**EXHIBIT 10.1**

 

*Portions of this Exhibit were omitted and filed separately with theSecretary of the Commission pursuant to an application for confidentialtreatment filed with the Commission pursuant to Rule 24b-2 under the SecuritiesExchange Act of 1934. Such omissions are designated as **.*

 

**PRODUCT DEVELOPMENT AND**

**COMMERCIALIZATION AGREEMENT**

 

**AMONG**

 

**SMITHKLINE BEECHAM CORPORATION**

**DOING BUSINESS AS GLAXOSMITHKLINE,**

 

**GLAXO GROUP LIMITED**

 

**AND**

 

**PHARMACOPEIA DRUG DISCOVERY, INC.**

 

**DATED AS OF**

# **MARCH24, 2006**

 

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PRODUCT DEVELOPMENT AND

COMMERCIALIZATION AGREEMENT

 

THIS PRODUCT DEVELOPMENT ANDCOMMERCIALIZATION AGREEMENT is made as of the 24th day of March, 2006 (the “EFFECTIVEDATE”) by and between SmithKline Beecham Corporation, doing business asGlaxoSmithKline, a Pennsylvania corporation having a principal place ofbusiness at One Franklin Plaza, 200 N 16th Street, Philadelphia, PA19102 (“SB Corp”), and Glaxo Group Limited, a company existing under the lawsof England and Wales, having its registered office at Glaxo Wellcome House,Berkeley Avenue, Greenford, Middlesex, UB6 0NN, England (“GGL”), SB Corp andGGL being collectively referred to hereinafter as “GSK”; and Pharmacopeia DrugDiscovery, Inc., a Delaware corporation having a principal place of business at3000 Eastpark Boulevard, Cranbury, New Jersey 08512 (“Pharmacopeia”). Pharmacopeia and GSK areeach referred to herein by name or as a “Party” or, collectively, as the “Parties.”

 

RECITALS

 

A.     Pharmacopeia has developed certain capabilities for the discovery anddevelopment of pharmaceutical products for the treatment of human diseases orconditions.

 

B.      GSKpossesses research, development, manufacturing and commercialization expertisefor the development and commercialization of pharmaceutical products for thetreatment of human diseases or conditions.

 

C.      GSK, through its Center of Excellence for External DrugDiscovery (“CEEDD”),

 

desires to engage in a collaborative effortwith Pharmacopeia, pursuant to which Pharmacopeia shall engage in research and developmentprograms to discover and develop compounds with demonstrated efficacy in humansthat will be available for commercialization by one of the Parties.

 

D.      PHARMACOPEIA desires to engage in a collaborative effort with GSKwhereby GSK will, pursuant to the Options granted to GSK by this Agreement,have exclusive worldwide rights to complete the development andcommercialization of certain compounds discovered and developed byPharmacopeia.

 

E.      The Parties acknowledge that any rights GSK acquires under thisAgreement, as defined below, will be held by GSK in accordance with GSK’s andits group’s inter-company agreements, as in effect from time to time.

 

F.      Contemporaneously with the execution of this Agreement, Pharmacopeia shall issue to GSK a Warrant toPurchase Common Stock substantially in the form attached hereto as Exhibit A(the “Warrant”), which will permit GSK to purchase shares of common stock ofPharmacopeia upon the fulfillment of the terms and conditions set forth in theWarrant and this Agreement.

 

Now, therefore, in consideration of thepremises and mutual covenants herein contained, and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the Parties agree as follows:

 

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**ARTICLE 1**

 

**DEFINITIONS**

 

As used in this Agreement, the followingterms shall have the meanings set forth in this Article unless context dictatesotherwise:

 

1.1 “AFFILIATE” shall mean any Person,whether de jure or de facto, which directly or indirectly through one (1) ormore intermediaries controls, is controlled by, or is under common controlwith, a Party to this Agreement. A Person shall be deemed to “control” anotherPerson if it (i) owns, directly or indirectly, beneficially or legally, atleast fifty percent (50%) of the outstanding voting securities or capital stock(or such lesser percentage which is the maximum allowed to be owned by a Personin a particular jurisdiction) of such other Person, or has other comparableownership interest with respect to any Person other than a corporation; or (ii)has the power, whether pursuant to contract, ownership of securities orotherwise, to direct the management and policies of the Person.

 

1.2 “AGREEMENT” shall mean this ProductDevelopment and Commercialization Agreement together with the recitals and allexhibits, schedules and attachments hereto.

 

1.3 “BACK-UP COMPOUND” shall mean acompound whose principal mechanism of action is to modulate a Target in themanner determined by the JSC for such Target, that meets the CandidateSelection Criteria with respect to such Target and, with the JSC’s approval, isintended to supplant a particular Pharmacopeia Development Compound or GSKDevelopment Compound if such Pharmacopeia Development Compound or GSKDevelopment Compound is removed from development. A Back-Up Compound may also be intended to supplant anotherBack-Up Compound if such other Back-Up Compound is removed from development.

 

1.4 “BANKRUPTCY CODE” shall have the meaningassigned to such term in Section 12.3.2.

 

1.5 “BREACHING PARTY” shall have the meaningassigned to such term in Section 12.2.1.

 

1.6 “CALENDAR QUARTER” shall mean a period ofthree (3) consecutive months ending at midnight, Eastern Time on the last dayof March, June, September, or December, respectively.

 

1.7 “CANDIDATE SELECTIONCOMPOUND” shall mean a compound resulting from a Program that the JSCdetermines meets all of the Candidate Selection Criteria as established by theJSC.

 

1.8 “CANDIDATE SELECTIONCRITERIA” shall mean criteria established by the JSC for advancement of a Leadinto pre-clinical development, based on the Target Product Profile ** and **. Ifa compound is advanced by either Party pursuant to the Agreement intopre-clinical development (i.e., beyond the stage of candidate selection), andif the **, then the compound will be deemed to have met the Candidate SelectionCriteria irrespective of the actual attainment of all of the defined criteria.

 

1.9 “cGMP” shall mean current GoodManufacturing Practices as defined in Parts 210 and 211 of Title 21 of the U.S.Code of Federal Regulations, as may be amended from time to time, or anysuccessor thereto.

 

Execution Version

 

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1.10 “CEDD” shall mean one ormore of GSK’s “Centers of Excellence for Drug Discovery”; i.e., anorganizational structure that oversees drug discovery and development beingconducted internally at GSK. CEDD shall include any successor organizationalstructures to CEDD, whether or not possessing the same name, that is responsiblefor internal drug discovery and development at GSK.

 

1.11 “CEEDD” shall mean GSK’s “Centerof Excellence for External Drug Discovery”; i.e., an organizational structurewithin GSK used by GSK to manage external drug discovery and development collaborations. The term “CEEDD” when used herein shall also include any organizationalstructure within GSK whose functions are broadly similar to the CEEDD, to whichmanagement of the Programs under this Agreement may be subsequently assigned.

 

1.12 “CEEDD LEADERSHIP TEAM” shall meanthe most senior member and head of the CEEDD, plus the CEEDD heads of biology,chemistry, pharmacology, operations management, business development,preclinical development, clinical development, commercial, legal, finance, and theCEEDD employee(s) assigned by the CEEDD to manage the collaboration withPharmacopeia.

 

1.13 “COLLABORATION COMPOUND” shall mean a TractableHit, Lead, Candidate Selection Compound, Proof-of-Concept Compound, GSKDevelopment Compound, Pharmacopeia Development Compound, Back-up Compound, orany compound derived from any of the foregoing. As used herein, a compoundshall be deemed to have been “derived” from another compound if it (i) is the **,(ii) is otherwise **, (iii) is **, or (iv) is ** in category (i), (ii) or (iii)above. As used herein,a compound also shall be deemed to have been “derived” from another compound ifit is the **. It is understood that this definition of “Collaboration Compound”shall **, in each case as evidenced by contemporaneous documentation.

 

1.14 “COMBINATION PRODUCT” shall mean aProduct incorporating two (2) or more therapeutically active ingredients, atleast one of which is a Collaboration Compound. Notwithstanding the foregoing,ingredients or components other than active ingredients, including withoutlimitation drug delivery vehicles, adjuvants, and excipients, shall not bedeemed to be “therapeutically active ingredients,” and their presence shall notbe deemed to create a Combination Product.

 

1.15 “CONFIDENTIAL INFORMATION” shall havethe meaning assigned to such term in Section 9.1.

 

1.16 “CONTRACT YEAR” shall mean a year of 365days (or 366 days in a leap year) beginning on the Effective Date and endingone (1) year thereafter and so on, year-by-year during the Term. “CONTRACT YEARONE” shall mean the first such year; “CONTRACT YEAR TWO” shall mean the secondsuch year, and so on, year-by-year.

 

1.17 “CONTROL,” “CONTROLS,” “CONTROLLED” OR “CONTROLLING”shall mean possession by the granting Party of the ability to grant thelicenses or sublicenses to the other Party, as provided in this Agreement,without violating the terms of any agreement or other arrangement with anyThird Party.

 

1.18 “DISCLOSING PARTY” shall have themeaning assigned to such term in Section 9.1.

 

1.19 “DRAFTING PARTY” shall have the meaningassigned to such term in Section 2.2.4(a).

 

1.20 “EFFECTIVE DATE” shall have the meaningassigned to such term in the Preamble.

 

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1.21 “EMEA” shall mean the European MedicinesEvaluation Agency and any successor entity thereto.

 

1.22 “ENABLING STUDIES” shall have themeaning assigned to such term in Section 3.9.

 

1.23 “EXECUTIVE OFFICERS” shall have themeaning assigned to such term in Section 2.2.5.

 

1.24 “FDA” shall mean the U.S. Food and DrugAdministration, or any successor entity thereto.

 

1.25 “FIELD” shall mean the treatment,prevention or diagnosis of any disease or condition adverse to human or animalhealth.

 

1.26 “FIRST COMMERCIAL SALE” shall mean, withrespect to each Product, the first sale for which payment has been received foruse or consumption by the general public of such Product in any country in theTerritory after all required Marketing Approvals have been granted, or suchsale is otherwise permitted, by the Regulatory Authority in such country,excluding registration samples, compassionate use sales, inter-companytransfers to Affiliates of a Party and the like.

 

1.27 “GSK” shall have the meaning assigned tosuch term in the Preamble.

 

1.28 “GSK DEVELOPMENT COMPOUND”shall mean a Candidate Selection Compound or Proof-of-Concept Compound that isselected by GSK for further development and commercialization by GSK andexclusively licensed to GSK pursuant to any one of the Options defined in Article4 of this Agreement. A “GSK Development Compound” shall be **.

 

1.29 “GSK PATENTS” shall mean all Patents inthe **. For the avoidance of doubt, no Patent shall be deemed tobe a GSK Patent until the **.

 

1.30 “GSK TARGET” shall mean aprotein target, and the related assay and and/or reagents, if any, provided toPharmacopeia by GSK, and accepted by the JSC for Pharmacopeia to use pursuantto Programs hereunder.

 

1.31 “GSK TARGET IP” shall meanall Patents, Know-how, proprietary materials and other related intellectualproperty rights Controlled by GSK and covering a given GSK Target.

 

1.32 “GSK IP” shall mean Know-How controlledby GSK and any GSK Patents. “GSK IP” shall include, without limitation, any GSKTarget IP.

 

1.33 “HSR ACT” shall have the meaningassigned to such term in Section 14.6.1.

 

1.34 “IND” shall mean any investigational newdrug application filed with the FDA pursuant to Part 312 of Title 21 of theU.S. Code of Federal Regulations, including any amendments thereto. Referencesherein to IND shall include, to the extent applicable, any comparable filing(s)outside the U.S. (such as a CTA in the European Union).

 

1.35 “INDEMNITEE” shall have the meaningassigned to such term in Section 11.3.

 

1.36 “INFORMATION” shall mean information andmaterials within the Control of GSK or its Affiliates or Pharmacopeia or itsAffiliates, in either case that (i) is necessary for thediscovery, development, manufacture or use of Collaboration Compounds and/orthe development, manufacture, use, sale or commercialization of correspondingProducts, and (ii) exists asof the Effective Date or is discovered, developed or acquired during the Term,and including, without limitation: (A) techniques and data, including, but notlimited to, screens, models, inventions, methods, test data including, but 

 

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not limited to, pharmacological,toxicological and clinical test data, analytical and quality control data,marketing, pricing, distribution, costs, and sales data, manufacturinginformation (including any relevant Third Party manufacturing information tothe extent Controlled by, and in the possession of, GSK or its Affiliates orPharmacopeia or its Affiliates), and patent and legal data or descriptions (tothe extent that disclosure thereof would not result in loss or waiver ofprivilege or similar protection); and (B) compositions of matter, including butnot limited to compounds, biological materials, vectors and assays. As usedherein, “CLINICAL TEST DATA” shall be deemed to include all information relatedto the clinical or preclinical testing of a Collaboration Compound orcorresponding Product, including without limitation, patient report forms,investigators’ reports, biostatistical, pharmaco-economic and other relatedanalyses, regulatory filings and communications, and the like.

 

1.37 “INITIAL SCREENING TERM”shall mean the period of time from the Effective Date until completion ofscreening by Pharmacopeia of the Initial Targets.

 

1.38 “INITIAL TARGETS” shall mean** for Pharmacopeia to use pursuant to Programs hereunder. The first ** shallbe agreed upon in writing by the Parties, together with the Tractable HitCriteria, Lead Declaration Criteria and the Candidate Selection Criteria foreach of such Targets, **, for use by Pharmacopeia pursuant to Programshereunder.

 

1.39 “INITIAL TARGET PROPOSALSCHEDULE” is as set forth in Section 3.2.1.

 

1.40  “JOINTIP” shall mean Know-How Controlled jointly by the Parties and any JointPatents.

 

1.41 “JOINT PATENTS” shall mean all Patents in the **.

 

1.42 “JOINT STEERING COMMITTEE”or “JSC” shall have the meaning ascribed to such term in Section 2.2.

 

1.43 “KNOW-HOW” shall mean all Information, technicalinformation, techniques, data, inventions, practices, methods, knowledge,skill, experience, test data or information necessary for the discovery, development, manufacture or use ofone or more Collaboration Compounds and/or the development, manufacture, use,sale or commercialization of corresponding Products, which (a) is **, or (b) is **.

 

1.44  “LEAD” shall mean a compound that meets all ofthe Lead Declaration Criteria as determined by the JSC.

 

1.45 “LEAD DECLARATION CRITERIA”shall mean criteria established by the JSC for advancing a Lead into a LeadOptimization Program. A compound that is advanced into a Lead OptimizationProgram pursuant to the Agreement will be deemed to have met all of the LeadDeclaration Criteria irrespective of the actual attainment of all LeadDeclaration Criteria, if the JSC unanimously approves such action in advance.

 

1.46 “LEAD GENERATION PROGRAM”shall mean a chemical synthesis program conducted by Pharmacopeia to generateanalogs of a Tractable Hit, designed to result in a Lead.

 

1.47 “LEAD OPTIMIZATION PROGRAM”shall mean a medicinal chemistry optimization effort conducted by Pharmacopeiawith respect to a Lead, designed to result in a Candidate Selection Compound.

 

1.48 “LOSSES” shall have the meaning assignedto such term in Section 11.1.

 

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1.49 “MAJOR MARKET” shall mean the UnitedStates, Japan, and the European Union.

 

1.50 “MARKETING APPROVAL” shall mean allapprovals, licenses, registrations or authorizations of any federal, state orlocal regulatory agency, department, bureau or other governmental entity,necessary for the manufacturing, use, storage, import, transport and sale of aProduct in a regulatory jurisdiction. “Marketing Approval” shall be deemed tooccur upon first receipt of notice from a Regulatory Authority that a Producthas been approved for commercial sale. For countries where governmentalapproval is required for pricing or for the Product to be reimbursed bynational health insurance (i.e., other than the United States), “MarketingApproval” shall not be deemed to occur until such pricing or reimbursementapproval is obtained. Marketing Approval shall be deemed to have occurred insuch a country where government approval of pricing or reimbursement has notbeen obtained if, at any time, the Party begins the commercial sale of suchProduct in the country without obtaining pricing approval or reimbursement,with the date of such Marketing Approval to be deemed to occur on the date ofthe First Commercial Sale of the Product in the country.

 

1.51 “MARKETING APPROVAL APPLICATION” OR “MAA”shall mean a New Drug Application (as defined in Title 21 of the U.S. Code ofFederal Regulations, Section 314.50, et. seq.), or a comparable filing forMarketing Approval (not including pricing or reimbursement approval) in acountry, in each case with respect to a Product in the Territory.

 

1.52 “MATERIAL BREACH” shall have the meaningassigned to such term in Section 12.2.1.

 

1.53 “NDA” shall mean a NewDrug Application (as definedin Title 21 of the U.S. Code of Federal Regulations, Section 314.50, et. seq.).

 

1.54 “NET SALES” shall mean the**. For purposes of thisSection, **.

 

1.55 “NON-BREACHING PARTY” shall have themeaning assigned to such term in Section 12.2.1.

 

1.56 “OPTIONS” shall mean GSK’srights under and subject to all the applicable provisions of this Agreement toelect to exclusively develop and commercialize any GSK Development Compoundresulting from a given Program under the Candidate Selection Option or the PoCOption, as applicable, and as more fully set forth in Article 4.

 

1.57 [Intentionally left blank]

 

1.58 “PARTY” OR “PARTIES” shall have themeaning assigned to such term in the Preamble, or where the context requires,shall mean GSK and its Affiliates and/or Pharmacopeia and its Affiliates.

 

1.59 “PATENT” shall mean: (i) issued andunexpired letters patent, including any extension, registration, confirmation,reissue, continuation, supplementary protection certificate, divisional,continuation-in-part, re-examination or renewal thereof, (ii) pendingapplications for letters patent, and (iii) foreign counterparts of any of theforegoing; in each case to the extent the same has not been held, by a court,administrative body or governmental agency of competent jurisdiction, to beinvalid or unenforceable in a decision from which no appeal can be taken orfrom which no appeal was taken within the time permitted for appeal.

 

1.60 “PATENT SUBCOMMITTEE” shall have themeaning assigned to such term in Section 2.2.6.

 

1.61 “PAYEE” shall have the meaning assignedto such term in Section 6.6.1.

 

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1.62 “PAYOR” shall have the meaning assignedto such term in Section 6.6.1.

 

1.63 “PERSON” shall mean any corporation,firm, partnership or other entity.

 

1.64 “PHARMACOPEIA” shall have the meaningassigned to such term in the Preamble.

 

1.65 “PHARMACOPEIA DEVELOPMENTCOMPOUND” shall mean a Tractable Hit, Lead, Candidate Selection Compound orProof-of-Concept Compound for which Pharmacopeia retains the right to continueto research, develop or commercialize hereunder, and which Pharmacopeia electsto further progress, subject to GSK’s rights, as applicable. Any PharmacopeiaDevelopment Compound shall **.

 

1.66  “PHARMACOPEIA IP” shall mean Know-How Controlled by Pharmacopeia and anyPharmacopeia Patents. “Pharmacopeia IP” shall include, without limitation, anyPharmacopeia Target IP.

 

1.67 “PHARMACOPEIA PATENTS” shall mean all Patents in the **. Forthe avoidance of doubt, no Patent shall be deemed to be a Pharmacopeia Patentuntil the **.

 

1.68 “PHARMACOPEIA TARGET”shall mean a protein target, and the related assay and reagents, if any,provided by Pharmacopeia and accepted by the JSC for Pharmacopeia to usepursuant to Programs hereunder.

 

1.69 “PHARMACOPEIA TARGET IP”shall mean all Patents, Know-How, proprietary materials and other relatedintellectual property rights Controlled by Pharmacopeia and covering a givenPharmacopeia Target.

 

1.70 “PHASE I,” “PHASE II” and “PHASE III” shall mean Phase I (or Phase I/II),Phase II (or Phase II/III) and Phase III clinical trials, respectively, in eachcase as prescribed by applicable FDA IND Regulations, or any correspondingforeign statutes, rules or regulations.

 

1.71 “PRODUCT” shall mean any productfor the therapeutic or prophylactic treatment or prevention of any disease orcondition in human beings, which contains a Collaboration Compound.

 

1.72 “PoC STUDIES” shall meanthe particular clinical trials that will be employed with respect to aCandidate Selection Compound, GSK Development Compound or PharmacopeiaDevelopment Compound to demonstrate the achievement of the Proof-of-ConceptCompound Criteria.

 

1.73 “PROOF-OF-CONCEPT COMPOUND”shall mean a compound resulting from the PoC Studies that has demonstrated thatit satisfies all of the Proof-of-Concept Compound Criteria.

 

1.74 “PROOF-OF-CONCEPT COMPOUND CRITERIA” shall meancriteria ** (at or about the time of first-time-in-humans (“FTIH”) testing(i.e., at Phase I clinical trials) to determine if a Candidate SelectionCompound, GSK Development Compound or Pharmacopeia Development Compound understudy demonstrates a clinically meaningful benefit-to-risk profile in treatingthe applicable disorder. This shall include a ** hereunder. Any CandidateSelection Compound, GSK Development Compound or Pharmacopeia DevelopmentCompound advanced by GSK into Phase III clinical trials will be deemed to havemet all of the Proof-of-Concept Compound Criteria and to be a Proof-of-ConceptCompound.

 

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1.75 “PROGRAM” shall mean anyactivities pursuant to one or more Work Plans that are approved hereunder bythe JSC for a given Target, including for example, Screening Programs, LeadGeneration Programs and/or Lead Optimization Programs.

 

1.76 “PROGRAM TERM” shall meanthe period of time commencing with the approval by the JSC of a ScreeningProgram with respect to a particular Target, and continuing until no furtheractivity pursuant to this Agreement is being pursued by either Party withrespect to the Program applicable to that particular Target.

 

1.77 “RECEIVING PARTY” shall have the meaningassigned to such term in Section 9.1.

 

1.78 “REGULATORY AUTHORITY” OR “REGULATORYAUTHORITIES” shall mean the FDA in the U.S., and any health regulatoryauthority(ies) in any country in the Territory that is a counterpart to the FDAand holds responsibility for granting regulatory marketing approval for aProduct in such country, and any successor(s) thereto.

 

1.79 “RESEARCH TERM” shall meanthe period of time that is ** (**) ** from the Effective Date, unless extendedor earlier terminated by the mutual written agreement of the Parties.

 

1.80 “SCREENING PROGRAM” shallmean a Program for the screening by Pharmacopeia of Targets with the goal ofgenerating Tractable Hits.

 

1.81 “SUBCOMMITTEE” shall have the meaningassigned to such term in Section 2.2.6.

 

1.82 “ SUBLICENSEE” shall mean, with respectto a particular Collaboration Compound or Product, a Third Party to whom GSK orPharmacopeia, as applicable, has granted a sublicense under any intellectualproperty licensed to such Party pursuant to this Agreement.

 

1.83 “TARGET” shall mean a GSKTarget or a Pharmacopeia Target.

 

1.84 “TARGET PRODUCT PROFILE”shall mean the projected productprofile ** for adoption by the JOINT STEERING COMMITTEE that shall provide,with respect to each Target, a description of the commercially relevant rangeof acceptable product performance of a PROOF-OF-CONCEPT COMPOUND against keyproduct characteristics, and which shall be used by Pharmacopeia and GSK toguide and shape the progression of and development decisions for suchPROOF-OF-CONCEPT COMPOUND.

 

1.85 “TERM” shall have the meaning assignedto such term in Section 12.1.2.

 

1.86 “TERRITORY” shall mean anywhere in theworld.

 

1.87 “THIRD PARTY” shall mean any entityother than Pharmacopeia, GSK or an Affiliate of Pharmacopeia or GSK.

 

1.88 “TRACTABLE HIT” shall mean a compound identified by Pharmacopeia and considered by the JSC to beactive against a Target and meeting the Tractable Hit Criteria.

 

1.89 “TRACTABLE HIT CRITERIA” shall mean criteria set by the JSC for selectinghits that are amenable to chemistry optimization. Any compound advanced into aLead Generation Program pursuant to the Agreement will be deemed to have metthe Tractable Hit Criteria irrespective of the actual attainment of allTractable Hit Criteria, if the JSC unanimously approves such action in advance.

 

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1.90 “UNITED STATES” OR “U.S.” shall mean theUnited States of America.

 

1.91 “VALID CLAIM**”**means a claim within an issued United States or foreignpatent that has not expired, lapsed, or been cancelled or abandoned, and thathas not been dedicated to the public, disclaimed, or held unenforceable,invalid, or cancelled by a court or administrative agency of competentjurisdiction in an order or decision from which no appeal can be taken or wastimely taken, including without limitation, through opposition, re-examination,reissue or disclaimer.

 

1.92 “WORK PLAN” shall have the meaningassigned to such term in Section 2.2.2(g).

 

1.93 “WRITTEN DISCLOSURE” shall have themeaning assigned to such term in Section 14.1.

 

**ARTICLE 2**

 

**OVERSIGHT OF THE COLLABORATION**

 

2.1    IN GENERAL. Subject to all the provisions ofthis Agreement, Pharmacopeia shall have principal responsibility for allresearch, discovery and development activities with respect to PharmacopeiaDevelopment Compounds prior to exercise by GSK of one of its Options withrespect to such Program and Pharmacopeia Development Compounds, and GSK shallhave principal responsibility for all research, development andcommercialization activities with respect to GSK Development Compounds, unlessand until any such GSK Development Compound reverts to Pharmacopeia pursuant tothe applicable provisions of the Agreement for any such reversion.

 

2.2     THE JSC. As soon as practicable after theEffective Date, the Parties shall establish a Joint Steering Committee (the “JSC”).The JSC shall have review and oversight responsibilities for all research anddevelopment activities performed under this Agreement during the Research Term,as more specifically provided herein; provided, however, that the JSC shallhave no authority to amend this Agreement. Each Party agrees to keep the JSCreasonably informed of its progress and activities during the Research Term. IfGSK elects to exercise one of its Options pursuant to Article 4 with respect toa Pharmacopeia Development Compound, the JSC (and any applicable Subcommitteeincluding, but not limited to, the Patent Subcommittee) shall continue as avehicle to maintain information flow between GSK and Pharmacopeia regarding theprogression of such compound as a GSK Development Compound, including byadministering Patent matters pursuant to Article 8. Notwithstanding the above,all decisions with respect to the development, progression or commercializationof any such GSK Development Compound after GSK has exercised one of its Optionswith respect to such compound shall be at the sole discretion of GSK as theParty responsible under this Agreement for developing such compound, subject toGSK’s obligations of diligence as set forth in this Agreement.

 

2.2.1  Membership. The JSC shall be comprised of anequal number of representatives from each of GSK and Pharmacopeia. The exactnumber of such representatives shall be three for each of GSK and Pharmacopeia,or such other number as the Parties may agree. Each Party shall provide theother with a list of its initial members of the JSC. Each Party may replace anyor all of its representatives on the JSC at any time upon written notice to theother Party in 

 

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accordance with Section 14.8 of this Agreement.Such representatives shall include individuals within the senior management ofPharmacopeia and the CEEDD, and those representatives of each Party shall,individually or collectively, have expertise in business, pharmaceutical drugdiscovery, development and commercialization. Any member of the JSC maydesignate a substitute to attend and perform the functions of that member atany meeting of the JSC. Each Party may, in its reasonable discretion, invitenon-member representatives of such Party to attend meetings of the JSC. If theJSC chooses to designate a chairperson, such chairperson shall be appointed fora one (1) year term and the right to name the chairperson shall alternatebetween the Parties.

 

2.2.2        Responsibilities. The JSC shall be responsiblefor overseeing each Program performed pursuant to this Agreement unless anduntil GSK exercises one of its Options to a given Program, or unless and untilPharmacopeia acquires the right hereunder to independently progress andcommercialize Products under a given Program. For avoidance of doubt, wheneverany matter is presented to the JSC or to either Party for decision underArticles 2, 3 or 4 of this Agreement, such decision shall be communicatedthrough the JSC within no more than thirty (30) days, unless a different timeperiod is specifically stated in this Agreement or is otherwise mutually agreedin writing by the Parties with respect to such matter. Failure by either Partyto communicate any such decision within the applicable thirty (30) day or otherspecific time period shall be deemed a positive decision and thus an approvalby such Party with respect to such matter. Without limiting the foregoing, theJSC shall perform the following functions, some or all of which may beaddressed directly at any given meeting of the JSC

 

(a)     determine the ** (other than the **, which shallbe determined prior to the Effective Date pursuant to Section 3.2.1) whichshall be pursued via Programs pursuant to this Agreement;

 

(b)     establish a Screening Program for each InitialTarget;

 

(c)     establish the schedule under which GSK shallprovide Pharmacopeia reagents and assays for each Initial Target, subject toSection 3.2.3;

 

(d)     approve all Programs under this Agreement andestablish the Tractable Hit Criteria, the Lead Declaration Criteria and theCandidate Selection Criteria (collectively “Criteria”) applicable for eachProgram with respect to a given Target before the applicable Program iscommenced by Pharmacopeia, it being understood that all such Criteria may beamended by the JSC;

 

(e)     determine when the Tractable Hit Criteria, theLead Declaration Criteria, the Candidate Selection Criteria and theProof-of-Concept Compound Criteria have been met for a Target;

 

(f)      establish Subcommittees as appropriate;

 

(g)     review and coordinate all of the Parties’activities under this Agreement, including establishing an annual “Work Plan”for the Parties’ activities in each Program. The Work Plan shall describe the activities to becarried out by each Party; provided, however, that (i) the ** and (ii) eachParty shall have the right to 

 

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determineand implement, in its sole discretion, **. It is further understood that if **;

 

(h)     assign relative priorities to the Programs; and

 

(i)      such other responsibilities as may be assignedto the JSC pursuant to this Agreement or as may be mutually agreed upon by theParties in writing from time to time.

 

2.2.3        Meetings. The JSC shall meet during eachCalendar Quarter during the Research Term, and more frequently as the Partiesdeem appropriate, on such dates, and at such places and times, as providedherein or as the Parties shall agree. Thereafter, the JSC shall meet, in personor otherwise, at least twice per Contract Year to provide Pharmacopeia anupdate regarding GSK’s progress in commercializing each Collaboration Compoundand otherwise to perform the responsibilities assigned to it under thisAgreement. Meetings of the JSC that are held in person shall alternate betweenthe offices of the Parties, or such other place as the Parties may agree. Themembers of the JSC also may convene or be polled or consulted from time to timeby means of telecommunications, video conferences, electronic mail orcorrespondence, as deemed necessary or appropriate.

 

2.2.4        Minutes. Minutes of JSC meetings shall be effectiveonly after approved by both Parties. With the sole exception of specific itemsof the meeting minutes to which the members cannot agree and which areescalated to the Executive Officers as provided in Section 2.2.4(d) below,definitive minutes of all JSC meetings shall be finalized no later than thirty(30) days after the meeting to which the minutes pertain, as follows:

 

(a)     Within ten (10) days after each JSC meeting, theParty responsible for preparing the minutes (the “DRAFTING PARTY”) shall prepareand distribute to all members of the JSC draft minutes of the meeting.

 

(b)     The non-Drafting Party shall then have ten (10)days after receiving such draft minutes to collect comments thereon from itsmembers of the JSC and provide these to the Drafting Party.

 

(c)     Upon the expiration of such ten-day commentperiod, the Parties shall have ten (10) days to discuss each other’s commentsand finalize the minutes. A member of the JSC from each Party shall sign anddate the final minutes. The signature of each Party’s JSC member upon the finalminutes shall indicate such Party’s assent to the minutes.

 

(d)     If at any time during the preparation andfinalization of the JSC minutes, the Parties do not agree on any issue withrespect to the minutes, such issue shall be resolved by the escalation processas provided in Section 2.2.5. The decision resulting from the escalationprocess shall be promptly recorded by the Drafting Party in amended finalizedminutes for said meeting.

 

2.2.5        Governance. Except as otherwise provided herein,decisions of the JSC shall by made by **, and **. In the event that a **, theneither Party may, by written notice to the other, have such issue referred tothe Chief Executive Officer of Pharmacopeia, or such other person holding asimilar 

 

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positiondesignated by Pharmacopeia from time to time, and the Senior Vice President forExternal Drug Discovery of GSK, or such other person holding a similar positiondesignated by GSK from time to time (collectively, the “EXECUTIVE OFFICERS”),for resolution. The Executive Officers shall meet promptly to discuss thematter submitted and to determine a resolution. If the Executive Officers areunable to determine a resolution in a timely manner, which shall in no case bemore than sixty (60) days after the matter was referred to them, the issueshall be resolved as follows below. For clarity it is understood and agreed bythe Parties that any final decision on any matter subject to the authority of theJSC and the dispute resolution and escalation process described in this Article2 shall not be subject to further dispute resolution under Article 14 of thisAgreement.

 

(a)   General. In the event that, after **, then the ** as set forth above. In theevent that the **, then the **. Pharmacopeia and GSK shall **.If Pharmacopeia and GSK ** who shall be **. Subject always to the ** below, the**, and the **.

 

(b)   Determination by the Expert.

 

(1)   Tractable Hit Declaration; Lead Declaration. With respect to the Tractable HitCriteria or the Lead Declaration Criteria, the Expert will be asked to decidewhether any proposed further studies are meaningful and necessary and/or if theCriteria have been achieved, or may reasonably be deemed to have been achieved basedon the overall properties of the applicable Collaboration Compounds.

 

(2)   **. With respect to the **, and will only havethe ** (i) **, or (ii) **. In ** for the applicable Program.

 

(c)     Establishment of Proof-of-Concept CompoundCriteria. ** or ** of such Criteria. If ** to such proposed Criteria in writingwithin such thirty-day period, such failure to respond shall automatically bedeemed an acceptance of such Criteria.

 

(d)     Achievement of Proof-of-Concept CompoundCriteria. In the event that a unanimous vote is not obtained by the JSCregarding the achievement of Proof-of-Concept Compound Criteria, and theExecutive Officers fail to resolve such disagreement between Pharmacopeia andGSK as provided above, then **.

 

(e) ** by **.

 

(1)   In the event that ** or to **shall not be **. However, in such a case, ** under this Agreement. It isfurther understood that, in any case where ** that have been **. In such case,such **.

 

(2)   (i)  In the event that, for a period of one (1)year after receiving the Expert’s written decision with respect to necessarystudies in a Program in the case of Tractable Hit Criteria or Lead DeclarationCriteria, and with respect to **, then Pharmacopeia shall ** , or any suchlonger period as **. In the event that ** under this Agreement.

 

(ii)  In the event that the **.

 

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(3)   Subject to subparagraph (1)above, in the event **, and shall **. If the **, then such ** ; provided,however, that in no event shall **.

 

(4)   In the event **, then **. If **.If **. If ** under this Agreement.

 

(5)   In the event **, or **. If **. If**. If ** under this Agreement.

 

(6)   With respect to **. Pharmacopeiashall have the **. If **, it shall **. If **. At the conclusion of **. If **,under this Agreement.

 

2.2.6 Subcommittee(s). From time to time, theJSC may establish subcommittees to oversee particular projects or activities,as it deems necessary or advisable (each, a “Subcommittee”). GSK andPharmacopeia shall each have one (1) vote on each Subcommittee. EachSubcommittee shall consist of such number of members of each Party as the JSCdetermines is appropriate from time to time. Such members shall be individualswith expertise and responsibilities in the areas of preclinical development,clinical development, intellectual property, process sciences, manufacturing,regulatory affairs, product development and/or product commercialization, asapplicable to the stage of development of the project or activity. One suchSubcommittee (the “Patent Subcommittee”) shall be responsible for overseeingand recommending the strategy for patent filings and coordinatingpatent-related matters including, but not limited to, the determination ofinventorship according to U.S. Patent Law (for Joint IP), the preparation,filing and prosecution of all patent applications covered under this Agreement,and the decision as to the countries where each such patent application will befiled and prosecuted. Each Subcommittee shall meet with such frequency as theJSC shall determine.

 

Each Subcommittee shall operate by unanimousvote in all decisions. If, with respect to a matter that is subject to aSubcommittee’s decision-making authority, the Subcommittee cannot reachunanimity, the matter shall be referred to the JSC, which shall resolve suchmatter in accordance with Section 2.2.5.

 

2.2.7 Expenses. Each Party shall bear its owntravel-related expenses and other costs with respect to its activities relatingto membership on the JSC or any Subcommittee.

 

2.2.8 The Joint Program Committee. In the eventthat GSK has not exercised its Candidate Selection Option with respect to aparticular Target, but has preserved its PoC Option with respect to theapplicable Collaboration Compounds under a Program active against such Target bymaking the requisite milestone payments pursuant to Section 6.2.1, due uponachievement of the applicable Candidate Selection Criteria, then, after thefirst dosing in the first FTIH study, but no later than forty-five (45) daysafter such first dosing, ** shall present to ** the proposed Proof-of-ConceptCompound Criteria with respect to such Collaboration Compound. Withinforty-five (45) days after the completion of the first FTIH study, the JSCshall establish a Joint Program Committee (the “Joint Program Committee”) forsuch Pharmacopeia Development Compound, with equal representation and inputfrom both GSK 

 

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and Pharmacopeia, for the purpose of developingand agreeing upon the applicable PoC Studies in accordance with Section 2.2.9with respect to such Proof-of-Concept Compound Criteria.

 

2.2.9 PoC Studies. GSK shall have the right toparticipate equally with Pharmacopeia in the design and planning of the PoCStudies via the Joint Program Committee. In the event that the JSC fails toapprove the PoC Studies as submitted by the Joint Program Committee withinforty-five (45) days, then the Chief Executive Officer of Pharmacopeia and theSenior Vice President of External Drug Discovery of GSK shall meet to resolvesuch matter within thirty (30) days. Notwithstanding the above, ** shall havethe **.

 

**ARTICLE 3**

 

**DEVELOPMENT PROGRAM**

 

3.1 INITIAL SCREENING TERM.

 

3.1.1        Screening.During the Initial Screening Term, Pharmacopeia will screen each of the InitialTargets against that portion of Pharmacopeia’s compound library as establishedunder a Work Plan pursuant to a Screening Program approved by the JSC for eachTarget.

 

3.1.2        Development.During the relevant Screening Program, Pharmacopeia will conduct activities asdescribed in the Work Plan for the relevant Program with the objective being toidentify Tractable Hits and develop Leads from such Tractable Hits. Pharmacopeiawill then conduct activities as described in the Work Plan for the relevantProgram, with the objective being to develop such Leads into CandidateSelection Compounds and then clinical Proof-of-Concept Compounds, subject toGSK’s Options.

 

3.2 SELECTION OF INITIAL TARGETS.

 

3.2.1        Initial Target ProposalSchedule. The first ** shall be ** and **. The Parties shall agree in writing,on or before the Effective Date, upon the Tractable Hit Criteria, LeadDeclaration Criteria and provisional Candidate Selection Criteria applicablefor the **. The ** shall be ** and accepted through the JSC within **. The **shall be ** and accepted through the JSC within **. The ** shall be ** andaccepted through the JSC within **. The ** shall be ** and accepted through theJSC within not more than **, upon a reasonable schedule agreed by the JSC suchthat there is a continuous flow of Targets into Programs. Notwithstanding theforegoing, if Pharmacopeia cannot, or does not, in its reasonable discretion **,GSK shall **.

 

3.2.2        In the event either Partyidentifies any issued patent **, the **. The **. The **. If **, (i) ** or (ii)**. Notwithstanding the **. If **.

 

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3.2.3        Provision of Reagents andAssays. The reagents and assays for screening of the Initial Targets shall beprovided by ** on a reasonable schedule to be established by the JSC, **. **after the Effective Date. In the event **.

 

3.3 RESTRICTION ON TARGETS / NONCOMPETE.

 

3.3.1  General Restrictions. Subject to allapplicable other provisions of this Agreement, Pharmacopeia shall not use GSKTarget IP or any Information developed or provided by GSK hereunder for anypurpose other than fulfillment of Pharmacopeia’s rights and responsibilitieswith respect to Collaboration Compounds and Products under this Agreement. Subjectto all applicable other provisions of this Agreement, GSK shall not usePharmacopeia Target IP or any Information developed or provided by Pharmacopeiahereunder during Pharmacopeia’s performance of a Program for any purpose otherthan fulfillment of GSK’s rights and responsibilities with respect toCollaboration Compounds and Products under this Agreement.

 

3.3.2   Basic Research Use of Targets. Subject toSection 3.3.1, both GSK and Pharmacopeia shall be free to use any Target at anytime for basic research purposes (e.g., basic biological research, targetvalidation studies, target mechanism studies, performance of selectivityscreens, counterscreens, secondary or confirmatory screens, and the like)outside the scope of this Agreement, either independently or with/for a ThirdParty, provided that such use does not materially impair the commercial orresearch value of any Program conducted pursuant to this Agreement.

 

3.3.3   Restrictions During **. Subject to Section3.3.2, during any Screening Program with respect to a particular Target, **.

 

3.3.4 Failure to Attain Tractable Hit. Subjectto Section 3.3.1, GSK shall be free immediately to use independently orwith/for any Third Party an Initial Target for any purpose whatsoever, withoutany obligation or payment of any kind to Pharmacopeia if, after a period of one(1) year from the commencement by Pharmacopeia of actual screening of itscompound library against such Initial Target (or such extended time as may bedetermined and agreed in writing by the JSC, it being understood by bothParties that approval to such extension shall not be unreasonably withheld inthe event of reasonable progress resulting in substantial completion byPharmacopeia of the applicable Screening Program), Pharmacopeia has notsucceeded in attaining a Tractable Hit against such Initial Target. In suchcase, the JSC shall have the right to immediately terminate the applicableScreening Program; Pharmacopeia shall not be required to undertake any furtherwork with respect to such Target pursuant to this Agreement; and Pharmacopeiashall promptly return to GSK all applicable GSK Know-How and GSK Informationand all remaining reagents and assays relating thereto provided by GSK underthis Agreement. In addition, in such case, all licenses under Section 5.1.1(a)or Section 5.2.1(a), as the case may be, pertaining thereto shall terminate. Further,during the ** (**) ** immediately following the JSC’s termination (if any) asdescribed above of the applicable Screening Program, Pharmacopeia shall **. Subjectto (i) any GSK IP, (ii) the obligation to return all GSK Know-How, GSKInformation, assays and reagents, and (iii) the ** (**) ** ** described in thisSection 3.3.4, Pharmacopeia will have no other obligations whatsoever to GSKwith respect to such Target.

 

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3.3.5 Attainment of Tractable Hit. IfPharmacopeia succeeds in attaining a Tractable Hit under a Screening Programfor an Initial Target during the first one (1) year period from thecommencement by Pharmacopeia of actual screening of its compound libraryagainst such Initial Target (or such extended time period as may be determinedand agreed in writing by the JSC), then, subject to Article 9 and Section3.3.1, **. Beyond such **. The scope of any such continued period ofexclusivity (i.e. beyond the ** described above) between the Parties shall beexpressly limited to apply only to **. As used herein, the **. Notwithstandingthe foregoing and subject to Section 3.3.1 and Article 9, it is understoodthat, after the expiration of the ** (if applicable as described above in thisSection 3.3.5), (i) **, and (ii) **.

 

3.4 RESTRICTIONON COMPOUNDS. Any compounds in **.

 

3.5 PHARMACOPEIA PROGRAM EXCLUSIVITY. Subject to all the otherprovisions of this Agreement, Pharmacopeia shall have the exclusive right toundertake the activities of each Program, including all scientific, legal andregulatory activities, until such time, if ever, as GSK exercises an Optionwith respect to such Program.

 

3.6 SUBCONTRACTING.Pharmacopeia may engage Third Party subcontractors (including contract researchorganizations) to perform certain of its obligations under this Agreement. AnyThird Party subcontractor to be engaged by Pharmacopeia to perform Pharmacopeia’sobligations set forth in this Agreement shall meet the qualifications typicallyrequired by Pharmacopeia for the performance of work similar in scope andcomplexity to the subcontracted activity. The activities of any suchThird Party contractors shall be considered activities of Pharmacopeia underthis Agreement. Pharmacopeia shall be responsible for ensuring compliance byany such Third Party contractors with the terms of this Agreement. In any casein which Pharmacopeia engages a Third Party subcontractor, Pharmacopeia shallobtain sole ownership of all inventions, data, Information and relatedintellectual property rights made or developed by such Third Partysubcontractor involving the manufacture or use of any Target or PharmacopeiaDevelopment Compound or other Collaboration Compound.

 

3.7 REPORTS; PUBLICATION OF CLINICAL TRIALS RESULTS.

 

3.7.1 Reports. During the Research Term and for such time thereafterthat any Collaboration Compound is being actively researched or developed byeither Party or its Sublicensee(s), Pharmacopeia and GSK shall provide to theJSC each Calendar Quarter written progress reports on the status of thePrograms, data associated with the Parties’ respective research and developmentefforts, as applicable, and the likelihood of and timetable for completion ofthe respective Programs or development activities and advancement of compoundsto the next phase of research or development, as applicable.

 

3.7.2 Publication of Clinical Trials Results. Each of GSK andPharmacopeia shall have the right to publish summaries of results from anyhuman clinical trials conducted by such Party or conducted by the other Partyunder this Agreement, without requiring the consent of the other Party. TheParties shall discuss and reasonably cooperate in order to facilitate the processto be employed in order to ensure the publication of any such summaries asrequired on the clinical trial registry of each respective Party, and shallprovide the other Party via submission to the Patent Subcommittee establishedunder Section 2.2.6, at least thirty (30) days prior notice to review theclinical trials results to be published for the purposes of preparing anynecessary Patent filings.

 

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3.8 GSK GUIDANCE. During the Lead Generation Program and the LeadOptimization Program, GSK, through the JSC, may provide Pharmacopeia withreasonable guidance and consultation in the conduct of such Programs if theParties so desire. If Pharmacopeia develops a compound as a PharmacopeiaDevelopment Compound, GSK shall provide, through the JSC, in vivo preclinicaland toxicology guidance to Pharmacopeia to assist Pharmacopeia in developingits own clinical trials. In addition, GSK shall grant Pharmacopeia access toGSK’s annual clinical updates for all Candidate Selection Compounds which GSKelects to develop as GSK Development Compounds pursuant to the CandidateSelection Option.

 

3.9 ENABLING STUDIES. GSK shall have the right at all times during theResearch Term, at its own expense, to conduct enabling activities (“EnablingStudies”) which the JSC deems necessary or useful for the purpose ofpre-clinical and clinical activities relating to the Pharmacopeia DevelopmentCompounds. Pharmacopeia shall offer GSK reasonable cooperation in relation tosuch enabling activities including, subject to availability, the transfer ofquantities of compounds, if necessary.

 

3.10 PHARMACOPEIA DILIGENCE. Pharmacopeia shall, and shall ensure thatits Sublicensees, Affiliates and subcontractors, if any, ** in an effort to meetPharmacopeia’s commitments with respect to such Programs and any developmentactivities as established by the JSC. With respect to any Program, the Partiesunderstand and agree that, so long as Pharmacopeia has satisfied itsresponsibilities under the applicable Work Plan with respect to such Program,then Pharmacopeia shall be deemed to have been diligent in its performance ofsuch Program, regardless of the final result of such Program. For example, ifPharmacopeia has performed a Screening Program as specified by the JSC,Pharmacopeia shall be deemed to have been diligent in its performance of suchScreening Program, whether or not Pharmacopeia succeeded in attaining aTractable Hit. It is further understood and agreed that, in the event theParties are unable to agree on the content of a particular Work Plan, suchfailure to agree shall not be deemed a lack of diligence on the part of eitherParty under this Agreement.

 

**ARTICLE 4**

 

**GSK’S OPTIONS**

 

4.1     (a)  For the avoidance of doubt,the Parties understand and agree that GSK’s Option rights, as described morefully below and subject to the terms of Section 4.2, shall be exclusive Optionsover the Programs hereunder, and unless and until the earliest of such time (ifany) as (i) GSK fails to maintain its Option rights under a given Program, or(ii) GSK declines to exercise all its outstanding Options with respect to anysuch Program, or (iii) the Program Term ends, Pharmacopeia shall not have theright to offer or negotiate with any Third Party with respect to the grant tosuch Third Party of any right or license or other encumbrance of any kind in orto any Collaboration Compound or any related Pharmacopeia IP or Joint IP undersuch Program.

 

(b) CANDIDATE SELECTION OPTION. On a Target–by-Target basis,if GSK has timely paid the milestone payment(s) pursuant to Section 6.2.1 dueupon achievement of the applicable Lead Declaration Criteria, Pharmacopeiashall notify the JSC when it believes it has successfully developed a compoundthat meets the Candidate Selection Criteria. If the JSC agrees that such 

 

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compound is a Candidate Selection Compound, subject to Section 4.2, GSKshall have the exclusive option (“Candidate Selection Option”), exercisable inits sole discretion within sixty (60) days after the written declaration by theJSC that the compound is a Candidate Selection Compound, to select and progresssuch Candidate Selection Compound (and, at GSK’s sole discretion, anycorresponding Back-up Compounds) for all further development andcommercialization, subject to the requirements that GSK use commerciallyreasonable diligence efforts as set forth for GSK in this Agreement, andsubject to GSK’s obligation to pay the milestone payments set forth in Sections6.2.1(b) and 6.2.2.

 

4.2     DEVELOPMENT BY PHARMACOPEIA. Each time that GSK has progressed **as a result of its exercise of the Candidate Selection Option, Pharmacopeiashall have **, subject to GSK’s PoC Option below and GSK’s obligation to paythe milestone payments set forth in Sections 6.2.1(b)(2), 6.2.1(c) and 6.2.3;provided that the JSC agrees that Pharmacopeia has the capacity on its own (orthrough the use of a contract research organization) to complete developmentactivities until the Proof-of-Concept Compound Criteria have been met for suchCandidate Selection Compound.

 

4.3     PoCOPTION. In the event that GSK elects not to exercise its Candidate SelectionOption when triggered for a given Pharmacopeia Development Compound, or ifPharmacopeia is progressing a Candidate Selection Compound pursuant to Section4.2, Pharmacopeia may, at its sole discretion, continue to progress, up to thecompletion of the PoC Studies, the development of such Pharmacopeia DevelopmentCompound or Candidate Selection Compound in order to satisfy theProof-of-Concept Compound Criteria. If GSK has timely paid all of the milestonepayments pursuant to Sections 6.2.1 and 6.2.3, due upon (i) **, (ii) **, (iii) **,and (iv) ** then, once the compound has been demonstrated to satisfy theProof-of-Concept Compound Criteria **, GSK shall have the exclusive option (“PoCOption”), exercisable in its sole discretion within sixty (60) days after suchcompound has been demonstrated to so satisfy the Proof-of-Concept CompoundCriteria, to progress the development of such Proof-of-Concept Compound (and,at GSK’s sole discretion, any corresponding Back-up Compounds) from Phase III(post-proof of concept) through to completion, ** in this Agreement, andsubject to GSK’s obligation to pay the remaining milestone payments set forthin Section 6.2.3. If GSK declines to exercise the PoC Option within suchsixty-day period, Pharmacopeia may, at its sole discretion, independentlypursue development of such Pharmacopeia Development Compound subject to itsobligations of Right of First Negotiation and milestone and royalty payments toGSK under this Agreement.

 

4.4     GSK RIGHTS AND OBLIGATIONSUPON EXERCISE OF AN OPTION.

 

4.4.1        License. If GSK exercises any of its Optionsfor a given Pharmacopeia Development Compound, GSK shall have the exclusive,fully sublicensable, worldwide right and license to further research, developand commercialize such compound (as a GSK Development Compound) together with,at GSK’s sole discretion, any corresponding Back-up Compounds, and shall makepayments, as applicable, to Pharmacopeia as provided in this Agreement.

 

4.4.2        GSK Diligence. Upon GSK’sexercise of the Candidate Selection Option or PoC Option, as applicable, GSKshall use, and shall ensure that its Affiliates, Sublicensees andsubcontractors use, ** consistent with the manner in which GSK would developone of its own products having a similar technical and scientific profile, 

 

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level of development complexity and potential commercial or strategicvalue, in developing and commercializing the GSK Development Compound.

 

4.4.3  Right to AdditionalCollaboration Compounds. In the event that GSK is unable to successfullydevelop the particular GSK Development Compound and Back-up Compounds, if any,licensed pursuant to Section 4.4.1 based on GSK’s exercise of an Option, GSKshall so notify Pharmacopeia in writing. Within sixty (60) days after providingsuch notice to Pharmacopeia, subject to Section 6.2, GSK shall have the rightto include, under the already-exercised Option, additional CollaborationCompounds with respect to the same Target, and such additional CollaborationCompounds (i) shall be deemed GSK Development Compounds and included within thelicense pursuant to Section 4.4.1, **.

 

4.4.4  ** of **.

 

(a) If, at any time during ** then, **. In the event that **, then theprovisions of **. However, in the event that **.

 

(b) If, as a result of such **, then **. However, if such ** then, **. Forthe avoidance of doubt, this Section **.

 

4.4.5  GSK Cessation ofDevelopment. After GSK’s selection of a compound as a GSK Development Compoundpursuant to any of the Options, GSK may, at its sole discretion and without anypenalty or liability of any kind, discontinue its development orcommercialization of such GSK Development Compound at any time, for any reasonor for no reason at all. In such event, GSK will promptly inform Pharmacopeiain writing of such termination, and all licenses to GSK under the PharmacopeiaIP relating to the applicable GSK Development Compound and any correspondingProduct shall revert back to Pharmacopeia. GSK shall grant to Pharmacopeia thelicense set forth in Section 5.1.1(b). In such case, GSK shall promptly providePharmacopeia with any Information, materials and data resulting from theProgram that is reasonably necessary or important for Pharmacopeia to continuethe development or commercialization of the applicable compound, and GSK shallcooperate with Pharmacopeia to provide a smooth transfer of such Information,materials and data as soon as reasonably practicable.

 

4.5 PHARMACOPEIA TRANSFER COOPERATION. Upon GSK’s exercise of anOption, Pharmacopeia shall provide GSK with any Information, materials and datathat is reasonably necessary or important for GSK to continue the developmentor commercialization of the applicable compound(s), and Pharmacopeia shallcooperate with GSK to provide a smooth transfer of such Information, materialsand data as soon as reasonably practicable after the Option is exercised.

 

4.6  TERMINATIONOF PHARMACOPEIA LICENSE. Upon the exercise by GSK of any of its Options for agiven Pharmacopeia Development Compound active against a particular Target,Pharmacopeia’s research license under the GSK Target IP and other relevant GSKIP and GSK Information pursuant to Section 5.1.1(a) shall terminate withrespect to the applicable Target and all reagents, assays and other subjectmatter provided by GSK.

 

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4.7  RIGHTOF FIRST NEGOTIATION. In the event that GSK has made all of the paymentsrequired to sustain its Options hereunder with respect to a particularTarget/Program (as provided in Sections 4.1 and 4.3, as the case may be), butdeclines to exercise all such Options, and Pharmacopeia seeks to either (i) **,or (ii) **, ** shall notify ** in writing, and ** shall have an exclusiveoption for a right of first negotiation (the “Right of First Negotiation”) toenter into an agreement with ** for such development and/or commercializationor outlicense of such Pharmacopeia Development Compound on **. GSK shallprovide written notice to Pharmacopeia of GSK’s decisions to exercise ordecline the Right of First Negotiation within ** after Pharmacopeia hasprovided such written notice. If the Parties are unable to agree on such termswithin a period of ** after Pharmacopeia has provided the written notice setforth above (or within any extended period that is mutually agreed in writingby the Parties), then **. In such case, or if **. For the avoidance of doubt,the **.

 

4.8  MILESTONEPAYMENTS. As described in this Article 4, GSK’s Option rights are conditionedon the payment of all applicable milestones. It is understood that eachmilestone payment set forth in Section 6.2 is payable upon achievement of theapplicable milestone event or criteria. It is not intended that any language inthis Article 4 be interpreted to the contrary.

 

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**ARTICLE 5**

 

**GRANT OF RIGHTS**

 

5.1     LICENSE GRANTS.

 

5.1.1  LicenseGrants to Pharmacopeia.

 

(a) Subject to the terms and conditions of this Agreement, GSK herebygrants to Pharmacopeia a non-exclusive, royalty-free license, without the rightto sublicense (except to a Pharmacopeia Affiliate), under all its rights in theGSK IP and the Information generated by GSK to the extent necessary forPharmacopeia to carry out its obligations under the Programs during theResearch Term.

 

(b)   Subject to the terms andconditions of this Agreement, in the event that (i) GSK discontinues itsdevelopment or commercialization of any GSK Development Compound at any timepursuant to Section 4.4.5, or (ii) Pharmacopeia acquires the right pursuant tothe provisions of Article 2 to independently progress the final development andcommercialization of any Collaboration Compound, or (iii) GSK declines toexercise all of its outstanding Options to a given Program, then all applicablelicenses granted to GSK by Pharmacopeia with respect to the Pharmacopeia IP orthe Joint IP (as applicable) shall terminate immediately, and GSK hereby grantsto Pharmacopeia, and Pharmacopeia shall have, an exclusive, worldwide license,with the right to sublicense, under the relevant GSK IP and GSK’s interest inthe Joint IP, to make, have made and use such GSK Development Compound (and anycorresponding Back-Up Compounds) as a Pharmacopeia Development Compound, and tomake, have made, use, sell, offer to sell and import Products based upon orincorporating such Pharmacopeia Development Compound (or any correspondingBack-Up Compounds), for any and all indications in the Field. For the avoidanceof doubt, any license granted under this Section 5.1.1(b) shall apply solely tosuch GSK Development Compound and any corresponding Back-Up Compounds or Product.In any such event, Pharmacopeia shall be obligated to make the applicablemilestone and royalty payments to GSK provided for in this Agreement.

 

5.1.2  LicenseGrants to GSK.

 

(a)  Subject to the terms andconditions of this Agreement, Pharmacopeia hereby grants to GSK anon-exclusive, royalty-free license, without the right to sublicense (except toa GSK Affiliate), under all its rights in the Pharmacopeia IP and theInformation generated by Pharmacopeia to the extent necessary for GSK to carry outits obligations under the Programs during the Research Term.

 

(b)   Subject to the terms andconditions of this Agreement, upon exercise of an Option by GSK with respect toa Collaboration Compound active against a particular Target in a particularProgram, Pharmacopeia hereby grants to GSK, and GSK shall have, an exclusive,worldwide, license, with the right to sublicense, under the relevantPharmacopeia IP and Pharmacopeia’s interest in the Joint IP, to make, have madeand use 

 

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such Collaboration Compound (and any corresponding Back-up Compounds)as a GSK Development Compound, and to make, have made, use, sell, offer to selland import Products based upon or incorporating such GSK Development Compound(or any corresponding Back-up Compounds), for any and all uses and indicationsin the Field. For the avoidance of doubt, any license granted under thisSection 5.1.2(b) shall apply solely to such Collaboration Compound and anycorresponding Back-Up Compounds or Product. In any such event, GSK shall beobligated to make the applicable milestone and royalty payments to Pharmacopeiaprovided for in this Agreement.

 

(c)   If **, and if **, then **.

 

5.2  SUBLICENSES. Subject to theterms and conditions of this Agreement, the Parties shall have the right tosublicense the rights granted to them, respectively in Sections 5.1.1(b) and 5.1.2(b)and (c), provided that the sublicensing Party shall provide the other Partywith at least the following information with respect to each Sublicensee: (i)the identity of the Sublicensee; (ii) a description of the CollaborationCompound or Product, and the rights granted to the Sublicensee; and (iii) theterritory in which the Product will be sold. Each such sublicense shall be consistentwith all the terms and conditions of this Agreement, and shall be **. Thesublicensing Party shall **. No sublicense **.

 

5.3  ** ACTIVITIES. It isunderstood that **, and that **. Notwithstanding the **. Accordingly, ** (i) **,or (ii) **.

 

**ARTICLE 6**

 

**EQUITY INVESTMENT; MILESTONES AND ROYALTIES;PAYMENTS**

 

6.1     PAYMENTS AND INVESTMENTS BY GSK.

 

6.1.1        EQUITY INVESTMENT. GSK may purchase, from Pharmacopeia, Common Stock onthe terms set forth in the Warrant.

 

6.1.2        CASH PAYMENTS TO PHARMACOPEIA. GSK agrees to pay Pharmacopeia the sumof US Fifteen Million Dollars ($15,000,000) cash, payable **, non-refundableexcept as set forth in Section 12.2.5, at the times and upon the fulfillment ofthe conditions set forth in the following paragraphs (a) through (c):

 

(a) First Tranche of Cash:  Pharmacopeia will submit an invoice to GSK onor about the Effective Date in the amount of US Five Million Dollars($5,000,000), and GSK will pay such amount to Pharmacopeia within thirty (30)days of receipt of such invoice.

 

(b)  **:   Within thirty (30) days of receipt by GSK ofa report of results which clearly verifies that **.

 

(c)  **:   Within thirty (30) days of receipt by GSK ofa report of results which clearly verifies that **.

 

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6.2  MILESTONEPAYMENTS TO PHARMACOPEIA. Each Party shall be responsible for funding its ownresearch, development and commercialization activities hereunder. Inconsideration for GSK’s Option rights hereunder, GSK shall pay to Pharmacopeiathe following non-refundable milestone payments upon the occurrence of eachevent set forth below:

 

6.2.1        (a) **.GSK shall pay to Pharmacopeia, on a Target-by-Target basis, ** upon each of (i)**, and (ii) **.

 

(b)  **. GSK shall pay to Pharmacopeia, on aTarget-by-Target basis, one or the other of the following milestone paymentsupon each of (i) **, and (ii) **:

 

(1)   **, or

 

(2)   **.

 

(c)  **. In the event that **.

 

6.2.2        **

 

GSK shall pay to Pharmacopeia the followingfurther milestone payments **:

 

 
| **Milestone  Event** | ** ** | **Milestone Payment  (U.S. Dollars)** | ** ** |
|----------------------|------------|---------------------------------------|------------|
| ** **           | ** ** | ** **                            | ** ** |
| **                   |       | $                                     | **         |   |
|                 |       |                                  |       |
| **                   |       | $                                     | **         |   |
|                 |       |                                  |       |
| **                   |       | $                                     | **         |   |
|                 |       |                                  |       |
| **                   |       | $                                     | **         |   |
|                 |       |                                  |       |
| **                   |       | $                                     | **         |   |

 

6.2.3        **. GSKshall pay to Pharmacopeia the following further milestone payments **:

 
| **Milestone  Event** | ** ** | **Milestone Payment (U.S. Dollars)** | ** ** |
|----------------------|------------|--------------------------------------|------------|
| ** **           | ** ** | ** **                           | ** ** |
| **                   |       | $                                    | **         |   |
|                 |       |                                 |       |
| **                   |       | $                                    | **         |   |
|                 |       |                                 |       |
| **                   |       | $                                    | **         |   |
|                 |       |                                 |       |
| **                   |       | $                                    | **         |   |

 

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6.2.4  **.GSK shall pay to Pharmacopeia an **. Such payment shall be made **.

 

6.2.5  NoWithholding. All payments to Pharmacopeia pursuant to Sections 6.1 and 6.2shall be made without withholding for taxes or other charges.

 

6.3                 ROYALTY PAYMENTS TO PHARMACOPEIA. Subject toSection 6.3.1(c), 6.3.2 and 6.4, GSK shall pay to Pharmacopeia royalties asfollows:

 

6.3.1  RoyaltyPayments.

 

(a)  Royaltiesbased on **. Subject to the provisions of Sections 6.3.1(c), 6.3.2, and 6.4,GSK shall pay Pharmacopeia a royalty on the annual Net Sales of each Product byGSK, its Affiliates or Sublicensees in the Territory according to the followingschedule:

 

(i)        **;

 

(ii)       **;

 

(iii)      **;

 

(iv)      **.

 

(b)  **. Subject to the provisions of Sections6.3.1(c), 6.3.2 and 6.4, GSK shall pay Pharmacopeia a royalty on annual NetSales of each Product by GSK, its Affiliates or Sublicensees in the Territoryaccording to the following schedule:

 

(i)        **;

 

(ii)       **;

 

(iii)      **;

 

(iv)      **;

 

(c) **.

 

(i) **

 

A.            **; or

 

B.            **. For purposes of thisSection 6.3.1, **. As used herein, the **. It is understood that **.

 

(ii)  Subject always to Section 6.3.1(c)(i) and toSection 6.4, the **. However, notwithstanding the preceding sentence, it isunderstood and agreed that the royalties shown in Section 6.3.1(a) and (b)shall ** as set forth below, and shall be fully payable, for any country ofsale in which **.

 

A.            **.

 

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B.            **.

 

C.            **.

 

D.            **. Notwithstandingthe preceding sentence, in the case where there is, **. Within ** from such **.

 

As used inthis Section 6.3, a claim covering an ** shall mean a **.

 

6.3.2  Periodof Royalty Obligation. Subject always to Section 6.3.1(c)(i) andSection 6.4, for each Product, GSKshall be required to pay royalties under Section 6.3.1, on a country-by-countrybasis, for a period beginning on the ** until the date that is the **.

 

6.4  **.

 

6.4.1 Subject to the final sentence of this Section 6.4.1, **.In no event shall the royalty due Pharmacopeia for any calendar quarter, withrespect to any such Product, be **.

 

6.4.2 If Pharmacopeia and GSKdo not agree pursuant to Section 6.4.1 that a Third Party license is necessaryfor GSK, the Parties shall ** for a **. If the **. If the **.

 

6.5  MILESTONEAND ROYALTY PAYMENTS TO GSK

 

6.5.1.       General. In (i) **,Pharmacopeia shall pay to GSK milestones and royalty payments as set forth inthis Section 6.5, as applicable below, worldwide:

 

6.5.2.       Milestonesshall be payable by Pharmacopeia to GSK in the event that Pharmacopeia assumesresponsibility for development pursuant to any of the scenarios described abovein Section 6.5.1(i), (ii) or (iii), and in accordance with the following:

 

(i) If Pharmacopeia **.

 

(ii) If Pharmacopeia **.

 

(iii) If Pharmacopeia **.

 

(iv) The milestones payable under this Section 6.5.2 **.

 

6.5.3.       Royaltiesshall be payable by Pharmacopeia to GSK in the event that Pharmacopeia assumesresponsibility for development pursuant to any of the scenarios described abovein Section 6.5.1(i), (ii) or (iii), and in accordance with the following:

 

(i) If Pharmacopeia **.

 

(ii)  If Pharmacopeia **.

 

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(iii)  If Pharmacopeia **.

 

(iv)  If Pharmacopeia **.

 

(v)  The royalties set forth insubparagraphs (i) – (iv) of this Section 6.5.3 shall be **.

 

(vi)  The royalties set forth insubparagraphs (i) – (iv) of this Section 6.5.3 shall be subject, **.

 

6.6  PAYMENTS.

 

6.6.1        Commencement.Beginning with the Calendar Quarter in which the First Commercial Sale for an applicableProduct is made and for each Calendar Quarter thereafter, royalty payments owedto a Party pursuant to Section 6.3 or 6.5.3 (in each case, the “PAYEE”) shallbe paid within forty-five (45) calendar days following the end of each suchCalendar Quarter. Each royalty payment shall be accompanied by a report,summarizing the total Net Sales for the applicable Product during the relevantCalendar Quarter and the calculation of royalties, if any, due thereon. In theevent that no royalties are payable in respect of a given Calendar Quarter, theParty making the payments (the “PAYOR”) shall submit a royalty report soindicating.

 

6.6.2        Mode ofPayment. All payments due under this Agreement shall be payable, in full, inU.S. dollars, regardless of the country(ies) in which sales are made or inwhich payments are originated. For the purposes of computing Net Sales ofProducts sold in a currency other than U.S. dollars, if GSK is the Payor, suchcurrency shall be converted into U.S. dollars using the average exchange ratesas calculated and utilized by GSK’s group reporting system and publishedaccounts for the pertinent quarter or year to date. If Pharmacopeia is thePayor, such currency shall be converted into U.S. dollars as calculated at theactual average rates of exchange for the pertinent quarter or year to date, asused by Pharmacopeia in producing its quarterly and annual accounts, asconfirmed by Pharmacopeia’s auditors. Subject to Sections 6.4 and 6.8, suchpayments shall be without deduction of exchange, collection or other charges.

 

6.6.3        RecordsRetention. Commencing with the First Commercial Sale of a Product, the Payorshall keep complete and accurate records pertaining to the sale of suchProducts, for a period of ** (**) ** after the year in which such salesoccurred, and in sufficient detail to permit the Payee to confirm the accuracyof the royalties paid by the Payor hereunder.

 

6.6.4        ExpatriatedPayments. If by law, regulation, or fiscal policy of a particular country,conversion into United States dollars or transfer of funds of a convertiblecurrency to the United States is restricted or forbidden, the Payor shall givethe Payee prompt written notice of such restriction, which notice shall satisfythe payment deadlines in this Agreement. The Payor shall pay any amounts due tothe Payee through whatever lawful method it chooses, including withoutlimitation making such payments in the local currency of such country,

 

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provided such choice isconsistent with seeking to make the payment in the most expeditious mannerpossible.

 

6.7  AUDITS.During the term of this Agreement and for a period of ** (**) ** thereafter, atthe request and expense of the Payee, the Payor shall permit an independent,certified public accountant of nationally recognized standing appointed by thePayee, and reasonably acceptable to the Payor, at reasonable times and uponreasonable notice, but in no case no more than once per calendar yearthereafter, to examine such records as may be necessary for the sole purpose ofverifying the calculation and reporting of Net Sales and the correctness of anyroyalty payment made under this Agreement for any period within the preceding** (**) years. Results of any such examination shall be made available to bothPayor and Payee. The independent, certified public accountant shall disclose tothe Payee only the royalty amounts which the independent auditor believes to bedue and payable hereunder to the Payee, and shall disclose no other informationrevealed in such audit. Any and all records examined by such independentaccountant shall be deemed the Payor’s Confidential Information which may notbe disclosed by said independent, certified public accountant to any ThirdParty. If, as a result of any inspection of the books and records of the Payor,it is shown that a Payee’s payments under this Agreement were less than theamount which should have been paid, then the Payor shall make all paymentsrequired to be made to eliminate any discrepancy revealed by said inspectionwithin sixty (60) days. The Payee shall pay the reasonable costs of the audit.

 

6.8  TAXES.

 

6.8.1  Salesor Other Transfers. The recipient of any transfer or license under thisAgreement of Pharmacopeia IP, GSK IP, Joint IP, Information, CollaborationCompounds or Products, as the case may be, shall be solely responsible for anysales, use, value added, excise or other non-income taxes applicable to suchtransfer.

 

6.8.2  Withholding.In the event that the Payor, or any of its Affiliates or Sublicensees isrequired to withhold any tax to the tax or revenue authorities in any countryregarding any payment to the Payee due to the laws of such country: (A) suchamount shall be promptly paid by the Payor or its Affiliate or Sublicensee forand on behalf of the Payee to the appropriate governmental authority; (B) suchamount shall be deducted from the payment to be made by the Payor; and (C) thePayor shall promptly notify the Payee of such withholding and, within areasonable amount of time after making such deduction, furnish the Payee withproof of payment of such tax together with copies of any tax certificate orother documentation evidencing such withholding sufficient to enable the Payeeto support a claim, if permissible, for income tax credit in respect of anyamount so withheld. Each of Payor and Payee agrees to cooperate with the otherin claiming exemptions from such deductions or withholdings under any agreementor treaty from time to time in effect. However, any such deduction orwithholding shall be an expense of and borne solely by the Payee.

 

6.9  THIRDPARTY LICENSES NEEDED BY PHARMACOPEIA. Pharmacopeia shall **. Such paymentsshall ** directly to the relevant Third Party in accordance with the provisionsof the applicable Third Party license agreement. Pharmacopeia shall **. Exceptas may arise under Section 3.2.2, the preceding sentence shall not apply to anylicenses or other rights specifically relating to any Target.

 

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6.10  COMPULSORYLICENSES. In the event that a governmental agency in any country in theTerritory grants, or compels GSK to grant a license to any Third Party for aProduct, other than to an Affiliate or Sublicensee of GSK, GSK shall be permittedto do so.

 

6.11 PAYMENTS BY AFFILIATES AND SUBLICENSEES. In each instance wherein “GSK”or “Pharmacopeia” is responsible for making a payment pursuant to thisAgreement, such responsibility also shall extend to such Party’s Affiliates andSublicensees, as applicable.

 

 

**ARTICLE 7**

**[INTENTIONALLY OMITTED]**

 

 

**ARTICLE 8**

 

**INTELLECTUAL PROPERTY AND PATENT RIGHTS**

 

8.1  PATENTPROSECUTION AND RELATED ACTIVITIES.

 

8.1.1  PHARMACOPEIA PATENTS. Subject toSections 2.2.6 and 8.1.3, Pharmacopeia shall be responsible for preparing,filing, prosecuting and maintaining, by itself or with Third Parties, thePharmacopeia Patents and conducting any interferences, re-examinations,reissues and oppositions relating to such Patents.

 

8.1.2  GSK PATENTS. Subject to Sections 2.2.6and 8.1.3, GSK shall be responsible, at its sole expense, for preparing,filing, prosecuting and maintaining, by itself or with Third Parties, the GSKPatents and conducting any interferences, re-examinations, reissues andoppositions relating to such Patents.

 

8.1.3  JOINT PATENTS AND PHARMACOPEIA PATENTSLICENSED TO GSK.

 

### (a)           Prosecution by GSK. Subject to Sections 2.2.6 and 8.1.3(c), uponexercise of an Option with respect to any Collaboration Compound, GSK shallbecome responsible, at its sole expense, for preparing, filing, prosecuting andmaintaining (i) any Joint Patent claiming Collaboration Compounds activeagainst the same Target as such Collaboration Compound, or methods of making orusing the same, and (ii) any Pharmacopeia Patent filed after the Effective Datepursuant to this Agreement and claiming the composition of matter of suchCollaboration Compounds, or methods of making or using such compounds, and forconducting any interferences, re-examinations, reissues and oppositionsrelating to such Patents identified in (i) and (ii). It is understood thatcategory (ii) in the preceding sentence is intended to include only thosePharmacopeia Patents directly applicable to such Collaboration Compounds, anddoes not include any Pharmacopeia Patent that also is applicable to other

 

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### activities of Pharmacopeiaoutside the relevant Program, unless the Patent Subcommittee decides that it ispracticable to file a corresponding divisional application.

###  

(b)           Prosecutionby Pharmacopeia. Except as otherwise provided in Section 8.1.3(a), Pharmacopeiashall be responsible for preparing, filing, prosecuting and maintaining JointPatents and conducting any interferences, re-examinations, reissues andoppositions relating to such Joint Patents. ** In addition, subject to Section 8.1.3(c), with respect to eachCollaboration Compound licensed to Pharmacopeia pursuant to Section 5.1.1(b),Pharmacopeia shall become responsible, at its sole expense and discretion, for preparing,filing, prosecuting and maintaining in such countries as it deems appropriate,(i) any Joint Patent claiming Collaboration Compounds active against the sameTarget as such Collaboration Compound, or methods of making or using the same,and (ii) any GSK Patent filed after the Effective Date pursuant to thisAgreement and claiming the composition of matter of such CollaborationCompounds, or methods of making or using such compounds (unless, pursuant tothis Agreement, GSK is developing or commercializing another CollaborationCompound within the scope of the claims of the same GSK Patent, in which caseGSK will remain responsible pursuant to Section 8.1.2), and for conducting anyinterferences, re-examinations, reissues and oppositions relating to suchPatents identified in (i) and (ii). It is understood that category (ii) in thepreceding sentence is intended to include only those GSK Patents directlyapplicable to such Collaboration Compounds, and does not include any GSK Patentthat also is applicable to other activities of GSK outside the relevantProgram, unless the Patent Subcommittee decides that it is practicable to filea corresponding divisional application.

 

(c)           Cooperation;Request to Responsible Party. Each of GSK and Pharmacopeia shall keep the otherfully informed as to the status of patent matters described in this Section8.1.3 including, without limitation, by providing the Patent Subcommittee theopportunity to fully review and comment on any substantive documents within the(i) GSK Patents filed after the Effective Date pursuant to this Agreement andclaiming a Collaboration Compound, or methods of making or using such acompound, (ii) Joint Patents or (iii) Pharmacopeia Patents filed after theEffective Date pursuant to this Agreement and claiming a CollaborationCompound, or methods of making or using such a compound, being prosecutedpursuant to Sections 8.1.1, 8.1.2 and 8.1.3 as the case may be, which will befiled in any patent office as far in advance of filing dates as feasible, andproviding to the other copies of any substantive documents that such Partyreceives from such patent offices promptly after receipt, including notice ofall interferences, reissues, re-examinations, oppositions or requests forpatent term extensions. GSK and Pharmacopeia shall each reasonably cooperatewith and assist the other at its own expense in connection with suchactivities, at the other Party’s request. Either Party may request the otherParty to file a patent application claiming any invention within the Joint IPfor which the other Party has responsibility as set forth in Section 8.1.3(a)and (b). For clarity, it is understood and agreed by the Parties that eachParty shall have the right to provide timely review, comment and input to theother Party on the content of all such substantive correspondence to be filedin any patent office or with any Third Party with

 

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respect to any Pharmacopeia Patent, GSK Patent or Joint Patent, andthat the other Party shall reasonably take into account such comments and inputin preparing any such filings or correspondence.

 

8.1.4  Ownership.Ownership of Patents shall be determined based upon US Patent Laws.

 

### 8.1.5  Election Not to Prosecute. Uponninety (90) days written notice to the other Party, the responsible Party may elect to discontinue theprosecution of any patent applications filed pursuant to Sections 8.1.3(a) or(b) and/or not to file or conduct any further activities with respect to the Patents described in such Sections. Inthe event the responsible Party declines to file or, having filed, fails tofurther prosecute or maintain any Patents filed pursuant to this Agreement, orto conduct any interferences, re-examinations, reissues, oppositions withrespect thereto, the other Party shall have the right to prepare, file,prosecute and maintain such Patents in such countries as it deem appropriate,and conduct any interferences, re-examinations, reissues or oppositions at itssole expense. The other Party agrees to cooperate in any manner reasonablyrequested in connection with any such actions by such Party, at the expense ofthe requesting Party.

###  

8.2  PERMITTEDDISCLOSURES. Following a written notice from the other Party hereto, theParties shall in good faith grant each other permission, not to be unreasonablywithheld, to disclose in the specification of a patent application filed by theother Party pursuant to this Agreement, any Pharmacopeia IP, GSK IP, or JointIP necessary to support and enable claims in such patent applications.

 

8.3      THIRDPARTY INFRINGEMENT.

 

8.3.1  Licensed Patents.

 

(a)  A Party shall have the firstright, but not the obligation, to initiate legal action to enforce all Patentslicensed to such Party pursuant to Section 5.1.1(b) or 5.1.2(b), as the casemay be, against infringement or misappropriation by Third Parties or defend anydeclaratory judgment action relating thereto at its sole expense.

 

(b)  Notwithstanding Section8.3.1(a), for infringement under 35 USC 271 (e)(2) where GSK has exercised itsOption under Article 4 of this Agreement and where GSK is the holder of theapplicable NDA, GSK has the sole right to initiate legal action to enforce allPatents licensed to it pursuant to Section 5.1.2(b), against infringement ormisappropriation by Third Parties or defend any declaratory judgment actionrelating thereto at its sole expense. For infringement under 35 USC 271 (e)(2)where Pharmacopeia has assumed responsibility for development pursuant to anyof the scenarios described above in Section 6.5.1(i), (ii) or (iii), and wherePharmacopeia is the holder of the applicable NDA, Pharmacopeia has the soleright to initiate legal action to enforce all Patents licensed to it pursuantto Section 5.1.1(b), against

 

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infringement or misappropriation by Third Parties or defend anydeclaratory judgment action relating thereto at its sole expense.

 

8.3.2  Failure to Enforce. Except as statedunder Section 8.3.1(b), if, within thirty (30) days following receipt ofwritten notice of an infringement or misappropriation of a Patent which a Partyhas the right to enforce pursuant to Section 8.3.1 above (or written notice ofa declaratory judgment action alleging invalidity or unenforceability of suchPatent), such Party fails to take action to halt such alleged infringement ormisappropriation or defend such a declaratory judgment action, then the otherParty may, at its expense, take such legal action as it deems appropriate, inits own name, to halt such an alleged infringement or misappropriation ordefend such a declaratory judgment action. If GSK fails to enforce such aPatent within such thirty (30) day period in any country pursuant to thisSection 8.3.2, then Section 6.3.1(c)(i)(B) shall not apply in such country.

 

8.3.3  NoSettlement Without Consent. Neither Party shall enter into any settlement ofany claim, suit or proceeding under Section 8.3.1 that admits or concedes thatany aspect of the Pharmacopeia IP, GSK IP or Joint IP licensed from the otherParty is invalid or unenforceable without the prior written consent of suchother Party.

 

8.3.4  Cooperation.Each Party shall keep the other reasonably informed of the progress of anyclaim, suit or proceeding subject to this Section 8.3 and cooperate reasonablyin connection with such activities at the request and expense of the Partyinvolved in such claim, suit or proceeding.

 

8.3.5  Division ofRecoveries. Any recovery received in connection with a suit brought by a Partypursuant to Section 8.3.1 shall be distributed in the following order: (1) toreimburse such Party for expenses (including attorneys, professional and expertfees) incurred in such suit; (2) to the extent that any recovery remains aftersuch reimbursement for expenses, to pay the other Party the full royalty thatwould have been due pursuant to Section 6.3 or 6.5.3 on any Net Sales that werelost as the result of such patent infringement; and (3) to the extent that anyrecovery remains after the distributions pursuant to (1) and (2), the remaindermay be kept by the Party involved in such suit.

 

8.4   INFRINGEMENTCLAIMS BY THIRD PARTIES. If the manufacture, sale or use of any Productpursuant to this Agreement results in any claim, suit or proceeding allegingpatent infringement against a first Party (or its Sublicensees), such firstParty shall promptly notify the other Party in writing setting forth the factsof such claim in reasonable detail. The first Party shall have the exclusiveright to defend and control the defense of any such claim, suit or proceeding,at its own expense, using counsel of its own choice; provided, however, itshall not enter into any agreement or settlement which admits or concedes thatany aspect of the Joint IP, the Pharmacopeia IP or the GSK IP is invalid,unenforceable or not infringed, without the prior written consent of the otherParty. The first Party shall keep the other Party reasonably informed of allmaterial developments in connection with any such claim, suit or proceeding, andthe other

 

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Party shall have the right (but not the obligation) to be separatelyrepresented, at its expense, by counsel of its own choice and to advise thefirst Party on the defense of such claim, suit or proceeding.

 

8.5   Regulatory Data Protection

 

8.5.1        To the extent required by law or permitted bylaw, each Party will use commercially reasonable efforts to promptly,accurately and completely list, with the applicable regulatory authoritiesduring the term of this Agreement, all applicable Patents for any Product thatsuch Party intends to, or has begun to commercialize, and that have become thesubject of a marketing application submitted to FDA, such listings to includeall so called “Orange Book” listings required under the Hatch-Waxman Act andall so called “Patent Register” listings as required in Canada.

 

8.5.2        Prior to such listings,the Parties will meet to evaluate and identify all applicable Patents. Notwithstandingthe preceding sentence, the Party responsible for marketing the applicableProduct will retain final decision making authority as to the listing of allapplicable Patents for such Product, regardless of which Party owns suchPatent.

 

**ARTICLE 9**

 

**CONFIDENTIALITY**

 

9.1      CONFIDENTIALITY; EXCEPTIONS. Except to the extent expressly authorized bythis Agreement or otherwise agreed in writing, the Parties agree that thereceiving Party (the “RECEIVING PARTY”) shall keep confidential and shall notpublish or otherwise disclose or use for any purpose other than as provided forin this Agreement any Information or other confidential and proprietaryinformation and materials patentable or otherwise, in any form (written, oral,photographic, electronic, magnetic, or otherwise) which is disclosed to it bythe other Party (the “DISCLOSING PARTY”) or otherwise received or accessed by aReceiving Party in the course of performing its obligations under thisAgreement including, but not limited to trade secrets, Know-How, proprietaryinformation, formulae, processes, techniques and information relating to aParty’s past, present and future marketing, financial, and research anddevelopment activities of any product of the Disclosing Party and the pricingthereof (collectively, “CONFIDENTIAL INFORMATION”), except to the extent thatit can be established by the Receiving Party that such ConfidentialInformation:

 

9.1.1  wasin the lawful knowledge and possession of the Receiving Party prior to the timeit was disclosed to, or learned by, the Receiving Party, or was otherwisedeveloped independently by the Receiving Party, as evidenced by written recordskept in the ordinary course of business, or other documentary proof of actualuse by the Receiving Party;

 

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9.1.2  wasgenerally available to the public or otherwise part of the public domain at thetime of its disclosure to the Receiving Party;

 

9.1.3  becamegenerally available to the public or otherwise part of the public domain afterits disclosure and other than through any act or omission of the ReceivingParty in breach of this Agreement; or

 

9.1.4  wasdisclosed to the Receiving Party, other than under an obligation ofconfidentiality, by a Third Party who had no obligation to the Disclosing Partynot to disclose such information to others. Notwithstanding any disclosure ofConfidential Information of the Disclosing Party to the Receiving Party, noownership of such Confidential Information shall be transferred as a result ofsuch disclosure.

 

9.2      AUTHORIZED DISCLOSURE. Except as expressly provided otherwise in thisAgreement, a Receiving Party may use and disclose Confidential Information ofthe Disclosing Party as follows: (i) under appropriate confidentialityprovisions substantially equivalent to those in this Agreement, in connectionwith the performance of its obligations or exercise of rights granted orreserved in this Agreement through an Affiliate or any Third Party (includingthe rights to commercialize Products and to grant licenses and sublicenseshereunder); or (ii) to the extent such disclosure is reasonably necessary forcomplying with section 3.7.2 or for filing or prosecuting patent, copyright andtrademark applications, prosecuting or defending litigation, complying withapplicable governmental regulations, obtaining regulatory approval, conductingpreclinical activities or clinical trials, marketing Products, or otherwiserequired by law; provided, however, that if a Receiving Party is required bylaw or regulation to make any such disclosure of a Disclosing Party’sConfidential Information it will, except where impracticable for necessarydisclosures (for example, in the event of medical emergency), give reasonableadvance notice to the Disclosing Party of such disclosure requirement and, exceptto the extent inappropriate in the case of patent applications, will use itsreasonable efforts to secure confidential treatment of such ConfidentialInformation required to be disclosed; or (iii) in communication with investors,consultants, advisors or others on a need to know basis, in each case underappropriate confidentiality provisions substantially equivalent to those ofthis Agreement; or (iv) to the extent mutually agreed to in writing by theParties.

 

9.3      GSK INTERNAL CONTROL OFINFORMATION. GSK shall limit the internal disclosure of all structural,chemical synthesis or structure-activity relationship Information received fromPharmacopeia hereunder prior to the exercise by GSK of any Option, on a “need-to-know”basis **. In addition, **. The ** under this Agreement. Pharmacopeia **.

 

9.4      REMEDIES. Each Party shall be entitled, in addition to any other right orremedy it may have, at law or in equity, to seek an injunction, without theposting of any bond or other security, enjoining or restraining the other Partyfrom any violation or threatened violation of this Article 9.

 

9.5      PUBLICATIONS. Each Party shall submit to the other Party any proposedpublication or presentation containing any Information generated by eitherParty (or by both Parties) hereunder during the Research Term or anyConfidential Information of the other Party at least thirty (30) days inadvance to allow that Party to review and approve such planned publicdisclosure or press release or any other public update, including withoutlimitation, any update on the progress of any research and developmentactivities pursuant to a Program hereunder to academia, to industry, or to theinvestment community. The reviewing Party will promptly review such proposedpublication and

 

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respond in any event within thirty (30) daysafter receipt and make any objections that it may have to the publication ofany such Information, or of any Confidential Information of the reviewing Partycontained therein. Should the reviewing Party make an objection to thepublication of any such Information or Confidential Information, then theParties shall discuss the advantages and disadvantages of publishing suchInformation and/or Confidential Information. Notwithstanding thepreceding sentences, either Party may submit for the other Party’s approval asummary of Program data or Information to be used in confidential and/ornon-confidential corporate presentations and, once the other Party’s writtenapproval has been received, the same summary of the Program data may be usedagain in subsequent presentations without further approval by the other Party. If the Parties are unable to agree on whetherparticular subject matter may be published or presented, then subject toSection 14.1, the JSC shall attempt to resolve the matter, but if it is unableto do so, such matter shall be resolved in accordance with the disputeresolution provisions of Section 14.2. Notwithstanding the foregoing, upon thereviewing Party’s request, the other Party shall not submit any suchpublication or presentation until the reviewing Party is given a reasonableperiod of time (no less than thirty (30) days) to secure patent protection forany material in such publication or presentation that it believes to bepatentable.

 

# **ARTICLE10**

# ** **

**REPRESENTATIONS; WARRANTIES AND COVENANTS**

 

10.1    REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES. Each Party represents andwarrants to the other Party, as of the Effective Date, that:

 

10.1.1 such Party is duly incorporated, validly existing and in good standingunder the laws of the jurisdiction of its incorporation and has full corporatepower and authority to enter into this Agreement and to carry out theprovisions hereof;

 

10.1.2  such Party has taken all necessary corporateaction on its part to authorize the execution and delivery of this Agreementand the performance of its obligations hereunder;

 

10.1.3  this Agreement has been duly executed anddelivered on behalf of such Party, and constitutes a legal, valid and bindingobligation, enforceable against it in accordance with the terms hereof, subjectto (i) the effect of applicable bankruptcy, insolvency, reorganization,moratorium or other similar Federal or state laws affecting the rights of creditorsand (ii) the effect or availability of rules of law governing specificperformance, injunctive relief or other equitable remedies (regardless ofwhether any such remedy is considered in a proceeding at law or in equity);

 

10.1.4  the execution and delivery of this Agreementby such Party do not, and the performance of this Agreement by such Party,including without limitation the grant of rights to the other Party pursuant tothis Agreement, will not: (A) conflict with, or result in any violation of ordefault under, any agreement, instrument or understanding, oral or written, towhich it or any Affiliate is a party or by which it or any Affiliate is bound;(B) conflict with any rights granted by such Party to any other Third Party orbreach any obligation that such

 

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Party has to any Third Party; or (C) violateany provision of law, statute, rule or regulation, or any ruling, right,injunction, order, judgment or decree of any court, administrative agency orother governmental body having jurisdiction over such Party; and

 

10.1.5  no government authorization, consent,approval, license, exemption of or filing or registration with any court orgovernmental department, commission, board, bureau, agency or instrumentality,domestic or foreign, under any applicable laws, rules or regulations currentlyin effect is necessary for, or in connection with, the transaction contemplatedby this Agreement or any other agreement or instrument executed in connection herewith,or for the performance by it of its obligations under this Agreement and suchother agreements except as may be required under the Stock Purchase Agreement.

 

10.2    REPRESENTATIONS AND WARRANTIES OF PHARMACOPEIA. Pharmacopeia representsand warrants to GSK, as of the Effective Date, that:

 

10.2.1  to the best of its knowledge and belief,Pharmacopeia Controls all rights to the Pharmacopeia IP;

 

10.2.2  to the best of its knowledge and belief: (A)Pharmacopeia is not aware of any notice from any Third Party asserting anyownership rights to any Know-How Controlled by Pharmacopeia; and (B)Pharmacopeia is not aware of any pending or threatened action, suit, proceedingor claim by a Third Party asserting that Pharmacopeia is infringing or hasmisappropriated or otherwise is violating any patent, trade secret or otherproprietary right of any Third Party as would reasonably be expected to resultin a material adverse effect upon the ability of Pharmacopeia to fulfill any ofits obligations under this Agreement;

 

10.2.3  to the best of its knowledge and belief,Pharmacopeia has not granted any right or license or other encumbrance of anykind to any Third Party relating to the Pharmacopeia IP that conflicts with anyof the rights or licenses granted to GSK hereunder;

 

10.2.4  Pharmacopeia has all right, power andauthority to conduct the activities to be conducted by Pharmacopeia under thisAgreement and to fulfill its obligations under this Agreement; and

 

10.2.5  other than as described in the reports Pharmacopeia has filed with the U.S.Securities and Exchange Commission under the Securities Exchange Act of 1934,as amended, there are no claims,actions, or proceedings pending or, to Pharmacopeia’s knowledge, threatened;nor are there any formal inquiries or notices that may lead to the institutionof any such legal proceedings, against Pharmacopeia or its properties, assetsor business, which if adversely decided, would, individually or in theaggregate, have a material adverse effect on, or prevent Pharmacopeia’s abilityto conduct any Programs or to grant the licenses or rights to be granted to GSKupon the exercise of GSK’s Options.

 

10.3    COVENANTS OF PHARMACOPEIA. Pharmacopeia covenants and agrees, from andafter the Effective Date and during the Term, that:

 

10.3.1  Pharmacopeia shall provide access toConfidential Information of GSK only to Pharmacopeia’s employees, consultantsand independent contractors who, in each case, need such access (including,without limitation, access on any database that is owned or controlled

 

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by Pharmacopeia or its Affiliates to Know-HowControlled by GSK), to perform services or activities in any Program and who,prior to such access, have executed appropriate confidentiality and inventionassignment agreements to protect the Confidential Information of GSK and toretain or obtain ownership of all Pharmacopeia IP;

 

10.3.2  Pharmacopeia shall not enter into anyagreement with any Third Party that Pharmacopeia reasonably believes wouldmaterially adversely affect (i) Pharmacopeia’s ability to successfully conductPrograms hereunder or (ii) any Pharmacopeia IP or Joint IP existing at the timeof entering into such an agreement or (iii) any GSK IP about which Pharmacopeiahas actual knowledge at the time of entering into such an agreement or (iv) anyintellectual property relating to any Collaboration Compound that is subject toSection 3.4;

 

10.3.3  all employees, agents, consultants orsubcontractors (with respect to subcontractors, subject to Section 3.6)providing services to Pharmacopeia or its Affiliates pursuant to thisAgreement  shall be under the obligationto assign all right, title and interest in and to their inventions, if any, toPharmacopeia as the sole owner thereof;

 

10.3.4  Pharmacopeia shall not employ (or, to the bestof its knowledge without further duty of inquiry, shall not use any contractoror consultant that employs) any individual or entity debarred by the FDA (orsubject to a similar sanction of EMEA), or, to the best of its knowledgewithout further duty of inquiry, any individual who or entity which is thesubject of an FDA debarment investigation or proceeding (or similar proceedingof EMEA), in the conduct of the preclinical or clinical studies of CollaborationCompounds and its activities under any Program; and

 

10.3.5  Pharmacopeia shall perform its activitiespursuant to this Agreement in compliance with good laboratory and clinicalpractices and cGMP, in each case as applicable under the laws and regulationsof the country and the state and local government wherein such activities areconducted, and with respect to the care, handling and use in research anddevelopment activities hereunder of any non-human animals by or on behalf ofPharmacopeia, shall at all times comply with all applicable federal, state andlocal laws, regulations and ordinances, and also with the most current bestpractices in the industry for the proper care, handling and use of animals inpharmaceutical research and development activities, subject to GSK’s reasonableright of inspection.

 

10.3.6 Pharmacopeia shall notify GSK in writing promptly in the event that ithas actual knowledge of the material breach of any covenant of Pharmacopeiaunder Section 10.3 or the material breach of any representation or warrantyprovided by Pharmacopeia under Section 10.2.

 

10.4    REPRESENTATIONS AND WARRANTIES OF GSK. GSK represents and warrants toPharmacopeia, as of the Effective Date, that :

 

10.4.1  to the best of its knowledge and belief, GSKControls all rights to the GSK IP;

 

10.4.2  to the best of its knowledge and belief: (A)GSK is not aware of any notice from any Third Party asserting any ownershiprights to any Know-How Controlled by GSK; and (B)

 

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GSK is not aware of any pending or threatenedaction, suit, proceeding or claim by a Third Party asserting that GSK isinfringing or has misappropriated or otherwise is violating any patent, tradesecret or other proprietary right of any Third Party as would reasonably beexpected to result in a material adverse effect upon the ability of GSK tofulfill any of its obligations under this Agreement;

 

10.4.3  to the best of its knowledge and belief, GSKhas not granted any right or license or other encumbrance of any kind to anyThird Party relating to the GSK IP that conflicts with any of the rightsgranted to Pharmacopeia hereunder;

 

10.4.4 GSK has all right, power and authorityto conduct the activities to be conducted by GSK under this Agreement and tofulfill its obligations under this Agreement; and

 

10.4.5 there are no claims, actions, orproceedings pending or, to GSK’s knowledge, threatened; nor are there anyformal inquiries or notices that may lead to the institution of such legal proceedings,against GSK or its properties, assets or business, which if adversely decided,would, individually or in the aggregate, have a material adverse effect on, orprevent GSK’s ability to collaborate with Pharmacopeia or to grant the licensesto Pharmacopeia contemplated hereunder.

 

10.5    COVENANTS OF GSK. GSK covenants and agrees, from and after the EffectiveDate and during the Term, that:

 

10.5.1 GSK shall provide access to Confidential Information of Pharmacopeiaonly to GSK’s employees, consultants and independent contractors who, in eachcase, need such access (including, without limitation, access on any databasethat is owned or controlled by GSK or its Affiliates to Know-How Controlled byPharmacopeia) to perform services or development activities under thisAgreement, and who, **;

 

10.5.2  GSK shall not enter into any agreement withany Third Party that GSK reasonably believes would materially adversely affect(i) GSK’s ability to fulfill its obligations hereunder or (ii) any GSK IP orJoint IP existing at the time of entering into such an agreement or (iii) anyPharmacopeia IP about which GSK has actual knowledge at the time of enteringinto such an agreement or (iv) any intellectual property relating to anyCollaboration Compound that is subject to Section 3.4;

 

10.5.3  all employees, agents, consultants orsubcontractors providing services to GSK or its Affiliates pursuant to thisAgreement shall be under the obligation to assign all right, title and interestin and to their inventions, if any, to GSK as the sole owner thereof;

 

10.5.4  it shall not employ (or, to the best of itsknowledge without further duty of inquiry, shall not use any contractor orconsultant that employs) any individual or entity debarred by the FDA (orsubject to a similar sanction of EMEA), or, to the best of its knowledgewithout further duty of inquiry, any individual who or entity which is thesubject of an FDA debarment investigation or proceeding (or similar proceedingof EMEA), in the conduct of the preclinical or clinical studies ofCollaboration Compounds and its development activities; and

 

10.5.5  GSK shall perform its development activitiesin compliance with good laboratory and clinical practices and cGMP, in eachcase as applicable under the laws and regulations of the

 

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country and of the state and local governmentwherein such activities are conducted, and with respect to the care, handlingand use in research and development activities hereunder of any non-humananimals by or on behalf of GSK, shall at all times comply with all applicablefederal, state and local laws, regulations and ordinances, and also with themost current best practices in the industry for the proper care, handling anduse of animals in pharmaceutical research and development activities, subjectto Pharmacopeia’s reasonable right of inspection.

 

10.5.6 GSK shall notify Pharmacopeia in writing promptly in the event that ithas actual knowledge of the material breach of any covenant of GSK underSection 10.5 or the material breach of any representation or warranty providedby GSK under Section 10.4.

 

10.6    DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THISAGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OFANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANYWARRANTY THAT ANY PATENTS ARE VALID OR ENFORCEABLE OR THAT THEIR EXERCISE DOESNOT INFRINGE ANY PATENT RIGHTS OF THIRD PARTIES, AND EXPRESSLY DISCLAIMS ALLWARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

 

**ARTICLE 11**

 

**INDEMNIFICATION; INSURANCE**

 

11.1    INDEMNIFICATION BY GSK. GSK shall indemnify, defend and hold harmlessPharmacopeia, and its Affiliates, and their respective directors, officers,employees and agents, from and against any and all liabilities, damages,losses, claims, costs and expenses including, but not limited to, thereasonable fees of attorneys and other professionals (collectively “LOSSES”),arising out of or resulting from any and all Third Party suits, claims actions,proceedings or demands based upon:

 

11.1.1 the negligent or reckless acts or omissions or the willful misconduct ofGSK or its Affiliates and its or their respective directors, officers,employees and agents, in connection with GSK’s performance of its obligationsor exercise of its rights under this Agreement;

 

11.1.2  any breach of any representation, warranty orcovenant made by GSK under Article 10; or

 

11.1.3  the research, development, manufacture, use,handling, storage, commercialization, sale or other disposition of anyCollaboration Compounds or Products or other chemical agents by GSK, itsAffiliates, agents or Sublicensees, for which GSK, its Affiliates, agents orSublicensees have responsibility for specific activities pursuant to thisAgreement, and which is not attributable merely to GSK’s participation in theJSC;

 

except, in each case above, to the extent anysuch claim arose out of or resulted from or is attributable to the ** negligentor reckless acts or omissions or the willful misconduct of Pharmacopeia or its

 

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Affiliates, and their respective directors,officers, employees and agents (including their Sublicensees andsubcontractors).

 

11.2    INDEMNIFICATION BY PHARMACOPEIA. Pharmacopeia shall indemnify, defend andhold harmless GSK and its Affiliates, and their respective directors, officers,employees and agents, from and against any and all Losses, arising out of orresulting from any and all Third Party suits, claims, actions, proceedings ordemands based upon:

 

11.2.1  the negligent or reckless acts or omissions orthe willful misconduct of Pharmacopeia or its Affiliates and its or theirrespective directors, officers, employees and agents, in connection with Pharmacopeia’sperformance of its obligations or exercise of its rights under this Agreement;

 

11.2.2  any breach of any representation, warranty orcovenant made by Pharmacopeia under Article 10; or

 

11.2.3  the research, development, manufacture, use,handling, storage, commercialization, sale or other disposition of anyCollaboration Compounds or Products or other chemical agents by Pharmacopeia,its Affiliates, agents or Sublicensees, for which Pharmacopeia, its Affiliates,agents or Sublicensees have responsibility for specific activities pursuant tothis Agreement, and which is not attributable merely to Pharmacopeia’s participation in the JSC.

 

except, in each case above, to the extent anysuch claim arose out of or resulted from or is attributable to the ** negligentor reckless acts or omissions or the willful misconduct of GSK or itsAffiliates, and their respective directors, officers, employees and agents(including their Sublicensees and subcontractors).

 

11.3    PROCEDURE. In the event that any person (an “INDEMNITEE”) entitled toindemnification under Section 11.1 or Section 11.2 is seeking suchindemnification, such Indemnitee shall: (i) inform, in writing, theindemnifying Party of the claim as soon as reasonably practicable after suchIndemnitee receives notice of such claim; (ii) permit the indemnifying Party toassume direction and control of the defense of the claim (including the soleright to settle it at the sole discretion of the indemnifying Party; providedthat such settlement does not impose any obligation on, or otherwise adverselyaffect, the Indemnitee or other Party); (iii) cooperate as requested (at theexpense of the indemnifying Party) in the defense of the claim; and (iv)undertake all reasonable steps to mitigate any loss, damage or expense withrespect to the claim(s). Notwithstanding the foregoing, the Indemnitee mayretain separate co-counsel reasonably acceptable to the indemnifying Party atits sole cost and expense and participate in the defense of the applicableclaim for which the indemnifying Party has assumed control.

 

11.4    INSURANCE.

 

11.4.1 Pharmacopeia’s Insurance Obligations. Pharmacopeia shall maintain, atits cost, with effect from prior to the date of first administration of anyCollaboration Compound or Product for testing in humans hereunder and duringthe Term thereafter, adequate insurance against liability and other risksassociated with its activities contemplated by this Agreement, including butnot limited to its clinical trials and its indemnification obligations herein,in

 

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such amounts and on such terms as arecustomary for prudent practices in the pharmaceutical industry for theactivities to be conducted by it under this Agreement. At a minimum, Pharmacopeiashall maintain, in force from prior to the date of first testing in humans andthereafter during the Term, at its cost, a ** policy providing coverage of atleast ** Dollars ($**) **, provided that such coverage is increased to at least (i) ** Dollars($**) ** and (ii) ** Dollars ($**) before **. Pharmacopeia shall furnish to GSK evidence of such insurance, uponrequest.

 

11.4.2 GSK’s Insurance Obligations. GSK hereby represents and warrants toPharmacopeia that it is self-insured against liability and other risksassociated with its activities and obligations under this Agreement in suchamounts and on such terms as are customary for prudent practices for largepharma in the pharmaceutical industry for the activities to be conducted by itunder this Agreement. GSK shall furnish to Pharmacopeia evidence of suchself-insurance, upon request.

 

**ARTICLE 12**

 

**TERM AND TERMINATION**

 

12.1    TERM; EXPIRATION. This Agreement shall become effective as of theEffective Date and, unless earlier terminated pursuant to the other provisionsof this Article 12, shall expire as follows:

 

12.1.1 on a Product-by-Product, and country-by-country, basis until theexpiration of all payment obligations under this Agreement with respect to suchProduct in such country; and

 

12.1.2 in its entirety upon the expiration of all payment obligations underthis Agreement with respect to the last Product in all countries in theTerritory pursuant to Section 12.1.1. The period from the Effective Date to theexpiration of the entire Agreement pursuant to this Section 12.1.2 shall be the“TERM.”

 

12.2    TERMINATION. Notwithstanding anything in this Agreement orelsewhere to the contrary, this Agreement may be terminated in its entirety orin part as follows:

 

12.2.1 **. Either Party (the “NON-BREACHING PARTY”) may, without prejudice toany other remedies available to it at law or in equity, terminate thisAgreement in its entirety in the event the other Party (the “BREACHING PARTY”)shall have **, after written notice thereof was provided to the Breaching Partyby the Non-Breaching Party. Any such termination shall become effective at theend of such ** period (or, in the case of a failure to make a payment, at theend of such ** period), unless the **, as the case may be. The right of either Partyto terminate this Agreement as provided in this Section 12.2.1 shall not beaffected in any way by such Party’s waiver or failure to take action withrespect to any previous default. A “MATERIAL BREACH” shall mean a default inthe performance of or failure to be in compliance with any material term ofthis Agreement, including any payment obligation. Notwithstandinganything in this Section 12.2.1 to the contrary, a Party that is in MaterialBreach under this Agreement shall not have the right to terminate thisAgreement pursuant to this Section 12.2.1.

 

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12.2.2      [intentionallyomitted]

 

12.2.3      Mutual Consent. This Agreement may be terminatedby the mutual written consent of the Parties.

 

12.2.4      **.

 

(a) **

 

(b) **

 

(c) **

 

12.2.5      Discretionary.** shall have the **, as set forth in the **. Notwithstanding the ** pursuantto this Section, **. It is understood that **.

 

12.2.6      Program-by-Program.So long as none of Sections 12.2.1, 12.2.4 or 12.3 is applicable, ** other thanthat which is **.

 

12.3    TERMINATION FOR INSOLVENCY.

 

12.3.1 Insolvency. Either Party may terminate this Agreement if, at any time,the other Party shall file in any court or agency pursuant to any statute orregulation of any state or country, a petition in bankruptcy or insolvency orfor reorganization or for an arrangement or for the appointment of a receiveror trustee of the Party or of substantially all of its assets, or if the otherParty proposes a written agreement of composition or extension of substantiallyall of its debts, or if the other Party shall be served with an involuntarypetition against it, filed in any insolvency proceeding, and such petitionshall not be dismissed within ninety (90) days after the filing thereof, or ifthe other Party shall propose or be a party to any dissolution or liquidation,or if the other Party shall make an assignment of substantially all of itsassets for the benefit of creditors.

 

12.3.2 Bankruptcy Code Section 365(n). All rights and licenses granted under orpursuant to any section of this Agreement are and shall otherwise be deemed tobe for purposes of Section 365(n) of Title 11, United States Code (the “BANKRUPTCYCODE”) licenses of rights to “intellectual property” as defined in Section101(56) of the Bankruptcy Code. The Parties shall retain and may fully exerciseall of their respective rights and elections under the Bankruptcy Code. Uponthe bankruptcy of any Party, the non-bankrupt Party shall further be entitledto a complete duplicate of, or complete access to, any such intellectualproperty, and such, if not already in its possession, shall be promptlydelivered to the non-bankrupt Party, unless the bankrupt Party elects tocontinue, and continues, to perform all of its obligations under thisAgreement.

 

12.4    EFFECT OF TERMINATION.

 

12.4.1      UponExpiration of the Term.

 

(a) Following the expiration of the Term withrespect to a Product sold by GSK in a country pursuant to Section 12.1.1,subject to the terms and conditions of this Agreement, GSK shall have anexclusive, fully-paid and royalty free, right and license, with the right togrant sublicenses, under the Pharmacopeia IP and under

 

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Pharmacopeia’s rights in the Joint IP licensedhereunder, solely to continue to make, have made, use, sell, offer for sale andimport the applicable Product in such country, for so long as it continues todo so. Following the expiration of the Term with respect to any Product sold byPharmacopeia in a country pursuant to Section 12.1.1, subject to the terms andconditions of this Agreement, Pharmacopeia shall have an exclusive, fully-paidand royalty free, right and license, with the right to grant sublicenses, underthe GSK IP and under GSK’s rights in the Joint IP licensed hereunder solely tocontinue to make, have made, use, sell, offer for sale and import theapplicable Product in such country, for so long as it continues to do so.

 

(b) Following expiration of the Term in itsentirety pursuant to Section 12.1.2, subject to the terms and conditions ofthis Agreement, GSK shall have an exclusive, fully-paid and royalty-free, rightand license, with the right to grant sublicenses, under the Pharmacopeia IP andunder Pharmacopeia’s rights in the Joint IP licensed hereunder solely tocontinue to make, have made, use, sell, offer for sale and import Products inthe Territory, for so long as it continues to do so. Following the expirationof the Term in its entirety pursuant to Section 12.1.2, subject to the termsand conditions of this Agreement, Pharmacopeia shall have an exclusive,fully-paid and royalty-free, right and license, with the right to grantsublicenses, under the GSK IP and under GSK’s rights in the Joint IP licensedhereunder solely to continue to make, have made, use, sell, offer for sale andimport Products in the Territory, for so long as it continues to do so.

 

12.4.2      Upon Termination **.

 

(a) In thecase of a termination by GSK pursuant to Section 12.2.4(a), Pharmacopeia shallhave no further rights to (A) GSK IP and the Information generated or providedby GSK associated with such terminated Program, or (B) the related assay andreagents provided by GSK. Pharmacopeia also shall return to GSK all Know-HowControlled by GSK and related to any applicable GSK Target. Further, upon anysuch termination under Section 12.2.4(a), Pharmacopeia shall promptly provideto GSK all Information and data resulting from the specific Program beingterminated that is reasonably necessary or important for GSK to continue theProgram. GSK shall automatically have a fully-paid and royalty-free, worldwide,sublicensable, exclusive license to use all such information, data and relevantPharmacopeia IP and Joint IP as necessary to make, have made, use, sell, offerto sell and import products which incorporate any Collaboration Compoundarising from such terminated Program.

 

(b) In thecase of a termination by GSK pursuant to Section 12.2.4(b), Pharmacopeia shallhave no further rights to (A) GSK IP and the Information generated or providedby GSK associated with all such terminated Programs, or (B) the related assayand reagents provided by GSK. Pharmacopeia also shall return to GSK allKnow-How Controlled by GSK and related to any applicable GSK Target for each ofthe terminated Programs. It is understood that any such termination will notapply to any Programs which, prior to such termination, have been optioned byGSK under the GSK Options, which shall continue always subject to themilestone, royalty and diligence obligations of GSK to Pharmacopeia. Further,upon any such termination

 

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under Section12.2.4(b), Pharmacopeia shall promptly provide to GSK all information and dataresulting from the Programs being terminated that is reasonably necessary orimportant for GSK to continue the Programs. GSK shall automatically have afully-paid and royalty-free, worldwide, sublicensable, exclusive license to useall such information, data and relevant Pharmacopeia IP and Joint IP asreasonably necessary or important to make, have made, use, sell, offer to selland import products which incorporate any Collaboration Compound arising fromsuch terminated Programs.

 

(c) In the case of a termination by Pharmacopeia pursuant to Section12.2.4(c), all licenses to GSK under the Pharmacopeia IP or Joint IP relatingto such GSK Development Compound and/or Program shall terminate. Upon suchtermination, GSK shall immediately provide to Pharmacopeia all information anddata resulting from the specific development activities being terminated thatis reasonably necessary or important for Pharmacopeia to continue suchdevelopment activities. Pharmacopeia shall automatically have a worldwide,sublicensable, exclusive license, subject to Pharmacopeia’s milestone androyalty obligations to GSK as set forth in this Agreement, to use all suchinformation, data and relevant GSK IP and Joint IP as reasonably necessary orimportant to make, have made, use, sell, offer to sell and import products whichincorporate any GSK Development Compounds or other Collaboration Compoundsarising from the terminated development activities.

 

12.4.3      DiscretionaryTermination.

 

(a)  Inthe event of a termination of this Agreement by **. ** of thisAgreement **. In the event of atermination of this Agreement by ** of this Agreement **.

 

(b)  Inthe event of a termination of this Agreement by **. For the avoidance of doubt,**.

 

(c)           Inthe event of a termination of this Agreement by **.

 

(i)     In the event thata **.

 

(ii)     In the eventthat a **.  If **.

 

(iii)     In the eventthat **.  If **. For the avoidance of doubt, **.

 

12.4.4      Terminationby GSK Due to Pharmacopeia’s Breach or Insolvency.

 

In the event of termination by GSK pursuant to Section 12.2.1 or 12.3, all rights andlicenses granted to Pharmacopeia hereunder shall terminate, and any licensesgranted by Pharmacopeia to GSK hereunder shall remain in effect, subject to theterms and conditions of this Agreement applicable thereto, including the applicableprovisions for payment of milestones and royalties to Pharmacopeia, in additionto the provisions that survive under Section 12.5(b).

 

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12.4.5      Terminationby Pharmacopeia Due to GSK’s Breach or Insolvency.

 

In the event of termination by Pharmacopeia pursuant to Section 12.2.1 or 12.3, all rights andlicenses granted to GSK hereunder shall terminate, and any licenses granted byGSK to Pharmacopeia hereunder shall remain in effect, subject to the terms andconditions of this Agreement applicable thereto, including the applicableprovisions for payment of milestones and royalties to GSK, in addition to theprovisions that survive under Section 12.5(b).

 

12.5    ACCRUED RIGHTS; SURVIVING OBLIGATIONS.

 

(a)  Termination, relinquishment orexpiration of this Agreement for any reason shall be without prejudice to anyrights that shall have accrued to the benefit of any Party prior to suchtermination, relinquishment or expiration including, without limitation, thepayment obligations under Article 6 hereof and any and all damages arising fromany breach hereunder. Such termination, relinquishment or expiration shall notrelieve any Party from obligations which are expressly indicated under thisSection 12.5 to survive termination or expiration of this Agreement.

 

(b)  Survival.  Theprovisions of Articles 6, 8, 9, 10, 11 and 14, and Sections 12.4 and 12.5 shallsurvive the expiration or termination of this Agreement for any reason, inaccordance with their respective terms and conditions, and for the respectiveduration stated therein, and where no duration is stated, shall surviveindefinitely.

 

**ARTICLE 13**

**[INTENTIONALLY OMITTED]**

 

**ARTICLE 14**

 

**MISCELLANEOUS**

 

14.1    PUBLICITY. Neither Party shall originate any written publicity,news release or other announcement or statement relating to the announcement orterms of this Agreement (collectively, a “WRITTEN DISCLOSURE”), without theprompt prior review and written approval of the other Party, which approvalshall not be unreasonably withheld or delayed. Notwithstanding the foregoing,either Party may make any public Written Disclosure it believes in good faithbased upon the advice of counsel is required by applicable law, rule orregulation or any listing or trading agreement concerning its or its Affiliates’publicly traded securities; provided, however, that such Written Disclosureshall minimize to the extent possible the financial information disclosed, andthat prior to making such Written Disclosure, the disclosing Party shallprovide to the other Party a copy of the materials proposed to be disclosed andprovide the receiving Party with an opportunity to promptly review the WrittenDisclosure and provide comments within two (2) business days of the proposeddrafts of the Written Disclosure. Notwithstanding the foregoing, the Partiesshall agree upon a press release to announce the execution of this Agreement,together with a corresponding question & answer outline for use inresponding to inquiries about the Agreement; thereafter, GSK and

 

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Pharmacopeia may each disclose to ThirdParties the information contained in such press release and question &answer outline without the need for further approval by the other.

 

14.2 DISPUTE RESOLUTION.   TheParties will try to settle their differences amicably between themselves. In the event of any controversy or claim arising out of or relating toany provision of this Agreement or the performance or alleged non-performance ofa Party of its obligations under this Agreement (a “Dispute”), a Party maynotify the other Party in writing of such Dispute.  If the Parties areunable to resolve the Dispute within 30 days of receipt of the written noticeby the other Party, such dispute will be referred to the Chief ExecutiveOfficer of Pharmacopeia, or such other person holding a similar positiondesignated by Pharmacopeia from time to time, and the Senior Vice President forExternal Drug Discovery of GSK, or such other person holding a similar positiondesignated by GSK from time to time, who will use their good faith efforts toresolve the Dispute within 15 days after it was referred to them.

 

Any Dispute that is not resolved as providedin this Section, whether before or after termination of this Agreement, will beresolved by final and binding arbitration.  Such Disputes will be finallysettled under the Commercial Arbitration Rules of the American ArbitrationAssociation (the “Rules”) or such other arbitration rules as the Parties mayagree upon.  Arbitration proceedings will be held in Princeton, New Jerseyor in a place which is mutually agreeable to the parties.  The arbitrationwill be conducted by one arbitrator knowledgeable in the subject matter that isat issue in the Dispute and who is selected by mutual agreement of the Partiesor, failing such agreement, will be selected according to the Rules.

 

The decision by the arbitrator will bebinding and conclusive upon the Parties, their successors and assigns, and theParties will comply with such decision in good faith. Each Party hereby submitsitself to the jurisdiction of the courts of the place where the arbitration isheld, but only for the entry of judgment with respect to the decision of thearbitrator hereunder. Notwithstanding the foregoing, judgment upon the awardmay be entered in any court in the country where the arbitration takes place,or any court having jurisdiction over the Parties. The Parties agree that anydamages awarded pursuant to any dispute submitted to arbitration hereunder willbe limited to compensatory damages and that the arbitrator will in no eventhave authority to award any special, incidental, consequential or punitivedamages. The arbitrator may award reasonable attorneys’ fees. Whether a claim, disputeor other matter in question would be barred by the applicable statute oflimitations, which statute of limitations will apply to any claim or disputewill also be determined by binding arbitration pursuant to this Section.

 

14.3 GOVERNING LAW. This Agreement and any dispute arising from theperformance or breach hereof shall be governed by and construed and enforced inaccordance with the laws of the State of Delaware, U.S.A., without reference toconflicts of laws principles.

 

14.4 ASSIGNMENT. This Agreement shall not be assignable by either Party toany Third Party hereto without the written consent of the other Party hereto.Notwithstanding the foregoing, either Party may assign this Agreement, withoutthe consent of the other Party, to an Affiliate or to an entity that acquiresall or substantially all of the business or assets of such Party to which thisAgreement pertains (whether by merger, reorganization, acquisition, sale orotherwise), and agrees in writing to be bound by the terms and conditions ofthis Agreement.

 

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14.5 BINDING AGREEMENT. This Agreement, and the terms and conditions hereof, shall be bindingupon and shall inure to the benefit of the Parties and their respectivesuccessors, heirs, administrators and permitted assigns.

 

14.6 REGULATORY REVIEW.

 

14.6.1 Tolling of Payment Obligations. If the exercise by GSK of any Optionunder Article 4 requires the making of filings under the Hart-Scott-RodinoAntitrust Improvements Act (the “HSR ACT”), or under any similar premergernotification provision in the European Union or any other jurisdiction, thenall rights and obligations related to the exercise of such Option shall betolled until the applicable waiting period has expired or been terminated oruntil approval or clearance from the reviewing authority has been received, andeach Party agrees to diligently make any such filings and respond to anyrequest for information to expedite review of such transaction.

 

14.6.2 Resolution of Regulatory Authority Opposition. If the antitrustenforcement authorities in the U.S. make a second request under the HSR Act, orany antitrust enforcement authority in another jurisdiction commences aninvestigation into the exercise by GSK of an Option, then the Parties shall, ingood faith, cooperate with each other and take reasonable actions to attemptto: (A) resolve all enforcement agency concerns about the transaction underinvestigation; and (B) diligently oppose any enforcement agency opposition tosuch transaction. In the event the enforcement agency files a formal action tooppose the transaction, the Parties shall confer in good faith to determine theappropriate strategy for resolving the enforcement agency opposition, includingwithout limitation, and where appropriate, the renegotiation of theirobligations under this Agreement with respect to that Option, with theobjective of placing each Party, to the maximum extent possible, in the sameeconomic position that each Party would have occupied if GSK had been permittedto exercise such Option. Notwithstanding the foregoing, nothing in this Section14.6 shall require either Party to divest any assets.

 

14.7 FORCE MAJEURE. No Party shall be held liable or responsible to the otherParty nor be deemed to be in default under, or in breach of any provision of,this Agreement for failure or delay in fulfilling or performing any obligationof this Agreement when such failure or delay is due to force majeure, andwithout the fault or negligence of the Party so failing or delaying. Forpurposes of this Agreement, “force majeure” is defined as causes beyond thecontrol of the Party, including, without limitation, acts of God; acts,regulations, or laws of any government; war; civil commotion; destruction ofproduction facilities or materials by fire, flood, earthquake, explosion orstorm; labor disturbances; epidemic; and failure of public utilities or commoncarriers. In the event of force majeure, Pharmacopeia or GSK, as the case maybe, shall immediately notify the other Party of such inability and of theperiod for which such inability is expected to continue. The Party giving suchnotice shall thereupon be excused from such of its obligations under thisAgreement as it is thereby disabled from performing for so long as such Partyis so disabled, up to a maximum of ninety (90) days, after which time the Partynot affected by the force majeure may terminate this Agreement. To the extentpossible, each Party shall use reasonable efforts to minimize the duration ofany force majeure.

 

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14.8 NOTICES. Any notice or request required or permitted to be given underor in connection with this Agreement shall be deemed to have been sufficientlygiven if in writing and personally delivered or sent by certified mail (returnreceipt requested), facsimile transmission (receipt verified), or overnightexpress courier service (signature required), prepaid, to the Party for whichsuch notice is intended, at the address set forth for such Party below:

 

If to Pharmacopeia,

 
| Addressed to:   |   | Pharmacopeia Drug Discovery,  Inc.                       |
|-----------------|--------|----------------------------------------------------------|
|            |   | 3000 Eastpark Blvd.                                      |
|            |   | Cranbury, NJ 08512                                       |
|            |   |                                                     |
|            |   | Attention: Chief Executive  Officer                      |
|            |   | Telephone: **                                            |
|            |   | Telecopy: **                                             |
|            |   |                                                     |
| With a copy to: |   | Pharmacopeia Drug Discovery,  Inc.                       |
|            |   | 3000 Eastpark Blvd.                                      |
|            |   | Cranbury, NJ 08512                                       |
|            |   |                                                     |
|            |   | Attention: General Counsel                               |
|            |   | Telephone: **                                            |
|            |   | Telecopy: **                                             |
|            |   |                                                     |
| If to GSK,      |   |                                                     |
|            |   |                                                     |
| Addressed to:   |   | GlaxoSmithKline                                          |
|            |   | 2301  Renaissance Boulevard                              |
|            |   | Mail  Code RN0210                                        |
|            |   | King  of Prussia, PA  19406                         |
|            |   |                                                     |
|            |   | Attention: Vice President, Business Development          |
|            |   | Center  of Excellence for External Drug Discovery        |
|            |   | Telephone:  **                                           |
|            |   | Telecopy:  **                                            |
|            |   |                                                     |
| With a copy to: |   | GlaxoSmithKline                                          |
|            |   | 2301 Renaissance Boulevard                               |
|            |   | Mail Code RN0220                                         |
|            |   | King of Prussia, PA  19406                          |
|            |   |                                                     |
|            |   | Attention: Vice President and Associate General  Counsel |
|            |   | Telecopy:  **                                            |

 

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or to such other address for such Party as itshall have specified by like notice to the other Parties, provided that noticesof a change of address shall be effective only upon receipt thereof. Ifdelivered personally or by facsimile transmission, the date of delivery shallbe deemed to be the date on which such notice or request was given. If sent byovernight express courier service, the date of delivery shall be deemed to bethe next business day after such notice or request was deposited with suchservice. If sent by certified mail, the date of delivery shall be deemed to bethe third business day after such notice or request was deposited with the U.S.Postal Service.

 

14.9  [Intentionally left blank]

 

14.10 EXPORT CLAUSE. Each Party acknowledgesthat the laws and regulations of the United States restrict the export andre-export of certain commodities and technical data of United States origin.Each Party agrees that it will not export or re-export any restrictedcommodities or any restricted technical data of the other Party in any formwithout any necessary United States and foreign government licenses.

 

14.11 WAIVER. Neither Party may waive or release any of its rights orinterests in this Agreement except in writing. The failure of either Party toassert a right hereunder or to insist upon compliance with any term orcondition of this Agreement shall not constitute a waiver of that right orexcuse a similar subsequent failure to perform any such term or condition. Nowaiver by either Party of any condition or term in any one or more instancesshall be construed as a continuing waiver of such condition or term or ofanother condition or term.

 

14.12 SEVERABILITY. If any provision hereof should be held invalid, illegal orunenforceable in any jurisdiction, the Parties shall negotiate in good faith avalid, legal and enforceable substitute provision that most nearly reflects theoriginal intent of the Parties and all other provisions hereof shall remain infull force and effect in such jurisdiction and shall be liberally construed inorder to carry out the intentions of the Parties hereto as nearly as may bepossible. Such invalidity, illegality or unenforceability shall not affect thevalidity, legality or enforceability of such provision in any otherjurisdiction.

 

14.13 ENTIRE AGREEMENT. This Agreement, including the schedules and exhibitshereto, together with the Warrant to Purchase Common Stock, sets forth all thecovenants, promises, agreements, warranties, representations, conditions andunderstandings between the Parties hereto and supersedes and terminates allprior agreements and understandings between the Parties. There are nocovenants, promises, agreements, warranties, representations, conditions orunderstandings, either oral or written, between the Parties other than as setforth herein and therein. No subsequent alteration, amendment, change oraddition to this Agreement shall be binding upon the Parties hereto unlessreduced to writing and signed by the respective authorized officers of theParties.

 

14.14 INDEPENDENT CONTRACTORS. Nothing herein shall be construed to create anyrelationship of employer and employee, agent and principal, partnership orjoint venture between the Parties. Each Party is an independent contractor.Neither Party shall assume, either directly or indirectly, any liability of orfor the other Party. Neither Party shall have the authority to bind or obligatethe other Party and neither Party shall represent that it has such authority.

 

14.15 HEADINGS. Headings used herein are for convenience only and shall not inany way affect the construction of or be taken into consideration ininterpreting this Agreement.

 

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14.16 USE OF NAME. Except as otherwise provided herein, no Party shall haveany right, express or implied, to use in any manner the name or otherdesignation of the other Parties or any other trade name, trademark or logos ofthe other Parties for any purpose in connection with the performance of thisAgreement.

 

14.17 BOOKS AND RECORDS. Any books and records to be maintained under thisAgreement by a Party or its Affiliates or Sublicensees shall be maintained inaccordance with U.S. generally accepted accounting principles, consistentlyapplied, except that the same need not be audited.

 

14.18 FURTHER ACTIONS. Each Party shall execute, acknowledge and deliver suchfurther instruments, and do all such other acts, as may be necessary orappropriate in order to carry out the purposes and intent of this Agreement.

 

14.19 PARTIES IN INTEREST. All of the terms and provisions of this Agreementshall be binding upon, inure to the benefit of and be enforceable by theParties hereto and their respective permitted successors and assigns.

 

14.20 CONSTRUCTION OF AGREEMENT. The terms and provisions of this Agreementrepresent the results of negotiations between the Parties and theirrepresentatives, each of which has been represented by counsel of its ownchoosing, and neither of which has acted under duress or compulsion, whetherlegal, economic or otherwise. Accordingly, the terms and provisions of thisAgreement shall be interpreted and construed in accordance with their usual andcustomary meanings, and each of the Parties hereto hereby waives theapplication in connection with the interpretation and construction of thisAgreement of any rule of law to the effect that ambiguous or conflicting termsor provisions contained in this Agreement shall be interpreted or construedagainst the Party whose attorney prepared the executed draft or any earlierdraft of this Agreement.

 

14.21 COUNTERPARTS. This Agreement may be signed in counterparts, each andevery one of which shall be deemed an original, notwithstanding variations informat or file designation which may result from the electronic transmission,storage and printing of copies of this Agreement from separate computers or printers.Facsimile signatures shall be treated as original signatures.

 

**[signature page follows; remainder of thispage intentionally left blank]**

 

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*** - * - * - ***

 

IN WITNESS WHEREOF, the Parties have causedthis Agreement to be executed by their duly authorized representatives as ofthe Effective Date.

 

 

PHARMACOPEIA DRUG DISCOVERY, INC.

 

 
| BY: |  /s/ Leslie J. Browne |   |
|-----|----------------------------|--------|

 

Name: Leslie J. Browne,Ph.D.

 

Title: President and Chief ExecutiveOfficer

 

 

SMITHKLINE BEECHAM CORPORATION, d/b/aGLAXOSMITHKLINE

 

 
| BY: |  /s/ Donald F. Parman |   |
|-----|----------------------------|--------|

 

Name: Donald F. Parman

 

Title: Vice President & Secretary

 

 

GLAXO GROUP LIMITED

 

 
| BY: |  /s/ Paul Williamson |   |
|-----|---------------------------|--------|

 

Name: Paul Williamson, forand on behalf of Edinburgh Pharmaceutical Industries Limited

 

Title: Corporate Director

 

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## **EXHIBIT A**

##  

[Warrant to Purchase CommonStock]

 

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