COLLABORATION AND LICENSE AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS

 

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

 

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

 

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

 

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

 

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

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1.50                         “Territory” means the entire world.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS

 

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

 

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

 

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

 

2.                                       RESEARCH PROGRAM  AND COMMITTEE STRUCTURE

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS

 

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

 

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

 

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

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS

 

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

 

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

 

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

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS

 

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

 

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

 

3.                                       DEVELOPMENT OF DEVELOPMENT COMPOUNDS

 

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

 

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

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS

 

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

 

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

 

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

 

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

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS

 

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

 

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

 

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

 

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

 

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

 

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

 

3.6                                Arena Conduct of Early Development .

 

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

 

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

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS

 

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

 

3.7                                Development Diligence.

 

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

 

 

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

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS MARKED BY ASTERISKS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4.                                       COMMERCIALIZATION OF COLLABORATION PRODUCTS

 

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

 

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

 

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

 

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

 

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5.                                       LICENSES AND RELATED RIGHTS AND OBLIGATIONS

 

5.1                                License Grants.

 

(a)                                   By Arena.

 

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

 

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

 

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

 

(b)                                   By J&J.  Subject to the terms and conditions of this Agreement, J&J hereby grants to Arena and its Affiliates, during the Research Term, a non-exclusive, worldwide, royalty-fre