Exhibit 10.23

 

Execution Copy

 

LICENSE, CO-DEVELOPMENT

 

AND CO-COMMERCIALIZATION AGREEMENT

 

BY AND BETWEEN

 

ARQULE, INC.

 

and

 

DAIICHI SANKYO CO., LTD

 

December 18, 2008

 

[*] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.  OMITTED TEXT IS INDICATED BY AN
“*”.

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

1.

DEFINITIONS

1

 

 

 

2.

ADMINISTRATION OF THE COLLABORATION

27

 

2.1

Joint Steering Committee

27

 

2.2

Joint Development Committee

30

 

2.3

Joint Life Cycle Management Committee

33

 

2.4

Joint Finance Committee

34

 

2.5

US Joint Marketing Committee

34

 

2.6

Alliance Managers

38

 

2.7

Decision Making

39

 

2.8

Appointment Not an Obligation; No Breach

39

 

 

 

 

3.

DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS

40

 

3.1

Implementation of Development Program

40

 

3.2

Identification of Back-Up Compounds

43

 

3.3

Supply of Licensed Products for Development and Commercialization

43

 

3.4

Supply of Proprietary Materials

44

 

3.5

Licensed Product Commercialization

45

 

3.6

Development and Commercialization Diligence

46

 

3.7

Compliance

46

 

3.8

Cooperation

47

 

3.9

Global Commercialization Coordination

47

 

3.10

Reports; Information; Updates

47

 

3.11

Development Cost Sharing; Reconciliation

51

 

3.12

Co-Commercialization Option

53

 

3.13

Expansion of the Field

57

 

3.14

Additional Cancer Indications

58

 

3.15

Additional Phase 5 Clinical Trials

60

 

 

 

 

4.

PAYMENTS

60

 

4.1

Up-front Fee

60

 

4.2

Milestone Payments

61

 

4.3

Payment of Royalties; Royalty Rates; Accounting and Records

64

 

 

 

 

5.

CONFIDENTIALITY

69

 

5.1

Confidentiality

69

 

5.2

Publicity

70

 

5.3

Publications and Presentations

71

 

5.4

Prior Approved Publication

72

 

5.5

Mechanism of Inhibition Information

72

 

 

 

 

6.

LICENSE GRANTS; EXCLUSIVITY

72

 

6.1

Licenses

72

 

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6.2

Right to Sublicense

74

 

6.3

No Other Rights

75

 

6.4

Exclusivity

75

 

6.5

Use of Third Party Technology

76

 

 

 

 

7.

INTELLECTUAL PROPERTY RIGHTS

77

 

7.1

ARQULE Intellectual Property Rights

77

 

7.2

DS Intellectual Property Rights

77

 

7.3

Joint Intellectual Property Rights

77

 

7.4

Patent Coordinators

78

 

7.5

Inventorship

78

 

 

 

 

8.

FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS

79

 

8.1

Patent Filing, Prosecution and Maintenance

79

 

8.2

Legal Actions

82

 

 

 

 

9.

TERM AND TERMINATION

86

 

9.1

Term

86

 

9.2

Termination

86

 

9.3

Consequences of Termination of Agreement

88

 

9.4

Surviving Provisions

92

 

 

 

 

10.

REPRESENTATIONS AND WARRANTIES

92

 

10.1

Mutual Representations and Warranties

92

 

10.2

Additional Representations of ARQULE

93

 

10.3

Covenants of DS Relating to Existing License Agreement

94

 

 

 

 

11.

INDEMNIFICATION

95

 

11.1

Indemnification of ARQULE by DS

95

 

11.2

Indemnification of DS by ARQULE

95

 

11.3

Conditions to Indemnification

96

 

11.4

Warranty Disclaimer

96

 

11.5

No Warranty of Success

96

 

11.6

Limited Liability

97

 

 

 

 

12.

MISCELLANEOUS

97

 

12.1

Arbitration

97

 

12.2

Notices

98

 

12.3

Governing Law

99

 

12.4

Binding Effect

100

 

12.5

Headings

100

 

12.6

Counterparts

100

 

12.7

Amendment; Waiver

100

 

12.8

No Third Party Beneficiaries

100

 

12.9

Purposes and Scope

100

 

12.10

Assignment and Successors

101

 

12.11

Force Majeure

101

 

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12.12

Interpretation

101

 

12.13

Integration; Severability

101

 

12.14

Further Assurances

102

 

12.15

Effective Date

102

 

List of Schedules

Schedule 1

Description of ARQ 197

 

Schedule 2

ARQULE Patent Rights

 

Schedule 3

Material Terms to be Included in Co-Commercialization Agreement

 

 

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LICENSE, CO-DEVELOPMENT AND CO-COMMERCIALIZATION AGREEMENT

 

This LICENSE, CO-DEVELOPMENT AND CO-COMMERCIALIZATION AGREEMENT (this
“Agreement”) is entered into as of December 18, 2008 (the “Execution Date”) and
effective as of the Effective Date (as defined below), by and between
ArQule, Inc., a Delaware corporation with offices at 19 Presidential Way,
Woburn, Massachusetts 01801 (“ARQULE”), and Daiichi Sankyo Co., Ltd, a Japanese
company organized under the laws of Japan with offices at 3-5-1 Nihonbashi
Honcho, Chuo-ku, Tokyo 103-8426, Japan (“DS”).  Each of DS and ARQULE is
sometimes referred to individually herein as a “Party” and collectively as the
“Parties.”

 

WHEREAS, ARQULE has developed and controls certain technology and proprietary
materials related to its proprietary compound ARQ 197 and is engaged in the
research, development and commercialization of human therapeutics; and

 

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

 

WHEREAS, the Parties desire to enter into a collaboration for the purpose of
developing and commercializing products containing ARQ 197 for the prevention,
diagnosis, delay and treatment of cancer.

 

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

 

1.                                      DEFINITIONS

 

Whenever used in this Agreement with an initial capital letter, the terms
defined in this Article 1 and in Schedule 3 attached hereto shall have the
meanings specified.

 

1.1                                 “AAA” MEANS THE AMERICAN ARBITRATION
ASSOCIATION.

 

1.2                                 “ACCEPTANCE” MEANS, WITH RESPECT TO A DRUG
APPROVAL APPLICATION FILED FOR A PRODUCT (A) IN THE UNITED STATES, THE RECEIPT
OF WRITTEN NOTICE FROM THE FDA IN ACCORDANCE WITH

 

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21 CFR 314.101(A)(2) THAT SUCH DRUG APPROVAL APPLICATION IS OFFICIALLY “FILED”,
AND (B) IN THE EUROPEAN UNION, RECEIPT OF WRITTEN NOTICE OF ACCEPTANCE BY THE
EMEA OF SUCH DRUG APPROVAL APPLICATION FOR FILING UNDER THE CENTRALIZED EUROPEAN
PROCEDURE; PROVIDED, THAT, IF THE CENTRALIZED FILING PROCEDURE IS NOT USED, THEN
ACCEPTANCE SHALL BE DETERMINED UPON THE ACCEPTANCE OF SUCH DRUG APPROVAL
APPLICATION BY THE APPLICABLE REGULATORY AUTHORITY IN ANY MAJOR EUROPEAN
COUNTRY.

 

1.3                                 “ADVERSE EVENT” MEANS ANY UNFAVORABLE AND
UNINTENDED CHANGE IN THE STRUCTURE (SIGNS), FUNCTION (SYMPTOMS), OR CHEMISTRY
(LABORATORY DATA), OF THE BODY TEMPORALLY ASSOCIATED WITH THE USE OF A LICENSED
PRODUCT, WHETHER OR NOT CONSIDERED RELATED TO THE USE OF SUCH LICENSED PRODUCT. 
CHANGES RESULTING FROM NORMAL GROWTH AND DEVELOPMENT WHICH DO NOT VARY
SIGNIFICANTLY IN FREQUENCY OR SEVERITY FROM EXPECTED LEVELS ARE NOT ADVERSE
EVENTS.

 

1.4                                 “AFFILIATE” MEANS, WITH RESPECT TO ANY
PERSON, ANY OTHER PERSON THAT, DIRECTLY OR INDIRECTLY THROUGH ONE OR MORE
AFFILIATES, CONTROLS, OR IS CONTROLLED BY, OR IS UNDER COMMON CONTROL WITH, SUCH
PERSON.  FOR PURPOSES OF THIS DEFINITION, “CONTROL” MEANS (A) OWNERSHIP OF FIFTY
PERCENT (50%) OR MORE OF THE SHARES OF STOCK ENTITLED TO VOTE FOR THE ELECTION
OF DIRECTORS IN THE CASE OF A CORPORATION, OR FIFTY PERCENT (50%) OR MORE OF THE
EQUITY INTERESTS IN THE CASE OF ANY OTHER TYPE OF LEGAL ENTITY, (B) STATUS AS A
GENERAL PARTNER IN ANY PARTNERSHIP, OR (C) ANY OTHER ARRANGEMENT WHEREBY A
PERSON CONTROLS OR HAS THE RIGHT TO CONTROL THE BOARD OF DIRECTORS OF A
CORPORATION OR EQUIVALENT GOVERNING BODY OF AN ENTITY OTHER THAN A CORPORATION.

 

1.5                                 “ANNUAL NET SALES” MEANS, WITH RESPECT TO
ANY CALENDAR YEAR, THE AGGREGATE AMOUNT OF THE NET SALES FOR SUCH CALENDAR YEAR.

 

1.6                                 “API” MEANS THE ACTIVE PHARMACEUTICAL
INGREDIENT KNOWN AS ARQ 197 AND/OR ANY OTHER COLLABORATION COMPOUND DEVELOPED
AND COMMERCIALIZED UNDER THIS AGREEMENT.

 

1.7                                 “APPLICABLE LAWS” MEANS ANY FEDERAL, STATE,
LOCAL, NATIONAL AND SUPRA-NATIONAL LAWS, STATUTES, RULES AND REGULATIONS,
INCLUDING ANY RULES, REGULATIONS, GUIDANCE, GUIDELINES OR REQUIREMENTS OF
REGULATORY AUTHORITIES, NATIONAL SECURITIES EXCHANGES OR SECURITIES LISTING
ORGANIZATIONS, THAT ARE IN EFFECT FROM TIME TO TIME DURING THE TERM AND
APPLICABLE TO A PARTICULAR ACTIVITY HEREUNDER.

 

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1.8                                 “APPROVED NON-CANCER INDICATION” MEANS ANY
NON-CANCER INDICATION WHICH THE PARTIES AGREE TO ADD TO THE FIELD PURSUANT TO
SECTION 3.13.

 

1.9                                 “ARQ 197” MEANS THE C-MET INHIBITOR
CONTROLLED BY ARQULE AND DESCRIBED MORE FULLY ON SCHEDULE 1 ATTACHED HERETO.

 

1.10                           “ARQULE BACKGROUND TECHNOLOGY” MEANS ANY
TECHNOLOGY THAT IS USED BY ARQULE, OR PROVIDED BY ARQULE FOR USE, IN THE
DEVELOPMENT PROGRAM OR THAT IS DISCLOSED BY ARQULE TO DS OR OF WHICH DS
OTHERWISE BECOMES AWARE SOLELY AS A RESULT OF THIS AGREEMENT AND THAT IS
(A) CONTROLLED BY ARQULE AS OF THE EFFECTIVE DATE, OR (B) CONCEIVED OR FIRST
REDUCED TO PRACTICE BY EMPLOYEES OF, OR CONSULTANTS TO, ARQULE AFTER THE
EFFECTIVE DATE OTHER THAN IN THE CONDUCT OF ARQULE DEVELOPMENT ACTIVITIES AND
WITHOUT THE USE IN ANY MATERIAL RESPECT OF ANY DS TECHNOLOGY, DS PATENT RIGHTS
OR DS MATERIALS.  FOR PURPOSES OF CLARITY, ARQULE BACKGROUND TECHNOLOGY SHALL
NOT INCLUDE ARQULE PROGRAM TECHNOLOGY OR ARQULE’S INTEREST IN JOINT TECHNOLOGY,
BUT SHALL INCLUDE ALL TECHNOLOGY RELATING TO THE MECHANISM OF INHIBITION OF ARQ
197.

 

1.11                           “ARQULE CO-COMMERCIALIZATION ACTIVITIES” MEANS,
WITH RESPECT TO EACH CO-COMMERCIALIZED LICENSED PRODUCT, THE COMMERCIALIZATION
ACTIVITIES SPECIFIED TO BE CONDUCTED BY ARQULE IN THE CO-COMMERCIALIZATION
TERRITORY IN ANY PRODUCT COMMERCIALIZATION PLAN APPLICABLE THERETO (OR AMENDMENT
THERETO) AND/OR IN THE CO-COMMERCIALIZATION AGREEMENT.

 

1.12                           “ARQULE COST-SHARING PERCENTAGE” MEANS FIFTY
PERCENT (50%).

 

1.13                           “ARQULE DECISION” MEANS ALL DECISIONS CONCERNING
*.

 

1.14                           “ARQULE DEVELOPMENT ACTIVITIES” MEANS ALL
DEVELOPMENT ACTIVITIES (INCLUDING WITHOUT LIMITATION ALL DEVELOPMENT ACTIVITIES
CONDUCTED WITH RESPECT TO CO-COMMERCIALIZED LICENSED PRODUCTS) SPECIFIED TO BE
CONDUCTED BY ARQULE IN ANY GLOBAL DEVELOPMENT PLAN (OR ANY AMENDMENT THERETO),
AS WELL AS ALL DEVELOPMENT ACTIVITIES CONDUCTED BY ARQULE NOT SPECIFIED IN A
GLOBAL DEVELOPMENT PLAN BUT APPROVED BY THE JSC AS A UNANIMOUS DECISION.

 

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1.15                           “ARQULE MATERIALS” MEANS ANY PROPRIETARY
MATERIALS THAT ARE CONTROLLED BY ARQULE AND USED BY ARQULE, OR PROVIDED BY
ARQULE FOR USE, IN THE DEVELOPMENT PROGRAM.  FOR PURPOSES OF CLARITY, ARQULE
MATERIALS SHALL INCLUDE THE COLLABORATION COMPOUNDS.

 

1.16                           “ARQULE PATENT RIGHTS” MEANS ANY PATENT RIGHTS
THAT CONTAIN ONE OR MORE CLAIMS THAT COVER ARQULE TECHNOLOGY, INCLUDING, BUT NOT
LIMITED TO, THE PATENT RIGHTS LISTED IN SCHEDULE 2 ATTACHED HERETO.  FOR
PURPOSES OF CLARITY, ARQULE PATENT RIGHTS INCLUDES ALL ARQULE PROGRAM PATENT
RIGHTS.

 

1.17                           “ARQULE PROGRAM PATENT RIGHTS” MEANS ANY PATENT
RIGHTS CONTROLLED BY ARQULE THAT CONTAIN ONE OR MORE CLAIMS THAT COVER ARQULE
PROGRAM TECHNOLOGY.

 

1.18                           “ARQULE PROGRAM TECHNOLOGY” MEANS (A) ANY PRODUCT
TECHNOLOGY; (B) ANY PROGRAM TECHNOLOGY THAT IS CONCEIVED OR FIRST REDUCED TO
PRACTICE BY EMPLOYEES OF, OR CONSULTANTS TO, ARQULE, ALONE OR JOINTLY WITH ANY
THIRD PARTY, WITHOUT THE USE IN ANY MATERIAL RESPECT OF ANY DS TECHNOLOGY, DS
PATENT RIGHTS, DS MATERIALS OR JOINT TECHNOLOGY; AND (C) ALL COLLABORATION
COMPOUNDS.

 

1.19                           “ARQULE TECHNOLOGY” MEANS, COLLECTIVELY, ARQULE
BACKGROUND TECHNOLOGY AND ARQULE PROGRAM TECHNOLOGY.

 

1.20                           “ASIAN TERRITORY” MEANS JAPAN, CHINA (INCLUDING
HONG KONG), SOUTH KOREA AND TAIWAN.

 

1.21                           “BACK-UP COMPOUND” MEANS ANY C-MET INHIBITOR * OR
ANY OTHER C-MET INHIBITOR THAT HAS BEEN DISCOVERED OR, IS DISCOVERED DURING THE
TERM, BY ARQULE, DS OR JOINTLY BY ARQULE AND DS, (AS DESIGNATED BY THE JSC,
PURSUANT TO SECTION 3.2, TO USE COMMERCIALLY REASONABLE EFFORTS TO DELIVER A
BACK-UP COMPOUND) AND THAT IS DESIGNATED BY THE JSC FOR FURTHER DEVELOPMENT AS A
BACK-UP COMPOUND PURSUANT TO SECTION 3.2.

 

1.22                           “BUSINESS DAY” MEANS ANY DAY ON WHICH BANKING
INSTITUTIONS IN NEW YORK, NEW YORK AND TOKYO ARE OPEN FOR BUSINESS.

 

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1.23                           “CALENDAR QUARTER” MEANS THE PERIOD BEGINNING ON
THE EFFECTIVE DATE AND ENDING ON THE LAST DAY OF THE CALENDAR QUARTER IN WHICH
THE EFFECTIVE DATE FALLS, AND THEREAFTER EACH SUCCESSIVE PERIOD OF THREE
(3) CONSECUTIVE CALENDAR MONTHS ENDING ON MARCH 31, JUNE 30, SEPTEMBER 30 OR
DECEMBER 31.

 

1.24                           “CALENDAR YEAR” MEANS EACH SUCCESSIVE PERIOD OF
TWELVE (12) MONTHS COMMENCING ON JANUARY 1 AND ENDING ON DECEMBER 31.

 

1.25                           “CANCER INDICATION” MEANS ANY AND ALL INDICATIONS
FOR CANCER OR METASTASIS.

 

1.26                           “CHALLENGE” MEANS ANY CHALLENGE TO THE VALIDITY
OR ENFORCEABILITY OF ANY OF THE ARQULE PATENT RIGHTS, INCLUDING WITHOUT
LIMITATION BY (A) FILING A DECLARATORY JUDGMENT ACTION IN WHICH ANY OF THE
ARQULE PATENT RIGHTS IS ALLEGED TO BE INVALID OR UNENFORCEABLE; (B) CITING PRIOR
ART PURSUANT TO 35 U.S.C. §301, FILING A REQUEST FOR RE-EXAMINATION OF ANY OF
THE ARQULE PATENT RIGHTS PURSUANT TO 35 U.S.C. §302 AND/OR §311, OR PROVOKING AN
INTERFERENCE WITH AN APPLICATION FOR ANY OF THE ARQULE PATENT RIGHTS PURSUANT TO
35 U.S.C. §135; OR (C) FILING OR COMMENCING ANY RE-EXAMINATION, OPPOSITION,
CANCELLATION, NULLITY OR SIMILAR PROCEEDINGS AGAINST ANY OF THE ARQULE PATENT
RIGHTS IN ANY COUNTRY.

 

1.27                           “CLINICAL TRIAL” MEANS A CLINICAL STUDY OF A
LICENSED PRODUCT INVOLVING THE ADMINISTRATION OF SUCH LICENSED PRODUCT TO
PATIENTS FOR ANY TARGETED INDICATION, AND INCLUDES ANY PHASE 1 CLINICAL TRIAL,
PHASE 2 CLINICAL TRIAL, PHASE 3 CLINICAL TRIAL, PHASE 4 CLINICAL TRIAL AND PHASE
5 CLINICAL TRIAL, AS APPLICABLE.

 

1.28                           “C-MET INHIBITOR” MEANS ARQ 197 AND ANY
THERAPEUTIC AGENT THAT BINDS THE C-MET RTK AND INHIBITS *.

 

1.29                           “CO-COMMERCIALIZE” OR “CO-COMMERCIALIZATION
ACTIVITIES” MEANS WITH RESPECT TO ANY CO-COMMERCIALIZED LICENSED PRODUCT, THE
JOINT DETAILING OF SUCH CO-COMMERCIALIZED LICENSED PRODUCT IN THE
CO-COMMERCIALIZATION TERRITORY USING A COORDINATED SALES FORCE CONSISTING OF
REPRESENTATIVES OF BOTH PARTIES.

 

1.30                           “CO-COMMERCIALIZATION TERRITORY” MEANS THE U.S.
TERRITORY.

 

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1.31         “COLLABORATION” MEANS THE ALLIANCE OF ARQULE AND DS ESTABLISHED
PURSUANT TO THIS AGREEMENT FOR THE PURPOSES OF DEVELOPING COLLABORATION
COMPOUNDS AND LICENSED PRODUCTS AND COMMERCIALIZING LICENSED PRODUCTS IN THE
FIELD IN THE TERRITORY.

 

1.32         “COLLABORATION COMPOUND” MEANS, COLLECTIVELY, ARQ 197 AND ANY
BACK-UP COMPOUND, AS WELL AS ANY * OR OTHER COMPOSITIONS CONSISTING OF ARQ 197
OR ANY BACK-UP COMPOUND *.

 

1.33         “COMMERCIALLY REASONABLE EFFORTS” MEANS (A) WITH RESPECT TO
ACTIVITIES OF ARQULE IN THE DEVELOPMENT PROGRAM AND/OR IN THE COMMERCIALIZATION
OF ANY CO-COMMERCIALIZED LICENSED PRODUCT, THE EFFORTS AND RESOURCES COMPARABLE
TO THOSE UNDERTAKEN BY ARQULE IN PURSUING INTELLECTUAL PROPERTY PROTECTION AND
THE RESEARCH, DISCOVERY OR COMMERCIALIZATION OF PROPRIETARY MATERIALS AND THE
DEVELOPMENT OF PRODUCT CANDIDATES, AS APPLICABLE, THAT ARE NOT SUBJECT TO THE
COLLABORATION AND THAT ARE AT AN EQUIVALENT STAGE OF DEVELOPMENT OR
COMMERCIALIZATION AND HAVE SIMILAR MARKET POTENTIAL AND ARE AT A SIMILAR STAGE
IN THEIR LIFECYCLE; AND (B) WITH RESPECT TO ACTIVITIES OF DS IN THE DEVELOPMENT
PROGRAM, THE DEVELOPMENT OF A PARTICULAR LICENSED PRODUCT OR THE
COMMERCIALIZATION OF A PARTICULAR LICENSED PRODUCT (INCLUDING ANY
CO-COMMERCIALIZED LICENSED PRODUCT), THE EFFORTS AND RESOURCES COMPARABLE TO
THOSE UNDERTAKEN BY DS IN PURSUING INTELLECTUAL PROPERTY PROTECTION AND
DEVELOPMENT OF PRODUCT CANDIDATES AND COMMERCIALIZATION OF PRODUCTS, AS
APPLICABLE, THAT ARE NOT SUBJECT TO THE COLLABORATION AND THAT ARE AT AN
EQUIVALENT STAGE OF DEVELOPMENT OR COMMERCIALIZATION AND HAVE SIMILAR MARKET
POTENTIAL AND ARE AT A SIMILAR STAGE IN THEIR LIFECYCLE.  FOR PURPOSES OF BOTH
(A) AND (B) ABOVE, ALL RELEVANT FACTORS AS MEASURED BY THE FACTS AND
CIRCUMSTANCES AT THE TIME SUCH EFFORTS ARE DUE SHALL BE TAKEN INTO ACCOUNT,
INCLUDING, AS APPLICABLE AND WITHOUT LIMITATION, MECHANISM OF ACTION; EFFICACY
AND SAFETY; PRODUCT PROFILE; ACTUAL OR ANTICIPATED REGULATORY AUTHORITY APPROVED
LABELING; AND THE NATURE AND EXTENT OF MARKET EXCLUSIVITY (INCLUDING PATENT
COVERAGE, PROPRIETARY POSITION AND REGULATORY EXCLUSIVITY; COST, TIME REQUIRED
FOR AND LIKELIHOOD OF OBTAINING COMMERCIALIZATION REGULATORY APPROVAL;
COMPETITIVENESS OF ALTERNATIVE PRODUCTS AND MARKET CONDITIONS; ACTUAL OR
PROJECTED PROFITABILITY AND AVAILABILITY OF CAPACITY TO MANUFACTURE AND SUPPLY
FOR COMMERCIAL SALE).

 

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1.34         “COMMERCIALIZATION” OR “COMMERCIALIZE” MEANS ANY AND ALL ACTIVITIES
DIRECTED TO THE COMMERCIALIZATION OF A LICENSED PRODUCT AFTER COMMERCIALIZATION
REGULATORY APPROVAL HAS BEEN OBTAINED, INCLUDING MARKETING, DEVELOPMENT AND
SCALE-UP OF PROCESSES FOR MANUFACTURE OF API AND LICENSED PRODUCT FOR COMMERCIAL
SALE, MANUFACTURING FOR COMMERCIAL SALE, PROMOTING, DETAILING, DISTRIBUTING,
OFFERING TO SELL AND SELLING A LICENSED PRODUCT, IMPORTING A LICENSED PRODUCT
FOR SALE UNDER THE PRODUCT TRADEMARKS SELECTED BY DS, CONDUCTING POST-MARKETING
HUMAN CLINICAL STUDIES AND INTERACTING WITH REGULATORY AUTHORITIES REGARDING THE
FOREGOING.  WHEN USED AS A VERB, “TO COMMERCIALIZE” AND “COMMERCIALIZING” MEANS
TO ENGAGE IN COMMERCIALIZATION AND “COMMERCIALIZED” HAS A CORRESPONDING MEANING.

 

1.35         “COMMERCIALIZATION REGULATORY APPROVAL” MEANS, WITH RESPECT TO ANY
LICENSED PRODUCT, THE REGULATORY APPROVAL REQUIRED BY APPLICABLE LAWS TO SELL
SUCH LICENSED PRODUCT FOR USE FOR A TARGETED INDICATION IN THE FIELD IN A
COUNTRY OR REGION IN THE TERRITORY, AS WELL AS, TO THE EXTENT REQUIRED BY
APPLICABLE LAWS FOR THE SALE OF THE LICENSED PRODUCT, PRICING APPROVALS AND
GOVERNMENT REIMBURSEMENT APPROVALS.  FOR PURPOSES OF CLARITY,
(A) “COMMERCIALIZATION REGULATORY APPROVAL” IN THE UNITED STATES MEANS FINAL
APPROVAL OF AN NDA OR SNDA PERMITTING MARKETING OF THE APPLICABLE LICENSED
PRODUCT IN INTERSTATE COMMERCE IN THE UNITED STATES; (B) “COMMERCIALIZATION
REGULATORY APPROVAL” IN THE EUROPEAN UNION MEANS MARKETING AUTHORIZATION FOR THE
APPLICABLE LICENSED PRODUCT GRANTED EITHER BY A REGULATORY AUTHORITY IN ANY
MAJOR EUROPEAN COUNTRY OR BY THE EMEA PURSUANT TO COUNCIL DIRECTIVE 2001/83/EC,
AS AMENDED, OR COUNCIL REGULATION 2309/93/EEC, AS AMENDED, TOGETHER, IF REQUIRED
BY APPLICABLE LAWS, WITH THE FIRST PRICE APPROVAL AND GOVERNMENT REIMBURSEMENT
APPROVAL FOR THE APPLICABLE LICENSED PRODUCT GRANTED BY A REGULATORY AUTHORITY
IN ANY MAJOR EUROPEAN COUNTRY; AND (C) “COMMERCIALIZATION REGULATORY APPROVAL”
IN ANY COUNTRY OUTSIDE OF THE UNITED STATES OR THE EUROPEAN UNION MEANS THE
EQUIVALENT APPROVAL IN SUCH COUNTRY.

 

1.36         “COMMITTEE” MEANS, COLLECTIVELY, THE JSC AND THE JDC, OR ANY OTHER
COMMITTEE OR SUB-COMMITTEE TO BE ESTABLISHED HEREUNDER.

 

1.37         “COMPLETION” MEANS, WITH RESPECT TO ANY CLINICAL TRIAL, THE DATE ON
WHICH ALL MATERIAL DATA REASONABLY EXPECTED TO BE DERIVED THEREFROM HAS BEEN
GENERATED AND THE FINAL STUDY REPORT WITH RESPECT THERETO HAS BEEN FINALIZED.

 

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1.38         “CONFIDENTIAL INFORMATION” MEANS (A) WITH RESPECT TO ARQULE, ALL
TANGIBLE EMBODIMENTS OF ARQULE TECHNOLOGY, (B) WITH RESPECT TO DS, ALL TANGIBLE
EMBODIMENTS OF DS TECHNOLOGY AND (C) WITH RESPECT TO EACH PARTY, (I) ALL
TANGIBLE EMBODIMENTS OF JOINT TECHNOLOGY AND (II) ALL INFORMATION, TECHNOLOGY
AND PROPRIETARY MATERIALS THAT ARE DISCLOSED OR PROVIDED BY OR ON BEHALF OF SUCH
PARTY (THE “DISCLOSING PARTY”) TO THE OTHER PARTY (THE “RECEIVING PARTY”) OR TO
ANY OF THE RECEIVING PARTY’S EMPLOYEES, CONSULTANTS, AFFILIATES, SUBLICENSEES OR
THIRD PARTY SUBCONTRACTORS HEREUNDER OR OF WHICH THE RECEIVING PARTY OR ANY OF
ITS EMPLOYEES, CONSULTANTS, AFFILIATES, SUBLICENSEES OR THIRD PARTY
SUBCONTRACTORS HAS BECOME AWARE OR HEREAFTER BECOMES AWARE SOLELY AS A RESULT OF
THIS AGREEMENT; PROVIDED, THAT, NONE OF THE FOREGOING SHALL BE CONFIDENTIAL
INFORMATION IF: (A) AS OF THE DATE OF DISCLOSURE, IT IS KNOWN TO THE RECEIVING
PARTY OR ITS AFFILIATES AS DEMONSTRATED BY CONTEMPORANEOUS CREDIBLE WRITTEN
DOCUMENTATION, OTHER THAN BY VIRTUE OF A PRIOR CONFIDENTIAL DISCLOSURE TO SUCH
RECEIVING PARTY; (B) AS OF THE DATE OF DISCLOSURE IT IS IN THE PUBLIC DOMAIN, OR
IT SUBSEQUENTLY ENTERS THE PUBLIC DOMAIN THROUGH NO FAULT OF THE RECEIVING
PARTY; (C) IT IS OBTAINED BY THE RECEIVING PARTY FROM A THIRD PARTY HAVING A
LAWFUL RIGHT TO MAKE SUCH DISCLOSURE FREE FROM ANY OBLIGATION OF CONFIDENTIALITY
TO THE DISCLOSING PARTY; OR (D) IT IS INDEPENDENTLY DEVELOPED BY OR FOR THE
RECEIVING PARTY WITHOUT REFERENCE TO OR USE OF ANY CONFIDENTIAL INFORMATION OF
THE DISCLOSING PARTY AS DEMONSTRATED BY CONTEMPORANEOUS CREDIBLE WRITTEN
DOCUMENTATION.  FOR PURPOSES OF CLARITY, UNLESS EXCLUDED FROM CONFIDENTIAL
INFORMATION PURSUANT TO THE PROVISO AT THE END OF THE PRECEDING SENTENCE, ANY
SCIENTIFIC, TECHNICAL OR FINANCIAL INFORMATION OF A PARTY THAT IS DISCLOSED AT
ANY MEETING OF ANY COMMITTEE OR DISCLOSED THROUGH AN AUDIT REPORT SHALL
CONSTITUTE CONFIDENTIAL INFORMATION OF THE DISCLOSING PARTY.  SUBJECT TO THE
RIGHTS OF THE PARTIES TO MAKE DISCLOSURES AS SET FORTH IN ARTICLE 5, THE TERMS
OF THIS AGREEMENT SHALL CONSTITUTE CONFIDENTIAL INFORMATION OF EACH PARTY. 
NOTWITHSTANDING THE PROVISO (A), (C) AND (D) AT THE END OF THE THIRD PRECEDING
SENTENCE, ALL MECHANISM OF INHIBITION INFORMATION SHALL BE ARQULE CONFIDENTIAL
INFORMATION.

 

1.39         “CONTROL” OR “CONTROLLED” MEANS (A) WITH RESPECT TO TECHNOLOGY
(OTHER THAN PROPRIETARY MATERIALS) OR PATENT RIGHTS, THE POSSESSION BY A PARTY
OF THE RIGHT TO GRANT A LICENSE OR SUBLICENSE TO SUCH TECHNOLOGY OR PATENT
RIGHTS AS PROVIDED HEREIN WITHOUT THE PAYMENT OF ADDITIONAL CONSIDERATION TO,
AND WITHOUT VIOLATING THE TERMS OF, ANY AGREEMENT OR ARRANGEMENT WITH, ANY THIRD
PARTY AND WITHOUT VIOLATING ANY APPLICABLE LAWS AND (B) WITH RESPECT TO
PROPRIETARY MATERIALS, THE POSSESSION BY A PARTY OF THE RIGHT TO SUPPLY SUCH
PROPRIETARY MATERIALS

 

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TO THE OTHER PARTY AS PROVIDED HEREIN WITHOUT THE PAYMENT OF ADDITIONAL
CONSIDERATION TO, AND WITHOUT VIOLATING THE TERMS OF ANY AGREEMENT OR
ARRANGEMENT WITH, ANY THIRD PARTY AND WITHOUT VIOLATING ANY APPLICABLE LAWS.

 

1.40         “DETAIL” MEANS WITH RESPECT TO A CO-COMMERCIALIZED LICENSED
PRODUCT, AN INTERACTIVE, LIVE, FACE-TO-FACE CONTACT OF A REPRESENTATIVE WITHIN
THE CO-COMMERCIALIZATION TERRITORY WITH A MEDICAL PROFESSIONAL WITH PRESCRIBING
AUTHORITY OR OTHER INDIVIDUALS OR ENTITIES THAT HAVE A SIGNIFICANT IMPACT OR
INFLUENCE ON PRESCRIBING DECISIONS, IN AN EFFORT TO INCREASE PHYSICIAN
PRESCRIBING PREFERENCES OF SUCH CO-COMMERCIALIZED LICENSED PRODUCT FOR ITS
APPROVED USES WITHIN THE CO-COMMERCIALIZATION TERRITORY.  WHEN USED AS AN
ADJECTIVE, “DETAILING” MEANS OF OR RELATED TO PERFORMING DETAILS.

 

1.41         “DEVELOPMENT” OR “DEVELOP” MEANS, WITH RESPECT TO EACH
COLLABORATION COMPOUND AND/OR LICENSED PRODUCT (INCLUDING WITHOUT LIMITATION ANY
CO-COMMERCIALIZED LICENSED PRODUCT), ALL NON-CLINICAL AND CLINICAL ACTIVITIES
PERFORMED IN ORDER TO DEVELOP FORMULATIONS OR FORMS OF A LICENSED PRODUCT AND/OR
TO OBTAIN REGULATORY APPROVAL OF A LICENSED PRODUCT (INCLUDING WITHOUT
LIMITATION ANY CO-COMMERCIALIZED LICENSED PRODUCT) DERIVED FROM SUCH
COLLABORATION COMPOUND OR LICENSED PRODUCT IN ACCORDANCE WITH THIS AGREEMENT. 
FOR PURPOSES OF CLARITY, THESE ACTIVITIES INCLUDE, WITHOUT LIMITATION, IN VIVO
ANIMAL TESTING, PRECLINICAL SAFETY TESTING, TEST METHOD DEVELOPMENT AND
STABILITY TESTING, REGULATORY TOXICOLOGY STUDIES, FORMULATION, PROCESS
DEVELOPMENT FOR MANUFACTURING OF API AND LICENSED PRODUCT FOR USE IN CLINICAL
TRIALS, SCALE-UP OF PROCESSES FOR MANUFACTURING OF API AND LICENSED PRODUCT FOR
USE IN CLINICAL TRIALS, QUALITY ASSURANCE/QUALITY CONTROL DEVELOPMENT,
STATISTICAL ANALYSIS AND REPORT WRITING, CLINICAL TRIAL DESIGN AND OPERATIONS,
THE CONDUCT OF CLINICAL TRIALS (INCLUDING THE MANUFACTURING API AND LICENSED
PRODUCT FOR USE IN CLINICAL TRIALS), REGULATORY TOXICOLOGY STUDIES, DRUG
METABOLISM AND PHARMACOKINETICS STUDIES, PREPARING AND FILING DRUG APPROVAL
APPLICATIONS, THE CONDUCT OF REGULATORY ACTIVITIES RELATED TO THE FOREGOING,
CONSULTATION TO KEY OPINION LEADERS OR OUTSIDE EXPERTS (E.G. KOL MEETING), AND
CERTAIN ACTIVITIES TO BE PERFORMED BY THE COMMERCIAL FUNCTION OF THE PARTIES FOR
SUPPORTING DEVELOPMENT (E.G., MARKET RESEARCH).  WHEN USED AS A VERB,
“DEVELOPING” MEANS TO ENGAGE IN DEVELOPMENT AND “DEVELOPED” HAS A CORRESPONDING
MEANING.

 

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1.42         “DEVELOPMENT COSTS” MEANS ALL OUT-OF-POCKET COSTS AND INTERNAL
COSTS INCURRED BY A PARTY (OR FOR ITS ACCOUNT BY AN AFFILIATE OR A THIRD PARTY)
ON OR AFTER THE EARLIER OF THE EXECUTION DATE OR JANUARY 1, 2009 THAT ARE
GENERALLY CONSISTENT WITH THE RESPECTIVE DEVELOPMENT ACTIVITIES OF SUCH PARTY IN
THE APPLICABLE GLOBAL DEVELOPMENT PLAN AND ARE ATTRIBUTABLE TO THE DEVELOPMENT
OF A LICENSED PRODUCT.  FOR PURPOSES OF CLARITY, DEVELOPMENT COSTS INCLUDES ALL
EXTERNAL DEVELOPMENT COSTS AND ALL OTHER DEVELOPMENT COSTS.

 

1.43         “DEVELOPMENT PROGRAM” MEANS THE DEVELOPMENT ACTIVITIES TO BE
CONDUCTED DURING THE TERM WITH RESPECT TO EACH COLLABORATION COMPOUND AND
LICENSED PRODUCT (INCLUDING WITHOUT LIMITATION CO-COMMERCIALIZED LICENSED
PRODUCTS) PURSUANT TO THE GLOBAL DEVELOPMENT PLANS, WITH THE OBJECTIVE OF
DEVELOPING SUCH COLLABORATION COMPOUND INTO A LICENSED PRODUCT.

 

1.44         “DMF” MEANS A DRUG MASTER FILE MAINTAINED WITH THE FDA OR ITS
EQUIVALENT MAINTAINED WITH A REGULATORY AUTHORITY IN OTHER COUNTRIES WITHIN THE
TERRITORY.

 

1.45         “DRUG APPROVAL APPLICATION” MEANS, WITH RESPECT TO EACH LICENSED
PRODUCT IN A PARTICULAR COUNTRY OR REGION, AN APPLICATION FOR COMMERCIALIZATION
REGULATORY APPROVAL FOR SUCH LICENSED PRODUCT IN SUCH COUNTRY OR REGION,
INCLUDING WITHOUT LIMITATION: (A) AN NDA OR SNDA; (B) A COUNTERPART OF AN NDA OR
SNDA IN ANY COUNTRY OR REGION IN THE TERRITORY; AND (C) ALL SUPPLEMENTS AND
AMENDMENTS TO ANY OF THE FOREGOING.

 

1.46         “DS BACKGROUND TECHNOLOGY” MEANS ANY TECHNOLOGY THAT IS USED BY DS,
OR PROVIDED BY DS FOR USE, IN THE DEVELOPMENT PROGRAM OR THAT IS DISCLOSED BY DS
TO ARQULE OR OF WHICH ARQULE OTHERWISE BECOMES AWARE SOLELY AS A RESULT OF THIS
AGREEMENT AND THAT IS (A) CONTROLLED BY DS AS OF THE EFFECTIVE DATE, OR
(B) CONCEIVED OR FIRST REDUCED TO PRACTICE BY EMPLOYEES OF, OR CONSULTANTS TO,
DS AFTER THE EFFECTIVE DATE OTHER THAN IN THE CONDUCT OF DS DEVELOPMENT
ACTIVITIES AND WITHOUT THE USE IN ANY MATERIAL RESPECT OF ANY COLLABORATION
COMPOUNDS, ARQULE TECHNOLOGY, ARQULE PATENT RIGHTS OR ARQULE MATERIALS.  FOR
PURPOSES OF CLARITY, DS BACKGROUND TECHNOLOGY SHALL NOT INCLUDE DS PROGRAM
TECHNOLOGY OR DS’S INTEREST IN JOINT TECHNOLOGY.

 

1.47         “DS COST-SHARING PERCENTAGE” MEANS FIFTY PERCENT (50%).

 

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1.48         “DS DECISION” MEANS ANY DECISION WITH RESPECT TO THE *.

 

1.49         “DS DEVELOPMENT ACTIVITIES” MEANS ALL DEVELOPMENT ACTIVITIES
(INCLUDING WITHOUT LIMITATION ALL DEVELOPMENT ACTIVITIES CONDUCTED WITH RESPECT
TO CO-COMMERCIALIZED LICENSED PRODUCTS) SPECIFIED TO BE CONDUCTED BY DS IN ANY
GLOBAL DEVELOPMENT PLAN (OR ANY AMENDMENT THERETO), AS WELL AS ALL DEVELOPMENT
ACTIVITIES CONDUCTED BY DS NOT SPECIFIED IN A GLOBAL DEVELOPMENT PLAN BUT
APPROVED BY THE JSC AS A UNANIMOUS DECISION.

 

1.50         “DS MATERIALS” MEANS ANY PROPRIETARY MATERIALS THAT ARE CONTROLLED
BY DS AND USED BY DS, OR PROVIDED BY DS FOR USE, IN THE DEVELOPMENT PROGRAM.

 

1.51         “DS PATENT RIGHTS” MEANS ANY PATENT RIGHTS CONTROLLED BY DS THAT
CONTAIN ONE OR MORE CLAIMS THAT COVER DS TECHNOLOGY.

 

1.52         “DS PROGRAM PATENT RIGHTS” MEANS ANY PATENT RIGHTS CONTROLLED BY DS
THAT CONTAIN ONE OR MORE CLAIMS THAT COVER DS PROGRAM TECHNOLOGY.

 

1.53         “DS PROGRAM TECHNOLOGY” MEANS ANY PROGRAM TECHNOLOGY THAT (A) IS
NOT ARQULE PROGRAM TECHNOLOGY OR JOINT TECHNOLOGY AND (B) IS CONCEIVED OR FIRST
REDUCED TO PRACTICE BY EMPLOYEES OF, OR CONSULTANTS TO, DS, ALONE OR JOINTLY
WITH ANY THIRD PARTY, WITHOUT THE USE IN ANY MATERIAL RESPECT OF ANY ARQULE
TECHNOLOGY, ARQULE PATENT RIGHTS, ARQULE MATERIALS OR JOINT TECHNOLOGY.

 

1.54         “DS TECHNOLOGY” MEANS, COLLECTIVELY, DS BACKGROUND TECHNOLOGY AND
DS PROGRAM TECHNOLOGY.

 

1.55         “EFFECTIVE DATE” MEANS THE DATE OF SATISFACTION OF THE HSR
CONDITIONS WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

1.56         “EMEA” MEANS THE EUROPEAN MEDICINES AGENCY OR ANY SUCCESSOR AGENCY
OR AUTHORITY THERETO.

 

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1.57         “EUROPEAN UNION” OR “EU” MEANS THE COUNTRIES OF THE EUROPEAN UNION,
AS THE EUROPEAN UNION IS CONSTITUTED AS OF THE EFFECTIVE DATE AND AS IT MAY BE
EXPANDED FROM TIME TO TIME DURING THE TERM.

 

1.58         “EXECUTION DATE” MEANS THE DATE SET FORTH IN THE FIRST RECITAL
ABOVE.

 

1.59         “EXISTING LICENSE AGREEMENT” MEANS THE LICENSE AGREEMENT DATED AS
OF APRIL 27, 2007 BY AND BETWEEN ARQULE AND KYOWA WITH RESPECT TO THE ASIAN
TERRITORY.

 

1.60         “EXTERNAL DEVELOPMENT COSTS” MEANS ANY OUT-OF-POCKET EXTERNAL
DEVELOPMENT COSTS INCURRED BY A PARTY (OR FOR ITS ACCOUNT BY AN AFFILIATE) ON OR
AFTER THE EARLIER OF THE EXECUTION DATE OR JANUARY 1, 2009 AND THAT ARE PAYABLE
TO ANY THIRD PARTY.  FOR PURPOSES OF CLARITY, EXTERNAL DEVELOPMENT COSTS
(A) SHALL ONLY INCLUDE THE ACTUAL AMOUNTS PAID BY A PARTY TO A THIRD PARTY FOR
SPECIFIC DEVELOPMENT ACTIVITIES CONDUCTED BY SUCH THIRD PARTY APPLICABLE TO A
LICENSED PRODUCT, INCLUDING, WITHOUT LIMITATION ALL FILING FEES REQUIRED FOR,
AND OTHER COSTS ASSOCIATED WITH, THE CONDUCT OF REGULATORY ACTIVITIES AND
CLINICAL TRIALS APPLICABLE TO ANY LICENSED PRODUCT; AND (B) SHALL NOT INCLUDE
ANY INTERNAL COSTS INCURRED BY A PARTY (OR FOR ITS ACCOUNT BY AN AFFILIATE) ON
OR AFTER THE EARLIER OF THE EXECUTION DATE OR JANUARY 1, 2009 THAT ARE
ATTRIBUTABLE TO THE DEVELOPMENT OF A LICENSED PRODUCT.

 

1.61         “FDA” MEANS THE UNITED STATES FOOD AND DRUG ADMINISTRATION OR ANY
SUCCESSOR AGENCY OR AUTHORITY THERETO.

 

1.62         “FDCA” MEANS THE UNITED STATES FEDERAL FOOD, DRUG, AND COSMETIC
ACT, AS AMENDED.

 

1.63         “FIELD” MEANS THE TREATMENT AND PREVENTION IN HUMANS OF ALL
TARGETED INDICATIONS.

 

1.64         “FIRST CO-COMMERCIALIZATION OPTION PERIOD” MEANS, WITH RESPECT TO
EACH LICENSED PRODUCT, THE PERIOD COMMENCING ON THE EFFECTIVE DATE AND
CONTINUING UNTIL * (*) DAYS FOLLOWING THE DATE THAT THE LAST PATIENT/LAST VISIT
NOTICE IS RECEIVED BY ARQULE.

 

1.65         “FIRST COMMERCIAL SALE” MEANS, WITH RESPECT TO A LICENSED PRODUCT
IN A COUNTRY IN THE TERRITORY, THE FIRST SALE, TRANSFER OR DISPOSITION FOR VALUE
OR FOR AN END USER OF SUCH LICENSED

 

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PRODUCT IN SUCH COUNTRY.  FOR PURPOSES OF CLARITY, THE USE OF ANY LICENSED
PRODUCT IN CLINICAL TRIALS OR THE DISPOSAL OR TRANSFER OF LICENSED PRODUCTS FOR
A BONA FIDE CHARITABLE PURPOSE OR A COMMERCIALLY REASONABLE SAMPLING PROGRAM,
SHALL NOT BE DEEMED TO BE A SALE, TRANSFER OR DISPOSITION FOR VALUE OR FOR AN
END USER, WITH RESPECT TO A LICENSED PRODUCT IN A COUNTRY IN THE TERRITORY.

 

1.66         “FORCE MAJEURE” MEANS ANY OCCURRENCE BEYOND THE REASONABLE CONTROL
OF A PARTY THAT (A) PREVENTS OR SUBSTANTIALLY INTERFERES WITH THE PERFORMANCE BY
SUCH PARTY OF ANY OF ITS OBLIGATIONS HEREUNDER AND (B) OCCURS BY REASON OF ANY
ACT OF GOD, FLOOD, FIRE, EXPLOSION, EARTHQUAKE, STRIKE, LOCKOUT, LABOR DISPUTE,
CASUALTY OR ACCIDENT, OR WAR, REVOLUTION, CIVIL COMMOTION, ACT OF TERRORISM,
BLOCKAGE OR EMBARGO, OR ANY INJUNCTION, LAW, ORDER, PROCLAMATION, REGULATION,
ORDINANCE, DEMAND OR REQUIREMENT OF ANY GOVERNMENT OR OF ANY SUBDIVISION,
AUTHORITY OR REPRESENTATIVE OF ANY SUCH GOVERNMENT.

 

1.67         “GLOBAL DEVELOPMENT PLAN” MEANS, WITH RESPECT TO EACH COLLABORATION
COMPOUND AND LICENSED PRODUCT, THE WRITTEN PLAN FOR, AND BUDGET APPLICABLE TO,
THE DEVELOPMENT ACTIVITIES TO BE CONDUCTED FOR SUCH COLLABORATION COMPOUND AND
LICENSED PRODUCT FOR THE TERRITORY, AS SUCH WRITTEN PLAN MAY BE AMENDED,
MODIFIED OR UPDATED IN ACCORDANCE WITH SECTION 3.1.2.

 

1.68         “GLOBAL PRICING POLICY” MEANS THE ESTABLISHMENT OF THE RANGE OF
PUBLISHED PRICES FOR LICENSED PRODUCTS THROUGHOUT THE TERRITORY.

 

1.69         “GLP” MEANS THE THEN CURRENT GOOD LABORATORY PRACTICE STANDARDS
PROMULGATED OR ENDORSED BY THE FDA OR IN THE CASE OF FOREIGN JURISDICTIONS,
COMPARABLE REGULATORY STANDARDS PROMULGATED OR ENDORSED BY THE APPLICABLE
REGULATORY AUTHORITY, INCLUDING THOSE PROCEDURES CONTEMPLATED BY ANY REGULATORY
FILINGS.

 

1.70         “GMP” MEANS CURRENT GOOD MANUFACTURING PRACTICES THAT APPLY TO THE
MANUFACTURE OF API AND CLINICAL PRODUCT, INCLUDING, WITHOUT LIMITATION, THE
UNITED STATES REGULATIONS SET FORTH UNDER TITLE 21 OF THE UNITED STATES CODE OF
FEDERAL REGULATIONS, PARTS 210, 211 AND 600-680, AS MAY BE AMENDED FROM
TIME-TO-TIME, AS WELL AS ALL APPLICABLE GUIDANCE PUBLISHED FROM TIME-TO-TIME BY
THE FDA.

 

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1.71         “HATCH-WAXMAN ACT” MEANS THE DRUG PRICE COMPETITION AND PATENT TERM
RESTORATION ACT OF 1984, AS AMENDED.

 

1.72         “HSR ACT” MEANS THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF
1976, AS AMENDED.

 

1.73         “IND” MEANS: (A) AN INVESTIGATIONAL NEW DRUG APPLICATION AS DEFINED
IN THE FDCA AND REGULATIONS PROMULGATED THEREUNDER OR ANY SUCCESSOR APPLICATION
OR PROCEDURE REQUIRED TO INITIATE CLINICAL TESTING OF A LICENSED PRODUCT IN
HUMANS IN THE UNITED STATES; (B) A COUNTERPART OF AN INVESTIGATIONAL NEW DRUG
APPLICATION THAT IS REQUIRED IN ANY OTHER COUNTRY OR REGION IN THE TERRITORY
BEFORE BEGINNING CLINICAL TESTING OF A LICENSED PRODUCT IN HUMANS IN SUCH
COUNTRY OR REGION; AND (C) ALL SUPPLEMENTS AND AMENDMENTS TO ANY OF THE
FOREGOING.

 

1.74         “INDICATION” MEANS ANY HUMAN DISEASE OR CONDITION WHICH CAN BE
TREATED, PREVENTED, CURED OR THE PROGRESSION OF WHICH CAN BE DELAYED.  FOR
PURPOSES OF CLARITY, DISTINCTIONS BETWEEN HUMAN INDICATIONS, DISEASES OR
CONDITIONS WITH RESPECT TO A LICENSED PRODUCT SHALL BE MADE BY REFERENCE TO THE
WORLD HEALTH ORGANIZATION INTERNATIONAL CLASSIFICATION OF DISEASES, VERSION 10
(AS REVISED AND UPDATED, THE “ICD10”).

 

1.75         “INITIATION” MEANS, WITH RESPECT TO A CLINICAL TRIAL, THE FIRST
DATE THAT A SUBJECT OR PATIENT IS DOSED IN SUCH CLINICAL TRIAL.

 

1.76         “JOINT DECISION” MEANS (A) ANY DECISION AS SET FORTH IN
SECTION 3.1.4(B); (B) ANY DECISION SET FORTH IN SECTION 3.14; (C) ANY DECISION
SET FORTH IN SECTION 3.15; AND (D) ANY OTHER DECISION DESIGNATED AS A JOINT
DECISION HEREIN.

 

1.77         “JOINT DEVELOPMENT COMMITTEE” OR “JDC” MEANS THE COMMITTEE COMPOSED
OF ARQULE AND DS REPRESENTATIVES ESTABLISHED PURSUANT TO SECTION 2.2.

 

1.78         “JOINT FINANCE COMMITTEE” OR “JFC” MEANS THE COMMITTEE COMPOSED OF
ARQULE AND DS REPRESENTATIVES ESTABLISHED PURSUANT TO SECTION 2.4.

 

1.79         “JOINT LIFE CYCLE MANAGEMENT COMMITTEE” OR “JLCMC” MEANS THE
COMMITTEE COMPOSED OF ARQULE AND DS REPRESENTATIVES ESTABLISHED PURSUANT TO
SECTION 2.3.

 

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1.80         “JOINT PATENT RIGHTS” MEANS PATENT RIGHTS THAT CONTAIN ONE OR MORE
CLAIMS THAT COVER JOINT TECHNOLOGY.

 

1.81         “JOINT STEERING COMMITTEE” OR “JSC” MEANS THE COMMITTEE COMPOSED OF
ARQULE AND DS REPRESENTATIVES ESTABLISHED PURSUANT TO SECTION 2.1.

 

1.82         “JOINT TECHNOLOGY” MEANS ANY PROGRAM TECHNOLOGY, OTHER THAN PRODUCT
TECHNOLOGY AND COLLABORATION COMPOUNDS, THAT IS (A) JOINTLY CONCEIVED OR REDUCED
TO PRACTICE BY ONE OR MORE EMPLOYEES OF OR CONSULTANTS TO DS AND ONE OR MORE
EMPLOYEES OF OR CONSULTANTS TO ARQULE, (B) CONCEIVED OR FIRST REDUCED TO
PRACTICE SOLELY BY ONE OR MORE EMPLOYEES OF, OR CONSULTANTS TO, A PARTY
RESULTING FROM THE USE IN ANY MATERIAL RESPECT OF ANY (I) JOINT TECHNOLOGY OR
(II) PATENT RIGHTS, TECHNOLOGY OR PROPRIETARY MATERIALS CONTROLLED BY THE OTHER
PARTY.

 

1.83         “KEY REGULATORY FILINGS” MEANS (A) ANY IND, NDA, SNDA, OTHER DRUG
APPROVAL APPLICATIONS, APPLICATION FOR DESIGNATION AS AN “ORPHAN PRODUCT(S)”
UNDER THE ORPHAN DRUG ACT, FOR “FAST TRACK” STATUS UNDER SECTION 506 OF THE FDCA
(21 U.S.C. § 356) OR FOR A SPECIAL PROTOCOL ASSESSMENT UNDER
SECTION 505(B)(4)(B) AND (C) OF THE FDCA (21 U.S.C. § 355(B)(4)(B)) AND
COUNTERPARTS TO THE FOREGOING IN THE EU OR ANY MAJOR EUROPEAN COUNTRY, PERIODIC
SAFETY UPDATE REPORTS, AND BRIEFING DOCUMENTS PRESENTED TO THE FDA, THE EMEA OR
ANY REGULATORY AUTHORITY IN ANY MAJOR EUROPEAN COUNTRY, (B) ALL SUPPLEMENTS AND
AMENDMENTS TO ANY OF THE FOREGOING, AND (C) ANY REGULATORY FILING RELATING TO
THE LICENSED PRODUCT LABEL, TARGETED INDICATIONS, WARNINGS, SIDE EFFECTS AND
PRECAUTIONS.

 

1.84         “KYOWA” MEANS KYOWA HAKKO KIRIN CO., LTD.

 

1.85         “LAST PATIENT/LAST VISIT” MEANS THE DATE ON WHICH THE LAST PATIENT
HAS HIS OR HER LAST VISIT (EITHER FOR THERAPEUTIC OR FOLLOW-UP PURPOSES) DURING
A PHASE 3 CLINICAL TRIAL.

 

1.86         “LICENSED PATENT RIGHTS” MEANS ANY ARQULE PATENT RIGHTS AND
ARQULE’S INTEREST IN JOINT PATENT RIGHTS THAT (A) CONTAIN ONE OR MORE CLAIMS
THAT COVER ANY COLLABORATION COMPOUND OR LICENSED PRODUCT, INCLUDING ITS
MANUFACTURE OR ITS FORMULATION OR A METHOD OF ITS DELIVERY OR OF ITS USE, OR
(B) ARE NECESSARY OR USEFUL FOR DS TO EXERCISE THE LICENSES GRANTED TO IT
HEREUNDER.

 

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1.87         “LICENSED PRODUCT” MEANS ANY PHARMACEUTICAL OR MEDICINAL ITEM,
SUBSTANCE OR FORMULATION THAT CONTAINS, INCORPORATES, COMPRISES OR IS DERIVED
FROM A COLLABORATION COMPOUND.

 

1.88         “LICENSED TECHNOLOGY” MEANS ANY ARQULE TECHNOLOGY AND ARQULE’S
INTEREST IN JOINT TECHNOLOGY THAT (A) RELATES TO ANY COLLABORATION COMPOUND OR
LICENSED PRODUCT, INCLUDING ITS MANUFACTURE OR ITS FORMULATION OR A METHOD OF
ITS DELIVERY OR OF ITS USE; AND (B) IS NECESSARY OR USEFUL FOR DS TO EXERCISE
THE LICENSES GRANTED TO IT HEREUNDER.

 

1.89         “MAJOR EUROPEAN COUNTRY” MEANS EACH OF THE UNITED KINGDOM, GERMANY,
FRANCE, ITALY AND SPAIN.

 

1.90         “MANUFACTURE” OR “MANUFACTURING” OR “MANUFACTURED” MEANS ALL
OPERATIONS INVOLVED IN THE MANUFACTURE, RECEIPT, INCOMING INSPECTION, STORAGE
AND HANDLING OF RAW MATERIALS, AND THE MANUFACTURE, PROCESSING, PURIFICATION,
PACKAGING, LABELING, WAREHOUSING, QUALITY CONTROL TESTING (INCLUDING IN-PROCESS
RELEASE AND STABILITY TESTING), SHIPPING AND RELEASE OF COLLABORATION COMPOUNDS
AND/OR LICENSED PRODUCTS.

 

1.91         “MANUFACTURING COST” MEANS WITH RESPECT TO ANY LICENSED PRODUCT
MANUFACTURED BY OR ON BEHALF OF A PARTY, SUCH PARTY’S COSTS OF MANUFACTURING
SUCH LICENSED PRODUCT, WHICH SHALL BE THE SUM OF THE FOLLOWING COMPONENTS:
(A) DIRECT COSTS, INCLUDING MANUFACTURING LABOR AND MATERIALS DIRECTLY USED IN
MANUFACTURING SUCH LICENSED PRODUCT BY SUCH PARTY OR ITS AFFILIATES AND
ALLOCATED SUPERVISORY COSTS OF THE MANUFACTURING DEPARTMENT; (B) DIRECT LABOR
AND ALLOCATED SUPERVISORY COSTS OF NON-MANUFACTURING DEPARTMENTS (SUCH AS
QUALITY AND REGULATORY) ATTRIBUTABLE TO SUCH LICENSED PRODUCT; (C) AN ALLOCATION
OF DEPRECIATION OF FACILITIES, MACHINERY AND EQUIPMENT USED IN MANUFACTURE OF
LICENSED PRODUCT; (D) TOLL PROCESS AND OTHER CHARGES INCURRED BY SUCH PARTY OR
ITS AFFILIATES FOR OUTSOURCING THE MANUFACTURE OF THE LICENSED PRODUCT AND THE
COST OF SUPERVISING AND MANAGING THE THIRD PARTY MANUFACTURERS, AND OF RECEIPT,
INCOMING INSPECTIONS, STORAGE, PACKAGING, HANDLING QUALITY CONTROL TESTING AND
RELEASE OF THE OUTSOURCED ITEMS; (E) ALLOCATED GENERAL AND ADMINISTRATIVE COSTS,
INCLUDING, WITHOUT LIMITATION, PURCHASING, HUMAN RESOURCES, PAYROLL, LEGAL,
MAINTENANCE, INFORMATION SYSTEM AND ACCOUNTING, ATTRIBUTABLE TO SUCH LICENSED
PRODUCT; AND (F) ANY OTHER REASONABLE AND CUSTOMARY OUT-OF-POCKET COSTS BORNE BY
SUCH PARTY OR ITS AFFILIATES FOR THE TESTING, TRANSPORT, CUSTOMS CLEARANCE,
DUTY,

 

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INSURANCE AND/OR STORAGE OF SUCH LICENSED PRODUCT.  FOR PURPOSES OF CLARITY, ALL
ALLOCATIONS UNDER THIS SECTION SHALL BE BASED ON SPACE OCCUPIED OR HEAD-COUNT OR
OTHER ACTIVITY-BASED METHOD.

 

1.92         “MANUFACTURING DEVELOPMENT” MEANS, WITH RESPECT TO A COLLABORATION
COMPOUND AND/OR LICENSED PRODUCT, ALL ACTIVITIES RELATED TO THE OPTIMIZATION OF
A COMMERCIAL-GRADE MANUFACTURING PROCESS FOR THE MANUFACTURE OF SUCH
COLLABORATION COMPOUND AND/OR LICENSED PRODUCT INCLUDING, WITHOUT LIMITATION,
TEST METHOD DEVELOPMENT AND STABILITY TESTING, FORMULATION, VALIDATION,
PRODUCTIVITY, TROUBLE SHOOTING AND NEXT GENERATION FORMULATION, PROCESS
DEVELOPMENT, MANUFACTURING SCALE-UP, STRAIN IMPROVEMENTS, DEVELOPMENT-STAGE
MANUFACTURING, AND QUALITY ASSURANCE/QUALITY CONTROL DEVELOPMENT.

 

1.93         “MECHANISM OF INHIBITION INFORMATION” MEANS ANY INFORMATION OR
TECHNOLOGY RELATING TO, OR ARISING OUT OF, THE MECHANISM BY WHICH ARQ 197, ANY
BACK-UP COMPOUND OR ANY PROPOSED BACK-UP COMPOUND INHIBITS *, INCLUDING WITHOUT
LIMITATION, ANY INFORMATION OR TECHNOLOGY RELATING TO THE BINDING OF ARQ 197,
ANY BACK-UP COMPOUND OR ANY PROPOSED BACK-UP COMPOUND TO ITS TARGET.

 

1.94         “MIT TUMOR” MEANS A MICROPHTHALMIA TRANSCRIPTION FACTOR TUMOR,
INCLUDING CLEAR CELL SARCOMA, ALVEOLAR SOFT PART SARCOMA AND RENAL CALL
CARCINOMA.

 

1.95         “NDA” MEANS A NEW DRUG APPLICATION, AS DEFINED IN THE FDCA AND
REGULATIONS PROMULGATED THEREUNDER OR ANY SUCCESSOR APPLICATION OR PROCEDURE
REQUIRED TO SELL A PRODUCT IN THE UNITED STATES.

 

1.96         “NET SALES” MEANS THE GROSS AMOUNT BILLED OR INVOICED BY DS OR ANY
OF ITS AFFILIATES OR SUBLICENSEES TO THIRD PARTIES THROUGHOUT THE TERRITORY FOR
SALES OR OTHER DISPOSITIONS OR TRANSFERS FOR VALUE OF LICENSED PRODUCTS LESS
(A) ALLOWANCES FOR NORMAL AND CUSTOMARY TRADE, QUANTITY AND CASH DISCOUNTS
(INCLUDING DISCOUNTS IMPOSED BY WAY OF WHOLESALER FEES) ACTUALLY ALLOWED AND
TAKEN, (B) TRANSPORTATION, INSURANCE AND POSTAGE CHARGES, IF PREPAID BY DS OR
ANY AFFILIATE OR SUBLICENSEE OF DS AND INCLUDED ON ANY SUCH PARTY’S BILL OR
INVOICE AS A SEPARATE ITEM, (C) CREDITS, REBATES, RETURNS PURSUANT TO AGREEMENTS
(INCLUDING, WITHOUT LIMITATION, MANAGED CARE AGREEMENTS) OR GOVERNMENT
REGULATIONS, TO THE EXTENT ACTUALLY ALLOWED, AND (D) SALES, USE AND

 

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OTHER CONSUMPTION TAXES SIMILARLY INCURRED TO THE EXTENT INCLUDED ON THE BILL OR
INVOICE AS A SEPARATE ITEM.  IN ADDITION, NET SALES ARE SUBJECT TO THE
FOLLOWING:

 

(i)            If DS or any of its Affiliates or Sublicensees effects a sale,
disposition or transfer of a Licensed Product to a customer in a particular
country other than on customary commercial terms or as part of a package of
products and services, the Net Sales of such Licensed Product to such customer
shall be deemed to be the “fair market value” of such Licensed Product.  For
purposes of this subsection, “fair market value” shall mean the value that would
have been derived had such Licensed Product been sold as a separate product to
another customer in the country concerned on customary commercial terms.

 

(ii)           In the case of pharmacy incentive programs, hospital performance
incentive program chargebacks, disease management programs, similar programs or
discounts on “bundles” of products, all discounts and the like shall be
allocated among products on the basis on which such discounts and the like were
actually granted or, if such basis cannot be determined, in proportion to the
respective list prices of such products or such other reasonable allocation
method as the Parties shall agree.

 

(iii)          For purposes of clarity, use of any Licensed Product in Clinical
Trials, pre-clinical studies or other research or development activities, or
disposal or transfer of Licensed Products for a bona fide charitable purpose or
a commercially reasonable sampling program, shall not give rise to any Net
Sales.

 

(iv)          Net Sales shall not include sales or transfers between DS and its
Affiliates or Sublicensees unless the Licensed Product is consumed by the
Affiliate or Sublicensee.

 

1.97         “NON-CANCER INDICATION” MEANS ANY INDICATION THAT IS NOT A CANCER
INDICATION.

 

1.98         “ONGOING REGULATORY FILING” MEANS THE REGULATORY FILING WITH
RESPECT TO ARQ-197 FILED BY OR ON BEHALF OF ARQULE AS OF THE EFFECTIVE DATE.

 

1.99         “OTHER DEVELOPMENT COSTS” MEANS ANY DEVELOPMENT COSTS INCURRED BY A
PARTY (OR FOR ITS ACCOUNT BY AN AFFILIATE) ON OR AFTER THE EARLIER OF THE
EXECUTION DATE OR JANUARY 1, 2009 THAT ARE NOT EXTERNAL DEVELOPMENT COSTS.

 

18

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1.100       “PATENT RIGHTS” MEANS THE RIGHTS AND INTERESTS IN AND TO ISSUED
PATENTS AND PENDING PATENT APPLICATIONS (WHICH, FOR PURPOSES OF THIS AGREEMENT,
INCLUDE CERTIFICATES OF INVENTION, APPLICATIONS FOR CERTIFICATES OF INVENTION
AND PRIORITY RIGHTS) IN ANY COUNTRY OR REGION, INCLUDING ALL PROVISIONAL
APPLICATIONS, SUBSTITUTIONS, CONTINUATIONS, CONTINUATIONS-IN-PART, DIVISIONS,
RENEWALS, ALL LETTERS PATENT GRANTED THEREON, AND ALL REISSUES, RE-EXAMINATIONS
AND EXTENSIONS THEREOF, AND ALL FOREIGN COUNTERPARTS OF ANY OF THE FOREGOING. 
PATENT RIGHTS SHALL INCLUDE PEDIATRIC EXCLUSIVITY ATTACHED TO ISSUED PATENTS
PURSUANT TO 21 U.S.C. 355A (SECTION 505A OF THE FDCA) AND PEDIATRIC EXCLUSIVITY
UNDER ANALOGOUS LAWS IN COUNTRIES OTHER THAN THE UNITED STATES OF AMERICA.

 

1.101       “PERMITTED TRANSACTIONS” MEANS ANY AGREEMENT BY AND BETWEEN A PARTY
AND (A) ANY THIRD PARTY PURSUANT TO WHICH SUCH THIRD PARTY CONDUCTS CONTRACT
SERVICES PERMITTED PURSUANT TO SECTION 6.2.1 OF THIS AGREEMENT OR (B) ANY THIRD
PARTY NON-PROFIT OR ACADEMIC INSTITUTION, WHICH AGREEMENT PROVIDES FOR THE GRANT
TO THE PARTY ENTERING INTO THE AGREEMENT OF ALL RIGHTS TO TECHNOLOGY AND PATENT
RIGHTS RELATING TO THE USE OF COLLABORATION COMPOUNDS THAT ARE CONCEIVED OR
REDUCED TO PRACTICE BY THE THIRD PARTY NON PROFIT OR ACADEMIC INSTITUTION UNDER
SUCH AGREEMENT, WITH THE RIGHT TO SUBLICENSE TO THE OTHER PARTY.

 

1.102       “PERSON” MEANS AN INDIVIDUAL, SOLE PROPRIETORSHIP, PARTNERSHIP,
LIMITED PARTNERSHIP, LIMITED LIABILITY PARTNERSHIP, CORPORATION, LIMITED
LIABILITY COMPANY, BUSINESS TRUST, JOINT STOCK COMPANY, TRUST, INCORPORATED
ASSOCIATION, JOINT VENTURE OR SIMILAR ENTITY OR ORGANIZATION, INCLUDING A
GOVERNMENT OR POLITICAL SUBDIVISION, DEPARTMENT OR AGENCY OF A GOVERNMENT.

 

1.103       “PHASE 1 CLINICAL TRIAL” MEANS A CLINICAL TRIAL IN HUMANS CONDUCTED
IN NORMAL VOLUNTEERS OR IN PATIENTS, TO GET INFORMATION ON PRODUCT SAFETY,
TOLERABILITY, PHARMACOLOGICAL ACTIVITY OR PHARMACOKINETICS, AS MORE FULLY
DEFINED IN FEDERAL REGULATION 21 C.F.R. § 312.21(A).  ANY CLINICAL TRIAL IN ANY
COUNTRY THAT WOULD SATISFY THE REQUIREMENTS OF 21 CFR § 312.21(A) SHALL BE A
PHASE 1 CLINICAL TRIAL.

 

1.104       “PHASE 2 CLINICAL TRIAL” MEANS, AS TO A PARTICULAR LICENSED PRODUCT
FOR ANY TARGETED INDICATION, A CLINICAL TRIAL IN HUMANS OF THE SAFETY AND/OR
DOSE RANGING AND/OR EFFICACY OF SUCH LICENSED PRODUCT, WHICH IS PROSPECTIVELY
DESIGNED TO GENERATE SUFFICIENT DATA (IF

 

19

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SUCCESSFUL) TO COMMENCE PHASE 3 CLINICAL TRIALS, AS FURTHER DEFINED IN FEDERAL
REGULATION 21 C.F.R. § 312.21(B).  ANY CLINICAL TRIAL IN ANY COUNTRY THAT WOULD
SATISFY THE REQUIREMENTS OF 21 CFR § 312.21(B) SHALL BE A PHASE 2 CLINICAL
TRIAL.

 

1.105       “PHASE 3 CLINICAL TRIAL” MEANS, A CLINICAL TRIAL IN HUMANS OF THE
EFFICACY AND SAFETY OF A LICENSED PRODUCT, WHICH IS PROSPECTIVELY DESIGNED TO
DEMONSTRATE STATISTICALLY WHETHER SUCH PRODUCT IS EFFECTIVE AND SAFE FOR USE IN
A PARTICULAR INDICATION IN A MANNER SUFFICIENT TO FILE AN NDA OR OTHER DRUG
APPROVAL APPLICATION TO OBTAIN REGULATORY APPROVAL TO MARKET THE LICENSED
PRODUCT, AS FURTHER DEFINED IN FEDERAL REGULATION 21 C.F.R. § 312.21(C);
PROVIDED THAT IF THE RESULTS OF ANY CLINICAL TRIAL ARE USED AS THE BASIS FOR
FILING A DRUG APPROVAL APPLICATION, THEN SUCH CLINICAL TRIAL WILL BE DEEMED TO
BE A PHASE 3 CLINICAL TRIAL, WHETHER OR NOT IT MEETS THE REQUIREMENTS OF 21C.F.R
§312.21(C).  ANY CLINICAL TRIAL IN ANY COUNTRY THAT WOULD SATISFY THE
REQUIREMENTS OF 21 CFR § 312.21(C) SHALL BE A PHASE 3 CLINICAL TRIAL.

 

1.106       “PHASE 4 CLINICAL TRIAL” MEANS A POST-REGISTRATIONAL CLINICAL TRIAL
CONDUCTED IN ANY COUNTRY OR COUNTRIES AND REQUIRED AS A CONDITION TO, OR FOR THE
MAINTENANCE OF, ANY REGULATORY APPROVAL FOR A LICENSED PRODUCT IN THE TERRITORY.

 

1.107       “PHASE 5 CLINICAL TRIAL” MEANS A POST-REGISTRATIONAL CLINICAL TRIAL
CONDUCTED IN ANY COUNTRY OR COUNTRIES AND NOT REQUIRED AS A CONDITION TO, OR FOR
THE MAINTENANCE OF, ANY REGULATORY APPROVAL FOR A LICENSED PRODUCT IN THE
TERRITORY.  FOR PURPOSES OF CLARITY, PHASE 5 CLINICAL TRIALS ARE COMMONLY
REFERRED TO AS “MARKETING” CLINICAL TRIALS.

 

1.108       “PHASE 2 DEVELOPMENT ACTIVITIES” MEANS, WITH RESPECT TO EACH
COLLABORATION COMPOUND, ALL CLINICAL DEVELOPMENT ACTIVITIES CONDUCTED BY THE
PARTIES IN ACCORDANCE WITH ANY GLOBAL DEVELOPMENT PLAN UP TO AND INCLUDING THE
COMPLETION OF PHASE 2 CLINICAL TRIALS, INCLUDING WITHOUT LIMITATION, THE CONDUCT
OF ACTIVITIES RELATED TO THE MANUFACTURE OF COLLABORATION COMPOUNDS FOR SUCH
PHASE 2 CLINICAL TRIALS.

 

1.109       “PHASE 3 DEVELOPMENT ACTIVITIES” MEANS, WITH RESPECT TO EACH
COLLABORATION COMPOUND, ALL CLINICAL DEVELOPMENT ACTIVITIES CONDUCTED BY THE
PARTIES IN ACCORDANCE WITH ANY GLOBAL DEVELOPMENT PLAN WITH RESPECT TO PHASE 3
CLINICAL TRIALS OF SUCH COLLABORATION COMPOUND AND INCLUDING THE COMPLETION OF
PHASE 3 CLINICAL TRIALS, INCLUDING WITHOUT LIMITATION,

 

20

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THE CONDUCT OF ACTIVITIES RELATED TO THE MANUFACTURE OF COLLABORATION COMPOUNDS
FOR SUCH PHASE 3 CLINICAL TRIALS.

 

1.110       “POST-REGISTRATION ACTIVITIES” MEANS, WITH RESPECT TO EACH
COLLABORATION COMPOUND OR LICENSED PRODUCT, ALL CLINICAL DEVELOPMENT ACTIVITIES
CONDUCTED BY THE PARTIES IN ACCORDANCE WITH ANY GLOBAL DEVELOPMENT PLAN FOR A
SPECIFIC TARGETED INDICATION AFTER THE FILING OF AN NDA WITH RESPECT TO SUCH
COLLABORATION COMPOUND OR LICENSED PRODUCT FOR WHICH AN NDA HAS BEEN FILED FOR
SUCH TARGETED INDICATION, UP TO AND INCLUDING THE COMPLETION OF PHASE 4 CLINICAL
TRIALS AND PHASE 5 CLINICAL TRIALS WITH RESPECT TO SUCH COLLABORATION COMPOUND
OR LICENSED PRODUCT AND THE CONDUCT OF ACTIVITIES RELATED TO THE MANUFACTURE OF
COLLABORATION COMPOUNDS OR LICENSED PRODUCTS FOR SUCH CLINICAL TRIALS.

 

1.111       “PRICING” MEANS THE DETERMINATION OF LICENSED PRODUCT PRICING AT ALL
LEVELS, INCLUDING WHOLESALE, RETAIL, HOSPITAL, CLINIC, HEALTH CARE PROVIDER,
HMO, NON-PROFIT ENTITY OR GOVERNMENT ENTITIES, INCLUDING AVERAGE SALES PRICE,
AVERAGE WHOLESALE PRICE AND BEST PRICE.

 

1.112       “PRICING APPROVAL” MEANS THE APPROVAL BY THE APPROPRIATE REGULATORY
AUTHORITY IN A COUNTRY OR JURISDICTION OF THE PRICE AND REIMBURSEMENT FOR A
LICENSED PRODUCT.

 

1.113       “PRIMARY DETAIL EQUIVALENT” MEANS (I) IF ONLY A LICENSED PRODUCT IS
DETAILED, ONE DETAIL OF SUCH LICENSED PRODUCT OR (II) IF A LICENSED PRODUCT IS
DETAILED WITH ANOTHER PRODUCT, * PERCENT (*%) OF A DETAIL IF THE LICENSED
PRODUCT IS DETAILED IN THE FIRST POSITION AND * PERCENT (*%) OF A DETAIL IF THE
LICENSED PRODUCT IS DETAILED IN THE SECOND POSITION OR (III) IF A LICENSED
PRODUCT IS DETAILED OTHER THAN IN THE FIRST OR SECOND POSITION, SUCH PERCENTAGE
OF A DETAIL AS THE PARTIES SHALL AGREE UPON IN THE CO-COMMERCIALIZATION
AGREEMENT.

 

1.114       “PRODUCT COMMERCIALIZATION PLAN” MEANS, WITH RESPECT TO EACH
LICENSED PRODUCT (INCLUDING WITHOUT LIMITATION ANY CO-COMMERCIALIZED LICENSED
PRODUCT), THE WRITTEN PLAN FOR THE COMMERCIALIZATION OF SUCH LICENSED PRODUCT IN
THE TERRITORY (INCLUDING, WITHOUT LIMITATION, EXPECTED PRE-LAUNCH AND LAUNCH
ACTIVITIES (OTHER THAN FOR DEVELOPMENT), MANUFACTURING SCALE-UP, MANUFACTURE,
FORMULATION AND FILLING REQUIREMENTS FOR SUCH LICENSED PRODUCT AND A DETAILED
STRATEGY, BUDGET AND PROPOSED TIMELINES), AS SUCH PLAN MAY BE AMENDED OR
UPDATED.  EACH PRODUCT COMMERCIALIZATION PLAN, AND EACH AMENDMENT, MODIFICATION
OR UPDATE TO

 

21

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EACH PRODUCT COMMERCIALIZATION PLAN, SHALL BE PREPARED BY, OR AT THE DIRECTION
OF, DS, AND APPROVED BY THE JSC AT SUCH TIME AS THE JSC MAY FROM TIME TO TIME
DIRECT AND IN ANY EVENT, ON OR PRIOR TO THE INITIATION OF COMMERCIALIZATION
ACTIVITIES WITH RESPECT TO THE LICENSED PRODUCT.

 

1.115       “PRODUCT TECHNOLOGY” MEANS ANY PROGRAM TECHNOLOGY THAT COVERS THE
COMPOSITION OF MATTER, SYNTHESIS, FORMULATION, DELIVERY, MECHANISM OF ACTION,
MECHANISM OF INHIBITION AND/OR USE OF A COLLABORATION COMPOUND AND/OR LICENSED
PRODUCT.

 

1.116       “PRODUCT TRADEMARK” MEANS ANY TRADEMARK OR TRADE NAME, WHETHER OR
NOT REGISTERED, OR ANY TRADEMARK APPLICATION OR RENEWAL, EXTENSION OR
MODIFICATION THEREOF, IN THE TERRITORY, OR ANY TRADE DRESS AND PACKAGING, IN
EACH CASE THAT ARE USED WITH ANY LICENSED PRODUCT BY DS, TOGETHER WITH ALL
GOODWILL ASSOCIATED THEREWITH AND PROMOTIONAL MATERIALS RELATING THERETO.

 

1.117       “PROGRAM TECHNOLOGY” MEANS ANY TECHNOLOGY (INCLUDING, WITHOUT
LIMITATION, ANY NEW AND USEFUL PROCESS, METHOD OF MANUFACTURE OR COMPOSITION OF
MATTER) OR PROPRIETARY MATERIAL (A) THAT IS CONCEIVED AND FIRST REDUCED TO
PRACTICE (ACTUALLY OR CONSTRUCTIVELY) BY EITHER PARTY OR JOINTLY BY BOTH PARTIES
IN THE CONDUCT OF THE DEVELOPMENT PROGRAM AND/OR IN THE COMMERCIALIZATION OF
LICENSED PRODUCTS, OR (B) THAT IS CONCEIVED AND FIRST REDUCED TO PRACTICE BY
EMPLOYEES OF, OR CONSULTANTS TO, ONE PARTY AFTER THE EFFECTIVE DATE OTHER THAN
IN THE CONDUCT OF DEVELOPMENT ACTIVITIES WITH THE USE IN ANY MATERIAL RESPECT OF
ANY TECHNOLOGY, PATENT RIGHTS OR PROPRIETARY MATERIALS OF THE OTHER PARTY.  FOR
PURPOSES OF CLARITY, PROGRAM TECHNOLOGY SHALL INCLUDE ANY SUCH TECHNOLOGY THAT
IS A PROCESS FOR MODIFYING, OPTIMIZING, USING, FORMULATING, DELIVERING AND/OR
STABILIZING ANY COLLABORATION COMPOUND OR LICENSED PRODUCT.

 

1.118       “PROPRIETARY MATERIALS” MEANS ANY TANGIBLE CHEMICAL, BIOLOGICAL OR
PHYSICAL MATERIALS (A) THAT ARE FURNISHED BY OR ON BEHALF OF ONE PARTY TO THE
OTHER PARTY IN CONNECTION WITH THIS AGREEMENT, WHETHER OR NOT SPECIFICALLY
DESIGNATED AS PROPRIETARY BY THE TRANSFERRING PARTY, OR (B) THAT ARE OTHERWISE
CONCEIVED OR REDUCED TO PRACTICE IN THE CONDUCT OF THE DEVELOPMENT PROGRAM
AND/OR IN CONNECTION WITH THE COMMERCIALIZATION OF LICENSED PRODUCTS.

 

1.119       “REGULATORY ACTIVITIES” MEANS ALL ACTIVITIES RELATING TO THE
OBTAINING AND MAINTAINING OF ANY REGULATORY APPROVAL WITH RESPECT TO A LICENSED
PRODUCT, INCLUDING WITHOUT

 

22

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LIMITATION, THE PREPARATION AND FILING OF REGULATORY FILINGS AND INTERACTING
WITH REGULATORY AUTHORITIES WITH RESPECT TO SUCH REGULATORY FILINGS.

 

1.120       “REGULATORY APPROVAL” MEANS, WITH RESPECT TO ANY COUNTRY OR REGION
IN THE TERRITORY, ANY APPROVAL, PRODUCT AND ESTABLISHMENT LICENSE, REGISTRATION
OR AUTHORIZATION OF ANY REGULATORY AUTHORITY REQUIRED FOR THE MANUFACTURE, USE,
STORAGE, IMPORTATION, EXPORTATION, TRANSPORT, DISTRIBUTION OR SALE OF A LICENSED
PRODUCT IN SUCH COUNTRY OR REGION.

 

1.121       “REGULATORY AUTHORITY” MEANS THE FDA, OR ANY COUNTERPART OF THE FDA
OUTSIDE THE UNITED STATES, OR ANY OTHER NATIONAL, SUPRA-NATIONAL, REGIONAL,
STATE OR LOCAL REGULATORY AGENCY, DEPARTMENT, BUREAU, COMMISSION, COUNCIL OR
OTHER GOVERNMENTAL ENTITY WITH AUTHORITY OVER THE DISTRIBUTION, IMPORTATION,
EXPORTATION, MANUFACTURE, PRODUCTION, USE, STORAGE, TRANSPORT, CLINICAL TESTING
OR SALE OF A LICENSED PRODUCT.

 

1.122       “REGULATORY FILINGS” MEANS, COLLECTIVELY: (A) ALL INDS, NDAS, BLAS,
ESTABLISHMENT LICENSE APPLICATIONS, DMFS, APPLICATIONS FOR DESIGNATION AS AN
“ORPHAN PRODUCT(S)” UNDER THE ORPHAN DRUG ACT, FOR “FAST TRACK” STATUS UNDER
SECTION 506 OF THE FDCA (21 U.S.C. § 356) OR FOR A SPECIAL PROTOCOL ASSESSMENT
UNDER SECTION 505(B)(4)(B) AND (C) OF THE FDCA (21 U.S.C. § 355(B)(4)(B)) AND
ALL OTHER SIMILAR FILINGS (INCLUDING, WITHOUT LIMITATION, COUNTERPARTS OF ANY OF
THE FOREGOING IN ANY COUNTRY OR REGION IN THE TERRITORY); (B) ALL SUPPLEMENTS
AND AMENDMENTS TO ANY OF THE FOREGOING; AND (C) ALL DATA AND OTHER INFORMATION
CONTAINED IN, AND CORRESPONDENCE RELATING TO, ANY OF THE FOREGOING.

 

1.123       “ROW TERRITORY” MEANS ALL OF THE COUNTRIES AND TERRITORIES OF THE
WORLD OTHER THAN THE U.S. TERRITORY AND THE ASIAN TERRITORY.

 

1.124       “ROYALTY TERM” MEANS ON A LICENSED PRODUCT-BY-LICENSED PRODUCT AND
COUNTRY-BY-COUNTRY BASIS, THE PERIOD BEGINNING ON THE DATE OF FIRST COMMERCIAL
SALE OF A LICENSED PRODUCT IN A COUNTRY AND ENDING ON THE LATER TO OCCUR OF
(A) EXPIRATION OF THE LAST TO EXPIRE OF THE LICENSED PATENT RIGHTS OR JOINT
PATENT RIGHTS HAVING A VALID CLAIM IN SUCH COUNTRY THAT COVERS SUCH LICENSED
PRODUCT OR ITS MANUFACTURE, USE, IMPORT, OFFER FOR SALE OR SALE OR (B) * (*)
YEARS FROM THE DATE OF THE FIRST COMMERCIAL SALE OF SUCH LICENSED PRODUCT IN
SUCH COUNTRY, AND “COVER” AS USED HEREIN MEANS, WITH RESPECT TO A LICENSED
PRODUCT, COMPOSITION, TECHNOLOGY,

 

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PROCESS OR METHOD THAT, IN THE ABSENCE OF OWNERSHIP OF OR A LICENSE GRANTED
UNDER A VALID CLAIM, THE MANUFACTURE, USE, OFFER FOR SALE, SALE OR IMPORTATION
OF SUCH LICENSED PRODUCT OR THE PRACTICE OF SUCH TECHNOLOGY, PROCESS OR METHOD
WOULD INFRINGE SUCH VALID CLAIM OF THE LICENSED PATENT RIGHTS OR JOINT PATENT
RIGHTS (OR, IN THE CASE OF A VALID CLAIM OF THE LICENSED PATENT RIGHTS OR JOINT
PATENT RIGHTS THAT HAS NOT YET ISSUED, WOULD INFRINGE SUCH VALID CLAIM IF IT
WERE TO ISSUE).

 

1.125       “SECOND CO-COMMERCIALIZATION OPTION PERIOD” MEANS, WITH RESPECT TO
EACH LICENSED PRODUCT, THE PERIOD COMMENCING ON THE DATE THAT THE NDA FILING
NOTICE IS RECEIVED BY ARQULE AND CONTINUING FOR A PERIOD OF * (*) DAYS
THEREAFTER.

 

1.126       “SHARED DEVELOPMENT COSTS” MEANS, WITH RESPECT TO A PARTY, * PERCENT
(*%) OF THE AGGREGATE AMOUNT OF THE EXTERNAL DEVELOPMENT COSTS INCURRED BY SUCH
PARTY IN THE CONDUCT OF DEVELOPMENT ACTIVITIES.

 

1.127       “SNDA” MEANS A SUPPLEMENTAL NEW DRUG APPLICATION, AS DEFINED IN THE
FDCA AND APPLICABLE REGULATIONS PROMULGATED THEREUNDER.

 

1.128       “SUBLICENSEE” MEANS ANY THIRD PARTY TO WHICH A PARTY GRANTS A
SUBLICENSE IN ACCORDANCE WITH SECTION 6.2.2.

 

1.129       “TARGETED INDICATIONS” MEANS (A) ALL HUMAN CANCER INDICATIONS AND
(B) ANY APPROVED NON-CANCER INDICATIONS.

 

1.130       “TECHNOLOGY” MEANS, COLLECTIVELY, INVENTIONS, DISCOVERIES,
IMPROVEMENTS, TRADE SECRETS AND PROPRIETARY METHODS, WHETHER OR NOT PATENTABLE,
INCLUDING WITHOUT LIMITATION: (A) METHODS OF MANUFACTURE OR USE OF, AND
STRUCTURAL AND FUNCTIONAL INFORMATION PERTAINING TO, CHEMICAL COMPOUNDS OR OTHER
THERAPEUTIC AGENTS AND (B) COMPOSITIONS OF MATTER, DATA, FORMULATIONS,
PROCESSES, TECHNIQUES, KNOW-HOW AND RESULTS (INCLUDING ANY NEGATIVE RESULTS).

 

1.131       “TERRITORY” ALL COUNTRIES AND TERRITORIES OF THE WORLD OTHER THAN
THE ASIAN TERRITORY, CONSISTING OF THE U.S. TERRITORY AND THE ROW TERRITORY.

 

1.132       “THIRD PARTY” MEANS A PERSON OTHER THAN DS AND ARQULE AND THEIR
RESPECTIVE AFFILIATES.

 

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1.133       “THIRD PARTY DATA PROVIDER” MEANS IMS HEALTH AND/OR ANY OTHER THIRD
PARTY REASONABLY ACCEPTABLE TO THE PARTIES THAT PERFORMS MARKET ANALYSES AND
PROVIDES SALES DATA FOR THE BIOTECHNOLOGY OR PHARMACEUTICAL INDUSTRY.

 

1.134       “UNANIMOUS DECISION” MEANS (A) ANY DECISION WITH RESPECT TO * AND
ANY AMENDMENT TO ANY SUCH *; (B) ANY DECISION THAT WOULD *; (C) ANY DECISION TO
*; (D) ANY DECISION REQUIRING A PARTY TO *; (E) ANY DECISION APPLICABLE TO * AND
ANY *; (F) ANY DECISION TO * AND (G) ANY OTHER DECISION DESIGNATED AS A
UNANIMOUS DECISION HEREIN.

 

1.135       “US JOINT MARKETING COMMITTEE” OR “USJMC” MEANS THE COMMITTEE
COMPOSED OF ARQULE AND DS REPRESENTATIVES ESTABLISHED PURSUANT TO SECTION 2.5.

 

1.136       “U.S. TERRITORY” MEANS THE UNITED STATES OF AMERICA AND ITS
TERRITORIES, INCLUDING, WITHOUT LIMITATION, PUERTO RICO AND THE U.S. VIRGIN
ISLANDS.

 

1.137       “VALID CLAIM” MEANS (A) ANY CLAIM OF AN ISSUED UNEXPIRED PATENT
THAT, (I) HAS NOT BEEN PERMANENTLY REVOKED, HELD INVALID, OR DECLARED
UNPATENTABLE OR UNENFORCEABLE IN A DECISION OF A COURT OR OTHER BODY OF
COMPETENT JURISDICTION THAT IS UNAPPEALABLE OR UNAPPEALED WITHIN THE TIME
ALLOWED FOR APPEAL, (II) HAS NOT BEEN RENDERED UNENFORCEABLE THROUGH DISCLAIMER
OR OTHERWISE, AND (III) IS NOT LOST THROUGH AN INTERFERENCE PROCEEDING; OR
(B) ANY CLAIM OF A PENDING PATENT APPLICATION THAT HAS NOT BEEN FINALLY
CANCELLED, WITHDRAWN, ABANDONED OR REJECTED BY ANY ADMINISTRATIVE AGENCY OR
OTHER BODY OF COMPETENT JURISDICTION, AND WHICH PENDING PATENT APPLICATION HAS
BEEN PENDING FOR LESS THAN * (*) YEARS SINCE ITS EARLIEST PRIORITY DATE.  IN THE
EVENT SUBSEQUENT TO SUCH * (*) YEAR PERIOD, SUCH PENDING CLAIM IS ISSUED AS A
CLAIM OF AN ISSUED AND UNEXPIRED PATENT INCLUDED WITHIN (A) ABOVE, SUCH CLAIM
SHALL BE REINSTATED THEREAFTER AS A “VALID CLAIM” IN ACCORDANCE WITH CLAUSE
(A) ABOVE.

 

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1.138       ADDITIONAL DEFINITIONS.  IN ADDITION, EACH OF THE FOLLOWING
DEFINITIONS SHALL HAVE THE RESPECTIVE MEANINGS SET FORTH IN THE SECTION OF THIS
AGREEMENT INDICATED BELOW:

 

Definition

 

Section

 

 

 

Abandoning Party

 

8.1.5(b)

Agreement

 

Preamble

Alliance Manager

 

2.6.1

Appointing Party

 

2.8

ARQULE

 

Preamble

ARQULE Indemnitees

 

11.1

Back-Up Compound

 

3.2

Claims

 

11.1

Combination Product

 

4.3.1(a)(i)

Co-Commercialization Agreement

 

3.12.1(c)(i)

Co-Commercialization Option

 

3.12.1(b)

Co-Commercialization Option Notice

 

3.12.1(b)

Co-Commercialization Plan

 

3.12.2

Co-Commercialized Licensed Product

 

3.12.1(b)

Cost Audited Party

 

3.11.2(b)

Cost Auditing Party

 

3.11.2(b)

Deferred Development Costs

 

3.11.2(a)(ii)

Designated Senior Officers

 

2.1.5

disclosing Party

 

1.38

Dispute

 

12.1

Disputed Matter

 

2.1.5

DS

 

Preamble

DS Indemnitees

 

11.2

DS Manufacturing Know-How

 

9.3.1(e)(xi)

Execution Date

 

Preamble

Filing Party

 

8.1.4

Generic Licensed Product

 

4.3.1(a)(ii)

HSR Conditions

 

12.15

ICD10

 

1.74

Indemnified Party

 

11.3

Indemnifying Party

 

11.3

Indication Proposal Notice

 

3.13

Infringement

 

8.2.1(a)

Infringement Notice

 

8.2.1(a)

INN

 

8.2.5

Last Patient/Last Visit Notice

 

3.12.1(a)

Losses

 

11.1

Maintaining Party

 

8.1.5(b)

Manufacturing Plan

 

3.3.1

Manufacturing Plan Completion Notice

 

3.3.1

 

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MiT Tumor Milestones

 

4.2.2(d)

NDA Filing Notice

 

3.12.1(a)

New Cancer Indication

 

3.14

Non-Filing Party

 

8.1.4

Other Products

 

4.3.1(a)(i)

Party/Parties

 

Preamble

Patent Coordinator

 

7.4

Permitted Employee

 

5.1.2

Phase 3 Costs

 

3.11.2(a)(ii)

Prior CDA

 

12.13

Product-Related Data

 

3.10.3

receiving Party

 

1.38

Recipient Party

 

3.4

Regulatory Transition Plan

 

3.1.4(a)

Supply Agreement

 

3.3.3

Term

 

9.1

Third Party Development Technology

 

6.5.2

Total Reimbursable Costs

 

3.14

Transferring Party

 

3.4

Upfront Fee

 

4.1

 

2.             ADMINISTRATION OF THE COLLABORATION

 

2.1           Joint Steering Committee.

 

2.1.1        ESTABLISHMENT.  AS SOON AS PRACTICABLE AFTER THE EXECUTION DATE,
ARQULE AND DS SHALL ESTABLISH THE JOINT STEERING COMMITTEE.  THE JSC SHALL HAVE
AND PERFORM THE RESPONSIBILITIES SET FORTH IN SECTION 2.1.4.

 

2.1.2        MEMBERSHIP.  UPON ESTABLISHMENT OF THE JSC, EACH OF ARQULE AND DS
SHALL DESIGNATE IN WRITING FOUR (4) REPRESENTATIVES, OR SUCH OTHER EQUAL NUMBER
OF REPRESENTATIVES AS THE PARTIES AGREE, TO THE JSC, WHO SHALL BE SENIOR LEVEL
PERSONNEL.  ONE (1) REPRESENTATIVE OF EACH PARTY SHALL BE DESIGNATED AS A
CO-CHAIR OF THE JSC.  EACH PARTY SHALL HAVE THE RIGHT AT ANY TIME TO SUBSTITUTE
INDIVIDUALS, ON A PERMANENT OR TEMPORARY BASIS, FOR ANY OF ITS PREVIOUSLY
DESIGNATED REPRESENTATIVES TO THE JSC BY GIVING WRITTEN NOTICE TO THE OTHER
PARTY.

 

2.1.3        MEETINGS.

 

(A)           SCHEDULE OF MEETINGS; AGENDA.  THE JSC SHALL ESTABLISH A SCHEDULE
OF TIMES FOR REGULAR MEETINGS, TAKING INTO ACCOUNT, WITHOUT LIMITATION, THE
PLANNING NEEDS OF THE

 

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COLLABORATION AND THE RESPONSIBILITIES OF THE JSC.  SPECIAL MEETINGS OF THE JSC
MAY BE CONVENED BY ANY MEMBER UPON NOT LESS THAN THIRTY (30) DAYS (OR, IF SUCH
MEETING IS PROPOSED TO BE CONDUCTED BY TELECONFERENCE, UPON NOT LESS THAN TEN
(10) DAYS) WRITTEN NOTICE TO THE OTHER MEMBERS; PROVIDED, THAT, (I) NOTICE OF
ANY SUCH SPECIAL MEETING MAY BE WAIVED AT ANY TIME, EITHER BEFORE OR AFTER SUCH
MEETING AND (II) ATTENDANCE OF ANY MEMBER AT A SPECIAL MEETING SHALL CONSTITUTE
A VALID WAIVER OF NOTICE FROM SUCH MEMBER.  UNLESS OTHERWISE AGREED BY THE
PARTIES, THE JSC SHALL MEET FOUR (4) TIMES IN EACH CALENDAR YEAR.  REGULAR AND
SPECIAL MEETINGS OF THE JSC MAY BE HELD IN PERSON OR BY TELECONFERENCE OR
VIDEOCONFERENCE; PROVIDED, THAT, MEETINGS HELD IN PERSON SHALL ALTERNATE BETWEEN
THE RESPECTIVE OFFICES OF THE PARTIES OR AT OTHER LOCATIONS MUTUALLY AGREEABLE
TO THE JSC MEMBERS.  THE CO-CHAIRS SHALL PREPARE AND CIRCULATE AN AGENDA FOR
EACH JSC MEETING NOT LATER THAN ONE (1) WEEK PRIOR TO SUCH MEETING.

 

(B)           QUORUM; VOTING; DECISIONS.  AT EACH JSC MEETING, THE PRESENCE IN
PERSON OF THE CO-CHAIRS SHALL CONSTITUTE A QUORUM PROVIDED THAT MINUTES OF THE
MEETING ARE PREPARED AS SET FORTH BELOW.  ALL MEMBERS DESIGNATED BY A PARTY
SHALL HAVE ONE (1) COLLECTIVE VOTE, TO BE CAST BY SUCH PARTY’S CO-CHAIR (OR HIS
DESIGNEE), ON ALL MATTERS BEFORE THE JSC AT SUCH MEETING.  ALL DECISIONS OF THE
JSC SHALL BE MADE BY UNANIMOUS VOTE.  ALTERNATIVELY, THE JSC MAY ACT BY WRITTEN
CONSENT SIGNED BY THE CO-CHAIRS.  WHENEVER ANY ACTION BY THE JSC IS CALLED FOR
HEREUNDER DURING A TIME PERIOD IN WHICH THE JSC IS NOT SCHEDULED TO MEET, EITHER
CO-CHAIR SHALL CAUSE THE JSC TO MEET TO TAKE THE ACTION IN THE REQUESTED TIME
PERIOD BY CALLING A SPECIAL MEETING OR THE CO-CHAIRS SHALL ACT BY WRITTEN
CONSENT.  REPRESENTATIVES OF EACH PARTY OR OF ITS AFFILIATES WHO ARE NOT MEMBERS
OF THE JSC MAY ATTEND JSC MEETINGS AS GUESTS WITH THE CONSENT OF THE OTHER
PARTY, WHICH SHALL NOT BE UNREASONABLY WITHHELD, CONDITIONED OR DELAYED.

 

(C)           MINUTES.  THE JSC SHALL KEEP MINUTES OF ITS MEETINGS THAT RECORD
ALL DECISIONS AND ALL ACTIONS RECOMMENDED OR TAKEN IN REASONABLE DETAIL.  DRAFTS
OF THE MINUTES SHALL BE PREPARED AND CIRCULATED TO THE MEMBERS OF THE JSC WITHIN
A REASONABLE TIME AFTER THE MEETING, NOT TO EXCEED TEN (10) BUSINESS DAYS, AND
THE CO-CHAIRS SHALL ALTERNATE RESPONSIBILITY FOR THE PREPARATION AND CIRCULATION
OF DRAFT MINUTES.  EACH MEMBER OF THE JSC SHALL HAVE THE OPPORTUNITY TO PROVIDE
COMMENTS ON THE DRAFT MINUTES.  THE MINUTES SHALL BE APPROVED, DISAPPROVED AND
REVISED AS SOON AS PRACTICABLE.  UPON APPROVAL, FINAL MINUTES OF EACH MEETING

 

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SHALL BE CIRCULATED TO THE MEMBERS OF THE JSC BY THE CO-CHAIR WITH
RESPONSIBILITY FOR PREPARING SUCH MINUTES.

 

(D)           EXPENSES.  ARQULE AND DS SHALL EACH BEAR ALL EXPENSES OF THEIR
RESPECTIVE JSC REPRESENTATIVES RELATED TO THEIR PARTICIPATION ON THE JSC AND
ATTENDANCE AT JSC MEETINGS.  IF ANY MEETING IS HELD OFF-SITE, THE EXPENSE FOR
USING THE NECESSARY MEETING FACILITY IS TO BE  BORN BY THE PARTY HOSTING SUCH
MEETING.

 

2.1.4        RESPONSIBILITIES.  THE JSC SHALL BE RESPONSIBLE FOR GENERAL
OVERSIGHT OF THE CONDUCT AND PROGRESS OF THE DEVELOPMENT PROGRAM, AND THE GLOBAL
DEVELOPMENT AND COMMERCIALIZATION OF LICENSED PRODUCTS.  WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THE JSC SHALL HAVE THE FOLLOWING RESPONSIBILITIES:

 

(A)           REVIEWING AND APPROVING THE OVERALL GOALS AND STRATEGY OF THE
DEVELOPMENT PROGRAM;

 

(B)           REVIEWING BUDGETS, DATA, REPORTS OR OTHER INFORMATION SUBMITTED TO
IT BY ANY OTHER COMMITTEE FROM TIME TO TIME;

 

(C)           OVERSEEING THE ACTIVITIES AND PERFORMANCE BY EACH OF THE OTHER
COMMITTEES OF ITS RESPECTIVE DUTIES;

 

(D)           REVIEWING AND APPROVING EACH GLOBAL DEVELOPMENT PLAN (AS A
UNANIMOUS DECISION) AND REVIEWING PRODUCT COMMERCIALIZATION PLAN (AS A DS
DECISION);

 

(E)           APPOINTING THE APPROPRIATE COMMITTEE OR PEOPLE FOR REVIEW OF
COMMERCIALIZATION ISSUES OUTSIDE THE UNITED STATES;

 

(F)            APPOINTING THE APPROPRIATE COMMITTEE OR PEOPLE FOR REVIEW AND
APPROVAL OF, OR VARIANCES FROM, GLOBAL PRICING POLICY (AS A UNANIMOUS DECISION);

 

(G)           RESOLVING ALL COMMITTEE MATTERS THAT ARE IN DISPUTE; AND

 

(H)           MAKING SUCH OTHER DECISIONS AS MAY BE DELEGATED TO THE JSC
PURSUANT TO THIS AGREEMENT OR BY MUTUAL WRITTEN AGREEMENT OF THE PARTIES DURING
THE TERM.

 

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2.1.5        DISPUTE RESOLUTION.  THE JSC MEMBERS SHALL USE REASONABLE EFFORTS
TO REACH AGREEMENT ON ANY AND ALL MATTERS.  IN THE EVENT THAT, DESPITE SUCH
REASONABLE EFFORTS, AGREEMENT ON A PARTICULAR MATTER CANNOT BE REACHED BY THE
JSC WITHIN * (*) DAYS AFTER THE JSC FIRST MEETS TO CONSIDER SUCH MATTER (EACH
SUCH MATTER, A “DISPUTED MATTER”), THEN, (A) IF THE DISPUTED MATTER INVOLVES A
DS DECISION, DS SHALL HAVE THE RIGHT TO MAKE THE FINAL DECISION ON SUCH DISPUTED
MATTER BUT SHALL ONLY EXERCISE SUCH RIGHT IN GOOD FAITH AFTER FULL CONSIDERATION
OF THE POSITIONS OF BOTH PARTIES; (B) IF THE DISPUTED MATTER INVOLVES AN ARQULE
DECISION, ARQULE SHALL HAVE THE RIGHT TO MAKE THE FINAL DECISION ON SUCH
DISPUTED MATTER BUT SHALL ONLY EXERCISE SUCH RIGHT IN GOOD FAITH AFTER FULL
CONSIDERATION OF THE POSITIONS OF BOTH PARTIES; (C) IF THE DISPUTED MATTER
INVOLVES A JOINT DECISION OR A UNANIMOUS DECISION, (I) THE CO-CHAIRS OF THE JSC
SHALL REFER SUCH DISPUTED MATTER TO THE CEO OF ARQULE AND THE SENIOR OFFICER OF
DS OR ITS AFFILIATES TO BE DESIGNATED BY THE CEO OF DS (THE “DESIGNATED SENIOR
OFFICERS”), WHO SHALL PROMPTLY INITIATE DISCUSSIONS IN GOOD FAITH TO RESOLVE
SUCH DISPUTED MATTER AND (II) IF SUCH DISPUTED MATTER IS NOT RESOLVED BY THE
DESIGNATED SENIOR OFFICERS WITHIN * (*) DAYS AFTER THE DATE THE DESIGNATED
SENIOR OFFICERS FIRST MET TO CONSIDER SUCH DISPUTED MATTER OR * (*) DAYS AFTER
THE DATE THE JSC FIRST MET TO CONSIDER SUCH DISPUTED MATTER, THE DISPUTED MATTER
SHALL BE RESOLVED IN ACCORDANCE WITH SECTION 12.1; AND (D) IF THE DISPUTED
MATTER INVOLVES A UNANIMOUS DECISION, SUCH MATTER MUST BE RESOLVED BY THE JSC OR
THE DESIGNATED SENIOR OFFICERS, AND SHALL NOT BE SUBMITTED TO THE ARBITRATION
PURSUANT TO SECTION 12.1.

 

2.2           Joint Development Committee.

 

2.2.1        ESTABLISHMENT.  AS SOON AS PRACTICABLE AFTER THE EXECUTION DATE,
ARQULE AND DS SHALL ESTABLISH THE JOINT DEVELOPMENT COMMITTEE.  THE JDC SHALL
HAVE AND PERFORM THE RESPONSIBILITIES SET FORTH IN SECTION 2.2.4.

 

2.2.2        MEMBERSHIP.  UPON ESTABLISHMENT OF THE JDC, EACH OF ARQULE AND DS
SHALL DESIGNATE IN WRITING FIVE (5) REPRESENTATIVES (REPRESENTING EACH KEY
FUNCTION SUCH AS CLINICAL DEVELOPMENT, REGULATORY, COMMERCIAL, CM&C AND PROJECT
MANAGEMENT), OR SUCH OTHER NUMBER OF REPRESENTATIVES AS THE PARTIES AGREE, TO
THE JDC.  UNLESS OTHERWISE AGREED BY THE PARTIES, ONE REPRESENTATIVE OF EACH
PARTY SHALL BE DESIGNATED AS A CO-CHAIR OF THE JDC.  EACH PARTY SHALL HAVE

 

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THE RIGHT AT ANY TIME TO SUBSTITUTE INDIVIDUALS, ON A PERMANENT OR TEMPORARY
BASIS, FOR ANY OF ITS PREVIOUSLY DESIGNATED REPRESENTATIVES TO THE JDC BY GIVING
WRITTEN NOTICE TO THE OTHER PARTY.

 

2.2.3        Meetings.

 

(A)           SCHEDULE OF MEETINGS; AGENDA.  THE JDC SHALL ESTABLISH A SCHEDULE
OF TIMES FOR REGULAR MEETINGS, TAKING INTO ACCOUNT, WITHOUT LIMITATION, THE
PLANNING NEEDS OF THE DEVELOPMENT PROGRAM AND THE RESPONSIBILITIES OF THE JDC. 
SPECIAL MEETINGS OF THE JDC MAY BE CONVENED BY ANY MEMBER UPON NOT LESS THAN
THIRTY (30) DAYS (OR, IF SUCH MEETING IS PROPOSED TO BE CONDUCTED BY
TELECONFERENCE, UPON NOT LESS THAN TEN (10) DAYS) WRITTEN NOTICE TO THE OTHER
MEMBERS; PROVIDED, THAT, (I) NOTICE OF ANY SUCH SPECIAL MEETING MAY BE WAIVED AT
ANY TIME, EITHER BEFORE OR AFTER SUCH MEETING AND (II) ATTENDANCE OF ANY MEMBER
AT A SPECIAL MEETING SHALL CONSTITUTE A VALID WAIVER OF NOTICE FROM SUCH
MEMBER.  IN NO EVENT SHALL THE JDC MEET LESS FREQUENTLY THAN FOUR (4) TIMES EACH
CALENDAR YEAR.  REGULAR AND SPECIAL MEETINGS OF THE JDC MAY BE HELD IN PERSON OR
BY TELECONFERENCE OR VIDEOCONFERENCE; PROVIDED, THAT, MEETINGS HELD IN PERSON
SHALL ALTERNATE BETWEEN THE RESPECTIVE OFFICES OF THE PARTIES OR AT OTHER
LOCATIONS MUTUALLY AGREEABLE TO THE JDC MEMBERS.  THE CO-CHAIRS SHALL PREPARE
AND CIRCULATE AN AGENDA FOR EACH JDC MEETING NOT LATER THAN ONE (1) WEEK PRIOR
TO SUCH MEETING.

 

(B)           QUORUM; VOTING; DECISIONS.  AT EACH JDC MEETING, THE PRESENCE IN
PERSON OF THE CO-CHAIRS SHALL CONSTITUTE A QUORUM PROVIDED THAT MINUTES OF THE
MEETING ARE PREPARED AS SET FORTH BELOW.  ALL MEMBERS DESIGNATED BY A PARTY
SHALL HAVE ONE (1) COLLECTIVE VOTE, TO BE CAST BY SUCH PARTY’S CO-CHAIR (OR HIS
DESIGNEE), ON ALL MATTERS BEFORE THE JDC AT SUCH MEETING.  ALL DECISIONS OF THE
JDC SHALL BE MADE BY UNANIMOUS VOTE.  ALTERNATIVELY, THE JDC MAY ACT BY WRITTEN
CONSENT SIGNED BY THE CO-CHAIRS.  WHENEVER ANY ACTION BY THE JDC IS CALLED FOR
HEREUNDER DURING A TIME PERIOD IN WHICH THE JDC IS NOT SCHEDULED TO MEET, EITHER
CO-CHAIR SHALL CAUSE THE JDC TO MEET TO TAKE THE ACTION IN THE REQUESTED TIME
PERIOD BY CALLING A SPECIAL MEETING OR THE CO-CHAIRS SHALL ACT BY WRITTEN
CONSENT.  REPRESENTATIVES OF EACH PARTY OR OF ITS AFFILIATES WHO ARE NOT MEMBERS
OF THE JDC MAY ATTEND JDC MEETINGS AS GUESTS WITH THE CONSENT OF THE OTHER
PARTY, WHICH SHALL NOT BE UNREASONABLY WITHHELD, CONDITIONED OR DELAYED.

 

(C)           MINUTES.  THE JDC SHALL KEEP MINUTES OF ITS MEETINGS THAT RECORD
ALL DECISIONS AND ALL ACTIONS RECOMMENDED OR TAKEN IN REASONABLE DETAIL.  DRAFTS
OF THE MINUTES

 

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SHALL BE PREPARED AND CIRCULATED TO THE MEMBERS OF THE JDC WITHIN A REASONABLE
TIME AFTER THE MEETING, NOT TO EXCEED TEN (10) BUSINESS DAYS, AND THE PARTIES
SHALL ALTERNATE RESPONSIBILITY FOR THE PREPARATION AND CIRCULATION OF DRAFT
MINUTES.  EACH MEMBER OF THE JDC SHALL HAVE THE OPPORTUNITY TO PROVIDE COMMENTS
ON THE DRAFT MINUTES.  THE MINUTES SHALL BE APPROVED, DISAPPROVED AND REVISED AS
NECESSARY AT THE NEXT JDC MEETING.  UPON APPROVAL, FINAL MINUTES OF EACH MEETING
SHALL BE CIRCULATED TO THE MEMBERS OF THE JDC BY THE CO-CHAIR WITH
RESPONSIBILITY FOR PREPARING SUCH MINUTES.

 

(D)           EXPENSES.  ARQULE AND DS SHALL EACH BEAR ALL EXPENSES OF THEIR
RESPECTIVE JDC REPRESENTATIVES RELATED TO THEIR PARTICIPATION ON THE JDC AND
ATTENDANCE AT JDC MEETINGS.  IF ANY MEETING IS HELD OFF-SITE, THE EXPENSE FOR
USING THE NECESSARY MEETING FACILITY IS TO BE  BORN BY THE PARTY HOSTING SUCH
MEETING.

 

2.2.4        RESPONSIBILITIES.  THE JDC SHALL BE RESPONSIBLE FOR OVERSEEING THE
CONDUCT AND PROGRESS OF THE DEVELOPMENT PROGRAM AND THE GLOBAL DEVELOPMENT OF
LICENSED PRODUCTS.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE JDC
SHALL HAVE THE FOLLOWING RESPONSIBILITIES:

 

(A)           PREPARING, OR DIRECTING THE PREPARATION BY THE PARTIES OF, THE
DEVELOPMENT PROGRAM;

 

(B)           PREPARING, OR DIRECTING THE PREPARATION BY THE PARTIES OF, EACH
GLOBAL DEVELOPMENT PLAN APPLICABLE TO THE DEVELOPMENT OF LICENSED PRODUCTS IN
THE TERRITORY, INCLUDING THE BUDGET WITH RESPECT THERETO;

 

(C)           PREPARING, OR DIRECTING THE PREPARATION BY THE PARTIES OF, EACH
AMENDMENT TO ANY GLOBAL DEVELOPMENT PLAN APPLICABLE TO THE DEVELOPMENT OF
LICENSED PRODUCTS IN THE TERRITORY OR THE BUDGET WITH RESPECT THERETO;

 

(D)           APPROVING THE MANUFACTURING PLAN TO BE PROPOSED BY DS FOR THE
MANUFACTURE OF LICENSED PRODUCTS;

 

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(E)           MONITORING THE PROGRESS OF THE DEVELOPMENT PROGRAM UNDER EACH
GLOBAL DEVELOPMENT PLAN APPLICABLE TO THE DEVELOPMENT OF LICENSED PRODUCTS IN
THE TERRITORY AND OF EACH PARTY’S ACTIVITIES THEREUNDER;

 

(F)            RECONCILING ISSUES BETWEEN THE PARTIES WITH RESPECT TO THE
PARTIES’ RESPECTIVE SHARE OF SHARED DEVELOPMENT COSTS WITH RESPECT TO LICENSED
PRODUCTS;

 

(G)           REVIEWING AND CIRCULATING TO THE PARTIES DATA, REPORTS OR OTHER
INFORMATION SUBMITTED BY EITHER PARTY WITH RESPECT TO WORK CONDUCTED UNDER THE
DEVELOPMENT PROGRAM;

 

(H)           OVERSEEING THE CONDUCT OF CLINICAL TRIALS FOR LICENSED PRODUCTS IN
THE TERRITORY;

 

(I)            REVIEWING AND APPROVING ANY AGREEMENT ENTERED INTO BY A PARTY
WITH A THIRD PARTY PURSUANT TO SECTION 6.2.1; AND

 

(J)            MAKING SUCH OTHER DECISIONS AS MAY BE DELEGATED TO THE JDC
PURSUANT TO THIS AGREEMENT OR BY THE JSC OR BY MUTUAL WRITTEN AGREEMENT OF THE
PARTIES DURING THE TERM.

 

2.2.5        DISPUTE RESOLUTION.  THE JDC MEMBERS SHALL USE REASONABLE EFFORTS
TO REACH AGREEMENT ON ANY AND ALL MATTERS.  IN THE EVENT THAT, DESPITE SUCH
REASONABLE EFFORTS, AGREEMENT ON A PARTICULAR MATTER CANNOT BE REACHED BY THE
JDC WITHIN * (*) DAYS AFTER THE JDC FIRST MEETS TO CONSIDER SUCH MATTER, THEN
THE MATTER SHALL BE REFERRED TO THE JSC FOR RESOLUTION PURSUANT TO
SECTION 2.1.5.

 

2.3           Joint Life Cycle Management Committee.  The JSC may establish the
Joint Life Cycle Management Committee as a sub-Committee to the JDC, the primary
purpose of which shall be to generate concepts and direct, plan, manage handoff
to execution teams and joint governing committees, and monitor strategies for
product innovations for the Licensed Product(s), including new indications, new
combinations, dosing regimens, new formulations, and line extensions.  The JLCMC
shall also ensure that critical success factors, timelines and issues are
transparent to the JDC.  The JLCMC shall consist of three (3) representatives,
or such

 

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other equal number of representatives as the Parties agree, from each Party. 
The JLCMC shall establish a life-cycle management plan for the Licensed Product
on an annual basis for approval by the JDC.  In the event of a dispute, the
matter shall be referred to the JDC.  If the JLCMC is not established, the
functions set forth above and below shall be performed by the JDC.  If
established, the JLCMC shall be responsible for (a) directing, planning and
managing the transition to the applicable Committees of responsibilities with
respect to the Development and Commercialization of Licensed Products and (b)
generating and monitoring strategies for innovation of Licensed Products,
including any strategies related to the pursuit of Non-Cancer Indications, new
combinations, dosing regimens and/or line extensions with respect to Licensed
Products.

 

2.4           Joint Finance Committee.  The JSC may establish the Joint Finance
Committee as a sub-Committee to the JDC, the primary purpose of which shall be
to provide monthly standardized financial information and analysis to project
team and joint governing committees to facilitate planning, decision making, and
controls in the United States.  The JFC shall consist of three (3)
representatives, or such other equal number of representatives as the Parties
agree, from each Party.  In the event of a dispute, the matter shall be referred
to the JDC.  If the JFC is not established, the functions set forth above and
below shall be performed by the JDC, or in the case of Section 3.11.2(a)(i), by
the Party designated by the JSC under such section.  If established, the JFC
shall be responsible for coordinating the financial information and analyses
prepared by the Parties in connection with the Commercialization of Licensed
Products in the U.S. Territory.

 

2.5           US Joint Marketing Committee.

 

2.5.1        Establishment.  As soon as practicable following the exercise by
ARQULE of a Co-Commercialization Option with respect to a Co-Commercialized
Licensed Product in accordance with Section 3.12, ARQULE and DS shall establish
the US Joint Marketing Committee which shall have and perform the
responsibilities set forth in Section 2.5.4.  Unless otherwise agreed by the
Parties, the term for the USJMC shall commence at such time and continue for so
long as a Co-Commercialized Product is being Commercialized.

 

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2.5.2        MEMBERSHIP.  UPON ESTABLISHMENT OF THE USJMC, EACH OF ARQULE AND DS
SHALL DESIGNATE IN WRITING THREE (3) REPRESENTATIVES, OR SUCH OTHER EQUAL NUMBER
OF REPRESENTATIVES AS THE PARTIES AGREE, TO THE USJMC.  UNLESS OTHERWISE AGREED
BY THE PARTIES, ONE REPRESENTATIVE OF EACH PARTY SHALL BE DESIGNATED AS A
CO-CHAIR OF THE USJMC.  EACH PARTY SHALL HAVE THE RIGHT AT ANY TIME TO
SUBSTITUTE INDIVIDUALS, ON A PERMANENT OR TEMPORARY BASIS, FOR ANY OF ITS
PREVIOUSLY DESIGNATED REPRESENTATIVES TO THE JDC BY GIVING WRITTEN NOTICE TO THE
OTHER PARTY.

 

2.5.3        MEETINGS.

 

(A)           SCHEDULE OF MEETINGS; AGENDA.  THE USJMC SHALL ESTABLISH A
SCHEDULE OF TIMES FOR REGULAR MEETINGS, TAKING INTO ACCOUNT, WITHOUT LIMITATION,
THE PLANNING NEEDS FOR THE COMMERCIALIZATION OF CO-COMMERCIALIZED PRODUCTS AND
THE RESPONSIBILITIES OF THE USJMC.  SPECIAL MEETINGS OF THE USJMC MAY BE
CONVENED BY ANY MEMBER UPON NOT LESS THAN THIRTY (30) DAYS (OR, IF SUCH MEETING
IS PROPOSED TO BE CONDUCTED BY TELECONFERENCE, UPON TEN (10) DAYS) WRITTEN
NOTICE TO THE OTHER MEMBERS; PROVIDED, THAT, (I) NOTICE OF ANY SUCH SPECIAL
MEETING MAY BE WAIVED AT ANY TIME, EITHER BEFORE OR AFTER SUCH MEETING AND
(II) ATTENDANCE OF ANY MEMBER AT A SPECIAL MEETING SHALL CONSTITUTE A VALID
WAIVER OF NOTICE FROM SUCH MEMBER.  UNLESS OTHERWISE AGREED BY THE PARTIES, THE
USJMC SHALL MEET TWO (2) TIMES EACH CALENDAR YEAR.  REGULAR AND SPECIAL MEETINGS
OF THE USJMC MAY BE HELD IN PERSON OR BY TELECONFERENCE OR VIDEOCONFERENCE;
PROVIDED, THAT, MEETINGS HELD IN PERSON SHALL ALTERNATE BETWEEN THE RESPECTIVE
OFFICES OF THE PARTIES OR AT OTHER LOCATIONS MUTUALLY AGREEABLE TO THE USJMC
MEMBERS.  THE CO-CHAIRS SHALL PREPARE AND CIRCULATE AN AGENDA FOR EACH USJMC
MEETING NOT LATER THAN ONE (1) WEEK PRIOR TO SUCH MEETING.

 

(B)           QUORUM; VOTING; DECISIONS.  AT EACH USJMC MEETING, (I) THE
PRESENCE IN PERSON OF AT LEAST TWO (2) MEMBERS DESIGNATED BY EACH PARTY SHALL
CONSTITUTE A QUORUM AND (II) ALL MEMBERS DESIGNATED BY A PARTY SHALL HAVE ONE
(1) COLLECTIVE VOTE ON ALL MATTERS BEFORE THE USJMC AT SUCH MEETING.  ALL
DECISIONS OF THE USJMC SHALL BE MADE BY UNANIMOUS VOTE.  ALTERNATIVELY, THE
USJMC MAY ACT BY WRITTEN CONSENT SIGNED BY THE CO-CHAIRS.  WHENEVER ANY ACTION
BY THE USJMC IS CALLED FOR HEREUNDER DURING A TIME PERIOD IN WHICH THE USJMC IS
NOT SCHEDULED TO MEET, THE CO-CHAIRS SHALL CAUSE THE USJMC TO MEET TO TAKE THE
ACTION IN THE REQUESTED TIME PERIOD BY CALLING A SPECIAL MEETING OR THE
CO-CHAIRS SHALL ACT BY WRITTEN

 

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CONSENT.  REPRESENTATIVES OF EACH PARTY OR OF ITS AFFILIATES WHO ARE NOT MEMBERS
OF THE USJMC MAY ATTEND USJMC MEETINGS AS GUESTS WITH THE CONSENT OF THE OTHER
PARTY, WHICH SHALL NOT BE UNREASONABLY WITHHELD, CONDITIONED OR DELAYED.

 

(C)           MINUTES.  THE USJMC SHALL KEEP MINUTES OF ITS MEETINGS THAT RECORD
ALL DECISIONS AND ALL ACTIONS RECOMMENDED OR TAKEN IN REASONABLE DETAIL.  DRAFTS
OF THE MINUTES SHALL BE PREPARED AND CIRCULATED TO THE MEMBERS OF THE USJMC
WITHIN A REASONABLE TIME AFTER THE MEETING, NOT TO EXCEED TEN (10) BUSINESS
DAYS, AND THE PARTIES SHALL ALTERNATE RESPONSIBILITY FOR THE PREPARATION AND
CIRCULATION OF DRAFT MINUTES.  EACH MEMBER OF THE USJMC SHALL HAVE THE
OPPORTUNITY TO PROVIDE COMMENTS ON THE DRAFT MINUTES.  THE MINUTES SHALL BE
APPROVED, DISAPPROVED AND REVISED AS NECESSARY AT THE NEXT USJMC MEETING.  UPON
APPROVAL, FINAL MINUTES OF EACH MEETING SHALL BE CIRCULATED TO THE MEMBERS OF
THE USJMC BY THE BY THE CO-CHAIR WITH RESPONSIBILITY FOR PREPARING SUCH MINUTES.

 

(D)           EXPENSES.  ARQULE AND DS SHALL EACH BEAR ALL EXPENSES OF THEIR
RESPECTIVE USJMC REPRESENTATIVES RELATED TO THEIR PARTICIPATION ON THE USJMC AND
ATTENDANCE AT USJMC MEETINGS.  IF ANY MEETING IS HELD OFF-SITE, THE EXPENSE FOR
USING THE NECESSARY MEETING FACILITY IS TO BE  BORN BY THE PARTY HOSTING SUCH
MEETING.

 

2.5.4        RESPONSIBILITIES.  THE USJMC SHALL BE RESPONSIBLE FOR OVERSEEING
THE CONDUCT AND PROGRESS OF THE CO-COMMERCIALIZATION OF EACH CO-COMMERCIALIZED
PRODUCT IN THE CO-COMMERCIALIZATION TERRITORY.  WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, THE USJMC SHALL HAVE THE FOLLOWING RESPONSIBILITIES:

 

(A)           PREPARING OR DIRECTING THE PREPARATION BY THE PARTIES OF, EACH
CO-COMMERCIALIZATION PLAN FOR CO-COMMERCIALIZED PRODUCTS IN THE
CO-COMMERCIALIZATION TERRITORY, INCLUDING THE BUDGETS WITH RESPECT THERETO;

 

(B)           PREPARING OR DIRECTING THE PREPARATION BY THE PARTIES OF EACH
AMENDMENT TO ANY CO-COMMERCIALIZATION PLAN FOR CO-COMMERCIALIZED PRODUCTS IN THE
CO-COMMERCIALIZATION TERRITORY OR THE RELATED BUDGET WITH RESPECT THERETO;

 

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(C)           DETERMINING STYLE GUIDELINES AND THE APPEARANCE OF
CO-COMMERCIALIZED PRODUCTS IN THE CO-COMMERCIALIZATION TERRITORY, INCLUDING
PACKAGING AND PROMOTIONAL MATERIALS;

 

(D)           DETERMINING MANAGED HEALTH CARE STRATEGY AND TACTICS, INCLUDING
PRICING, REBATES, DISCOUNTS AND CHARGE-BACKS FOR CO-COMMERCIALIZED PRODUCTS IN
THE CO-COMMERCIALIZATION TERRITORY;

 

(E)           DETERMINING THE APPROPRIATE USE OF MEDICAL SCIENCE LIAISONS IN
SUPPORT OF THE CO-COMMERCIALIZED PRODUCTS;

 

(F)            DETERMINING THE FORMAT AND QUANTITIES OF PROMOTIONAL SALES,
MARKETING AND EDUCATIONAL MATERIALS FOR THE CO-COMMERCIALIZED PRODUCTS;

 

(G)           REVIEWING AND APPROVING ANY PROPOSALS FOR MODIFICATIONS OF
EXISTING CO-COMMERCIALIZED PRODUCTS, INCLUDING, WITHOUT LIMITATION, NEW
FORMULATIONS AFTER FIRST COMMERCIAL SALE AND LINE EXTENSIONS;

 

(H)           AGREEING UPON THE DESIGN AND IMPLEMENTATION OF ALL
CO-COMMERCIALIZED PRODUCT LAUNCH ACTIVITIES;

 

(I)            MONITORING THE PROGRESS OF COMMERCIALIZATION OF CO-COMMERCIALIZED
PRODUCTS IN THE CO-COMMERCIALIZATION TERRITORY UNDER EACH CO-COMMERCIALIZATION
PLAN AND OF EACH PARTY’S ACTIVITIES THEREUNDER;

 

(J)            REVIEWING AND CIRCULATING TO THE PARTIES DATA, REPORTS OR OTHER
INFORMATION SUBMITTED BY EITHER PARTY WITH RESPECT TO THE COMMERCIALIZATION OF
CO-COMMERCIALIZED PRODUCTS IN THE CO-COMMERCIALIZATION TERRITORY;

 

(K)           DETERMINING APPROPRIATE TARGETS FOR SALES FORCE STAFFING AND
TERRITORY MAPPING PURPOSES, DETERMINING THE APPROPRIATE LEVEL OF DETAILING
EFFORT TO BE PROVIDED BY EACH PARTY IN CO-COMMERCIALIZING SUCH CO-COMMERCIALIZED
PRODUCT AND COORDINATING THE DETAILING EFFORTS OF BOTH PARTIES WITH RESPECT TO
CO-COMMERCIALIZED PRODUCTS;

 

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(L)            OVERSEEING ALL RECALLS, MARKET WITHDRAWALS AND ANY OTHER
CORRECTIVE ACTIONS RELATED TO CO-COMMERCIALIZED PRODUCTS;

 

(M)          RECEIVING AND PROVIDING TO THE PARTIES SALES REPORTS PERTAINING TO
CO-COMMERCIALIZED PRODUCTS;

 

(N)           APPROVING ALL THIRD PARTIES TO BE ENGAGED BY EITHER PARTY TO
PROVIDE REPRESENTATIVES TO COMMERCIALIZE CO-COMMERCIALIZED PRODUCTS, WHICH
APPROVAL SHALL BE REFLECTED IN THE MINUTES OF THE USJMC; AND

 

(O)           MAKING SUCH OTHER DECISIONS AS MAY BE DELEGATED TO THE USJMC
PURSUANT TO THIS AGREEMENT OR BY THE JSC OR BY MUTUAL WRITTEN AGREEMENT OF THE
PARTIES DURING THE TERM.

 

2.5.5        DISPUTE RESOLUTION.  THE USJMC MEMBERS SHALL USE REASONABLE EFFORTS
TO REACH AGREEMENT ON ANY AND ALL MATTERS.  IN THE EVENT THAT, DESPITE SUCH
REASONABLE EFFORTS, AGREEMENT ON A PARTICULAR MATTER CANNOT BE REACHED BY THE
USJMC WITHIN * (*) DAYS AFTER THE USJMC FIRST MEETS TO CONSIDER SUCH MATTER,
THEN THE MATTER SHALL BE REFERRED TO THE JSC FOR RESOLUTION PURSUANT TO
SECTION 2.1.5.

 

2.6           Alliance Managers.

 

2.6.1        APPOINTMENT.  EACH PARTY SHALL HAVE THE RIGHT TO APPOINT A PERSON
WHO SHALL OVERSEE INTERACTIONS BETWEEN THE PARTIES FOR ALL MATTERS RELATED TO
THE DEVELOPMENT AND COMMERCIALIZATION OF LICENSED PRODUCTS BETWEEN COMMITTEE
MEETINGS (EACH, AN “ALLIANCE MANAGER”).  THE ALLIANCE MANAGERS SHALL HAVE THE
RIGHT TO ATTEND ALL COMMITTEE MEETINGS AS NON-VOTING PARTICIPANTS AND MAY BRING
TO THE ATTENTION OF THE APPLICABLE COMMITTEE ANY MATTERS OR ISSUES EITHER OF
THEM REASONABLY BELIEVES SHOULD BE DISCUSSED AND SHALL HAVE SUCH OTHER
RESPONSIBILITIES AS THE PARTIES MAY MUTUALLY AGREE IN WRITING.  EACH PARTY MAY
REPLACE ITS ALLIANCE MANAGER AT ANY TIME OR MAY DESIGNATE DIFFERENT ALLIANCE
MANAGERS WITH RESPECT TO DEVELOPMENT AND COMMERCIALIZATION, RESPECTIVELY, BY
NOTICE IN WRITING TO THE OTHER PARTY.

 

2.6.2        RESPONSIBILITIES.  THE ALLIANCE MANAGERS, IF APPOINTED, SHALL HAVE
THE RESPONSIBILITY OF CREATING AND MAINTAINING A CONSTRUCTIVE WORK ENVIRONMENT
WITHIN THE

 

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COMMITTEES AND BETWEEN THE PARTIES FOR ALL MATTERS RELATED TO THE
COLLABORATION.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH ALLIANCE
MANAGER SHALL:

 

(A)           IDENTIFY AND BRING TO THE ATTENTION OF THE JSC, AS APPLICABLE, ANY
DISPUTES ARISING BETWEEN THE PARTIES RELATED TO THE COLLABORATION IN A TIMELY
MANNER, INCLUDING, WITHOUT LIMITATION, ANY ASSERTED OCCURRENCE OF A MATERIAL
BREACH BY A PARTY, AND FUNCTION AS THE POINT OF FIRST REFERRAL IN THE RESOLUTION
OF EACH DISPUTE;

 

(B)           PROVIDE A SINGLE POINT OF COMMUNICATION FOR SEEKING CONSENSUS
WITHIN THE PARTIES’ RESPECTIVE ORGANIZATIONS AND BETWEEN THE PARTIES WITH
RESPECT TO THE COLLABORATION;

 

(C)           PLAN AND COORDINATE COOPERATIVE EFFORTS, INTERNAL COMMUNICATIONS
AND EXTERNAL COMMUNICATIONS BETWEEN THE PARTIES WITH RESPECT TO THE
COLLABORATION; AND

 

(D)           TAKE SUCH STEPS AS MAY BE REQUIRED TO ENSURE THAT COMMITTEE
MEETINGS OCCUR AS SET FORTH IN THIS AGREEMENT, THAT PROCEDURES ARE FOLLOWED WITH
RESPECT TO SUCH MEETINGS (INCLUDING, WITHOUT LIMITATION, THE GIVING OR PROPER
NOTICE AND THE PREPARATION AND APPROVAL OF MINUTES) AND THAT RELEVANT ACTION
ITEMS RESULTING FROM SUCH MEETINGS ARE APPROPRIATELY CARRIED OUT OR OTHERWISE
ADDRESSED.

 

2.7           Decision Making.  All decisions made and all actions taken by any
Committee or the officers of the Parties pursuant to Section 2.1.5 shall be made
or taken in the best interest of the Collaboration.

 

2.8           Appointment Not an Obligation; No Breach.  The appointment of
members of any Committee and the Alliance Managers is a right of each Party and
not an obligation and shall not be a “deliverable” as defined in EITF Issue
No. 00-21.  Each Party shall be free to determine not to appoint members to the
JSC, JDC, and USJMC, and not to appoint an Alliance Manager.  If a Party (an
“Appointing Party”) does not appoint members of a Committee or an Alliance
Manager, it shall not be a breach of this Agreement, nor shall any consideration
be required to be returned, and unless and until such persons are appointed, the
other Party may discharge the roles of the Committee for which members were not
appointed by an Appointing Party.

 

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3.             DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS

 

3.1           Implementation of Development Program.

 

3.1.1        OBJECTIVES OF THE DEVELOPMENT PROGRAM.  THE OBJECTIVES OF THE
DEVELOPMENT PROGRAM SHALL BE THE DEVELOPMENT OF LICENSED PRODUCTS IN ORDER TO
OBTAIN, AS EXPEDITIOUSLY AS POSSIBLE, COMMERCIALIZATION REGULATORY APPROVAL OF
ONE OR MORE LICENSED PRODUCTS IN THE FIELD IN THE TERRITORY PURSUANT TO THE
GLOBAL DEVELOPMENT PLANS.

 

3.1.2        PREPARATION OF GLOBAL DEVELOPMENT PLAN.  A CLINICAL DEVELOPMENT
PLAN FOR THE DEVELOPMENT OF THE COLLABORATION COMPOUND FOR EACH TARGETED
INDICATION HAS BEEN AGREED UPON IN WRITING BY THE PARTIES.  WITHIN * (*) MONTHS
OF THE EXECUTION DATE, A GLOBAL DEVELOPMENT PLAN, WHICH INCLUDES AT LEAST THE
PHASE 2 CLINICAL TRIALS DESCRIBED IN SUCH CLINICAL DEVELOPMENT PLAN, WILL BE
PREPARED BY THE JDC AND APPROVED BY THE JSC.  UNTIL A GLOBAL DEVELOPMENT PLAN IS
APPROVED BY THE JSC, THE CLINICAL DEVELOPMENT PLAN DESCRIBED ABOVE SHALL BE THE
GLOBAL DEVELOPMENT PLAN.  AT LEAST ANNUALLY, DURING THE TERM, A GLOBAL
DEVELOPMENT PLAN FOR EACH COLLABORATION COMPOUND AND LICENSED PRODUCT AND
TARGETED INDICATION SHALL BE PREPARED OR UPDATED BY THE JDC AND SUBMITTED TO THE
JSC FOR APPROVAL AT LEAST * (*) DAYS BEFORE THE MEETING OF THE JSC AT WHICH IT
WILL BE CONSIDERED.  EACH GLOBAL DEVELOPMENT PLAN SHALL: (A) SET FORTH *.

 

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3.1.3        RESPONSIBILITY FOR DEVELOPMENT OF LICENSED PRODUCTS.

 

(A)           PHASE 2 DEVELOPMENT ACTIVITIES.  EXCEPT AS OTHERWISE SET FORTH IN
THE GLOBAL DEVELOPMENT PLAN, THE PARTIES SHALL COLLABORATE IN THE CONDUCT OF ALL
PHASE 2 DEVELOPMENT ACTIVITIES (INCLUDING, WITHOUT LIMITATION THE CONDUCT OF ANY
PHASE 2 CLINICAL TRIALS), AND EACH PARTY SHALL HAVE THE RESPONSIBILITY FOR THE
CONDUCT OF ALL PHASE 2 DEVELOPMENT ACTIVITIES (INCLUDING, WITHOUT LIMITATION THE
CONDUCT OF ALL PHASE 2 CLINICAL TRIALS) DESIGNATED AS THE RESPONSIBILITY OF SUCH
PARTY IN ANY GLOBAL DEVELOPMENT PLAN.

 

(B)           PHASE 3 DEVELOPMENT ACTIVITIES.  EXCEPT AS OTHERWISE SET FORTH IN
THE GLOBAL DEVELOPMENT PLAN, THE PARTIES SHALL COLLABORATE IN THE CONDUCT OF ALL
PHASE 3 DEVELOPMENT ACTIVITIES (INCLUDING, WITHOUT LIMITATION THE CONDUCT OF ANY
PHASE 3 CLINICAL TRIALS), AND EACH PARTY SHALL CONDUCT THE PHASE 3 DEVELOPMENT
ACTIVITIES SPECIFIED AS ITS RESPONSIBILITY IN ANY GLOBAL DEVELOPMENT PLAN.

 

(C)           POST-REGISTRATION ACTIVITIES.  EXCEPT AS OTHERWISE SET FORTH IN
THE GLOBAL DEVELOPMENT PLAN, THE PARTIES SHALL COLLABORATE IN THE CONDUCT OF ALL
POST-REGISTRATION ACTIVITIES (INCLUDING, WITHOUT LIMITATION THE CONDUCT OF ANY
PHASE 4 CLINICAL TRIALS AND PHASE 5 CLINICAL TRIALS), AND EACH PARTY SHALL
CONDUCT THE POST-REGISTRATION ACTIVITIES SPECIFIED AS ITS RESPONSIBILITY IN ANY
GLOBAL DEVELOPMENT PLAN.

 

(D)           ENGAGEMENT OF THIRD PARTIES.  EACH PARTY SHALL HAVE THE RIGHT TO
ENGAGE THIRD PARTY CONTRACTORS TO PERFORM SOME OR ALL OF ITS DEVELOPMENT
ACTIVITIES IN CONNECTION WITH THE DEVELOPMENT OF LICENSED PRODUCTS HEREUNDER
PURSUANT TO SECTION 6.2.1.

 

(E)           CONDUCT OF CLINICAL TRIALS.  NEITHER PARTY SHALL CONDUCT ANY
CLINICAL TRIAL UNLESS SUCH CLINICAL TRIAL IS SPECIFIED TO BE CONDUCTED IN THE
GLOBAL DEVELOPMENT PLAN, EXCEPT AS SET FORTH IN SECTIONS 3.14 AND 3.15.

 

3.1.4        REGULATORY FILINGS; ADVERSE EVENT REPORTING.

 

(A)           REGULATORY TRANSITION ACTIVITIES.  AS SOON AS PRACTICABLE, BUT IN
ANY EVENT ON OR BEFORE * (*) DAYS FROM THE EXECUTION DATE, ARQULE SHALL PREPARE
AND SUBMIT TO THE JDC FOR ITS REVIEW AND APPROVAL A MUTUALLY-ACCEPTABLE
REGULATORY TRANSITION PLAN WHICH SHALL

 

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DESCRIBE WITH REASONABLE SPECIFICITY THE STEPS TO BE FOLLOWED, AND THE TIMELINES
APPLICABLE TO, THE TRANSFER BY ARQULE OF THE ONGOING REGULATORY FILING (THE
“REGULATORY TRANSITION PLAN”).  AS SOON AS PRACTICABLE FOLLOWING THE JDC’S
APPROVAL OF THE REGULATORY TRANSITION PLAN, (I) ARQULE SHALL USE COMMERCIALLY
REASONABLE EFFORTS TO CONDUCT THE ACTIVITIES DESCRIBED IN THE REGULATORY
TRANSITION PLAN AND (II) DS SHALL PROVIDE SUCH ASSISTANCE AS MAY BE REASONABLY
NECESSARY TO COMPLETE SUCH ACTIVITIES.

 

(B)           RESPONSIBILITY FOR REGULATORY FILINGS.  SUBJECT TO THE REGULATORY
TRANSITION PLAN AND SECTION 3.10.6, *.  IN ADDITION, DS SHALL BE OBLIGATED TO
PREPARE AND FILE A DRUG APPROVAL APPLICATION BASED ON DATA FROM PHASE 2 CLINICAL
TRIALS AND/OR PHASE 3 CLINICAL TRIALS IF THE JSC DETERMINES, AS A JOINT
DECISION, THAT (I) THE PRIMARY ENDPOINTS FOR EFFICACY AND SAFETY OF SUCH
CLINICAL TRIALS HAVE BEEN MET IN ALL MATERIAL RESPECTS, AND (II) THERE IS A
REASONABLE LIKELIHOOD OF APPROVAL WITH A LABEL SUBSTANTIALLY EQUIVALENT TO THE
LABEL THAT WILL BE REQUESTED IN THE DRUG APPROVAL APPLICATION, UNLESS THE JSC
DETERMINES AS A JOINT DECISION TO DELAY THE PREPARATION AND FILING OF SUCH DRUG
APPROVAL APPLICATION IN ORDER TO CONDUCT ADDITIONAL CLINICAL TRIALS TO OBTAIN
DATA TO MAXIMIZE THE LIKELIHOOD OF OBTAINING COMMERCIALIZATION REGULATORY
APPROVAL OR OPTIMIZE THE LABEL.  ARQULE (I) SHALL, AT DS’S REQUEST, PROVIDE TO
DS, AND DS SHALL HAVE THE RIGHT TO PROVIDE TO ITS SUBLICENSEES OR AFFILIATES,
COPIES OF A DRUG APPROVAL APPLICATION FILED BY KYOWA WITH THE REGULATORY
AUTHORITIES IN THE FIELD OUTSIDE THE TERRITORY, AND GRANTS TO DS AND ITS
SUBLICENSEES OR AFFILIATES THE RIGHT TO ACCESS, REFERENCE, USE AND INCORPORATE
SUCH DRUG APPROVAL APPLICATION IN THE TERRITORY; AND (II) AGREES THAT ARQULE
SHALL, AT DS’S REQUEST, PROVIDE TO DS, AND THAT DS SHALL HAVE THE RIGHT TO
PROVIDE TO ITS SUBLICENSEES OR AFFILIATES, COPIES OF ANY ADDITIONAL INFORMATION
OR DATA WITH RESPECT TO THE LICENSED PRODUCT GENERATED BY, OR ON BEHALF OF,
KYOWA AND OWNED OR OTHERWISE CONTROLLED BY KYOWA AND NECESSARY OR USEFUL FOR DS
AND ITS SUBLICENSEES OR AFFILIATES TO OBTAIN ANY REGULATORY APPROVALS OR PERFORM
SUCH OTHER REGULATORY ACTIVITIES UNDER THIS AGREEMENT, AND TO DEVELOP,
MANUFACTURE AND COMMERCIALIZE LICENSED PRODUCTS.  FOR THE AVOIDANCE OF DOUBT,
DS’S

 

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OBLIGATIONS UNDER THIS SECTION 3.1.4(B) SHALL APPLY TO REGULATORY FILINGS AND
DRUG APPROVAL APPLICATIONS FOR LICENSED PRODUCTS IN NEW CANCER INDICATIONS (AS
DEFINED IN SECTION 3.14 BELOW).

 

3.2           Identification of Back-Up Compounds.  If the JSC determines, as a
Unanimous Decision, to seek to identify a Back-up Compound for Development under
this Agreement, and upon agreement by the Parties on a research plan, including
the allocation of research responsibilities, a budget, and responsibility for
all costs of performing such research plan, ARQULE, DS or ARQULE and DS jointly
(as designated by the JSC) will use Commercially Reasonable Efforts to deliver *
(*) or more c-MET Inhibitors in addition to ARQ 197 which may be Developed as a
follow-up compound or simultaneously with ARQ 197 for Targeted Indications (each
such compound, a “Back-Up Compound”).  The rights and obligations of the Parties
relating to each Back-Up Compound shall be identical to those applicable to ARQ
197, except as otherwise expressly provided herein.  Either Party shall notify
the JSC in writing in the event it wishes to replace ARQ 197 with a specified
c-MET Inhibitor developed hereunder as a Back-Up Compound or to Develop such
c-MET Inhibitor as a Back-Up Compound in addition to ARQ 197.  Within * (*) days
after its receipt of such notice, the JSC shall review the data information and
determine, as a Unanimous Decision, whether to so designate the proposed c-MET
Inhibitor as a Back-Up Compound.  Subsequent to such designation, as applicable,
any reference to the Licensed Product shall be deemed to include or to be made
to the Back-Up Compound for purposes of this Agreement.

 

3.3           Supply of Licensed Products for Development and Commercialization.

 

3.3.1        MANUFACTURING PLAN.  WITHIN * (*) DAYS OF THE EXECUTION DATE, DS
WILL PROPOSE TO THE JDC A PLAN FOR ESTABLISHING MANUFACTURING CAPABILITIES
NECESSARY FOR DS TO MANUFACTURE THE LICENSED PRODUCT FOR USE IN THE TERRITORY
(THE “MANUFACTURING PLAN”).  FOLLOWING APPROVAL OF THE MANUFACTURING PLAN BY THE
JDC, DS WILL USE COMMERCIALLY REASONABLE EFFORTS TO COMPLETE THE ACTIVITIES AND
ESTABLISH MANUFACTURING CAPABILITIES IN ACCORDANCE WITH SUCH MANUFACTURING PLAN.
 ARQULE WILL ASSIST WITH SUCH ACTIVITIES BY PROVIDING DS WITH TECHNICAL
DOCUMENTATION AS MAY BE REASONABLY REQUESTED TO INFORM DS ABOUT THE
MANUFACTURING PROCESS.  NOTWITHSTANDING THE FOREGOING, DS WILL (A) RETAIN SOLE
RESPONSIBILITY

 

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FOR THE IMPLEMENTATION AND PROGRESS OF THE MANUFACTURING PLAN AND (B) PROVIDE
ARQULE AND THE JDC WITH WRITTEN NOTICE UPON ITS COMPLETION OF THE ACTIVITIES
CONTEMPLATED BY THE MANUFACTURING PLAN (THE “MANUFACTURING PLAN COMPLETION
NOTICE”).

 

3.3.2        DEVELOPMENT SUPPLY.  DURING THE PERIOD COMMENCING ON THE EFFECTIVE
DATE AND CONTINUING UNTIL THE DATE OF RECEIPT BY ARQULE OF THE MANUFACTURING
PLAN COMPLETION NOTICE, ARQULE WILL BE SOLELY RESPONSIBLE FOR SUPPLYING DS WITH
API AND/OR FINISHED LICENSED PRODUCT NECESSARY FOR THE CONDUCT OF THE
DEVELOPMENT PROGRAM UNDER THE GLOBAL DEVELOPMENT PLAN IN SUCH QUANTITIES AS MAY
BE MUTUALLY AGREED BY THE PARTIES.  AFTER RECEIPT OF THE MANUFACTURING PLAN
COMPLETION NOTICE, DS WILL BE SOLELY RESPONSIBLE FOR SUPPLYING DS AND ARQULE
WITH API AND/OR FINISHED LICENSED PRODUCT NECESSARY FOR THE CONDUCT OF THE
DEVELOPMENT PROGRAM UNDER THE GLOBAL DEVELOPMENT PLAN IN SUCH QUANTITIES AS MAY
BE MUTUALLY AGREED BY THE PARTIES.

 

3.3.3        COMMERCIAL SUPPLY.  DURING THE PERIOD COMMENCING ON THE DATE OF
RECEIPT BY ARQULE OF THE MANUFACTURING PLAN COMPLETION NOTICE AND CONTINUING FOR
THE REMAINDER OF THE TERM, DS WILL BE SOLELY RESPONSIBLE, AT ITS SOLE COST AND
EXPENSE, FOR SUPPLYING ALL API AND FINISHED LICENSED PRODUCT NECESSARY FOR
COMMERCIALIZATION OF LICENSED PRODUCTS IN THE TERRITORY.  IN THE EVENT THAT
ARQULE REQUESTS IN WRITING THAT DS SUPPLY ARQULE’S THIRD PARTY LICENSEES AND
COLLABORATORS WITH API AND/OR UNLABELED FINISHED AND FILLED LICENSED PRODUCT
NECESSARY FOR COMMERCIALIZATION OF LICENSED PRODUCT OUTSIDE OF THE TERRITORY,
ARQULE AND DS SHALL NEGOTIATE IN GOOD FAITH AND ENTER INTO A MANUFACTURE AND
SUPPLY AGREEMENT (THE “SUPPLY AGREEMENT”) DETAILING THE TERMS OF SUPPLY FOR SUCH
API AND/OR FINISHED AND FILLED LICENSED PRODUCT, WHICH SUPPLY AGREEMENT SHALL
INCLUDE, WITHOUT LIMITATION, THE TRANSFER PRICE FOR SUCH API AND/OR LICENSED
PRODUCT.

 

3.4           Supply of Proprietary Materials.  From time to time during the
Term, either Party (the “Transferring Party”) may supply the other Party (the
“Recipient Party”) with Proprietary Materials of the Transferring Party for use
in the Development Program.  In connection therewith, each Recipient Party
hereby agrees that (a) it shall not use such Proprietary Materials for any
purpose other than exercising its rights or performing its obligations
hereunder; (b) it shall use such Proprietary Materials only in compliance with
all Applicable Laws; (c) it

 

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shall not transfer any such Proprietary Materials to any Third Party without the
prior written consent of the Transferring Party, except for (i) the transfer of
Licensed Products for use in Clinical Trials or (ii) in a Permitted Transaction
or as otherwise expressly permitted hereby; (d) the Recipient Party shall not
acquire any right, title or interest in or to such Proprietary Materials as a
result of such supply by the Transferring Party; and (e) upon the expiration or
termination of the Development Program, the Recipient Party shall, if and as
instructed by the Transferring Party, either destroy or return any such
Proprietary Materials that are not the subject of the grant of a continuing
license hereunder.

 

3.5           Licensed Product Commercialization.

 

3.5.1        PRODUCT COMMERCIALIZATION PLANS.  WITHIN * (*) DAYS AFTER THE
INITIATION OF A PHASE 3 CLINICAL TRIAL WITH RESPECT TO EACH LICENSED PRODUCT, DS
SHALL, WITH ADVANCE INPUT FROM ARQULE, PREPARE AND PROVIDE TO THE JSC FOR ITS
REVIEW A PRODUCT COMMERCIALIZATION PLAN FOR EACH SUCH LICENSED PRODUCT, AND
SHALL INFORM THE JSC WITH RESPECT TO ALL SIGNIFICANT COMMERCIALIZATION DECISIONS
TO BE MADE WITH RESPECT TO SUCH LICENSED PRODUCT.  THE PRODUCT COMMERCIALIZATION
PLAN SHALL BE UPDATED AND REVIEWED AT SUCH TIMES AS THE JSC MAY DETERMINE, NOT
LESS THAN ANNUALLY.

 

3.5.2        RESPONSIBILITY FOR COMMERCIALIZATION OF LICENSED PRODUCTS.  SUBJECT
TO ARQULE’S CO-COMMERCIALIZATION OPTION, DS SHALL HAVE THE SOLE RIGHT AND
RESPONSIBILITY, AT ITS SOLE EXPENSE, FOR ALL ASPECTS WITH RESPECT TO THE
COMMERCIALIZATION OF LICENSED PRODUCTS IN ACCORDANCE WITH THE APPLICABLE PRODUCT
COMMERCIALIZATION PLAN, IN THE FIELD AND IN THE TERRITORY AND SHALL HAVE THE
SOLE RIGHT AND RESPONSIBILITY, AT ITS SOLE EXPENSE, FOR ORDER FULFILLMENT AND
DISTRIBUTION OF LICENSED PRODUCT AND FOR BOOKING ALL SALES OF LICENSED PRODUCT
IN THE TERRITORY, INCLUDING, WITHOUT LIMITATION, THE CONDUCT OF: (A) ALL
ACTIVITIES RELATING TO THE DEVELOPMENT AND SCALE-UP OF PROCESSES FOR MANUFACTURE
OF API AND LICENSED PRODUCT FOR COMMERCIAL SALE AND THE MANUFACTURE AND SUPPLY
OF LICENSED PRODUCTS FOR COMMERCIALIZATION; AND (B) ALL MARKETING, PROMOTION,
SALES, DISTRIBUTION, IMPORT AND EXPORT ACTIVITIES (INCLUDING SECURING
REIMBURSEMENT, CONDUCTING SALES AND MARKETING ACTIVITIES, POST-MARKETING SAFETY
SURVEILLANCE (OTHER THAN PHASE 4 CLINICAL TRIALS OR PHASE 5 CLINICAL TRIALS) AND
MAINTAINING DATABASES).

 

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3.6                                 Development and Commercialization Diligence.

 

3.6.1                        DS DILIGENCE.  DS SHALL USE COMMERCIALLY REASONABLE
EFFORTS DURING THE TERM TO DEVELOP AND COMMERCIALIZE LICENSED PRODUCTS FOR ALL
TARGETED INDICATIONS IN THE FIELD AND IN THE TERRITORY (INCLUDING THE CONDUCT OF
THOSE DEVELOPMENT ACTIVITIES IN THE TERRITORY SET FORTH IN ANY GLOBAL
DEVELOPMENT PLAN, THE CONDUCT OF THOSE COMMERCIALIZATION ACTIVITIES IN THE
TERRITORY SET FORTH IN ANY PRODUCT COMMERCIALIZATION PLAN AND/OR THOSE
CO-COMMERCIALIZATION ACTIVITIES FOR WHICH IT IS RESPONSIBLE IN THE
CO-COMMERCIALIZATION TERRITORY AS SET FORTH IN THE CO-COMMERCIALIZATION
AGREEMENT) AND SHALL COMMIT SUCH RESOURCES (INCLUDING EMPLOYEES, CONSULTANTS,
CONTRACTORS, FACILITIES, EQUIPMENT AND MATERIALS) AS ARE COMMERCIALLY REASONABLE
TO CONDUCT SUCH DEVELOPMENT ACTIVITIES AND COMMERCIALIZE SUCH LICENSED PRODUCTS
IN THE TERRITORY.  NOTWITHSTANDING THE FOREGOING, DS’S OBLIGATIONS WITH RESPECT
TO THE COMMERCIALIZATION OF LICENSED PRODUCTS UNDER THIS SECTION 3.6.1 SHALL
ALSO APPLY TO LICENSED PRODUCTS FOR NEW CANCER INDICATIONS.

 

3.6.2                        ARQULE DILIGENCE.  ARQULE SHALL USE COMMERCIALLY
REASONABLE EFFORTS DURING THE TERM TO CONDUCT ARQULE DEVELOPMENT ACTIVITIES IN
THE TERRITORY SET FORTH IN ANY GLOBAL DEVELOPMENT PLAN, IF ANY, AND TO THE
EXTENT APPLICABLE, ALL ARQULE CO-COMMERCIALIZATION ACTIVITIES FOR WHICH IT IS
RESPONSIBLE IN THE CO-COMMERCIALIZATION TERRITORY AS SET FORTH IN THE
CO-COMMERCIALIZATION AGREEMENT.

 

3.7                                 Compliance.  Each Party shall perform its
obligations under each Global Development Plan and Product Commercialization
Plan in good scientific manner and in compliance in all material respects with
all Applicable Laws.  For purposes of clarity, with respect to each activity
performed under a Global Development Plan and/or Product Commercialization Plan
that will or would reasonably be expected to be submitted to a Regulatory
Authority in support of a Regulatory Filing or Drug Approval Application, the
Party performing such activity shall comply in all material respects with GLPs,
GMPs or Good Clinical Practices (or, if and as appropriate under the
circumstances, International Conference on Harmonization (ICH) guidance or other
comparable regulation and guidance of any Regulatory Authority in any country or
region in the Territory).

 

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3.8                                 Cooperation.  ARQULE and DS shall cooperate
in the performance of the Development Program and, subject to the terms of this
Agreement and any confidentiality obligations to Third Parties, shall exchange
such data, information and materials as is reasonably necessary for the other
Party to perform its obligations under any Global Development Plan and Product
Commercialization Plan.

 

3.9                                 Global Commercialization Coordination.  At
meetings of the JSC, representatives of the Parties will interact to ensure that
the Commercialization activities and strategy are consistent on a global basis. 
In connection therewith, ARQULE will have the right to (i) provide input into
the global strategy applicable to the Commercialization of a Licensed Product
and (ii) review the status of all significant Regulatory Filings applicable to
the Commercialization of a Licensed Product.

 

3.10                           Reports; Information; Updates.

 

3.10.1                  DEVELOPMENT PROGRAM REPORTS.  EACH PARTY SHALL KEEP THE
JDC REGULARLY INFORMED OF THE PROGRESS OF ITS EFFORTS TO DEVELOP LICENSED
PRODUCTS IN THE FIELD IN THE TERRITORY.  WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, EACH PARTY SHALL, ON AT LEAST A QUARTERLY BASIS, PROVIDE THE JDC WITH
REPORTS IN REASONABLE DETAIL REGARDING THE STATUS OF ALL CLINICAL TRIALS,
MANUFACTURING DEVELOPMENT AND OTHER ACTIVITIES CONDUCTED UNDER THE DEVELOPMENT
PROGRAM, TOGETHER WITH ALL RAW DATA AND RESULTS GENERATED IN EACH SUCH CLINICAL
TRIAL AND SUCH ADDITIONAL INFORMATION THAT IT HAS IN ITS POSSESSION AS MAY BE
REASONABLY REQUESTED FROM TIME TO TIME BY THE JDC.

 

3.10.2                  COMMERCIALIZATION REPORTS.  EACH PARTY SHALL KEEP THE
JSC REGULARLY INFORMED OF THE PROGRESS OF ITS EFFORTS TO COMMERCIALIZE LICENSED
PRODUCTS IN THE FIELD IN THE TERRITORY THROUGH PERIODIC UPDATES IN ADVANCE OF
EACH JSC MEETING.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, DS SHALL
PROVIDE THE JSC WITH ANNUAL WRITTEN UPDATES TO EACH PRODUCT COMMERCIALIZATION
PLAN, WHICH SHALL (A) SUMMARIZE DS’S EFFORTS TO COMMERCIALIZE LICENSED PRODUCTS,
(B) IDENTIFY THE REGULATORY FILINGS AND DRUG APPROVAL APPLICATIONS WITH RESPECT
TO SUCH LICENSED PRODUCT THAT DS OR ANY OF ITS AFFILIATES OR SUBLICENSEES HAVE
FILED, SOUGHT OR OBTAINED IN THE PRIOR * (*) MONTH PERIOD OR REASONABLY EXPECT
TO MAKE, SEEK OR ATTEMPT TO OBTAIN IN THE FOLLOWING * (*) MONTH PERIOD AND
(C) SUMMARIZE ALL CLINICAL AND OTHER DATA

 

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GENERATED BY DS WITH RESPECT TO LICENSED PRODUCTS.  IN ADDITION, DS SHALL
PROVIDE SUCH ADDITIONAL INFORMATION THAT IT HAS IN ITS POSSESSION AS MAY BE
REASONABLY REQUESTED BY ARQULE REGARDING THE COMMERCIALIZATION OF ANY LICENSED
PRODUCT, WHICH REQUEST SHALL NOT BE MADE MORE THAN * EACH CALENDAR YEAR.

 

3.10.3                  RIGHT OF ACCESS.  EACH PARTY SHALL PROVIDE THE OTHER
PARTY WITH ACCESS TO ALL CLINICAL PROJECT PLANS AND CLINICAL DATA, RESULTS AND
INFORMATION DERIVED FROM OR RELATING TO ALL CLINICAL TRIALS CONDUCTED, AND ALL
REGULATORY FILINGS PREPARED, WITH RESPECT TO COLLABORATION COMPOUNDS AND/OR
LICENSED PRODUCTS (COLLECTIVELY, “PRODUCT-RELATED DATA”) IN ENGLISH AND AT NO
ADDITIONAL COST OR EXPENSE.  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, ARQULE (A) MAY USE, AND PROVIDE TO ITS THIRD PARTY LICENSEES AND
COLLABORATORS, SUCH PRODUCT-RELATED DATA; PROVIDED, THAT, (I) ARQULE SHALL ONLY
HAVE THE RIGHT TO SHARE SUCH PRODUCT-RELATED DATA TO ITS THIRD PARTY
COLLABORATORS AND LICENSEES THAT HAVE GRANTED ARQULE THE RECIPROCAL RIGHT TO
SHARE WITH DS CLINICAL DATA, RESULTS AND INFORMATION, AND INFORMATION DERIVED
FROM OR RELATED TO REGULATORY FILINGS CONTROLLED BY SUCH THIRD PARTY
COLLABORATORS AND LICENSEES FOR USE WITH LICENSED PRODUCTS UNDER THIS AGREEMENT
AND (II) ARQULE SHALL, UPON DS’S REQUEST, USE COMMERCIALLY REASONABLE EFFORTS TO
COORDINATE A GLOBAL CLINICAL TRIAL TARGETING BOTH WITHIN THE TERRITORY AND THE
ASIAN TERRITORY INVOLVING ITS THIRD PARTY COLLABORATORS AND DS; (B) MAY USE SUCH
PRODUCT-RELATED DATA FOR THE PERFORMANCE OF ITS OBLIGATIONS AND EXERCISE OF ITS
RIGHTS UNDER THIS AGREEMENT; AND (C) SHALL HAVE A RIGHT OF ACCESS, A RIGHT OF
REFERENCE AND A RIGHT TO USE AND INCORPORATE ALL SUCH PRODUCT-RELATED DATA IN
ANY REGULATORY FILINGS AND DRUG APPROVAL APPLICATIONS IT MAKES WITH RESPECT TO
LICENSED PRODUCTS.  THE PARTIES SHALL COOPERATE SO THAT SUCH PRODUCT-RELATED
DATA IS TRANSFERRED TO ARQULE AS EXPEDITIOUSLY AS POSSIBLE.

 

3.10.4                  PHARMACOVIGILENCE; ADVERSE EVENT REPORTS.

 

(A)                                  ADVERSE EVENTS.  SUBJECT TO THE REGULATORY
TRANSITION PLAN, DS SHALL HAVE THE SOLE RIGHT AND RESPONSIBILITY FOR FURNISHING
TIMELY NOTICE TO THE APPLICABLE GOVERNMENTAL AGENCIES WITHIN THE TERRITORY OF
ALL SIDE EFFECTS, DRUG INTERACTIONS AND OTHER ADVERSE EFFECTS IDENTIFIED OR
SUSPECTED WITH RESPECT TO THE LICENSED PRODUCTS FOR THE TARGETED INDICATIONS
ADMINISTERED, DISTRIBUTED, MARKETED AND SOLD UNDER AUTHORITY OF ANY IND, NDA OR
REGULATORY APPROVALS ISSUED BY SUCH GOVERNMENTAL AGENCIES.  ARQULE SHALL PROVIDE
DS WITH ANY

 

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ASSISTANCE THAT MAY BE REASONABLY NECESSARY TO COMPLY WITH ALL ADVERSE REACTION
REPORTING REQUIREMENTS ESTABLISHED BY, OR REQUIRED UNDER, ANY APPLICABLE IND,
NDA OR REGULATORY APPROVALS AND/OR APPLICABLE LAWS WITHIN THE TERRITORY.  IN
ADDITION TO THE UPDATES DESCRIBED IN SECTIONS 3.10.1 AND 3.10.2, DS SHALL
PROVIDE ARQULE WITH ALL ADVERSE EVENT INFORMATION AND PRODUCT COMPLAINT
INFORMATION RELATING TO THE LICENSED PRODUCT AS SUCH INFORMATION IS COMPILED OR
PREPARED BY DS IN THE NORMAL COURSE OF BUSINESS IN CONNECTION WITH THE
DEVELOPMENT OR COMMERCIALIZATION OF THE LICENSED PRODUCT AND, IN ANY EVENT,
WITHIN TIME FRAMES CONSISTENT WITH REPORTING OBLIGATIONS UNDER APPLICABLE LAWS. 
DS SHALL PROVIDE SUCH ADVERSE EVENT AND PRODUCT COMPLAINT INFORMATION HEREUNDER
TO ARQULE’S ALLIANCE MANAGER UNLESS ARQULE OTHERWISE NOTIFIES DS.  AT THE
REQUEST OF ARQULE, DS AND ARQULE SHALL MEET WITH KYOWA TO DISCUSS INFORMATION
SHARING AND COORDINATION WITH RESPECT TO REPORTING OF ADVERSE EVENTS AND OTHER
SAFETY MATTERS.

 

(B)                                 GLOBAL SAFETY DATA BASE.  SUBJECT TO THE
REGULATORY TRANSITION PLAN, ADVERSE EVENTS RELATED TO THE USE OF THE LICENSED
PRODUCT IN THE TERRITORY SHALL BE RECORDED IN A SINGLE, CENTRALIZED DATABASE,
WHICH SHALL BE HELD BY DS AT DS’S FACILITY.  THE LISTINGS OF ALL SAFETY DATA
WILL BE PROVIDED TO ARQULE AND TO KYOWA ON THE 1ST AND 15TH OF EVERY MONTH;
PROVIDED, HOWEVER, THAT IN THE EVENT THAT EITHER THE 1ST OR THE 15TH  OF A MONTH
IS NOT A BUSINESS DAY, THEN DS SHALL PROVIDE SUCH LISTINGS ON THE NEXT BUSINESS
DAY FOLLOWING SUCH DATE.  DETAILS OF SAFETY REPORTING ACTIVITIES RELATING TO THE
LICENSED PRODUCT IN THE TERRITORY WILL BE ADDRESSED IN A PHARMACOVIGILANCE
AGREEMENT, WHICH THE PARTIES SHALL ENTER INTO AFTER THE EFFECTIVE DATE.

 

3.10.5                  REVIEW OF REGULATORY FILINGS; REGULATORY MEETINGS.

 

(A)                                  REGULATORY FILINGS.  DS SHALL (I) CONSULT
WITH ARQULE IN GOOD FAITH IN THE PREPARATION OF KEY REGULATORY FILINGS FOR
LICENSED PRODUCTS AND (II) CONSIDER ALL COMMENTS OF ARQULE IN GOOD FAITH, TAKING
INTO ACCOUNT THE DUE INTERESTS OF ARQULE AND THE DEVELOPMENT AND
COMMERCIALIZATION OF THE LICENSED PRODUCT ON A GLOBAL BASIS.  IN ADDITION,
SUBJECT TO ANY THIRD PARTY CONFIDENTIALITY OBLIGATIONS, DS SHALL (I) PROVIDE
ARQULE WITH DRAFTS OF EACH KEY REGULATORY FILING OR CORRESPONDENCE PERTAINING TO
A LICENSED PRODUCT AND PREPARED FOR SUBMISSION TO THE FDA OR OTHER REGULATORY
AUTHORITY AT THE SAME TIME AS IT IS PROVIDED TO INTERNAL REVIEWERS AT DS, AND
(II) PROVIDE ARQULE WITH CONTEMPORANEOUS COMMENTS FROM

 

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INTERNAL REVIEWERS AT DS REGARDING SUCH DRAFTS AND (III) PROMPTLY PROVIDE ARQULE
WITH COPIES OF THE DOCUMENT OR OTHER CORRESPONDENCE RECEIVED FROM THE FDA OR
OTHER REGULATORY AUTHORITY WHICH RELATES TO SUCH KEY REGULATORY FILINGS
PERTAINING TO ANY LICENSED PRODUCT.  DS SHALL ADVISE ARQULE OF THE TIME PERIOD
IN WHICH DS’S INTERNAL REVIEWERS ARE REQUIRED TO COMPLETE THEIR REVIEWS AND IF
ARQULE HAS NOT COMMENTED ON SUCH KEY REGULATORY FILING, OR CORRESPONDENCE WITHIN
SUCH PERIOD, THEN ARQULE SHALL BE DEEMED TO HAVE NO COMMENTS ON SUCH KEY
REGULATORY FILING OR CORRESPONDENCE.  DS SHALL CONSIDER ALL COMMENTS OF ARQULE
IN GOOD FAITH, TAKING INTO ACCOUNT THE BEST INTERESTS OF THE COLLABORATION AND
OF THE DEVELOPMENT OR COMMERCIALIZATION OF THE LICENSED PRODUCT ON A GLOBAL
BASIS.

 

(B)                                 REGULATORY MEETINGS.  DS SHALL PROVIDE
ARQULE WITH AT LEAST THIRTY (30) DAYS’ ADVANCE NOTICE FOR A FACE-TO-FACE MEETING
(AND REASONABLE NOTICE FOR TELEPHONIC MEETINGS) WITH THE FDA OR OTHER REGULATORY
AUTHORITY REGARDING A DRUG APPROVAL APPLICATION RELATING TO, OR REGULATORY
APPROVAL FOR, ANY LICENSED PRODUCT AND ARQULE MAY PROVIDE ADVICE TO DS WITH
RESPECT TO SUCH MEETING AND ELECT TO SEND UP TO TWO (2) PERSONS TO PARTICIPATE
AS AN OBSERVER (AT ARQULE’S SOLE COST AND EXPENSE) IN SUCH MEETING.

 

3.10.6                  LICENSED PRODUCT RECALLS.  IN THE EVENT THAT ANY
REGULATORY AUTHORITY ISSUES OR REQUESTS A RECALL OR TAKES SIMILAR ACTION IN
CONNECTION WITH A LICENSED PRODUCT, OR IN THE EVENT A PARTY REASONABLY BELIEVES
THAT AN EVENT, INCIDENT OR CIRCUMSTANCE HAS OCCURRED THAT MAY RESULT IN THE NEED
FOR A RECALL, MARKET WITHDRAWAL OR OTHER CORRECTIVE ACTION REGARDING A LICENSED
PRODUCT EITHER IN THE TERRITORY OR OUTSIDE THE TERRITORY, SUCH PARTY SHALL
PROMPTLY ADVISE THE DESIGNATED SENIOR OFFICER (THE VICE-PRESIDENT OF REGULATORY
AFFAIRS IN THE CASE OF ARQULE AND THE VICE-PRESIDENT OF EU/US QUALITY ASSURANCE,
DAIICHI SANKYO PHARMA DEVELOPMENT IN THE CASE OF DS (OR OTHER RESPECTIVE
DESIGNEES)) OF THE OTHER PARTY THEREOF BY TELEPHONE OR FACSIMILE.  EXCEPT WITH
RESPECT TO CO-COMMERCIALIZED LICENSED PRODUCTS (FOR WHICH RECALLS SHALL BE
COVERED IN THE CO-COMMERCIALIZATION AGREEMENT), FOLLOWING SUCH NOTIFICATION, DS
SHALL DECIDE AND HAVE CONTROL OF WHETHER TO CONDUCT A RECALL OR MARKET
WITHDRAWAL IN THE TERRITORY (EXCEPT IN THE EVENT OF A RECALL OR MARKET
WITHDRAWAL MANDATED BY A REGULATORY AUTHORITY, IN WHICH CASE IT SHALL BE
REQUIRED) OR TO TAKE OTHER CORRECTIVE ACTION IN ANY COUNTRY IN THE TERRITORY AND
THE MANNER IN WHICH ANY SUCH RECALL, MARKET WITHDRAWAL OR CORRECTIVE ACTION
SHALL BE CONDUCTED; PROVIDED, THAT, DS SHALL KEEP ARQULE REGULARLY INFORMED
REGARDING ANY SUCH RECALL, MARKET WITHDRAWAL OR

 

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CORRECTIVE ACTION.  ALL EXPENSES INCURRED BY DS IN CONNECTION WITH ANY SUCH
RECALL, MARKET WITHDRAWAL OR CORRECTIVE ACTION (INCLUDING, WITHOUT LIMITATION,
EXPENSES FOR NOTIFICATION, DESTRUCTION AND RETURN OF THE AFFECTED LICENSED
PRODUCT AND ANY REFUND TO CUSTOMERS OF AMOUNTS PAID FOR SUCH LICENSED PRODUCT)
SHALL BE THE SOLE RESPONSIBILITY OF DS.

 

3.11                           Development Cost Sharing; Reconciliation.

 

3.11.1                  DEVELOPMENT COST SHARING.  ARQULE SHALL BE RESPONSIBLE
FOR (A) * PERCENT (*%) OF ALL OTHER DEVELOPMENT COSTS INCURRED BY ARQULE;
(B) THE ARQULE COST-SHARING PERCENTAGE OF ALL SHARED DEVELOPMENT COSTS INCURRED
BY DS; AND (C) ALL SHARED DEVELOPMENT COSTS INCURRED BY ARQULE THAT DS IS NOT
OBLIGATED TO REIMBURSE PURSUANT TO SECTION 3.11.2.  DS SHALL BE RESPONSIBLE FOR
(A) * PERCENT (*%) OF ALL OTHER DEVELOPMENT COSTS INCURRED BY DS; (B) THE DS
COST-SHARING PERCENTAGE OF ALL SHARED DEVELOPMENT COSTS INCURRED BY ARQULE; AND
(C) ALL SHARED DEVELOPMENT COSTS INCURRED BY DS THAT ARQULE IS NOT OBLIGATED TO
REIMBURSE PURSUANT TO SECTION 3.11.2.

 

3.11.2                  RECONCILIATION OF SHARED DEVELOPMENT COSTS.

 

(A)                                  REPORTS; RECONCILIATION PAYMENTS.

 

(I)                                     WITHIN * FOLLOWING THE END OF EACH
CALENDAR QUARTER DURING THE TERM, EACH OF ARQULE AND DS SHALL SUBMIT TO THE
OTHER PARTY, AND THE JOINT FINANCE COMMITTEE IF IT IS ESTABLISHED, A WRITTEN
REPORT SETTING FORTH IN REASONABLE DETAIL ALL SHARED DEVELOPMENT COSTS INCURRED
BY EACH SUCH PARTY OVER SUCH CALENDAR QUARTER APPLICABLE TO THE CONDUCT OF THE
DEVELOPMENT PROGRAM.  IF THE JFC HAS NOT BEEN ESTABLISHED, THE JSC WILL
DESIGNATE ONE PARTY TO PREPARE A REPORT AS SET FORTH BELOW. WITHIN * FOLLOWING
THE RECEIPT BY THE DESIGNATED PARTY OR THE FINANCE COMMITTEE OF SUCH WRITTEN
REPORTS, THE DESIGNATED PARTY OR THE JOINT FINANCE COMMITTEE SHALL ISSUE A
WRITTEN CONSOLIDATED REPORT SETTING FORTH IN REASONABLE DETAIL (A) THE
CALCULATION OF ALL SUCH SHARED DEVELOPMENT COSTS INCURRED BY BOTH PARTIES OVER
SUCH CALENDAR QUARTER, (B) THE CALCULATION OF THE NET AMOUNT OWED BY DS TO
ARQULE OR BY ARQULE TO DS IN ORDER TO ENSURE THE APPROPRIATE SHARING OF SUCH
SHARED DEVELOPMENT COSTS, AND (C) THE CUMULATIVE AMOUNT OF THE DEFERRED
DEVELOPMENT COSTS TO BE RECOVERED BY DS FROM MILESTONES AND ROYALTIES.  UNLESS
DISPUTED, AMOUNTS REIMBURSED TO

 

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EITHER PARTY IN RESPECT OF THE SHARED DEVELOPMENT COSTS SHALL BE PAID IN U.S.
DOLLARS ACCORDING TO THE EXCHANGE PROCEDURE SET FORTH IN SECTION 4.3.5 WITHIN *
(*) DAYS OF THE TIME THE CONSOLIDATED REPORT IS PROVIDED.  IN THE EVENT OF A
DISPUTE CONCERNING REIMBURSEMENT SETTLEMENT AMOUNTS, THE PORTION IN DISPUTE
SHALL BE PLACED IN AN INTEREST-BEARING ESCROW ACCOUNT AND ALLOCATED BETWEEN THE
PARTIES UPON GOOD FAITH RESOLUTION OF THE DISPUTE OR BY ARBITRATION PURSUANT TO
SECTION 12.1.  IF NECESSARY, MUTUALLY AGREED TO ADJUSTMENTS OR CORRECTIONS TO
THE REIMBURSEMENT COSTS SHALL BE MADE TO THE CONSOLIDATED REPORT BEFORE IT IS
SUBMITTED FOR PAYMENT.  OTHERWISE, ADJUSTMENTS SHALL BE MADE IN THE SUBSEQUENT
CONSOLIDATED REPORT.  EACH PARTY SHALL HAVE THE RIGHT TO AUDIT THE OTHER PARTY’S
RECORDS WITH RESPECT TO SUCH CONSOLIDATED REPORT, IN ACCORDANCE WITH
SECTION 3.11.2(B).

 

(II)                                  NOTWITHSTANDING ANYTHING TO THE CONTRARY
IN SECTION 3.11.2(A)(I), THAT PORTION OF SHARED DEVELOPMENT COSTS INCURRED BY DS
FOR WHICH ARQULE IS OTHERWISE RESPONSIBLE UNDER SECTION 3.11.1 THAT ARE
ATTRIBUTABLE TO THE CONDUCT OF ANY PHASE 3 DEVELOPMENT ACTIVITIES (“PHASE 3
COSTS”) AND THAT, TOGETHER WITH PHASE 3 COSTS PREVIOUSLY BORNE BY ARQULE, EXCEED
MILESTONE PAYMENTS AND ROYALTIES PREVIOUSLY PAID TO ARQULE (“DEFERRED
DEVELOPMENT COSTS”) SHALL BE BORNE BY DS; PROVIDED, THAT, NOTWITHSTANDING THE
FOREGOING, THE PARTIES SHALL CONTINUE TO HAVE THE RESPONSIBILITY TO EXCHANGE THE
REPORTS CONTEMPLATED BY SECTION 3.11.2 WITH RESPECT TO SUCH DEFERRED DEVELOPMENT
COSTS.  THE AGGREGATE AMOUNT OF THE DEFERRED DEVELOPMENT COSTS BORNE BY DS SHALL
BE CREDITABLE BY DS AGAINST THE AMOUNT OF (A) ANY MILESTONE PAYMENTS DUE AND
PAYABLE BY DS TO ARQULE ON AND AFTER THE DATE OF DEFERRAL AND (B) ANY ROYALTY
PAYMENTS DUE AND PAYABLE BY DS TO ARQULE ON AND AFTER THE DATE OF DEFERRAL,
UNTIL THE DEFERRED DEVELOPMENT COSTS ARE RECOVERED IN FULL.

 

(B)                                 RECORDS; AUDIT RIGHTS.  EACH PARTY SHALL
KEEP AND MAINTAIN FOR * (*) YEARS, OR SUCH OTHER PERIOD OF TIME AS REQUIRED BY
APPLICABLE LAWS IF LONGER THAN * (*) YEARS, COMPLETE AND ACCURATE RECORDS OF
SHARED DEVELOPMENT COSTS INCURRED WITH RESPECT TO LICENSED PRODUCTS IN
SUFFICIENT DETAIL TO ALLOW CONFIRMATION OF SAME BY THE JSC AND THE OTHER PARTY. 
EACH PARTY (THE “COST AUDITING PARTY”) SHALL HAVE THE RIGHT FOR A PERIOD OF *
(*) YEARS, OR SUCH OTHER PERIOD OF TIME AS REQUIRED BY APPLICABLE LAWS IF LONGER
THAN * (*) YEARS, AFTER SUCH SHARED DEVELOPMENT COST IS RECONCILED IN ACCORDANCE
WITH SECTION 3.11.2(A) TO APPOINT AT ITS EXPENSE AN INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANT REASONABLY ACCEPTABLE TO THE OTHER PARTY (THE “COST

 

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AUDITED PARTY”) TO AUDIT THE RELEVANT RECORDS OF THE COST AUDITED PARTY AND ITS
AFFILIATES TO VERIFY THAT THE AMOUNT OF SUCH DEVELOPMENT COSTS WAS CORRECTLY
DETERMINED.  THE COST AUDITED PARTY AND ITS AFFILIATES SHALL EACH MAKE ITS
RECORDS AVAILABLE FOR AUDIT BY SUCH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
DURING REGULAR BUSINESS HOURS AT SUCH PLACE OR PLACES WHERE SUCH RECORDS ARE
CUSTOMARILY KEPT, UPON THIRTY (30) DAYS WRITTEN NOTICE FROM THE COST AUDITING
PARTY.  SUCH AUDIT RIGHT SHALL NOT BE EXERCISED BY THE COST AUDITING PARTY MORE
THAN ONCE IN ANY CALENDAR YEAR AND THE RECORDS OF SHARED DEVELOPMENT COSTS FOR A
GIVEN PERIOD MAY NOT BE AUDITED MORE THAN ONCE.  ALL RECORDS MADE AVAILABLE FOR
AUDIT SHALL BE DEEMED TO BE CONFIDENTIAL INFORMATION OF THE COST AUDITED PARTY. 
THE RESULTS OF EACH AUDIT, IF ANY, SHALL BE BINDING ON BOTH PARTIES ABSENT
MANIFEST ERROR.  IN THE EVENT THERE WAS AN ERROR IN THE AMOUNT OF SHARED
DEVELOPMENT COSTS REPORTED BY THE COST AUDITED PARTY HEREUNDER, (A) IF THE
AMOUNT OF SHARED DEVELOPMENT COSTS WAS OVER REPORTED, THE COST AUDITED PARTY
SHALL PROMPTLY (BUT IN ANY EVENT NO LATER THAN * (*) DAYS AFTER THE COST AUDITED
PARTY’S RECEIPT OF THE REPORT SO CONCLUDING) MAKE PAYMENT TO THE COST AUDITING
PARTY OF THE COST AUDITED PARTY’S COST-SHARING PERCENTAGE OF OVER REPORTED
AMOUNT AND (B) IF THE AMOUNT OF SHARED DEVELOPMENT COSTS WAS UNDERREPORTED, THE
COST AUDITING PARTY SHALL PROMPTLY (BUT IN ANY EVENT NO LATER THAN * (*) DAYS
AFTER THE COST AUDITING PARTY’S RECEIPT OF THE REPORT SO CONCLUDING) MAKE
PAYMENT TO THE COST AUDITED PARTY OF THE COST AUDITED PARTY’S COST-SHARING
PERCENTAGE OF UNDERREPORTED AMOUNT.  THE COST AUDITING PARTY SHALL BEAR THE FULL
COST OF SUCH AUDIT UNLESS SUCH AUDIT DISCLOSES AN OVER REPORTING BY THE COST
AUDITED PARTY OF MORE THAN * PERCENT (*%) OF THE AGGREGATE AMOUNT OF SHARED
DEVELOPMENT COSTS REPORTABLE IN ANY CALENDAR YEAR, IN WHICH CASE THE COST
AUDITED PARTY SHALL REIMBURSE THE COST AUDITING PARTY FOR ALL COSTS INCURRED BY
THE COST AUDITING PARTY IN CONNECTION WITH SUCH AUDIT.

 

3.12                           Co-Commercialization Option.

 

3.12.1                  EXERCISE OF CO-COMMERCIALIZATION OPTION.

 

(A)                                  NOTICE OF LAST PATIENT/LAST VISIT AND
ANTICIPATED NDA FILING.  DS SHALL GIVE ARQULE WRITTEN NOTICE OF (I) THE DATE OF
THE LAST PATIENT/LAST VISIT IN THE LAST PHASE 3 CLINICAL TRIAL FOR A LICENSED
PRODUCT TO BE CONDUCTED FOR THE FIRST TARGETED INDICATION PRIOR TO THE FILING OF
AN NDA FOR SUCH LICENSED PRODUCT FOR SUCH TARGETED INDICATION (“LAST
PATIENT/LAST

 

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VISIT NOTICE”), AND (II) ITS DECISION TO FILE THE NDA COVERING EACH LICENSED
PRODUCT FOR A SECOND TARGETED INDICATION AFTER THE UNBLINDING OF THE DATA (IF A
BLINDED TRIAL) FOR SUCH TARGETED INDICATION BUT AT LEAST * (*) DAYS PRIOR TO THE
ANTICIPATED DATE OF SUCH ANTICIPATED FILING (THE “NDA FILING NOTICE”).

 

(B)                                 EXERCISE OF CO-COMMERCIALIZATION OPTION. 
DURING THE FIRST CO-COMMERCIALIZATION OPTION PERIOD, OR IN THE EVENT THAT ARQULE
DOES NOT EXERCISE THE CO-COMMERCIALIZATION OPTION DURING THE FIRST
CO-COMMERCIALIZATION OPTION PERIOD, THE SECOND CO-COMMERCIALIZATION OPTION
PERIOD, ARQULE SHALL HAVE THE OPTION (THE “CO-COMMERCIALIZATION OPTION”), IN ITS
SOLE DISCRETION, TO CO-COMMERCIALIZE ANY LICENSED PRODUCT IN THE
CO-COMMERCIALIZATION TERRITORY BY PROVIDING WRITTEN NOTICE TO DS (THE
“CO-COMMERCIALIZATION OPTION NOTICE”) WHICH NOTICE SHALL IDENTIFY THE LICENSED
PRODUCT (EACH, SUCH LICENSED PRODUCT, A “CO-COMMERCIALIZED LICENSED PRODUCT”).
 IF ARQULE EXERCISES ITS CO-COMMERCIALIZATION OPTION WITH RESPECT TO ANY
LICENSED PRODUCT, (I) SUCH LICENSED PRODUCT WILL BE DEEMED TO BE A
CO-COMMERCIALIZED LICENSED PRODUCT FOR PURPOSES OF THIS AGREEMENT, AND (II) THE
PARTIES SHALL (A) NEGOTIATE A CO-COMMERCIALIZATION AGREEMENT FOR SUCH
CO-COMMERCIALIZED LICENSED PRODUCT IN ACCORDANCE WITH SECTION 3.12.1(C) AND
(B) FORM THE USJMC IN ACCORDANCE WITH SECTION 2.5.

 

(C)                                  NEGOTIATION OF CO-COMMERCIALIZATION
AGREEMENT.

 

(I)                                     PREPARATION, NEGOTIATION, EXECUTION AND
DELIVERY.  WITHIN * (*) DAYS AFTER ARQULE PROVIDES A CO-COMMERCIALIZATION OPTION
NOTICE, THE PARTIES SHALL COMMENCE THE PREPARATION OF A CO-COMMERCIALIZATION
AGREEMENT (THE “CO-COMMERCIALIZATION AGREEMENT”) WHICH SHALL (1) PROVIDE FOR THE
TERMS APPLICABLE TO SUCH CO-COMMERCIALIZATION; (2) CONFORM IN ALL MATERIAL
RESPECTS WITH THE TERMS AND CONDITIONS SET FORTH IN THIS AGREEMENT AND ON
SCHEDULE 3 ATTACHED HERETO; AND (3) INCLUDE SUCH ADDITIONAL PROVISIONS AS ARE
USUAL AND CUSTOMARY FOR INCLUSION IN A CO-PROMOTION AGREEMENT BETWEEN COMPANIES
IN THE PHARMACEUTICAL INDUSTRY.  FOR PURPOSES OF CLARITY, ANY ADDITIONAL TERMS
NEGOTIATED BY THE PARTIES FOR INCLUSION IN THE CO-COMMERCIALIZATION AGREEMENT
SHALL SUPPLEMENT AND SHALL NOT MATERIALLY EXPAND, LIMIT OR CHANGE THE TERMS SET
FORTH IN THIS AGREEMENT AND ON SCHEDULE 3 ATTACHED HERETO.  THE PARTIES HEREBY
ACKNOWLEDGE AND AGREE THAT THE CO-COMMERCIALIZATION AGREEMENT SHALL PROVIDE THAT
(1)

 

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THE PARTIES SHALL SHARE CO-COMMERCIALIZATION ACTIVITIES WITH RESPECT TO SUCH
CO-COMMERCIALIZATION LICENSED PRODUCT IN THE CO-COMMERCIALIZATION TERRITORY WITH
ARQULE PROVIDING, ON AN INDICATION-BY-INDICATION BASIS, AT ITS OPTION, UP TO *
PERCENT (*%) (WHICH MAY INCLUDE NO PRIMARY DETAIL EQUIVALENTS FOR A PARTICULAR
TARGETED INDICATION) OF ALL REQUIRED PRIMARY DETAIL EQUIVALENTS, BUT NO MORE
THAN * (*) REPRESENTATIVES UNLESS A LICENSED PRODUCT IS APPROVED FOR * OR MORE
TARGETED INDICATIONS, PURSUANT TO THE CO-COMMERCIALIZATION PLAN; (2) DS SHALL BE
RESPONSIBLE FOR ALL ACCOUNT MANAGEMENT OF COMMUNITY, ACADEMIC AND VETERANS
HOSPITALS AND ASSOCIATED ACTIVITIES, INCLUDING, BUT NOT LIMITED TO,
COMMUNICATION WITH HOSPITAL PHARMACY AND THE PHARMACY AND THERAPEUTICS
COMMITTEE, FORMULARY MANAGEMENT AND CONTRACTING; (3) DS SHALL REIMBURSE ARQULE
FOR THE FULLY-BURDENED COST INCURRED BY ARQULE IN CONDUCTING SUCH
CO-COMMERCIALIZATION ACTIVITIES, BUT IN NO EVENT SHALL SUCH RATE BE IN EXCESS OF
THE FULLY BURDENED COST TO DS OF EMPLOYING OR OTHERWISE ENGAGING ITS OWN
REPRESENTATIVES WHO DETAIL ITS ONCOLOGY PRODUCTS IN THE CO-COMMERCIALIZATION
TERRITORY (INCLUDING INCENTIVE COMPENSATION FOR THE ARQULE SALES PERSONNEL ON
THE SAME BASIS AS THE INCENTIVE COMPENSATION OF DS PERSONNEL IN THE
CO-COMMERCIALIZATION TERRITORY); (4) SUCH ARQULE SALES PERSONNEL SHALL ENGAGE IN
DETAILING THE CO-COMMERCIALIZED LICENSED PRODUCT AND ANY OTHER PRODUCT BEING
CO-PROMOTED BY ARQULE AND DS IN THE FIRST POSITION, BUT SHALL NOT EXPEND MORE
THAN * PERCENT (*%) OF THE DETAILING EFFORT ON ANY OTHER PRODUCTS UNLESS THE
PARTIES AGREE, AND SHALL NOT PROMOTE ANY OTHER PRODUCT THAT IS DIRECTLY
COMPETITIVE WITH THE CO-COMMERCIALIZED LICENSED PRODUCT OR ANY OTHER PRODUCT OF
DS; PROVIDED, THAT IN THE EVENT ARQULE’S SALES PERSONNEL PROMOTE ANY PRODUCT
THAT IS NOT BEING CO-PROMOTED BY ARQULE AND DS, THERE SHALL BE A REDUCTION IN
DS’S REIMBURSEMENT OF ARQULE’S COST THAT IS PROPORTIONAL TO THE PERCENTAGE OF
DETAILING EFFORT EXPENDED ON PRODUCTS THAT ARE NOT BEING CO-PROMOTED BY ARQULE
AND DS; AND (5) THE PARTIES SHALL CREATE THE USJMC WITH EQUAL REPRESENTATION TO
OVERSEE THE GLOBAL COMMERCIALIZATION OF THE LICENSED PRODUCT, INCLUDING THE
CO-COMMERCIALIZATION OF THE CO-COMMERCIALIZED LICENSED PRODUCT IN THE
CO-COMMERCIALIZATION TERRITORY.  DISPUTES SHALL BE REFERRED TO THE JSC FOR
RESOLUTION IN ACCORDANCE WITH SECTION 2.1.5.  FOR CLARITY, IN THE EVENT THAT
ARQULE EXERCISES THE CO-COMMERCIALIZATION OPTION, THE PARTIES SHALL NEGOTIATE
AND EXECUTE THE CO-COMMERCIALIZATION AGREEMENT AS SET FORTH HEREIN AND FORM THE
USJMC AS SET FORTH IN SECTION 2.5, WHETHER OR NOT ARQULE WILL PROVIDE ANY
PRIMARY DETAIL EQUIVALENTS FOR ANY PARTICULAR INDICATION.  THE PARTIES SHALL
NEGOTIATE THE CO-COMMERCIALIZATION AGREEMENT IN GOOD FAITH AND WITH SUFFICIENT
DILIGENCE AS IS REQUIRED TO

 

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EXECUTE AND DELIVER THE CO-COMMERCIALIZATION AGREEMENT WITHIN * (*) DAYS AFTER
ARQULE PROVIDES THE CO-COMMERCIALIZATION OPTION NOTICE.

 

(II)                                  DISPUTE RESOLUTION.  IN THE EVENT THE
PARTIES FAIL TO EXECUTE AND DELIVER THE CO-COMMERCIALIZATION AGREEMENT WITHIN
THE * (*) DAY PERIOD DESCRIBED IN SECTION 3.12.1(C)(I), THE PARTIES SHALL
(1) USE REASONABLE EFFORTS TO COMPLETE SUCH NEGOTIATIONS AND TO EXECUTE AND
DELIVER THE CO-COMMERCIALIZATION AGREEMENT AS SOON AS POSSIBLE AFTER SUCH * (*)
DAY PERIOD AND (2) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, AFTER THE
EXPIRATION OF SUCH * (*) DAY PERIOD, EACH PRODUCE A LIST OF ISSUES ON WHICH THEY
HAVE FAILED TO REACH AGREEMENT AND SUBMIT ITS LIST TO THE JSC TO BE RESOLVED IN
ACCORDANCE WITH SECTION 2.1.5.

 

3.12.2                          CO-COMMERCIALIZATION PLAN.  AS SOON AS
PRACTICABLE FOLLOWING THE EXERCISE BY ARQULE OF A CO-COMMERCIALIZATION OPTION,
THE USJMC SHALL PREPARE A CO-COMMERCIALIZATION PLAN (THE “CO-COMMERCIALIZATION
PLAN”) FOR EACH CO-COMMERCIALIZED LICENSED PRODUCT FOR THE CO-COMMERCIALIZATION
TERRITORY WHICH SHALL INCLUDE, BUT NOT BE LIMITED TO, (A) DEMOGRAPHICS AND
MARKET DYNAMICS, MARKET STRATEGIES, AND ESTIMATED LAUNCH DATE OF SUCH
CO-COMMERCIALIZED LICENSED PRODUCT IN THE CO-COMMERCIALIZATION TERRITORY, (B) A
SALES AND EXPENSE FORECAST (INCLUDING AT LEAST FIVE (5) YEARS OF ESTIMATED SALES
AND EXPENSES), MANUFACTURING PLANS AND TARGETED LABEL CLAIMS FOR SUCH
CO-COMMERCIALIZED LICENSED PRODUCT IN THE CO-COMMERCIALIZATION TERRITORY, (C) A
MARKETING PLAN (INCLUDING FIVE (5) YEAR ADVERTISING AND DETAILING FORECASTS AND
PRICING STRATEGIES) FOR SUCH CO-COMMERCIALIZED LICENSED PRODUCT IN THE
CO-COMMERCIALIZATION TERRITORY, (D) A FIVE (5) YEAR BUDGET FOR SUCH
CO-COMMERCIALIZED LICENSED PRODUCT FOR THE CO-COMMERCIALIZATION TERRITORY, AND
(E) SALES FORCE STRATEGY, TRAINING PLANS, TERRITORIAL DIVISIONS AND ALLOCATION
OF TARGETED AUDIENCE.  THE USJMC SHALL USE REASONABLE COMMERCIAL EFFORTS TO
PREPARE SUCH CO-COMMERCIALIZATION PLAN WITHIN * (*) DAYS AFTER ARQULE’S EXERCISE
OF ITS CO-COMMERCIALIZATION OPTION.  THE CO-COMMERCIALIZATION PLAN SHALL BE
UPDATED BY THE USJMC NOT LESS THAN ANNUALLY.  THE CO-COMMERCIALIZATION PLAN AND
ANNUAL WRITTEN UPDATES THERETO SHALL BE APPROVED BY THE USJMC BY A DATE TO BE
ESTABLISHED BY THE USJMC TAKING INTO ACCOUNT DS’S AND ARQULE’S ANNUAL BUDGET
PLANNING CALENDARS, BUT NO LATER THAN DECEMBER 31 OF EACH CALENDAR YEAR.

 

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3.12.3         LABELING.  ALL PRODUCT LABELS FOR CO-COMMERCIALIZED LICENSED
PRODUCTS SHALL INCLUDE, IN EQUAL PROMINENCE, THE NAMES OF BOTH DS AND ARQULE. 
THE JSC SHALL HAVE THE RESPONSIBILITY OF MEETING NOT LESS FREQUENTLY THAN
ANNUALLY AND DECIDING WHETHER CHANGES IN THE PARTICULAR APPEARANCE IN LABELING
OF PACKAGING AND CONTAINERS OF CO-COMMERCIALIZED LICENSED PRODUCTS OR IN THE
PRODUCT INFORMATION ARE REQUIRED.

 

3.12.4         COOPERATION; ADDITIONAL INFORMATION.  IN CONNECTION WITH ARQULE’S
CONSIDERATION OF THE EXERCISE OF A CO-COMMERCIALIZATION OPTION WITH RESPECT TO
EACH LICENSED PRODUCT, DS SHALL PROVIDE ARQULE WITH ANY INFORMATION CONTROLLED
BY DS AND REASONABLY REQUESTED BY ARQULE THAT IS NECESSARY OR USEFUL TO ARQULE
IN DETERMINING WHETHER TO EXERCISE SUCH CO-COMMERCIALIZATION OPTION.

 

3.13         Expansion of the Field.  If at any time during the Term of this
Agreement, either Party desires to add one or more Non-Cancer Indications to the
Field that it wishes to pursue with respect to a Collaboration Compound or
Licensed Product for purposes of this Agreement, such Party shall give written
notice to the other Party, specifying the particular Collaboration Compound or
Licensed Product and Non-Cancer Indication (each, an “Indication Proposal
Notice”).  The other Party shall consider each such Indication Proposal Notice
in good faith and shall, on or before * (*) days from the date of the Indication
Proposal Notice, provide the proposing Party with a written response as to
whether or not it is willing to add such Non-Cancer Indication to the Field,
which consideration shall include a determination by the other Party in good
faith as to whether it Controls the Technology and Patent Rights applicable to
such Collaboration Compound or Licensed Product for such Non-Cancer Indication. 
If the other Party indicates in its response that it is willing to add such
Non-Cancer Indication to the Field, the Parties shall for a period of * (*) days
from the date the proposing Party receives the written response from the other
Party negotiate in good faith to complete and execute any amendment to this
Agreement that may be required to add the Non-Cancer Indication to the
definition of Field for purposes of this Agreement, including, without
limitation, the inclusion of any amendments to the applicable Global Development
Plans, and/or Product Commercialization Plans, as well as any amendments to the
compensation payable by DS pursuant to Article 4, that may be required to add
such Non-Cancer Indication to the Field; provided, that, (a) if any such
Non-Cancer Indication is added to the Field, the royalties for such Non-Cancer
Indication will be the same as

 

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for the other Targeted Indications and (b) such Non-Cancer Indication will be
included as a Targeted Indication for purposes of determining whether a
Milestone Event has been achieved in Section 4.2.1.  Upon the execution of such
amendment by the Parties, any Non-Cancer Indication on which the Parties so
agree shall be referred to herein as an “Approved Non-Cancer Indication” for
purposes of this Agreement.

 

3.14         Additional Cancer Indications.  Either Party may at any time
propose to the JDC a Clinical Trial of a Licensed Product for a Cancer
Indication for the treatment of a type of tumor that is not already included in
the Global Development Plan, and is not a type of tumor that is within the scope
of an approved Cancer Indication for a Licensed Product that has received
Commercialization Regulatory Approval (a “New Cancer Indication”).  The JDC
shall consider such proposal and if such Clinical Trial is not approved by the
JDC within * (*) days of the date that such trial was proposed to the JDC (or in
the event such trial was proposed to the JDC other than at a meeting of the JDC,
within * (*) days of the date that the JDC first meets (whether in person or by
teleconference) following the date such trial was proposed to the JDC), then the
matter shall be resolved as a Joint Decision as set forth in Section 2.2.5. 
During the decision period, the proposing Party shall timely provide all
information reasonably requested by any member of the JDC that would be material
to making a determination as to whether such proposed Clinical Trial should be
approved.  If such Clinical Trial is not approved by the JSC or the Designated
Senior Officers, then the proposing Party shall have the right to conduct such
Clinical Trial, at is own expense, unless the JSC or the Designated Senior
Officers determine, as a Joint Decision, that there is a substantial safety risk
in the proposed Clinical Trial that is greater than the safety risk in other
Clinical Trials of the same Licensed Product being conducted by the Parties for
other Targeted Indications, or that there is a material risk of adversely
affecting the label of the Licensed Product for other Targeted Indications as a
result of the proposed Clinical Trial.  The Party conducting such proposed
Clinical Trial shall furnish the other Party with a copy of the proposed
protocol at least * (*) days prior to submission to the FDA or EMEA, as
applicable, and shall give good faith consideration to comments received from
the other Party within such * (*) day period.  If the Licensed Product involved
in such Clinical Trial receives Commercialization Regulatory Approval in the
United States, in any Major European Country or from the EMEA for the New Cancer
Indication, then the other Party shall reimburse the proposing Party for *% of
the External Development Costs relating to such Clinical Trial (“Total

 

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Reimbursable Costs”) that the other Party would have otherwise been responsible
for if the JDC would have approved such trial (i.e., *% of *% of the External
Development Costs incurred in such Clinical Trial), provided that, (a) in the
event that Commercialization Regulatory Approval is obtained in the United
States prior to its being obtained from the EMEA or in any Major European
Country, then the other Party shall reimburse the proposing Party for * percent
(*%) of the Total Reimbursable Costs and shall only be responsible for
reimbursing the remaining * (*%) of the Total Reimbursable Costs at such time as
Commercialization Regulatory Approval is obtained from either the EMEA or in any
Major European Country and (b) in the event that Commercialization Regulatory
Approval is obtained from either the EMEA or in any Major European Country prior
to its being obtained in the United States, then the other Party shall reimburse
the proposing Party for * percent (*%) of the Total Reimbursable Costs and shall
only be responsible for reimbursing the remaining * percent (*%) of the Total
Reimbursable Costs at such time as Commercialization Regulatory Approval is
obtained in the United States.  The foregoing right may only be exercised once
in any twenty-four month period by each Party.  No milestone payments will be
due for such a Clinical Trial until Commercialization Regulatory Approval is
obtained in the United States, the EMEA or any Major European Country, as
applicable; provided that if Commercialization Regulatory Approval is obtained
in a “niche” Targeted Indication that will not materially increase the sale of
the Licensed Product, as determined by the JSC as a Joint Decision, then no
milestone payments will be due for the conduct of such Clinical Trial or as a
result of such Commercialization Regulatory Approval.  If Commercialization
Regulatory Approval is obtained in the Target Indication that is not in a
“niche” Targeted Indication that will materially increase the sale of the
Licensed Product, as determined by the JSC as a Joint Decision, then all
milestones based on Clinical Trials and Commercialization Regulatory Approval of
the Targeted Indication will be due upon receipt of Commercialization Regulatory
Approval (unless the relevant number of milestones have been fully paid for
other Targeted Indications).  The rights provided by this section shall apply
only to New Cancer Indications.  Neither Party shall, unless expressly approved
by the JDC, have the right to conduct a Clinical Trial for a Cancer Indication
that is not a New Cancer Indication.  Examples of Cancer Indications that are
not New Cancer Indications, include, but are not limited to, new dosing
regimens, combinations with other therapeutic agents, patient sub-sets, and line
of therapy for a tumor when the tumor is already within the Global Development
Plan, or the tumor

 

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is already within the scope of an approved Cancer Indication for a Licensed
Product that has received Commercialization Regulatory Approval.  For the
avoidance of doubt, DS’s obligations with respect to Regulatory Filings of
Licensed Products under Section 3.1.4(b) and the Commercialization of Licensed
Products under Section 3.6.1 shall apply to Licensed Products for New Cancer
Indications.

 

3.15         Additional Phase 5 Clinical Trials.  In the event that DS proposes
a Phase 5 Clinical Trial that is not approved by the JDC or the JSC, DS may, at
its option, conduct such Phase 5 Clinical Trial at its sole expense, unless the
JSC or the Designated Senior Officers determine, as a Joint Decision, that there
is a substantial safety risk in such Phase 5 Clinical Trial that is greater than
the safety risk in other Clinical Trials of the same Licensed Product being
conducted by the Parties, or that there is a material risk of adversely
affecting the label of the Licensed Product as a result of such Phase 5 Clinical
Trial.  DS shall furnish ARQULE with a copy of the proposed protocol at least *
(*) days prior to the submission to the FDA, the EMEA or the Regulatory
Authority in any Major European Country, if so submitted and as applicable, and
shall give good faith consideration to comments received from ARQULE within such
* (*) day period.  The out of pocket costs and internal costs incurred by DS in
conducting such Phase 5 Clinical Trial shall not constitute a Shared Development
Cost that is reimbursable under Section 3.11.

 

4.             PAYMENTS

 

4.1          Up-front Fee.  DS shall pay ARQULE a non-refundable, non-creditable
up-front fee (the “Upfront Fee”) in the aggregate amount of Sixty Million
Dollars (U.S. $60,000,000), payable by wire transfer in accordance with the wire
transfer instructions of ARQULE provided in writing to DS, at the later of (i)
thirty (30) days after the execution of the Binding Letter of Intent or (ii)
within five (5) Business Days after the waiting period under the
Hart-Scott-Rodino Act has expired or earlier been terminated.

 

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4.2           Milestone Payments.

 

4.2.1        Milestones.

 

(A)           DEVELOPMENT AND REGULATORY MILESTONES.  SUBJECT TO SECTIONS
4.2.2(C) AND (D), DS SHALL MAKE THE FOLLOWING NON-REFUNDABLE PAYMENTS TO ARQULE
WITHIN * (*) DAYS AFTER THE OCCURRENCE OF EACH OF THE FOLLOWING MILESTONE EVENTS
FOR EACH LICENSED PRODUCT THAT ACHIEVES EACH SUCH MILESTONE:

 

Milestone Event

 

Milestone
Payment

 

 

 

1. *

 

$* million

 

 

 

2. *

 

$* million

 

 

 

3. *

 

$* million

 

 

 

4. *

 

$* million

 

 

 

5. *

 

$* million

 

 

 

6. *

 

$* million

 

 

 

7. *

 

$* million

 

 

 

8. *

 

$* million

 

 

 

9. *

 

$* million

 

 

 

10. *

 

$* million

 

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Milestone Event

 

Milestone
Payment

 

 

 

11. *

 

$* million

 

 

 

12. *

 

$* million

 

 

 

13. *

 

$* million

 

 

 

14. *

 

$* million

 

 

 

15. *

 

$* million

 

 

 

16. *

 

$* million

 

 

 

17. *

 

$* million

 

 

 

18. *

 

$* million

 

 

 

19. *

 

$* million

 

 

 

20. *

 

$* million

 

(B)           SALES MILESTONES.  IN ADDITION TO THE MILESTONE PAYMENTS
CONTEMPLATED BY SECTION 4.2.1(A), DS SHALL MAKE EACH OF THE FOLLOWING
NON-REFUNDABLE, ONE-TIME

 

--------------------------------------------------------------------------------

(1)           DS agrees to use best industry practices in order to execute the
First Commercial Sale.

 

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PAYMENTS TO ARQULE WITHIN * (*) DAYS AFTER THE FIRST OCCURRENCE OF THE
CORRESPONDING MILESTONE EVENT FOR THE APPLICABLE LICENSED PRODUCT:

 

Milestone Event

 

Milestone Payment

 

 

 

Annual Net Sales in a Calendar Year of $* million

 

$* million

 

 

 

Annual Net Sales in a Calendar Year of $* million

 

$* million

 

 

 

Annual Net Sales in a Calendar Year of $* billion

 

$* million

 

 

 

Annual Net Sales in a Calendar Year of $* billion

 

$* million

 

4.2.2        Notice and Payment of Milestones.

 

(A)           DEFINITION OF INDICATION.  FOR PURPOSES OF CLARITY, THE USE OF THE
TERM TARGETED INDICATION, IF IT IS A CANCER INDICATION, IN
SECTION 4.2.1(A) ABOVE SHALL REFER TO A PARTICULAR TUMOR TYPE AND NOT TO CHANGES
IN, OR EXPANSION OF, THE REGULATORY LABEL APPLICABLE TO A GIVEN TUMOR TYPE.

 

(B)           NOTICE OF MILESTONE EVENTS.  DS SHALL PROVIDE ARQULE WITH PROMPT
WRITTEN NOTICE UPON EACH OCCURRENCE OF A MILESTONE EVENT SET FORTH IN
SECTION 4.2.1.  IN THE EVENT THAT, NOTWITHSTANDING THE FACT THAT DS HAS NOT
GIVEN SUCH A NOTICE, AND ARQULE BELIEVES ANY SUCH MILESTONE EVENT HAS OCCURRED,
IT SHALL SO NOTIFY DS IN WRITING AND SHALL PROVIDE TO DS THE DATA, DOCUMENTATION
OR OTHER INFORMATION THAT SUPPORTS ITS BELIEF.  ANY DISPUTE UNDER THIS
SECTION 4.2.2 THAT RELATES TO WHETHER OR NOT A MILESTONE EVENT HAS OCCURRED
SHALL FIRST BE REFERRED TO THE JSC TO BE RESOLVED IN ACCORDANCE WITH
SECTION 2.1.5, BUT IF NOT RESOLVED AS SET FORTH IN SECTION 2.1.5, SHALL BE
SUBJECT TO ARBITRATION UNDER SECTION 12.1.

 

(C)           SKIPPED MILESTONES.  IF AT THE TIME ANY GIVEN MILESTONE PAYMENT
SET FORTH IN SECTION 4.2.1 IS DUE AND ONE OR MORE PRECEDING MILESTONE PAYMENTS
FOR ANTECEDENT MILESTONE EVENTS,  FOR THE SAME INDICATION IN THE CASE OF
DEVELOPMENT AND REGULATORY MILESTONES, HAVE NOT BEEN PAID, THEN SUCH UNPAID
PRECEDING MILESTONE PAYMENTS SHALL BE PAID AT SUCH TIME AS WELL.  FOR EXAMPLE,
(I) IF A MILESTONE PAYMENT IS MADE FOR THE ACCEPTANCE OF A DRUG APPROVAL
APPLICATION WITH RESPECT TO A LICENSED PRODUCT FOR THE SECOND INDICATION BUT NO
PHASE 3 CLINICAL

 

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TRIALS WERE CONDUCTED WITH RESPECT TO THAT LICENSED PRODUCT FOR THE SECOND
INDICATION, THE MILESTONE PAYMENT ASSOCIATED WITH THE INITIATION OF A PHASE 3
CLINICAL TRIAL FOR THAT LICENSED PRODUCT WILL BE PAID CONCURRENTLY WITH THE
MILESTONE PAYMENT FOR THE ACCEPTANCE OF A DRUG APPROVAL APPLICATION FOR THE
SECOND INDICATION AND (II) IF THE FIRST CALENDAR YEAR IN WHICH NET SALES REACH
$* MILLION IS ALSO THE FIRST CALENDAR YEAR IN WHICH NET SALES REACH $* MILLION,
THEN BOTH THE MILESTONE PAYMENT FOR ACHIEVEMENT OF $* MILLION OF NET SALES AND
THE MILESTONE PAYMENT FOR ACHIEVEMENT OF $* MILLION OF NET SALES WILL BE PAID
CONCURRENTLY.

 

(D)           MIT TUMOR MILESTONES.  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS SECTION 4.2.1, IN THE EVENT BOTH OF (I) THE MILESTONE EVENT NUMBERS 4, 8,
12, 16 OR 20 IN SECTION 4.2.1(A) ABOVE (THE “MIT TUMOR MILESTONES”) AND
(II) MILESTONE EVENT NUMBERS 3, 7, 11, 15 OR 19 IN SECTION 4.2.1(A) ABOVE
OCCURS, ONLY THE CORRESPONDING MILESTONE PAYMENTS TO THE EARLY TO OCCUR
MILESTONE EVENTS BETWEEN (I) AND (II) SHALL BE PAID.  FOR THE PURPOSES OF
DETERMINING OCCURRENCE OF OTHER MILESTONE EVENTS, THE MIT TUMOR MILESTONES SHALL
NOT BE COUNTED IN THE FIRST, SECOND OR THIRD INDICATIONS.

 

4.3          Payment of Royalties; Royalty Rates; Accounting and Records.

 

4.3.1        Payment of Royalties.  DS shall pay ARQULE a royalty based on
Annual Net Sales of each Licensed Product in the Territory in each Calendar Year
(or partial Calendar Year) commencing with the First Commercial Sale of such
Licensed Product in any country in the Territory and ending upon the last day of
the last Royalty Term for such Licensed Product, at the following rates:

 

Annual Net Sales Increment in the Territory

 

Royalty Rate
applicable for such tier

 

 

 

Up to $* million

 

*%

 

 

 

Above $* million, but less than or equal to $* billion

 

*%

 

 

 

Above $* billion

 

*%

 

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(A)           ADJUSTMENTS TO ROYALTIES.

 

(I)            IN THE EVENT THAT A LICENSED PRODUCT IS SOLD AS PART OF A
COMBINATION PRODUCT, WHERE “COMBINATION PRODUCT” MEANS ANY UNIFIED DOSE (E.G.,
NOT A KIT OF TWO SEPARATE AND DISTINCT DRUG DOSAGE FORMS) OF PHARMACEUTICAL
PRODUCT WHICH IS COMPRISED OF LICENSED PRODUCT AND OTHER THERAPEUTICALLY ACTIVE
COMPOUND(S) AND/OR INGREDIENTS (COLLECTIVELY THE “OTHER PRODUCTS”), NET SALES OF
LICENSED PRODUCT, FOR THE PURPOSES OF DETERMINING ROYALTY PAYMENTS, SHALL BE
DETERMINED BY MULTIPLYING THE NET SALES OF THE COMBINATION PRODUCT BY THE
FRACTION, A / (A+B) WHERE A IS THE WEIGHTED AVERAGE SALE PRICE OF THE LICENSED
PRODUCT WHEN SOLD SEPARATELY IN FINISHED FORM, AND B IS THE WEIGHTED AVERAGE
SALE PRICE OF THE OTHER PRODUCTS SOLD SEPARATELY IN FINISHED FORM, IN EACH CASE
IN THE COUNTRY OF SALE OF THE COMBINATION PRODUCT IN THE CALENDAR QUARTER OF
SUCH SALE.  IN THE EVENT THAT NO SEPARATE SALES ARE MADE OF EITHER THE LICENSED
PRODUCT OR THE OTHER PRODUCTS, THE REASONABLY ESTIMATED COMMERCIAL VALUE THEREOF
WILL BE USED INSTEAD OF THE SALE PRICE.  EACH OF “WEIGHTED AVERAGE SALE PRICE”
AND “REASONABLY ESTIMATED COMMERCIAL VALUE” SHALL BE DETERMINED AS SET FORTH
BELOW:

 

“Weighted average sale price” and “reasonably estimated commercial value,” as
the case may be, for a Licensed Product and Other Products shall be calculated
once at the commencement of each Calendar Year and such amount shall be used
during all applicable royalty reporting periods for the entire following
Calendar Year.  When determining the weighted average sale price of a Licensed
Product or Other Products, the weighted average sale price shall be calculated
by dividing the Net Sales (translated into U.S. dollars in accordance with
Section 4.3.5 hereof) by the units of active ingredient sold during the twelve
(12) months (or the number of months sold in a partial Calendar Year) of the
preceding Calendar Year for the respective Licensed Product or Other Products. 
“Estimated commercial value” shall be determined by agreement of the Parties
using criteria to be mutually agreed upon by the Parties.  If the Parties do not
agree, such dispute shall be first referred to the JSC to be resolved in
accordance with Section 2.1.5, but if not resolved as set forth in
Section 2.1.5, shall be resolved in accordance with Section 12.1 hereof.  In the
Calendar Year in which the First Commercial Sale occurs, a forecasted weighted
average sale price will be used for the License Product and Other Products, if
applicable.  Any over or under payment due to a difference between forecasted

 

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and actual weighted average sale prices will be paid or credited in the first
royalty payment of the following Calendar Year.

 

(II)           GENERIC LICENSED PRODUCTS.  IN THE EVENT THAT ONE OR MORE THIRD
PARTIES SELL A GENERIC LICENSED PRODUCT (AS DEFINED BELOW) IN ANY COUNTRY IN
WHICH A LICENSED PRODUCT IS THEN BEING SOLD BY DS, THEN, (I) DURING ANY CALENDAR
QUARTER IN WHICH SALES OF THE GENERIC LICENSED PRODUCT BY SUCH THIRD PARTIES ARE
EQUAL TO OR GREATER THAN * PERCENT (*%) BUT LESS THAN * PERCENT (*%) OF
AGGREGATE UNIT SALES OF LICENSED PRODUCTS AND GENERIC LICENSED PRODUCTS IN SUCH
COUNTRY (AS MEASURED BY PRESCRIPTIONS OR OTHER SIMILAR INFORMATION AVAILABLE
FROM A THIRD PARTY DATA PROVIDER AND APPLICABLE TO SUCH COUNTRY) THE APPLICABLE
ROYALTIES IN EFFECT WITH RESPECT TO SUCH LICENSED PRODUCT IN SUCH COUNTRY AS
SPECIFIED IN SECTION 4.3.1 SHALL BE REDUCED BY * PERCENT (*%) AND (II) DURING
ANY CALENDAR QUARTER IN WHICH SALES OF THE GENERIC LICENSED PRODUCTS BY SUCH
THIRD PARTIES ARE EQUAL TO OR GREATER THAN * PERCENT (*%) OF AGGREGATE UNIT
SALES OF LICENSED PRODUCTS AND GENERIC LICENSED PRODUCTS IN SUCH COUNTRY (AS
MEASURED BY PRESCRIPTIONS OR OTHER SIMILAR INFORMATION AVAILABLE FROM A THIRD
PARTY DATA PROVIDER AND APPLICABLE TO SUCH COUNTRY) THE APPLICABLE ROYALTIES IN
EFFECT WITH RESPECT TO SUCH LICENSED PRODUCT IN SUCH COUNTRY AS SPECIFIED IN
SECTION 4.3.1 SHALL BE REDUCED BY * PERCENT (*%).  NOTWITHSTANDING THE
FOREGOING, (I) DS’S OBLIGATION TO PAY ROYALTIES AT * PERCENT (*%) OF THE
APPLICABLE ROYALTY RATES SHALL BE REINSTATED ON THE FIRST DAY OF THE CALENDAR
QUARTER IMMEDIATELY FOLLOWING THE CALENDAR QUARTER IN WHICH SALES OF SUCH
GENERIC LICENSED PRODUCTS ACCOUNT FOR LESS THAN * PERCENT (*%) BUT MORE THAN *
PERCENT (*%) OF AGGREGATE UNIT SALES OF LICENSED PRODUCTS AND GENERIC LICENSED
PRODUCTS IN SUCH COUNTRY AND (II) DS’S OBLIGATION TO PAY ROYALTIES AT THE FULL
ROYALTY RATES SHALL BE REINSTATED ON THE FIRST DAY OF THE CALENDAR QUARTER
IMMEDIATELY FOLLOWING THE CALENDAR QUARTER IN WHICH SALES OF SUCH GENERIC
LICENSED PRODUCTS ACCOUNT FOR * PERCENT (*%) OR LESS OF AGGREGATE UNIT SALES OF
LICENSED PRODUCTS AND GENERIC LICENSED PRODUCTS IN SUCH COUNTRY.  FOR PURPOSES
OF THIS SECTION 4.3.1(A)(II), A “GENERIC LICENSED PRODUCT” MEANS A
PHARMACEUTICAL PRODUCT THAT CONTAINS THE SAME ACTIVE INGREDIENT AS A LICENSED
PRODUCT AND IS BIOEQUIVALENT TO SUCH LICENSED PRODUCT; PROVIDED, THAT, ANY
PRODUCT SOLD BY DS OR ANY AFFILIATE OR LICENSEE OF DS SHALL NOT BE A GENERIC
LICENSED PRODUCT FOR PURPOSES OF THIS AGREEMENT.

 

(B)           LIMIT ON ROYALTY REDUCTIONS.  NOTWITHSTANDING SECTIONS
4.3.1(A)(II), IN NO EVENT SHALL THE ROYALTIES OWED UNDER SECTIONS 4.3.1 WITH
RESPECT TO A LICENSED

 

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PRODUCT IN A COUNTRY BE REDUCED BY OPERATION OF SECTIONS 4.3.1(A)(II), BY MORE
THAN * PERCENT (*%) OF WHAT WOULD OTHERWISE BE OWED UNDER SECTION 4.3.1 WITH
RESPECT TO SUCH LICENSED PRODUCT IN SUCH COUNTRY.

 

(C)           PAYMENT DATES AND REPORTS.  ROYALTY PAYMENTS SHALL BE MADE BY DS
WITHIN * (*) DAYS AFTER THE END OF EACH CALENDAR QUARTER, COMMENCING WITH THE
CALENDAR QUARTER IN WHICH THE FIRST COMMERCIAL SALE OF A LICENSED PRODUCT
OCCURS.  DS SHALL ALSO PROVIDE, AT THE SAME TIME EACH SUCH PAYMENT IS MADE, A
REPORT SHOWING: (A) THE NET SALES OF EACH LICENSED PRODUCT BY TYPE OF LICENSED
PRODUCT AND COUNTRY IN THE TERRITORY; (B) THE TOTAL AMOUNT OF DEDUCTIONS FROM
GROSS SALES TO DETERMINE NET SALES; (C) THE APPLICABLE ROYALTY RATES FOR
LICENSED PRODUCTS IN EACH COUNTRY IN THE TERRITORY AFTER APPLYING ANY REDUCTIONS
SET FORTH ABOVE; AND (D) A CALCULATION OF THE AMOUNT OF ROYALTY DUE TO ARQULE.

 

4.3.2        RECORDS; AUDIT RIGHTS.  DS AND ITS AFFILIATES AND SUBLICENSEES
SHALL KEEP AND MAINTAIN FOR * (*) YEARS, OR SUCH OTHER PERIOD OF TIME AS
REQUIRED BY APPLICABLE LAWS IF LONGER THAN * (*) YEARS, FROM THE DATE OF EACH
PAYMENT OF ROYALTIES HEREUNDER COMPLETE AND ACCURATE RECORDS OF GROSS SALES AND
NET SALES BY DS AND ITS AFFILIATES AND SUBLICENSEES OF EACH LICENSED PRODUCT, IN
SUFFICIENT DETAIL TO ALLOW ROYALTIES TO BE DETERMINED ACCURATELY.  ARQULE SHALL
HAVE THE RIGHT FOR A PERIOD OF * (*) YEARS, OR SUCH OTHER PERIOD OF TIME AS
REQUIRED BY APPLICABLE LAWS IF LONGER THAN * (*) YEARS, AFTER RECEIVING ANY SUCH
PAYMENT TO APPOINT AT ITS EXPENSE AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
REASONABLY ACCEPTABLE TO DS TO AUDIT THE RELEVANT RECORDS OF DS AND ITS
AFFILIATES AND SUBLICENSEES TO VERIFY THAT THE AMOUNT OF SUCH PAYMENT WAS
CORRECTLY DETERMINED.  DS AND ITS AFFILIATES AND SUBLICENSEES SHALL EACH MAKE
ITS RECORDS AVAILABLE FOR AUDIT BY SUCH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
DURING REGULAR BUSINESS HOURS AT SUCH PLACE OR PLACES WHERE SUCH RECORDS ARE
CUSTOMARILY KEPT, UPON THIRTY (30) DAYS WRITTEN NOTICE FROM ARQULE.  SUCH AUDIT
RIGHT SHALL NOT BE EXERCISED BY ARQULE MORE THAN ONCE IN ANY CALENDAR YEAR OR
MORE THAN ONCE WITH RESPECT TO SALES OF A PARTICULAR LICENSED PRODUCT IN A
PARTICULAR PERIOD.  ALL RECORDS MADE AVAILABLE FOR AUDIT SHALL BE DEEMED TO BE
CONFIDENTIAL INFORMATION OF DS.  THE RESULTS OF EACH AUDIT, IF ANY, SHALL BE
BINDING ON BOTH PARTIES ABSENT MANIFEST ERROR.  IN THE EVENT THERE WAS AN
UNDERPAYMENT BY DS HEREUNDER, DS SHALL PROMPTLY (BUT IN ANY EVENT NO LATER THAN
* (*) DAYS AFTER DS’S RECEIPT OF THE REPORT SO CONCLUDING) MAKE PAYMENT TO
ARQULE OF ANY SHORTFALL.  SHOULD THE AUDIT LEAD TO THE DISCOVERY

 

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OF A DISCREPANCY TO DS’S DETRIMENT, THEN DS MAY CREDIT THE AMOUNT OF THE
DISCREPANCY WITHOUT INTEREST AGAINST ANY FUTURE PAYMENTS DUE TO ARQULE UNDER
SECTION 4.3.1.  ARQULE SHALL BEAR THE FULL COST OF SUCH AUDIT UNLESS SUCH AUDIT
DISCLOSES AN UNDERREPORTING BY DS OF MORE THAN * PERCENT (*%) OF THE AGGREGATE
AMOUNT OF ROYALTIES PAYABLE IN ANY CALENDAR YEAR, IN WHICH CASE DS SHALL
REIMBURSE ARQULE FOR ALL COSTS INCURRED BY ARQULE IN CONNECTION WITH SUCH AUDIT.

 

4.3.3        OVERDUE PAYMENTS.  ALL ROYALTY PAYMENTS NOT MADE WITHIN THE TIME
PERIOD SET FORTH IN SECTION 4.3.1(C), INCLUDING UNDERPAYMENTS DISCOVERED DURING
AN AUDIT, AND ALL MILESTONE PAYMENTS NOT MADE WITHIN THE TIME PERIOD SPECIFIED
IN SECTION 4.3.1, SHALL BEAR INTEREST AT A RATE OF * PERCENT (*%) PER MONTH FROM
THE DUE DATE UNTIL PAID IN FULL OR, IF LESS, THE MAXIMUM INTEREST RATE PERMITTED
BY APPLICABLE LAWS.  ANY SUCH OVERDUE ROYALTY OR MILESTONE PAYMENT SHALL, WHEN
MADE, BE ACCOMPANIED BY, AND CREDITED FIRST TO, ALL INTEREST SO ACCRUED.

 

4.3.4        PAYMENTS; WITHHOLDING TAX.

 

(A)           PAYMENTS IN U.S. DOLLARS.  ALL PAYMENTS MADE BY DS UNDER THIS
ARTICLE 4 SHALL BE MADE BY WIRE TRANSFER IN U.S. DOLLARS IN ACCORDANCE WITH
INSTRUCTIONS GIVEN IN WRITING FROM TIME TO TIME BY ARQULE.

 

(B)           WITHHOLDING TAXES.  IF APPLICABLE LAWS REQUIRE WITHHOLDING OF
INCOME OR OTHER TAXES IMPOSED UPON ANY PAYMENTS MADE BY DS TO ARQULE UNDER THIS
AGREEMENT, DS SHALL (I) MAKE SUCH WITHHOLDING PAYMENTS AS MAY BE REQUIRED,
(II) SUBTRACT SUCH WITHHOLDING PAYMENTS FROM SUCH PAYMENTS, (III) SUBMIT
APPROPRIATE PROOF OF PAYMENT OF THE WITHHOLDING TAXES TO ARQULE WITHIN A
REASONABLE PERIOD OF TIME, AND (IV) PROMPTLY PROVIDE ARQULE WITH ALL OFFICIAL
RECEIPTS WITH RESPECT THERETO.  DS SHALL RENDER ARQULE REASONABLE ASSISTANCE IN
ORDER TO ALLOW ARQULE TO OBTAIN THE BENEFIT OF ANY PRESENT OR FUTURE TREATY
AGAINST DOUBLE TAXATION WHICH MAY APPLY TO SUCH PAYMENTS.

 

4.3.5        FOREIGN CURRENCY EXCHANGE.  ALL PAYMENTS TO BE MADE BY DS TO ARQULE
OR BY ARQULE TO DS UNDER THIS AGREEMENT SHALL BE MADE IN UNITED STATES DOLLARS
AND SHALL BE PAID BY BANK WIRE TRANSFER TO SUCH BANK ACCOUNT AS MAY BE
DESIGNATED IN WRITING BY THE OTHER PARTY FROM TIME TO TIME.  IF, IN ANY CALENDAR
QUARTER, NET SALES ARE MADE IN ANY CURRENCY OTHER THAN UNITED STATES DOLLARS,
SUCH NET SALES SHALL BE CONVERTED INTO UNITED STATES

 

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DOLLARS USING THE CONVERSION RATE AS OF THE LAST DAY OF SUCH CALENDAR QUARTER AS
PUBLISHED IN THE WALL STREET JOURNAL.

 

5.             CONFIDENTIALITY

 

5.1           Confidentiality.

 

5.1.1        CONFIDENTIALITY OBLIGATIONS.  ARQULE AND DS EACH RECOGNIZES THAT
THE OTHER PARTY’S CONFIDENTIAL INFORMATION AND PROPRIETARY MATERIALS CONSTITUTE
HIGHLY VALUABLE ASSETS OF SUCH OTHER PARTY.  ARQULE AND DS EACH AGREES THAT,
SUBJECT TO SECTIONS 5.1.2 AND 5.3, (A) IT WILL NOT DISCLOSE, AND WILL CAUSE ITS
AFFILIATES AND SUBLICENSES (OR SUBLICENSEES, AS THE CASE MAY BE) NOT TO
DISCLOSE, ANY CONFIDENTIAL INFORMATION OR PROPRIETARY MATERIALS OF THE OTHER
PARTY, AND (B) IT WILL NOT USE, AND WILL CAUSE ITS AFFILIATES AND SUBLICENSEES
NOT TO USE, ANY CONFIDENTIAL INFORMATION OR PROPRIETARY MATERIALS OF THE OTHER
PARTY EXCEPT AS EXPRESSLY PERMITTED HEREUNDER.  THE OBLIGATIONS OF EACH PARTY
UNDER THIS SECTION 5.1.1 SHALL REMAIN IN EFFECT DURING THE TERM AND FOR AN
ADDITIONAL TEN (10) YEARS FOLLOWING THE EXPIRATION OR TERMINATION OF THIS
AGREEMENT.

 

5.1.2        LIMITED DISCLOSURE.  ARQULE AND DS EACH AGREES THAT DISCLOSURE OF
ITS CONFIDENTIAL INFORMATION OR ANY TRANSFER OF ITS PROPRIETARY MATERIALS MAY BE
MADE BY THE OTHER PARTY TO (A) ANY EMPLOYEE, CONSULTANT OR AFFILIATE OF SUCH
OTHER PARTY WHO REQUIRES SUCH CONFIDENTIAL INFORMATION OR PROPRIETARY MATERIALS
FOR A PARTY TO EXERCISE ITS RIGHTS OR CARRY OUT ITS RESPONSIBILITIES UNDER THIS
AGREEMENT OR (B) THIRD PARTY SUBCONTRACTOR ENGAGED BY A PARTY UNDER AN AGREEMENT
APPROVED BY THE JDC PURSUANT TO SECTION 6.2.1 TO ENABLE SUCH OTHER PARTY TO
EXERCISE ITS RIGHTS OR TO CARRY OUT ITS RESPONSIBILITIES UNDER THIS AGREEMENT;
PROVIDED, THAT, ANY SUCH DISCLOSURE OR TRANSFER SHALL ONLY BE MADE TO PERSONS
WHO ARE BOUND BY WRITTEN OBLIGATIONS AS DESCRIBED IN SECTION 5.1.3.  IN
ADDITION, ARQULE AND DS EACH AGREES THAT THE OTHER PARTY MAY DISCLOSE ITS
CONFIDENTIAL INFORMATION (A) ON A NEED-TO-KNOW BASIS TO SUCH OTHER PARTY’S LEGAL
AND FINANCIAL ADVISORS, (B) AS REASONABLY NECESSARY IN CONNECTION WITH AN ACTUAL
OR POTENTIAL (I) PERMITTED SUBLICENSE OF SUCH OTHER PARTY’S RIGHTS HEREUNDER,
(II) DEBT OR EQUITY FINANCING OF SUCH OTHER PARTY OR (III) MERGER, ACQUISITION,
CONSOLIDATION, SHARE EXCHANGE OR OTHER SIMILAR TRANSACTION INVOLVING SUCH PARTY
AND ANY THIRD PARTY, AND (C) FOR ANY OTHER PURPOSE WITH THE OTHER PARTY’S
CONSENT, NOT TO BE UNREASONABLY WITHHELD.  IN ADDITION, EACH PARTY AGREES THAT
THE OTHER PARTY MAY DISCLOSE SUCH PARTY’S CONFIDENTIAL INFORMATION OR PROVIDE
SUCH PARTY’S PROPRIETARY MATERIALS (A) 

 

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AS REASONABLY NECESSARY TO FILE, PROSECUTE OR MAINTAIN PATENT RIGHTS, OR TO
FILE, PROSECUTE OR DEFEND LITIGATION RELATED TO PATENT RIGHTS, IN ACCORDANCE
WITH THIS AGREEMENT; OR (B) AS REQUIRED BY APPLICABLE LAWS AS DETERMINED BY THE
DISCLOSING PARTY IN ITS REASONABLE DISCRETION; PROVIDED, THAT, IN THE CASE OF
ANY DISCLOSURE UNDER THIS CLAUSE (B), THE DISCLOSING PARTY SHALL (1) IF
PRACTICABLE, PROVIDE THE OTHER PARTY WITH REASONABLE ADVANCE NOTICE OF AND AN
OPPORTUNITY TO COMMENT ON ANY SUCH REQUIRED DISCLOSURE AND (2) IF REQUESTED BY
THE OTHER PARTY, COOPERATE IN ALL REASONABLE RESPECTS WITH THE OTHER PARTY’S
EFFORTS TO OBTAIN CONFIDENTIAL TREATMENT OR A PROTECTIVE ORDER WITH RESPECT TO
ANY SUCH DISCLOSURE, AT THE OTHER PARTY’S EXPENSE.  NOTWITHSTANDING THE
FOREGOING, (X) DS MAY DISCLOSE MECHANISM OF INHIBITION INFORMATION ONLY TO
INDIVIDUALS WHO ARE EMPLOYEES OF DS AND ITS AFFILIATES, WHO ARE DIRECTLY ENGAGED
IN THE DEVELOPMENT OF A COLLABORATION COMPOUND AND WHO REQUIRE SUCH MECHANISM OF
INHIBITION INFORMATION IN ORDER TO PERFORM THE DEVELOPMENT ACTIVITIES ASSIGNED
TO THEM (EACH, A “PERMITTED EMPLOYEE”), AND NOT TO CONSULTANTS, THIRD PARTY
SUBCONTRACTORS AND (Y) DS MAY NOT INCLUDE ANY MECHANISM OF INHIBITION
INFORMATION IN ANY HARDCOPY OR ELECTRONIC DATABASE OR OTHER ARCHIVE TO WHICH ANY
PERSON WHO IS NOT A PERMITTED EMPLOYEE HAS ACCESS.

 

5.1.3        EMPLOYEES, CONSULTANTS AND THIRD PARTY SUBCONTRACTORS.  ARQULE AND
DS EACH HEREBY REPRESENTS THAT ALL OF ITS EMPLOYEES AND CONSULTANTS, ALL OF THE
EMPLOYEES AND CONSULTANTS OF ITS AFFILIATES, AND ALL OF ITS THIRD PARTY
SUBCONTRACTORS WHO PARTICIPATE IN THE ACTIVITIES OF THE COLLABORATION OR HAVE
ACCESS TO CONFIDENTIAL INFORMATION OR PROPRIETARY MATERIALS OF THE OTHER PARTY
ARE OR WILL, PRIOR TO THEIR PARTICIPATION OR ACCESS, BE BOUND BY WRITTEN
OBLIGATIONS TO MAINTAIN SUCH CONFIDENTIAL INFORMATION OR PROPRIETARY MATERIALS
IN CONFIDENCE.  EACH PARTY AGREES TO USE, AND TO CAUSE ITS AFFILIATES TO USE,
REASONABLE EFFORTS TO ENFORCE SUCH OBLIGATIONS AND TO PROHIBIT ITS EMPLOYEES AND
CONSULTANTS FROM USING SUCH INFORMATION EXCEPT AS EXPRESSLY PERMITTED
HEREUNDER.  EACH PARTY WILL BE LIABLE TO THE OTHER FOR ANY DISCLOSURE OR MISUSE
BY ITS EMPLOYEES, CONSULTANTS, AFFILIATES OR THIRD PARTY SUBCONTRACTORS OF
CONFIDENTIAL INFORMATION OR PROPRIETARY MATERIALS OF THE OTHER PARTY.

 

5.2           Publicity.  The Parties acknowledge that the terms of this
Agreement constitute Confidential Information of each Party and may not be
disclosed except as permitted by Sections 5.1.2 and 5.2.  Notwithstanding the
foregoing, the terms of this Agreement may be disclosed by a Party to investment
bankers, analysts, investors and potential investors, lenders and potential

 

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lenders and other sources and other potential sources of financing, or any
acquirer or merger partner and potential acquirer or merger partner but only to
the extent reasonably necessary.  In addition, a copy of this Agreement may be
filed by either Party with the Securities and Exchange Commission if such filing
is required by law or regulation.  In connection with any such filing, such
Party shall endeavor to obtain confidential treatment of economic and trade
secret information, and shall provide the other Party with the proposed
confidential treatment request with reasonable time for such other Party to
provide comments, which comments shall be reasonably considered by the filing
Party.  Except for public announcements of the occurrence of any milestone event
and any event that ARQULE reasonably believes is material under Applicable Laws,
neither Party shall issue a press or news release or make any similar public
announcement (it being understood that publication in scientific journals,
presentation at scientific conferences and meetings and the like are intended to
be covered by Section 5.3 and not subject to this Section 5.2) related to the
Development Program without the prior written consent of the other Party.  Each
Party shall provide the other Party an advance copy of any proposed press
release relating to this Agreement or any Licensed Product to the extent
reasonably practicable and shall consider any comments or proposals for a joint
press release if agreed to by the Parties.

 

5.3           Publications and Presentations.  The Parties acknowledge that
scientific publications and presentations must be strictly monitored to prevent
any adverse effect from premature publication or dissemination of results of the
activities hereunder.  Each Party agrees that, except as required by Applicable
Laws, it shall not publish or present, or permit to be published or presented,
the results of the Development Program without the prior review by and written
approval of the other Party.  Each Party shall provide to the other Party the
opportunity to review each of the submitting Party’s proposed abstracts,
manuscripts or presentations (including, without limitation, information to be
presented verbally) that relate to the Development Program at least * (*) days
prior to its intended presentation or submission for publication, and such
submitting Party agrees, upon written request from the other Party given within
such * (*) day period, not to submit such abstract or manuscript for publication
or to make such presentation until the other Party is given up to * (*) days
from the date of such written request to seek appropriate patent protection for
any material in such publication or presentation that it reasonably believes may
be patentable.  Notwithstanding the foregoing, in the event that a

 

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Party reasonably requests a response by the other Party in less than * (*) days,
then the reviewing Party shall use Commercially Reasonable Efforts to respond in
the time period requested.  Once such abstracts, manuscripts or presentations
have been reviewed and approved by each Party, the same abstracts, manuscripts
or presentations do not have to be provided again to the other Party for review
for a later submission for publication.  Each Party also shall have the right to
require that any of its Confidential Information that is disclosed in any such
proposed publication or presentation be deleted prior to such publication or
presentation.  In any permitted publication or presentation by a Party, the
other Party’s contribution shall be duly recognized, and co-authorship shall be
determined in accordance with customary standards.  Each Party (a) expressly
acknowledges that the other Party’s business may be substantially dependent on
its ability to publish results in scientific journals, presentation at
scientific conferences and meetings and (b) agrees that it shall not
unreasonably withhold, condition or delay its consent to any request by the
other Party to publish results of the Development Program in accordance with its
internal publication guidelines.

 

5.4           Prior Approved Publication.  Notwithstanding Sections 5.2 and 5.3,
either Party may include in a public disclosure or in a scientific or medical
publication or representation, without prior delivery to or review by the other
Party, any information which has previously been included in a public disclosure
or scientific or medical publication that has been reviewed pursuant to
Section 5.2 or Section 5.3 or published or publicly disclosed by the other
Party.

 

5.5           Mechanism of Inhibition Information.  Notwithstanding anything to
the contrary set forth herein, including without limitation, the right to
disclose Confidential Information of ARQULE set forth in Section 5.2 and the
rights to publish set forth in Section 5.3, DS shall in no event disclose any
Mechanism of Inhibition Information.

 

6.             LICENSE GRANTS; EXCLUSIVITY

 

6.1           Licenses.

 

6.1.1        ARQULE LICENSE GRANTS.

 

(A)           DEVELOPMENT PROGRAM.  SUBJECT TO THE OTHER TERMS OF THIS
AGREEMENT, ARQULE HEREBY GRANTS TO DS AN EXCLUSIVE, EXCEPT AS TO ARQULE AS SET
FORTH

 

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HEREIN, ROYALTY-FREE, WORLDWIDE LICENSE OR SUBLICENSE (WITH RESPECT TO LICENSED
TECHNOLOGY AND LICENSED PATENT RIGHTS LICENSED BY THIRD PARTIES TO ARQULE)
DURING THE TERM, WITH THE RIGHT TO GRANT SUBLICENSES SOLELY AS PROVIDED IN
SECTION 6.2.1, UNDER LICENSED TECHNOLOGY AND LICENSED PATENT RIGHTS FOR THE SOLE
PURPOSE OF CONDUCTING DS DEVELOPMENT ACTIVITIES AS PART OF THE DEVELOPMENT
PROGRAM, INCLUDING WITHOUT LIMITATION, THE MANUFACTURE OF COLLABORATION
COMPOUNDS AND LICENSED PRODUCTS FOR USE IN DEVELOPMENT.

 

(B)           COMMERCIALIZATION LICENSES.  SUBJECT TO THE OTHER TERMS OF THIS
AGREEMENT, ARQULE HEREBY GRANTS TO DS (I) AN EXCLUSIVE, EXCEPT AS TO ARQULE AS
SET FORTH HEREIN, ROYALTY-BEARING LICENSE OR SUBLICENSE (WITH RESPECT TO
LICENSED TECHNOLOGY AND LICENSED PATENT RIGHTS LICENSED BY THIRD PARTIES TO
ARQULE) DURING THE TERM, WITH THE RIGHT TO GRANT SUBLICENSES SUBJECT TO
SECTION 6.2.2, UNDER LICENSED TECHNOLOGY AND LICENSED PATENT RIGHTS FOR THE SOLE
PURPOSE OF COMMERCIALIZING CO-COMMERCIALIZED LICENSED PRODUCTS IN THE FIELD IN
THE U.S. TERRITORY AND (II) AN EXCLUSIVE (EVEN AS TO ARQULE), ROYALTY-BEARING
LICENSE OR SUBLICENSE (WITH RESPECT TO LICENSED TECHNOLOGY AND LICENSED PATENT
RIGHTS LICENSED BY THIRD PARTIES TO ARQULE) DURING THE TERM, INCLUDING THE RIGHT
TO GRANT SUBLICENSES SOLELY AS PROVIDED IN SECTION 6.2.2, UNDER LICENSED
TECHNOLOGY AND LICENSED PATENT RIGHTS FOR THE SOLE PURPOSE OF COMMERCIALIZING
LICENSED PRODUCTS IN THE FIELD IN THE ROW TERRITORY.

 

6.1.2        DS LICENSE GRANTS.

 

(A)           DEVELOPMENT PROGRAM.  SUBJECT TO THE OTHER TERMS OF THIS
AGREEMENT, DS HEREBY GRANTS TO ARQULE A NON-EXCLUSIVE, ROYALTY-FREE, WORLDWIDE
LICENSE DURING THE TERM, WITH THE RIGHT TO GRANT SUBLICENSES SOLELY AS PROVIDED
IN SECTION 6.2.1, UNDER DS TECHNOLOGY, DS PATENT RIGHTS FOR THE SOLE PURPOSE OF
CONDUCTING ARQULE DEVELOPMENT ACTIVITIES AS PART OF THE DEVELOPMENT PROGRAM.

 

(B)           CO-COMMERCIALIZED LICENSED PRODUCTS.  SUBJECT TO THE OTHER TERMS
OF THIS AGREEMENT, DS HEREBY GRANTS TO ARQULE A NON-EXCLUSIVE, ROYALTY-FREE
LICENSE DURING THE TERM, WITHOUT THE RIGHT TO GRANT SUBLICENSES, UNDER DS
TECHNOLOGY AND DS PATENT RIGHTS FOR THE SOLE PURPOSE OF COMMERCIALIZING
CO-COMMERCIALIZED LICENSED PRODUCTS IN THE FIELD IN THE U.S. TERRITORY.

 

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(C)           LICENSED PRODUCTS.  SUBJECT TO THE OTHER TERMS OF THIS AGREEMENT,
DS HEREBY GRANTS TO ARQULE A NON-EXCLUSIVE, PERPETUAL, ROYALTY-FREE, WORLDWIDE
LICENSE, WITH THE RIGHT TO GRANT SUBLICENSES SOLELY AS PROVIDED IN THIS
SECTION 6.1.2(C), UNDER DS TECHNOLOGY, DS PATENT RIGHTS AND DS’S INTEREST IN
JOINT TECHNOLOGY AND JOINT PATENT RIGHTS, TO DEVELOP, HAVE DEVELOPED, MAKE, HAVE
MADE, SELL, HAVE SOLD, IMPORT AND HAVE IMPORTED LICENSED PRODUCTS FOR ANY AND
ALL USES WITHIN AND OUTSIDE OF THE FIELD OUTSIDE THE TERRITORY.  ARQULE SHALL
HAVE THE RIGHT TO GRANT SUBLICENSES UNDER THE LICENSE GRANTED TO IT UNDER THIS
SECTION 6.1.2(C) SOLELY TO THIRD PARTY LICENSEES AND COLLABORATORS (I) THAT ARE
DEVELOPING AND/OR COMMERCIALIZING LICENSED PRODUCTS OUTSIDE OF THE TERRITORY AND
(II) THAT HAVE GRANTED ARQULE THE RECIPROCAL RIGHT TO INCLUDE TECHNOLOGY AND/OR
PATENT RIGHTS OF SUCH THIRD PARTY LICENSEE OR COLLABORATOR AS LICENSED
TECHNOLOGY AND/OR LICENSED PATENT RIGHTS UNDER THIS AGREEMENT.

 

6.1.3        DISCLOSURE OF TECHNOLOGY.  EACH PARTY SHALL DISCLOSE TO THE OTHER
PARTY ALL TECHNOLOGY AND PATENT RIGHTS CONTROLLED BY SUCH PARTY THAT IS
REASONABLY NECESSARY OR USEFUL FOR THE DEVELOPMENT, OR COMMERCIALIZATION OF
LICENSED PRODUCTS, AND ALL SUCH TECHNOLOGY AND PATENT RIGHTS SHALL BE INCLUDED
IN THE LICENSES GRANTED IN THIS SECTION 6.1.

 

6.2           Right to Sublicense.

 

6.2.1        DEVELOPMENT PROGRAM LICENSES.  NOTWITHSTANDING ANYTHING CONTAINED
HEREIN TO THE CONTRARY, EITHER PARTY SHALL HAVE THE RIGHT TO GRANT SUBLICENSES
UNDER THE LICENSE GRANTED TO IT UNDER SECTIONS 6.1.1(A) AND 6.1.2(A),
RESPECTIVELY, SOLELY TO THIRD PARTY SUBCONTRACTORS ENGAGED BY SUCH PARTY TO
PERFORM DESIGNATED FUNCTIONS RELATED TO THE CONDUCT OF DEVELOPMENT ACTIVITIES
UNDER THE DEVELOPMENT PROGRAM OR TO AFFILIATES; PROVIDED, THAT, (A) EXCEPT AS TO
SUBLICENSES TO AFFILIATES, SUCH PARTY SHALL OBTAIN THE PRIOR APPROVAL OF THE
JDC, AS REFLECTED IN MINUTES OF THE JDC, TO EACH SUBLICENSE GRANT; (B) SUCH
PARTY SHALL REMAIN RESPONSIBLE FOR THE SATISFACTORY ACCOMPLISHMENT OF SUCH WORK
IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT; AND (C) EACH SUCH
THIRD PARTY SUBCONTRACTOR SHALL ENTER INTO A WRITTEN AGREEMENT CONTAINING SUCH
PROVISIONS AS ARE NORMAL AND CUSTOMARY FOR SIMILAR TYPES OF AGREEMENTS.

 

6.2.2        COMMERCIALIZATION LICENSES.  DS SHALL HAVE THE RIGHT TO GRANT
SUBLICENSES TO SUBLICENSEES AND AFFILIATES OF DS UNDER THE COMMERCIALIZATION
LICENSE GRANTED TO IT UNDER SECTION 6.1.1(B), WITH RESPECT TO LICENSED PRODUCTS
FOR SALE IN THE TERRITORY IN THE FIELD;

 

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PROVIDED, THAT, (A) TO THE EXTENT ANY SUCH SUBLICENSE IS WITH RESPECT TO THE
COMMERCIALIZATION OF A LICENSED PRODUCT IN THE UNITED STATES TO AN ENTITY OTHER
THAN AN AFFILIATE OF DS, DS SHALL OBTAIN THE PRIOR WRITTEN CONSENT OF ARQULE,
WHICH MAY BE WITHHELD IN ITS SOLE DISCRETION; (B) IT SHALL BE A CONDITION OF ANY
SUCH SUBLICENSE THAT SUCH SUBLICENSEE OR AFFILIATE OF DS AGREES TO BE BOUND BY
ALL TERMS OF THIS AGREEMENT APPLICABLE TO THE COMMERCIALIZATION OF LICENSED
PRODUCTS IN THE FIELD IN THE TERRITORY (INCLUDING, WITHOUT LIMITATION,
ARTICLE 5); (C) DS SHALL PROVIDE WRITTEN NOTICE TO ARQULE OF ANY SUCH PROPOSED
SUBLICENSE AT LEAST * (*) DAYS PRIOR TO SUCH EXECUTION AND PROVIDE COPIES TO
ARQULE OF EACH SUCH SUBLICENSE WITHIN TEN (10) DAYS OF ITS EXECUTION; (D) IF DS
GRANTS A SUBLICENSE TO A SUBLICENSEE OR AFFILIATE OF DS, DS SHALL BE DEEMED TO
HAVE GUARANTEED THAT SUCH SUBLICENSEE OR AFFILIATE OF DS WILL FULFILL ALL OF
DS’S OBLIGATIONS UNDER THIS AGREEMENT APPLICABLE TO THE SUBJECT MATTER OF SUCH
SUBLICENSE; (E) DS SHALL NOT BE RELIEVED OF ITS OBLIGATIONS PURSUANT TO THIS
AGREEMENT AS A RESULT OF SUCH SUBLICENSE.

 

6.3           No Other Rights.  DS shall have no rights to use or otherwise
exploit ARQULE Technology, ARQULE Patent Rights, or ARQULE Proprietary
Materials, and ARQULE shall have no rights to use or otherwise exploit DS
Technology, DS Patent Rights or DS Proprietary Materials, in each case, except
as expressly set forth herein.

 

6.4           Exclusivity.

 

6.4.1        ARQULE.  DURING THE TERM OF THIS AGREEMENT, ARQULE SHALL NOT, AND
SHALL CAUSE EACH OF ITS AFFILIATES TO NOT, CONDUCT ANY ACTIVITY, EITHER ON ITS
OWN, OR WITH, FOR THE BENEFIT OF, OR SPONSORED BY ANY THIRD PARTY, OR SPONSOR
ANY ACTIVITY BY A THIRD PARTY, IN ANY CASE THAT INVOLVES THE DEVELOPMENT OR
COMMERCIALIZATION, OR GRANT ANY LICENSE OR OTHER RIGHTS TO ANY THIRD PARTY TO
UTILIZE ANY TECHNOLOGY OR PATENT RIGHTS CONTROLLED BY ARQULE OR ANY OF ITS
AFFILIATES FOR THE EXPRESS PURPOSE OF DEVELOPING OR COMMERCIALIZING, ANY C-MET
INHIBITOR IN THE TERRITORY EXCEPT *.

 

6.4.2        DS.  DURING THE TERM OF THIS AGREEMENT, DS SHALL NOT, AND SHALL
CAUSE EACH OF ITS AFFILIATES TO NOT, CONDUCT ANY ACTIVITY, EITHER ON ITS OWN, OR
WITH, FOR THE BENEFIT OF, OR SPONSORED BY ANY THIRD PARTY, OR SPONSOR ANY
ACTIVITY BY A THIRD PARTY, IN ANY CASE THAT THAT

 

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INVOLVES THE DEVELOPMENT OR COMMERCIALIZATION, OR GRANT ANY LICENSE OR OTHER
RIGHTS TO ANY THIRD PARTY TO UTILIZE ANY TECHNOLOGY OR PATENT RIGHTS CONTROLLED
BY DS OR ANY OF ITS AFFILIATES FOR THE EXPRESS PURPOSE OF DEVELOPING OR
COMMERCIALIZING (A) ANY COLLABORATION COMPOUND OR LICENSED PRODUCT (I) * OR
(II) WITHIN THE TERRITORY FOR ANY USE OUTSIDE OF THE FIELD OR (B)* EXCEPT
(A) HEREUNDER IN THE DEVELOPMENT PROGRAM OR THE DEVELOPMENT OR COMMERCIALIZATION
OF LICENSED PRODUCTS AND (B) IN CONNECTION WITH THE CONDUCT OF ANY PERMITTED
TRANSACTIONS.

 

6.4.3        FUTURE NEGOTIATIONS.  NOTWITHSTANDING ANY PROVISION OF THIS
AGREEMENT OR THE EXISTING LICENSE AGREEMENT, AT THE REQUEST OF DS, ARQULE AGREES
TO NEGOTIATE IN GOOD FAITH WITH DS (I) TO PERMIT DS TO NEGOTIATE AND ENTER INTO
AN AGREEMENT WITH KYOWA WITH RESPECT TO THE DEVELOPMENT AND/OR COMMERCIALIZATION
OF LICENSED PRODUCTS IN THE ASIAN TERRITORY AND (II) TO DISCUSS THE RELEASE OF
DS FROM THE RESTRICTION SET FORTH IN SECTION 6.4.2(B) IN ORDER TO PERMIT DS TO
DEVELOP AND/OR COMMERCIALIZE * THAT IS NOT * OF * OR * IN THE ASIAN TERRITORY.

 

6.4.4        PERMITTED TRANSACTIONS.  IF EITHER PARTY ENTERS INTO AN AGREEMENT
FOR A PERMITTED TRANSACTION, ALL TECHNOLOGY AND PATENT RIGHT GRANTED TO SUCH
PARTY UNDER THE PERMITTED TRANSACTION SHALL BE INCLUDED WITHOUT FURTHER ACTION
IN THE LICENSES GRANTED TO THE OTHER PARTY BY SECTION 6.1.1 OR 6.1.2.

 

6.5           Use of Third Party Technology.

 

6.5.1        EXISTING LICENSE AGREEMENT.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY SET FORTH IN THIS AGREEMENT, ANY ROYALTIES (OR ANY OTHER PAYMENTS) TO
BE PAID UNDER THE EXISTING LICENSE AGREEMENT SHALL BE THE SOLE RESPONSIBILITY OF
ARQULE.

 

6.5.2        ADDITIONAL THIRD PARTY DEVELOPMENT TECHNOLOGY.  NEITHER PARTY SHALL
HAVE ANY OBLIGATION TO USE ANY PATENT RIGHTS (OTHER THAN THE LICENSED PATENT
RIGHTS, JOINT PATENT RIGHTS OR DS PATENT RIGHTS) IN CONNECTION WITH THE
DEVELOPMENT OR COMMERCIALIZATION OF ANY COLLABORATION COMPOUND OR LICENSED
PRODUCT, AND EACH PARTY HEREBY AGREES THAT, EXCEPT AS PROVIDED IN THE GLOBAL
DEVELOPMENT PLAN OR AS AGREED TO BETWEEN THE PARTIES FOLLOWING A PROPOSAL
SUBMITTED IN ACCORDANCE WITH THIS SECTION 6.5.2, IT SHALL NOT USE ANY TECHNOLOGY
OWNED OR CONTROLLED BY A THIRD PARTY (“THIRD PARTY DEVELOPMENT TECHNOLOGY”) IN
THE DEVELOPMENT AND/OR COMMERCIALIZATION OF ANY COLLABORATION COMPOUND OR
LICENSED PRODUCT IF THE OTHER PARTY

 

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WOULD THEREBY BE REQUIRED TO PAY A ROYALTY OR OTHER COMPENSATION TO THE THIRD
PARTY HOLDER OF RIGHTS TO THAT TECHNOLOGY IN CONNECTION THEREWITH.  EITHER PARTY
MAY AT ANY TIME DURING THE TERM SUBMIT TO THE OTHER PARTY AND TO THE JDC A
PROPOSAL TO LICENSE THIRD PARTY DEVELOPMENT TECHNOLOGY THAT SUCH PARTY
REASONABLY BELIEVES WOULD BE NECESSARY OR USEFUL IN ORDER TO DEVELOP OR
COMMERCIALIZE ANY COLLABORATION COMPOUND OR LICENSED PRODUCT.  SUCH PROPOSAL
SHALL CONTAIN, AT A MINIMUM, INFORMATION SUPPORTING THE RATIONALE FOR SUCH
LICENSE FROM A SCIENTIFIC, REGULATORY AND COMMERCIAL STANDPOINT, AN ESTIMATED
DEVELOPMENT CRITICAL PATH AND A GOOD FAITH ESTIMATE OF THE COST OF SUCH
LICENSE.  ANY DECISION WITH RESPECT TO THE LICENSE OF ANY SUCH THIRD PARTY
DEVELOPMENT TECHNOLOGY SHALL BE A UNANIMOUS DECISION FOR PURPOSES OF THIS
AGREEMENT.  IF, IN MAKING ANY SUCH UNANIMOUS DECISION, THE JDC IS UNABLE TO
REACH A DETERMINATION WITH RESPECT TO ANY ISSUE RELATING TO A PROPOSED LICENSE
AGREEMENT, THEN SUCH ISSUE SHALL BE RESOLVED IN ACCORDANCE WITH THE PROCEDURES
SET FORTH IN SECTION 2.1.5.  IF SUCH ISSUE CANNOT BE RESOLVED PURSUANT TO
SECTION 2.1.5, THEN NEITHER PARTY SHALL PROCEED WITH THE ACTIVITIES IN THE
CONDUCT OF THE DEVELOPMENT PROGRAM TO THE EXTENT DOING SO WOULD INFRINGE SUCH
THIRD PARTY DEVELOPMENT TECHNOLOGY.  IF THE JDC DETERMINES, AS A UNANIMOUS
DECISION, THAT A LICENSE TO SUCH THIRD PARTY DEVELOPMENT TECHNOLOGY SHOULD BE
OBTAINED, (A) UNLESS OTHERWISE DETERMINED BY THE JDC, THE PARTY THAT SUBMITTED
THE PROPOSAL SHALL BE RESPONSIBLE FOR NEGOTIATING AND EXECUTING SUCH LICENSE
AGREEMENT AND (B) THE PARTIES SHALL * FOR * PERCENT (*%) OF THE * IN SUCH
LICENSE AGREEMENT WITH RESPECT TO THE LICENSE OF SUCH THIRD PARTY DEVELOPMENT
TECHNOLOGY.

 

7.             INTELLECTUAL PROPERTY RIGHTS

 

7.1           ARQULE Intellectual Property Rights.  ARQULE shall have sole and
exclusive ownership of all right, title and interest, or exclusive license
rights, on a worldwide basis in and to any and all ARQULE Technology and ARQULE
Patent Rights.

 

7.2           DS Intellectual Property Rights.  DS shall have sole and exclusive
ownership of all right, title and interest on a worldwide basis in and to any
and all DS Technology, Product Trademark and DS Patent Rights.

 

7.3           Joint Intellectual Property Rights.  DS and ARQULE shall jointly
own all Joint Technology and Joint Patent Rights.  Notwithstanding anything to
the contrary contained herein or under Applicable Laws, except to the extent
exclusively licensed to one Party under this

 

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AGREEMENT SET FORTH HEREIN, THE PARTIES HEREBY AGREE THAT, EXCEPT AS PROHIBITED
BY SECTION 6.4, EITHER PARTY MAY USE OR LICENSE OR SUBLICENSE TO AFFILIATES OR
THIRD PARTIES ALL OR ANY PORTION OF ITS INTEREST IN JOINT TECHNOLOGY, JOINT
PATENT RIGHTS OR JOINTLY OWNED CONFIDENTIAL INFORMATION OR PROPRIETARY MATERIALS
FOR USE OUTSIDE THE FIELD, OR FOR USE IN THE FIELD IN CONNECTION WITH PRODUCTS
THAT ARE NOT C-MET INHIBITORS, WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER
PARTY, WITHOUT RESTRICTION AND WITHOUT THE OBLIGATION TO PROVIDE COMPENSATION TO
THE OTHER PARTY; PROVIDED, THAT, DURING THE TERM OF THIS AGREEMENT, NEITHER
PARTY MAY USE OR LICENSE OR SUBLICENSE TO THIRD PARTIES ALL OR ANY PORTION OF
ITS INTEREST IS JOINT TECHNOLOGY AND/OR JOINT PATENT RIGHTS OR JOINTLY OWNED
CONFIDENTIAL INFORMATION OR PROPRIETARY MATERIALS FOR USE IN THE FIELD IN
CONNECTION WITH ANY PRODUCT THAT IS A C-MET INHIBITOR.

 

7.4           Patent Coordinators.  ARQULE and DS shall, by written notice to
the other Party, each appoint a patent coordinator reasonably acceptable to the
other Party (each, a “Patent Coordinator”) to serve as such Party’s primary
liaison with the other Party on matters relating to patent filing, prosecution,
maintenance and enforcement.  Each Party may replace its Patent Coordinator at
any time by notice in writing to the other Party.  The initial Patent
Coordinators shall be:

 

For ARQULE: Robert Connaughton, Deputy General Counsel, ARQULE, INC.

For DS: Dr. Kazuo Sato, General Manager, Intellectual Property, DAIICHI SANKYO,
CO., LTD.

 

7.5           Inventorship.  The Patent Coordinators shall initially determine
inventorship of Program Technology under U.S. patent law.  In case of a dispute
between the Patent Coordinators over inventorship and, as a result, whether any
particular Technology is ARQULE Technology, DS Technology or Joint Technology,
such dispute shall be resolved according to U.S. patent law.

 

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8.             FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS

 

8.1           Patent Filing, Prosecution and Maintenance.

 

8.1.1        DS’s Prosecution Rights.

 

(A)           DS PROGRAM TECHNOLOGY.  SUBJECT TO SECTIONS 8.1.4 AND 8.1.5, DS,
ACTING THROUGH PATENT COUNSEL OR AGENTS OF ITS CHOICE, SHALL BE RESPONSIBLE FOR
THE PREPARATION, FILING, PROSECUTION AND MAINTENANCE, AT ITS SOLE COST AND
EXPENSE, OF PATENT RIGHTS COVERING DS PROGRAM TECHNOLOGY.  AT DS’S REQUEST,
ARQULE SHALL COOPERATE WITH DS IN ALL REASONABLE RESPECTS IN CONNECTION WITH
SUCH PREPARATION, FILING, PROSECUTION AND MAINTENANCE OF SUCH PATENT RIGHTS,
INCLUDING BUT NOT LIMITED TO OBTAINING ASSIGNMENTS TO REFLECT CHAIN OF TITLE
CONSISTENT WITH THE TERMS OF THIS AGREEMENT, GAINING UNITED STATES PATENT TERM
EXTENSIONS, SUPPLEMENTARY PROTECTION CERTIFICATES AND ANY OTHER EXTENSIONS THAT
ARE NOW OR BECOME AVAILABLE IN THE FUTURE WHEREVER APPLICABLE.

 

(B)           DS BACKGROUND TECHNOLOGY.  DS, AT ITS SOLE EXPENSE AND ACTING
THROUGH PATENT COUNSEL OR AGENTS OF ITS CHOICE, SHALL BE RESPONSIBLE FOR THE
PREPARATION, FILING, PROSECUTION AND MAINTENANCE OF ALL PATENT RIGHTS COVERING
DS BACKGROUND TECHNOLOGY.

 

8.1.2        ARQULE PROSECUTION RIGHTS.

 

(A)           ARQULE PROGRAM TECHNOLOGY.  SUBJECT TO SECTIONS 8.1.4 AND 8.1.5,
ARQULE, ACTING THROUGH PATENT COUNSEL OR AGENTS OF ITS CHOICE, SHALL BE
RESPONSIBLE FOR THE PREPARATION, FILING, PROSECUTION AND MAINTENANCE, AT ITS
SOLE COST AND EXPENSE, OF PATENT RIGHTS COVERING ARQULE PROGRAM TECHNOLOGY.  AT
ARQULE’S REQUEST, DS SHALL COOPERATE WITH AND ASSIST ARQULE IN ALL REASONABLE
RESPECTS IN CONNECTION WITH SUCH PREPARATION, FILING, PROSECUTION AND
MAINTENANCE OF SUCH PATENT RIGHTS, INCLUDING BUT NOT LIMITED TO OBTAINING
ASSIGNMENTS TO REFLECT CHAIN OF TITLE CONSISTENT WITH THE TERMS OF THIS
AGREEMENT, GAINING UNITED STATES PATENT TERM EXTENSIONS, SUPPLEMENTARY
PROTECTION CERTIFICATES AND ANY OTHER EXTENSIONS THAT ARE NOW OR BECOME
AVAILABLE IN THE FUTURE WHEREVER APPLICABLE.

 

(B)           ARQULE BACKGROUND TECHNOLOGY.  ARQULE, AT ITS SOLE EXPENSE AND
ACTING THROUGH PATENT COUNSEL OR AGENTS OF ITS CHOICE, SHALL BE RESPONSIBLE FOR
THE PREPARATION, FILING, PROSECUTION AND MAINTENANCE OF ALL PATENT RIGHTS
COVERING ARQULE BACKGROUND TECHNOLOGY.

 

8.1.3        JOINT PROSECUTION.  IN THE CASE OF JOINT PATENT RIGHTS, THE PARTIES
SHALL MEET THROUGH THE PATENT COORDINATORS OR HOLD A TELECONFERENCE OR VIDEO
CONFERENCE TO DISCUSS IN

 

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GOOD FAITH AND AGREE UPON THE CONTENT AND FORM OF ANY APPLICATION FOR A JOINT
PATENT RIGHT AND HEREBY AGREE THAT ONLY THE APPLICATION IN THE FORM AS AGREED
BETWEEN THE PARTIES MAY BE FILED IN RESPECT OF THE JOINT PATENT RIGHTS.  ANY
DISPUTE BETWEEN THE PATENT COORDINATORS SHALL BE RELEASED TO THE JSC FOR
RESOLUTION PURSUANT TO SECTION 2.1.5.  THE PARTIES SHALL SHARE THE COSTS EQUALLY
IN RESPECT OF THE PREPARATION OF THE APPLICATION, FILING, PROSECUTION, GRANT AND
MAINTENANCE OF ANY JOINT PATENT RIGHT JOINTLY FILED; AND JOINTLY INSTRUCT AN
APPROPRIATELY QUALIFIED PATENT ATTORNEY TO DRAFT, FILE AND PROSECUTE THE
APPLICATION AND EACH PARTY WILL HAVE EQUAL CONTROL OVER THE PROSECUTION OF THE
FILING SUCH THAT THE PATENT ATTORNEY WILL ONLY BE ABLE TO ACT ON UNANIMOUS
INSTRUCTIONS.  IN THE EVENT THAT ONE PARTY IS (I) NOT INTERESTED, OR (II) NOT
WILLING TO EQUALLY SHARE THE RELATED COST AND EXPENSE, WITH RESPECT TO ANY JOINT
PATENT RIGHTS IN A GIVEN COUNTRY, THEN THE OTHER PARTY SHALL HAVE THE RIGHT, AT
ITS OWN COST AND EXPENSE, TO FILE FOR AND PROSECUTE SUCH JOINT PATENT RIGHTS IN
SUCH COUNTRY IN BOTH PARTIES’ NAMES.

 

8.1.4        INFORMATION AND COOPERATION.  EACH PARTY THAT HAS RESPONSIBILITY
FOR FILING AND PROSECUTING ANY PATENT RIGHTS UNDER THIS SECTION 8.1 (A “FILING
PARTY”) SHALL (A) REGULARLY PROVIDE THE OTHER PARTY (THE “NON-FILING PARTY”)
WITH COPIES OF ALL PATENT APPLICATIONS FILED HEREUNDER FOR PROGRAM TECHNOLOGY
AND OTHER MATERIAL SUBMISSIONS AND CORRESPONDENCE WITH THE PATENT OFFICES, IN
SUFFICIENT TIME TO ALLOW FOR REVIEW AND COMMENT BY THE NON-FILING PARTY; AND
(B) PROVIDE THE NON-FILING PARTY AND ITS PATENT COUNSEL WITH AN OPPORTUNITY TO
CONSULT WITH THE FILING PARTY AND ITS PATENT COUNSEL REGARDING THE FILING,
FILING COUNTRIES OR REGIONS, AND CONTENTS OF ANY SUCH APPLICATION, AMENDMENT,
SUBMISSION OR RESPONSE.  THE ADVICE AND SUGGESTIONS OF THE NON-FILING PARTY AND
ITS PATENT COUNSEL SHALL BE TAKEN INTO CONSIDERATION IN GOOD FAITH BY SUCH
FILING PARTY AND ITS PATENT COUNSEL IN CONNECTION WITH SUCH FILING.  EACH FILING
PARTY SHALL PURSUE IN GOOD FAITH ALL REASONABLE CLAIMS AND TAKE SUCH OTHER
REASONABLE ACTIONS, AS MAY BE REQUESTED BY THE NON-FILING PARTY IN THE
PROSECUTION OF ANY PATENT RIGHTS COVERING ANY PROGRAM TECHNOLOGY UNDER THIS
SECTION 8.1; PROVIDED, HOWEVER, IF THE FILING PARTY INCURS ANY ADDITIONAL
EXPENSE AS A RESULT OF ANY SUCH REQUEST, THE NON-FILING PARTY SHALL BE
RESPONSIBLE FOR THE COST AND EXPENSES OF PURSUING ANY SUCH ADDITIONAL CLAIM OR
TAKING SUCH OTHER ACTIVITIES.  IN ADDITION, DS AGREES THAT IF ARQULE CLAIMS ANY
ACTION TAKEN UNDER SECTION 8.1.1(A) WOULD BE DETRIMENTAL TO PATENT RIGHTS
COVERING ARQULE BACKGROUND TECHNOLOGY, ARQULE SHALL PROVIDE WRITTEN NOTICE TO DS
AND THE PATENT COORDINATORS SHALL, AS PROMPTLY AS POSSIBLE

 

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THEREAFTER, MEET TO DISCUSS AND RESOLVE SUCH MATTER AND, IF THEY ARE UNABLE TO
RESOLVE SUCH MATTER, THE PARTIES SHALL REFER SUCH MATTER TO A MUTUALLY AGREEABLE
OUTSIDE PATENT COUNSEL FOR RESOLUTION.

 

8.1.5        ABANDONMENT.

 

(A)           PATENT RIGHTS OWNED SOLELY BY ARQULE OR DS.  IF A FILING PARTY
DECIDES TO ABANDON OR TO ALLOW TO LAPSE ANY OF THE PATENT RIGHTS COVERING ANY
PROGRAM TECHNOLOGY FOR WHICH IT HAS RESPONSIBILITY, IT SHALL INFORM THE
NON-FILING PARTY OF SUCH DECISION PROMPTLY AND, IN ANY EVENT, SO AS TO PROVIDE
THE NON-FILING PARTY A REASONABLE AMOUNT OF TIME TO MEET ANY APPLICABLE DEADLINE
TO ESTABLISH OR PRESERVE SUCH PATENT RIGHTS IN SUCH COUNTRY OR REGION.  THE
NON-FILING PARTY SHALL HAVE THE RIGHT TO ASSUME RESPONSIBILITY FOR CONTINUING
THE PROSECUTION OF SUCH PATENT RIGHTS IN SUCH COUNTRY OR REGION AND PAYING ANY
REQUIRED FEES TO MAINTAIN SUCH PATENT RIGHTS IN SUCH COUNTRY OR REGION OR
DEFENDING SUCH PATENT RIGHTS, THROUGH PATENT COUNSEL OR AGENTS OF ITS CHOICE,
WHICH SHALL BE AT THE NON-FILING PARTY’S SOLE EXPENSE.  THE NON-FILING PARTY
SHALL NOT BECOME AN ASSIGNEE OF ANY SUCH PATENT RIGHTS AS A RESULT OF ITS
ASSUMPTION OF ANY SUCH RESPONSIBILITY.  UPON TRANSFER OF SUCH RESPONSIBILITY
UNDER THIS SECTION 8.1.5(A), THE FILING PARTY SHALL PROMPTLY DELIVER TO THE
NON-FILING PARTY COPIES OF ALL NECESSARY FILES RELATED TO THE PATENT RIGHTS WITH
RESPECT TO WHICH RESPONSIBILITY HAS BEEN TRANSFERRED AND SHALL TAKE ALL ACTIONS
AND EXECUTE ALL DOCUMENTS REASONABLY NECESSARY FOR THE NON-FILING PARTY TO
ASSUME SUCH RESPONSIBILITY.

 

(B)           JOINT PATENT RIGHTS.  IF ONE PARTY DECIDES TO ABANDON ITS SHARE OF
THE JOINT PATENT RIGHTS IN ANY COUNTRY OR REGION (THE “ABANDONING PARTY”), IT
SHALL INFORM THE OTHER PARTY (THE “MAINTAINING PARTY”) OF SUCH DECISION
PROMPTLY.  THE MAINTAINING PARTY SHALL HAVE THE RIGHT TO ASSUME ALL
RESPONSIBILITY FOR CONTINUING THE PROSECUTION OF SUCH PATENT RIGHTS IN SUCH
COUNTRY OR REGION AND PAYING ANY REQUIRED FEES TO MAINTAIN SUCH PATENT RIGHTS IN
SUCH COUNTRY OR REGION OR DEFENDING SUCH PATENT RIGHTS, THROUGH PATENT COUNSEL
OF ITS CHOICE, WHICH SHALL BE AT THE MAINTAINING PARTY’S SOLE EXPENSE.  UPON
ABANDONMENT OF THE ABANDONING PARTY’S SHARE OF ANY JOINT PATENT RIGHTS UNDER
THIS SECTION 8.1.5(B), THE ABANDONING PARTY SHALL TAKE ALL ACTIONS AND EXECUTE
ALL DOCUMENTS REASONABLY NECESSARY FOR THE MAINTAINING PARTY TO ASSUME SUCH
RESPONSIBILITY.

 

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8.2           Legal Actions.

 

8.2.1        THIRD PARTY INFRINGEMENT.

 

(A)           NOTICE.  IN THE EVENT EITHER PARTY BECOMES AWARE OF (I) ANY
POSSIBLE INFRINGEMENT OF ANY ARQULE PATENT RIGHTS, DS PATENT RIGHTS OR JOINT
PATENT RIGHTS THROUGH THE DEVELOPMENT OR COMMERCIALIZATION OF A C-MET INHIBITOR,
OR (II) THE SUBMISSION BY ANY THIRD PARTY OF AN ABBREVIATED NEW DRUG APPLICATION
UNDER THE HATCH-WAXMAN ACT FOR A PRODUCT THAT INCLUDES A LICENSED PRODUCT OR
COLLABORATION COMPOUND OR BACKUP COMPOUND (EACH, AN “INFRINGEMENT”), THAT PARTY
SHALL PROMPTLY NOTIFY THE OTHER PARTY AND PROVIDE IT WITH ALL DETAILS OF SUCH
INFRINGEMENT OF WHICH IT IS AWARE (EACH, AN “INFRINGEMENT NOTICE”).

 

(B)           DS RIGHT TO ENFORCE.

 

(I)            ENFORCEMENT OF DS BACKGROUND PATENT RIGHTS.  IN THE EVENT THAT
ANY INFRINGEMENT RELATES TO ANY PATENT RIGHTS COVERING DS BACKGROUND TECHNOLOGY,
DS SHALL HAVE THE SOLE RIGHT BUT NOT THE OBLIGATION TO ENFORCE SUCH CLAIM.

 

(II)           ENFORCEMENT OF DS PROGRAM PATENT RIGHTS.  IN THE EVENT THAT ANY
INFRINGEMENT RELATES TO ANY DS PROGRAM PATENT RIGHTS, THEN DS SHALL HAVE THE
FIRST RIGHT (BUT NOT THE OBLIGATION) TO ENFORCE SUCH CLAIM, WHICH MAY INCLUDE
THE INSTITUTION OF LEGAL PROCEEDINGS OR OTHER ACTION.  DS SHALL KEEP ARQULE
REASONABLY INFORMED ON A QUARTERLY BASIS, IN PERSON OR BY TELEPHONE, PRIOR TO
AND DURING ANY SUCH ENFORCEMENT.  ARQULE SHALL ASSIST DS, UPON REQUEST, IN
TAKING ANY ACTION TO ENFORCE ANY SUCH PATENT RIGHTS AND SHALL JOIN IN ANY SUCH
ACTION IF DEEMED TO BE A NECESSARY PARTY.  DS SHALL INCUR NO LIABILITY TO ARQULE
AS A CONSEQUENCE OF SUCH LITIGATION OR ANY UNFAVORABLE DECISION RESULTING
THEREFROM, INCLUDING ANY DECISION HOLDING ANY SUCH CLAIM INVALID, NOT INFRINGED
OR UNENFORCEABLE.  ALL COSTS, INCLUDING WITHOUT LIMITATION ATTORNEYS’ FEES,
RELATING TO SUCH LEGAL PROCEEDINGS OR OTHER ACTION SHALL BE BORNE BY DS.  IF DS
DOES NOT TAKE COMMERCIALLY REASONABLE STEPS TO ABATE THE INFRINGEMENT OF SUCH
PATENT RIGHTS WITHIN * (*) DAYS FROM ANY INFRINGEMENT NOTICE (OR * (*) DAYS IN
THE CASE OF AN INFRINGEMENT RESULTING FROM THE SUBMISSION BY ANY THIRD PARTY OF
AN ABBREVIATED NEW DRUG APPLICATION UNDER THE HATCH-WAXMAN ACT), THEN ARQULE
SHALL HAVE THE RIGHT AND OPTION TO DO SO AT ITS EXPENSE.

 

(C)           ARQULE RIGHT TO ENFORCE.

 

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(I)            ENFORCEMENT OF ARQULE BACKGROUND PATENT RIGHTS.  IN THE EVENT
THAT ANY INFRINGEMENT RELATES TO ANY PATENT RIGHTS COVERING ARQULE BACKGROUND
TECHNOLOGY, ARQULE SHALL HAVE THE SOLE RIGHT BUT NOT THE OBLIGATION TO ENFORCE
SUCH CLAIM.

 

(II)           ENFORCEMENT OF ARQULE PROGRAM PATENT RIGHTS.  IN THE EVENT THAT
ANY INFRINGEMENT RELATES TO ANY ARQULE PROGRAM PATENT RIGHTS, THEN ARQULE SHALL
HAVE THE FIRST RIGHT (BUT NOT THE OBLIGATION) TO ENFORCE SUCH CLAIM, WHICH MAY
INCLUDE THE INSTITUTION OF LEGAL PROCEEDINGS OR OTHER ACTION.  ARQULE SHALL KEEP
DS REASONABLY INFORMED ON A QUARTERLY BASIS, IN PERSON OR BY TELEPHONE, PRIOR TO
AND DURING ANY SUCH ENFORCEMENT.  DS SHALL ASSIST ARQULE, UPON REQUEST, IN
TAKING ANY ACTION TO ENFORCE ANY SUCH PATENT RIGHTS AND SHALL JOIN IN ANY SUCH
ACTION IF DEEMED TO BE A NECESSARY PARTY.  ARQULE SHALL INCUR NO LIABILITY TO DS
AS A CONSEQUENCE OF SUCH LITIGATION OR ANY UNFAVORABLE DECISION RESULTING
THEREFROM, INCLUDING ANY DECISION HOLDING ANY SUCH CLAIM INVALID, NOT INFRINGED
OR UNENFORCEABLE.  ALL COSTS, INCLUDING WITHOUT LIMITATION ATTORNEYS’ FEES,
RELATING TO SUCH LEGAL PROCEEDINGS OR OTHER ACTION SHALL BE BORNE BY ARQULE.  IF
ARQULE DOES NOT TAKE COMMERCIALLY REASONABLE STEPS TO ABATE THE INFRINGEMENT OF
SUCH PATENT RIGHTS WITHIN * (*) DAYS FROM ANY INFRINGEMENT NOTICE (OR * (*) DAYS
IN THE CASE OF AN INFRINGEMENT RESULTING FROM THE SUBMISSION BY ANY THIRD PARTY
OF AN ABBREVIATED NEW DRUG APPLICATION UNDER THE HATCH-WAXMAN ACT), THEN DS
SHALL HAVE THE RIGHT AND OPTION TO DO SO AT ITS EXPENSE.  FOR PURPOSES OF
CLARITY, NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, DS SHALL HAVE NO RIGHT
TO ENFORCE ANY ARQULE PATENTS RIGHTS COVERING PRODUCT TECHNOLOGY.

 

(D)           JOINT PATENT RIGHTS.  IN THE EVENT OF AN INFRINGEMENT OF A JOINT
PATENT RIGHT, THEN, THE PARTIES SHALL ENTER INTO GOOD FAITH DISCUSSIONS AS TO
WHETHER AND HOW TO ELIMINATE THE INFRINGEMENT.  SUBJECT TO THE FOREGOING,
(I) ARQULE SHALL HAVE THE FIRST RIGHT AND OPTION TO ELIMINATE SUCH INFRINGEMENT
BY REASONABLE STEPS, WHICH MAY INCLUDE THE INSTITUTION OF LEGAL PROCEEDINGS OR
OTHER ACTION AND (II) ALL COSTS, INCLUDING WITHOUT LIMITATION ATTORNEYS’ FEES,
RELATING TO SUCH LEGAL PROCEEDINGS OR OTHER ACTION SHALL BE BORNE BY ARQULE.  IF
ARQULE DOES NOT TAKE OR INITIATE COMMERCIALLY REASONABLE STEPS TO ELIMINATE THE
INFRINGEMENT WITHIN * (*) DAYS FROM ANY INFRINGEMENT NOTICE (OR * (*) DAYS IN
THE CASE OF AN INFRINGEMENT RESULTING FROM THE SUBMISSION BY ANY THIRD PARTY OF
AN ABBREVIATED NEW DRUG APPLICATION UNDER THE HATCH-WAXMAN ACT), THEN DS SHALL
HAVE THE RIGHT AND OPTION TO DO SO AT ITS EXPENSE.  NEITHER DS NOR ARQULE

 

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SHALL ADMIT THE INVALIDITY OR UNENFORCEABILITY OF ANY JOINT PATENT RIGHTS OR
VALID CLAIMS THEREIN WITHOUT THE OTHER PARTY’S PRIOR WRITTEN CONSENT.

 

(E)           REPRESENTATION OF EITHER PARTY.  EACH PARTY SHALL HAVE THE RIGHT
TO BE REPRESENTED BY COUNSEL THAT IT SELECTS IN ANY LEGAL PROCEEDINGS OR OTHER
ACTION INSTITUTED UNDER THIS SECTION 8.2.1 BY THE OTHER PARTY.

 

(F)            COOPERATION BY THE PARTIES.  IN ANY ACTION, SUIT OR PROCEEDING
INSTITUTED UNDER THIS SECTION 8.2.1, THE PARTIES SHALL COOPERATE WITH AND ASSIST
EACH OTHER IN ALL REASONABLE RESPECTS IN THE TERRITORY.  UPON THE REASONABLE
REQUEST OF THE PARTY INSTITUTING SUCH ACTION, SUIT OR PROCEEDING, THE OTHER
PARTY SHALL JOIN SUCH ACTION, SUIT OR PROCEEDING AND SHALL BE REPRESENTED USING
COUNSEL OF ITS OWN CHOICE, AT THE REQUESTING PARTY’S EXPENSE.  IF A PARTY WITH
THE RIGHT TO INITIATE LEGAL PROCEEDINGS UNDER THIS SECTION 8.2.1 LACKS STANDING
TO DO SO AND THE OTHER PARTY HAS STANDING TO INITIATE SUCH LEGAL PROCEEDINGS,
THEN THE PARTY WITH STANDING SHALL INITIATE SUCH LEGAL PROCEEDINGS AT THE
REQUEST AND EXPENSE OF THE OTHER PARTY.

 

(G)           ALLOCATION OF RECOVERIES.  ANY AMOUNTS RECOVERED BY DS PURSUANT TO
ACTIONS UNDER SECTION 8.2.1(B)(II) OR 8.2.1(D), WHETHER BY SETTLEMENT OR
JUDGMENT, SHALL BE ALLOCATED IN THE FOLLOWING ORDER: (I) FIRST, TO REIMBURSE DS
AND ARQULE FOR THEIR REASONABLE OUT-OF-POCKET EXPENSES IN MAKING SUCH RECOVERY
(WHICH AMOUNTS SHALL BE ALLOCATED PRO RATA IF INSUFFICIENT TO COVER THE TOTALITY
OF SUCH EXPENSES); AND (II) SECOND, (A) WITH RESPECT TO ACTUAL DAMAGES, TO DS
AND ARQULE IN THE * AND (B) WITH RESPECT TO PUNITIVE, SPECIAL OR CONSEQUENTIAL
DAMAGES, * PERCENT (*%) TO DS AND * PERCENT (*%) TO ARQULE.  ANY AMOUNTS
RECOVERED BY ARQULE PURSUANT TO ACTIONS UNDER SECTION 8.2.1(C)(II) OR
8.2.1(D) SHALL BE ALLOCATED IN THE FOLLOWING ORDER: (X) FIRST, TO REIMBURSE
ARQULE AND DS FOR THEIR REASONABLE OUT OF POCKET EXPENSES IN MAKING SUCH
RECOVERY (WHICH AMOUNTS SHALL BE ALLOCATED PRO RATA IF INSUFFICIENT TO COVER THE
TOTALITY OF SUCH EXPENSES); AND (Y) THEN, 100% TO ARQULE.

 

8.2.2        DEFENSE OF CLAIMS.  IN THE EVENT THAT ANY ACTION, SUIT OR
PROCEEDING IS BROUGHT AGAINST EITHER PARTY OR ANY AFFILIATE OR SUBLICENSEE OF
EITHER PARTY ALLEGING THE INFRINGEMENT OF THE TECHNOLOGY OR PATENT RIGHTS OF A
THIRD PARTY BY REASON OF OR THE

 

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DEVELOPMENT OR COMMERCIALIZATION OF ANY LICENSED PRODUCT, SUCH PARTY SHALL
NOTIFY THE OTHER PARTY WITHIN FIVE (5) DAYS OF THE EARLIER OF (A) RECEIPT OF
SERVICE OF PROCESS IN SUCH ACTION, SUIT OR PROCEEDING, OR (B) THE DATE SUCH
PARTY BECOMES AWARE THAT SUCH ACTION, SUIT OR PROCEEDING HAS BEEN INSTITUTED,
AND THE JSC SHALL MEET AS SOON AS POSSIBLE TO DISCUSS THE OVERALL STRATEGY FOR
DEFENSE OF SUCH MATTER.  EXCEPT AS AGREED BY THE JSC (SUBJECT TO DISPUTE
RESOLUTION AS A UNANIMOUS DECISION), (A) DS SHALL HAVE THE OBLIGATION TO DEFEND
SUCH ACTION, SUIT OR PROCEEDING IN THE TERRITORY; (B) ARQULE AND/OR ANY OF ITS
AFFILIATES OR SUBLICENSEES SHALL HAVE THE RIGHT TO SEPARATE COUNSEL AT ITS OWN
EXPENSE IN ANY SUCH ACTION, SUIT OR PROCEEDING; AND (C) THE PARTIES SHALL
COOPERATE WITH EACH OTHER IN ALL REASONABLE RESPECTS IN ANY SUCH ACTION, SUIT OR
PROCEEDING.  ALL EXPENSES OF SUCH ACTION, SUIT OR PROCEEDING SHALL BE BORNE BY
DS.  EACH PARTY SHALL PROMPTLY FURNISH THE OTHER PARTY WITH A COPY OF EACH
COMMUNICATION RELATING TO THE ALLEGED INFRINGEMENT THAT IS RECEIVED BY SUCH
PARTY INCLUDING ALL DOCUMENTS FILED IN ANY LITIGATION.  IN NO EVENT SHALL EITHER
PARTY SETTLE OR OTHERWISE RESOLVE ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT
AGAINST THE OTHER PARTY OR ANY OF ITS AFFILIATES OR SUBLICENSEES WITHOUT THE
OTHER PARTY’S PRIOR WRITTEN CONSENT.

 

8.2.3        TRADEMARK PROSECUTION AND REGISTRATION.  DS SHALL BE RESPONSIBLE
FOR THE FILING, PROSECUTION, MAINTENANCE, DEFENSE AND ENFORCEMENT OF ALL PRODUCT
TRADEMARKS CREATED DURING THE DEVELOPMENT AND/OR COMMERCIALIZATION AT DS’S
EXPENSE.  DS GRANTS ARQULE THE NON-EXCLUSIVE, ROYALTY-FREE, NON-ASSIGNABLE
(EXCEPT IN CONNECTION WITH AN ASSIGNMENT OF THIS AGREEMENT PURSUANT TO
SECTION 12.10), NON-TRANSFERABLE (EXCEPT IN CONNECTION WITH AN ASSIGNMENT OF
THIS AGREEMENT PURSUANT TO SECTION 12.10) AND NON-SUBLICENSABLE LICENSE OF THE
PRODUCT TRADEMARK IN USA.  ALL GOODWILL DERIVING FROM THE USE OF THE PRODUCT
TRADEMARK WILL ACCRUE SOLELY AND EXCLUSIVELY TO DS.  ARQULE SHALL USE THE
PRODUCT TRADEMARK ONLY IN ACCORDANCE WITH REASONABLE STANDARDS.  IN ANY
CIRCUMSTANCES, ARQULE MAY NOT APPLY OR REGISTER THE SAME OR A CONFUSINGLY
SIMILAR TRADEMARK WITHOUT PRIOR WRITTEN CONSENT OF DS.  ARQULE AGREES NOT TO
ENGAGE IN ANY FORM OF CONDUCT, OR MAKE ANY STATEMENTS OR REPRESENTATIONS, THAT
DISPARAGE OR OTHERWISE HARM THE REPUTATION, GOODWILL OR COMMERCIAL INTEREST
RELATED TO THE PRODUCT TRADEMARK.  IN ALL LICENSED PRODUCT PRIMARY AND SECONDARY
PACKAGES AND LABELS AND ALL MARKETING AND PROMOTIONAL LITERATURE, ARQULE SHALL
BE PRESENTED AND DESCRIBED AS THE PARTY WHO DEVELOPED THE LICENSED PRODUCT, AND
THE ARQULE NAME AND LOGO SHALL APPEAR IN THE SAME IN SIZE AND PROMINENCE AS THE
DS NAME AND LOGO ON ALL LICENSED PRODUCT PRIMARY AND SECONDARY PACKAGES AND
LABELS AND ALL MARKETING AND PROMOTIONAL LITERATURE USED IN THE

 

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TERRITORY, UNLESS PROHIBITED BY APPLICABLE LAWS; PROVIDED, HOWEVER, THAT IF IT
IS COMMERCIALLY IMPRACTICABLE TO DO SO, THE PARTIES WILL DISCUSS IN GOOD FAITH
AN ALTERNATE PRESENTATION OF THEIR NAMES AND LOGOS.

 

8.2.4        TRADEMARK INFRINGEMENT IN USA AND KYOWA’S TERRITORY.  IF, DURING
THE TERM, ANY THIRD PARTY USES, INFRINGES, THREATENS TO INFRINGE OR OTHERWISE
DAMAGES THE PRODUCT TRADEMARK IN THE U.S. TERRITORY OR ASIAN TERRITORY, EACH
PARTY SHALL IMMEDIATELY NOTIFY THE OTHER.  DS SHALL HAVE THE RIGHT, BUT NOT THE
OBLIGATION, TO TAKE ALL REASONABLE STEPS, WHETHER BY ACTION, SUIT, PROCEEDING,
OR OTHERWISE TO PREVENT FURTHER INFRINGEMENT OF OR DAMAGE TO THE PRODUCT
TRADEMARK IN THE U.S. TERRITORY.  THE PARTIES AGREE TO FULLY COOPERATE WITH EACH
OTHER IN THE PROSECUTION, DEFENSE AND/OR SETTLEMENT OF ANY SUCH SUITS.

 

8.2.5        DOMAIN NAME FOR INN AND TRADEMARK.  THE PARTIES SHALL COLLABORATE
TO REGISTER AND MAINTAIN THE DOMAIN NAMES THAT CORRESPOND TO THE INTERNATIONAL
NONPROPRIETARY NAMES (“INN”) OF THE LICENSED PRODUCTS AND THE PRODUCT TRADEMARKS
OR THEIR CANDIDATES FOR THE LICENSED PRODUCT IN THE TERRITORY IN ORDER TO
PREVENT THE REGISTRATION OF SUCH DOMAIN NAMES BY THIRD PARTIES IN BAD FAITH. 
ARQULE SHALL INFORM DS OF (I) THE FIRST TO THE THIRD INN CANDIDATES FOR
REGISTERING THE RELATED DOMAIN NAME CONSIDERING THE PRIORITY OF INN CANDIDATES,
AND (II) THE INN SELECTED BY WHO, SO THAT DS MAY REGISTER THE CORRESPONDING
DOMAIN NAMES IN TIMELY AND EFFICIENT MANNER.

 

9.             TERM AND TERMINATION

 

9.1           Term.  This Agreement shall commence on the Effective Date and
shall continue in full force and effect, unless otherwise terminated pursuant to
Section 9.2, until (a) such time as DS is no longer Developing at least * (*)
Licensed Product or (b) if, as of the time DS is no longer Developing at least *
(*) Licensed Product, DS is Commercializing a Licensed Product, such time as all
Royalty Terms for all Licensed Products have ended, whichever is later (the
“Term”).  Upon the expiration of this Agreement as set forth in this Section
9.1, the license rights granted hereunder shall be converted to perpetual and
fully paid-up licenses.

 

9.2           Termination.  Subject to Section 12.1(d), this Agreement may be
terminated by either Party as follows:

 

 

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9.2.1        UNILATERAL RIGHT TO TERMINATE AGREEMENT.

 

(A)           DS RIGHTS TO TERMINATE.  DS MAY TERMINATE THIS AGREEMENT, (A) AT
ANY TIME PRIOR TO THE INITIATION OF PHASE 3 CLINICAL TRIALS WITH RESPECT TO A
LICENSED PRODUCT ON NOT LESS THAN NINETY (90) DAYS’ PRIOR WRITTEN NOTICE TO
ARQULE AND (B) AT ANY TIME ON AND AFTER THE INITIATION OF PHASE 3 CLINICAL
TRIALS WITH RESPECT TO A LICENSED PRODUCT ON NOT LESS THAN ONE HUNDRED EIGHTY
(180) DAYS’ PRIOR WRITTEN NOTICE TO ARQULE.

 

(B)           ARQULE RIGHT TO TERMINATE.  EXCEPT TO THE EXTENT THE FOLLOWING IS
UNENFORCEABLE UNDER THE LAW OF A PARTICULAR JURISDICTION WHERE A PATENT
APPLICATION WITH ARQULE PATENT RIGHTS IS PENDING OR A PATENT WITHIN ARQULE
PATENT RIGHTS IS ISSUED, ARQULE MAY TERMINATE THIS AGREEMENT IMMEDIATELY UPON
WRITTEN NOTICE TO DS IN THE EVENT THAT DS OR ANY OF ITS AFFILIATES CHALLENGES
ANY ARQULE PATENT RIGHT OR ASSISTS A THIRD PARTY IN INITIATING A CHALLENGE OF
ANY ARQULE PATENT RIGHT.

 

9.2.2        TERMINATION FOR BREACH.  EXCEPT AS SET FORTH HEREIN, EITHER PARTY
MAY TERMINATE THIS AGREEMENT, EFFECTIVE IMMEDIATELY UPON WRITTEN NOTICE TO THE
OTHER PARTY, FOR A MATERIAL BREACH BY THE OTHER PARTY OF ANY OBLIGATION UNDER
THIS AGREEMENT THAT REMAINS UNCURED * (*) DAYS (* (*) DAYS IN THE EVENT THAT THE
BREACH IS A FAILURE OF EITHER PARTY TO MAKE ANY PAYMENT REQUIRED HEREUNDER)
AFTER THE NON-BREACHING PARTY FIRST GIVES WRITTEN NOTICE TO THE OTHER PARTY OF
SUCH BREACH AND ITS INTENT TO TERMINATE THIS AGREEMENT IF SUCH BREACH IS NOT
CURED.

 

9.2.3        TERMINATION FOR INSOLVENCY.  IN THE EVENT THAT EITHER PARTY FILES
FOR PROTECTION UNDER BANKRUPTCY LAWS, MAKES AN ASSIGNMENT FOR THE BENEFIT OF
CREDITORS, APPOINTS OR SUFFERS APPOINTMENT OF A RECEIVER OR TRUSTEE OVER ALL OR
SUBSTANTIALLY ALL OF ITS PROPERTY, FILES A PETITION UNDER ANY BANKRUPTCY OR
INSOLVENCY ACT OR HAS ANY SUCH PETITION FILED AGAINST IT WHICH IS NOT DISCHARGED
WITHIN * (*) DAYS OF THE FILING THEREOF, THEN THE OTHER PARTY MAY TERMINATE THIS
AGREEMENT EFFECTIVE IMMEDIATELY UPON WRITTEN NOTICE TO SUCH PARTY.  IN
CONNECTION THEREWITH, ALL RIGHTS AND LICENSES GRANTED UNDER THIS AGREEMENT ARE,
AND SHALL BE DEEMED TO BE, FOR PURPOSES OF SECTION 365(N) OF THE UNITED STATES
BANKRUPTCY CODE, LICENSES OF RIGHTS TO “INTELLECTUAL PROPERTY” AS DEFINED UNDER
SECTION 101(35A) OF THE UNITED STATES BANKRUPTCY CODE.

 

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9.3           Consequences of Termination of Agreement.  In the event of the
termination of this Agreement pursuant to Section 9.2, the following provisions
shall apply, as applicable.

 

9.3.1        TERMINATION BY ARQULE UNDER 9.2.1(B), 9.2.2 OR 9.2.3 OR BY DS UNDER
SECTION 9.2.1(A).  IF THIS AGREEMENT IS TERMINATED BY DS PURSUANT TO
SECTION 9.2.1(A) OR BY ARQULE PURSUANT TO SECTION 9.2.1(B), 9.2.2 OR 9.2.3:

 

(A)           ALL LICENSES AND RIGHTS GRANTED TO DS, INCLUDING WITHOUT
LIMITATION, ALL LICENSES GRANTED TO DS UNDER ARTICLE 6, SHALL IMMEDIATELY
TERMINATE AND ARQULE SHALL NO LONGER BE SUBJECT TO ANY OBLIGATIONS UNDER
SECTION 6.4.1;

 

(B)           DS SHALL CONTINUE TO BE SUBJECT TO THE OBLIGATIONS SET FORTH IN
SECTION 6.4.2 FOR ONE (1) YEAR FOLLOWING SUCH TERMINATION;

 

(C)           EACH PARTY SHALL PROMPTLY RETURN ALL CONFIDENTIAL INFORMATION AND
PROPRIETARY MATERIALS OF THE OTHER PARTY THAT ARE NOT SUBJECT TO A CONTINUING
LICENSE HEREUNDER; PROVIDED, THAT, EACH PARTY MAY RETAIN ONE COPY OF THE
CONFIDENTIAL INFORMATION OF THE OTHER PARTY IN ITS ARCHIVES SOLELY FOR THE
PURPOSE OF ESTABLISHING THE CONTENTS THEREOF AND ENSURING COMPLIANCE WITH ITS
OBLIGATIONS HEREUNDER;

 

(D)           WITH RESPECT TO A TERMINATION OF THIS AGREEMENT BY DS PURSUANT TO
SECTION 9.2.1(A) ONLY, FROM THE PERIOD COMMENCING ON THE DATE THAT ARQULE
RECEIVES THE NOTICE DESCRIBED IN SECTION 9.2.1(A), DS SHALL (I) RELINQUISH ITS
RIGHT TO REPRESENTATION ON ANY COMMITTEE THAT IS FORMED UNDER THIS AGREEMENT AND
(II) ALL DECISIONS THAT WERE DESIGNATED AS DS DECISIONS, JOINT DECISIONS AND
UNANIMOUS DECISIONS SHALL BE MADE SOLELY BY ARQULE;

 

(E)           UPON REQUEST OF ARQULE, DS SHALL PROMPTLY, AND IN ANY EVENT WITHIN
SIXTY (60) DAYS AFTER ARQULE’S REQUEST (WHICH REQUEST MAY SPECIFY ANY OR ALL OF
THE ACTIONS IN CLAUSES (I) THROUGH (XII);

 

(I)            ASSIGN TO ARQULE, FREE OF CHARGE, THE OWNERSHIP OF ALL PRODUCT
TRADEMARKS APPLICABLE TO LICENSED PRODUCTS; PROVIDED THAT AFTER SUCH ASSIGNMENT
ARQULE SHALL ASSUME ALL RESPONSIBILITY FOR MAINTAINING SUCH PRODUCT TRADEMARKS,
AND IF

 

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ARQULE DOES NOT REQUEST SUCH ASSIGNMENT, DS MAY TERMINATE OR WITHDRAW FROM
REGISTRATION, ALL SUCH PRODUCT TRADEMARKS.

 

(II)           ASSIGN TO ARQULE, FREE OF CHARGE, OR AT DS’S CHOICE, GRANT ARQULE
AN EXCLUSIVE, WORLDWIDE, ROYALTY-FREE LICENSE, WITH THE UNRESTRICTED RIGHT TO
SUBLICENSE, UNDER ALL DS PATENT RIGHTS AND DS TECHNOLOGY SPECIFIC TO THE
COLLABORATION COMPOUNDS AND LICENSED PRODUCTS AND A NON-EXCLUSIVE WORLDWIDE,
ROYALTY-FREE LICENSE, WITH THE UNRESTRICTED RIGHT TO SUBLICENSE, UNDER ALL OTHER
DS PATENT RIGHTS AND DS TECHNOLOGY NECESSARY OR USEFUL FOR ARQULE TO DEVELOP AND
COMMERCIALIZE THE LICENSED PRODUCTS.

 

(III)          TRANSFER TO ARQULE ALL OF ITS RIGHT, TITLE AND INTEREST IN ALL
REGULATORY FILINGS, DRUG APPROVAL APPLICATIONS AND REGULATORY APPROVALS THEN IN
ITS NAME APPLICABLE TO LICENSED PRODUCTS, IF ANY, AND ALL CONFIDENTIAL
INFORMATION CONTROLLED BY IT AS OF THE DATE OF TERMINATION RELIED ON BY SUCH
REGULATORY FILINGS, DRUG APPROVAL APPLICATIONS AND REGULATORY APPROVALS;

 

(IV)          NOTIFY THE APPLICABLE REGULATORY AUTHORITIES AND TAKE ANY OTHER
ACTION REASONABLY NECESSARY TO EFFECT SUCH TRANSFER;

 

(V)           PROVIDE ARQULE WITH COPIES ALL CORRESPONDENCE BETWEEN DS AND SUCH
REGULATORY AUTHORITIES RELATING TO SUCH REGULATORY FILINGS, DRUG APPROVAL
APPLICATIONS AND REGULATORY APPROVALS;

 

(VI)          ASSIGN (OR CAUSE ITS AFFILIATES TO ASSIGN) TO ARQULE ALL
AGREEMENTS WITH ANY THIRD PARTY WITH RESPECT TO MANUFACTURE OF COLLABORATION
COMPOUNDS AND LICENSED PRODUCTS OR THE CONDUCT OF CLINICAL TRIALS FOR THE
LICENSED PRODUCTS,  INCLUDING, WITHOUT LIMITATION, AGREEMENTS WITH CONTRACT
RESEARCH ORGANIZATIONS, CLINICAL SITES AND INVESTIGATORS, UNLESS EXPRESSLY
PROHIBITED BY ANY SUCH AGREEMENT (IN WHICH CASE DS SHALL COOPERATE WITH ARQULE
IN ALL REASONABLE RESPECTS TO SECURE THE CONSENT OF SUCH THIRD PARTY TO SUCH
ASSIGNMENT);

 

(VII)         COOPERATE WITH ARQULE, CAUSE ITS AFFILIATES TO COOPERATE WITH
ARQULE AND USE COMMERCIALLY REASONABLE EFFORTS TO REQUIRE ANY THIRD PARTY WITH
WHICH DS HAS AN AGREEMENT WITH RESPECT TO THE CONDUCT OF CLINICAL TRIALS FOR
LICENSED PRODUCTS OR THE

 

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MANUFACTURE OF LICENSED PRODUCTS (INCLUDING, WITHOUT LIMITATION, AGREEMENTS WITH
CONTRACT MANUFACTURING ORGANIZATIONS, CONTRACT RESEARCH ORGANIZATIONS, CLINICAL
SITES AND INVESTIGATORS), TO COOPERATE WITH ARQULE IN ORDER TO ACCOMPLISH THE
TRANSFER TO ARQULE OF SIMILAR RIGHTS AS HELD BY DS UNDER ITS AGREEMENTS WITH
SUCH THIRD PARTIES;

 

(VIII)        PROVIDE ARQULE AT COST WITH ALL SUPPLIES OF COLLABORATION
COMPOUNDS AND LICENSED PRODUCTS IN THE POSSESSION OF DS OR ANY AFFILIATE OR
CONTRACTOR OF DS;

 

(IX)           PROVIDE ARQULE WITH COPIES OF ALL REPORTS AND DATA GENERATED OR
OBTAINED BY DS OR ITS AFFILIATES PURSUANT TO THIS AGREEMENT THAT RELATE TO ANY
LICENSED PRODUCT THAT HAVE NOT PREVIOUSLY BEEN PROVIDED TO ARQULE;

 

(X)            GRANT TO ARQULE THE RIGHT TO USE AND DISCLOSE IN CONNECTION WITH
THE DEVELOPMENT AND COMMERCIALIZATION OF LICENSED PRODUCTS ALL DS CONFIDENTIAL
INFORMATION CONTROLLED BY DS THAT IS NECESSARY OR USEFUL FOR THE DEVELOPMENT AND
COMMERCIALIZATION OF LICENSED PRODUCTS, AND AGREE THAT ALL SUCH DS CONFIDENTIAL
INFORMATION SHALL BE SUBJECT TO CLAUSE (I) OF THE SECOND SENTENCE OF
SECTION 5.1.1 AS IF IT WERE ARQULE CONFIDENTIAL INFORMATION BUT SHALL NOT BE
SUBJECT TO CLAUSE (II) OF THE SECOND SENTENCE OF SECTION 5.1.1;

 

(XI)           IF DS HAS MANUFACTURED, IS MANUFACTURING OR IS HAVING
MANUFACTURED SUCH LICENSED PRODUCT OR ANY INTERMEDIATE OF SUCH LICENSED PRODUCT
AS OF THE DATE OF TERMINATION, (A) TRANSFER COPIES OF ALL DOCUMENTS AND
MATERIALS CONTROLLED BY DS AND EMBODYING DS TECHNOLOGY AND/OR DS PATENT RIGHTS
THAT ARE AT THE TIME OF SUCH TERMINATION BEING USED BY DS OR ITS THIRD PARTY
MANUFACTURERS TO MANUFACTURE A COLLABORATION COMPOUND OR LICENSED PRODUCT,
INCLUDING BUT NOT LIMITED TO ALL SUPPLIERS, ANALYTICAL METHODS, QUALITY
STANDARDS, SPECIFICATIONS, COMMERCIAL API FORMULA, PROCESS CHEMISTRY,
MANUFACTURING PROCESS DESCRIPTIONS, PROCESS FLOWS, CYCLE TIMES, PROCESS
PARAMETERS, PROCESS EQUIPMENT TYPE AND SIZES, CLEANING METHODS, COMMERCIAL API
SAMPLES, MASTER SAFETY DATA SHEETS, AND STABILITY REPORTS (THE “DS MANUFACTURING
KNOW-HOW”) SOLELY TO ENABLE THE MANUFACTURE OF A COLLABORATION COMPOUND OR
LICENSED PRODUCT BY ARQULE, ITS AFFILIATES OR ANY THIRD PARTY MANUFACTURER OF
ARQULE; (B) PROMPTLY MAKE AVAILABLE TO ARQULE OR ANY SUCH THIRD PARTY
MANUFACTURER A REASONABLE NUMBER OF APPROPRIATELY TRAINED PERSONNEL TO PROVIDE,
ON A MUTUALLY CONVENIENT

 

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TIMETABLE, TECHNICAL ASSISTANCE IN THE TRANSFER OF DS MANUFACTURING KNOW-HOW TO
ARQULE AT ARQULE’S REASONABLE EXPENSE TO REIMBURSE DS FOR THE TIME EXPENDED BY
DS PERSONNEL; (C) COOPERATE WITH ARQULE, CAUSE ITS AFFILIATES TO COOPERATE WITH
ARQULE AND USE COMMERCIALLY REASONABLE EFFORTS TO REQUIRE ITS THIRD PARTY
MANUFACTURERS OF A COLLABORATION COMPOUND OR LICENSED PRODUCT TO COOPERATE WITH
ARQULE IN ORDER TO ACCOMPLISH THE TRANSFER TO ARQULE OF SIMILAR RIGHTS AS HELD
BY DS UNDER ITS THIRD PARTY MANUFACTURER AGREEMENTS; AND (D) SUPPLY ARQULE WITH
ITS REQUIREMENTS OF SUCH COLLABORATION COMPOUND OR LICENSED PRODUCT FOR UP TO *
(*) MONTHS FOLLOWING SUCH TERMINATION AT A TRANSFER PRICE EQUAL TO (1) DS’S
MANUFACTURING COST THEREOF FOR THE FIRST * (*) MONTHS AND (2) DS’S MANUFACTURING
COST THEREOF, PLUS * PERCENT (*%) FOR THE SECOND * (*) MONTH PERIOD; AND

 

(XII)          ENTER INTO NEGOTIATIONS WITH ARQULE AND AGREE UPON AND IMPLEMENT
A PLAN FOR THE ORDERLY TRANSITION OF DEVELOPMENT AND COMMERCIALIZATION FROM DS
TO ARQULE IN A MANNER CONSISTENT WITH APPLICABLE LAWS AND STANDARDS OF ETHICAL
CONDUCT OF HUMAN CLINICAL TRIALS, INCLUDING WITHOUT LIMITATION, THE TRANSFER OF
THE GLOBAL SAFETY DATA TO ARQULE, AND WILL SEEK TO REPLACE ALL DS PERSONNEL
ENGAGED IN ANY DEVELOPMENT OR COMMERCIALIZATION ACTIVITIES, IN EACH CASE, AS
PROMPTLY AS PRACTICABLE.

 

(F)            ARQULE SHALL REIMBURSE DS FOR ITS ACTUAL OUT-OF-POCKET COSTS OF
COMPLYING WITH SECTION 9.3.1(E)(I), (II), (III), (IV), (V), (VI), (VII),
(VIII) AND (IX), UP TO A TOTAL OF * DOLLARS (US $*).

 

9.3.2        TERMINATION BY DS.  IF THIS AGREEMENT IS TERMINATED BY DS PURSUANT
TO SECTION 9.2.2 OR 9.2.3:

 

(A)           ALL LICENSES GRANTED BY ARQULE TO DS PURSUANT TO SECTION 6.1.1
(INCLUDING ANY ADDITIONAL LICENSES REQUIRED TO MANUFACTURE API), SHALL SURVIVE
THE TERMINATION IN EACH CASE SUBJECT TO DS’S CONTINUED PAYMENT OF ALL MILESTONE,
ROYALTY AND OTHER PAYMENTS UNDER AND IN ACCORDANCE WITH THIS AGREEMENT WITH
RESPECT THERETO;

 

(B)           ALL LICENSES GRANTED BY DS TO ARQULE PURSUANT TO
SECTION 6.1.2(A) AND 6.1.2(B) SHALL CONTINUE, PROVIDED, THAT, THE PARTIES SHALL
NEGOTIATE, IN GOOD FAITH, THE TERMS OF PAYMENT TO DS BY ARQULE FOR ANY SUCH
LICENSES, AND IN THE CASE OF TERMINATION BY DS

 

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PURSUANT TO SECTION 9.2.2, ARQULE SHALL CONTINUE TO BE SUBJECT TO THE
OBLIGATIONS SET FORTH IN SECTION 6.4.1 FOR ONE (1) YEAR FOLLOWING SUCH
TERMINATION; AND

 

(C)           EACH PARTY SHALL PROMPTLY RETURN ALL CONFIDENTIAL INFORMATION AND
PROPRIETARY MATERIALS OF THE OTHER PARTY THAT ARE NOT SUBJECT TO A CONTINUING
LICENSE HEREUNDER; PROVIDED, THAT, EACH PARTY MAY RETAIN ONE COPY OF THE
CONFIDENTIAL INFORMATION OF THE OTHER PARTY IN ITS ARCHIVES SOLELY FOR THE
PURPOSE OF ESTABLISHING THE CONTENTS THEREOF AND ENSURING COMPLIANCE WITH ITS
OBLIGATIONS HEREUNDER.

 

9.4           Surviving Provisions.  Termination or expiration of this Agreement
for any reason shall be without prejudice to:

 

(A)           SURVIVAL OF RIGHTS SPECIFICALLY STATED IN THIS AGREEMENT TO
SURVIVE, INCLUDING WITHOUT LIMITATION AS SET FORTH IN SECTION 9.3;

 

(B)           THE RIGHTS AND OBLIGATIONS OF THE PARTIES PROVIDED IN ARTICLES 1,
5, 7, 8 (WITH RESPECT TO JOINT PATENT RIGHTS AND DS PATENT RIGHTS LICENSED TO
ARQULE PURSUANT TO SECTION 9.3.1(E)(II)), 10, 11 AND 12 AND SECTIONS 3.10.4(B),
6.3, 9.3 AND 9.4 SHALL SURVIVE SUCH TERMINATION EXCEPT AS PROVIDED IN THIS
ARTICLE 9;

 

(C)           THE OBLIGATIONS OF EITHER PARTY THAT HAVE ACCRUED PRIOR TO
TERMINATION OR EXPIRATION, INCLUDING, WITHOUT LIMITATION, ANY MILESTONE, ROYALTY
RELATING TO A DATE OR PERIOD PRIOR TO TERMINATION OR EXPIRATION; AND

 

(D)           ANY OTHER RIGHTS OR REMEDIES PROVIDED AT LAW OR EQUITY WHICH
EITHER PARTY MAY OTHERWISE HAVE.

 

10.          REPRESENTATIONS AND WARRANTIES

 

10.1         Mutual Representations and Warranties.  ARQULE and DS each
represents and warrants to the other, as of the Effective Date, as follows:

 

10.1.1      ORGANIZATION.  IT IS A CORPORATION DULY ORGANIZED, VALIDLY EXISTING
AND IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS ORGANIZATION, AND
HAS ALL REQUISITE POWER AND AUTHORITY, CORPORATE OR OTHERWISE, TO EXECUTE,
DELIVER AND PERFORM THIS AGREEMENT.

 

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10.1.2      AUTHORIZATION.  THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE
PERFORMANCE BY IT OF THE TRANSACTIONS CONTEMPLATED HEREBY HAVE BEEN DULY
AUTHORIZED BY ALL NECESSARY CORPORATE ACTION AND WILL NOT VIOLATE (A) SUCH
PARTY’S CERTIFICATE OF INCORPORATION OR BYLAWS, (B) ANY AGREEMENT, INSTRUMENT OR
CONTRACTUAL OBLIGATION TO WHICH SUCH PARTY IS BOUND IN ANY MATERIAL RESPECT,
(C) ANY REQUIREMENT OF ANY APPLICABLE LAWS, OR (D) ANY ORDER, WRIT, JUDGMENT,
INJUNCTION, DECREE, DETERMINATION OR AWARD OF ANY COURT OR GOVERNMENTAL AGENCY
PRESENTLY IN EFFECT APPLICABLE TO SUCH PARTY.

 

10.1.3      BINDING AGREEMENT.  THIS AGREEMENT IS A LEGAL, VALID AND BINDING
OBLIGATION OF SUCH PARTY ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS AND
CONDITIONS.

 

10.1.4      NO INCONSISTENT OBLIGATION.  IT IS NOT UNDER ANY OBLIGATION,
CONTRACTUAL OR OTHERWISE, TO ANY PERSON THAT CONFLICTS WITH OR IS INCONSISTENT
IN ANY RESPECT WITH THE TERMS OF THIS AGREEMENT OR THAT WOULD IMPEDE THE
DILIGENT AND COMPLETE FULFILLMENT OF ITS OBLIGATIONS HEREUNDER.

 

10.2         Additional Representations of ARQULE.  ARQULE represents and
warrants to DS as follows:

 

10.2.1      LICENSED TECHNOLOGY.  ALL LICENSED TECHNOLOGY EXISTING AS OF THE
EFFECTIVE DATE IS CONTROLLED BY ARQULE.

 

10.2.2      Licensed Patent Rights.  To the actual knowledge of the Chief
Executive Officer, the President, any Vice President or ARQULE’s internal patent
counsel, as of the Effective Date, except as previously disclosed to DS, (i) no
Third Party has initiated, or threatened in writing to initiate, any litigation
against ARQULE or its Affiliates, including, without limitation, by initiating
any declaratory judgment lawsuit, or by sending a cease-and-desist letter,
alleging that the Licensed Patent Rights are invalid or unenforceable or that
the use of the Licensed Patent Rights or Licensed Technology as contemplated by
this Agreement infringes the Patent Rights of such Third Party and (ii) the
Licensed Patent Rights listed on Schedule 2 are not invalid or unenforceable.

 

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10.3         Covenants of DS Relating to Existing License Agreement.

 

(A)           DS ACKNOWLEDGES RECEIPT FROM ARQULE OF A COPY OF THE EXISTING
LICENSE AGREEMENT, WITH ALL FINANCIAL INFORMATION REDACTED.  AS USED IN THIS
SECTION 10.3, “LICENSED PRODUCT,” “BACK-UP COMPOUND,” “CANCER FIELD,”
“REGULATORY APPROVAL,” “REGULATORY ACTIVITIES,” “API,” “ARQULE TRADEMARKS” AND
“ADDITIONAL FIELD” SHALL HAVE THE MEANINGS SET FORTH IN THE EXISTING LICENSE
AGREEMENT.

 

(B)           DS ACKNOWLEDGES THAT DS IS AN “OTHER LICENSEE” WITHIN THE MEANING
OF THE EXISTING LICENSE AGREEMENT AND THAT ARQULE HAS CERTAIN OBLIGATIONS AND
COMMITMENTS UNDER THE EXISTING LICENSE AGREEMENT WITH RESPECT TO TECHNOLOGY,
PATENT RIGHTS AND TRADEMARKS OF AN OTHER LICENSEE RELATING TO LICENSED
PRODUCTS.  DS AGREES THAT ARQULE SHALL HAVE THE RIGHT TO HONOR SUCH OBLIGATIONS
AND FULFILL SUCH COMMITMENTS, AND THAT HONORING SUCH OBLIGATIONS AND FULFILLING
SUCH COMMITMENTS SHALL NOT BE A BREACH OF THIS AGREEMENT, NOTWITHSTANDING
ANYTHING TO THE CONTRARY HEREIN.  SUCH OBLIGATIONS AND COMMITMENTS INCLUDE,
WITHOUT LIMITATION:  (I) THE RIGHTS OF KYOWA WITH RESPECT TO ARQULE TRADEMARKS
SET FORTH IN SECTION 2.1.4 OF THE EXISTING LICENSE AGREEMENT, (II) THE
OBLIGATIONS OF ARQULE AND THE RIGHTS OF KYOWA WITH RESPECT TO BACK-UP COMPOUNDS
SET FORTH IN SECTION 3.7 OF THE EXISTING LICENSE AGREEMENT, AND (III) THE
OBLIGATIONS OF ARQULE AND RIGHTS OF KYOWA WITH RESPECT TO INDICATIONS IN THE
ADDITIONAL FIELD SET FORTH IN SECTION 3.8 OF THE EXISTING LICENSE AGREEMENT.

 

(C)           SUBJECT TO RECIPROCAL RIGHTS TO DS AS SET FORTH IN
SECTION 3.1.4(B), DS HEREBY (I) AGREES THAT DS SHALL PROVIDE TO ARQULE, AND THAT
ARQULE SHALL HAVE THE RIGHT TO PROVIDE TO KYOWA, COPIES OF ANY NDA OR EQUIVALENT
DRUG APPROVAL APPLICATION FILED BY DS WITH THE FDA OR THE EMEA IN THE CANCER
FIELD, AND GRANTS TO KYOWA THE RIGHT TO ACCESS, REFERENCE, USE AND INCORPORATE
ANY SUCH NDA CONSISTENT WITH THE TERMS OF THE EXISTING LICENSE AGREEMENT;
(II) AGREES THAT DS SHALL PROVIDE TO ARQULE, AND THAT ARQULE SHALL HAVE THE
RIGHT TO PROVIDE TO KYOWA, COPIES OF ANY ADDITIONAL INFORMATION OR DATA WITH
RESPECT TO LICENSED PRODUCT GENERATED BY, OR ON BEHALF OF, DS AND OWNED OR
OTHERWISE CONTROLLED BY DS AND NECESSARY OR USEFUL FOR KYOWA TO OBTAIN ANY
REGULATORY APPROVALS OR PERFORM SUCH OTHER REGULATORY ACTIVITIES UNDER THE
EXISTING LICENSE AGREEMENT, OR AS IS OTHERWISE REASONABLY REQUESTED IN WRITING
BY KYOWA; (III) AGREES THAT DS SHALL, AT THE REQUEST OF ARQULE, ATTEND REGULAR
MEETINGS WITH KYOWA AND ARQULE TO DISCUSS DEVELOPMENT AND SALES STRATEGY WITH
RESPECT TO LICENSED PRODUCTS; (IV) AGREES TO EITHER GRANT A ROYALTY-FREE LICENSE
TO ARQULE OR

 

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KYOWA, IN WHICH CASE ARQULE OR KYOWA SHALL PAY OR REIMBURSE ALL MAINTENANCE FEES
IN THE ASIAN TERRITORY, OR AT DS’S CHOICE PERMIT ARQULE TO OBTAIN, OR TO GRANT
TO KYOWA THE RIGHT TO OBTAIN, AT ARQULE’S OR KYOWA’S OWN EXPENSE, REGISTRATION
IN THE ASIAN TERRITORY OF ANY PRODUCT TRADEMARK USED BY DS IN THE TERRITORY THAT
DOES NOT INCORPORATE THE NAME OR LOGO OF DS AND (V) GRANTS TO ARQULE AN
EXCLUSIVE, ROYALTY-FREE, FULLY PAID-UP, PERPETUAL, IRREVOCABLE LICENSE, WITH THE
RIGHT TO GRANT A SUBLICENSE TO KYOWA, UNDER DS TECHNOLOGY AND DS PATENT RIGHTS
AND DS’S INTEREST IN JOINT TECHNOLOGY AND JOINT PATENT RIGHTS TO IMPORT AND USE
COLLABORATION COMPOUNDS SOLELY FOR USE IN LICENSED PRODUCTS AND/OR TO DEVELOP,
USE, DISTRIBUTE FOR SALE, OFFER FOR SALE, SELL, IMPORT AND EXPORT LICENSED
PRODUCTS IN THE CANCER FIELD, AND THE ADDITIONAL FIELD IF APPLICABLE UNDER THE
EXISTING LICENSE AGREEMENT, IN THE ASIAN TERRITORY.

 

11.          INDEMNIFICATION

 

11.1         Indemnification of ARQULE by DS.  DS shall indemnify, defend and
hold harmless ARQULE, its Affiliates, their respective directors, officers,
employees and agents, and their respective successors, heirs and assigns
(collectively, the “ARQULE Indemnitees”), against all liabilities, damages,
losses and expenses (including, without limitation, reasonable attorneys’ fees
and expenses of litigation) (collectively, “Losses”) incurred by or imposed upon
ARQULE Indemnitees, or any of them, as a direct result of claims, suits,
actions, demands or judgments of Third Parties, including, without limitation,
personal injury and product liability claims (collectively, “Claims”), arising
out of the Development of any Collaboration Compound or Licensed Product or the
Commercialization (including, without limitation, the production, manufacture,
promotion, import, sale or use by any Person) of any Licensed Product by DS or
any of its Affiliates, Sublicensees, distributors or agents, and the
Co-Commercialization of any Co-Commercialized Licensed Product by DS or any of
its Affiliates, Sublicensees, distributors or agents, except with respect to any
Claim or Losses that result from a breach of this Agreement by, or the gross
negligence or willful misconduct of, ARQULE.

 

11.2         Indemnification of DS by ARQULE.  ARQULE shall indemnify, defend
and hold harmless DS, its Affiliates, their respective directors, officers,
employees and agents, and their respective successors, heirs and assigns
(collectively, the “DS Indemnitees”), against all Losses incurred by or imposed
upon DS Indemnitees, or any of them, as a direct result of Claims

 

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arising out of the Co-Commercialization by ARQULE or any of its Affiliates,
sublicensees, distributors or agents of any Co-Commercialized Licensed Product,
except with respect to any Claim or Losses that result from a breach of this
Agreement by, or the gross negligence or willful misconduct of, DS.

 

11.3         Conditions to Indemnification.  A Person seeking recovery under
this Article 11 (the “Indemnified Party”) in respect of a Claim shall give
prompt notice of such Claim to the Party from which indemnification is sought
(the “Indemnifying Party”); provided, that, the Indemnifying Party is not
contesting its obligation under this Article 11, shall permit the Indemnifying
Party to control any litigation relating to such Claim and the disposition of
such Claim; provided, that, the Indemnifying Party shall (a) act reasonably and
in good faith with respect to all matters relating to the settlement or
disposition of such Claim as the settlement or disposition relates to such
Indemnified Party and (b) not settle or otherwise resolve such claim without the
prior written consent of such Indemnified Party (which consent shall not be
unreasonably withheld, conditioned or delayed).  Each Indemnified Party shall
cooperate with the Indemnifying Party in its defense of any such Claim in all
reasonable respects and shall have the right to be present in person or through
counsel at all legal proceedings with respect to such Claim.

 

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

 

11.5         No Warranty of Success.  Nothing contained in this Agreement shall
be construed as a warranty, either express or implied, on the part of either
Party that (a) the Development Program will yield a Licensed Product or
otherwise be successful or meet its goals, time lines or budgets, or (b) the
outcome of the Development Program will be commercially exploitable in any
respect.

 

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11.6         Limited Liability.  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, AND EXCEPT WITH RESPECT TO EITHER PARTY’S OBLIGATIONS UNDER
SECTION 11.1 AND 11.2 FOR INDEMNIFICATION PAYMENTS WITH RESPECT TO LOSSES PAID
TO THIRD PARTIES, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY OF ITS
AFFILIATES FOR (I) ANY SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST PROFITS OR LOST REVENUES, OR
(II) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES, WHETHER
UNDER ANY CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR
EQUITABLE THEORY.

 

12.          MISCELLANEOUS

 

12.1         Arbitration.  Any dispute, controversy or claim arising between the
Parties with respect to this Agreement, including any dispute, controversy or
claim relating to any Joint Decision (each, a “Dispute”), shall be resolved by
binding arbitration before a panel of three (3) arbitrators in accordance with
the rules of the AAA in effect at the time the proceeding is initiated.  In any
such arbitration, the following procedures shall apply:

 

(A)           THE PANEL WILL BE COMPRISED OF ONE ARBITRATOR CHOSEN BY DS, ONE BY
ARQULE AND THE THIRD BY THE TWO SO CHOSEN.  IF EITHER, OR BOTH, OF DS OR ARQULE
FAILS TO CHOOSE AN ARBITRATOR OR ARBITRATORS WITHIN THIRTY (30) DAYS AFTER
RECEIVING NOTICE OF COMMENCEMENT OF ARBITRATION OR IF THE TWO ARBITRATORS FAIL
TO CHOOSE A THIRD ARBITRATOR WITHIN THIRTY (30) DAYS AFTER THEIR APPOINTMENT,
THEN EITHER OR BOTH PARTIES SHALL IMMEDIATELY REQUEST THAT THE AAA SELECT THE
REMAINING NUMBER OF ARBITRATORS TO BE SELECTED, WHICH ARBITRATOR(S) SHALL HAVE
THE REQUISITE SCIENTIFIC BACKGROUND, EXPERIENCE AND EXPERTISE.  THE PLACE OF
ARBITRATION SHALL BE BOSTON, MASSACHUSETTS.

 

(B)           EITHER PARTY MAY APPLY TO THE ARBITRATORS FOR INTERIM INJUNCTIVE
RELIEF UNTIL THE ARBITRATION DECISION IS RENDERED OR THE DISPUTE IS OTHERWISE
RESOLVED.  EITHER PARTY ALSO MAY, WITHOUT WAIVING ANY RIGHT OR REMEDY UNDER THIS
AGREEMENT, SEEK FROM ANY COURT HAVING JURISDICTION ANY INJUNCTIVE OR PROVISIONAL
RELIEF NECESSARY TO PROTECT THE RIGHTS OR PROPERTY OF THAT PARTY PENDING
RESOLUTION OF THE DISPUTE PURSUANT TO THIS SECTION 12.1.  THE ARBITRATORS

 

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SHALL HAVE NO AUTHORITY TO AWARD PUNITIVE OR ANY OTHER TYPE OF DAMAGES NOT
MEASURED BY A PARTY’S COMPENSATORY DAMAGES.  EACH PARTY SHALL BEAR ITS OWN COSTS
AND EXPENSES AND ATTORNEYS’ FEES IN CONNECTION WITH ANY SUCH ARBITRATION;
PROVIDED, THAT, THE NON-PREVAILING PARTY SHALL PAY THE COSTS AND EXPENSES
INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH ANY SUCH ARBITRATION,
INCLUDING REASONABLE ATTORNEYS’ FEES AND COSTS.  THE PARTIES ACKNOWLEDGE THAT
WHILE SECTION 12.3 SHALL APPLY TO ANY SUCH DISPUTE, IT IS THE INTENTION OF THE
PARTIES NOT TO USE THE DISCOVERY RULES OF THE COMMONWEALTH OF MASSACHUSETTS IN
CONNECTION WITH ANY SUCH DISPUTE.

 

(C)           EXCEPT TO THE EXTENT NECESSARY TO CONFIRM AN AWARD OR DECISION OR
AS MAY BE REQUIRED BY APPLICABLE LAWS, NEITHER PARTY NOR ANY ARBITRATOR MAY
DISCLOSE THE EXISTENCE OR RESULTS OF ANY ARBITRATION WITHOUT THE PRIOR WRITTEN
CONSENT OF BOTH PARTIES.  IN NO EVENT SHALL ANY ARBITRATION BE INITIATED AFTER
THE DATE WHEN COMMENCEMENT OF A LEGAL OR EQUITABLE PROCEEDING BASED ON THE
DISPUTE WOULD BE BARRED BY THE APPLICABLE MASSACHUSETTS STATUTE OF LIMITATIONS.

 

(D)           IN THE EVENT OF A DISPUTE INVOLVING THE ALLEGED BREACH OF THIS
AGREEMENT (INCLUDING, WITHOUT LIMITATION, WHETHER A PARTY HAS SATISFIED ITS
DILIGENCE OBLIGATIONS HEREUNDER), (I) NEITHER PARTY MAY TERMINATE THIS AGREEMENT
UNDER SECTION 9.2.2 UNTIL RESOLUTION OF THE DISPUTE PURSUANT TO THIS
SECTION 12.1 AND (II) IF THE ARBITRATORS RENDER A DECISION THAT A BREACH OF THIS
AGREEMENT HAS OCCURRED, THE ARBITRATORS SHALL HAVE NO AUTHORITY TO MODIFY THE
RIGHT OF THE NON-BREACHING PARTY TO TERMINATE THIS AGREEMENT IN ACCORDANCE WITH
SECTION 9.2.2.

 

(E)           ANY DISPUTED PERFORMANCE OR SUSPENDED PERFORMANCE PENDING THE
RESOLUTION OF A DISPUTE THAT THE ARBITRATORS DETERMINE TO BE REQUIRED TO BE
PERFORMED BY A PARTY SHALL BE COMPLETED WITHIN A REASONABLE TIME PERIOD
FOLLOWING THE FINAL DECISION OF THE ARBITRATORS.

 

(F)            THE DECISION OF THE ARBITRATORS SHALL BE THE SOLE, EXCLUSIVE AND
BINDING REMEDY BETWEEN THE PARTIES REGARDING THE DETERMINATION OF ALL DISPUTES
PRESENTED.  ANY MONETARY PAYMENT TO BE MADE BY A PARTY PURSUANT TO A DECISION OF
THE ARBITRATORS SHALL BE MADE IN UNITED STATES DOLLARS, FREE OF ANY TAX OR OTHER
DEDUCTION.

 

12.2         Notices.  All notices and communications shall be in writing and
delivered personally or by internationally-recognized overnight express courier
providing evidence of

 

98

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delivery or mailed via certified mail, return receipt requested, addressed as
follows, or to such other address as may be designated from time to time:

 

 

If to DS:

 

If to ARQULE:

 

 

 

 

 

Daiichi Sankyo Co., Ltd.

 

ArQule, Inc.

 

3-5-1, Nihonbashi Honcho, Chuo-ku

 

19 Presidential Way

 

Tokyo 103-8426, Japan

 

Woburn, MA 01801, U.S.A.

 

Tel: +81-3-6225-1008

 

Tel: (781) 994-0300

 

Fax: +81-3-6225-1903

 

Fax: (781) 376-6019

 

Attention: Vice President, Licensing

 

Attention: General Counsel

 

 

 

Attention Vice President, Business Development

 

 

 

 

 

 

 

With a copy to:

 

 

 

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

 

 

 

One Financial Center

 

 

 

Boston, Massachusetts 02111, U.S.A.

 

 

 

Attention: Jeffrey Wiesen, Esq.

 

 

 

Tel: (617) 542-6000

 

 

 

Fax: (617) 542-2241

 

In addition, all notices to any Committee shall be sent to each Party’s
designated members of such committees at such Party’s address stated above or to
such other address as such Party may designate by written notice given in
accordance with this Section 12.2.

 

Except as otherwise expressly provided in this Agreement or mutually agreed in
writing, any notice, communication or document (excluding payment) required to
be given or made shall be deemed given or made and effective upon actual receipt
or, if earlier, (a) three (3) Business Days after deposit with an
internationally-recognized overnight express courier with charges prepaid, or
(b) five (5) Business Days after mailed by certified, registered or regular
mail, postage prepaid, in each case addressed to a Parties at its address stated
above or to such other address as such Party may designate by written notice
given in accordance with this Section 12.2.

 

12.3         Governing Law.  This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts (U.S.A.),
without regard to the application of principles of conflicts of law.

 

99

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12.4         Binding Effect.  This Agreement shall be binding upon and inure to
the benefit of the Parties and their respective legal representatives,
successors and permitted assigns.

 

12.5         Headings.  Section and subsection headings are inserted for
convenience of reference only and do not form a part of this Agreement.

 

12.6         Counterparts.  This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and both of
which, together, shall constitute a single agreement.

 

12.7         Amendment; Waiver.  This Agreement may be amended, modified,
superseded or canceled, and any of the terms of this Agreement may be waived,
only by a written instrument executed by each Party or, in the case of waiver,
by the Party or Parties waiving compliance.  The delay or failure of either
Party at any time or times to require performance of any provisions shall in no
manner affect the rights at a later time to enforce the same.  No waiver by
either Party of any condition or of the breach of any term contained in this
Agreement, whether by conduct, or otherwise, in any one or more instances, shall
be deemed to be, or considered as, a further or continuing waiver of any such
condition or of the breach of such term or any other term of this Agreement.

 

12.8         No Third Party Beneficiaries.  Except as set forth in Sections 11.1
and 11.2, no Third Party (including, without limitation, employees of either
Party) shall have or acquire any rights by reason of this Agreement.

 

12.9         Purposes and Scope.  The Parties hereto understand and agree that
this Collaboration is limited to the activities, rights and obligations as set
forth in this Agreement.  Nothing in this Agreement shall be construed (a) to
create or imply a general partnership between the Parties, (b) to make either
Party the agent of the other for any purpose, (c) to alter, amend, supersede or
vitiate any other arrangements between the Parties with respect to any subject
matters not covered hereunder, (d) to give either Party the right to bind the
other, (e) to create any duties or obligations between the Parties except as
expressly set forth herein, or (f) to grant any direct or implied licenses or
any other right other than as expressly set forth herein.

 

100

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12.10       Assignment and Successors.  Neither this Agreement nor any
obligation of a Party hereunder may be assigned by either Party without the
consent of the other which shall not be unreasonably withheld, except that each
Party may assign this Agreement and the rights, obligations and interests of
such Party, (i) in whole or in part, to any of its Affiliates, or (ii) to any
purchaser of all or substantially all of its assets to which this Agreement
relates or to any successor corporation resulting from any merger,
consolidation, share exchange or other similar transaction.

 

12.11       Force Majeure.  Neither DS nor ARQULE shall be liable for failure of
or delay in performing obligations set forth in this Agreement, and neither
shall be deemed in breach of its obligations, if such failure or delay is due to
a Force Majeure.  In event of such Force Majeure, the Party affected shall use
reasonable efforts to cure or overcome the same and resume performance of its
obligations hereunder.

 

12.12       Interpretation.  The Parties hereto acknowledge and agree that:
(a) each Party and its counsel reviewed and negotiated the terms and provisions
of this Agreement and have contributed to its revision; (b) the rule of
construction to the effect that any ambiguities are resolved against the
drafting Party shall not be employed in the interpretation of this Agreement;
and (c) the terms and provisions of this Agreement shall be construed fairly as
to each Party and not in a favor of or against either Party, regardless of which
Party was generally responsible for the preparation of this Agreement.  In
addition, unless a context otherwise requires, wherever used, the singular shall
include the plural, the plural the singular, the use of any gender shall be
applicable to all genders, the word “or” is used in the inclusive sense (and/or)
and the word “including” is used without limitation and means “including without
limitation”.

 

12.13       Integration; Severability.  This Agreement is the entire agreement
with respect to the subject matter hereof and supersedes all other agreements
and understandings between the Parties with respect to such subject matter. 
Notwithstanding the foregoing, this Agreement shall not supersede the
Confidential Disclosure Agreement dated August 11, 2008 (the “Prior CDA”)
between ARQULE and DS, which shall continue to be in full force and effect in
accordance with its terms and conditions.  All disclosures and information from
ARQULE to DS prior to the Effective Date shall be governed by the Prior CDA, and
all disclosures and information from

 

101

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ARQULE to DS after the Effective Date shall be governed by this Agreement.  If
any provision of this Agreement is or becomes invalid or is ruled invalid by any
court of competent jurisdiction or is deemed unenforceable, it is the intention
of the Parties that the remainder of the Agreement shall not be affected.

 

12.14       Further Assurances.  Each of ARQULE and DS agrees to duly execute
and deliver, or cause to be duly executed and delivered, such further
instruments and do and cause to be done such further acts and things, including,
without limitation, the filing of such additional assignments, agreements,
documents and instruments, as the other Party may at any time and from time to
time reasonably request in connection with this Agreement or to carry out more
effectively the provisions and purposes of, or to better assure and confirm unto
such other Party its rights and remedies under, this Agreement.

 

12.15       Effective Date.  The Effective Date shall not occur until such time
as the waiting period under the HSR Act shall have expired or earlier been
terminated; provided, that, (a) no injunction (whether temporary, preliminary or
permanent) prohibiting consummation of the transactions contemplated by this
Agreement or any material portion hereof shall be in effect; and (b) no
requirements or conditions shall have been imposed in connection therewith that
are not otherwise reasonably satisfactory to the Parties (collectively, the “HSR
Conditions”).

 

[Remainder of page intentionally left blank.]

 

102

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives.

 

 

 

ARQULE, INC.

 

 

 

 

 

 

 

 

By:

/s/ Paolo Pucci

 

 

 

 

 

Name:

Paolo Pucci

 

 

 

 

 

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

DAIICHI SANKYO CO., LTD.

 

 

 

 

 

 

 

 

 

By:

/s/ Takashi Shoda

 

 

 

 

 

 

Name:

Takashi Shoda

 

 

 

 

 

 

Title:

President and Chief Executive Officer

 

103

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SCHEDULE 1

 

DESCRIPTION OF ARQ 197

 

ARQ 197 is a totally synthetic small molecule having a *.

 

Chemical Name:

*

 

Molecular Weight:

*

 

Molecular Formula:

*

 

 

1-1

--------------------------------------------------------------------------------

 

SCHEDULE 2

 

ARQULE PATENT RIGHTS

 

Country/Code

 

Application Number

 

Filed

 

Publication
Number

 

Publication
Date

*

 

*

 

*

 

 

 

 

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

 

 

 

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

 

 

 

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

 

 

 

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

 

 

 

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

 

 

 

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

 

 

 

*

 

*

 

*

 

 

 

 

*

 

*

 

*

 

 

 

 

*

 

*

 

*

 

 

 

 

*

 

*

 

*

 

*

 

*

*

 

*

 

*

 

*

 

*

 

2-1

--------------------------------------------------------------------------------

 

SCHEDULE 3

 

MATERIAL TERMS TO BE INCLUDED IN

 

CO-COMMERCIALIZATION AGREEMENT

 

The Co-Commercialization Agreement to be negotiated by the Parties shall contain
the following material terms in addition to the provisions set forth in
Section 3.12.1(c)(i) of the LICENSE, CO-DEVELOPMENT AND CO-COMMERCIALIZATION
AGREEMENT.  Capitalized terms used in this Schedule 3 and not otherwise defined
have the meanings given to them in the Agreement.

 

1.             Co-Commercialization Rights.

 

(a)           All Detailing calls shall be made in such markets as the USJMC
reasonably considers to be appropriate for the successful Commercialization of
Co-Commercialized Products based on objective, quantifiable information and
market research data with the objectives of allocating to each of ARQULE and DS
target audience and accounts from which each such Party will have the
opportunity to attain its Detailing target.  The Parties recognize that it may
be necessary from time to time to reassign individual accounts and/or target
audience between the Parties and the USJMC shall be entitled to review the
allocation of accounts as it reasonably determines to be appropriate.

 

(b)           Each Party shall use Commercially Reasonable Efforts to execute
its responsibilities under each Co-Commercialization Plan, consistent with the
applicable budget and in accordance with all Applicable Laws, and to cooperate
diligently with each other in carrying out such Co-Commercialization Plan.

 

(c)           Except as otherwise specified in the Agreement or the
Co-Commercialization Agreement, all decisions of the USJMC regarding the
Co-Commercialization of Co-Commercialized Products (including, without
limitation, managed care strategy) shall, if referred to the JSC for resolution
of disagreements, be DS Decisions.

 

3-1

--------------------------------------------------------------------------------

 

2.             Integrated Sales Force.

 

(a)           ARQULE and DS shall use an integrated sales force to Detail each
Co-Commercialized Product.  ArQule shall provide a sales force (secondary sales
force) as set forth in Section 3.12(c)(i).  The ARQULE salesforce shall be
deployed in overlap in high potential territories (as identified by ZS mapping)
already covered by DS sales force (primary sales force).  The aggregate number
of PDE’s for the primary and secondary sales force as well as the respective
deployment will be determined by the USJMC and established pursuant to the
Co-Commercialization Plan.

 

(b)           Each Party shall be responsible for ensuring that its sales
personnel Detail each Co-Commercialized Product in a manner consistent with the
Co-Commercialization Plan and/or the decisions of the USJMC.  In performing
their respective Detailing obligations hereunder, each of the Parties agrees to
(i) use sales personnel with an experience profile appropriate for the target
audience and Detailing role as described in the Co-Commercialization Plan and
(ii) in addition to DS providing the infrastructure contained in Section 8(c),
provide its own sales management organization and infrastructure for its sales
personnel.  All ARQULE sales personnel will be recruited by ARQULE at ARQULE’s
sole expense, and all DS representatives will be recruited by DS at DS’s sole
expense.

 

(c)           Each Party shall provide Scientific Affairs Liaisons (“SALs”), in
proportion to the number of sales personnel provided by them.  DS will manage
the SALs, develop the training program for SALs and train the SALs at DS’s
expense.

 

(d)           The Parties will strive to establish a transparent and compatible
sales reporting system for Co-Commercialized Products to facilitate call
planning and sales personnel activities, and all costs related to such
integration shall be borne by DS.

 

3.             Co-Commercialization Plan.

 

(a)           Preparation of Annual Co-Commercialization Plan.  The USJMC will
prepare and amend the Co-Commercialization Plan (including the related budget)
and update the Co-Commercialization Plan (and related budget) as set forth in
the Agreement.

 

(b)           Reporting.  DS shall provide an update on the performance of the
Co-Commercialization Plan to the USJMC no less frequently than quarterly.

 

3-2

--------------------------------------------------------------------------------

 

(c)           Detail Audit Rights.  Each of DS and ARQULE shall maintain written
records of Details performed for a period of * (*) years from the date of
performance.  Each Party shall have the right to inspect such records of the
other Party to verify Detailing reports provided to the USJMC under the
Co-Commercialization Agreement.  Each Audited Party shall make its records
available for inspection by appropriate representatives of the Auditing Party
during regular business hours at such place or places where such records are
customarily kept, upon reasonable notice from the Auditing Party, solely to
verify the accuracy of such statements.  Such inspection right shall not be
exercised more than once in any Calendar Year.  All information concerning such
statements, and all information learned in the course of any audit or
inspection, shall be Confidential Information of the Audited Party.  The
Auditing Party shall pay the costs of such inspections, except that in the event
there is any downward adjustment in the number of Details shown by such
inspection of more than * percent (*%) of the number of Details reported in such
statement, the Audited Party shall pay the costs of such inspection.

 

4.             Control Over Marketing, Advertising and Detailing.

 

(a)           DS shall be responsible for the creation, preparation, production
and reproduction of all marketing or promotional materials, as approved by the
USJMC pursuant to procedures and timelines to be mutually agreed upon,
consistent with the Co-Commercialization Plan. Whenever marketing or promotional
materials are presented and described to the medical community (including, for
example, the physician, pharmacy, governmental, reimbursement and hospital
sectors), the Parties will be presented and described as joining in the
promotion of the Co-Commercialization Product in the United States.  All
marketing or promotional materials will state this arrangement and will display
the names and logos of the Parties with equal prominence, as and to the extent
permitted by Applicable Laws.

 

(b)           Neither Party shall engage in any advertising or use any label,
package, literature or other written material in connection with a
Co-Commercialized Product in the Co-Commercialization Territory, unless the
specific form and content thereof is approved by the USJMC.

 

(c)           General public relations materials of either Party need not be
approved by the USJMC, but all representations and statements pertaining to
Co-Commercialized Products

 

3-3

--------------------------------------------------------------------------------

 

that appear in general public relations materials of ARQULE or DS and include
subject matter not previously approved by the USJMC shall be subject to the
approval of the USJMC.

 

(d)           Each Party shall annually certify to the other Party that its
field sales force (including persons responsible for managing the field sales
force) is properly trained with respect to both C-Commercialized Product
information and compliance with Applicable Laws.

 

5.             Sales Efforts in the U.S. Territory.  As part of each
Co-Commercialization Plan for the U.S. Territory, the USJMC shall determine the
targeted level of sales of the applicable Co-Commercialized Product for the
target audience for the Calendar Year covered by such Co-Commercialization Plan.
The Co-Commercialization Plan shall include the number of Details and the
allocation between the Parties of such Details to the defined target audience. 
The Co-Commercialization Plan shall also establish a minimum and maximum number
of total Details by position (i.e., first or second position) to be conducted by
the Parties each year for the Co-Commercialized Product. During the launch
period for a Product for an Indication, a majority of Details will be in the
first position.  The Co-Commercialized Product shall be included in each Party’s
respective sales incentive bonus program for the corresponding sales
representatives, with specified links to sales performance.  The Parties shall
allocate physicians in the Co-Promotion target audience in an unbiased manner
based on objective, quantifiable information and market research data with the
objectives of allocating to each Party those physicians in the Co-Promotion
target audience with the appropriate Detailing frequency to optimize the
penetration of such Co-Commercialized Product and achieve such Co-Promotion’s
sales target.  The Parties recognize that it may be necessary from time to time
to reassign individual medical professionals in the target audience to optimize
the targeted market opportunity, and, as a result, the USJMC shall be entitled
to review the allocation of medical professionals in the target audience as it
reasonably determines to be appropriate.  Neither Party may utilize Third Party
contracted sales representatives without the express written consent of the
other Party.  Such consent shall not be unreasonably withheld and shall be
deemed given if not expressly denied in writing within fifteen (15) days of a
request for such consent.

 

6.             Performance Criteria/Detailing Shortfall.  The Parties shall
agree on criteria for measuring each Party’s performance under the Co-
Commercialization Agreement.

 

3-4

--------------------------------------------------------------------------------

 

7.             Training Program.  DS shall (a) develop a training program for
the promotion of all Co-Commercialized Products in the U.S. Territory and
(b) train all sales personnel of both Parties to be used for the
Co-Commercialization of Co-Commercialized Products in the U.S. Territory prior
to commencement of Detailing.  The Parties agree to utilize such training
programs on an ongoing basis to assure a consistent, focused promotional
strategy and all such training shall be carried out at a time that is mutually
acceptable to ARQULE and DS.  No sales personnel of either Party may Detail a
Co- Commercialized Product unless such person successfully completes the
training program described in this Section 7.  The costs of such training
programs (including, without limitation, the out-of-pocket costs of the
development, production, printing of such training materials) shall be borne by
DS.

 

8.             Co-Promotion Mechanism.

 

(a)           Sales.  All sales of Co-Commercialized Products in the U.S.
Territory shall be booked by DS.  If, during the term of the Co-Promotion
Agreement, ARQULE receives orders from customers for a Co-Commercialized
Product, it shall refer such orders to DS.

 

(b)           Processing of Orders for Co-Commercialized Products.

 

(i)            DS shall have sole responsibility for arranging for the
distribution and warehousing of Co-Commercialized Products and for all billing
and collections for Co-Commercialized Products.

 

(ii)           All orders for Co-Commercialized Products received and accepted
by DS during the term of the Co-Promotion Agreement shall be executed by DS in a
reasonably timely manner consistent with the general practices applied by it in
executing orders for other pharmaceutical products sold by it or its Affiliates.

 

(iii)          DS shall have the discretion to reject any order received by it
for a Co-Commercialized Product; provided, however, that DS shall not reject
such orders on an arbitrary basis, but only with reasonable justification and
consistent with the general policies applied by it with respect to orders for
other pharmaceutical products sold by it or its Affiliates.

 

(iv)          DS shall comply with all Applicable Laws in selling any
Co-Commercialized Product.

 

3-5

--------------------------------------------------------------------------------

 

(c)           DS shall supply the following functions in relation to the
Co-Commercialization of Co-Commercialized Product (i) customer
operations/service; (ii) production forecasting and inventory control;
(iii) strategic contracting (rebates, Medicaid, Medicare, contract analysis);
(iv) managed care internal management (including managed care account managers),
(v) managed care external distribution, (vi) sales operations/services,
(vii) freight, (viii) accounts payable, (ix) credit and collections, (x) state
and federal government affairs representatives, (xi) reimbursement of Medicare
and Medicaid expenses and (xii) operation of a vendor hotline.

 

9.             Regulatory Matters.

 

(a)           DS shall furnish ARQULE with efficacy and safety information
reasonably requested by ARQULE to assist ARQULE in promoting the
Co-Commercialized Product in the United States, including without limitation
relevant clinical and safety data included in the NDA for the Co-Commercialized
Product and additional information, if any, related to the efficacy and safety
profile of the Co-Commercialized Product.

 

(b)           DS and ARQULE will have joint responsibility for and will make all
decisions with respect to any recall, market withdrawal, or any other corrective
action related to the Co-Commercialized Product in the United States.  DS will
notify and consult with ARQULE prior to implementation of any such actions that
are reasonably likely to result in a material adverse effect on the
marketability of the Co-Commercialized Product in the United States and shall
consider in good faith any comments ARQULE may have with respect to such
implementation.  DS and ARQULE will be jointly responsible for interactions with
the FDA or other Regulatory Authorities with regard to such corrective action.

 

(c)           In accordance with Section 3.10.4(b), the parties shall exercise
Commercially Reasonable Efforts to execute a mutually satisfactory
pharmacovigilance agreement for the Territory (the “Pharmacovigilance
Agreement”) at least ninety (90) days prior to the date of Commercialization
Regulatory Approval in the United States.  The Pharmacovigilance Agreement shall
provide for, but not be limited to, the exchange of (i) drug safety information;
(ii) Co-Commercialized Product defect information; (iii) reporting data
regarding lack of efficacy; (iv) International Conference on Harmonisation (ICH)
seven (7) and fifteen (15) day reports; (v) the creation and maintenance of a
Master Drug Safety Database; (vi) 

 

3-6

--------------------------------------------------------------------------------

 

evaluations derived from drug safety data; and (vii) such other information and
data as may be reasonably agreed upon by the parties.  DS will be solely
responsible for submitting, recording and storing all data to the FDA and other
appropriate regulatory authorities.

 

(d)           DS will be solely responsible for submitting, recording and
storing all FDA 2253 submissions.

 

10.           Miscellaneous.  Other customary terms, including confidentiality,
indemnification and termination.

 

3-7

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