Exhibit 10.2

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

execution copy

 

MASTER SERVICES AGREEMENT

 

This Master Services Agreement (this “Agreement”) is entered into as of July 20,
2017 (the “Effective Date”) by and between ArQule, Inc., a Delaware corporation
having a place of business at One Wall Street, Burlington, MA 01803 (“ArQule”)
and ARUP Laboratories Inc., a Utah nonprofit organization having its principal
place of business at 500 Chipeta Way, Salt Lake City, UT 84108 (“ARUP”). ArQule
and ARUP may be referred to herein individually as a “Party” and collectively as
the “Parties.”

 

RECITALS

 

WHEREAS, ARUP and its Affiliates are engaged in the business of supplying
specialized assay and Companion Diagnostic development and testing services;

 

WHEREAS, ArQule is pursuing a clinical development program of ARQ 087 in
subjects with Intrahepatic Cholangiocarcinoma (“iCCA”);

 

WHEREAS, pursuant to the terms of a Master Collaboration Agreement (the “MCA”)
dated as of July 20, 2017 by and between ArQule and that certain third party
manufacturer of the *** set forth in Exhibit 1 hereto (the “Supplier”), ArQule
and the Supplier have agreed to commercialize an in vitro diagnostic and/or
companion diagnostic for the ArQule Compound (as defined below) in certain
European and other countries;

 

WHEREAS, ArQule desires to engage and contract for the services of ARUP for the
development, validation, regulatory approval and commercialization of a
Companion Diagnostic assay in the United States (as defined below) that meets
FDA requirements for use by ArQule in the above identified clinical development
program and ARUP is willing to provide such services, on the terms set forth
herein; and

 

WHEREAS, following validation and regulatory approval of the Companion
Diagnostic test, ARUP will commercialize the test in accordance with the terms
to be included in a Statement of Work to be executed by the Parties.

 

NOW, THEREFORE, In consideration of the above recitals and mutual covenants
contained herein, the Parties agree as follows:

 

1.          Definitions. As used in this Agreement:

 

1.1           “Applicable Laws” means all relevant United States federal, state
and local laws, statutes, rules, and regulations including any rules,
regulations or requirements of any Regulatory Authority, that are applicable to
a Party’s activities hereunder.

 

1.2           “Affiliate” means, with respect to a Party, a person or business
entity that directly or indirectly controls, or is controlled by, or is under
common control with, that Party. For purposes of this definition, the term
“control,” including the terms “controlled by” or “under common control with,”
means (a) owning fifty percent (50%) or more of the voting stock of a company or
(b) the possession of, directly or indirectly, the capability to control the
direction of the management and policies through the ownership of voting
securities or control the board of directors or equivalent governing body of an
organization.

 

 Page 1 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

1.3           “ArQule Background Patents” means any Patents Controlled by ArQule
that contain one or more claims that cover ArQule Background Know-How.

 

1.4           “ArQule Background Know-How” means any Know-How that (a) is
Controlled by ArQule as of the Effective Date and/or during the Term, (b) Covers
the ArQule Compound and/or any ArQule Materials and (c) is necessary or useful
for ARUP to perform the Project. For purposes of clarity, ArQule Background
Know-How (i) shall not include any ArQule Inventions and (ii) shall include,
without limitation, any Know-How that is specifically described as ArQule
Background Know-How in any Scope of Work.

 

1.5           “ArQule Compound” means the proprietary compound of ArQule
designated by ArQule as ARQ 087.

 

1.6           “ArQule Contact” means ArQule’s contact person for a particular
Scope of Work as identified in the Scope of Work.

 

1.7           “ArQule Invention” means any Invention that (a) relates to the
composition, synthesis, formulation, mechanism of action and/or use of the
ArQule Compound and/or (b) is a process or method of manufacture of the ArQule
Compound. For purposes of clarity, ArQule Invention shall not include the
Companion Diagnostic.

 

1.8           “ArQule Materials” means all Materials provided by ArQule to ARUP
for use in the Project. For clarity, all ArQule Materials will be described in a
Scope of Work.

 

1.9           “ARUP Background Patents” means any Patents Controlled by ARUP
that contain one or more claims that Cover ARUP Background Know-How.

 

1.10         “ARUP Background Know-How” means any Know-How that is Controlled by
ARUP as of the Effective Date and/or during the Term, and used by ARUP in the
conduct of the Project. For purposes of clarity, ARUP Background Know-How (a)
shall not include any ARUP Inventions. and (b) shall include, without
limitation, (i) the PDP and (ii) any Know-How that is specifically described as
ARUP Background Know-How in any Scope of Work.

 

1.11         “ARUP Companion Diagnostic” means the Companion Diagnostic
incorporating the Supplier *** developed by ARUP to be used in conjunction
and/or commercialized with the ArQule Compound in the Territory.

 

1.12         “ARUP IUO” means the diagnostic test developed by ARUP
incorporating the Supplier *** for investigational use only in Clinical Trials
with the ArQule Compound.

 

1.13         “ARUP Invention” means any Invention that (a) does not relate to
(i) the composition, synthesis, formulation, mechanism of action, use or
manufacture of the ArQule Compound and/or (ii) ArQule Background Know-How, and
(b) relates specifically to ARUP Background Know-How including the PDP). For
purposes of clarity, the Companion Diagnostic will be considered an ARUP
Invention and is not considered to be related to the ArQule Compound and/or
ArQule Background Know-How.

 

 Page 2 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

1.14         “ARUP Invention Patents” means any Patents that contain one or more
claims that cover any ARUP Invention.

 

1.15         “Companion Diagnostic” means a diagnostic test that is intended to
be commercialized for use (a) in identifying patients who may or may not be
suitable for treatment with one or more prescription pharmaceutical products, or
(b) otherwise in conjunction with the treatment of patients with a prescription
pharmaceutical product, including a diagnostic test that meets the definition of
“IVD companion diagnostic device” as set forth in FDA’s Guidance for Industry
and Food and Drug Administration Staff on In Vitro Companion Diagnostic Devices
of August 6, 2014.

 

1.16         “Confidential Information” any confidential and/or proprietary
data, information and/or Know-How of a Party that is provided by such Party (the
“Disclosing Party”) to the other Party (the “Receiving Party”) in connection
with this Agreement, whether communicated in writing, electronically or orally,
including any such information relating to any Assay, diagnostic, biomarker,
genetic sequence, compound, Materials, research project, clinical and
preclinical data, work in process, future development, scientific, engineering,
launch, manufacturing, marketing, business plan, financial or personnel matter
relating to such Disclosing Party, its present or future products, sales,
suppliers, customers, employees, investors and business, whether or not marked
or described in writing as “confidential”, “proprietary” or the like. For
purposes of clarity, (a) all ArQule Inventions and ArQule Project Results shall
be Confidential Information of ArQule, and (b) all ARUP Inventions, the PDP and
ARUP Project Results shall be Confidential Information of ARUP. The terms and
conditions of this Agreement and any Scope of Work shall be Confidential
Information of ArQule and ARUP.

 

1.17         “Commercially Reasonable Efforts” means, with respect to an
objective, the reasonable, diligent, good faith efforts of a Party of the type
to accomplish such objective that a company in the industry of a similar size
and profile as such Party would normally use to accomplish a similar objective
taking into account all applicable scientific, commercial and other relevant
factors.

 

1.18         “Control” or “Controlled by” means, with respect to any item of
information, material, Patents or other intellectual property assets, that a
Party owns or that a Party otherwise has the right to grant a license,
sublicense or other right (including a right of reference) to such assets
without violating the terms of any written agreement with any third party.

 

1.19         “ Covers” or Covered by” means, with respect to a particular item
or form of Intellectual Property, that such Intellectual Property cannot be
practiced, used, made, or sold without infringing upon or misappropriating
certain other Intellectual Property rights.

 

1.20         “Deliverables” means the items specifically designated or
characterized as deliverables in a Scope of Work.

 

 Page 3 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

1.21         “Drug Development Failure” means, with respect to the ArQule
Compound, that ArQule has provided ARUP with written notice that it has
discontinued development of such ArQule Compound for any indication.

 

1.22         “FDA” means the United States Food and Drug Administration or any
successor entity thereto.

 

1.23         “Intellectual Property” or “IP” means all intellectual property,
including Patents, Know-How, discoveries, inventions, developments, trade
secrets, techniques, methodologies, modifications, innovations, improvements,
writings, documentation, electronic code, data and rights (whether or not
protectable under state, federal or foreign patent, trademark, copyright or
similar laws) or the like, whether or not written or otherwise fixed in any form
or medium, regardless of the media on which contained and whether or not
patentable or copyrightable; provided, that, “Intellectual Property” shall not,
unless clearly indicated to the contrary, include names, logos, trademarks,
trade dress and service marks.

 

1.24         “Invention” means any Know-How (including, without limitation, any
new and useful process, method of manufacture or composition of matter) that is
conceived or first reduced to practice by ARUP, any Affiliate of ARUP and/or any
Approved Subcontractor in the conduct of the Services.

 

1.25         “Joint Invention” means any Invention that is not an ArQule
Invention nor an ARUP Invention.

 

1.26         “Know-How” means any information, improvements, practices, formula,
trade secrets, techniques, procedures, knowledge, skill, experience and results,
including any information regarding marketing, pricing, distribution, cost,
sales or manufacturing.

 

1.27         “Materials” means those materials supplied by either Party for use
in connection with the Services.

 

1.28          “Patent” means any existing or future: (a) national, regional or
international patent or patent application in any jurisdiction (including any
provisional, divisional, continuation, continuation-in-part, non-provisional,
converted provisional, or continued prosecution application, any utility model,
petty patent, design patent and/or certificate of invention), (b) any extension,
restoration, revalidation, reissue, re-examination and extension (including any
supplementary protection certificate and the like) of any of the foregoing
patents or patent applications, and (c) any ex-U.S. equivalents corresponding to
any of the foregoing.

 

1.29         “Product Development Program” or “PDP” means ARUP’s proprietary
design control program, consisting of standard operating procedures utilized
during general assay (including CDx) development, validation and
commercialization. For clarity, the PDP (a) is the sole property of ARUP, and
(b) is not a component of the Deliverables or the Results.

 

1.30         “Project” means the full range of services to be provided by ARUP
under this Agreement as more fully described in a Scope of Work.

 

 Page 4 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

1.31         “Regulatory Authority” means any United States regulatory
authority, including the FDA, with authority over conduct of the Services and/or
the use of any Deliverables.

 

1.32         “Results” means all data and results produced or developed by ARUP
in the conduct of the Services, including all Reports.

 

1.33         “Services” means the services specifically set forth in a Scope of
Work.

 

1.34         “Specifications” means any procedures, process parameters,
analytical tests and other attributes and written specifications for the
Services and Deliverables included in a Scope of Work.

 

1.35         “Supplier ***” means ***.

 

2.          Services

 

2.1           Scope. The details of the Services to be performed by ARUP under
this Agreement shall be specified in writing on terms and in a form acceptable
to the Parties (each, a “Scope of Work”), and subject to the terms and
conditions set forth in this Agreement. . An initial form of Scope of Work is
attached hereto as Exhibit A. Each Scope of Work shall include, as appropriate,
the scope of the work to be performed, time line, budget, other Deliverables, as
well as a payment schedule. Each Scope of Work shall be subject to all of the
terms and conditions of this Agreement, in addition to the specific details set
forth in any Scope of Work. A Scope of Work may be entered into by ArQule or, as
applicable, an ArQule Affiliate. Affiliates of ArQule may become a Party to this
Agreement by such Affiliate executing a Scope of Work. Any such Affiliate of
ArQule will be bound to the terms and conditions under this Agreement and shall
have the rights and obligations applicable to ArQule under this Agreement for
the respective Scope of Work. Should any provision in any exhibits or
attachments hereto conflict with any of the provisions in this Agreement, this
Agreement shall control unless such conflicting provision specifically states
otherwise.

 

2.2           Performance of Services. ARUP shall use Commercially Reasonable
Efforts, and be diligent, in the performance of Services and in meeting its
obligations hereunder. The Services shall be performed by ARUP in a
professional, workmanlike manner, consistent with industry standards, and in
accordance with Applicable Laws. ARUP shall furnish all tools, equipment,
supplies or other overhead items necessary to perform the Services required
under this Agreement, unless, and only to the extent that, the applicable Scope
of Work specifies otherwise, or to the extent that any Scope of Work
contemplates the transfer of certain Materials or ArQule Intellectual Property
as a necessary component of ARUP performing the Services. ARUP makes no
representations regarding the outcome of the Project, and specifically disclaims
any particular result with respect to FDA approval of the diagnostic method
developed by ARUP, as a “Companion Diagnostic,” under the FDA regulations, or
that such method will be eligible for classification as a “Humanitarian Use
Device,” eligible for a “Humanitarian Device Exemption,” or that any other
outcome of the Project will be achieved with respect to the FDA or any other
Regulatory Authority.

 

 Page 5 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

2.3           Change Orders. Any material change in the details of a Scope of
Work or the assumptions upon which any Scope of Work is based may require
changes in the scope, budget and/or timelines of Services, and shall require a
written amendment to any Scope of Work (a “Change Order”). If at any time during
the Term, either Party reasonably determines that a Change Order is necessary,
such Party shall prepare a Change Order describing in reasonable detail the
nature of such additional Services, and submit such Change Order to the other
Party for its review and written approval. Each such Change Order shall detail
the requested changes to the applicable task, responsibility, duty, budget,
timeline or other matter. The Change Order shall become effective upon the
execution of the Change Order by both Parties. Both Parties agree to act in good
faith and promptly when considering a Change Order requested by the other Party.
Change Orders shall be attached to this Agreement and incorporated herein. A
Change Order may, but need not, include an increase in fees payable under any
Scope of Work.

 

2.4           Project Management.

 

2.4.1           Project Manager. ARUP shall appoint one of its employees as the
“Project Manager” for each Scope of Work. The Project Manager shall be
responsible for all aspects of the Services under such Scope of Work through
completion of such Services. Such Project Manager shall regularly report
progress on such Scope of Work to the ArQule Contact for such Scope of Work, and
coordinate with such ArQule Contact for the performance of the Services. Unless
otherwise agreed, all communications between ArQule and ARUP regarding the
conduct of the Services pursuant to a Scope of Work shall be addressed between
such Project Manager and ArQule Contact. The Project Manager shall respond to
any communication from ArQule with reasonable promptness after his/her receipt
of such communication.

 

2.4.2           Joint Steering Committee. The Parties hereby establish a Joint
Steering Committee (the “JSC”), which will be comprised of an equal number (not
less than three (3)) of representatives of each of the Parties. The JSC will
meet on dates mutually agreed to by the Parties not less than once per Calendar
Quarter, in person or by teleconference which, if in person, shall alternate
between the offices of the Parties. ArQule will be responsible for the costs and
expenses incurred by (i) its representative in participating on the JSC and (ii)
ARUP’s representative in participating on the JSC, as set forth in in the Scope
of Work. The JSC shall be responsible for (a) overseeing the conduct and
progress of the Project; (b) ensuring the exchange of Reports and Results by the
Parties; and (c) attempting to resolve any dispute that may arise between the
Parties with respect to this Agreement. Except as otherwise agreed to by the
Parties, the JSC shall have no authority to make any decisions binding on either
of the Parties with respect to either Party’s performance under this Agreement.

 

2.5           Timelines. The Parties shall use commercially reasonable efforts
to comply with any timelines, milestones, schedules or target dates for
completing the Services or any portion thereof as set forth in such Scope of
Work. If at any time a Party anticipates a delay in meeting such timelines for a
given Scope of Work, said Party shall promptly notify the other Party in writing
of such anticipated delay and the estimated duration of such delay.

 

 Page 6 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

2.6           Materials. To the extent specified in a particular Scope of Work,
ArQule shall promptly provide ARUP with sufficient amounts of the ArQule
Materials for ARUP to perform the Services; provided, that, ARUP hereby
acknowledges that the Supplier *** related to the Companion Diagnostic developed
by ARUP under this Agreement will be provided by the Supplier pursuant to a
separate supply agreement to be executed by and among ARUP, the Supplier and
ArQule (the “*** Supply Agreement”). ArQule acknowledges and agrees that ARUP’s
obligations under this Agreement are contingent upon the execution by ARUP of
the *** Supply Agreement and compliance by the Supplier of its obligations to
provide such Materials to ARUP in accordance with the terms of the *** Supply
Agreement. Except as otherwise set forth in a Scope of Work, ARUP shall use the
ArQule Materials provided by ArQule solely to perform the Services under such
Scope of Work and for no other purpose, and in compliance with ArQule’s
instructions and Applicable Laws. ARUP shall not sell, transfer, disclose or
otherwise provide access to the ArQule Materials provided by ArQule to any
person or entity without the prior written consent of ArQule. Upon written
request following completion or termination of the applicable Services, ARUP
shall return or destroy the ArQule Materials provided by ArQule and, if
destroyed, certify such destruction in writing, upon completion or termination
of the applicable Services.

 

2.7           Records. ARUP will maintain records of all Results obtained or
generated by ARUP in the course of providing Services, including all
computerized records and files, in accordance with Applicable Laws and industry
standards in a secure area. Upon the written request of ArQule, copies of all
such records will be delivered to ArQule or to its designee in such form as is
then currently in the possession of ARUP. In the event any requested records
contain Confidential Information of ARUP, ARUP Background Know-How, or ARUP
Background Patents (collectively, “ARUP Proprietary Information”), ARUP may
redact such ARUP Proprietary Information from the copies provided to ArQule;
provided, that, ARUP shall not redact such ARUP Proprietary Information to the
extent that such information is required by ArQule for regulatory, patent
application and/or patent prosecution purposes. ARUP shall retain originals of
all such records for a period of *** years, or as otherwise required by
Applicable Laws, whichever is longer. In no event will ARUP dispose of any such
records without first giving ArQule*** days’ prior written notice of its intent
to do so; provided, that, ARUP may, retain copies of any records as are
reasonably necessary for regulatory or insurance purposes, subject to ARUP’s
obligations of confidentiality under this Agreement. ArQule will reimburse ARUP
for the reasonable costs and expenses incurred by ARUP for the copying and
shipping of such records to ArQule. In the event ARUP generates or receives
records related to the conduct of a clinical study during the term of this
Agreement or any Scope of Work, ARUP will retain all such records for the longer
of *** years following the completion of the clinical study, or *** years
following the last approval of a marketing application in an ICH region, unless
a longer retention period is required by applicable law. If ARUP is or becomes
unable to comply with this retention period, ARUP will notify ArQule in writing
and shall make such records accessible for ArQule’s review and collection

 

2.8           Reports. ARUP shall keep ArQule regularly informed of the progress
of the Project. Without limiting the generality of the foregoing and unless
otherwise provided in a Scope of Work, ARUP shall promptly, not less than ***
during the Term (and more frequently if required to keep ArQule sufficiently
informed), provide ArQule with (a) reports in reasonable detail regarding the
status of ARUP’s conduct of the Services, (b) all not previously reported
Results, Inventions and original works of authorship generated, conceived,
developed and/or reduced to practice in the performance of the Services and (c)
such supporting data and information as may be reasonably requested from time to
time by ArQule regarding the Project (each such report, a “Report”).

 

 Page 7 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

2.9           Facility Visit. ArQule’s representatives may, upon reasonable
prior written notice, visit the ARUP facility with reasonable frequency during
normal business hours, and subject to ARUP’s policies and practices related to
visitors to ARUP facilities to discuss the progress of the Services and ARUP’s
compliance with the terms of this Agreement. Any information disclosed to ArQule
representatives in writing, orally or by inspection of tangible objects in
connection with any such visit shall be considered Confidential Information of
ARUP and protected as such by ArQule pursuant to the terms of this Agreement.
Notwithstanding the foregoing, except as otherwise agreed by the Parties in any
Scope of Work, absent the prior written approval of ARUP, the number of such
visits shall be limited to no more than *** per calendar year; shall not span
more than *** consecutive business days; and the number of ArQule
representatives onsite during such visits shall exceed no more than *** at any
given time.

 

3.          Independent Contractor Relationship; Certain Liabilities; Taxes;
Subcontracting.

 

3.1           Independent Contractor. ARUP represents and warrants that it is an
independent contractor and not the agent, employee, or franchisee of any other
entity. This Agreement does not constitute a hiring by either Party and nothing
in this Agreement shall be interpreted or construed as creating or establishing
the relationship of employer and employee between ArQule and ARUP, or any person
providing the Services on behalf of ARUP. It is the Parties’ intention that ARUP
have an independent contractor status and that ARUP and its employees,
independent contractors, advisors or Affiliates (hereafter, collectively,
“ARUP’s Workers”) shall not be considered ArQule employees for any purposes,
including, but not limited to, the application of the Federal Insurance
Contribution Act, the Social Security Act, the Federal Unemployment Tax Act, the
provisions of the Internal Revenue Code, any applicable State Revenue and
Taxation Code pertaining to income tax withholding at the source of income, and
the Workers’ Compensation Insurance Code. This Agreement does not create or
evidence any joint venture or partnership of the Parties. ArQule shall not be
liable for any obligations incurred by ARUP unless specifically authorized in
writing. Neither Party shall have any authority to incur, create or assume any
liability or any other obligation, express or implied, in the name of, or on
behalf of, the other Party.

 

3.2           Waiver of Benefits. ARUP, on behalf of ARUP and ARUP’s Workers,
hereby waives and foregoes any right to receive benefits given by ArQule to its
regular employees, including, but not limited to health insurance, paid
vacation, sick leave, profit sharing or 401(k) plan benefits, stock
distributions or any other ArQule employee benefit. ARUP is solely responsible
for the provision of benefits to ARUP’s Workers. This Section 3.1 is effective
independently of the employment status of ARUP or ARUP’s Workers as adjudged for
taxation purposes or for any other purpose.

 

3.3           Taxes/Withholding. ARUP acknowledges that no income, social
security or other taxes shall be withheld or accrued by ArQule for the benefit
of ARUP or ARUP’s Workers. ARUP will be solely responsible for all employment
insurance and taxes, licensing requirements, government approvals and filings,
or any other registration, authorization or permit required in connection with
the performance of its obligations hereunder. ARUP is solely responsible for
determining and fulfilling ARUP’s Federal and State tax obligations including
the filing of tax returns and payment of taxes in accordance with the applicable
provisions of Federal and State law. ARUP is solely responsible for determining
and fulfilling any income tax, social security, workers compensation, and any
other employment-related obligation related to ARUP’s engagement of ARUP’s
Workers.

 

 Page 8 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

3.4           Persons Hired by ARUP. ARUP shall be solely responsible for
hiring, supervising, directing and managing all persons, except for Approved
Subcontractors (as defined in Section 3.4, below), needed to provide the
Services and perform the tasks and duties necessary to complete the Deliverables
described in the operative Scope of Work.

 

3.5           Subcontracting. ARUP may not subcontract with another business or
individual to perform a portion or portions of the Services without the prior
written approval of ArQule, which approval shall not be unreasonably withheld
(each, an “Approved Subcontractor”); provided, that, ARUP may subcontract and
perform the Services or any part of the Services through the efforts of one or
more of ARUP’s medical directors, who are employees of the University of Utah.
The approval by ArQule of any Approved Subcontractor shall not release ARUP from
any responsibility or liability in connection with said Approved Subcontractor
and shall not create a contractual or employment relationship between ArQule and
the Approved Subcontractor. ARUP shall be responsible for the oversight and
supervision of the work and designated activities of each Approved
Subcontractor, including assuring compliance with applicable terms of this
Agreement. ARUP shall ensure that all Approved Subcontractors comply with ARUP’s
obligations under this Agreement including, but not limited to, ARUP’s
obligations concerning confidentiality and ownership of intellectual property.
ArQule shall have no obligation or liability to the Approved Subcontractor under
this Agreement and the Approved Subcontractor shall have no rights or remedies
against ArQule under this Agreement or otherwise. ArQule may, at its discretion
and upon request by ARUP, directly pay an Approved Subcontractor for any
Services performed pursuant to this Agreement and offset the amount of such
payment against any amount owed to ARUP.

 

3.6           Licenses and Access to Third Party Technology. In the event ARUP
concludes, in ARUP’s reasonable discretion, that it is necessary to obtain and
maintain a license(s) or other rights for ARUP to access or use any third-party
Intellectual Property for the development, manufacture, use or commercialization
of the Companion Diagnostic (“ARUP Third Party Intellectual Property”), ARUP
will have the right, in its discretion, to negotiate a license to such ARUP
Third Party Intellectual Property; provided, that, (a) to the extent that any
such license agreement requires (or would be reasonably expected to require)
ARUP to pay consideration greater than $*** in any one calendar year and (b)
ARUP wishes to have ArQule reimburse ARUP for such consideration, ARUP shall (i)
regularly inform ArQule with respect to the negotiation status of such license
agreement, (ii) reasonably consult with ArQule regarding the terms of such
license agreement, (iii) reasonably consider any comments from ArQule on the
terms of such license agreement; (iv) obtain ArQule’s written approval of such
terms before executing such license agreement; and (v) subject to the foregoing,
ArQule shall reimburse ARUP for the consideration paid by ARUP under any such
license agreement. ARUP shall not be held responsible to the extent that ARUP is
unable to obtain rights to any such ARUP Third Party Intellectual Property from
the controlling third parties under economically reasonable conditions.

 

4.          Compensation

 

4.1           Fees. Subject to the terms and conditions of this Agreement,
ArQule shall pay ARUP the fees specified in each Scope of Work (“Fees”), along
with Expenses, as set forth below, as ARUP’s sole and complete compensation for
all Services, Deliverables, and Intellectual Property rights provided by ARUP
under this Agreement. Unless otherwise set forth in a Scope of Work, ARUP shall
invoice ArQule within *** days of the end of each month for Services provided in
such month. All invoices will be addressed and sent to: Accounts Payable,
ArQule, Inc., One Wall Street, Burlington, MA 01803 or via such other method as
may reasonably be requested by ArQule, including electronic invoicing and
payment systems. Each invoice will include a written description of the invoiced
Services with such specific detail as may be reasonably requested by ArQule. The
invoice submitted by ARUP pursuant to this Section 4 shall also include a detail
of all reimbursable Expenses incurred during the period covered by such invoice
as described in Section 4.2.

 

 Page 9 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

4.2           Expenses. Solely to the extent described in the applicable Scope
of Work, ArQule shall reimburse ARUP for any reasonable expenses for travel
undertaken at ArQule’s request, and other out-of-pocket expenses previously
approved by ArQule, that are incurred by ARUP or any of its employees in
performing the Services (the “Expenses”), on the condition that ARUP provides
ArQule with invoices for such Expenses and adequate supporting documentation for
such invoices.

 

4.3           Payments. Unless otherwise expressly provided in the applicable
Scope of Work, payment to ARUP of all undisputed invoiced Fees and Expenses
shall be due within *** days following ArQule’s receipt of the invoice for such
Fees and Expenses submitted by ARUP pursuant to Section 4.1 or 4.2 above.
Payments shall be addressed to:

 

ARUP Laboratories Inc.

Attn: Yurika Oktavianna

500 Chipeta Way, Mail code #133

Salt Lake City, UT 84108

Tel: (801) 583-2787 ext. 2194

Email: yurika.oktavianna@aruplab.com

 

ARUP Tax Identification Number: 87-0403206

 

4.4           Disputed Amounts. For disputed invoices or the disputed portion of
an invoice, ArQule shall use reasonable efforts to provide to ARUP, in writing,
within *** business days, justification for the withheld payment. In the event
the Parties mutually determine that a disputed amount was properly invoiced by
ARUP, ArQule will promptly pay the disputed amount without additional invoicing
by ARUP. ArQule and ARUP shall negotiate in a timely, good faith manner to
resolve billing queries.

 

5.          Audits

 

5.1           Financial Audit and Record Keeping. ARUP shall keep full and
accurate records and accounts of all its Service Fees and Expenses incurred in
connection with this Agreement. All records demonstrating ARUP’s performance
under this Agreement, including but not limited to ARUP’s and any authorized
Approved Subcontractors’ invoices, shall be available for inspection and audit
by ArQule or any independent auditors designated by ArQule at all reasonable
times and upon reasonable notice during the Term of the Agreement and for ***
years thereafter (“Financial Records and Accounts”) solely for the purpose of
confirming ARUP’s performance under this Agreement. Upon request by ArQule and
subject to ARUP’s policies and practices related to visitors to ARUP facilities,
ARUP shall allow ArQule or ArQule’s authorized representatives, at ArQule’s sole
expense, to visit ARUP's facilities during normal business hours to review the
Financial Records and Accounts and/or to make copies of relevant records.. If
ArQule discovers that ARUP has been overcharging ArQule as a result of such
audit, ARUP will refund the amount of any overcharging that is not disputed in
good faith by ARUP within *** days after ArQule’s demand therefor. All Financial
Records and Accounts shall be deemed Confidential Information of ARUP.

 

 Page 10 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions. 

 

5.2           Regulatory Inspections. ARUP shall promptly notify ArQule upon
becoming aware of any regulatory inspections by a duly authorized representative
(“Inspector”) of any Regulatory Authority, including, without limitation, the
FDA, of which it becomes aware and which directly relate to the Services or
Deliverables to be provided under a Scope of Work. ARUP shall provide ArQule
with the following data as soon as practicable: (a) the inspecting entity and
the purpose of the inspection, (b) the name and credential number of the
Inspector, and (c) a copy of the form(s) issued by the Inspector, if any. In the
event that ArQule believes that such inspection is not required by Applicable
Laws or an accrediting or licensing entity providing approval, licensure, or
accreditation to ARUP and and/or that the conduct of such inspection would, if
permitted by ARUP, constitute a breach of ARUP’s confidentiality obligations
under this Agreement, ArQule shall notify ARUP of ArQule’s determination
sufficiently in advance of such inspection that ARUP can notify the inspecting
authority of ArQule’s objection. ArQule will reasonably cooperate with ARUP in
enabling ARUP to communicate ArQule’s objection to such inspection. ARUP shall
have the primary responsibility for preparing any responses relating to the
Materials and/or Services that may be required by the inspecting entity, but
ArQule will provide reasonable assistance, at ArQule’s expense, in aiding ARUP
with respect to such responses. ARUP will consult with ArQule regarding any
response to an inspecting entity relating to the Materials and/or Services. ARUP
shall keep ArQule informed on such inspection and shall provide ArQule with
copies of all correspondence, received or generated pursuant to any such
inspection. Materials, forms and records associated with such inspection will be
made available to ArQule at ARUP’s premises or via webinar. Unless prohibited by
Applicable Laws, ArQule shall have the right to be present at any such
inspections, and where not prohibited by Applicable Laws, shall be present at
such inspections. ARUP shall take any reasonable and necessary actions requested
by ArQule to cure deficiencies as noted during any such inspection.

 

6.          Intellectual Property

 

6.1           In General.

 

6.1.1           Scope of Work. The Parties hereby acknowledge and agree that (a)
the rights and obligations of the Parties under this Agreement with respect to
intellectual property, including the ownership and use of any and all
Inventions, are set forth this Article 6; (b) while the Parties may from time to
time supplement such rights and obligations in this Article 6 through a Scope of
Work, such supplemental provisions shall apply only to the extent such
provisions are not in conflict, or inconsistent with this Article 6; and (c) in
the event of any inconsistency between this Article 6 and the intellectual
property provisions in a Scope of Work, this Article 6 shall control.

 

 Page 11 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

6.1.2           ArQule. ArQule shall have sole and exclusive ownership of all
right, title and interest on a worldwide basis in and to any and all ***. In
connection therewith, ARUP hereby assigns, and shall require its employees to
assign, to ArQule, all right, title and interest in and to all ***.

 

6.1.3           ARUP. ARUP shall have sole and exclusive ownership of all right,
title and interest on a worldwide basis in and to any and all ***. In connection
therewith, ArQule hereby assigns, and shall require its employees to assign, to
ARUP, all right, title and interest in and to all ***, subject to the license to
ARUP Inventions granted to ArQule pursuant to Section 6.3.

 

6.1.4           Joint Inventions. The Parties shall jointly own all Joint
Inventions. Notwithstanding anything to the contrary contained herein or under
Applicable Laws, the Parties hereby agree that either Party may use, license or
sublicense to Affiliates or Third Parties all or any portion of its interest in
the Joint Inventions for any purposes without the prior written consent of the
other Party, without restriction and without the obligation to provide
compensation to any other Party.

 

6.2           Patent Prosecution. ArQule shall be responsible, acting through
patent counsel of its choice, for the filing, prosecution and maintenance of any
Patent applications and Patents claiming or covering any ***, and ARUP shall be
responsible, acting through patent counsel of its choice, for the filing,
prosecution and maintenance of any Patent applications and Patents claiming or
covering any ***; provided, that, nothing in this Agreement shall be construed
as requiring either Party to file, prosecute, or a maintain a patent for an
Invention Controlled by that Party. Each Party shall reasonably cooperate with
the other Party in connection with the same, including, upon the request of the
prosecuting Party, promptly executing any and all Patent applications, formal
documents, assignments, or other instruments which the prosecuting Party deems
necessary or reasonably useful for the filing, prosecution and/or maintenance of
any Patent applications or Patents claiming or covering any such Inventions

 

6.3           Cooperation. During the Term of this Agreement, ARUP shall provide
reasonable cooperation to ArQule and its attorneys and agents in the preparation
and filing of all papers and other documents as may be required to obtain,
perfect, sustain and enforce ArQule’s rights in and to any ***, including but
not limited to, joining in any proceeding to obtain letters, patents,
copyrights, trademarks or other legal rights with respect to any such *** in the
United States and in any and all other countries; provided, that, ArQule shall
bear the expense of such proceedings. Any patent or other legal right with
respect to any *** issued to ARUP personally shall be assigned by ARUP to ArQule
without charge by ARUP. In the event ArQule is unable for any reason, after
reasonable effort, to secure ARUP’s signature on any document needed in
connection with the actions specified in this Section 6.3, ARUP hereby
irrevocably designates and appoints ArQule and its duly authorized officers and
agents as its agent and attorney in fact, which appointment is coupled with an
interest, to act for and on its behalf, for the express and sole purpose to
execute, verify and file any such documents to further the purposes of this
Section 6.3 with the same legal force and effect as if executed by ARUP.

 

 Page 12 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

6.4           Joint Invention Patents. Promptly after the determination that any
Invention is a Joint Invention, the Parties will determine which Party (the
“Prosecuting Party”) will undertake the filing, prosecution and maintenance of
Patents covering such Joint Invention (“Joint Invention Patent”) with respect
thereto, based on the respective expertise of the Parties. If the Parties fail
to agree, the filing, prosecution and maintenance of such Joint Invention Patent
shall be jointly controlled by the Parties, using patent counsel agreed upon by
the Parties. All patent costs incurred in connection with the preparation,
filing, prosecution and maintenance of a Joint Invention Patent shall be shared
equally by the Parties. If one Party (the “Assigning Party”) is not interested,
or not willing to equally share the related patent costs, with respect to any
such Joint Invention Patent in a given country, then: (a) the other Party shall
become the Prosecuting Party upon giving notice to the Assigning Party of its
intention to continue to seek rights for such Joint Invention Patent, (b) upon
receiving written notice from the Prosecuting Party, the Assigning Party shall
assign all of its rights in the Joint Invention Patent to the Prosecuting Party,
and (c) the Prosecuting Party shall at its own cost and expense, file for,
prosecute and maintain such Joint Invention Patent in such country in the
Prosecuting Party’s own name. For all Joint Invention Patents for which the
Parties are sharing costs, the Prosecuting Party shall keep the other Party
reasonably informed of prosecution activities with respect to the Patent
application for a Joint Invention Patent. The Prosecuting Party shall provide
the other Party with a copy of material communications from any Patent authority
regarding such Joint Invention Patents, and shall provide drafts of any material
filings or responses to be made to such Patent authorities a reasonable amount
of time in advance of submitting such filings or responses so that the other
Party may have an opportunity to review and comment.

 

6.5           Project Results. Ownership of Project Results shall be determined
as follows: (a) ArQule shall own all Project Results that relate to ***
(“Patient-Related Project Results”) (the “ArQule Project Results”) and (b) ARUP
shall own all Project Results, other than Patient-Related Project Results, that
relate to *** (“ARUP Project Results”), the PDP and (c) all other Project
Results, including the Project Results, other than Patient-Related Project
Results, that would consist of, constitute or relate to information that falls
within both subsections (a) and (b) above shall be jointly owned by the Parties
(“Joint Project Results”), and each Party shall have the right to use such Joint
Project Results for any and all purposes.

 

6.6           License Grant to ARUP. ArQule hereby grants to ARUP a fully paid,
non-exclusive license under any and all ArQule Background Know-How and ArQule
Background Patents to the extent necessary for ARUP to conduct the Services
during the Term.

 

6.7           License Grant to ArQule. If any ARUP Invention is employed by, is
embodied within, or otherwise materially useful or necessary to use or to
practice, any ***, ARUP shall be deemed to have granted, and hereby grants, to
ArQule a non-exclusive, worldwide, royalty-free, fully-paid, sublicensable,
perpetual license under such ARUP Invention solely to the extent necessary to
use such *** and/or practice such ***.

 

 Page 13 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

7.          Confidentiality

 

7.1           Confidential Information Except to the extent expressly authorized
by this Agreement or by the disclosing Party in writing, during the Term and for
*** years thereafter, a Receiving Party shall maintain the Confidential
Information of the Disclosing Party in strict trust and confidence and shall
disclose such Confidential Information only to its Representatives and use such
Confidential Information only for the purposes provided for in this Agreement.
The term “Representatives” shall mean a Party’s directors, officers, employees,
agents, subcontractors, representatives, or other individuals or entities
controlled by that Party. Without limiting the foregoing, (a) ARUP may use the
Confidential Information received from ArQule only to the extent required to
perform the Services and (b) either Party may use the Confidential Information
received from the other Party to perform its obligations or to exercise its
rights under this Agreement, or for the purpose of determining the receiving
Party’s rights and obligations with respect to such information or this
Agreement, and for no other purposes. Neither Party shall use the Confidential
Information for any purpose or in any manner that would constitute a violation
of Applicable Laws. This Agreement hereby expressly supersedes any previous
agreements between the parties with respect to use or disclosure obligations
that might otherwise apply to any information that may be exchanged pursuant to
this Agreement.

 

7.2           Additional Agreements. Each Receiving Party shall ensure that each
of its Representatives who will have access to any Confidential Information of
the Disclosing Party or perform any Services is under confidentiality and
non-use obligations with respect to the Disclosing Party’s information no less
stringent than those set forth herein.

 

7.3           Exceptions. The obligations of confidentiality and nonuse set
forth in Section 7.1 shall not apply to any specific portion of information that
the Receiving Party can demonstrate by competent written proof: (a) is in the
public domain or comes into the public domain through no fault of the Receiving
Party; (b) is furnished to the Receiving Party by a third party that the
Receiving Party does not know is subject to a duty of confidentiality with
respect thereto; (c) is already known by the Receiving Party at the time of
receiving such Confidential Information; or (d) is independently developed by
the Receiving Party without access to or use of the Confidential Information of
the Disclosing Party.

 

7.4           Authorized Disclosure. Notwithstanding the foregoing in this
Section 7, a Receiving Party may disclose Confidential Information of the
Disclosing Party to the extent such disclosure is required by Applicable Laws,
or pursuant to a valid order of a court or other governmental body having
jurisdiction, provided that the Party required to make such disclosure provides
the other Party with reasonable prior written notice of such disclosure and
reasonable assistance in obtaining a protective order or confidential treatment
preventing or limiting the disclosure and/or requiring that the Confidential
Information so disclosed be used only for the purposes for which the Applicable
Laws require, or for which the order was issued.

 

7.5           Publication; Use of Names.

 

7.5.1           Publication of Results- in General. Under no circumstances may
either Party use the name of the other Party or any of its personnel in any
publication or any form of advertising without such other Party’s prior written
consent, except as necessary to comply with applicable law or regulations. For
the avoidance of doubt, neither Party shall disclose, present, disseminate or
produce any publication that contains information regarding the Services,
Deliverables or any Confidential Information of the other Party without such
other Party’s prior written consent except as provided in this Section 7.5.
ArQule will have the sole right to make, be responsible for, and control the
timing and scope of, any publication, presentation or use, including for
non-confidential discussions with a Third Party (each, a “Publication”) of
ArQule Project Results and ARUP will have the sole right to make, be responsible
for and control the timing and scope of any Publication of ARUP Project Results.
ArQule and its Affiliates shall not publish, present or use ARUP Project Results
or any portion thereof for any Publication without ARUP’s prior written consent,
and ARUP and its Affiliates shall not publish, present or use ArQule Project
Results or any portion thereof for any Publication without ArQule’s prior
written consent.

 

 Page 14 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

7.5.2           Publication of Joint Project Results. Any Publication of any
Joint Project Results must be agreed and approved by both Parties. All
Publications that include Joint Project Results shall be subject to the
provisions of this Agreement relating to confidentiality and non-disclosure. At
least *** days prior to submission of a Publication that includes Joint Project
Results, the publishing Party shall submit to the other Party for review any
proposed Publication. The other Party may review the proposed Publication and
shall provide comments (if any) to the publishing Party no later than *** days
prior to the proposed submission date for the Publication. Upon notice to the
publishing Party that the other Party reasonably believes that one or more
Patent applications should be filed to claim Inventions owned by the other Party
(or Joint Inventions) prior to any Publication, the publishing Party shall delay
the submission or disclosure of the Publication until such Patent application(s)
have been filed; provided, that, the other Party expeditiously files any such
Patent application(s); and, provided, further, that, any such delay of
disclosure or submission of a Publication will not exceed *** days from the date
of receipt of such notice by the publishing Party. If the other Party believes
that any Publication contains Confidential Information belonging to the other
Party, the other Party will notify the publishing Party, which will remove all
references to such Confidential Information prior to publication, presentation
or use. Notwithstanding the foregoing, to the extent ArQule reasonably
determines that the Publication of data or results that constitutes Joint
Project Results is necessary to accurately present the results of any clinical
trial, it shall have the right to make such Publication upon written notice to
ARUP but without ARUP’s prior written consent.

 

7.6           Return of Confidential Information. Upon termination or expiration
of the Agreement, or upon written request of the disclosing Party, the Receiving
Party shall promptly return or destroy all documents, notes and other tangible
materials representing the Disclosing Party’s Confidential Information and all
copies thereof; provided, however, that the Receiving Party may retain a single
archival copy of the Confidential Information for the sole purpose of
facilitating compliance with the surviving provisions of this Agreement. The
foregoing obligation to return or destroy Confidential Information shall not
apply to Confidential Information, such as that stored in routine electronic
backups, the destruction or return of which is economically or technologically
infeasible.

 

7.7           Injunctive Relief. The Parties expressly acknowledge and agree
that any breach or threatened breach of this Section 7 by one Party may cause
immediate and irreparable harm to the other Party that may not be adequately
compensated by damages. Each Party therefore agrees that in the event of such
breach or threatened breach by a Party, and in addition to any remedies
available at law, the non-breaching Party shall have the right to seek equitable
and injunctive relief, without bond, in connection with such a breach or
threatened breach.

 

 Page 15 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

8.          Representations and Warranties

 

8.1           Due Authorization. Each Party represents and warrants that (a) it
has the full power and authority to enter into this Agreement, (b) this
Agreement has been duly authorized, and (c) this Agreement is binding upon it.

 

8.2           No Inconsistent Obligations or Constraints upon ARUP. ARUP
represents and warrants that (a) it is qualified and permitted to enter into
this Agreement; (b) the terms of the Agreement are not inconsistent with its
other contractual arrangements; (c) it has the right to grant all licenses
granted to ArQule in this Agreement; and (d) it shall perform the Services in
accordance with the highest standards of care and diligence practiced by
recognized firms in providing services of a similar nature.

 

8.3           No Debarred Person. Neither ARUP nor any of ARUP’s Workers is
debarred pursuant to the Generic Drug Enforcement Act of 1992, 21 U.S.C. §335a,
as amended, or any similar state law or regulation (collectively “Debarred”),
excluded by the Office of Inspector General pursuant to 42 U.S.C. § 1320a-7, et
seq. or any state agency from participation in any federal or state health care
program (collectively “Excluded”) or otherwise disqualified or restricted by the
FDA pursuant to 21 C.F.R. 312.70 or any other Regulatory Authority (collectively
“Disqualified”). ARUP further represents and certifies that, to the best of
ARUP’s actual knowledge as of the date of execution of this Agreement, after due
inquiry, ARUP, its employees and ARUP’s Workers are not under investigation or
otherwise aware of any circumstances which may result in ARUP being Debarred,
Excluded or Disqualified. ARUP further represents and certifies that it shall
not employ or otherwise use any business or individual that is Debarred,
Excluded or Disqualified to perform any portion or portions of the Services
hereunder. ARUP further represents and certifies that in connection with the
subject matter of this Agreement: (i) none of its ARUP, Its employees or ARUP
Workers is a Foreign Official as defined in the U.S. Foreign Corrupt Practices
Act, (ii) it will not make, accept or request any payment, either directly or
indirectly, of money or other assets to any third party where such payment would
constitute violation of any law, including the U.S. Foreign Corrupt Practices
Act and the UK Bribery Act 2010, (iii) regardless of legality, it shall neither
make, accept nor request any such payment for the purpose of improperly
influencing the decisions or actions of any third party, and (iv) it shall
report any suspected or actual violation of this Section 8.3 to ArQule upon
becoming aware of the same. During the term of this Agreement, ARUP shall
immediately notify Sponsor in writing, pursuant to the Notice provisions
provided herein, of any change in the status of any representation or
certification set forth in this Section 8.3.

 

8.4           No Infringement. ARUP’s performance of the Services under this
Agreement shall not, to the best of ARUP’s knowledge, infringe the intellectual
property rights of a third party. In performing the Services, neither ARUP nor
any of ARUP’s Workers shall knowingly make any unauthorized use of any
confidential or proprietary information of any other party or knowingly infringe
the intellectual property rights of any other party.

 

8.5           Deliverables. The Services performed and the Deliverables shall
conform to the Specifications, requirements, and other terms in the applicable
Scope of Work and this Agreement. In the event that the Services performed
and/or the Deliverables do not conform to the Specifications, requirements, and
other terms in the applicable Scope of Work and this Agreement, without limiting
any other rights or remedies ArQule may have, ARUP will cooperate with ArQule to
identify the failure of conformity and to correct such failure at no additional
charge to ArQule. If the breach has not been fully cured within *** days after
ARUP received notice thereof (or such longer period of time as ArQule may, in
its discretion, give ARUP to cure the breach, by written notice to ARUP), (a)
ARUP will refund all Fees and Expenses previously pre-paid to ARUP for any
milestones yet to be achieved under the applicable Scope of Work, and (b) ArQule
will have the right, in its discretion, to terminate the applicable Scope of
Work and/or this Agreement upon written notice on the expiration of such ***-day
period.

 

 Page 16 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

8.6           Warranty Disclaimer. EXCEPT AS EXPLICITLY SET FORTH IN THIS
SECTION 8, EACH PARTY HEREBY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE. ASIDE FROM THE ASSURANCES SET FORTH IN SECTION 8.5
REGARDING THE PARTIES’ COOPERATION TO OBTAIN DESIRED FUNCTIONALITY WITH RESPECT
TO THE DELIVERABLES, ARUP SPECIFICALLY DISCLAIMS ANY WARRANTY WITH RESPECT TO
THE FUNCTIONALITY OR PERFORMANCE OF ANY DELIVERABLES AND FURTHER DISCLAIMS ANY
ASSURANCE THAT THE DELIVERABLES WILL MEET ANY STANDARDS NECESSARY FOR APPROVAL
BY THE FDA OR ANY OTHER REGULATORY BODY.

 

9.          Insurance. Throughout the term of this Agreement, ARUP and ArQule
shall each secure and maintain, where appropriate, on an occurrence basis,
commercial general liability insurance, professional liability insurance,
employers liability insurance, and such other insurance coverage, in forms and
amounts as may be reasonable and appropriate in the performance of the
obligations assumed hereunder but in no event with limits less than $*** per
occurrence and $*** annual aggregate. Each Party shall also secure and maintain
workers compensation in accordance with all applicable statutory requirements.
Upon request, each Party shall provide to the other certificates of proof of the
required insurance coverage. Each Party shall indemnify and hold harmless the
other Party from any claims which may arise as a result of the Party’s failure
to provide any of the insurance coverage required herein. ARUP and ArQule may
self-insure all or any of these required coverages.

 

10.         Indemnification; Limitation of Liability

 

10.1         By ARUP. ARUP shall indemnify, defend and hold harmless ArQule and
its affiliates and their respective directors, officers, employees, and agents
(the “ArQule Indemnitees”) from and against any and all costs, expenses,
liabilities, damages, losses and harm (including reasonable legal expenses and
attorneys’ fees) arising out of or resulting from any third party suits, claims,
actions, or demands (collectively, “Claims”) to the extent caused by: (a) breach
of this Agreement by ARUP in its performance of obligations hereunder; (b) the
negligence of ARUP or its officers, directors, employees, or agents within the
course and scope of their employment; (c) ARUP’s material breach of its
warranties, or representations under this Agreement; except in each case to the
extent that a Claim arises out of or results from the negligent acts or
intentional omissions of any ArQule Indemnitee or ArQule’s breach of its
obligations, warranties, or representations under this Agreement.

 

 Page 17 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

10.2         By ArQule. ArQule shall indemnify, defend and hold harmless ARUP
and its directors, officers, employees, and agents (the “ARUP Indemnitees”) from
and against any and all Claims to the extent resulting from or caused by: (a)
breach of this Agreement by ArQule in the performance of its obligations
hereunder; (b) the negligence of any ArQule Indemnitee within the course or
scope of their employment; or (c) ArQule’s material breach of its warranties or
representations under this Agreement; (d) the actual or alleged infringement of
any Patents of any Third Party as a result of the use by ARUP of ArQule
Background Know-How or ArQule Background Patents in the conduct of the Services
in accordance with any Scope of Work; or (e) the actual or alleged infringement
of any Intellectual Property of any Third Party as a result of the use by ARUP
of the Supplier *** to develop and commercialize the Companion Diagnostic assay
in the United States as contemplated by this Agreement, except in each case to
the extent that a Claim arises out of or results from the negligent acts or
intentional omissions of any ARUP Indemnitee or ARUP’s modification of ArQule IP
or ARUP’s breach of its obligations, warranties, or representations under this
Agreement.

 

10.3         Indemnification Conditions and Procedures. Each Party’s agreement
to indemnify, defend and hold harmless the other Party is conditioned on the
indemnified Party: (i) providing written notice to the indemnifying Party of any
claim or demand for which is it seeking indemnification hereunder promptly after
the indemnified Party has knowledge of such claim; (ii) permitting the
indemnifying party to assume full responsibility to investigate, prepare for and
defend against any such claim or demand, except that the indemnified Party may
cooperate in the defense at its expense using its own counsel; (iii) assisting
the indemnifying Party, at the indemnifying Party’s reasonable expense, in the
investigation of, preparing for and defense of any such claim or demand. Neither
Party may enter into any non-monetary compromise or settlement, consent judgment
or other voluntary final disposition of any such claim or demand without the
indemnifying Party’s written consent, such consent not to be unreasonably
withheld or delayed.

 

10.4         Defense of Certain Infringement Claims. In the event that any
action, suit or proceeding is brought against ARUP alleging the infringement of
the Intellectual Property of any Third Party by reason of the use by ARUP of the
Supplier *** to develop and commercialize the Companion Diagnostic assay in the
United States as contemplated by this Agreement, ARUP shall notify ArQule
promptly upon the earlier of (a) receipt of service of process in such action,
suit or proceeding or (b) the date on which ARUP becomes aware that such action,
suit or proceeding has been instituted. ArQule shall have the sole right to
defend such action, suit or proceeding at its sole expense, the Supplier shall
have the right to separate counsel at its own expense in any such action, suit
or proceeding and the Parties shall cooperate with each other in all reasonable
respects in any such action, suit or proceeding. ArQule will have the sole right
to settle or otherwise resolve any such action, suit or proceeding without
ARUP’s prior written consent, provided that such settlement does not admit fault
on the part of ARUP or result in any monetary liability on the part of ARUP. Any
settlement costs and/or royalties paid in settlement of any such suit, and the
payment of any damages to the Third Party, shall be borne solely by ArQule. In
the event ArQule concludes, in its sole discretion, that it is unable to settle
or otherwise resolve any such action, including by obtaining a license from the
relevant Third Party, ArQule may terminate this Agreement by providing written
notice to ARUP.

 

10.5         Limitation of Liability. EXCEPT FOR DAMAGES AVAILABLE FOR BREACHES
OF CONFIDENTIALITY OBLIGATIONS UNDER SECTION 7, AND THE INDEMNIFICATION RIGHTS
AND OBLIGATIONS UNDER SECTION 10, (A) NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR INDIRECT DAMAGES
ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY
NOTICE OF THE POSSIBILITY OF SUCH DAMAGES; AND (B) NEITHER PARTY’S AGGREGATE
LIABILITY TO THE OTHER FOR ANY MATTERS OR CLAIMS ARISING OUT OF THIS AGREEMENT
OR THE SERVICES, OTHER THAN A CLAIM FOR FAILURE TO PAY AMOUNTS OWED, SHALL
EXCEED ***.

 

 Page 18 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

11.         Term and Termination

 

11.1         Term. Subject to the provision for early termination set forth
below in Section 11.2 of this Agreement, this Agreement shall commence as of the
Effective Date and shall continue for *** years from the Effective Date (the
“Term”), provided that the terms of this Agreement shall continue to apply to
any Scope of Work entered into prior to the expiration of the Term that expires
after the Term. This Agreement will automatically be renewed for *** year if not
terminated in writing by either Party within *** days of the termination date,
and may be renewed for successive years if no written request for termination is
sent by either Party to the other Party.

 

11.2         Termination.

 

11.2.1           Termination for Material Breach. In the event that either Party
materially breaches its obligations as required hereunder, the other Party shall
have the right to terminate this Agreement upon *** days’ prior written notice
to the defaulting Party specifying the default; provided, however, if said
defaulting Party cures the default within the said *** day period, this
Agreement shall continue in full force and effect as if no default had occurred.
For clarity, a breach that is specific to a Scope of Work shall not serve to
terminate this Agreement, but shall be addressed as set forth below. Any
termination of this Agreement shall automatically terminate any Scopes of Work
or related agreements that may be in effect, unless the Parties agree otherwise
in writing. Either Party may terminate a Scope of Work upon *** days’ notice if
the other party commits a material breach of such Scope of Work and fails to
cure such breach within the notice period.

 

11.2.2           Termination by ArQule. ArQule may terminate this Agreement upon
written notice to ARUP pursuant to Section 10.4 or upon *** days’ prior written
notice to ARUP in the event of a Drug Development Failure.

 

11.3         Effects of Termination

 

11.3.1           Survival. Sections 1, 2.6, 2.7, 3.1, 3.2, 3.3, 3.4, 5.1, 6
(other than Section 6.6), 7, 9, 10 (solely to the extent the Claims can be
attributed to action or omission during the Term), 11.3 and 12 shall survive any
termination or expiration of this Agreement. Termination or expiration of this
Agreement shall not affect either Party’s liability for any breach of this
Agreement it may have committed before such expiration or termination.

 

11.3.2           Return of ArQule Property. Upon the termination of this
Agreement for any reason and written request by either Party, ArQule or ARUP, as
the case may be shall return or destroy the Materials provided by the other
Party under this Agreement, and return to the other Party, or destroy, such
other Party’s Confidential Information, as set forth herein, unless the
applicable Scope of Work or an applicable materials transfer agreement between
the parties expressly provides otherwise.

 

 Page 19 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

11.3.3           Compensation. Upon the expiration or termination of this
Agreement or a Scope of Work, unless the applicable Scope of Work expressly
provides otherwise, ArQule will pay ARUP Fees reflecting the amounts owed for
Services that are completed in accordance with this Agreement prior to the
effective date of such termination and the Results or Deliverables thereof
delivered to ArQule. ArQule shall also reimburse ARUP for non-cancellable
Expenses incurred by ARUP with respect thereto before the effective date of such
termination.

 

12.         General Provisions

 

12.1         Governing Law. This Agreement is made under and shall be construed
according to the laws of the State of Delaware without regard to any conflict of
law principles that would provide for the application of the law of another
jurisdiction.

 

12.2         Severability. If any provision of this Agreement should be held
invalid or unenforceable, the remaining provisions shall be unaffected and shall
remain in full force and effect, to the extent consistent with the intent of the
parties as evidenced by this Agreement as a whole.

 

12.3         Force Majeure. If either Party hereto is prevented from carrying
out its obligations under this Agreement by events beyond its reasonable
control, acts of God or government, natural disasters, including earthquakes or
storms, fire, political strife, public health emergencies, terrorism, failure or
delay of transportation, then such Party’s performance of its obligations
hereunder shall be excused during the period of such events and for a reasonable
period of recovery thereafter, and the time for performance of such obligations
shall be automatically extended for a period of time equal to the duration of
such events; provided, however, that the Party claiming force majeure shall
promptly notify the other Party of the existence of such force majeure, shall
use commercially reasonable efforts to avoid or remedy such force majeure and
shall continue performance hereunder with the utmost dispatch whenever such
force majeure is avoided or remedied. When such circumstances arise, the Parties
shall discuss what, if any, modification of the terms of this Agreement may be
required in order to arrive at an equitable solution.

 

12.4         Resolution of Disputes.

 

12.4.1           In General. The Parties shall first attempt to settle any and
all disputes arising out of or in connection with or relating to the execution,
interpretation, performance, or nonperformance of this Agreement or any other
certificate, agreement, or other instrument between, involving, or affecting the
parties (including the validity, scope, and enforceability of this agreement)
(each, a “Dispute”) through good faith negotiation before resorting to
litigation. The Parties shall conduct and complete such good faith negotiation
involving substantive participation by senior management for each party within
*** days of a Dispute notice, which shall set forth the nature of any dispute
between the Parties. All Dispute notices shall be sent in accordance with the
notice provision herein. Parties, upon written agreement, can adjust time limits
within this Section 12.4.

 

12.4.2           Disputes Under *** Supply Agreement. Notwithstanding anything
to the contrary in this Agreement or in the *** Supply Agreement, any Dispute
that arises under the *** Supply Agreement shall be resolved in accordance with
§ 19 of the *** Supply Agreement, subject to the following:

 

 Page 20 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

(a)          Each Party shall bear its own costs and expenses, including
attorneys’ fees, in connection with any arbitration conducted under §19 of the
*** Supply Agreement; provided, that, (i) ArQule shall reimburse ARUP for the
reasonable costs and expenses incurred by ARUP in connection with any such
arbitration, including ARUP’s reasonable attorneys’ fees and costs
(collectively, “ARUP Arbitration Costs”), solely to the extent that (A) the
Dispute that is the subject of the arbitration (1) is initiated by the Supplier
and (2) does not involve a claim that arises out of, or results from, the
alleged breach by ARUP of this Agreement or the alleged negligent acts or
intentional omissions of ARUP outside of the course of ARUP’s performance under
the *** Supply Agreement and (B) ARUP provides written notice to ArQule of any
Dispute for which is it seeking reimbursement promptly after ARUP has knowledge
of such Dispute; and (ii) ArQule shall reimburse ARUP for ARUP Arbitration Costs
to the extent that the Dispute that is the subject of the arbitration is for any
reason not covered by subsection (i), including any Dispute that is being
defended by ARUP in good faith; provided, that, ArQule’s obligation to reimburse
ARUP for ARUP Arbitration Costs under this Section 12.4.2(a) shall not exceed
$*** in the aggregate.

 

12.5         No Assignment. ARUP may not assign its rights or obligations under
this Agreement without the prior written consent of ArQule, which consent may be
given or withheld in ArQule’s sole and absolute discretion; provided, that, ARUP
may assign its rights or delegate its obligations under this Agreement without
such consent to (i) any Affiliate or (ii) its successor in interest in
connection with any merger, consolidation, or sale of all or substantially all
of the assets of ARUP. ArQule may not transfer or assign this Agreement or any
Scope of Work, or any of its rights and obligations under this Agreement or any
Scope of Work, in whole or in part, without the consent of ARUP, provided that
such consent shall not be unreasonably delayed, conditioned, or denied.
Notwithstanding the foregoing, ArQule may transfer or assign this Agreement or
any Scope of Work, or any of its rights and obligations under this Agreement or
any Scope of Work, in whole in in part, (a) without the consent of ARUP to any:
(i) Affiliate; (ii) wholly owned subsidiary or successor in interest; (iii) any
third party with which it merges, or consolidates, or to which it transfers all
or substantially all of its assets to which this Agreement relates and (b) with
the prior written consent of ARUP, which will not be unreasonably withheld to
any third party licensee of ARQ 087. In the case of any permitted assignment or
transfer of or under this Agreement, this Agreement shall be binding upon and
shall inure to the benefit of the respective permitted successors and assigns of
each of the Parties hereto (if any). No person who is not a Party shall have any
rights hereunder as a third-party beneficiary or otherwise.

 

12.6         Notices. Each Party will deliver all notices or reports permitted
or required under this Agreement in writing and will be sent by personal
delivery or reputable expedited delivery service with signature required. All
such notices or reports will be deemed given upon receipt or refusal of
delivery. Such notices shall be addressed to the Party concerned at the
addresses set forth below or at such other addresses as may be furnished in
writing to the other party hereto. Each Party may change its address for receipt
of notice by giving notice of such change to the other Party.

 

If to ArQule:   ArQule , Inc.   One Wall Street   Burlington, MA 01803

 

 Page 21 of 27 

 

 

Confidential Materials omitted and filed separately with the Securities and
Exchange Commission.
***Triple asterisks denote omissions.

 

  Attention:  Ron Savage   Title:  Senior Director, Preclinical Development  
Tel: 781-994-0300   Email: rsavage@arqule.com   Fax Number:       With a copy to
Peter S. Lawrence   Email: plawrence@arqule.com     If to ARUP: ARUP
Laboratories Inc.   500 Chipeta Way, Mail code #209   Salt Lake City, UT 84108  
Attention:  Karen A. Heichman, PhD   Director, PharmaDx   Tel: (801) 584-5068  
Fax Number: (801) 584-5207

 

12.7         Remedies. The rights and remedies provided to each Party in this
Agreement are cumulative and in addition to any other rights and remedies
available to such Party at law or in equity.

 

12.8         Headings. The headings and section identifiers contained in this
Agreement are for convenience of reference only, shall not be deemed to be a
substantive part of this Agreement and shall not be referred to in connection
with the construction or interpretation of this Agreement.

 

12.9         Waiver. All waivers must be in writing and signed by the Party to
be charged. Any waiver or failure to enforce any provision of this Agreement on
one occasion will not be deemed a waiver of any other provision or of such
provision on any other occasion.

 

12.10         Entire Agreement; Amendments. This Agreement, including the Scopes
of Work hereunder, constitutes the final, complete and exclusive agreement of
the Parties with respect to the subject matter hereof and supersedes all prior
and contemporaneous agreements, communications, negotiations or understandings
between the Parties with respect to the matters addressed herein. No
modification of or amendment to this Agreement will be effective unless in
writing and signed by all Parties.

 

12.11         Counterparts. This Agreement may be executed in one or more
counterparts (including by facsimile or .pdf), each of which shall constitute an
original and all of which, when taken together, shall constitute one agreement.

 

Signature Page to Follow

 

 Page 22 of 27 

 

 

In Witness Whereof, the Parties have executed this Master Services Agreement as
of the Effective Date.

 

ArQule, Inc.   ARUP Laboratories Inc.       Signed:   Signed:       /s/ Peter S.
Lawrence     Peter S. Lawrence   /s/ Sherrie L. Perkins President and Chief
Operating Officer   Sherrie L. Perkins, MD, PhD           Senior Vice President
          Director, Research & Development           Chief, Clinical Pathology

 

Signature Page to Master Services Agreement

 

 Page 23 of 27 

 

 

Exhibit A

 

Form Scope of Work

 

This Scope of Work is incorporated into the Master Services Agreement dated
[month] [day], [year] by and between ArQule and ARUP (for the purposes of this
Scope of Work, the “Agreement”). This Scope of Work describes Services and
Deliverables to be performed and provided by ARUP pursuant to the Agreement. In
the event of any conflict between the Agreement and any provision of this Scope
of Work, the Agreement will control unless the Parties’ intent to alter the
terms of the Agreement is expressly set forth in such provision, and such
alteration shall only apply to this Scope of Work and shall not be construed as
an amendment to the terms of the Agreement. All capitalized terms used and not
expressly defined in this Scope of Work will have the meanings given to them in
the Agreement.

 

Approach

[DESCRIBE METHODS/PROCESSES/TASK SUMMARY of the Services – if a proposal was
provided, this is most likely outlined in the proposal and can be copied here]

 

Deliverables

[DESCRIBE EXACTLY WHAT IT IS THAT ARQULE IS RECEIVING AS A RESULT OF THE
SERVICES]

 

Project Results

[DESCRIBE ITEMS RESULTING FROM THE PERFORMANCE OF THE SCOPE OF WORK THAT WILL BE
OWNED PURSUANT TO THE PROJECT RESULTS SECTION IN THE AGREEMENT]

 

Intellectual Property

Pursuant to section 6 of the Agreement, the Parties intend that the following
provisions control with respect to Parties’ respective rights to intellectual
property.

[DESCRIBE IP RIGHTS AND OBLIGATIONS]

 

[optional] Obligations of ArQule

[DESCRIBE EXACTLY WHAT, IF ANYTHING, ARQULE MUST PROVIDE SO THAT ARUP CAN
SUCCESSFULLY PROVIDE SERVICES]

 

Project Assumptions

 

1)With respect to any intellectual property license reasonably necessary for
ARUP to perform the Services contemplated hereunder, such license shall be
readily available and will be timely procured at ArQule’s expense.

 

 

 

 

[optional] Specifications

 

Points of Contact

For ArQule:

ArQule

Address

Attention:

Tel:

Email:

 

For ARUP:

ARUP Laboratories, Inc.

500 Chipeta Way

Salt Lake City, UT 84108

Attention: Karen A. Heichman, PhD

Director, PharmaDx

Phone: (801) 584-5068

Email: karen.heichman@aruplab.com

 

Budget

[DESCRIBE ENTIRELY WHAT IT IS THAT ARQULE IS AGREEING TO PAY FOR WITH RESPECT TO
THE SERVICES – if a proposal was provided, this is most likely outlined in the
proposal and can be copied here]

 

Payment Schedule

 

[PICK ONE OF THE THREE LISTED BELOW]

Time & Materials Basis: as invoiced by ARUP at the rates set forth below;
provided, however, that ARUP will obtain ArQule’s prior written approval before
providing more than [_____ dollars ($__.__)] worth of Services.

 

Rates:

 

Fixed Fee Basis: Total fee of [_____ dollars ($__.__)] payable in [_____ (__)]
installments of [_____ dollars ($__.__)] each.

 

Milestone Fee Basis: Fees payable in accordance with the table immediately below
and the development schedule of this Scope of Work.

 

Milestone   Fee (US$)                  

 

 

 

 

Term

The term of this Scope of Work will begin on ___________ and shall terminate on
____________.

 

ArQule, Inc.   ARUP Laboratories, Inc.       Signed:   Signed:       Name:  
Name:       Title:   Title:       Dated:   Dated:

 

 

 

 

EXHIBIT 1

 

Supplier ***

 

‒   ‒ *** (the “Product”)   ***       ***       This Product is designed for in
vitro diagnostic use only. This Product is a ready-to-use reagent (i.e. "one
vial solution").       Interpretation of the results must be made within the
context of the patient´s clinical history with respect to further clinical and
pathologic data of the patient by a qualified pathologist.       The result
should be considered in the clinical context (including therapeutical decision).
Thus, this Product is not in relation to a clinical therapy, and, thus, it is
not a companion diagnostic.     ‒ Products will be delivered with minimum shelf
life mentioned in the *** Supply Agreement.