Exhibit
10.20


 


CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
ASTERISKS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.


 


COLLABORATION
AND LICENSE AGREEMENT


 


THIS COLLABORATION AND LICENSE
AGREEMENT (this “Agreement”)
is entered into as of December 20, 2004 (the “Effective
Date”) by and between ARENA PHARMACEUTICALS,
INC., a Delaware corporation having an office at 6166 Nancy Ridge
Drive, San Diego, CA  92121 (“Arena”), and ORTHO-MCNEIL
PHARMACEUTICAL, INC., a New Jersey corporation having an office at
1000 U.S. Route 202, Raritan, New Jersey 
08869 (“J&J”).  Arena and J&J may each be referred to
individually as a “Party”, and collectively as the “Parties”.


 


RECITALS


 


WHEREAS, Arena
has discovered and developed certain compounds that modulate the activity of a
G-protein coupled receptor referred to by Arena as 19AJ; and


 


WHEREAS, Arena
has expertise and intellectual property related to the above compounds and
19AJ, including assays for identifying compounds that modulate 19AJ; and


 


WHEREAS,
J&J is engaged in the research, development and commercialization of
pharmaceutical products; and


 


WHEREAS,
J&J and Arena desire to enter into a collaborative relationship (as a joint
research agreement in accordance with 35 U.S.C. § 103(c)(3)) to identify
and develop compounds that modulate 19AJ for clinical development and
commercialization by J&J, subject to the terms and conditions set forth
herein.


 


AGREEMENT


 


NOW, THEREFORE,
in consideration of the foregoing premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties agree as follows:


 


1.                                      DEFINITIONS


 


1.1                               “19AJ” means the G-protein coupled
receptor referred to by Arena as 19AJ, as more particularly described in
Exhibit A of this Agreement.


 


1.2                               “Active Compound” means:


 


(a)                                  either
of the lead molecules of Arena known as AR****** and AR******, as more
particularly described in Exhibit A of this Agreement; or


 


(b)                                  any
molecule deemed to be an Active Compound by unanimous written consent of all
members of the JSC; or


 


(c)                                  any
other composition of matter, including a small molecule, protein, antibody, or
other compound:


 


CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY
ASTERISKS


 


1





















 


(i)                                    that
is Controlled by Arena or any of its Affiliates, or is owned or licensed by
J&J or any of their respective Affiliates, as of the Effective Date or at
any time prior to the first anniversary of the end of the Research Term; and


 


(ii)                                that
(1) modulates (including antagonism, inverse agonism, agonism and any
variations thereof), or, in the case of a prodrug, that on administration to a
mammal, generates a species that modulates, 19AJ with an *********** equal to
or less than ** *************** (assay protocol attached in Exhibit B); and (2)
affects or blocks 19AJ ****** ********************** with an **** equal to or
less than *************** (assay protocol attached in Exhibit B); and


 


(iii)                            for
which the activity criteria in subsection (c)(ii) above either:


 


(1)                                 is
known to Arena and/or J&J (or an Affiliate of either of them) as of the Effective
Date; or


 


(2)                                 is
discovered or identified by or on behalf of, or otherwise becomes known to,
Arena and/or J&J (or an Affiliate of either of them) during the Research
Term or the one year period after the end of the Research Term, which shall
include any compound:  (A) that is
generically or specifically described within a claim, describing a genus or
species of compounds the utility of which is given (in the applicable patent or
patent application) as modulation of 19AJ, in any pending or issued Arena
Patent, J&J Patent or Joint Patent filed in the United States or Japan or
as a European Patent Application, or as a Patent Cooperation Treaty (“PCT”) application
designating the United States and the contracting states of the European Patent
Convention, and as to which at least one member of such genus or species is one
of the compounds in subsection 1.2(a), or meets the requirements of
subsections 1.2(c)(i) and 1.2(c)(ii), and (B) provided
that such compound is synthesized and assayed and determined to meet
the requirements of subsection 1.2(c)(ii) by or on behalf of Arena and/or
J&J (or an Affiliate of either of them) prior to the first anniversary of
the end of the Research Term.


 


1.3                               “Affiliate”
means, with respect to a Party, any company or other entity controlled by,
controlling, or under common control with such Party where the term “controlled
by” (with correlative meanings for the terms “controlling” and “under common
control with”) means that the Party owns or controls, directly or indirectly,
at least 50% of the voting power of the subject company or other entity which
voting power in the case of a corporation is entitled to vote for the election
of directors, or otherwise has the actual right and ability to control and
direct the management and business affairs of the subject company or entity.


 


1.4                               “Arena
Know-How” means any Information that (a) is Controlled by Arena on the
Effective Date or during the Research Term and the one year period thereafter,
and (b) relates directly to an Active Compound or is directly useful for
purposes of the Research Program or is necessary for the manufacture, use or
sale of any Collaboration Product, but excluding the Arena Patents and Joint
Patents and Information disclosed therein.


 


1.5                               “Arena
Patent” means any Arena Commercialization Patent or Arena Research Patent.


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


2





















 


(a)                                  “Arena Commercialization Patent”
means any Patent to the extent that the Patent:  (i) is Controlled by
Arena on the Effective Date or at any time during the Term of the Agreement,
and (ii) claims (x) a Selected Compound (including a combination containing a
Selected Compound), or its manufacture or use, or (y) an invention that is
directly useful for the manufacture, use or sale of any Collaboration Product,
but excluding the Joint Patents.


 


(b)                                  “Arena Research Patent” means any
Patent to the extent that the Patent:  (i) is Controlled by Arena on the
Effective Date or during the Research Term and the one year period thereafter,
and (ii) claims (x) an Active Compound (including a combination containing an
Active Compound), or its manufacture or use, or (y) an invention relating
specifically to 19AJ or its use that is directly useful for purposes of the
Research Program, but excluding the Joint Patents.


 


1.6                               “Arena
Technology” means the Arena Patents and Arena Know-How.


 


1.7                               “Business
Day” means a day
on which banking institutions in New York, NY are open for business.


 


1.8                               “Calendar Quarter” means
each one of four time periods in any calendar year comprising approximately a
three-month period which will be determined in accordance with the Johnson
& Johnson Universal Calendar.  The
2004 and 2005 Calendar is attached hereto as Exhibit D.  For any year during this Agreement after
2005, J&J will provide Arena with the then current Johnson & Johnson
Universal Calendar as requested by Arena.


 


1.9                               “Collaboration Invention” means
any Information discovered, developed or created by either Party, or the
Parties jointly, and/or by their respective Affiliates pursuant to work
conducted under the Research Program during the Research Term, or during the
one-year period after the end of the Research Term relating to work done under
the Research Program or Active Compounds.


 


1.10                        “Collaboration Product” means any
pharmaceutical product that contains a Development Compound (or any prodrug,
ester, salt form, stereoisomer, crystalline polymorph, hydrate or solvate
thereof), and including all formulations, line extensions and modes of
administration thereof.


 


1.11                        “Commercial
Sale” means, with respect to a Collaboration Product, the sale of such
Collaboration Product intended for end use or consumption in a country after
the governing health regulatory authority of such country has granted
Regulatory Approval of the Collaboration Product (which will include sales of a
Collaboration Product occurring prior to Regulatory Approval in a country if
such sold Collaboration Products are intended to be used by end user in such
country after Regulatory Approval is obtained in such country).  Sale to an Affiliate or Sublicensee will not
constitute a Commercial Sale unless the Affiliate or Sublicensee is the end
user of the Collaboration Product.


 


1.12                        “Confidential
Information” has the meaning provided in Section 10.1.


 


1.13                        “Controlled”
means, with respect to any Information, Patent or other intellectual
property right, that the applicable Party owns or has a license to such
Information, Patent or other


 


3





















 


intellectual property right and has the ability to
disclose same to the other Party and to grant such other Party a license or a
sublicense (as applicable) under same as provided in this Agreement without violating
the terms of any agreement or other arrangement with any Third Party.


 


1.14                        “Development Compound” means a
Selected Compound that has been selected for further pre-clinical research and
clinical development pursuant to a Drug Evaluation Acceptance, as provided in Section 3.2.


 


1.15                        “Development Costs” means, with
respect to a particular Development Compound, the actual costs and expenses
incurred by or on behalf of a Party in conducting research or development of
the Development Compound under the applicable Early Development Plan or Late
Stage Development Plan or otherwise pursuant to this Agreement.


 


1.16                        “Development Plan” means an Early
Development Plan or a Late Stage Development Plan, as applicable.


 


1.17                        “Diligent Efforts” means carrying out tasks or obligations in
a manner consistent with the efforts the applicable Party devotes to a product
at a similar stage of development or commercialization and of similar market
potential resulting from its own research efforts, based on conditions then prevailing.  A Party that is required to use Diligent
Effort with respect to a task or obligation must:  (i) promptly assign responsibility for such
task or obligation to specific employee(s) who are held accountable for
progress and monitor such progress on an on-going basis, (ii) establish means
for and consistently seek to achieve such task or obligation, and (iii)
consistently make and implement decisions and allocate resources designed to
advance progress with respect to such task or obligation.


 


1.18                        “Drug Evaluation Acceptance” means
the decision by the appropriate committees or personnel of J&J (or its
Affiliate) to select a particular preclinical compound for Drug Evaluation (as
such term is used generally by J&J as of the Effective Date), which means
the decision to transfer a compound from discovery to drug evaluation in order to commence a program of GLP
toxicology, GMP scale-up and/or related pre-clinical studies on such compound
needed to develop the data necessary for preparing and filing an IND for such
compound and subsequent early clinical studies, and as such decision may be
renamed or otherwise referred to by J&J and/or its Affiliate.


 


1.19                        “Early Stage Development” means
the development activities that are conducted in connection with a Development
Compound during the period of time beginning on the date a Development Compound
achieves Drug Evaluation Acceptance through the completion of Phase IIa
Clinical trials and ending at the start of Phase IIb Clinical Trials.


 


1.20                        “Early Development Plan” means the
plan, prepared by J&J and approved by the JSC pursuant to Section 3.2
for a particular Development Compound, for conducting the GLP toxicology and
related work needed to prepare and file an IND for such Development Compound
and for conducting clinical development of such Development Compound through
completion of Phase IIa clinical trials in all appropriate countries and
jurisdictions in the Territory, and including the budget and timeline for all
such work, and as such plan may be updated or modified by the JSC as provided
in Section 3.3.


 


4





















 


1.21                        “EU Major Market Country” means
any of the United Kingdom, France, Germany, Italy or Spain.


 


1.22                        “FDA”
means the United States Food and Drug Administration, or any successor
agency thereto having the administrative authority to regulate the marketing of
human pharmaceutical products or biological therapeutic products, delivery
systems and devices in the United States of America.


 


1.23                        “Field
of Use” means all therapeutic, prognostic, and diagnostic indications and
applications for human and non-human purposes.


 


1.24                        “FTE”
means the equivalent of the work of one (1) employee full time for one (1)
calendar year (consisting of a total of 1880 hours per calendar year) of work
on the Research pursuant to the Research Plan. 
Any employee who devotes less than 1880 hours per calendar year on the
Research Program shall be treated as an FTE on a pro-rata basis calculated by
dividing the actual number of hours worked on the Research Program during such
calendar year by 1880.  Each Party
understands and agrees that the other Party retains complete discretion to
change the identity of any individual employee or consultant devoted to the
Research Program and/or the frequency and the time during which such individual
employee’s or consultant’s efforts are devoted to the Research Program, and
that either Party’s scientists who are working on the Research Program also may
be working (during periods that do not count towards the FTE allocation devoted
to the Research Program) on other of the Party’s independent projects.


 


1.25                        “IND”
means an Investigational New Drug Application filed with the FDA, or the
equivalent application or filing filed with any equivalent agency or
governmental authority outside the United States of America (including any
supra-national such as the European Union) necessary to commence and conduct
human clinical trials in such jurisdiction.


 


1.26                        “Indication” means a
separate and distinct disease, disorder or medical condition that a
Collaboration Product is intended to treat, prevent, cure, or ameliorate, or
that is the subject of a clinical trial on a Development Compound where an
endpoint of the trial is demonstrating an effect by the Development Compound in
treating, preventing, curing, or ameliorating such disease, disorder or medical
condition and where it is intended that the data and results of such clinical
trial (if successful) will be used to support a regulatory submission and
approval that is intended to result in distinct labeling within the indications
section of the label relevant to usage in the disease, disorder or medical
condition that is separate and distinct from another disease, disorder or
medical condition.


 


1.27                        “Information”
means all tangible and intangible (a) information, techniques,
technology, practices, trade secrets, inventions (whether patentable or not),
methods, knowledge, know-how, skill, experience, data, results (including
pharmacological, toxicological and clinical test data and results), analytical
and quality control data, results or descriptions, software and algorithms and
(b) compositions of matter, cells, cell lines, assays, animal models and
physical, biological or chemical material.


 


1.28                        “J&J
Know-How” means any Information that (a) is Controlled by J&J or its
Affiliate on the Effective Date or during the Research Term and the one year
period thereafter,


 


5





















 


and (b) relates directly to an Active Compound or is
directly useful for purposes of the Research Program or is necessary for the
manufacture, use or sale of any Collaboration Product, but excluding the
J&J Patents and Joint Patents and Information disclosed therein.


 


1.29                        “J&J
Patent” means any J&J Commercialization Patent or J&J Research
Patent.


 


(a)                                  “J&J Commercialization Patent”
means any Patent that:   (i) is
Controlled by J&J on the Effective Date or at any time during the Term of
the Agreement, and (ii) claims (x) any Active Compound that is not a Selected
Compound (including a combination containing such Active Compound), or its
manufacture or use, or (y) an invention to the extent relating specifically to
19AJ or modulators thereof that is directly useful for the manufacture, use or
sale of product that contains such Active Compound (which is not a Selected
Compound), but excluding the Joint Patents.


 


(b)                                  “J&J Research Patent” means
any Patent that:   (i) is Controlled
by J&J on the Effective Date or during the Research Term and the one year
period thereafter, and (ii) claims (x) an Active Compound (including a
combination containing an Active Compound), or its manufacture or use, or (y)
an invention to the extent relating specifically to 19AJ or modulators thereof
that is directly useful for purposes of the Research Program, but excluding the
Joint Patents.


 


1.30                        “J&J
Technology” means the J&J Patents and J&J Know-How.


 


1.31                        “Joint
Inventions” means Collaboration Inventions made or discovered by employees
(or contractors) of Arena jointly with employees (or contractors) of J&J
and/or its Affiliate.


 


1.30                        “Joint Research Committee” or “JRC”
has the meaning recited in Section 2.2.


 


1.32                        “Joint
Patents” means all Patents that claim or disclose a Joint Invention.


 


1.33                        “Joint
Steering Committee” or “JSC” means the
committee formed by the Parties pursuant to Section 2.3 to oversee the
Research Program and the Early Stage Development of Collaboration Products, as
more specifically recited in Section 2.4.


 


1.34                        “Late
Stage Development” means the development activities that are conducted in
connection with a Development Compound during the period of time beginning on
the date a Development Compound enters Phase IIb Clinical Trials up to and
including Regulatory Approval.


 


1.35                        “Late Stage Development Plan”
means the plan prepared by J&J pursuant to Section 3.4, with respect
to a particular Development Compound that has completed all needed Phase IIa
clinical trials, for conducting all subsequent clinical development of the
Development Compound through achieving Regulatory Approval in all appropriate
countries and jurisdictions in the Territory, and including the budget and
timeline for all such work.


 


6





















 


1.36                        “NDA”
means a New Drug Application (as more fully defined in 21 C.F.R. 314.5 et seq. or its successor regulation) and all amendments and supplements
thereto filed with the FDA, or the equivalent application filed with any
equivalent agency or governmental authority outside the United States of
America (including any supra-national agency such as in the European Union),
including all documents, data, and other information concerning a
pharmaceutical product which are necessary for gaining Regulatory Approval to
market and sell such pharmaceutical product.


 


1.37                        “Net
Sales” means the **************************************************************************
********************************************, less deductions for the following
to the extent actually allowed or incurred with respect to such sales:


 


(a)                                  *************************************************************************************

***********************************************************************************************************

***********************************************************************************************************

***********************************************************************************************************

************************************


 


(b)                                  *************************************************************************************

***********************************************************************************************************

*****************************************


 


(c)                                  *************************************************************************************

************************************************************************************************


 


(d)                                  *************************************************************************************

************


 


(e)                                  *************************************************


 


Sales of Collaboration Product by and between J&J and its
Affiliates and their distributors and Sublicensees are not sales to Third
Parties and shall be excluded from Net Sales calculations for all purposes
provided that such purchasers resell the product.  Sales of Collaboration Product for use in
conducting clinical trials of Collaboration Product in a country in order to
obtain the first Regulatory Approval of Collaboration Product in such country
shall be excluded from Net Sales calculations but
solely to the extent such sales are at the selling party’s actual
costs.  Net Sales shall be determined in
a manner consistent for all products sold by or on behalf of J&J and in
accordance with applicable U.S. generally accepted accounting principles as consistently
applied across the J&J pharmaceutical product lines.


 


If a particular Collaboration Product contains one or more other active
pharmaceutical drug ingredients in addition to the Development Compound(s) in
such Collaboration Product (a “Combination Product”),
************************************************* ************************************************************************************


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


7





















 


***********************************************************************************************************

***********************************************************************************************************

***********************************************************************************************************

*************************************************************


 


***********************************************************************************************************

***********************************************************************************************************

***********************************************************************************************************

***********************************************************************************************************

**********************************************************************************


 


***********************************************************************************************************

***********************************************************************************************************

***********************************************************************************************************

**********************************************************************************************************


 


Regardless
of which of the above methods is used to determine the fraction, such fraction
cannot in any event be less than 0.5.


 


1.38                        “Patents”
means (a) United States patents, re-examinations, reissues, renewals,
extensions and term restorations, and foreign counterparts thereof, and
(b) pending applications for United States patents, including, without
limitation, provisional applications, continuations, continuations-in-part, divisional
and substitute applications, inventors’ certificates, and extensions, and
foreign counterparts of any of the foregoing.


 


1.39                        “Phase
I Clinical Trial” means that portion of the clinical development program
which provides for the first introduction into humans of a Collaboration
Product with the purpose of determining human toxicity, metabolism, absorption,
elimination and/or other pharmacological action, as more fully defined in 21
C.F.R. § 312.21(a), or its successor regulation, or the equivalent in any
foreign country.


 


1.40                        “Phase
IIa Clinical Trial” means that portion of the clinical development program
which provides for the initial trials of a Collaboration product on a limited
number of patients for the purpose of determining whether the Collaboration
Product affects a surrogate marker or indicator of pharmacological or clinical
activity in the proposed therapeutic indication, as more fully described in 21
C.F.R. § 312.21(b), or its successor regulation, or the equivalent in any
foreign country.


 


1.41                        “Phase
IIb Clinical Trial” means that portion of the clinical development program
which provides for the definitive, well controlled clinical trials of a
Collaboration Product in patients for the purpose of determining the safe and
effective dose range in the


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


8





















 


proposed
therapeutic indication, as more fully described in 21 C.F.R. § 312.21(b),
or its successor regulation, or the equivalent in any foreign country.


 


1.42                        “Phase
III Clinical Trial” means that portion of the clinical development program
which provides for continued trials of a collaboration Product on sufficient
numbers of patients to establish the safety and efficacy of a Product and (if
applicable) generate pharmaco-economic data to support Regulatory Approval in
the proposed therapeutic indication, as more fully defined in 21 C.F.R. § 312.21(c),
or its successor regulation, or the equivalent in any foreign country.


 


1.43                        “Regulatory
Approval” means any and all approvals (including price and reimbursement
approvals, if required prior to sale in the applicable jurisdiction), licenses,
registrations, or authorizations of any country, federal, supranational, state
or local regulatory agency, department, bureau or other government entity that
are necessary for the manufacture, use, storage, import, transport and/or sale
of a particular Collaboration Product in the jurisdiction.


 


1.44                        “Research”
means all the work performed by the Parties or on their behalf under the
Research Program, which is directed towards or in connection with the
discovery, identification, synthesis and preclinical research on Active
Compounds during the Research Term in accordance with the Research Plan.


 


1.45                        “Research
Plan” means the plan for conducting the Research Program, as amended from
time to time by the JSC.  The initial
Research Plan has been agreed upon by the Parties in writing as of the
Effective Date.


 


1.46                        “Research
Program” means a collaborative research program carried out by Arena and
J&J during the Research Term pursuant to Articles 2 and 3 to identify
and conduct pre-clinical research on compounds that ***************** modulate
the activity of 19AJ in a manner that may be useful in treating
**************** type 2 diabetes ****************** ******* and other
Indications***************************************************** ********** as
such program is more fully described in the Research Plan.


 


1.47                        “Research
Term” means the period beginning on the Effective Date and ending on the
2nd anniversary of the Effective Date, as such period may be extended if the
Research Program is extended in accordance with Section 2.13, or earlier
terminated on early termination of this Agreement or the Research Program in
accordance with Article 11.


 


1.48                        “Selected
Compound” means any Active Compound, up to a maximum of ***** ****
compounds, that has been selected by J&J as provided in Section 3.1.  For clarity, all Development Compounds are deemed
Selected Compounds.


 


1.49                        “Sublicensee” means a Third Party
to whom J&J or any of its Affiliates has granted a license or sublicense of
the right to make, have made, import, offer for sale, and/or sell one or more
Collaboration Products.


 


1.50                        “Territory”
means the entire world.


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


9





















 


1.51                        “Term” has the meaning provided in Section 11.1.


 


1.52                        “Third
Party” means any entity other than Arena or J&J or an Affiliate of
Arena or J&J.


 


1.53                        “Valid
Claim” means (a) an unexpired claim of an issued patent within the
Arena Patents, Joint Patents or J&J Patents which has not been found to be
unpatentable, invalid or unenforceable by a court or other authority in the
subject country, from which decision no appeal is taken or can be taken; or
(b) a claim of a pending application within the Arena Patents, Joint
Patents or J&J Patents, which application claims a first priority no more
than seven years prior to the date upon which pendency is determined.


 


2.                                      RESEARCH
PROGRAM  AND COMMITTEE STRUCTURE


 


2.1                               Research Overview.  Commencing on the Effective Date, the Parties
will each use Diligent Efforts to conduct the Research Program on a collaborative
basis and in accordance with this Agreement, with the goal of discovering,
identifying, synthesizing and performing preclinical research on Active
Compounds, and with the further goal of identifying and selecting certain
Active Compounds that are suitable for clinical development by J&J as
Development Compounds and, if Regulatory Approval is obtained, for
commercialization by J&J as Collaboration Products as soon as reasonably
practicable.  The Parties will conduct
the Research Program in accordance with the Research Plan (as amended or
revised by the JRC from time to time) and subject to the oversight of the
JSC.  The Research Plan, among other
things as further specified in Section 2.6, will specify the scientific
direction and research activities, and allocate Research Program
responsibilities and resources between the Parties in a manner consistent with
this Agreement.


 


2.2                               Joint Research Committee.   Promptly after
the Effective Date, the Parties shall form a Joint Research Committee (the “JRC”).
The JRC shall be comprised of 2 representatives of each Party, unless otherwise
agreed to by the Parties.  One member of
the JRC will be selected to act as the chairperson of the JRC, with each
chairperson acting for a term of 12 months. 
The chairperson will be selected alternately by Arena and J&J, and J&J will designate the first
chairperson.  The purpose of the JRC is
to coordinate the Research efforts of the Parties and expedite the progress of
the work being done under the Research Plan. 
The JRC will set specific Research goals, evaluate the results of the
Research, discuss information relating to the Research, assign FTEs their
responsibilities, manage resources and priorities and ensure that there is
appropriate scientific direction for the collaboration of the Parties under the
Research Plan. The JRC may modify the Research Plan as needed and submit it to
the JSC for review and approval. 
Regardless of the number of representatives, each Party will present one
consolidated view and have one vote.  All
decisions of the JRC will be made by unanimous vote, with each Party having one
vote, except as otherwise expressly provided elsewhere in this Agreement.  If the JRC fails to reach consensus, the
matter will be submitted to the JSC for decision, subject to the provisions of Section 2.5.  The JRC shall have meetings from time to time
in person and by phone or video conference.


 


2.3                               Joint Steering Committee.  Promptly after the Effective Date, the Parties will
form a Joint Steering Committee (the “JSC”) comprised
of three representatives of each of J&J


 


10





















 


and Arena, unless otherwise agreed by the Parties.  One member of the JSC will be selected to act
as the chairperson of the JSC, with each chairperson acting for a term of 12
months.  The chairperson will be selected
alternately by Arena and J&J, and J&J
will designate the first chairperson. 
The JSC will meet at least four times per year during the Research Term
and semi-annually during Early Stage Development or at such greater frequency
as the JSC agrees.  The JSC shall only
address activities carried out during the Research Term and Early Stage
Development.  After the end of the Research
Term, and once all Development Compounds have moved past Early Stage Development,
the JSC shall cease to function until such time as another Development Compound
enters Early Stage Development, in which case the JSC will recommence meetings
under this Section.  Such meetings may be
conducted by videoconference, teleconference or in person, as agreed by the
Parties (except that at least one of such meetings per year will be conducted
in person).  The JSC will agree upon the
time and location of the meetings.  The
chairperson or his or her designee will circulate an agenda for each meeting
approximately one week before the date scheduled for the meeting, and will
include all matters requested to be included on such agenda by either
Party.  The chairperson, or his or her
designee, will take complete and accurate minutes of all discussions occurring
at the JSC meetings and all matters decided upon at the meetings except that
matters reflecting legal advice of counsel will not be included in such
minutes.  A copy of the draft minutes of
each meeting will be provided to each Party by the chairperson or his or her
designee within 20 days after each meeting, or as soon thereafter as practical,
and such minutes will be reviewed by the JSC, any needed changes discussed and
final minutes agreed to and provided to each Party by the end of the next JSC
meeting, or as soon thereafter as practical. 
Within 30 days after each meeting, or as soon thereafter as
practical, the JSC chairperson or his or her designee will provide the Parties
with a written report describing, in reasonable detail, the status of the
Research Program and all Early Stage Development programs, a summary of the
results and progress to date, the issues requiring resolution, and the agreed
resolution of previously reported issues. 
A reasonable number of additional representatives of a Party may attend
meetings of the JSC in a non-voting capacity.


 


2.4                               Joint
Steering Committee Functions and Powers. 
The responsibilities of the JSC will be as follows:


 


(a)                                  encouraging
and facilitating communication between the Parties with respect to the Research
Program and the development of Development Compounds in Early Stage
Development;


 


(b)                                  reviewing
and approving the Research Plan and other plans for accomplishing the goals and
budget of the Research Program;


 


(c)                                  monitoring
the progress of the Research Program and each Party’s diligence in carrying out
its responsibilities thereunder;


 


(d)                                  recommending
to J&J appropriate Active Compounds for selection as Development Compounds;


 


(e)                                  reviewing
and commenting on  the Early Development
Plan;


 


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(f)                                    monitoring
the progress of the development program for each Development Compound during
Early Stage Development; and


 


(g)                                 carrying
out the other duties and responsibilities described for it in this Agreement.


 


2.5                               JSC
Decision Making.  All decisions of
the JSC will be made by unanimous vote, with each member having one vote,
except as otherwise expressly provided elsewhere in this Agreement.  No vote of the JSC may be taken unless at
least two of each Party’s representatives on the JSC vote.  If after reasonable discussion and
consideration of each of the Parties’ views on a particular matter before the
JSC, the JSC is unable to reach a decision by unanimous vote on that matter,
then J&J in its reasonable good-faith judgment will have the final decision
on such matter, except that in no event can J&J make such a decision on the
matter which would have the effect of increasing Arena’s payment obligations or
obligations to conduct research or development activities already contemplated
under this Agreement, decreasing the level of J&J-funded FTEs of Arena
dedicated to conducting the Research, requiring Arena to conduct Research
activities beyond its existing expertise and resources, determining whether or
not J&J has met its diligence obligations under the Agreement, or
designating a compound as an Active Compound. 
For clarity, in no event will the JSC (or J&J’s decision of a matter
for which the JSC cannot reach agreement) have the authority or ability to
amend or modify the terms of the Agreement, which can only be amended as
provided in Section 14.2.


 


2.6                               Research
Plan.  The Research Plan is agreed to
by the Parties as of the Effective Date (in the form exchanged by the Parties
by signed letter on the Effective Date), and it sets forth the specific
research tasks to be undertaken and objectives to be achieved, the specific
responsibilities of each Party, and the total number of FTEs to be devoted by
each Party to the Research Program (subject to Section 2.7 with respect to
Arena’s FTE commitments).  The JSC will
be responsible for reviewing and approving any updates or amendments to the
Research Plan submitted to it by the JRC.


 


2.7                               Arena
Research Commitment and Performance.  During the Research Term, Arena will
devote to the Research Program ********* Arena FTEs, subject to J&J’s
compliance with its funding obligations under Section 6.2.  Arena shall use Diligent Efforts to ensure
that the * Arena FTEs devoted to the Research carry out its obligations under
the Research Program as specified in the Research Plan.  The mix of these ****** FTEs (between
biology, chemistry and other technical areas) to be devoted by Arena in the
Research Program is as set forth in the Research Plan.  The number of Arena FTEs devoted to the
Research Program will not be reduced during the first two (2) years of the
Research Term.  Arena may, at its expense
and at its discretion, devote additional of its FTEs to conduct work relating
to the Research Program activities. 
Arena will conduct its activities under the Research Program in
accordance with good scientific standards and practices and in compliance in
all material respects with the requirements of applicable laws and regulations
and with applicable good laboratory practices, to attempt to achieve its
objectives efficiently and expeditiously. 
Arena will maintain laboratories, offices and all other facilities
reasonably necessary to carry out the activities to be performed by it pursuant
to the Research Plan.  In conformity with
standard pharmaceutical and biotechnology industry practices and the terms and
conditions of this Agreement, Arena will prepare and maintain, or will cause to
be prepared and maintained, complete and accurate written records,


 


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accounts,
notes, reports and data with respect to activities conducted pursuant to the
Research Plan and, upon J&J’s written request and at its expense, will send
legible copies of the aforesaid to J&J. 
Arena will not be required to undertake any additional efforts or expend
any additional amounts or resources in conducting the Research Program other
than devoting the number of FTEs to the Research Program as set forth in the
Research Plan (******** FTEs for the initial Research Term).  Notwithstanding the foregoing, Arena shall,
at its sole cost, supply any research reagents, similar materials and any
standard laboratory equipment currently owned by Arena (and any replacements
thereto) that it needs to carry out its duties under the Research Plan, but any
needed additional capital equipment or other extraordinary expenses, to the
extent that the JRC has discussed and agreed on the need for such equipment or
expenses and the Research Plan contemplates Arena acquiring such equipment or
incurring such expenses, shall be paid for by J&J (or otherwise by the
Parties if they so agree), except that if
Arena makes an Early Development Election under Section 3.6, then J&J
will only be responsible for *********
******************************************************* of such expenses
relating to such Early Stage Development activities if the JSC so approves
unanimously.


 


2.8                               J&J
Research Commitment and Performance.  During the Research Term, J&J
will devote to the Research Program such number of J&J FTEs as are
necessary for J&J to fulfill its obligations under the Research Plan.  J&J will be responsible for the payment
of all costs and expenses for the FTEs and other activities it undertakes in
conducting its responsibilities under the Research Plan.  J&J will conduct its activities under the
Research Program in accordance with good scientific standards and practices and
in compliance in all material respects with the requirements of applicable laws
and regulations and with applicable good laboratory practices, to attempt to
achieve its objectives efficiently and expeditiously.  J&J will maintain laboratories, offices
and all other facilities reasonably necessary to carry out the activities to be
performed by it pursuant to the Research Plan. 
In conformity with standard pharmaceutical and biotechnology industry
practices and the terms and conditions of this Agreement, J&J will prepare
and maintain, or will cause to be prepared and maintained, complete and
accurate written records, accounts, notes, reports and data with respect to
activities conducted pursuant to the Research Plan and, upon Arena’s written
request and at its expense, will send legible copies of the aforesaid to
Arena.  J&J shall, at its sole cost,
supply any research reagents and similar materials and any needed capital
equipment or other materials to carry out its duties under the Research Plan.


 


2.9                               Research
Reports.  Each Party will keep the
other informed as to all progress achieved and results, discoveries and
technical developments made in the course of performing activities under the
Research Program.  Each Party will report
to the other Party promptly after such Party is aware of any significant Collaboration
Inventions.  In addition, each Party will
prepare, and distribute to all members of the JSC no later than 10 days
prior to the next JSC meeting, a reasonably detailed written summary report, in
such form and format and setting forth such information regarding the results
and progress of performance of the Research Program as determined from time to
time by the JSC.  Each Party will
identify in each such written summary report summaries of all material Collaboration
Inventions made, discovered or developed. 
Nothing herein will require either Party to disclose information
received from or generated for a Third Party that remains subject to bona fide confidentiality obligations to such Third Party.


 


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2.10                        Subcontracts.  Arena may not perform any of its
obligations under this Agreement through one or more subcontractors or
consultants, without the prior written approval of J&J, such approval not
to be unreasonably withheld, provided that Arena
will have the right to use such subcontractors and consultants as it selects,
with J&J being deemed to have approved without prior Arena request, for
conducting its development activities under an Early Stage Development program
for which Arena has made an Early Development Election under Section 3.6(a).  If Arena has the approval to use a
subcontractor or consultant, then Arena may perform its obligations under this
Agreement through that consultant or subcontractor, provided that (a) none
of the rights of either Party under this Agreement are, to the knowledge of
Arena at the time, diminished or otherwise adversely affected as a result of
such subcontracting, and (b) the subcontractor undertakes in writing
obligations of confidentiality and non-use regarding Confidential Information
which are substantially the same as those undertaken by the Parties pursuant to
Article 10 hereof.  In the event
Arena performs any of its obligations under the Research Plan through a
subcontractor, then Arena will be responsible at all times for the performance
and payment of such subcontractor.


 


2.11                        Technology
Transfer.  Commencing promptly after
the Effective Date and from time to time thereafter during the Research Term,
Arena will disclose to J&J such Arena Technology as Arena reasonably
determines is directly useful for J&J to perform its tasks under the
Research Program and to exercise the licenses granted to J&J under Article 5
hereof.  Commencing promptly after the
Effective Date and from time to time thereafter during the Research Term,
J&J will disclose to Arena such J&J Technology as J&J reasonably
determines is directly useful for Arena to perform its tasks under the Research
Program and to otherwise exercise the licenses granted to Arena under Article 5
hereof.  During the Term, Arena will
provide J&J with reasonable technical assistance relating to the use of the
Arena Technology by J&J solely to the extent permitted under the license
granted to J&J under Article 5. 
During the Term, J&J will provide Arena with reasonable technical
assistance relating to the use of the J&J Technology by Arena solely to the
extent permitted under the license granted to Arena under Article 5.


 


2.12                        Materials
Transfer.  In order to facilitate the
Research Program, either Party may provide to the other Party certain
biological materials or chemical compounds Controlled by the supplying Party,
including Active Compounds or other compounds for testing against 19AJ, (collectively,
the “Materials”) for use by the other
Party in furtherance of the Research Program. 
For the avoidance of doubt, it is agreed that only those Materials
comprising Arena Technology or J&J Technology will be disclosed under the foregoing,
and all such Materials will be used by the other Party only as permitted under
the applicable license rights granted under Article 5 and subject to all
the other restrictions and obligations under this Agreement.   Except as otherwise provided under this
Agreement, all such Materials delivered to the other Party will remain the sole
property of the supplying Party, will be used only in furtherance of the
Research Program in accordance with this Agreement, will not be used or
delivered to or for the benefit of any Third Party except as otherwise
permitted under this Agreement without the prior written consent of the
supplying Party, and will be used in compliance with all applicable laws, rules
and regulations.  The Materials supplied
under this Agreement must be used with prudence and appropriate caution in any
experimental work because not all of their characteristics may be known.  Except as expressly set forth herein, THE
MATERIALS ARE PROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED,


 


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INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR
ANY PARTICULAR PURPOSE OR EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT ANY
WARRANTY THAT THE USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT
OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY.


 


2.13                        Research Term Extension(s).  At
J&J’s option, exercisable by written notice to Arena given no less than
90 days prior to the 2nd anniversary of the Effective Date, J&J may
extend the Research Term by one full year until the 3rd anniversary of the
Effective Date.  In the event of such
extension, Arena will devote to the Research Program ***** FTEs funded by
J&J during such additional year of the Research Term, or such other number
of FTEs funded by J&J as the Parties may agree at that time in writing,
subject to J&J’s compliance with its funding obligations (including any
modification to the per FTE rate) as provided in Section 6.2.  Upon such extension, the JRC will promptly
meet and amend the Research Plan as appropriate to cover the Research Program
work to be conducted during the extension period.  Any additional extensions to the Research
Program would be on such terms as agreed to in writing by the Parties at the
time of any such extension.


 


3.                                      DEVELOPMENT
OF DEVELOPMENT COMPOUNDS


 


3.1                               Selection
of Selected Compounds.  At any time
prior to the first anniversary of the end of the Research Term, J&J may by
written notice to Arena select a particular Active Compound as a Selected
Compound, up to a maximum of a total of ********** Selected Compounds.


 


3.2                               Development of Compounds.  In order for J&J or its Affiliates to
initiate development of any Active Compound, J&J or its Affiliate will
first:  (a) have selected such Active
Compound as a Selected Compound (which selection must have occurred in any
event, as provided in Section 3.1, prior to the first anniversary of the
end of the Research Term), and (b) provide written notice to Arena of the
occurrence of Drug Evaluation Acceptance with respect to such Selected Compound
and thereby notify Arena of J&J’s selection of the compound as a
Development Compound.  J&J will use
Diligent Efforts to effect Drug Evaluation Acceptances of such number of
Development Compounds as is commercially reasonable, as soon as practical.  The JSC may also from time to time recommend
that J&J select a particular Active Compound as a Selected Compound and as
a Development Compound.  J&J will
consider any such recommendations in good faith, but the decision to select a
particular Active Compound as a Selected Compound and to effect a Drug
Evaluation Acceptance as to such Selected Compound will be made by J&J in its
sole discretion, subject to its compliance with its diligence obligations under
this Section and Section 3.7. 
Subject to the terms and conditions of this Agreement, J&J will
control and be responsible for the worldwide development and for obtaining Regulatory
Approvals of Development Compounds, including all pre-clinical work necessary
to prepare and file INDs covering the Development Compounds (other than such
work that is covered by the Research Plan), the planning and conduct of
clinical trials and related studies of Development Compounds, the worldwide
supply of Development Compounds in appropriate formulations and packaging for
use in development through Regulatory Approval and the planning, filing and
prosecution of applications for Regulatory Approval.  J&J will use Diligent Efforts to conduct
all the tasks and meet on a timely basis all the objectives and milestones
under each Development


 


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Plan.  At J&J’s request and expense, Arena will
use reasonable efforts to contribute support in the area of clinical
development to support J&J’s development of Development Compounds, any such
efforts ********************************************* ****************************************************************************************************
implementing and conducting each Early Development Plan, except as otherwise
provided in Section 3.6, and for implementing and conducting each Late
Stage Development Plan.


 


3.3                               Early Development Plans.  Promptly after J&J (or its Affiliate)
selects a Development Compound, J&J will prepare an Early Development Plan
for such Development Compound, which shall be submitted to the JSC for review
and comment.  Each such Early Development
Plan will set forth the specific pre-clinical tasks to be undertaken and
objectives to be achieved in order to prepare and file INDs covering such
Development Compound, the initial clinical plan and regulatory strategy for the
Development Compound through Phase IIa Clinical Trials, and the timeline and
budget for such development.  Each such
Early Development Plan will be considered in good faith by the members of the
JSC at the meeting, with at least 2 members of each Party voting at such
meeting.  J&J will be responsible for
conducting all the work under each such Early Development Plan, except as
otherwise provided in Section 3.6, and subject to the assistance of Arena
as contemplated in Section 3.2 and to the possibility the JSC may agree to
allocate certain specific development tasks to Arena, as agreed between the
Parties at the time, which tasks would be fully funded by J&J.  The JSC will be responsible for updating and amending
each Early Development Plan at least quarterly, based on the progress and
results of the applicable development program, and any relevant progress and
results from development of Development Compounds.  For purpose of assisting the Arena members of
the JSC in their function to review and comment on the Early Development Plans,
J&J will provide Arena a new Development Report (as defined in Section 3.5
below) at least 10 days prior to a JSC meeting, if the most recent prior
Development Report would be more than 75 days old as of the date of such JSC
meeting.


 


3.4                               Late Stage Development Plans.  For each Development Compound that has
entered Phase IIb clinical trials, J&J shall prepare a Late Stage
Development Plan for such Development Compound, which it shall submit to Arena
for review and comment.  Each such Late
Stage Development Plan will set forth the clinical plan and regulatory strategy
for the Development Compound through completion of all clinical trials expected
to be needed to seek Regulatory Approval of a Collaboration Product containing
the applicable Development Compound, the regulatory strategy for seeking such
Regulatory Approvals, and the timeline and budget for such Development
Compound.  It is anticipated the J&J
will be responsible for conducting all of the work under each such Late Stage
Development Plan, subject to the assistance of Arena as contemplated in Section 3.2.  J&J will be responsible for updating and
amending each Late Stage Development Plan at least yearly, based on the
progress and results of the applicable development program, and any relevant
progress and results from development of Development Compounds, which shall be
submitted to the Arena for review and comment.


 


3.5                               Ongoing Disclosure Regarding Development.  J&J will keep Arena informed about all of
J&J’s efforts to develop the Development Compounds, including all results
and data from such development efforts, progress towards meeting all goals and
milestones in each Development Plan, significant findings and developments, any
reasons for any delays in meeting milestones or timelines in any Development
Plan, and any proposed changes in the plan. 
Such


 


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disclosures
will be made in a written report (each, a “Development Report”) provided to Arena at
least once semi-annually, or more often at J&J’s election or as required in
Section 3.3.  Without limiting the
generality of the foregoing, the Development Reports will contain the following:


 


(a)                                  Summary
of development results and data, including progress of initiation of sites and
enrollment of patients in clinical trials and any significant events occurring
in the clinical development program, including adverse events;


 


(b)                                  filing
of an IND or NDA with respect to any Development Compound in any jurisdiction;


 


(c)                                  initiation
of Phase I Clinical Trials, Phase IIa Clinical Trials, Phase IIb Clinical
Trials, and Phase III Clinical Trials with respect to any Development Compound
in any jurisdiction; and


 


(d)                                  identification
of significant development results and clinical trial progress and Regulatory
Approvals with respect to Development Compounds in any jurisdiction.


 


In addition, upon
request by Arena on reasonable advance notice, J&J shall make those of its
employees with managerial responsibility over development of Development
Compounds who are informed as to the status, results and plans of the
development programs for the Development Compounds reasonably available at
their respective places of employment to consult with Arena and answer to the
best of their ability all of Arena’s questions regarding such development
programs.


 


3.6                               Arena Conduct of Early Development.


 


(a)                                  With
respect to the ongoing J&J development program under an Early Development
Plan, if J&J does not comply with its diligence obligations under Section 3.7(a)
with respect to such Early Development Plan, Arena may, on written notice to
J&J (an “Early
Development Election”), elect to assume control of conducting
the Early Stage Development of the applicable Development Compound under such
Early Development Plan.  If Arena makes
an Early Development Election as to a particular Development Compound and its
respective Early Development Plan, then the JSC, and appropriate additional
representatives of each Party with development expertise, will meet as soon as
possible thereafter and agree on a transition plan for Arena to undertake the
control of such Early Development Plan. 
The Parties shall each act in good faith at such meeting to achieve a
plan that effects a transition that is as smooth and efficient and quick as
possible.  As to such Early Development
Plan, Arena shall immediately direct and control the ongoing conduct of
development of the Development Compound under the terms of such Early
Development Plan using its own resources or a combination of Arena and J&J
resources as the Parties agree pursuant to the transition plan.


 


(b)                                 All
Development Costs incurred by either Party in the conduct of any Early
Development Plan for which Arena has made an Early Development Election shall
be shared ** ************************** after such election.  Within 20 Business Days of the end of each
month during which such Arena-controlled development is ongoing, each Party
shall provide to the other a detailed accounting of all Development Costs
incurred by such Party in its conduct of


 


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such
development efforts in accordance with the applicable Early Development Plan(s)
and Arena’s direction.  The Parties shall
then reconcile these reports within 20 Business Days of the end of such month,
with the Party that **************************** of the total of such Development
Costs incurred by the Parties during the month paying the other Party, within
20 Business Days of such reconciliation, an amount so that each Party bore an
equal share of such Development Costs.


 


3.7                               Development Diligence.


 


(a)                                  J&J
will use Diligent Efforts to conduct the development (including clinical trials
and other studies) on Development Compounds during Early Stage Development, to
conduct all the tasks and meet on a timely basis all the objectives and
milestones under each Early Development Plan, and in such a manner as to
achieve successful conclusion of Phase 2a Trials of the Development Compounds
in Early Stage Development as soon as practicable throughout the Territory
where it is commercially appropriate to do so. 
J&J shall achieve the following regulatory milestone events with
respect to each Development Compound by the “Time to Complete” dates indicated
below, subject to any applicable extensions of such deadlines as provided in
the following (the “Diligence Milestones”):


 




	
  Diligence Milestones

  	
   

  	
  Time to Complete

  
	
   

  	
   

  	
   

  
	
  1. Provide First dose to fifth patient or
  volunteer in Phase I Clinical Trial of a Development Compound

  	
   

  	
  Within twenty-four (24) months from Drug
  Evaluation Acceptance of a Development Compound.

  
	
   

  	
   

  	
   

  
	
  2. Provide first dose to fifth patient in
  Phase IIa Clinical Trial of a Development Compound

  	
   

  	
  Within twenty-four months (24) of achieving
  Milestone 1.

  






 


(b)                                  If,
notwithstanding J&J’s exercise of Diligent Efforts, J&J is materially
delayed in its ability to pursue Early Stage Development of a Development
Compound due to matters outside of its control (such as delays imposed for the
reason set forth below), and such delays cause J&J to be unable to meet one
of the above milestones by the applicable deadline date, then J&J may
notify Arena of the specific delay and the causes of such delay.  Arena and J&J shall then discuss the
matter in good faith and agree in writing on a reasonable extension of the
applicable deadline (and, if appropriate, reasonable extensions of the
subsequent deadlines if any) for a period reasonably sufficient to resolve the
problem, including if necessary as needed to identifying a substitute
Development Compound.  Without
limitation, the following are examples of the types of situations in which
J&J shall be entitled to seek such extension:  If J&J, after Drug Evaluation Acceptance
of a Development Compound, initiates development of GLP synthesis, toxicology
studies, ADME studies, formulation or Phase I Clinical Trials of a Development
Compound, and such Development Compound fails in such development or is delayed
in such development activities, either (i) for reasons that are out of J&J’s
control and


 


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could
not reasonably have been anticipated, or (ii) because of unanticipated new or
different requirements imposed by a regulatory agency.


 


(c)                                  If
the Parties disagree as to whether J&J is entitled to an extension of the
Time to Complete for any Milestone specified in the above table, or cannot
agree on the length of a reasonable extension, then upon the written request by
either Party such shall be resolved in accordance with Article 13.  However, notwithstanding any other provision
of Article 13, the arbitration shall be concluded within sixty (60) days
after the Panel of Arbitrators has been appointed in accordance with Section 13.2,
and the time periods recited in Section 13.2 shall be reset accordingly to
achieve the sixty (60) day completion date. 
After the commencement of Phase IIa Clinical Trials for a particular
Development Compound, J&J’s diligence obligations as to such Development
Compound shall be that specified in the first sentence of Section 3.7(a)
and in Section 3.7(e).


 


(d)                                  If
in conducting Early Stage Development of a Development Compound, J&J fails
to meet any Diligence Milestone by the applicable deadline for such development
program (as such deadline may be extended by written agreement of the Parties),
then Arena may elect to proceed under Section 3.6 above.  If J&J otherwise is not exercising
Diligent Efforts in Early Stage Development, then Arena may submit the matter
for resolution under the provisions of Article 13.


 


(e)                                  J&J
will use Diligent Efforts to conduct the development (including clinical trials
and other studies) of Development Compounds during Late Stage Development, in
such a manner as to obtain Regulatory Approval of Collaboration Products as
soon as practicable, in each country and regulatory jurisdiction throughout the
Territory where it is commercially appropriate to do so.  If Arena believes that J&J is not
complying with the above diligence obligations, then Arena may submit the
matter for resolution under the provisions of Article 13.


 


3.8                               Regulatory
Matters.  J&J will have the sole
authority and responsibility, at its cost and expense, but subject to the
following terms, for all regulatory matters relating to conducting clinical
trials on Development Compounds and seeking and obtaining Regulatory Approvals,
including: (a) filing, maintaining and updating any INDs and NDAs for
Development Compounds and Collaboration Products (as applicable), (b) reporting
all adverse drug experience events and serious adverse drug experience events,
to the extent required and on the applicable report forms, to the FDA and/or
other appropriate governmental or regulatory authorities, (c) submitting or
filing with the FDA the required product labeling and related marketing
materials for Collaboration Products, and (d) handling medical and technical
complaints and disputes with the FDA, patients and physicians regarding any
Collaboration Product.  J&J (through
the JSC, if it is still meeting) will consult with Arena in all stages of
planning for and seeking INDs and Regulatory Approvals and in preparing NDAs
for the Collaboration Products throughout the Territory.  J&J will provide Arena with regular
reporting on the status and progress in its efforts to obtain INDs and
Regulatory Approvals, and of any material communications with the FDA.  Arena will report in writing to J&J
within five calendar days (and within 24 hours in the case of the death of or
serious injury to a subject or patient taking a Collaboration Product) any information
that comes into Arena’s possession relevant to J&J’s responsibilities under
this Section 3.8 and will provide J&J with such assistance as is
reasonably requested by J&J from


 


19





















 


time to time to perform its responsibilities under
this Section 3.8, provided that the actual internal and external costs of
Arena associated with such assistance will be reimbursed by J&J.


 


3.9                               Product Recalls.  J&J (and its Affiliates and Sublicensees,
as applicable) will have sole authority over and responsibility for any and all
proposed, recommended or required recalls of Collaboration Products throughout
the Territory.


 


4.                                      COMMERCIALIZATION
OF COLLABORATION PRODUCTS


 


4.1                               Exclusive Commercialization Rights.  J&J will use Diligent Efforts to seek to
obtain Regulatory Approval of Collaboration Products as soon as practicable, in
each country and regulatory jurisdiction throughout the Territory where it is
commercially reasonable to do so. 
Subject to the foregoing, and to the other terms and conditions of this
Agreement (including Section 3.6), J&J will have the sole decision on
the Development Compounds (if any) it will include in Collaboration Products
for which it files regulatory applications seeking Regulatory Approvals, and
will control and have exclusive rights over the worldwide commercialization of
all approved Collaboration Products, including the worldwide supply of
Collaboration Products for use in all such commercialization activities.  J&J will be solely responsible for all
costs and expenses in the commercialization of Collaboration Products.


 


4.2                               Commercial Diligence.  For each Collaboration Product that achieves
Regulatory Approval in a particular country or jurisdiction, J&J will use
Diligent Efforts to commercialize and sell the Collaboration Product in such
country or jurisdiction.  If Arena
believes that J&J is not complying with the above diligence obligations,
then Arena may submit the matter for resolution under the provisions of Article 13,
including Section 13.4.


 


4.3                               Commercialization Efforts Reporting.  J&J will keep Arena informed about all of
J&J’s efforts to commercialize the Collaboration Products, including
summaries of J&J’s (and its Affiliates’ and Sublicensees’) global marketing
plans (as updated), progress towards meeting the  goals and milestones in the global marketing
plan, significant developments in the commercialization of the Collaboration
Products, any reasons for any deviations or variances (either in time or in
sales or other numerical figures) in meeting sales projections, milestones or
timelines in any such global marketing plans, and any proposed changes in the
marketing plans.  Such disclosures will
be made in a written report (each, a “Marketing Report”) provided to Arena at least
once every six months while Collaboration Products are being sold anywhere in
the Territory.


 


Upon request by Arena on reasonable advance notice, J&J shall make
those of its and its Affiliates’ employees with managerial responsibility over
promotion, marketing and sales of Collaboration Products who are informed as to
the status, results and plans of the commercialization efforts for the
Collaboration Products reasonably available at their respective places of
employment to consult with Arena and answer to the best of their ability all of
Arena’s questions regarding such commercialization efforts and results.  J&J shall also require that its
Sublicensees make their applicable employees available to meet with Arena on
the same basis as the foregoing.


 


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5.                                      LICENSES
AND RELATED RIGHTS AND OBLIGATIONS


 


5.1                               License
Grants.


 


(a)                                  By
Arena.


 


(i)                                    Research
License.  Subject to the terms and conditions of this Agreement, Arena
hereby grants to J&J and its Affiliates, during the Research Term and for
one year thereafter, a co-exclusive, worldwide, royalty-free license, without
the right to sublicense, under the Arena Know-How, the Arena Research Patents
and Arena’s interest in the Joint Patents solely to perform J&J’s
obligations under the Research Plan to seek to identify and to conduct research
on Active Compounds.


 


(ii)                                Development
License.  Subject to the terms and conditions of
this Agreement, Arena hereby grants to J&J an exclusive (even as to Arena,
except for Arena’s rights as provided in Article 3), worldwide, royalty-free
license, with the right to sublicense to J&J Affiliates, under the Arena
Technology and Arena’s interest in the Joint Patents solely to conduct
development on Development Compounds, and to make, have made, and use such
Development Compounds as needed for such development efforts.  J&J will at all times be responsible for
the performance of its Sublicensees and Third Party contractors under this
Agreement.


 


(iii)                            Commercialization
License.  Subject to the terms and
conditions of this Agreement, Arena hereby grants to J&J an exclusive (even
as to Arena), worldwide, royalty bearing license, with the right to sublicense,
under the Arena Know-How, Arena Commercialization Patents and Arena’s interest
in the Joint Patents to make, have made, use, sell, offer for sale, and import
Collaboration Products in the Field of Use. 
J&J will at all times be responsible for the performance of its
Sublicensees and Third Party contractors under this Agreement.


 


(b)                                  By
J&J.  Subject to the terms and conditions of this Agreement, J&J
hereby grants to Arena and its Affiliates, during the Research Term, a non-exclusive,
worldwide, royalty-free license, without the right to sublicense, under the
J&J Know-How and J&J Research Patents and J&J’s interest in the
Joint Patents solely to perform Arena’s obligations under the Research Plan and
for Arena to conduct such development of Development Compounds as is permitted
or allocated to Arena under the terms of Article 3.  Subject
to the terms and conditions of this Agreement, J&J hereby grants to
Arena and its Affiliates, commencing on the first anniversary of the end of the
Research Term and continuing thereafter, the exclusive, worldwide, fully-paid,
royalty-free license (with full rights to sublicense) under the J&J Technology
and J&J’s interest in the Joint Patents solely to make, have made, use,
sell, offer for sale, and import products containing any Active Compound that
is not a Selected Compound.   For
clarity, the foregoing excludes any rights with respect to all Selected
Compounds and all Collaboration Products, which rights are retained exclusively
by J&J (except as otherwise provided in Article 11).


 


5.2                               Retained Rights; No Implied Licenses.  Arena hereby expressly reserves the right to
practice, and to grant licenses under, the Arena Technology and under its
interest in the Arena Joint Patents (as defined in Section 8.1) for any
and all purposes other than the specific


 


21





















 


purposes for which J&J has been granted an exclusive
license under Section 5.1(a)(ii) or (iii). 
J&J hereby expressly reserves the right to practice, and to grant
licenses under, the J&J Technology and under its interest in the J&J
Joint Patents (as defined in Section 8.1) for any and all purposes other
than the specific purposes for which Arena has been granted a license under Section 5
or Section 11.6(b).  No right or
license under any Patents or Information is granted by either Party or will be
granted by either Party by implication. 
In particular, but not in any way limiting the foregoing, no right or
license is granted to a proprietary compound that is not an Active Compound, or
under any Patent claim that claims specifically the composition of matter of
such proprietary compound, even if there is by a claim in the Arena Patents or
J&J Patents that claims the combination of such proprietary compound with
an Active Compound as a combination.  The
only rights and licenses granted by one Party to the other under this Agreement
are or will be granted only as expressly provided in the other terms of this
Agreement.  J&J covenants that
J&J and its Affiliates will not practice any of the Arena Technology except
as expressly permitted under Section 5.1. 
Arena covenants that Arena and its Affiliates will not practice any of
the J&J Technology except as expressly permitted under Section 5.1 or Article 11.  Notwithstanding anything to the contrary,
J&J and its Affiliates will not have the right to grant sublicenses under
any rights granted under this Agreement to any Active Compounds unless and
until the particular Active Compound has been selected as a Selected Compound
and Development Compound and has commenced Phase I clinical trials.  For clarity, commencing on the first
anniversary of the end of the Research Term and for all times thereafter during
the Term of the Agreement, J&J and its Affiliates and Sublicensees will not
have any rights to any Active Compounds that are not Selected Compounds, and
all rights in Active Compounds that are not Selected Compounds will revert to
and will be held exclusively by Arena (and/or its subsequent licensees or
successors).


 


5.3                               Exclusivity of Program.  Each Party expressly covenants and agrees to
the other Party that such Party and its Affiliates will not conduct any research
or development activity, or license any Third Party to conduct any research or
development activity, during the Research Term, that seeks to identify or
research or develop any Active Compounds, except pursuant to the Research
Program under this Agreement.  The
Parties acknowledge and agree that any compounds discovered, identified,
acquired or in-licensed by either Party during the one year period after the
end of the Research Term which meet the requirements of Section 1.2(c)(i)
and (ii) will be deemed to be Active Compounds to the extent such compounds are
discovered or identified by or on behalf of the Party or its Affiliate, or
otherwise become known to such Party or Affiliate, to meet such
requirements.  If either Party (or its
Affiliate) knowingly in-licenses or acquires a compound that meets the
definition of an Active Compound prior to the first anniversary of the end of
the Research Term, such compound shall be deemed an Active Compound.    J&J does not in any way represent or
warrant that, commencing solely after the end of the Research Term, a
Collaboration Product developed under this Agreement will be the only drug that
J&J will at the same time develop or commercialize for identical or similar
therapeutic uses.


 


6.                                      FEES
AND PAYMENTS


 


6.1                               Upfront Fee.  J&J will pay to Arena a non-refundable,
non-creditable upfront fee of seventeen million five hundred thousand dollars
($17,500,000) within 20 days of the Effective Date.


 


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6.2                               Research Funding.  During the initial Research Term, J&J
will make research funding payments to Arena for **** FTEs per year, quarterly
in advance, at the rate of $******* per FTE per year.  The first payment under this Section 6.2
will be made within 20 Business Days of the Effective Date and each
subsequent payment will be made on the first day of each Calendar Quarter
during the Research Term (with the first and last such payments being adjusted
pro rata in proportion to:  (i) the
number of days from the Effective Date to the end of 2004, and (ii) the number
of days from the beginning of the Calendar Quarter in which the Research Term
ends, until the end of the Research Term, respectively).  Any commitment by Arena of more than *********
FTEs to the Research Program during the Research Term will be subject to
negotiation by the Parties and require the mutual written agreement of the
Parties.  If J&J extends the Research
Term for one additional year beyond the second anniversary of the Effective
Date pursuant to Section 2.13, then the FTE rate for research funding
payments for such extended term beyond the second anniversary will be increased
by an amount equivalent to the change, on a percentage basis, in the Bureau of
Labor Statistics Consumer Price Index for all Urban Consumers that has occurred
between the Effective Date and the second anniversary thereof.  Research funding payable to Arena by J&J
for Arena FTEs devoted to the Research Program for any subsequent extensions of
the Research Program will be subject to negotiation by the Parties and require
the mutual written agreement of the Parties.


 


6.3                               Milestone
Payments.


 


(a)                                  For each Development Compound or
Collaboration Product (as applicable), and except as otherwise provided in
subsections (c) and (f) below, J&J will pay to Arena, within 20
Business Days following the first occurrence of a Milestone Event listed
below with respect to such Development Compound or Collaboration Product
(whether such milestone event is achieved by J&J, its Affiliate or any of
their respective Sublicensees), the milestone payment applicable to such
Milestone Event as set forth below.


 


CONFIDENTIAL TREATMENT HAS BEEN
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  Milestone Event

  	
   

  	
  Milestone Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1.              Acceptance of Active Compound as
  Development Compound by Drug Evaluation
     Acceptance

  	
   

  	
  $

  	
  2,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.              First administration of Development
  Compound to the fifth human
  subject in a Phase I 
     Clinical Trial

  	
   

  	
  $

  	
  *********

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.              First administration of Development
  Compound to the fifth human
  subject in a Phase IIa 
     Clinical Trial

  	
   

  	
  $

  	
  *********

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.              First administration of Development
  Compound to the fifth human
  subject in a Phase IIb 
     Clinical Trial

  	
   

  	
  $

  	
  **********

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.              First administration of Development
  Compound to the fifth human
  subject in a Phase III 
     Clinical Trial

  	
   

  	
  $

  	
  **********

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.              First acceptance for filing of NDA
  for product containing Development Compound by 
     the FDA in the United States or
  equivalent in an EU Major Market Country

  	
   

  	
  $

  	
  **********

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.              First regulatory approval of
  Collaboration Product containing Development Compound 
     for sale in the United States

  	
   

  	
  $

  	
  **********

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.              First regulatory approval of
  Collaboration Product containing Development Compound 
     for sale in an EU Major Market
  Country

  	
   

  	
  $

  	
  **********

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.              First regulatory approval of
  Collaboration Product containing Development Compound 
     for sale in Japan

  	
   

  	
  $

  	
  **********

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.       First achievement of worldwide annual Net
  Sales of $************* of the 
     Collaboration Product containing
  the Development Compound

  	
   

  	
  $

  	
  **********

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.       First achievement of worldwide annual Net
  Sales of $************* of the 
     Collaboration Product containing
  the Development Compound

  	
   

  	
  $

  	
  **********

  	
   

  






 


(b)                                  In the event that J&J (or its Affiliate
or Sublicensee) achieves one of the Milestone Events numbers 3 through 9
set forth in subsection (a) above in developing a particular Development Compound for an Indication
(and, consequently, has the obligation to pay Arena the associated milestone
payment under subsection (a)), and J&J
(or its Affiliate or Sublicensee) then (or simultaneously) achieves such
Milestone Event in developing the Development Compound for a different
Indication, then, within 20 days following the first
occurrence of such Milestone Event in developing the Development Compound for
such different Indication, J&J will pay Arena a milestone payment equal to
50% of the milestone payment applicable to such Milestone Event as set forth in
the table in subsection (a) above. 
If J&J (or its Affiliates or Sublicensees) is developing a
particular Development Compound for


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


24





















 


more
than one Indication, then the milestone payments for the second Indication (in
addition to milestone payments for the first Indication) become due and payable
to Arena within 20 days of the occurrence of the applicable Milestone Event
with respect to the second Indication.


 


(c)                                  If
the development of a Development Compound is abandoned after one or more of the
milestone payments under Section 6.3(a) has been made (such Development
Compound, the “Discontinued
Compound”), and J&J (or its Affiliate or Sublicensee) then
commences and conducts development of another Development Compound in a
development program pursuing the same Indication (which development program may
also include one or more different Indications) as was being pursued in the
development program for the Discontinued Compound (such replacement Development
Compound, the “Replacement
Compound”), then only those milestone payments under this Section 6.3
that were not previously made with respect to such Discontinued Compound will
be payable with respect to achievement by the Replacement Compound of Milestone
Events as provided above.  For clarity,
there can be only one Replacement Compound with respect to a Discontinued
Compound at any one time.


 


(d)                                  For
purposes of the Milestone Events in subsection (a) above, acceptance for
filing of the applicable regulatory approval application and regulatory
approval by the applicable pan-European Union regulatory authority will be
deemed to meet the applicable Milestone Events (i.e., numbers 6 and 8,
respectively) in an “EU Major Market Country”.


 


(e)                                  In
the event a Milestone Event is achieved (either under subsection (a) or
subsection (b) above) with respect to a particular  Development Compound, all prior Milestone
Events (in the applicable subsection) will be deemed to have been concurrently
achieved, and to the extent payment for any such prior Milestone Event has not
been made, J&J within twenty (20) Business Days will pay Arena for any such
Milestone Events deemed to have been achieved.


 


(f)                                    For
clarity, if J&J develops a Collaboration Product in one or more different
dosage forms or formulations, J&J will owe milestone payments only for the
first achievement of the applicable Milestone Events above (including the
payments for the first achievement of the applicable Milestone Events for a
second Indication if applicable) for such Collaboration Products.


 


6.4                               Royalties.  J&J will pay to Arena royalties on
Net Sales where the royalty rate is determined based on the aggregate amount of
Net Sales in the Territory occurring in the particular calendar year as
follows:


 


(a)                                  ****************
of the Net Sales occurring in the calendar year, until the aggregate amount of
such Net Sales equals $*************;


 


(b)                                  *******************
of that portion of the Net Sales occurring in the calendar year that is greater
than $***********  and is less than or
equal to $***********; and


 


(c)                                  *******************
of all Net Sales occurring in the calendar year that are greater than
$*************.


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


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6.5                               Royalty Term for Collaboration Products.  As to sales of a particular Collaboration
Product in a country, the royalty payments specified in Section 6.4 will
be owed and payable for all sales of the Collaboration Product in such country
occurring during the period (the
“Royalty Term”) commencing on the first Commercial Sale of the
Collaboration Product in such country and ending upon the later of:  (a) 10 years after the date of first
Commercial Sale of the Collaboration Product in such country occurring after
Regulatory Approval of marketing and sale in the country, and (b) the
expiration of the last to expire (taking into account any applicable extension
period) of the Arena Patents, Joint Patents or J&J Patents in such country
containing a Valid Claim that claims the Collaboration Product or its
manufacture or use.


 


6.6                               Royalty Offsets.  Royalties on Net Sales of a
Collaboration Compound in a particular country shall be paid at the applicable
rate set forth in Section 6.4 during the specific Royalty Term, except
that such rate may be adjusted as provided below:


 


(a)                                  If, in a given country during
a calendar quarter for which royalties are being calculated under Section 6.4 for
a particular Collaboration Product, Market Competition (as defined below)
exists for such Collaboration Product in such country, then the royalty rate
applicable to the sales of the Collaboration Product in such country during
such quarter ******************** *.  As
used herein, “Market Competition” means, as to a Collaboration Product, that
J&J has provided Arena with competent written evidence (based on
commercially-available market research data such as IMS) that another product
(which is not a Collaboration Product) competitive with such Collaboration
Product is being lawfully marketed and sold by a Third Party (which is not a
Sublicensee) in the country at the applicable time, and such product contains
as an active ingredient the Development Compound which is in the Collaboration
Product, and the sales of such competitive product (in units sold) in such
quarter in the country *************************** of the total aggregate sales
(in units sold) of such competitive product combined with sales of the
Collaboration Product in such country during such quarter; provided that Arena may dispute the claim
by J&J that Market Competition exists, by written notice within 45 days of
J&J providing the above evidence, which dispute will be resolved under the
terms of Article 13.


 


(b)                                  If
J&J is required to make royalty payments, based on the sales of a
particular Collaboration Product, to a Third Party under a patent license
granted to J&J under a patent controlled by the Third Party that claims the
Development Compound in the Collaboration Product or its use or its
manufacture, then J&J may credit, against royalty payments otherwise due to
Arena under Section 6.4 for sales of such Collaboration Product,
******************** ******************************************* to the Third
Party based on such sales, but subject to the limitation in sub clause (c)
below.  J&J will use Diligent Efforts
to minimize the amount of any such royalty payments to a Third Party, and in
particular, J&J is not permitted take a license under the Third Party
patent where such license grants rights to products other than the
Collaboration Products, or where J&J is obtaining rights under other
intellectual property of the Third Party, unless
the amounts payable by J&J for such license rights are equitable
across all the rights granted to J&J and are not biased towards payment
obligations with respect to sales of the Collaboration Products.


 


(c)                                  In
no event will the amount of royalties payable to Arena by J&J, for the
sales in a country of a Collaboration Product in a country during a specific
royalty period, be


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


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reduced
by the operation of this Section 6.6
***************************************** otherwise be owed by J&J under Section 6.4,
absent application of this Section 6.6.


 


7.                                      PAYMENT;
RECORDS; AUDITS


 


7.1                               Payment;
Reports.  Within twenty (20) Business
Days after the end of each Calendar Quarter for which royalty fees are payable
by J&J to Arena with respect to Net Sales pursuant to Section 6.4,
J&J shall submit to Arena a report, on a country by country basis,
providing in reasonable detail an accounting of all Net Sales (including an
accounting of all unit sales of Product) made during such calendar quarter and
the calculation of such applicable royalty fees under Section 6.4.  Within forty (40) Business Days after the end
of each Calendar Quarter for which royalty fees are payable by J&J to
Arena, J&J shall pay Arena all royalties payable by it under Section 6.4
by wire transfer.  J&J will pay Arena
royalties on Net Sales of each Collaboration Product invoiced by J&J, its
Affiliates and their respective distributors and Sublicensees at the rates
shown in Section 6.4.


 


7.2                               Exchange
Rate; Manner and Place of Payment.  All
payments to be made by J&J to Arena shall be made in U.S. Dollars, to an
Arena bank account able to receive U.S. Dollars.  Royalty fee payments by J&J to Arena
shall be converted to U.S. Dollars in accordance with the following:  the rate of currency conversion shall be
calculated using a simple average of mid-month and month-end rates as published
by Brown Brothers Harriman, 59 Wall Street, NY, NY 10005 (or such other
conversion rate as the Parties agree in writing in the event such rates are not
available) .


 


7.3                               Tax
Matters.


 


(a)                              J&J
Payments to Arena Without Withholding. 
J&J will make all payments to Arena under this Agreement without
deduction or withholding for Taxes except to the extent that any such deduction
or withholding is required by law in effect at the time of payment; provided
that J&J shall use commercially reasonable efforts to minimize any such
required deductions or withholdings to the extent permitted by applicable laws,
rules and regulations.


 


(b)                              J&J
Payment of Tax.  Any Tax required to
be withheld on amounts payable under this Agreement will promptly be paid by
J&J on behalf of Arena to the appropriate governmental authority, and
J&J will furnish Arena with proof of payment of such Tax.  Any such Tax required to be withheld will be
an expense of and borne by Arena. 
J&J will give notice of its intention to begin withholding any such
Tax in advance and cooperate to use reasonable and legal efforts to reduce such
Tax on payments made to Arena hereunder.


 


(c)                              Cooperation
Between J&J and Arena.  J&J
and Arena will cooperate with respect to all documentation required by any government
taxing authority or reasonably requested by J&J to secure a reduction in
the rate of applicable withholding Taxes.


 


(d)                              Arena
Compensation for J&J’s Failure to Withhold.  If J&J had a duty to withhold Taxes in
connection with any payment it made to Arena under this Agreement but J&J


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


27





















 


failed to withhold, and
such Taxes were assessed against and paid by J&J, then Arena will indemnify
and hold harmless J&J from and against such Taxes (excluding penalties),
subject to Arena’s right to dispute or protest the withholding of the Taxes,
and J&J shall indemnify and hold harmless Arena from and against any
penalties with respect to such Taxes.  If
J&J makes a claim under this Section 7.3(d), it will comply with the
obligations imposed by Section 7.3(b) as if J&J had withheld taxes
from a payment Arena..  Notwithstanding
anything to the contrary in this Section, Arena shall not be responsible for
paying to J&J any penalties attributable to any period between the date the
withholding Taxes were first due by J&J and ending thirty (30) calendar
days after written notice by J&J to Arena of such assessment or proposed
assessment.


 


(e)                              Tax.  Solely for purposes of this Section, “Tax” or
“Taxes” means any present or future taxes, levies, imposts, duties, charges,
assessments or fees of any nature (including interest, penalties and additions
thereto) that are imposed by a government taxing authority on Arena’s receipt
of payments hereunder.  Notwithstanding
the foregoing, “Tax” or “Taxes” shall not include charges, value-added taxes,
taxes imposed on J&J’s income, or assessments or fees of any nature (or any
interest, penalties or additions thereto) imposed by the FDA or any related or
successor agency.


 


(f)                                Protest.  J&J shall promptly notify Arena in
writing of any assessment, proposed assessment or other claim for any
additional amount of Tax assessed by the United States.  Notwithstanding any other provision of this
Section, Arena may, at its own expense, protest any assessment, proposed
assessment, or other claim by any governmental authority for any additional
amount of Tax or seek a refund of such amounts paid if permitted to do so by law
or if the payment of such amounts are its ultimate contractual responsibility
under the terms of this Agreement. 
J&J shall cooperate with Arena in any protest by providing records,
giving testimony and providing such additional information or assistance as may
reasonably be necessary to pursue such protest.


 


7.4                               Audits.


 


(a)                                  Each Party, its Affiliates
and Sublicensees shall keep or cause to be kept complete and accurate records which are relevant to any payment
to be made under this Agreement, including without limitation, records on Net Sales and
royalty calculations, and records relating to the milestone events covered in Section 6.3.  At the request and expense of either Party,
the other Party, its Affiliates and its Sublicensees shall permit an independent
certified public accountant appointed by such Party and reasonably acceptable
to the other Party, at reasonable times and upon reasonable notice, to examine
such records as may be necessary to determine, with respect to any calendar
quarter ending not more than 36 months prior to such Party’s request, the
correctness or completeness of any report or payment made under this Agreement.


 


(b)                              The foregoing right of
examination may be exercised only once per 12 month period and only once with
respect to any such periodic report and payment.  Results of any such examination shall be (a)
limited to Information relating to the applicable reporting and payment
obligations, and (b) made available to both Parties.  The Party requesting the audit shall bear the
expenses of such independent certified public accountant related to the
performance of any such audit, unless such audit discloses a variance to the
detriment of the auditing Party of


 


28





















 


more than five percent (5%) from the amount of the original
report, or payment calculation.  In such
case, the Party being audited shall bear the full cost of the performance of
such audit.


 


(c)                              If such audit reveals that
the audited Party, its Affiliate or Sublicensee has failed to accurately report
information, and the result was under payment of amounts owed, the relevant
Party shall promptly pay any amounts due to the inspecting Party together with
interest on such amount, calculated from the date originally owed at the interest
rate set forth in Section 7.5.  In
the event of overpayment, any amount of such overpayment shall be fully
creditable against amount payable in subsequent periods.


 


(d)                              Audit Disagreement. If there
is a dispute between the Parties related to GAAP compliance following any audit
performed pursuant to this Section 7.4, either Party may refer the issue
(an “Audit Disagreement”) to an independent certified public accountant for
resolution.  In the event an Audit
Disagreement is submitted for resolution by either Party, the Parties shall
comply with the following procedures:


 


(i)                                     The Party submitting the
Audit Disagreement for resolution shall provide written notice to the other
Party that it is invoking the procedures of this Section.


 


(ii)                                  Within thirty (30) days of
the giving such notice, the Parties shall jointly select a recognized
international accounting firm to act as an independent expert to resolve such
Audit Disagreement.


 


(iii)                               The Audit Disagreement
submitted for resolution shall be described by the Parties to the independent
expert, which description may be in written or oral form, within ten (10) days
of the selection of such independent expert.


 


(iv)                              The independent expert shall
render a decision on the matter as soon as practicable.


 


(v)                                 The decision of the
independent expert shall be final and binding and shall not be subject to Article 13
hereof, unless such Audit Disagreement involves alleged fraud, breach of this
Agreement or construction or interpretation of any of the terms and conditions hereof.


 


(vi)                              All fees and expenses of the
independent expert, including any Third Party support staff or other costs
incurred with respect to carrying out the procedures specified at the direction
of the independent expert in connection with such Audit Disagreement, shall be
borne by the Party against whom such expert rules.


 


7.5                               Late
Payments.  In the event that any
payment due under this Agreement is not made when due, the payment will accrue
interest from the date due until paid on an annual basis **************************,
provided, however, that in no event will
such rate exceed the maximum legally permissible annual interest rate.  The payment of such interest will not limit
Arena from exercising any other rights it may have as a consequence of the lateness
of any payment.


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


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8.                                      INTELLECTUAL
PROPERTY


 


8.1                               Ownership
of Inventions.  Inventorship of all
Collaboration Inventions conceived and/or reduced to practice will be
determined in accordance with the rules of inventorship under United States
patent laws.  Arena will own the entire
right, title and interest in and to all Collaboration Inventions made or
discovered solely by the employees and contractors of Arena (or its
Affiliates), together with all intellectual property rights therein, subject
only to the license rights in such Collaboration Inventions granted to J&J
pursuant to Section 5.1 to the extent such Collaboration Inventions
qualify as Arena Technology.  J&J
will own the entire right, title and interest in and to all Collaboration
Inventions made or discovered solely by employees and contractors of J&J
(or its Affiliate or Sublicensee), subject only to the license rights in such
Collaboration Inventions granted to Arena pursuant to Section 5.1 or 11.6
to the extent such Collaboration Inventions qualify as J&J Technology.  All Collaboration Inventions that are made or
discovered jointly by employees or contractors of J&J (or its Affiliate or
Sublicensee) and employees or contractors of Arena (or its Affiliates) together
with any intellectual property rights therein (the “Joint Inventions”) shall be
owned as follows:  Arena shall own the
entire right, title and interest in and to all Joint Inventions that are or
relate directly to: the composition of matter of, or the use or manufacture of,
an Active Compound or a compound based on or derived from an Active Compound
(including any prodrug, ester, salt form, stereoisomer, crystalline polymorph,
hydrate or solvate thereof); 19AJ or its use in discovering compounds or
methods of treatment; or in vivo or
in vitro screening methods or
assays (the “Arena Joint Inventions”). 
Any Patent claiming an Arena Joint Inventions will be an “Arena Joint
Patent”.  J&J shall own the entire
right, title and interest in and to all Joint Inventions that are not Arena
Joint Inventions (the “J&J Joint Inventions”).  Any Patent claiming a J&J Joint Invention
shall be a “J&J Joint Patent”.  Each Party
will take such actions and sign such documents as reasonably needed to effect
the assignment of its interest in the applicable Joint Inventions and related
Joint Patents to the other Party as required above ownership.


 


8.2                               Patent
Prosecution and Maintenance.


 


(a)                                  Arena Patents.


 


(i)                                    Arena
will have the sole (except as otherwise provided below) responsibility for the
preparation, filing, prosecution and maintenance of, and conducting or
defending any interferences or similar proceedings and in obtaining and
maintaining any patent extensions, supplementary protection certificates and
the like with respect to, the Arena Patents (“Arena Patent Prosecution”).  The
************************************************ ************, except that if
Arena grants licenses under particular Arena Patents to any Third Party, Arena
will give J&J notice of such licenses having been granted, and the Parties
******** ***************** Arena Patent Prosecution for such Arena Patents
equally, or on some other basis as the Parties may agree in writing.  ***************************************** on
a monthly basis (with appropriate supporting documentation),
********************************************************************************************
****************** for particular Arena Patents as provided in subsection (iii)
below).  Arena will keep J&J informed
of the progress with regard to all activities relating to Arena Patent
Prosecution, to the extent such progress reasonably relates to the claims in
the Arena Patents that are licensed to J&J under this Agreement.  More specifically, Arena shall provide to
J&J copies of all proposed


 


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filings
and patent office responses and of all office actions and other material
communications from patent offices relating to such prosecution efforts, to the
extent related to the Arena Patent claims that are licensed to J&J, a
reasonable time in advance of any proposed filing or required response, and
J&J will have the right to comment on any such filing or response, and
Arena will consider in good faith the timely received requests and suggestions
of J&J with respect to such filings or responses and Arena’s strategies for
filing and prosecuting such Arena Patents.


 


(ii)                                If Arena intends to abandon or not maintain any Arena Patent that claims a Selected
Compound or its manufacture or use or that specifically claims 19AJ or its use
in discovering modulators or in a method of treatment, and Arena is not
abandoning such Arena Patent in favor of another Arena Patent, Arena will
provide reasonable prior written notice to J&J of such intention to abandon
(which notice will, in any event, be given no later than 60 days prior to
the next deadline for any action that may be taken with respect to such Arena
Patent with the U.S. Patent & Trademark Office or any foreign patent
office) and provide J&J the opportunity to assume responsibility for
prosecuting and maintaining such Arena Patent. 
In the event that J&J, in its sole discretion, elects to assume
responsibility for prosecuting and maintaining such Arena Patent, J&J shall
have the right to prosecute such Arena Patent, but such right being limited to
prosecuting claims specifically covering an invention comprising a Selected
Compound or its manufacture or use, or the genus of compounds containing one or
more Selected Compounds, or 19AJ or its use in discovering modulators or in a
method of treatment (and J&J shall not have the right to prosecute any
other claims that may have existed in such Patent), and within 60 days of
written notice by J&J that it will assume such responsibility, Arena will
effect the assignment of all of its right, title and interest in such Arena
Patent to J&J (except as limited by the foregoing) by executing all
necessary documents, and such Patent will then be deemed to be a J&J
Patent, and J&J will be deemed to grant to Arena a non-exclusive,
fully-paid, royalty-free license in the applicable country (or jurisdiction)
for all uses and purposes other than the manufacture, use, import, offer for
sale and sale of Selected Compounds and Collaboration Products.


 


(iii)                            As to any particular Arena Patent in a
country or jurisdiction, J&J may elect, in writing to Arena,
*****************************************************
***************************************************, in which case such Arena
Patent will be excluded from the scope of all license rights granted to J&J
under Section 5.1, and J&J will lose all rights in the applicable
country or jurisdiction under such Arena Patent and with regards to any Active
Compound claimed or covered by such Arena Patent and such Arena Patent will not
be considered in determining whether or not royalties are owed to Arena by
J&J based on Net Sales in the applicable country or jurisdiction.


 


(b)                                  J&J Patents.


 


(i)                                    J&J
will be solely responsible (except as otherwise provided in Section 11.6(b)(viii))
for the preparation, filing, prosecution and maintenance of, and conducting or
defending any interferences or similar proceedings and in obtaining and
maintaining any patent extensions, supplementary protection certificates and
the like with respect to, the J&J Patents (“J&J Patent Prosecution”), at J&J’s
sole expense.  As to all J&J Patents
that claim an Active Compound or its manufacture or use, or that relate to 19AJ
or its use in discovering modulators of 19AJ or in treating diseases or
conditions (each, a “J&J
Compound Patent”), J&J


 


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will
keep Arena informed of the progress with regard to all activities relating to
the J&J Patent Prosecution of the J&J Compound Patents, including providing
to Arena copies of all proposed filings and patent office responses and of all
office actions and other material communications from patent offices relating
to such prosecution efforts a reasonable time in advance of any proposed filing
or required response, and Arena will have the right to comment on any such
filings and responses.  J&J will
consider in good faith the timely received requests and suggestions of Arena
with respect to such filings or responses and Arena’s strategies for J&J
Patent Prosecution.


 


(ii)                                If J&J intends to abandon any J&J
Compound Patent, and J&J is not abandoning such J&J Compound Patent in
favor of another J&J Compound Patent, J&J shall provide reasonable
prior written notice to Arena of such intention to abandon (which notice shall,
in any event, be given no later than 60 days prior to the next deadline
for any action that may be taken with respect to such J&J Compound Patent
with the U.S. Patent & Trademark Office or any foreign patent office) and
provide Arena the opportunity to assume responsibility for prosecuting and
maintaining such J&J Compound Patent.


 


(c)                                  Joint Patents.  Arena will have the sole responsible for the
preparation, filing, prosecution and maintenance and conducting or defending
any interferences or similar proceedings and in obtaining and maintaining any
patent extensions, supplementary protection certificates and the like with
respect to the Arena Joint Patents. 
J&J will have the sole responsible for the preparation, filing,
prosecution and maintenance and conducting or defending any interferences or
similar proceedings and in obtaining and maintaining any patent extensions,
supplementary protection certificates and the like with respect to the J&J
Joint Patents.  The Party conducing the
Joint Patent Prosecution of a Joint Patent will consult with the other Party as
to the prosecution strategy and will keep such Party informed as to the
progress and all activities relating to the Joint Patent Prosecution, including
providing to the Party copies of all proposed filings and patent office
responses and of all office actions and other material communications from
patent offices relating to such prosecution efforts a reasonable time in
advance of any proposed filing or required response, and such Party will have
the right to comment on any such filings and responses.  The prosecuting Party will consider in good
faith the requests and suggestions of the other Party with respect to such
filings or responses and the strategies and activities relating to such Joint
Patent Prosecution.  If the prosecuting
Party intends to abandon any Joint Patent that it is responsible for, such
Party will provide reasonable prior written notice to the other Party of such
intention to abandon or decline responsibility (which notice will, in any
event, be given no later than 60 days prior to the next deadline for any
action that may be taken with respect to such Joint Patent with the U.S. Patent
& Trademark Office or any foreign patent office), and the other Party will
have the right, at its expense, to prepare, file, prosecute, and maintain such
Joint Patent.  Except as set forth below,
*********************** ***********
**************************************.  As to any particular Joint Patent in a
country or jurisdiction that ***********************************************************
for the ongoing prosecution and/or maintenance of such Joint Patent, such Joint
Patent will be excluded from the scope of all license rights granted to J&J
under Section 5.1, J&J will effect the assignment of all of its right,
title and interest in such Joint Patent to Arena by executing all necessary
documents, and J&J will lose all rights in the applicable country or
jurisdiction under such Joint Patent.


 


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8.3                               Cooperation
of the Parties.  Each Party agrees to
use reasonable efforts to cooperate with the other Party in the preparation,
filing, prosecution and maintenance of and conducting or defending any
interferences or similar proceedings with respect to any Patents covered under
this Agreement and in obtaining and maintaining any patent extensions,
supplementary protection certificates and the like with respect to any Patent
claiming a Collaboration Product being developed or commercialized by J&J
in accordance with this Agreement.  Such
cooperation includes, but is not limited to:


 


(a)                                  executing
all papers and instruments, or requiring its (and its Affiliates’) employees or
contractors, to execute such papers and instruments, so as to effectuate the
ownership of Inventions set forth in Section 8.1, and Patents claiming or
disclosing such Inventions, and to enable the other Party to apply for and to
prosecute patent applications in any country; and


 


(b)                                  promptly
informing the other Party of any matters coming to such Party’s attention that
may affect the preparation, filing, prosecution or maintenance of or conducting
or defending any interferences or similar proceedings with respect to any such
Patents.


 


8.4                               Infringement
by Third Parties.  Arena and J&J
will promptly notify the other in writing of any alleged or threatened
infringement or challenge to the validity or enforceability of any Arena
Patent, J&J Patent or Joint Patent of which they become aware.  Both Parties will use their diligent efforts
in cooperating with each other to terminate such infringement or challenge
without litigation.  Arena will have the
sole and exclusive right to defend or otherwise respond to any alleged
invalidity or unenforceability of Arena Patents.


 


(a)                                  Arena Patents – Field Infringement.  With respect to infringement of an Arena Patent by the manufacture, use or
sale by a Third Party of a compound that is a Selected Compound, which manufacture,
use or sale is likely to have a material adverse effect on current or future
sales of any Development Compound or Collaboration Product being researched,
developed or commercialized by J&J or its Affiliate or Sublicensee (a “Field Infringement”), J&J may request that Arena bring an
action or suit with respect to such Field Infringement.  If J&J makes such request, Arena shall
promptly initiate and conduct such action, using counsel mutually agreed to by
the Parties, and *********************************************************
*******************************************************************************
*********************** *******************************.  If requested by J&J in writing, Arena
will include J&J as a party, or, if Arena fails to do so, J&J may
intervene as a party, in such action or suit, to the extent permitted by law,
and in such regard may have counsel of its choosing and at its expense to
represent J&J’s interest in such action or suit, but Arena will control the
conduct of the action or suit, and J&J shall not bring any claim against
Arena based on the conduct of such action or suit.  If Arena does not receive any such request
from J&J within sixty (60) days after the Parties first are aware of such
Field Infringement, then Arena may, at its discretion, choose to bring an
action or suit at Arena’s own expense. 
In any such action or suit brought by Arena, J&J will have
the right, at its own expense, to be represented in any such action by counsel
of its own choice, but shall not have any right to control or interfere with
Arena’s conduct of the suit or action.  In no event shall J&J notify any Third
Party of any alleged Field Infringement or bring any suit or other
action against any Third Party seeking to enforce any Arena


 


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Patents
against any alleged Field Infringement (or otherwise), without first obtaining
Arena’s prior written consent.


 


(b)                                  J&J Patents.  J&J will have the sole right to bring and
control any action or proceeding with respect to infringement of any J&J
Patent at its own expense and by counsel of its own choice.


 


(c)                                  Joint
Patents.  Except as otherwise
provided below or as agreed by the Parties in writing, Arena will have the sole
right to bring and control any action or proceeding with respect to
infringement of any Arena Joint Patent.  
If such infringement is a Field Infringement, Arena will bring such
action or suit if so requested by J&J in writing within 60 days of becoming
aware of such Field Infringement, using
counsel mutually agreed to the Parties, and
*************************************** *************************************
**********.  J&J will have the
right, at its own expense, to be represented in any such action by counsel of
its own choice, but shall not have any right to control or interfere with Arena’s
conduct of the suit or action.  J&J
will have the sole right to bring and control any action or proceeding with respect
to a Field Infringement of any J&J Joint Patent.   For any infringement of a Joint Patent that
is not a Field Infringement, the Parties will discuss and agree in good faith
on the appropriate actions to be brought to deal with such infringement, and
the terms of any such action including the sharing of costs for bringing such
action and of any recovery from such action.


 


(d)                                  Cooperation;
Recovery.  If a Party brings an
infringement action in accordance with this Section 8.4, the other Party
will cooperate fully, including, if required to bring such action, furnishing a
power of attorney or being named as a Party plaintiff in the action.  Except as otherwise agreed to by the Parties
************************************************* ******************************************************************************************************
********************************************************************************************
*******************************************************************************************************
****************************************************************************************************
********************************************************
********************************************** ********************************
*********************************************************************** *************.  Arena
will have the sole right to bring and control, and to retain all recovery from,
any action or proceeding with respect to infringement of any Arena Patent at
its own expense and by counsel of its own choice with respect to any activities
by a Third Party that are not Field Infringements.


 


8.5                               Infringement
of Third Party Rights.  Each Party
will promptly notify the other in writing of any allegation or claims by a
Third Party that the activity of either of the Parties pursuant to this
Agreement infringes or may infringe the intellectual property rights of such
Third Party.  The Parties will meet and
discuss in good faith the appropriate steps to respond to any such allegations
or claims, but the foregoing will not impede in any way the right of a Party to
defend itself against legal actions.  In
the event that a Third Party brings an action for infringement against J&J
for infringement of one or more claims covering the manufacture, sale


 


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or
importation of a Development Compound in a Collaboration Product, and
********************************************* ************************************************************************************************
*************************************************************************************************
***********************************************************************.


 


8.6                               Cooperation by J&J and Arena in Patent
and Regulatory Filings.  The Parties shall cooperate in order
to avoid loss of any rights that may otherwise be available to the Parties
under the U.S. Drug Price Competition and Patent Term Restoration Act of 1984,
the Supplementary Certificate of Protection of the Member States of the
European Union and other similar measures in any other country.  Without limiting the foregoing, J&J shall
notify Arena upon receipt of Regulatory Approval to market a Collaboration
Compound or Collaboration Product in the United States, and timely supply Arena
with all information necessary to file an application for patent term extension
for a relevant Arena Patent, within the sixty (60) calendar day period
following Regulatory Approval.  Arena
agrees to timely file any such application, unless it reasonably objects to
seeking such extension for such Patent (in which case the dispute shall be
resolved pursuant to Article 13). 
The obligations set forth in this Section shall apply with respect
to patent term extensions, or the equivalent, in any other country.  Any application for patent term extension in
the United States shall be made by the Party who Controls the relevant patent.


 


9.                                      REPRESENTATIONS,
WARRANTIES, AND COVENANTS


 


9.1                               Mutual
Representations and Warranties.  Each
Party represents and warrants to the other that: (a) it is duly organized
and validly existing under the laws of its jurisdiction of incorporation or
formation, and has full corporate or other power and authority to enter into
this Agreement and to carry out the provisions hereof; (b) it is duly
authorized to execute and deliver this Agreement and to perform its obligations
hereunder, and the person or persons executing this Agreement on its behalf has
been duly authorized to do so by all requisite corporate or partnership action;
and (c) this Agreement is legally binding upon it, enforceable in
accordance with its terms, and does not conflict with any agreement, instrument
or understanding, oral or written, to which it is a Party or by which it may be
bound, nor violate any material law or regulation of any court, governmental
body or administrative or other agency having jurisdiction over it.


 


9.2                               Arena
IP Warranties.   Arena represents and
warrants to J&J as of the Effective Date that:


 


(a)                                  To
Arena’s knowledge after reasonable investigation, Exhibit C is accurate and
complete and identifies all Patents rights owned by or licensed to Arena as of
the Effective Date that specifically claim the manufacture, use or sale of 19AJ
*****************
*****************************************************************************
****************************************** identified by Arena as of the
Effective Date;


 


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(b)                                  it
has disclosed to J&J all Third Party Patents of which Arena has knowledge
as of the Effective Date that Arena believes are relevant to Arena’s and/or
J&J’s freedom-to-operate with respect to the use of the Arena Technology as
contemplated under this Agreement and/or the discovery, development or
commercialization of Active Compounds; and


 


(c)                                  it
has not granted any right, license or interest in or to the Arena Technology
that is in conflict with the rights and licenses granted to J&J under this
Agreement.


 


9.3                               Disclaimer.  Except
as expressly set forth herein, THE TECHNOLOGY AND INTELLECTUAL PROPERTY
RIGHTS PROVIDED BY EACH PARTY HEREUNDER ARE PROVIDED “AS IS” AND EACH PARTY
EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS
OF THIRD PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE
PRACTICES, IN ALL CASES WITH RESPECT THERETO. 
Without limiting the generality of the foregoing, each Party expressly
does not warrant, and disclaims any warranties with regards to:  (a) the success of any study or test
commenced under the Research Program, (b) the safety or usefulness for any
purpose of the technology or materials, including any Active Compounds, it
provides or discovers under this Agreement; and/or (c) the validity,
enforceability, or non-infringement of any intellectual property rights or
technology it provides or licenses to the other Party under this Agreement.


 


9.4                               Limitation
of Liability.  EXCEPT FOR LIABILITY
FOR BREACH OF ARTICLE 10, NEITHER PARTY
WILL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY
LICENSE GRANTED HEREUNDER; provided,
however, that this Section 9.4 will not be construed to limit
either Party’s indemnification obligations under Article 12.


 


9.5                               Covenants
of the Parties


 


(a)                                  Throughout
the term of this Agreement, Arena and J&J will comply (and will cause their
Affiliates and Sublicensees to comply) in all material respects with all
applicable laws and regulations concerning the manufacture, use and sale of the
Selected Compounds and the Collaboration Products.


 


(b)                                  Each of the Parties will, at the
reasonable request of the other Party, use reasonable efforts to execute and
deliver any further or additional instruments or documents, and to perform any
other acts, as are necessary in order to effectuate and carry out the terms of
this Agreement, but provided that the
foregoing shall not be interpreted to require such Party to incur any
additional expenses or grant any other rights to the other Party, other than
rights expressly granted elsewhere in the Agreement.


 


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10.                               CONFIDENTIALITY


 


10.1                        Confidential
Information.  Except to the extent
expressly authorized by this Agreement or otherwise provided herein or agreed
in writing by the Parties, each Party agrees that, during the Term and for five
years thereafter, the receiving Party and its Affiliates and sublicensees will
keep confidential and will not publish or otherwise disclose and will not use
for any purpose other than as expressly permitted in this Agreement any
Information furnished to it or its Affiliates by the other Party pursuant to
this Agreement (collectively, “Confidential Information”
of the disclosing Party).  Each Party may
use such Confidential Information of the other Party only to the extent
required to accomplish the purposes of this Agreement or exercise its rights
under the licenses granted to it under this Agreement.  Each Party will use at least the same
standard of care as it uses to protect proprietary or confidential information
of its own, but in no event less than reasonable care, to ensure that its and
its Affiliates’ and sublicensees’ employees, agents, consultants and other
representatives do not disclose or make any unauthorized use of the
Confidential Information.  Each Party
will promptly notify the other upon discovery of any unauthorized use or
disclosure of the Confidential Information. 
The Parties further acknowledge that each Party has disclosed to the
other Party (or its Affiliates), prior to the Effective Date, certain
confidential Information pursuant to non-disclosure and/or material transfer
agreements entered into between the Parties (or a Party’s Affiliates), that
limit the disclosure and use of such Information by the receiving Party.  The Parties hereby agree that any such
confidential Information earlier disclosed by one Party to the other (or its
Affiliates) under such earlier agreements will be deemed to be the Confidential
Information of the disclosing Party and subject to all the terms of this Article 10,
as well as the additional terms covering such Information (if any) under the
earlier agreements.


 


10.2                        Exceptions.  The obligations of non-disclosure and non-use
under Section 10.1 will not apply as to particular Confidential
Information of a disclosing Party to the extent that the receiving Party can
prove by competent written evidence that such Confidential Information:
(a) is at the time of receipt, or thereafter becomes, through no act or
failure to act on the part of the receiving Party, generally known or
available; (b) is known by the receiving Party at the time of receiving
such Information, as evidenced by its records; (c) is hereafter furnished to
the receiving Party by a Third Party, as a matter of right and without
restriction on disclosure; (d) is independently discovered or developed by
the receiving Party without reference to Confidential Information belonging to
the disclosing Party; or (e) is the subject of a written permission to
disclose provided by the disclosing Party.


 


10.3                        Authorized
Disclosure.  Each Party may disclose
Confidential Information belonging to the other Party to the extent such
disclosure is reasonably necessary in the following instances:


 


(a)                                  filing
or prosecuting Patents as permitted by this Agreement;


 


(b)                                  regulatory
filings for Collaboration Products such Party has a license or right to develop
hereunder;


 


(c)                                  prosecuting
or defending litigation as permitted by this Agreement;


 


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(d)                                  complying
with applicable court orders or governmental regulations;


 


(e)                                  disclosure
to Affiliates, sublicensees, employees, consultants, or agents on a need to
know basis and only for purposes of performance of such Party’s obligations
under this Agrement, and provided, in each case, that any such Affiliate,
Sublicensee, employee, consultant or agent agrees to be bound by similar terms
of written confidentiality and non-use at least equivalent in scope to those
set forth in this Article 10; or


 


(f)                                    disclosure
to existing or potential Third Party investors, merger partners, acquirors, and
professional advisors (including lawyers, accountants, and investment bankers)
in the context of a potential transaction, provided, that any such Third Party
agrees to be bound by similar terms of confidentiality and non-use at least
equivalent in scope to those set forth in this Article 10.


 


Notwithstanding
the foregoing, (1) in the event a Party is required to make a disclosure of the
other Party’s Confidential Information pursuant to Section 10.3(b), (c) or
(d), it will, except where impracticable, give reasonable advance notice to the
other Party of such disclosure and use reasonable efforts to secure, or to
assist the other Party in securing, confidential treatment of and/or a
protective order regarding such Information, and (2) any disclosure by Arena
under 10.3(e) to sublicensees, consultants or agents may only be made following
consultation with and permission from J&J (such permission not to be
unreasonably withheld) as to the form and content of such disclosure.  The Parties will consult with each other on
the provisions of this Agreement to be redacted in any filings made by the
Parties with the Securities and Exchange Commission or as otherwise required by
law.


 


10.4                        Publications.


 


(a)                                  If
either Party seeks to publish any Information relating to the results of work
conducted under this Agreement, which utilizes data generated from the Research
Program and/or includes Confidential Information of the other Party or relates
in any way to an Active Compound (prior to the first anniversary of the end of
the Research Term), or to a Selected Compound or Collaboration Product (after
the first anniversary of the end of the Research Term), that Party will provide
the other Party the material proposed for disclosure or publication, such as by
oral presentation, manuscript or abstract, and the other Party will have the
right to review and comment on all such material.  The Parties will reasonably agree on the
content of any such publication, except that
J&J shall be free to publish the results of and/or Information
concerning development of a Development Compound in Phase IIb Trials or later
stage trials subject to subclause (b) below.


 


(b)                                  If
J&J seeks to publish any Information relating to the results of work
conducted under this Agreement concerning development of a Development Compound
in Phase IIb Trials or later stage trials or commercialization of a Collaboration
Product, which Information or publication includes Confidential Information of
Arena, J&J will deliver a complete copy to Arena at least 45 days
prior to submitting the material to a publisher or initiating any other
disclosure.  Arena will review any such
material and give its comments to J&J as soon as practicable and will give
written notice whether it authorizes the disclosure of its Confidential
Information or requests deletion of Arena Confidential Information and/or other


 


38





















 


comments
regarding the disclosure.   J&J will
comply with any request of Arena to delete references to Arena’s Confidential
Information and will reasonably consider any other comments.


 


(c)                                  J&J
agrees, at Arena’s request, to delay any submission for publication or other
public disclosure regarding results of work conducted under this Agreement,
which utilizes data generated from the Research Program or relates in any way
to an Active Compound, a Collaboration Compound or a Collaboration Product, and
other information regarding the Research Program, including oral presentations
and abstracts, for a period of up to an additional 90 days for the purpose
of preparing and filing appropriate patent applications.


 


10.5                        Publicity.  Arena may issue a press release
announcing the execution of this Agreement, the text of which will be mutually
agreed upon in advance by the Parties promptly after the Effective Date and
acting reasonably.  In the event that
either Party desires to issue subsequent press releases relating to this
Agreement or activities under this Agreement that disclose Information
materially different from the Information in the text set forth in such initial
press release, or in any subsequent authorized press release, such Party agrees
to obtain the other Party’s written permission with respect to the text and
timing of such press releases prior to the issuance thereof, provided that such
other Party may not unreasonably withhold consent to such releases, and that
each Party may make any governmental filings and public disclosures as it
determines, based on advice of counsel, are reasonably necessary to comply with
laws or regulations or for appropriate market disclosure.  In addition, following the initial (or any
subsequent) press release announcing this Agreement or any activity under the
Agreement, each Party will be free to disclose, without the other Party’s prior
written consent, the existence of this Agreement and the identity of J&J
and those terms of this Agreement or activities which have already been
publicly disclosed in accordance herewith. 
Arena will have the right to make disclosures as necessary to comply
with law and regulations, and will also be able to disclose specific sections
or provisions of this Agreement to prospective merger partners or acquirers to
the extent such disclosure is needed in connection with the proposed
transaction, and such party agrees to keep the disclosed information in
confidence.  Arena will also be able to
disclose specific sections or provisions of this Agreement relating to the
ownership and control of intellectual property rights to prospective licensee
to the extent such disclosure is needed in connection with the proposed
transaction, and such party agrees to keep the disclosed information in
confidence.


 


10.6                        Residual
Information.  Notwithstanding the
foregoing restrictions, but subject to the other limitations set forth in this Section 10.6,
an employee of receiving Party shall not be prevented from using
unintentionally the residuals (as defined below) remaining in such person’s
memory from access to or work with the Confidential Information of the
disclosing Party.  The term “residuals”
means Information in intangible form that is incidentally and unintentionally
retained in the memory of a persons who have had access to the Information, and
where the source of the Information has become remote (e.g., as a result of the
passage of time or the person’s subsequent exposure to Information of a similar
nature from other sources) such that the person can no longer identify the
Information’s confidential source at the relevant time; provided, however, that
no license to any patent or copyright of the disclosing Party is or shall be
deemed granted under this Section.  The
term “residuals” shall not cover any Information that is known to be in
tangible form, or which a reasonable person should be able to identify as the 


 


39





















 


proprietary
information of the disclosing Party, such as specific assays, protocols,
methods of identifying Active Compounds, or the structure or composition of
compounds.


 


11.                               TERM AND TERMINATION


 


11.1                        Term
of Agreement.  The term of this
Agreement (the “Term”) will commence on the
Effective Date and continue until expiration of this Agreement upon the
expiration or termination of all payment obligations of J&J under this
Agreement, or upon earlier termination of this Agreement pursuant to Section 11.2,
11.3, 11.4, 11.5, 13.4 or 14.10.


 


11.2                        Termination
for Cause.  Each Party will have the
right to terminate this Agreement upon 60 days’ prior written notice to
the other Party upon the breach by such other Party of any material provision
of this Agreement provided that such notice has
given detail of the basis for the breach and the breaching Party has not cured
such breach within the 60-day period following such written notice.  The right of a Party to terminate this
Agreement under this Section, and the notice period for such termination, will
be tolled during the period of any arbitration or judicial proceeding that is
invoked to resolve the issue of whether the alleged breaching Party has in fact
committed a material breach of this Agreement, or whether such Party has cured
such breach.


 


11.3                        Termination
by J&J Without Cause During The Research Term.  At any time during the Research Term, J&J
may terminate this Agreement by providing Arena at least 60 days prior written
notice, provided, however, that if J&J terminates before making all
payments that would be owed to Arena under Section 6.2 prior to the end of
the original Research Term (i.e., absent
such early termination), it agrees to pay Arena within 20 Business Days of such
termination an amount equal to the total of all such remaining research funding
under Section 6.2 that would have been due Arena assuming J&J had not
terminated the Agreement prior to the end of the Research Term.


 


11.4                        Termination
by J&J Without Cause After The End of the Research Term.  At any time after the end of the Research
Term, J&J may terminate this Agreement by providing Arena at least 60 days
prior written notice.


 


11.5                        Termination
by J&J As A Result Of Arena Change of Control.  If an Arena Change of Control occurs
during the Research Term, J&J may terminate the Agreement, or in the alternative
may terminate early the Research Program, on sixty days prior written notice,
and in such event J&J shall not have any obligation to pay Arena any
remaining research funding that would have been due, after the effective date
of such termination, if it had not terminated prior to the end of the Research
Term.  If J&J terminates the Research
Program early, but not the entire Agreement, under this Section, then the
Parties will use diligent efforts to wind down the Research efforts of Arena by
the effective date of such termination, and the Agreement shall continue in all
other aspects with the Research Term being deemed ended as of the effective
date of such termination.  For the
purposes of this Section 11.5:


 


“Arena Change of Control” means any
transaction or series of related transactions in which a Major Health Care
Company acquires or becomes the beneficial owner of (i) more than fifty-one
percent (51%) of the outstanding voting securities of Arena or the surviving
entity,


 


40





















 


whether
by merger, consolidation, reorganization, tender offer or similar means, or
(ii) all or substantially all of the assets of Arena.


 


“Major Health Care Company” shall
mean a Third Party pharmaceutical or biotechnology company (including a “group”
within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934 but excluding J&J and any affiliates of J&J) whose worldwide net
sales of human pharmaceutical products, including consumer over-the-counter
pharmaceutical products, in the most recently completed fiscal year for which
audited financial statements are publicly available at the time such Change of
Control occurs, causes such company (or group) to rank within the top
*********** companies as reported in such financial statements, or if such
information is not publicly available, as appropriately provided by Arena.


 


11.6                        Effect
of Termination; Surviving Obligations.


 


(a)                                  Upon
termination of this Agreement, except as otherwise provided in subsection (b)
below:


 


(i)                                    all
rights under the licenses granted by either Party to the other under this
Agreement, if then in effect, will automatically terminate and revert to the
granting Party; and


 


(ii)                                the
other rights and obligations of each Party will terminate, except as otherwise
provided in Section (c) below.


 


(b)                                  Upon
termination of this Agreement by Arena pursuant to Section 13.4 (for
breach of diligence) or 14.10 or under Section 11.2, or by J&J under Section 11.2,
11.3, 11.4, 11.5 or 14.10:


 


(i)                                    all
rights under the licenses granted by either Party to the other under Article 5,
if then in effect, will automatically terminate and revert to the granting
Party, except as otherwise provided in this Section 11.6(b) below, and any
and all Selected Compounds terminate and revert to being solely Active
Compounds;


 


(ii)                                the
other rights and obligations of each Party will terminate, except as otherwise
provided in Section (c) below;


 


(iii)                            J&J
is automatically deemed to grant to Arena the worldwide, exclusive (even as to
J&J), irrevocable, perpetual, fully –paid-up license with the right to
sublicense to its and its Affiliates’ entire right and interest in all
Collaboration Inventions to the extent that they relate to Active Compounds, or
19AJ and modulators of 19AJ, and Joint Patents to the extent that they relate
to Active Compounds (including their development, manufacture or use), or 19AJ
and modulators of 19AJ, including research results, clinical trial data, and
regulatory information solely to allow Arena, its assigns, Affiliates or
sublicensees, to make, have made, use, sell, have sold, offer for sale and
import products containing Active Compounds (including all Collaboration
Products) in the Field;


 


(iv)                               J&J
will promptly deliver and assign to Arena all of its right, title and interest
in and to all regulatory filings and applications and Regulatory Approvals
relating to


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


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Collaboration
Products, including INDs, NDAs, drug dossiers, DMFs, CMC sections, and master
files with respect to Active Compounds and Collaboration Products and all
Regulatory Approvals, and take such other actions and execute such other
instruments, assignments and documents as may be necessary to effect the
transfer of rights hereunder to Arena;


 


(v)                                   J&J
is automatically deemed to grant to Arena the worldwide, exclusive (even as to
J&J), irrevocable, perpetual, fully paid license, with the right to
sublicense, under the J&J Technology, but excluding the Proprietary
Delivery Technology as defined below, to make, have made, use, sell, have sold,
offer for sale and import products containing Active Compounds in the
Field;  as used in this subclause (v), the term “Proprietary Delivery
Technology” means Patents or trade secrets that are Controlled by J&J and
cover or claim proprietary formulation or delivery technologies, devices or
methods (including but not limited to methods of treating or preventing
diseases or conditions in mammals) that were developed independent of the
Research Program or activities under the Agreement and are broadly applicable
to use with pharmaceutical agents other than the Active Compounds;


 


(vi)                               if
such termination of this Agreement by Arena pursuant to Section 13.4 (for
breach of diligence) or 14.10 or under Section 11.2, or by J&J under Section 11.2,
11.3, 11.4, 11.5 or 14.10 occurs after dosing of the first patient in a Phase
IIa Clinical Trial, Arena shall have the option to obtain a worldwide, exclusive
(even as to J&J), irrevocable, perpetual license, with the right to
sublicense, under the Proprietary Delivery Technology, solely to make, have
made, use, sell, have sold, offer for sale and import products containing
whatever Active Compound or Active Compounds were undergoing or had undergone
(as a Selected Compound) such Phase IIa Clinical Trial in the Field, and Arena
shall pay to J&J royalties equal to three percent (3%) of the net sales by
Arena, its Affiliates or sublicensees of products covered under such
Proprietary Delivery Technology as the sole consideration for such license (and
where such “net sales” shall be defined in the equivalent manner as “Net Sales”
in Article 1 for sales of Collaboration Products by J&J);


 


(vii)                           J&J
covenants to Arena that J&J and its Affiliates and Sublicensees will not
develop, promote, market or sell any compound that has been discovered or
identified as an Active Compound, or has otherwise become known to J&J or
its Affiliate as an Active Compound, or any product containing such an Active
Compound; and


 


(viii)                       If
J&J intends to abandon or not
maintain any J&J Patent or
Joint Patent that claims an Active Compound or its manufacture or use or that
claims 19AJ or its use in discovering modulators or in a method of treatment,
J&J will provide reasonable prior written notice to Arena of such intention
to abandon (which notice will, in any event, be given no later than
60 days prior to the next deadline for any action that may be taken with
respect to such Joint Patent with the U.S. Patent & Trademark Office or any
foreign patent office) and Arena may then assume the J&J Patent Prosecution
with respect to such J&J Patent or Joint Patent.


 


(c)                                  Expiration
or termination of this Agreement will not relieve the Parties of any obligation
accruing prior to such expiration or termination.  The obligations and rights of the 


 


42





















 


Parties
under the following provisions of this Agreement will survive expiration or
termination of this Agreement:


 


Sections 5.2, 7.3, 7.4,
7.5, 8.1, 8.3(a), 9.3, 9.4, 10.1, 10.2, 10.3, 10.4, 10.6, 14.1 and 14.2 and
Articles 1, 11, 12, 13 and 14 of Agreement.


 


(d)                                  Within
30 days following the expiration or termination of this Agreement, except to
the extent and for so long as a Party retains license rights under
Sections 11.6(a) or (b), each Party will deliver to the other Party any
and all Confidential Information of the other Party in its possession or at the
other Party’s option, will destroy such Confidential Information and will
certify to the other party in writing that it has so destroyed such
Confidential Information.


 


11.7                        Exercise
of Right to Terminate.  The use by
either Party hereto of a termination right provided for under this Agreement
will not in and of itself give rise to the payment of damages or any other form
of compensation or relief to the other Party with respect thereto.


 


11.8                        Damages;
Relief.  Subject to Sections 9.4
and 11.7 above, termination of this Agreement will not preclude either
Party from claiming or seeking or being entitled to any other damages,
compensation or relief that it may be entitled to which accrued prior to such
termination based on the Agreement.


 


11.9                        Rights
in Bankruptcy.


 


(a)                                  It
is the intention of J&J and Arena that J&J’s rights under this
Agreement will remain in place if Arena files a petition in bankruptcy, is
adjudicated as bankrupt or files a petition or otherwise seeks relief under any
bankruptcy, insolvency or reorganization statue or proceeding, or a petition in
bankruptcy is filed against it or is not dismissed within 60 days, or it
becomes insolvent or makes an assignment for the benefit of creditors or a
custodian, receiver or trustee is appointed for it or a substantial portion of
its business or assets or admits in writing its inability to pay its debts as
they become due (each a “Bankruptcy Event”). 
It is the intention of J&J and Arena that J&J’s exclusive rights
and licenses to commercialize and market Active Compounds and Collaboration
Products in the Territory continue, without impairment, if and after any
Bankruptcy Event.  To that end, J&J
may make direct arrangement with Arena’s suppliers to obtain the Compound, and
any related testing or other services, and to continue developing and commercializing
Products.


 


(b)                                  All
rights and licenses granted under or pursuant to this Agreement by J&J or
Arena are, and will otherwise be deemed to be, for purposes of Section 365(n)
of the U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined
under Section 101 of the U.S. Bankruptcy Code.  The Parties agree that the Parties, as
licensees of such rights under this Agreement, will retain and may fully
exercise all of their rights and elections under the U.S. Bankruptcy Code.  The Parties further agree that, in the event
of the commencement of a bankruptcy proceeding by or against either Party under
the U.S. Bankruptcy Code, the Party hereto that is not a Party to such
proceeding will be entitled to a complete duplicate of (or complete access to,
as appropriate) any such intellectual property and all embodiments of such
intellectual property, and same, if not already in their possession, will be
promptly delivered to them (i) upon any such commencement of a bankruptcy
proceeding upon their written request


 


43





















 


therefor,
unless the Party subject to such proceeding elects to continue to perform all
of its obligations under this Agreement, or (ii) if not delivered under
(i) above, following the rejection of this Agreement by or on behalf of the
Party subject to such proceeding upon written request therefor by the
non-subject Party.


 


(c)                                  If,
under the Bankruptcy Code or successor similar law, a trustee in bankruptcy of
Arena, or Arena, as debtor, desires to assign this Agreement to a Third Party
in accordance with the Bankruptcy Code, the trustee or Arena, as the case may
be (in either case, the “Debtor”), will notify J&J.  The notice will set out the name and address
of the proposed assignee, the proposed consideration for the assignment and all
other relevant data about the proposed assignment.  Nothing in this Section 11.8 is intended
to impair any rights which J&J may have as a creditor in the bankruptcy
proceeding.


 


12.                               INDEMNIFICATION


 


12.1                        Indemnification by Arena.  Arena hereby agrees to save, defend and hold
J&J and its Affiliates and their respective directors, officers, employees
and agents (each, a “J&J
Indemnitee”) harmless from and against any and all claims,
suits, actions, demands, liabilities, damages, expenses and/or loss, including
reasonable legal expense and attorneys’ fees (collectively, “Losses”), to which any J&J
Indemnitee may become subject to the extent such Losses result from any claim,
demand, action or other proceeding against the J&J Indemnitee by any Third
Party to the extent based upon: (i) the practice by Arena of any license
granted by J&J under this Agreement, (ii) the manufacture, use,
handling, storage, sale or other disposition of any Collaboration Product by
Arena, its Affiliates or sublicensees (other than J&J, its Affiliates and
their respective Sublicensees), or (iii) the breach by Arena of any
warranty, representation, covenant or agreement made by Arena in this
Agreement; except, in each case, to the extent such Losses result from the
negligence or willful misconduct of any J&J Indemnitee or the breach by
J&J of any warranty, representation, covenant or agreement made by J&J
in this Agreement.


 


12.2                        Indemnification by J&J.  J&J hereby agrees to save, defend and hold
Arena and its Affiliates and their respective directors, officers, employees
and agents (each, a “Arena
Indemnitee”) harmless from and against any and all Losses to
which any Arena Indemnitee may become subject to the extent such Losses result
from any claim, demand, action or other proceeding against the Arena Indemnitee
by any Third Party to the extent based upon: (i) the practice by J&J
(or its Affiliate or Sublicensee) of any license rights granted by Arena under
this Agreement, (ii) the manufacture, use, handling, storage, sale or
other disposition of any Collaboration Product by J&J, its Affiliates or
any of their respective Sublicensees, or (iii) the breach by J&J of
any warranty, representation, covenant or agreement made by J&J in this
Agreement; except, in each case, to the extent such Losses result from the
negligence or willful misconduct of any Arena Indemnitee or the breach by Arena
of any warranty, representation, covenant or agreement made by Arena in this
Agreement.


 


12.3                        Control
of Defense.  Any entity entitled to
indemnification under this Article 12 will give notice to the indemnifying
Party of any Losses that may be subject to indemnification, promptly after
learning of such Losses, and the indemnifying Party will assume the defense of
such Losses with counsel reasonably satisfactory to the indemnified Party.  If such defense is assumed by the
indemnifying Party with counsel so selected, the indemnifying Party will not be



 


44





















 


subject
to any liability for any settlement of such Losses made by the indemnified
Party without its consent (but such consent will not be unreasonably withheld
or delayed), and will not be obligated to pay the fees and expenses of any
separate counsel retained by the indemnified Party with respect to such Losses.


 


12.4                        Insurance.  J&J,
at its own expense, will maintain product liability insurance (or self-insure)
in an amount consistent with industry standards during the Term of this
Agreement and will name Arena as an additional insured with respect to such
insurance.  J&J will provide a
certificate of insurance (or evidence of self-insurance) evidencing such
coverage to Arena upon request.  Arena agrees during the term of the
Agreement and for a period of at least three (3) years thereafter to maintain
(a) workers’ compensation insurance for all of its employees, the limits of
which shall be as required under statute; and (b) commercial general liability
insurance on a claims made basis having limits of not less than $5,000,000 in
the aggregate and $1,000,000 per occurrence.


 


13.                               DISPUTE RESOLUTION


 


13.1                        Discussion
by Senior Executives.  If there is a
matter for which the JSC is unable to reach a decision (except for those
matters for which this Agreement provides that J&J will have the final
decision authority), or if any other dispute or issue (including any claim or
controversy arising from or related in any way to this Agreement or the
interpretation, application, breach, termination or validity thereof, including
any claim of inducement of this Agreement by fraud or otherwise) arises between
the Parties under this Agreement, such matter, dispute or issue will be
referred to the Chief Executive Officer of Arena and the Company Group Chairman
of J&J (or the senior officer of one of the applicable pharma-group
Affiliate that is involved in the specific dispute or issue based on ongoing
involvement in the operations under the Agreement), for further discussion and
resolution.  These individuals will as
soon as practicable meet and attempt in good faith to resolve the matter,
dispute or issue and reach agreement. 
These individuals may obtain the advice of other employees or
consultants as they deem necessary or advisable in order to make the
decision.  If these individuals cannot
reach agreement as to the matter, dispute or issue within 30 days of the
matter, dispute or issue being referred to them by either Party in writing,
then the matter, dispute or issue (an “Unresolved Issue”) will be resolved as
provided in Section 13.2 or 13.3, as applicable.


 


13.2                        Arbitration.


 


(a)                                  Any
Unresolved Issue may be submitted by either Party for resolution to arbitration
pursuant to the rules then pertaining of the CPR Institute for Dispute
Resolution for Non-Administered Arbitration (available at
www.cpradr.org/arb-rules.htm), or successor (“CPR”), except where those rules
conflict with these provisions, in which case these provisions control.  The arbitration will be held in New York
County, New York.  In the case that no
such rules exist, the Parties will in that case agree in good faith on
alternate arbitration rules to govern any arbitration conducted under this Section 13.2.


 


(b)                                  The
panel will consist of three arbitrators chosen from the CPR Panels of
Distinguished Neutrals (or, by agreement, from another provider of arbitrators)
each of whom is a lawyer with at least 15 years experience with a law firm or
corporate law department of over 25 


 


45





















 


lawyers
or who was a judge of a court of general jurisdiction.  If the aggregate damages sought by the
claimant are stated to be less than $5 million, and the aggregate damages
sought by the counterclaimant are stated to be less than $5 million, and neither
side seeks equitable relief, then a single arbitrator will be chosen, having
the same qualifications and experience specified above.  Each arbitrator will be neutral, independent,
disinterested, and impartial and will abide by The CPR-Georgetown Commission
Proposed Model Rule for the Lawyer as Neutral available at
www.cpradr.org/cpr-george.html.


 


(c)                                  The
parties agree to cooperate (1) to attempt to select the arbitrator(s) by
agreement within 45 days of initiation of the arbitration, including jointly
interviewing the final candidates, (2) to meet with the arbitrator(s) within 45
days of selection and (3) to agree at that meeting or before upon procedures
for discovery and as to the conduct of the hearing which will result in the
hearing being concluded within no more than nine (9) months after selection of
the arbitrator(s) and in the award being rendered within 60 days of the
conclusion of the hearings, or of any post hearing briefing, which briefing
will be completed by both sides within 45 days after the conclusion of the
hearings.


 


(d)                                  In
the event the Parties cannot agree upon selection of the arbitrator(s), the CPR
will select arbitrator(s) as follows: CPR will provide the parties with a list
of no less than 25 proposed arbitrators (15 if a single arbitrator is to be
selected) having the credentials referenced above.  Within 25 days of receiving such list, the
parties will rank at least 65% of the proposed arbitrators on the initial CPR
list, after exercising cause challenges. 
The Parties may then interview the five candidates (three if a single
arbitrator is to be selected) with the highest combined rankings, such
interviews to be either in person or, if in-person interviews are impractical,
by telephone, in each case, for no more than one hour each and, following the
interviews, may exercise one peremptory challenge each.  The panel will consist of the remaining three
candidates (or one, if one arbitrator is to be selected) with the highest
combined rankings.  In the event these
procedures fail to result in selection of the required number of arbitrators,
CPR will select the appropriate number of arbitrators from among the members of
the various CPR Panels of Distinguished Neutrals, allowing each side challenges
for cause and three peremptory challenges each.


 


(e)                                  In
the event the parties cannot agree upon procedures for discovery and conduct of
the hearing meeting the schedule set forth in paragraph c above, then the
arbitrator(s) will set dates for the hearing, any post hearing briefing, and
the issuance of the award in accord with the schedule in subclause (c)
above.  The arbitrator(s) will provide
for discovery according to those time limits, giving recognition to the
understanding of the parties that they contemplate reasonable discovery,
including document demands and depositions, but that such discovery be limited
so that the schedule may be met. 
Multiple hearing days will be scheduled consecutively to the greatest
extent possible.


 


(f)                                    The
arbitrator(s) must render their award by application of the substantive law of
New York and are not free to apply “amiable compositeur” or “natural justice
and equity.”  The arbitrator(s) will
render a written opinion setting forth findings of fact and conclusions of law
with the reasons therefor stated.  A
transcript of the evidence adduced at the hearing will be made and will, upon
request, be made available to either Party. 
The arbitrator(s) will have power to exclude evidence on grounds of
hearsay, prejudice beyond its probative 


 


46





















 


value,
redundancy, or irrelevance and no award will be overturned by reason of such
ruling on evidence.  To the extent
possible, the arbitration hearings and award will be maintained in confidence.


 


(g)                                 The
Parties consent to the jurisdiction of the Federal District Court for the
district in which the arbitration is held for the enforcement of these
provisions and the entry of judgment on any award rendered hereunder.  Should such court for any reason lack
jurisdiction, any court with jurisdiction will act in the same fashion.


 


(h)                                 In
the event the panel’s award exceeds $10 million in monetary damages or includes
or consists of equitable relief, or rejects a claim in excess of that amount or
for that relief, then the losing party may obtain review of the arbitrators’
award or decision by panel of three appealate arbitrators (the “Appeal
Arbitrators”) selected from the CPR Panels of Distinguished Neutrals by
agreement or, failing agreement within seven working days, pursuant to the
selection procedures specified in paragraph d above.  If CPR cannot provide such services, the
parties will together select another provider of arbitration services that
can.  No Appeal Arbitrators will be
selected unless they can commit to rendering a decision within forty five days
following oral argument as provided in paragraph i.  Any such review must be initiated within
thirty (30) days following the rendering of the award referenced in f above.


 


(i)                                    The
Appeal Arbitrators will make the same review of the arbitration panel’s ruling
and its bases that the U.S. Court of Appeals of the Circuit where the
arbitration hearings are held would make of findings of fact and conclusions of
law rendered by a district court after a bench trial and then modify, vacate or
affirm the arbitration panel’s award or decision accordingly, or remand to the
panel for further proceedings.  The
Appeal Arbitrators will consider only the arbitration panel’s findings of fact
and conclusions of law, pertinent portions of the hearing transcript and
evidentiary record as submitted by the parties, opening and reply briefs of the
party pursuing the review, and the answering brief of the opposing party, plus
a total of no more than four (4) hours of oral argument evenly divided between
the parties.  The party seeking review
must submit its opening brief and any reply brief within seventy five (75) and
one hundred thirty (130) days, respectively, following the date of the award
under review, whereas the opposing party must submit its responsive brief
within one hundred ten (110) days of that date. 
Oral argument will take place within five (5) months after the date of
the award under review, and the Appeal Arbitrators will render a decision
within forty five (45) days following oral argument.  That decision will be final and not subject
to further review, except pursuant to the Federal Arbitration Act.  The Party that seeks review under paragraph h
and i of the award or decision of the arbitration panel must pay all of the
costs of the Appeal Arbitrators and the relevant proceeding, but excluding the
other Party’s costs and expenses in such proceeding.


 


(j)                                    EACH
PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY.


 


(k)                                Each
Party has the right before or, if the arbitrator(s) cannot hear the matter
within an acceptable period, during the arbitration to seek and obtain from the
appropriate court provisional remedies such as attachment, preliminary
injunction, replevin, etc. to avoid irreparable harm, maintain the status quo,
or preserve the subject matter of the arbitration.


 


47





















 


13.3                        Notwithstanding
anything to the contrary, either Party may at any time seek to obtain
preliminary injunctive relief in equity from a court of competent jurisdiction
with respect to an issue arising under this Agreement if the rights of such
Party would be prejudiced absent such relief.


 


13.4                        Diligence
Disputes;  Remedies.  For any Unresolved Dispute that involves a
claim by Arena that J&J has breached its diligence obligations, under Section 3.7
or 4.2, the arbitrators of such Unresolved Dispute will, under the arbitration
conducted under Section 13.2, determine if J&J breached such diligence
obligations.  If J&J is determined to
have breached its diligence obligation, then Arena will have the right to terminate
this Agreement.


 


14.                               GENERAL PROVISIONS


 


14.1                        Governing
Law.  This Agreement will be governed
by, and construed and enforced in accordance with, the laws of the State of New
York, without giving effect to any conflicts of laws principles.


 


14.2                        Entire
Agreement; Modification.  This
Agreement is both a final expression of the Parties’ agreement and a complete
and exclusive statement with respect to all of its terms.  This Agreement supersedes all prior and
contemporaneous agreements and communications between the Parties, whether
oral, written or otherwise, concerning the subject matter contained herein,
excluding the letter agreement between the Parties dated the Effective Date
approving the initial Research Plan.  No
rights or licenses with respect to any intellectual property of either Party
are granted or deemed granted hereunder or in connection herewith, other than
those rights expressly granted in this Agreement.  This Agreement may only be modified or supplemented
in a writing expressly stated for such purpose and signed by the Parties to
this Agreement.


 


14.3                        Relationship
of the Parties.  The Parties’
relationship, as established by this Agreement, is solely that of independent
contractors.  This Agreement does not
create any partnership, joint venture or similar business relationship between
the Parties.  Neither Party is a legal
representative of the other Party, and neither Party can assume or create any
obligation, representation, warranty or guarantee, express or implied, on
behalf of the other Party for any purpose whatsoever.


 


14.4                        Performance
by Affiliates and Sublicensees.  The
Parties recognize that each may perform some or all of its obligations under
this Agreement through Affiliates or Sublicensees, provided, however, that each Party will remain responsible
and be guarantor of the performance by its Affiliates and will cause its
Affiliates and Sublicensees to comply with the provisions of this Agreement in
connection with such performance.  In particular,
if any Affiliate of a Party or a Sublicensee participates in research under
this Agreement or with respect to Products, (a) the restrictions of this
Agreement which apply to the activities of a Party with respect to Products
will apply equally to the activities of such Affiliate and Sublicensee, and
(b) the Party affiliated with such Affiliate or Sublicensee will assure,
and hereby guarantees, that any intellectual property developed by such
Affiliate or Sublicensee will be governed by the provisions of this Agreement
(and subject to the licenses set forth in Article 5) as if such
intellectual property had been developed by the Party.  Any action or omission by a Party’s Affiliate
or a Sublicensee which would, if such action or omission were conducted by the
Party, 


 


48





















 


constitute
a breach of the Party’s obligations under this Agreement will constitute a
breach of such obligation by the Party (unless such obligation were otherwise
satisfied by such Party or another of its Affiliates or Sublicensees).


 


14.5                        Non-Waiver.  The failure of a Party to insist upon
strict performance of any provision of this Agreement or to exercise any right
arising out of this Agreement will neither impair that provision or right nor
constitute a waiver of that provision or right, in whole or in part, in that
instance or in any other instance.  Any
waiver by a Party of a particular provision or right will be in writing, will
be as to a particular matter and, if applicable, for a particular period of
time and will be signed by such Party.


 


14.6                        Assignment.  Except as expressly provided hereunder,
neither this Agreement nor any rights or obligations hereunder may be assigned
or otherwise transferred by either Party without the prior written consent of
the other Party (which consent will not be unreasonably withheld); provided, however, that either Party may assign this
Agreement and its rights and obligations hereunder without the other Party’s
consent:


 


(a)                                  To
its successor in interest in connection with the transfer or sale of all or
substantially all of the business of such Party to which this Agreement
relates, whether by merger, sale of stock, sale of assets or otherwise,
provided that in the event of a transaction (whether this Agreement is actually
assigned or is assumed by the acquiring Party by operation of law (e.g., in the context of a reverse
triangular merger)), intellectual property rights of the acquiring party to
such transaction (if other than one of the Parties to this Agreement) will not
be included in the technology licensed hereunder; or


 


(b)                                  To
an Affiliate, provided that the assigning Party will remain liable and
responsible to the non-assigning Party hereto for the performance and
observance of all such duties and obligations by such Affiliate.


 


The rights and
obligations of the Parties under this Agreement will be binding upon and inure
to the benefit of the successors and permitted assigns of the Parties.  Any assignment not in accordance with this
Agreement will be void.


 


14.7                        No
Third Party Beneficiaries.  This
Agreement is neither expressly nor impliedly made for the benefit of any Party
other than those executing it.


 


14.8                        Severability.  If, for any reason, any part of this
Agreement is adjudicated invalid, unenforceable or illegal by a court of
competent jurisdiction, all other portions will remain in full force and
effect, and the Parties will use their best efforts to substitute for the
invalid, unenforceable or illegal provision a valid, enforceable and legal
provision which conforms as nearly as possible with the original intent of the
Parties.


 


14.9                        Notices.  Any notice to be given under this
Agreement must be in writing and delivered either in person, by registered or
certified mail (postage prepaid) requiring return receipt, or by overnight
courier or facsimile confirmed thereafter by any of the foregoing, to the Party
to be notified at its address(es) given below, or at any address such Party has
previously designated by prior written notice to the other.  Notice will be deemed sufficiently given for
all purposes upon the earliest of: 
(a) the date of actual receipt; (b) if mailed, three days
after the 


 


49





















 


date
of postmark; or (c) if delivered by overnight courier, the next business
day the overnight courier regularly makes deliveries.


 


If to J&J,
notices must be addressed to:


 


Ortho-McNeil
Pharmaceutical, Inc.


1000 U.S. Route 202


Raritan, New Jersey  08869


Attention: Company Group Chairman, North
American


Pharmaceuticals


Telephone: 
732-524-2904


Facsimile: 
732-524-5262


 


With a
required copy to:


 


Johnson & Johnson


One Johnson & Johnson Plaza


New Brunswick, NJ 08933


Attention: General Counsel


Telephone: 
732-524-2448


Facsimile: 
732-524-2788


 


If to Arena, notices must
be addressed to:


 


6166 Nancy Ridge Drive


San Diego, CA


92121


Attention: Chief Executive Officer


Telephone: 
858-453-7200, ext 223


Facsimile: 
858-677-0065


 


with a copy to:


 


6166 Nancy Ridge Drive


San Diego, CA


92121


Attention: General Counsel


Telephone: 
858-453-7200, ext 229


Facsimile: 858-677-0065


 


14.10                 Force
Majeure.  Except for the obligation
to make payment when due, each Party will be excused from liability for the
failure or delay in performance of any obligation under this Agreement by
reason of any event beyond such Party’s reasonable control including but not
limited to Acts of God, fire, flood, explosion, earthquake, or other natural
forces, war, civil unrest, accident, destruction or other casualty, any lack or
failure of transportation facilities, any lack or failure of supply of raw
materials, any strike or labor disturbance, or any other event similar to those
enumerated above.  Such excuse from
liability will be effective only to the extent and duration of the event(s)
causing the failure or delay in performance and provided that the 


 


50





















 


Party
has not caused such event(s) to occur and continues to use diligent, good faith
efforts to avoid the effects of such event and to perform the obligation.  Notice of a Party’s failure or delay in
performance due to force majeure must be given to the other Party within 10
days after its occurrence.  All delivery
dates under this Agreement that have been affected by force majeure will be
tolled for the duration of such force majeure. 
In no event will any Party be required to prevent or settle any labor
disturbance or dispute.  Notwithstanding
the foregoing, should the event(s) of force majeure suffered by a Party extend
beyond a nine-month period, the other Party may then terminate this Agreement
by written notice to the non-performing Party, with the consequences of such
termination as set forth in Section 11.6.


 


14.11                 Interpretation.


 


(a)                                  Captions
& Headings.  The captions and
headings of clauses contained in this Agreement preceding the text of the
articles, sections, subsections and paragraphs hereof are inserted solely for
convenience and ease of reference only and will not constitute any part of this
Agreement, or have any effect on its interpretation or construction.


 


(b)                                  Singular
& Plural.  All references in this
Agreement to the singular will include the plural where applicable, and all
references to gender will include both genders and the neuter.


 


(c)                                  Including
as Example.  Use of the term “including”
in this Agreement will be interpreted to mean “including, without limitation,”
and will be exemplary rather than restrictive.


 


(d)                                  Articles,
Sections & Subsections.  Unless
otherwise specified, references in this Agreement to any article will
include all sections, subsections, and paragraphs in such article; references
in this Agreement to any section will include all subsections and
paragraphs in such sections; and references in this Agreement to any subsection will
include all paragraphs in such subsection.


 


(e)                                  Days.  All references to days in this Agreement
means calendar days, unless otherwise specified.


 


(f)                                    Ambiguities.  Ambiguities and uncertainties in this
Agreement, if any, will not be interpreted against either Party, irrespective
of which Party may be deemed to have caused the ambiguity or uncertainty to
exist.


 


(g)                                 English Language.  All notices required or permitted to be given
hereunder, and all written, electronic, oral or other communications between
the Parties regarding this Agreement will be in the English language.


 


14.12                 Counterparts.  This Agreement may be executed in two or
more counterparts, each of which will be deemed an original document, and all
of which, together with this writing, will be deemed one instrument.


 


[Remainder
of this page intentionally left blank.]


 


51





















 


IN
WITNESS WHEREOF, the Parties have duly executed this
Agreement as of the Effective Date.


 


	
  ARENA PHARMACEUTICALS, INC.

  	
   

  	
  ORTHO-MCNEIL PHARMACEUTICAL, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Jack Lief

  	
   

  	
  By:

  	
   

  	
  /s/ Joseph C.
  Bondi

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Jack Lief

  	
   

  	
  Name:

  	
   

  	
  Joseph C. Bondi

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  President &
  CEO

  	
   

  	
  Title:

  	
   

  	
  V.P. Finance

  	
   

  
													



 


52





















 


EXHIBIT A


 


19AJ AND LEAD MOLECULES


 


[***19AJ AND LEAD MOLECULES EXHIBIT DELETED,


CONFIDENTIAL
TREATMENT REQUESTED***]


 


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


53





















 


EXHIBIT B


 


ASSAY PROTOCOLS


 


[***TWO-PAGE
ASSAY PROTOCOLS EXHIBIT DELETED,


CONFIDENTIAL
TREATMENT REQUESTED***]


 


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


54





















 


EXHIBIT C


 


ARENA PATENTS


 


[***TWO-PAGE
ARENA PATENTS EXHIBIT DELETED,


CONFIDENTIAL
TREATMENT REQUESTED***]


 


 


CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS


 


55





















 


EXHIBIT D


 


2004
AND 2005 JOHNSON & JOHNSON UNIVERSAL CALENDARS


 


	
   

  	
   

  	
   

  	
  2004 UNIVERSAL CALENDAR

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  M

  	
  T

  	
  W

  	
  T

  	
  F

  	
  S

  	
  S

  	
   

  	
   

  	
  M

  	
  T

  	
  W

  	
  T

  	
  F

  	
  S

  	
  S

  	
   

  
	
   

  	
   Q1

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   Q3

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  JAN

  	
  29

  	
  30

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  JUL

  	
  28

  	
  29

  	
  30

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (4 Weeks)

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
   

  	
  (4 Weeks)

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
   

  
	
   

  	
   

  	
  5

  	
  6

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
   

  	
   

  	
  5

  	
  6

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
   

  
	
   

  	
   

  	
  12

  	
  13

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
   

  	
   

  	
  12

  	
  13

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
   

  
	
   

  	
   

  	
  19

  	
  20

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
   

  	
   

  	
  19

  	
  20

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  FEB

  	
  26

  	
  27

  	
  28

  	
  29

  	
  30

  	
  31

  	
   

  	
   

  	
  AUG

  	
  26

  	
  27

  	
  28

  	
  29

  	
  30

  	
  31

  	
   

  	
   

  
	
   

  	
  (4 Weeks)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
  (4 Weeks)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
  2

  	
  3

  	
  4

  	
  5

  	
  6

  	
  7

  	
  8

  	
   

  	
   

  	
  2

  	
  3

  	
  4

  	
  5

  	
  6

  	
  7

  	
  8

  	
   

  
	
   

  	
   

  	
  9

  	
  10

  	
  11

  	
  12

  	
  13

  	
  14

  	
  15

  	
   

  	
   

  	
  9

  	
  10

  	
  11

  	
  12

  	
  13

  	
  14

  	
  15

  	
   

  
	
   

  	
   

  	
  16

  	
  17

  	
  18

  	
  19

  	
  20

  	
  21

  	
  22

  	
   

  	
   

  	
  16

  	
  17

  	
  18

  	
  19

  	
  20

  	
  21

  	
  22

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MAR

  	
  23

  	
  24

  	
  25

  	
  26

  	
  27

  	
  28

  	
  29

  	
   

  	
  SEP

  	
  23

  	
  24

  	
  25

  	
  26

  	
  27

  	
  28

  	
  29

  	
   

  
	
   

  	
  (5 Weeks)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  (5 Weeks)

  	
  30

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
  5

  	
  6

  	
  7

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
  5

  	
   

  
	
   

  	
   

  	
  8

  	
  9

  	
  10

  	
  11

  	
  12

  	
  13

  	
  14

  	
   

  	
   

  	
  6

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
  12

  	
   

  
	
   

  	
   

  	
  15

  	
  16

  	
  17

  	
  18

  	
  19

  	
  20

  	
  21

  	
   

  	
   

  	
  13

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
  19

  	
   

  
	
   

  	
   

  	
  22

  	
  23

  	
  24

  	
  25

  	
  26

  	
  27

  	
  28

  	
   

  	
   

  	
  20

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
  26

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   Q2

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   Q4

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  APR

  	
  29

  	
  30

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  OCT

  	
  27

  	
  28

  	
  29

  	
  30

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (4 Weeks)

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
   

  	
  (4 Weeks)

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
   

  
	
   

  	
   

  	
  5

  	
  6

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
   

  	
   

  	
  4

  	
  5

  	
  6

  	
  7

  	
  8

  	
  9

  	
  10

  	
   

  
	
   

  	
   

  	
  12

  	
  13

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
   

  	
   

  	
  11

  	
  12

  	
  13

  	
  14

  	
  15

  	
  16

  	
  17

  	
   

  
	
   

  	
   

  	
  19

  	
  20

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
   

  	
   

  	
  18

  	
  19

  	
  20

  	
  21

  	
  22

  	
  23

  	
  24

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MAY

  	
  26

  	
  27

  	
  28

  	
  29

  	
  30

  	
   

  	
   

  	
   

  	
  NOV

  	
  25

  	
  26

  	
  27

  	
  28

  	
  29

  	
  30

  	
  31

  	
   

  
	
   

  	
  (4 Weeks)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
   

  	
  (4 Weeks)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3

  	
  4

  	
  5

  	
  6

  	
  7

  	
  8

  	
  9

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
  5

  	
  6

  	
  7

  	
   

  
	
   

  	
   

  	
  10

  	
  11

  	
  12

  	
  13

  	
  14

  	
  15

  	
  16

  	
   

  	
   

  	
  8

  	
  9

  	
  10

  	
  11

  	
  12

  	
  13

  	
  14

  	
   

  
	
   

  	
   

  	
  17

  	
  18

  	
  19

  	
  20

  	
  21

  	
  22

  	
  23

  	
   

  	
   

  	
  15

  	
  16

  	
  17

  	
  18

  	
  19

  	
  20

  	
  21

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  JUN

  	
  24

  	
  25

  	
  26

  	
  27

  	
  28

  	
  29

  	
  30

  	
   

  	
  DEC

  	
  22

  	
  23

  	
  24

  	
  25

  	
  26

  	
  27

  	
  28

  	
   

  
	
   

  	
  (5 Weeks)

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  (6 Weeks)

  	
  29

  	
  30

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
  5

  	
  6

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
  5

  	
   

  
	
   

  	
   

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
  12

  	
  13

  	
   

  	
   

  	
  6

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
  12

  	
   

  
	
   

  	
   

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
  19

  	
  20

  	
   

  	
   

  	
  13

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
  19

  	
   

  
	
   

  	
   

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
  26

  	
  27

  	
   

  	
   

  	
  20

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
  26

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  27

  	
  28

  	
  29

  	
  30

  	
  31

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
   

  



 


56





















 


	
   

  	
   

  	
   

  	
  2005 UNIVERSAL CALENDAR

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  M

  	
  T

  	
  W

  	
  T

  	
  F

  	
  S

  	
  S

  	
   

  	
   

  	
  M

  	
  T

  	
  W

  	
  T

  	
  F

  	
  S

  	
  S

  	
   

  
	
   

  	
   Q1

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   Q3

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  JAN

  	
  3

  	
  4

  	
  5

  	
  6

  	
  7

  	
  8

  	
  9

  	
   

  	
  JUL

  	
  4

  	
  5

  	
  6

  	
  7

  	
  8

  	
  9

  	
  10

  	
   

  
	
   

  	
  (4 Weeks)

  	
  10

  	
  11

  	
  12

  	
  13

  	
  14

  	
  15

  	
  16

  	
   

  	
  (4 Weeks)

  	
  11

  	
  12

  	
  13

  	
  14

  	
  15

  	
  16

  	
  17

  	
   

  
	
   

  	
   

  	
  17

  	
  18

  	
  19

  	
  20

  	
  21

  	
  22

  	
  23

  	
   

  	
   

  	
  18

  	
  19

  	
  20

  	
  21

  	
  22

  	
  23

  	
  24

  	
   

  
	
   

  	
   

  	
  24

  	
  25

  	
  26

  	
  27

  	
  28

  	
  29

  	
  30

  	
   

  	
   

  	
  25

  	
  26

  	
  27

  	
  28

  	
  29

  	
  30

  	
  31

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  FEB

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  AUG

  	
  1

  	
  2

  	
  3

  	
  4

  	
  5

  	
  6

  	
  7

  	
   

  
	
   

  	
  (4 Weeks)

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
  5

  	
  6

  	
   

  	
  (4 Weeks)

  	
  8

  	
  9

  	
  10

  	
  11

  	
  12

  	
  13

  	
  14

  	
   

  
	
   

  	
   

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
  12

  	
  13

  	
   

  	
   

  	
  15

  	
  16

  	
  17

  	
  18

  	
  19

  	
  20

  	
  21

  	
   

  
	
   

  	
   

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
  19

  	
  20

  	
   

  	
   

  	
  22

  	
  23

  	
  24

  	
  25

  	
  26

  	
  27

  	
  28

  	
   

  
	
   

  	
   

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
  26

  	
  27

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MAR

  	
  28

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  SEP

  	
  29

  	
  30

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (5 Weeks)

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
  5

  	
  6

  	
   

  	
  (5 Weeks)

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
   

  
	
   

  	
   

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
  12

  	
  13

  	
   

  	
   

  	
  5

  	
  6

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
   

  
	
   

  	
   

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
  19

  	
  20

  	
   

  	
   

  	
  12

  	
  13

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
   

  
	
   

  	
   

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
  26

  	
  27

  	
   

  	
   

  	
  19

  	
  20

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
   

  
	
   

  	
   

  	
  28

  	
  29

  	
  30

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  26

  	
  27

  	
  28

  	
  29

  	
  30

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   Q2

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   Q4

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  APR

  	
  4

  	
  5

  	
  6

  	
  7

  	
  8

  	
  9

  	
  10

  	
   

  	
  OCT

  	
  3

  	
  4

  	
  5

  	
  6

  	
  7

  	
  8

  	
  9

  	
   

  
	
   

  	
  (4 Weeks)

  	
  11

  	
  12

  	
  13

  	
  14

  	
  15

  	
  16

  	
  17

  	
   

  	
  (4 Weeks)

  	
  10

  	
  11

  	
  12

  	
  13

  	
  14

  	
  15

  	
  16

  	
   

  
	
   

  	
   

  	
  18

  	
  19

  	
  20

  	
  21

  	
  22

  	
  23

  	
  24

  	
   

  	
   

  	
  17

  	
  18

  	
  19

  	
  20

  	
  21

  	
  22

  	
  23

  	
   

  
	
   

  	
   

  	
  25

  	
  26

  	
  27

  	
  28

  	
  29

  	
  30

  	
   

  	
   

  	
   

  	
  24

  	
  25

  	
  26

  	
  27

  	
  28

  	
  29

  	
  30

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MAY

  	
  2

  	
  3

  	
  4

  	
  5

  	
  6

  	
  7

  	
  8

  	
   

  	
  NOV

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (4 Weeks)

  	
  9

  	
  10

  	
  11

  	
  12

  	
  13

  	
  14

  	
  15

  	
   

  	
  (4 Weeks)

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
  5

  	
  6

  	
   

  
	
   

  	
   

  	
  16

  	
  17

  	
  18

  	
  19

  	
  20

  	
  21

  	
  22

  	
   

  	
   

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
  12

  	
  13

  	
   

  
	
   

  	
   

  	
  23

  	
  24

  	
  25

  	
  26

  	
  27

  	
  28

  	
  29

  	
   

  	
   

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
  19

  	
  20

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
  26

  	
  27

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  JUN

  	
  30

  	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  DEC

  	
  28

  	
  29

  	
  30

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (5 Weeks)

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
  5

  	
   

  	
  (5 Weeks)

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
  4

  	
   

  
	
   

  	
   

  	
  6

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
  12

  	
   

  	
   

  	
  5

  	
  6

  	
  7

  	
  8

  	
  9

  	
  10

  	
  11

  	
   

  
	
   

  	
   

  	
  13

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
  19

  	
   

  	
   

  	
  12

  	
  13

  	
  14

  	
  15

  	
  16

  	
  17

  	
  18

  	
   

  
	
   

  	
   

  	
  20

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
  26

  	
   

  	
   

  	
  19

  	
  20

  	
  21

  	
  22

  	
  23

  	
  24

  	
  25

  	
   

  
	
   

  	
   

  	
  27

  	
  28

  	
  29

  	
  30

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  26

  	
  27

  	
  28

  	
  29

  	
  30

  	
  31

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
  2

  	
  3

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


57