ANNUAL REPORTS WITHIN THIRTY (30) DAYS AFTER THE FIRST AND
EACH SUBSEQUENT ANNIVERSARY OF THE EFFECTIVE DATE, WHICH REPORTS SHALL PROVIDE:
(I) A BRIEF REPORT SUMMARIZING THE DEVELOPMENT STATUS OF EACH LEAD COMPOUND
AND/OR DEVELOPMENT CANDIDATE UNDER DEVELOPMENT AT SCHERING; (II) THE STATUS OF
ALL PATENT APPLICATIONS CLAIMING ANY LIBRARY COMPOUNDS OR DERIVATIVE COMPOUNDS,
AND (III) COPIES OF ALL SUCH PATENT APPLICATIONS WHICH HAVE PUBLISHED DURING THE
RELEVANT TWELVE (12) MONTH PERIOD AND WERE NOT PREVIOUSLY PROVIDED TO
PHARMACOPEIA.
SUCH REPORTS SHALL CONTAIN INFORMATION SUFFICIENT TO ALLOW
PHARMACOPEIA TO MONITOR THE STATUS OF SCHERING'S EFFORTS WITH RESPECT TO THE
ACCOMPLISHMENT OF THE MILESTONES SET FORTH IN SECTION 5.3; PROVIDED, HOWEVER,
THAT NOTHING HEREUNDER SHALL BE CONSTRUED AS REQUIRING SCHERING TO PROVIDE
PHARMACOPEIA WITH ANY SPECIFIC RESEARCH DATA OR RESULTS, INCLUDING, WITHOUT
LIMITATION, INFORMATION RELATING TO TARGETS OR DATA OBTAINED FROM SCREENING
PROGRAMS BEING CONDUCTED AT SCHERING.
UNTIL THE FIRST COMMERCIAL SALE OF EACH
AGREEMENT PRODUCT BY OR ON BEHALF OF SCHERING HEREUNDER, SCHERING SHALL KEEP
PHARMACOPEIA REASONABLY INFORMED AS TO THE STATUS OF THE PRE-CLINICAL, CLINICAL
AND COMMERCIAL DEVELOPMENT OF SUCH AGREEMENT PRODUCT BY PROVIDING PHARMACOPEIA
WITH ANNUAL WRITTEN REPORTS SUMMARIZING SUCH ACTIVITIES WITH RESPECT TO EACH
POTENTIAL AGREEMENT PRODUCT UNDER DEVELOPMENT DURING THE TERM OF THIS
AGREEMENT.
WITHIN THIRTY (30) DAYS OF THE FIRST COMMERCIAL SALE OF ANY
AGREEMENT PRODUCT, SCHERING SHALL GIVE PHARMACOPEIA WRITTEN NOTICE THEREOF,
WHICH NOTICE
14
SHALL DESCRIBE THE RELEVANT AGREEMENT PRODUCT, IDENTIFY THE ACTIVE INGREDIENTS
IN SUCH AGREEMENT PRODUCT, AND IDENTIFY THE SPECIFIC TARGET(S) WHICH LED TO THE
DEVELOPMENT OF SUCH AGREEMENT PRODUCT.
3.5
DILIGENCE.
THE PARTIES ACKNOWLEDGE AND
AGREE THAT ALL BUSINESS DECISIONS REGARDING RESEARCH, DEVELOPMENT AND
COMMERCIALIZATION OF AGREEMENT PRODUCTS (INCLUDING, WITHOUT LIMITATION,
DECISIONS RELATING TO THE DEVELOPMENT AND MANUFACTURE OF AGREEMENT COMPOUNDS, OR
TO THE DESIGN, DEVELOPMENT, MANUFACTURE, SALE, PRICE, DISTRIBUTION, MARKETING
AND PROMOTION OF AGREEMENT PRODUCTS UNDER THIS AGREEMENT) AND THE DECISION
WHETHER TO DEVELOP (OR CEASE DEVELOPING) A PARTICULAR AGREEMENT COMPOUND, OR TO
DEVELOP AND COMMERCIALIZE (OR CEASE DEVELOPING AND COMMERCIALIZING) A PARTICULAR
AGREEMENT PRODUCT, SHALL BE WITHIN THE SOLE DISCRETION OF SCHERING.
SCHERING
SHALL USE REASONABLE GOOD FAITH EFFORTS TO DISCOVER AND DEVELOP AGREEMENT
COMPOUNDS, AND TO DISCOVER, DEVELOP AND COMMERCIALIZE AGREEMENT PRODUCTS;
PROVIDED, HOWEVER, THAT SCHERING SHALL HAVE NO QUOTAS OR OTHER MINIMUM DILIGENCE
OBLIGATIONS WITH REGARD TO NUMBER OF AGREEMENT COMPOUNDS AND AGREEMENT PRODUCTS
TO BE DEVELOPED AND COMMERCIALIZED HEREUNDER.
SUCH DECISION MAKING AND/OR
REASONABLE GOOD FAITH EFFORTS SHALL BE EXPENDED BY SCHERING, AS DETERMINED IN
ITS REASONABLE COMMERCIAL JUDGEMENT, BASED UPON THE FACTS AND CIRCUMSTANCES IN
EXISTENCE AND REASONABLY AVAILABLE TO SCHERING AT THAT TIME, AND SHALL BE
EXERCISED IN A MANNER CONSISTENT WITH THE DISCOVERY, DEVELOPMENT AND
COMMERCIALIZATION OF SCHERING'S OTHER PRODUCTS OF COMPARABLE COMMERCIAL VALUE,
POTENTIAL AND STAGE OF DEVELOPMENT.
ALL OF SCHERING'S DILIGENCE OBLIGATIONS
HEREUNDER ARE EXPRESSLY CONDITIONED UPON THE CONTINUING ABSENCE OF ANY ADVERSE
CONDITION OR EVENT WHICH WARRANTS A DELAY IN COMMERCIALIZATION OF AN AGREEMENT
PRODUCT INCLUDING, BUT NOT LIMITED TO, AN ADVERSE CONDITION OR EVENT RELATING TO
THE