Research & Development Agreement

RESEARCH & DEVELOPMENT AGREEMENT





This Agreement is entered into effective as of March 10, 1995 (the "Effective Date") between PHARMACIA BIOTECH AB ("Pharmacia"), a Swedish corporation having its principal offices at Bjorkgatan 30, S-751 82 Uppsala, Sweden and ARQULE, INC. ("ArQule"), a Delaware corporation having its principal offices at 200 Boston Avenue, Suite 3600, Medford, MA 02155, USA.



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A. ArQule has developed certain technologies that Pharmacia believes may

be useful in the development of products in the areas of

* .



B. Pharmacia and ArQule have entered into an Option Agreement, dated as of

the Effective Date, which grants to Pharmacia the right to acquire

certain exclusive rights to use the ArQule technologies and

improvements to make, use, and sell products in these business areas.



C. Pharmacia desires to evaluate whether the ArQule technology would

contribute to the development of products in these business areas, and

ArQule desires to give Pharmacia the opportunity to conduct such an



D. ArQule is willing to perform this technology evaluation, with the

assistance and funding of Pharmacia, subject to the terms and

conditions set forth herein.



NOW, THEREFORE, in consideration of the foregoing and the covenants and promises contained herein, Pharmacia and ArQule agree as follows:



SECTION 1. DEFINITIONS



The following definitions shall control the construction of this Agreement wherever they appear:



1.1 "AFFILIATE" shall mean any company or other legal entity which controls, is controlled by, or is under common control with either party. A company or other legal entity shall be presumed to control another if it owns fifty percent (50%) or more of the outstanding voting equity or assets of the other company or entity.



1.2 "ARQULE TECHNOLOGY" shall mean all of the patents and patent applications listed in Enclosure 1 hereto and all corresponding foreign patents and patent applications and all









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continuations, continuations-in-part, and divisions thereof, as well as all of the Proprietary Materials and unpatented know-how and trade secrets relating thereto.



1.3 "BIOMOLECULES" shall mean amino acids, peptides, proteins, nucleic acids (nucleotides, oligonucleotides, polynucleotides), carbohydrates (monosaccharides, oligosaccarides, polysaccharides), lipids, phospholipids, or any combination of such molecules, whether produced by natural means or by organic synthesis in solution or using solid phase technologies.



1.4 "COMMENCEMENT DATE" shall mean April 1, 1995.



1.5 "CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section 7.1.



1.6 "CONTRIBUTED TECHNOLOGY" shall mean all patents, patent applications, Proprietary Materials, know-how, and trade secrets that Pharmacia may legally provide to ArQule and which relate to or are useful for the development of the ArQule Technology for applications in the Field of Applications.



1.7 "DERIVATIVES" shall mean any molecules that are chemical derivatives or analogues of Biomolecules or Natural Products.



1.8 "FIELD OF APPLICATIONS" shall mean





*





1.9 "IMPROVEMENT" shall mean any improvement, change, addition, upgrade, or modification to the ArQule Technology or Contributed Technology that either party discovers or develops in the course of any Research Project.



1.10 "NATURAL PRODUCTS" shall mean all molecules (other than Biomolecules) that are the naturally occurring products of biosynthesis in living cells or are produced by isolated cellular components outside of living cells, whether by natural means or by organic synthesis in solution or using solid phase technologies. This definition is intended to include subcellular components and viral particles. Examples of Natural Products are vitamins, steroid hormones, and various cofactors.



1.11 "OPTION AGREEMENT" shall mean a certain Option Agreement between the parties, dated as of the Effective Date, which is attached to this Agreement as Enclosure 2.



1.12 "PROJECT LEADER" shall have the meaning set forth in Section 2.3.



1.13 "PROJECT PLAN" shall mean a comprehensive plan of research that the parties intend to conduct under this Agreement, as amended from time to time by the Research Committee. The Project Plan will contain a description of current Research Projects, payments for each







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Research Project, and personnel for each Research Project. The initial Project Plan is attached as Enclosure 3 to this Agreement.



1.14 "PROPRIETARY MATERIALS" shall have the meaning set forth in Section 7.2.



1.15 "RESEARCH COMMITTEE" shall have the meaning set forth in Section 4.1.



1.16 "RESEARCH PERIOD" shall mean the six-month period during which the parties conduct each Research Project.



1.17 "RESEARCH PROJECT" shall mean the research planned for a particular Subfield during a Research Period. The initial Research Project, for Subfield I, is described in the initial Project Plan. Subsequent Research Projects for Subfield I or any other Subfield will be established by the Research Committee in accordance with the procedures set forth below.



1.18 "SUBFIELD I" shall mean









*













1.19 "SUBFIELD II" shall mean









*













1.20 "SUBFIELD III" shall mean









*













1.21 "SUBFIELD IV" shall mean



*











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*









SECTION 2. RESEARCH ACTIVITIES



2.1 Initial Research Project. The initial Research Project relating to Subfield I shall be described in the Project Plan attached to this Agreement on the Effective Date. As further described below, the initial Project Plan shall also provide for a description of the resources that each party will commit to the initial Research Project, specifically including personnel.



2.2 Establishment of Subsequent Research Projects. After the completion of the initial Research Project, Pharmacia may elect to fund subsequent Research Projects in one or more Subfields during subsequent Research Periods in accordance with the procedures set forth in the Option Agreement. If Pharmacia elects to fund one or more additional Research Projects, the Research Committee shall amend the Research Plan to provide for (i) a description of each Research Project, including without limitation overall goals, specific goals, priorities, and time schedules, (ii) payments to ArQule for each Research Project, and (iii) a description of the resources that each party will commit to each Research Project. Each amended Research Plan shall be adopted by the Research Committee during the time periods specified in the Option Agreement, and then attached to this Agreement as an addition to Enclosure 3.



2.3 Conduct of Research Projects. During the term of this Agreement, ArQule agrees to use commercially reasonable efforts to conduct all Research Projects in accordance with the Project Plan and as directed by the Research Committee. Pharmacia agrees to provide reasonable assistance to ArQule in the conduct of the Research Projects in accordance with the Project Plan and as directed by the Research Committee. ArQule and Pharmacia each agree that the ArQule Technology and the Contributed Technology may be used as reasonably required to perform any Research Project, and each party further agrees to effect the transfer of such required technology upon request. ArQule agrees to use the Contributed Technology only for the purposes set forth in this Agreement. Each party shall designate a project leader (the "Project Leaders") who shall have primary responsibility over (i) the performance of the Research Project by such party and (ii) coordination of efforts with the other party. The Project Leaders shall report directly to the Research Committee. The Project Leaders for each Research Project shall be identified in the Project Plan; provided, however, that each party shall have the right to change its Project Leaders upon thirty (30) days written notice to the other party. All Project Leaders designated by a party must be approved by the other party, provided that such approval may not be unreasonably withheld.



2.4 Personnel. In addition to the Project Leaders, each party agrees to assign to each Research Project such qualified and competent members of its staff as may be required to achieve the aims and goals set forth for such Research Project. All such commitments of personnel shall be listed in the Project Plan, as amended from time to time. ArQule agrees to commit a total of * full-time equivalents to the initial Research Project and





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Pharmacia agrees to commit a total of * full-time equivalents to such Research Project, as further described in the Project Plan. Upon the completion of each Research Project, ArQule agrees to provide Pharmacia with a written summary of time committed by ArQule personnel to such Research Project.



2.5 Compliance. In conducting each Research Project, each party shall use reasonable efforts (i) to ensure that each Research Project will comply with all technical and other requirements set out in the Project Plan, as adjusted by the Research Committee, (ii) to generate and maintain adequate documentation describing in sufficient detail the results of each Research Project, and (iii) to conduct each Research Project in accordance with all applicable laws and regulations.



SECTION 3. PAYMENTS



Pharmacia agrees to pay ArQule a total of * Dollars

* on the Effective Date in accordance with the Project Plan for performance of the initial Research Project. Thereafter, in consideration of the performance of each Research Project, Pharmacia agrees to pay ArQule the amount set forth in the Project Plan prior to the commencement of the Research Period for that Research Project. All such payments shall be nonrefundable.



SECTION 4. MANAGEMENT AND REPORTING



4.1 Composition and Duties of Research Committee. Prior to the Commencement Date, each party shall designate two (2) of its employees or consultants to serve as members of a committee that will supervise and direct all Research Projects, report on results of all Research Projects, and adopt amendments to the Project Plan (the "Research Committee"). If any Project Leader is not a member of the Research Committee, such Project Leader shall attend all meetings of the Research Committee as an observer. Other personnel of either party may attend meetings of the Research Committee as observers with the consent or invitation of the Research Committee. The initial members of the Research Committee from both Pharmacia and ArQule are named in Enclosure 4 hereto. Either party may change the individuals so named upon thirty (30) days written notice to the other party.



4.2 Meetings of Research Committee. The Research Committee will meet at least once each calendar month. Members of the Research Committee may participate either in person or by telephone. If a designated representative of a party cannot attend any 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. All decisions of the Research Committee will require the vote of a majority of its members. If the Research Committee cannot reach agreement on any matter, the matter will be resolved in accordance with the procedures set forth in Section 9.9 below.



4.3 Reports. The Research Committee and/or the applicable Project Leaders shall prepare and submit the following reports to the management of each of the parties:





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(a) within ten (10) days of the end of every calendar month, a

management report that describes the progress of each of the current

Research Projects, the significant results obtained for such Research

Projects, deviations of the Research Project from the description

provided in the Project Plan, and recommended modifications to the

Research Project for the subsequent one-month period; and



(b) within ten (l0) days of the completion, cessation, or termination

of any Research Project, a final report that describes in full detail

(i) the work completed in the course of the Research Project and (ii)

the significant results obtained for the Research Project.



4.4 Meetings. The Research Committee shall organize bi-monthly meetings for the purpose of reporting on the progress of each Research Project and planning for the future conduct of each Research Project. Such meetings shall be held at alternating locations suitable to both parties or by teleconferences, and shall be attended by appropriate management individuals from both Pharmacia and ArQule.



SECTION 5. TERM AND TERMINATION



5.1 Term. This Agreement shall commence on the Effective Date and shall terminate upon the expiration or termination of the Option Agreement, unless earlier terminated in accordance with this Section 5.



5.2 Termination for Breach. If either Pharmacia or ArQule breaches any representation made herein or fails to abide by any of the material terms of this Agreement, the other party shall have the right to terminate this Agreement upon sixty (60) days' prior written notice to the defaulting party specifying the default; provided, however, that if said defaulting party cures the default within the said sixty (60) day period, this Agreement shall continue in full force and effect as if no default had occurred.



5.3 Personal Services. In addition to, and independent of, the right of Pharmacia to terminate this Agreement under Section 5.2, if (i) proceedings in bankruptcy or insolvency are instituted by or against ArQule, or a receiver is appointed for ArQule, or if any substantial part of the assets of ArQule is the ...