CANNOT BE REMITTED TO PHARMACOPEIA FOR ANY REASON WITHIN SIX (6)
MONTHS AFTER THE END OF THE CALENDAR QUARTER DURING WHICH THEY ARE EARNED, THEN
SPL SHALL BE OBLIGATED TO DEPOSIT THE ROYALTIES IN A BANK ACCOUNT IN SUCH
COUNTRY IN THE NAME OF PHARMACOPEIA.
5.7
MAINTENANCE OF RECORDS; AUDITS.
5.7.1
RECORDS; INSPECTION.
SPL AND ITS AFFILIATES SHALL
KEEP COMPLETE, TRUE AND ACCURATE BOOKS OF ACCOUNT AND RECORDS FOR THE PURPOSE OF
DETERMINING THE ROYALTY AMOUNTS PAYABLE UNDER THIS AGREEMENT, WHICH BOOKS AND
RECORDS SHALL BE MAINTAINED IN ACCORDANCE WITH SPL'S RECORDS RETENTION POLICIES.
UPON PRIOR WRITTEN NOTICE FROM PHARMACOPEIA, SPL SHALL, WITHIN A PERIOD NOT TO
EXCEED FORTY-FIVE (45) DAYS, PERMIT AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTING
FIRM OF NATIONALLY RECOGNIZED STANDING SELECTED BY PHARMACOPEIA AND REASONABLY
ACCEPTABLE TO SPL, AT PHARMACOPEIA'S EXPENSE, TO HAVE ACCESS DURING NORMAL
BUSINESS HOURS TO EXAMINE PERTINENT BOOKS AND RECORDS OF SPL AND/OR ITS
AFFILIATES AS MAY BE REASONABLY NECESSARY TO VERIFY THE ACCURACY OF THE ROYALTY
REPORTS HEREUNDER.
THE EXAMINATION SHALL BE LIMITED TO PERTINENT BOOKS AND
RECORDS FOR ANY CALENDAR YEAR ENDING NOT MORE THAN THIRTY-SIX (36) MONTHS PRIOR
TO THE DATE OF SUCH REQUEST.
SUCH INSPECTIONS MAY BE MADE NO MORE THAN ONCE
EACH CALENDAR YEAR.
IN THE EVENT THAT THE ACCOUNTING FIRM CORRECTLY CONCLUDES
THAT A VARIATION OR ERROR HAS OCCURRED RESULTING IN AN UNDERPAYMENT OF ROYALTIES
BY SPL OF FIVE PERCENT (5)% OR MORE OF THE AMOUNT ACTUALLY DUE FOR THE PERIOD
COVERED BY THE INSPECTION, SPL SHALL PAY TO PHARMACOPEIA SUCH ADDITIONAL
AMOUNTS, AS WELL AS THE COSTS RELATING TO THE INSPECTION, WITHIN THIRTY (30)
DAYS OF RECEIPT OF AN INVOICE FOR SUCH AMOUNTS.
ANY OVERPAYMENT OF ROYALTIES BY
SPL DISCOVERED THROUGH SUCH AUDIT SHALL BE FULLY CREDITABLE AGAINST ROYALTIES
SUBSEQUENTLY DUE HEREUNDER.
SPL MAY DESIGNATE COMPETITIVELY SENSITIVE
INFORMATION WHICH SUCH AUDITOR MAY NOT DISCLOSE TO PHARMACOPEIA; PROVIDED,
HOWEVER, THAT SUCH DESIGNATION SHALL NOT ENCOMPASS THE AUDITOR'S CONCLUSIONS.
THE ACCOUNTING FIRM SHALL DISCLOSE TO PHARMACOPEIA ONLY WHETHER THE ROYALTY
REPORTS ARE CORRECT OR INCORRECT AND THE SPECIFIC DETAILS CONCERNING ANY
DISCREPANCIES.
NO OTHER INFORMATION SHALL BE PROVIDED TO PHARMACOPEIA.
THE
ACCOUNTING FIRM EMPLOYEES SHALL SIGN CONFIDENTIALITY AGREEMENTS ACCEPTABLE TO
SPL AS A CONDITION PRECEDENT TO THEIR INSPECTION.
SPL SHALL INCLUDE IN EACH
SUBLICENSE GRANTED BY IT PURSUANT TO THIS AGREEMENT A PROVISION REQUIRING THE
SUBLICENSEE TO MAKE REPORTS TO SPL, TO KEEP AND MAINTAIN RECORDS OF SALES MADE
PURSUANT TO SUCH SUBLICENSE AND TO GRANT ACCESS TO SUCH RECORDS BY
PHARMACOPEIA'S INDEPENDENT ACCOUNTANT TO THE SAME EXTENT REQUIRED OF SPL UNDER
THIS AGREEMENT.
UPON EXPIRATION OF THE THIRTY-SIX (36) MONTH PERIOD IMMEDIATELY
FOLLOWING THE RECEIPT BY PHARMACOPEIA OF SPL'S FOURTH QUARTER ROYALTY REPORT FOR
A GIVEN CALENDAR YEAR IN ACCORDANCE WITH SECTION 5.6.1, THE CALCULATION OF
ROYALTIES PAYABLE WITH RESPECT TO SUCH YEAR SHALL BE BINDING AND CONCLUSIVE UPON
PHARMACOPEIA, AND SPL, ITS AFFILIATES AND ITS SUBLICENSEES SHALL BE RELEASED
FROM ANY LIABILITY OR ACCOUNTABILITY WITH RESPECT TO ROYALTIES FOR SUCH YEAR,
EXCEPT FOR INSTANCES OF FRAUD OR