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EXHIBIT 10.29
RESEARCH AND DEVELOPMENT AGREEMENT
between
SANKYO CO., LTD
and
ARQULE, INC.
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TABLE OF CONTENTS
Page
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1. DEFINITIONS........................................................... (1)
1.1. "ACTIVE HOMOLOG"............................................... (1)
1.2. "ACTIVE ARQULE COMPOUND"....................................... (1)
1.3. "ACTIVE COMPOUND".............................................. (1)
1.4. "ACTIVE SANKYO COMPOUND"....................................... (1)
1.5. "AFFILIATE".................................................... (1)
1.6. "AGREEMENT".................................................... (2)
1.7. "ARQULE COMPOUND".............................................. (2)
1.8. "ARQULE DERIVATIVE COMPOUND"................................... (2)
1.9. "ARQULE PATENT RIGHTS"......................................... (2)
1.10. "ARQULE TECHNOLOGY"............................................ (2)
1.11. "ARRAY"........................................................ (2)
1.12. "BASE RATE OF INTEREST"........................................ (2)
1.13. "CHEMICAL THEME"............................................... (2)
1.14. "CONFIDENTIAL INFORMATION"..................................... (2)
1.15. "CONTRACT YEAR"................................................ (2)
1.16. "DERIVATIVE COMPOUND".......................................... (2)
1.17. "DIRECTED ARRAY(TM)"........................................... (3)
1.18. "DIRECTED ARRAY(TM)PROGRAM".................................... (3)
1.19. "DISCLOSING PARTY"............................................. (3)
1.20. "EFFECTIVE DATE"............................................... (3)
1.21. "EXTRAORDINARY EXPENSES"....................................... (3)
1.22. "FDA".......................................................... (3)
1.23. "JOINT PATENT RIGHTS".......................................... (3)
1.24. "LICENSED COMPOUND"............................................ (3)
1.25. "LICENSED COMPOUND SET"........................................ (3)
1.26. "MAPPING ARRAY(TM)"............................................ (3)
1.27. "MAPPING ARRAY(TM)PROGRAM"..................................... (3)
1.28. "NET SALES".................................................... (3)
1.29. "NET SALES PRICE".............................................. (4)
1.30. "PARTY"........................................................ (4)
1.31. "PATENT RIGHTS"................................................ (4)
1.32. "PHASE I CLINICAL TRIALS"...................................... (4)
1.33. "PHASE II CLINICAL TRIALS"..................................... (4)
1.34. "PHASE III CLINICAL TRIALS".................................... (4)
1.35. "PRECLINICAL COMPOUND"......................................... (5)
1.36. "PRECLINICAL DEVELOPMENT"...................................... (5)
1.37. "RECEIVING PARTY".............................................. (5)
1.38. "RESEARCH PERIOD".............................................. (5)
1.39. "RESEARCH PROGRAM"............................................. (5)
1.40. "RESEARCH PLAN"................................................ (5)
1.41. "ROYALTY-BEARING PRODUCT"...................................... (5)
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1.42. "ROYALTY PERIOD"............................................... (5)
1.43. "SANKYO COMPOUND".............................................. (5)
1.44. "SANKYO DERIVATIVE COMPOUND"................................... (5)
1.45. "SANKYO PATENT RIGHTS"......................................... (6)
1.46. "STEERING COMMITTEE"........................................... (6)
1.47. "SUBLICENSEE".................................................. (6)
1.48. "TARGET"....................................................... (6)
1.49. "U.S. TERRITORY"............................................... (6)
1.50. "VALID CLAIM".................................................. (6)
1.51. "WORLDWIDE TERRITORY".......................................... (6)
2. MANAGEMENT OF RESEARCH PROGRAM........................................ (6)
2.1. COMPOSITION OF STEERING COMMITTEE.............................. (6)
2.2. DUTIES OF THE STEERING COMMITTEE............................... (6)
2.3. COMPOUNDS EXCLUDED FROM THE DIRECTED ARRAY(TM)PROGRAM.......... (7)
2.4. MEETINGS OF THE STEERING COMMITTEE............................. (7)
2.5. COOPERATION.................................................... (8)
2.6. VISITS TO FACILITIES........................................... (8)
3. MAPPING ARRAY(TM)PROGRAM.............................................. (8)
3.1. CONDUCT OF MAPPING ARRAY(TM)PROGRAM............................ (8)
3.2. MUTUAL DISCLOSURE.............................................. (9)
3.3. RESERVATION OF ACTIVE ARQULE COMPOUNDS......................... (9)
3.4. MAPPING ARRAY(TM)PROGRAM PAYMENTS.............................. (9)
3.5. TERM OF MAPPING ARRAY(TM)PROGRAM............................... (10)
3.6. PERFORMANCE OF MAPPING ARRAY(TM)PROGRAM........................ (10)
4. DIRECTED ARRAY(TM)PROGRAM............................................. (10)
4.1. DESCRIPTION OF DIRECTED ARRAY(TM)PROGRAM....................... (10)
4.2. CONDUCT OF DIRECTED ARRAY(TM)PROGRAM........................... (10)
4.3. DIRECTED ARRAY(TM)PROGRAM PAYMENTS............................. (11)
4.3.1. DELIVERY FEE........................................... (11)
4.3.2. EXPENSES............................................... (11)
4.4. TERM OF DIRECTED ARRAY(TM) PROGRAM............................. (11)
5. LICENSE GRANTS; REVERSION OF RIGHTS................................... (11)
5.1. SCREENING LICENSES............................................. (11)
5.2. PRECLINICAL AND CLINICAL LICENSES.............................. (11)
5.3. COMMERCIALIZATION LICENSE...................................... (12)
5.4. REVERSION OF RIGHTS; RETURN OF MATERIALS....................... (12)
6. OWNERSHIP OF COMPOUNDS................................................ (12)
6.1. SANKYO COMPOUNDS; SANKYO DERIVATIVE COMPOUNDS.................. (12)
6.2. ARQULE COMPOUNDS; ARQULE DERIVATIVE COMPOUNDS.................. (12)
7. INTELLECTUAL PROPERTY RIGHTS.......................................... (12)
(ii)
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7.1. OWNERSHIP OF PATENT RIGHTS..................................... (12)
7.2. MANAGEMENT OF JOINT PATENT RIGHTS.............................. (13)
7.3. COOPERATION OF THE PARTIES..................................... (13)
7.4. INFRINGEMENT BY THIRD PARTIES.................................. (13)
8. PAYMENTS, REPORTS, AND RECORDS........................................ (14)
8.1. MILESTONE PAYMENTS............................................. (14)
8.2. ALTERNATIVE TO MILESTONE PAYMENTS.............................. (14)
8.3. ROYALTIES...................................................... (14)
8.4. REPORTS AND PAYMENTS........................................... (15)
8.5. INVOICES; PAYMENTS IN U.S. DOLLARS............................. (15)
8.6. PAYMENTS IN OTHER CURRENCIES................................... (15)
8.7. RECORDS........................................................ (15)
8.8. LATE PAYMENTS.................................................. (16)
8.9. WITHHOLDING TAX PAYMENTS....................................... (16)
8.9.1. PAYMENTS............................................... (16)
8.9.2. ROYALTY PAYMENTS....................................... (16)
9. CONFIDENTIAL INFORMATION.............................................. (16)
9.1. DEFINITION OF CONFIDENTIAL INFORMATION......................... (16)
9.2. DESIGNATION OF CONFIDENTIAL INFORMATION........................ (17)
9.3. OBLIGATIONS.................................................... (17)
9.4. EXCEPTIONS..................................................... (17)
9.5. RETURN OF CONFIDENTIAL INFORMATION............................. (18)
9.6. SURVIVAL OF OBLIGATIONS........................................ (18)
10. REPRESENTATIONS AND WARRANTIES........................................ (18)
10.1. AUTHORIZATION.................................................. (18)
11. INDEMNIFICATION AND INSURANCE......................................... (18)
11.1. SANKYO INDEMNITY OBLIGATIONS................................... (18)
11.2. PROCEDURE...................................................... (19)
11.3. INSURANCE...................................................... (19)
12. TERM AND TERMINATION.................................................. (19)
12.1. TERM........................................................... (19)
12.2. BREACH OF PAYMENT OBLIGATIONS.................................. (19)
12.3. MATERIAL BREACH................................................ (20)
12.4. EFFECT OF TERMINATION.......................................... (20)
13. MISCELLANEOUS......................................................... (20)
13.1. RELATIONSHIP OF PARTIES........................................ (20)
13.2. PUBLICITY...................................................... (20)
13.3. NON-SOLICITATION............................................... (20)
13.4. GOVERNING LAW.................................................. (20)
13.5. DISPUTE RESOLUTION PROCEDURES.................................. (20)
13.6. COUNTERPARTS................................................... (22)
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13.7. HEADINGS....................................................... (22)
13.8. BINDING EFFECT................................................. (22)
13.9. ASSIGNMENT..................................................... (22)
13.10. NOTICES........................................................ (22)
13.11. AMENDMENT AND WAIVER........................................... (23)
13.12. SEVERABILITY................................................... (23)
13.13. ENTIRE AGREEMENT............................................... (23)
13.14. FORCE MAJEURE.................................................. (23)
EXHIBIT A.................................................................. (25)
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RESEARCH AND DEVELOPMENT AGREEMENT
This Agreement, dated as of November 1, 1997, is between Sankyo Co., LTD
("Sankyo"), a Japanese corporation, having a business address at 5-1, Nihonbashi
▇▇▇▇▇▇ ▇-▇▇▇▇▇, ▇▇▇▇-▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, and ArQule, Inc. ("ArQule"), a
Delaware corporation, having a business address at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, U.S.A..
R E C I T A L S
WHEREAS, ArQule has developed certain technology that has applications in
the discovery and development of pharmaceutical compounds;
WHEREAS, Sankyo desires that ArQule apply its technologies to the
research and development of pharmaceutical compounds for Sankyo; and
WHEREAS, in exchange for payment by Sankyo of research funds, milestone
payments and royalties, ArQule is willing to perform certain research and
development activities for Sankyo, subject to the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants set forth in
this Agreement, the Parties hereby agree as follows:
1. DEFINITIONS.
1.1. "ACTIVE HOMOLOG" shall mean any ArQule Derivative Compound or
Sankyo Derivative Compound that exhibits substantial homology with an Active
Compound as determined by the Steering Committee.
1.2. "ACTIVE ARQULE COMPOUND" shall mean any ArQule Compound or ArQule
Derivative Compound which exhibits confirmed significant functional activity
against a Target. The Steering Committee shall establish the criteria for
"significant functional activity" at the time of selection of each Target.
1.3. "ACTIVE COMPOUND" shall mean any Active ArQule Compound or Active
Sankyo Compound.
1.4. "ACTIVE SANKYO COMPOUND" shall mean any Sankyo Compound or Sankyo
Derivative Compound which exhibits confirmed significant functional activity
against a Target. The Steering Committee shall establish the criteria for
"significant functional activity" at the time of selection of each Target.
1.5. "AFFILIATE" shall mean a corporation or other legal entity that
controls, is controlled by, or is under common control with such Party. For
purposes of this definition, "control" means the ownership, directly or
indirectly, of fifty percent (50%) or more of the
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outstanding equity securities of a corporation which are entitled to vote in the
election of directors or a fifty percent (50%) or greater interest in the net
assets or profits of an entity which is not a corporation.
1.6. "AGREEMENT" shall mean this Research and Development Agreement,
together with EXHIBIT A hereto.
1.7. "ARQULE COMPOUND" shall mean any organic chemical molecule that
is synthesized by ArQule using its proprietary technology and provided by ArQule
to Sankyo under the Mapping Array(TM) Program.
1.8. "ARQULE DERIVATIVE COMPOUND" shall mean a Derivative Compound
synthesized by ArQule from an ArQule Compound under the Directed Array(TM)
Program described in Section 4.
1.9. "ARQULE PATENT RIGHTS" shall mean Patent Rights controlled or
owned by ArQule as of the Effective Date or during the Research Period; all to
the extent and only to the extent that ArQule now has or hereafter will have the
right to grant licenses, immunities or other rights thereunder.
1.10. "ARQULE TECHNOLOGY" shall mean all information and data which is
owned by ArQule or licensed by third parties to ArQule prior to or during the
Research Program and is necessary or useful to conduct the screening to discover
Active ArQule Compounds and Active Homologs thereto or to develop, make, use,
sell or seek regulatory approval in any country to market a product containing a
Licensed Compound; all to the extent and only to the extent that ArQule now has
or hereafter will have the right to grant licenses, immunities or other rights
thereunder.
1.11. "ARRAY" shall mean a set of samples of structurally related
chemical compounds arranged in a format such as a microtiter screening plate.
1.12. "BASE RATE OF INTEREST" shall mean the base rate of interest
declared from time to time by the Bank of Boston.
1.13. "CHEMICAL THEME" shall mean the chemical or structural
characteristics shared by a group of compounds as determined by the Steering
Committee pursuant to Section 2.2.
1.14. "CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 9.1.
1.15. "CONTRACT YEAR" shall mean each twelve (12) month period of the
Research Period, commencing on the Effective Date.
1.16. "DERIVATIVE COMPOUND" shall mean a chemical compound structurally
derived in one or more steps from another by a process of modification or
partial substitution of at least one component wherein at least one structural
feature is retained at each process step. The number of intermediate steps or
compounds is not relevant to the classification of a
(2)
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compound as a Derivative Compound. A compound need not have structural
similarity to another compound in order to be classified as a Derivative
Compound.
1.17. "DIRECTED ARRAY(TM)" shall mean an Array comprised of ArQule
Derivative Compounds synthesized by ArQule under the Directed Array(TM) Program
described in Section 4.
1.18. "DIRECTED ARRAY(TM) PROGRAM" shall mean a Directed Array(TM)
Program conducted by ArQule as set forth in Section 4, with each Directed
Array(TM) Program consisting of multiple Arrays derived from one (1) Sankyo
Compound or one (1) Active ArQule Compound.
1.19. "DISCLOSING PARTY" shall mean that Party disclosing Confidential
Information to the other Party under Section 9.
1.20. "EFFECTIVE DATE" shall mean the first business day of the month
immediately following the date of execution of this Agreement by the Parties
hereto.
1.21. "EXTRAORDINARY EXPENSES" shall mean those expenses incurred from
time to time by ArQule in connection with the Directed Array(TM) Program which
are not (a) direct, out-of-pocket costs provided for in the Research Plan which
are directly attributable to the Directed Array(TM) Program or (b) fixed
overhead costs provided for in the Research Plan which are allocable to the
Directed Array(TM) Program.
1.22. "FDA" shall mean the United States Food and Drug Administration
(or its foreign equivalent in Japan or Europe).
1.23. "JOINT PATENT RIGHTS" shall mean any Patent Rights that are
jointly owned by the Parties, as set forth in Section 7.1(b).
1.24. "LICENSED COMPOUND" shall mean any Active Compound or Active
Homolog thereto with respect to which the Steering Committee has designated in
accordance with Sections 2.2 and 3.2.
1.25. "LICENSED COMPOUND SET" shall mean, with respect to a Licensed
Compound, such Licensed Compound and any Active Homolog thereto.
1.26. "MAPPING ARRAY(TM)" shall mean an Array of ArQule Compounds
synthesized by ArQule under the Mapping Array(TM) Program set forth in Section
3.
1.27. "MAPPING ARRAY(TM) PROGRAM" shall mean the Mapping Array(TM)
component of the Research Program as set forth in Section 3.
1.28. "NET SALES" shall mean the aggregate Net Sales Price of
Royalty-Bearing Products in any Royalty Period.
(3)
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1.29. "NET SALES PRICE" shall mean the * received on sales by Sankyo,
its Affiliates and Sublicensees of Royalty-Bearing Products, less the following:
*. In any transfers of Royalty-Bearing Products between Sankyo and an Affiliate,
the Net Sales Price shall be calculated based on the * of the Royalty-Bearing
Product to an independent third party. In the event that Sankyo receives
non-monetary consideration for any Royalty-Bearing Products, the Net Sales Price
shall be calculated based on the * by Sankyo for such Royalty-Bearing Products
during the * Royalty Period.
1.30. "PARTY" means ArQule or Sankyo or their respective Affiliates;
"PARTIES" means ArQule and Sankyo and their respective Affiliates.
1.31. "PATENT RIGHTS" shall mean all rights arising under issued
patents and reissues, reexaminations, extensions and supplementary protection
certificates thereof and all patent applications and any divisions,
continuations, or continuations-in-part thereof or patents issuing thereon.
1.32. "PHASE I CLINICAL TRIALS" shall mean clinical trials in healthy
adults and/or in a small number of patients commencing upon the filing of a
trial protocol with the appropriate regulatory body and designed to determine
the metabolism and pharmacologic actions of a product in humans, the side
effects associated with increasing doses and to gather evidence on effectiveness
and meeting the requirements established by the FDA or by the equivalent
Japanese agency for Phase I clinical trials. The completion of the Phase I
Clinical Trials will be deemed to have occurred upon the first formal internal
issuance of trial results as measured by trial objectives, or in any event no
later than the commencement of the Phase II Clinical Trials.
1.33. "PHASE II CLINICAL TRIALS" shall mean clinical trials in a small
sample of the intended patient population commencing upon the filing of a trial
protocol with the appropriate regulatory body and designed to assess the
efficacy for a specific indication of a compound proposed to be used as a
therapeutic or diagnostic pharmaceutical product, to determine dose tolerance
and the optimal dose range as well as to gather additional information relating
to safety and potential adverse effects, and meeting the requirements
established by the FDA or the equivalent Japanese agency for Phase II clinical
trials. The completion of the Phase II Clinical Trials will be deemed to have
occurred upon the first formal internal issuance of trial results as measured by
trial objectives, or in any event no later than the commencement of the Phase
III Clinical Trials.
1.34. "PHASE III CLINICAL TRIALS" shall mean clinical trials commencing
upon the filing of a trial protocol with the appropriate regulatory body and
designed to demonstrate safety and efficacy of a compound proposed to be used as
a prophylactic, therapeutic or diagnostic pharmaceutical product in an expanded
patient population at geographically dispersed study sites, meeting the
requirements established by the FDA or the equivalent Japanese agency for Phase
III clinical trials. The completion of the Phase III Clinical Trials
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*Confidential Treatment has been requested for the marked portion.
(4)
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will be deemed to have occurred upon the first formal internal issuance of trial
results as measured by trial objectives, or in any event no later than the
filing of an NDA.
1.35. "PRECLINICAL COMPOUND" shall mean any Licensed Compound selected
by Sankyo or an Affiliate of Sankyo to enter into Preclinical Development.
1.36. "PRECLINICAL DEVELOPMENT" shall mean, with respect to any
Preclinical Compound, the commencement of potency and efficacy testing in animal
models.
1.37. "RECEIVING PARTY" shall mean that Party receiving Confidential
Information under Section 9.1.
1.38. "RESEARCH PERIOD" shall mean the period during which the Research
Program remains in effect. The duration of the Research Period shall be a *,
unless extended by the mutual agreement of the Parties.
1.39. "RESEARCH PROGRAM" shall mean, collectively, each of the Directed
Array(TM) Programs and the Mapping Array(TM) Program.
1.40. "RESEARCH PLAN" shall mean a plan of research for the Directed
Array(TM) Program covering a minimum of a * period, which shall be updated
quarterly pursuant to Section 2.2 to reflect developments during the previous
three (3) months and extended for the subsequent three (3) months. The parties
will begin development of the initial Research Plan by *. The parties will
complete the Research Plan for the first Directed Array Program by * and will
complete the Research Plan for the second Directed Array Program by *. The
completed Research Plan will be attached to this Agreement as EXHIBIT A.
1.41. "ROYALTY-BEARING PRODUCT" shall mean a product containing *.
1.42. "ROYALTY PERIOD" shall mean, with respect to each Royalty-Bearing
Product, every calendar quarter, or partial calendar quarter, commencing with
the first commercial sale of such Royalty-Bearing Product in any country and
ending on the later to occur of (i) the end of the quarter during which all
Valid Claims of all Patent Rights covering such Royalty-Bearing Product expire
in the applicable country, or * years after such first commercial sale in the
applicable country.
1.43. "SANKYO COMPOUND" shall mean any chemical compound provided by
Sankyo or its Affiliates to ArQule under the Directed Array(TM) Program
described in Section 4.
1.44. "SANKYO DERIVATIVE COMPOUND" shall mean a Derivative Compound
synthesized by ArQule from a Sankyo Compound under the Directed Array(TM)
Program described in Section 4.
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*Confidential Treatment has been requested for the marked portion.
(5)
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1.45. "SANKYO PATENT RIGHTS" shall mean Patent Rights controlled or
owned by Sankyo as of the Effective Date or during the Research Period; all to
the extent and only to the extent that Sankyo now has or hereafter will have the
right to grant licenses, immunities or other rights thereunder.
1.46. "STEERING COMMITTEE" shall have the meaning set forth in
Section 2.1.
1.47. "SUBLICENSEE" shall mean any non-Affiliate third party licensed
by Sankyo to make, use (except where the right to use accompanies the sale of
any Royalty-Bearing Product by Sankyo or its Affiliates or Sublicensees) or sell
any Royalty-Bearing Product.
1.48. "TARGET" shall mean any biological target selected by Sankyo for
which Sankyo has certain proprietary technology and/or expertise.
1.49. "U.S. TERRITORY" shall mean the fifty states comprising the
United States of America and all American possessions.
1.50. "VALID CLAIM" shall mean either (a) a claim of an issued patent
that has not been held unenforceable or invalid by an agency or a court of
competent jurisdiction in any unappealable or unappealed decision or (b) a claim
of a pending patent application that has not been abandoned or finally rejected
without the possibility of appeal or refiling.
1.51. "WORLDWIDE TERRITORY" shall mean the world excluding the U.S.
Territory.
1.52. The above definitions are intended to encompass the defined terms
in both the singular and plural tenses.
2. MANAGEMENT OF RESEARCH PROGRAM.
2.1. COMPOSITION OF STEERING COMMITTEE. The Parties hereby establish a
Steering Committee comprised of six (6) members, with three (3) representatives
appointed by each Party. The initial members of the Steering Committee shall be
as follows:
ARQULE REPRESENTATIVES SANKYO REPRESENTATIVES
*
A Party may change one or more of its representatives to the Steering Committee
at any time upon notice to the other Party. Each Party will designate one of its
representatives as its team leader.
2.2. DUTIES OF THE STEERING COMMITTEE. The Steering Committee shall
direct and administer the Research Program. With respect to each Directed
Array(TM) Program, the
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*Confidential Treatment has been requested for the marked portion.
(6)
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Steering Committee shall specifically determine the following: (i) the
appropriate objectives of each Chemical Theme and/or Active Compound to be
submitted to the Directed Array(TM) Program; (ii) the appropriate number and
type of Chemical Themes to be submitted to the Directed Array(TM) Program,
subject to ArQule's right to exclude certain compounds as set forth in Section
2.3 below; (iii) the appropriate number of compounds that ArQule should generate
in a Directed Array(TM) for a particular Chemical Theme; and (iv) the
appropriate amount of each compound in a Directed Array(TM) that ArQule should
deliver to Sankyo for further research and development. The scope of each
Chemical Theme will be determined on the basis of the following criteria: (i)
the specific reaction or reaction sequence used to combine members of two or
more discrete chemical units in which each chemical unit bears the functional
group(s) required for the specific reaction(s) that result in the combination of
the chemical units; and (ii) the extent to which a class of compounds is related
by a recurring structural motif associated with a particular biological
activity. In addition, the Steering Committee shall (i) determine whether any
Active Compound should be designated as a Licensed Compound; (ii) determine and
update the list of Licensed Compounds; (iii) determine the allocation of the
funding and personnel resources to be contributed by ArQule under this
Agreement; (iv) revise and extend the Research Plan each calendar quarter for
the subsequent six (6) months based on prior developments; and (v) resolve
matters involving scientific questions.
2.3. COMPOUNDS EXCLUDED FROM THE DIRECTED ARRAY(TM) PROGRAM. ArQule
shall have the right, at the time Sankyo seeks to include any Active ArQule
Compound or Active Homolog thereto in any Directed Array(TM) Program, to exclude
from such Directed Array(TM) Program any Active ArQule Compound or Active
Homolog thereto that is at that time either (i) included within a Directed
Array(TM) Program for a third party, (ii) being optimized by a third party from
a Mapping Array(TM) Program, (iii) previously licensed or reserved by a third
party, or (iv) is included within an existing ArQule internal development
program.
2.4. MEETINGS OF THE STEERING COMMITTEE. The Steering Committee shall
communicate regularly, but in no event less than monthly, via written project
status reports through written communications means, including, without
limitation, electronic mail. A member of the committee from each Party will
promptly respond to such communications where appropriate within * of its
receipt by such member. In the event that questions or issues arise from such
written communications that cannot be, or are not being effectively addressed by
such written communications, or upon request by any member of the Steering
Committee, the Steering Committee shall promptly conduct one or more telephone
conferences to address such questions or issues and shall prepare and deliver to
each Party a brief written report describing the significant issues and
discussions that take place during such telephone conference(s). A
representative of the Steering Committee jointly appointed by its members shall
provide each member with * notice of the time of any such telephone conferences
and the proposed agenda with respect thereto, unless waived by all members. The
Steering Committee shall meet at least once each quarter at the facilities of
ArQule, or at such other times and locations as the Steering Committee
determines. A representative of the Steering Committee jointly appointed by its
members shall provide each member with*
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*Confidential Treatment has been requested for the marked portion.
(7)
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notice of the time and location of meetings, unless such notice is waived by all
members. If a designated representative of a Party cannot attend any meeting of
the Steering Committee, such Party may designate a different representative for
that meeting without notice to the other Party, and the substitute member will
have full power to vote on behalf of the permanent member. Except as otherwise
provided in this Section 2, all actions and decisions of the Steering Committee
will require the unanimous consent of all of its members. If the Steering
Committee fails to reach agreement upon any matter, the dispute will be resolved
in accordance with the procedures set forth in Section 13.5 below. Within *
following each quarterly meeting of the Steering Committee, the Steering
Committee shall prepare and deliver, to both Parties, a written report
describing the decisions made, conclusions and actions agreed upon.
2.5. COOPERATION. Each Party agrees to provide the Steering Committee
with information and documentation as reasonably required for the Steering
Committee to fulfill its duties under this Agreement. In addition, each Party
agrees to make available its employees and consultants as reasonably requested
by the Steering Committee. The Parties anticipate that members of the Steering
Committee will communicate informally with each other and with employees and
consultants of the Parties on matters relating to the Directed Array(TM)
Program.
2.6. VISITS TO FACILITIES. Members of the Steering Committee shall
have reasonable access to the facilities of each Party where activities under
this Agreement are in progress, but only during normal business hours and with
reasonable prior notice. Each Party shall bear its own expenses in connection
with such site visits.
3. MAPPING ARRAY(TM) PROGRAM.
3.1. CONDUCT OF MAPPING ARRAY(TM) PROGRAM. ArQule will supply Sankyo
with Mapping Arrays(TM) containing approximately * each of approximately *
different ArQule Compounds during the first Contract Year selected by ArQule
from the * based on no more than * Chemical Themes selected by Sankyo and
approved by the Steering Committee. Subject to Section 3.6, ArQule will supply
Sankyo with Mapping Arrays(TM) containing approximately * each of approximately
* different ArQule Compounds during each subsequent Contract Year of the term of
the Mapping Array(TM) Program provided for in Section 3.5, selected at the start
of such subsequent Contract Year from the then available Mapping Array(TM)
compounds based on no more than * Chemical Themes selected by Sankyo and
approved by the Steering Committee. ArQule agrees to ship such * Mapping
Array(TM) compounds (i) for the first Contract Year by * (ii) for the second
Contract Year on or after the earlier to occur of (a) * after Sankyo completes
initial screening, as determined by the Steering Committee, of the Mapping
Array(TM) compounds shipped to Sankyo during the first Contract Year, or (ii) *,
or earlier when available if so requested by Sankyo in writing, and (iii) for
the third Contract Year *. Sankyo agrees to accept each such shipment of Mapping
Array(TM) compounds *. Promptly upon its receipt of any such Mapping Arrays(TM),
Sankyo shall commence testing of such Mapping Arrays(TM) for activity against
Targets. Upon the
-------------------
*Confidential Treatment has been requested for the marked portion.
(8)
14
completion by Sankyo of its testing of any such Mapping Arrays(TM), Sankyo shall
promptly provide each member of the Steering Committee with notice by telefax
communication detailing the discovery of Active Compounds, together with
relevant information concerning the functional activity identified, which
telefax shall be followed by a confirmatory letter.
3.2. MUTUAL DISCLOSURE. Initially, ArQule will identify the Chemical
Themes of each Mapping Array(TM) but not the structures of the individual ArQule
Compounds in the Mapping Arrays(TM). Sankyo may screen the Mapping Arrays(TM)
against any Targets during the term of this Agreement and thereafter. Initially,
Sankyo will not disclose the Targets screened. If Sankyo detects any Active
ArQule Compound in a Mapping Array(TM), ArQule will disclose (a) the structure
of each Active ArQule Compound and (b) the structures, but not the locations in
the Mapping Array(TM), of all other ArQule Compounds in the Mapping Array(TM)
and Sankyo will disclose (a) the identity of the Target and (b) the level of
activity. All such disclosed information shall be treated as Confidential
Information by both Parties. Sankyo shall submit each such Active ArQule
Compound to the Directed Array(TM) Program pursuant to Section 4. Sankyo, at its
discretion, may request that the Steering Committee designate any such Active
ArQule Compound and Active Homologs thereto as Licensed Compounds comprising a
Licensed Compound Set if such Active ArQule Compound and Active Homologs are
still available as Licensed Compounds. * Subject to the foregoing, (a) ArQule
shall notify the Steering Committee that such Active ArQule Compound and Active
Homologs thereto are properly designated as Licensed Compounds, and (b) provide
Sankyo with the confirmed chemical composition, structure, purity information
and location of all Active ArQule Compounds and Active Homologs thereto so
designated as Licensed Compounds belonging to such Licensed Compound Set.
3.3. RESERVATION OF ACTIVE ARQULE COMPOUNDS. Prior to designating any
Active ArQule Compounds and Active Homologs thereto as Licensed Compounds
pursuant to Section 3.2 hereof, Sankyo, at its discretion, may notify ArQule of
its intent to license such Active ArQule Compounds and Active Homologs, and
request a reservation of such Active ArQule Compounds and Active Homologs
thereto (collectively the "Reserved Compounds"). Upon ArQule receiving from
Sankyo (i) a written request to reserve such Reserved Compounds, and (ii)
disclosure of the Target and activity information pursuant to Section 3.2
hereof, ArQule shall reserve such Reserved Compounds for subsequent designation
by Sankyo as Licensed Compounds for a period ending upon the earlier to occur of
(i) * or (ii) * days.
3.4. MAPPING ARRAY(TM) PROGRAM PAYMENTS. In consideration of the
performance by ArQule of the Mapping Array(TM) Program, during each Contract
Year, Sankyo shall pay ArQule a delivery fee equal to * in the initial Contract
Year, payable *. Thereafter, Sankyo shall make the following annual payment to
ArQule during each Contract Year, in the second Contract Year payable * and in
the third Contract Year payable *:
Annual Payment = *
----------------
*Confidential Treatment has been requested for the marked portion.
(9)
15
Where CPI is a fraction, the numerator of which is the difference between
the Consumer Price Index (CPI-U; U.S. City Average for all items; 1982-84
= 100) as of the last month of the immediately preceding Contract Year
and the Consumer Price Index as of the month immediately preceding the
Effective Date and the denominator of which is the Consumer Price Index
as of the month immediately preceding the Effective Date.
3.5. TERM OF MAPPING ARRAY(TM) PROGRAM. The Mapping Array(TM) Program
shall commence on the Effective Date, continue for a period of * Contract Years,
unless earlier terminated as provided in Section 3.6 or Article 12 below.
Termination of the Mapping Array(TM) Program shall have no effect on the
continuation of any Directed Array(TM) Program.
3.6. PERFORMANCE OF MAPPING ARRAY(TM) PROGRAM. Sankyo shall have the *
the Mapping Array(TM) Program on or before the earlier to occur of (i) * as
determined by the Steering Committee, of the Mapping Array(TM) compounds shipped
to Sankyo during the first Contract Year, or (ii) *, upon written notice to
ArQule, in the event that *. ArQule shall be under the obligation to deliver
Mapping Arrays(TM) for the successive Contract Years *.
4. DIRECTED ARRAY(TM) PROGRAM.
4.1. DESCRIPTION OF DIRECTED ARRAY(TM) PROGRAM. Under the direction of
the Steering Committee and in accordance with the Research Plan, ArQule will
synthesize multiple Directed Arrays(TM) of compounds derived from (i) each
Sankyo Compound provided to ArQule by Sankyo and/or (ii) each Active ArQule
Compound provided by ArQule to Sankyo under the Mapping Array(TM) Program,
subject to Section 2.3 above. The Parties intend that, during the Research
Period, ArQule will produce such Directed Arrays(TM) in * Directed Array(TM)
Programs, each based on a different Chemical Theme and intended to produce
approximately *, per Contract Year for a minimum of * Contract Years beginning
on the Effective Date. However, the number of closely related Chemical Themes
actually submitted to each Directed Array(TM) Program for the same Target
pursuant to a given Research Plan and the number of ArQule Derivative Compounds
and/or Sankyo Derivative Compounds actually produced per Chemical Theme will be
determined by the Steering Committee. The Parties also intend that ArQule will
produce approximately * of each ArQule Derivative Compound and/or Sankyo
Derivative Compound in the Directed Arrays(TM), subject to the availability of
the original Sankyo Compounds and/or the ArQule Compounds; PROVIDED, HOWEVER,
that the amount of each ArQule Derivative Compound and/or Sankyo Derivative
Compound that ArQule actually produces will ultimately be determined by the
Steering Committee.
4.2. CONDUCT OF DIRECTED ARRAY(TM) PROGRAM. The Directed Array(TM)
Program shall be conducted in a good scientific manner and in compliance with
all applicable legal requirements. The conduct of the Directed Array(TM) Program
shall be the primary responsibility of ArQule with participation by Sankyo.
Sankyo shall propose Chemical Themes to the Steering Committee for inclusion in
the Directed Array(TM) Program. If the Steering Committee approves the inclusion
of the proposed Chemical Theme, Sankyo shall
---------------
*Confidential Treatment has been requested for the marked portion.
(10)
16
provide ArQule with the requisite amount and purity of Sankyo Compounds for that
Chemical Theme, as directed by the Steering Committee. ArQule shall thereupon
diligently synthesize Directed Arrays(TM) of ArQule Derivative Compounds and/or
Sankyo Derivative Compounds, as the case may be, in accordance with the Research
Plan. Sankyo shall, in its discretion, test all compounds in the Directed
Arrays(TM). The Parties shall continue the procedure described in this Section
4.2 for each Active Compound until the earliest to occur of (i) the
determination by the Steering Committee, in accordance with Section 2.2, to
designate any such Active Compound and any Active Homolog thereto as a Licensed
Compound Set, (ii) the determination by the Steering Committee to cease further
testing of such Active Compound, or (iii) the termination of this Agreement in
accordance with Section 12.
4.3. DIRECTED ARRAY(TM) PROGRAM PAYMENTS.
4.3.1. DELIVERY FEE. In consideration of the performance by
ArQule of the Directed Array(TM) Program, Sankyo shall pay ArQule a delivery fee
equal to * per Directed Array(TM) Program during the first Contract Year,
payable *. Thereafter, Sankyo shall make the following annual payment to ArQule
during each Contract Year, payable *:
Annual Payment = *
Notwithstanding the foregoing, if the number of Active Compounds submitted to
all Directed Array(TM) Programs exceeds * for the first * Contract Years, the
Parties *.
4.3.2. EXPENSES. In addition to the amounts payable pursuant to
Section 4.3.1 above, Sankyo shall pay any and all Extraordinary Expenses of
ArQule, as required and approved by the Steering Committee.
4.4. TERM OF DIRECTED ARRAY(TM) PROGRAM. The term of each Directed
Array(TM) Program shall begin upon the commencement of the Research Plan and
terminate no later than the first anniversary of such commencement date unless
extended by the Steering Committee because of extraordinary circumstances. The
period for initiating and completing all Directed Array(TM) Programs commenced
pursuant to Section 4.1 hereof shall terminate at the end of the * Contract
Year, PROVIDED, HOWEVER, that upon * months prior written notice by Sankyo, such
period may be extended for * period at * on terms and conditions to be mutually
agreed upon by the Parties.
5. LICENSE GRANTS; REVERSION OF RIGHTS.
5.1. SCREENING LICENSES. ArQule hereby grants to Sankyo, under ArQule
Patent Rights and ArQule Technology *.
5.2. PRECLINICAL AND CLINICAL LICENSES. Upon the identification by
Sankyo of any Active Compound and the determination by the Steering Committee
that such Active
-----------------
*Confidential Treatment has been requested for the marked portion.
(11)
17
Compound and any Active Homolog thereto should properly be designated as a
Licensed Compound Set, ArQule shall grant to Sankyo, under any intellectual
property rights covering the composition, manufacture or use of such Licensed
Compound Set, *.
5.3. COMMERCIALIZATION LICENSE. ArQule hereby grants to Sankyo *.
5.4. REVERSION OF RIGHTS; RETURN OF MATERIALS. In the event that *. In
such event, ArQule shall thereafter be free to grant licenses covering such
Active ArQule Compounds and Active Homologs related to such Active ArQule
Compounds to third parties. Upon termination of such license by ArQule, Sankyo
shall (i) grant to ArQule an exclusive, royalty-free license, with the right to
grant sublicenses, to manufacture, use or sell such Active ArQule Compounds and
Active Homologs related to such Active ArQule Compounds under any patent rights
of Sankyo covering the composition or use of such Active ArQule Compounds and
Active Homologs related to such Active ArQule Compounds and (ii) return to
ArQule all Proprietary Materials and Confidential Information supplied by ArQule
which relate to such Active ArQule Compounds and Active Homologs related to such
Active ArQule Compounds. Notwithstanding the foregoing, the provisions of this
Section 5.4 shall not apply to Sankyo Compounds or Sankyo Derivative Compounds.
6. OWNERSHIP OF COMPOUNDS.
6.1. SANKYO COMPOUNDS; SANKYO DERIVATIVE COMPOUNDS. All Sankyo
Compounds and Sankyo Derivative Compounds shall be owned by Sankyo or its
Affiliates, except, and only to the extent that, with respect to the Directed
Array(TM) Program, ArQule can show that any such compound *.
6.2. ARQULE COMPOUNDS; ARQULE DERIVATIVE COMPOUNDS. All ArQule
Compounds and ArQule Derivative Compounds shall be owned by ArQule except, and
only to the extent that, Sankyo can show that any such compound was in the
possession of Sankyo before it was provided by ArQule to Sankyo or its
Affiliates.
7. INTELLECTUAL PROPERTY RIGHTS.
7.1. OWNERSHIP OF PATENT RIGHTS.
(a) ARQULE PATENT RIGHTS. Any Patent Rights filed by either
Party covering Active ArQule Compounds only will be owned solely by
ArQule except as provided in Section 7.1(b).
(b) JOINT PATENT RIGHTS. Any Patent Rights (i) filed by either
Party covering both Active ArQule Compounds and Active Sankyo Compounds,
(ii) claiming an Active ArQule Compound and uses thereof discovered by
Sankyo; and/or
---------------
*Confidential Treatment has been requested for the marked portion.
(12)
18
(iii) claiming an Active Sankyo Compound and uses thereof discovered by
ArQule, shall be owned jointly by ArQule and Sankyo.
(c) SANKYO PATENT RIGHTS. Any Patent Rights filed by either
Party covering solely Active Sankyo Compounds will be owned solely by
Sankyo.
(d) PATENT RIGHTS GENERALLY. Any Patent Rights arising out of or
related to this Agreement, the ownership of which cannot be determined
from Subsections (a), (b) or (c) of this Section 7.1, will be owned by
the Party(ies) having inventorship under the patent laws of the United
States.
7.2. MANAGEMENT OF JOINT PATENT RIGHTS. In the case of Joint Patent
Rights, the Parties shall agree on the allocation of responsibility for, and the
expense of, the preparation, filing, prosecution, and maintenance of any Joint
Patent Rights claiming such inventions. In the event of any disagreement
concerning any Joint Patent Rights, the matter shall be resolved by the Steering
Committee or, in the absence thereof, by the President of ArQule and the
Director of the Patent Department of Sankyo. The Party controlling a Joint
Patent Right shall consult with the other Party as to the preparation, filing,
prosecution, and maintenance of such Joint Patent Right reasonably prior to any
deadline or action with the U.S. Patent & Trademark Office or its foreign
equivalent in Japan or Europe, and shall furnish to the other Party copies of
all relevant documents reasonably in advance of such consultation. In the event
that the Party controlling a Joint Patent Right desires to abandon such Joint
Patent Right, or if the Party assuming control of a Joint Patent Right later
declines responsibility for such Joint Patent Right, the controlling Party shall
provide reasonable prior written notice to the other Party of such intention to
abandon or decline responsibility, and such other Party shall have the right, at
its expense, to prepare, file, prosecute, and maintain such Joint Patent Rights.
7.3. COOPERATION OF THE PARTIES. Each Party agrees to cooperate fully
in the preparation, filing, and prosecution of any Patent Rights under this
Agreement. Such cooperation includes, but is not limited to:
(a) executing all papers and instruments, or requiring its
employees or agents, to execute such papers and instruments, so as to
effectuate the ownership of Patent Rights set forth in Section 7.1 above
and to enable the other Party to apply for and to prosecute patent
applications in any country;
(b) promptly informing the other Party of any matters coming to
such Party's attention that may affect the preparation, filing, or
prosecution of any such patent applications; and
(c) undertaking no actions that are potentially deleterious to
the preparation, filing, or prosecution of such patent applications.
7.4. INFRINGEMENT BY THIRD PARTIES. ArQule and Sankyo shall each
promptly notify the other in writing of any alleged or threatened infringement
by a third party of any ArQule
(13)
19
Patent Right, Sankyo Patent Right or Joint Patent Right of which they become
aware. The parties shall consult concerning the action(s) to be taken.
8. PAYMENTS, REPORTS, AND RECORDS.
8.1. MILESTONE PAYMENTS. In partial consideration of the rights granted
Sankyo under this Agreement, Sankyo shall pay ArQule the following amounts
within * days after each occurrence of the following milestones:
Payment for Royalty-
Bearing Products Milestone
-------------------- ---------
* *
Such milestone payments shall be non-refundable and shall not be credited
against royalties payable to ArQule under this Agreement, PROVIDED, HOWEVER,
that * of any such milestone payments made with respect to any Royalty-Bearing
Product consisting of an ArQule Compound provided to Sankyo pursuant to the
Mapping Array(TM) Program, and not submitted to a Directed Array(TM) Program,
shall be creditable up to * per year against royalties due ArQule for such
Royalty-Bearing Product pursuant to Section 8.3. Sankyo shall promptly notify
ArQule of each occurrence of any of the foregoing milestones.
8.2. ALTERNATIVE TO MILESTONE PAYMENTS. If any time on or before * days
prior to the * with respect to any Royalty-Bearing Product, Sankyo elects, *, it
shall so notify ArQule in writing. Promptly upon its receipt of such written
notice, ArQule shall enter into good faith negotiations with Sankyo for an
appropriate amendment to this Agreement under which either *. If the Parties are
unable to reach agreement with respect to the foregoing by the expiration of *
days from the commencement of such negotiations, Sankyo shall remain obligated
to pay the full amount of milestone payments set forth in Section 8.1 above for
such Royalty-Bearing Product.
8.3. ROYALTIES. In consideration of the licenses granted to Sankyo
hereunder, for each Royalty Period, Sankyo shall pay to ArQule a royalty for
each Royalty-Bearing Product as follows:
Source of Royalty-bearing Product Royalty Rate (Percentage of Net Sales)
--------------------------------- --------------------------------------
Worldwide Territory U.s. Territory
------------------- --------------
Sankyo Derivative Compound * *
ArQule Compound or ArQule * *
Derivative Compound
-------------
*Confidential Treatment has been requested for the marked portion.
(14)
20
8.4. REPORTS AND PAYMENTS. Within * days after the conclusion of each
Royalty Period, Sankyo shall deliver to ArQule a report containing the following
information:
*
All such reports shall be maintained in confidence by ArQule. If no royalties
are due to ArQule for any reporting period, the report shall so state.
Concurrent with this report, Sankyo shall remit to ArQule any payment due for
the applicable Royalty Period. The method of payment shall be mutually agreed
to. All amounts payable to ArQule under this Section will first be calculated in
the currency of sale and then converted into U.S. dollars in accordance with
Section 8.6, and such amounts shall be paid without deduction of any withholding
taxes, value-added taxes, or other charges applicable to such payments, except
as provided for in Section 8.9.
8.5. INVOICES; PAYMENTS IN U.S. DOLLARS. With the exception of royalty
payments due under Section 8.3, ArQule shall submit invoices to Sankyo for each
payment due ArQule hereunder (including without limitation all payments due
pursuant to Section 3.3), and Sankyo shall pay such invoices within * days of
receipt thereof. All payments due under this Agreement shall, except as provided
in Section 8.6 below, be payable in United States dollars. Conversion of foreign
currency to U.S. dollars shall be made at the conversion rate existing in the
United States (as reported in the WALL STREET JOURNAL) on the last working day
of the calendar quarter preceding the applicable calendar quarter. Such payments
shall be without deduction of exchange, collection, or other charges, except as
provided for in Section 8.9.
8.6. PAYMENTS IN OTHER CURRENCIES. If by law, regulation, or fiscal
policy of a particular country, conversion into United States dollars or
transfer of funds of a convertible currency to the United States is restricted
or forbidden, Sankyo shall give ArQule prompt written notice of such
restriction, which notice shall satisfy the *day payment deadline described in
Section 8.4. Sankyo shall pay any amounts due ArQule through whatever lawful
methods ArQule reasonably designates; provided, however, that if ArQule fails to
designate such payment method within * days after ArQule is notified of the
restriction, then Sankyo may deposit such payment in local currency to the
credit of ArQule in a recognized banking institution selected by Sankyo and
identified by written notice to ArQule, and such deposit shall fulfill all
obligations of Sankyo to ArQule with respect to such payment.
8.7. RECORDS. Sankyo and its Affiliates shall maintain complete and
accurate records of Royalty-Bearing Products made, used or sold by them or their
Sublicensees under this Agreement, and any amounts payable to ArQule in relation
to such Royalty-Bearing Products, which records shall contain sufficient
information to permit ArQule to confirm the accuracy of any reports delivered to
ArQule in accordance with Section 8.4. The relevant Party shall retain such
records relating to a given Royalty Period for at least * years after the
conclusion of that Royalty Period. Each Party (acting as the "Auditing Party")
shall have the right, at its own expense, to cause an independent certified
public accountant to inspect such records of the other Party (the "Audited
Party") during normal business hours for the
----------------
*Confidential Treatment has been requested for the marked portion.
(15)
21
sole purpose of verifying any reports and payments delivered under this
Agreement. Such accountant shall not disclose to the Auditing Party any
information other than information relating to accuracy of reports and payments
delivered under this Agreement and shall provide the Audited Party with a copy
of any report given to the Auditing Party. The Parties shall reconcile any
underpayment or overpayment within * days after the accountant delivers the
results of the audit. In the event that any audit performed under this Section
reveals an underpayment in excess of * in any Royalty Period, the Audited Party
shall bear the full cost of such audit. Each party may exercise its rights under
this Section only once every year and only with reasonable prior notice to the
other Party.
8.8. LATE PAYMENTS. Any payments by Sankyo that are not paid on or
before the date such payments are due under this Agreement shall bear interest,
to the extent permitted by law, at * calculated based on the number of days that
payment is delinquent.
8.9. WITHHOLDING TAX PAYMENTS.
8.9.1. PAYMENTS. All amounts payable under Section 3.4, 4.3 and
8.1 shall represent the actual proceeds to be received by ArQule after
any applicable deductions have been made, including without limitation
any withholding taxes. ArQule agrees to reasonably cooperate with Sankyo
in obtaining a refund of any withholding taxes paid by Sankyo with
respect to any payments to ArQule hereunder. In the event that ArQule is
successful in obtaining any refund of tax withholding amounts paid by
Sankyo under Sections 3.4, 4.3 and 8.1 of this Agreement, ArQule agrees
to promptly remit such refund amount received by ArQule to Sankyo.
8.9.2. ROYALTY PAYMENTS. Sankyo may only withhold from royalties
due to ArQule under Section 8.3 amounts for payment of Japanese
withholding tax that is required by law to be paid to the Japanese taxing
authority with respect to such royalty amounts due to ArQule; PROVIDED,
HOWEVER, that such amount withheld shall not exceed the lesser of * and
FURTHER PROVIDED, HOWEVER, that in regard to any such tax withholding
Sankyo shall give ArQule such documents, and provide any other
cooperation or assistance on a reasonable basis, as may be necessary to
enable ArQule to claim exemption therefrom, to receive a full allowance
of such withholding tax or claim a foreign tax credit, and Sankyo shall
upon ArQule's request give proper evidence as to the payment of such tax.
In the event that Sankyo is successful in obtaining any refund of tax
withholding amounts paid by Sankyo under Sections 8.3 of this Agreement,
Sankyo agrees to promptly remit such refund amount received by Sankyo to
ArQule.
9. CONFIDENTIAL INFORMATION.
9.1. DEFINITION OF CONFIDENTIAL INFORMATION. Confidential Information
shall mean any technical or business information furnished by the Disclosing
Party to the Receiving Party in connection with this Agreement and specifically
designated as confidential. Such
---------------
*Confidential Treatment has been requested for the marked portion.
(16)
22
Confidential Information may include, without limitation, the identity of a
chemical compound, the use of a chemical compound, trade secrets, know-how,
inventions, technical data or specifications, testing methods, business or
financial information, research and development activities, product and
marketing plans, and customer and supplier information.
9.2. DESIGNATION OF CONFIDENTIAL INFORMATION. Confidential Information
that is disclosed in writing shall be marked with a legend indicating its
confidential status. Confidential Information that is disclosed orally or
visually shall be documented in a written notice prepared by the Disclosing
Party and delivered to the Receiving Party within thirty (30) days of the date
of disclosure; such notice shall summarize the Confidential Information
disclosed to the Receiving Party and reference the time and place of disclosure.
9.3. OBLIGATIONS. The Receiving Party agrees that it shall:
(a) maintain all Confidential Information in strict confidence,
except that the Receiving Party may disclose or permit the disclosure of
any Confidential Information to its, and its Affiliates, directors,
officers, employees, consultants, and advisors who are obligated to
maintain the confidential nature of such Confidential Information and who
need to know such Confidential Information for the purposes set forth in
this Agreement;
(b) use all Confidential Information solely for the purposes set
forth in, or as permitted by, this Agreement; and
(c) allow its directors, officers, employees, consultants, and
advisors to reproduce the Confidential Information only to the extent
necessary to effect the purposes set forth in this Agreement, with all
such reproductions being considered Confidential Information.
9.4. EXCEPTIONS. The obligations of the Receiving Party under
Section 9.3 above shall not apply to the extent that the Receiving Party can
demonstrate that certain Confidential Information:
(a) was in the public domain prior to the time of its disclosure
under this Agreement;
(b) entered the public domain after the time of its disclosure
under this Agreement through means other than an unauthorized disclosure
resulting from an act or omission by the Receiving Party;
(c) was independently developed or discovered by the Receiving
Party without use of the Confidential Information;
(d) is or was disclosed to the Receiving Party at any time,
whether prior to or after the time of its disclosure under this
Agreement, by a third party having no fiduciary relationship with the
Disclosing Party and having no obligation of
(17)
23
confidentiality to the Disclosing Party with respect to such Confidential
Information; or
(e) is required to be disclosed to comply with applicable laws or
regulations (such as disclosure to the FDA or the United States Patent
and Trademark Office or to their foreign equivalents), or to comply with
a court or administrative order, provided that the Disclosing Party
receives prior written notice of such disclosure and that the Receiving
Party takes all reasonable and lawful actions to obtain confidential
treatment for such disclosure and, if possible, to minimize the extent of
such disclosure.
9.5. RETURN OF CONFIDENTIAL INFORMATION. Upon the termination of this
Agreement, at the request of the Disclosing Party, the Receiving Party shall
destroy or return to the Disclosing Party all originals, copies, and summaries
of documents, materials, and other tangible manifestations of Confidential
Information in the possession or control of the Receiving Party, except that the
Receiving Party may retain one copy of the Confidential Information in the
possession of its legal counsel (for ArQule) and its Legal Department (for
Sankyo) solely for the purpose of monitoring its obligations under this
Agreement.
9.6. SURVIVAL OF OBLIGATIONS. The obligations set forth in this Article
shall remain in effect for a period of * years after termination of this
Agreement, except that the obligations of the Receiving Party to destroy or
return Confidential Information to the Disclosing Party shall survive until
fulfilled.
10. REPRESENTATIONS AND WARRANTIES.
10.1. AUTHORIZATION. Each Party represents and warrants to the other
that it has the legal right and power to enter into this Agreement, to extend
the rights and licenses granted to the other in this Agreement, and to fully
perform its obligations hereunder, and that the performance of such obligations
will not conflict with its charter documents or any agreements, contracts, or
other arrangements to which it is a Party.
11. INDEMNIFICATION AND INSURANCE.
11.1. SANKYO INDEMNITY OBLIGATIONS. Sankyo agrees to defend, indemnify
and hold ArQule, its Affiliates and their respective directors, officers,
employees and agents harmless from all costs, judgments, liabilities and damages
assessed by a court of competent jurisdiction arising from claims asserted by a
third party against ArQule, its Affiliates or their respective directors,
employees or agents as a result of: (a) actual or asserted violations of any
applicable law or regulation by Sankyo, its Affiliates, sublicensees or third
party manufacturers by virtue of which the Royalty-Bearing Products
manufactured, distributed or sold shall be alleged or determined to be
adulterated, misbranded, mislabeled or otherwise
---------------
*Confidential Treatment has been requested for the marked portion.
(18)
24
not in compliance with such applicable law or regulation; (b) claims for bodily
injury, death or property damage attributable to the manufacture, distribution,
sale or use of the Royalty-Bearing Products by Sankyo, its Affiliates,
sublicensees or third party manufacturers; or (c) a recall ordered by a
governmental agency, or required by a confirmed failure, of Royalty-Bearing
Products manufactured, distributed, or sold by Sankyo, its Affiliates,
sublicensees or third party manufacturers as reasonably determined by the
Parties hereto.
11.2. PROCEDURE. In the event that ArQule or any of its Affiliates or
their respective employees or agents (the "Indemnitee") intends to claim
indemnification under this Article 11, such Party shall promptly notify Sankyo
of any loss, claim, damage, liability or action in respect of which the
Indemnitee intends to claim such indemnification, and Sankyo shall assume the
defense thereof with counsel mutually satisfactory to the Parties; provided,
however, that an Indemnitee shall have the right to retain its own counsel, with
the fees and expenses to be paid by Sankyo, if representation of such Indemnitee
by the counsel retained by Sankyo would be inappropriate due to actual or
potential differing interests between such Indemnitee and any other Party
represented by such counsel in such proceedings. The indemnity agreement in this
Article 11 shall not apply to amounts paid in settlement of any loss, claim,
damage, liability or action if such settlement is effected without the consent
of Sankyo, which consent shall not be withheld unreasonably. The failure to
deliver notice to Sankyo within a reasonable time after the commencement of any
such action, if prejudicial to its ability to defend such action, shall relieve
Sankyo of any liability to the Indemnitee under this Article 11, but the
omission so to deliver notice to Sankyo will not relieve it of any liability
that it may have to any Indemnitee otherwise than under this Article 11. The
Indemnitee under this Article 11, its employees and agents, shall cooperate
fully with Sankyo and its legal representatives in the investigation of any
action, claim or liability covered by this indemnification.
11.3. INSURANCE. Sankyo shall maintain appropriate product liability
insurance with respect to development, manufacture and sales of the
Royalty-Bearing Products by Sankyo in such amount as Sankyo customarily
maintains with respect to sales of its other products. Sankyo shall each
maintain such insurance for so long as it continues to manufacture or sell the
Royalty-Bearing Products, and thereafter for so long as Sankyo maintains
insurance for itself covering such manufacture or sales.
12. TERM AND TERMINATION.
12.1. TERM. This Agreement shall commence on the Effective Date and
shall remain in effect until the expiration of the last Royalty Period covering
any Royalty-Bearing Product, unless earlier terminated as provided in this
Article 12.
12.2. BREACH OF PAYMENT OBLIGATIONS. In the event that Sankyo fails to
make timely payment of any amounts due to ArQule under this Agreement, ArQule
may terminate this
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Agreement upon * days written notice to Sankyo, unless Sankyo pays all past-due
amounts within such *day notice period.
12.3. MATERIAL BREACH. In the event that either Party commits a material
breach of any of its obligations under this Agreement (other than as provided in
Section 12.2) and such Party fails (i) to remedy that breach within * days after
receiving written notice thereof from the other Party or (ii) to commence
dispute resolution pursuant to Section 13.5, within * days after receiving
written notice of that breach from the other Party, the other Party may
immediately terminate this Agreement upon written notice to the breaching Party.
12.4. EFFECT OF TERMINATION. Termination of this Agreement shall not
relieve the Parties of any obligation accruing prior to such termination. The
provisions of Article 5, Article 6, Article 7 and Article 8 (with respect only
to milestone payments and royalties accrued at the time of termination but not
yet paid), Article 9, Article 11 and Article 13 shall survive the expiration or
termination of this Agreement.
13. MISCELLANEOUS.
13.1. RELATIONSHIP OF PARTIES. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, employer-employee or joint
venture relationship between the Parties. No Party shall incur any debts or make
any commitments for the other, except to the extent, if at all, specifically
provided therein.
13.2. PUBLICITY. Neither Party shall use the name of the other Party or
reveal the terms of this Agreement in any publicity or advertising without the
prior written approval of the other Party, except that (i) either Party may use
the text of a written statement approved in advance by both Parties without
further approval, (ii) either Party shall have the right to identify the other
Party and to disclose the terms of this Agreement as required by applicable
securities laws or other applicable law or regulation, and (iii) either Party
may use the name of the other Party and reveal the existence of this Agreement.
13.3. NON-SOLICITATION. During the term of this Agreement and thereafter
for a period of * years, each Party agrees not to seek to persuade or induce any
employee of the other Party to discontinue his or her employment with that Party
in order to become employed by or associated with any business, enterprise, or
effort that is associated with its own business.
13.4. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts.
13.5. DISPUTE RESOLUTION PROCEDURES.
(a) The Parties hereby agree that they will attempt in good
faith to resolve any controversy, claim or dispute ("Dispute") arising
out of or relating to this
------------
*Confidential Treatment has been requested for the marked portion.
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Agreement promptly by negotiations. Any such Dispute which is not settled
by the Parties within fifteen (15) days after notice of such Dispute is
given by one Party to the other in writing shall be referred to a senior
executive of ArQule and the Director of the Research Institute of Sankyo
who are authorized to settle such Disputes on behalf of their respective
companies ("Senior Executives"). The Senior Executives will meet for
negotiations within fifteen (15) days of the end of the 15 day
negotiation period referred to above, at a time and place mutually
acceptable to both Senior Executives. If the Dispute has not been
resolved within thirty (30) days after the end of the 15 day negotiation
period referred to above (which period may be extended by mutual
agreement), subject to any rights to injunctive relief and unless
otherwise specifically provided for herein, any Dispute will be settled
first by non-binding mediation and thereafter by arbitration as described
in subsections (b) and (c) below.
(b) Any Dispute which is not resolved by the Parties within
the time period described in subsection (a) shall be submitted to an
alternative dispute resolution process ("ADR"). Within five (5) business
days after the expiration of the thirty (30) day period set forth in
subsection (a), each Party shall select for itself a representative with
the authority to bind such Party and shall notify the other Party in
writing of the name and title of such representative. Within ten (10)
business days after the date of delivery of such notice, the
representatives shall schedule a date for engaging in non-binding ADR
with a neutral mediator or dispute resolution firm mutually acceptable to
both representatives. Any such mediation shall be held in Boston,
Massachusetts. Thereafter, the representatives of the Parties shall
engage in good faith in an ADR process under the auspices of such
individual or firm. If the representatives of the Parties have not been
able to resolve the Dispute within thirty (30) business days after the
conclusion of the ADR process, or if the representatives of the Parties
fail to schedule a date for engaging in non-binding ADR within the ten
(10) day period set forth above, the Dispute shall be settled by binding
arbitration as set forth in subsection (c) below. If the representatives
of the Parties resolve the dispute within the thirty (30) day period set
forth above, then such resolution shall be binding upon the Parties. If
either Party fails to abide by such resolution, the other Party can
immediately refer the matter to arbitration under Section 13.5(c).
(c) If the Parties have not been able to resolve the
Dispute as provided in subsections (a) and (b) above, the Dispute shall
be finally settled by binding arbitration. Any arbitration hereunder
shall be conducted under rules of the American Arbitration Association.
The arbitration shall be conducted before three arbitrators chosen
according to the following procedure: each of the Parties shall appoint
one arbitrator and the two so nominated shall choose the third. If the
arbitrators chosen by the Parties cannot agree on the choice of the third
arbitrator within a period of thirty (30) days after their appointment,
then the third arbitrator shall be appointed by the Court of Arbitration
of the American Arbitration Association. Any such arbitration shall be
held in Boston, Massachusetts. The arbitrators shall have the authority
to grant specific performance, and to allocate between the Parties the
costs of arbitration in such equitable manner as they determine. The
arbitral award (i) shall be final and binding upon the Parties; and (ii)
may be entered in any court of competent jurisdiction.
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(d) Nothing contained in this Section or any other
provisions of this Agreement shall be construed to limit or preclude a
Party from bringing any action in any court of competent jurisdiction for
injunctive or other provisional relief to compel the other Party to
comply with its obligations hereunder before or during the pendency of
mediation or arbitration proceedings. The Parties hereby irrevocably
consent to submit to the jurisdiction of the courts of the Commonwealth
of Massachusetts and/or any other court having jurisdiction for this
purpose.
13.6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
13.7. HEADINGS. All headings in this Agreement are for convenience only
and shall not affect the meaning of any provision hereof.
13.8. BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon the Parties, their Affiliates, and their respective lawful
successors and assigns.
13.9. ASSIGNMENT. This Agreement may not be assigned by either Party
without the prior written consent of the other Party, except that either Party
may assign this Agreement to a successor in connection with the merger,
consolidation, or sale of all or substantially all of its assets or that portion
of its business pertaining to the subject matter of this Agreement.
13.10. NOTICES. All notices, requests, demands and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed to have been duly given upon the date of receipt if
delivered by hand, recognized international overnight courier, confirmed
facsimile transmission, or registered or certified mail, return receipt
requested, postage prepaid to the following addresses or facsimile numbers:
If to Sankyo: If to ArQule:
Sankyo Co., LTD ArQule, Inc.
2-58, Hiromachi 1-Chome ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇-▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tokyo ▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Tel: ▇▇ ▇▇▇▇ ▇▇▇▇ Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: ▇▇ ▇▇▇▇ ▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & Dodge
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esquire
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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Either Party may change its designated address and facsimile number by notice to
the other Party in the manner provided in this Section.
13.11. AMENDMENT AND WAIVER. This Agreement may be amended,
supplemented, or otherwise modified only by means of a written instrument signed
by both Parties. Any waiver of any rights or failure to act in a specific
instance shall relate only to such instance and shall not be construed as an
agreement to waive any rights or fail to act in any other instance, whether or
not similar.
13.12. SEVERABILITY. In the event that any provision of this Agreement
shall, for any reason, be held to be invalid or unenforceable in any respect,
such invalidity or unenforceability shall not affect any other provision hereof,
and the Parties shall negotiate in good faith to modify the Agreement to
preserve (to the extent possible) their original intent.
13.13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Parties with respect to the subject matter hereof and supersedes all
prior agreements or understandings between the Parties relating to the subject
matter hereof.
13.14. FORCE MAJEURE. Neither Party shall be held liable or responsible
to the other Party, nor be deemed to be in breach of this Agreement, for failure
or delay in fulfilling or performing any provisions of this Agreement when such
failure or delay is caused by or results from any cause whatsoever outside the
reasonable control of the Party concerned including, but not limited to, fire,
explosion, breakdown of plant, strike, lock-out, labor disputes, casualty or
accident, lack or failure of transportation facilities, flood, lack or failure
of sources of supply or of labor, raw materials or energy, civil commotion,
embargo, any law, regulation, decision, demand or requirement of any national or
local government or authority. The Party claiming relief shall, without delay,
notify the other Party by registered airmail or by telefax of the interruption
and cessation thereof and shall use its best efforts to remedy the effects of
such hindrance with all reasonable dispatch. The onus of proving that any such
Force Majeure event exists shall rest upon the Party so asserting. During the
period that one Party is prevented from performing its obligations under this
Agreement due to a Force Majeure event, the other Party may, in its sole
discretion, suspend any obligations that relate thereto. Upon cessation of such
Force Majeure event the Parties hereto shall use their best efforts to make up
for any suspended obligations. If such Force Majeure event is anticipated to
continue, or has existed for nine (9) consecutive months or more, this Agreement
may be forthwith terminated by either Party by registered airmail or by telefax.
In case of such termination the terminating Party will not be required to pay to
the other Party any indemnity whatsoever.
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as a sealed instrument effective as of the date first above written.
SANKYO CO., LTD ARQULE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------- --------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Ph.D. Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Member of the Board and Title: President and Chief Executive
Director of Research
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EXHIBIT A
RESEARCH PLAN
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