**Exhibit 10.1**

* *

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

* *

**COLLABORATIONAND LICENSE AGREEMENT**

**This COLLABORATION AND LICENSE AGREEMENT**(the “Agreement”), effective as of May 18th, 2006 (the “Effective Date”), is made by and betweenPharmacopeia Drug Discovery, Inc., a Delaware corporation, having a principalplace of business at 3000 Eastpark Boulevard, Cranbury, New Jersey 08512 (“Pharmacopeia”),and Cephalon, Inc., a Delaware corporation, having a principal place ofbusiness at 41 Moores Road, Frazer, PA 19355 (“Cephalon”).

**BACKGROUND**

**WHEREAS**, Pharmacopeia hasexpertise in the optimization of pharmaceutical compounds;

**WHEREAS**, Cephalon has expertisein the research, development and commercialization of pharmaceutical compounds;

## **WHEREAS**, Cephalonand Pharmacopeia wish to enter into a collaboration employing Pharmacopeia’s medicinal chemistry, analytical chemistry andprimary biology capabilities and Cephalon’s chemistry, *in vitro*biology,**and*in vivo* biology capabilities, in order todevelop and commercialize pharmaceutical compounds subject to and in accordancewith the terms and conditions of this Agreement (the “Collaboration”).

**NOW THEREFORE,**in considerationof the mutual covenants and conditions hereinafter set forth in this Agreement,the Parties hereto agree as follows:

**ARTICLE 1DEFINITIONS**

As used herein,the following terms shall have the meanings set forth below:

1.1           “Affiliate”shall mean any Person controlled by, controlling, or under common control witha Party.  For the purpose of this Section1.1 only, “control” shall refer to (a) the possession, directly or indirectly,of the power to direct the management or policies of a Person, whether throughthe ownership of voting securities, by contract or otherwise, or (b) theownership, directly or indirectly, of more than fifty percent (50%) of thevoting securities or other ownership interest of a Person.

1.2           “Cephalon Compound” shall mean anycompound **, which is ** at or after the **, and which is **.

1.3           “Cephalon Field” shall mean, with respect to eachCollaboration Compound, ** by such Collaboration Compound.

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1.4           “Cephalon IP” shall mean Cephalon Patents andCephalon Know-how.

1.5           “CephalonPatents”shall mean all **, or **; in each case,**.

1.6           “Collaboration” shall have themeaning ascribed to such term in the Preamble.

1.7           “Collaboration Compound” shall mean a ** or a **, or a **; in each case,that **.  A compound shall be deemed tohave been ** in category (i), (ii) or (iii) above.  A compound shall bedeemed to have been ** (i) through (iv) above. For purposes of clarity, any compound **.

1.8           “Collaboration IP” shall meanCollaboration Patents and CollaborationKnow-how.  Collaboration IP shall not includePharmacopeia IP or Cephalon IP.

1.8.1       “Collaboration Patents”shall mean (i) all **; and (ii) any ** in (i) above, and any ** ofany of the foregoing, in each case, which is **; provided, however,that Collaboration Patents shall not include any Cephalon Patents orPharmacopeia Patents.

1.8.2       “Collaboration Know-how”shall mean **; provided, however, that Collaboration Know-Howshall not include Collaboration Patents, Cephalon IP or Pharmacopeia IP.

1.9           “Collaboration Product” shall mean a pharmaceutical productcontaining a **.  It is understood that,in the event any Collaboration Compound is sold for therapeutic purposes, suchCollaboration Compound shall be deemed a Collaboration Product and shall besubject to milestones and royalties as set forth in this Agreement.

1.10         “Collaboration Target” shall mean a Target ** pursuant to Section2.2.

1.11         “Collaboration Term” shall mean theInitial Term plus any extension pursuant to Section 15.2.

## 1.12         “Combination Product” shall meana **.

1.13         “CommercializingParty” shall have the meaning set forth in Section 5.7(a).

1.14         “ConfidentialInformation” as to each Party, shall mean such Party’s confidentialinformation, trade secrets, Patents and Know-how, all the data and materials ofthat Party relating to the Collaboration, the Targets, Cephalon Compounds,Pharmacopeia Compounds, Collaboration Compounds, or Collaboration Products, andincluding, without limitation, all research, technical, clinical development,manufacturing, marketing, financial, personnel, and other business informationand plans of such Party.

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1.15         “Controls” or “Controlled”shall mean possession of the ability to grant licenses or sublicenses pursuantto this Agreement without violating the terms of any agreement or otherarrangement with, or the rights of, any Third Party.

1.16         “Development Compound” shall mean any **.  Any Collaboration Compound **.

1.17         “Executive Officers” shall meanthe Executive VicePresident of Research and Development of Cephalon, and the Chief ExecutiveOfficer of Pharmacopeia or such other executive officer of a Party as may besubstituted from time to time upon the giving of written notice to the otherParty.

1.18         “Exclusivity Period” shall havethe meaning set forth in Section 4.1.

1.19         “Fair Market Value” shall meanthe cash consideration, which a willing seller would realize from an unrelatedwilling buyer in an arm’s length sale of an identical item sold in the samequantity and at the same time and place of the transaction.

1.20         “FDA” shall mean the U.S. Foodand Drug Administration, any successor thereto, or any corresponding foreignregistration or regulatory authority.

1.21         “First Commercial Sale” shallmean, with respect to a Collaboration Product in any country, the first salefor use or consumption by the general public of such Collaboration Product insuch country after all Regulatory Approvals have been obtained in such country.

1.22         “IND” shall mean anInvestigational New Drug Application, as defined in the U.S. Food, Drug andCosmetic Act and the regulations promulgated thereunder for initiating clinicaltrials in the United States, or any corresponding foreign application,registration or certification.

1.23         “Initial Term” shall mean theperiod commencing on the earlier of (i) approval by the JRC of the firstResearch Plan pursuant to Section 2.1 or (ii) June 1, 2006, and ending three(3) years thereafter.

1.24         “Joint Research Committee” or “JRC”shall mean the entity organized to manage the scientific implementation of theCollaboration and acting pursuant to Article 3.

1.25         “Know-how” shall mean any andall proprietary ideas, inventions, data, know-how, instructions, processes,formulas, materials, expert opinion, technology or other informationdiscovered, developed, conceived or reduced to practice by or for a Party as ofthe Effective Date, or by one or both Parties during and in the course of the Collaboration,whether or not patentable, constituting materials, methods, processes,techniques or data, necessary for the development, manufacture or use of aCollaboration Compound, or for the manufacture, use or sale of a CollaborationProduct.

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1.26         “Management Steering Committee”or “MSC” shall mean the entity organized to oversee the entireCollaboration and acting pursuant to Article 3.

1.27         “NDA” shall mean a New DrugApplication, as defined in the U.S. Food, Drug and Cosmetic Act and theregulations promulgated thereunder, or any corresponding foreign application,registration or certification.

1.28         “Net Sales” shall mean the **:

(i)**,

(ii)**,

(iii)**,

(iv)**, and

(v)**.

A “sale” shall include **, and Net Sales shall include**.

The** of Net Sales. All sales of **.

To calculate the value of**.

1.29         “Non-Exclusive Compound” shall mean any compound brought to the **.

1.30         “Party” shall mean Pharmacopeiaor Cephalon.  Pharmacopeia and Cephalonshall be collectively referred to as the Parties.

1.31         “Patent Committee” shall meanthat committee to be formed pursuant to Section 3.5.

1.32         “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, including provisional applications, and (iii)foreign counterparts of any of the foregoing; in each case to the extent thesame has not been held, by a court, administrative body or governmental agencyof competent jurisdiction, to be invalid or unenforceable in a decision fromwhich no appeal can be taken or from which no appeal was taken within the timepermitted for appeal.

1.33         “PatentOwner” shall have the meaning set forth in Section 10.4.2.

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## 1.34         “Person”shall mean any natural person, corporation, firm, business trust, jointventure, association, organization, company, partnership or other businessentity, or any government or agency or political subdivision thereof.

1.35         “Pharmacopeia Compound” shall mean any compound **, which is ** at orafter the **, and which is **.

1.36         “Pharmacopeia Field” shall mean, with respect to eachCollaboration Compound **.

1.37         “Pharmacopeia IP” shall meanPharmacopeia Patents and Pharmacopeia Know-how. Pharmacopeia IP shall not include **.

## 1.38         “PharmacopeiaPatents” shall mean all **, or **; in each case, **.

## 1.39         “Phase I,” “Phase II” and “Phase III”shall mean Phase I (or Phase I/II), Phase II (or Phase II/III) and Phase IIIclinical trials, respectively, in each case as prescribed by applicable FDA INDRegulations, or any corresponding foreign statutes, rules or regulations.

## 1.40         “Pursuing Party” shall have the meaning set forth inSection 10.4.1.

1.41         “Regulatory Agency” shall meanthe FDA or the applicable department, bureau or other governmental regulatoryauthority in each country in the Territory involved in the granting ofRegulatory Approvals.

1.42         “Regulatory Approval” shall meanany and all approvals (including price reimbursement approvals), licenses,registrations, or authorizations of any Regulatory Agency, necessary for themanufacture, use, storage, import, export, transport or sale of a CollaborationProduct.

1.43         “RelevantThird Party Patent Right” shall mean a Patent owned or controlled by a Third Party which claims ** where suchCollaboration Compound (in each case) is being used as an active ingredient ina Collaboration Product.

1.44         “Research Plan” shall mean, on aCollaboration Target-by-Collaboration Target basis, a description of theParties’ respective activities and objectives with respect to a CollaborationTarget.   Minutes of JRC meetings, ifsigned by a JRC representative of each Party, shall be deemed included withinthe Research Plan.

### 1.45         “SignificantActivity” shall mean any of the following in relation to aCollaboration Compound or Collaboration Product:

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(a) **;

(b) **;

(c) **;

(d) **;

(e) **;

(f) **;

(g) **;

(h) **;

(i) **.

Notwithstandingthe foregoing, any **.  Further, if **.

1.46         “Sublicensee” shall mean, as toeach Party, a Person other than an Affiliate of the Party, to whom has beengranted sublicense rights under the license granted to such Party hereunder,which rights include at least the right to sell a Collaboration Product.  As used in this Agreement, “Sublicensee”shall also include a Third Party to whom a Party has granted a sublicense underthis Agreement to distribute such Collaboration Product, provided that suchThird Party has the primary responsibility for marketing and promotion, at itsexpense, of such Collaboration Product within countries in the Territory forwhich such distribution rights are granted, which marketing and promotionalactivities are not subsidized directly or indirectly by that Party, such as,without limitation, through a specific allowance or a guaranteed selling marginfor such Third Party meant to cover its expenses.  Third Parties that are permitted tomanufacture or finish Collaboration Products for supply to a Party, itsAffiliates or Sublicensees are not “Sublicensees.”

1.47         “Substantial Generic Competition”shall have the meaning set forth in Section 5.7(c).

1.48         “Target”shall mean a **.

1.49         “Term” shall have the meaningset forth in Section 15.1.

1.50         “Territory” shall mean **.

1.51         “Third Party” shall mean anyPerson other than Cephalon, Pharmacopeia, or their respective Affiliates orSublicensees.

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1.52         “Unrelated Target” shall havethe meaning set forth in Section 4.1.3.

1.53         “Valid Claim” shall mean a claim of an issued patentwhich has not lapsed or become abandoned, been held permanently revoked,unenforceable or invalid by a decision of a court or other governmental agencyof competent jurisdiction, unappealable or un-appealed within the time allowedfor appeal, and which has not been admitted to be invalid or unenforceablethrough reissue or disclaimer or otherwise.

**ARTICLE 2PERFORMANCE OF THE COLLABORATION**

2.1           Goals of the Collaboration.

## 2.1.1        General. Each Party shall:

(i) undertake aninteractive, cooperative role in the Collaboration with the other Party as setforth in the applicable Research Plan, and such other activities which, fromtime to time, the JRC decides are necessary for the continuing success of theCollaboration, with the objective of identifying Development Compounds with respectto the Collaboration Targets;

(ii) use **; and

(iii) conduct theCollaboration in good scientific manner, and in compliance in all materialrespects with all requirements of applicable laws, rules and regulations, andall other requirements of any good laboratory practices to attempt to achieveits objectives efficiently and expeditiously.

## 2.1.2        Activities of Pharmacopeia.   During the Collaboration Term:

(a) Pharmacopeia shall provide medicinalchemistry efforts as defined in the applicable Research Plan.  In addition, the applicable Research Plan may specify that Pharmacopeiawill provide reasonable primary biology support, including running a primaryassay*in vitro* on a CollaborationTarget — by — Collaboration Targetbasis.  **.

(b) The JRC also may request thatPharmacopeia **.

(c) Pharmacopeia shall provide Cephalonwith all feedback in a timely manner on the progress of its efforts under theCollaboration necessary to enable Cephalon to provide Pharmacopeia the supportthat it requires to conduct its activities hereunder.

## 2.1.3        Activities of Cephalon.  During the Collaboration Term, as directed bythe JRC, Cephalonshall provide *in vivo* and *in vitro*biology as necessary to 

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supportthe Collaboration.  Cephalon furthershall provide to the Collaboration various Cephalon Compounds and Non-ExclusiveCompounds having demonstrated activity against ** and such other Targetsaccepted into the Collaboration as Collaboration Targets, in order to supportthe Collaboration with respect to such Collaboration Targets.

2.2           Selection of Collaboration Targets.  The first ** Collaboration Targets will be**.  At the first JRC meeting the JRCwill: (i) ** and (ii) **. ** by Cephalon, which shall **.  Pharmacopeia, ** pursuant to this Section2.2.

2.3           Third Party Licenses.  With respect to a particular CollaborationTarget, to the extent that either Party identifies the existence of Third Partypatent rights covering such Target, **. The JRC shall **.  The **.

2.4           Records and Reports.  Each Party shall maintain records insufficient detail and in good scientific manner appropriate for patent and FDApurposes and so as to properly reflect all work done and results achieved inthe performance of this Agreement (including all data in the form requiredunder any applicable governmental regulations and as directed by the JRC).  Such records shall include applicable books,records, reports, research notes, charts, graphs, comments, computations,analyses, recordings, photographs, computer programs and documentation thereof,samples of materials and other graphic or written data generated in connectionwith the Collaboration, including any data required to be maintained pursuantto applicable governmental regulations. During the Term, each Party shall respond to reasonable requests fromthe other for information based on such records.

**ARTICLE 3GOVERNANCE OF THE COLLABORATION**

3.1           Joint Research Committee.  Within thirty (30) days after the EffectiveDate, Cephalon and Pharmacopeia shall establish a Joint Research Committee, comprised of Pharmacopeia and Cephalonscientists, to manage the scientific implementation of the Collaboration.  The responsibilities of the JRC shallinclude: (i) monitoring and reporting the progress of the Collaboration andensuring open and frequent exchange between the Parties; (ii) establishingcriteria for the selection of Collaboration Compounds for each CollaborationTarget; (iii) identifying and resolving any scientific or technical conflictsbetween the Parties; (iv) approving and overseeingthe implementation of a Research Plan for each Collaboration Target and its associated program undertaken inthe Collaboration; (v) determining if and when a Development Compoundhas been identified with respect to each Collaboration Target; and (vi) coordinatingwith the Patent Committee all patent activities as they relate to the resultsof the Collaboration, and in keeping with the overall patent strategydelineated by the Patent Committee.

## 3.2           Membership.  The JRC shall include three (3) namedrepresentatives of each of the Parties, and each Party’s representatives shallbe selected by that Party.  Each Partymay replace its representatives at any time, upon written notice to the otherParty.

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## From time to time, the JRC may establishsubcommittees, to oversee particular projects or activities, and to manage the more frequent interactionsbetween the Parties’ scientists with respect to individual research projects.  Such subcommittees will be constituted as theJRC determines, in its sole discretion.

## 3.3           Meetings and Minutes.  During the Collaboration Term, unlessotherwise agreed to by the Parties, the JRC shall meet at least **, or morefrequently as agreed by the Parties, at such locations or by suchteleconferencing means as the Parties may determine from time to time.  In addition to regularly scheduled meetings,the JRC representatives will communicate regularly by telephone, electronicmail, facsimile and/or videoconference. Other representatives of Pharmacopeia or Cephalon may attend JRCmeetings as nonvoting observers.  EachParty shall be responsible for all of its expenses associated with attendingthe JRC meetings.  The Parties shallalternate preparing agendas for each JRC meeting and written minutes of eachJRC meeting and shall prepare a written record of all JRC voting and decisions,whether made at a JRC meeting or otherwise. A copy of the Research Plan foreach Collaboration Target shall be signed and appended to the minutes of theJRC meeting at which such Research Plan is approved.  The written minutes of each JRC meeting andthe written record of all JRC voting and decisions shall be written anddisseminated to the JRC members for review within ten (10) business days of theJRC meeting, and upon signature by Pharmacopeia and Cephalon, shall becomefinal.

## 3.4           Decision-Making.  Decisions of the JRC shall be made by **. The JRC will report to a Management SteeringCommittee (“MSC”), which shall be comprised of three (3) senior members of themanagement teams (comprising two (2) individuals from science and one (1) froma business department) of each Party, who shall oversee the overallimplementation of the Collaboration.  Inthe event that, with respect to **.  Decisionsof the MSC shall be made by **.  In theevent that **.  The MSC shall meetat least **, or more frequently as agreed by the Parties, at such locations orby such teleconferencing means as the Parties may determine from time to time.

## 3.5           PatentCommittee.  Upon recommendation ofthe JRC, the Parties shall form a patent committee (the “Patent Committee”) tobe in existence as long as Patents within the Collaboration IP are being filedand/or prosecuted.  Each Party shalldesignate at least one (1) chemist and one (1) patent attorney or equallyqualified legally trained personnel, as its representatives on the PatentCommittee. The Patent Committee shall be responsible for recommending patentfilings and coordinating patent-related matters, including, but not limited to,the determination of inventorship according to U.S. Patent Laws, thepreparation, filing and prosecution of patent applications, and the performanceof other duties as set forth in Section 10.2.3(c).  Any disputes of the Patent Committee duringthe Collaboration Term shall be handled pursuant to Section 3.4.  Any disputes of the Patent Committee afterthe end of the Collaboration Term shall be referred to the Executive Officers, who shallpromptly meet and endeavor to reach consensus in a timely manner.  If such individuals cannot resolve suchdispute, then such dispute shall be handled pursuant to Section 16.19.  Unless otherwise agreed by the Parties, thePatent Committee shall meet at least **. Such meetings shall be held at mutually agreed times and locations.  It is recognized and understood that thePatent Committee will 

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## communicate on a more frequent basis as necessary, whether in writing,by telephone, in person or otherwise, to ensure compliance with relevant patentfiling and prosecution timetables and deadlines.  Each Party shall bear its own expenses associatedwith such meetings and the activities of the Patent Committee; provided,however, that each Party shall bear the expense of providing the otherParty with copies of all Patents filed pursuant to this Agreement including allsubstantive correspondence with U.S. and foreign patent offices.

**ARTICLE 4EXCLUSIVITY**

4.1           Collaboration Targets.

## 4.1.1        Subject to Section 4.1.4, **.

## 4.1.2        Notwithstanding Section 4.1.1, it is understood that (i) **;and (ii) with respect to **.

## 4.1.3        Notwithstanding Sections 4.1.1 and 4.1.2,if, in the course of a **.

## 4.1.4        It is understood that as of the EffectiveDate, **.  Notwithstanding the **.

## 4.1.5        Cephalon herebyagrees to **, as evidenced by contemporaneous records.

4.2           Pharmacopeia Development.  In the event Pharmacopeia desires to develop and commercialize aCollaboration Compound in the Pharmacopeia Field (subject, in each case, to themilestone and royalty obligations set forth in Sections 7.1.2 and 8.2.2),Pharmacopeia shall **.

**ARTICLE 5LICENSES**

5.1           Ownership of Intellectual Property.  All Cephalon IP shall be the sole property of Cephalon.  All Pharmacopeia IP shall be the soleproperty of Pharmacopeia.  AllCollaboration IP  shall be the sole orjoint property, as the case may be, of the Party or Parties inventing orgenerating the same.

5.2.          Licenses to Cephalon. 

## 5.2.1        License to CommercializeCollaboration Compounds.  With respect to all Collaboration Compoundsactive against a Collaboration Target, except for those Collaboration Compoundsfor which Pharmacopeia has

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## **, Pharmacopeia grants to Cephalon a worldwide, exclusive license,with the right to sublicense, under the Pharmacopeia IP and Pharmacopeia’sinterest in the Collaboration IP, to make, have made, use, sell, offerto sell and import Collaboration Compounds, and/or Collaboration Products basedon such Collaboration Compounds, for any and all uses and indications in theCephalon Field.

## 5.2.2        License to Compounds (Other thanCollaboration Compounds) Derived from Cephalon Compounds.  Pharmacopeia grants to Cephalon a worldwide, ** license, with the rightto sublicense, under Pharmacopeia’s interest in the Collaboration IP, toexploit for any and all purposes all compounds (other than CollaborationCompounds) derived, directly or indirectly, from Cephalon Compounds.

5.3                                 Licensesto Pharmacopeia.

5.3.1              License to CommercializeCollaboration Compounds.  With respect to all Collaboration Compoundsfor which Pharmacopeia has **, Cephalon grants to Pharmacopeia a worldwide,exclusive license, with the right to sublicense, under the Cephalon IP andCephalon’s interest in the Collaboration IP, to make, have made, use,sell, offer to sell and import Collaboration Compounds, and/or CollaborationProducts based on such Collaboration Compounds, for any and all uses andindications in the Pharmacopeia Field.

5.3.2              License to Compounds (Otherthan Collaboration Compounds) Derived from Pharmacopeia Compounds.  Cephalon grants to Pharmacopeia a worldwide, ** license, with the rightto sublicense, under Cephalon’s interest in the Collaboration IP, to exploitfor any and all purposes all compounds (other than Collaboration Compounds)derived, directly or indirectly, from Pharmacopeia Compounds.

5.4           Research Licenses.  Notwithstanding Sections 5.2 and 5.3, Pharmacopeia and Cephalon herebygrant each other non-exclusive, worldwide, royalty-free research licenses,without the right to sublicense, under their respective interests in thePharmacopeia IP, Cephalon IP and Collaboration IP, in order for each Party toperform its research obligations pursuant to Research Plans during theCollaboration Term.

5.5           Limited Licenses to **.  Notwithstanding Sections 5.2, 5.3 and 5.4, Pharmacopeia and Cephalonhereby grant each other ** licenses under their respective interests in theCollaboration IP, to **.  However, in theevent that, **.

5.6           Restrictions on Sublicenses.  Subject to the terms and conditions of thisAgreement and except as set forth herein, each Party shall have the right tosublicense the rights granted to it in Section 5.2.1 or 5.3.1 as the case maybe, provided that such Party 

 

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shall provide the otherParty with at least the following information with respect to each Sublicensee:(i) the identity of the Sublicensee; (ii) a description of the CollaborationProduct and of the rights granted to the Sublicensee; and (iii) the territoryin which the Collaboration Product will be sold.  Each such sublicense shall be consistent withall the terms and conditions of this Agreement. The sublicensing Party shall remain primarily liable to the other Partyfor all of each such Sublicensee’s applicable financial and other obligationsunder the sublicense.  No sublicensegranted by a Party may be assigned, transferred or further sublicensed to anyThird Party without the prior written consent of the other Party, which consentshall not unreasonably be withheld.

### 5.7           ThirdParty Royalties and Royalty Reductions.

### (a)           TheParty that is developing and commercializing a particular CollaborationCompound pursuant to this Agreement (“Commercializing Party”) shall beresponsible for procuring such licenses ** appropriate for the manufacture,use, marketing, sale or distribution of a corresponding Collaboration Productby such Party, its Affiliates or Sublicensees. In the event that the Commercializing Party is required (as provided inClause 5.7(b) below) to pay royalties to a Third Party in respect of RelevantThird Party Patent Rights, then the **.

(b)           For purposes of Clause 5.7(a), whether a Party is “required”to enter a license shall be determined as follows:

(i) a Party shall be required toenter a license if so ordered by a court of competent jurisdiction, or if acourt of competent jurisdiction has found Pharmacopeia and/or Cephalon liablefor infringing Relevant Third Party Patent Rights, or

(ii) each Party shall bring to theattention of the other Party, in writing, any relevant Third Party PatentRights.  The Parties agree to meet,within thirty (30) days after such written notification, along with theirpatent counsel under the appropriate confidentiality obligations, including ifnecessary the execution of a joint defense agreement to discuss in good faiththe basis of the determination that such a license is required.  During such meeting the Parties agree todiscuss such facts, findings, conclusions, opinions and other information asthe Parties deem relevant.  If at the endof such discussions Cephalon and Pharmacopeia are unable to reach agreement,then the matter shall bereferred to the Executive Officers, who shall promptly meet and endeavorto reach consensus in a timely manner. **

(c)           In respect of any **.

5.8           Development and CommercializationStatus.  During the period from theend of the Collaboration Term to the First Commercial Sale of a CollaborationProduct, Cephalon or Pharmacopeia, as the case may be, shall keep the otherParty informed of its 

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development activitieswith respect to such Collaboration Product, including without limitation, theachievement of the milestones set forth in Section 7.1 and thecommercialization of such Collaboration Product, by ** providing the otherParty with a written report stating the status of development of each suchCollaboration Product.

5.9           No Implied Licenses.  Only the licenses granted pursuant to theexpress terms of this Agreement shall be of any legal force or effect.  No other license rights shall be created byimplication, estoppel or otherwise.

5.10         Pharmacopeia Option to NegotiateCo-Development.  Each time Cephalon elects to beginpre-clinical development studies on a Development Compound, Pharmacopeia willhave the option to ** pursuant to the terms of this Agreement.

**ARTICLE 6FUNDING**

### 6.1           Program Access Fee.  In****partial************considerationfor the licenses granted in Section 5, and access to Pharmacopeia ****IP****during the Collaboration Term, Cephalon agrees to pay Pharmacopeia the nonrefundableamount of fifteen million U.S. dollars (US$15,000,000), due within thirty (30)days after the Effective Date.  Otherthan the milestone and royalty payments set forth in Articles 7 and 8, nofurther payments shall be due to Pharmacopeia from Cephalon, unless the Partiesmutually agree to change the Collaboration or to extend the Collaboration Termpursuant to Section 15.2.

6.2           No Withholding.  The amount paid to Pharmacopeia pursuant toSection 6.1 shall be made without withholding for taxes or other charges.

**ARTICLE 7MILESTONE PAYMENTS**

7.1           Milestone Payments.

## 7.1.1        Milestone Payments by Cephalon.

Cephalon shall pay toPharmacopeia the following nonrefundable amounts within thirty (30) daysfollowing the first achievement by Cephalon, its Affiliates, Sublicensees orother designees, as the case may be, of each of the following milestones withrespect to any Collaboration Compound (and each corresponding CollaborationProduct) for which Cephalon is responsible for development and commercializationpursuant to the terms of this Agreement:

 

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| **Milestone** | **Amount (US$)** |
|---------------|------------------|
| **            | **               |
| **            | **               |
| **            | **               |
| **            | **               |
| **            | **               |
| **            | **               |

 

7.1.2     MilestonePayments by Pharmacopeia.

Pharmacopeia shall pay toCephalon the following nonrefundable amounts within thirty (30) days followingthe first achievement by Pharmacopeia, its Affiliates, Sublicensees or otherdesignees, as the case may be, of each of the following milestones with respectto any Collaboration Compound (and each corresponding Collaboration Product)for which Pharmacopeia is responsible for development and commercializationpursuant to the terms of this Agreement:
| **Milestone** | **Amount (US$)** |
|---------------|------------------|
| **            | **               |
| **            | **               |
| **            | **               |
| **            | **               |
| **            | **               |
| **            | **               |

 

7.1.3     It is understoodand agreed that **.

7.1.4     NoWithholding.  All amounts paid pursuantto this Section 7.1 shall be made without withholding for taxes or othercharges.

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7.2           **.  For each Collaboration Compound andcorresponding Collaboration Product for which a Party is responsible fordevelopment and commercialization pursuant to the terms of this Agreement, such**.

7.3           Reversion of Rights.  Following the end of the Collaboration Term,in the event that a Party:

(i)         fails to exercisediligence as required pursuant to Section 7.2. and does not remedy such failurein accordance with the provisions of Section 7.4 below, or

(ii)        discontinuesdevelopment of all Collaboration Products and Collaboration Compounds activewith respect to a particular Collaboration Target,

thenthe other Party shall have the right to terminate all licenses granted to suchParty pursuant to Section 5.2.1 or Section 5.3.1 as the case may be, pertainingto such Collaboration Products and to all Collaboration Compounds from whichsuch Collaboration Products were developed.

7.4           Ifat any time during the course of the development of a Collaboration Productthere has been **, then:

(a)        the **; or

(b)        if the **.

7.5           Invoices. Unless otherwisespecified in writing, all payments required according to this Article 7 shallbe made by transfer to the bank account nominated by the receiving Party upontimely receipt of an invoice.

If invoice to Cephalon:                                               Cephalon,Inc.41 Moores RoadFrazer, PA 19355Attention: Accounts PayableTelephone: **Telecopy:   **

If invoice toPharmacopeia:                        Pharm acopeia Drug Discovery, Inc.3000 Eastpark Blvd.Cranbury, NJ  08512Attention: Chief FinancialOfficerTelephone: **Telecopy:   **

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**ARTICLE 8ROYALTY PAYMENTS**

 

8.1           Royalty Term.

8.1.1     RoyaltyTerm for Cephalon.  Cephalon shallpay Pharmacopeia **.

8.1.2     Royalty Term for Pharmacopeia.  Pharmacopeia shall pay Cephalon **.

8.1.3     Paid-UpLicense. If the licenses granted to either Party pursuant to Section 5.2.1or Section 5.3.1, as the case may be, are still in force with respect to aparticular Collaboration Compound at the end of the period for which royaltieson the corresponding Collaboration Product are due pursuant to this Agreement,such license shall be converted to a ** license, with the right to sublicense,under any Collaboration IP, Pharmacopeia IP or Cephalon IP, as the case may be,necessary to make, have made, use, sell, offer to sell, and  import the applicable Collaboration Producton a country-by-country and Collaboration Product-by-Collaboration Productbasis.

8.2           Royalty Rate.

8.2.1     Royaltieson Cephalon Collaboration Products. Cephalon shall pay to Pharmacopeia royalties on **, according to thefollowing schedule:

(a)       **.

(b)       **.

(c)       **.

(d)       **.

8.2.2     Royaltieson Pharmacopeia Collaboration Products. Pharmacopeia shall pay to Cephalon royalties on **:

(a)       **.

(b)       **.

(c)       **.

(d)       **.

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8.3           Payment of Royalties.

8.3.1     RoyaltyReport.  After the First CommercialSale of a Collaboration Product for which royalties are due and payable byeither Party, its Affiliates orSublicensees hereunder, the paying Party shall provide the other Party with agood-faith estimate of sales within two (2) weeks of the end of each calendarquarter. In addition, the paying Party shall provide the other Party with aroyalty report on a quarterly calendar basis within ninety (90) days after theend of the calendar quarter to which such royalty report applies. Each suchreport shall state, separately for the paying Party, and each Affiliate andSublicensee, the number, description, and aggregate Net Sales, on a country-by-countrybasis, and product-by-product basis during the calendar quarter during which aroyalty is payable. Contemporaneously with the submission of the royaltyreports, the paying Party shall pay to the other Party all royalties due.

8.3.2     RecordsRetention.  Each Party shall keep,and require its Affiliates and Sublicensees to keep, for a period of not lessthan seven (7) years, complete and accurate records of all Net Sales. EachParty shall have the right, **.  Such person appointed shall act on thefollowing basis:

(i)          such person shall act as an expert and not as anarbitrator;

(ii)         such person’s terms of reference shall be to determine thematters in dispute within twenty (20) days of his appointment;

(iii)        the Parties shall each provide such person with allinformation relating to the items in dispute which such person reasonablyrequires and such person shall be entitled (to the extent he considersappropriate) to base his determination on such information;

(iv)        the decision of such person is, in the absence of fraud ormanifest error, final and binding on the Parties; and

### (v)         such person’s costs shall be paid bythe Parties as such person may determine.

### Where the paying Party agrees that it has oris found to have underpaid royalties, the paying Party shall promptly pay suchroyalties together with interest at the prime rate as stated in the WallStreet Journal Europe under “Money Rates” plus two percent (2%) (“PrimePlus 2”) applied to the amount unpaid from the date due to the date paid.  If the paying Party has overpaid royalties,the paying Party may credit such overpayments against future royalties owed tothe other Party. The interest available to each Party pursuant to this Sectionshall in no way limit any other remedies available to each Party.

8.3.3     Taxon Royalties.  Any tax paid orrequired to be withheld by a Party for the benefit of the other Party onaccount of royalties payable under this Agreement shall be deducted from theamount of royalties otherwise due. Each Party shall secure and send to theother Party proof of any such taxes withheld and paid for its benefit of andshall, at the request of the other Party, provide reasonable assistance toother Party in recovering said taxes.

8.3.4     Formof Payment.  All payments requiredaccording to this Article 8 shall be made in U.S. dollars, for  the payee’s account, by wire transfer to a bank in the

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United States designated in writing by the payee; provided,however, that where payments in respectof Net Sales are based on Net Sales in non-U.S. currencies, the amount of NetSales and any deductions used to calculate Net Sales, if any, shall beconverted by the payor, based on the average of the “bid” and “asked” exchangerate provided by the Wall Street Journal Europe, for the last businessday of each calendar quarter, into U.S. dollars.  Any payments that are not paid on the datesuch payments are due under this Agreement shall bear interest to the extentpermitted by applicable law at the prime rate as reported by the Chase ManhattanBank, New York, New York, on the date such payment is due, plus an additionaltwo percent (2%) calculated on the number of days such payment is delinquent.The interest available to each Party pursuant to this Section shall in no waylimit any other remedies available.

**ARTICLE 9REPORTS, BOOKS AND TAX MATTERS**

9.1           Examination of Books.  Each of the Parties shall keep and maintaincomplete and accurate books in respect of its activities during the Term, andwith respect to books and records for which payment may be required, inaccordance with applicable accounting principles consistently applied and inaccordance with local law.  Each Partyshall provide the other the right to inspect such financial records, and shallprovide copies of all requested records, to the extent reasonably related tothe performance of the other Party’s obligations under this Agreement.  The Parties shall retain such records for solong as the Parties shall mutually determine.

9.2           Tax Matters.  Each Party agrees that the other Party isentitled to all tax benefits, including in particular, tax credits and/or taxdeductions attributable to amounts the other Party has paid hereunder.  Each Party shall file its federal, state, andlocal tax returns on a basis consistent with this Agreement, and shall not takeany action inconsistent with the other Party’s entitlement to such taxbenefits. In the event that a Party, in its judgment, determines that it mustobtain information and verification regarding the use or application of suchexpenditures in order to prepare its tax returns or to respond to an inquiryduring a tax audit or any other inquiry relating to such treatment of its taxreturn, or to defend its tax position in any proceeding including litigation,the Parties shall reasonably cooperate with each other and provide suchinformation as the other Party may reasonably require at the request andexpense of the requesting Party.

**ARTICLE 10PATENTS**

10.1         Disclosure by Employees, Agents orIndependent Contractors.  Cephalonand Pharmacopeia agree that as to any employees, agents, or independentcontractors of Cephalon and Pharmacopeia presently in their employ or who arehired or retained by Cephalon or Pharmacopeia to perform, manage performanceof, or participate in the research done pursuant to this Agreement, Cephalonand Pharmacopeia will ensure that such employees, agents, or inde­pendentcontractors will promptly disclose and assign or

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exclusivelylicense to the Party engaging them any and all rights to inventions,developments, or improvements, (whether patentable or not) conceived and/orreduced to practice during the course of their duties.  Each Party will notify the other Partypromptly of any sole or joint inventions within the Collaboration IP.

10.2         Patent Prosecution and RelatedActivities.

10.2.1   PharmacopeiaIP.  Pharmacopeia shall beresponsible, at its sole discretion and expense, for preparing, filing,prosecuting and maintaining in such countries it deems appropriate, by itselfor with Third Parties, Patents within the Pharmacopeia IP and conducting anyinterferences, re-examinations, reissues and oppositions relating to suchPatents.

10.2.2   CephalonIP.  Cephalon shall be responsible,at its sole discretion and expense, for preparing, filing, prosecuting andmaintaining in such countries it deems appropriate, by itself or with ThirdParties, Patents within the Cephalon IP and conducting any interferences,re-examinations, reissues and oppositions relating to such Patents.

10.2.3   CollaborationIP.

(a)       Prosecutionby Cephalon.  Cephalon shall have theright to prepare, file, prosecute and maintain in such countries as it deemsappropriate in its discretion and at its sole expense, and upon appropriateconsultation with Pharmacopeia and/or the Patent Committee pursuant to Section10.2.3(c), Patents within the Collaboration IP directed to all compounds to which Cephalon has a license inforce pursuant to Section 5.2, and for conducting any interferences,re-examinations, reissues, oppositions or requests for patent term extension orgovernmental equivalents relating to such Patents within the Collaboration IP,and Pharmacopeia shall give reasonable cooperation in connection therewith, atCephalon’s request.

(b)       Prosecutionby Pharmacopeia.  Pharmacopeia shallhave the right to prepare, file, prosecute and maintain in such countries as itdeems appropriate in its discretion and at its sole expense, and uponappropriate consultation with Cephalon and/or the Patent Committee pursuant toSection 10.2.3(c), Patents within the Collaboration IP directed to allinventions other than compounds to which Cephalon has a license in forcepursuant to Section 5.2, and for conducting any interferences, re-examinations,reissues, oppositions or requests for patent term extension or governmentalequivalents relating to such Patents within the Collaboration IP, and Cephalonshall give reasonable cooperation in connection therewith, at Pharmacopeia’srequest.

(c)       Cooperation;Request to Responsible Party.  Eachof Cephalon and Pharmacopeia shall keep the other fully informed as to thestatus of patent matters described in this Section 10.2.3 relating toCollaboration Compounds, including, without limitation, by providing the PatentCommittee the opportunity to fully review and comment on any inventiondisclosures, as well as any documents which will be filed in any patent officeas far in advance of filing dates as feasible, and providing the other

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copiesof any substantive documents that such Party receives from such patent officespromptly after receipt, including notice of all interferences, reissues,re-examinations, oppositions or requests for patent term extensions.  With respect to each Patent governed by thisSection 10.2.3, the Patent Committee shall decide whether such Patent fallswithin Section 10.2.3(a) or 10.2.3(b). In the event of any overlap or conflict between subject matter that isclaimed (or could be claimed) in a Patent for which Cephalon is responsiblepursuant to Section 10.2.3(a) and subject matter that is claimed (or could beclaimed) in a Patent for which Pharmacopeia is responsible pursuant to Section10.2.3(b), the Patent Committee shall determine which Patent should claim suchsubject matter pursuant to the terms of this Agreement.  Where practicable and where appropriate underthe terms of this Agreement, the Patent Committee shall endeavor to adjust thescope of the claims of either such Patent or both such Patents, or to proposethe filing of appropriate divisional applications, in order to avoid orminimize such overlap or conflict. Cephalon and Pharmacopeia shall each reasonably cooperate with andassist the other at its own expense in connection with such activities, at theother Party’s request.  Reasonablecooperation shall include, without limitation, providing the requesting Partywith necessary or useful data and information relating to the Collaboration IPand reasonable access to the inventors of said inventions, as well as causingthe execution of required patent assignments and/or other documents.  EitherParty may request the other Party, at the other Party’s discretion, to file apatent application claiming any invention within the Collaboration IP for whichthe other Party has responsibility as set forth in Sections 10.2.3(a) or10.2.3(b).  It is understood and agreedthat a Party shall not have any liability to the other Party with respect tosuch Party’s preparation or prosecution of any Patent pursuant to this Section10.2.3, as long as (i) such Party has complied with this Section 10.2.3(c) withrespect to such Patent and (ii) such Party has not been negligent in conductingany such activities with respect to such Patent.

(d)       Procedureon Uncertainty to Prosecute.  Incases where the prosecution of Collaboration IP is not clearly addressed by theprovisions of Sections 10.2.3(a) and 10.2.3(b), the Patent Committee shallpromptly hold discussions to determine how best to proceed and how costs shouldbe apportioned between the Parties and shall make a recommendation to the JRC,which shall make a decision on the matter.

10.2.4   Inventorship.   Inventorship of all Patents shall bedetermined based upon U.S. Patent Laws.

10.2.5   ElectionNot to Prosecute.  Upon ninety (90)days written notice to the other Party, the responsible Party, on acountry-by-country basis, may elect to discontinue the prosecution of anypatent applications filed pursuant to Sections 10.2.3(a) or (b) and/or not tofile or conduct any further activities with respect to the Patents described insuch Sections.  In the event theresponsible Party declines or elects not to file or, having filed, elects notto further prosecute or maintain any Patents filed pursuant to this Agreementwhich relate to the Collaboration IP, or to conduct any interferences,re-examinations, reissues, oppositions or requests for patent term extension or governmental equivalents withrespect thereto, the other Party shall have the right, at its discretion, andat its sole expense, to prepare, file, prosecute and maintain such Patents insuch countries

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asit deems appropriate, and conduct any interferences, re-examinations, reissues,oppositions or requestsfor patent term extension or governmental equivalents with respectthereto at its sole expense.  Theresponsible Party agrees to cooperate in any manner reasonably requested inconnection with any such actions by the other Party, at the expense of theother Party, and shall assign, provided the Patents are freely assignable andnot subject to a terminal disclaimer or other encumbrance, all right, title andinterest in and to such Patents to the Party continuing such activities.  If the responsible Party does not receivewritten notice within the ninety (90) days written notice to the other Party ofthe responsible Party’s election not to prosecute that the other Party exercisesits right to prepare, file, prosecute and maintain such Patents in suchcountries as it deems appropriate, then the responsible Party shall be free toabandon such Patents at its sole discretion without any legal recourse by theother Party.

10.3         Permitted Disclosures.  Following a written notice from the otherParty hereto, the Parties shall in good faith grant each other permission inwriting, not to be unreasonably withheld, to disclose in the specification of apatent application filed by the other Party pursuant to this Agreement, anyPharmacopeia IP, Cephalon IP, or Collaboration IP necessary to support andenable claims in such patent applications.

10.4         Third Party Infringement.

10.4.1   CollaborationIP.  Cephalon and Pharmacopeia shallhave the right to initiate legal action to enforce the Patents within theCollaboration IP against infringement or misappropriation by Third Parties orto defend any declaratory judgment action relating thereto.  A Party shall have the initial right, but notthe obligation, to initiate and conduct legal proceedings to enforce againstany infringement of, or defend any declaratory judgment action involving, aPatent within the Collaboration IP for which such Party is responsible forprosecution and maintenance pursuant to Section 10.2.3(a) or (b) as the casemay be, at its sole expense. Cephalon or Pharmacopeia (as the case may be)shall notify the other Party of its decision to bring proceedings or not withinsixty (60) days of the date that the infringement has come to itsknowledge.  If the actual or threatenedinfringement relates to the manufacture, use or sale of a product or materialwhich is a competing product to a Collaboration Product and the Partyconducting the proceedings (“the Pursuing Party”) is not the CommercializingParty with regard to the applicable Collaboration Product, then theCommercializing Party shall have the right at its option, to join with thePursuing Party in the suit and participate in all meetings, negotiations,discussions and proceedings in respect of issues which relate to theinfringement of the Patent(s) by such competing product. Where the conduct ofthe action relates to matters relevant only to issues of infringement by thecompeting product and not the scope or validity of the Pursuing Party’sPatents, the Pursuing Party shall follow the Commercializing Party’s reasonabledirections in the conduct of that part of the proceedings.  In respect of other parts of the proceedings,the Pursuing Party agrees to take into account the Commercializing Party’sreasonable views and comments.   Subjectto Section 10.4.8, in the circumstances outlined in this Section 10.4.1 wherethe Commercializing Party exercises its right to participate in the suit, theCommercializing Party shall bear fifty percent (50%) of the costs of suchproceedings.

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10.4.2   Failureto Enforce Collaboration IP.  If,within sixty (60) days of the date that the infringement or misappropriation ofCollaboration IP comes to its knowledge (or written notice of a declaratoryjudgment action alleging invalidity or unenforceability of such CollaborationIP), the Party with the initial right to bring proceedings (“Patent Owner”)under Section 10.4.1 above  fails to takeaction to halt such alleged infringe­ment or misappropriation or defend such adeclaratory judgment action, the other Party may, at its expense, take suchlegal action as it deems appropriate, in its own name (or to the extentnecessary the Patent Owner’s name), to halt such an alleged infringement ormisappropriation or defend such a declaratory judgment action.  The other Party shall notify the Patent Ownerof its decision to do so.  Where, inaccordance with the procedure set out in this Section, the other Partycommences the proceedings, the Patent Owner may, at its option, join with theother Party in the suit and the Patent Owner shall have the right toparticipate in all meetings, discussions and proceedings in respect of issuesregarding the validity and/or revocation of the relevant Patent(s).  In those circumstances, the other Party(i.e., the Pursuing Party) agrees to take into account the Patent Owner’sreasonable views and comments in the conduct of the proceedings and, subject toSection 10.4.8, the Patent Owner shall bear fifty percent (50%) of the costs ofsuch proceedings.  The Patent Owneragrees to render such reasonable assistance as the Pursuing Party may request.

10.4.3   PharmacopeiaIP or Cephalon IP.  In the event thateither Party becomes aware that any Patent within the Pharmacopeia IP or CephalonIP is being infringed or misappropriated by a Third Party, or is subject to adeclaratory judgment action arising from such infringement or misappropriation,such Party shall promptly notify the other Party.  It is understood and agreed that Pharmacopeiashall have the initial right, but not the obligation, to initiate and conductlegal proceedings to enforce the Pharmacopeia IP against any infringement ormisappropriation or defend any declaratory judgment action relating thereto, atits sole expense, and that Cephalon shall have the initial right, but not theobligation, to initiate and conduct legal proceedings to enforce the CephalonIP against any infringement or misappropriation or defend any declaratoryjudgment action relating thereto, at its sole expense.  Cephalon or Pharmacopeia (as the case may be)shall notify the other Party of its decision to bring proceedings or not withinsixty (60) days of the date that the infringement has come to its knowledge.  If the actual or threatened infringementrelates to the manufacture, use or sale of a product or material which is acompeting product to a Collaboration Product and the Pursuing Party is not theCommercializing Party with regard to the applicable Collaboration Product, thenthe Commercializing Party shall have the right at its option, to join with thePursuing Party in the suit and participate in all meetings, negotiations,discussions and proceedings in respect of issues which relate to theinfringement of the Patent(s) by such competing product. Where the conduct ofthe action relates to matters relevant only to issues of infringement by thecompeting product and not the scope or validity of the Pursuing Party’sPatents, the Pursuing Party shall follow the Commercializing Party’s reasonabledirections in the conduct of that part of the proceedings.  In respect of other parts of the proceedings,the Pursuing Party agrees to take into account the Commercializing Party’sreasonable views and comments.   Subjectto Section 10.4.8, in the circumstances outlined in this Section 10.4.3 wherethe Commercializing Party exercises its right to

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participate in the suit, the Commercializing Partyshall bear fifty percent (50%) of the costs of such proceedings.

10.4.4   Failureto Enforce Pharmacopeia or Cephalon Patent Rights.   If, within sixty (60) days of the date thatthe infringement or misappropriation comes to its knowledge (or written noticeof a declaratory judgment action alleging invalidity or unenforceability ofsuch Pharmacopeia or Cephalon IP, as the case may be), the Patent Owner failsto take action to halt such alleged infringe­ment or misappropriation or defendsuch a declaratory judgment action under Section 10.4.3 above, the other Partymay, if it has been granted a license under such Pharmacopeia or Cephalon IP(as the case may be), at its expense, take such legal action as it deemsappropriate, in its own name (or to the extent necessary the Patent Owner’sname), to halt such an alleged infringement or misappropriation or defend sucha declaratory judgment action.  The otherParty shall notify the Patent Owner of its decision to do so.  Where, in accordance with the procedure setout in this Section, the other Party commences the proceedings, the PatentOwner may, at its option, join with the other Party in the suit and the PatentOwner shall have the right to participate in all meetings, discussions andproceedings in respect of issues regarding the validity and/or revocation ofthe relevant Patent(s).  In thosecircumstances, the other Party (i.e., the Pursuing Party) agrees to take intoaccount the Patent Owner’s reasonable views and comments in the conduct of theproceedings and, subject to Section 10.4.8, the Patent Owner shall bear fiftypercent (50%) of the costs of such proceedings. The Patent Owner agrees to render such reasonable assistance as thePursuing Party may request.

10.4.5     Limitationon Timing to Bring Suit.   TheParties acknowledge that there may exist in certain countries in the Territorystatutory limitations on the period during which suit may be filed or otherenforcement actions initiated against a Third Party’s infringement of thePatents (for example, the forty-five (45) day period for responding to a ThirdParty certification in the United States under 21 USC Sections 355(b)(2)(A)(iv)and 355(j)(2)(a)(vii), or any amendment or successor statute thereto, claimingthat Patents covering a Collaboration Compound or Collaboration Product areinvalid or that infringement will not arise from the manufacture, use or saleof a product equivalent to the Licensed Compound or Product by such ThirdParty).  In such event:

(a)       Pharmacopeiaand Cephalon each shall immediately give written notice to the other of anypotential infringement action against such Third Party infringer of which theybecome aware; and

(b)       the relevant Party shall have the right butnot the obligation to bring suit, and the provisions of this Section 10.4 shallapply save that such Party shall be required to obtain a discontinuance orelect to bring suit at least fourteen (14) business days prior to the expiry ofthe relevant statutory period.  If suchParty elects to bring suit within such period, the provisions of this Section10.4 shall apply; or

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(c)       if therelevant Party elects not to, or has failed to, bring an infringement actionagainst such Third Party infringer in such country(ies) within the time periodprovided in this Section 10.4.5, then the other Party  shall have the right but not the obligation,to bring suit against such infringer under this Section 10.4 prior to theexpiration of the statutory period.  Inthe event that such other Party elects to bring suit, the provisions of thisSection 10.4 shall apply.

10.4.6   NoSettlement Without Consent.  NeitherParty shall enter into any settlement of any claim, suit or proceeding underthis Section 10.4 which admits or concedes that any Collaboration Patent or anyPatent licensed from the other Party is invalid or unenforceable without theprior written consent of such other Party.

10.4.7   Cooperation.  Each Party shall keep the other reasonablyinformed of the progress of any claim, suit or proceeding subject to thisSection 10.4 and cooperate reasonably in connection with such activities at therequest and expense of the Party involved in such claim, suit or proceeding.

10.4.8   Divisionof Recoveries.  Any recovery receivedin connection with a suit brought by a Party pursuant to Section 10.4.1,10.4.2, 10.4.3 or 10.4.4 shall be retained by the Party initiating such suit,provided the Commercializing Party was not a Party to the suit.  If the Commercializing Party was a Party tothe suit, then any recovery received in connection with a suit brought pursuantto Section 10.4.1, 10.4.2, 10.4.3 or 10.4.4 shall be used first to reimburseeach Party pro rata for expenses (including attorneys’, professional and expertfees) incurred in such suit, and any balance shall be retained by theCommercializing Party subject to a payment to the other Party of such otherParty’s lost royalties.

10.5         Infringement Claims by Third Parties.  If the manufacture, sale or use of anyCollaboration Product pursuant to this Agreement results in any claim, suit orproceeding alleging patent infringement against a Commercializing Party (or itsSublicensees), such Commercializing Party shall promptly notify the other Partyin writing setting forth the facts of such claim in reasonable detail. TheCommercializing Party shall have the exclusive right to defend and control thedefense of any such claim, suit or proceeding, at its own expense, usingcounsel of its own choice; provided, however, it shall not enter into anyagreement or settlement which admits or concedes that any Collaboration Patentor any Patent licensed from the other Party is invalid, unenforceable or notinfringed, without the prior written consent of the other Party. TheCommercializing Party shall keep the other Party reasonably informed of allmaterial developments in connection with any such claim, suit or proceeding,and the other Party shall have the right (but not the obligation) to beseparately represented, at its expense, by counsel of its own choice and toadvise the Commercializing Party on the defense of such claim, suit orproceeding.

10.6         Patent Term Restoration. The Parties hereto shall give reasonable cooperation to each other in obtainingpatent term restoration or supplemental protection

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certificates or theirequivalents in any country in the Territory where applicable to theCollaboration IP.

**ARTICLE11CONFIDENTIALITY**

11.1         Confidentiality.

11.1.1.  Termof Confidentiality.  Except asotherwise provided in this Section 11.1, the Party receiving ConfidentialInformation (the “Receiving Party”) shall keep all Confidential Informationdisclosed to it by the disclosing Party (the “Disclosing Party”) confidentialfor the Collaboration Term and ten (10) years thereafter.  Without the prior written consent of theDisclosing Party, the Receiving Party shall not disclose any ConfidentialInformation to any Third Party, except to the officers, employees, agents, orrepresentatives of the Receiving Party or the Receiving Party’s Affiliates(collectively the “Representatives”), who, in each case, have a need to knowany such Confidential Information for purposes of the implementation andperformance by the Receiving Party of its obligations pursuant to thisAgreement, and will use the Confidential Information provided by the DisclosingParty only for such limited purposes.

11.1.2.  Warrantyof Obligation.  Each Party warrantsthat each of its Representatives to whom any Confidential Information isdisclosed shall previously have been informed of the confidential nature of theConfidential Information and shall have agreed to be bound by terms andconditions equivalent to those set forth in this Agreement.  The Receiving Party shall ensure that theConfidential Information provided by the Disclosing Party shall not be used ordisclosed by such Representatives except as permitted by this Agreement.  The Receiving Party shall stand responsiblefor any breach by its Representatives of the confidentiality provisions setforth in this Agreement.

11.1.3.  Ownershipof Confidential Information. Except as provided herein with respect to theownership of Collaboration IP, all Confidential Information disclosed by theDisclosing Party shall remain the property of the Disclosing Party.  Upon the written request of the DisclosingParty (i) all tangible Confidential Information provided by the DisclosingParty (including, but not limited to all copies thereof and all unused samples ofmaterials provided by the Disclosing Party) except for Confidential Informationconsisting of analyses, studies and other documents prepared by or for thebenefit of the Receiving Party, shall be promptly returned to the DisclosingParty, and (ii) all portions of such analyses, studies and other documentsprepared by or for the benefit of the Receiving Party (including all copiesthereof) which are within the definition of Confidential Information shall bedestroyed, and the Receiving Party shall certify such destruction in writing tothe Disclosing Party.

11.1.4.  PermittedDisclosures.  The obligations ofconfidentiality and non-use set forth in this Agreement shall not apply to anyportion of the Confidential Information which:

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(a)       is orbecomes public or available to the general public otherwise than through thewrongful act or default of the Receiving Party or its representatives; or

(b)       isobtained by the Receiving Party from a Third Party who is lawfully inpossession of such Confidential Information and is not subject to an obligationof confidentiality or non-use owed to the Disclosing Party; or

(c)       ispreviously known to the Receiving Party prior to disclosure by the DisclosingParty, as shown by written evidence, and is not obtained or derived directly orindirectly from the Disclosing Party; or

(d)       isindependently developed by the Receiving Party without the use of or relianceon any Confidential Information provided by the Disclosing Party hereunder, asshown by contemporaneous written evidence.

11.1.5.  LegalDisclosure. The Receiving Party may disclose the Confidential Informationof the Disclosing Party to the extent reasonably necessary in prosecuting ordefending litigation, complying with applicable laws, governmental regulationsor court order, or otherwise submitting required information to tax or othergovernmental authorities.  If theReceiving Party intends to so disclose any such Confidential Information, theReceiving Party shall provide the Disclosing Party prompt prior notice of suchfact so that the Disclosing Party may seek to obtain a protective order orother appropriate remedy concerning any disclosure of such ConfidentialInformation.  The Receiving Party willreasonably cooperate with the Disclosing Party in connection with theDisclosing Party’s efforts to obtain any such order or other remedy.  If any such order or other remedy does notfully preclude the disclosure of such Confidential Information, the ReceivingParty will make such disclosure only to the extent that such disclosure islegally required and will use its reasonable efforts to have confidentialtreatment accorded to the disclosed Confidential Information.

11.1.6.  NoWarranty As To Reliability.  Each ofthe Parties acknowledges that neither Party makes any representation orwarranty as to the reliability, accuracy or completeness of any of theConfidential Information disclosed hereunder, except for any specificrepresentation or warranty made in other sections of this Agreement.  The Receiving Party agrees that neither theDisclosing Party nor any of the Disclosing Party’s Representatives shall haveany liability to the Receiving Party arising from the disclosure ofConfidential Information by the Disclosing Party except as otherwise providedherein.

11.1.7.  No ImpliedLicense.  Except as otherwiseexpressly set forth in this Agreement, nothing herein shall be construed asgiving the Receiving Party any right, title and interest in and to theConfidential Information of the Disclosing Party.

11.1.8.  PublicDomain.  For the purpose of thisAgreement, specific information disclosed as part of the ConfidentialInformation shall not be deemed to be in the public domain or in the priorpossession of the Receiving Party merely because it is

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embraced by more general information in the publicdomain or by more general information in the prior possession of the ReceivingParty.

11.2         Publications.  A Partydesiring to submit a publication or presentation related to the Collaborationshall not do so without the prior written consent of the other Party, whichconsent shall not be unreasonably withheld. Each Party shall submit for the other Party’s review any proposedpublication or presentation containing any information generated by eitherParty (or by both Parties) hereunder during the Collaboration Term, orcontaining any Confidential Information of the other Party, at least forty-five(45) days in advance of such proposed publication or presentation.  The reviewing Party shall promptly reviewsuch proposed publication and respond in any event within forty-five (45) daysafter receipt, and shall make any objections that it may have to thepublication of any such information, or of any Confidential Information of thereviewing Party contained therein. Should the reviewing Party make an objectionto the publication of any such information or Confidential Information, thenthe Parties shall discuss the advantages and disadvantages of publishing suchinformation and/or Confidential Information provided always that a Party shallnot be compelled to agree to the disclosure of its Confidential Information andif following such discussions the Party still objects to the inclusion of suchConfidential Information it shall be removed. Notwithstanding the precedingsentences, either Party may submit for the other Party’s approval a summary ofCollaboration 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 Collaboration data may beused again in subsequent presentations of an equivalent nature without furtherapproval by the other Party.  If theParties are unable to agree on whether particular subject matter may be publishedor presented, then the MSC shall attempt to resolve the matter, but if it isunable to do so, such matter shall not be subject to the dispute resolutionprovisions of Sections 3.4 and 16.19. 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 (not less than sixty (60) days) to secure patent protection forany material in such publication or presentation that it believes to bepatentable.

**ARTICLE 12REPRESENTATIONS AND WARRANTIES OF PHARMACOPEIA**

12.1         Pharmacopeia represents and warrants toCephalon as follows:

12.1.1   Organization.  It is a corporation validly existing and ingood standing under the laws of the State of Delaware.

12.1.2   Authority.  It has full corporate power and authority toexecute and deliver this Agreement and to consummate the transactionscontemplated hereby.  All corporate actsand other proceedings required to authorize such execution, delivery, andconsummation have been duly and properly taken and obtained.

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### 12.1.3      Enforceability.  This Agreement has been duly executed anddelivered by Pharmacopeia and constitutes legal, valid, and binding obligationsof Pharmacopeia enforceable against Pharmacopeia in accordance with its terms.

### 12.1.4      Approvalsand Consents.  No approval,authorization, consent, or other order or action of or filing with any court,administrative agency or other governmental authority is required for theexecution and delivery by Pharmacopeia of this Agreement or the consummation byPharmacopeia of the transaction contemplated hereby (other than contemplatedCollaboration Product Regulatory Approvals).

### 12.1.5      NoConflicts.  None of the execution,delivery, or performance of this Agreement by Pharmacopeia (i) conflicts withor results in a breach under the charter documents or any material contractualundertaking of Pharmacopeia, or its Affiliates or (ii) conflicts with orresults in a violation of any of the laws of the jurisdiction of incorporationof Pharmacopeia.  Pharmacopeia has not,to the best of its knowledge entered into, nor will Pharmacopeia, after theEffective Date, knowingly enter into any written or oral agreement that is orwould be inconsistent with its obligations under this Agreement or deprives orwould deprive Cephalon of the benefits of this Agreement.

### 12.1.6      Title.  As of the Effective Date, it has good titleto or valid leases or licenses for all its properties, rights, and assetsnecessary for the fulfillment of its obligations and responsibilities underthis Agreement.

### 12.1.7      Disclaimer.  Except as provided herein, Pharmacopeiaspecifically disclaims any guarantee that the Collaboration will be successful,in whole or in part.  The failure ofPharmacopeia to successfully identify Development Compounds will not, ofitself, constitute a breach of any representation or warranty or otherobligation under this Agreement. Pharmacopeia does not make any representation or warranty or guarantythat the Collaboration will be sufficient for the successful completion of theresearch contemplated thereby.  EXCEPT ASOTHERWISE EXPRESSLY SET FORTH HEREIN, PHARMACOPEIA MAKES NO REPRESENTATIONS ANDEXTENDS NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED,WITH RESPECT TO THE COLLABORATION IP, COLLABORATION COMPOUNDS OR PHARMACOPEIACOMPOUNDS INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESSFOR A PARTICULAR PURPOSE, VALIDITY OF PHARMACOPEIA IP OR COLLABORATION IP,PATENTED OR UNPATENTED, OR NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTSOF THIRD PARTIES.

12.1.8        Sufficient Rights. As of theEffective Date, it owns or Controls its Patents necessary to conduct theCollaboration and to grant the rights and licenses to Cephalon, and to fulfillits duties and obligations pursuant to this Agreement.  To the knowledge of Pharmacopeia, as of theEffective Date, the practice of the Pharmacopeia IP does not violate the validpatent rights of any Third Party.

12.1.9        No Prior Grant or Patents.  As of the Effective Date, Pharmacopeia hasnot (i) knowingly granted any licenses to Third Parties, or (ii)

 

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knowinglyfiled any patent application, in either case inconsistent with the licensesgranted or to be granted to Cephalon hereunder.

**ARTICLE 13REPRESENTATIONS AND WARRANTIES OF CEPHALON**

13.1         Cephalonrepresents and warrants to Pharmacopeia as follows:

13.1.1      Organization.  It is a corporation validly existing and ingood standing under the laws of Delaware.

### 13.1.2      Authority.  It has full corporate power and authority toexecute and deliver this Agreement and to consummate the transactionscontemplated hereby.  All corporate actsand other proceedings required to authorize such execution, delivery, andconsummation have been duly and properly taken and obtained.

### 13.1.3      Enforceability.  This Agreement has been duly executed anddelivered by Cephalon and constitutes the legal, valid, and binding obligationsof Cephalon enforceable against Cephalon in accordance with its terms.

### 13.1.4      Approvalsand Consents.  No approval,authorization, consent, or other order or action of or filing with any court,administrative agency or other governmental authority is required for theexecution and delivery by Cephalon of this Agreement or the consummation byCephalon of the transaction contemplated hereby (other than contemplated CollaborationProduct Regulatory Approvals).

### 13.1.5      NoConflicts.  None of the execution,delivery, or performance of this Agreement by Cephalon (i) conflicts with orresults in a breach under the charter documents or any material contractualundertaking of Cephalon, or its Affiliates or (ii) conflicts with or results ina violation of any of the laws of the jurisdiction of incorporation ofCephalon.  Cephalon has not, to the bestof its knowledge entered into, nor will Cephalon, after the Effective Date, knowinglyenter into any written or oral agreement that is or would be inconsistent withits obligations under this Agreement or deprives or would deprive Pharmacopeiaof the benefits of this Agreement.

### 13.1.6      Title.  As of the Effective Date, it has good titleto or valid leases or licenses for all its properties, rights, and assetsnecessary for the fulfillment of its obligations and responsibilities underthis Agreement.

### 13.1.7      Disclaimer.  Except as provided herein, Cephalonspecifically disclaims any guarantee that the Collaboration will be successful,in whole or in part.  The failure ofCephalon to successfully identify Development Compounds will not, of itself,constitute a breach of any representation or warranty or other obligation underthis Agreement.  Cephalon does not makeany representation or warranty or guaranty that the Collaboration will besufficient for the successful completion of the research contemplatedthereby.  EXCEPT AS OTHERWISE EXPRESSLYSET FORTH HEREIN, CEPHALON MAKES NO REPRESENTATIONS AND EXTENDS NO

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### WARRANTIES OR CONDITIONS OF ANY KIND, EITHEREXPRESS OR IMPLIED, WITH RESPECT TO THE COLLABORATION IP, COLLABORATIONCOMPOUNDS OR CEPHALON COMPOUNDS INCLUDING, BUT NOT LIMITED TO, WARRANTIES OFMERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF CEPHALON IP ORCOLLABORATION IP, PATENTED OR UNPATENTED, OR NON-INFRINGEMENT OF THEINTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

13.1.8        Sufficient Rights. As of theEffective Date, it owns or Controls its Patents necessary to conduct theCollaboration and to grant the rights and licenses to Pharmacopeia, and tofulfill its duties and obligations pursuant to this Agreement.  To the knowledge of Cephalon, as of theEffective Date, the practice of the Cephalon IP does not violate the validpatent rights of any Third Party.

13.1.9        No Prior Grant or Patents.  As of the Effective Date, Cephalon has not(i) knowingly granted any licenses to Third Parties, or (ii) knowingly filedany patent application, in either case inconsistent with the licenses grantedor to be granted to Pharmacopeia hereunder.

**ARTICLE 14SURVIVAL AND INDEMNIFICATION**

14.1         Survivalof Representations, Warranties, Covenants, and Agreement.  The representations, warranties, covenants,and agreements contained in this Agreement shall **.  Except as expressly provided herein, theParties confirm that they have not relied upon any other representations,warranties, covenants, and agreements as an inducement to enter into thisAgreement or the other agreements and instruments to be executed and deliveredby the Parties pursuant to this Agreement.

14.2         Indemnificationby Pharmacopeia.  Pharmacopeia herebyagrees to indemnify and hold Cephalon, its Affiliates and their respectiveofficers, directors, stockholders, employees, agents, and representatives(collectively, the “Cephalon Indemnitees”) harmless from and against any andall claims, liabilities, losses, damages, costs and expenses in respect ofclaims against the Cephalon Indemnitees by Third Parties other than the CephalonIndemnitees, including reasonable fees and disbursements of counsel andexpenses of reasonable investigation (collectively, “Cephalon Losses”), arisingout of, based upon or caused by: **.

14.3         Indemnificationby Cephalon.  Cephalon hereby agreesto indemnify and hold Pharmacopeia, its Affiliates, subcontractors and theirrespective officers, directors, stockholders, employees, agents, andrepresentatives (collectively, the “Pharmacopeia, Indemnitees”) harmless fromand against any and all claims, liabilities, losses, damages, costs andexpenses in respect of claims against the Pharmacopeia Indemnitees by ThirdParties other than the Pharmacopeia Indemnitees, including reasonable fees and

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disbursementsof counsel and expenses of reasonable investigation (collectively, “PharmacopeiaLosses”), arising out of, based upon or caused by: **.

14.4         Notices.  Each indemnified Party agrees to give theindemnifying Party prompt written notice of any action, claim, demand,discovery of fact, proceeding or suit (collectively, “Claims”) for which suchindemnified Party intends to assert a right to indemnification under thisAgreement; providedhowever, that failure to give suchnotification shall not affect the indemnified Party’s entitlement toindemnification hereunder except to the extent that the indemnifying Partyshall have been prejudiced as a result of such failure.  The indemnifying Party shall have the **;provided however that if the indemnifying Party **.  If the indemnifying Party fails to **,subject to the applicable provisions of Sections 14.2 and 14.3 above.

**ARTICLE 15TERM, TERMINATION, AND EXPIRATION**

15.1.        Termof Agreement.  The term of thisAgreement (the “Term”) shall commence on the Effective Date and shall continuein full force and effect on a country-by-country and CollaborationProduct-by-Collaboration Product basis until both Parties and their respectiveSublicensees have no remaining royalty obligations in a country, unlessterminated earlier as provided in this Article 15.

15.2         CollaborationTerm. The Collaboration shall commence on the Effective Date and terminateon the last day of the Initial Term, unless extended by mutual agreement of theParties.  In the event that Cephalondesires to extend the Collaboration Term, it shall so inform Pharmacopeia ofsuch desire not less than ** before the last day of the Initial Term orthen-current Collaboration Term, in which case the Parties shall negotiateadditional consideration to Pharmacopeia for any such proposed extension.  If not further extended in the manner setforth in the preceding sentence, the Collaboration shall terminate on the lastday of such extension.

15.3         Termination.

15.3.1      **.  If either Party **:

(a) If the **.

(b)  If the **.

Any **.

15.3.2      Bankruptcy.Either Party may, subject to the provisions herein, terminate the Collaborationand this Agreement if, at any time, the other Party shall file in any courtpursuant to any statute, a petition in bankruptcy or insolvency or for

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reorganizationin bankruptcy or for an arrangement or for the appointment of a receiver ortrustee of such Party or of its assets, or if such Party proposes a writtenagreement of composition or extension of its debts, or if such Party shall beserved with an involuntary petition against it, filed in any insolvencyproceeding, and such petition shall not be dismissed within sixty (60) daysafter the filing thereof, or if such Party shall propose or be a party to anydissolution, or if such Party shall make an assignment for the benefit ofcreditors.

15.3.3      **.  **this Agreement **.  As of the ** pursuant to this Agreement.

15.3.4      Rightsin Law or Equity.  Except asotherwise expressly provided herein, termination by either Party pursuant tothis Section 15.3 shall not prejudice any other remedy that a Party might havein law or equity, except that neither Party may claim compensation for lostopportunity or like consequential damages arising out of the fact of suchtermination.

15.4         Effect of Breach or Termination.

15.4.1      AccruedObligations.  Termination of thisAgreement for any reason shall not release any Party hereto from any liabilitywhich, at the time of such termination, has already accrued to the other Partyor which is attributable to a period prior to such termination.

15.4.2      Returnof Materials.  Upon any terminationof this Agreement, Cephalon and Pharmacopeia shall promptly (i) return to theother Party all Confidential Information received from the other Party (exceptone copy of which may be retained for archival purposes) and (ii) destroy anyanalyses, studies or other documents, prepared by or for the benefit ofCephalon or Pharmacopeia as the case may be, relating to such other Party’sConfidential Information.

15.4.3      Effectof Termination of Collaboration.  Inthe event of any termination of the Collaboration, Pharmacopeia shall have nofurther obligation to conduct research activities pursuant to any Research Planafter the effective date of such termination.

15.4.4      Licenses.

#### (a)           Terminationby Pharmacopeia With Respect to **. **, subject to the terms and conditions of this Agreement applicablethereto.  Furthermore, such **.

#### (b)           Terminationby Cephalon With Respect to a **. **, subject to the terms and conditions of this Agreement applicablethereto.  Furthermore, such **.

#### (c)           Terminationby Pharmacopeia of the **.     In theevent of termination by Pharmacopeia of the ** pursuant to:

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#### (i) **, or

#### (ii) **,

#### where the **. Furthermore, such **.

#### (d)           Terminationby Cephalon of the **.  In the eventof termination by Cephalon of the ** pursuant to:

#### (i) **, or

#### (ii) **,

#### where the **. Furthermore, such **.

#### (e)           Terminationby Pharmacopeia of the **.

#### (I)  Inthe event of termination by Pharmacopeia of the ** pursuant to:

#### (i) **,

#### (ii) **,

#### where the **,

#### or

#### (iii) **,

#### **.

#### (II) In the event of termination by Pharmacopeia of the **.

#### (f)            Terminationby Cephalon of the **.

#### (I)  Inthe event of termination by Cephalon of the ** pursuant to:

#### (i) **,

#### (ii) **,

#### where the **,

#### or

#### (iii) **,

#### **.

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#### (II)  In the event of termination by Cephalon ofthe **.

(g)            Termination by Cephalon of the ** Pursuant to Section **.  Inthe event of termination of the ** by Cephalon pursuant to Section **.

15.5         Survival.  The provisions of Articles 7, 8, 9, 10, 11,12, 13, 14, 16 and Sections 4.1.4, 4.1.5, 15.4 and 15.5 shall survive theexpiration or termination of this Agreement.

**ARTICLE 16MISCELLANEOUS**

16.1         Notices.  Any notice or other communication required orpermitted to be given by either Party under this Agreement shall be effectivewhen delivered, if delivered by hand or by electronic facsimile or five (5)days after mailing if mailed by registered or certified mail, postage prepaidand return receipt requested, and shall be addressed to each Party at thefollowing addresses or such other address an may be designated by noticepursuant to this Section:

 
| If to Pharmacopeia:                |   | If to Cephalon:                                             |
|------------------------------------|--------|-------------------------------------------------------------|
|                               |   |                                                        |
| Pharmacopeia  Drug Discovery, Inc. |   | Cephalon, Inc.                                              |
| 3000 Eastpark  Boulevard           |   | 41 Moores Road                                              |
| Cranbury, NJ  08512                |   | Frazer, PA 19355                                            |
| Attn: Chief  Executive Officer     |   | Attn: Executive Vice President, Research &  Development |
| Fax: **                            |   | Fax: **                                                     |
|                               |   |                                                        |
|                               |   |                                                        |
| With a copy to:                    |   | With a copy to:                                             |
|                               |   |                                                        |
| Pharmacopeia  Drug Discovery, Inc. |   | Cephalon, Inc.                                              |
| 3000 Eastpark  Boulevard           |   | 41 Moores Road                                              |
| Cranbury, NJ  08512                |   | Frazer, PA 19355                                            |
| Attn: General  Counsel             |   | Attn: General Counsel                                       |
| Fax: **                            |   | Fax: **                                                     |

 

16.2         Amendments.  No amendment, modification or addition heretoshall be effective or binding on either Party unless set forth in writing andexecuted by duly authorized representatives of both Parties.

16.3         Waiver.  No waiver of any rights under this Agreementshall be deemed effective unless contained in writing signed by the Partycharged with such waiver, and

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no waiver of any breach or failure to perform shall bedeemed a waiver of any future breach or failure to perform or any other rightarising under this Agreement.

16.4         Headings.  The section headings contained in thisAgreement are included for convenience only and form no part of the agreementbetween the Parties.

16.5         ApplicableLaw.  This Agreement shall begoverned by, subject to and construed in accordance with the laws of the Stateof Delaware and the Parties consent to the jurisdiction of the State andFederal Courts of Delaware.

16.6         Severability.  If any provision of this Agreement is held tobe invalid, void or unenforceable for any reason, it shall be adjusted, ifpossible, rather than voided in order to achieve the intent of the Parties tothe maximal extent possible.  In anyevent, all other provisions of this Agreement shall be deemed valid andenforceable to the fullest extent possible.

16.7         Assignment:Binding Effect.  Neither thisAgreement, nor any obligations or rights hereunder, shall be assignable by anyParty hereto without the prior written consent of the other Party; providedhowever, that either Party may assign this Agreement without the consentof the other Party to its Affiliates, if the assigning Party guarantees thefull performance of its Affiliates’ obligations hereunder, or in connectionwith the sale or transfer of all or substantially all of its assets relating tothis Agreement, whether by merger, sale of stock, operation of law orotherwise.  Any purported assignment incontravention of this Section shall, at the option of the non-assigningParty, be null and void and of no effect.

16.8         NoImplied licenses.  Only the licensesgranted expressly herein shall be of legal force and effect.  No license rights shall be created hereunderby implication, estoppel or otherwise.

16.9         FurtherAssurances.  Each Party agrees toexecute, acknowledge and deliver such further instruments, and to do all suchother acts as may be necessary or appropriate in order to carry out thepurposes and intent of this Agreement.

16.10       ForceMajeure.  No Party shall be liablefor any failure or delay in performance under this Agreement to the extent suchfailure or delay arises from Force Majeure. A Force Majeure is fire, explosion, earthquake, storm, flood, strike,labor difficulties, war, insurrection, riot, act of God or the public enemy, orany law, act, order, export or import control regulations, proclamation,decree, regulation, ordinance, or instructions of local, state, federal orforeign governmental or other public authorities, or judgment or decree of acourt of competent jurisdiction (but excluding a court injunction against aParty’s performance) and not otherwise arising out of breach by such Party ofthis Agreement.  In the event of theoccurrence of such an event, the Party so affected shall give prompt writtennotice to the other Party, stating the period of time the occurrence isexpected to continue and shall use best efforts to end the failure or delay andensure that the effects of such Force Majeure are minimized.

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16.11       Negationof Agency.  Nothing herein containedshall be deemed to create an agency, joint venture, amalgamation, partnership,or similar relationship between Cephalon and Pharmacopeia.  The relationship between the Partiesestablished by this Agreement is that of independent contractors.

16.12       Publicity.  Promptly after the Effective Date, Pharmacopeia and Cephalon shallissue a joint press release regarding this Agreement, in a form agreed to bythe parties prior to the Effective Date. No other public announcement concerning the existence or the termsof this Agreement shall be made, either directly or indirectly, by Pharmacopeiaor Cephalon, except as may be legally required by applicable laws, regulations,or judicial order, without first obtaining the approval of the other Party andagreement upon the nature, text, and timing of such announcement, whichapproval and agreement shall not be unreasonably withheld.  The Party desiring to make any such publicannouncement shall provide the other Party with a written copy of the proposedannouncement in sufficient time prior to public release to allow such otherParty to comment upon such announcement, prior to public release.  Neither Party shall issue any press releaseor make any public announcement, which includes or otherwise uses the name ofthe other Party in any public statement or document except with the priorwritten consent of such Party. Notwithstanding the preceding sentence, Pharmacopeia and Cephalon shall issue joint press releases in a timelymanner announcing the achievement of significant events related to or arisingfrom the Collaboration.  Such eventsinclude, by way of example, the achievement of milestone events and the paymentof milestone payments, IND or NDA filings, and the commencement of specificclinical trials.

16.13       Registrationand Filing of the Agreement.  Tothe extent, if any, that a Party concludes in good faith that it is required tofile or register this Agreement, a summary of the terms of this Agreement, or anotification thereof with any governmental authority, including withoutlimitation the U.S. Securities and Exchange Commission and the CompetitionDirectorate of the Commission of the European Communities, in accordance withapplicable laws and regulations, such Party may do so, and the other Partyshall cooperate in such filing or notification and shall execute all documentsreasonably required in connection therewith at the, expense of the requestingParty.  The Parties shall promptly informeach other as to the activities or inquiries of any such governmental authorityrelating to this Agreement, and shall cooperate, to respond to any request forfurther information therefrom at the expense of the requesting Party.

16.14       EntireAgreement.  This Agreement containsthe entire agreement between the Parties with respect to the subject matterhereof.  Any prior agreement, arrangementor undertaking, whether oral or in writing is hereby superseded.

16.15       Beneficiaries.  No person, other than Cephalon orPharmacopeia and their permitted assignees hereunder, shall be deemed anintended beneficiary hereunder or have any right to enforce any obligation ofthis Agreement.

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16.16       Affiliatesand Subcontractors.  Either Party may engage, at its sole expense,its Affiliates or Third Party subcontractors (including contract researchorganizations) to perform certain of its obligations under this Agreement.  Any Affiliate or Third Party subcontractor tobe engaged by a Party to perform such Party’s obligations set forth in thisAgreement shall meet the qualifications typically required by such Party forthe performance of work similar in scope and complexity to the subcontractedactivity.  The activities of anysuch Affiliates or Third Party subcontractors shall be considered activities ofsuch Party under this Agreement.  SuchParty shall be responsible for ensuring compliance by any such Affiliates orThird Party subcontractors with the terms of this Agreement.  In any case in which a Party engages anAffiliate or a Third Party subcontractor, such Party shall obtain soleownership of, or exclusive license to, all inventions, data, information andrelated intellectual property rights made or developed by such Affiliate orThird Party subcontractor involving the manufacture or use of any CollaborationTarget or Collaboration Compound.

16.17       Compliancewith Laws.  In exercising theirrights under this Agreement, the Parties shall fully comply with therequirements of any and all applicable laws, regulations, rules and orders ofany governmental body having jurisdiction over the exercise of rights underthis Agreement.

16.18       PatentMarking.  Each Party agrees to markand have its Affiliates and Sublicensees mark all Collaboration Products soldpursuant to this Agreement in accordance with the applicable statute orregulations relating to patent marking in the country or countries ofmanufacture and sale thereof.

16.19       DisputeResolution.

(a)           Attemptto Settle.  The Parties agree to takeall reasonable efforts to resolve any and all disputes between them concerningdiligence obligations and/or questions of material breach and default inconnection with this Agreement in an amicable manner.

(b)           BindingArbitration.  Except in the event ofalleged breach, default or lack of diligence by a bankrupt or insolvent Party,the Parties agree that any such dispute that arises in connection with thisAgreement and which cannot be amicably resolved by the Parties shall beresolved by binding arbitration as set forth in this Section, conducted inaccordance with the Commercial Arbitration Rules of the American ArbitrationAssociation (AAA) by three (3) arbitrators.

(c)           WrittenNotice.  If a Party intends to beginan arbitration to resolve a dispute, such Party shall provide written notice tothe other Party informing the other Party of such intention and the issues tobe resolved.  Within twenty (20) businessdays after its receipt of such notice, the other Party may, by written noticeto the Party initiating arbitration, add additional issues to be resolved.

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(d)           Selectionof Arbitrators.  Within forty-five(45) days following the receipt of the notice of arbitration, the Parties shallagree on the arbitrators, or if the Parties are unable to agree the arbitratorsshall be selected as provided in the AAA Commercial Arbitration Rules.  The arbitrators shall not be employees,directors or shareholders of either Party or of an Affiliate and shall beselected in accordance with AAA rules. Where applicable, the arbitrators shall be independent experts inpharmaceutical product development (including clinical development andregulatory affairs) in the U.S., Japan and Europe.

(e)           Hearings.  The arbitrators shall conduct one or morehearings to allow the parties to present their positions regarding the dispute.

(i)            Discovery.  The arbitrators shall determine whatdiscovery will be permitted, consistent with the goal of limiting the cost andtime that the Parties must expend for discovery; provided the arbitrators shallpermit such discovery as they deem necessary to permit an equitable resolutionof the dispute.  Any written evidenceoriginally in a language other than English shall be submitted in Englishtranslation accompanied by the original or a true copy thereof.  The arbitrators shall have sole discretionwith regard to the admissibility of any evidence.

(ii)           ProposedRuling.  At least ten (10) businessdays prior to a hearing, each Party must submit to the arbitrators and serve onthe other Party a proposed ruling on each issue to be resolved.  Such writings shall be limited to not morethan fifty (50) pages.

(iii)          Time;Testimony.  Each Party shall beentitled to no more than five (5) days of hearing to present testimony ordocumentary evidence.  Such timelimitation shall include any direct, cross or rebuttal testimony, but such timelimitation shall only be charged against the Party conducting such direct,cross or rebuttal testimony.  It shall bethe responsibility of the arbitrators to determine whether the Parties have hadthe five (5) days to which each is entitled.

(iv)          Representationby an Attorney.  Each Party shallhave the right to be represented by counsel.

(v)           Location.  The arbitration shall take place inPhiladelphia, Pennsylvania.

(f)            Costs.  The costs of the arbitration, includingadministrative and arbitrator fees, shall be shared equally by theParties.  Each Party shall bear its owncosts and attorney and witness fees.

(g)           WrittenDecision.  The arbitrators shallrender a written decision with their resolution of the dispute.  The decision of the arbitrators shall befinal and not subject to appeal and binding on the Parties hereto.

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(h)           Remedy.  A disputed performance or suspendedperformances pending the resolution of the arbitration must be completed withinthirty (30) days following the final decision of the arbitrators or such otherreasonable period as the arbitrators determine in a written opinion.

(i)            FinalDecision Within Six Months.  Anyarbitration subject to this Section 16.19 shall be completed within six (6)months from the filing of notice of a request for such arbitration.

16.20       NoTrademark Rights.  Except as providedherein, no right, express or implied, is granted by this Agreement to use inany manner the name “Pharmacopeia”, “Cephalon” or any other trade name ortrademark of the other Party or its Affiliates in connection with performanceof this Agreement.

**IN WITNESS WHEREOF**,the Parties have caused this Agreement to be executed by their duly authorizedrepresentatives as of the Effective Date.
| **CEPHALON, INC.** | ** **             | ** **                | ** ** | **PHARMACOPEIA DRUG** | ** **           | ** **                              |
|--------------------|------------------------|---------------------------|------------|-----------------------|----------------------|-----------------------------------------|
|               |                   | **DISCOVERY, INC.**       |
|               |                   |                      |
|               |                   |                      |
| By:                | /s/ Frank Baldino, Jr. |                      |       | By:                   | /s/ Leslie J. Browne |                                    |
|               |                   |                      |
| Name:              |                   | Frank Baldino, Jr., Ph.D. |       | Name:                 |                 | Leslie J. Browne, Ph.D.                 |
|               |                   |                      |       |                  |                 |                                    |
| Title:             |                   | Chairman & CEO        |       | Title:                |                 | President & Chief Executive Officer |
|               |                   |                      |       |                  |                 |                                    |
| Date:              |                   |                      |       | Date:                 |                 | May 18, 2006                            |
|                    |                        |                           |            |                       |                      |                                         |  |  |  |  |  |  |  |

 

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