8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 24, 2005

ARQULE, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	000-21429	04-3221586
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

19 Presidential Way
Woburn, MA

(Address of principal executive offices)

01801

(Zip code)

(781) 994-0300

(Registrant’s telephone number, including area code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 8. – Other Events

Item 8.01. Other Events

     On December 23, 2003 the Securities and Exchange Commission (the “Commission”) declared effective the Registration Statement on Form S-3 (File No. 333-11181) (the “Registration Statement”) of ArQule, Inc. (the “Company”), which permits the Company to issue up to an aggregate of $50,000,000 of common stock. The prospectus dated December 23, 2003 included in the Registration Statement (the “Prospectus”).

     On January 25, 2005 the Company issued a press release announcing that it had entered into an agreement to sell on an agency basis up to 5,788,095 shares of the Company’s common stock at a price of $5.25 per share (the “Shares”). J.P. Morgan Securities Inc. is acting as placement agent in connection with the offering of the Shares. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

     The Company filed with the Commission on January 25, 2005 the Prospectus, together with a supplement to the Prospectus, dated January 24, 2005 (the “Prospectus Supplement”) relating to the issuance and sale of the Shares. In connection with the filing of the Prospectus and Prospectus Supplement with the Commission and the offering of the Shares, the Company is filing the Placement Agent Agreement relating thereto as part of this Current Report on Form 8-K as Exhibit 99.2. The Company is also filing the form of Subscription Agreement and the Escrow Agreement as Exhibits 99.3 and 99.4 respectively.

Section 9. – Financial Statements and Exhibits

Item 9.01(c) Exhibits

99.1	Press Release dated January 25, 2005
99.2	Placement Agent Agreement dated January 24, 2005, by and among ArQule, Inc. and J.P. Morgan Securities Inc.
99.3	Form of Subscription Agreement
99.4	Escrow Agreement dated January 24, 2005, by and among JPMorgan Chase Bank, N.A., ArQule Inc., and J.P. Morgan Securities Inc.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ARQULE, INC. (Registrant)
	/s/ J. David Jacobs J. David Jacobs Vice President, Legal &     General Counsel

Date: January 25, 2005

EX-99.1

Exhibit 99.1

Contacts:
Dr. Stephen A. Hill, CEO
Louise A. Mawhinney, CFO
(781) 994-0300
www.ArQule.com

ARQULE TO RAISE UP TO $31 MILLION

Woburn, Mass., Jan. 25, 2005 – ArQule, Inc. (NASDAQ: ARQL) today announced that it has entered into subscription agreements for the sale, in a registered direct offering, of shares of its common stock at $5.25 per share. The transaction is expected to provide aggregate gross proceeds of up to $31 million to ArQule. The shares of common stock offered by ArQule in this transaction were registered under the Company’s existing shelf registration statement on Form S-3, which was declared effective by the Securities and Exchange Commission on December 23, 2003. The closing is expected to occur on January 28, 2005.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

About ArQule

ArQule, Inc. is a biotechnology company engaged in research and development of next-generation small-molecule cancer therapeutics based on its innovative Activated Checkpoint Therapy^SM (ACT^SM) platform. ACT^SM compounds are intended to improve the way cancer patients are treated because they selectively kill cancer cells and spare normal cells by restoring and activating cellular checkpoints that are defective in cancer. In addition to advancing its own programs, ArQule continues to advance the drug discovery efforts of pharmaceutical collaborators by providing high-quality library design and compound production, including collaborations with Pfizer and Novartis. For more information, please visit www.ArQule.com.

This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which provides a safe harbor for forward-looking statements made by or on behalf of ArQule. Actual results may differ materially

from those projected in the forward-looking statements or historical performance due to numerous risks and uncertainties that exist in ArQule’s operations, development efforts and the business environment, including without limitation: the ACT^SM platform may not improve efficacy or reduce toxicity and compounds resulting from the platform may not operate as intended; the preclinical efforts associated with the ACT^SM pipeline may fail or prove disappointing; collaborators may terminate their agreements with ArQule because ArQule may fail to satisfy the collaborators’ needs or for other reasons; and, the risks and uncertainties described in ArQule’s Form 10-Q filed with the Securities and Exchange Commission on November 9, 2004, its Form 10-Q filed with the Commission on August 4, 2004, its Form 10-Q filed with the Commission on May 7, 2004 and its Form 10-K filed with the Commission on March 12, 2004. The forward-looking statements contained herein represent the judgment of ArQule as of the date of this report. ArQule disclaims any intent or obligation to update any forward-looking statement except to the extent required by law.

# # #

EX-99.2

Exhibit 99.2

ARQULE, INC.

5,788,095 Shares of Common Stock, $.01 par value per share

PLACEMENT AGENT AGREEMENT

January 24, 2005

J.P. Morgan Securities Inc.
277 Park Avenue, 3^rd Floor
New York, New York 10172

Dear Sir or Madam:

     ArQule, Inc., a Delaware corporation (the “Company”), proposes to sell to certain purchasers (each a “Purchaser” and, collectively, the “Purchasers”), pursuant to the terms of this Placement Agent Agreement (this “Agreement”), an aggregate of up to 5,788,095 shares of Common Stock, par value $.01 per share (the “Common Stock”), of the Company. The aggregate of 5,788,095 shares so proposed to be sold is hereinafter referred to as the “Stock.” The Company hereby confirms its agreement with J.P. Morgan Securities Inc. (“JPMorgan”) as follows (certain terms used herein are defined in Section 13 hereof):

     1. AGREEMENT TO ACT AS PLACEMENT AGENT; PLACEMENT OF SECURITIES. On the basis of the representations, warranties and agreements of the Company herein contained, and subject to all the terms and conditions of this Agreement:

     (a) The Company hereby authorizes JPMorgan (in such capacity, the “Placement Agent”) to act as its exclusive agent to solicit offers for the purchase of all or part of the Stock from the Company in connection with the proposed offering of the Stock (the “Offering”). Prior to the earlier of (i) the date on which this Agreement is terminated and (ii) the Closing Date (as defined in Section 3), the Company shall not, without the prior consent of the Placement Agent, solicit or accept offers to purchase Stock (other than pursuant to the exercise of options or warrants to purchase shares of Common Stock that are outstanding at the date hereof) otherwise than through the Placement Agent.

     (b) The Placement Agent agrees, as agent of the Company, to use its best commercially practicable efforts to solicit offers to purchase the Stock from the Company on the terms and subject to the conditions set forth in the Base Prospectus (as defined below) and the Prospectus Supplement (as defined below). The Placement Agent agrees to use its best commercially practicable efforts to assist the Company in obtaining performance by each Purchaser whose offer to purchase Stock has been solicited by the Placement Agent and accepted by the Company, but the Placement Agent shall not, except to facilitate such acceptance by the Company or as otherwise provided in this Agreement, be obligated to disclose the identity of any potential purchaser. The Placement Agent shall not have any liability to the Company in the event any such purchase is not consummated for any reason. Under no circumstances will the Placement Agent be obligated to purchase any Stock for its own account and, in soliciting purchases of Stock, the Placement Agent shall act solely as the Company’s agent and not as principal.

     (c) Subject to the provisions of this Section 1, offers for the purchase of Stock may be solicited by the Placement Agent as agent for the Company at such times and in such amounts as the Placement Agent deems advisable. The Placement Agent shall communicate to the Company, orally or in writing, each reasonable offer to purchase Stock received by it as agent of the Company. The Company shall have the sole right to accept offers to purchase the Stock and may reject any such offer, in whole or in part. The Placement Agent shall have the right, in its discretion reasonably exercised, without notice to the Company, to reject any offer to purchase Stock received by it, in whole or in part, and any such rejection shall not be deemed a breach of its agreement contained herein.

     (d) Concurrently with the execution and delivery of this Agreement, the Company, the Placement Agent and JPMorgan Chase Bank, N.A., as escrow agent (the “Escrow Agent”), shall enter into an Escrow Agreement substantially in the form of Exhibit A attached hereto (the “Escrow Agreement”), pursuant to which an escrow account will be established, at the Company’s expense, for the benefit of the Company and the Purchasers (the “Escrow Account”). Prior to the Closing Date, each of the Purchasers will deposit in the Escrow Account an amount equal to the price per share for the Stock set forth on the cover page of the Prospectus Supplement multiplied by the number of shares of Stock to be purchased by such Purchaser (the “Escrow Funds”).

     (e) As compensation for services rendered, on the Closing Date the Company shall pay to the Placement Agent by wire transfer of immediately available funds to an account or accounts designated by the Placement Agent, an amount equal to six percent (6%) of the gross proceeds received by the Company from the sale of the Stock.

     (f) No Stock which the Company has agreed to sell pursuant to this Agreement shall be deemed to have been purchased and paid for, or sold by the Company, until such Stock shall have been delivered to the Purchaser thereof against payment by such Purchaser. If the Company shall default in its obligations to deliver Stock to a Purchaser whose offer it has accepted, and from which it has received payment for such Stock, the Company shall indemnify and hold the Placement Agent harmless against any loss, claim or damage arising from or as a result of such default by the Company.

     2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to, and agrees with, the Placement Agent and the Purchasers that:

     (a) The Company meets the requirements for use of Form S-3 under the Securities Act of 1933, as amended (the “Securities Act”), and has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on such Form (Registration File No. 333-111181), which became effective as of December 23, 2003, for the registration under the Securities Act of the Stock for the transactions described therein, including the Offering. Such registration statement meets the requirements set forth in Rule 415(a)(1)(x) under the Securities Act and complies in all other material respects with said Rule. The Company will file with the

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Commission, pursuant to Rule 424(b) under the Securities Act, a supplement to the form of prospectus included in such registration statement relating to the Offering and has provided the Placement Agent with a copy of such supplement. Such registration statement, including the exhibits thereto, as amended at the date of this Agreement, is hereinafter called the “Registration Statement;” such prospectus in the form in which it appears in the Registration Statement is hereinafter called the “Base Prospectus;” and the supplemented form of prospectus, in the form in which it will be filed with the Commission pursuant to Rule 424(b) under the Securities Act and the rules and regulations of the Commission promulgated thereunder (the “Rules and Regulations”) (including the Base Prospectus as so supplemented) is hereinafter called the “Prospectus Supplement.” Any reference herein to the Registration Statement, the Base Prospectus or the Prospectus Supplement shall be deemed to refer to and include the documents incorporated by reference therein (the “Incorporated Documents”) pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on or before the date of this Agreement, or the issue date of the Base Prospectus or the Prospectus Supplement, as the case may be; and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, the Base Prospectus or the Prospectus Supplement shall be deemed to refer to and include the filing by the Company of any document under the Exchange Act after the date of this Agreement, or the issue date of the Base Prospectus or the Prospectus Supplement, as the case may be, on or before the Closing Date (as defined below), incorporated or deemed to be incorporated therein by reference. All references in this Agreement to financial statements and schedules and other information which is “contained,” “included,” “described,” “set forth” or “stated” in the Registration Statement, the Base Prospectus or the Prospectus Supplement (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is or is deemed to be incorporated by reference in the Registration Statement, the Base Prospectus or the Prospectus Supplement, as the case may be. No stop order suspending the effectiveness of the Registration Statement or the use of the Base Prospectus or the Prospectus Supplement has been issued, and, to the Company’s knowledge, no proceeding for any such purpose is pending, has been initiated or is threatened by the Commission.

     (b) The Registration Statement contains all exhibits and schedules required by the Securities Act. The Registration Statement, at the time it became effective, complied in all material respects with the Securities Act and the Exchange Act and the applicable Rules and Regulations and did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Each of the Base Prospectus and the Prospectus Supplement, as of its respective date, complies or will comply, as the case may be, in all material respects with the Securities Act and the Exchange Act and the applicable Rules and Regulations. The Base Prospectus and the Prospectus Supplement, taken as a whole, as amended or supplemented, will not contain as of the date of the Prospectus Supplement and the Closing Date, any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Incorporated Documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the applicable rules and regulations promulgated thereunder, and none of such documents, when they were filed with the Commission, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the

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statements therein, in light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Base Prospectus or Prospectus Supplement prior to the consummation of the Offering, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act and the applicable rules and regulations promulgated thereunder, as applicable, and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, the Company makes no representations or warranties in this Section 2(b) with respect to statements or omissions made in reliance upon and in conformity with the Placement Agent’s Information (as defined in Section 15). No post-effective amendment to the Registration Statement reflecting any facts or events arising after the effective date thereof which represent, individually or in the aggregate, a fundamental change in the information set forth therein is required to be filed with the Commission.

     (c) The Company has not distributed and will not distribute, prior to the completion of the distribution of the Stock, any offering material in connection with the offering and sale of the Stock other than the Base Prospectus and the Prospectus Supplement or the Registration Statement and copies of the documents incorporated by reference therein.

     (d) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, has full corporate power and corporate authority to own or lease its properties and conduct its business as described in the Registration Statement, the Base Prospectus or the Prospectus Supplement and as now being conducted, and is duly qualified as a foreign corporation and in good standing in all jurisdictions in which the character of the property owned or leased or the nature of the business transacted by it makes qualification necessary, except where failure to be so qualified would not reasonably be expected to have a material adverse effect on the business, properties, financial condition or results of operations of the Company and its subsidiary taken as a whole (a “Material Adverse Effect”). Except as disclosed in the Registration Statement and on Schedule 2(d) to this Agreement, the Company does not own, and at the Closing Date will not own, directly or indirectly, any shares of stock or any other equity or long term debt securities of any corporation or have any equity interest in any firm, partnership, joint venture, association or other entity. ArQule U.K., Ltd., a company organized under the laws of the United Kingdom, is the only subsidiary of the Company, and such subsidiary has conducted no material business operations since April 1, 2004.

     (e) The Stock being issued and sold pursuant to the Transaction Documents (as defined in Section 13) has been duly authorized and, when issued and paid for in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable and free of any preemptive or similar rights (except those that have been waived by the holder thereof) and will conform in all material respects to the description thereof contained in the Registration Statement, the Base Prospectus and the Prospectus Supplement.

     (f) The Company has an authorized capitalization as set forth in the Registration Statement, the Base Prospectus and the Prospectus Supplement, all of the issued and outstanding shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform to the description thereof contained in the

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Registration Statement, the Base Prospectus and the Prospectus Supplement and, except as set forth in the Registration Statement, Base Prospectus and the Prospectus Supplement and except for options granted under any of the Company’s stock option plans described therein, no options, warrants or other rights to purchase, agreements or other obligations to issue, or rights to convert any obligations into or exchange any securities for, shares of capital stock of, or ownership interests in, the Company are outstanding.

     (g) The Company has full corporate power and authority to execute and deliver the Transaction Documents and to consummate the transactions contemplated herein and therein. The Transaction Documents have been duly authorized and validly executed and delivered by the Company and constitute legal, valid and binding obligations of the Company, enforceable in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Company herein may be legally unenforceable.

     (h) None of the execution and delivery of the Transaction Documents, the issuance and sale of the Stock by the Company hereunder and thereunder, the fulfillment of the terms of the Transaction Documents or the consummation of the transactions contemplated by the Transaction Documents, will (i) violate any law, rule, regulation, judgment, injunction, decree, determination, award or order of any court or governmental agency or instrumentality, domestic or foreign, or (ii) conflict with or result in any breach of any of the terms of or constitute a default (with or without the giving of notice or the passage of time or otherwise) under, or result in the termination of or the creation or imposition of any mortgage, lien, security interest or other charge or encumbrance of any nature under the terms of: (A) any material contract or agreement to which the Company is a party or by which the Company or any of the assets and properties of the Company is bound, other than any such conflict, breach or default which would not reasonably be expected to have a Material Adverse Effect; or (B) the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) or the Company’s Amended and Restated By-laws (the “Bylaws”). None of the execution and delivery of the Transaction Documents, the issuance and sale of the Stock by the Company hereunder and thereunder, the fulfillment of the terms of the Transaction Documents or the consummation of the transactions contemplated by the Transaction Documents requires any consent, approval, order or authorization of, or registration with, or the giving of notice to, any governmental or public body or authority or any other person, except for (i) such notices, consents or approvals which have previously been given or obtained or which will be given or obtained on or before the Closing Date, (ii) notices and filings that may be required under applicable state and federal securities laws that will be undertaken by the Company after the Closing Date and (iii) such notices or filings that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

     (i) There is no contract, lease, instrument or other document of a character required by the Securities Act or the Rules and Regulations to be described in the Registration Statement, the Base Prospectus and the Prospectus Supplement, or to be filed as an exhibit to the Registration Statement, which is not described or filed as required.

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     (j) All existing minute books of the Company since January 1, 2002, including all existing records of all meetings and actions of the board of directors (including, Audit, Compensation and Corporate Governance Committees) and stockholders of the Company through the date of the latest meeting and action (collectively, the “Corporate Records”) are complete and all approved minutes accurately reflect, in all material respects, all transactions referred to in such Corporate Records. There are no material transactions, agreements or other actions that have been consummated by the Company that are not properly approved and/or recorded in the Corporate Records.

     (k) Except as set forth in Schedule 2(k) or as described in the Registration Statement, the Base Prospectus or the Prospectus Supplement, no person or entity has the right to require registration of shares of Common Stock or other securities of the Company because of the filing or effectiveness of the Registration Statement or otherwise, and the Company is not required under the terms and conditions of any existing agreement to which the Company is a party or otherwise bound to file any registration statement for the registration of any securities of any person or register any such securities pursuant to any other registration statement filed by the Company under the Securities Act for a period of at least 90 days after the date hereof.

     (l) As of the dates specified, the consolidated financial statements of the Company, together with related notes and schedules, included or incorporated by reference in the Registration Statement, the Base Prospectus or the Prospectus Supplement complied and will comply in form in all material respects with Regulation S-X promulgated by the Commission with respect thereto. Such financial statements and related notes and schedules have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the period involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of the Company as of the dates thereof and its results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

     (m) Except as set forth in the Registration Statement, the Base Prospectus or the Prospectus Supplement, there is no material legal or governmental proceeding pending or, to the knowledge of the Company, threatened, to which the Company is a party or of which the business or property of the Company is subject that is not disclosed in the Registration Statement, the Base Prospectus or the Prospectus Supplement under the heading “Legal Proceedings.” There are no requests for confidential treatment of information currently pending before the Commission. Except as set forth in Schedule 2(m), there is no investigation, inquiry or proceeding by the Commission of or against the Company currently pending, and, to the Company’s knowledge, no such investigation, inquiry or proceeding has been threatened.

     (n) Except as set forth in the Registration Statement, the Base Prospectus or the Prospectus Supplement, the Company has good and marketable title to its properties, free and clear of all material security interests, mortgages, pledges, liens, charges, encumbrances and claims of record. The properties of the Company are, in the aggregate, in good repair (reasonable wear and tear excepted), and suitable for their respective uses. To the Company’s knowledge, any real property held under lease by the Company is held under valid, subsisting

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and enforceable leases with such exceptions as are not material and do not interfere with the conduct of the business of the Company. The Company owns or leases all such properties as are necessary to its business or operations as now conducted.

     (o) The Company is not (i) in violation of its Certificate of Incorporation, Bylaws or other organizational documents, (ii) in violation of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company, which violation, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect, or (iii) in default (and there exists no condition which, with or without the passage of time or giving of notice or otherwise, would constitute a default) in the performance of any bond, debenture, note or any other evidence of indebtedness in any indenture, mortgage, deed of trust or any other agreement or instrument to which the Company is a party or by which the Company is bound or by which the property of the Company is bound, which would be reasonably expected to have a Material Adverse Effect.

     (p) The Company has fulfilled its obligations, if any, under the minimum funding standards of Section 302 of the United States Employee Retirement Income Security Act of 1974 (“ERISA”) and the regulations and published interpretations thereunder with respect to each “Plan” (as defined in Section 3(3) of ERISA and such regulations and published interpretations) in which employees of the Company are eligible to participate, and each such Plan is in compliance with the presently applicable provisions of ERISA and such regulations and published interpretations, except for such instances of non-compliance as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No “prohibited transaction” (as defined in Section 406 of ERISA, or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)) has occurred with respect to any employee benefit plan which could reasonably be expected to have a Material Adverse Effect. Except as could not be reasonably expected to have a Material Adverse Effect, Company has not incurred any unpaid liability to the Pension Benefit Guaranty Corporation (other than for the payment of premiums in the ordinary course) or to any such plan under Title IV of ERISA.

     (q) The Company carries, or is covered by, insurance in such amounts and covering such risks as it reasonably believes is adequate for the conduct of its business and the value of its properties.

     (r) The Company owns, possesses or has obtained all licenses, permits, certificates, consents, orders, approvals and other authorizations from, and has made all declarations and filings with, all federal, state, local and other governmental authorities (including foreign regulatory agencies), all self-regulatory organizations and all courts and other tribunals, domestic or foreign, necessary to own or lease, as the case may be, and to operate its properties and to carry on its business as conducted as of the date hereof, except where such failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and the Company has not received any notice of any proceeding relating to the revocation or modification of any such license, permit certificate, consent, order, approval or other authorization, except as described in the Registration Statement, the Base Prospectus or the Prospectus Supplement, and the Company is in compliance with all laws and regulations relating to the conduct of its business as conducted as of the date hereof, except where such noncompliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

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     (s) PricewaterhouseCoopers LLP, who has certified certain financial statements of the Company and delivered its report with respect to the audited consolidated financial statements and schedules included in the Base Prospectus, the Prospectus Supplement or the Registration Statement, or incorporated by reference therein, is an independent registered public accounting firm with respect to the Company within the meaning of the Securities Act and the Rules and Regulations.

     (t) The Company has filed all material tax returns required to be filed, which returns are true and correct in all material respects, and the Company, to its knowledge, is not in default in the payment of any taxes, including penalties and interest, assessments, fees and other charges, shown thereon due or otherwise assessed, other than those being contested in good faith and for which adequate reserves have been provided or those currently payable without interest which were payable pursuant to said returns or any assessments with respect thereto.

     (u) The Company maintains a system of internal accounting controls that the Company reasonably believes are sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability of assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

     (v) Neither the Company nor any of its officers or directors, or to the Company’s knowledge, any of their affiliates (as such term is defined in Rule 405 under the Securities Act), has taken or will take, directly or indirectly, any action designed or intended to stabilize or manipulate the price of any security of the Company, or which caused or resulted in, or which might in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of the Common Stock.

     (w) The Company (i) is in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”); (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business ; and (iii) is in compliance with all terms and conditions of any such permit, license or approval; except where such noncompliance with Environmental Laws, failure to receive require permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There are no pending or, to the knowledge of the Company, threatened Environmental Claims (as defined below) against the Company. “Environmental Claims” means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law.

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     (x) The Company has ownership or license or legal right to use all patent, copyright, trade secret, trademark, customer lists, designs, manufacturing or other processes, computer software, systems, data compilation, research results or other proprietary rights used in the business of the Company and material to the Company (collectively, “Intellectual Property”) other than Intellectual Property generally available on commercial terms from other sources and other than Intellectual Property where lack of ownership, license or right to use could not reasonably be expected to have a Material Adverse Effect. All of such patents, registered trademarks and registered copyrights owned by the Company have been duly registered in, filed in or issued by the United States Patent and Trademark Office, the United States Register of Copyrights or the corresponding offices of other jurisdictions and have been maintained and renewed in accordance with all applicable provisions of law and administrative regulations in the United States and all such jurisdictions, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. All material licenses or other material agreements under which (i) the Company is granted rights in Intellectual Property, other than Intellectual Property generally available on commercial terms from other sources, or (ii) the Company has granted rights to others in Intellectual Property owned or licensed by the Company, are, to the knowledge of the Company, in full force and effect and, to the knowledge of the Company, there is no material default by the Company thereunder. The Company believes it has taken all steps required in accordance with sound business practice and business judgment to establish and preserve its ownership of or rights to all material Intellectual Property. To the knowledge of the Company, the present business, activities and products of the Company do not infringe any intellectual property of any other person, except where such infringement could not reasonably be expected to have a Material Adverse Effect. Except as set forth in Schedule 2(x) or as described in the Base Prospectus, the Prospectus Supplement or the Registration Statement, no proceeding charging the Company with infringement of any adversely held Intellectual Property has been filed. To the knowledge of the Company, the Company is not making unauthorized use of any confidential information or trade secrets of any person. Neither the Company nor, to the knowledge of the Company, any of its employees has any agreements or arrangements with any persons other than the Company related to confidential information or trade secrets of such persons other than such agreements that would not materially restrict the Company from conducting its business as currently conducted.

     (y) The Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed on The Nasdaq National Market (the “Nasdaq Stock Market”), and the Company has taken no action designed to terminate, or reasonably likely to have the effect of terminating, the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the Nasdaq Stock Market. The Company has filed, or promptly following the execution of this Agreement will file, a Notification Form for Listing of Additional Shares with the Nasdaq Stock Market with respect to the Stock.

     (z) Since January 1, 2002, the Company has made all required filings pursuant to the rules and regulations promulgated thereunder, and all such filings, as may have been amended, complied in all material respects with the Exchange Act and such rules and regulations promulgated hereunder as of the date filed with the Commission.

     (aa) No relationship, direct or indirect, exists between or among the Company on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company on the other hand, which is required by the Securities Act to be described in the Registration Statement, the Base Prospectus and the Prospectus Supplement which is not so described.

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     (bb) The Company is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

     (cc) The Company is not a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company or the Placement Agent for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Stock.

     (dd) Except as disclosed in the Registration Statement, the Base Prospectus or the Prospectus Supplement (excluding, for purposes of this paragraph, any exhibits thereto), since September 30, 2004 there has not been (i) any Material Adverse Effect, whether or not arising in the ordinary course of business, (ii) any obligation, direct or contingent, that is material to the Company, incurred by the Company, except obligations incurred in the ordinary course of business consistent with past practice, (iii) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company, or (iv) any loss or damage (whether or not insured) to the physical property of the Company which has been sustained which has had a Material Adverse Effect.

     Any certificate signed by any officer of the Company and delivered to the Placement Agent or counsel for the Placement Agent in connection with the offering of the Stock shall be deemed a representation and warranty by the Company, as to the matters covered thereby, to the Placement Agent and the Purchasers.

     3. THE CLOSING. The time and date of closing and delivery of the documents required to be delivered to the Placement Agent pursuant to Section 6 hereof shall be at 10:00 A.M., New York time, on January 28, 2005 (the “Closing Date”) at the offices of Dechert LLP, at 4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, PA 19013. At the Closing, the Escrow Agent will disburse the Escrow Funds from the Escrow Account to the Company as provided in the Escrow Agreement and the Company shall deliver the shares of Stock to the Purchasers who have deposited in the Escrow Account an amount equal to the price per share for the Stock, which delivery may be made through the facilities of the Depository Trust Company.

     4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the Placement Agent:

     (a) (i) To make no further amendment or supplement prior to the Closing Date to the Registration Statement or any amendment or supplement to the Prospectus Supplement, which shall be reasonably disapproved by the Placement Agent in good faith promptly after reasonable notice thereof; (ii) for so long as the delivery of a prospectus is required in connection with the offering or sale of the Stock, to advise the Placement Agent promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus Supplement or any amended Prospectus Supplement has been filed and to furnish the Placement Agent with copies thereof; (iii) to use its best commercially practicable efforts to file promptly all reports and any definitive proxy or

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information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 15 or 15(d) of the Exchange Act subsequent to the date of the Prospectus Supplement and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Stock; (iv) to advise the Placement Agent, promptly after it receives notices thereof, for so long as the delivery of a prospectus is required in connection with the offering or sale of the Stock, (x) of any request by the Commission to amend the Registration Statement or to amend or supplement the Prospectus Supplement or for additional information relating thereto and (y) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or any order directed at any Incorporated Document or any amendment or supplement thereto or any order preventing or suspending the use of the Base Prospectus or the Prospectus Supplement or any amendment or supplement thereto, of the suspension of the qualification of the Stock for offering or sale in any jurisdiction, of the institution or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus Supplement or for additional information relating thereto; and, (v) in the event of the issuance of any stop order or of any order preventing or suspending the use of the Base Prospectus or Prospectus Supplement or suspending any such qualification, promptly to use its best commercially practicable efforts to obtain the withdrawal of such order.

     (b) To comply with the Securities Act and the Exchange Act, and the rules and regulations thereunder, so as to permit the completion of the distribution of the Stock as contemplated in the Transaction Documents and the Prospectus Supplement. If during the period in which a prospectus is required by law to be delivered by the Placement Agent or a dealer in connection with the distribution of Stock contemplated by the Prospectus Supplement, any event shall occur as a result of which, in the judgment of the Company or in the reasonable opinion of the Placement Agent or counsel for the Placement Agent, it becomes necessary to amend or supplement the Prospectus Supplement in order to make the statements therein, in the light of the circumstances existing at the time the Prospectus Supplement is delivered to a purchaser, not misleading, or, if it is necessary at any time to amend or supplement the Prospectus Supplement to comply with any law, the Company promptly will prepare and file with the Commission, and furnish at its own expense to the Placement Agent and to such dealers, an appropriate amendment to the Registration Statement or supplement to the Prospectus Supplement so that the Prospectus Supplement as so amended or supplemented will not, in the light of the circumstances when it is so delivered, be misleading, or so that the Prospectus Supplement will comply with such law. Before amending the Registration Statement or supplementing the Base Prospectus in connection with the Offering, the Company will furnish the Placement Agent with a copy of such proposed amendment or supplement and will not file such amendment or supplement to which the Placement Agent reasonably objects.

     (c) To deliver promptly to the Placement Agent such number of the following documents as the Placement Agent shall reasonably request: (i) the Base Prospectus; (ii) the Prospectus Supplement (not later than 10:00 A.M., New York time, on the second Business Day following the execution and delivery of this Agreement) and any amendment or supplement thereto (not later than 10:00 A.M., New York City time, on the Business Day following the date of such amendment or supplement); and (iii) any document incorporated by reference in the Base Prospectus or Prospectus Supplement. The Company will pay the expenses of printing or other production of all documents relating to the Offering.

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     (d) To make generally available to its stockholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Securities Act), an earnings statement of the Company (which need not be audited) complying with Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158).

     (e) To pay the fee, if any, of the National Association of Securities Dealers, Inc. (“NASD”) in connection with its review of the Offering.

     (f) Not to directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock for a period of 90 days from the date of the Prospectus Supplement without the prior written consent of the Placement Agent other than (i) the Company’s sale of the Stock hereunder, (ii) the issuance of shares or options to purchase shares pursuant to qualified stock option plans and currently outstanding options, warrants or rights, (iii) securities issued to a collaborative partner of the Company solely in connection with a corporate partnering transaction; provided, however, that before issuing any shares to a collaborative partner, the Company shall obtain from such collaborative partner an agreement to be bound by a letter substantially in the form of Exhibit C, pursuant to which such collaborative partner shall agree not to directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock for a period of 90 days from the date of the Prospectus Supplement, without the prior written consent of the Placement Agent; or (iv) in connection with a Sale of the Company. The Company will cause each of its executive officers and directors listed on Exhibit B hereto to furnish to the Placement Agent, prior to the Closing Date, a letter, substantially in the form of Exhibit C hereto, pursuant to which each such person shall agree not to directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock for a period of 90 days from the date of the Prospectus Supplement, without the prior written consent of the Placement Agent, other than the exercise of currently outstanding options or in connection with a Sale of the Company.

     (g) Prior to the Closing Date, to furnish to the Placement Agent, as soon as they have been prepared (if at all), copies of any unaudited interim consolidated financial statements of the Company for any periods subsequent to the periods covered by the financial statements appearing or incorporated by reference in the Base Prospectus, the Prospectus Supplement or the Registration Statement.

     (h) Prior to the Closing Date, not to issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for communications in the ordinary course of business and consistent with the past practices of the Company and of which the Placement Agent is notified), without the prior written consent of the Placement Agent, unless in the judgment of the Company and its counsel, and after notification to the Placement Agent, such press release or communication is required by law.

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     (i) Between the date hereof and the Closing Date, to promptly disclose to the Placement Agent in writing any information that gives the Company any reason to believe that any of the conditions set forth in Section 6 will not be satisfied as of the Closing Date.

     (j) To apply the net proceeds received by the Company from the sale of the Stock pursuant to this Agreement in the manner specified in the Prospectus Supplement under the heading “Use of Proceeds”.

     (k) To maintain, at its expense, a registrar and transfer agent for the Stock.

     (l) To supply the Placement Agent with copies of all correspondence to and from, and all documents issued to and by, the Commission in connection with the registration of the Stock under the Securities Act.

     (m) To take from time to time such reasonable actions as required to permit the Stock to continue to be listed and authorized for trading on the Nasdaq Stock Market.

     (n) To furnish to the Placement Agent such further information, certificates and documents as the Placement Agent may reasonably request.

     5. PAYMENT OF EXPENSES. The Company agrees with the Placement Agent to pay (a) the costs incident to the authorization, issuance, sale, preparation and delivery of the Stock to the Purchasers and any taxes payable in that connection; (b) the costs incident to the Registration of the Stock under the Securities Act; (c) the costs incident to the preparation, printing and distribution of the Registration Statement, Base Prospectus and Prospectus Supplement and any amendments and exhibits thereto or any document incorporated by reference therein, and the costs of printing, reproducing and distributing, the Transaction Documents by mail, telex or other means of communication; (d) the fees and expenses incurred in connection with filings, if any, made with the NASD; (e) any applicable listing or other fees; (f) all fees and expenses of the registrar and transfer agent of the Stock; (g) the fees and expenses of the Escrow Agent incurred pursuant to the Escrow Agreement; and (h) all other costs and expenses incident to the performance of the obligations of the Company under the Transaction Documents (including, without limitation, the fees and expenses of the Company’s counsel and the Company’s independent accountants). The Company further agrees with the Placement Agent to pay the costs and expenses of the Placement Agent to the extent set forth in the engagement letter, dated December 22, 2004, by and between the Placement Agent and the Company (the “Engagement Letter”).

     6. CONDITIONS TO THE OBLIGATIONS OF THE PLACEMENT AGENT AND THE SALE OF THE STOCK. The obligations of the Placement Agent and the closing of the sale of the Stock hereunder are subject to the accuracy, when made and on the Closing Date, of the representations and warranties on the part of the Company contained herein, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company in all material respects to the extent not otherwise qualified by materiality, and in all respects to the extent qualified by materiality, of their obligations hereunder, and to each of the following additional terms and conditions:

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     (a) No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the Commission, and any request for additional information on the part of the Commission (to be included in the Registration Statement, the Base Prospectus or the Prospectus Supplement or otherwise) shall have been complied with to the reasonable satisfaction of the Placement Agent. Any filings required to be made by the Company in accordance with Section 4(a) shall have been timely filed with the Commission.

     (b) The Placement Agent shall not have discovered and disclosed to the Company on or prior to the Closing Date that the Registration Statement, the Base Prospectus or the Prospectus Supplement or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Placement Agent (after consultation with Company and its counsel), is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading.

     (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of each of the Transaction Documents, the Stock, the Registration Statement, the Base Prospectus and the Prospectus Supplement and all other legal matters relating to the Transaction Documents and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Placement Agent, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.

     (d) Arnold & Porter LLP shall have furnished to the Placement Agent, such counsel’s written opinion, as counsel for the Company, addressed to the Placement Agent and the Purchasers and dated the Closing Date in form and substance reasonably satisfactory to the Placement Agent, to the effect that, subject to customary qualifications and assumptions:

          (i) the Company is validly existing as a corporation in good standing under the laws of the state of Delaware, is duly qualified to do business and is in good standing as a foreign corporation in the Commonwealth of Massachusetts and has all corporate authority necessary to own or hold its properties and to conduct the business in which it is engaged as described in the Base Prospectus and the Prospectus Supplement, except where the failure to so qualify or have such authority, singularly or in the aggregate, would not reasonably be expected to have a Material Adverse Effect;

          (ii) the Company has the authorized capitalization as set forth in the Base Prospectus as supplemented by the Prospectus Supplement, and the Stock when issued and delivered to and paid for by the purchasers thereof as contemplated by this Agreement, will be duly and validly authorized and issued, fully paid and non-assessable and will conform in all material respects to the description thereof contained in the Base Prospectus as supplemented by the Prospectus Supplement;

          (iii) there are no preemptive or other rights to subscribe for or to purchase, nor any restriction upon the voting or transfer of, any shares of the Stock pursuant to the Company’s

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Certificate of Incorporation or Bylaws or any material agreement or other instrument known to such counsel;

          (iv) the Transaction Documents have been duly authorized, executed and delivered by the Company;

          (v) the execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not result in any violation of the provisions of the Certificate of Incorporation or Bylaws of the Company or, to the knowledge of such counsel, any judgment, order or decree of any court or governmental agency or body having jurisdiction over the Company or any of its properties or assets;

          (vi) the Registration Statement was declared effective under the Securities Act as of the date and time specified in such opinion, the Prospectus Supplement was filed with the Commission pursuant to the subparagraph of Rule 424(b) of the Rules and Regulations specified in such opinion on the date specified therein and, to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and, to the knowledge of such counsel, no proceeding for that purpose is pending or threatened by the Commission;

          (vii) except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under applicable state securities laws in connection with the purchase and distribution of the Stock, no consent, approval, authorization or order of, or filing or registration with, any court, governmental agency or governmental body is required for the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby;

          (viii) except as set forth in Schedule 2(k), to such counsel’s knowledge, no person or entity has the right to require registration of shares of Common Stock of the Company because of the completion of the Offering, except for persons and entities who have expressly waived such right or who have been given proper notice and have failed to exercise such right within the time or times required under the terms and conditions of such right;

     In addition, such counsel shall state that it has participated, in the course of serving as special counsel to the Company in connection with the preparation of the Registration Statement and Prospectus Supplement, in discussions with representatives of the Company, the Placement Agent, and the Placement Agent’s counsel during which the contents of drafts of the Registration Statement, the Base Prospectus and the Prospectus Supplement were discussed. Such counsel also shall state that, although it has made no independent investigation or verification of the correctness and completeness of the information included in the Registration Statement or the Prospectus Supplement, nothing has come to its attention that has caused it to believe that either the Registration Statement or any amendments thereto, at the time the Registration Statement or any such amendments became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the

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statements therein not misleading or that the Prospectus Supplement, as of the Closing, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no belief as to the financial statements, including the notes and schedules thereto, or any other financial or statistical information, or the information regarding the Placement Agent or the method of distribution of the Stock included in the Registration Statement or the Prospectus Supplement).

     (e) The Company shall have furnished to the Placement Agent and the Purchasers a certificate, dated the Closing Date, executed by its President and Chief Executive Officer and its Chief Financial Officer stating that (i) such officers have examined the Registration Statement, the Base Prospectus and the Prospectus Supplement and, in their opinion, the Registration Statement as of its effective date and the Prospectus Supplement (taken together with the Base Prospectus), as of the date of the Prospectus Supplement and the date of such certificate, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of the Prospectus Supplement, taken together with the Base Prospectus, in light of the circumstances in which such statements were made), (ii) since the effective date of the Registration Statement no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Base Prospectus or the Prospectus Supplement and which has not been so set forth, (iii) as of the Closing Date, the representations and warranties of the Company in this Agreement are true and correct and the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, and (iv) subsequent to the date of the most recent financial statements included or incorporated by reference in the Base Prospectus and the Prospectus Supplement, there has been no material adverse change in the financial position or results of operation of the Company, or any change, or any development including a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of the Company, except as set forth in the Base Prospectus and the Prospectus Supplement.

     (f) At the time of the execution of this Agreement, the Placement Agent shall have received from PricewaterhouseCoopers LLP a draft of a letter, addressed to the Placement Agent and the Company and dated such date, in form and substance reasonably satisfactory to the Placement Agent and PricewaterhouseCoopers LLP (i) confirming that it is an independent registered public accounting firm with respect to the Company within the meaning of the Securities Act and the Rules and Regulations and (ii) stating the conclusions and findings of such firm with respect to the financial statements and certain financial information contained or incorporated by reference into the Base Prospectus or the Prospectus Supplement (the “Comfort Letter”).

     (g) On the Closing Date, the Placement Agent shall have received the Comfort Letter duly executed by PricewaterhouseCoopers LLP addressed to the Placement Agent and the Company and dated the Closing Date.

     (h) Since the date of the latest audited financial statements included or incorporated by reference in the Base Prospectus and the Prospectus Supplement, there has been no event,

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development or occurrence which has had or that would reasonably be expected to result in a Material Adverse Effect, the effect of which is, in the judgment of the Placement Agent, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Stock on the terms and in the manner contemplated by the Base Prospectus and the Prospectus Supplement.

     (i) The Stock shall have been listed and authorized for trading on the Nasdaq Stock Market.

     (j) At the time of execution of this Agreement, the Company shall have furnished to the Placement Agent a letter substantially in the form of Exhibit C hereto from each executive officer and director of the Company listed on Exhibit B hereto.

     (k) Subsequent to the execution and delivery of this Agreement, there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange, the Nasdaq Stock Market or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or minimum or maximum prices or maximum ranges for prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal or state authorities or a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States, (iii) there shall have been a declaration of a national emergency or a declaration of war by the United States or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the sole judgment of the Placement Agent, impracticable or inadvisable to proceed with the sale or delivery of the Stock on the terms and in the manner contemplated by the Base Prospectus and the Prospectus Supplement.

     (l) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Stock; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Stock.

     (m) The Company shall have prepared and filed with the Commission a Current Report on Form 8-K with respect to the Offering, including as an exhibit thereto this Agreement and any other documents relating thereto.

     (n) The Company shall have entered into the Escrow Agreement with the Placement Agent and the Escrow Agent and such agreement shall be in full force and effect.

     (o) Prior to the Closing Date, the Company shall have furnished to the Placement Agent such further information, certificates and documents as the Placement Agent may reasonably request.

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     All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Placement Agent.

     7. Indemnification and Contribution.

     (a) The Company shall indemnify and hold harmless the Placement Agent, its affiliates, directors and officers and each person, if any, who controls the Placement Agent within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively the “Placement Agent Indemnified Parties” and each a “Placement Agent Indemnified Party”) against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which that Placement Agent Indemnified Party may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Base Prospectus, the Registration Statement or the Prospectus Supplement or in any amendment or supplement thereto or (ii) the omission or alleged omission to state in the Base Prospectus, the Registration Statement or the Prospectus Supplement or in any amendment or supplement thereto a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse the Placement Agent Indemnified Party promptly upon demand for any legal or other expenses reasonably incurred by that Placement Agent Indemnified Party in connection with investigating or preparing to defend or defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from the Base Prospectus, the Registration Statement or the Prospectus Supplement or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company through the Placement Agent specifically for use therein, which information the parties hereto agree is limited to the Placement Agent’s Information (as defined in Section 15). This indemnity agreement is not exclusive and will be in addition to any liability, which the Company might otherwise have and shall not limit any rights or remedies which may otherwise be available at law or in equity to the Placement Agent Indemnified Party.

     (b) The Placement Agent shall indemnify and hold harmless the Company, its officers, employees, representatives and agents, each of its directors and each person, if any, who controls the Company within the meaning of the Securities Act (collectively the “Company Indemnified Parties” and each a “Company Indemnified Party”) against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company Indemnified Parties may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Base Prospectus, the Registration Statement or the Prospectus Supplement or in any amendment or supplement thereto, or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but with respect to each of clause (i) and this clause (ii) only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning the Placement Agent furnished to the Company by the Placement Agent

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specifically for use therein, and shall reimburse the Company Indemnified Parties promptly upon demand for any legal or other expenses reasonably incurred by such parties in connection with investigating or preparing to defend or defending against or appearing as third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred. This indemnity agreement is not exclusive and will be in addition to any liability, which the Placement Agent and the Purchasers might otherwise have and shall not limit any rights or remedies which may otherwise be available at law or in equity to the Company Indemnified Parties. Notwithstanding the provisions of this Section 7(b), in no event shall any indemnity under this Section 7(b) with respect to the Placement Agent exceed the total compensation received by the Placement Agent in accordance with Section 1(f).

     (c) Promptly after receipt by an indemnified party under this Section 7 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 7 except to the extent it has been materially prejudiced by such failure; and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 7. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment thereof has been specifically authorized by the indemnifying party in writing, (ii) such indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party and in the reasonable judgment of such counsel it is advisable for such indemnified party to employ separate counsel or (iii) the indemnifying party has failed to assume the defense of such action in a reasonably prompt manner and employ counsel reasonably satisfactory to the indemnified party, in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party. It is understood, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for all such indemnified parties, which firm shall be designated in writing by the Placement Agent, if the indemnified parties under this Section 7 consist of any Placement Agent Indemnified Party, or by the Company if the indemnified parties under this Section 7 consist of any Company Indemnified Parties. Each indemnified party, as a condition of the

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indemnity agreements contained in Sections 7(a) and 7(b) shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. Subject to the provisions of Section 7(d) below, no indemnifying party shall be liable for any settlement, compromise or the consent to the entry of judgment in connection with any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action other than a judgment entered with the consent of such indemnified party, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment.

     (d) If at any time an indemnified party shall have requested that an indemnifying party reimburse the indemnified party for reasonable fees and actual out-of-pocket expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by this Section 7 effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the request for reimbursement, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

     (e) If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party under Section 7(a) or 7(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and the Placement Agent on the other from the offering of the Stock or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Placement Agent on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Placement Agent on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Stock purchased under this Agreement (before deducting expenses) received by the Company bears to the total compensation received by the Placement Agent with respect to the Stock purchased under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Placement Agent on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission; provided that the parties hereto agree that the written information furnished to the Company by the Placement Agent for use in the Prospectus Supplement consists solely of the Placement Agent’s Information. The Company and the Placement Agent agree that it would not be just and equitable if contributions pursuant to this Section 7(e) were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or

20

action in respect thereof, referred to above in this Section 7(e) shall be deemed to include, for purposes of this Section 7(e), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7(e), the Placement Agent shall not be required to contribute any amount in excess of the amount by which the total price at which the Stock was offered and sold to the public less the amount of any damages which the Placement Agent has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

     8. TERMINATION. This Agreement may be terminated by the Placement Agent in its absolute discretion by notice given to the Company if, at any time after the execution and delivery of this Agreement and prior to the Closing Date: (a) in the judgment of the Placement Agent there shall have occurred any Material Adverse Effect; or (b) any of the events described in Sections 6(h) or 6(k) have occurred, and such event singly or together with any other event, makes it, in the Placement Agent’s judgment, impracticable or inadvisable to market the Stock or otherwise proceed with the sale of the Stock in the manner and on the terms contemplated in the Base Prospectus and the Prospectus Supplement. This Agreement may be terminated by the Placement Agent or the Company if, at any time after the execution and delivery of this Agreement and prior to the Closing Date, either party delivers to the other ten days’ prior written notice that it desires to terminate this Agreement. Any termination pursuant to this Section 8 shall be without liability on the part of any party hereto to any other party except that the provisions of Sections 5, 7 and 9 shall at all times be effective and shall survive such termination.

     9. CONFIDENTIALITY. The Placement Agent will not use confidential information obtained from the Company pursuant to this Agreement or its other relationships with the Company other than in connection with the performance by the Placement Agent of its services hereunder. The Placement Agent will not furnish any such confidential information to other companies or other third parties. The Company also acknowledges that Placement Agent has no obligation to use in connection with this Agreement, or to furnish to the Company, confidential information obtained from other companies.

     10. SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of and be binding upon the Placement Agent, the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person; except that the representations, warranties, covenants, agreements and indemnities of the Company contained in this Agreement shall also be for the benefit of the Placement Agent Indemnified Parties, and the indemnities of the Placement Agent shall also be for the benefit of the Company Indemnified Parties. It is understood that the Placement Agent’s responsibility to the Company is solely contractual in nature and the Placement Agent do not owe the Company, or any other party, any fiduciary duty as a result of this Agreement.

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     11. SURVIVAL OF INDEMNITIES, REPRESENTATIONS AND WARRANTIES, ETC. The respective indemnities, covenants, agreements, representations and warranties of the Company and the Placement Agent as set forth in this Agreement or made by them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation made by or on behalf of the Placement Agent, the Company or any person controlling any of them and shall survive delivery of and payment for the Stock.

     12. NOTICES. All statements, requests, notices and agreements hereunder shall be in writing, and:

     (a) if to the Placement Agent, shall be delivered or sent by mail, telex or facsimile transmission to J.P. Morgan Securities Inc., 277 Park Avenue, 11^th Floor, New York, NY 10172, Attention: Robert Vincent, Esq. (facsimile: (212) 270-7487), with a copy to Dechert LLP, 4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, Pennsylvania 19103, Attention: James A. Lebovitz, Esq. (facsimile: (215) 994-2222); and

     (b) if to the Company, shall be delivered or sent by mail, telex or facsimile transmission to ArQule, Inc., 19 Presidential Way, Woburn, Massachusetts 01801, Attention: Stephen A. Hill (facsimile: (781) 503-0009), with copies to (i) ArQule, Inc., 19 Presidential Way, Woburn, Massachusetts 01801, Attention: General Counsel (facsimile: (781) 994-0587), and (ii) Arnold & Porter LLP, 555 Twelfth Street, NW, Washington, DC 20004, Attention: Richard E. Baltz, Esq. (facsimile: (202) 942-5999).

     13. DEFINITIONS OF CERTAIN TERMS. The terms which follow, when used in this Agreement, shall have the meanings indicated.

     “Business Day” shall mean any day other than a Saturday, a Sunday, a legal holiday, a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City or any day on which the Nasdaq Stock Market is not open for trading.

     “Interference Proceeding” shall have the meaning set forth in 35 U.S.C. § 135.

     “Sale of the Company” shall mean any transaction or series of related transactions involving: (a) any merger, consolidation or other similar transaction (i) in which a person or “group” (as defined in the Exchange Act and the rules promulgated thereunder) of persons acquires beneficial or record ownership of securities representing more than 50% of the outstanding Common Stock of the Company or (ii) in which the Company issues securities representing more than 50% of the outstanding Common Stock of the Company; or (b) any sale or disposition of more than 50% of the assets of the Company.

     “to the knowledge of the Company” or “to the Company’s knowledge” shall mean to the actual knowledge of any of the persons holding the following executive offices of the Company: President and Chief Executive Officer; Vice President and Chief Financial Officer; and Vice President and General Counsel.

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     “Transaction Documents” shall mean this Agreement and the Escrow Agreement.

     14. GOVERNING LAW; VENUE. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the conflicts of laws principles thereof. The Company and the Placement Agent irrevocably submit to the exclusive jurisdiction of the Federal and State courts in Manhattan, New York with respect to any action, proceeding, claim or counterclaim brought by or on behalf of any party related to or arising out of this Agreement or the performance of services hereunder and agree to waive trial by jury in any such action, proceeding, claim or counterclaim.

     15. PLACEMENT AGENT’S INFORMATION. The parties hereto acknowledge and agree that, for all purposes of this Agreement, the only written information furnished by the Placement Agent consists solely of the following statement concerning the Placement Agent contained in the first paragraph under the heading “Plan of Distribution” in the Prospectus Supplement: “Pursuant to the placement agent agreement, J.P. Morgan Securities Inc. has agreed to act as placement agent in connection with the offering.”

     16. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

     17. GENERAL. This Agreement, the Engagement Letter and the Escrow Agreement together constitute the entire agreement of the parties to this Agreement and supersede all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. In this Agreement, the masculine, feminine and neuter genders and the singular and the plural include one another. The section headings in this Agreement are for the convenience of the parties only and will not affect the construction or interpretation of this Agreement. This Agreement may be amended or modified, and the observance of any term of this Agreement may be waived, only by a writing signed by the Company and the Placement Agent.

     18. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[Signature Page Follows]

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     If the foregoing is in accordance with your understanding of the agreement between the Company and the Placement Agent, kindly indicate your acceptance in the space provided for that purpose below.

Very truly yours, ARQULE, INC.
By:	/s/ J. David Jacobs
	Name:   J. David Jacobs
	Title:  Vice President, Legal and             General Counsel

Accepted as of
the date first above written:

J.P. MORGAN SECURITIES INC.

By:	/s/ Peter P. Buckley
	Name:  Peter P. Buckley
	Title: Managing Director

[Signature Page to Placement Agent Agreement]

EX-99.3

Exhibit 99.3

SUBSCRIPTION AGREEMENT

ArQule, Inc.
19 Presidential Way
Woburn, Massachusetts 01801

The undersigned (the “Investor”) hereby confirms its agreement with you as follows:

1. This Subscription Agreement (this “Agreement”) is made as of the date set forth below between ArQule, Inc., a Delaware corporation (the “Company”), and the Investor.

2. The Company has authorized the sale and issuance to certain investors of up to 5,788,095 shares (the “Shares”) of its Common Stock, par value $.01 per share (the “Common Stock”), for a purchase price of $5.25 per share (the “Purchase Price”).

3. The offering and sale of the Shares (the “Offering”) are being made pursuant to an effective Registration Statement on Form S-3 (including the Prospectus contained therein (the “Base Prospectus”), the “Registration Statement”) filed by the Company with the Securities and Exchange Commission (the “Commission”). Promptly following the consummation of the sale of the Shares pursuant to the Offering, the Company will file a Prospectus Supplement (the “Prospectus Supplement”) with the Commission containing certain supplemental information regarding the Shares and terms of the Offering.

4. The Company and the Investor agree that the Investor will purchase from the Company, and the Company will issue and sell to the Investor, the Shares set forth below for the aggregate purchase price set forth below. The Shares shall be purchased pursuant to the Terms and Conditions for Purchase of Shares attached hereto as Annex I and incorporated herein by this reference as if fully set forth herein. Unless otherwise requested by the Investor and agreed to by the Company, the Shares purchased by the Investor will be delivered by electronic book-entry, registered in the Investor’s name and address as set forth below and will be released by American Stock Transfer & Trust Company, the Company’s transfer agent (the “Transfer Agent”), to the Investor at the Closing (as defined in the Terms and Conditions for Purchase of Shares).

5. The Investor represents that, except as set forth below, (a) it has had no position, office or other material relationship within the past three years with the Company or its affiliates and (b) it has no direct or indirect affiliation or association with any NASD member. Exceptions:

(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)

Number of Shares: _________________

Aggregate Purchase Price: $___________

     Please confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below for that purpose.

Dated as of: January ____, 2005

INVESTOR

By:

Name:

Title:

Address: 

Agreed and Accepted

this ___day of January, 2005:

ARQULE, INC.

By:

Name: 

Title:

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ANNEX I

TERMS AND CONDITIONS FOR PURCHASE OF SHARES

1. Authorization and Sale of the Shares. Subject to the terms and conditions of this Agreement, the Company has authorized the sale of the Shares.

2. Agreement to Sell and Purchase the Shares; Placement Agent.

     2.1. Purchase and Sale. At the Closing (as defined in Section 3.1), the Company will sell to the Investor, and the Investor will purchase from the Company, upon the terms and conditions hereinafter set forth, the number of Shares set forth on the signature page to which these Terms and Conditions for Purchase of Shares are attached as Annex I (the “Signature Page”) for the aggregate purchase price therefor set forth on the Signature Page.

     2.2. Other Investors. The Company proposes to enter into this same form of Subscription Agreement with certain other investors (the “Other Investors”) and expects to complete sales of Shares to them. The Investor and the Other Investors are hereinafter sometimes collectively referred to as the “Investors,” and this Agreement and the Subscription Agreements executed by the Other Investors are hereinafter sometimes collectively referred to as the “Agreements.”

     2.3. Placement Agent. Investor acknowledges that the Company intends to pay J.P. Morgan Securities Inc. (the “Placement Agent”) fees (the “Placement Fees”) in respect of the sale of Shares to the Investors.

     2.4. Placement Agent Agreement. The Company has entered into a Placement Agent Agreement (the “Placement Agent Agreement”) with the Placement Agent that contains certain representations, warranties, covenants and agreements of the Company. A copy of the Placement Agent Agreement is available upon request.

3. Closings and Delivery of the Shares and Funds.

     3.1. Closing. The completion of the purchase and sale of the Shares (the “Closing”) will occur at a place and time (the “Closing Date”) to be specified by the Company and the Placement Agent, and of which the Investors will be notified in advance by the Placement Agent. At the Closing, (a) the Company will cause the Transfer Agent to deliver to the Investor the number of Shares set forth on the signature page hereto registered in the name of the Investor or, if so indicated on the Stock Certificate Questionnaire attached hereto as Exhibit A, in the name of a nominee designated by the Investor and (b) the aggregate purchase price for the Shares being purchased by the Investor will be delivered by or on behalf of the Investors to the Escrow Agent (as defined in Section 3.3 hereof) for the benefit of the Company.

     3.2. Closing Conditions.

     (a) Conditions to the Company’s Obligations. The Company’s obligation to issue the Shares to the Investor will be subject to the accuracy as of the Closing Date of the representations and warranties made by the Investor and the fulfillment of those undertakings of the Investor to be fulfilled at or prior to the applicable Closing Date.

     (b) Conditions to the Investor’s Obligations. The Investor’s obligation to purchase the Shares will be subject to the fulfillment of those undertakings of the Company to be fulfilled at or prior to the applicable Closing Date contained in the Placement Agent Agreement (collectively, the “Company Closing Conditions”), or the waiver thereof by the Placement Agent. The Investor’s obligations are expressly not conditioned on the purchase by any or all of the other Investors of the Shares that they have agreed to purchase from the Company, and the Investor acknowledges that the Company may sell less than all of the Shares in the Offering.

     3.3. Delivery of Funds. Promptly after the execution of this Agreement by the Investor and the Company, the Investor shall remit by wire transfer the amount of funds equal to the aggregate purchase price for the Shares being purchased by the Investor to the following account designated by the Company and the Placement Agent pursuant to the terms of that certain Escrow Agreement (the “Escrow Agreement”) dated as of January ___, 2005, by and among the Company, the Placement Agent and JPMorgan Chase Bank, N.A. (the “Escrow Agent”):

JPMorgan Chase Bank, N.A.

ABA No.: 021 000 021

Account No.: 507 897455

Account Name: NY Escrow Special Subscription Account

FFC: a/c # 10220760 ArQule, Inc. Escrow Account

Attention: Audrey Mohan

Tel. No: (212) 623-5087

Such funds shall be held in escrow until the Closing and delivered by the Escrow Agent on behalf of the Placement Agent and the Investors to the Company upon the satisfaction, in the sole judgment of the Placement Agent, or the waiver, in the sole discretion of the Placement Agent, of the Company Closing Conditions. The Placement Agent shall have no rights in or to any of the escrowed funds, unless the Placement Agent and the Escrow Agent are notified in writing by the Company in connection with the Closing that a portion of the escrowed funds shall be applied to the Placement Fees. The Company and the Investor agree to indemnify and hold the Placement Agent and the Escrow Agent harmless from and against any and all losses, costs, damages, expenses and claims (including, without limitation, court costs and reasonable attorneys fees) (“Losses”) arising under this Section 3.3 or otherwise with respect to the funds held in escrow pursuant hereto or arising under the Escrow Agreement, except for Losses resulting from the willful misconduct or gross negligence of the Placement Agent or the Escrow Agent. Anything in this Agreement to the contrary notwithstanding, in no event shall the Placement Agent or the Escrow Agent be liable for any special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Placement Agent or the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

     3.4. Delivery of Shares. Promptly after the execution of this Agreement by the Investor and the Company, the Investor shall direct the broker-dealer at which the account or

2

accounts to be credited with the Shares are maintained, which broker/dealer shall be a DTC participant, to set up a Deposit/Withdrawal at Custodian (“DWAC”) instructing the Transfer Agent to credit such account or accounts with the Shares by means of an electronic book-entry delivery. Such DWAC shall indicate the settlement date for the deposit of the Shares, which date shall be provided to the Investor by the Placement Agent. Simultaneously with the delivery to the Company by the Escrow Agent of the funds held in escrow pursuant to Section 3.3 above, the Company shall direct the Transfer Agent to credit the Investor’s account or accounts with the Shares pursuant to the information contained in the DWAC.

4. Representations, Warranties and Covenants of the Investor.

     4.1. The Investor represents and warrants to, and covenants with, the Company that (a) the Investor is knowledgeable, sophisticated and experienced in making, and is qualified to make decisions with respect to, investments in shares presenting an investment decision like that involved in the purchase of the Shares, including investments in securities issued by the Company and investments in comparable companies, and has requested, received, reviewed and considered all information it deemed relevant in making an informed decision to purchase the Shares, and (b) the Investor, in connection with its decision to purchase the number of Shares set forth on the Signature Page, relied only upon the Registration Statement and the Company’s regular reports on Forms 10-K, 10-Q, and 8-K as filed by the Company with the Commission.

     4.2. The Investor acknowledges, represents and agrees that no action has been or will be taken in any jurisdiction outside the United States by the Company or the Placement Agent that would permit an offering of the Shares, or possession or distribution of offering materials in connection with the issue of the Shares, in any jurisdiction outside the United States where action for that purpose is required. Each Investor outside the United States will comply with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers Shares or has in its possession or distributes any offering materials, in all cases at its own expense. The Placement Agent is not authorized to make any representation or use any information in connection with the issue, placement, purchase and sale of the Shares, except as set forth or incorporated by reference in the Base Prospectus or the Prospectus Supplement.

     4.3. The Investor further represents and warrants to, and covenants with, the Company that (a) the Investor has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and (b) this Agreement constitutes a valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreement of the Investor herein may be legally unenforceable.

     4.4. The Investor understands that nothing in this Agreement or any other materials presented to the Investor in connection with the purchase and sale of the Shares constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Shares.

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     4.5. The Investor represents, warrants and agrees that it has not engaged in any short selling of the Company’s securities, or established or increased any “put equivalent position” as defined in Rule 16(a)-1(h) under the Securities Exchange Act of 1934 with respect to the Company’s securities, within the past 10 trading days.

5. Survival of Representations, Warranties and Agreements. Notwithstanding any investigation made by any party to this Agreement or by the Placement Agent, all covenants, agreements, representations and warranties made by the Company and the Investor herein will survive the execution of this Agreement, the delivery to the Investor of the Shares being purchased and the payment therefor.

6. Notices. All notices, requests, consents and other communications hereunder will be in writing, will be mailed (a) if within the domestic United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by facsimile or (b) if delivered from outside the United States, by International Federal Express or facsimile, and will be deemed given (i) if delivered by first-class registered or certified mail domestic, three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two business days after so mailed, and (iv) if delivered by facsimile, upon electric confirmation of receipt and will be delivered as addressed as follows:

(a)	if to the Company, to:
	ArQule, Inc.
	19 Presidential Way
	Woburn, MA 01801
	Fax No.: (781) 503-0009
	Attention: Stephen A. Hill
(b)	with copies mailed to:
	ArQule, Inc.
	19 Presidential Way
	Woburn, MA 01801
	Fax No.: (781) 994-0587
	Attention: General Counsel
	and
	Arnold & Porter LLP
	555 Twelfth Street, N.W.
	Washington, DC 20004
	Fax No.: (202) 942-5999
	Attention: Richard E. Baltz, Esq.

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(c) if to the Investor, at its address on the Signature Page hereto, or at such other address or addresses as may have been furnished to the Company in writing.

7. Changes. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Investor.

8. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and will not be deemed to be part of this Agreement.

9. Severability. In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein will not in any way be affected or impaired thereby.

10. Governing Law. This Agreement will be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to the principles of conflicts of law that would require the application of the laws of any other jurisdiction.

11. Counterparts. This Agreement may be executed in two or more counterparts, each of which will constitute an original, but all of which, when taken together, will constitute but one instrument, and will become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties.

5

Exhibit A

ARQULE, INC.

STOCK CERTIFICATE QUESTIONNAIRE

Pursuant to Section 3 of the Agreement, please allocate the Shares as follows:

ACCOUNT NAME	SHARES
TOTAL

EX-99.4

Exhibit 99.4

ESCROW AGREEMENT

     THIS ESCROW AGREEMENT (“Agreement”) is made and entered into as of the 24^th day of January, 2005, by and among JPMorgan Chase Bank, N.A., a national banking association (the “Escrow Agent”), ArQule, Inc., a Delaware corporation (the “Company”), and J.P. Morgan Securities Inc., a Delaware corporation (the “Placement Agent”).

Background

     WHEREAS, the Company proposes to sell an aggregate of up to 5,788,095 shares of its common stock, par value $.01 per share (the “Shares”), for an aggregate of up to $30,387,500, all as described in the Company’s registration statement on Form S-3 (Registration No. 333-111181) (which, together with all amendments or supplements thereto is referred to herein as the “Registration Statement”);

     WHEREAS, the Shares are being offered by the Company to subscribers identified by the Placement Agent, pursuant to the terms of the Placement Agent Agreement, dated January 24, 2005, by and between the Company and the Placement Agent (the “Placement Agent Agreement”);

     WHEREAS, unless the transactions contemplated by the Placement Agent Agreement have been abandoned pursuant to the terms thereof, or unless otherwise agreed to by the Company and the Placement Agent, the closing of the purchase and sale of the Shares shall take place on January 28, 2005 (the “Closing Date”);

WHEREAS, the offering of the Shares may be terminated pursuant to the terms of the Placement Agent Agreement (the date of such termination, if so terminated, is referred to herein as the “Termination Date”);

     WHEREAS, with respect to each of the subscription payments received from subscribers, the Company and the Placement Agent propose to establish an escrow account with the Escrow Agent in the name of the Company at 4 New York Plaza, 21^st Floor, New York, New York 10004; and

     WHEREAS, the Escrow Agent is willing to receive and disburse the proceeds from the offering of the Shares in accordance herewith.

Terms

     NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     1. Deposit of Escrowed Funds. The subscribers for the Shares shall wire to the Escrow Agent funds of the subscribers delivered in payment for the Shares (the “Escrowed Funds”). Upon receipt of funds from such subscribers, the Escrow Agent shall credit such funds to a non-interest bearing account held by the Escrow Agent. The wire instructions for such

subscriber funds are set forth in the notice provision for the Escrow Agent in Section 9 of this Agreement.

     2. Acceptance. Upon receipt of the Escrowed Funds, the Escrow Agent shall acknowledge such receipt in writing to the Company and the Placement Agent and shall hold and disburse the same pursuant to the terms and conditions of this Agreement. The Escrow Agent shall have no duty to verify whether the amounts and property delivered comport with the requirements of any other agreement.

     3. List of Subscribers. The Placement Agent shall furnish or cause to be furnished to the Escrow Agent, at the time of each deposit of funds pursuant to Section 1, a list, substantially in the form of Exhibit A hereto, containing the name of, the address of, the number of Shares subscribed for by, the subscription amount to be delivered to the Escrow Agent on behalf of, and the social security or taxpayer identification number of, each subscriber whose funds are being deposited. The Escrow Agent shall promptly notify the Placement Agent and the Company of any discrepancy between the subscription amounts set forth on any list delivered pursuant to this Section 3 and the subscription amounts received by the Escrow Agent. The Escrow Agent is authorized to revise such list to reflect the actual subscription amounts received and the release of any subscription amounts pursuant to Section 4.

     4. Withdrawal of Subscription Amounts.

          (a) If the Escrow Agent shall receive a notice, substantially in the form of Exhibit B hereto (an “Offering Termination Notice”), from the Company, the Escrow Agent shall, promptly after receipt of such Offering Termination Notice, send to each subscriber listed on the list held by the Escrow Agent pursuant to Section 3 whose total subscription amount shall not have been released pursuant to paragraph (b) or (c) of this Section 4, in the manner set forth in paragraph (d) of this Section 4, a check to the order of such subscriber in the amount of the remaining subscription amount held by the Escrow Agent as set forth on such list held by the Escrow Agent. The Escrow Agent shall notify the Company and the Placement Agent of the distribution of such funds to the subscribers.

          (b) In the event that (i) the Shares have been subscribed for and funds in respect thereof shall have been deposited with the Escrow Agent on or before the Termination Date and (ii) no Offering Termination Notice shall have been delivered to the Escrow Agent, the Company and the Placement Agent shall deliver to the Escrow Agent a joint notice, not less than one (1) nor more than three (3) business days prior to the Closing Date, substantially in the form of Exhibit C hereto (a “Closing Notice”), designating how the proceeds of such subscriptions are to be distributed on the Closing Date, and identifying the subscribers and the number of Shares to be sold to each subscriber on the Closing Date. The Escrow Agent, after receipt of such Closing Notice, on the Closing Date, shall pay to the Company and the Placement Agent, in federal or other immediately available funds and otherwise in the manner specified in such Closing Notice, an amount equal to the aggregate of the subscription amounts paid by the subscribers identified in such Closing Notice for the Shares to be sold on the Closing Date as set forth on the list held by the Escrow Agent pursuant to Section 3.

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          (c) If at any time and from time to time prior to the release of any subscriber’s total subscription amount pursuant to paragraph (a) or (b) of this Section 4 from escrow, the Company shall deliver to the Escrow Agent a notice, substantially in the form of Exhibit D hereto (a “Subscription Termination Notice”), to the effect that any or all of the subscriptions of such subscriber have been rejected by the Company (a “Rejected Subscription”), the Escrow Agent, promptly after receipt of such Subscription Termination Notice, to the extent of the sum of such subscriber’s Rejected Subscription amount as set forth in the Subscription Termination Notice, send to such subscriber, in the manner set forth in paragraph (d) of this Section 4, a check to the order of such subscriber in the amount of such Rejected Subscription amount.

          (d) For the purposes of this Section 4, any check that the Escrow Agent shall be required to send to any subscriber shall be sent to such subscriber by first class mail, postage prepaid, at such subscriber’s address furnished to the Escrow Agent pursuant to Section 3.

     5. Escrow Agent; Duties and Liabilities.

          (a) It is expressly understood and agreed by the parties that (i) the duties of the Escrow Agent, as herein specifically provided, are purely ministerial in nature; (ii) the Escrow Agent shall not have any duty to deposit the Escrowed Funds except as provided herein, (iii) the Escrow Agent shall not be responsible or liable in any manner whatsoever for, or have any duty to inquire into, the sufficiency, correctness, genuineness or validity of the notices it receives hereunder, or the identity, authority or rights of any of the parties; (iv) the Escrow Agent shall have no duties or responsibilities in connection with the Escrowed Funds, other than those specifically set forth in this Agreement; (v) the Escrow Agent shall not incur any liability in acting upon any signature, written notice, request, waiver, consent, receipt, or any other paper or document reasonably believed by the Escrow Agent to be genuine; (vi) the Escrow Agent may assume that any person purporting to have authority to give notices on behalf of any of the parties in accordance with the provisions hereof has been duly authorized to do so; (vii) the Escrow Agent shall incur no liability whatsoever except for such resulting from its willful misconduct or gross negligence, as long as the Escrow Agent has acted in good faith in the performance of its duties hereunder; and (viii) upon the Escrow Agent’s performance of its obligations under Section 4 hereof, the Escrow Agent shall be relieved of all liability, responsibility and obligation with respect to the Escrowed Funds or arising out of or under this Agreement.

          (b) The Escrow Agent shall not be under any obligation to take any legal action in connection with this Agreement or towards its enforcement or performance, or to appear in, prosecute or defend any action or legal proceeding, or to file any return, or pay or withhold any income or other tax payable with respect to any Escrowed Funds or the disbursement thereof, any payment of or in respect of which shall constitute a Loss under Section 6 below, and the Placement Agent and the Company agree to provide to the Escrow Agent such information and documentation as the Escrow Agent may reasonably request in connection therewith.

          (c) In the event of any disagreement relating to the Escrowed Funds or the disbursement thereof resulting in adverse claims or demands being made in connection with the Escrowed Funds or in the event that the Escrow Agent is in doubt as to what action it should take

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hereunder, the Escrow Agent shall be entitled to retain the Escrowed Funds, but only to the extent of the Escrowed Funds in controversy, until the Escrow Agent shall have received a final non-appealable order of a court of competent jurisdiction directing delivery of the Escrowed Funds, in which event the Escrow Agent shall disburse the Escrowed Funds in accordance with such order. Any court order shall be accompanied by a legal opinion by counsel for the presenting party satisfactory to the Escrow Agent to the effect that the order is final and non-appealable. The Escrow Agent shall act on such court order and legal opinion without further question. If a proceeding for such determination is not begun and diligently continued, the Escrow Agent may make an ex parte application, or bring any appropriate action, for leave to deposit the Escrowed Funds in the Supreme Court of the State of New York, County of New York seeking such determination or such declaratory relief as the Escrow Agent shall deem reasonably necessary under the circumstances, and the parties each hereby irrevocably consent to the entering of an ex parte order pursuant to all applicable laws, rules and procedures of the State of New York and such court. The Escrow Agent shall be reimbursed by the Company for all of the Escrow Agent’s reasonable costs and expenses of such action or proceeding, including, without limitation, attorneys’ fees and disbursements.

          (d) The Escrow Agent does not have any interest in the Escrowed Funds deposited hereunder and is serving as escrow agent only and having only possession thereof. Any payments of income from the Escrowed Funds shall be subject to withholding regulations then in force with respect to United States federal or state income taxes. The parties hereto shall provide the Escrow Agent with appropriate Internal Revenue Service Forms W-9 for tax identification number certification or non-resident alien certifications. Section 5(c), Section 5(d) and Section 6 shall survive any termination of this Agreement or the resignation of the Escrow Agent in accordance with Section 5(h) below.

          (e) None of the provisions of this Agreement shall require the Escrow Agent to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to it against such risk or liability is not assured to it.

          (f) The Escrow Agent may consult with independent counsel and the advice or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in accordance with such advice or opinion of counsel.

          (g) The Escrow Agent may execute any of the trusts or powers hereunder to perform any (and the Escrow Agent may execute any of the trusts or powers hereunder to perform any other duties hereunder with the written consent of the Company, which consent may not unreasonably withheld) either directly or through agents, attorneys, custodians or nominees appointed with due care, and shall not be responsible for any willful misconduct or gross negligence on the part of any agent, attorney, custodian or nominee so appointed.

          (h) The Escrow Agent may at any time resign by giving ten (10) days written notice of resignation to the Company and the Placement Agent. Upon receiving such notice of

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resignation, the Company and the Placement Agent shall promptly appoint a successor and, upon the acceptance by the successor of such appointment, release the resigning Escrow Agent from its obligations hereunder by written instrument, a copy of which instrument shall be delivered to the resigning Escrow Agent and the successor. If no successor shall have been so appointed and have accepted appointment within forty-five (45) days after the giving of such notice of resignation, the resigning Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor.

          (i) Any partnership, corporation or other similar entity into which the Escrow Agent may be merged or converted or with which it may be consolidated, or any partnership, corporation or other similar entity resulting from any merger, conversion or consolidation to which the Escrow Agent shall be a party, or any partnership, corporation or other similar entity succeeding to the business of the Escrow Agent shall be the successor of the Escrow Agent hereunder without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties hereto except where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding.

          (j) No printed or other matter in any language (including, without limitation, the Registration Statement, the prospectus and prospectus supplement relating to the Registration Statement, notices, reports and promotional material) which mentions the Escrow Agent’s or the Company’s name or the rights, powers, or duties of the Escrow Agent shall be issued by the other parties hereto or on such parties’ behalf unless the Escrow Agent or the Company, as the case may be, shall first have given its specific written consent thereto. The Escrow Agent hereby consents to the use of its name and the reference to the escrow arrangement in the Placement Agent Agreement, the Registration Statement and the prospectus and prospectus supplement relating to the Registration Statement.

     6. Indemnification of Escrow Agent. The Company hereby agrees to indemnify and hold the Escrow Agent harmless from any and all liabilities, obligations, damages, losses, claims, encumbrances, costs or expenses (including reasonable attorneys’ fees and expenses) (any or all of the foregoing herein referred to as a “Loss”) arising hereunder or under or with respect to the Escrowed Funds, except for Losses resulting from the willful misconduct or gross negligence of the Escrow Agent. Anything in this agreement to the contrary notwithstanding, in no event shall the Escrow Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

     7. Fees. The Company agrees to (a) pay the Escrow Agent upon execution of this Agreement and from time to time thereafter reasonable compensation for the services to be rendered hereunder, which unless otherwise agreed in writing shall be as described in Schedule 1 attached hereto, and (b) pay or reimburse the Escrow Agent upon request for all expenses, disbursements and advances, including reasonable attorney’s fees and expenses, incurred or made by it in connection with the performance, delivery, modification and termination of this Agreement.

     8. Security Procedures. In the event funds transfer instructions are given (other than in writing at the time of execution of this Agreement, as indicated in Schedule 2 attached hereto),

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whether in writing, by telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of such instructions by telephone call-back to the person or persons designated in Schedule 3 attached hereto, and the Escrow Agent may rely upon the confirmation of anyone purporting to be the person or persons so designated. The persons and telephone numbers for call-backs may be changed only in a writing actually received and acknowledged by the Escrow Agent. If the Escrow Agent is unable to contact any of the authorized representatives identified in Schedule 3, the Escrow Agent is hereby authorized to seek confirmation of such instructions by telephone call-back to any one or more of the executive officers of the Company or the Placement Agent, as applicable (each an “Executive Officers”), as the Escrow Agent may select. Such Executive Officer shall deliver to the Escrow Agent a fully executed Incumbency Certificate, and the Escrow Agent may rely upon the confirmation of anyone purporting to be any such officer. The Escrow Agent and the beneficiary’s bank in any funds transfer may rely solely upon any account numbers or similar identifying numbers provided by the Company or the Placement Agent to identify (a) the beneficiary, (b) the beneficiary’s bank or (c) an intermediary bank. The Escrow Agent may apply any of the escrowed funds for any payment order it executes using any such identifying number, even when its use may result in a person other than the beneficiary being paid, or the transfer of funds to a bank other than the beneficiary’s bank or an intermediary bank designated; provided that the Escrow Agent has no knowledge that such identifying number is inaccurate. The parties to this Agreement acknowledge that these security procedures are commercially reasonable.

     9. Notices. Any notice or demand desired or required to be given hereunder shall be in writing and deemed given when sent by facsimile transmission with receipt confirmed to the facsimile number set forth below and addressed as follows:

(a)	If to the Escrow Agent, to:
	JPMorgan Chase Bank, N.A.
	Escrow Services
	4 New York Plaza, 21st Floor
	New York, NY 10004
	Fax No.: (212) 623-6168/6380
	Attention: Audrey Mohan
	with wire transfers to:
	JPMorgan Chase Bank, N.A.
	ABA # 021 000 021
	Account No.: 507 897455
	Account Name: NY Escrow Special Subscription Account
	FFC: a/c # 10220760 ArQule, Inc. Escrow Account
	Attention: Audrey Mohan
	Tel. No: (212) 623-5087

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(b)	If to the Company, to:
	ArQule, Inc.
	19 Presidential Way
	Woburn, MA 01801
	Fax No.: (781) 503-0009
	Attention: Stephen A. Hill
	with copies to:
	ArQule, Inc.
	19 Presidential Way
	Woburn, MA 01801
	Fax No.: (781) 994-0587
	Attention: General Counsel
	and
	Arnold & Porter LLP
	555 Twelfth Street, NW
	Washington, DC 20004
	Fax No.: (202) 942-5999
	Attention: Richard E. Baltz, Esq.
(c)	If to the Placement Agent, to:
	J.P. Morgan Securities Inc.
	277 Park Avenue, 11th Floor
	New York, NY 10172
	Fax No.: (212) 270-7487
	Attention: Robert Vincent, Esq.
	with a copy to:
	Dechert LLP
	4000 Bell Atlantic Tower
	1717 Arch Street Philadelphia, PA 19103-2793 Fax No.: (215) 994-2222 Attention: James A. Lebovitz, Esq.

or to such other address or account information as hereafter shall be designated in writing by the applicable party to the other parties hereto.

     10. Entire Agreement. This Agreement and any exhibits and schedules hereto constitute the entire agreement between the parties hereto pertaining to the subject matters hereof, and supersede all negotiations, preliminary agreements and all prior and

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contemporaneous discussions and understandings of the parties in connection with the subject matters hereof. Any exhibits and schedules hereto are hereby incorporated into and made a part of this Agreement.

     11. Amendments. No amendment, waiver, change or modification of any of the terms, provisions or conditions of this Agreement shall be effective unless made in writing and signed by the parties or by their duly authorized agents. Waiver of any provision of this Agreement shall not be deemed a waiver of future compliance therewith and such provision shall remain in full force and effect.

     12. Severability. In the event any provision of this Agreement is held invalid, illegal or unenforceable, in whole or in part, the remaining provisions of this Agreement shall not be affected thereby and shall continue to be valid and enforceable.

     13. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York without regard to any applicable principles of conflicts of law.

     14. Submission to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF. THE COMPANY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF TO THE COMPANY BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE COMPANY AT ITS ADDRESS SPECIFIED HEREIN. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.

     15. Headings and Captions. The titles or captions of paragraphs in this Agreement are provided for convenience of reference only, and shall not be considered a part hereof for purposes of interpreting or applying this Agreement, and such titles or captions do not define, limit, extend, explain or describe the scope or extent of this Agreement or any of its terms or conditions.

     16. Gender and Number. Words and phrases herein shall be construed as in the singular or plural number and as masculine, feminine or neuter gender, according to the context.

     17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one

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and the same instrument, and in making proof hereof, it shall not be necessary to produce or account for more than one such counterpart.

     18. Binding Effect on Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns, and the subscribers of the Shares. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto (and their respective legal representatives, heirs, successors and assigns), any rights, remedies, obligations or liabilities.

[Signature Page Follows]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

ESCROW AGENT:
JPMORGAN CHASE BANK, N.A.
By:	/s/ Debra A. DeMarco
	Name: Debra A. DeMarco
	Title: Vice President
COMPANY:
ARQULE, INC.
By:	/s/ J. David Jacobs
	Name: J. David Jacobs
	Title: Vice President, Legal and General Counsel
PLACEMENT AGENT:
J.P. MORGAN SECURITIES INC.
By:	/s/ Peter P. Buckley
	Name: Peter P. Buckley
	Title: Managing Director

[Signature Page to Escrow Agreement]