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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.
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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.
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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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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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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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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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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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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:
Contract Year Payment
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1st [*]
2nd [*]
3rd [*]
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:
Contract Year Success Fee Per Compound Aggregate Success Fees
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1st [*] [*]
2nd [*] [*]
3rd [*] [*]
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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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 ten (10) 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 three (3) 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
ninety (90) 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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*Confidential treatment has been requested for the marked portion.
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EXHIBIT B
DESCRIPTION OF [*]
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*Confidential treatment has been requested for the marked portion.
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[*]
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*Confidential treatment has been requested for the marked portion.
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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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*Confidential treatment has been requested for the marked portion.
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