<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1999 Commission File No. 000-21429
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ARQULE, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 04-3221586
(State of Incorporation) (I.R.S. Employer Identification Number)
200 BOSTON AVENUE, MEDFORD, MASSACHUSETTS 02155
(Address of Principal Executive Offices)
(781) 395-4100
(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES________X___________ NO_____________________
Number of shares outstanding of the registrant's Common Stock as of November 5,
1999:
Common Stock, par value $.01 12,838,465 shares outstanding
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ARQULE, INC.
QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
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Item 1 - Unaudited Consolidated Financial Statements
Consolidated Balance Sheet (Unaudited)
September 30, 1999 and December 31, 1998 ....................................................... 2
Consolidated Statement of Operations (Unaudited)
Three months ended September 30, 1999 and 1998
and nine months ended September 30, 1999 and 1998............................................... 3
Consolidated Statement of Cash Flows (Unaudited)
Nine months ended September 30, 1999 and 1998................................................... 4
Notes to Unaudited Consolidated Financial Statements................................................... 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations................................................... 7
PART II - OTHER INFORMATION..................................................................................... 11
Signatures...................................................................................................... 13
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ARQULE, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(UNAUDITED)
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ASSETS
Current Assets:
Cash and cash equivalents $ 7,033 $ 5,780
Marketable securities 33,973 28,090
Accounts receivable 1,272 3,028
Accounts receivable related party 1,729 2,680
Inventory 562 526
Prepaid expenses and other current assets 433 869
Notes receivable from related parties -- 30
-------- --------
Total current assets 45,002 41,003
Property and equipment, net 13,634 14,696
Construction-in-progress 16,816 3,125
Other assets 1,764 1,656
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$ 77,216 $ 60,480
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations $ 470 $ 907
Accounts payable and accrued expenses 4,387 2,094
Current portion of long-term debt 1,900 --
Deferred revenue 4,578 1,656
Deferred revenue related party 412 800
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Total current liabilities 11,747 5,457
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Capital lease obligations 20 306
Long-term debt 9,513 --
Deferred revenue 11,700 450
Shareholders' Equity:
Common stock, $0.01 par value; 30,000,000
shares authorized; 12,726,845 and
12,171,335 shares issued and outstanding at
September 30, 1999 and December 31,
1998, respectively 127 122
Additional paid-in capital 72,502 71,432
Accumulated deficit (28,322) (17,105)
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44,307 54,449
Deferred compensation (71) (182)
-------- --------
Total stockholders' equity 44,236 54,267
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$ 77,216 $ 60,480
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</TABLE>
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ARQULE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) (UNAUDITED)
1999 1998 1999 1998
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Revenue:
Compound development revenue $ 2,457 $ 2,431 $ 6,630 $ 8,580
Compound development revenue - related parties 2,403 2,161 6,833 7,703
-------- -------- -------- --------
Total revenue 4,860 4,592 13,463 16,283
-------- -------- -------- --------
Costs and expenses:
Cost of revenue 2,071 1,691 5,754 5,213
Cost of revenue - related parties 2,021 1,505 5,931 4,680
Research and Development 3,248 3,409 9,751 7,423
Marketing, general and administrative 1,643 1,802 4,380 4,561
-------- -------- -------- --------
Total costs and expenses 8,983 8,407 25,816 21,877
-------- -------- -------- --------
Loss from operations
(4,123) (3,815) (12,353) (5,594)
Interest income 482 570 1,310 1,882
Interest expense (16) (38) (174) (138)
-------- -------- -------- --------
Net loss $ (3,657) $ (3,283) $(11,217) $ (3,850)
======== ======== ======== ========
Basic and diluted net loss per share $ (0.29) $ (0.27) $ (0.90) $ (0.32)
Weighted average common shares outstanding 12,715 12,112 12,522 11,999
======== ======== ======== ========
</TABLE>
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ARQULE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
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<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Net loss $(11,217) $ (3,850)
Adjustment to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 4,209 3,291
Amortization of deferred compensation 275 148
Decrease (increase) in accounts receivable 2,707 (1,685)
Increase in inventory (36) (75)
Decrease (increase) in prepaid expenses and other current 436 (288)
assets
Increase in other assets (108) (1,500)
Decrease in notes receivable from related party 30 23
Increase (decrease) in accounts payable and accrued expenses 2,293 (1,327)
Increase (decrease) in deferred revenue 13,784 (2,431)
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Net cash provided by (used in) operating activities 12,373 (7,694)
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Cash flows from investing activities:
Purchases of available-for-sale securities (51,359) (34,829)
Proceeds from sale or maturity of marketable securities 45,476 36,313
Additions to property and equipment (16,838) (6,594)
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Net cash used in investing activities (22,721) (5,110)
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Cash flows from financing activities:
Principal payments of capital lease obligation (723) (917)
Proceeds from issuance of common stock 911 2,976
Net borrowings of long-term debt 11,413 --
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Net cash provided by financing activities 11,601 2,059
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Net increase (decrease) in cash and cash equivalents 1,253 (10,745)
Cash and cash equivalents, beginning of period 5,780 15,137
-------- --------
Cash and cash equivalents, end of period $ 7,033 $ 4,392
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</TABLE>
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ARQULE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by
the Company without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These
consolidated financial statements should be read in conjunction with the
Company's audited financial statements and related footnotes for the year
ended December 31, 1998 thereto included in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 29,
1999. The unaudited consolidated financial statements include, in the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position of the
Company as of September 30, 1999, and the results of its operations for the
three and nine month periods ended September 30, 1999 and 1998. The results
of operations for such interim periods are not necessarily indicative of
the results to be achieved for the full year.
2. CASH EQUIVALENTS AND MARKETABLE SECURITIES
The following is a summary of cash equivalents held by the Company at
September 30, 1999 and December 31, 1998 which are carried at amortized
cost approximating fair market value: (In thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
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U.S. Government Obligations $ 4,961 $ 2,002
Corporate Notes 29,012 26,088
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$ 33,973 $ 28,090
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</TABLE>
All of the Company's marketable securities are classified as current at
September 30, 1999 and December 31, 1998 as these funds are highly liquid
and are available to meet working capital needs and to fund current
operations.
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ARQULE, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTIES
In January 1998, the Company elected an individual to its Board of
Directors who is also an employee of Wyeth-Ayerst (a subsidiary of American
Home Products). In July 1999, the Company elected an individual to its
Board of Directors who is also an employee of Solvay Pharmaceuticals, an
affiliate of Solvay Duphar BV.
4. FLEET TERM LOAN
In March 1999, the Company executed a term loan agreement (the "Agreement")
with Fleet National Bank. Under the Agreement, the Company may borrow up to
$15.0 million to support capital expenditures. As of September 30, 1999,
the Company has borrowed $11.8 million pursuant to the Agreement. The
Company made its first principal payment of $0.4 million on September 30,
1999.
5. NEW COLLABORATIONS
In July 1999, the Company entered into a Technology Acquisition Agreement
with Pfizer, Inc. In connection with this collaboration, the Company will
devote designated technologies, scientists, and its AMAP(TM) Chemistry
Operating System at its Medford, Massachusetts facility to generate
compound libraries for Pfizer. ArQule may receive up to $117 million in
total payments during the full 4.5 year term of the collaboration.
In September 1999, the Company entered into a Research Cooperation
Agreement with Bayer AG, a German corporation (the "Bayer Agreement"),
effective October 1, 1999. In connection with the Bayer Agreement, the
Company will generate compound libraries for Bayer. ArQule may receive up
to $30 million in total payments for development and delivery of screening
libraries during the full three-year term of the collaboration.
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ARQULE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
OVERVIEW
ArQule, Inc. is engaged in the production and development of novel chemical
compounds with commercial potential in the pharmaceutical, biotechnology,
bioseparations and agrochemical industries. We primarily manufacture arrays
of synthesized compounds for delivery to our customers for use in lead
compound generation and lead compound optimization activities. We also
offer other research and development services to meet the needs of our
customers. In addition, we have established a number of joint drug
discovery programs with biotechnology companies and academic institutions,
and pursue a limited number of our own internal drug discovery programs.
We primarily generate revenue through our collaborative agreements for
production and delivery of compound arrays and other research and
development services. Under most of these collaborative agreements, we are
also entitled to receive milestone and royalty payments if the customer
develops products resulting from the collaboration. To date, we have
received two milestone payments and no royalty payments. In addition, we
have not yet realized any significant revenue from our joint drug discovery
programs with biotechnology companies and academic institutions, or from
our internal drug discovery programs. Quarterly variations in financial
performance may be expected because levels of revenue are dependent on
expanding or continuing existing collaborations, obtaining additional
corporate collaborations, receiving future milestones and royalty payments,
and realizing value from ongoing drug discovery programs, all of which are
inconsistent and difficult to anticipate.
We will continue to invest in technologies that enhance and expand our
capabilities in drug discovery and other areas in the life sciences. These
continued investments in technology are intended to advance the two primary
objectives of our future business strategy. First, we intend to enhance the
novelty, diversity, and medicinal relevance of our compound arrays for lead
generation. Second, we intend to invest in additional technologies such as
informatics, pharmacology, and biology to augment the power and scope of
our chemistry capabilities for the purpose of lead optimization. As we meet
these two primary objectives, we believe that we can contribute to the
acceleration of the drug discovery process. In addition to investments in
technology, we will continue to invest in our drug discovery programs with
the goal of delivering clinical candidates. Investments of this nature may
result in near term earnings fluctuations or impact the magnitude of
profitability or loss.
We have incurred a cumulative net loss of $28.3 million through September
30, 1999. Losses have resulted principally from costs incurred in research
and development activities related to our efforts to develop our
technologies and from the associated administrative costs required to
support those efforts. Our ability to achieve profitability is dependent on
a number of factors, including our ability to perform under our
collaborations at the expected cost, expand or continue existing
collaborations, obtain additional corporate collaborations, and realize
value from the development and commercialization of products in which we
have an economic interest, all of which are difficult to anticipate.
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This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements reflecting
management's current expectations regarding our future financial
performance. Such expectations are based on certain assumptions regarding
the progress of product development efforts under collaborative agreements,
the execution of new collaborative agreements and other factors relating to
our growth. Such expectations may not materialize if product development
efforts are delayed or suspended, if negotiations with potential
collaborators are delayed or unsuccessful or if other assumptions prove
incorrect. See also "Important Factors Regarding Forward-Looking
Statements" described more fully in Exhibit 99.1 to our Annual Report on
Form 10-K for the year ended December 31, 1998.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
REVENUE. Our revenue for the three months ended September 30, 1999
increased $0.3 million to $4.9 million from $4.6 million for the same
period in 1998. Revenue was $13.5 million and $16.3 million for the nine
months ended September 30, 1999 and 1998, respectively. This decrease is
primarily due to completion of certain programs and reduced compound
development revenue from work performed on, and the delivery of Mapping
Array(TM) and Directed Array(TM) sets under our collaborative agreements.
COST OF REVENUE. Our cost of revenue for the three months ended September
30, 1999 increased $0.9 million to $4.1 million from $3.2 million for the
same period in 1998. Cost of revenue was $11.7 million and $9.9 million for
the nine months ended September 30, 1999 and 1998, respectively. This
increase is primarily attributable to the costs of additional scientific
personnel and the necessary supplies and overhead expenses related to the
performance of the work and the delivery of the Mapping Array(TM) and
Directed Array(TM) sets and other services provided pursuant to our
collaborative agreements. We anticipate that the aggregate cost of revenue
will increase over the next several years as our business expands.
RESEARCH AND DEVELOPMENT EXPENSES. Our research and development expenses
for the three months ended September 30, 1999 decreased $0.2 million to
$3.2 million from $3.4 million for the same period in 1998. Research and
development expenses were $9.8 million and $7.4 million for the nine months
ended September 30, 1999 and 1998, respectively. This increase is the
result of our expansion of our chemistry capabilities and related
proprietary technologies. We expect research and development spending to
increase over the next several years as we further expand our drug
discovery and development programs.
MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Our marketing, general and
administrative expenses for the three months ended September 30, 1999 and
1998 decreased $0.2 million to $1.6 million from $1.8 million for the same
period in 1998. Marketing, general and administrative expenses were $4.4
million and $4.6 million for the nine months ended September 30, 1999 and
1998, respectively. These expenses will likely increase in the aggregate in
future periods to support our projected growth.
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NET INTEREST INCOME. Our net interest income for the three months ended
September 30, 1999 and 1998 was $0.5 million. Net interest income was $1.1
million and $1.7 million for the nine months ended September 30, 1999 and
1998, respectively. Higher interest income in 1998 resulted primarily from
our holding higher cash and marketable securities balances.
NET LOSS. Our net loss for the three months ended September 30, 1999 was
$(3.7) million as compared to net loss of $(3.3) million for the same
period in 1998. Net loss was $(11.2) and $(3.9) for the nine months ended
September 30, 1999 and 1998, respectively. The net loss for 1999 is
primarily attributable to increased costs of revenue and aggressive
investments in technologies in order to expand our drug discovery
capabilities.
LIQUIDITY AND CAPITAL RESOURCES
At September 30,1999, we held cash and cash equivalents and marketable
securities with a value of $41.0 million. Our working capital at September
30, 1999 was $33.3 million. We have funded operations through September 30,
1999 with sales of common stock, payments from corporate collaborators, and
the term loan agreement with Fleet Bank dated March 18, 1999.
We expect that our available cash and marketable securities, together with
operating revenues, investment income, and debt financing arrangements,
will be sufficient to finance our working capital and capital requirements
for the foreseeable future. Our cash requirements may vary materially from
those now planned depending upon the results of our drug discovery and
development strategies, our ability to enter into any corporate
collaborations in the future and the terms of such collaborations, the
results of research and development, the need for currently unanticipated
capital expenditures, competitive and technological advances, acquisitions
and other factors. There can be no assurance that we will be able to obtain
additional customers for our products and services, or that such products
and services will produce revenues adequate to fund our operating expenses.
We may have to seek additional financing from public or private sales of
our securities, including equity securities. There can be no assurance that
additional funding will be available when needed or on acceptable terms.
YEAR 2000 COMPLIANCE
Many currently installed systems are not capable of distinguishing 21st
century dates from 20th century dates. As a result, in less than three
months, computer systems and/or software used by many companies in a very
wide variety of applications may experience operating difficulties unless
they are modified or upgraded to adequately process information involving,
related to or dependent upon the century change. Significant uncertainty
exists concerning the scope and magnitude of problems associated with the
century change.
We have established a project team to address Year 2000 risks. We have also
initiated various Information Technology ("IT") enhancement projects
intended to improve the access and dissemination of scientific and business
information throughout the enterprise to enhance development and
operational efficiencies. As a part of this initiative, we acquired an
Enterprise Resource Financial System in late 1997 and have implemented the
major relevant components of that system. Our internal financial system is
currently Year 2000 compliant. As the costs associated with these
initiatives are part of our continuing improvement process, they were
recognized as incurred.
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We have completed our assessment phase of the data gathered in the
data-gathering phase with respect to automated production equipment, and
have concluded that there are no Year 2000 issues that can not be remedied
by operating system upgrade, hardware upgrade and/or software upgrade or
patch. These upgrades and patches have been attained and are being
installed either by vendors or the in-house IT staff. There are internally
developed software packages that have been written to control instruments
or acquire data from automation production equipment. These software
programs have been assessed and it has been concluded that they are
compliant or can be brought to compliance by recompiling the source code in
newer versions of the development software. The process of upgrading the
automated production equipment hardware and software is nearing completion
and should be completed in a timely fashion.
We are continuing the process of contacting our critical suppliers, service
providers and contractors to determine the extent to which our interface
systems are vulnerable to those third parties' failure to remedy their own
Year 2000 issues. To the extent that responses to Year 2000 readiness are
unsatisfactory, we intend to change suppliers, service providers or
contractors to those who have demonstrated Year 2000 readiness but we
cannot be assured that we will be successful in finding such alternative
suppliers, service providers and contractors. We do not currently have any
formal information concerning the Year 2000 compliance status of our
customers but have received indications that most of our customers are
working on being Year 2000 compliant. In the event that any of our
significant customers and suppliers do not successfully and timely achieve
Year 2000 compliance, and we are unable to replace them with new customers
or alternate suppliers, our business or operations could be adversely
affected.
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ARQULE, INC.
PART II - OTHER INFORMATION
Item 1 - None
Item 2 - Use of Proceeds from Registered Securities
A Registration Statement on Form S-1 (File No. 333-11105) registering
2,875,000 shares our Common Stock, filed in connection with our Initial
Public Offering (the "IPO") was declared effective by the Securities and
Exchange Commission on October 16, 1996. Exercise of the over-allotment
option was initiated on November 13, 1996 and was closed on November 18,
1996.
We, along with our selling shareholders, sold, in aggregate, all 2,875,000
shares registered in the IPO, with an aggregate offering price to the
public of $34.5 million. The managing underwriters of the IPO were
Hambrecht & Quist LLC, Oppenheimer & Co., Inc. and Vector Securities
International Inc.
In connection with the IPO, we incurred total expenses of $3.0 million,
including underwriting discounts and commissions of $2.4 million and other
expenses of $0.6 million. After such expenses, our net proceeds from the
IPO were $31.5 million. As of September 30, 1999, we have used the net
proceeds as follows: approximately $28.6 million for the fixed asset
additions and approximately $2.9 million for capital lease obligations.
Item 3 - None
Item 4 - None
Item 5 - None
Item 6(a) - Exhibits:
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EXHIBITS DESCRIPTION
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10.1 Technology Acquisition Agreement between and by Pfizer Inc. and ArQule, Inc. dated
July 19, 1999
10.2 Sublease by and among Pfizer Inc. and ArQule, Inc. dated July 16, 1999
10.3 Research Cooperation Agreement between Bayer AG and ArQule, Inc. dated October 1, 1999
10.4 Employment Agreement with Philippe Bey dated July 21, 1999
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
11.1 Statement Re Computation of Unaudited Net Income (Loss) Per Share
27 Financial Data Schedule
</TABLE>
Item 6(b) - Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
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ARQULE, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
ArQule, Inc.
Date: November 15, 1999 /s/ James R. Fitzgerald, Jr.
-------------------------------------
James R. Fitzgerald, Jr.
(Vice President, Chief Financial Officer and
Treasurer)
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ARQULE, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
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10.1+ Technology Acquisition Agreement between and by Pfizer Inc. and ArQule, Inc. dated
July 19, 1999
10.2+ Sublease by and among Pfizer Inc. and ArQule, Inc. dated July 16, 1999
10.3+ Research Cooperation Agreement between Bayer AG and ArQule, Inc. dated October 1, 1999
10.4* Employment Agreement with Philippe Bey dated July 21, 1999
11.1 Statement Re Computation of Unaudited Net Income (Loss) Per Share
27 Financial Data Schedule
</TABLE>
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+ Confidential treatment has been requested for certain portions of these
Exhibits pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
* Indicates a management contract.
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EXHIBIT 10.1
TECHNOLOGY ACQUISITION AGREEMENT
This TECHNOLOGY ACQUISITION AGREEMENT is entered into as of July 19, 1999 by and
between PFIZER INC, a Delaware corporation, having an office at 235 East 42nd
Street, New York, New York 10017 and its Affiliates ("Pfizer"), and ARQULE, INC,
a Delaware corporation, having an office at 200 Boston Avenue, Medford, MA 02155
and its Affiliates ("ArQule").
WHEREAS, Pfizer has expertise in medicinal chemistry and its use in the
discovery, research, and development of pharmaceutical products; and
WHEREAS, ArQule has certain technology, know-how and expertise relating to the
automated synthesis of compounds and has ownership of the patent applications
and the patents set forth in Exhibit A, attached to and made part of this
Agreement; and
WHEREAS, Pfizer seeks to license ArQule's automated compound synthesis
technology and to access ArQule's expertise and know-how in the automated
synthesis of compounds for production of compound libraries; and
WHEREAS, Pfizer and ArQule wish to enter into this Agreement for transfer of
automated compound synthesis technology to Pfizer and to produce compound
libraries for Pfizer;
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS
Whenever used in this Agreement, the terms defined in this Section 1 shall have
the meanings specified.
<PAGE> 2
1.1 "AFFILIATE" means any corporation or other legal entity owning,
directly or indirectly, fifty percent (50%) or more of the voting capital shares
or similar voting securities of Pfizer or ArQule; any corporation or other legal
entity fifty percent (50%) or more of the voting capital shares or similar
voting rights of which is owned, directly or indirectly, by Pfizer or ArQule or
any corporation or other legal entity fifty percent (5 0%) or more of the voting
capital shares or similar voting rights of which is owned, directly or
indirectly, by a corporation or other legal entity which owns, directly or
indirectly, fifty percent (50%) or more of the voting capital shares or similar
voting securities of Pfizer or ArQule.
1.2 "AMAP(TM) PARALLEL SYNTHESIS SYSTEM" or "System" means ArQule's
combinatorial chemistry synthesis platform comprising [*], as more fully
described in Exhibit B (AMAP Description) and Exhibit C (System Equipment),
attached to and made part of this Agreement. The term "AMAP" is a trademark of
ArQule.
1.3 "ARQULE COMPOUNDS" means [*].
1.4 "ARQULE CONFIDENTIAL INFORMATION" means all information about any
element of the ArQule Technology which is disclosed by ArQule to Pfizer and
designated "Confidential' in writing by ArQule at the time of disclosure or
within thirty (30) days following disclosure to the extent that such information
(i) as of the date of disclosure to Pfizer is not known to Pfizer other than by
virtue of a prior confidential disclosure to Pfizer by ArQule; or (ii) is not
disclosed in published literature, or otherwise generally known to the public
through no fault or omission of Pfizer; or (iii) is not obtained by Pfizer from
a third party free from any obligation of confidentiality to ArQule.
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*Confidential treatment has been requested for the marked portion.
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1.5 "ARQULE STAFF" means the full time equivalent ("FTE") ArQule employees
in the Production Facility who shall perform the Collaboration Program.
1.6 "ARQULE TECHNOLOGY" means Technology, including, but not limited to
Technology described and made a part of this Agreement in Exhibit A, comprising
the System and Improvements thereto, which Technology is developed by employees
of or consultants to ArQule alone or jointly with third parties prior to the
Effective Date and during the Contract Period, but excluding technology that
ArQule does not have the right to license, sublicense, or practice as set forth
in this Agreement without the consent of or payment to a third party. ArQule
Technology also includes all Improvements to the System that are developed under
the Plans by Pfizer employees alone or jointly with ArQule Staff during the
Contract Period; provided, however, that Pfizer Confidential Information has
been removed. ArQule Technology does not include Pfizer Compounds.
1.7 "AUTOMATED TRANSFORMATION" means [*].
1.8 "CHEMICAL TRANSFORMATION" means [*].
1.9 "COLLABORATION PLAN" means the written plan describing and governing
the activities to be carried out by Pfizer and ArQule pursuant to this
Agreement. The initial Collaboration Plan is attached to and made a part of this
Agreement as Exhibit D.
1.10 "COLLABORATION PROGRAM" is the ArQule Technology transfer program and
the Pfizer Compound synthesis program conducted by ArQule and Pfizer pursuant to
the Plans.
1.11 "CONTRACT PERIOD" means the period beginning on the Effective Date and
ending on the date on which this Agreement terminates.
1.12 "EFFECTIVE DATE" means July 19, 1999.
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*Confidential treatment has been requested for the marked portion.
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<PAGE> 4
1.13 "IMPROVEMENT" means any improvement, augmentation, or enhancement to
the System that is developed by a party during the Contract Period.
1.14 "LEGAL BOOKS" mean the formal laboratory notebooks issued to ArQule
Staff and owned by Pfizer in which all work performed by ArQule Staff in the
Production Facility will be recorded. Legal Books will not be removed from the
Production Facility. Pfizer may review Legal Books at any time.
1.15 "LIBRARY PROTOCOLS" means [*].
1.16 "MOVE-IN DATE" means such date after the Effective Date and on or
before [*] ArQule shall certify the Production Facility as ready for occupancy
and operations by Pfizer employees and ArQule Staff.
1.17 "PATENT RIGHTS" shall mean all patent rights in and to inventions
within Pfizer Technology and ArQule Technology including patents and patent
applications, whether domestic or foreign, claiming such patentable inventions,
including all continuations, continuations-in-part, divisions, and renewals, and
letters patent granted thereon, and all reissues, re-examinations and
extensions.
1.18 "PFIZER COMPOUNDS" means [*].
1.19 "PFIZER CONFIDENTIAL INFORMATION" means all information about any
element of Pfizer Technology which is disclosed by Pfizer to ArQule and
designated "Confidential" in writing by Pfizer at the time of disclosure or
within thirty (30) days following disclosure to the extent that such information
(i) as of the date of disclosure to ArQule is not known to ArQule other than by
virtue of a prior confidential disclosure to ArQule by Pfizer; or (ii) is not
disclosed in published literature, or otherwise generally known to the public
through no fault or omission
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of ArQule; or (iii) is not obtained by ArQule from a third party free from any
obligation of confidentiality to Pfizer.
1.20 "PFIZER STAFF" means Pfizer FTE employees in the Production Facility
who shall perform the Collaboration Program.
1.21 "PFIZER TECHNOLOGY" means Technology developed by employees of or
consultants to Pfizer alone or jointly with third parties prior to the Effective
Date and during the Contract Period and shall include, without limitation,
Pfizer Compounds.
1.22 "PLANS" are the Collaboration Plan and the Production Plan.
1.23 [*].
1.24 "PRODUCTION FACILITY" means the space that Pfizer has leased from
ArQule under the terms and conditions of the Sublease Agreement, attached to and
made part of this Agreement as Exhibit E.
1.25 "PRODUCTION GOALS" mean [*].
1.26 "PRODUCTION PLAN" means the plan, first adopted by both parties during
the initial [*] months of the Contract Period and thereafter, amended every
calendar quarter ("Quarter") in advance. The Production Goals for each Quarter
will be described in the Production Plan. Each Production Plan will be attached
to and made part of this Agreement as Exhibit F.
1.27 "SUPPLEMENTARY STAFF" means the supplementary, full time Pfizer
employees who occupy the Production Facility but perform operations outside the
Collaboration Program, as further described in Section 2.5.4. (iv).
1.28 "TECHNOLOGY" means all information and materials, including, but not
limited to chemical reagents, monomers, compounds, protocols, chemistry,
hardware and software
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technology, Automated Transformations, Chemical Transformations, technical
information, know-how, expertise and trade secrets as further described in the
Plans.
2. COLLABORATION PROGRAM
2.1 PURPOSE. ArQule and Pfizer shall conduct the Collaboration Program
throughout the Contract Period. The objectives of the Collaboration Program are
to transfer ArQule Technology to Pfizer and to produce Pfizer Compounds.
2.2 Collaboration Plan. The initial Collaboration Plan is described in
Exhibit D. The Steering Committee shall prepare an amended Collaboration Plan no
later than [*] and every [*] thereafter, during the Contract Period. Such
amended Collaboration Plans shall be appended to Exhibit D and made part of this
Agreement.
2.3 STEERING COMMITTEE
2.3.1 PURPOSE. Each party shall establish a committee to manage the
activities of both parties during the course of the Collaboration Program (the
"Steering Committee'):
(a) to review and evaluate progress under the Collaboration
Plan;
(b) to prepare the Plans and any amendments;
(c) to review and monitor progress under the Production Plan and
to report to Pfizer the completion of Production Goals:
(d) to coordinate and monitor activities and staffing of the
Production Facility as further described in Exhibit D;
(e) to coordinate and monitor [*];
(f) to coordinate and monitor [*];
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(g) to monitor, review and approve [*] for the Production
Facility. (Approval of such [*] by either party shall not be unreasonably
withheld);
(h) to establish, implement and manage a series of operational
guidelines, including, but not limited to, FTE use reporting practices and
invoicing procedures;
(i) [*];
(j) to identify, to review and to coordinate licensing of third
party Chemical Transformations for use in the Production Facility;
(k) to establish and implement procedures to control both
physical and other security measures relating to the collaboration and the
Production Facility, including procedures controlling access to the Production
Facility (see Section 2.5.1 (vii) below); and
(l) to coordinate and monitor publication of Technology
developed during the Contract Period as specified in Section 4.2 and to
coordinate and monitor the exchange of information and materials that relate to
the Collaboration Program. (This function shall survive termination of this
Agreement.) The Steering Committee may have other duties as mutually agreed by
the parties or as expressly set forth in this Agreement.
2.3.2 MEMBERSHIP. Pfizer and ArQule each shall appoint four (4)
members to the Steering Committee. Subject to the terms and conditions of
Section 2.10, either party may appoint substitutes at any time upon written
notice to the other party.
The members initially shall be:
Pfizer Appointees: [*]
ArQule Appointees: [*]
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2.3.3 CHAIR. Two co-chairpersons shall chair the Steering Committee,
one appointed by Pfizer and the other appointed by ArQule.
2.3.4 MEETINGS. The Steering Committee shall meet at least quarterly,
at places and on dates selected by each party in turn. Representatives of either
party, in addition to members of the Steering Committee, may attend such
meetings at the invitation of both parties.
2.3.5 MINUTES. The Steering Committee shall keep accurate minutes of
its deliberations, which record all proposed decisions and all actions
recommended or taken. Specifically, the minutes shall provide a record of
operational details relating to, among other things, training on the System and
the transfer of Improvements to the ArQule Technology (e.g., which Improvements
and the timing for their delivery and implementation). Drafts of the minutes
shall be delivered to all Steering Committee members within ten (10) business
days after each meeting. The party hosting the meeting shall be responsible for
the preparation and circulation of the draft minutes. Draft minutes shall be
edited by the co-chairpersons and shall be issued in final form only with their
approval and agreement.
2.3.6 DECISIONS. All decisions of the Steering Committee shall be made
[*]. ArQules' representatives on the Steering Committee shall [*] vote and
Pfizer's representatives on the Steering Committee shall [*] vote.
2.3.7 EXPENSES. Pfizer and ArQule shall each bear all expenses of
their respective members related to their participation on the Steering
Committee.
2.4 REPORTS
2.4.1 REPORTS. During the Contract Period, Pfizer and ArQule each
shall furnish to the Steering Committee:
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(a) summary written reports within [*] days after the end of
each Quarter commencing on the Effective Date[*].
(b) comprehensive written reports within [*] days after the end
of each calendar year, describing in detail the work accomplished by it under
the Plans during the year and discussing and evaluating the results of such work
as further described in Section 2.4.1(a).
2.5 PRODUCTION FACILITY. During the Contract Period, the Collaboration
Program shall be performed in the Production Facility. The System and
Improvements shall be assembled, constructed and maintained in the Production
Facility as more fully described and provided below. ArQule covenants that the
Production Facility shall be made suitable in all respects for the performance
of its duties pursuant to this Agreement and shall be maintained in such
condition during the term of this Agreement.
2.5.1 ArQule shall be responsible for the following operations in the
Production Facility: [*].
2.5.2 Pfizer may inspect environmental health and safety procedures in
the Production Facility and may make recommendations with respect to
improvements to ensure compliance with local, state and federal regulations. At
ArQules' own expense, ArQule will make all such improvements to the Production
Facility as may be required to comply with any government regulations as
identified by Pfizer or the responsible government agency. If Pfizer seeks to
improve the standards of environmental health and safety beyond those required
by law, Pfizer may do so at Pfizer's own expense.
2.5.3 Pfizer may inspect security procedures in the Production
Facility and may seek to improve such procedures at Pfizer's own expense.
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2.5.4 ArQule Staff, Pfizer Staff and Supplementary Staff will
co-occupy the Production Facility.
(i) The skills of ArQule Staff with respect to disciplines,
roles. level of education and ArQule employment experience will be as described
in the Collaboration Plan.
(ii) [*] will be responsible for management of ArQule Staff
and [*] or his appointee will be responsible for management of Pfizer Staff and
Supplementary Staff. The day to day operations of the Production Facility shall
be the responsibility of [*] or his successor pursuant to Section 2.10.
(iii) Subject to the terms and conditions of Section 2.5.4
(iv), commencing on [*], with [*] months written notice, Pfizer may substitute
ArQule Staff with Pfizer Staff for the performance of Plans; provided, however,
at least [*] ArQule Staff remain in the facility. Pfizer will replace ArQule
Staff with an equivalent number of Pfizer Staff, so that the total number of
FTEs dedicated to Pfizer Compound production is [*]. Commencing [*], until the
termination of this Agreement. Pfizer Staff may be increased to a maximum of [*]
FTEs so that there may be as many as [*] FTEs performing the Production Plan.
(iv) In addition to Pfizer Staff specified in Section 2.5.4
(iii), [*] Supplementary Staff may also occupy the facility to perform
operations which include, but are not limited to: [*].
(v) For each Pfizer Staff or Supplementary Staff member
occupying the Production Facility, Pfizer will compensate ArQule at the rates
provided in Section 3.6, applied to such staff members pro rata on the basis of
the time they actually occupy
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the Production Facility. The Steering Committee shall establish methods to
record such occupancy times.
2.6 PRODUCTION PLAN AND GOALS. Subject to the Production Plans, if ArQule
achieves all Production Goals during the Contract Period, they will produce a
total of [*] Pfizer Compounds, each of which satisfies the following general
specifications:
[*]
Compounds produced during the Contract Period that fail to satisfy such
specifications will not count toward ArQule's Production Goal of [*] and ArQule
will destroy any such compounds, unless Pfizer notifies ArQule to the contrary
in writing, within [*] days of the end of the quarter in which such compounds
were a part of the Production Plan.
2.6.1 During the Contract Period, Key Investigators will be solely
responsible for the process of [*]. ArQule shall be responsible for ensuring
that ArQule does not [*]. Such procedures shall be described in detail in the
Collaboration Plan as the same is updated from time to time.
2.7 ARQULE TECHNOLOGY TRANSFER. Upon execution of this Agreement by both
parties, ArQule will [*], as further described in the Collaboration Plan and the
Steering Committee minutes. The Steering Committee will govern these [*]
activities. [*] will continue throughout the Contract Period; provided, however,
that Pfizer acknowledges that [*] will be limited until Pfizer has full access
to [*]. As further described in the Collaboration Plans and in minutes of the
Steering Committee, during the Contract Period ArQule will document and transfer
to Pfizer any Improvements to ArQule Technology.
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2.8 [*]. Within [*] days of the Effective Date, ArQule shall transfer to
Pfizer [*]. From time to time, during the Contract Period, ArQule will provide
Pfizer with all additional [*].
2.9 DILIGENT EFFORTS. Pfizer and ArQule each shall use reasonably diligent
efforts to achieve the objectives of the Collaboration Program. ArQule will use
reasonably diligent efforts to achieve the Plans and Pfizer will use reasonably
diligent efforts to assist ArQule in the Plans in pursuit of those objectives.
2.10 KEY INVESTIGATORS. (a) Subject to the provisions of Section 2.10 (b),
during the Contract Period, [*] ("Key Investigators") shall serve on the
Steering Committee. During such period, [*] shall commit approximately [*] of
his time each week to the Collaboration Program and [*] shall commit
approximately [*] of his time each week, (b) Promptly after execution of this
Agreement, ArQule shall [*]. Following approval by Pfizer, ArQule shall [*] and
during the Contract Period shall [*]. If for any reason, either [*], ArQule
shall within [*] days [*].
3. PAYMENTS AND RESPONSIBILITIES.
3.1 [*]. In return for [*], Pfizer shall pay ArQule an amount (the "[*]
Cost") between [*] (the "Minimum [*] Cost") and [*] (the "Maximum [*] Cost")
depending upon [*]. ArQule shall deliver [*] no later than [*] months from the
Effective Date, at which time Pfizer shall acquire legal title and shall bear
the risk of loss. The Minimum [*] Cost shall be paid as follows: [*] shall be
payable within [*] days of execution of this Agreement and the remaining [*]
shall be payable over [*] years beginning on [*], in advance quarterly
installments, each of [*] during [*] years, and each of [*] during [*] years. In
addition to the Minimum [*] Cost, Pfizer will pay ArQule an additional amount of
up to [*] payable over [*] years beginning on the [*], in quarterly
installments, each of up to[*] during [*] years, and each of up to [*] during
[*] years, in
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each case if, as, and when the [*] achieves [*], as determined by the Steering
Committee. Such additional amount (the "[*] Amount") shall be determined at the
end of each Quarter during the [*] year period beginning [*]. At the end of each
quarter, if [*]. Pfizer will pay ArQule the Quarterly installments of [*] Costs
within thirty (30) days of receipt of invoice and certification.
3.2 [*] COST FOR [*]. Pfizer shall reimburse ArQule for direct costs
incurred by ArQule to [*] that are needed to [*] any [*] to the ArQule
Technology; provided, however, that each such [*] and ArQule's estimated costs
are approved in advance by the Steering Committee in accordance with the
procedures set forth in the Collaboration Plan. Pfizer will pay ArQule within
thirty (30) days of receipt of an itemized invoice for each such [*]. At
Pfizer's option, Pfizer may purchase part or all of any such [*] directly from
the vendor (for example, [*]) and may pay the vendor directly.
3.3 SUBLEASE FOR PRODUCTION FACILITY. Commencing on the Move-In Date,
during the Contract Period, Pfizer will pay ArQule [*] annually for the sublease
to the Production Facility, which will be paid quarterly, in advance, upon
invoice from ArQule. As further described in the Sublease Agreement, Pfizer will
also pay ArQule for [*]. If ArQule fails or refuses to execute this Agreement,
Pfizer shall have no obligation to execute the Sublease Agreement.
3.4 [*] COSTS. From the Move-In Date and thereafter during the Contract
Period, Pfizer shall pay ArQule for [*] produced in the [*], an amount not to
exceed [*] in quarterly installments, each of [*] payable against ArQule's
invoice submitted in advance of such quarter. Pfizer shall supply the [*] with
any [*] necessary for performance of the [*] and not available by purchase from
an outside vendor.
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3.5 [*] FEES. As set forth in the Collaboration Plan, ArQule will dedicate
[*] ArQule Staff FTEs per year (a) [*] and (b) [*]. After the Effective Date,
Pfizer will pay ArQule a fee of [*] in support of [*], against invoice.
Thereafter, commencing on Move-In Date, and until the termination of this
Agreement, Pfizer will pay to ArQule an annual fee of [*] in support of [*].
Such fee will be paid to ArQule in equal quarterly installments, in advance,
thirty (30) days after receipt of invoice.
3.6 [*] FEES. Pursuant to Section 2.5.4 (v), for each [*] person who
replaces [*] person in the Production Facility, Pfizer will pay ArQule [*] for
each year or part thereof during the Contract Period that each such [*] person
is employed in the Production Facility; and, for each [*] person in the
Production Facility, Pfizer will pay ArQule [*] for each year or part thereof
during the Contract Period that each such [*] person is employed in the
Production Facility. The Steering Committee will determine the methods for
tracking and pro-rating the time spent by Pfizer employees in the Production
Facility.
3.7 REBATES. If Pfizer substitutes Pfizer Staff for ArQule Staff as
permitted by Section 2.5.4. (iii), then during the period of such substitution
the quarterly amount due ArQule as set forth in Section 3.4 shall be reduced by
the Steering Committee as further described in the Collaboration Plan.
3.8 RECORDS. ArQule shall keep for [*] years from the conclusion of each
year complete and accurate records of its expenditures pursuant to the Plans.
The records shall conform to good accounting principles as applied to a similar
company similarly situated. Pfizer shall have the right at its own expense
during the term of this Agreement and during the subsequent [*] period to
appoint an independent certified public accountant,-reasonably
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acceptable to ArQule, to verify the accuracy of such expenditures. Upon
reasonable notice by Pfizer, ArQule shall make its records available for
inspection by the auditing company or the independent certified public
accountant during regular business hours at the place or places where such
records are customarily kept. This right of inspection shall not be exercised
more than once in any calendar year and not more than once with respect to
records covering any specific period of time. All information concerning such
expenditures, and all information learned in the course of any audit or
inspection, shall be deemed to be ArQule Confidential Information, except to the
extent that it is necessary for Pfizer to reveal the information in order to
enforce any rights it may have pursuant to this Agreement or if disclosure is
required by law. The failure of Pfizer to request verification of any
expenditures before or during the [*] period shall be considered acceptance by
Pfizer of the accuracy of such expenditures, and ArQule shall have no obligation
to maintain any records pertaining to such report or statement beyond such [*]
period. The results of such inspection, if any, shall be binding on the parties.
4. TREATMENT OF CONFIDENTIAL INFORMATION
4.1 CONFIDENTIALITY
4.1.1 Pfizer and ArQule each recognize that the other's Confidential
Information constitutes highly valuable, confidential information. Subject to
the terms and conditions of this Agreement, the obligations set forth in Section
4.3, the publication rights set forth in Section 4.2. Pfizer and ArQule each
agree that during the term of this Agreement and for [*] years thereafter, it
will keep confidential, and will cause its Affiliates to keep confidential, all
ArQule Confidential Information or Pfizer Confidential Information, as the case
may be, that is disclosed to it, or to any of its Affiliates pursuant to this
Agreement. Neither Pfizer nor
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ArQule nor any of their respective Affiliates shall use such Confidential
Information except as expressly permitted in this Agreement.
4.1.2 Pfizer and ArQule each agree that any disclosure of the other's
Confidential Information to any officer, employee or agent of the other party or
of any of its Affiliates shall be made only if and to the extent necessary to
carry out its responsibilities under this Agreement and shall be limited to the
maximum extent possible consistent with such responsibilities. Pfizer and ArQule
each agree not to disclose the other's Confidential Information to any third
parties under any circumstance without written permission from the other party.
Each party shall take such action, and shall cause its Affiliates to take such
action, to preserve the confidentiality of each other's Confidential Information
as it would take to preserve the confidentiality of its own Confidential
Information. Upon the termination of this Agreement by either party by its
breach, the breaching party, upon the other's request, will return all the
Confidential Information disclosed to the other party pursuant to this
Agreement, including all copies and extracts of documents, within sixty (60)
days of the request upon the termination of this Agreement except for one (1)
copy which may be kept for the purpose of complying with continuing obligations
under this Agreement.
4.1.3 ArQule and Pfizer each represent that all of its employees, and
any consultants to such party, participating in the Collaboration Program who
shall have access to Pfizer Technology, ArQule Technology and Pfizer
Confidential Information and ArQule Confidential Information are bound by
agreement to maintain such information in confidence consistent with the terms
and conditions of this Agreement.
4.2 PUBLICATION. Notwithstanding any matter set forth with particularity
in this Agreement to the contrary, results obtained in the course of the
Collaboration Program may be
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submitted for publication following scientific review by the Steering Committee
and subsequent approval by ArQule's and Pfizer's managements. After receipt of
the proposed publication by both Pfizer's and ArQule's managements written
approval or disapproval shall be provided within thirty (30) days for a
manuscript, within fourteen (14) days for an abstract for presentation at, or
inclusion in the proceedings of a scientific meeting, and within fourteen (14)
days for a transcript of an oral presentation to be given at a scientific
meeting.
4.3 PUBLICITY. Except as required by law, neither party may disclose the
terms of this Agreement, nor the Collaboration Program described in it, without
the written consent of the other party, which consent shall not be unreasonably
withheld. Either party shall have the right to issue a press release or other
public statement concerning this Agreement provided that the content of such
release or statement has first been agreed by the other party, such agreement
not to be unreasonably withheld or delayed.
4.4 DISCLOSURE OF INVENTIONS. ArQule shall inform Pfizer about all
Improvements to ArQule Technology and Pfizer shall inform ArQule about all
Improvements to ArQule Technology which Pfizer employees invent and use in the
Production Facility. The Steering Committee shall establish and implement
appropriate procedures to ensure that each party is given complete and timely
information about Improvements to ArQule Technology.
4.5 RESTRICTIONS ON TRANSFERRING MATERIALS. Subject to the grant of
license to Pfizer in Section 5.2, Pfizer and ArQule recognize that the synthetic
chemical materials, including, but not limited to, monomers, chemical
components, intermediates, and reagents which are part of ArQule Technology or
Pfizer Technology, represent valuable commercial assets. Therefore, throughout
the Contract Period and for [*] years thereafter, ArQule and Pfizer agree not to
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transfer such materials received from the other party to any third party, unless
prior written consent for any such transfer is obtained from the other party.
For the purposes of this Section 4.5, ArQule employees outside of the Production
Facility shall be viewed as third parties with respect to Pfizer Technology
(i.e. materials within Pfizer Technology shall not be transferred to ArQule
outside the Production Facility).
5. INTELLECTUAL PROPERTY RIGHTS. The following provisions relate to rights in
the intellectual property developed by ArQule or Pfizer, or both, during the
course of carrying out the Collaboration Program.
5.1 OWNERSHIP. ArQule shall own all ArQule Confidential Information and
ArQule Technology and ArQule Patent Rights relating to them. Pfizer shall own
all Pfizer Confidential Information, Pfizer Technology and Pfizer Patent Rights
relating to them.
5.2 GRANTS OF LICENSES.
5.2.1 ArQule hereby grants to Pfizer a non-exclusive, worldwide, [*]
license, including the right to grant sublicenses to Affiliates, to make and use
[*] for [*]. Such license shall continue until termination of this Agreement,
whereupon its status shall be determined as provided in Sections 8 or 9, as the
case may be.
5.2.2 At all times Pfizer owns all intellectual property with respect
to all [*], and shall be free to use and dispose of any [*] in any manner it
sees fit without any compensation or other obligation to ArQule. ArQule
covenants that during the Contract Period and for a period of [*] years after
[*], it shall not [*] any [*]. In furtherance of the foregoing covenant, ArQule
shall [*]. If ArQule consults such [*] determines that it has [*], it shall
promptly [*]. Pfizer shall have the right to monitor and review ArQule
activities with respect to [*] during normal business
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hours and upon reasonable notification; provided, however; that Pfizer shall not
have access to ArQule confidential information or confidential information of
ArQule's collaborators (other than Pfizer) for this purpose. ArQule shall not
[*] for a period of [*] years after [*], after which ArQule will [*].
5.2.3 At Pfizer's expense, but without further compensation to ArQule,
ArQule shall (a) prepare and complete any documents and take such actions as
Pfizer may require to file patent applications and to prosecute patents with
respect to Pfizer Compounds and Pfizer Technology in Pfizer's name or ArQule's
name or both; and (b) if Pfizer deems it necessary or desirable, to execute an
assignment of rights in favor of Pfizer with respect to such patent applications
and patents.
5.2.4 At ArQule's expense, but without further compensation to Pfizer,
Pfizer shall (a) prepare and complete any documents and take such actions as
ArQule may require to file patent applications and to prosecute patents with
respect to ArQule Technology in Pfizer's name or ArQule's name or both; and (b)
if ArQule deems it necessary or desirable, to execute an assignment of rights in
favor f ArQule with respect to such patent applications and patents.
5.3 [*]. ArQule will have the right to use and transfer to third parties
[*] developed under the Collaboration Program, which the Steering Committee
certifies, acting by an affirmative vote, that the [*] would not [*].
5.4 [*]. During the Contract Period, Pfizer shall not have the right to
modify any [*] without the prior written consent of ArQule. ArQule acknowledges
that from time to time Pfizer [*] staff will seek to [*] between [*]. ArQule
will provide [*] within thirty (30) days of Pfizer's written request for such
[*].
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6. PROVISIONS CONCERNING THE FILING, PROSECUTION AND MAINTENANCE OF PATENTS.
ArQule and Pfizer shall each be responsible for the filing, prosecuting and
maintaining all ArQule Patent Rights and Pfizer Patent Rights, respectively.
7. OTHER AGREEMENTS. Concurrently with the execution of this Agreement, ArQule
and Pfizer shall enter into the Sublease Agreement. This Agreement, Exhibits A,
B, C, D, E and F, each appended to and made part of this Agreement, are the sole
agreements with respect to the subject matter and supersede all other agreements
and understandings between the parties with respect to same.
8. TERM, TERMINATION AND DISENGAGEMENT
8.1 TERM. Unless sooner terminated or extended, this Agreement shall
expire on [*] at which time, provided that Pfizer has then paid all amounts
earned by ArQule under Section 3 of this Agreement, (a) Pfizer shall [*] as set
forth in Section 5 and (b) Pfizer shall [*].
8.2 EVENTS OF TERMINATION. The following events shall constitute events of
termination ("Events of Termination"):
(a) any material written representation or warranty by ArQule or
Pfizer, or any of its officers, made under or in connection with this Agreement
shall prove to have been incorrect in any material respect when made.
(b) ArQule or Pfizer shall fail in any material respect to
perform or observe any term, covenant or understanding contained in this
Agreement or in any of the other documents or instruments delivered pursuant to,
or concurrently with, this Agreement, and any such failure shall remain
unremedied for thirty (30) days after written notice to the failing party.
8.3 TERMINATION.
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8.3.1 Upon the occurrence of any Event of Termination, the party not
responsible may, by notice to the other party, terminate this Agreement.
8.3.2 If Pfizer terminates this Agreement pursuant to Section 8.3.1
and Pfizer pays ArQule within [*] days of termination the full amount of the
Minimum [*] Cost payable under Section 3.1 not previously paid, Pfizer's
research license to [*] granted under Section 5 shall become worldwide,
perpetual, irrevocable, and fully paid and Pfizer shall retain ownership of all
[*]; otherwise, the aforesaid research license to Pfizer shall thereupon
terminate and Pfizer shall return any [*] that incorporate or rely on ArQule
Technology. If ArQule terminates this Agreement pursuant to Section 8.3.1, then
the aforesaid research license to Pfizer shall thereupon terminate. Insofar as
the [*] then in Pfizer's possession do not incorporate or rely upon ArQule
Technology, Confidential Information or Patent Rights, Pfizer shall retain
ownership of them and the right to use them.
9. TERMINATION BY PFIZER.
9.1 [*] months after the date of initiation of Pfizer Compound Production
and occupancy of the Production Facility by Pfizer, Pfizer may terminate this
Agreement, without cause, upon [*] months' notice to ArQule, effective at the
conclusion of the [*]-month notice period. If Pfizer does not provide ArQule
notice at that time, Pfizer may only terminate the Agreement pursuant to Section
8.3.
9.2 If Pfizer terminates this Agreement pursuant to this Section, (i)
Pfizer will pay ArQule a termination fee of [*] within [*] days of termination;
(ii) the research license granted to Pfizer under Section 5 shall thereupon
terminate; (iii) the sublease shall terminate and Pfizer shall have no further
obligation thereunder (except for rent accrued and unpaid through the
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effective date of termination; (iv) the equipment purchased by Pfizer including,
[*] shall be returned to ArQule; and (v) Pfizer shall continue to [*], and
ArQule shall act with respect to all such [*], as provided in Section 5 of this
Agreement.
9.3 Termination of this Agreement for any reason shall be without
prejudice to:
(a) the rights and obligations of the parties provided in those
Sections of the Agreement which by virtue of their term and condition extend
beyond any termination of this Agreement including Pfizer's rights in, and
ArQule's obligations respecting Pfizer Compounds set forth in Section 5;
(b) ArQule's right to receive all payments accrued under Section
3; or
(c) (c) any other remedies which either party may otherwise
have.
10. REPRESENTATIONS AND WARRANTIES. ArQule and Pfizer each represents and
warrants as follows:
10.1 It is a corporation duly organized, validly existing and is in good
standing under the laws of the State of Delaware, is qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the conduct of its business of the ownership of its properties requires such
qualification and has all requisite power and authority, corporate or otherwise,
to conduct its business as now being conducted, to own, lease and operate its
properties and to execute, deliver and perform this Agreement.
10.2 The execution, delivery and performance by it of this Agreement have
been duly authorized by all necessary corporate action and do not and will not
(a) require any consent or approval of its stockholders, (b) violate any
provision of any law, rule, regulations, order, writ, judgment, injunctions,
decree, determination award presently in effect having applicability to it
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or any provision of its certificate of incorporation or by-laws or (c) result in
a breach of or constitute a default under any material agreement, mortgage,
lease, license, permit or other instrument or obligation to which it is a party
or by which it or its properties may be bound or affected.
10.3 This Agreement is a legal, valid and binding obligation of it
enforceable against it in accordance with its terms and conditions, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws, from time to time in effect,
affecting creditor's rights generally.
10.4 It is not under any obligation to any person, or entity, contractual
or otherwise, that is conflicting or inconsistent in any respect with the terms
of this Agreement or that would impede the diligent and complete fulfillment of
its obligations.
10.5 It has good and marketable title to or valid leases or licenses for,
all of its properties, rights and assets necessary for the fulfillment of its
responsibilities under the Collaboration Program, subject to no claim of any
third party other than the relevant lessors or licensors.
11. COVENANTS OF ARQULE AND PFIZER OTHER THAN REPORTING REQUIREMENTS.
Throughout the Contract Period, ArQule and Pfizer each shall:
11.1 maintain and preserve its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified as a foreign corporation in good standing in each jurisdiction in
which such qualification is from time to time necessary or desirable in view of
their business and operations or the ownership of their properties.
11.2 comply in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any government authority to
the extent necessary to conduct the
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Research Program, except for those laws, rules, regulations, and orders it may
be contesting in good faith.
12. INDEMNIFICATION. Pfizer will indemnify ArQule and its agents and employees
("the Indemnitees") for damages, settlements, costs, legal fees and other
expenses incurred in connection with a claim against the Indemnitees based on an
action or omission of Pfizer, its agents or employees related to the rights or
obligations of Pfizer under this Agreement; provided, however, that the
foregoing shall not apply (i) if the claim is found to be based upon the
negligence, recklessness or willful misconduct of the Indemnitees or (ii) if
ArQule fails to give Pfizer prompt notice of any claim it receives and such
failure materially prejudices Pfizer with respect to any claim or action to
which Pfizer's obligation pursuant to this Section applies. Pfizer, in its sole
discretion, shall choose legal counsel, shall control the defense of such claim
or action and shall have the right to settle same on such terms and conditions
it deems advisable; provided, however, it shall obtain ArQule's prior consent to
such part of any settlement which requires payment or other action by ArQule or
is likely to have a material adverse effect on ArQule's business.
13. NOTICE. All notices shall be in writing mailed via certified mail, return
receipt requested, courier, or confirmed facsimile transmission addressed as
follow, or to such other address as may be designated from time to time:
If to Pfizer: To Pfizer at its address as set forth at the beginning
of this Agreement.
Attention: President, Central Research
with copy to: Counsel, Central Research
Pfizer Inc
Eastern Point Road
Groton, CT 06340
If to ArQule: To ArQule at its address as set forth at the beginning
of this Agreement.
Attention: President
with copy to: General Counsel
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Notices shall be deemed given as of the date received.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
15. MISCELLANEOUS. 15.1 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective legal
representatives, successors and permitted assigns.
15.2 HEADING. Paragraph headings are inserted for convenience of reference
only and do not form a part of this Agreement.
15.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original.
15.4 AMENDMENT, WAIVER. This Agreement may be amended, modified, superseded
or canceled, and any of the terms may be waived, only by a written instrument
executed by each party or, in the case of waiver, by the party or parties
waiving compliance. The delay or failure of any party at any time or times to
require performance of any provisions shall in no manner affect the rights at a
later time to enforce the same. No waiver by any party of any condition or of
the breach of any term contained in this Agreement, whether by conduct, or
otherwise, in any one or more instances, shall be deemed to be, or considered
as, a further or continuing waiver of any such condition or of the breach of
such term or any other term of this Agreement.
15.5 NO THIRD PARTY BENEFICIARIES. No third party including any employee of
any party to this Agreement shall have or acquire any rights by reason of this
Agreement. Nothing contained in this Agreement shall be deemed to constitute the
parties partners with each other or any third party.
15.6 ASSIGNMENT AND SUCCESSORS. This Agreement may not be assigned by
either arty, except that each party may assign this Agreement and the rights and
interests of such party, in
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whole or in part, to any of its Affiliates, any purchaser of all or
substantially all of its assets or to any successor corporation resulting from
any merger or consolidation of such party with or into such corporations.
15.7 Y2K COMPLIANCE. ArQule represents and covenants that Y2K issues will
not materially affect Production Facility and ArQule Technology. Pfizer shall
have the right to inspect and/or evaluate the Production Facility and ArQule
Technology and documentation thereof in order to confirm such representation.
15.8 FORCE MAJEURE. Neither Pfizer nor ArQule shall be liable for failure
of or delay in performing obligations set forth in this Agreement, and neither
shall be deemed in breach of its obligations, if such failure or delay is due to
natural disasters or any causes reasonably beyond the control of Pfizer or
ArQule.
15.9 SEVERABILITY. If any provision of this Agreement is or becomes invalid
or is ruled invalid by any court of competent jurisdiction or is deemed
unenforceable, it is the intention of the parties that the remainder of the
Agreement shall lot be affected.
15.10 [*]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
PFIZER INC. ARQULE, INC.
By: /s/ George Milne By: /s/ Stephen Hill
----------------------------------- ---------------------------------
Title: Sr. Vice President Title: CEO
------------------------------- ------------------------------
Date: 14 June 1999 Date: 19 July 1999
-------------------------------- -------------------------------
cc: Pfizer Inc, Legal Division, Groton, CT
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EXHIBIT A
ArQule Patents
[*]
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EXHIBIT B
AMAP Description
[*]
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EXHIBIT C
System Equipment
[*]
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EXHIBIT D
Collaboration Plan
[*]
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EXHIBIT E
Sublease
[Filed as Exhibit 10.2 to Arqule's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999 and incorporated herein by reference.]
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EXHIBIT F
Production Plan
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EXHIBIT 10.2
SUBLEASE
This Sublease (the "Sublease") is made as of this 16th day of July, 1999,
by and among ArQule, Inc., a Delaware corporation (the "Sublessor"), and Pfizer
Inc. a Delaware corporation (the "Sublessee").
The parties to this instrument hereby agree with each other as follows:
ARTICLE I
SUMMARY OF BASIC SUBLEASE PROVISIONS
------------------------------------
1.1 BASIC DATA
ALL CAPITALIZED TERMS USED HERE[N SHALL HAVE THE MEANINGS ASCRIBED TO THEM [N
THE PRIME LEASE (HEREINAFTER DEFINED) UNLESS OTHERWISE DEFINED HEREIN.
Commencement Date: The date on which the Premises are
deemed ready for occupancy by
Sublessee. See Section 3.1.
Sublessor: ArQule, Inc.
Present Mailing Address 200 Boston Avenue
of Sublessor: Medford, Massachusetts 02155
Sublessor' s Representative: [*]
Sublessee: Pfizer Inc
Present Mailing Address of Sublessee: 235 East 42nd Street
New York, New York 10017
Sublessee's Representative: [*]
Prime Lessor: Cummings Properties, LLC
(successor-in-interest to Cummings
Properties Management, Inc.), as
agent for Beautyrest, Inc. and
Boston North, LLC (successor-in-
interest to WRB, Inc.)
Present Mailing Address 200 West Cummings Park
of Prime Lessor: Woburn, Massachusetts 01801
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Permitted Uses: For Suites [*]: As described in
Section 3 of Prime Lease 1 (as
defined below), and Sections G and
H of the Rider to Prime Lease 1.
For Suites [*]: As described in
Section 3 of Prime Lease 2 (as
defined below), and Sections 5 and
6 of Amendment #1 to Prime Lease 2.
Premises: [*] rentable square feet of space
in Suites [*], located on [*] of
the building known as 200 Boston
Avenue, Medford, Massachusetts (the
"Building"), together with the
right to use Sublessor's FF&E (as
hereinafter defined), and together
with the right to have access to
and use in common with Sublessor
the Collaboration Areas (as
described in Section 2.1 of this
Sublease). The Premises demised
under this Sublease consist of a
portion of the premises leased by
Sublessor from Prime Lessor under
Prime Lease 1, Prime Lease 2, and a
separate Commercial Lease dated
September 29, 1993, as amended,
between Prime Lessor, as landlord,
and ArQule Partners, L.P
(Sublessor's predecessor in
interest) as tenant, with respect
to approximately [*] square feet on
the [*] floors of the Building (the
"Third Floor Lease"); Prime Lease
1, Prime Lease 2, and the [*] Lease
are referred to herein collectively
as the "Overlease" and the premises
leased by Sublessor under the
Overlease are referred to herein
collectively as the "Leased
Premises".
Prime Lease 1: Collectively, that certain
Commercial Lease dated July 27,
1995, as supplemented by Rider to
Lease dated July 27, 1995 (the
"Rider to Prime Lease 1"), and as
amended by Amendment to Lease #1
dated January 24, 1996 ("Amendment
#1 to Prime Lease 1"), Amendment to
Lease #2 dated September 10, 1997
("Amendment #2 to Prime Lease 1"),
and Amendment to Lease #3 dated
January 12, 1998 ("Amendment #3 to
Prime Lease 1")
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between Prime Lessor, as landlord,
and Sublessor, as tenant. A copy of
Prime Lease I is attached hereto
and incorporated herein by
reference as EXHIBIT A.
Prime Lease 2: Collectively, that certain
Commercial Lease dated December 20,
1996, as supplemented by Rider to
Lease dated December 20, 1996 (the
"Rider to Prime Lease 2"), and as
amended by Amendment to Lease #1
dated August 15, 1997 ("Amendment
#1 to Prime Lease 2"), Amendment to
Lease #2 dated March 18, 1997
("Amendment #2 to Prime Lease 2"),
Amendment to Lease #3 dated
September 15, 1997 ("Amendment #3
to Prime Lease 2"), Amendment to
Lease #4 dated September 30, 1997
("Amendment #4 to Prime Lease 2"),
Amendment to Lease #5 dated
November 28, 1997 ("Amendment #5 to
Prime Lease 2"), and Amendment to
Lease #6 dated January 12, 1998
("Amendment #6 to Prime Lease 2")
between Prime Lessor, as landlord,
and Sublessor, as tenant. A copy of
Prime Lease 2 is attached hereto
and incorporated herein by
reference as EXHIBIT B.
Prime Lease: Collectively, Prime Lease 1 and
Prime Lease 2.
Base Rent: [*] per annum payable in advance in
equal quarterly installments of [*]
each. See Section 6.1.
Additional Rent: So that the Base Rent payable to
Sublessor hereunder shall be net to
Sublessor, Sublessee shall pay as
additional rent hereunder:
Sublessee's Prorata Share of [*]
Prorata Share: The percentage equal to area of the
pertinent portion of the Premises
divided by the area of the
pertinent portion of the entire
Leased Premises. The Prorata Share
shall be adjusted in the event the
area of either the Premises demised
under this Sublease or the Leased
Premises shall change during the
Sublease
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Term. As of the Commencement Date,
Sublessee's Prorata Share shall be
as follows:
- With respect to items of
Additional Rent, if any,
allocable solely to the
portion of the Premises [*]
located within the portion of
the Leased Premises [*]
demised under Prime Lease 1
and related to costs and
expenses attributable solely
to such portion of the Leased
Premises as is demised under
Prime Lease 1,[*].
- With respect to items of
Additional Rent, if any,
allocable solely to the
portion of the Premises [*]
located within the portion of
the Leased Premises [*]
demised under Prime Lease 2
and related to costs and
expenses attributable solely
to such portion of the Leased
Premises as is demised under
Prime Lease 2, [*].
- With respect to items of
Additional Rent, if any,
allocable to the Premises [*]
and related to costs and
expenses attributable solely
to such portion of the Leased
Premises [*] as is demised
under the Prime Lease, [*].
- With respect to items of
Additional Rent, if any,
allocable to the Premises [*]
and related to costs and
expenses attributable to all
of the Leased Premises [*].
Sublease Term or Term: Beginning on the Commencement Date
and expiring on the Term Expiration
Date.
Term Expiration Date: [*], unless extended or earlier
terminated as provided herein.
Sublessor's FF&E: All furnishings, fixtures and
equipment physically located in
the Premises as of the
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<PAGE> 5
date of this Sublease, including,
without limitation, [*] , as such
furnishings, fixtures and equipment
are more fully described on the
attached Exhibit C; explicitly
excluded from Sublessor's FF&E,
however, shall be all fixtures,
equipment, workstations and the
like that constitute [*] physically
located in the Premises as of the
date of this Sublease as more fully
described in Exhibits C and E of
the Technology Agreement as defined
below (the [*]).
Technology Agreement: That certain Technology Acquisition
Agreement, dated July __, 1999,
between Sublessor and Sublessee.
The parties hereby agree that,
except as otherwise expressly
provided in this Sublease to the
contrary, the respective rights and
obligations of the parties under
the Technology Agreement are wholly
independent of and separate from
the respective rights and
obligations of the parties under
this Sublease.
ARTICLE II
PREMISES
--------
2.1 LEASE OF PREMISES
Sublessor hereby leases to Sublessee, and Sublessee hereby accepts and
leases from Sublessor, upon and subject to the terms and provisions of the Prime
Lease (except as may otherwise be expressly Set forth in the written Sublease
Consent entered into on or about the date hereof by and among Prime Lessor,
Sublessor and Sublessee), all of Sublessor's right, title and interest in and to
the Premises for the Permitted Uses, subject to the right of Sublessor, which
right Sublessor hereby reserves, for itself, its employees, licensees,
consultants and contractors, during the term of the Technology Agreement to have
access to and use the Premises in common with Sublessee in furtherance of the
parties' business collaboration to the extent and in the manner described in the
Technology Agreement. Subject to the terms and provisions of the Prime Lease and
the collaboration procedures, if any, agreed upon by the parties pursuant to the
Technology Agreement, Sublessee shall have the right to have access to and use
in common with Sublessor and subtenants or other occupants of other portions of
the Leased Premises to whom Sublessor may from time to time grant similar rights
(provided that no such other subtenant's or occupants' rights may be
inconsistent with or unreasonably interfere with the respective rights
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<PAGE> 6
and obligations of Sublessor and Sublessee under the Technology Agreement) the
following: [*] (the items described in the preceding clauses (i) through (iii)
are referred to herein collectively as the "Collaboration Areas"). Also included
as part of the Premises sublet hereunder is the right, in common with Sublessor,
to exercise all of Sublessor's appurtenant rights under the Prime Lease to use
the common areas and facilities of the Building (including, without limitation,
the parking facilities serving the Building), subject in all events to the Prime
Lessor's rights expressly reserved and excepted in the Prime Lease and to Prime
Lessor's rules and regulations, if any.
2.2 PRIME LEASE
2.2.1 Sublessor hereby represents and warrants that: (i) Sublessor is
lessee under the Prime Lease; (ii) the Prime Lease is in full force and effect,
Sublessor has submitted to Sublessee a true and complete copy of the Prime Lease
and the Prime Lease has not been modified except as set forth in Section 1.1
hereof; (iii) Sublessor has not received any notice of default on the part of
Sublessor as tenant under the Prime Lease which has not been cured, nor has
Sublessor given Prime lessor notice of any default on the part of Prime Lessor
as landlord under the Prime Lease which has not been cured, nor does Sublessor
have any knowledge of any default by either party under the Prime Lease; and
(iv) Sublessor has not received any notice or complaint that any portion of the
Premises built out or otherwise improved by Sublessor fails to comply with the
physical accessibility requirements of the Americans With Disabilities Act.
Sublessee warrants and acknowledges that it has reviewed the Prime Lease and is
satisfied with the arrangements therein reflected. Sublessee also warrants that
it is satisfied with the present condition of the Premises (which Sublessee
takes "as is" without any representation or warranty by Sublessor regarding the
condition of the Premises or the fitness of the Premises for any particular use
except as otherwise specifically set forth in the Technology Agreement) and with
Sublessee's ability to use the Premises on the terms herein set forth.
Sublessor also represents that it has heretofore used and/or stored, and
shall from the date hereof through the Commencement Date use and/or store, in
the Leased Premises certain hazardous or toxic materials or substances,
including without limitation oil and radioactive materials (collectively,
"Hazardous Substances") regulated by local, state or Federal law (for example,
the Federal Comprehensive Environmental Response Compensation Liability Act of
1980, the Massachusetts Hazardous Waste Management Act and the Massachusetts Oil
and Hazardous Material Release Prevention Act). Sublessor further represents and
warrants that it has heretofore used, stored and disposed of, and shall from the
date hereof through the Commencement Date use, store and dispose of, all such
Hazardous Substances strictly in accordance with all applicable laws and that it
has not caused or permitted the release or discharge of any Hazardous Substances
in or about the Premises that has not been fully cleaned up and remediated in
accordance with all applicable laws. Sublessor shall indemnify and hold harmless
Sublessee from any claims, losses, liability, costs and expenses incurred by
Sublessee as a result of any breach by Sublessor of any of the foregoing
representations relating to Sublessor's use, storage and disposal of Hazardous
Substances. Sublessor shall, prior to the
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<PAGE> 7
Commencement Date, engage an independent and accredited industrial hygiene
consultant to certify that the Premises are free from any biological or chemical
contamination or any contamination by other Hazardous Substances.
2.2.2 The Prime Lease is by this reference incorporated into and made a
part hereof, except that:
(i) all of the following references in the Prime Lease to "Lessor",
"Lessee", "lease" and "leased premises", respectively, shall be deemed
to refer to Sublessor, Sublessee, this Sublease and the Premises
subleased hereunder, respectively:
PRIME LEASE 1
(a) Section 3 (Use of Premises)
(b) Section 4 (Additional Rent), except that Sublessee shall
only be obligated to pay its Prorata Share of the additional
rent described in this Section 4.
(c) Section 6 (Compliance with Laws), except that nothing in the
second sentence of this Section shall obligate, or be deemed
to obligate, Sublessee to provide worker's compensation
insurance for any of Sublessor's employees.
(d) Section 8 (Maintenance), except for the first and last
grammatical sentences; and except further, that in the
second grammatical sentence of this provision the phrase
"fire or other casualty or Lessor's negligence or misconduct
only excepted" shall be deemed to be revised to read "fire
or other casualty or Prime Lessor's or Sublessor's
negligence or misconduct only excepted."
(e) The first grammatical sentence of Section 15 (Lessee's
Liability and Insurance), except that the last phrase of
such sentence shall be deemed to read "resulting from the
sole willful misconduct or omission or negligence of Prime
Lessor or Sublessor."
(f) Section 19 (Default) except that the references in the
second grammatical sentence to "security deposit" and the
reference to "to any unamortized improvements completed for
Lessee's occupancy," shall be deemed to be deleted, since
they are inapplicable.
(g) Section 21 (Occupancy), except for the second and third
grammatical sentences; and except further, that in the first
grammatical sentence the phase "except the obligation for
the payment of extra rent for any period of less than one
month" shall be deemed to be deleted, since it is
inapplicable.
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<PAGE> 8
(h) Section 22 (Fire Prevention)
(i) Section 24 (Environment)
(j) Section 26 (Surrender), except that in the second
grammatical sentence of this provision the phrase "fire or
other casualty or Lessor's negligence or misconduct only
excepted" shall be deemed to be revised to read "fire or
other casualty or Prime Lessor's or Sublessor's negligence
or misconduct only excepted."
(k) Section 27 (General), except that clause (h) of this Section
shall be deemed to be revised to read "Sublessor makes no
representation or warranty, express or implied, concerning
the suitability of the Premises for Sublessee's intended use
except as otherwise expressly set forth in the Technology
Agreement"; and that clause (i) shall be deleted.
(l) Section 29 (Waivers)
(m) Sections E, G, H, I, T and X of Rider to Prime Lease 1
(n) The second grammatical sentence of Section K of Rider to
Prime Lease 1
(o) Section 3 of Amendment Ito Prime Lease 1 provided that
Sublessee shall be entitled to remove the equipment set
forth in this Section 3 only to the extent that Sublessee
has installed such equipment at its sole expense.
PRIME LEASE 2
(a) Section 3 (Use of Premises)
(b) Section 4 (Additional Rent), except that Sublessee shall
only be obligated to pay its Prorata Share of the additional
rent described in this Section 4.
(c) Section 6 (Compliance with Laws) , except that nothing in
the second sentence of this Section shall obligate, or be
deemed to obligate, Sublessee to provide worker's
compensation insurance for any of Sublessor's employees.
(d) Section 9 (Maintenance), except for the first and last
grammatical sentence; and except further, that in the second
grammatical sentence of this provision the phrase "fire or
other casualty or Lessor's negligence or misconduct only
excepted" shall be deemed to be revised to read "fire or
other casualty or Prime Lessor's or Sublessor's negligence
or misconduct only excepted."
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<PAGE> 9
(e) Section 16 (Liability), except that the last phase of such
sentence shall be deemed to read "resulting from the sole
willful misconduct or omission or negligence of Prime Lessor
or Sublessor."
(f) Section 20 (Default), except that the references in the
second grammatical sentence to "security deposit" and the
reference to "to any unamortized improvements completed for
Lessee's occupancy," shall be deemed to be deleted, since
they are inapplicable.
(g) Section 22 (Occupancy), except for the second and third
grammatical sentences; and except further, that in the first
grammatical sentence the phrase "except the obligation for
the payment of extra rent for any period of less than one
month" shall be deemed to be deleted, since it is
inapplicable.
(h) Section 23 (Fire Prevention)
(i) Section 25 (Environment)
(j) Section 27 (Surrender), except that in the second
grammatical sentence of this provision the phrase "fire or
other casualty or Lessor's negligence or misconduct only
excepted" shall be deemed to be revised to read "fire or
other casualty or Prime Lessor's or Sublessor's negligence
or misconduct only excepted."
(k) Section 28 (General), except that clause (h) of this Section
shall be deemed to be revised to read "Sublessor makes no
representation or warranty, express or implied, concerning
the suitability of the Premises for Sublessee's intended use
except as otherwise expressly set forth in the Technology
Agreement"; and that clause (i) shall be deleted.
(l) Section 30 (Waivers)
(m) Sections 1, K, V and Z, provided that Sublessee shall be
entitled to remove the equipment set forth in Section Z only
to the extent that Sublessee has installed such equipment at
its sole expense
(n) The second grammatical sentence of Section M of Rider to
Prime Lease 2
(o) Sections 4, 5 and 6 of Amendment #1 to Prime Lease 2
(ii) All references in the following sections and/or provisions of
each of Prime Lease and Prime Lease 2 to "Lessor", "Lessee", "lease",
and "leased premises", respectively, shall be deemed to refer to Prime
Lessor, Sublessee, this Sublease and the Premises subleased hereunder,
respectively [i.e., it is the intention of the
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<PAGE> 10
parties that Prime Lessor shall retain all of its rights and
obligations under such sections and/or provisions; that Sublessor
shall not be entitled to exercise any of Prime Lessor's rights, nor
shall be bound by any of Prime Lessor's obligations, under such
sections and/or provisions; and that Sublessee shall be entitled to
exercise all of Lessee's rights, and shall be bound by all of Lessee's
obligations, under such sections and/or provisions]:
PRIME LEASE 1
(a) The first and last grammatical sentence of Section 5
(Utilities)
(b) Section 7 (Fire, Casualty, Eminent Domain)
(c) The first and last grammatical sentence of Section 8
(Maintenance)
(d) Section 9 (Alterations)
(e) Section 11 (Subordination)
(f) Section 12 (Lessor's Access)
(g) Section 13 (Snow Removal)
(h) Section 14 (Access and Parking)
(i) Section 16 (Fire Insurance)
(j) Section 23 (Outside Area)
(k) Section 25 (Responsibility)
(l) Section A of Rider to Prime Lease I
(m) Section B of Rider to Prime Lease I
(n) Section C of Rider to Prime Lease 1
(o) Section D of Rider to Prime Lease 1
(p) Section F of Rider to Prime Lease 1
(q) Section J of Rider to Prime Lease 1
(r) The first grammatical sentence of Section K of Rider to
Prime Lease 1
(s) Section M of Rider to Prime Lease 1
(t) Section C) of Rider to Prime Lease 1
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(u) Section P of Rider to Prime Lease 1
(v) Section Q of Rider to Prime Lease 1
(w) Section R of Rider to Prime Lease 1
(x) Section S of Rider to Prime Lease 1
(y) Section U of Rider to Prime Lease 1
(z) Section X of Rider to Prime Lease I
(aa) The second grammatical sentence of Section Z of Rider to
Prime Lease 1
(bb) Section 3 of Amendment #1 to Prime Lease I, provided that
Sublessee be entitled to remove the equipment set forth in
this Section 3 only to the extent that Sublessee has
installed such equipment at its sole expense.
(cc) Sections 1, 2 and 3 of Amendment #2 to Prime Lease 1
(dd) Section 1 of Amendment #3 to Prime Lease 1, except that such
industrial hygiene consultant's certification shall run to
the benefit of both Prime Lessor and Sublessor
PRIME LEASE 2
(a) The first and last grammatical sentence of Section 5
(Utilities)
(b) Section 7 (Fire, Casualty, Eminent Domain)
(c) Section 8 (Fire Insurance)
(d) Section 9 (Maintenance), first and last sentences only
(e) Section 10 (Alterations)
(f) Section 12 (Subordination)
(g) Section 13 (Lessor's Access)
(h) Section 14 (Snow Removal)
(i) Section 15 (Access and Parking)
(j) Section 24 (Outside Area)
(k) Section 26 (Responsibility)
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(l) The second grammatical sentence of Section B of Rider to
Prime Lease 2
(m) Section E of Rider to Prime Lease 2
(n) Section F of Rider to Prime Lease 2
(o) Section G of Rider to Prime Lease 2
(p) Section H of Rider to Prime Lease 2
(q) Section J of Rider to Prime Lease 2
(r) Section L of Rider to Prime Lease 2
(s) The first grammatical sentence of Section M of Rider to
Prime Lease 2
(t) Section 0 of Rider to Prime Lease 2
(u) Section Q of Rider to Prime Lease 2
(v) Section R of Rider to Prime Lease 2
(w) Section S of Rider to Prime Lease 2
(x) Section T of Rider to Prime Lease 2
(y) Section U of Rider to Prime Lease 2
(z) Section W of Rider to Prime Lease 2
(aa) Section Z of Rider to Prime Lease 2
(bb) Section Z of Rider to Prime Lease 2, provided that Sublessee
shall be entitled to remove the equipment set forth in this
Section Z only to the extent that Sublessee has installed
such equipment at its expense.
(cc) Section 2 of Amendment #6 to Prime Lease 2, except that such
industrial hygiene consultant's certification shall run to
the benefit of both Prime Lessor and Sublessor.
(iii) The following sections and/or provisions of each of Prime Lease I and
Prime Lease 2 are expressly excluded from this Sublease (i.e., they shall be
deemed to be incorporated into this Sublease) either because they are
inapplicable, or they are superseded by specific provisions hereof:
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PRIME LEASE 1
(a) Section 1 (Rent)
(b) Section 2 (Security Deposit)
(c) Section 5 (Utilities), except for the first and last
grammatical sentence
(d) Section 10 (Assignment or Subleasing)
(e) Section 15 (Lessee's Liability and Insurance), except for
the first grammatical sentence
(f) Section 17 (Brokerage)
(g) Section 18 (Signs)
(h) Section 20 (Notice)
(i) The second and third grammatical sentences of Section 21
(Occupancy)
(j) Section 28 (Security Agreement)
(k) Section L of Rider to Prime Lease 1
(l) Section N of Rider to Prime Lease 1
(m) Section Q of Rider to Prime Lease 1
(n) Section V of Rider to Prime Lease 1
(o) Section W of Rider to Prime Lease 1
(p) Section Y of Rider to Prime Lease 1
(q) The first grammatical sentence of Section Z of Rider to
Prime Lease 1
(r) Sections 1 and 2 of Amendment #1 to Prime Lease 1
PRIME LEASE 2
(a) Section 1 (Rent)
(b) Section 2 (Security Deposit)
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(c) Section 5 (Utilities), except for the first and last
grammatical sentence
(d) Section 11 (Assignment or Subleasing)
(e) Section 17 (Insurance)
(f) Section 18 (Signs)
(g) Section 19 (Brokerage)
(h) Section 21 (Notice)
(i) The second and third grammatical sentences of Section 21
(Occupancy)
(j) Section 29 (Security Agreement)
(k) Section A of Rider to Prime Lease 2
(l) Section C of Rider to Prime Lease 2
(m) Section D of Rider to Prime Lease 2
(n) Section N of Rider to Prime Lease 2
(o) Section P of Rider to Prime Lease 2
(p) Section V of Rider to Prime Lease 2
(q) Section X of Rider to Prime Lease 2
(r) Section Y of Rider to Prime Lease 2
(s) Sections 1, 2 and 3 of Amendment #1 to Prime Lease 2
(t) Amendment #2 to Prime Lease 2
(u) Amendment #3 to Prime Lease 2
(v) Amendment #4 to Prime Lease 2
(w) Amendment #5 to Prime Lease 2
(x) Section 1 to Amendment #6 to Prime Lease 2
2.2.3 Except as otherwise expressly set forth in the written Sublease
Consent entered into on or about the date hereof by and among Prime Lessor,
Sublessor and Sublessee, this Sublease is and shall remain subject and
subordinate in all respects to the Prime Lease, and to all
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<PAGE> 15
renewals, modifications, consolidations, replacements and extensions thereof. In
the event of termination or cancellation of the Prime Lease for any reason
whatsoever with respect to all or any portion of the Premises, this Sublease
shall automatically terminate with respect to all or such portion of the
Premises.
2.2.4 Except as may otherwise be specifically set forth in the Technology
Agreement or this Sublease, Sublessor shall have no obligation to provide any
services of any nature whatsoever to Sublessee or to or for the benefit of the
Premises, or to expend any money for the repair of the Premises, and Sublessee
agrees to look solely and directly to Prime Lessor for the furnishing of any
services, expenditure of any sums, or performance of any obligations that
Sublessor is not required to furnish, expend or perform under the Technology
Agreement or this Sublease, but nothing in the foregoing shall be deemed to
exculpate or otherwise release Sublessor from, or prevent Sublessee from looking
directly to Sublessor for, any liability arising out of Sublessor's negligent,
willful or malicious acts or omissions or Sublessor's misconduct, or the failure
of Sublessor to perform its express obligations hereunder; nor shall the
foregoing relieve Sublessor of its express obligations set forth in this
Sublease. Sublessor shall, however, upon the request of Sublessee from time to
time (which request may be oral), use due diligence and reasonable efforts to
cause Prime Lessor to furnish such services, expend such sums, and observe and
perform such obligations. Sublessor's only obligations under the Prime Lease
with respect to such obligations of Prime Lessor are to use the aforesaid due
diligence and reasonable efforts and to make those payments of all rent and
other charges due to Prime Lessor thereunder. Sublessor hereby agrees that, so
long as Sublessee makes timely payment to Sublessor of all rent and other
charges payable by Sublessee hereunder, Sublessor shall make timely payment of
all rent and other charges due to Prime Lessor as landlord under the Sublease.
Except to the extent that this Sublease imposes such obligations on Sublessee,
it is the intention of the parties that Sublessee comply with, and to such
extent Sublessee agrees to comply with, all of Sublessor's obligations as lessee
under the Prime Lease with respect to the Premises to the same extent and with
the same force and effect as if Sublessee were Lessee thereunder. Sublessee
shall have no claim against Sublessor for any default by Prime Lessor under
Prime Lease. If as a result of any default by Prime Lessor as landlord under the
Prime Lease, Sublessor as tenant under the Prime Lease is entitled to any offset
or similar rights against Prime Lessor, Sublessee shall be entitled to a fair
and equitable share of such offset or similar rights. If Prime Lessor shall
default under any of it obligations under the Prime Lease with respect to the
Premises, Sublessee shall have the right, at Sublessee's sole cost and expense,
but in the name of Sublessor, to make demand or prosecute any appropriate action
or proceeding against Prime Lessor for the enforcement of the obligations of
Prime Lessor with respect to the Premises. Sublessor agrees that it will sign
such demand, pleading and/or other papers as may be required or appropriate to
enable Sublessee to proceed in Sublessor's name to enforce the obligations of
Prime Lessor; provided, however, that Sublessee will pay all costs and expenses
in the prosecution of any action or any proceeding so taken by Sublessee, and
agrees to defend and indemnify Sublessor against all costs and liability arising
therefrom.
2.2.5 Sublessee shall neither do, nor permit anyone else to do, nor permit
to be done anything that would increase Sublessor's obligations to Prime Lessor
under the Prime Lease (unless Sublessee shall indemnify Sublessor from such
increased obligation), or that would cause the Prime Lease to be cancelled,
terminated or forfeited. Sublessor shall not amend or modify (nor agree to amend
or modify) the Prime Lease in any way that would increase Sublessee's
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<PAGE> 16
obligations or diminish Sublessee's rights under this Sublease, nor shall
Sublessor do, nor permit to do or be done, anything that would cause the Prime
Lease to be cancelled, terminated or forfeited.
2.2.6 Sublessor shall copy Sublessee on any notice of default, termination
or otherwise affecting the existence or validity of the Sublease, given by
Sublessor or Prime Lessor to the other.
2.2.7 Sublessor hereby agrees that, as set forth in the written Sublease
Consent entered into on or about the date hereof by and among Prime Lessor,
Sublessor and Sublessee, to enable Sublessee to use and occupy the Premises for
the full Sublease Term, Sublessor has exercised its option to extend the lease
term of Prime Lease 1 with respect to the Premises, through [*] and its option
to extend the lease term of Prime Lease 2 with respect to the Premises through
[*].
2.3 SUBLESSEE'S EXPANSION OPTION
So long as Sublessee is not in default hereunder beyond any applicable
notice, grace and cure period, Sublessee shall have the one time only right and
option to sublease all or any substantial portion of the Leased Premises
currently retained and occupied by Sublessor ("Sublessor's Retained Space"). If
Sublessee exercises its option as hereinafter set forth, Sublessee's occupancy
of such expansion space shall be pursuant to a separate sublease agreement on
terms substantially similar to this Sublease, but modified to delete all
references and provisions relating to the Technology Agreement and to
incorporate the economic terms and conditions applicable to such new sublease
for new expansion space; and rent for any such expansion space shall be fair
market rent, on a triple net basis, for a sublease term co-terminous with the
expiration of the term of the Prime Lease. To exercise such expansion option,
Sublessee must give written notice to Sublessor not later than [*], which notice
shall specify the portion of the Leased Premises that Sublessor wishes to
sublease, and the date (which date shall be no later than three (3) months after
the date of such notice) on which Sublessee wishes to enter into a sublease for
such expansion space. Within thirty (30) days after Sublessor's receipt of any
expansion notice from Sublessee, Sublessor shall give Sublessee written notice
of Sublessor's reasonable determination of fair market rent for such expansion
space (`Sublessor's Rent Rate Determination"). Sublessee shall have the option,
within twenty (20) days of receipt of the Sublessor's Rent Rate Determination to
accept Sublessor's Rent Rate Determination or to reject Sublessor's Rent Rate
Determination and withdraw the exercise of its option to expand. If Sublessee
accepts Sublessor's Rent Rate Determination, Sublessor and Sublessee shall enter
into a new sublease agreement with respect to such expansion space as aforesaid.
If Sublessee exercises this option, the expansion space shall be delivered to
Sublessee in its then existing condition, "as is", and Sublessor shall have no
obligation to make any alterations or improvements to the expansion space. If
Sublessee shall fail to exercise its expansion option hereunder within the time
periods set forth above Sublessee shall have no further expansion rights under
this Section.
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*Confidential treatment has been requested for the marked portion.
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<PAGE> 17
If, however, Sublessee exercises such option but rejects Sublessor's Rent
Rate Determination, Sublessee shall have no further right or option to expand
the Premises, but in such case if Sublessor desires to sublease all or any
substantial portion of Sublessor's Retained Space to any third party at any time
prior to [*] (unless Sublessee has exercised its right under Section 9.1 to
request that Sublessor surrender its interest in and to the Premises and the
Prime Lease [to the extent applicable to the Premises], in which case such date
shall be deemed to be the Term Expiration Date), at a rent rate materially more
favorable to such third party subtenant than the amount of Sublessor's Rent Rate
Determination rejected by Sublessee (for purposes of this Sublease, a reduction
in the fair market rent, on a triple net basis, of more than [*] percent [*]
shall be deemed to be "materially more favorable"), prior to consummating any
such third party sublease, Sublessor shall first offer such expansion space to
Sublessee at such materially more favorable rent rate but otherwise on the terms
and conditions described above in this Section 2.3. Within twenty (20) days
after Sublessee's receipt of any such reduced rent rate proposal, Sublessee
shall notify Sublessor in writing whether or not Sublessee wishes to sublease
such expansion space at such reduced rent rate. If Sublessee accepts Sublessor's
reduced rent rate notice, then Sublessor and Sublessee shall enter into a new
sublease agreement with respect to such expansion space as described above. If
Sublessee fails or declines to accept Sublessor's reduced rent rate notice
within such twenty day period, then Sublessor shall be entitled to sublease such
expansion space or any other portion of Sublessor's Retained Space to any party
at a rent rate not materially more favorable to such third party than the amount
of such reduced rent rate rejected by Sublessee. Once Sublessor has subleased
any portion of Sublessor's Retained Space to any third party in the manner as
aforesaid, all of Sublessee's rights under this Section 2.3 in and to such
portion of Sublessor's Retained Space so subleased to such third party shall
terminate and be of no further force and effect and Sublessee's rights under
this Section 2.3 shall thereupon terminate and be of no further force and
effect.
Sublessee acknowledges, however, that any such sublease by Sublessee of
expansion space under this Section 2.3 shall be subject to the approval of the
Prime Lessor in accordance with the Prime Lease (Sublessor shall not be
responsible for the failure or refusal of Prime Lessor to consent to any such
sublease of expansion space).
ARTICLE III
TERM OF SUBLEASE
----------------
3.1 TERM
The term of this Sublease shall be for the period specified in Section 1.1
as the Sublease Term.
For purposes of this Sublease, the Premises shall be deemed ready for
occupancy on the date on which Sublessor certifies to Sublessee that the
Premises are in a condition and otherwise ready for use and occupancy by
Sublessee for the conduct of the parties' business collaboration to the extent
and in the manner contemplated by the Technology Agreement.
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*Confidential treatment has been requested for the marked portion.
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<PAGE> 18
3.2 SUBLESSEE'S EARLY TERMINATION OPTION
If Sublessee exercises its right under Sections 9.1 and 9.2 of the
Technology Agreement to terminate the Technology Agreement and makes the
termination and other payments required under such Section 9.2, then this
Sublease shall terminate, effective on the termination date of the Technology
Agreement, with the same force and effect as if such early termination date were
the originally scheduled Term Expiration Date.
The parties expressly acknowledge and agree that notwithstanding the
termination of the Technology Agreement for any reason, other than a termination
under Sections 9.1 and 9.2 thereof as expressly described above, this Sublease
shall remain in force and effect and the respective rights and obligations of
the parties under this Sublease shall remain unchanged as a result of
termination of the Technology Agreement.
ARTICLE IV
PREMISES
--------
4.1 CONDITION OF PREMISES; MAINTENANCE
Sublessee agrees to accept the Premises and Sublessor's FF&E in their "as
is" condition, generally in the same order and condition as the Premises as
Sublessor's FF&E are in as of the date hereof, without any representation or
warranty other than as set forth in the Technology Agreement. Sublessor shall
maintain and repair the Premises, at Sublessee's sole cost and expenses (which
costs and expenses shall be payable by Sublessee as part of Additional Rent), in
a professional and workmanlike manner, and keep the Premises in the same order,
repair and condition that they were in on the Commencement Date, reasonable wear
and tear and damage by fire, other casualty, improvements made to the Premises
in accordance with Section 4.4, below, or the acts or omissions of Sublessee
excepted.
4.2 SUBLESSOR'S SERVICES
In addition to Sublessor's repair and maintenance obligations with respect
to the Premises set forth in Section 4.1 above, for so long as the Technology
Agreement remains in force and effect, Sublessor shall provide to Sublessee, at
Sublessee's cost and expense (which costs and expenses shall be payable by
Sublessee as part of Additional Rent), the following services and facilities
("Sublessor's Additional Services") to substantially the same extent and in
substantially the same manner that Sublessor provided such services and
facilities for the conduct of Sublessor's business in the Premises as of the
date of this Sublease:
(a) [*]
(b) [*]
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*Confidential treatment has been requested for the marked portion.
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(c) [*]
(d) [*]
(e) [*]
From and after the date on which the Technology Agreement is terminated,
for any reason whatsoever, Sublessor shall have no obligation to provide any of
Sublessor's Additional Services.
4.3 FURNISHINGS, FIXTURES AND EQUIPMENT
Sublessee shall have the right to use all of Sublessor's FF&E. Until such
time as Sublessee has exercised, and closed the purchase under, the FF&E
Purchase Option set forth in Section 9.2, below, Sublessor shall maintain and
repair Sublessor's FF&E, at Sublessee's sole cost and expense, in the same
order, repair and condition that they were in on the Commencement Date or the
condition they are thereafter placed by virtue of improvements to Sublessor's
FF&E made in accordance with Section 4.4 below, reasonable wear and tear [not
affecting functionality] and damage by fire, other casualty, or the acts or
omissions of Sublessee excepted.
Sublessor shall, at its expense prior to the Commencement Date, remove from
the Premises the Sublessor's existing AMAP(TM) System to enable Sublessor to
configure and install in the Premises a new AMAP(TM) System in the Premises in
the manner and within the time periods specified in Section 3.1 of the
Technology Agreement.
4.4 IMPROVEMENTS IN OR TO THE PREMISES
Sublessee shall make no improvements, alterations, renovations, or
additions in or to the Premises or Sublessor's FF&E, or any portion thereof
without the prior written consent of Sublessor, which consent shall not be
unreasonably withheld or delayed, subject in any event to Sublessee also having
obtained the consent of Prime Lessor (Sublessor shall not be responsible for the
failure or refusal of Prime Lessor to consent to any such improvements,
alterations, renovations or additions); Sublessor hereby agrees that it shall
not withhold or delay its consent to any improvements, alterations, renovations
or additions to which Prime Lessor consents, so long as Sublessee agrees, upon
the expiration or earlier termination of this Sublease, to remove the same and
restore the Premises to substantially the condition they were in prior to such
improvements, alterations, renovations or additions. Any such approved
improvements, alterations, renovations or additions shall be constructed by
Sublessee (or by Sublessor if required under the Technology Agreement), at the
sole cost and expense of Sublessee in accordance with plans and specifications
therefor reasonably approved in advance by Sublessor and shall be done in a good
and workmanlike manner, and in compliance with all applicable laws, rules and
regulations.
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*Confidential treatment has been requested for the marked portion.
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Without limiting the generality of the foregoing, Sublessee shall have the
right, at its sole cost and expense, to install such security system and
equipment as it deems necessary, provided that such system and equipment shall
not impair either Sublessor's or Prime Lessor's own security systems. Toward
achieving the goal that each party's security system and equipment does not
interfere with the other party's, Sublessor and Sublessee agree to review the
design and installation of their respective security systems with one another,
subject to the reasonable security and business confidentiality needs of each
party. Sublessor shall not be responsible for any financial or property losses
which Sublessee may suffer relating to actions of third parties other than
Sublessor, including, but not limited to, thefts, robberies, or other crimes;
nothing in this Section 4.4 or elsewhere in this Sublease, however, shall be
deemed to exculpate Sublessor from any liability arising out of the negligence
or willful misconduct of Sublessor, its agents, contractors or employees.
4.5 ACCESS, ENTRY AND INSPECTION
4.5.1 For so long as the Technology Agreement remains in force and effect,
Sublessor agrees to limit access to the Premises to ArQule Staff (as such
capitalized term is defined in the Technology Agreement) and Sublessor's
management personnel, employees and other individuals who are otherwise
authorized by Sublessee to have access to the Premises (e.g., for training,
technical support or facilities maintenance); provided, however, that Sublessee
shall also allow Sublessor access to the Premises as otherwise required under
this Sublease.
4.5.2 Sublessor and Sublessee acknowledge that the Premises occupy only
portions of the Leased Premises and that Sublessor (or its other subtenants)
occupies and uses Sublessor's Retained Space for its (or their) purposes. The
parties agree that the Premises and the Sublessor's Retained Space shall each be
safe, secure and separate from the other. But Sublessor and/or other subtenants
or occupants and Sublessee will occupy and use the Collaboration Areas for its
or their business purposes. Accordingly, Sublessor and Sublessee each agrees
that it (and its subtenants) will use the Collaboration Areas in such manner as
to prevent and/or minimize any unreasonable interference to the business
activities of the other party and to recognize and respect the reasonable
business security and confidentiality needs of the other party.
4.5.3 At reasonable times, and upon reasonable advance notice to Sublessee
(except that, in the event of any emergency, Sublessor may enter the Premises at
any time without notice), Sublessee shall permit Sublessor, its agents and
invitees to enter and inspect the Premises or any portion thereof during
Sublessee's regular business hours, subject in all events to Sublessee's
reasonable confidentiality and security needs.
4.6 SURRENDER
4.6.1 Sublessee shall surrender the Premises to Sublessor at the end of the
Term in accordance with Section 26 of the Prime Lease and (as applicable)
Section 1 of Amendment #3 to Prime Lease 1 and Section 2 of Amendment #6 to
Prime Lease 2, all to the extent modified by the terms of this Sublease
(together as so modified, the "Surrender Obligations"), and in the condition
described in Section 4.1, above, reasonable wear and tear and damage by fire or
other casualty and acts or omissions of Sublessor excepted.
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4.6.2 If Sublessee has not exercised the FF&E Purchase Option on or before
the Term Expiration Date, Sublessee shall surrender all of Sublessor's FF&E not
then owned by Sublessee to Sublessor at the end of the Term in accordance with
the Surrender Obligations, and in the condition described in Section 4.3, above,
reasonable wear and tear and damage by fire or other casualty and acts or
omissions of Sublessor excepted.
ARTICLE V
USES; ASSIGNMENT AND SUBLETTING
-------------------------------
5.1 PERMITTED USES
Sublessee agrees that the Premises shall be used and occupied for the
Permitted Uses only, and in compliance with all applicable laws, rules and
regulations now or hereafter in effect. As set forth in Section 4.2 above and in
the Technology Agreement, for so long as the Technology Agreement remains in
force and effect. Sublessor shall, to the extent requested by and at the sole
cost and expense of Sublessee, apply for and obtain all licenses, permits and
approvals, renew, amend or modify existing licenses, permits and approvals, and
perform all other obligations as required to conduct Sublessee's business
operations in the Premises in compliance with all such laws, rules and
regulations. If the Technology Agreement is terminated but this Sublease remains
in full force and effect, Sublessor shall cooperate with Sublessee, reasonably
and in good faith but at no out-of-pocket expense to Sublessor, to transfer any
such licenses, permits and approvals to Sublessee or otherwise to assist
Sublessee to apply for and seek to obtain such licenses, permits and approvals
in Sublessee's own name.
5.2 ASSIGNMENT AND SUBLETTING BY SUBLESSEE
Sublessee shall not, by operation of law or otherwise, assign, mortgage,
pledge, encumber or in any manner transfer this Sublease or any interest of
Sublessee hereunder, or sublet or permit the Premises or any part thereof to be
used or occupied by others, without the prior consent of Sublessor, which
consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, Sublessor hereby agrees that Sublessee may, without the consent of
Sublessor but upon prior notice to Sublessor, assign this Sublease or sub-sublet
all or any portion of the Premises to any "affiliate" of Sublessee, or to any
corporation or other business entity into which Sublessee may merge or to which
Sublessee may sell all or substantially all of its assets or capital stock. For
purposes of this Sublease, the term "affiliate" shall mean any corporation or
other legal entity owning directly or indirectly, fifty percent (50%) or more of
the voting capital shares or similar voting securities of Sublessee; any
corporation or other legal entity fifty percent (50%) or more of the voting
capital shares or similar voting rights of which is owned, directly or
indirectly, by Sublessee or any corporation or other legal entity fifty percent
(50%) or more of the voting capital shares or similar voting rights of which is
owned, directly or indirectly, by a corporation or other legal entity which own,
directly or indirectly, fifty percent (50%) or more of the voting capital share
or similar voting securities of Sublessee. The foregoing restrictions on
transfer of any interest in Sublessee shall not apply to any transfer of the
capital stock of Sublessee for so long as the capital stock of Sublessee is
publicly traded on any nationally or regionally recognized securities exchange.
Sublessee acknowledges, however, that any such assignment or sub-sublet shall be
subject to the approval of the Prime Lessor in
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accordance with the Prime Lease (Sublessor shall not be responsible for the
failure or refusal of Prime Lessor to consent to any such assignment or
sub-sublet). Notwithstanding any assignment by Sublessee or sub-sublease by
Sublessee of all or any portion of the Premises, the Sublessee originally named
herein shall remain liable to Sublessor for all obligations of Sublessee
hereunder.
5.3 ASSIGNMENT BY SUBLESSOR
Sublessor hereby agrees that for so long as the Technology Agreement
remains in force and effect. Sublessor shall not assign its rights as lessee
under the Prime Lease (and Sublessor under this Sublease) without the prior
written consent of Sublessee, which consent shall not be unreasonably withheld
or delayed.
ARTICLE VI
RENT AND UTILITIES
------------------
6.1 BASE RENT AND ADDITIONAL RENT
6.1.1 The Base Rent and Additional Rent specified in Section 1.1 hereof,
and any other charges payable pursuant to this Sublease, shall be payable by
Sublessee to Sublessor at Sublessor's mailing address (or to such other place as
Sublessor may from time to time designate by notice to Sublessee).
6.1.2 During the Term of this Sublease, Base Rent shall be due and payable,
in advance, on the first day of each and every calendar quarter during the Term
of this Sublease.
6.1.3 During the term of this Sublease, Sublessee shall pay to Sublessor,
monthly in advance, prorata monthly installments on account of the projected
Additional Rent payable by Sublessee for the coming calendar year. Attached
hereto as Exhibit D is a schedule, in reasonable detail, showing by line items,
the costs and expenses incurred by Sublessor in calendar year 1998 in operating
the Leased Premises. Not less than forty-five (45) days prior to the
Commencement Date, Sublessor shall deliver to Sublessee a written invoice, in
reasonable detail, calculating the estimated monthly installments on account of
projected Additional Rent on the basis of Sublessor's most recent operating and
maintenance budget information available; Sublessor may adjust such estimated
monthly installments from time to time if Sublessor determines that the annual
amount of Additional Rent will increase above Sublessor's initial estimate due
to increase in costs of services or supplies or other reasonable grounds, but
monthly installments at any such adjusted amount shall not be due and payable
until forty-five (45) days after receipt by Sublessee of a written invoice, in
reasonable detail, calculating such adjusted monthly installment amount.
Promptly after the end of each calendar year, Sublessor shall provide Sublessee
with a statement, in reasonable detail, that calculates the actual amount of
Additional Rent for the preceding calendar year, the actual amount of monthly
installments paid by Sublessee for such year and the amount of the adjustment,
if any, between Sublessor and Sublessee on account of Additional Rent for each
calendar year. If the total of such monthly installments in any calendar year is
greater than the actual amount of Additional Rent for such year, Sublessee shall
be entitled to a credit against Sublessee's rental obligations hereunder in the
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<PAGE> 23
amount of such excess (or if after the expiration of the Sublease Term, such
excess shall be paid to Sublessee). If the total of such monthly installments is
less than the actual amount of Additional Rent for such calendar year, Sublessee
shall pay to Sublessor the amount of such deficiency within forty-five (45) days
after receipt of an invoice thereafter.
Within six (6) months after receipt of Sublessor's annual reconciliation
statement, Sublessee may request to audit (at Sublessee's expense) the
Additional Rent for the preceding calendar year. Such audit shall take place at
Sublessor's office in the Metropolitan Boston Area where its books and records
are kept or at such other location in the Metropolitan Boston area are designed
by Sublessor. If such audit discloses a discrepancy (a "Discrepancy") between
(a) the final amount of the Additional Rent for such year determined by
Sublessor and used for purposes of making the annual adjustment described above
and (b) the actual amount of the Additional Rent for such year as determined and
confirmed by such audit, and Sublessor concurs in the result of such audit, or
if Sublessor does not concur but any arbitration proceedings (as described
below) regarding such audit determine and confirm the existence of a
Discrepancy, additional appropriate adjustments shall be paid to Sublessor or
Sublessee as the case may be; if the Discrepancy resulted in Sublessee being
overcharged by more than three and one-half percent (3.50%) for such year, the
cost of such audit shall be borne by Sublessor, otherwise the costs of such
audit shall be paid by Sublessee. If the Sublessor does not concur with the
results of such audit, the matter shall be submitted to binding arbitration with
the American Arbitration Association at its office in Boston, Massachusetts in
accordance with procedures designated by its applicable rules.
6.1.4 Base Rent for any partial calendar quarter shall be paid by Sublessee
to Sublessor on a prorata basis. Other charges payable by Sublessee on a monthly
basis, as provided, shall likewise be prorated.
6.1.5 All Base Rent, Additional Rent and other amounts due under this
Sublease shall be paid without demand (except as otherwise expressly provided
herein to the contrary), offset or deduction. Sublessee shall be entitled to a
fair and equitable share of all rent abatements set forth in the Prime Lease
which Sublessor has been granted with respect to the Premises.
6.2 LATE PAYMENTS
If any installment of Base Rent, Additional Rent or other charges is not
paid on or before the date such payment is due and payable and such non-payment
continues for more than five (5) days after written notice thereof from
Sublessor, it shall bear interest at a rate equal to the average prime
commercial rate from time to time established by Fleet Bank of Massachusetts
plus three percent (3%) per annum from such due date, which interest shall be
immediately due and payable to Sublessor; provided, however, that nothing
contained herein shall be construed as permitting Sublessor to charge or receive
interest in excess of the maximum legal rate then allowed by law.
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ARTICLE VII
INSURANCE
---------
7.1 INSURANCE COVERAGE
7.1.1 To the extent Sublessee does not self-insure as described in Section
7.1.4, below, Sublessee shall carry and maintain, throughout the Term hereof, at
its own cost and expense, (a) a commercial general liability insurance policy
insuring against any claim up to [*] for each occurrence, and up to [*] in the
aggregate, involving bodily injury (including death) or damage to property and
(b) a fire and other casualty policy insuring (i) the full replacement value of
the [*] and other laboratory equipment, (ii) the full replacement value of
Sublessee's improvements, fixtures, furnishings, equipment and personal property
located in the Premises or any portion thereof, and (iii) the full replacement
value of Sublessor's FF&E against loss or damage by fire, theft, sprinkler
leakage and such other risks or hazards as are insurable under present and
future forms of "All Risk" insurance policies, and (c) during any period that
construction or renovations are being performed at any portion of the Premises,
the insurance required in (b) above shall be written on a builder's risk,
completed value, non-reporting form, meeting all of the terms in (b) above,
cover the total value of the work performed, materials, equipment, machinery and
supplies furnished, and contain soft cash (loss of rents) coverage and
permission to occupy endorsements. Said casualty policy shall also insure
against physical damage to the Premises arising out of an accident covered
thereunder.
7.1.2 All insurance policies required under Section 7.1.1, above, are to be
written by good and solvent insurance companies licensed or authorized to do
business in the Commonwealth of Massachusetts with a minimum Best's rating of
A-VI; shall be for such limits and with such maximum deductibles as Sublessor
may reasonably require (Sublessee hereby agreeing that Sublessor shall in no
event be responsible for payment of any such deductibles); and shall name
Sublessor, Prime Lessor, Beautyrest Property, Inc. and Boston North, LLC
(successor-in-interest to WRB, Inc.) as loss payees and additional insureds, as
applicable (provided, however, that the casualty policy insuring Sublessor's
FF&E shall name Sublessor as the insured, and Sublessee, Prime Lessor,
Beautyrest Property, Inc. and Boston North, LLC (successor-in-interest to WRB,
Inc.) as loss payees and additional insureds, as applicable. Sublessor expressly
reserves the right to increase limits and require adjustments to coverage as
industry standards hereafter change and Prime Lessor hereafter requires.
Sublessee will furnish Sublessor with such information as Sublessor may
reasonably request from time to time as to the full replacement cost of
Sublessee's improvements, fixtures, furnishings, equipment and personal property
located in the Premises or any portion thereof or Sublessor's FF&E within ten
(10) days after a request therefor.
7.1.3 Sublessee shall also pay its Prorata Share of all insurance premiums
allocable to both the Premises and other portions of the Leased Premises that
Sublessor is required to pay to Prime Lessor as additional rent under the Prime
Lease.
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7.1.4 So long as this Sublease remains in full force and effect and
Sublessee has a net worth in excess of [*] (as "net worth" is defined and
determined in accordance with generally accepted accounting principles),
Sublessee may self-insure against the risks described in Section 7.1.1, above,
and shall not be required to maintain insurance under this Article 7; provided,
however, that to the extent any type of risk may not be self-insured under any
applicable law, rule or regulation (including, without limitation, risks covered
by industrial accident insurance, occupational disease insurance or workmen's
compensation insurance), Sublessee shall obtain insurance covering such risks in
accordance with applicable laws, rules and regulations to the extent of the
respective statutory limits pertaining to the work or operations conducted in or
on the Premises.
7.2 EVIDENCE OF INSURANCE
Prior to the time insurance is first required to be carried (or
self-insurance is first required to be maintained) by Sublessee under Section
7.1, above (e.g., upon execution of this Sublease), and thereafter at least
fifteen (15) days prior to the expiration date of any such policy, Sublessee
agrees to deliver to Sublessor a certificate of insurance (or other evidence of
such insurance satisfactory to Sublessor) upon which both Sublessor and Prime
Lessor are entitled to rely, which shall contain an endorsement that any such
insurance policy may not be cancelled without at least ten (10) days' prior
written notice to each insured. Sublessee's failure to provide and keep in force
the aforementioned insurance (or self-insurance) or to make the aforementioned
payments to Sublessor shall be regarded as a default hereunder, entitling
Sublessor to exercise any or all of the remedies provided in this Sublease in
the event of Sublessee's default. All insurance policies carried by Sublessee
shall be written as primary coverage policies not contributing with or secondary
to coverage which Sublessor carries.
7.3 INSURANCE SUBROGATION
Insofar as, and to the extent that, the following may be effective without
invalidating or making it impossible to secure insurance coverage obtainable
from good and solvent insurance companies licensed or authorized to do business
in the Commonwealth of Massachusetts with a minimum Best's rating of A-VI, each
of Sublessor and Sublessee mutually agrees that, with respect to any hazard that
is covered by property insurance, real and personal, including betterments and
improvements, then being carried by them respectively, the one carrying such
insurance and such loss releases the other of and from any and all claims with
respect to such loss. Each of Sublessor and Sublessee further mutually agrees
that its respective insurance company shall have no right of subrogation against
the other or the other's insurance company on account thereof.
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ARTICLE VIII
CASUALTY AND TAKING
-------------------
If the Premises or any portion thereof is damaged by fire or other
casualty, or taken by eminent domain, Sublessee shall promptly notify Prime
Lessor and Sublessor. Under Section 7 of the Prime Lease, Prime Lessor may
terminate the Prime Lease if a substantial portion of the Premises or the
Building is substantially damaged or taken. If (a) Prime Lessor fails to give
written notice of its intention to restore as set forth in Section 7 of the
Prime Lease, or (b) Prime Lessor does not complete restoration or reconstruction
of the Premises or any portion thereof in the manner and within the time periods
set forth in such Section 7, Sublessee shall have the right to terminate this
Sublease by giving both Sublessor and Prime Lessor written notice of such
termination within the applicable notice period set forth in Section 7 of the
Prime Lease. In addition, if Sublessor elects to terminate the Prime Lease
pursuant to such Section 7, the Prime Lease shall cease and come to an end, and
this Sublease shall similarly terminate. Sublessee acknowledges that Sublessor
shall, in no event, have any obligation whatsoever to reconstruct or restore the
Premises or any portion thereof damaged by fire or other casualty or taken by
eminent domain. If this Sublease is not terminated as a result of damage by fire
or other casualty or eminent domain, Sublessor shall repair and/or replace any
items of Sublessor's FF&E damaged, in no event, however, shall Sublessor be
required to expend for such repair and restoration any amount in excess of the
net insurance proceeds made available to Sublessor as a result of such damage if
and to the extent that Sublessee is required hereunder to carry the insurance
covering such risks.
ARTICLE IX
SUBLESSOR'S SURRENDER OF PRIME LEASE;
SUBLESSEE'S FF&E PURCHASE OPTION
-------------------------------------
9.1 SURRENDER OF PRIME LEASE
Sublessor shall, upon Sublessee's prior written request given to Sublessor
at least one hundred twenty (120) days prior to the Term Expiration Date,
surrender all of its interest in and to the Premises and the Prime Lease (to the
extent applicable to the Premises) to Prime Lessor in order to enable Sublessee
to enter into a direct lease with Prime Lessor for the Premises; provided,
however, that such surrender shall not be effective unless and until Prime
Lessor has agreed in writing to accept Sublessor's surrender with the same force
and effect as if the date of such surrender were the originally scheduled
expiration date of the Prime Lease with respect to the Premises.
9.2 SUBLESSEE'S FF&E PURCHASE OPTION
Sublessee shall have the option to purchase those portions of Sublessor's
FF&E described on Schedule C as "Assets Owned/Controlled by ArQule" at the
expiration of the Term of this Sublease, provided that (a) Sublessee provides
Sublessor written notice of its exercise of such
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<PAGE> 27
purchase option at least [*] days prior to the Term Expiration Date and (b)
Sublessor surrenders its interest in and to the Premises to Prime Lessor in
accordance with Section 9.1 above. The purchase price for such portions of
Sublessor's FF&E shall be the fair market value of such portions of Sublessor's
FF&E as of the Term Expiration Date.
Upon the closing of the sale of such portions of Sublessor's FF&E or any
part thereof to Sublessee, Sublessor shall convey good title (free and clear of
Prime Lessor's security interest under Section 28 of the Prime Lease and all
other liens and encumbrances) to such portions of Sublessor's FF&E, and such
portions of Sublessor's FF&E shall be substantially in the condition the same is
required to be maintained hereunder, but otherwise without any representation or
warranty from Sublessor. Sublessor agrees to assign to Sublessee any
manufacturer's warranty in its name covering such portions of Sublessor's FF&E
to the extent such manufacturer's warranty is assignable.
Sublessor shall provide to Sublessee its determination of the fair market
value of such portions of Sublessor's FF&E within [*] days of Sublessor's
receipt of Sublessee's written notice of the exercise of such purchase option.
Sublessee shall have the option, within [*] days of the Sublessor's notice, to
accept the Sublessor's estimate or to reject Sublessor's estimate and request
arbitration. Failure by the Sublessee to respond to the Sublessor's notice
within the [*] day period shall be deemed an acceptance of the Sublessor's
estimate. In the event Sublessee rejects Sublessor's estimate, then the fair
market value shall be arbitrated in accordance with the following procedure. The
parties within [*] days after Sublessee's rejection of Sublessor's estimate
shall each identify an impartial third party to serve as an arbitrator and these
two arbitrators shall seek to identify one mutually acceptable impartial third
party to serve as the third arbitrator. If either party has not designated its
arbitrator to the other in a timely fashion, then the determination of the other
party's arbitrator shall be final. All such arbitrators shall be facilities
managers of biotechnology or pharmaceutical facilities, having current and at
least ten (10) years' prior experience in operating, designing or constructing
biotechnology or pharmaceutical facilities in the Greater Boston area. If the
two arbitrators are unable to agree upon a third arbitrator within [*] days, the
third arbitrator shall be selected by J.A.M.S/ENDISPUTE, or any successor
entity. If neither J.A.M.S/ENDISPUTE nor any successor entity exists at the time
of the dispute, the third arbitrator shall be selected by the American
Arbitration Association ("AAA") or any successor entity. If neither AAA nor any
successor exists at the time of the dispute, the third arbitrator shall be
selected by the largest private provider of dispute resolution services then
doing business in the Greater Boston area. Within [*] days after the parties are
notified as to the identity of the third arbitrator, each of the three
arbitrators shall submit his or her final determination of the fair market value
of such portions of Sublessor's FF&E (the "Final Value Determination") to the
other arbitrators. The two Final Value Determinations which are closest to each
other shall be averaged and this average shall be designated as the fair value.
If the highest and lowest Final Value Determinations are equally close to the
middle Final Value Determination then the middle one shall be designated as the
fair market value. If one of the arbitrators has not submitted its Final Value
Determination to the other arbitrators within the time limits set forth herein,
the other
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<PAGE> 28
arbitrators will designate the average of their Final Value Determinations as
the fair market value. The arbitrators shall notify the parties of their
decision in writing within such [*] day period. All costs incurred for the
services of the arbitrator shall be borne equally by the parties. The fair
market value as designated by the arbitrators shall be final and binding and the
parties shall have no further recourse to such determination.
ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
10.1 INDEMNIFICATION BY SUBLESSEE
Sublessee hereby indemnifies and covenants to save Sublessor harmless from
and against any and all claims, liabilities or penalties asserted by or on
behalf of any person, firm, corporation or public authority regarding:
(i) any injury to person, or loss of or damage to property, sustained
or occurring on the Premises or any portion thereof arising from or
related to the act, omission, fault, negligence or misconduct of
Sublessee, its servants, agents, employees or invitees (provided,
however, that nothing in this Section shall require Sublessee to
indemnify Sublessor from any claims, liabilities or penalties arising
out of any negligent acts or omissions of, or misconduct by, Sublessor
or Sublessor's servants, agents, employees or invitees on the Premises
from time to time pursuant to the Technology Agreement).
(ii) any injury to person, or loss of or damage to property, sustained
or occurring in or about the Building or the lot surrounding the
Building and other than on the Premises or any portion thereof (and,
in particular, without limiting the generality of the foregoing, on or
about the elevators, stairways, public corridors, sidewalks,
concourses, approaches, area ways, roof or other appurtenances and
facilities used in connection with the Building, the Premises or any
portion thereof) arising from the use or occupancy of the Building,
the Premises or any portion thereof by Sublessee or any person
claiming by, through or under Sublessee (other than Sublessor, its
servants, agents, employees or invitees), and arising from or related
to the act, omission, fault, negligence or misconduct of any person
other than Sublessor, or its servants, agents, employees or invitees,
and in addition to, and not in limitation of the foregoing provision
(i); and
(iii) any work or thing whatsoever (including monies due on account
thereof) done on the Premises or any portion thereof during the Term
of this Sublease and during the period of time, if any, prior to the
Commencement Date when Sublessee may have been given access to the
Premises or any portion thereof,
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except to the extent caused by any negligent acts or omissions or
misconduct of Sublessor, its servants, agents, employees or invitees;
and, with respect to any of the foregoing, from and against all costs, expenses
(including, without limitation, reasonable attorneys' fees) and liabilities
incurred in connection with any such claim, or any action or proceeding brought
thereon. If any action or proceeding is brought against Sublessor based on any
such claim, Sublessee, upon notice from Sublessor, shall at Sublessee's sole
cost and expense resist or defend such action or proceeding, and employ counsel
therefor reasonably satisfactory to Sublessor. The foregoing indemnification
shall survive termination of this Sublease.
10.2 INDEMNIFICATION BY SUBLESSOR
Sublessor hereby indemnifies and covenants to save Sublessee harmless from
and against any and all claims, liabilities or penalties asserted by or on
behalf of any person, firm, corporation or public authority regarding any injury
to person, or loss of or damage to property, arising from or related to the act,
omission, fault, negligence or misconduct of Sublessor, its servants, agents,
employees or invitees (provided, however, that nothing in this Section shall
require Sublessor to indemnify Sublessee from any claims, liabilities or
penalties arising out of any negligent acts or omissions of, or misconduct by,
Sublessee or any of Sublessee's servants, agents, employees or invitees on the
Premises or in the Building, provided further, however, that for purposes of
this limitation on Sublessor's indemnification obligations, neither Sublessor
nor its servants, agents, employees or invitees shall be deemed to constitute
Sublessee's agents or invitees by virtue of the Technology Agreement or
otherwise) and, with respect to any of the foregoing, from and against all
costs, expenses (including, without limitation, reasonable attorneys' fees) and
liabilities incurred in connection with any such claim, or any action or
proceeding brought thereon. If any action or proceeding is brought against
Sublessee based on any such claim, Sublessor, upon notice from Sublessee, shall
at Sublessor's sole cost and expense resist or defend such action or proceeding,
and employ counsel therefor reasonably satisfactory to Sublessee. The foregoing
indemnification shall survive termination of this Sublease.
10.3 LIMITATION OF SUBLESSOR'S LIABILITY
The agreements contained in this Sublease on the part of Sublessor shall be
binding on Sublessor only during and in respect to such period as Sublessor
holds the interest as lessee under the Prime Lease. In no event shall Sublessor
or Sublessee ever be responsible to the other for loss of business or other
indirect or consequential damages arising out of any breach of the agreements
contained in this Sublease.
10.4 NO BROKERAGE
The parties represent that they have dealt with no real estate broker or
agent in connection with this Sublease or with anyone who would otherwise be
entitled to a brokerage commission or other compensation with respect to this
Sublease. Each of Sublessor and Sublessee agrees to defend and indemnify the
other against any claims, losses, damages,
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liabilities or expenses (including reasonable attorneys' fees) arising out of
the breach of any of its respective foregoing representations.
10.5 NOTICES
Whenever by the terms of this Sublease notice, demand or other
communication shall or may be given, either to Sublessor, Sublessee or Prime
Lessor, the same shall be adequately given if in writing and delivered by hand
or sent by registered or certified mail, postage prepaid:
If intended for Sublessor, addressed to it at the Present Mailing Address
of Sublessor, with a copy to Sublessor's attorneys, Palmer & Dodge LLP, One
Beacon Street, Boston, Massachusetts 02108, Attention: Michael Lytton,
Esquire (or to such other address or addresses as may from time to time
hereafter be designated by Sublessor by like notice).
If intended for Sublessee, addressed to it at the Present Mailing Address
of Sublessee, with a copy to Pfizer Central Research, Eastern Point Road,
Groton, Connecticut 06340, Attention: General Counsel and to Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, Attention: Keith
Barnett, Esquire (or to such other address or addresses as may from time to
time hereafter be designated by Sublessee by like notice).
If intended for Prime Lessor, addressed to it at the Present Mailing
Address of Prime Lessor (or to such other address or addresses as may from
time to time hereafter be designated by Prime Lessor by like notice).
All such notices shall be effective upon receipt or refusal to receive.
10.6 EFFECTIVENESS OF SUBLEASE
This Sublease shall not be effective until and unless Prime Lessor has
given its consent hereto, which consent shall be in form and substance
reasonably satisfactory to Sublessee; Sublessor shall be responsible for paying
all costs and expenses payable to Prime Lessor under the Prime Lease in
connection with obtaining such consent. Sublessor shall use reasonable efforts
to obtain Prime Lessor's consent, but shall not be responsible for the failure
or refusal of Prime Lessor to consent to this Sublease.
10.7 BINDING AGREEMENT
This Sublease shall bind and inure to the benefit of the parties hereto and
such respective heirs, representatives, successors or assigns as are permitted
by this Sublease. This Sublease contains the entire agreement of the parties
with respect to the subleasing of the Premises and may not be modified except by
an instrument in writing signed by the parties hereto. This Sublease shall be
governed by the laws of The Commonwealth of Massachusetts.
10.8 REPRESENTATIVES
Each party authorizes the others to rely in connection with their
respective rights and obligations under this Sublease upon approval and other
actions on the party's behalf by Sublessor's Representative, in the case of
Sublessor, and by Sublessee's Representative, in the
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case of Sublessee, or by any person designated in substitution of or in addition
to said representatives by notice to the parties thereon relying.
10.9 COUNTERPARTS
This Sublease may be signed in any number of counterparts, and in such
event each shall act as an original for all purposes, so long as each party has
signed at least one counterpart.
Executed under seal as of the date first written above.
Sublessor: ARQULE, INC.
By: /s/ Stephen Hill
---------------------------
Its
Here unto duly authorized
Sublessee: PFIZER INC
By: /s/ George Milne
---------------------------
Its
Here unto duly authorized
Exhibits:
- --------
Exhibit A: Prime Lease I
Exhibit B: Prime Lease 2
Exhibit C: List of Sublessor's FF&E
Exhibit D: List of Operating Expense Line Items
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EXHIBIT A
---------
[Previously filed as Exhibit 10.7 to ArQule's Registration Statement on Form S-1
(File No. 333-11105) and incorporated herein by reference.]
<PAGE> 33
EXHIBIT B
---------
[Previously filed as Exhibit 10.22 to ArQule's Registration Statement on Form
S-1 (File No. 333-22945) and incorporated herein by reference.]
<PAGE> 34
EXHIBIT C
---------
[*]
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<PAGE> 35
EXHIBIT D
---------
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* Confidential treatment has been requested for the marked portions.
<PAGE> 36
CUMMINGS PROPERTIES, LLC
STANDARD FORM
SUBLEASE CONSENT
In connection with two leases currently in effect between the parties at
200 Boston Avenue, Suites [*] ("lease 1") and Suites [*] ("lease 2"), Medford,
Massachusetts, executed on July 27, 1995 (lease 1), and December 20, 1996 (lease
2), both as heretofore amended, and terminating [*] (lease 1), and [*] (lease
2), and in consideration of one dollar ($1.00) and other mutual benefits to be
derived herefrom, Cummings Properties, LLC, LESSOR, and ArQule, Inc., LESSEE,
hereby agree to amend said lease 1 and lease 2 (collectively, the "lease") as
follows:
1. LESSEE desires to sublease to Pfizer Inc. (SUBLESSEE) approximately
[*] rentable square feet at the above-referenced premises ("the subleased
premises") effective on the Commencement Date established under the
sublease (scheduled to occur on or before [*]), LESSOR acknowledges receipt
of $250 towards its expenses in connection with this consent, and LESSEE
shall, upon execution of this Sublease Consent by all three parties, pay
any additional reasonable charges that me be due in accordance with the
lease in connection with this consent.
2. LESSOR, as provided in the lease, hereby approves LESSEE's sublease to
SUBLESSEE. LESSEE represents that the attached document is a true and
complete copy of the sublease. LESSEE and SUBLESSEE shall not amend the
attached sublease without LESSOR's prior written consent, which consent
shall not be unreasonably withheld or delayed. Notwithstanding the
provisions of this sublease, LESSOR is not a party to it and shall not be
bound by it.
3. SUBLESSEE agrees to comply with all covenants, conditions and terms of
the lease as fully as if, for purposes hereof, SUBLESSEE were LESSEE under
the lease, except as expressly stated in the attached Rider to Sublease
Consent.
4. Notwithstanding the foregoing, however, LESSEE shall continue to
remain liable to LESSOR, as provided in the lease, for the payment of all
rent and for the full performance of all covenants and conditions of the
lease.
5. LESSEE shall pay LESSOR an additional security deposit of [*] upon
execution of this Sublease Consent by all three parties, subject to the
same terms and conditions provided in Section 2 of the lease.
6. SUBLESSEE shall, upon its execution of this Sublease Consent, supply
LESSOR with a certificate of insurance in the amount of [*] naming LESSOR
and the owner of the building (OWNER) as additional insureds. LESSOR and
OWNER shall be included as
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additional insureds using standard endorsement ISO Form CG 20 26 11 85 or
another similar form specifically approved in advance by LESSOR.
7. Any notices from LESSOR to LESSEE shall be served at 200 Boston
Avenue, Suite 1000, Medford, Massachusetts 02155 and otherwise as provided
in the lease. Any notices from LESSOR to SUBLESSEE shall be served at the
subleased premises, with copy to Pfizer Central Research, Eastern Point
Road, Groton, Connecticut 06340, Attention: General Counsel and otherwise
as provided in the lease.
8. Acceptance of any payments by LESSOR from SUBLESSEE pursuant to the
Rider to Sublease Consent shall not establish a new tenancy or in any way
affect the relationship between LESSOR and LESSEE and LESSEE's covenants
and obligations under the lease. See the attached Rider to Sublease
Consent.
9. Intentionally deleted.
10. To the extent any inconsistency exists between the lease and the
sublease, the terms and conditions of the lease shall govern, except as
expressly stated in the attached Rider to Sublease Consent.
11. *LESSOR represents that Cummings Properties, LLC has succeeded to all
interests of Cummings Properties Management, Inc. as LESSOR, that
Beautyrest, Inc. and Boston North, LLC (successor-in-interest to WRB, Inc.)
are the owners of the building, and that LESSOR has full right, power and
authority, by its signature below, to bind Beautyrest, Inc. and Boston
North, LLC (successor-in-interest to WRB, Inc.).
12. See the attached Rider to Sublease Consent for additional provisions.
All other terms, conditions and covenants of the lease shall continue to
apply. In Witness Whereof, LESSOR, LESSEE and SUBLESSEE have hereunto set their
hands and commons seals this 16th day of July, 1999.
LESSOR: CUMMINGS PROPERTIES, LLC LESSEE: ArQule, Inc.
By: /s/ Douglas Stephens By: James Fitzgerald
------------------------------ ---------------------------
Executive Vice President
SUBLESSEE: Pfizer Inc.
By: George Milne
---------------------------
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CUMMINGS PROPERTIES, LLC
RIDER TO SUBLEASE CONSENT
-------------------------
The following additional provisions are incorporated into and made a part
of the attached Sublease Consent by and among ArQule, Inc., as LESSEE, Pfizer
Inc. as SUBLESSEE, and Cummings Properties, LLC, as LESSOR:
A. LESSOR and LESSEE hereby agree that the lease is modified as follows:
(1) Notwithstanding any provisions in the lease to the contrary, LESSOR
hereby acknowledges that LESSEE has duly exercised its options to extend the
terms of lease 1 and lease 2; accordingly; the termination date of lease 1 is
now [*], and the termination date of lease 2 is now [*].
(2) Notwithstanding any provisions in the lease to the contrary, LESSEE
hereby agrees that LESSEE shall pay to LESSOR [*].
B. LESSOR hereby agrees that upon SUBLESSEE's attornment as stated below,
SUBLESSEE's use, possession and enjoyment of the subleased premises shall not be
interfered with, notwithstanding termination of the lease, and such use,
possession and enjoyment shall continue uninterrupted as more completely set
forth herein.
C. Except as stated below in this Rider Paragraph C and Rider Paragraph D
below, upon the expiration or other termination of the lease prior to its
scheduled expiration date, for any reason whatsoever, SUBLESSEE shall attorn to
LESSOR, and LESSOR shall accept SUBLESSEE's attornment, as tenant of the
subleased premises, on all the terms and conditions of the lease as modified by
Rider Paragraph D below (the lease with such Rider Paragraph D modifications
being referred to as the "Attorned Lease"); provided however, that if the lease
is being terminated in whole or in part by reason of any default arising from or
related to acts of the SUBLESSEE in or with respect to the subleased premises
which would entitle LESSOR to exercise the remedy of termination under the terms
and conditions of the lease ("SUBLESSEE Defaults"), then LESSOR shall be fully
entitled to terminate the lease and to rescind the recognition and attornment
set forth herein (in such case SUBLESSEE shall vacate and surrender the
subleased premises peaceably; any holding over in the subleased premises by
SUBLESSEE in such case shall be deemed a holding over under the terms of the
lease and SUBLESSEE shall be liable for all loss, damage or expense incurred by
LESSOR as a result of such holding over and shall pay rent at the revised
monthly rate set forth in Section 21 of lease 1 and Section 22 of lease 2). Such
recognition and attornment shall be self-operative and shall be effective
without the execution of any further instrument on the part of either party;
however, SUBLESSEE
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34
<PAGE> 39
and LESSOR shall execute, upon the written request of either party, an
instrument confirming such recognition and attornment.
D. In the event of any recognition and attornment between LESSOR and
SUBLESSEE as provided in Rider Paragraph C above, SUBLESSEE's use and occupancy
of the subleased premises shall be on all of the terms and conditions of the
lease, as modified by the following provisions:
(1) All references in the lease to LESSOR shall be deemed to refer to
LESSOR named in this Sublease Consent and all references in the lease to LESSEE
shall be deemed to refer to SUBLESSEE named in this Sublease consent.
(2) The premises demised under the lease shall be deemed to be the
subleased premises consisting of [*] square feet of space in Suites [*] in the
building only, not the premises described in the lease.
(3) The base rent payable by SUBLESSEE shall be the base rent set forth in
Section 1.1 of the Sublease, not the base rent set forth in the lease.
(4) The term of SUBLESSEE's occupancy shall be the "Sublease Term" set
forth in Section 1.1 of the Sublease, not the term set forth in the lease.
(5) SUBLESSEE shall be entitled to terminate the Attorned Lease (as if the
Attorned Lease were the Sublease) in accordance with Section 3.2 of the
Sublease.
(6) The following provisions of the lease shall be deemed deleted in their
entirety:
lease 1 -
a) Section 1 (Rent)
b) Section 2 (Security Deposit)
c) Section 17 (Brokerage)
d) The second and third grammatical sentences of Section 21
(Occupancy)
e) Section 28 (Security Agreement)
f) Section Y of Rider to lease 1
g) The first grammatical sentence of Section Z of Rider to
lease 1
h) Sections 1 and 2 of Amendment #1 to lease 1
lease 2 -
a) Section 1 (Rent)
b) Section 2 (Security Deposit)
c) Section 19 (Brokerage)
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*Confidential treatment has been requested for the marked portion.
35
<PAGE> 40
d) The second and third grammatical sentences of Section 22
(Occupancy)
e) Section 29 (Security Agreement)
f) Section A of Rider to lease 2
g) Section C of Rider to lease 2
h) Section D of Rider to lease 2
i) Sections 1, 2 and 3 of Amendment #1 to lease 2
j) Amendment #2 to lease 2
k) Amendment #3 to lease 2
l) Amendment #4 to lease 2
m) Amendment #5 to lease 2
n) Section 1 to Amendment #6 to lease 2
E. From and after receipt of a copy of the LESSOR's notice to LESSEE of
LESSOR's intention to terminate the lease, SUBLESSEE shall pay all rent
thereafter due and payable under the Sublease directly to LESSOR (any such rent
payments received by LESSOR from SUBLESSEE shall be applied by LESSOR as a
credit toward LESSEE's obligations under the lease) and shall otherwise fully
and faithfully observe and perform (x) all of its obligations under the Sublease
while the Sublease remains in effect, and (z) all of its obligations as LESSEE
under the Attorned Lease. LESSOR hereby agrees to indemnify SUBLESSEE and hold
SUBLESSEE harmless from any claims made by LESSEE with respect to any rents so
paid by SUBLESSEE to LESSOR at LESSOR's direction; LESSEE hereby agrees that
SUBLESSEE shall have the right to rely on any such notice and direction from
LESSOR, without any obligation to inquire as to whether there exists any default
by LESSEE under the lease; that LESSEE shall have no right or claim against
SUBLESSEE on account of any rental payments made by SUBLESSEE to LESSOR
following receipt of such notice and direction; and that as between LESSEE and
SUBLESSEE, any payments made, or obligations performed, by SUBLESSEE to or for
the benefit of LESSOR from and after receipt of such notice and direction shall
be deemed to have be paid to and/or performed for the benefit of, LESSEE.
F. LESSOR agrees to give to SUBLESSEE a copy of notice of any default
given to LESSEE respecting the performance of any obligations of LESSEE that
would entitle LESSOR, under the terms of the Lease or by law, to terminate the
lease.
G. LESSOR agrees to list SUBLESSEE on the tenant directories in the
lobbies of the building at 200 Boston Avenue, Medford.
H. Nothing in this Rider to Sublease Consent or the Sublease Consent to
which this Rider is attached, nor anything in the Sublease or any Attorned
Lease, shall be deemed or construed to amend, modify, alter or otherwise affect
in any way the lease or the respective rights and obligations of LESSOR and
LESSEE under the lease. The recognition and attornment of SUBLESSEE by LESSOR
shall have no effect on any obligations of LESSEE under the lease or on any
rights and remedies of LESSOR against LESSEE under the lease.
36
<PAGE> 41
LESSOR: CUMMINGS PROPERTIES, LLC LESSEE: ArQule, Inc.
By: /s/ Douglas Stephens By: /s/ James Fitzgerald
----------------------------- -------------------------
Executive Vice President
SUBLESSEE: Pfizer Inc.
By: /s/ George Milne
-------------------------
37
<PAGE> 1
EXHIBIT 10.3
RESEARCH COOPERATION AGREEMENT
This Research Cooperation Agreement effective as of October 1, 1999 (the
"Effective Date") is between Bayer AG ("Bayer"), a German corporation, and
ArQule, Inc. ("ArQule"), a Delaware Corporation.
RECITALS
WHEREAS, ArQule has expertise relating to the design and synthesis of
libraries of chemical compounds using rapid parallel synthesis methods;
WHEREAS, Bayer desires to obtain chemical compounds on a custom synthesis
basis; and
WHEREAS, ArQule is willing to use its expertise to produce such chemical
compounds for Bayer under the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement, Bayer and ArQule hereby agree as follows:
1. DEFINITIONS.
1.1 "AFFILIATE" means any business entity which directly or indirectly
controls, is controlled by, or is under common control with either party to this
Agreement. A business entity shall be deemed to control another business entity
if it owns, directly or indirectly, at least fifty percent of the outstanding
voting securities, capital stock, or other comparable equity or ownership
interest of such business entity, or exercises equivalent influence over such
entity. If the Laws of the jurisdiction in which such entity operates prohibit
ownership by a party of 50% control shall be deemed to exist at the maximum
level of ownership allowed by such jurisdiction.
1.2 "CHEMICAL BUILDING BLOCK" means a chemical component used in the
synthesis of a compound in a combinatorial library, and specifically refers to
the chemical components used to produce Custom Array Compounds under this
Agreement.
1.3 "CHEMICAL THEME" means chemical, structural, or other physical
characteristics that define a Custom Array Set, as determined by the Research
Committee in accordance with Section 3.2. Typically, a Chemical Theme will be
defined by a core structure or synthesis pathway.
1.4 "CONFIDENTIAL INFORMATION" means any technical or business information
furnished by one party (the "Disclosing Party") to the other party (the
"Receiving Party") in connection with this Agreement. Such Confidential
Information may include, without limitation, the identity or use of a chemical
compound, the identity or use of a biological target, trade secrets, know-how,
inventions, technical data or specifications, testing methods, business or
financial information, research and development activities, and Research
Committee reports.
1.5 "CUSTOM ARRAY COMPOUND" means a chemical compound in the Custom Array
Sets provided by ArQule to Bayer under the Custom Array Program.
<PAGE> 2
1.6 "CUSTOM ARRAY PROGRAM" means a synthesis program under which ArQule
produces Custom Array Compounds and delivers the Custom Array Compounds to
Bayer, as further described in Article 3 below.
1.7 "CUSTOM ARRAY SET" means a set of Custom Array Compounds consisting of
diverse, structurally related small organic chemical compounds with a single
Chemical Theme arranged in a spatially addressable format, which are produced by
ArQule for Bayer under the Custom Array Program as described in Article 3 below.
1.8 "PATENT RIGHTS" means any United States and foreign patent application
and any divisional, continuation, or continuation-in-part of such patent
application (to the extent the claims are directed to subject matter
specifically described therein), as well as any patent issued thereon and any
reissue or reexamination of such patent, and any foreign counterparts to such
patents and patent applications. "ARQULE PATENT RIGHTS" means Patent Rights that
are either (i) assigned solely to ArQule, (ii) assigned jointly to ArQule and a
party other than Bayer, or (iii) licensed to or otherwise controlled by ArQule,
in each case to the extent that ArQule has the ability to license or sublicense
such rights as required under this Agreement without payment to or the consent
of a third party. "BAYER PATENT RIGHTS" means Patent Rights that are either (i)
assigned solely to Bayer, (ii) assigned jointly to Bayer and a party other than
ArQule, or (iii) licensed to or otherwise controlled by Bayer, in each case to
the extent that Bayer has the ability to license or sublicense such rights as
required under this Agreement without payment to or the consent of a third
party. "JOINT PATENT RIGHTS" means Patent Rights assigned to both ArQule and
Bayer as joint owners. Joint Patent Rights will include (i) Patent Rights
claiming Joint Technology and (ii) Patent Rights claiming both ArQule Technology
and Bayer Technology in a single filing.
1.9 "PRODUCTION PLAN" means an initial [*] plan developed by the parties
prior to the Effective Date and each successive [*] plan developed by the
Research Committee and approved by the Steering Committee for the production of
Custom Array Sets by ArQule for Bayer under the Custom Array Program as
described in Section 3.3. The Research Committee may periodically modify the
Production Plans during the performance of the Custom Array Program, subject to
the approval of the Steering Committee in the case of material changes.
1.10 "PROPRIETARY MATERIALS" means any tangible research materials, whether
biological, chemical, physical, or otherwise, that one party (the "Provider")
furnishes to the other party (the "Recipient") under this Agreement and
designates as proprietary or confidential, excluding Custom Array Compounds and
compounds within the virtual libraries designated in accordance with the
procedures set forth on Exhibit C.
1.11 "RESEARCH COMMITTEE" means the joint Research Committee described in
Section 2.1.
1.12 "STEERING COMMITTEE" means the joint Steering Committee described in
Section 2.2.
-2-
<PAGE> 3
1.13 "TECHNOLOGY" means any proprietary development, idea, design, concept,
technique, process, invention, Proprietary Material, discovery, or improvement,
whether or not patentable or copyrightable. "ARQULE TECHNOLOGY" means Technology
that is either (i) assigned solely to ArQule, (ii) assigned jointly to ArQule
and a party other than Bayer, or (iii) licensed to or otherwise controlled by
ArQule, in each case to the extent that ArQule has the ability to license or
sublicense such rights as required under this Agreement without payment to or
the consent of a third party. "BAYER TECHNOLOGY" means Technology that is either
(i) assigned solely to Bayer, (ii) assigned jointly to Bayer and a party other
than ArQule, or (iii) licensed to or otherwise controlled by Bayer, in each case
to the extent that Bayer has the ability to license or sublicense such rights as
required under this Agreement without payment to or the consent of a third
party. "JOINT TECHNOLOGY" means Technology that is developed or discovered
jointly by one or more employees or consultants of Bayer and one or more
employees or consultants of ArQule in connection with this Agreement.
1.14 "VALID CLAIM" means either (i) a claim of an issued patent that has
not been held unenforceable or invalid by an agency or a court of competent
jurisdiction in any unappealable or unappealed decision or (ii) a claim of a
patent application that is pending and has not been abandoned or finally
rejected without the possibility of appeal or refiling.
2. MANAGEMENT OF CUSTOM ARRAY PROGRAM.
2.1 RESEARCH COMMITTEE
2.1.1 ESTABLISHMENT OF RESEARCH COMMITTEE. The parties hereby
establish a Research Committee comprised of six (6) members, with three (3)
representatives appointed by each party. The members initially designated by
Bayer are [*]. The members initially designated by ArQule are [*]. A party may
change any of its representatives to the Research Committee at any time upon
written notice to the other party.
2.1.2 DUTIES OF RESEARCH COMMITTEE. The Research Committee shall
monitor, manage, and administer the Custom Array Program under this Agreement.
In general, the Research Committee will have responsibility for all issues of a
scientific or technical nature (e.g., scheduling, quality, and delivery
formats). Specifically, the Research Committee will select Chemical Themes for
production, develop Production Plans, determine whether to publish research
results, and resolve all matters involving scientific questions. The Research
Committee may have other responsibilities as expressly set forth in this
Agreement. All decisions of the Research Committee are subject to the authority
of the Steering Committee.
2.1.3 MEETINGS OF RESEARCH COMMITTEE. Unless otherwise determined by
the Research Committee, the Research Committee shall meet at least once each
calendar quarter alternately at the location of each party, or at other times,
locations, or manner (e.g., telephone conferences) determined by the Research
Committee. Each party shall bear its own costs incurred in connection with such
meetings. A representative of the Research Committee jointly appointed by its
members shall provide each member with live (5) business days notice of the
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<PAGE> 4
time and location of each quarterly meeting, unless such notice is waived by all
members. If a designated representative of a party cannot attend a meeting of
the Research Committee, such party may designate a different representative for
that meeting without notice to the other party, and the substitute member will
have full power to vote on behalf of the permanent member. Except as otherwise
provided in this Agreement, all actions and decisions of the Research Committee
will require [*]. If the Research Committee fails to reach agreement upon any
matter, the dispute will be resolved by the Steering Committee. Within ten (10)
business days following each quarterly meeting of the Research Committee, a
representative of the Research Committee jointly appointed by its members shall
prepare and deliver, to both parties, a written report describing the program
status and the issues, decisions, conclusions, and other actions taken by the
Research Committee. The written minutes will be approved by the Research
Committee at its next quarterly meeting.
2.2 STEERING COMMITTEE
2.2.1 ESTABLISHMENT OF THE STEERING COMMITTEE. The parties hereby
establish a Steering Committee comprised of six (6) members, with three (3)
representatives appointed by each party. The members initially designated by
Bayer are [*]. The members initially designated by ArQule are [*]. A party may
change any of its representatives to the Steering Committee at any time upon
written notice to the other party.
2.2.2 DUTIES OF THE STEERING COMMITTEE. The Steering Committee shall
monitor the Custom Array Program, and shall have general approval authority for
all matters within the Custom Array Program. Specifically, the Steering
Committee shall approve each Production Plan and material changes to the
Production Plan, including any variances to the standard criteria in Section
3.5. The Steering Committee may have other responsibilities as expressly set
forth in this Agreement. [*].
2.2.3 MEETINGS OF THE STEERING COMMITTEE. Unless otherwise determined
by the Steering Committee, the Steering Committee shall meet at least once each
calendar quarter alternately at the location of each party, or at other times,
locations, or manner (e.g., telephone conferences) determined by the Steering
Committee. Each party shall bear its own costs incurred in connection with such
meetings. A representative of the Steering Committee jointly appointed by its
members shall provide each member with five (5) business days notice of the time
and location of each quarterly meeting, unless such notice is waived by all
members. If a designated representative of a party cannot attend a meeting of
the Steering Committee, such party may designate a different representative for
that meeting without notice to the other party, and the substitute member will
have full power to vote on behalf of the permanent member. Except as otherwise
provided in this Agreement, all actions and decisions of the Steering Committee
will require [*]. If the Steering Committee fails to reach agreement upon any
matter, the dispute will be resolved in accordance with the procedures set forth
in Article 10 below. Within ten (10) business days following each quarterly
meeting of the Research Committee, a representative of the Steering Committee
jointly appointed by its members shall prepare and
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<PAGE> 5
deliver, to both parties, a written report describing the program status and the
issues, decisions, conclusions, and other actions taken by the Steering
Committee. The written minutes will be approved by the Steering Committee at its
next quarterly meeting.
2.3 COOPERATION. Each party agrees to provide the Research Committee and
Steering Committee with information and documentation as reasonably required for
the Research Committee and Steering Committee to fulfill their duties under this
Agreement. In addition, each party agrees to make available its employees and
consultants as reasonably requested by the Research Committee and Steering
Committee. The parties anticipate and intend that members of the Research
Committee will communicate informally with each other and with employees and
consultants of the parties on matters relating to the Custom Array Program.
2.4 PROJECT LEADER. ArQule shall appoint a full-time Project Leader who
will manage the day-to-day operations of the Custom Array Program. The Project
Leader shall serve on the Research Committee. The initial Project Leader shall
be [*]. If the Project Leader becomes unavailable for any reason, ArQule shall
promptly appoint a new Project Leader after consulting with Bayer.
3. CONDUCT OF CUSTOM ARRAY PROGRAM.
3.1 DESCRIPTION OF CUSTOM ARRAY PROGRAM. The Custom Array Program under
this Agreement consists of the production and delivery by ArQule of Custom Array
Sets containing an aggregate of [*] Custom Array Compounds over a [*}
period, as further described in this Article. As described in Section 3.3.,
ArQule will produce and deliver the Custom Array Sets in accordance with a
Production Plan that is developed and modified by the Research Committee. As
described in Section 3.5., each Custom Array Set will [*], subject to
modification by the Research Committee. ArQule will use diligent efforts to
produce and deliver to Bayer approximately [*] Custom Array Compounds [*] and
approximately [*] Custom Array Compounds [*].
3.2 DESIGN OF CUSTOM ARRAY SETS. The parties will design and plan the
Custom Array Sets according the following procedures. [*]. Each party shall
follow the "Operational Procedures for Library Exclusivity" set forth on Exhibit
C for the disclosure, evaluation, and acceptance of each library proposal in the
Custom Array Program, which exhibit is hereby incorporated into and made a part
of this Agreement. In accordance with the Operational Procedures for Library
Exclusivity, ArQule reserves the right to exclude from the Custom Array Program
any compound that was previously committed to a third party or an internal
ArQule program. In such event, ArQule will notify the Research Committee as soon
as possible after the Custom Array Set is designed, but in any event before the
Custom Array Set is delivered to Bayer.
3.3 DEVELOPMENT OF PRODUCTION PLAN. At the first Steering Committee
meeting, the parties shall approve an initial Production Plan pursuant to which
ArQule will use diligent efforts to produce and deliver the Custom Array Sets to
Bayer during the first [*] of the Custom Array
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<PAGE> 6
Program, commencing on the Effective Date. Thereafter, the parties shall develop
Production Plans at least once every [*]. The Research Committee shall submit
each Production Plan to the Steering Committee for approval. Each Production
Plan shall become effective only after approval by the Steering Committee. The
Research Committee may modify any Production Plan at its discretion, subject to
approval of material changes by the Steering Committee. Each Production Plan
will include the following: [*]. The Production Plan shall also include an
expected production and delivery schedule of Custom Array Sets by ArQule and may
include other issues or items that the Research Committee determines would
facilitate the Custom Array Program.
3.4 SUPPLY OF CHEMICAL BUILDING BLOCKS. Bayer will supply any Chemical
Building Blocks required under each Production Plan that are Bayer Proprietary
Materials or are otherwise not readily available to ArQule [*] from the most
recent version of the Available Chemicals Directory (ACD) or, in the case of
Chemical Blocks that are ArQule Proprietary Materials, within the ArQule
inventory. To the extent that Bayer does not supply such Chemical Building
Blocks on schedule or within the specifications required by the Production Plan
(e.g., quantity and purity), ArQule will be relieved of its obligations under
that Production Plan for producing Custom Array Sets that require those Chemical
Building Blocks. However, in such event, the Research Committee shall determine
whether to substitute different Chemical Building Blocks or postpone production
of the library until Bayer supplies the required Chemical Building Blocks.
3.5 PERFORMANCE OF CUSTOM ARRAY PROGRAM. ArQule will use diligent efforts
to produce and deliver the Custom Array Sets in accordance with the Production
Plan. The parties intend that ArQule will produce and deliver [*] Custom Array
Compounds in [*] Custom Array Compounds in [*]; and [*] Custom Array Compounds
in [*]. The parties further intend that the Custom Array Sets delivered under
the Custom Array Program will, on average, contain approximately [*] Custom
Array Compounds per Custom Array Set. The parties will determine whether to
proceed with full production of a Custom Array Set based on the "Standard
Procedure for the Automated Process Development of Bayer Custom Arrays" set
forth on EXHIBIT D, which exhibit is hereby incorporated into and made a part of
this Agreement. After ArQule completes each step of this standard procedure, the
Research Committee will decide whether to proceed with the next step in the
development and production of a proposed Custom Array Set. If the Research
Committee decides to proceed. ArQule will use diligent efforts to complete the
next step in the development and production of the Custom Array Set; otherwise,
the proposed Custom Array Set is eliminated from that Production Plan (but may
be incorporated into future Production Plans as circumstances change). Unless
otherwise determined by the Research Committee, ArQule will deliver the
following of each Custom Array Compound: [*] Upon the shipment of each Custom
Array Set. ArQule will provide Bayer with electronic data files containing,
among other things, [*]. ArQule will format the data for compatibility with the
Bayer chemical registration system.
3.6 EXCLUSIVITY FOR CUSTOM ARRAY COMPOUNDS. For a period [*] after ArQule
ships a Custom Array Set to Bayer pursuant to this Agreement. ArQule will not
disclose or
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<PAGE> 7
transfer to any third party any Custom Array Compound within that Custom Array
Set or any other compound within a virtual library based on that Custom Array
Set as defined in accordance with the procedures set forth on EXHIBIT C. At the
conclusion of the [*] exclusivity period, the above restriction shall expire
except with respect to compounds that are covered by a Valid Claim of a patent
or patent application within the Bayer Patent Rights as identified by Bayer in a
list provided to ArQule before the exclusivity period expires.
3.7 USE AND DISCLOSURE OF [*]. Bayer shall have the right to use the [*]
furnished by ArQule under Section 3.5. above for each Chemical Theme for
internal research and development purposes. All proprietary [*] furnished by
ArQule to Bayer shall he considered ,ArQule Confidential Information and treated
in accordance with Article 7 of this Agreement; provided, however, that Bayer
shall have the right to disclose such [*] as required to [*], with written
notice to ArQule which is received by ArQule at least twenty (20) days before
such [*]. ArQule shall have the right to use [*] furnished by Bayer for use in
the Custom Array Program for any purpose, except as otherwise provided in this
Agreement. All proprietary [*] furnished by Bayer to ArQule shall be considered
Bayer Confidential Information and treated in accordance with Article 7 of this
Agreement.
4. TECHNOLOGY TRANSFER.
4.1 TECHNOLOGY TRANSFER TO ARQULE. Bayer agrees to disclose to ArQule the
proprietary Bayer Technology set forth on Exhibit A and any improvements thereto
that Bayer develops during the term of this Agreement (the "[*]") and to furnish
ArQule with detailed specifications, protocols, and know-how. Bayer will
undertake diligent efforts to enable ArQule to achieve the results achieved by
Bayer using the [*]. ArQule acknowledges that establishing the [*] at ArQule may
require certain adjustments which are specific for ArQule and that Bayer cannot
guarantee the success of this process. Bayer hereby grants ArQule a
non-exclusive, worldwide, perpetual, royalty-free license (without the right to
sublicense) under the Bayer Patent Rights and other rights in Bayer Technology
to use the [*] within ArQule and its Affiliates. ArQule acknowledges that the
[*] constitutes Bayer Confidential Information.
4.2 TECHNOLOGY TRANSFER TO BAYER. ArQule hereby agrees to disclose to
Bayer the proprietary ArQule Technology set forth on Exhibit B and any
improvements thereto that ArQule develops during the term of this Agreement (the
"[*]") and to furnish Bayer with detailed specifications, protocols, and
know-how. ArQule will undertake diligent efforts to enable Bayer to achieve the
results achieved by ArQule using the [*]. Bayer acknowledges that establishing
the [*] at Bayer may require certain adjustments which are specific for Bayer
and that ArQule cannot guarantee the success of this process. ArQule hereby
grants Bayer a non-exclusive, worldwide, perpetual, royalty-free license
(without the right to sublicense) under the ArQule Patent Rights and other
rights in ArQule Technology to use the [*] within Bayer and its Affiliates.
Bayer acknowledges that the [*] constitutes ArQule Confidential Information.
5. PAYMENTS, PROCEDURES, AND RECORDS.
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<PAGE> 8
5.1 UP-FRONT FEES. In consideration of the ongoing development and
production of the Custom Array Sets by ArQule under the Custom Array Program and
of the [*] exclusive right granted to Bayer for filing Patent Rights on such
compounds as described in Section 3.6., Bayer shall pay ArQule the following
up-front fees:
<TABLE>
<CAPTION>
Contract Year Payment
------------- -------
<S> <C>
1st [*]
2nd [*]
3rd [*]
</TABLE>
Bayer shall pay the initial [*] up-front fee within ten (10) business days after
the Effective Date. Thereafter, the up-front fee will be payable in four equal
installments at the beginning of each calendar quarter during the term of the
Agreement.
5.2 SUCCESS FEES. In consideration of the delivery of the Custom Array
Sets by ArQule under the Custom Array Program and of the [*] exclusive right
granted to Bayer for filing Patent Rights on such compounds as described in
Section 3.6. Bayer shall pay ArQule the following success fees for each Custom
Array Compound delivered:
<TABLE>
<CAPTION>
Contract Year Success Fee Per Compound Aggregate Success Fees
------------- ------------------------ ----------------------
<S> <C> <C>
1st [*] [*]
2nd [*] [*]
3rd [*] [*]
</TABLE>
The success fees shall be due on a quarterly basis at the conclusion of each
calendar quarter, payable within thirty (30) days.
5.3 EXTRAORDINARY EXPENSES. In the unusual event that ArQule incurs
extraordinary expenses at the request of the Research Committee in order to
produce a specific Custom Array Set (e.g., the purchase or development of
special capital equipment or the purchase or synthesis of Chemical Building
Blocks or other stoichiometric chemicals or reagents that cost in excess of [*]
per gram), Bayer shall pay such extraordinary expenses as approved by the
Steering Committee.
5.4 METHOD AND CURRENCY OF PAYMENT. The parties shall use a mutually
acceptable method of payment for all amounts payable by Bayer to ArQule under
this Agreement. All payments due to ArQule under this Agreement shall be payable
in United States dollars within thirty (30) days after invoice.
5.5 LATE PAYMENTS. Any payments by Bayer that are not paid on or before
the date such payments are due under this Agreement shall bear interest, to the
extent permitted by law, at two percentage points above the Prime Rate of
interest as reported in the WALL STREET JOURNAL on
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<PAGE> 9
the date payment is due, with interest calculated based on the number of days
that payment is delinquent.
5.6 WITHHOLDING AND SIMILAR TAXES. Each party shall pay any and all taxes
levied on account of amounts it receives as payments under this Agreement. If
laws or regulations require that taxes be withheld, the party making payments to
the other party will (i) deduct those taxes from the remittable payment, (ii)
timely pay the taxes to the proper taxing authority, and (iii) send to the party
receiving a payment evidence of such taxes within thirty (30) days following
that payment. The selling party agrees to make all reasonable and lawful efforts
to minimize such taxes to the other party.
5.7 TRANSIT OF COMPOUNDS. ArQule shall have responsibility for the Custom
Array Compounds during transit to Germany, including payment of associated
expenses and the risk of transit. Bayer shall have responsibility for the Custom
Array Compounds after they are unloaded in Germany, including payment of
associated expenses, customs and duties, and the risk of transit.
6. INTELLECTUAL PROPERTY.
6.1 OWNERSHIP OF INTELLECTUAL PROPERTY. Neither party shall have any
rights in Patent Rights and Technology that is developed or discovered by the
other party prior to the Effective Date or outside of the research performed
under this Agreement. Ownership of Patent Rights and Technology arising from the
research performed under this Agreement shall be allocated in the following
manner:
(i) [*]
(ii) [*]
(iii) [*].
6.2 PATENT RIGHTS.
6.2.1 PATENT RIGHTS IN CUSTOM ARRAY COMPOUNDS.[*].
6.2.2 PATENT RIGHTS IN COMBINATORIAL LIBRARIES. [*].
6.2.3 OTHER PATENT RIGHTS. Bayer shall have sole responsibility for
and control over the management of Bayer Patent Rights and ArQule shall have
sole responsibility for and control over the management of ArQule Patent Rights.
Each party will bear its own expenses in connection with such Patent Rights. The
Research Committee will recommend and the Steering Committee will decide whether
to seek Joint Patent Rights. If the Steering Committee decides to seek any Joint
Patent Rights under this Subsection, the parties shall jointly prepare, file,
prosecute, and maintain such Patent Rights, and all related expenses shall be
borne equally by
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the parties. In the event that a party desires to cease further payment of
patent-related expenses for such a Joint Patent Right in any country and the
other party desires to maintain the Joint Patent Right, the withdrawing party
may assign to the continuing party all rights in that Joint Patent Right in such
country and thereafter have no further obligation to pay such expenses.
6.2.4 COOPERATION. Each party agrees to cooperate fully in the
preparation, filing, and prosecution of any Patent Rights arising under the
Custom Array Program. Such cooperation includes, but is not limited to:
(i) executing all papers and instruments, or requiring its employees or
agents, to execute such papers and instruments, so as to effectuate
the ownership of Patent Rights as established under this Agreement
and to enable the other party to apply for and to prosecute patent
applications in any country;
(ii) promptly informing the other party of any matters coming to such
party's attention that may affect the preparation, filing, or
prosecution of any such patent applications; and
(iii) undertaking no actions that are potentially deleterious to the
preparation, filing, or prosecution of such patent applications.
6.3 INFRINGEMENT.
6.3.1 OFFENSIVE ACTIONS. Each party will promptly notify the other
party if they become aware of any potential infringement of Patent Rights
arising under this Agreement. Neither party shall have any obligation to
initiate an infringement action to assert any Patent Right under this Agreement.
6.3.2 DEFENSIVE ACTIONS. Bayer will indemnify, defend, and hold
harmless ArQule, its Affiliates, and their respective officers, directors,
employees, and agents from any and all loss, damage, cost, and expense
(including reasonable attorneys fees) and amounts paid in settlement arising
from any actual or alleged infringement claim brought by a third party, in law
or in equity, based on activities undertaken pursuant to this Agreement (except
for claims based solely on the practice of an ArQule Patent Right or the use of
an ArQule Technology) or based on the manufacture or sale of a final product
based on a Custom Array Compound. In the event that ArQule intends to claim
indemnification under this Subsection. ArQule shall promptly notify Bayer of the
infringement action and Bayer shall assume the defense of the action under its
sole control, including the right to effect a settlement. A failure to deliver
notice to Bayer within a reasonable time shall relieve Bayer of its indemnity
obligation under this Subsection to the extent such failure prejudices the
ability of Bayer to defend such action. ArQule shall cooperate fully with Bayer
and its legal representatives in the investigation and defense of the action. In
the event of a settlement, Bayer shall obtain the prior consent of ArQule (which
will not be unreasonably withheld) before agreeing to any settlement that
imposes restrictions which are inconsistent with the rights and obligations of
the parties under this Agreement.
6.4 ACCESS TO RESTRICTED TECHNOLOGY. Bayer acknowledges that ArQule is
subject to restrictions on the use of certain synthetic methods and chemical
compositions that Bayer may desire to access in the Custom Synthesis Program.
For the purposes of this Section, the term
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"RESTRICTED PATENT RIGHTS" means Patent Rights that, as of the Effective Date
and thereafter during the term of this Agreement, ArQule has the ability to
license, sublicense, or practice in the Custom Array Program with the consent of
or payment to a third party, and the term "RESTRICTED TECHNOLOGY" means
Technology that, as of the Effective Date and thereafter during the term of this
Agreement, ArQule has the ability to license, sublicense, or use in the Custom
Array Program with the consent of or payment to a third party. At the request of
Bayer, ArQule will use commercially reasonable efforts to obtain the ability for
Bayer (i) to practice Restricted Patent Rights and to use Restricted Technology
within the Custom Array Program and (ii) to grant to Bayer and its Affiliates,
for internal research and development purposes, a non-exclusive, worldwide
license (without the right to sublicense) under the Restricted Patent Rights and
other rights in Restricted Technology. ArQule will grant this license to Bayer
on terms which, considered in the aggregate, are at least as favorable as the
terms given to any third party. Bayer acknowledges that the grant of such rights
may require execution of a separate sublicense agreement or payment of
additional consideration, or both. Bayer shall not have any obligation to enter
into any sublicense agreement or pay any additional consideration that Bayer has
not approved in advance; however, in such event, ArQule shall have no obligation
to practice any Restricted Patent Rights or use any Restricted Technology in the
Custom Array Program.
7. CONFIDENTIAL INFORMATION.
7.1 DESIGNATION OF CONFIDENTIAL INFORMATION. Confidential Information that
is disclosed in writing shall be marked with a legend indicating its
confidential status. Confidential Information that is disclosed orally or
visually shall be documented in a written notice prepared by the Disclosing
Party and delivered to the Receiving Party within thirty (30) days of the date
of disclosure; such notice shall summarize the Confidential Information
disclosed to the Receiving Party and reference the time and place of disclosure.
7.2 OBLIGATIONS. The Receiving Party agrees that it shall:
(i) maintain all Confidential Information in strict confidence, except
that the Receiving Party may disclose or permit the disclosure of any
Confidential Information to its, and its Affiliates, directors,
officers, employees, consultants, and advisors who are obligated to
maintain the confidential nature of such Confidential Information and
who need to know such Confidential Information for the purposes set
forth in this Agreement;
(ii) use all Confidential Information solely for the purposes set forth
in, or as permitted by, this Agreement; and
(iii) allow its directors, officers, employees, consultants, and advisors
to reproduce the Confidential Information only to the extent
necessary to effect the purposes set forth in this Agreement, with
all such reproductions being considered Confidential Information.
7.3 EXCEPTIONS. The obligations of the Receiving Party under Section 7.2.
above shall not apply to the extent that the Receiving Party can demonstrate
that certain Confidential Information:
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(i) was in the public domain prior to the time of its disclosure under
this Agreement;
(ii) entered the public domain after the time of its disclosure under this
Agreement through means other than an unauthorized disclosure
resulting from an act or omission by the Receiving Party;
(iii) was independently developed or discovered by the Receiving Party
without use of the Confidential Information;
(iv) is or was disclosed to the Receiving Party at any time, whether prior
to or after the time of its disclosure under this Agreement, by a
third party having no fiduciary relationship with the Disclosing
Party and having no obligation of confidentiality to the Disclosing
Party with respect to such Confidential Information; or
(v) is required to he disclosed to comply with applicable laws or
regulations (such as disclosure to the FDA or the United States
Patent and Trademark Office or to their foreign equivalents), or to
comply with a court or administrative order, provided that the
Disclosing Party receives prior written notice of such disclosure and
that the Receiving Party takes all reasonable and lawful actions to
obtain confidential treatment for such disclosure and, if possible,
to minimize the extent of such disclosure.
7.4 RETURN OF CONFIDENTIAL INFORMATION. Upon the termination of this
Agreement, at the request of the Disclosing Party, the Receiving Party shall
destroy or return to the Disclosing Party all originals, copies, and summaries
of documents, materials, and other tangible manifestations of Confidential
Information in the possession or control of the Receiving Party, except that (i)
Bayer shall retain the Confidential Information disclosed by ArQule under
Section 3.5. pertaining to structures of Custom Array Compounds, purity of
Custom Array Sets, experimental procedures for Chemical Themes, and information
disclosed pursuant to Section 4.2. (Technology Transfer), (ii) ArQule shall
retain the Confidential Information disclosed by Bayer pertaining to Chemical
Themes, experimental procedures for Chemical Themes, and information disclosed
pursuant to Section 4.1. (Technology Transfer), and (iii) the Receiving Party
may retain one copy of the Confidential Information in the possession of its
Legal Department solely for the purpose of monitoring its obligations under this
Agreement.
7.5 PUBLICATION. Either party may disclose Confidential Information of the
other party in a scientific publication or presentation approved by the Steering
Committee and approved by the appropriate procedures within Bayer and ArQule.
7.6 SURVIVAL OF OBLIGATIONS. Except as otherwise expressly provided in
this Agreement, the obligations set forth in this Article shall remain in effect
for a period of [*] years after termination of this Agreement, provided that the
obligations of the Receiving Party to destroy or return Confidential Information
to the Disclosing Party shall survive until fulfilled.
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8. PROPRIETARY MATERIALS.
8.1 OWNERSHIP. Bayer acknowledges and agrees that any Proprietary
Materials provided to Bayer and its Affiliates under this Agreement are and
shall remain the property of ArQule. ArQule acknowledges and agrees that any
Proprietary Materials provided to ArQule and its Affiliates under this Agreement
are and shall remain the property of Bayer. The foregoing notwithstanding, the
parties agree that ownership of any intellectual property rights in Proprietary
Materials shall be determined in accordance with Articles 6.1. and 6.2.3.
8.2 RESTRICTIONS ON USE AND TRANSFER. Each Recipient agrees to use such
Proprietary Materials only for the purposes indicated by the Provider, and shall
not transfer the Proprietary Materials to any third party without the prior
written consent of the Provider. Each Recipient further agrees to inform its
employees and consultants about the proprietary nature of the Proprietary
Materials and to take reasonable precautions, at least as stringent as those
observed by Recipient to protect its own Proprietary Materials, to ensure that
such employees and consultants observe the obligations of Recipient under this
Section.
8.3 DISPOSITION OF UNUSED MATERIALS. Upon the expiration or termination of
this Agreement, or earlier at the request of the Provider, Recipient will return
or destroy any unused Proprietary Materials furnished by Provider.
8.4 COMPLIANCE WITH LAW. Recipient agrees to comply with all United
States, German, and international laws and regulations applicable to the use,
storage, disposal, and transfer of Proprietary Materials furnished by Provider,
including without limitation the Toxic Substances Control Act (15 USC 2601 et
seq.) and implementing regulations (in particular, 40 CFR 720.36 [Research and
Development Exemption]), the Food, Drug, and Cosmetic Act (21 USC 301 et seq.)
and implementing regulations, and all Export Administration Regulations of the
Department of Commerce, Recipient assumes sole responsibility for any violation
of such laws or regulations by Recipient or any of its Affiliates.
8.5 LIMITATION OF LIABILITY. Any Proprietary Materials delivered pursuant
to this Agreement are understood to be experimental in nature and may have
hazardous properties. Recipient should assume that the materials are dangerous
and should use appropriate precautions. PROVIDER MAKES NO REPRESENTATIONS, AND
EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO
THE PROPRIETARY MATERIALS FURNISHED TO RECIPIENT. THERE ARE NO EXPRESS OR
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
PROVIDER DISCLAIMS ANY WARRANTY, EXPRESS OR IMPLIED, THAT THE USE OF ANY
PROPRIETARY MATERIALS WILL NOT INFRINGE ANY PATENT OR OTHER INTELLECTUAL
PROPERTY RIGHTS OF A THIRD PARTY, AND PROVIDER SHALL HAVE NO LIABILITY RELATING
THERETO EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT.
9. TERM AND TERMINATION.
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9.1 TERM. This Agreement shall commence on the Effective Date and shall
remain in effect for a period of [*] years, unless earlier terminated as
provided in this Article 9.
9.2 MATERIAL BREACH. In the event that either party commits a material
breach of any of its obligations under this Agreement and such party fails (i)
to remedy that breach within sixty (60) days after receiving written notice
thereof from the other party or (ii) to commence dispute resolution pursuant to
Article 10, within sixty (60) days after receiving written notice of that breach
from the other party, the other party may immediately terminate this Agreement
upon written notice to the breaching party. If ArQule has substantially not met
the requirements of the Production Plan for two consecutive calendar quarters,
according to objective criteria set in advance by the Steering Committee, the
parties agree that such event shall constitute a material breach under this
Agreement.
9.3 TERMINATION DUE TO ACQUISITION. If any third party which is a
competitor of Bayer shall purchase substantially all the assets of ArQule, or if
there is a change of control of ArQule. Bayer may terminate this Agreement upon
[*] days' written notice which is received by ArQule or its parent; successor,
or the surviving or new entity resulting from the business combination, as the
case may be. As used herein, the term "change of control" shall mean the
acquisition by a third party which is a competitor of Bayer of more than fifty
percent (50%) of the voting stock of ArQule.
9.4 FORCE MAJEURE. Neither party will be responsible for delays resulting
from acts beyond the control of such party, provided that the nonperforming
party uses commercially reasonable efforts to avoid or remove such causes of
nonperformance and continues performance hereunder with reasonable dispatch
whenever such causes are removed.
9.5 EFFECT OF TERMINATION. Termination of this Agreement shall not relieve
the parties of any obligation accruing prior to such termination. The following
provisions shall survive the expiration or termination of this Agreement:
Sections 3.6., 3.7., 5.4., 5.5., 5.6., 6.1., 6.2., 6.3., 9.5., 12.8., 12.10.,
and 12.13.; and Articles 4, 7, 8, 10, and 11.
10. DISPUTE RESOLUTION.
10.1 PROCEDURES MANDATORY. The parties agree that any dispute arising out
of or relating to this Agreement shall be resolved solely by means of the
procedures set forth in this Article, and that such procedures constitute
legally binding obligations that are an essential provision of this Agreement;
provided, however, that all procedures and deadlines specified in this Article
may be modified by written agreement of the parties. If either party fails to
observe the procedures of this Article, as modified by their written agreement,
the other party may bring an action for specific performance in any court of
competent jurisdiction.
10.2 DISPUTE RESOLUTION PROCEDURES.
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10.2.1 NEGOTIATION. In the event of any dispute arising out of or
relating to this Agreement, the affected party shall notify the other party, and
the Steering Committee shall attempt in good faith to resolve the matter,
subject to the approval of the senior management of both parties, within ten
(10) days after the date such notice is received by the other party (the "Notice
Date"). Any disputes not resolved by good faith discussions by the Steering
Committee shall be referred to the Chief Executive Officer of ArQule and the
Head of Pharmaceutical Research of Bayer, who shall meet at a mutually
acceptable time and location within sixty (60) days after the Notice Date and
attempt to negotiate a settlement.
10.2.2 TRIAL WITHOUT JURY. If the matter remains unresolved within
ninety (90) days after the Notice Date, each party shall have the right to
pursue any other remedies legally available to resolve the dispute, provided,
however, that the parties expressly waive any right to a jury trial in any legal
proceeding under this Section. Any legal action taken under this Section by
either party shall be brought only in a federal or state court located in the
State of New York, and the parties hereby irrevocably consent to jurisdiction in
the federal and state courts of the State of New York.
11. INDEMNIFICATION AND INSURANCE.
11.1 INDEMNIFICATION. Bayer agrees to defend, indemnify and hold ArQule,
its Affiliates and their respective directors, officers, employees, and agents
(the "Indemnitees") harmless from all costs, judgments, liabilities, and damages
assessed by a court of competent jurisdiction arising from claims asserted by a
third party against any of the Indemnitees as a result of: (i) actual or
asserted violations by Bayer or its Affiliates, sublicensees, or third party
manufacturers of any applicable law or regulation that relates to the
manufacture, distribution, or sale of any product containing an Custom Array
Compound, or any derivative or analog thereof, including without limitation any
alleged or actual claim that such product was adulterated, misbranded, or
mislabeled; (ii) claims for bodily injury, death, or property damage
attributable to the manufacture, distribution, sale, or use by Bayer or its
Affiliates, subicensees, or third party manufacturers of any product containing
an Custom Array Compound or any derivative or analog thereof; or (iii) a recall
ordered by a governmental agency, or required by a confirmed failure, of any
product containing an Custom Array Compound or any derivative or analog thereof,
that is manufactured, distributed, or sold by Bayer, its Affiliates,
sublicensees, or third party manufacturers.
11.2 PROCEDURE. The Indemnitees agree to provide Bayer with prompt written
notice of any claim, suit, action, demand, or judgment for which indemnification
is sought under this Agreement. Bayer agrees, at its own expense, to provide
attorneys reasonably acceptable to ArQule to defend against any such claim. The
Indemnitees shall cooperate fully with Bayer in such defense and will permit
Bayer to conduct and control such defense and the disposition of such claim,
suit, or action (including all decisions relative to litigation, appeal, and
settlement); provided, however, that any Indemnitee shall have the right to
retain its own counsel, at the expense of Bayer, if representation of such
Indemnitee by the counsel retained by Bayer would be inappropriate because of
actual or potential differences in the interests of such Indemnitee and any
other party represented by such counsel. Bayer agrees to keep ArQule informed of
the progress in the defense and disposition of such claim and to consult with
ArQule with regard to any proposed settlement.
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11.3 INSURANCE. Bayer shall maintain appropriate product liability
insurance or self-insurance with respect to development, manufacture, and sales
of products containing Custom Array Compounds or any derivatives or analogs
thereof, in such amount as Bayer customarily maintains with respect to sales of
its other products. Bayer shall each maintain such insurance for so long as it
continues to manufacture or sell such products, and thereafter for so long as
Bayer maintains insurance for itself covering such manufacture or sales.
12. MISCELLANEOUS.
12.1 PUBLICITY. Neither party shall reveal the terms of this Agreement or
use the name of the other party in connection with any promotional statements to
the public about the work performed under this Agreement or the relationship
between the parties. Whether in a press release, advertisement, promotional
sales literature, or other promotional oral or written statements, without the
prior written approval of the other party, which consent shall not he
unreasonably withheld or delayed, except for restatements of previously-approved
statements and disclosures required by applicable law or regulation.
12.2 RELATIONSHIP OF PARTIES. For the purposes of this Agreement, each
party is an independent contractor and not an agent or employee of the other
party. Neither party shall have authority to make any statements,
representations, or commitments of any kind, or to take any action which shall
be binding on the other party, except as may be explicitly provided for herein
or authorized in writing.
12.3 REPRESENTATIONS AND WARRANTIES. Each party represents and warrants to
the other party (i) that it has the legal right, power, and authority to enter
into this Agreement, to extend the rights and licenses granted to the other
party in this Agreement, and to fully perform its obligations under this
Agreement, and (ii) that the performance of such obligations will not conflict
with its charter documents or any agreements, contracts, or other arrangements
to which it is a party. In the event that a party becomes aware that any of its
representations and warranties under this Section become untrue during the term
of this Agreement, such party shall immediately furnish the other party with
written notice which describes the facts in reasonable detail.
12.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
12.5 HEADINGS. All headings in this Agreement are for convenience only and
shall not affect the meaning of any provision hereof.
12.6 BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective lawful successors and assigns.
12.7 ASSIGNMENT. Neither party may assign this Agreement without the prior
written consent of the other party, except that a party may assign this
Agreement to an Affiliate or to a successor in connection with the merger,
consolidation, or sale of all or substantially all of its assets or that portion
of its business pertaining to the subject matter of this Agreement.
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12.8 NOTICES. All notices, requests, demands and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be deemed to have been duly given upon the date of receipt it'
delivered by hand, recognized national overnight courier, confirmed facsimile
transmission, or registered or certified mail, return receipt requested, postage
prepaid, to the following addresses or facsimile numbers:
If to Bayer:
Bayer AG
Pharmaceuticals Business Group
Attn: International Cooperation and Licensing
Q30
D-51368 Leverkusen
Germany
with a copy (which shall not constitute notice) to:
Bayer AG
KB-RP
Attn: Patents and Licensing/Pharma
Q18
D-51368 Leverkusen
Germany
If to ArQule:
ArQule, Inc.
200 Boston Avenue
Medford, MA 02155
Attn: President
Tel: (781) 395-4100
Fax: (781) 393-8321
with a copy (which shall not constitute notice) to:
ArQule, Inc.
200 Boston Avenue
Medford, MA 02155
Attn: Legal Department
Tel: (781) 395-4100
Fax: (781) 393-8321
Either party may change its designated address and facsimile number by notice to
the other party in the manner provided in this Section.
12.9 AMENDMENT AND WAIVER. This Agreement may be amended, supplemented, or
otherwise modified at any time, but only by means of a written instrument signed
by both parties. Any waiver of any rights or failure to act in a specific
instance shall relate only to such instance
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and shall not be construed as an agreement to waive any rights or fail to act in
any other instance, whether or not similar.
12.10 GOVERNING LAW. This Agreement and the legal relations among the
parties shall be governed by and construed in accordance with the laws of the
State of New York irrespective of any conflict of laws principles.
12.11 HART-SCOTT-RODINO ACT. If required by law, the parties shall, at
their own expense, prepare and make appropriate filings under Title II of the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules
and regulations promulgated thereunder (16 C.F.R. 801.1 et. seq.) (the "Act") as
soon as reasonably practicable. The parties shall co-operate in the antitrust
clearance process and agree to furnish promptly to the FTC and the Antitrust
Division of the Department of Justice any additional information reasonably
requested by them in connection with such filings. In such event, the parties
shall delay performance under this Agreement until such time as the requirements
of the Act are met, and shall adjust the time periods for performance
accordingly.
12.12 SEVERABILITY. In the event that any provision of this Agreement
shall, for any reason, be held to be invalid or unenforceable in any respect,
such invalidity or unenforceability shall not affect any other provision hereof,
and this Agreement shall be construed as if such invalid or unenforceable
provision had not been included herein.
12.13 NON-SOLICITATION. During the term of this Agreement and thereafter
for a period of [*] years, Bayer shall not persuade or induce, or attempt to
persuade or induce, any ArQule employee to discontinue his or her employment
with ArQule in order to become employed by or associated with Bayer; its
Affiliates; or any other business, enterprise, or effort that is associated with
Bayer.
12.14 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes any
and all prior or contemporaneous oral and prior written agreements and
understandings.
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as a sealed instrument effective as of the date first above written.
BAYER A.G.
By: /s/ Dr. P. Bamelis
--------------------------------
Name: Dr. P. Bamelis
Title: Member of the Board
of Management
By: /s/ Dr. Van der Kerchhoff
--------------------------------
Name: Dr. Van der Kerchhoff
Title: Licensing Manager
ARQULE, INC.
By: /s/ Stephen Hill 09/08/99
--------------------------------
Name: Stephen Hill
Title: President and Chief
Executive Officer
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EXHIBIT A
DESCRIPTION OF [*]
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[*]
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EXHIBIT B
DESCRIPTION OF [*]
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[*]
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EXHIBIT C
OPERATIONAL PROCEDURES FOR LIBRARY EXCLUSIVITY
----------------------------------------------
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[*]
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EXHIBIT D
STANDARD PROCEDURE FOR THE AUTOMATED PROCESS DEVELOPMENT OF
-----------------------------------------------------------
CUSTOM ARRAY SETS
-----------------
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[*]
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of July 21, 1999 (the "Execution Date") by
and between ArQule, Inc., a Delaware corporation (the "Company") with its
principal offices at 200 Boston Avenue, Medford, Massachusetts 02155, and Dr.
Philippe Bey ("Executive") whose current principal residential address is One
Vail Court, Bridgewater, NJ 08807.
WHEREAS, the Company desires to employ Executive in a senior executive
capacity and to enter into an Agreement embodying the terms of such employment
(the "Agreement"); and
WHEREAS, Executive desires to accept such employment and enter into such an
Agreement;
NOW, THEREFORE, in consideration of the premises, and the mutual covenants
and agreements contained herein and for other good and valuable consideration,
the receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby agrees to employ Executive, and
Executive hereby accepts employment with the Company, upon the terms and subject
to the conditions set forth in this Agreement, for a period commencing on a
mutually acceptable date (the "Effective Date") and continuing until terminated
in accordance with the provisions of Section 5 (the "Employment Term").
2. TITLE; DUTIES. During the Employment Term, Executive shall serve as
the Chief Scientific Officer of the Company reporting directly to the Chief
Executive Officer. Within three months of the beginning of employment of
Executive, the Board of Directors (the "Board") or its designee and the
Executive shall agree upon the initial duties and responsibilities of the
Executive and such duties and responsibilities shall become part of this
Agreement and will be attached hereto as Appendix I. Subsequently, the Board or
its designee may from time to time amend such duties and responsibilities. The
Executive hereby agrees to undertake the duties and responsibilities inherent in
such position and such other duties and responsibilities as the Board or its
designee shall from time to time reasonably assign to him.
3. NO CONFLICT. During the Employment Term, Executive shall devote
substantially all of his business time and best efforts to the performance of
his duties hereunder and shall not, directly or indirectly, engage in any other
business, profession or occupation for compensation or otherwise which would
conflict with the rendition of such duties without the prior written consent of
the Board, which consent shall not unreasonably be withheld, delayed or
conditioned. Executive represents and warrants that Schedule A attached hereto
states all current business relationships, including, but not limited to,
consulting agreements, confidentiality agreements and non-competition agreements
that Executive is currently a party to.
<PAGE> 2
4. COMPENSATION AND BENEFITS.
4.1. BASE SALARY. During the Employment Term, the Company shall pay
Executive for his services hereunder a base salary (the "Base Salary") at the
initial annual rate of $240,000, payable in regular installments in accordance
with the Company's usual payment practices and subject to annual review and
adjustment by the Board in its sole discretion.
4.2. ADDITIONAL COMPENSATION.
4.2.1. STOCK OPTION. As further compensation for his services
hereunder, the Company shall grant to Executive, on or after the Effective Date,
a stock option (the "Stock Option") to purchase 170,000 (reduced to 150,000 in
the event that Executive is unable to commence employment on or before August
16th, 1999) shares of the Company's Common Stock, $0.01 par value per share (the
"Common Stock"), pursuant to the Company's Amended and Restated 1994 Equity
Incentive Plan (the "Plan") and in accordance with the terms, and subject to the
vesting schedule of twenty-five percent annually commencing on the first
anniversary of the Effective Date and other conditions, set forth in the form of
Option Certificate attached hereto as Exhibit A. The method of determining the
exercise price of such Stock Option is set forth in Exhibit B. In the event that
Executive's employment hereunder is subsequently terminated, or the scope of his
responsibilities significantly reduced, by the Company without Cause (as defined
in Section 5.2) within one year of a Change of Control of the Company (as
defined herein), the Stock Option shall become immediately exercisable as to all
option shares without regard to the vesting schedule set forth on the form of
Option Certificate.
For purposes of this Section 4.2.1, any one of the following events shall
be considered a Change of Control:
(i) the acquisition by any "person" (as such term is
defined in Section 3(a)(9) of the Securities Exchange Act of 1934) of any
amount of the Company's Common Stock so that it holds or controls fifty
percent (50%) or more of the Company's Common Stock;
(ii) a merger or consolidation after which fifty percent
(50%) or more of the voting stock of the surviving corporation is held by
persons who were not stockholders of the Company immediately prior to such
merger or combination; or
(iii) the election by the stockholders of the Company of
twenty percent (20%) or more of the directors of the Company other than
pursuant to nomination by the Company's management.
4.2.2. MILESTONE BONUS. As further compensation for his services
hereunder, the Company shall pay Executive an annual bonus (the "Bonus") of up
to $60,000, upon the achievement of certain milestones. Any Bonus due to
Executive will be paid to the Executive on the anniversary of the Effective
Date.
2
<PAGE> 3
4.3. EXECUTIVE BENEFITS. During the Employment Term and subject to any
contributions therefor generally required of senior executives of the Company,
Executive shall be entitled to receive such employee benefits (including fringe
benefits, 401(k) plan participation, and life, health, accident and disability
insurance) which the Company may, in its sole and absolute discretion, make
available generally to its senior executives, or for personnel similarly
situated; PROVIDED, HOWEVER, that it is hereby acknowledged and agreed that any
such employee benefit plans may be altered, modified or terminated by the
Company at any time in its sole discretion without recourse by Executive. In
addition, Executive shall be entitled to have up to $200,000 of life insurance,
payable to such beneficiaries as Executive may from time to time direct, paid
for by the Company.
4.4. VACATION. Executive shall be entitled to three weeks (15 working
days) of paid vacation per annum during the Employment Term, to be taken at such
time or times as shall be mutually convenient for the Company and Executive.
Unused vacation time will be allocated pursuant to the Company's existing
policies and practices.
4.5. EXPENSES.
4.5.1. RELOCATION. The Company shall reimburse Executive for (i)
reasonable relocation expenses incurred by Executive in connection with his
acceptance of employment hereunder, including moving expenses and travel
expenses incurred by Executive in travelling to his new location of employment,
up to a maximum of $75,000 in the aggregate, (ii) temporary living accommodation
at a maximum rate of $1,500 per month for up to six months from the Effective
Date, and (iii) any taxes payable by Executive (including any tax on the
gross-up) as a result of the reimbursement by the Company of Executive's
relocation expenses under this Section 4.5.1. The Company shall undertake to
assist and pay for any legal and other costs associated with any immigration
matters connected to Executive's relocation to the United States.
4.5.2. BUSINESS EXPENSES AND PERQUISITES. Executive shall be
entitled to reimbursement by the Company during the Employment Term for
reasonable travel, entertainment and other business expenses incurred by
Executive in the performance of his duties hereunder in accordance with such
policies as the Company may from time to time have in effect.
4.5.3 STOCK OPTION FULFILLMENT. The Company acknowledges that
Executive is entitled to stock appreciation rights and stock options allocated
by his current employer in 1998. If Executive is denied any amount of such
rights or options solely due to his execution of this Agreement, the Company
shall pay Executive up to, but no more than, $50,000, excluding any rights or
options actually granted by Executive's former employer.
5. TERMINATION.
5.1. WITHOUT CAUSE BY THE COMPANY. The Executive's employment
hereunder may be terminated by the Company at any time without Cause upon not
less than sixty (60) days
3
<PAGE> 4
prior written notice from the Company to Executive. If Executive's employment is
terminated by the Company without Cause due to a Change of Control, the Company
shall pay Executive a lump sum amount equal to the Base Salary plus any benefits
to which Executive is entitled under Section 4.3 of this Agreement (to the
extent permitted by the then-current terms of the applicable benefit plans and
subject to any employee contribution requirements applicable to Executive on the
date of termination) through the conclusion of a period of one year from the
date of such termination. The payment to Executive of any other benefits
following the termination of Executive's employment pursuant to this Section 5.1
shall be determined by the Board in its sole discretion in accordance with the
policies and practices of the Company.
5.2. FOR CAUSE BY THE COMPANY. Notwithstanding any other provision of
this Agreement, Executive's employment hereunder may be terminated by the
Company at any time for Cause. For purposes of this Agreement, "Cause" shall
mean (i) Executive's willful failure to perform his duties hereunder (other than
as a result of total or partial incapacity due to physical or mental illness)
for thirty (30) days after a written demand for performance is delivered to
Executive on behalf of the Company which specifically identifies the manner in
which it is alleged that Executive has not substantially performed his duties,
(ii) Executive's dishonesty in the performance of his duties hereunder, (iii) an
act or acts on Executive's part involving moral turpitude or constituting a
felony under the laws of the United States or any state thereof, or (iv)
Executive's material breach of his obligations under Section 6 and 7 hereof,
which breach shall remain uncured by Executive for thirty (30) days following
receipt of notice from the Company specifying such breach. If Executive's
employment is terminated by the Company for Cause, the Company shall pay
Executive a lump sum amount equal to the Base Salary through the last day of his
actual employment by the Company. The payment to Executive of any other benefits
following the termination of Executive's employment pursuant to this Section 5.2
shall be determined by the Board in its sole discretion in accordance with the
policies and practices of the Company.
5.3. DISABILITY. Executive's employment hereunder may be terminated by
the Company at any time in the event of the Disability of the Executive. For
purposes of this Agreement, "Disability" shall mean the inability of Executive
to perform substantially his duties hereunder due to physical or mental
disablement which continues for a period of six (6) consecutive months during
the Employment Term, as determined by an independent qualified physician
mutually acceptable to the Company and Executive (or his personal
representative) or, if the Company and Executive (or such representative) are
unable to agree on an independent qualified physician, as determined by a panel
of three physicians, one designated by the Company, one designated by Executive
(or his personal representative) and one designated by the two physicians so
designated. If Executive's employment is terminated by the Company for
Disability, the Company shall pay Executive an amount equal to the Base Salary
plus any benefits to which Executive is entitled under Section 4.3 of this
Agreement (to the extent permitted by the then-current terms of the applicable
benefit plans and subject to any employee contribution requirements applicable
to Executive on the date of termination) through the date on which Executive is
first eligible to receive payment of disability benefits in lieu of Base Salary
under the Company's employee benefit plans as then in effect. The payment to
Executive of any other benefits following the termination of Executive's
employment pursuant to this Section 5.3
4
<PAGE> 5
shall be determined by the Board in its sole discretion in accordance with the
policies and practices of the Company.
5.4. DEATH. Executive's employment hereunder shall automatically
terminate in the event of the Executive's death. If Executive's employment is
terminated by the death of Executive, the Company shall pay to Executive's
estate or legal representative an amount equal to the Base Salary at the rate in
effect at the time of Executive's death through the last day of the month in
which his death occurs. The payment to Executive of any other benefits following
the termination of Executive's employment pursuant to this Section 5.4 shall be
determined by the Board in its sole discretion in accordance with the policies
and practices of the Company.
5.5. TERMINATION BY EXECUTIVE. Executive's employment hereunder may be
terminated by Executive at any time upon not less than sixty (60) days prior
written notice from Executive to the Company. If Executive terminates his
employment with the Company pursuant to this Section 5.5, the Company shall pay
Executive an amount equal to the Base Salary through the last day of his actual
employment by the Company.
5.6. NOTICE OF TERMINATION. Any purported termination of employment by
the Company or by Executive shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 9 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so indicated.
5.7. SURVIVAL. The provisions of Sections 6 and 7 shall survive the
termination of this Agreement.
6. NON-COMPETITION. Executive acknowledges and recognizes the highly
competitive nature of the businesses of the Company and accordingly agrees that
during the Employment Term and for a period of one (1) year after expiration or
termination of Executive's employment hereunder:
6.1. Executive will not engage in any activity which is competitive
with any business which is now, or is at any time during the Employment Term,
conducted by the Company, including without limitation becoming an employee,
investor (except for passive investments of not more than one percent (1%) of
the outstanding shares of, or any other equity interest in, a company or entity
listed or traded on a national securities exchange or in an over-the-counter
securities market), officer, agent, partner or director of, or other participant
in, any firm, person or other entity in any geographic area which is engaged in
any activities in the field of combinatorial chemistry. Notwithstanding any
provision of this Agreement to the contrary, upon the occurrence of any breach
of this Section 6.1, if Executive is employed by the Company, the Company may
immediately terminate the employment of Executive for Cause in accordance with
the notice provisions contained in Sections 5.6 and 9, and, whether or not
Executive is employed by the Company, the Company shall immediately cease to
have any obligations to make payments to Executive under this Agreement.
5
<PAGE> 6
6.2. Executive will not directly or indirectly assist others in
engaging in any of the activities in which Executive is prohibited to engage by
clause 6.1 above.
6.3. Executive will not directly or indirectly (a) induce any employee
of the Company to engage in any activity in which Executive is prohibited from
engaging by clause 6.1 above or to terminate his or her employment with the
Company, or (b) employ or offer employment to any person who was employed by the
Company unless such person shall have ceased to be employed by the Company for a
period of at least one (1) year.
6.4. It is expressly understood and agreed that (a) although Executive
and the Company consider the restrictions contained in this Section 6 to be
reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in
this Agreement is unenforceable, this Agreement shall not be rendered void but
shall be deemed to be enforceable to such maximum extent as such court may
judicially determine or indicate to be enforceable and (b) if any restriction
contained in this Agreement is determined to be unenforceable and such
restriction cannot be amended so as to make it enforceable, such finding shall
not affect the enforceability of any of the other restrictions contained herein.
7. CONFIDENTIALITY. Executive will not at any time (whether during or
after his employment with the Company) disclose or use for his own benefit or
purposes or the benefit or purposes of any other person, firm, partnership,
joint venture, association, corporation or other organization, entity or
enterprise other than the Company, any Confidential Information. As used herein,
the term "Confidential Information" shall mean, without limitation, all
Proprietary Materials (as defined below), any and all information about
inventions, improvements, modifications, discoveries, costs, profits, markets,
sales, products, key personnel, pricing policies, operational methods, concepts,
technical processes and applications, and other business affairs and methods of
the Company and of its affiliates, collaborators, consultants, suppliers, and
customers, as well as any other information not readily available to the public,
including without limitation any information supplied by third parties to the
Company under an obligation of confidence. As used in this Agreement
"Proprietary Materials" shall include, without limitation, the following
materials: any and all reagents, substances, chemical compounds, subcellular
constituents, cells or cell lines, organisms and progeny, and mutants, as well
as any and all derivatives or replications derived from or relating to such
materials. Confidential Information may be contained in various media, including
without limitation patent applications, computer programs in object and/or
source code, flow charts and other program documentation, manuals, plans,
drawings, designs, technical specifications, laboratory notebooks, supplier and
customer lists, internal financial data, and other documents and records of the
Company, whether or not in written form and whether or not labeled or identified
as confidential or proprietary. Executive further agrees that (a) upon
termination or expiration of his employment hereunder, Executive will return
immediately to the Company any Proprietary Materials and any materials
containing Confidential Information then in Executive's possession or under
Executive's control and (b) he will not retain or use for his account at any
time any trade name, trademark or other proprietary business designation used or
owned in connection with the business of the Company.
6
<PAGE> 7
8. SPECIFIC PERFORMANCE. Executive acknowledges and agrees that the
Company's remedies at law for a breach or threatened breach of any of the
provisions of Section 6 or Section 7 would be inadequate and, in recognition of
this fact, Executive agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the Company, without posting any
bond, shall be entitled to obtain equitable relief in the form of specific
performance, temporary restraining orders, temporary or permanent injunctions or
any other equitable remedy which may then be available.
9. NOTICES. Any notice hereunder by either party to the other shall be
given in writing by personal delivery, telex, telecopy or registered mail,
return receipt requested, addressed, if to the Company, to the attention of
Chairman of the Board at the Company's executive offices or to such other
address as the Company may designate in writing at any time or from time to time
to the Executive, and if to the Executive, to his most recent address on file
with the Company. Notice shall be deemed given, if by personal delivery, on the
date of such delivery or, if by telex or telecopy, on the business day following
receipt of answer back or telecopy information or, if by registered mail, on the
date shown on the applicable return receipt.
10. ASSIGNMENT. This Agreement may not be assigned by either party without
the prior written consent of the other party. The Company shall require any
persons, firm or corporation succeeding to all or substantially all of the
business or assets of the Company whether by purchase, merger or consolidation
to expressly assume and agree to perform this Agreement.
11. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the Company and Executive with respect to the subject matter thereof and there
have been no oral or other agreements of any kind whatsoever as a condition
precedent or inducement to the signing of this Agreement or otherwise concerning
this Agreement or the subject matter hereof.
12. EXPENSES. Each party shall pay its own expenses incident to the
performance or enforcement of this Agreement, including all fees and expenses of
its counsel for all activities of such counsel undertaken pursuant to this
Agreement, except as otherwise herein specifically provided. If any action at
law or equity is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reimbursement of reasonable attorney's
fees and other costs incurred by such party in connection with such action, in
addition to any other relief to which such party is entitled.
13. ARBITRATION. In the event any dispute shall arise between the Company
and the Executive with respect to any of the terms and conditions of this
Agreement, then such dispute shall be submitted and finally settled by
arbitration in Boston, Massachusetts under the rules of the American Arbitration
Association. The award rendered by the arbitrator shall be final and binding
upon the parties hereto, and judgment upon the award rendered may be entered by
either party in any court that would ordinarily have jurisdiction over the
parties or the subject matter of the controversy or claim. Each party shall pay
its own expenses incident to such arbitration, including attorneys' fees. The
parties agree not to institute any litigation or proceedings against each other
in connection with this Agreement except as provided in this Section 13.
7
<PAGE> 8
14. WAIVERS AND FURTHER AGREEMENTS. Any waiver of any terms or conditions
of this Agreement shall not operate as a waiver of any other breach of such
terms or conditions or any other term or condition, nor shall any failure to
enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof; provided, however, that no such written wavier, unless
it, by its own terms, explicitly provides to the contrary, shall be construed to
effect a continuing waiver of the provision being waived and no such waiver in
any instance shall constitute a waiver in any other instance or for any other
purpose or impair the right of the party against whom such waiver is claimed in
all other instances or for all other purposes to require full compliance with
such provision. Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action as the other party
may reasonably require in order to effectuate the terms and purposes of this
Agreement.
15. AMENDMENTS. This Agreement may not be amended, nor shall any waiver,
change, modification, consent or discharge be effected except by an instrument
in writing executed by or on behalf of the party against whom enforcement of any
waiver, change, modification, consent or discharge is sought.
16. SEVERABILITY. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and in pleading or
proving any provision of this Agreement, it shall not be necessary to produce
more than one of such counterparts.
18. SECTION HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
19. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the law (other than the law governing conflict of
law questions) of the Commonwealth of Massachusetts.
<PAGE> 9
IN WITNESS WHEREOF, the parties have been executed or caused to be executed this
Agreement as of the date first above written.
ARQULE, INC.
By: /s/ Stephen A. Hill 7/22/99
-------------------------------
Name: Stephen A. Hill
Title: President
/s/ Philippe Bey
----------------------------------
Dr. Philippe Bey
9
<PAGE> 10
SCHEDULE A
----------
BUSINESS RELATIONSHIPS
----------------------
10
<PAGE> 11
EXHIBIT A
---------
OPTION CERTIFICATE
11
<PAGE> 12
EXHIBIT B
---------
DETERMINATION OF OPTION PRICE
Executive shall have the choice of having either one of the following exercise
prices:
(1) The Fair Market Value of ArQule's Common Stock (as defined below) as of the
date of signing by Executive of a letter of intent to join ArQule, namely June
28th, 1999 in which case the stock options granted to the Executive may not
qualify as "Incentive Stock Options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"); or
(2) The Fair Market Value of ArQule's Common Stock (as defined below) as of the
date the Board of Directors grants the stock options to the Executive (by
written consent or at a meeting) which is either on or after the Effective Date,
in which case some of the stock options granted to the Executive may qualify as
"Incentive Stock Options" under Section 422 of the Code, as permitted under the
Code.
The Fair Market Value of ArQule's Common Stock shall be the closing price of the
Common Stock as reported by the Nasdaq National Market on the trading day
immediately prior to the appropriate date discussed above.
12
<PAGE> 1
EXHIBIT 11.1
ArQule, Inc.
Statement Re Computation of Unaudited Net Loss Per Share
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
(Unaudited) (Unaudited)
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $ (3,657) $ (3.283) $(11,217) $ (3,850)
======== ========= ======== ========
Weighted average shares outstanding:
Common Stock 12,715 12,112 12,522 11,999
Weighted average common shares outstanding 12,715 12,112 12,522 11,999
======== ========= ======== ========
Net loss per share - basic and diluted $ (0.29) $ (0.27) $ (0.90) $ (0.32)
======== ========= ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 7,033
<SECURITIES> 33,973
<RECEIVABLES> 3,001
<ALLOWANCES> 0
<INVENTORY> 562
<CURRENT-ASSETS> 45,002
<PP&E> 43,727
<DEPRECIATION> 13,277
<TOTAL-ASSETS> 77,216
<CURRENT-LIABILITIES> 11,747
<BONDS> 0
0
0
<COMMON> 127
<OTHER-SE> 44,109
<TOTAL-LIABILITY-AND-EQUITY> 77,216
<SALES> 13,463
<TOTAL-REVENUES> 13,463
<CGS> 12,685
<TOTAL-COSTS> 25,816
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,136
<INCOME-PRETAX> (11,217)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,217)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,217)
<EPS-BASIC> (0.90)
<EPS-DILUTED> (0.90)
</TABLE>
