Document:

Exhibit 10.23

 

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

 

This Second Amendment to Amended and Restated Credit Agreement (this “Amendment”) is entered into as of November 4, 2010, by and among AMERICAN CRYSTAL SUGAR COMPANY, a cooperative corporation formed under the laws of the State of Minnesota (the “Borrower”), the several banks and other financial institutions from time to time party to the Credit Agreement referred to below (the “Lenders”), and COBANK, ACB, a federally chartered banking organization (“CoBank”), in its capacity as administrative agent for the Lenders (in such capacity, the “Administrative Agent”).

 

RECITALS

 

The Borrower, the Lenders and the Administrative Agent are parties to that certain Amended and Restated Credit Agreement dated as of July 30, 2009 (as amended by a First Amendment to Amended and Restated Credit Agreement dated as of July 30, 2010, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

 

The Borrower has requested to increase the Commitment Amount for the Revolving Credit Facility (each as defined in the Credit Agreement) in accordance with Section 2.16(b) of the Credit Agreement, and the Lenders are willing to grant such request on the terms and subject to the conditions contained in this Amendment and Section 2.16(b) of the Credit Agreement.

 

ACCORDINGLY, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

Section 1.              Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings given them in the Credit Agreement.

 

Section 2.              Amendments to the Credit Agreement.  The Credit Agreement is hereby amended as follows:

 

(a)           Amendment to Section 1.1 of the Credit Agreement (Definitions).  Section 1.1 of the Credit Agreement is hereby amended by amending and restating each of the following definitions:

 

“Aggregate Revolving Credit Facility Commitment Amount” means  $400,000,000, constituting the sum of the Revolving Credit Facility Commitments of all Lenders, subject to adjustment in accordance with Section 2.16(a).

 

“Fee Letter” means, collectively, the separate agreement dated as of the Closing Date, the separate agreement dated as of June 30, 2010, and the separate agreement dated as of October 14, 2010, each between the Borrower and the 

 

 

Administrative Agent, and each setting forth certain fees to be paid by the Borrower to the Administrative Agent for the Administrative Agent’s own account or for the account of the Lenders, as more fully set forth therein.

 

(b)           Amendment to Section 2.16(b)(i) of the Credit Agreement (Request to Increase).  Section 2.16(b)(i) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

 

(i)            Request to Increase.  From and after November 4, 2010, and provided no Event of Default has occurred and is continuing, the Borrower may from time to time propose to increase the Commitment Amount for any Facility in accordance with this Section 2.16(b).  The aggregate principal amount of the increase to the Commitment Amount for such Facility (the “Increased Facility Amount”) shall not exceed $100,000,000 and each increase shall be at least  $10,000,000.  The Borrower shall provide notice to the Administrative Agent of any requested Increased Facility Amount.  The Administrative Agent may, in its sole discretion, offer one or more Lenders the opportunity (but not the obligation), for a period of 20 days following receipt of such notice, to elect by notice to the Borrower and the Administrative Agent to subscribe to participate in the Increased Facility Amount.  Each such Lender that fails to respond to such a notice shall be deemed to have elected not to subscribe to or increase its Percentage in such Facility.

 

(c)           Amendments to Exhibits A and O to the Credit Agreement.  The Credit Agreement is hereby amended by deleting Exhibits A and O to the Credit Agreement and replacing them in their entirety with Exhibits A and O to this Amendment.

 

Section 3.              References.  All references in the Credit Agreement to “this Agreement” shall be deemed to refer to the Credit Agreement as amended hereby, and any and all references in any other Loan Document to the Credit Agreement shall be deemed to refer to the Credit Agreement as amended hereby.

 

Section 4.              No Other Changes.  Except as expressly set forth herein, all terms of the Credit Agreement and each of the other Loan Documents remain in full force and effect.

 

Section 5.              Representations and Warranties.  The Borrower hereby represents and warrants to the Administrative Agent and the Lenders as follows:

 

(a)           The Borrower has all requisite power and authority, corporate or otherwise, to execute and deliver this Amendment and to perform its obligations under this Amendment and the Loan Documents to which the Borrower is a party.  This Amendment and the Loan Documents to which the Borrower is a party have been duly and validly executed and delivered to the Administrative Agent by the Borrower, and this Amendment and the Loan Documents to which the Borrower is a party constitute the Borrower’s legal, valid and binding obligations, enforceable in accordance with their terms.

 

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(b)           The execution, delivery and performance by the Borrower of this Amendment and the Loan Documents to which the Borrower is a party have been duly authorized by all necessary corporate or other action and do not and will not (i) require  any authorization, consent or approval by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate the Borrower’s Organizational Documents or any provision of any law, rule, regulation or order presently in effect having applicability to the Borrower, or (iii) result in a breach of, or constitute a default under, any indenture or agreement to which the Borrower is a party or by which the Borrower or its properties may be bound or affected.

 

(c)           All of the representations and warranties contained in Article IV of the Credit Agreement and in each other Loan Document are correct on and as of the date hereof as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date.

 

(d)           No event has occurred and is continuing, or would result from the execution and delivery of this Amendment or the other documents contemplated hereunder to which the Borrower is a party, which constitutes a Default or an Event of Default.

 

Section 6.              Effectiveness.  This Amendment shall be effective only if the Administrative Agent has received, on or before the date of this Amendment (or such later date as the Administrative Agent may agree in writing), each of the following, each in form and substance acceptable to the Administrative Agent in its sole discretion:

 

(a)           this Amendment, duly executed by the Borrower;

 

(b)           an Acknowledgment and Agreement of Guarantor, duly executed by the Guarantor;

 

(c)           amended and restated Revolving Credit Facility Notes, duly executed by the Borrower in favor of each of the Revolving Credit Facility Lenders whose Revolving Credit Facility Commitment has increased in accordance with this Amendment;

 

(d)           a certificate of the secretary or other appropriate officer of the Borrower certifying (i) that the execution, delivery and performance of this Amendment and the other documents contemplated hereunder to which the Borrower is a party have been duly approved by all necessary action of the Governing Board of the Borrower, and attaching true and correct copies of the applicable resolutions granting such approval; (ii) that the Organizational Documents of the Borrower, which were certified and delivered to the Administrative Agent pursuant to the most recent certificate of secretary or assistant secretary given by the Borrower to the Lenders, continue in full force and effect and have not been amended or otherwise modified except as set forth in the certificate to be delivered as of the date hereof; and (iii) that the officers and agents of the Borrower who have been certified to the Administrative Agent, pursuant to the certificate of secretary or assistant secretary given by the Borrower to the Administrative Agent, as being authorized to sign and to act on behalf of the Borrower continue to be so authorized or 

 

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setting forth the sample signatures of each of the officers and agents of the Borrower authorized to execute and deliver this Amendment and all other documents, agreements and certificates on behalf of the Borrower;

 

(e)           a signed copy of an opinion of counsel for each Obligor addressed to the Administrative Agent, on behalf of the Lenders, with respect to the matters contemplated by this Amendment and all other documents, agreements and certificates contemplated hereunder;

 

(f)            the absence of any Material Adverse Effect, financial or otherwise, affecting the Borrower or the Consolidated Group since July 15, 2010; and

 

(g)           payment of all fees and expenses due and payable pursuant to the Fee Letter dated as of October 14, 2010, and Section 9 hereof.

 

Section 7.              No Waiver.  The execution of this Amendment and any documents, agreements and certificates contemplated hereunder shall not be deemed to be a waiver of any Default or Event of Default or any other breach, default or event of default under any Loan Document or other document held by the Administrative Agent or any Lender, whether or not known to the Administrative Agent or any Lender and whether or not existing on the date of this Amendment.

 

Section 8.              Release of Administrative Agent and Lenders. The Borrower, by its signature to this Amendment, hereby absolutely and unconditionally releases and forever discharges the Administrative Agent and the Lenders, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all of the present and former Directors, officers, agents and employees of any of the foregoing, from any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which the Borrower has had, now has or has made claim to have against any such Person for or by reason of any act, omission, matter, cause or thing whatsoever occurring or arising prior to the date of this Amendment, whether such claims, demands and causes of action are matured or unmatured or known or unknown.

 

Section 9.              Costs and Expenses.  The Borrower hereby reaffirms its agreement under Section 9.6 of the Credit Agreement to pay or reimburse the Administrative Agent on demand for all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and specifically including allocated costs of in house counsel),  in connection with the preparation, negotiation, execution, delivery and administration of this Amendment and the other documents, agreements and certificates contemplated hereunder (whether or not the transactions contemplated hereby or thereby shall be consummated).

 

Section 10.            Miscellaneous.  This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. 

 

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This Amendment shall be governed by, and construed in accordance with, the laws of the State of Colorado (other than its conflicts of laws rules).

 

Signature page follows

 

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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the day and year first above written.

 

 

	
 
  	
AMERICAN CRYSTAL SUGAR COMPANY, as Borrower
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
By: 
  	
/s/ Samuel S. M. Wai
  
	
 
  	
 
  	
Name: 
  	
Samuel S. M. Wai
  
	
 
  	
 
  	
Title: 
  	
Treasurer
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
COBANK, ACB, as Administrative Agent and as a Lender
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
By:
  	
 /s/ Michael Tousignant
  
	
 
  	
 
  	
Name: 
  	
Michael Tousignant
  
	
 
  	
 
  	
Title: 
  	
Vice President
  
	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
By: 
  	
/s/ Edward L. Cooper III
  
	
 
  	
 
  	
Name: 
  	
Edward L. Cooper III
  
	
 
  	
 
  	
Title: 
  	
Senior Vice President
  
	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as a Lender
  
	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
By: 
  	
/s/ Victor Pierzchalski
  
	
 
  	
 
  	
Name: 
  	
Victor Pierzchalski
  
	
 
  	
 
  	
Title: 
  	
Authorized Signatory
  
	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
U.S. AGBANK, FCB, as a Lender
  
	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
By: 
  	
/s/ Travis W. Ball
  
	
 
  	
 
  	
Name: 
  	
Travis W. Ball
  
	
 
  	
 
  	
Title: 
  	
Vice President
  

 

Signature Page to Second Amendment to Amended and Restated Credit Agreement

 

 

ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR

 

The undersigned, a guarantor of the indebtedness of American Crystal Sugar Company, a cooperative corporation formed under the laws of the State of Minnesota (the “Borrower”), to CoBank, ACB, a federally chartered banking organization, in its capacity as the Administrative Agent (as described in the Credit Agreement defined in the foregoing Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”)), pursuant to an Amended and Restated Guaranty dated as of July 30, 2009 (as amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”), hereby (i) acknowledges receipt of the Second Amendment; (ii) consents to the terms and execution thereof; (iii) reaffirms all obligations to the Administrative Agent and the Lenders pursuant to the terms of the Guaranty; and (iv) acknowledges that the Administrative Agent and the Lenders may amend, restate, extend, renew or otherwise modify the Credit Agreement and any indebtedness or agreement of the Borrower, or enter into any agreement or extend additional or other credit accommodations, without notifying or obtaining the consent of the undersigned and without impairing the liability of the undersigned under the Guaranty.

 

	
 
  	
SIDNEY SUGARS INCORPORATED
  
	
 
  	
 
  
	
 
  	
 
  
	
 
  	
By: 
  	
/s/ Samuel S. M. Wai
  
	
 
  	
 
  	
Name: 
  	
Samuel S. M. Wai
  
	
 
  	
 
  	
Title:
  	
Treasurer
  

 

Signature Page to Acknowledgment and Agreement of Guarantor

 

 

Exhibit A

 

COMMITMENTS AND ADDRESSES

 

	
Name
  	
 
  	
Commitment Amounts
  	
 
  	
Notice Address
  
	
CoBank, ACB, as Administrative Agent
  	
 
  	
N/A
  	
 
  	
5500 South Quebec Street

Greenwood Village, CO 80111

Attention: Jacquie Fredericks

Phone: (303) 694-5833

Facsimile: (303) 796-1456

E-mail: jfreder@cobank.com
  
	
CoBank, ACB, as a Lender
  	
 
  	
Revolving Credit Facility Commitment: $245,500,000

Term Commitment: $22,293,401.98

Term Revolving Commitment: $40,000,000

Revolving Letter of Credit Commitment: $54,304,163.06
  	
 
  	
5500 South Quebec Street

Greenwood Village, CO 80111

Attention: Jacquie Fredericks

Phone: (303) 694-5833

Facsimile: (303) 796-1456

E-mail: jfreder@cobank.com
  
	
U.S. AgBank, FCB, as a Lender by assignment pursuant to an Assignment and Assumption
  	
 
  	
Revolving Credit Facility Commitment: $57,500,000

Term Commitment: $0

Term Revolving Commitment: $10,000,000

Revolving Letter of Credit Commitment: $6,545,036.93
  	
 
  	
245 N. Waco

Wichita, KS 67202

Attention:  Travis W. Ball

Phone:  (316) 266-5448

Facsimile:  (316) 291-5011

E-mail:  travis.ball@usagbank.com
  

 

Exhibit A - 1

 

	
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
  	
 
  	
Revolving Credit Facility Commitment: $36,000,000

Term Commitment: $0

Term Revolving Commitment: $0

Revolving Letter of Credit Commitment: $0
  	
 
  	
1251 Avenue of the Americas

New York, NY 10020-1104

Attention: Portfolio Management Group

Phone: (212) 782-4206

Facsimile: (212) 782-6440

 

With a copy to:

Attention: Scott Ackerman, VP

601 Carlson Parkway, Suite 370

Minnetonka, MN 55305

Phone: (952) 473-7894

Facsimile: (952) 473-5152

E-mail: sackerman@us.mufg.jp
  
	
Wells Fargo Bank, National Association
  	
 
  	
Revolving Credit Facility Commitment: $61,000,000

Term Commitment: $0

Term Revolving Commitment: $0

Revolving Letter of Credit Commitment: $0
  	
 
  	
1740 Broadway

Denver, CO 80274

Attention: Edward Cooper III

Phone: (312) 845-9747

Facsimile: (312) 845-4462

Email: ed.cooper3@wellsfargo.com
  

 

Exhibit A - 2

 

Exhibit O

 

FARM CREDIT PARTICIPANTS

 

 

	
Name
  	
 
  	
Participation Amounts
  	
 
  	
Notice Address
  	
 
  	
Voting Participant
  
	
AgCountry Farm Credit Services, FLCA
  	
 
  	
Revolving Credit Facility Participation: $21,000,000

Term Facility Participation: $0

Term Revolving Facility Participation: $0

Revolving Letter of Credit Participation:   $5,336,397.89
  	
 
  	
David B. Rupp

AgCountry, FCS

1900 44th Street South

PO Box 6020

Fargo, ND 58103

 

Business Phone: 701-499-2559

Business Fax: 877-811-4074

 

EMail: dave.rupp@agcountry.com
  	
 
  	
Yes
  
	
AgFirst Farm Credit Bank
  	
 
  	
Revolving Credit Facility Participation: $47,500,000

Term Facility Participation: $0

Term Revolving Facility Participation: $8,000,000

Revolving Letter of Credit Participation:   $0
  	
 
  	
John Burnside

AgFirst Farm Credit Bank

1401 Hampton Street

Columbia, SC 29201

 

Business Phone: 803-753-2221

Business Fax: 803-254-4219

 

EMail: jburnside-servicing@agfirst.com
  	
 
  	
Yes
  

 

Exhibit O - 1

 

	
Bank of North Dakota
  	
 
  	
Revolving Credit Facility Participation: $24,000,000

Term Facility Participation: $0

Term Revolving Facility Participation: $0

Revolving Letter of Credit Participation:   $0
  	
 
  	
Tom Redmann

Bank of North Dakota

700 E. Main Avenue

Bismarck, ND 58502-5509

 

Business Phone: 701-328-5671

Business Fax: 701-328-5731

 

EMail: tredmann@state.nd.us
  	
 
  	
Yes
  
	
Farm Credit Bank of Texas
  	
 
  	
Revolving Credit Facility Participation: $27,500,000

Term Facility Participation: $0

Term Revolving Facility Participation: $0

Revolving Letter of Credit Participation:   $0
  	
 
  	
Isaac E. Bennett

Farm Credit Bank of Texas

4801 Plaza on the Lake Drive

Austin, TX 78746

 

Business Phone: 512-465-0717

Business Fax: 512-465-1832

 

EMail: isaac.bennett@farmcreditbank.com
  	
 
  	
Yes
  
	
Farm Credit Services of America, FLCA
  	
 
  	
Revolving Credit Facility Participation: $7,500,000

Term Facility Participation: $0

Term Revolving Facility Participation: $8,000,000

Revolving Letter of Credit Participation:   $4,438,130.33
  	
 
  	
Curt Brown

Farm Credit Services of America, FLCA

5015 South 118th Street

Omaha, NE 68137

 

Business Phone: 402-348-3668

Business Fax: 402-348-3324

 

EMail: brownc@fcsamerica.com
  	
 
  	
Yes
  

 

Exhibit O - 2

 

	
Farm Credit Services of Mid-America, FLCA
  	
 
  	
Revolving Credit Facility Participation: $31,000,000

Term Facility Participation: $0

Term Revolving Facility Participation: $0

Revolving Letter of Credit Participation:   $0
  	
 
  	
Ralph Bowman

Farm Credit Services of Mid-America, FLCA

1601 UPS Drive

Louisville, KY 40223

 

Business Phone: 502-420-3918

Business Fax: 502-420-3618

 

EMail: rbowman@e-farmcredit.com
  	
 
  	
Yes
  
	
First Pioneer Farm Credit, ACA
  	
 
  	
Revolving Credit Facility Participation: $0

Term Facility Participation: $0

Term Revolving Facility Participation: $8,000,000

Revolving Letter of Credit Participation:   $4,266,562.38
  	
 
  	
James Papai

First Pioneer Farm Credit, ACA

240 South Road

Enfield, CT 06082

 

Business Phone: 860-741-4380 x261

Business Fax: 860-253-5565

 

EMail: james.papai@firstpioneer.com
  	
 
  	
Yes
  
	
Northwest Farm Credit Services, FLCA
  	
 
  	
Revolving Credit Facility Participation: $3,000,000

Term Facility Participation: $0

Term Revolving Facility Participation: $11,000,000

Revolving Letter of Credit Participation:   $15,205,663.01
  	
 
  	
Northwest Farm Credit Services, FLCA

1700 S. Assembly Street

Spokane, WA 99224

 

EMail: participations@farm-credit.com
  	
 
  	
Yes
  

 

Exhibit O - 3Exhibit 10.1

 

AMENDMENT NO. 1 TO COLLABORATIVE RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT

 

This AMENDMENT NO. 1 TO COLLABORATIVE RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT (the “Amendment”) is entered into as of October 8, 2010 (the “Effective Date”) by and between ArQule, Inc. and Daiichi Sankyo Co., Ltd. (collectively, the “Parties”).

 

WHEREAS, the Parties have entered into that certain Collaborative Research, Development and License, Agreement on November 7, 2008, and the Agreement on Milestone Payments and Royalties (collectively, the “Agreement”), (terms which are defined in the Agreement being used herein as so defined);

 

WHEREAS, ARQULE has neared completion of the ARQULE Research Activities with respect to the two (2) Initial DS Targets;

 

WHEREAS, the Parties wish to amend the Agreement to add one (1) or two (2) additional DS Targets to the Research Program, as determined by DS, extend the Research Collaboration Period, and otherwise modify the Agreement as set forth herein;

 

NOW, THEREFORE, in consideration of the mutual promises set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by the Parties, the Parties hereto, intending to be legally bound, hereby agree as follows:

 

1.             The new Target set forth on Schedule 1 to this Amendment and a second new Target if selected by DS as set forth in this Section 1 (collectively, the “New DS Targets”) are hereby designated as DS Targets for all purposes of the Agreement and are added to the DS Target List.  If DS has not given notice to ARQULE of a decision to replace an Initial DS Target with another Target, DS may select a second New DS Target by giving written notice of its decision to do so to the JRC and ARQULE (a “New DS Target Notice”).  The Parties shall then follow the procedures set forth in Section 3.5.2(b) (with the New DS Target Notice replacing the notice under Section 3.5.2(a)), 3.5.2(c) and 3.5.2(d) to select a second New DS Target.

 

2.             Each New DS Target shall be subject to substitution as set forth in Section 3.5.2.

 

3.             Section 1.64 is modified to read in full as follows:

 

1.64         “FTE Funding Commitment” means (a) with respect to the ARQULE Research Activities conducted in the first Contract Year during the Research Collaboration Period, the funding of * ARQULE FTEs at the FTE Rate; (b) with respect to the ARQULE Research Activities conducted by ARQULE in the second Contract Year during the Research Collaboration Period, the funding of that number of FTEs as shall be consistent with the Annual Research Plan for such second Contract Year and agreed to by the Parties not later than * (*) days prior to the commencement of such Contract Year; (c) with respect to the ARQULE Research Activities conducted in the third Contract Year during the Research Collaboration Period, the funding of * ARQULE FTEs at the FTE Rate, and (d) with respect to the ARQULE Research Activities conducted in the fourth Contract Year during the Research Collaboration Period, the funding of that number of FTEs as shall be

 

 

consistent with the Annual Research Plan for the fourth Contract Year and agreed to by the Parties not later than * (*) days prior to the commencement of the fourth Contract Year; provided, that, (i) such number of FTEs is more than * (*),  and (ii) ARQULE’s consent shall be required to increase the number of FTEs above the number in the third Contract Year.   In the event the Parties cannot agree on the number of FTEs in the fourth Contract Year, each Party shall give written notice to the JEC of the number of FTEs it believes is needed to perform the ARQULE Research Activities in the fourth Contract Year and the number of FTEs shall be decided in accordance with Section 2.1.5.  Until the number of FTEs is decided, the FTE Funding Commitment for the fourth Contract Year shall be the funding at the FTE Rate of a number of FTEs equal to * (*).

 

4.             Section 1.93 is modified to read in full as follows:

 

1.93         “Quarterly FTE Payment” means (i) prior to December 1, 2010, with respect to the Initial DS Targets and any replacements designated pursuant to section 3.5.2, the amount payable by DS to ARQULE for FTEs for all ARQULE Research Activities to be conducted during each Calendar Quarter of the Research Collaboration Period, which shall equal * (*) of the FTE Funding Commitment set forth in the Annual Research Plan for the applicable Calendar Year, provided, that such amount shall be prorated for the first and last Calendar Quarter based on the number of days in such first or last Calendar Quarter divided by 365; and (ii) for the period beginning with December 1, 2010, with respect to New DS Targets and/or any replacements designated pursuant to section 3.5.2 for either the New DS Targets or the Initial DS Targets, * (*) of the funding of the number of ARQULE FTEs set forth in Section 1.64 at the FTE Rate.

 

5.             Section 1.97 is modified to read in full as follows:

 

1.97         “Research Collaboration Period” means the period beginning on the Effective Date and ending at the end of the fourth Contract Year, as such period may be extended by the mutual written agreement of the Parties; provided, that, if this Agreement is terminated prior to the end of the Research Collaboration Period, the effective date of such early termination shall become the last day of the Research Collaboration Period.

 

6.             Section 3.10 is modified to read in full as follows:

 

3.10         Research Collaboration Period.  The Research Program shall commence on the Effective Date and continue until the expiration of the Research Collaboration Period. Notwithstanding the foregoing, the Research Program may be terminated prior to the expiration of the Research Collaboration Period (a) by either Party on * (*) days’ prior written notice to the other Party at any time following the exercise by DS of (i) * (*) DS Options in the event that DS names * (*) New DS Targets or (ii) * (*) DS Options in the event that DS substitutes a new DS Target for an Initial DS Target as set forth in Section 3.5.2 prior to naming a * New DS Target; and (b) by DS at any time upon not less than * (*) days’ prior written notice to ARQULE and payment in full with such notice of the amount which would have been payable for the remainder of the Research Collaboration Period pursuant to Section 5.3.1 if the Research Program were conducted for the entire four (4) year Research Collaboration Period.

 

7.             Section 1.48 is modified to read in full as follows:

 

1.48         “DS Option Period” means, with respect to any Primary Development

 

 

Compound and the related Backup Compounds, the period commencing on the date of designation by DS of a Primary Development Compound, and continuing until sixty (60) days following the date of receipt by the JRC of the Toxicology Studies Results with respect to such Primary Development Compound, or up to * (*) subsequently evaluated Backup Compounds provided that DS has designated such Backup Compounds prior to the start of the first Toxicology Study; provided that the DS Option Period shall end no later than * * (*) months after * with respect to any Primary Development Compound and the related Backup Compounds whose DS Target is an Initial DS Target and shall end no later than * (*) months after the end of the Research Collaboration Period with respect to any Primary Development Compound and the related Backup Compounds whose DS Target is a New DS Target or a replacement to an Initial DS Target or a New DS Target designated pursuant to Section 3.5.2.

 

8.             Section 3.5.2(e) is modified to read in full as follows:

 

(e)           Limitation on DS Targets. Notwithstanding anything to the contrary set forth in this Agreement, (A) in the event that DS names * (*) New DS Targets, DS shall have the right to designate an aggregate of up to * (*) DS Targets pursuant to this Agreement, consisting of (i) the * (*) Initial DS Targets designated by the Parties on the Effective Date, (ii) the * (*) New DS Targets, and (iii) up to * (*) Validated Targets designated by DS to replace Abandoned DS Targets pursuant to Section 3.5.2(d); and (B) in the event that DS designates a substitute for an Initial DS Target as set forth in Section 3.5.2 prior to naming a * New DS Target, DS shall have the right to designate an aggregate of up to * (*) DS Targets pursuant to this Agreement, consisting of (i) the * (*) Initial DS Targets designated by the Parties on the Effective Date, (ii) the * (*) New DS Target, and (iii) up to *  (*) Validated Targets designated by DS to replace Abandoned DS Targets pursuant to Section 3.5.2(d).  For clarity, in no event shall ARQULE be obligated to conduct ARQULE Research Activities on more than * (*) DS Targets at any given time.

 

9.             Section 5.2  is modified to read in full as follows:

 

5.2 License Fee. For each DS Option exercised by DS pursuant to Section 7.1, DS shall pay ARQULE a license fee (the “License Fee”):  (i) in the case of the Initial DS Targets and any replacement thereof designated pursuant to Section 3.5.2, *Dollars (US $*) shall be paid within * (*) days of the execution of the License Agreement for the Primary Development Compound and related Backup Compounds that were the subject of such DS Option, and * Dollars (US $*) shall be paid within * (*) days of the Initiation of the first Phase II Clinical Trial of any Licensed Product under such License Agreement; or (ii) in the case of the New DS Targets and any replacement thereof designated pursuant to Section 3.5.2, * Dollars (US $*) shall be paid within * (*) days of the execution of the License Agreement for the Primary Development Compound and related Backup Compounds that were the subject of such DS Option, and * Dollars (US *) shall be paid within * (*) days of the Initiation of the first Phase II Clinical Trial of any Licensed Product under such License Agreement.

 

10.             The following Section 5.5 is added to the Agreement:

 

5.5 FTE Payment Advance.  On *, DS shall pay ARQULE * Dollars (US $*) as an advance payment of the first * Dollars (US $*) payable by DS pursuant to Section 5.3.1 for the * Contract Year during the Research Collaboration Period. Once payments due under Section 5.3.1 for the * Contract Year during the Research Collaboration Period reach * Dollars (US *), DS shall resume making payments as set forth in Section 5.3.1.

 

 

11.           Section 6.3 is modified to read in full as follows:

 

6.3           Publications and Presentations.  The Parties acknowledge that scientific publications and presentations must be strictly monitored to prevent any adverse effect from premature publication or dissemination of results of the activities hereunder.  Each Party agrees that, except as required by Applicable Laws, it shall not publish or present, or permit to be published or presented, the results of the Research Program or the Development Program without the prior review by the other Party. Each Party shall provide to the other Party the opportunity to review each of the submitting Party’s proposed abstracts, manuscripts or presentations (including, without limitation, information to be presented verbally) that relate to the Research Program or the Development Program at least * (*) days prior to its intended presentation or submission for publication, and such submitting Party agrees, upon written request from the other Party given within such * (*) day period, not to submit such abstract or manuscript for publication or to make such presentation until the other Party is given up to * (*) days from the date of such written request to seek appropriate patent protection for any material in such publication or presentation that it reasonably believes may be patentable. In the event that the Parties disagree on a proposed publication or presentation, they will discuss the matter in good faith and the matter shall be decided in accordance with Section 2.1.5 as a Unanimous Decision, provided that if such Disputed Matter is not resolved by the Designated Senior Officers within * (*) days after the date the Designated Senior Officers first met to consider such Disputed Matter or * (*) days after the date the JEC first met to consider such Disputed Matter, whichever is later, then the Disputed Matter shall not be resolved in accordance with Section 13.1, but instead, ARQULE shall have the right to make the final decision on publication or presentation of the results of the Research Program and DS shall have the right to make the final decision on publication or presentation of the results of the Development Program.  Once such abstracts, manuscripts or presentations have been published or presented by each Party, the same abstracts, manuscripts or presentations do not have to be provided again to the other Party for review for a later submission for publication.  Each Party also shall have the right to require that any of its Confidential Information that is disclosed in any such proposed publication or presentation be deleted prior to such publication or presentation; provided, that, ARQULE shall be permitted to use data generated by ARQULE and information about the Target in any such publication or presentation.  In any permitted publication or presentation by a Party, the other Party’s contribution shall be duly recognized, and co-authorship shall be determined in accordance with customary standards. Each Party expressly acknowledges that the other Party’s business may be substantially dependent on its ability to publish results in scientific journals, presentation at scientific conferences and meetings.

 

12.           Notwithstanding anything to the contrary in the Agreement, this Amendment or any Annual Research Plan, ARQULE shall perform the *studies for the DS Target * and DS shall bear all costs associated with such * studies, including, but not limited to, *, as requested by DS and agreed by ARQULE.  A plan for the * studies for the DS Target *, including the costs, shall be agreed upon by the Parties.  Any amendment, modification and/or update to such plan shall be discussed and agreed by the Parties.  ARQULE shall invoice DS (a) quarterly in advance, at least * (*) days prior to each Calendar Quarter, for all ARQULE FTEs involved in performing or managing external performance of such * studies and (b) quarterly in arrears for all Third Party Costs associated with such * studies, including without limitation, * costs. DS shall pay such invoices for ARQULE FTEs at least * (*) days before the first day of each Calendar Quarter and shall pay such invoices for Third Party Costs within * (*) days after receipt thereof.

 

 

13.           The Parties agree to issue a press release relating to this Amendment in the form attached hereto as Exhibit 1 within seven (7) days after the Effective Date.

 

14.           In all other respects, the Agreement shall remain in full force and effect and shall not be modified hereby.

 

This Amendment may be executed as of the date first written above in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same agreement.

 

*   *   *   *   *   *   *   *

 

	
 
  	
 
  	
ArQule, Inc.
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
By:
  	
 
  
	
 
  	
 
  	
 
  	
/s/ Paolo Pucci
  
	
 
  	
 
  	
 
  	
Name: Paolo Pucci
  
	
 
  	
 
  	
 
  	
Title: Chief Executive Officer
  
	
 
  	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  	
 
  
	
 
  	
 
  	
Daiichi Sankyo Co., Ltd.
  
	
 
  	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  	
 
  
	
 
  	
 
  	
By:
  	
 
  
	
 
  	
 
  	
 
  	
/s/Kazunori Hirokawa
  
	
 
  	
 
  	
 
  	
Name: Kazunori  Hirokawa
  
	
 
  	
 
  	
 
  	
Title: Senior Executive Officer and Head of R&D Division
  

 

 

SCHEDULE 1

 

NEW DS TARGETS LIST

 

*

 

 

EXHIBIT 1

 

Exhibit 99.1 to Form 8-K filed on October 14, 2010

 

	

  	

  

 

	
 
  	
Contact:
  
	
 
  	
 
  
	
 
  	
Toshiaki Sai
  
	
 
  	
Corporate Office, Corporate
  
	
 
  	
Communications
  
	
 
  	
Daiichi Sankyo Co., Ltd. (Japan)
  
	
 
  	
+81-3-6225-1126
  
	
 
  	
 
  
	
 
  	
William B. Boni
  
	
 
  	
VP, Investor Relations/
  
	
 
  	
Corp. Communications
  
	
 
  	
ArQule, Inc.
  
	
 
  	
(781) 994-0300
  

 

FOR IMMEDIATE RELEASE

 

ARQULE AND DAIICHI-SANKYO EXPAND DRUG DISCOVERY COLLABORATION

 

IN ONCOLOGY

 

Woburn, MA, October 12, 2010 — ArQule, Inc. (NASDAQ: ARQL) and Daiichi Sankyo Co., Ltd. (TSE 4568) today announced the expansion of their research, development and license agreement for the discovery of novel kinase inhibitors in the field of oncology.  This expanded agreement establishes a third therapeutic target, with an option for a fourth, in the field of oncology, and it includes a two-year extension based on the application of the proprietary ArQule Kinase Inhibitor Platform (AKIPTM) technology.

 

“This technology has provided us with a unique and innovative approach for discovery in the treatment of cancer,” said Dr. Hideyuki Haruyama, the Global Head of Research, Daiichi Sankyo.  “We expect that the expansion of this collaboration will produce other drug candidates and lay the foundation for future growth in this field.”

 

Consistent with the existing AKIPTM collaboration, the economic terms provided for in the expanded agreement include payments for research support, licensing fees for compounds discovered as a result of this research, milestone payments related to clinical development, regulatory review and sales, and tiered royalty payments on net sales of each product.  Daiichi Sankyo will have an option to license compounds directed to the targets defined under the agreement following the completion of certain pre-clinical studies.  ArQule retains the option to co-commercialize any resulting licensed products in the U.S.

 

“Our initial drug discovery collaboration has identified a development candidate for one target, and we are optimizing advanced lead compounds for the other target,” said Dr. Thomas C.K. Chan, chief scientific officer of ArQule.  “The expansion of this collaboration will continue to deploy AKIP technology to discover novel kinase inhibitors for additional oncology targets over the next two years.”

 

 

About the ArQule Kinase Inhibitor Platform (AKIPTM)

 

Kinases play pivotal roles in modulating diverse cellular activities and have been implicated as important mediators of certain forms of cancer and other diseases.  The AKIPTM technology is based on a novel binding mode that leads to inhibition of target kinases by small molecules that do not compete with adenosine triphosphate (ATP).  ArQule has identified binding sites in more than 200 kinases involved in multiple therapeutic areas that are amenable to such non-ATP competitive inhibition.

 

ArQule’s ability to rationally design novel kinase inhibitors that encompass new chemical spaces allows for an expanding intellectual property estate.  The Company believes that non-ATP competitive small molecule inhibitors may have fewer off-target side effects and utility in a broad range of human diseases.

 

About ArQule

 

ArQule is a biotechnology company engaged in the research and development of next-generation, small-molecule cancer therapeutics.  The Company’s targeted, broad-spectrum products and research programs are focused on key biological processes that are central to human cancers.  ArQule’s lead product, in Phase 2 and upcoming Phase 3 clinical development, is ARQ 197, an inhibitor of the c-Met receptor tyrosine kinase.  The Company has also initiated Phase 1 clinical testing with ARQ 621, designed to inhibit the Eg5 kinesin motor protein.  The Company’s pre-clinical pipeline includes a compound designed to inhibit the BRAF kinase.  ArQule’s current discovery efforts, which are based on the ArQule Kinase Inhibitor Platform (AKIPTM), are focused on the identification of novel kinase inhibitors that are potent, selective and do not compete with ATP (adenosine triphosphate) for binding to the kinase.

 

About Daiichi Sankyo

 

The Daiichi Sankyo Group is dedicated to the creation and supply of innovative pharmaceutical products to address the diversified, unmet medical needs of patients in both mature and emerging markets. While maintaining its portfolio of marketed pharmaceuticals for hypertension, hyperlipidemia, and bacterial infections, the Group is engaged in the development of treatments for thrombotic disorders and focused on the discovery of novel oncology and cardiovascular-metabolic therapies. Furthermore, the Daiichi Sankyo Group has created a “Hybrid Business Model,” which

 

 

will respond to market and customer diversity and optimize growth opportunities across the value chain.  For more information, please visit www.daiichisankyo.com.

 

Daiichi Sankyo, Inc., headquartered in Parsippany, New Jersey, is a member of the Daiichi Sankyo Group.  For more information on Daiichi Sankyo, Inc., please visit www.dsi.com.

 

This press release contains forward-looking statements regarding the Company’s ArQule Kinase Inhibitor Platform (AKIPTM) and its related agreement with Daiichi Sankyo. These statements are based on the Company’s current beliefs and expectations, and are subject to risks and uncertainties that could cause actual results to differ materially.  Positive information about pre-clinical results does not ensure that later stage pre-clinical or clinical development will be successful. For example, targets for the kinase research may not prove to be therapeutically relevant. Compounds developed through application of the AKIPTM platform may not demonstrate positive activity in pre-clinical in vivo or in vitro testing or in subsequent clinical trials; in addition, they may not demonstrate an appropriate safety profile later development as a result of known or as yet unanticipated side effects. The results achieved in later stage trials may not be sufficient to meet applicable regulatory standards. Problems or delays may arise during clinical trials or in the course of developing, testing or manufacturing these compounds that could lead the Company or Daiichi Sankyo to discontinue development.  Even if later stage clinical trials are successful, the risk exists that unexpected concerns may arise from analysis of data or from additional data or that obstacles may arise or issues be identified in connection with review of clinical data with regulatory authorities. Regulatory authorities may disagree with the Company’s or Daiichi Sankyo’s view of the data or require additional data or information or additional studies.  Drug development involves a high degree of risk. Only a small number of research and development programs result in the commercialization of a product.  Positive pre-clinical data may not be supported in later stages of development.  Furthermore, ArQule may not have the financial or human resources to successfully pursue drug discovery in the future.  Daiichi Sankyo may not exercise its option to license compounds even if the compounds show initial promise.  For more detailed information on the risks and uncertainties associated with the Company’s drug development and other activities, see the Company’s periodic reports filed with the Securities and Exchange Commission. The Company does not undertake any obligation to publicly update any forward-looking statements.

 

###

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