBRAand (Z) the date Executive becomes eligible to receive healthcare coverage from a subsequent employer. Notwithstanding the foregoing, if the Companydetermines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law or incurring an excise tax(including by reason of Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to Executive a taxable monthly payment inan amount equal to the monthly COBRA premium that Executive would be required to pay to continue Executive’s and Executive’s covered dependents’group health coverage in effect on the Date of Termination (which amount shall be based on the premium for the first month of COBRA coverage), less theamount Executive would have had to pay to receive group health coverage for Executive and Executive’s covered dependents based on the cost sharinglevels in effect on the Date of Termination, which payments shall be made regardless of whether Executive elects COBRA continuation coverage and shallcommence in the month following the month in which the Date of Termination occurs and shall end on the earlier of (X) the last day of the nine (9) monthperiod following Executive’s Separation from Service, (Y) the date that Executive and/or Executive’s covered dependents become no longer eligible forCOBRA and (Z) the date Executive becomes eligible to receive healthcare coverage from a subsequent employer; and(iii) accelerated vesting of any portion of the Option and any portion of any other outstanding equity awards granted to Executive prior to thedate of the Change in Control, in each case that are unvested as of the Date of Termination; provided, that, any equity awards that are subject to the vestingbased on the achievement of performance goals as of the Date of Termination shall only vest if the applicable performance goals are achieved. 65. Employee Proprietary Information and Inventions Assignment Agreement.Executive acknowledges and agrees that, as a condition to Executive’s employment by the Company, Executive shall enter into, and be bound by theterms of Parent’s Employee Proprietary Information and Inventions Assignment Agreement in the form attached hereto as Exhibit C (the “ProprietaryInformation Agreement”), effective from and after the Effective Date in accordance with its terms.6. Assignment and Successors.Each of the Company and Parent may assign its rights and obligations under this Agreement to any successor to all or substantially all of the businessor the assets of the Company or Parent, as applicable, whether by merger or otherwise. This Agreement shall be binding upon and inure to the benefit of theCompany, Executive and their respective successors, permitted assigns, personnel and legal representatives, executors, administrators, heirs, distributees,devisees, and legatees, as applicable. None of Executive’s rights or obligations may be assigned or transferred by Executive, other than Executive’s rights topayments hereunder, which may be transferred only by will or operation of law. Notwithstanding the foregoing, Executive shall be entitled, to the extentpermitted under applicable law and applicable Company Arrangements, to select and change a beneficiary or beneficiaries to receive compensationhereunder following Executive’s death by giving written notice thereof to the Company.7. Certain Definitions.(a) Cause. The Company shall have “Cause” to terminate Executive’s employment hereunder upon:(i) Executive’s wilful failure to (A) substantially perform his duties as contemplated under this Agreement (other than any such failure resultingfrom Executive’s Disability) or (B) comply with, in any material respect, any of the Company’s Policies;(ii) Executive’s wilful failure in any material respect to carry out or comply with any lawful and reasonable directive of the Board;(iii) Executive’s breach of a material provision of this Agreement or the Proprietary Information Agreement;(iv) Executive’s conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or crimeinvolving moral turpitude;(v) Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s (or any of its affiliate’s)premises or while performing Executive’s duties and responsibilities under this Agreement; or 7(vi) Executive’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against theCompany or any of its affiliates.Notwithstanding the foregoing, no Cause will have occurred pursuant to clauses (i), (ii) or (iii) of this definition of Cause unless and until the Company has:(i) provided Executive, within 60 days of the Board’s (excluding Executive) knowledge of the occurrence of the facts and circumstances underlying theCause event, written-notice stating with specificity the applicable facts and circumstances underlying such finding of Cause; (ii) provided Executive with anopportunity to cure the same within 30 days after the receipt of such notice; and (iii) Executive fails to cure the same within such 30 day period after receiptof such notice.(b) Change in Control. “Change in Control” shall mean and include each of the following:(i) A transaction or series of related transactions (other than an offering of common shares of Parent to the general public through aregistration statement filed with the Securities and Exchange Commission or a transaction or series of related transactions that meets the requirements ofclauses (A) and (B) of subsection (ii) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) ofthe Securities Exchange Act of 1934 (the “Exchange Act”)) (other than Parent, any of its subsidiaries, an employee benefit plan maintained by the Parent orany of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, theParent) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of Parent possessingmore than 50% of the total combined voting power of Parent’s securities outstanding immediately after such acquisition; or(ii) The consummation by Parent (whether directly involving Parent or indirectly involving Parent through one or more intermediaries)of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Parent’s assets in anysingle transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:(A) which results in Parent’s voting securities outstanding immediately before the transaction continuing to represent (either by remainingoutstanding or by being converted into voting securities of Parent or the person that, as a result of the transaction, controls, directly or indirectly,Parent or owns, directly or indirectly, all or substantially all of Parents assets or otherwise succeeds to the business of Parent (Parent or suchperson, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstandingvoting securities immediately after the transaction, and(B) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of theSuccessor Entity; provided, however, that no person or group shall be treated for purposes of this clause (B) as beneficially owning 50% or moreof the combined voting power of the Successor Entity solely as a result of the voting power held in Parent prior to the consummation of thetransaction. 8Notwithstanding the foregoing, in no event shall the transaction or event described in subsection (i) or (ii) constitute a Change in Control for purposesof this Agreement unless such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).(c) Date of Termination. “Date of Termination” shall mean (i) if Executive’s employment is terminated by Executive’s death, the date of Executive’sdeath; or (ii) if Executive’s employment is terminated pursuant to Section 3(a)(ii) – (vi) either the date indicated in the Notice of Termination or the datespecified by the Company pursuant to Section 3(b), after delivery by Executive of the Notice of Termination,whichever is earlier.(d) Disability. “Disability” shall mean, at any time the Company or any of its affiliates sponsors a long-term disability plan for the Company’semployees, “disability” as defined in such long-term disability plan for the purpose of determining a participant’s eligibility for benefits, provided, however,if the long-term disability plan contains multiple definitions of disability, “Disability” shall refer to that definition of disability which, if Executive qualifiedfor such disability benefits, would provide coverage for the longest period of time. The determination of whether Executive has a Disability shall be made bythe person or persons required to make disability determinations under the long-term disability plan. At any time the Company does not sponsor a long-termdisability plan for its employees, Disability shall mean Executive’s inability to perform, with or without reasonable accommodation, the essential functionsof Executive’s position hereunder for a total of three months during any six-month period as a result of incapacity due to mental or physical illness asdetermined by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative, with such agreement as toacceptability not to be unreasonably withheld or delayed. Any refusal by Executive to submit to a medical examination for the purpose of determiningDisability shall be deemed to constitute conclusive evidence of Executive’s Disability.(e) Good Reason. For the sole purpose of determining Executive’s right to severance payments as described above, Executive’s resignation will be for“Good Reason” if Executive resigns within ninety days of Executive’s knowledge of the occurrence of any of the following events, unless Executiveconsents to the applicable event; (i) a decrease in Executive’s Annual Base Salary, other than a reduction in annual base salary of less than 10% that isimplemented in connection with a contemporaneous reduction in annual base salaries affecting other senior executives of the Company and the Parent, (ii) amaterial decrease in Executive’s reporting relationship, authority or areas of responsibility as are commensurate with Executive’s title or position (other thandecreases that occur when individuals are hired to replace departing executives or are hired at a level below Executive Vice President and other than inconnection with a corporate transaction where Executive continues to hold the position referenced in Section 1(b) above with respect to the Parent’sbusiness, substantially as such business exists prior to the date of consummation of such corporate transaction, but does not hold such position with respectto the successor corporation), (iii) the relocation of Executive’s primary office to a location more 9than 50 miles from the Boston, Massachusetts metropolitan area, (iv) a material breach by the Company or Parent of their respective obligations pursuant tothis Agreement, or (v) a material breach by Parent of the Option Grant Notice or any other agreement evidencing an award of incentive equity granted byParent to Executive. Notwithstanding the foregoing, no Good Reason will have occurred unless and until Executive has: (i) provided Parent, within 60 daysof Executive’s knowledge of the occurrence of the facts and circumstances underlying the Good Reason event, written-notice stating with specificity theapplicable facts and circumstances underlying such finding of Good Reason; (ii) provided Parent with an opportunity to cure the same within 30 days afterthe receipt of such notice; and (iii) Parent fails to cure the same within such 30 day period after receipt of such notice.(f) Person. “Person” means any individual or any corporation, limited liability company, general partnership, limited partnership, venture, trust,business trust, unincorporated association, estate or other entity.8. Miscellaneous Provisions.(a) Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with its express terms, and otherwise inaccordance with the substantive laws of the Commonwealth of Massachusetts without reference to the principles of conflicts of law of the Commonwealth ofMassachusetts or any other jurisdiction, and where applicable, the laws of the United States.(b) Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of anyother provision of this Agreement, which shall remain in full force and effect.(c) Notices. Any notice, request, claim, demand, document and other communication hereunder to any Party shall be effective upon receipt (or refusalof receipt) and shall be in writing and delivered personally or sent by facsimile, nationally recognized overnight delivery service, postage prepaid, orcertified or registered mail, postage prepaid, as follows:(i) If to the Company or Parent, the General Counsel of the Parent at its headquarters,(ii) If to Executive, at the last address that the Company or the Parent has in its personnel records for Executive, or(iii) At any other address as any Party shall have specified by notice in writing to the other Party.(d) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which togetherwill constitute one and the same Agreement. Signatures delivered by facsimile, PDF or other electronic means shall be deemed effective for all purposes. 10(e) Entire Agreement. The terms of this Agreement, the Option Grant Notice and the Proprietary Information Agreement are intended by the Parties tobe the final expression of their agreement with respect to the subject matter hereof and thereof and supersede all prior understandings and agreements,whether written or oral. The Parties further intend that this Agreement, the Option Grant Notice and the Proprietary Information Agreement shall constitutethe complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or otherlegal proceeding to vary the terms of this Agreement, the Option Grant Notice or the Proprietary Information Agreement.(f) Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by Executive and aduly authorized officer of the Parent or the Company. By an instrument in writing similarly executed, Executive or a duly authorized officer of the Companyor the Parent may waive compliance by the other Party with any specifically identified provision of this Agreement that such other Party was or is obligatedto comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, orpower provided herein or by law or in equity.(g) No Inconsistent Actions. The Parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with theprovisions or essential intent of this Agreement. Furthermore, it is the intent of the Parties hereto to act in a fair and reasonable manner with respect to theinterpretation and application of the provisions of this Agreement.(h) Construction. This Agreement shall be deemed drafted equally by the Parties. Its language shall be construed as a whole and according to its fairmeaning. Any presumption or principle that the language is to be construed against any Party shall not apply. The headings in this Agreement are only forconvenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to thoseparts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (a) the plural includesthe singular and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every”means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and othersimilar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) allpronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or personsreferred to may require.(i) Arbitration. Any controversy, claim or dispute arising out of or relating to this Agreement, shall be settled solely and exclusively by a bindingarbitration process administered by JAMS/Endispute before a single arbitrator in Boston, Massachusetts. Such arbitration shall be conducted in accordancewith the then-existing JAMS/Endispute Rules of Practice and Procedure, with the following exceptions if in conflict: (a) one arbitrator who is a retired judgeshall be chosen consistent with the then current rules of JAMS/Endispute; (b) each Party to the arbitration will pay one-half of the expenses and fees of thearbitrator, together with other expenses of the arbitration incurred or approved by the arbitrator; and (c) arbitration may 11proceed in the absence of any Party if written notice (pursuant to the JAMS/Endispute rules and regulations) of the proceedings has been given to such Party.Each Party shall bear its own attorneys’ fees and expenses; provided that the arbitrator may assess the prevailing Party’s fees and costs against thenon-prevailing Party as part of the arbitrator’s award. The Parties agree to abide by all decisions and awards rendered in such proceedings. Such decisions andawards rendered by the arbitrator shall be final and conclusive. All such controversies, claims or disputes shall be settled in this manner in lieu of any actionat law or equity; provided, however, that nothing in this subsection shall be construed as precluding the bringing of an action for injunctive relief or specificperformance as provided in this Agreement or the Proprietary Information Agreement. This dispute resolution process and any arbitration hereunder shall beconfidential and neither any Party nor the neutral arbitrator shall disclose the existence, contents or results of such process without the prior written consentof all Parties, except where necessary or compelled in a Court to enforce this arbitration provision or an award from such arbitration or otherwise in a legalproceeding. If JAMS/Endispute no longer exists or is otherwise unavailable, the Parties agree that the American Arbitration Association (“AAA”) shalladminister the arbitration in accordance with its then-existing rules as modified by this subsection. In such event, all references herein to JAMS/Endisputeshall mean AAA.(j) Enforcement. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the termof this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceableprovision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall notbe affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid orunenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceableprovision as may be possible and be legal, valid and enforceable.(k) Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreignwithholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel ifany questions as to the amount or requirement of withholding shall arise.(1) Survival. Notwithstanding anything to the contrary in this Agreement, the provisions of Sections 5 through 9 will survive the termination ofExecutive’s employment and the expiration or termination of the Term.(m) Section 409A.(i) General. The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of theInternal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, tothe maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. 12(ii) Separation from Service. Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under thisAgreement that are designated under this Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s“separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any suchcompensation or benefits described in Sections 4(b) and 4(c) shall not be paid, or, in the case of installments, shall not commence payment, until the 30th dayfollowing Executive’s Separation from Service (the “First Payment Date”). Any installment payments that would have been made to Executive during the30-day period immediately following Executive’s Separation from Service but for the preceding sentence shall be paid to Executive on the First PaymentDate and the remaining payments shall be made as provided in this Agreement.(iii) Specified Employee. Notwithstanding anything in this Agreement to the contrary, if Executive is deemed by the Company at the time ofExecutive’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of thebenefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion ofExecutive’s benefits shall not be provided to Executive prior to the earlier of (i) the expiration of the 6-month period measured from the date of Executive’sSeparation from Service with the Company or (ii) the date of Executive’s death. Upon the first business day following the expiration of the applicableSection 409A period, all payments deferred pursuant to the preceding sentence shall be paid in a lump sum to Executive (or Executive’s estate orbeneficiaries), and any remaining payments due to Executive under this Agreement shall be paid as otherwise provided herein.(iv) Expense Reimbursements. To the extent that any reimbursements under this Agreement are subject to Section 409A, any suchreimbursements payable to Executive shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred,provided that Executive submits Executive’s reimbursement request promptly following the date the expense is incurred. The amount of expenses reimbursedin one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of theCode, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.(v) Installments. Executive’s right to receive any installment payments under this Agreement, including any continuation of salary paymentsthat are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installmentpayment shall at all times be considered a separate and distinct payment as permitted under Section 409A. Except as otherwise permitted underSection 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interestpursuant to Section 409A.(n) Legal Fees. The Company shall, within ten (10) calendar days of Executive’s delivery to the Company of appropriate documentation evidencingExecutive’s legal fees and costs incurred in connection with the negotiation, preparation and related advice concerning this Agreement and the otheragreements referenced herein (the “Executive’s Legal Fees”) pay directly by wire transfer to Executive’s legal counsel the Executive’s Legal Fees up to a capof Five Thousand Dollars ($5,000). 13(o) No Mitigation. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of any amountspayable to Executive pursuant to Section 4 and such amounts shall not be reduced whether or notExecutive obtains other employment (including self-employment).9. Acknowledgements and Representations.(a) Executive acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance uponany representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based onExecutive’s own judgment.(b) The Company represents and warrants that this Agreement has been authorized by all necessary corporate action and is a valid and bindingagreement of the Company enforceable against it in accordance with its terms. Parent represents and warrants that this Agreement and the Option GrantNotice have each been authorized by all necessary corporate action and the applicable portions of this Agreement are, and the Option Grant Notice will whenexecuted be, valid and binding agreement of Parent enforceable against it in accordance with its terms.10. Third Party Beneficiary Rights.Parent has third party beneficiary rights to the terms of this Agreement applicable to the Company.[Signature Page Follows] 14EXECUTION VERSIONIN WITNESS WHEREOF, the persons below have executed this Agreement on the date and year first above written. COMPANYBy: /s/ Ton Logtenberg Ton Logtenberg Chief Executive Officer By: Shelley MargetsonPARENT (solely for purposes of Sections 1, 2(c), 6, 8 and 9(b))By: /s/ Ton Logtenberg Ton Logtenberg Chief Executive Officer By: Shelley MargetsonEXECUTIVEBy: /s/ Andres Sirulnik Andres SirulnikEXECUTION VERSIONEXHIBIT AForm of Option Grant Notice A-1Exhibit 4.9Additional Employment agreementIn addition to the employment agreement between Mark Throsby (Employee) and Merus B.V. (Employer) regarding the start of employment of Mark Throsbyas of 1 October 2008 at Merus, the Employer and Employee hereby additionally agree that the following provisions shall apply as well with respect to theintellectual property rights. 1.All intellectual property rights, including but not limited to patent rights, design rights, copyrights, trademark rights and knowledge, created duringand after the end of the employment agreement or as a result of the work or activities performed by the Employer in the service of the Employer, belongor shall belong exclusively and in their entirety to the Employer. 2.If based on legal agreements the aforementioned intellectual property rights do not immediately accrue to the Employer, the Employee hereby transfersthese rights to the Employer. 3.Insofar as the intellectual property rights mentioned in clause 1 cannot be transferred to the Employer, then the Employee hereby grants the Employer,without any payment obligations of the Employer, an exclusive, comprehensive and finite licence to use these rights in the broadest sense of the word. 4.If, despite that which is agreed above, personal rights on the intellectual property mentioned in clause 1 accrue to the Employee and insofar as the lawallows such, then the Employee hereby waives all his/her personal rights, including the right he/she has to have his/her name mentioned as a result ofthe Copyright Act 1912. 5.The Employee shall inform the Employer without delay about all results, inventions, information and intellectual property rights which are the resultof his/her employment and/or which are in any way relevant for the creation, protection or enforceability of the intellectual property rights. 6.As long as the employment agreement and these additional provisions are in force, the Employee shall perform all actions which are necessary,anywhere in the world, for the registration of or application for intellectual property rights in name of the Employer. 7.If the Employer is not able or not in a position to give effect to the collaboration pledged above in paragraphs 2 and 6, then the Employee herebygrants the Employer an irrevocable authorisation to represent him/her with regard to the assignment and registration of the intellectual property rightsas referred to in paragraphs 2 and 6. 8.The Employee acknowledges and determines that his/salary indeed offers reasonable compensation for the loss of intellectual and industrial propertyrights as determined here, in the employment agreement and by law.Thus agreed, prepared in duplicate and signed inUtrecht on 10 March 2010: For Merus B.V.: Employee Signature:[signature] [signature]T. Logtenberg Mark ThrosbyManaging Director Employment agreementM. ThrosbyThe undersigned:Merus B.V., located at the Uppsalalaan 8 in 3584 CT Utrecht, duly represented by Mr T. Logtenberg, in the position of Managing Director, hereinafterreferred to as “Employer”,andMark Throsby, born in Adelaide on 22 March 1967, residing at Kerkstraat 37 in Utrecht, hereinafter referred to as “Employee”,have agreed as follows:Article 1 Start of employment, position, nature and location of workThe Employee shall commence his employment with the Employer on 1 October 2008 in the position of Chief Operations Officer.The activities associated with this position are: 1) The development and supervision together with the Chief Scientific Officer of research programs for thegenerating and improvement of therapeutic antibodies and bearing final responsibility for this, and 2) the development together with the “Chief ExecutiveOfficer”, “Chief Scientific Officer” and “Chief Business Officer” of the Research and Development Strategy of Merus B.V. and furthermore all work which canreasonable asked from the employee.This position is performed from Uppsalalaan 8 – 3584 CT UtrechtArticle 2 DurationThis employment agreement is concluded for an undetermined period of time.Article 3 Probationary periodThe probationary period is two months. During the probationary period, both the Employer and the Employee may terminate the employment agreement atany time with immediate effect.Article 4 CancellationOutside of the probationary period, both the Employer and the Employee are authorised to cancel the employment agreement prematurely in writing with dueobservance of the legal notice periods. The employment agreement can only be cancelled at the end of each calendar month. Merus B.V. Employment agreement for an undetermined period Page 1 of 4[initials]Article 5 SalaryThe gross salary excluding vacation allowance of the Employee at the start of employment is €7,200 per month based on a full-time position. The payment ofthe salary takes place no later than the last day of the month.Article 6 Salary in case of disabilityFrom the first day of disability during the first year, the Employee is entitled to continued payment of 100% of the most recent salary and to 70% of the mostrecent salary during the second year.Article 7 Working time, working hours and overtimeThe position will be fulfilled for 40 hours per week (full-time position). The working hours shall be determined by the Employer in consultation with theEmployee.The Employee is reasonably obligated to abide by a request of the Employer to work overtime, without receiving overtime pay.Article 8 Vacation and vacation allowanceThe Employee is entitled to 30 vacation days per calendar year with retention of salary. The vacation days are used in consultation with the Employer.As a rule, vacation days must be used in the year to which they relate. In the first year of employment, the number of vacation days is 24.The Employee is entitled to a vacation allowance of 8% of the gross salary. The vacation allowance is calculated over the period located between 1 June and31 May. The vacation allowance is paid as a lump sum in the month of May.In case of an interim start or termination of the employment agreement, the vacation allowance shall be calculated pro rata the number of months theEmployee has been employed.Article 9 Employment and company regulations of Hubrecht InstituteThe Employee declares to be aware of and to agree with the employment and company regulations applicable at the Hubrecht Institute. The employee hasreceived a copy of these employment and company regulations.Article 10 Employee ManualThis employment agreement is subject to the attached Employee Manual (Annex I). This Employee Manual contains the general employment conditionswhich apply to all employees of Merus B.V. The Employee Manual is an integral part of this employment agreement and is provided to the Employee at thestart of the employment. The provisions laid down in the Employee Manual apply to this employment agreement insofar as these are not expressly deviatedfrom. The Employer reserves the right to make changes to the provisions which are laid down in the Employee Manual.Article 11 Pension SchemeA pension scheme shall be set up for the Employee which is attached to this agreement as Annex II. Merus B.V. Employment agreement for an undetermined period Page 2 of 4[initials]Special provisionsArticle 12 Confidentiality clauseThe Employee is obligated to observe the confidentiality of all he has learned about the business of the Employer and its clients and of which the Employeecan reasonably suspect the confidential nature during and for a period of 5 years after the end of the employment agreement.For every non-compliance or violation of the above, the Employee shall forfeit an immediately payable penalty of €50,000 to the Employer, as well as apenalty of €1,000 for each day the violation continues. This penalty shall be owed by the mere fact of the non-compliance or violation but shall not affect theright of the Employer to claim full damage. The penalty is owed directly to the Employer and shall be for the benefit of the Employer, which constitutes adeviation from Article 7:650(3-5) DCC.Article 13 Relationship clauseThe Employee is forbidden may not perform work for or on behalf of a relationship of the Employer which exist at the time of the end of this employmentagreement who perform activities in a similar area or which otherwise competes with the activities of the Employer for a period of 12 months after the end ofthe employment agreement.This provision shall not apply if the Employee has received prior written permission from the Employer, whether or not granted under special conditions.For each violation of the above, the Employee shall forfeit an immediately payable penalty of €10,000 to the Employer, as well as a penalty of €1,000 foreach day the violation continues. This penalty shall be owed by the mere fact of the violation but shall not affect the right of the Employer to claim fulldamage. The penalty is owed directly to the Employer and shall be for its benefit, which constitutes a deviation from Article 7:650(3-5) DCC.Article 14 Ban on ancillary activitiesThe Employee shall not perform work for another employer or client during the term of this employment agreement. The Employee shall also directly andindirectly refrain from doing business for his own account.This provision shall not apply if the Employee has received prior written permission from the Employer, whether or not granted under special conditions.For each non-compliance or violation of the above, the Employee shall forfeit an immediately payable penalty of €5,000 to the Employer, as well as apenalty of €1,000 for each day the violation continues. This penalty shall be owed by the mere fact of the non-compliance or violation but shall not affect theright of the Employer to claim full damage. The penalty is owed directly to the Employer and shall be for its benefit, which constitutes a deviation fromArticle 7:650(3-5) DCC. Merus B.V. Employment agreement for an undetermined period Page 3 of 4[initials]Additional provisionsArticle 15 Reimbursement mobile phoneThe Employee is entitled to a mobile phone and full reimbursement of a mobile phone subscription. The nature of the subscription is determined inconsultation with the Managing Director. The costs of the subscription are paid monthly together with the salary.Article 16 Business travelFlights in the context of the work for Merus generally take place economy class. This can be deviated from in consultation with the Managing Director.Article 17 Government measuresGovernment measures which mandate a different policy than set out in this agreement, including a change to fiscal regulation, shall be taken into accountand shall not require the Employer to pay any compensation on any other ground.Article 18 Change clauseThe Employer reserves the right to change the employment agreement unilaterally if it has such compelling interest that the interest of the Employee, whichis harmed by the change, must make way by standards of reasonableness and fairness.Article 19 Final provisionThis agreement and all subsequent agreements between the parties are governed by Dutch law.Annexes belonging to this agreement: 1.Employee Manual Merus B.V. 2.Pension SchemeThus agreed to, drawn up in duplicate and signed in Utrecht on [hw:] 19 JULY 2008. Employer signature: Employee signature:[signature] [signature]T. Logtenberg M. ThrosbyManaging Director Merus B.V. Employment agreement for an undetermined period Page 4 of 4[initials]Exhibit 4.10Employment agreementLex BakkerThe undersigned:Merus B.V., located at Padualaan 8 in 3584 CH Utrecht, duly represented by Mr T. Logtenberg in the position of Managing Director, hereinafter referred to as“Employer”,andAlexander Bakker, born in Ooststellingwerg, on 1 December 1966, residing at Waardenburg 51, 2181 LN Hillegom, hereinafter referred to as “Employee”,have agreed as follows:Article 1 Start of employment, position, nature and location of workThe Employee shall commence his employment with the Employer on 1 October 2010 in the position of Chief Development Officer (CDO).The CDO reports directly to the CEO and is a member of the management team. The CDO provides leadership and guidance to the planning and execution ofthe internal and external pre-clinical and clinical development activities of product candidates of Merus according to strict quality demands as required bythe FDA and EMEA. The CDO is responsible for the creation and implementation of a development plan and the associated budget based on the integrationof the scientific and business objectives of Merus and knowledge of the regulatory environment and pre-clinical and clinical development processes. In themanagement team, the CDO contributes to the strategic discussions regarding new product and licence possibilities based on his expertise and to all businessdevelopment activities in a broader sense. The CDO provides the CEO and the Supervisory Board with recommendations regarding possibilities and risks ofproduct development activities.This position is performed at or from Padualaan 8 – 3584 CH Utrecht.Article 2 DurationThis employment agreement is concluded for an undetermined period of time.Article 3 Probationary periodThe probationary period is two months. During the probationary period, both the Employer and the Employee may terminate the employment agreement atany time with immediate effect.Article 4 CancellationOutside of the probationary period, both the Employer and the Employee are authorised to cancel the employment agreement prematurely in writing with dueobservance of the legal notice periods. The employment agreement can only be cancelled at the end of each calendar month. Merus B.V. Employment agreement Alexander Bakker Page 1 of 5[initials]Article 5 SalaryThe gross salary excluding of vacation allowance of the Employee at the start of employment is €8,416.00 per month based on a full-time position. Thepayment of the salary takes place no later than the last day of the month.Article 6 Salary in case of disabilityFrom the first day of disability during the first year, the Employee is entitled to continued payment of 100% of the most recent salary and to 70% of the mostrecent salary during the second year.Article 7 Working time, working hours and overtimeThe position will be fulfilled for 40 hours per week (full-time position). The working hours shall be determined by the Employer in consultation with theEmployee.The Employee is reasonably obligated to abide by a request of the Employer to work overtime, without receiving overtime pay.Article 8 Vacation and vacation allowanceThe Employee is entitled to 30 vacation days per calendar year with retention of salary. The vacation days are used in consultation with the Employer.As a rule, vacation days must be used in the year to which they relate. In the first year of employment, the number of vacation days is 12.The Employee is entitled to a vacation allowance of 8% of the gross salary. The vacation allowance is calculated over the period located between 1 June and31 May. The vacation allowance is paid as a lump sum in the month of May.In case of an interim start or termination of the employment agreement, the vacation allowance shall be calculated pro rata the number of months theEmployee has been employed.Article 9 Employment and company regulations of Merus BVThe Employee declares to be aware of and to agree with the employment and company regulations applicable at the Employer. The Employee shall receive acopy of these employment and company regulations at the start of the employment.Article 10 Employee ManualThis employment agreement is subject to the attached Employee Manual (Attachment I). This Employee Manual contains the general employmentconditions which apply to all employees of Merus B.V. The Employee Manual is an integral part of this employment agreement and is provided to theEmployee at the start of the employment. The provisions laid down in the Employee Manual apply to this employment agreement insofar as these are notexpressly deviated from. The Employer reserves the right to make changes to the provisions which are laid down in the Employee Manual.Article 11 Pension SchemeA pension scheme is set up for the Employee (Annex II). Merus B.V. Employment agreement Alexander Bakker Page 2 of 5[initials]Special provisionsArticle 12 Confidentiality clauseThe Employee is obligated to observe the confidentiality of all he has learned about the business of the Employer and its clients and of which the Employeecan reasonably suspect the confidential nature during and for a period of 5 years after the end of the employment agreement.For every non-compliance or violation of the above, the Employee shall forfeit an immediately payable penalty of €50,000 to the Employer, as well as apenalty of €1,000 for each day the violation continues. This penalty shall be owed by the mere fact of the non-compliance or violation but shall not affect theright of the Employer to claim full damage. The penalty is owed directly to the Employer and shall be for the benefit of the Employer, which constitutes adeviation from Article 7:650(3-5) DCC.Article 13 Relationship clauseThe Employee is forbidden may not perform work for or on behalf of a relationship of the Employer which exist at the time of the end of this employmentagreement who perform activities in a similar area or which otherwise competes with the activities of the Employer for a period of 12 months after the end ofthe employment agreement.This provision shall not apply if the Employee has received prior written permission from the Employer, whether or not granted under special conditions.For each violation of the above, the Employee shall forfeit an immediately payable penalty of €10,000 to the Employer, as well as a penalty of €1,000 foreach day the violation continues. This penalty shall be owed by the mere fact of the violation but shall not affect the right of the Employer to claim fulldamage. The penalty is owed directly to the Employer and shall be for its benefit, which constitutes a deviation from Article 7:650(3-5) DCC.Article 14 Ban on ancillary activitiesThe Employee shall not perform work for another employer or client during the term of this employment agreement. The Employee shall also directly andindirectly refrain from doing business for his own account.This provision shall not apply if the Employee has received prior written permission from the Employer, whether or not granted under special conditions.For each non-compliance or violation of the above, the Employee shall forfeit an immediately payable penalty of €5,000 to the Employer, as well as apenalty of €1,000 for each day the violation continues. This penalty shall be owed by the mere fact of the non-compliance or violation but shall not affect theright of the Employer to claim full damage. The penalty is owed directly to the Employer and shall be for its benefit, which constitutes a deviation fromArticle 7:650(3-5) DCC. Merus B.V. Employment agreement Alexander Bakker Page 3 of 5[initials]Additional provisionsArticle 15 Intellectual property rightsAll intellectual property rights, including but not limited to patent rights, design rights, copyrights, trademark rights and knowledge created during and afterthe end of the employment agreement or as a result of the work or activities performed by the Employee in the service of the Employer, belong or shallbelong exclusively and in their entirety to the Employer.If the aforementioned intellectual property rights do not immediately accrue to the Employer based on legal agreements, the Employee hereby transfers theserights to the Employer.Insofar as the intellectual property rights mentioned in this article cannot be transferred to the Employer, the Employee hereby grants the Employer anexclusive, comprehensive and finite licence to use these rights in the broadest sense of the word without any payment obligation of the Employer. If, despitethe above, personal rights on the intellectual property mentioned in this article accrue to the Employee and insofar as the law allows, the Employee herebywaives all his/her personal rights, including the right to have his/her name mentioned based on the Copyright Act 1912.The Employee shall inform the Employer without delay of all results, inventions, information and intellectual property rights which are the result of his/heremployment and/or which are in any way relevant to the creation, protection or enforceability of the intellectual property rights.As long as the employment agreement and these additional provisions are in force, the Employee shall perform all actions which are necessary for theregistration of or application for intellectual property rights in name of the Employer anywhere in the world.If the Employer is not able or not in a position to give effect to the collaboration pledged above in paragraphs 2 and 6, the Employee hereby grants theEmployer an irrevocable mandate to represent him/her with regard to the assignment and registration of the intellectual property rights as referred to inparagraphs 2 and 6.The Employee acknowledges and determines that his/her salary offers reasonable compensation for the loss of intellectual and industrial property rights as setout in this Article, the employment agreement and by law.Article 16 Travel expense allowanceThe Employee is entitled to compensation of travel expenses for public transportation based on economy class. In case of a move to a location within a radiusof 15km from the work location of Merus, any right to the travel expense allowance expires. Merus B.V. Employment agreement Alexander Bakker Page 4 of 5[initials]Travel other than the commute which is performed in the context of the work or Merus BV will be reimbursed separately after declaration of the costs incurredby the Employee. The travel expenses allowance is paid monthly together with the salary.Article 17 Reimbursement mobile phoneThe Employee is entitled to a mobile phone (“smartphone”) and full reimbursement of a mobile phone subscription. The nature of the subscription isdetermined in consultation with the Managing Director. The costs of the subscription are paid directly by Merus.Article 18 Reimbursement of study expensesCosts for training in the context of the work for Merus are reimbursed in full by the Employer. If the employment agreement between the Employer and theEmployee ends within 2 years after the completion of the course, the Employee shall repay 50% of the study costs.Article 19 Moving expensesIn case of a move to a location within a radius of 15 km from the location of Merus, the Employee is entitled to a one-time allowance for the moving expensesof €1,500.Article 20 Government measuresGovernment measures which mandate a different policy than set out in this agreement, including a change to fiscal regulation, shall be taken into accountand shall not require the Employer to pay any compensation on any other ground.Article 21 Change clauseThe Employer reserves the right to change the employment agreement unilaterally if it has such compelling interest that the interest of the Employee, whichis harmed by the change, must make way by standards of reasonableness and fairness.Article 22 Final provisionThis agreement and all subsequent agreements between the parties are governed by Dutch law.Annexes belonging to this agreement: I.Employee Manual Merus B.V. II.Pension Scheme Lex BakkerThus agreed to, drawn up in duplicate and signed in Utrecht on [hw:] 05/08/2010. Employer Signature: Employee Signature: [signature] [signature] T. Logtenberg Alexander Bakker Managing Director Merus B.V. Employment agreement Alexander Bakker Page 5 of 5[initials]Exhibit 4.11Additional Employment agreementSupplementary to the employment agreement between John de Kruif (Employee) and Merus B.V. (Employer) regarding the start of employment of John Kruifper 2 April 2007 at Merus, the Employer and Employee hereby additionally agree that regarding the intellectual property rights the following provisionsshall apply as well. 1.All intellectual property rights, including but not limited to patent rights, design rights, copyrights, trademark rights and knowledge, created duringand after the end of the employment agreement or as a result of the work or activities performed by the Employer in the service of the Employer, belongor shall belong exclusively and in their entirety to the Employer. 2.If the aforementioned intellectual property rights as referred to in clause 1 do not immediately accrue to the Employer pursuant to statutory provisions,the Employee hereby transfers these rights to the Employer. 3.Insofar as the intellectual property rights mentioned in clause 1 cannot be transferred to the Employer, then the Employee hereby grants the Employer,without any payment obligations of the Employer, an exclusive, comprehensive and perpetual licence to use these rights in the broadest sense of theword. 4.If, despite that which is agreed above, personal rights on the intellectual property mentioned in clause 1 accrue to the Employee and insofar as the lawallows such, then the Employee hereby waives all his/her personal rights, including the right he/she has to have his/her name mentioned as a result ofthe Copyright Act of 1912. 5.The Employee shall inform the Employer without delay about all results, inventions, information and intellectual property rights which are the resultof his/her employment and/or which are in any way relevant for the creation, protection or enforceability of the intellectual property rights. 6.As long as the employment agreement and these additional provisions are in force, the Employee shall perform all actions which are necessary,anywhere in the world, for the registration of or application for intellectual property rights in the Employer’s name. 7.If the Employer is not able, or not in a position, to give effect to the collaboration pledged above in paragraphs 2 and 6, then the Employee herebygrants the Employer an irrevocable authorisation to represent him/her with regard to the assignment and registration of the intellectual property rightsas referred to in paragraphs 2 and 6. 8.The Employee acknowledges and determines that his/salary indeed provides a reasonable compensation for the loss of intellectual and industrialproperty rights as determined here, in the employment agreement and by law.Thus agreed, prepared in duplicate and signed inUtrecht on 10 March 2010: For Merus B.V.: Signature Employee: [signature] [signature] T. Logtenberg John de Kruif Managing Director Employment agreement John de KruifPreamble, start date of employment, position, nature and location of the workThe undersigned:Merus BV, located at the Uppsalalaan 8, 3584 CT Utrecht, duly represented by Mr T. Logtenberg, in the position of Managing Director, hereinafter referred toas employer,andJohn de Kruif, born in Jutphaas, on 7 January 1964, residing in de Bilt, Westerlaan 40, hereinafter referred to as employee,have agreed as follows:Article 1Effective 2 April 2007, the employee will commence employment with the employer in the position of Scientific Director.The work associated with this position consist of: bearing overall responsibility for the daily leadership of the Research and Development Department ofMerus BV and the development of the Research and Development Strategy of Merus BV in collaboration with the Managing Director, and furthermore of anywork which may be reasonable expected from the employee. This position’s duties will be performed at or from the location Uppsalalaan 8 – 3584 CTUtrecht.Duration of employmentArticle 2This employment agreement is concluded for an undetermined period of time.Article 3The probationary period is two months. During the probationary period, both the employer and the employee may terminate the employment agreement withimmediate effect at any time.Termination of employment agreementArticle 4 [initials]Outside of the probationary period, the employer and the employee are authorised to terminate the employment agreement prematurely with due observanceof the legal notice periods. The employment agreement may only be terminated per the end of each calendar month.The SalaryArticle 5The gross salary of the employee at the start of his employment is €6,700 per month, with a full-time position. The payment of the salary takes place no laterthan on the last day of the month.Salary in case of disability and waiting periodArticle 6In case of sickness, the employee must report that he/she is sick to the secretary of Merus BV before 9:00 a.m.From the first day of disability, the employee is entitled to the payment of 70% of the most recent salary for a period of two years.Provisions concerning working time, working hours and overtimeArticle 7The working time is 40 hours per week.The employee is reasonably obligated to comply with a request of the employer to work overtime, without receiving overtime compensation for this.Vacation and vacation allowanceArticle 8The employee is entitled to 30 vacation days per calendar year with retention of salary. The vacation days are used in consultation with the employer.As a rule, vacation days must be used during the year to which they relate. During the first year of employment, the number of vacation days is 23.The employee is entitled to a vacation allowance of 8% of the gross salary. The vacation allowance is calculated over the period which is located bewten1 June and 31 May. The vacation allowance is paid in one lump sum in the first year of the month of September, and in the following years during the monthof May.In case of an interim start or end of the employment agreement, the vacation allowance is calculated prorated to the number of months the employee isemployed. [initials]Employment and company rulesArticle 9The employee declares to be aware of and to agree with the employment and company rules that apply at the employer. The employee has received a copy ofthese employment and company rules.Pension schemeArticle 10A pension scheme will be set up for the employee, which is attached as annex I to this agreement.Special conditionsConfidentiality clauseArticle 11The employee is obligated during and for 5 years after the end of the employment agreement to observe confidentiality with regard to all that he has learnedabout the business of the employer and its clients and which the employee may reasonably suspect to be confidential in nature.For any non-compliance with or violation of the above, the employer shall forfeit an immediately payable penalty of €50,000.00 to the employer, as well as apenalty of €1,000.00 for each day the violation continues. The penalty will be forfeit by the mere fact of the non-compliance or violation but shall not affectthe right of the employer to claim full damages. The penalty is owed directly to the employer and shall be for its benefit, which is in deviation of theprovisions in article 7:650, paragraph 3-5 of the Civil Code.Relationship clauseArticle 12For 12 months after the end of the employment agreement, the employee is prohibited to perform work for or on behalf of the employer’s commercial contactswhich exist at the time of the termination of this employment agreement.This provision does not apply if the employee has received written permission for this from the employer, whether or not subject to certain conditions. [initials]For any violation of the above, the employer shall forfeit an immediately payable penalty of €10,000.00 to the employer, as well as a penalty of €1,000.00 foreach day the violation continues. The penalty will be forfeit by the mere fact of the violation but shall not affect the right of the employer to claim fulldamages. The penalty is owed directly to the employer and shall be for its benefit.Prohibition of ancillary activitiesArticle 13During this employment agreement, the employee shall not perform work for another employer or client. Furthermore, the employee shall directly andindirectly refrain from doing business on his own behalf.This provision does not apply if the employee has received written permission for this from the employer, whether or not subject to certain conditionsFor any non-compliance with or violation of the above, the employer shall forfeit an immediately payable penalty of €5,000.00 to the employer, as well as apenalty of €1,000.00 for each day the violation continues. The penalty will be forfeit by the mere fact of the non-compliance or violation but shall not affectthe right of the employer to claim full damages. The penalty is owed directly to the employer and shall be for its benefit, which is in deviation of theprovisions in article 7:650, paragraph 3-5 of the Civil Code.Additional provisionsArticle 14Business resources, as well as all correspondence, notes, drawings, etc. relating to business matters shall be returned in good condition to the employer by theemployee on the last working day of the employment agreement.Article 15The employer reserves the right to amend the employment agreement unilaterally if it has such compelling interest that the interest of the employee which isharmed by the amendment must give way for this in accordance with standards of reasonableness and fairness. [initials]Confirmation receipt of copyArticle 16The employee declares having received a signed copy of this agreement.Thus agreed, prepared in duplicate and signed inDriebergen, on 2 April 2007. Signature employer: Signature employee:[signature] [signature]T. Logtenberg John de KruifManaging Director Exhibit 4.12Execution versionEMPLOYMENT AGREEMENTThis Employment Agreement (this “Agreement”), dated as of 24th December, 2016 is made by and among Merus US, Inc., a Delaware corporation(together with any successors or assigns, the “Company”) and Peter Silverman (‘“Executive”). The Company and Executive are collectively referred to hereinas the “Parties” and individually as a “Party.”RECITALS (A)It is the desire of the Company to assure itself of the services of Executive beginning on and following a date to be mutually agreed upon by theCompany and Executive, which date will be no later than 1st February, 2017 by entering into this Agreement. The actual date on which Executivebegins his employment with the Company is referred to herein as the “Effective Date.” (B)Executive and the Company mutually desire that Executive provide services to the Company on the terms herein provided.AGREEMENTNOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the Parties hereto agree asfollows:1. Employment.(a) General. Effective as of the Effective Date, the Company shall employ Executive and Executive shall remain in the employ of the Company, for theperiod and in the position set forth in this Section 1, and subject to the other terms and conditions herein provided.(b) At-Will Employment. The Company and Executive acknowledge that Executive’s employment is at-will, as defined under applicable law, and thatExecutive’s employment with the Company may be terminated by the Company or Executive at any time for any or no reason (subject to the noticerequirements of Section 3(b)). This “at-will” nature of Executive’s employment shall remain unchanged during Executive’s tenure as an employee and maynot be changed, except in an express writing signed by Executive and a duly authorized officer of the Company. If Executive’s employment terminates forany reason, Executive shall not be entitled to any payments, benefits, damages, award or compensation other than as provided in this Agreement or otherwiseagreed to in writing by a duly authorized officer of the Company or as provided by applicable law. The period of Executive’s employment by the Companyshall be referred to herein as the “Term”.(c) Position; Duties and Location. Executive shall serve as Senior Vice President and Chief IP Officer the Company, with such responsibilities, dutiesand authority normally associated with such positions and as may from time to time be assigned to Executive.Executive’s normal place of work shall be at the Company’s office in the Boston, Massachusetts metropolitan area. Executive shall devote substantially all ofExecutive’s working time and efforts to the business and affairs of the Company (which shall include service to its affiliates, including Merus N.V., a Dutchpublic limited liability company (“Parent”), as applicable) andshall not engage in outside business activities (including serving on outside boards or committees) without the consent of the Board of Directors of theCompany or the Management Board or the Supervisory Board of Parent (collectively, the “Board”), provided that Executive shall be permitted to (i) manageExecutive’s personal, financial and legal affairs, (ii) participate in trade associations, and (iii) serve on the board of directors and committees of not-for-profitor tax-exempt charitable organizations, in each case, subject to compliance with this Agreement and provided that such activities do not materially interferewith Executive’s performance of Executive’s duties and responsibilities hereunder. Executive agrees to observe and comply with the written rules andpolicies of the Company and Parent as adopted by the Company or Parent, as applicable from time to time, in each case as amended from time to time, as setforth in writing, and as delivered or made available to Executive (each, a “Policy”).2. Compensation and Related Matters.(a) Annual Base Salary. During the Term, Executive shall receive a base salary as adjusted from time to time, “Annual Base Salary”, at a rate of no lessthan $315,000 per annum, which shall be paid in accordance with the customary payroll practices of the Company and shall be pro-rated for partial years ofemployement. The Annual Base Salary shall be reviewed from time to time and may be increased (but not decreased) from the annual rate then in effect.(b) Annual Bonus. During the Term, Executive will be eligible to participate in an annual incentive program established by the Board. Executive’sannual incentive compensation under such incentive program (the “Annual Bonus”) shall be targeted at 30% of the Annual Base Salary. The Annual Bonuspayable under the incentive program shall be based on the achievement of performance goals to be determined by the Company and may be pro-rated forcalendar year 2016 performance based on the Effective Date. The payment of any Annual Bonus pursuant to the incentive program shall be subject toExecutive’s continued employment with the Company through the date of payment.(c) Equity Awards. Within thirty (30) days following the Effective Date, Parent will grant Executive an option to purchase 50,000 common shares ofParent pursuant to Parent’s 2016 Incentive Award Plan and the Stock Option Grant Notice in the form attached hereto as Exhibit A (the “Option GrantNotice”), which shall provide for a per share exercise price equal to the per share fair market value (closing price on Nasdaq Global Market) as per the date ofgrant (the “Option”). Executive shall be eligible to receive additional equity awards at the discretion of the Board.(d) Benefits. During the Term, Executive shall be eligible to participate in employee benefit plans, programs and arrangements of the Company(including medical, dental, vision, life insurance, disability insurance and defined contribution 401(k) plan) made available to other similarly-situatedemployees of the Company, consistent with the terms thereof and as such plans, programs and arrangements may be amended from time to time.Notwithstanding the foregoing, if the Company does not maintain any “group health plan” (within the meaning of Section 4980B of the Internal RevenueCode of 1986, as amended (the “Code”) and the regulations thereunder (“COBRA”)) for its U.S. employees as of the Effective Date, then, subject toExecutive’s valid election to receive COBRA benefits under the health plans of Executive’s prior employer, during the period beginning on the EffectiveDate and ending on the first to 2occur of: (i) the date on which the Company adopts or otherwise makes generally available to its U.S. employees a group health plan or (ii) the date on whichExecutive terminates employment with the Company, the Company shall reimburse Executive for the actual cost of healthcare premiums incurred byExecutive under the group health plan of Executive’s prior employer pursuant to COBRA, subject to proper substantiation of such costs in accordance withapplicable Company Policy no later than sixty (60) days after such costs are incurred; provided, that, in the event the period of time during which Executiveis entitled to continuation coverage under the group health plan of Executive’s prior employer pursuant to COBRA expires prior to the Company adopting orotherwise making available a group health plan to its U.S. employees, the Company shall continue to pay Executive for healthcare costs in an amount equalto the cost of healthcare premiums incurred by Executive under the group health plan of Executive’s prior employer pursuant to COBRA based on the lastmonth of the COBRA period. Such costs shall be reimbursed promptly, but in no event later than sixty (60) days following proper substantiation thereof.(e) Vacation. During the Term, Executive shall be entitled to paid personal leave in accordance with the Company’s paid time off Policies. Anyvacation shall be taken at the reasonable and mutual convenience of the Company and Executive.(f) Business Expenses. During the Term, the Company shall reimburse Executive for all reasonable travel and other business expenses incurred byExecutive in the performance of Executive’s duties to the Company in accordance with the Company’s expense reimbursement Policy.(g) Relocation Expenses. In the event the Company requests that the Executive relocate to the Boston, Massachusetts metropolitan area, the Companyshall reimburse Executive up to a maximum amount of $10,000 for reasonable, documented moving expenses incurred as a result of such relocation, whichrelocation expense reimbursement shall be paid (subject to all tax withholdings which the Company reasonably determines are required) as soon asreasonably practicable following Executive’s submission of documentation of such expenses reasonably requested by the Company, but no later thanDecember 31 of the year following the year in which the expenses were incurred (“Relocation Expenses”).(h) Key Person Insurance. At any time during the Term, the Company shall have the right to insure the life of Executive for the Company’s sole benefit.The Company shall have the right to determine the amount of insurance and the type of policy. Executive shall reasonably cooperate with the Company inobtaining such insurance by submitting to physical examinations, by supplying all information reasonably required by any insurance carrier, and byexecuting all necessary documents reasonably required by any insurance carrier, provided that any information provided to an insurance company or brokershall not be provided to the Company or its affiliates without the prior written authorization of Executive. Executive shall incur no financial obligation byexecuting any required document, and shall have no interest in any such policy. 33. Termination.(a) Circumstances. Executive’s employment hereunder may be terminated by the Company or Executive, as applicable, without any breach of thisAgreement, at any time, under the following circumstances:(i) Death. Executive’s employment hereunder shall terminate upon Executive’s death.(ii) Disability. If Executive has incurred a Disability, as defined below, the Company may terminate Executive’s employment.(iii) Termination for Cause. The Company may terminate Executive’s employment for Cause, as defined below.(iv) Termination without Cause. The Company may terminate Executive’s employment without Cause.(v) Resignation from the Company for Good Reason. Executive may resign Executive’s employment with the Company for Good Reason, asdefined below.(vi) Resignation from the Company Without Good Reason. Executive may resign Executive’s employment with the Company for any reasonother than Good Reason or for no reason.(b) Notice of Termination. Any termination of Executive’s employment by the Company or by Executive under this Section 3 (other than terminationpursuant to Section 3(a)(i)) shall be communicated by a written notice to the other Party (i) indicating the specific termination provision in this Agreementrelied upon, (ii) setting forth in reasonable detail the facts and circumstances claimed to provide a basis for the termination of Executive’s employment underthe provision so indicated, if applicable, and (iii) specifying a Date of Termination which, if submitted by Executive, shall be at least thirty (30) daysfollowing the date of such notice (a “Notice of Termination”); provided, however, that in the event that Executive delivers a Notice of Termination to theCompany, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of the Company’s receipt ofsuch Notice of Termination and is prior to the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may providefor a Date of Termination on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. Thefailure by the Company or Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or GoodReason shall not waive any right of such Party hereunder or preclude such Party from asserting such fact or circumstance in enforcing such Party’s rightshereunder. 4(c) Company Obligations upon Termination. Upon termination of Executive’s employment pursuant to this Section 3, Executive (or Executive’sestate) shall be entitled to receive the sum of: (i) the portion of Executive’s Annual Base Salary earned through the Date of Termination, but not yet paid toExecutive; (ii) any expenses owed to Executive pursuant to Section 2(f) and Section 2(g); and (iii) any amount accrued and arising from Executive’sparticipation in, or benefits accrued under any employee benefit plans, programs or arrangements, which amounts shall be payable in accordance with theterms and conditions of such employee benefit plans, programs or arrangements (collectively, the “Company Arrangements”). Except as otherwise expresslyrequired by law (e.g., COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other compensatoryamounts hereunder (if any) shall cease upon the termination of Executive’s employment hereunder. In the event that Executive’s employment is terminatedby the Company for any reason, Executive’s sole and exclusive remedy hereunder shall be to receive the payments and benefits described in this Section 3(c)or Section 4, as applicable. For the avoidance of doubt, nothing in this Agreement shall limit in any way any rights of Executive to receive compensation,reimbursement or other payments pursuant to any other agreement (including the Option Grant Notice) entered into between Executive and the Company,Parent and/or their respective affiliates, to the extent any such agreement provides for payment following the termination of Executive’s employment.(d) Deemed Resignation. Upon termination of Executive’s employment for any reason, Executive shall be deemed to have resigned from all offices anddirectorships, if any, then held with the Company or any of its affiliates, including Parent.4. Severance Payments.(a) Termination for Cause, or Termination Upon Death, Disability or Resignation from the Company Without Good Reason. If Executive’s employmentshall terminate as a result of Executive’s death pursuant to Section 3(a)(i) or Disability pursuant to Section 3(a)(ii), pursuant to Section 3(a)(iii) for Cause, orpursuant to Section 3(a)(vi) for Executive’s resignation from the Company without Good Reason, then Executive shall not be entitled to any severancepayments or benefits, except as provided in Section 3(c).(b) Termination without Cause or Resignation from the Company for Good Reason. If Executive’s employment is terminated by the Company withoutCause pursuant to Section 3(a)(iv) or pursuant to Section 3(a)(v) due to Executive’s resignation for Good Reason, then Executive shall receive the paymentsand benefits set forth in Section 3(c) and, in addition to such payments and benefits, subject to Executive signing on or before the 21st day followingExecutive’s Separation from Service (as defined below), and not revoking, a release of claims in substantially the form attached hereto as Exhibit B (the“Release”), and Executive’s continued compliance with the terms of the Proprietary Information Agreement (as defined below), Executive shall receive (i) anamount in cash equal to the sum of (A) 0.5 times the Annual Base Salary and (B) a pro-rata portion of the Annual Bonus for the calendar year in which theDate of Termination occurs, in an amount equal to the targeted Annual Bonus for such calendar year multiplied by a fraction, the numerator of which is thenumber of days that have elapsed during such calendar year up to the Date of Termination and the denominator of which is 365, which shall be paid in theform of salary continuation in regular instalments over the six-month period following Executive’s Separation from Service in accordance with theCompany’s customary payroll practices, and (ii) payment, on the First Payment Date (or, if later, the date paid to active executives of the Company), of anyunpaid and earned Annual Bonus for a completed bonus year. 55. Employee Proprietary Information and Inventions Assignment Agreement.Executive acknowledges and agrees that, as a condition to Executive’s employment by the Company, Executive shall enter into, and be bound by theterms of the Employee Proprietary Information and Inventions Assignment Agreement in the form attached hereto as Exhibit C (the “Proprietary InformationAgreement”), effective from and after the Effective Date in accordance with its terms.6. Assignment and Successors.The Company may assign its rights and obligations under this Agreement to any successor to all or substantially all of the business or the assets of theCompany whether by merger or otherwise. This Agreement shall be binding upon and inure to the benefit of the Company, Executive and their respectivesuccessors, permitted assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable. None ofExecutive’s rights or obligations may be assigned or transferred by Executive, other than Executive’s rights to payments hereunder, which may be transferredonly by will or operation of law. Notwithstanding the foregoing, Executive shall be entitled, to the extent permitted under applicable law and applicableCompany Arrangements, to select and change a beneficiary or beneficiaries to receive compensation hereunder following Executive’s death by givingwritten notice thereof to the Company.7. Certain Definitions.(a) Cause. The Company shall have “Cause” to terminate Executive’s employment hereunder upon:(i) Executive’s failure to (A) substantially perform his duties as contemplated under this Agreement (other than any such failure resulting fromExecutive’s Disability) or (B) comply with, in any material respect, any of the Company’s Policies;(ii) Executive’s failure in any material respect to carry out or comply with any lawful and reasonable directive of the Board or Executive’simmediate supervisor;(iii) Executive’s breach of a material provision of this Agreement or the Proprietary Information Agreement;(iv) Executive’s conviction, plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or crimeinvolving moral turpitude;(v) Executive’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s (or any of its affiliate’s)premises or while performing Executive’s duties and responsibilities under this Agreement; or 6(vi) Executive’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against theCompany or any of its affiliates.(b) Date of Termination. “Date of Termination” shall mean (i) if Executive’s employment is terminated by Executive’s death, the date of Executive’sdeath; or (ii) if Executive’s employment is terminated pursuant to Section 3(a)(ii) – (vi) either the date indicated in the Notice of Termination or the datespecified by the Company pursuant to Section 3(b), after delivery by Executive of the Notice of Termination, whichever is earlier.(c) Disability. “Disability” shall mean, at any time the Company or any of its affiliates sponsors a long-term disability plan for the Company’semployees, “disability” as defined in such long-term disability plan for the purpose of determining a participant’s eligibility for benefits, provided, however,if the long-term disability plan contains multiple definitions of disability, “Disability” shall refer to that definition of disability which, if Executive qualifiedfor such disability benefits, would provide coverage for the longest period of time. The determination of whether Executive has a Disability shall be made bythe person or persons required to make disability determinations under the long-term disability plan. At any time the Company does not sponsor a long-termdisability plan for its employees, Disability shall mean Executive’s inability to perform, with or without reasonable accommodation, the essential functionsof Executive’s position hereunder for a total of three months during any six-month period as a result of incapacity due to mental or physical illness asdetermined by a physician selected by the Company or its insurers and acceptable to Executive or Executive’s legal representative, with such agreement as toacceptability not to be unreasonably withheld or delayed. Any refusal by Executive to submit to a medical examination for the purpose of determiningDisability shall be deemed to constitute conclusive evidence of Executive’s Disability.(d) Good Reason. For the sole purpose of determining Executive’s right to severance payments as described above, Executive’s resignation will be for“Good Reason” if Executive resigns within ninety days of Executive’s knowledge of the occurrence of any of the following events, unless Executiveconsents to the applicable event: (i) a decrease in Executive’s Annual Base Salary, other than a reduction in annual base salary of less than 10% that isimplemented in connection with a contemporaneous reduction in annual base salaries affecting other similarly situated employees of the Company, or (ii) therelocation of Executive’s primary office to a location more than 50 miles from the Boston, Massachusetts metropolitan area. Notwithstanding the foregoing,no Good Reason will have occurred unless and until Executive has: (i) provided the Company, within 60 days of Executive’s knowledge of the occurrence ofthe facts and circumstances underlying the Good Reason event, written-notice stating with specificity the applicable facts and circumstances underlying suchfinding of Good Reason; (ii) provided the Company with an opportunity to cure the same within 30 days after the receipt of such notice; and (iii) theCompany fails to cure the same within such 30 day period after receipt of such notice. 78.Miscellaneous Provisions.(a) Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with its express terms, and otherwise inaccordance with the substantive laws of the Commonwealth of Massachusetts without reference to the principles of conflicts of law of the Commonwealth ofMassachusetts or any other jurisdiction, and where applicable, the laws of the United States.(b) Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of anyother provision of this Agreement, which shall remain in full force and effect.(c) Notices. Any notice, request, claim, demand, document and other communication hereunder to any Party shall be effective upon receipt (or refusalof receipt) and shall be in writing and delivered personally or sent by facsimile, nationally recognized overnight delivery service, postage prepaid, orcertified or registered mail, postage prepaid, as follows:(i) If to the Company, the Chief Financial Officer at its headquarters,(ii) If to Executive, at the last address that the Company has in its personnel records for Executive, or(iii) At any other address as any Party shall have specified by notice in writing to the other Party.(d) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which togetherwill constitute one and the same Agreement. Signatures delivered by facsimile, PDF or other electronic means shall be deemed effective for all purposes.(e) Entire Agreement. The terms of this Agreement, the Option Grant Notice and the Proprietary Information Agreement are intended by the Parties tobe the final expression of their agreement with respect to the subject matter hereof and thereof and supersede all prior understandings and agreements,whether written or oral. The Parties further intend that this Agreement, the Option Grant Notice and the Proprietary Information Agreement shall constitutethe complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or otherlegal proceeding to vary the terms of this Agreement, the Option Grant Notice or the Proprietary Information Agreement.(f) Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by Executive and aduly authorized officer of the Company. By an instrument in writing similarly executed, Executive or a duly authorized officer of the Company may waivecompliance by the other Party with any specifically identified provision of this Agreement that such other Party was or is obligated to comply with orperform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure toexercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power providedherein or by law or in equity. 8(g) No Inconsistent Actions. The Parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with theprovisions or essential intent of this Agreement. Furthermore, it is the intent of the Parties hereto to act in a fair and reasonable manner with respect to theinterpretation and application of the provisions of this Agreement.(h) Construction. This Agreement shall be deemed drafted equally by the Parties. Its language shall be construed as a whole and according to its fairmeaning. Any presumption or principle that the language is to be construed against any Party shall not apply. The headings in this Agreement are only forconvenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to thoseparts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (a) the plural includesthe singular and the singular includes the plural; (b) “and” and “or” are each used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every”means “any and all,” and “each and every”; (d) “includes” and “including” are each “without limitation”; (e) “herein,” “hereof,” “hereunder” and othersimilar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) allpronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or personsreferred to may require.(i) Arbitration. Any controversy, claim or dispute arising out of or relating to this Agreement, shall be settled solely and exclusively by a bindingarbitration process administered by JAMS/Endispute before a single arbitrator in Boston, Massachusetts. Such arbitration shall be conducted in accordancewith the then-existing JAMS/Endispute Rules of Practice and Procedure, with the following exceptions if in conflict: (a) one arbitrator who is a retired judgeshall be chosen consistent with the then current rules of JAMS/Endispute; (b) each Party to the arbitration will pay one-half of the expenses and fees of thearbitrator, together with other expenses of the arbitration incurred or approved by the arbitrator; and (c) arbitration may proceed in the absence of any Party ifwritten notice (pursuant to the JAMS/Endispute rules and regulations) of the proceedings has been given to such Party. Each Party shall bear its ownattorneys’ fees and expenses; provided that the arbitrator may assess the prevailing Party’s fees and costs against the non-prevailing Party as part of thearbitrator’s award. The Parties agree to abide by all decisions and awards rendered in such proceedings. Such decisions and awards rendered by the arbitratorshall be final and conclusive. All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law or equity; provided,however, that nothing in this subsection shall be construed as precluding the bringing of an action for injunctive relief or specific performance as provided inthis Agreement or the Proprietary Information Agreement. This dispute resolution process and any arbitration hereunder shall be confidential and neither anyParty nor the neutral arbitrator shall disclose the existence, contents or results of such process without the prior written consent of all Parties, except wherenecessary or compelled in a court to enforce this arbitration provision or an award from such arbitration or otherwise in a legal proceeding. IfJAMS/Endispute no longer exists or is otherwise unavailable, the Parties agree that the American Arbitration Association (“AAA”) shall administer thearbitration in accordance with its then-existing rules as modified by this subsection. In such event, all references herein to JAMS/Endispute shall mean AAA. 9(j) Enforcement. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the termof this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceableprovision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall notbe affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid orunenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceableprovision as may be possible and be legal, valid and enforceable.(k) Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreignwithholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if anyquestions as to the amount or requirement of withholding shall arise.(1) Survival. Notwithstanding anything to the contrary in this Agreement, the provisions of Sections 5 through 9 will survive the termination ofExecutive’s employment and the expiration or termination of the Term.(m) Section 409A.(i) General. The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of theCode and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted, thisAgreement shall be interpreted to be in compliance therewith.(ii) Separation from Service. Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under thisAgreement that are designated under this Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s“separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any suchcompensation or benefits described in Section 4(b) shall not be paid, or, in the case of installments, shall not commence payment, until the 30th dayfollowing Executive’s Separation from Service (the “First Payment Date”). Any installment payments that would have been made to Executive during the30-day period immediately following Executive’s Separation from Service but for the preceding sentence shall be paid to Executive on the First PaymentDate and the remaining payments shall be made as provided in this Agreement.(iii) Specified Employee. Notwithstanding anything in this Agreement to the contrary, if Executive is deemed by the Company at the time ofExecutive’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of thebenefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion ofExecutive’s benefits shall not be provided to Executive prior to the earlier of (i) the expiration of the 6-month period measured from the date of Executive’sSeparation from Service with the Company or (ii) the date of Executive’s death. Upon the first business day following the expiration of the applicableSection 409A period, all payments deferred pursuant to the preceding sentence shall be paid in a lump sum to Executive (or Executive’s estate orbeneficiaries), and any remaining payments due to Executive under this Agreement shall be paid as otherwise provided herein. 10(iv) Expense Reimbursements. To the extent that any reimbursements under this Agreement are subject to Section 409A, any suchreimbursements payable to Executive shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred,provided that Executive submits Executive’s reimbursement request promptly following the date the expense is incurred. The amount of expenses reimbursedin one year shall not affect the amount eligible for reimbursement in any subsequent year, other than medical expenses referred to in Section 105(b) of theCode, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.(v) Installments. Executive’s right to receive any installment payments under this Agreement, including any continuation of salary paymentsthat are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installmentpayment shall at all times be considered a separate and distinct payment as permitted under Section 409A. Except as otherwise permitted underSection 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interestpursuant to Section 409A.(n) No Mitigation. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of any amountspayable to Executive pursuant to Section 4 and such amounts shall not be reduced whether or not Executive obtains other employment (including self-employment).9. Acknowledgements and Representations.Executive acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon anyrepresentations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based onExecutive’s own judgment.10. Third Party Beneficiary Rights.Parent has third party beneficiary rights to the terms of this Agreement applicable to the Company.[Signature Page Follows] 11Execution versionIN WITNESS WHEREOF, the persons below have executed this Agreement on the date and year first above written. COMPANYBy: /s/ Ton Logtenberg Ton Logtenberg Chief Executive OfficerBy: /s/ Shelley Margetson Shelley Margetson Chief Operating OfficerEXECUTIVEBy: /s/ PETER SILVERMAN PETER SILVERMAN 12/27/2017Execution versionEXHIBIT AForm of Option Grant Notice A-1Execution versionEXHIBIT BSeparation Agreement and ReleaseThis Separation Agreement and Release (this “Agreement”) is made by and between Peter Silverman (“Executive”) and (the “Company”)(collectively referred to as the “Parties” or individually referred to as a “Party”). Capitalized terms used but not defined in this Agreement shall have themeanings set forth in the Employment Agreement (as defined below).WHEREAS, the Parties have previously entered into that certain Employment Agreement, dated as of (the “Employment Agreement”); andWHEREAS, in connection with Executive’s termination of employment with the Company or a subsidiary or affiliate of the Companyeffective , 20, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands thatExecutive may have against the Company and any of the Releasees as defined below, including, but not limited to, any and all claims arising out of or in anyway related to Executive’s employment with or separation from the Company or its subsidiaries or affiliates but, for the avoidance of doubt, nothing hereinwill be deemed to release any rights or remedies in connection with the Retained Claims, as defined below.NOW, THEREFORE, in consideration of the severance payments and benefits described in Section 4 of the Employment Agreement, which, pursuantto the Employment Agreement, are conditioned on Executive’s execution and non-revocation of this Agreement, and in consideration of the mutual promisesmade herein, the Company and Executive hereby agree as follows:1. Severance Payments; Salary and Benefits. The Company agrees to provide Executive with the severance payments and benefits described inSection 4(b) of the Employment Agreement, payable at the times set forth in, and subject to the terms and conditions of, the Employment Agreement. Inaddition, to the extent not already paid, and subject to the terms and conditions of the Employment Agreement, the Company shall pay or provide toExecutive all other payments or benefits described in Section 3(c) of the Employment Agreement, subject to and in accordance with the terms thereof.2. Release of Claims. Executive agrees that, other than with respect to the Retained Claims, the foregoing consideration represents settlement in full ofall outstanding obligations owed to Executive by the Company, any of its direct or indirect parents, subsidiaries and affiliates, and any of their current andformer officers, directors, equity holders, managers, employees, agents, investors, attorneys, shareholders, administrators, affiliates, benefit plans, planadministrators, insurers, trustees, divisions, and subsidiaries and predecessor and successor corporations and assigns (collectively, the “Releasees”).Executive, on Executive’s own behalf and on behalf of any of Executive’s affiliated companies or entities and any of their respective heirs, family members,executors, agents, and assigns, other than with respect to the Retained Claims, hereby and forever releases the Releasees from, and agrees not to sueconcerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, or cause of action relating to any matters ofany kind, whether presently known or unknown, suspected or unsuspected, that Executive may possess against any of the Releasees arising from anyomissions, acts, facts, or damages that have occurred up until and including the Effective Date of this Agreement (as defined in Section 7 below), including,without limitation: B-1(a) any and all claims relating to or arising from Executive’s employment or service relationship with the Company or any of its direct or indirectsubsidiaries or affiliates and the termination of that relationship;(b) any and all claims relating to, or arising from, Executive’s right to purchase, or actual purchase of any shares of stock or other equity interestsof the Company or any of its affiliates, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty underapplicable state corporate law, and securities fraud under any state or federal law;(c) any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation;breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent orintentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract orprospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy;false imprisonment; conversion; and disability benefits;(d) any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair CreditReporting Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income SecurityAct of 1974; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; and the Sarbanes-Oxley Act of 2002;(e) any and all claims for violation of the federal or any state constitution;(f) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;(g) any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of theproceeds received by Executive as a result of this Agreement; and(h) any and all claims for attorneys’ fees and costs.Executive agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released.Notwithstanding anything to the contrary in this Agreement, the release set forth in this Agreement does not release any of the following claims by Executive(collectively, the “Retained Claims”): (i) claims that cannot be released as a matter of law, including, but not limited to, Executive’s right to report possibleviolations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F ofthe Securities Exchange Act of B-21934 or Section 806 of the Sarbanes-Oxley Act of 2002, or any other whistleblower protection provisions of state or federal law or regulation; (ii) Executive’sright to file a charge with or participate in a charge by the Equal Employment Opportunity Commission, or any other local, state, or federal administrativebody or government agency that is authorized to enforce or administer laws related to employment, against the Company or any Releasee (with theunderstanding that Executive’s release of claims herein bars Executive from recovering such monetary relief from the Company or any Releasee); (iii) claimsfor unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law; (iv) claims to continued participationin certain of the Company’s and the other Releasees group benefit plans pursuant to the terms and conditions of COBRA; (v) claims to any benefitentitlements vested as the date of separation of Executive’s employment, pursuant to written terms of any employee benefit plan of the Company or any otherReleasee and Executive’s right under applicable law; (vi) claims related to Executive’s ownership of vested equity securities, and vested options to purchaseequity securities, in each case of the Company or any other Releasee (including equity securities and options to purchase equity securities that vest pursuantto the Employment Agreement); (vii) claims related to Executive’s right to indemnification by the Company or any other Releasee pursuant to contract orapplicable law; (viii) claims for breach of Section 3(c) or Section 4(b) of the Employment Agreement; or (ix) claims for breach of this Agreement.3. Acknowledgment of Waiver of Claims under ADEA. Executive understands and acknowledges that Executive is waiving and releasing any rightsExecutive may have under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this waiver and release is knowing and voluntary.Executive understands and agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date ofthis Agreement. Executive understands and acknowledges that the consideration given for this waiver and release is in addition to anything of value to whichExecutive was already entitled. Executive further understands and acknowledges that Executive has been advised by this writing that: (a) Executive shouldconsult with an attorney prior to executing this Agreement; (b) Executive has 21 days within which to consider this Agreement; (c) Executive has 7 daysfollowing Executive’s execution of this Agreement to revoke this Agreement pursuant to written notice to the General Counsel of the Company; (d) thisAgreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Executive fromchallenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, orcosts for doing so, unless specifically authorized by federal law. In the event Executive signs this Agreement and returns it to the Company in less than the 21day period identified above, Executive hereby acknowledges that Executive has freely and voluntarily chosen to waive the time period allotted forconsidering this Agreement.4. Severability. In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or isdeclared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect withoutsaid provision or portion of provision.5. No Oral Modification. This Agreement may only be amended in a writing signed by Executive and a duly authorized officer of the Company. B-36. Governing Law; Dispute Resolution. This Agreement shall be subject to the provisions of Sections 8(a), 8(c), 8(d) and 8(i) of the EmploymentAgreement.7. Effective Date. If Executive has attained or is over the age of 40 as of the date of Executive’s termination of employment, then Executive has sevendays after Executive signs this Agreement to revoke it and this Agreement will become effective on the eighth day after Executive signed this Agreement, solong as it has not been revoked by Executive before that date (the “Effective Date”). If Executive has not attained the age of 40 as of the date of Executive’stermination of employment, then the “Effective Date” shall be the date on which Executive signs this Agreement.8. Voluntary Execution of Agreement. Executive understands and agrees that Executive executed this Agreement voluntarily, without any duress orundue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of Executive’s claims against the Company andany of the other Releasees. Executive acknowledges that: (a) Executive has read this Agreement; (b) Executive has not relied upon any representations orstatements made by the Company that are not specifically set forth in this Agreement; (c) Executive has been represented in the preparation, negotiation, andexecution of this Agreement by legal counsel of Executive’s own choice or has elected not to retain legal counsel; (d) Executive understands the terms andconsequences of this Agreement and of the releases it contains; and (e) Executive is fully aware of the legal and binding effect of this Agreement.IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below. Dated: Peter Silverman COMPANYDated: 12/24/16 By: /s/ Ton Logtenberg Name: Ton Logtenberg Title: CEODated: 12/24/16 By: Name: Shelley Margetson Title: COO B-4ADDENDUM TO EMPLOYMENT AGREEMENTThis addendum to the Employment Agreement dated December 24, 2016 (the Agreement) is entered into as of February 1, 2017 by and between Merus US,Inc., a Delaware corporation (together with any successors or assigns, the Company) and Peter Silverman (Executive) (the Addendum). The Company andExecutive are collectively referred to herein as the Parties and individually as a Party.WHEREAS the Company and Executive wish to amend the Agreement with this Addendum.NOW THEREFORE THE PARTIES HAVE AGREED AS FOLLOWS 1.The Parties hereby agree to replace recital (A) of the Agreement with the following:“It is the desire of the Company to assure itself of the services of the Executive beginning on and following a date to be mutually agreed uponby the Company and Executive, which date will be no later than 15 February 2017 by entering into this Agreement. The actual date on whichExecutive begins his employment with the Company is referred to herein as the “Effective Date”.” 2.The Agreement is amended only to the extent necessary to give full effect to the Agreement. All other terms and conditions of the Agreementshall remain in full force and effect.IN WHITNESS WHEREOF, the Parties have duly executed the Addendum as of February 1, 2017. Merus US, Inc. Peter SilvermanBy: /s/ Ton Logtenberg /s/ Peter SilvermanTon Logtenberg CEO By: /s/ Shelley Margetson Shelley Margetson COO Exhibit 4.15.1CONFIDENTIALLEASE AGREEMENT Lessor Stichting Incubator UtrechtYalelaan 403584 CM UTRECHTLessee Merus B.V.Padualaan 83584 CH UtrechtThe NetherlandsObject Yalelaan 62, 3584 CM, in UtrechtLease period 5 yearsLease commencement date 1 November 2016Lease notice period 12 monthsEnd date 31 October 2021Bank guarantee 3 months rentExtension options automatic extensionAnnual lease (base price) € 434,150.60 (also see Article 4.1)Taxed lease yes, as of lease commencement dateIndexation annual, for the first time as of 1 July 2017 Merus B.V. Lease Agreement 30/11/2016 1/11CONFIDENTIAL LEASE AGREEMENT FOR OFFICE SPACEAND LABORATORY SPACE WHEREAS:The LSI on the Yalelaan is intended primarily to accommodate life sciences companies (objective);Given the aforementioned objective, various companies can be accommodated on each floor;These companies must share the joint facilities, such as the toilets and pantry present on their floor, among other things;Office and laboratory space in the LSI are offered at market conditions, taking into account the European Regional Development Fund (ERDF) subsidyprovided;Where appropriate, specific and individual agreements will be made with start-up life science companies, including with regard to the lease price, anydiscount, lease period and notice period.THE UNDERSIGNEDStichting Incubator Utrecht, having its registered address and having offices at 3584 CM Utrecht, at Yalelaan 40, and legally represented in this matter by itsDirector, Oscar Schoots, hereinafter to be called “Lessor”,ANDMerus B.V., having its registered office at 6534 AB Nijmegen and having offices at 3584 CH Utrecht at Padualaan 8, and legally represented in this matter byMr Ton Logtenberg and Ms Shelley J. Margetson, jointly.hereinafter to be called “Lessee”,registered in the trade register in Amsterdam under Chamber of Commerce No. 30189136, VAT (Value Added Tax) number NL812247413B01.HAVE AGREEDThis lease agreement replaces the agreement dated 22 April 2016The leased object, purpose 1.1Lessor leases to Lessee and Lessee leases from Lessor specific spaces in the new multi-tenant business building to be delivered known as LSI (locatedat Yalelaan 62, 3584 CM, Utrecht), these being the spaces on the third (3rd) and fourth (4th) floors numbered 3.01 through 3.15 and 4.01 through 4.15(offices) and 3.16 through 3.28 and 4.16 through 4.19 (laboratories), hereinafter called “the Leased Object”, situated at Yalelaan in Utrecht, includingthe shared use of common areas including entrance, service entrance and atrium (LSI ground floor), lifts, the hallway pantry and toilets on the samefloor, the service building behind the LSI and the bicycle shed (basement of the Alexander Numan building) at Yalelaan 40-60 in Utrecht and furtherindicated on the drawing attached to this agreement and signed by parties, which drawing is part of this agreement. Merus B.V. Lease Agreement 30/11/2016 2/11CONFIDENTIAL 1.2The leased object will only be used by or on account of Lessee for the purpose of laboratory space with associated office space. 1.3The Lessee is prohibited from giving the leased object a purpose other than what is described in 1.2 without prior written consent from Lessor. 1.4The highest permissible load on the floors of the leased object is 500 kg/m².Conditions 2.1The “GENERAL PROVISIONS OF THE LEASE AGREEMENT FOR OFFICE SPACE and LABORATORY SPACE”, hereinafter to be called “GeneralProvisions”, are part of this agreement. The content of these General Provisions is known to parties. Lessee and Lessor have received one copy of theGeneral Provisions as Appendix to this agreement. 2.2The General Provisions to which 2.1 refers are completely applicable except insofar as they are explicitly deviated from in this agreement and anyappendices, in which case this agreement and any appendices prevail, or if application of the General Provisions is not possible with regard to theleased object.Term, start, extension and termination 3.1This agreement has been entered into for the term of five (5) years, starting on 1 November 2016 and running until 31 October 2021. Cancellationmust occur 12 months before the expiration of the lease period. If the agreement is extended in accordance with 3.2, then cancellation must occur sixmonths before the expiration of the lease period. 3.2After the expiration of the cancellation option stated in 3.1, if no cancellation has occurred, the agreement will be tacitly extended for a new period oftwo (2) years each time. In the event of cancellation, Lessee agrees that the Leased Object will be evacuated and clean and free of use and usage rightsas of the relevant date. 3.3Premature termination of this agreement is only possible by mutual consent. In the event that Lessee and Lessor mutually consent to terminate theagreement prematurely, Lessee will then in any event pay to Lessor the remainder of the Tenant Share of Adjustments (as stated under 4.1 and 4.6)until the end of this agreement’s duration, the details of such a remuneration to be then specified and recorded in mutual consultation. In any event, alump sum payment of the remainder of the Tenant Share of Adjustments will suffice as remuneration. 3.4In the event of an acquisition of the majority of the Lessee’s shares by a third party under “at arm’s-length” conditions, Lessee is entitled, once,during 3 (three) months after aforementioned share transfer, to prematurely terminate this agreement with due observance of a notice period of 12months. 3.5Cancellation or premature termination must be done by bailiff’s writ or registered letter. Merus B.V. Lease Agreement 30/11/2016 3/11CONFIDENTIAL Lease price, VAT, lease price adjustment, payment obligation, payment period 4.1The annual base lease price of the leased object amounts to € 434,150.60, excluding Tenant Share of Adjustments, VAT and service costs. In additionto the aforementioned base lease price, Lessee receives extra discounts on the base lease price, decreasing each year as shown in the schedule below.Insofar as the lease in the first quarter, or upon cancellation in the last quarter, does not concern a full quarter, the amount to be paid for the first andlast quarter, respectively, will be adjusted proportionally. PAYMENT SCHEDULE 5-year lease contract Year 1 Year 2 Year 3 Year 4 (all amounts in Euros, 2016 price level) base lease price on an annual basis at start 434.150,60 434.150,60 434.150,60 434.150,60 base lease price per quarter at start 108.537,65 108.537,65 108.537,65 108.537,65 discount on lease price 30% -32.561,30 20% -21.707,53 10% -10.853,77 0% 0,00 lease price per quarter including discount 75.976,36 86.830,12 97.683,89 108.537,65 share of tenant adjustments (estimate) 33.947,08 33.947,08 33.947,08 33.947,08 lease VAT and tenant adjustments 21% 23.083,92 25.363,21 27.642,50 29.921,79 subtotal 1 133.007,35 146.140,41 159.273,46 172.406,52 advance payment service costs per quarter (20% of the base lease price) 20% 21.707,53 21.707,53 21.707,53 21.707,53 service costs VAT 21% 4.558,58 4.558,58 4.558,58 4.558,58 subtotal 2 26.266,11 26.266,11 26.266,11 26.266,11 total to be paid before start of quarter (subtotal 1 + subtotal 2) 159.273,46 172.406,52 185.539,58 198.672,63 4.2Parties agree that Lessor will charge VAT on the lease price. If a lease charged with VAT is not agreed upon, Lessee owes to Lessor, in addition to thelease price, a separate remuneration to compensate for the disadvantage that Lessor and/or its legal successor(s) suffer or will suffer because the VATon the Lessor’s investments and operating costs are not (or no longer) deductible. What is stated in 19.1 through 19.9 of the General Provisions willnot apply in that case. 4.3If parties have agreed to a lease charged with VAT, Lessee and Lessor make use of the option, based on Notification 45, decision of 24 March 1999,no. VB 99/571, to waive the submission of a joint request for a lease charged with VAT. By signing the lease agreement, Lessee declares, also onbehalf of Lessor’s legal successor(s), that it will continue to use the leased object or will ensure that leased object continues to be used for purposesfor which a full or practically full right to deduction of VAT exists based on Article 15 of the Value Added Tax Act of 1968. 4.4The lease price will be adjusted on an annual basis each 1 July, for the first time effective 1 July 2017, in accordance with General Provisions 9.1through 9.4. 4.5The remuneration that Lessee owes for additional supplies and services to be provided by or on account of Lessor will be specified in accordance withArticle 16 General Provisions and Article 5 of this agreement. A system of advance payments with later settlement will be applied to thisremuneration, as indicated there. 4.6The Lessee’s payment obligation consists of: a.the lease price; b.the VAT owed on the lease price if parties have agreed to a lease charged with VAT; c.the advance payment on the remuneration for the additional supplies and services to be provided by or on account of Lessor with the correspondingVAT owed; d.a remuneration called the “Tenant Share of Adjustments” estimate, due to the Leased Object adjustments commissioned by Lessor upon Lessee’srequest for Lessee’s benefit. This Tenant Share of Adjustments regards the investment costs and financing expenses settled over a period of five years.For the avoidance of doubt, the Tenant Share of Adjustments under 4.6d consists of an estimate at the time of signing this agreement. Based on theadjustment requests and cost estimates already made in consultation with Lessee, as well as an agreed-upon distribution of costs between the Lesseeand Lessor, the final costs per Tenant will be known definitively after negotiated calls for tenders and selection. An amendment with the finalcalculation of Tenant Share of Adjustments will then be added to this agreement. Parties hereby acknowledge that the costs may be higher, by nomore than 20%, or lower than estimated. Merus B.V. Lease Agreement 30/11/2016 4/11CONFIDENTIAL 4.7For each payment period of 3 (three) calendar months, to be paid in advance each quarter. 4.8The periodic payments to be made by Lessee to Lessor based on this lease agreement are due in Euros in one amount to be paid in advance as shownin 4.7. Lessor sends Lessee an invoice for each period for this purpose. 4.9Lessee may at any time pay Lessor the remainder of the Tenant Share of Adjustments (as stated under 4.1 and 4.6) until the end of this agreement’sduration by means of a lump sum. The redemption value is then the sum of the number of remaining quarters multiplied by the quarterly Tenant Shareof Adjustments amount with a discount of 5%. 4.10Unless stated otherwise, all of the amounts in this lease agreement and General Provisions that are part of this agreement are listed excluding VAT.Supplies and services 5.As additional supplies and services to be provided by or on account of Lessor, parties agree that, in accordance with Article 16 of the GeneralProvisions, the advance payment for service costs amounts to 20% of the base lease price (without discount) at the start of the lease agreement,€ 21,707.53 per quarter, to be increased with VAT, to be paid in full via advance payment at the time of payment of the lease price. • heat supply • electricity supply in the leased object and the general areas • water supply (water for business and drinking purposes and demineralised water) • supply of additional cooling • maintenance and periodic control of heatingand/or air treatment installation(s)same, lift installation(s) • same, hydrophone [sic] installation • same, window cleaning installation • same, fire alarm, building security, automatic fault report system and emergency power installations • cleaning costs for the common areas, lifts, façade, outside of the windows as well as the awnings, windows in common areas, patios, parking garageand/or lot, offices and laboratories in accordance with sufficient standard • waste processing costs for normal business waste (with the exception of specific lab waste such as chemical waste, specific hospital waste, GMO[Genetically Modified Organism] waste) • surveillance/security costs • reception services costs • catering facility costs • insurance premium for exterior windows • sewer rights • user OZB (onroerendezaakbelasting [property tax]) • retention and maintenance of environmental licence (Wabo (Wet algemene bepalingen omgevingsrecht [Environmental Licensing Act])) • administration costs of 5% over the supplies and services ticked off above Merus B.V. Lease Agreement 30/11/2016 5/11CONFIDENTIAL Bank guarantee 6.1In accordance with 12.1 of the General Provisions, Lessee will provide a bank guarantee for 3 (three) months lease. The amount of the bank guaranteespecified in 12.1 is hereby established between parties at € 108,537.65. The bank guarantee will be provided to Lessor prior to the finalcommencement date of the lease.Manager 7.1Until Lessor communicates otherwise, the following shall act as Manager: Lessor.Special provisionsIndemnification 8.1Lessee indemnifies Lessor for each liability regarding ARBO (Health and Safety) requirements related to the intended use or intended layout.Other facilities 8.2Lessee can use the Lessor’s present infrastructure for the data and telecommunications facilities and for that purpose, must make agreements withLessor and the University of Utrecht, ITS (Information and Technology Services) Board. If desired, Lessee can also use the service provided by theUniversity of Utrecht Facilities Service Centre (FSC) for items such as the cleaning of the leased object, security (connecting the leased object’sbreak-in alarm and the alarms on refrigerators/freezers and the like with the control centre), waste disposal, doorman services and the like. Lessee willmake these agreements directly with the FSC and also settle the costs directly with the FSC, unless agreed upon otherwise with Lessor.Condition of delivery 8.3The leased object will be delivered all at once time with partitioning walls, ceilings, lighting, flooring and fixed furnishings, as indicated on theattached agreement drawings (being the final drawings including the Lessee’s requirements). Offices equipped with climate control per grid size of3.60 m for a maximum of three fully occupied workspaces. If Lessee purchases and will install biohazard cabinets or microbiological safety cabinets,then these must satisfy the NEN-EN 12469 standard or its replacement. The Lessee may not apply any changes to the finishes and fixed layout of thespaces (being the walls, acid cabinets, lab islands, flooring and awnings) without prior consultation and without written consent from the Lessor. Inthe event that Lessee wants to apply adjustments, parties will meet in consultation. Lessor will not withhold consent for adjustment requests onunreasonable grounds and will explain its reasoning in writing insofar as these are not permitted. Upon termination of the lease agreement, Lesseemust deliver the Leased Object in accordance with the agreement drawings. Merus B.V. Lease Agreement 30/11/2016 6/11CONFIDENTIAL Parking 8.4Lessee has option to lease a limited number of exclusive parking spaces on the adjacent terrain for € 700.00 per parking space per year. Lessee alsohas the option to purchase parking passes from the UU at the applicable rate for access to parking spaces in the Veterinary Medicine quadrant. Thetotal of the parking passes may not exceed the municipal parking standard (0.7 per 100 m² gross floor area). Parking prices to be increased by VATand price level starting in 2017 to be adjusted in accordance with Articles 9.1 through 9.4 General Provisions. Visitors may use the parking spacespurchased by Lessee. There is an additional option, when available, to request a visitor parking space for a visitor via the Lessor.Utilisation 8.5Lessee is obligated utilise the Leased Object with care, in accordance with the objective specified for this purpose in 1.2, with sufficiently skilledpersonnel and management, taking into account the Lessor’s interests. Lessee ensures that the utilisation of the Leased Object will always be inaccordance with all of the applicable (legal) regulations, which also include those of the municipality and the owner of the land (leaseholder).Visitors 8.6Lessee will ensure that the Lessee’s visitors do not make their way around in the premises without a Lessee escort. Lessee will also ensure that visitorsare only allowed in that part of the building to which this agreement is applicable, being the Leased Object as described in Article 1.1.Liability 8.7In addition to Article 11 General Provisions, Lessee is liable—if Lessee, in the execution of its business and/or profession, uses or possesses a resourceand/or substance, of which it is known that this has properties such that it constitutes a serious hazard to persons or items—for the correspondingconsequences.In any event, special hazards of a serious nature include substances that are explosive, oxidising, flammable, highly flammable or extremelyflammable, toxic or highly toxic or contagious or highly contagious according to the criteria and methods established pursuant to theEnvironmentally Hazardous Substances Act. Lessee is liable for all direct and indirect damage that the Lessor and the other tenants in the premisesmay suffer as a consequence of the realisation of the hazard.In addition to Article 11 General Provisions, in the event of any defects to the Object and Leased Object upon delivery and after delivery due tonegligence or demonstrable fault on the part of Lessor, Lessor is liable for damage demonstrably suffered, up to a maximum of the annual base leaseprice. 8.8Lessee indemnifies Lessor for third party claims, also including the other tenants in the premises of which the leased object is part and thegovernment, regarding damage that is the direct or indirect consequence of the Lessee’s use of hazardous substances. Merus B.V. Lease Agreement 30/11/2016 7/11CONFIDENTIAL Insurance 8.9Lessee has a liability insurance which covers, at a minimum, the damage for which Lessee is liable based on the legal provisions regarding liability,including, without being limited to, environmental liabilities and the risk liability in the context of the use or possession of hazardous substances, orLessee is obligated to develop the required activities in order to obtain such a liability insurance.Usage requirements 8.10Lessee is familiar with the current purpose of the Leased Object and qualitative obligations and fire brigade requirements. Lessee will observe andcomply with all public and private law requirements, including those qualitative obligations applicable to the Leased Object, the zoning planapplicable at any time, permits and safety requirements from the government, fire brigade and other authorised agencies. The failure to comply withthese requirements will not in any way be at the Lessor’s expense.Permits 8.11Lessee itself must provide for the acquisition of the required permits, with the exception of the construction permit and other (municipal) permits tobe granted to Lessor for the design according to attached drawings and the environmental licence (Wabo) as stated in Article 8.14. Lessee must act inaccordance with the provisions in these permits. It must also follow any guidelines issued by the Lessor.Lessee must maintain adequate administration regarding the required permits. Lessor is entitled to inspect this administration. Insofar as deemednecessary, Lessee will inform Lessor and if desired, make available copies of permits including appendices for the Wabo, among other things (8.14).Lessee itself must apply for permits for working with GMOs (Genetically Modified Organisms), nevertheless in consultation with the UniversityHealth, Safety and Environment Department.Lessee is liable for violations when acting without required permit(s) and/or not acting in accordance with these permits unless a violation and/or notacting in accordance with the permits is committed by Lessor or a third party hired by Lessor.Environmentally Hazardous Substances Act 8.12The Lessee guarantees that, insofar as the Environmentally Hazardous Substances Act and/or corresponding decisions/regulations are applicable tothe Lessee’s activities that occur in the leased object, it satisfies all the requirements set out in this law and any decisions/regulations and that it hascomplied and will comply with all the requirements and obligations as a result of this law and such decisions/regulations.Lessee, insofar as it is obligated to do so based on Article 3 of the Environmentally Hazardous Substances Act, has made the required notification tothe Minister of Housing, Spatial Planning and the Environment and insofar as it is obligated, Lessee has a permit based on the EnvironmentallyHazardous Substances Act. Merus B.V. Lease Agreement 30/11/2016 8/11CONFIDENTIAL Animal Testing Act 8.13In principle, tests on animals are not permitted. Tests on animals can be conducted where appropriate, and only after written consent from the Lessor.The Lessee must then guarantee that, insofar as the Animal Testing Act and/or corresponding decisions/regulations are applicable to the Lessee’sactivities that occur in the leased object, it satisfies all the requirements set out in this law and any decisions/regulations and that it has complied andwill comply with all the requirements and obligations as a result of this law and such decisions/regulations.If the Lessee conducts tests on animals in the sense of the Animal Testing Act, it has obtains a permit for this purpose from the Minister of PublicHealth, Welfare and Sport.Wet algemene bepalingen omgevingsrecht (Wabo) [Environmental Licensing Act] 8.14In the context of the Environmental Licensing Act (Wabo), the Environmental Licence with reference HZ_WABO-14- 20927 has been granted for theAlexander Numan building on the Yalelaan 40-60 and the LSI on the Yalelaan 62 on 15 September 2015. The Lessee guarantees that it, insofar as theWabo and/or corresponding decisions/regulations are applicable to the Lessee’s activities that occur in the Leased Object, satisfies all therequirements from this law and decisions/regulations and that it has complied and will comply with all the requirements and obligations as a result ofthis law and the decisions/regulations.Nuclear Energy Act 8.15The Lessee guarantees that, insofar as the Nuclear Energy Act and/or corresponding decisions/regulations are applicable to the Lessee’s activities thatoccur in the Leased Object, satisfies all the requirements set out in this law and any decisions/regulations and that it has complied and will complywith all the requirements and obligations as a result of this law and such decisions/regulations.If Lessee prepares, transports, has in its possession, applies, brings or has delivered within or outside of Dutch territory, radioactive substances, ordisposes itself of it, Lessee has obtained a permit for this purpose and Lessee is obligated to perform administration in that regard.Access to the Leased Object 8.16Lessor and all persons to be indicated by Lessor are entitled to enter the Leased Object with equipment necessary to do so at any time without priorconsent from Lessee and to inspect inside as well as outside, when, in the Lessor’s opinion, there is a need for this purpose and where reasonablypossible, with due observance of the restrictions and precautions that are required in accordance with the current licences. Lessor is entitled to checkat any time whether Lessee satisfies the legal requirements and in that context, Lessee will provide the information required for that purpose to Lessorupon Lessor’s first request. Lessor will, if possible, first consult with Lessee in the event that access to the Leased Object is anticipated. Lessor willalso ensure that, where applicable, only persons legally authorised for that purpose enter the Leased Object. Should prior consultation between Lesseeand Lessor not have been possible, Lessor will inform Lessee afterwards about the access and the corresponding reasoning and background. Merus B.V. Lease Agreement 30/11/2016 9/11CONFIDENTIAL Sublease 8.17Subject to prior consent from Lessor, Lessee is prohibited from renting, subletting or relinquishing use of the leased object completely or partially tothird parties, or from transferring the lease rights completely or partially to third parties or contributing them to a professional partnership or legalentity.Violation of lease agreement provisions 8.18Should either Lessee or Lessor act in conflict with any provision in this lease agreement and fail to remedy this within a period of 30 (thirty) days, oras sooner as is reasonably possible, then the other party is entitled to immediately terminate the lease agreement, without prejudice to the right ofparties to claim fulfilment or dissolution, as well as damage compensation.In addition to Article 6.7 General Provisions, Lessor is entitled to immediately terminate the lease agreement without prior notice of default, if therequired permits and/or exemptions that Lessee requires in the execution of its activities in the lease object are lacking, have expired, are refused orare withdrawn.Choice of applicable law 8.19Dutch law is applicable to this lease agreement. Merus B.V. Lease Agreement 30/11/2016 10/11CONFIDENTIAL Thus prepared and signed in duplicate. Utrecht, dated Utrecht, dated(Lessor) (Lessee)Stichting Incubator Utrecht Merus B.V.O. Schoots T. LogtenbergDirector CEO (Lessee) Merus B.V. S.J. Margetson CFO Merus B.V. Lease Agreement 30/11/2016 11/11Exhibit 4.19Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIALCONTRACT RESEARCH AND LICENSE AGREEMENTTHIS CONTRACT RESEARCH AND LICENSE AGREEMENT (this “Agreement”) is entered into as of March 14, 2018 (the “Effective Date”) byand between MERUS N.V., a Dutch company having an office at Yalelaan 62, 3584 CM Utrecht, the Netherlands (“Merus”), and Ono Pharmaceutical Co.,Ltd., a Japanese company with its head offices located at 8-2, Kyutaromachi 1-chome, Chuo-ku, Osaka 541-8564, Japan (“Ono”). Merus and Ono may eachbe referred to individually as a “Party”, and collectively as the “Parties”.RECITALSWHEREAS, Merus is the owner of proprietary MeMo® mouse, Spleen to Screen™, CH3 dimerization and CH2 silencing technologies for the efficientgeneration of next generation Biclonics® bispecific antibodies for therapy; andWHEREAS, Merus has expertise and intellectual property related to the above mentioned technologies, including related know how and materials;andWHEREAS, Ono is engaged in the research, development and commercialization of pharmaceutical products; andWHEREAS, Ono and Merus executed the Contract Research and License Agreement dated April 8, 2014, and Addendums on March 27, 2015,February 1, 2017, May 18, 2017, August 18, 2017, September 20, 2017, and November 20, 2017 (collectively, the “CRLA”); andWHEREAS, Pursuant to Section 5.4 of CRLA, Ono has exercised the Exclusive Option, by means of the Notice of Exercise of Exclusive Optionreceived by Merus on November 21, 2016, to enter into a collaborative relationship whereby Merus will use its MeMo® mouse, Spleen to Screen™, CH3dimerization and CH2 silencing technologies for the efficient generation of next generation Biclonics® [***] bispecific antibodies with immunosuppressiveproperties to be further characterized and developed by Ono under a license from Merus for preclinical development, clinical development andcommercialization by Ono, subject to the terms and conditions set forth herein.AGREEMENTNOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein and other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:1. DEFINITIONS1.1 Capitalized Terms. For purposes of this Agreement (including its appended schedules and exhibits), the capitalized terms used in this Agreementshall have the defined meanings set forth below or elsewhere in this Agreement. Capitalized singular, plural, and other variant forms of the defined terms shallhave the corresponding meanings. Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL “Affiliate” means, with respect to a Party, any company or other entity controlled by, controlling, or under common control with such Party, where theterm “controlled by” (with correlative meanings for the terms “controlling” and “under common control with”) means for purposes of this definition thepossession, through ownership or control, directly or indirectly, of at least 50% of the voting power, which voting power in the case of a corporation isentitled to vote for the election of directors, or otherwise has the actual right and ability to control and direct the management and business affairs.“Antibody” or “Antibodies” shall mean a molecule, or a set of genes encoding such a molecule, comprising or containing one or moreimmunoglobulin variable domains or any existing or future fragments, variants, modifications or derivatives thereof.“Biclonics Antibody” or “Biclonics” means any bispecific Antibody generated using Merus Technology, including the [***], from [***] contains a[***] and a [***], which bispecific antibody binds to 2 different targets as described in Exhibit A of this Agreement.“Business Day(s)” means any day other than (i) Saturday, Sunday or other national holidays in Japan and/or the Netherlands, and (ii) a day withinOno’s or Merus’ corporate holidays. Each Party shall provide the other Party with the relevant corporate calendar of the following year promptly after it isavailable.“[***]” means [***] encoded by the [***] gene.“Commercial Sale” means, with respect to a Product, the sale in a commercial arms’-length transaction of such Product intended for end use orconsumption for any application in the Field of Use in a country after the governing Regulatory Authority of such country has granted Regulatory Approvalof the Product for such end use or consumption in the Field of Use (which will include sales of a Product occurring prior to Regulatory Approval in a countryif such sold Products are intended to be used and are sold for use by an end user in such country after Regulatory Approval is obtained in such country). Saleto an Affiliate or Sublicensee for distribution will not constitute a Commercial Sale.“Confidential Information” has the meaning provided in Section 10.1.“Controlled” means, in reference to any information, materials, Patent Rights or other intellectual property, that the applicable Party owns, possesses,or has a license to such intellectual property or intellectual property right (including through control of an Affiliate or through a license from an Affiliate orThird Party) of the right or ability to grant the other Party a license or a sublicense or other right (as applicable) under same as provided in this Agreementwithout violating the terms of any agreement or other arrangement with any Third Party.“Cover” means, with respect to a claim of any Patent Rights in reference to specified subject matter (such as a composition of matter or method of use),reading on or literally, or by the doctrine of equivalents, encompassing such subject matter, whether generically or specifically. 2[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL “EMA” means the European Medicines Agency, a decentralized body of the European Union, located in London, whose main responsibility is theprotection and promotion of public and animal health, through the evaluation and supervision of medicines for human and veterinary use, or any successoragency thereto having the administrative authority to regulate the marketing of human pharmaceutical products or biological therapeutic products, deliverysystems and devices in the European Union.“FDA” means the United States Food and Drug Administration, or any successor agency thereto having the administrative authority to regulate themarketing of human pharmaceutical products or biological therapeutic products, delivery systems and devices in the United States of America.“Field of Use” means the [***].“FTE” or “Full Time Equivalent” means the equivalent of the work of one scientist full time during one full year of work during the Research Term,meaning a total of at least 1600 working hours. Each Party understands that scientists who are working on the Research Program subject to the terms andconditions of this Agreement also may be working (during periods that do not count towards the FTE allocation devoted to the Research Program) on otherindependent projects.“Human Antibodies” shall mean any [***]; specifically (a) the [***] or (b) from [***].For [***], “Human Antibodies of Lead Biclonics” shall mean [***](“[***] HALBs”)]. Subject to the conditions of Section 5.4, Ono may [***], and[***], i.e.,[***] Human Antibodies of Successful Bicloinics® (“[***] HASBs”)].For [***], “Human Antibodies of Successful Biclonics” shall mean [***], i.e., [***] Human Antibodies of Successful Biclonics® (“[***] HASBs”).“IND” means an investigational drug application, including any amendments, to perform clinical investigation(s) of a Product as an investigationalnew drug or investigational medicinal product or the like that is filed with a Regulatory Authority in any jurisdiction for approval to conduct clinical studiesof such Product in humans prior to the delivery of a Regulatory Approval or any request for authorization to use in an emergency situation filed with aRegulatory Authority in any jurisdiction prior to delivery of a Regulatory Approval.“Joint Steering Committee” or “JSC” means the committee comprised of three representatives of each of Ono and Merus, unless otherwise agreed bythe Parties, to oversee the Research Program pursuant to Section 3.1.“Know-How” means all know-how, whether or not reduced to writing, technical information, data, ideas, concepts, materials (including but not limitedto chemical and biological materials), techniques, specifications, processes, software, algorithms, practices, methods, material compositions, formulas,discoveries, inventions, trade practices, and trade secrets, whether or not patentable.“Lead Biclonics” means Target Specific Biclonics that is/are functional and identified by Ono in accordance with the Specifications as furtherdescribed in Exhibit B of this Agreement. For clarity, Lead Biclonics includes Successful Biclonics and Licensed Biclonics. 3[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL “Licensed Biclonics” means up to five [***] is/are identified and selected by Ono for further research, development and commercialization as aProduct.“Merus IP” means (i) Merus Patent Rights, (ii) Merus Know-How and (iii) any related Research Tool Controlled by Merus as of the Effective Date.“Merus Know-How” means the Know-How Controlled by Merus as of the Effective Date or developed by Merus during the Term that are necessary forresearch, development, use manufacturing and/or commercialization activities of Ono, its Affiliates or Sublicensees with respect to Successful Biclonicsand/or Products. For clarity, Merus Know-How will not include Merus Patent Rights and/or Ono Patent Rights.“Merus Patent Rights” means the Patent Rights (a) Controlled by Merus as of the Effective Date relating to the Merus Technology or (b) Covering anyinvention and discovery conceived, developed or reduced to practice solely by either Party, or jointly by both Parties during the Term relating to (i) anyimprovement of Merus Technology, (ii) any process or material for making, delivering, or formulating bispecific Antibodies generated using MerusTechnology, (iii) any method of using bispecific Antibodies generated using Merus Technology, or (iv) any Research Tool or any process or material formaking or using a Research Tool, or (v) a Human Antibody against either [***] or [***], but excluding [***] HALBs, [***] HASBs (to the extent made) and[***] HASBs, in each case of subsection (i) through (v) in this paragraph excluding Ono Patent Rights. The Merus Patent Rights include the Patent Rightslisted in Exhibit C.“Merus Technology” means [***] for the efficient generation of Biclonics® bispecific antibodies.“Net Sales” means the gross amount invoiced on sales of a Product by Ono or its Affiliates or Sublicensees to Third Party distributor(s), wholesaler,medical institution or otherwise, less the following deductions related to the Products: (i) direct credits and allowances or adjustments granted to such ThirdParties on account of price adjustments, government or other rebates, rejections or returns in respect of the Products; (ii) any trade or cash discounts, rebates,charge-backs or administrative fees or other price reductions granted to such Third Parties who are involved in the acquisition, dispensing, utilization ormanagement of prescriptions; (iii) any sales or other like taxes (but specifically excluding any taxes based on net income imposed upon the sale of theProducts) to the extent included in the gross sales price, (iv) the costs of freight, transport, insurance, postage, handling and any other similar charges relatingto the sale, transportation, delivery or return of the Development Product, (v) commissions related to import of the Product paid to Third Parties, (vi) [***],and (vii) [***]. In the event any combination product, sold in a finished dosage form containing a Licensed Biclonics and other therapeutic component(s)which is not the Licensed Biclonics, all as active pharmaceutical ingredients (as opposed to excipients or additives) is sold in any country, the Parties shalldiscuss in good faith to agree on the calculation method of Net Sales of such combination product reflecting relative value of the Licensed Biclonics andother therapeutic component(s) contained in such combination product by means of prices listed in publicly available drug tariff of Development Productcontaining the Licensed Biclonics and a pharmaceutical product containing such other therapeutic component each as a sole active pharmaceuticalingredient and sold as a single agent, or by any other means. 4[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL “Ono IP” means (i) Ono Patent Rights, (ii) Ono Know-How and (iii) any related Research Tool Controlled by Ono as of the Effective Date.“Ono Know-How” means the Know-How Controlled by Ono as of the Effective Date or developed by Ono during the Term under this Agreement andthat are reasonably required for the practice of Ono Patent Rights. For clarity, Ono Know-How will not include Merus Patent Rights and/or Ono Patent Rights.“Ono Patent Rights” means the Patent Rights (a) Controlled by Ono as of the Effective Date specifically relating to the Research Program or(b) Covering any invention or discovery conceived, developed or reduced to practice solely by either Party, or jointly by both Parties, during the Termrelating to (i) any composition of matter claims relating to Successful Biclonics and/or [***] HALBs, [***] HASBs (to the extent made) and [***] HASBs,(ii) any process or material for making, delivering, or formulating Successful Biclonics, (iii) any method of using Successful Biclonics, or (iv) any ResearchTool or any process or material for making or using a Research Tool specifically relating to Successful Biclonics.“Ono Proceeds” means the gross amounts [***] by Ono to any of its Affiliates or Sublicensees, including but not limited to [***], [***] in partialconsideration [***] and the later of [***]. For clarity Ono Proceeds shall not include [***] and [***].“Patent Rights” means, with respect to a particular invention, any and all original (priority-establishing) patent applications filed anywhere in theworld including any claim Covering the invention, including provisional and non-provisional applications, and all related applications thereafter filedincluding any claim Covering such invention or including a common priority right, including any continuations, continuations-in-part, divisional andsubstitute applications, any patents issued or granted from any such patent applications, and any reissues, renewals, reexaminations, extensions (including byvirtue of any supplementary protection certificates) of any such patents, and any confirmation patents, inventor’s certificates or registration patents or patentsof addition based on any such patents, and all foreign counterparts or equivalents in any country or jurisdiction of any of the foregoing.“[***]” means [***] encoded by the gene [***].“Phase I Clinical Trial” means that portion of a clinical drug development program which provides a clinical trial involving the first introductioninto humans of a Product with the purpose of determining human toxicity, metabolism, absorption, elimination and/or other pharmacological action, as morefully defined in 21 C.F.R. § 312.21(a), or its successor regulation, or the equivalent in any foreign country.“Phase IIb Clinical Trial” means that portion of a clinical drug development program which provides a definitive, well controlled clinical trial of aProduct in the relevant patient population for the purpose of determining its safety and efficacy in the proposed therapeutic indication, as more fullydescribed in 21 C.F.R. § 312.21(b), or its successor regulation, or the equivalent in any foreign country. 5[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL “Phase III Clinical Trial” means that portion of a clinical drug development program which provides an expanded trial of a Product on sufficientnumbers of patients to establish the safety and efficacy of a Product and generate pharmaco-economic/benefit-risk data to support Regulatory Approval in theproposed therapeutic indication or provide an adequate basis for physician labeling, as more fully defined in 21 C.F.R. § 312.21(c), or its successorregulation, or the equivalent in any foreign country.“PMDA” means the Pharmaceuticals and Medical Devices Agency, a Japanese regulatory agency, working together with Ministry of Health, Labourand Welfare with the obligation to protect the public health by assuring safety, efficacy and quality of pharmaceuticals and medical devices.“Preclinical Proof of Mechanism” means immune suppressive effects mediated through [***] in one relevant animal model as more specifically setforth in Exhibit B.“Product” means a pharmaceutical product containing a Licensed Biclonics in final form suitable for human use.“Prosecute”, “Prosecuting” or “Prosecution” means, with regard to specified Patent Rights, preparing, filing, prosecuting, maintaining, and defendingsuch Patent Rights, including with respect to any reexamination, review, reissue, interference, or opposition proceedings. For the avoidance of doubt,“Prosecuting” excludes any infringement suits or other legal proceedings to enforce the specified Patent Rights, regardless of whether or not suchproceedings involve the defense of the Patent Rights in suit.“Regulatory Approval” means receipt of any and all approvals, licenses, registrations, or authorizations of any country, federal, supranational, state orlocal regulatory agency, ministry, department, bureau or other government entity that are necessary for the use or sale of a particular Product in thejurisdiction for a particular indication, including any approvals for importation, manufacture, pricing, and/or reimbursement where necessary.“Regulatory Authority” means any country, federal, supranational, state or local regulatory agency, ministry, department, bureau or othergovernmental entity having authority in any country, region, or supra-national jurisdiction to grant a Regulatory Approval, such as the FDA, EMA, PMDA orany equivalent governmental entity in any other country.“Research” means any research work performed by any of the Parties or on their behalf under the Research Program pursuant to the Research Plan.“Research Budget” means the itemized budget described in Exhibit A specifying those Merus FTEs to be funded by Ono pursuant to Section 6.2 andany personnel, equipment, reagents and all other expenses including support staff and overhead for or associated with an FTE, which budget and anyamendment thereto shall be in writing and signed by duly authorized representatives of both Parties.“Research Plan” means the written plan outlining the Parties’ respective responsibilities for conducting the Research Program, setting forth theResearch Budget, and allocating the Merus FTEs funded by Ono, as such plan may be amended from time to time by the Parties. The initial Research Plan hasbeen agreed upon by the Parties as of the Effective Date and is described in Exhibit A. 6[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL “Research Program” means a collaborative research program carried out by Merus and Ono during the Research Term pursuant to Articles 3 and 4 toconduct pre-clinical research and process development related to Target Specific Biclonics in the Field of Use.“Research Term” means the period beginning on the Effective Date and ending on the date of Ono’s payment of RME4 in accordance withSection 6.3(a), or earlier terminated on early termination of this Agreement in accordance with Article 11.“Research Tool” means any assay method, protocol, reagent, or material Controlled by Merus or Ono and necessary or useful for carrying out Researchactivities pursuant to the Research Plan.“Royalty Term” means with respect to a particular Product in a particular country, the period commencing on the first Commercial Sale of the Productin such country and ending upon the expiration of the last to expire Valid Claim of the licensed Merus Patent Rights in such country Covering the Product.“Senyoh Jisshiken Tohroku” has the meaning set forth in Section 5.3.“Sublicensee” means a Third Party or Affiliate to whom Ono has granted a license or sublicense of the right to use, have used, make, have made,market, have marketed, offer for sale, have offered to sell, sell, have sold, export and/or import one or more Licensed Biclonics and/or Products.“Successful Biclonics” means [***] Target Specific Biclonics within the Lead Biclonics, [***] for which Preclinical Proof of Mechanism isdemonstrated as further described in Exhibit B of this Agreement.“Target Combination” means [***] and [***].“Target Specific Biclonics” means one or more Biclonics that bind to the Target Combination and that is/are transferred by Merus to Ono foridentification of the Lead Biclonics.“Territory” means the entire world.“Term” means the term of this Agreement as further provided in Section 11.1.“Third Party” means any entity other than Merus or Ono or an Affiliate of Merus or Ono.“Valid Claim” means (a) an unexpired claim of an issued patent that has not been found or held to be invalid or unenforceable by a court or otherauthority in the subject country of competent jurisdiction, from which decision no appeal is taken or can be taken; or (b) a pending allowed or finallyunrejected claim of a pending application that has its earliest priority date (by filing or claiming the benefit of the earlier filing date of one or more relatedapplications) no more than [***] ([***]) years prior to the date upon which pendency of the claim is determined. 7[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 1.2 Miscellaneous Interpretation Aids.(a) Each use in this Agreement of the term “including”, “comprising”, or “containing” (or a variant form thereof) shall be understood to have an open,non-limiting meaning. Thus, e.g., “including” shall be interpreted as meaning “including without limitation” or “including but not limited to”, regardless ofwhether the words “without limitation” or “but not limited to” actually follow the term “including”. Similarly, the terms “such as”, “for example”, and “e.g.”shall be understood as referring to non-limiting illustrations or examples.(b) “Herein,” “hereby,” “hereunder,” “hereof,” and other equivalent words shall be understood as referring to this Agreement in its entirety, and notsolely to the particular provision or portion of this Agreement in which any such word is used.(c) Wherever used herein, any pronoun or pronouns shall be understood to cover all genders.(d) All references to days, months, quarters, or years shall be understood to refer, respectively, to calendar days, calendar months, calendar quarters, orcalendar years, unless otherwise indicated.(e) Any reference to a supranational, national, federal, state, local, or foreign statute or law shall be understood to refer to the applicable version of thelaw or statute then in force (as it may have been amended or superseded) as well as all rules and regulations promulgated thereunder, unless the contextrequires otherwise.(f) All references to “€” shall mean EUROS.2. RESEARCH COLLABORATION2.1 Diligence. Subject to the terms and conditions set forth herein, and commencing on the Effective Date, the Parties will each use commerciallyreasonable efforts during the Research Term to conduct their respective activities in the Research Program on a collaborative basis and in accordance withthis Agreement, with the goal of performing pre-clinical research related to Target Specific Biclonics and Successful Biclonics. The Parties will conduct theResearch Program in accordance with the Research Plan (Exhibit A), as may be amended or revised by the JSC from time to time. The Research Plan willspecify the scientific direction and Research activities, and allocate Research Program responsibilities and resources between the Parties in a mannerconsistent with this Agreement.2.2 Exclusive Collaboration.(a) Merus’ conduct of research activities related to Target Specific Biclonics shall be exclusively carried out for the sole benefit of Ono in the ResearchProgram or in support thereof as provided for hereunder. Neither Merus nor its Affiliates shall conduct, alone or in collaboration with any Third Parties,(i) any independent research, development or commercialization of [***] or (ii) any independent development or commercialization of [***] and shall [***]during (a) [***], or (b) [***].(b) Notwithstanding the provisions set forth in Section 2.2(a), if Ono does not perform any relevant research activities for a period of more than [***]([***]) months following [***] without any reasonable justification, the exclusivity under this Section 2.2 will terminate and Merus may then [***],provided that [***]. 8[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL (c) Notwithstanding the provisions set forth in Section 2.2(a), in case of an assignment of this Agreement by Merus as indicated in Section 14.6(a) to aThird Party that, prior to the transfer or sale of all or substantially all of the business of Merus, already had a license from Merus under Merus Technology thatincluded the Target Combination, the exclusivity conditions under Section 2.2(a) will not apply to such Third Party. 3. GOVERNANCE3.1 Joint Steering Committee. The Parties shall establish the Joint Steering Committee within [***] ([***]) days of the Effective Date of thisAgreement. The Parties’ initial members of the JSC are identified in Exhibit E. Promptly after the Effective Date, one member of the JSC will be selected byeach Party to act as the chairperson of the JSC. The JSC will meet at least [***] per year during the Research Term. Such meetings may be conducted byvideoconference, teleconference or in person, as agreed by the Parties, and each Party shall bear its own costs, including travel, lodging, food and telephoneor video conference costs, for its personnel serving on the JSC or attending any meeting of the JSC. Upon completion of the Research Term, the JSC will bedisbanded. Promptly after the Effective Date, the Parties will establish a project team (the “Project Team”) consisting of key employees of both Partiesperforming or involved in the Research Program. One of the Project Team members of each Party shall be appointed as a project manager (a “ProjectManager”) to coordinate its part of the activities under the Research Program. The Project Managers will be the primary contacts between the Parties withrespect to all Research activities performed under the Research Program. Meetings of the Project Team may be conducted by videoconference, teleconferenceor in person, to discuss the results of the Research and progress or delay thereof, at least once a month, or will be held ad hoc upon reasonable request ofProject Manager of a Party and acceptable by the same of the other Party, acceptance of which will not be unreasonably withheld or delayed. Either Party maychange its Project Manager upon written notice to the other Party. A Project Manager may be a member of the JSC.3.2 Decision making. The purpose of the JSC is to coordinate the Research efforts of the Parties and oversee the progress of the work being done underthe Research Plan during the Research Term. The JSC will set specific Research goals, evaluate the results of the Research, discuss information relating to theResearch, assign priorities and ensure that there is appropriate scientific direction for the collaboration of the Parties under the Research Plan. Subject to theterms and conditions of this Agreement, the JSC may modify the Research Plan with respect to the Parties’ respective Research responsibilities as deemedappropriate and submit recommended Research Budget modifications to the Parties for review and approval. The specific number of Merus FTEs that Onowill fund is specified in the Research Plan. Regardless of the number of representatives, each Party will present one consolidated view via one vote. Alldecisions of the JSC will be made by unanimous vote, and if the JSC is unable to reach a decision by unanimous vote, Section 13.1 shall apply. If followingthe application of Section 13.1(a) there is still no consensus, then [***] on such matter. 9[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 3.3 Minutes. The JSC chairperson, or his or her designee, will prepare and distribute draft of complete and accurate minutes of all discussions occurringat the JSC meetings regarding matters within its purview and all matters decided upon at the meetings within [***] ([***]) Business Days after such meeting,except that matters reflecting legal advice of counsel will not be included in such minutes, and the minutes shall be finalized by agreement of bothParties. Communications reflecting legal or regulatory advice may, to the extent desired, shall be kept in a separate file with the legend “Attorney-ClientCommunications Privileged and Confidential”.3.4 Responsibilities. The JSC shall have no authority to modify any provision set forth in the body of this Agreement, including any paymentconditions or terms, periods for performance, or obligations of the Parties, and such modification is only effective and in force in a writing expressly stated forsuch purpose and signed by the Parties hereto pursuant to Section 14.2. The JSC shall have authority to:(a) allocate (and reallocate from time to time) activities in the Research Program to the Ono funded FTEs committed by Merus to the ongoing ResearchProgram;(b) modify the Research Plan, excluding the Research Budget, or propose modifications to the Research Budget, subject to the applicable provisions ofthis Agreement;(c) provide general oversight for the Parties’ activities in the Research Program; and(d) periodically review the goals, strategies, and results of the Research Program.3.5 Research Plan. The initial Research Plan as agreed to by the Parties as of the Effective Date is described in Exhibit A. The JSC will be responsiblefor reviewing and approving any updates or amendments to the Research Plan except as related to the Research Budget and for making any recommendationsfor additional resources or otherwise proposing any changes to the Research Budget.4. RESEARCH AND DEVELOPMENT OF SUCCESSFUL BICLONICS4.1 Merus Research Commitment and Performance. During the Research Term, Merus will devote to the Research Program the FTEs as designated inthe Research Plan, which shall be funded by Ono, subject to Ono’s compliance with its funding obligations under Section 6.2. Merus shall use commerciallyreasonable efforts in performing the Research to carry out its Research obligations as specified in the Research Plan. Merus will conduct its activities underthe Research Program in accordance with good scientific standards and practices and in compliance in all material respects with the requirements ofapplicable laws and regulations and with applicable good research practices. In conformity with standard pharmaceutical and biotechnology industrypractices and the terms and conditions of this Agreement, Merus will prepare and maintain, or will cause to be prepared and maintained, complete andaccurate laboratory notebooks and other written records, accounts, notes, reports and data with respect to activities conducted pursuant to the Research Planfor [***] ([***]) years after expiration or termination of the Research Term and, upon Ono’s written request and at its expense, will send legible copies of theaforesaid to Ono. Notwithstanding anything to the contrary herein, Merus shall, at its sole cost, supply any research reagents, similar materials and anystandard laboratory equipment (and any replacements thereto) that it needs to carry out its duties under the Research Plan. 10[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 4.2 Ono Research Commitment and Performance. During the Research Term, Ono will devote to the Research Program such number of FTEs of Onoor its Affiliates or contract out a part of its work to any Third Party research organization as are necessary for Ono to fulfill its obligations under the ResearchPlan. Ono will be responsible for the payment of all costs and expenses for such FTEs and other activities it undertakes in conducting its responsibilitiesunder the Research Plan. Ono will conduct its activities under the Research Program in accordance with good scientific standards and practices and incompliance in all material respects with the requirements of applicable laws and regulations and with applicable good laboratory practices. Ono will, directlyor through its Affiliates, maintain laboratories, offices and all other facilities reasonably necessary to carry out the activities to be performed by it pursuant tothe Research Plan. In conformity with standard pharmaceutical and biotechnology industry practices and the terms and conditions of this Agreement, Onowill prepare and maintain, or will cause to be prepared and maintained, complete and accurate laboratory notebooks and other written records, accounts,notes, reports and data with respect to activities conducted pursuant to the Research Plan for [***] ([***]) years after expiration or termination of theResearch Term.4.3 Research Reports. Each Party will keep the other reasonably informed as to the progress achieved and results, discoveries and technicaldevelopments made in the course of performing activities under the Research Program pertaining to any Target Specific Biclonics. Each Party will prepare,and distribute to all members of the JSC, no later than [***] ([***]) Business Days prior to the next scheduled JSC meeting, a reasonably detailed writtensummary regarding the Party’s results and progress of performance in the Research Program during the period following the last such report (if any). In theevent of early termination hereof, Merus shall submit a final report covering all the work performed by Merus under the Research Program up to suchtermination within [***] ([***]) days after the effective date of such termination.4.4 Subcontracts. Either Party may perform appropriate Research under the Research Plan pursuant to this Agreement through one or more Third Partysubcontractors approved by the JSC, provided that such Party engages each Third Party subcontractor through a written agreement consistent with the termsand conditions of this Agreement, and further provides that (a) no rights or obligations of either Party under this Agreement are diminished or otherwiseadversely affected as a result of such subcontracting, (b) the subcontractor undertakes the obligations of confidentiality and non-use regarding ConfidentialInformation which are substantially the same as those undertaken by the Parties pursuant to Article 9 hereof, and (c) the subcontractor agrees that anyintellectual property developed in the course of the work hereunder shall be assigned to the Party engaging the subcontractor or such Party’s designee, so asto permit re-assignment as required by the terms and conditions of this Agreement. The Party engaging any such Third Party subcontractor shall beresponsible for all compensation due to the Third Party subcontractor (or its employees or agents) arising from such subcontracting.4.5 Technology Transfer. Commencing promptly after the Effective Date and from time to time thereafter during the Research Term and as indicatedin the Research Plan, Merus shall transfer to Ono the identified Target Specific Biclonics, necessary Research Tools and related Know-How Controlled byMerus as the JSC reasonably determines to be necessary or useful for Ono to perform its Research under the Research Program and to exercise the licensesgranted to Ono under 11[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL Article 5 hereof. Commencing promptly after the Effective Date and from time to time thereafter during the Research Term, Ono will use its commerciallyreasonable efforts to disclose to Merus such materials and related Know-How Controlled by Ono as the JSC reasonably determines to be necessary or usefulfor Merus to perform its Research under the Research Program and to otherwise exercise the licenses granted to Merus under Article 5 hereof. During theTerm, Merus will provide Ono with reasonable technical assistance (in an amount to be set forth in the Research Plan) relating to (i) the use of such TargetSpecific Biclonics and Research Tools, (ii) manufacturing of Licensed Biclonics, and (iii) related Know-How with respect to subsections (i) and (ii) in thisSection 4.5, in each case of subsection (i), (ii) and (iii), transferred and/or disclosed by Merus to Ono solely to the extent permitted under the license rightsgranted to Ono under Article 5. During the Term, Ono will provide Merus with reasonable technical assistance (in an amount to be set forth in the ResearchPlan) relating to the use of the materials and related Know-How disclosed by Ono to Merus solely to the extent permitted to perform the Research Program.4.6 Conditions for Technology Transfer. All supplied Target Specific Biclonics, Research Tools and related Know-How will be used in confidence bythe other Party only for purposes of the Research or otherwise as permitted under the applicable license rights granted under Article 5, and subject to all theother restrictions and obligations under this Agreement. Except as otherwise provided under this Agreement, all such materials and related Know-Howdelivered to the other Party will remain the sole property of the supplying Party, will be used only for purposes of the Research Program or as otherwisepermitted by this Agreement, will not be used or delivered to or for the benefit of any Third Party except as otherwise permitted under this Agreement withoutthe prior written consent of the supplying Party, and will be used in compliance with all applicable laws, rules and regulations. The materials and relatedKnow How supplied under this Agreement shall be used by the receiving Party at its own risk and with prudence and appropriate caution in any experimentalwork because not all of their characteristics may be known. Except as expressly set forth herein, THE MATERIALS AND RELATED KNOW HOW AREPROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANYIMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR EXCEPT AS OTHERWISE PROVIDED INTHIS AGREEMENT ANY WARRANTY THAT THE USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHERPROPRIETARY RIGHTS OF ANY THIRD PARTY.4.7 Regulatory Affairs Responsibility. Ono (directly or through its Affiliates or Third Party subcontractors) shall be solely responsible for conductingall its activities contemplated by the Research Plan to be performed for Successful Biclonics, including Preclinical Proof of Mechanism Product. Thereafter,Ono shall have the sole responsibility, for each Product, to file all clinical research exemptions for any clinical trials and all INDs related thereto.4.8 Ongoing Disclosure Regarding Development. Ono (directly or through its Affiliates or Third Party subcontractors) shall solely control and beresponsible for selection of Licensed Biclonics from Successful Biclonics and conducting all further non-clinical and clinical development activities forLicensed Biclonics and Products, including manufacture of sufficient amounts of all research, non-clinical and clinical supplies of Licensed Biclonics andProduct for non-clinical studies and clinical trials to be performed by Ono, as well as relating to process development (including scale-up) for (pre-)clinicaland/or commercial manufacture of Licensed Biclonics and Product. 12[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL Ono will keep Merus informed about Ono’s development of the Licensed Biclonics and Product, including the results from such development progresstowards meeting goals and milestones during the development of the Licensed Biclonics and Product, significant findings and developments, any delays andany proposed changes in its plans. Such disclosures will be made in a written report provided to Merus at least annually, or more often at Ono’s election, thecontents of which shall be treated as Ono’s Confidential Information.4.9 Exclusive Commercialization Rights. Subject to the terms and conditions of this Agreement, Ono will control and have exclusive rights over theworldwide commercialization of all approved Products, including the worldwide supply of Products for use in all such commercialization activities. Ono willbe solely responsible for all costs and expenses in the commercialization of Products.5. LICENSES AND OBLIGATIONS5.1 License Grants. The grants of rights provided in this Section 5.1 are subject to the terms and conditions of this Agreement.(a) License to Ono. Merus hereby grants to Ono an exclusive (even as to Merus but subject to subsection (b) below of this Section 5.1) royalty-bearinglicense, with the right to sublicense, under the Merus IP to (i) research, test, and/or study Target Specific Biclonics and Lead Biclonics, and (ii) use, haveused, make, have made, market, have marketed offer to sell, have offered to sell, sell, have sold, export and/or import Licensed Biclonics and/or Products inthe Field of Use in the Territory.(b) Merus Retained Rights. Merus retains all rights to use and commercialize any Human Antibodies that are generated under the Research Programbut which are not [***] HALBs, [***] HASBs (to the extent made) or [***] HASBs, and provided that such retained use or commercialization is not withrespect to the Target Combination.(c) For the avoidance of doubt, Third Parties to whom Merus has or will grant a license under Merus IP, have been or will be granted rights to research,develop and commercialize bispecific Antibodies generated using Merus Technology against either [***] or [***] or the Target Combination, provided that,for as long as the exclusivity of the collaboration between the Parties exists as specified in Section 2.2, neither Merus nor its Affiliates shall conduct, alone orin collaboration with any such Third Party licensees, directly or indirectly, any research or development of such bispecific Antibodies generated using MerusTechnology against the Target Combination, and shall neither sell, supply, provide nor transfer directly or indirectly, any Target Specific Biclonics to anyThird Party.(d) Sublicenses. Ono shall have the right to grant sublicenses under the licenses granted under Section 5.1(a), and Ono shall notify Merus of each grantof a sublicense right to any Third Party within the rights granted in Section 5.1(a), and each such Sublicensee shall be identified in a notice to Merus, whichMerus shall treat as Ono’s Confidential Information. Notwithstanding any such sublicensing, Ono shall remain liable to Merus for the performance of itsSublicensees hereunder, and Ono shall use reasonable measures to ensure that its Sublicensees comply with the applicable terms and conditions of thisAgreement. 13[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL (e) License to Merus. Ono hereby grants to Merus a perpetual, royalty-free, non-exclusive worldwide license, with the right to sublicense, (i)under the Ono IP to conduct the Research under the Research Program as contemplated in this Agreement, and (ii)under Ono IP other than those Controlled by Ono on the Effective Date, to research, develop, use, make, have made, offer to sell, haveoffered to sell, sell, have sold, export and/or import any products containing monospecific or bispecific Antibodies, but not any productscontaining bispecific Antibodies against the Target Combination, alone or in collaboration with any Third Parties, subject to theprovisions of Section 2.2.Merus shall be permitted to sublicense the license granted under this Section 5.1(e)(ii) only to such other licensees of Merus Patent Rights forbispecific Antibodies generated using Merus Technology (“Merus Licensees”) that are contractually obligated to license to Merus (with the right tosublicense to other Merus Licensees) rights under such other Merus Licensees’ Patent Rights and Know How rights in improvements to the Merus IPdeveloped by or on behalf of such other Merus Licensees.5.2 No Implied Licenses. Except as for expressly provided for herein, no other right or license under any Patent Rights or Know How Controlled by aParty is granted to the other Party.5.3 Senyoh Jisshiken Tohroku. Upon Ono’s request, Merus agrees that Ono shall be entitled to register, at Ono’s sole expense, Ono’s exclusive licenseto the extent granted pursuant to Section 5.1(a) with respect to Merus IP in Japan (“Senyoh Jisshiken Tohroku”) in accordance with the patent law of Japan,and, at Ono’s request, Merus shall render reasonable assistance for such registration by Ono, including providing Ono with any documents duly signed by anauthorized personnel of Merus in the English language reasonably necessary for such registration; provided, however, that Ono shall promptly cancel suchregistration of Senyoh Jisshiken Tohroku in the event of termination of this Agreement pursuant to Section 11 hereof.5.4 [***]. To the extent that after the Delivery Period no Lead Biclonics, Successful Biclonics or Licensed Biclonics are [***], based on use of [***]HALBs, Merus will [***].6. FEES AND PAYMENTS6.1 Upfront Fee. Ono will pay to Merus a non-refundable, non-creditable upfront fee of €700,000 (seven hundred thousand euros), exclusive of VAT,which shall be due upon execution of this Agreement and payable within [***] ([***]) days after Ono’s receipt of the relevant invoice. 14[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 6.2 Research Funding.6.2.1 Funded Merus FTEs. Except as expressly provided herein, each Party shall be responsible for its costs and expenses incurred in performingits Research in the Research Program. Ono will agree to fund Merus FTEs for the Research Term in a total amount of €[***], as further described in Exhibit A.Any further Merus FTEs above the specified number of FTEs to be funded by Ono during the Research Term shall be specified in a written amendmentexecuted by duly authorized representatives of the Parties setting forth in the Research Plan the specific number of Merus FTEs to be so funded. Merus shallbe reimbursed for the funded FTEs actually contributed pursuant to the Research Plan (up to the maximum specified therein) at the rate of €[***] perScientist/Technician FTE per year and €[***] per Project Manager/Director FTE per year. Merus shall be reimbursed €[***] for the funded FTEs andassociated costs that actually contributed Merus’ generation of [***] Human Antibodies that will be evaluated as part of this Agreement. Such rates shallinclude all personnel, equipment, consumables, materials reagents and all other expenses including support staff and overhead for or associated with an FTE,and in no event shall Ono be obligated to make any other funding to support the Research to be performed by Merus except as expressly set forth in thisAgreement Exhibit A unless otherwise agreed in writing and signed by duly authorized representatives of both Parties. In the event that Merus contributesany additional FTEs to Research other than those agreed upon to be funded by Ono as specified in the Research Plan, Merus shall be solely responsible forthe costs of such additional FTEs. On a quarterly basis during the Research Term, Ono shall reimburse Merus in arrears for the funded Merus FTEs actuallyexpended in Research pursuant to the Research Plan.6.2.2 FTE Payment Terms. The payments for the funded FTEs under Section 6.2.1 shall be paid by Ono in arrears upon receipt of a properinvoice from Merus on a quarterly basis based on Merus’ actual work performed by qualified FTEs. Ono shall pay Merus such amount within [***] ([***])days of Ono’s receipt of the invoice.6.2.3 General Payment Terms. Any payment for an amount due under this Section 6.2 or Section 6.3 below shall be payable within [***]([***]) days after Ono’s receipt of an invoice from Merus for such amount, which invoice shall specifically refer to this Agreement and contain theinformation describing such payment as specified in sample invoice set forth at Exhibit F. All payments shall be made by wire to such bank account as Merusmay designate in writing to Ono. Any payments due and payable under this Agreement on a date that is not a Business Day may be made on the nextBusiness Day.6.3 Milestone Payments.(a) Subject to the terms and conditions provided in subsections (b) and (c) below and in consideration for the license granted and the ownership rights thatare assigned hereunder (provided that any Ono IP is generated by Merus), the following amounts shall be due, each one time only upon the first attainment ofthe specified event by the first Product regardless of subsequent or repeated achievement of such milestone except as specified in Section 6.3(d), from Ono toMerus upon the first occurrence of the specified milestone event listed below with respect to the Licensed Biclonics or Product (whether such milestone eventis achieved by Ono directly or 15[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL through its Affiliates or any Third Party Sublicensees). Milestone payments shall be made by Ono within [***] ([***]) days of receipt of the correspondinginvoice issued by Merus, which invoice may be issued upon the same date as achieving the milestone. In the event any Target Specific Biclonics delivered toOno later than after a period of [***] ([***]) times the Delivery Period (as defined below) fulfills RME1 for the first time, the amount of RME1 payment setforth in the table below will be reduced by [***] percent ([***]%) and if any Target Specific Biclonics delivered to Ono later than after a period of [***]([***]) times the Delivery Period fulfills RME1 for the first time, the amount of RME1 payment set forth in the table below will be reduced by [***] percent([***]%). “Delivery Period” means mutually agreed putative period starting from the Effective Date and ending upon the [***] as more specifically set forthin the Research Plan (as amended from time to time), provided that a period of time during which Merus is [***], and therefore [***] under the Research Plan,will be excluded from the determination of such period. Research Milestone Events EURORME1: [***] € [***]RME2: [***] € [***]RME3: [***] €[***]RME4: [***] € [***]Clinical Development Milestone Events [***] € [***][***] € [***][***] €[***][***] €[***][***]% of the Ono Proceeds][***] €[***][***]% of the Ono Proceeds][***] €[***][***]% of the Ono Proceeds][***] € [***](b) The Clinical Development Milestones are minimum payments. If Ono grants a sublicense to a Sublicensee under the Merus IP to use, have used, make,have made, market, have marketed, offer to sell, have offered to sell, sell, have sold and import Products in the Field of Use in any country other than Japan,Ono shall pay Merus the larger of either the [***] or [***]% of the Ono Proceeds. The [***]% Ono Proceeds shall be applied pro-rata to the Phase III ClinicalTrial and Regulatory Approval milestones for the United States of America and Europe indicated above. Each of the development and approval milestonepayments set forth above will be due one time only upon the first attainment of the specified event by the first Product regardless of subsequent or repeatedachievement of such milestone except as specified in Section 6.3(d). 16[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL (c) If the development of a Product is being abandoned after any of the milestone payments under Section 6.3(a) has been made (such Product, the“Discontinued Product”), and Ono (or its Affiliate or Sublicensee) then commences and conducts development of a replacement Product for theDiscontinued Product, then only those milestone payments under this Section 6.3 that were not previously made with respect to such Discontinued Productwill be payable with respect to achievement by the replacement Product of any further milestone events as provided above.(d) Notwithstanding anything to the contrary contained in Section 6.3(a), in the event [***], Ono shall pay [***]% amount of the Clinical DevelopmentMilestones of those specified in the table of Section 6.3(a) above for [***]. In the event [***], Ono shall pay [***]% amount of the Clinical DevelopmentMilestones of those specified in the table of Section 6.3(a) above for [***]. For clarity, Ono will not be obliged to pay any milestone payments for [***].6.4 Royalties.6.4.1 Royalty Rate. In consideration for the license granted and the ownership rights that are assigned hereunder (provided that any Ono IP isgenerated by Merus), on a Product-by-Product basis and country-by-country basis, Ono will pay Merus a royalty of [***] % based on the aggregate Net Salesof any Product sold in such country by Ono (directly or through its Affiliates, distributors, or Sublicensees) for each calendar quarter (or portion thereof)during the Royalty Term. For clarity, a royalty rate of [***]% set forth in this Section 6.4.1 shall apply to Net Sales of the second and further Products. Theseroyalties will be paid in each country where at least one Valid Claim of the licensed Merus Patent Rights Covers the Product or its use. Royalties due shall becalculated by multiplying the applicable total(s) of Net Sales of each Product sold in such countries against the applicable royalty rate of [***]%, suchamounts converted from local currency to Euros where necessary and as detailed below in article 7.3.6.4.2 Royalty Term for Products. As to sales of a particular Product in a country, the royalty payments specified in Section 6.4 will be due onall Net Sales of the Product in such country occurring during the Royalty Term. After the Royalty Term expires with respect to a particular Product in a givencountry, Ono’s license rights with respect to such Product will be fully paid-up and perpetual and continue on a royalty-free basis.6.4.3 No Royalty Reductions. Parties hereby agree that there will be no royalty reductions under any circumstance, including but not limited tothe event in which Ono would have to grant compulsory licenses or obtain additional licenses under third party intellectual property rights related to the saleof Products. 17[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 7. PAYMENT; RECORDS; AUDITS7.1 Research Program Payments. In consideration for Merus’ performance of its obligations under the Research Program, and subject to the termscontained in this Agreement, Ono shall provide the FTE funding as provided for in Section 6.2.7.2 Royalty Payments; Reports. Within [***] ([***]) days after the end of each calendar quarter for which royalties are due by Ono to Merus, Onoshall pay Merus all such amounts payable by it under Section 6.4 by wire transfer on a country by country basis. Each such payment shall be accompaniedwith a report, providing in reasonable detail an accounting of all Net Sales made during such calendar quarter and the calculation of any royalties due underSection 6.4.7.3 Exchange Rate. If any currency conversion shall be required in connection with the calculation of royalties hereunder, such conversion shall bemade using the following procedures. Sales recorded during each calendar quarter will be translated to Euro values at the rate on the last working day of thatcalendar quarter based on the exchange rates published on the European Central Bank website. Any changes to procedures for currency conversion shall onlyapply after such notice has been delivered and provided that such changes are consistently applied across Ono’s operating units and continue to maintain aset methodology for currency conversion.7.4 Tax Matters.(a) Ono Payments to Merus Without Withholding. Ono will make all payments to Merus under this Agreement without deduction orwithholding for taxes except to the extent that any such deduction or withholding is required by law in effect at the time of payment.(b) Ono Payment of Tax. Any tax required to be withheld on amounts payable to Merus under this Agreement will promptly be paid by Ono onbehalf of Merus to the appropriate governmental authority, and Ono will furnish Merus with proof of payment of such tax. Any such tax required to bewithheld will be an expense of and borne by Merus.(c) Cooperation Between Ono and Merus. Ono and Merus will cooperate with respect to all documentation required by any government taxingauthority or reasonably requested by Ono to secure a reduction in the rate of applicable withholding taxes to the maximum extent permitted by law. Thedocumentation referred in this Section 7.4(c) as of the Effective Date includes Form 3 and Form 17 (application form for the relief from Japanese Income Taxon Royalties) and Certificate of Residence of Merus issued and signed by the tax authority in the Netherlands, or thereafter any other document that may berequired for the similar purpose from time to time during the Term. Notwithstanding the provisions of Section 6.2.3, Merus agrees that Ono’s payments ofupfront fee, research and development milestones and royalties payments respectively set forth in Section 6.1, 6.3 and 6.4 will not be made until all theprocedures required for such withholdings or its reduction is accepted by the authority, or Ono will pay to Merus the amount due in accordance with thisAgreement deducting the applicable withholding tax if Merus so requests. In such case Ono will pay the applicable withholding tax to the Japanese taxauthority, and provide Merus with the relevant tax proof. 18[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 7.5 Audits.(a) Each Party shall keep, and cause its Affiliates and Third Party subcontractors or Sublicensees to keep, complete and accurate records for [***]([***]) years which are relevant to the determination of any payment to be made by such Party under this Agreement, including without limitation, FTErecords, records on Net Sales and royalty calculations, and records relating to the milestone events covered in Section 6.3. At the request and expense of aParty, the other Party and its applicable Affiliates and its Third Party subcontractors or Sublicensees shall permit an independent certified public accountantappointed by such requesting Party and reasonably acceptable to the other Party, at reasonable times and upon [***] ([***]) days prior notice, to examine inconfidence such records as may be necessary to determine, with respect to any records pertaining to any financial report or payment due in any quarter endingnot more than [***] months prior to such Party’s request, to verify the correctness or completeness of any such report or payment made under this Agreement.(b) The foregoing right of examination may be exercised only once per [***]-month period during the Term and only [***] with respect to anysuch financial report or payment due hereunder. Results of any such examination shall be limited to information relating to the applicable reporting andpayment obligations, and made available to the audited Party. The accountant shall disclose to the auditing Party only whether the applicable reports andpayments were correct or incorrect and the amount of any discrepancy between an amount due and an amount paid. The Party requesting the audit shall bearthe expenses of such independent certified public accountant related to the performance of any such audit, unless such audit discloses such a discrepancy tothe detriment of the auditing Party of more than [***] percent ([***]%) from the amount of the original payment made; in such case, the Party being auditedshall bear the such expenses for the performance of such audit.(c) If such audit reveals that the audited Party, its Affiliate or Third Party subcontractor or Sublicensee has failed to accurately report informationcausing a discrepancy resulting in the underpayment of any amounts owed, the audited Party shall promptly pay any amounts due to the auditing Partytogether with interest on such amount, calculated from the date originally owed at the interest rate set forth in Section 7.6. In the event of a discrepancyresulting in an overpayment, any amount of such overpayment shall be fully credited against amounts payable by the audited Party in subsequent periods orreimbursed to the audited Party.7.6 Late Payments. In the event that any payment due under this Agreement is not made when due, the payment will accrue interest from the date dueuntil paid, calculated on a daily basis, based on the total number of days payment is delinquent at a rate per annum equal to the [***] ([***]) month USDLIBOR rate quoted [***] Business Days prior to the due date by the British Bankers’ Association plus a premium of [***] percent ([***]%), provided,however, that in no event will such rate exceed the maximum legally permissible annual interest rate. The payment of such interest will not limit either Partyfrom exercising any other rights it may have as a consequence of the lateness of any payment. 19[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 8. INTELLECTUAL PROPERTY8.1 Ownership.8.1.1. Ono’s Ownership. Ono IP is and will remain the sole property of Ono and all rights to any Ono IP generated under this Agreement solelyvests in Ono, subject to the license grants of Section 5.1. If the perfection and documentation of the assignment of ownership set forth in Section 8.1.4 ascontemplated in Section 8.1.2 is not technically practical or feasible in Prosecution, then such Patent Rights nevertheless remain the sole property of Onosubject to the license granted set forth in Section 5.1(e).8.1.2. Merus’ Ownership. Merus IP is and will remain the sole property of Merus and all rights to any Merus IP generated under this Agreementsolely vests in Merus. If assignment of ownership set forth in Section 8.1.4 as contemplated in Section 8.1.1 is not technically practical or feasible inProsecution, then such Patent Rights nevertheless remain the sole property of Merus subject to the license granted set forth in Section 5.1(a), (c) and (d).8.1.3. Negative Covenant. Except as expressly provided hereunder, Merus (a) shall not acquire, or attempt to acquire, pursuant to this Agreementany right, title or interest to any Successful Biclonics and any Patent Rights solely owned by Ono pursuant to Section 8.1.1 (b) shall not (and shall notattempt to purport to attempt to) transfer, assign, sell, have sold, lease, offer to sell or lease, distribute, license, sublicense or otherwise transfer title in,commercialize or exploit any Successful Biclonics and Patent Rights solely owned by Ono pursuant to Section 8.1.1, and (c) shall not, directly or indirectly,file, Prosecute, or maintain, in any country, any Patent Rights applicable to such Successful Biclonics and Patent Rights solely owned by Ono pursuant toSection 8.1.1.8.1.4. Assignment of Ownership; Assistance. Either Party hereby assigns and transfers to the other Party all right, title and interest includingownership rights to and in all inventions falling into the scope of the other Party’s ownership rights as set forth in Section 8.1.1 or 8.1.2 hereof. Each Partyundertakes that it shall do or procure to be done all such acts and things, and execute, or procure the execution of, all such documents, as the other Party mayfrom time to time reasonably require to give it the full benefit of any assignment contemplated in Article 8, and shall cause its employees to have anydocuments or instruments required by laws or regulations duly executed by signing in order to effect such assignment and transfer. In no event shall eitherParty be liable for compensation for inventions conceived, developed or reduced to practice by the other Party’ employee(s) regardless of which Party hasownership rights to such invention.8.2 Patent Prosecution.(a) General Principle. The Parties will discuss in good faith and mutually agree on the best strategy for the Prosecution of Patent Rights forSuccessful Biclonics and its use, provided, that, in any event, [***] shall have the final right to Prosecute and to decide the scope of claims on patentapplications, in which countries and when patent claims shall be filed, and whether patent claims shall be filed within one or several patents or patentapplications. Subject to Merus’ discretion and agreement, Ono may [***] the [***]. 20[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL (b) Prosecution. Unless otherwise agreed between the Parties, [***] shall, at its sole expense, control the Prosecution of all Patent Rights relatingto Successful Biclonics, but that for clarity excludes Merus Patent Rights. Upon reasonable request of [***] shall, at [***] expense, reasonably cooperatewith [***] in relation to such Prosecution. In particular in case of any interference, opposition, reexamination request, nullity proceeding, appeal or otherinterparty action, [***] shall review it with [***] as reasonably requested, and make employees of [***] available in any course of such interference,opposition, reexamination request, nullity proceeding, appeal or other interparty action for testimony, deposition or hearing, and [***] shall [***] inconnection with such cooperation including [***] of its own employees.(c) Cooperation. [***] agrees to cooperate with [***], and perform such lawful acts, and execute such documents in order to reasonably assist[***] with respect to the Prosecution of Patent Rights pursuant to Section 8.2.8.3 Infringement of Third Party Patent Rights.(a) If either Party after the Effective Date is warned or sued by a Third Party alleging or charging infringement of any patents or published patentapplications of a Third Party arising out of or resulting from the use of the Merus Technology, the Party, which is warned or sued, shall notify promptly theother Party.(b) Merus shall be responsible, at its expense, for settling and/or defending such warning or litigation for patent infringement in which thealleged infringing process or product giving rise to liability for damages involves [***]. In so far as any such settlement or defense effects is likely to have aneffect on Ono activities, Merus shall promptly inform Ono and Merus and Ono shall confer as to any modification of any right granted to Ono hereunder.Upon Merus’ written request, Ono agrees to reasonably assist Merus in any such defense, if such infringement action might have an effect on Ono activities.(c) Ono shall be responsible, [***], for settling and/or defending such warning or litigation for patent infringement in which the allegedinfringing process or product giving rise to liability for damages involves [***]. If Merus should suffer any [***] and [***] as a result of such dispute,including [***], [***] any such [***].9. REPRESENTATIONS, WARRANTIES, AND COVENANTS9.1 Mutual Representations and Warranties. Each Party represents and warrants to the other that: (a) it is duly organized and validly existing underthe laws of its jurisdiction of incorporation or formation, and has full corporate or other power and authority to enter into this Agreement and to carry out theprovisions hereof; (b) it is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and each person executing thisAgreement on its behalf has been duly authorized to do so by all requisite corporate or partnership action; and (c) this Agreement is legally binding upon it,enforceable in accordance with its 21[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL terms, and does not conflict with any agreement, instrument or understanding, oral or written, to which it is a Party or by which it may be bound, nor violateany applicable law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.9.2 Merus IP Warranties. Merus represents and warrants to Ono as of the Effective Date that:(a) to Merus’ knowledge, Merus Patent Rights listed in Exhibit C are accurate and complete and identifies all Patent Rights Controlled by Merusor any of its Affiliates as of the Effective Date that include any claim Covering or otherwise directly relating to the Merus Technology; and(b) Merus has not granted any Third Party any right, license or interest in or under, nor assigned, transferred, conveyed or encumbered any right,title and interest in and to, any of the Merus Patent Rights, or any of Merus Know-How disclosed therein, that is in conflict with the rights and licensesgranted to Ono under this Agreement.(c) to Merus’ knowledge, Merus IP are free and clear of any liens, charges and encumbrances, and no other person, corporate or other privateentity, or governmental entity or subdivision thereof, has or shall have any claim of ownership whatsoever with respect to Merus IP.(d) Except for the individual cases as more specifically described in Exhibit D, Merus has not received notice from, or been prosecuted through alegal action by, any Third Party claiming that the use or exploitation of Background IP infringes any Third Party’s Patent Rights and Know-How.(e) no consent by any Third Party or governmental entity is required with respect to the execution and delivery of this Agreement by Merus orthe consummation by Merus of the transactions contemplated hereby.(f) Except for the individual cases as more specifically described in Exhibit D, to Merus’ knowledge, there is no unauthorized use, infringementor misappropriation of any of Background IP by any employee or former employee of Merus, or any other Third Party.(g) Any and all fact based statement(s) contained in Exhibit D is/are true.(h) Merus Patent Rights listed on Exhibit C hereto constitute all of Merus’ Patent Rights that are, to Merus’ knowledge, necessary for theperformance of the Research Program by Merus and/or Ono as contemplated herein.(i) to Merus’ knowledge, all inventors identified in Merus Patent Rights, or all employees or sub-contractors of Merus have agreed to assign orlicense to Merus their entire rights, title and interest to and in any Intellectual Property that may be made, discovered or developed by them as a result ofperformance of their activities contemplated herein.9.3 Disclaimer. Except as expressly set forth herein, THE KNOW-HOW, MATERIALS AND INTELLECTUAL PROPERTY RIGHTS PROVIDED BYEACH PARTY HEREUNDER ARE PROVIDED “AS IS”. WITH RESPECT TO SUCH KNOW-HOW AND MATERIALS SUPPLIED HEREUNDER, EACHSUPPLYING PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUTLIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NONINFRINGEMENT OF THEINTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES. Without limiting the generality of the 22[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL foregoing, each Party expressly does not warrant, and disclaims any warranties with regards to: (a) the success of any study or test commenced under theResearch Program, (b) the safety or usefulness for any purpose of the materials it provides or discovers under this Agreement; and/or (c) the validity orenforceability of any intellectual property rights existing as of the Effective Date licensed to the other Party under this Agreement.9.4 Limitation of Liability. EXCEPT FOR LIABILITY FOR BREACH OF ARTICLE 9, NEITHER PARTY WILL BE ENTITLED TO RECOVERFROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENTOR ANY LICENSE GRANTED HEREUNDER; provided, however, that this Section 9.4 will not be construed to limit either Party’s indemnificationobligations under Article 12.9.5 Covenants of the Parties(a) Throughout the Term, Merus and Ono will comply (and will cause their respective Affiliates and Sublicensees to comply) in all materialrespects with all applicable laws and regulations concerning any of their activities hereunder, including with respect to performing Research and to theresearch, manufacture, use and sale of Products.(b) Each of the Parties will, at the reasonable request of the other Party, use reasonable efforts to execute and deliver any further or additionalinstruments or documents, and to perform any other acts, as are necessary in order to effectuate and carry out the terms of this Agreement, but provided thatthe foregoing shall not be interpreted to require such Party to incur any additional expenses or grant any other rights to the other Party, other than rightsexpressly granted elsewhere in the Agreement.10. CONFIDENTIALITY10.1 Confidential Information. Except to the extent expressly authorized by this Agreement or agreed in writing by the Parties, each Party agrees that,during the Term and for [***] ([***]) years thereafter, the receiving Party and its Affiliates and Sublicensees and Third Party subcontractors will keepconfidential and will not publish or otherwise disclose, and will not use for any purpose other than as expressly permitted in this Agreement, any informationfurnished to it or its Affiliates, Sublicensees or Third Party subcontractors by the other Party pursuant to this Agreement or information acquired or developedon such other Party’s behalf (collectively, “Confidential Information”). For the avoidance of doubt, as long as Ono retains license rights to any SuccessfulBiclonics and/or Products hereunder, data and other information relating thereto shall be considered Ono’s Confidential Information. Each Party may usesuch Confidential Information of the other Party only to the extent required to accomplish the purposes of this Agreement or exercise its rights under thelicenses granted to it under this Agreement. Each Party will use at least the same standard of care as it uses to protect proprietary or confidential informationof its own, but in no event less than stringent as set forth in this Article 10. Each Party shall use reasonable efforts to ensure that its and its Affiliates’ andSublicensees’ and Third Party subcontractors’ employees, agents, consultants, investors and other representatives comply with the Party’s obligationshereunder and do not disclose or make any unauthorized use of the Confidential Information, 23[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL and that the terms of any subcontracts will be in all essential aspects consistent with the obligations and restrictions hereunder, including by providing aconfidentiality term that is of equivalent duration or no less than what is reasonable to protect the Confidential Information to be disclosed or developed inthe subcontractual arrangement. Each Party will promptly notify the other upon discovery of any unauthorized use or disclosure of the other Party’sConfidential Information. The Parties further acknowledge that each Party has disclosed to the other Party (or its Affiliates), prior to the Effective Date, certainConfidential Information pursuant to non-disclosure and/or material transfer agreements entered into between the Parties (or a Party’s Affiliates), that limit thedisclosure and use of such information by the receiving Party. The Parties hereby agree that any such Confidential Information earlier disclosed by one Partyto the other (or its Affiliates) under such earlier agreements will be deemed to be the Confidential Information of the disclosing Party and subject to all theterms of this Article 10 and Section 4.6, as well as the additional terms covering such information and materials (if any) under the earlier agreements.10.2 Exceptions. The obligations of non-disclosure and non-use under Section 10.1 will not apply as to particular Confidential Information of adisclosing Party to the extent that the receiving Party can prove by competent written evidence that such Confidential Information: (a) is at the time ofreceipt, or thereafter has become, through no act or failure to act on the part of the receiving Party (or its Affiliates or Sublicensees or Third Partysubcontractors), published, generally known or otherwise available in the public domain; (b) is known by the receiving Party at the time of receiving suchinformation, as evidenced by its records; (c) is hereafter furnished to the receiving Party by a Third Party, as a matter of right and without restriction ondisclosure; (d) is independently discovered or developed by the receiving Party without reference to Confidential Information belonging to the disclosingParty; or (e) is the subject of a written permission to disclose provided by the disclosing Party.10.3 Authorized Disclosure. Each Party may disclose Confidential Information belonging to the other Party solely to the extent such disclosure isreasonably necessary in connection with the following:(a) Prosecuting Patent Rights as permitted by this Agreement;(b) in connection with regulatory filings for Licensed Biclonics and/or Products that such Party has a license or right to develop hereunder;(c) prosecuting or defending litigation as permitted by this Agreement;(d) complying with applicable court orders or governmental regulations;(e) disclosure to Affiliates, Sublicensees, Third Party subcontractors, clinical or non-clinical institutions, and consultants (including theirpotential entities) on a need to know basis and only for purposes of performance of such Party’s obligations under this Agreement, and provided, in each case,that any such Affiliate, Sublicensee, or Third Party subcontractor, clinical or non-clinical institutions, and consultants (including their potential entities)agrees to be bound by similar terms of written confidentiality and non-use at least equivalent in scope to those set forth in this Article 10; or 24[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL (f) disclosure to existing or potential Third Party investors, merger partners, acquirers, and professional advisors (including lawyers, accountants,and investment bankers) solely as reasonably necessary in the context of a potential transaction to which the Confidential Information is material, provided,that any such Third Party agrees to be bound by similar terms of confidentiality and non-use at least equivalent in scope to those set forth in this Article 10.Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information pursuant to Section 10.3(d)or (f), it will, except where impracticable, give reasonable advance notice to the other Party of such planned disclosure and use reasonable efforts to secure, orto assist the other Party in securing, confidential treatment of and/or a protective order regarding such information. In the case of authorized disclosure setforth in Section 10.3(a) through (f) above such Party shall disclose only such Confidential Information of such other Party as is required to be disclosed. Thereceiving Party of Confidential Information shall take all steps reasonably necessary, including obtaining an order of confidentiality or redacting financialterms of conditions of this Agreement, to ensure the continued confidential treatment of such Confidential Information. Each Party agrees that it shallcooperate fully with the other with respect to all disclosures regarding this Agreement as required under the regulations of Securities and ExchangeCommission in the US or similar regulatory agency in any other country including requests for confidential information or proprietary information of eitherParty to be included in any such disclosure. Authorized disclosure of the Confidential Information pursuant to this Section 10.3 shall not be deemedexceptions pursuant to Section 10.2 unless and until publicly available.10.4 Publications.10.4.1 If either Party seeks to publish any information relating to any results of Research conducted under this Agreement or which includes anyConfidential Information of the other Party, including any information relating in any way to any Target Specific Biclonics or Product, the Party seeking topublish will provide the other Party the material proposed for publication, such as by draft slide presentation, manuscript, poster, or abstract, at least [***]([***]) days in advance of submitting the material to a publisher or an organizing committee or other equivalent organization of scientific meeting, and theother Party will have the right to review and comment on all such material. The Parties will reasonably agree on the content of any such publication, exceptthat Ono shall be free to publish the results of and/or information concerning research and development of Successful Biclonics and/or Product subject toSection 10.4.2 below.10.4.2 If Ono seeks to publish any of Merus’ Confidential Information relating to the results of its Research conducted under this Agreement inconnection with a proposed publication concerning development of Successful Biclonics and/or Product, Ono will deliver the draft material to Merus at least[***] ([***]) days prior to submitting the material to a publisher or an organizing committee or other equivalent organization of scientific meeting. Meruswill review any such material and give its comments to Ono as soon as practicable and will give written notice whether it authorizes the disclosure of itsConfidential Information or requests deletion of Merus Confidential Information, but shall not unreasonably withhold such authorization. 25[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 10.5 Publicity. 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 tothis Agreement or its subject matter, without the prior express written consent of the other Party, except as may be required by law. Without prior writtenconsent, the name of a Party or any other of its Affiliates may not be used by the other Party for any advertising or promotional purposes. Either Party maymake subsequent public disclosure of the same contents as previously done pursuant to this Section 10.5. Each Party agrees not to issue any other pressrelease or other public statement, whether oral or written, disclosing the existence of this Agreement, the terms hereof or any information relating to thisAgreement without the prior written consent of the other Party.10.6 Public Announcement. No public announcement with respect to this Agreement or any activities under the Research Program shall be made,whether directly or indirectly, by either Party without prior agreement of the other Party. A Party desiring to make public announcement shall provide theother Party with the proposed text of such announcement with sufficient time prior to public release for the other Party’s review and comments, and suchdesiring Party shall use its reasonable efforts to incorporate the other Party’s comments. Both Parties shall discuss in good faith and agree on the timing,nature and text of such announcement. Subject to Section 10.7 below, either Party may make public announcement repeatedly to the extent that once it hasbeen made pursuant to this Section 10.6, without first obtaining the written approval of the other Party. Either Party agrees that it may include the otherParty’s name and short description of its business and the collaboration on a list of strategic partners in its corporate documents to be made publiclyavailable, including the corporate website, financial reports for its shareholders or such documents submitted to Securities and Exchange Commission in theUS or similar regulatory agency in any other country.10.7 Combination of Features or Disclosures. Any combination of features or disclosures shall not be deemed to fall within the foregoing exceptionscontemplated in Section 10.3 merely because individual features are published or available to the general public or in the rightful possession of the receivingParty unless the combination itself and principle of operation are published or available to the public or in the rightful possession of the receiving Party.10.8 Return of Confidential Information. Upon termination of this Agreement, the receiving Party shall promptly return to the disclosing Party ordestroy the disclosing Party’s Confidential Information, including all copies thereof, except to the extent that retention of such Confidential Information isreasonably necessary for the receiving Party to exploit any continuing rights it may have and/or to fulfil its obligations contemplated herein, including itsobligations of non-disclosure and non-use hereunder. Any such destruction requested by the disclosing Party shall be certified in writing to the disclosingParty by an authorized officer of the receiving Party. The return and/or destruction of such Confidential Information as provided above shall not relieve thereceiving Party of its obligations under this Agreement. 26[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 11. TERM AND TERMINATION11.1 Term of Agreement. The term of this Agreement (the “Term”) will commence on the Effective Date and continue until expiration of the later ofexpiration or termination of all payment obligations of Ono accruing prior to the effective date of early termination under this Agreement or expiration of theRoyalty Term for all Products licensed hereunder, unless earlier terminated as provided below.11.2 Termination for Cause. Each Party will have the right to terminate this Agreement upon sixty (60) days’ prior written notice to the other Partyupon the material breach by such other Party of any obligation under this Agreement, including a breach of any diligence obligations, provided that suchnotice has given sufficient detail of the basis for the breach and the breaching Party has not cured such breach within the 60-day period following suchwritten notice. The right of a Party to terminate this Agreement under this Section, and the notice period for such termination, will be tolled during the periodof any dispute resolution process (including arbitration) that is invoked under Article 13 to resolve the issue of whether the alleged breaching Party has infact committed a material breach of this Agreement, or whether such Party has cured such breach.11.3 Termination by Ono Without Cause During The Research Term. At any time during the Research Term, Ono may terminate this Agreement byproviding Merus at least forty-five (45) days prior written notice. Ono agrees to pay Merus within forty-five (45) days of such termination an amount equal tothe research funding owed under Section 6.2 for a ninety (90) day period. The calculation of such amount will be made based on the annual FTE rate set forthin Section 6.2.1 above pro-rata to the Business Days of Merus up to the end of such ninety (90) day period.11.4 Termination by Ono Without Cause. At any time after expiration of the Research Term, by providing Merus at least ninety (90) days priorwritten notice to Merus, Ono may terminate this Agreement in its entirety.11.5 Termination for Insolvency. Either Party may terminate this Agreement by written notice to the other with immediate effect if the other Partybecomes insolvent, is compelled to file bankruptcy, is determined otherwise imminently subject to control by a bankruptcy trustee, liquidator oradministrator or the equivalent, or upon an assignment of a substantial portion of the assets for the benefit of creditors by the other Party pursuant to the lawsof the jurisdiction in which such Party is doing business; provided, however, that in the case of any involuntary bankruptcy proceeding such right toterminate shall only become effective if the Party consents to the involuntary bankruptcy or such proceeding is not dismissed within ninety (90) days afterthe filing thereof.11.6 Effect of Termination; Surviving Obligations.11.6.1 Except in the case of termination by Ono for cause pursuant to Section 11.2, upon early termination of this Agreement, all rights under thelicenses granted by Merus to Ono under this Agreement, if then in effect, will automatically terminate and revert to Merus; in the case of termination by Onofor cause pursuant to Section 11.2, the provisions of this Section 11.6.1 shall not apply and Ono’s license granted hereunder will be fully paid-up andperpetual and continue on a royalty-free basis; and 27[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 11.6.2 Except in the case of termination by Ono for cause pursuant to Section 11.2, upon early termination of this Agreement by either Party, atMerus’ written request, Ono and its Affiliates shall destroy all Research Tools and all supplies of Target Specific Biclonics, Licensed Biclonics and Product,and shall promptly thereafter confirm such destruction in writing to Merus.11.6.3 Expiration or termination of this Agreement will not relieve the Parties of any obligation accruing prior to such expiration ortermination. The following provisions of this Agreement will survive expiration or termination of this Agreement: Articles 1, 4.1, 4.2, 4.3, 5.1 (e)ii, 6.4.2, 7.5,8.1, 9, 10, 11.6, 11.8, 12, 13, and 14 until expiration of a period of performance of its obligations set forth in the relevant Section or, if such period is notexpressly provided, completely performed of its obligations.11.6.4 Within [***] ([***]) days following the expiration or termination of this Agreement, except to the extent and for so long as a Party retainslicense rights hereunder pertaining to any of the other Party’s Confidential Information or materials, at a Party’s request the other Party will deliver to therequesting Party any other Confidential Information and materials of the requesting Party in its possession or at the requesting Party’s option, will destroysuch Confidential Information and materials and will certify to the requesting Party in writing that it has so destroyed such Confidential Information andmaterials.11.7 Exercise of Right to Terminate. The use by either Party hereto of a termination right provided for under this Agreement will not in and of itselfgive rise to the payment of damages or any other form of compensation or relief to the other Party with respect thereto.11.8 Damages; Relief. Subject to Sections 9.4 and 11.6 above, termination of this Agreement will not preclude either Party from claiming or seeking orbeing entitled to any other damages, compensation or relief that it may be entitled to which accrued prior to such termination based on the Agreement.12. INDEMNIFICATION12.1 Indemnification by Merus. Merus hereby agrees to save, defend and hold harmless Ono and its Affiliates and their respective directors, officers,employees and agents (each, a “Ono Indemnitee”) from and against any and all claims, suits, actions, demands, liabilities, damages, expenses and/or loss,including reasonable legal expense and attorneys’ fees (collectively, “Losses”), to which any Ono Indemnitee may become subject, to the extent such Lossesresult from any claim, demand, action or other proceeding against the Ono Indemnitee by any Third Party to the extent based upon: (i) the [***], butprovided that Merus is not obliged to enter litigation and defend Ono for [***] against Ono (ii) the [***], or (iii) the breach by Merus of any warranty,covenant or agreement made by Merus in this Agreement; except, in each case, to the extent such Losses result from the negligence or willful misconduct ofany Ono Indemnitee or the breach by Ono of any warranty, covenant or agreement made by Ono in this Agreement. For avoidance of doubt, suchindemnification shall not apply to any Loss caused by the sale of any Product by Ono to any Third Party. 28[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 12.2 Indemnification by Ono. Ono hereby agrees to save, defend and hold harmless Merus and its Affiliates and their respective directors, officers,employees and agents (each, a “Merus Indemnitee”) from and against any and all Losses to which any Merus Indemnitee may become subject, to the extentsuch Losses result from any claim, demand, action or other proceeding against the Merus Indemnitee by any Third Party to the extent based upon: (i) the[***], including the practice by Ono (or its Affiliate or any Third Party subcontractor or Sublicensee) of [***] under this Agreement, (ii) the manufacture, use,handling, storage, sale or other disposition of any Product and/or Licensed Biclonics by Ono, its Affiliates or Sublicensees, or (iii) the breach by Ono of anywarranty, covenant or agreement made by Ono in this Agreement; except, in each case, to the extent such Losses result from the negligence or willfulmisconduct of any Merus Indemnitee or the breach by Merus of any warranty, covenant or agreement made by Merus in this Agreement.12.3 Control of Defense. Any Party or any of its indemnitees entitled to indemnification under this Article 12 will give notice to the indemnifyingParty of any Losses for which it is claiming indemnification promptly after learning of such Losses, and the indemnifying Party will assume the defense ofsuch Losses with counsel reasonably satisfactory to the indemnified Party. If such defense is assumed by the indemnifying Party with counsel so selected, theindemnifying Party will not be liable for any settlement of such Losses made by the indemnified Party without consent of the indemnifying Party (providedthat such consent is not unreasonably withheld or delayed), and will not be obligated to pay the fees and expenses of any separate counsel retained by theindemnified Party with respect to such Losses or indemnification claim.12.4 Insurance. Each Party shall maintain at its expense insurance coverage consistent with normal business practices and adequate to cover the risksassociated with its performance of any activities hereunder, and each Party acknowledges and agrees that the maintenance of such insurance coverage shallnot relieve either Party of its obligations under this Agreement. Ono, at its own expense, will maintain product liability insurance (or self-insure) in anamount consistent with industry standards during the Term of this Agreement. Ono will provide a certificate of insurance (or evidence of self-insurance)evidencing such coverage to Merus upon request. Merus, at its own expense, will maintain during the Research Term and for a period of at least [***] ([***])years thereafter to maintain (a) workers’ compensation insurance for all of its employees, the limits of which shall be as required under statute; and(b) commercial general liability insurance on a claims made basis having limits of not less than €[***] in the aggregate and €[***] per occurrence. Merus willprovide a certificate of insurance (or evidence of self-insurance) evidencing such coverage to Ono upon request. For avoidance of doubt, such insuranceobligation by Merus shall not apply to cover any Loss caused by the sale of any Product by Ono to any Third Party. 29[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 13. DISPUTE RESOLUTION13.1 Discussion by Senior Executives.(a) If there is a matter within the JSC’s authority for which the JSC is unable to reach a decision, or if any dispute (including any claim or controversyarising from or related in any way to this Agreement or the interpretation, application, breach, termination or validity thereof, including any claim ofinducement of breach of this Agreement by fraud or otherwise) arises between the Parties under this Agreement, such matter or dispute will be referred to theChief Executive Officer of Merus and the Executive Director of Discovery and Research of Ono, for further discussion and resolution. These individuals willas soon as practicable meet and attempt in good faith to resolve the matter or dispute and reach agreement. These individuals may obtain the advice of otheremployees or consultants as they deem necessary or advisable to facilitate resolution.(b) If an unresolved JSC matter or the dispute with respect to performance of Ono under its sole responsibility is not resolved by such senior executives,the decision by Ono’s senior executive shall be final and bind on the Parties as set forth the last sentence of Section 3.2. For all other disputes, if the seniorexecutives cannot reach agreement as to the dispute within [***] ([***]) days of the dispute being referred to them by either Party in writing, then the dispute(an “Unresolved Issue”) will be resolved as provided in Section 13.2 or 13.3, as applicable.13.2 Arbitration.(a) Any Unresolved Issue not resolved under Section 13.1 shall be resolved by arbitration pursuant to the rules then pertaining under the Rulesof Arbitration of the International Chamber of Commerce (“ICC”) by [***] ([***]) arbitrators, except where these Rules conflict with this provision, in whichcase this provision controls. The arbitration will be held in New York, in the U.S.A., and shall be conducted in the English language. The arbitrators shalldecide the Dispute in accordance with the law governing this Agreement. In the case that no ICC rules exist, the Parties will in that case agree in good faithon alternate arbitration rules to govern any arbitration conducted under this Section 13.2.(b) The panel will consist of [***] ([***]) arbitrators each of whom is a lawyer with a law firm or corporate law department or was a judge of acourt of general jurisdiction who, in either case, has at least [***] ([***]) years of experience in the biopharmaceutical field. Notwithstanding the foregoing,if the aggregate damages sought by the claimant are stated to be less than €[***], and the aggregate damages sought by the counterclaimant are stated to beless than €[***], and neither side seeks equitable relief, then a single arbitrator will be chosen, having the same qualifications and experience specifiedabove. Each arbitrator will be neutral, independent, disinterested, and impartial.(c) Each Party shall nominate in the request for arbitration and the answer thereto one arbitrator and the two arbitrators so named shall thenjointly appoint the third arbitrator as chairman of the arbitration tribunal, each of them reasonably acceptable to the other Party, acceptance of which shallnot be unreasonably withheld. If one Party fails to nominate its arbitrator or, if the Parties’ arbitrators cannot agree on the person to be named as chairmanwithin [***] ([***]) days, the President of the ICC shall make the necessary appointments. After appointment, the Parties shall have no ex-partecommunication with their proposed arbitrator. 30[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL (d) Within [***] ([***]) days of initiation of arbitration, the Parties shall reach agreement upon and thereafter follow procedures assuring that thearbitration shall be concluded and the award rendered within no more than [***] ([***]) months from selection of the arbitrators. Failing such agreement, theICC Arbitration Rules shall control the scheduling and the Parties shall follow procedures that meet such a time schedule. Each Party has the right before or,if the arbitrators cannot hear the matter within an acceptable period, during the arbitration to seek and obtain from any court of competent jurisdictionprovisional remedies such as attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the status quo or preserve the subjectmatter of the arbitration. Any request for such provisional measures by a Party to a court shall not be deemed a waiver of this agreement to arbitrate. Inaddition, the arbitration tribunal may, at the request of a Party, order provisional or conservatory measures (including preliminary injunctions to preventbreaches hereof) and the Parties shall be able to enforce the terms and provisions of such orders in any court having jurisdiction. The decision of thearbitration tribunal must be in writing and must specify the basis on which the decision was made, and the award of the arbitration tribunal shall be final,non-appealable and binding upon the Parties and judgment upon such an award may be entered in any competent court or application may be made to anycompetent court for judicial acceptance of such an award and order of enforcement. THE ARBITRATION TRIBUNAL SHALL NOT AWARD ANY PARTYPUNITIVE, EXEMPLARY, MULTIPLIED OR CONSEQUENTIAL DAMAGES, AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TOSEEK SUCH DAMAGES. NO PARTY MAY SEEK OR OBTAIN PREJUDGMENT INTEREST OR ATTORNEY’S FEES OR COSTS.13.3 Preliminary Injunctive Relief. Notwithstanding anything to the contrary, either Party may at any time seek to obtain provisional remedies suchas attachment, preliminary injunctive relief, replevin, etc., solely to avoid irreparable harm, maintain the status quo or preserve the subject matter of thearbitration in equity from a court of competent jurisdiction with respect to an issue arising under this Agreement if the rights of such Party would beprejudiced absent such relief, including any dispute relating to (i) the determination as to the infringement, validity or claim interpretation of a Party’s PatentRights, or (ii) the misuse and/or misappropriation of a Party’s Confidential Information, in each case, a Party may submit such dispute to the competent court.13.4 Diligence Disputes. For any Unresolved Dispute that involves a claim by either Party that the other Party has breached its diligence obligationsunder the Agreement, the arbitrators of such Unresolved Dispute will, under the arbitration conducted under Section 13.2, determine if such other Partymaterially breached such diligence obligations.14. GENERAL PROVISIONS14.1 Governing Law. This Agreement will be governed by, and construed and enforced in accordance with, the laws and regulations of the State ofNew York, U.S.A., as well as United States federal law and regulations, without giving effect to any conflicts of laws principles. 31[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL 14.2 Entire Agreement; Modification. This Agreement, including its appendices and exhibits, is both a final expression of the Parties’ agreement anda complete and exclusive statement with respect to all of its terms. In the event of any inconsistency between the terms of the body of this Agreement and theterms of any appendices or exhibits, the body of this Agreement shall control. This Agreement supersedes all prior and contemporaneous agreements andcommunications between the Parties, whether oral, written or otherwise, concerning the subject matter contained herein. No rights or licenses with respect toany intellectual property of either Party are granted or deemed granted hereunder or in connection herewith, other than those rights expressly granted in thisAgreement. This Agreement may only be modified or supplemented in a writing expressly stated for such purpose and signed by the Parties to thisAgreement.14.3 Relationship of the Parties. The Parties’ relationship, as established by this Agreement, is solely that of independent contractors. This Agreementdoes not create any partnership, joint venture or similar business relationship between the Parties. Neither Party is a legal representative or agent of the otherParty, and neither Party can assume or create any obligation, representation, warranty or guarantee, express or implied, on behalf of the other Party for anypurpose whatsoever.14.4 Performance by Affiliates and Sublicensees. The Parties recognize that each may perform some or all of its obligations under this Agreementthrough Affiliates or Third Party subcontractors or Sublicensees, provided, however, that each Party will remain responsible and be guarantor of theperformance by its Affiliates and Third Party subcontractors and Sublicensees and will cause them to comply with the provisions of this Agreement inconnection with such performance. In particular, if any Affiliate of a Party or its Third Party subcontractor participates in Research under this Agreement or itsSublicensee with respect to Target Specific Biclonics, (a) the restrictions and obligations of this Agreement which apply to the activities of a Party will applyequally to the activities of such Affiliate and Third Party subcontractors and Sublicensees, and (b) the Party performing through such Affiliate or Third Partysubcontractor or Sublicensee will assure, and hereby guarantees, that such performance will be consistent with the provisions of this Agreement. Any actionor omission by a Party’s Affiliate, Third Party subcontractor, or a Sublicensee which would, if such action or omission were conducted by the Party, constitutea breach of the Party’s obligations under this Agreement will constitute a breach by the Party.14.5 Non-Waiver. The failure of a Party to insist upon strict performance of any provision of this Agreement or to exercise any right arising out of thisAgreement will neither impair that provision or right nor constitute a waiver of that provision or right, in whole or in part, in that instance or in any otherinstance. Any waiver by a Party of a particular provision or right to be effective must be in writing signed by such Party, and will be limited to the specifiedmatter and, if applicable, the specified period of time in such writing.14.6 Assignment. Except as expressly provided hereunder, neither this Agreement nor any rights or obligations hereunder may be assigned orotherwise transferred by either Party without the prior written consent of the other Party (which consent will not be unreasonably withheld); provided,however, that either Party may assign this Agreement or any of its license rights granted hereunder without the other Party’s consent: 32[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL (a) to its successor in interest in connection with the transfer or sale of all or substantially all of the business of such Party to which thisAgreement relates, whether by merger, sale of stock, sale of assets or otherwise, provided that in the event of a transaction (whether this Agreement is actuallyassigned or is assumed by the acquiring Party by operation of law), intellectual property rights of the acquiring party to such transaction (if other than one ofthe Parties to this Agreement) will not be included in the technology licensed hereunder, and, provided further that the such acquiring party will remainliable and responsible to the non-assigning Party hereto for the performance and observance of all such duties and obligations of the assigning Party; or(b) to an Affiliate, provided that the assigning Party will remain liable and responsible to the non-assigning Party hereto for the performance andobservance of all such duties and obligations by such Affiliate.The rights and obligations of the Parties under this Agreement will be binding upon and inure to the benefit of the successors and permitted assigns of theParties. Any assignment not in accordance with this Agreement will be void.14.7 No Third Party Beneficiaries. This Agreement is neither expressly nor impliedly made for the benefit of any party other than those Partiesexecuting it.14.8 Severability. If, for any reason, any part of this Agreement is adjudicated invalid, unenforceable or illegal by a court of competent jurisdiction, allother portions will remain in full force and effect, and the Parties will use their reasonable efforts to substitute for the invalid, unenforceable or illegalprovision a valid, enforceable and legal provision which conforms as nearly as possible with the original intent of the Parties.14.9 Notices. Any notice to be given under this Agreement must be in writing and delivered either in person, by Express or certified mail (return receiptrequested) (in each case postage prepaid), or by an internationally recognized express courier, or by facsimile with confirmed transmission, to the Party to benotified at its address(es) given below, or at any address such Party has previously designated by prior written notice to the other. Notice will be deemedsufficiently given for all purposes upon the earliest of: (a) the date of actual receipt; (b) if mailed, [***] ([***]) days after the date of postmark; or (c) ifdelivered by express courier, [***].If to Ono, notices must be addressed to:Ono Pharmaceutical Co., LtdMinase Research institute1-1, Sakurai, 3-chome,Shimamoto, Mishima, Osaka, 618-8585, JapanAttn: Senior Director, Discovery Research AllianceFacsimile: [***] 33[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL If to Merus, notices must be addressed to:Merus N.V.Yalelaan 623584 CM Utrechtthe NetherlandsAttention: Mark Throsby, CSOTelephone: [***]Email: [***]with a copy to:Peter B. Silverman, Chief IP Officer, Head of Legal U.S.Email: [***]14.10 Force Majeure. Each Party will be excused from liability for the failure or delay in performance of any obligation under this Agreement byreason of any event beyond such Party’s reasonable control, including but not limited to Acts of God, fire, flood, explosion, earthquake, or other naturalforces, war, terrorism, civil unrest, accident, destruction or other casualty, any lack or failure of transportation facilities, any lack or failure of supply of rawmaterials, any strike or labor disturbance, or any other event similar to those enumerated above. Such excuse from liability will be effective only to the extentand duration of the event(s) causing the failure or delay in performance and provided that the Party has not caused such event(s) to occur and continues to usediligent, good faith efforts to avoid the effects of such event and to perform the obligation. Notice of a Party’s failure or delay in performance due to forcemajeure must be given to the other Party within [***] ([***]) days after its occurrence. All delivery dates under this Agreement that have been affected byforce majeure will be tolled for the duration of such force majeure. The Party failing or delaying in performance of any obligation under this Agreement byreason of such force majeure event will use reasonable effort to recover from such force majeure event to perform its obligations, provided that in no eventwill any Party be required to prevent or settle any labor disturbance or dispute. Notwithstanding the foregoing, should the event(s) of force majeure sufferedby a Party extend beyond a nine-month period, the other Party may then terminate this Agreement by written notice to the non-performing Party, with theconsequences of such termination as set forth in Section 11.5.14.11 Interpretation.(a) Captions & Headings. The captions and headings of clauses contained in this Agreement preceding the text of the articles, sections,subsections and paragraphs hereof are inserted solely for convenience and ease of reference only and will not constitute any part of this Agreement, or haveany effect on its interpretation or construction.(b) Singular & Plural. All references in this Agreement to the singular will include the plural where applicable, and all references to gender willinclude both genders and the neuter.(c) Articles, Sections & Subsections. Unless otherwise specified, references in this Agreement to any article will include all sections, subsections,and paragraphs in such article; references in this Agreement to any section will include all subsections and paragraphs in such sections; and references in thisAgreement to any subsection will include all paragraphs in such subsection. 34[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL (d) Ambiguities. Ambiguities and uncertainties in this Agreement, if any, will not be interpreted against either Party, irrespective of which Partymay be deemed to have caused the ambiguity or uncertainty to exist.(e) English Language. All notices required or permitted to be given hereunder, and all written, electronic, oral or other communications betweenthe Parties regarding this Agreement will be in the English language.14.12 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original document, and all ofwhich, together with this writing, will be deemed one instrument. Signing and delivery of this Agreement may be evidenced by an electronic transmission ofthe front and signed signature page to the other Party, provided however, that such electronic signing and delivery is confirmed in written paper copy signedby and delivered to each Party promptly following electronic signing and delivery.IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the Effective Date. MERUS N.V. ONO PHARMACEUTICAL Co. Ltd.By: /s/ Ton Logtenberg By: /s/ Gyo SagaraName: Ton Logtenberg Name: Gyo SagaraTitle: CEO Title: President, Representative Director and Chief Executive Officer 35[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL EXHIBIT AInitial Research Plan 1.Rationale[***] 2.Background information[***] 3.Objective[***] 4.Endpoint / Outcome[***] 5.Proposed start and end date[***] 6.Time line for Merus and Ono activities and FTE[***] 7.Merus Research Budget and planning [[***]]Table 1 timelines| [***][***]Table 2 Contracted rates[***]Table 3 External costs. [***]8. Detailed research plan[***]] 36[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL EXHIBIT B[***] 37[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL EXHIBIT CMERUS PATENT RIGHTS[***] 38[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL EXHIBIT DLitigation UpdateOn 11 March 2014 Regeneron Pharmaceuticals Inc. (“Regeneron”) filed a complaint in the United States District Court for the Southern District of New York(the “Court”), alleging that the Company was infringing on one or more claims in Regeneron’s U.S. Patent No. 8,502,018, entitled “Methods of ModifyingEukaryotic Cells.” On 3 July 2014, the Company filed a response to the complaint, denying Regeneron’s allegations of infringement and raising affirmativedefenses, and filed counterclaims seeking, among other things, a declaratory judgment that the Company did not infringe the patent and that the patent wasinvalid. The Company subsequently filed amended counterclaims during the period from August to December 2014, seeking a declaratory judgment ofunenforceability of the patent due to Regeneron’s commission of inequitable conduct.On 21 November 2014, the Court found that there was clear and convincing evidence that a claim term present in each of the patent claims was indefinite andgranted the Company’s proposed claim constructions. On 24 February 2015, the Court entered partial judgment in the proceeding, on the grounds that theCompany did not infringe each of the patent claims, and that each of the patent claims were invalid due to indefiniteness. On 2 November 2015, the Courtfound Regeneron had withheld material information from the United States Patent and Trademark Office during prosecution of the patent, and Regeneron hadengaged in inequitable conduct and affirmative egregious misconduct in connection with the prosecution of the patent. On 18 December 2015, Regeneronfiled an appeal of the Court’s decision which is currently pending. An oral hearing before the US Court of Appeals for the Federal Circuit is scheduled for13 February 2017, and a decision issued July 27 affirming that Regeneron has committed inequitable conduct in procuring the ‘018 patent, and affirming thejudgment of unenforceability. Regeneron petitioned for rehearing and rehearing en banc, which the Federal Circuit denied on December 26, 2017.On 11 March 2014, Regeneron served a writ in the Netherlands alleging that the Company was infringing one or more claims in their European patent EP 1360 287 B1. The Company opposed the patent in June 2013. On 17 September 2014, Regeneron’s patent EP 1 360 287 B1 was revoked in its entirety by theEuropean Opposition Division of the European Patent Office (the “EPO”). In Europe, an appeal hearing occurred in October and November 2015 at theTechnical Board of Appeal for the EPO at which time the patent was reinstated to Regeneron with amended claims. The Company believes that its currentbusiness operations do not infringe the patent reinstated to Regeneron with amended claims because it believes it has not used the technology or methodsclaimed under the amended claims. The Dutch litigation procedure is stayed. 39[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL EXHIBIT EINITIAL MEMBERS OF JSCMembers representing Merus:[***]Members representing Ono:[***] 40[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Confidential Treatment Requested Under 17 C.F.R.§§ 200.80(b)(4) and 240-24b-2CONFIDENTIAL EXHIBIT FForm of InvoiceInvoice to be printed on official Merus letterhead with date, payee’s tax ID, and Ono’s (or its designated Affiliate payor’s) P.O. number inserted:DATE: INVOICE NO.: Merus* Tax ID: [***]Bill To:Ono Pharmaceutical Co., Ltd.3-1-1 Sakurai, Shimamoto-choMishima-gun, Osaka 618-8585, JapanOno P.O. Number: Terms: Net [***]Amount of payment due: EuroPayment due according to CONTRACT RESEARCH AND LICENSE AGREEMENT between Merus B.V. and ONO Pharmaceuticals Inc. dated ,2016,for: (If Research Funding) Relevant Research Period: (If Milestone Payment) Milestone Event: Ship To:Director, Research Licensing, Discovery Research Alliance, Discovery and ResearchOno Pharmaceutical Co., Ltd.3-1-1 Sakurai, Shimamoto-choMishima-gun, Osaka 618-8585, JapanWire Instructions for Remittance to Merus:* Merus to provide details and contact information 41[***] Certain information in this document has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment hasbeen requested with respect to the omitted portions.Exhibit 12.1I, Ton Logtenberg, certify that:1. I have reviewed this annual report on Form 20-F of Merus N.V. (the “Company”);2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for theCompany and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by theannual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theCompany’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internalcontrol over financial reporting. Date: April 30, 2018 By: /s/ Ton Logtenberg Ton LogtenbergChief Executive Officer(Principal Executive Officer) 2Exhibit 12.2I, John J. Crowley, certify that:1. I have reviewed this annual report on Form 20-F of Merus N.V. (the “Company”);2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for theCompany and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by theannual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theCompany’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internalcontrol over financial reporting. Date: April 30, 2018 By: /s/ John J. Crowley John J. CrowleyChief Financial Officer(Principal Financial Officer) Exhibit 13.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Ton Logtenberg, Chief Executive Officer of Merus N.V. (the “Company”), hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:1. The Annual Report on Form 20-F of the Company for the period ended December 31, 2017 (the “Report”) fully complies with the requirements ofSection 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 30, 2018 By: /s/ Ton Logtenberg Ton LogtenbergChief Executive Officer(Principal Executive Officer) Exhibit 13.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350 ,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, John J. Crowley, Chief Financial Officer of Merus N.V. (the “Company”), hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 ofthe Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:1. The Annual Report on Form 20-F of the Company for the period ended December 31, 2017 (the “Report”) fully complies with the requirements ofSection 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 30, 2018 By: /s/ John J. Crowley John J. CrowleyChief Financial Officer(Principal Financial Officer)Exhibit 15.1Consent of Independent Registered Public Accounting FirmThe Board of DirectorsMerus N.V.:We consent to the incorporation by reference in the registration statement (No. 333-211497) on Form S-8 and in the registration statement (No. 333-218432)on Form F-3 and F-3/A of Merus N.V. of our report dated April 30, 2018, with respect to the consolidated statements of financial position of Merus N.V. as ofDecember 31, 2017 and 2016, and the related consolidated statements of profit or loss and comprehensive loss, changes in equity, and cash flows for each ofthe years in the three-year period ended December 31, 2017, and the related notes (collectively, the consolidated financial statements), which report appearsin the December 31, 2017 annual report on Form 20-F of Merus N.V./s/ KPMG Accountants N.V.Amstelveen, The NetherlandsApril 30, 2018

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