WITH
THE POLICY SET FORTH IN EXHIBIT A HERETO.
IF, DUE TO RESTRICTIONS OR
PROHIBITIONS IMPOSED BY NATIONAL OR INTERNATIONAL AUTHORITY, PAYMENTS CANNOT BE
MADE AS AFORESAID, THE PARTIES SHALL CONSULT WITH A VIEW TO FINDING A PROMPT AND
ACCEPTABLE SOLUTION, AND SCHERING OR ITS DESIGNATED AFFILIATES WILL, FROM TIME
TO TIME, DEAL WITH SUCH MONIES AS PHARMACOPEIA MAY LAWFULLY DIRECT AT NO
ADDITIONAL OUT-OF-POCKET EXPENSE TO SCHERING.
NOTWITHSTANDING THE FOREGOING, IF
ROYALTIES IN ANY COUNTRY 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 SCHERING 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.
SCHERING 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 SCHERING'S RECORDS
RETENTION POLICIES. UPON PRIOR WRITTEN NOTICE FROM PHARMACOPEIA, SCHERING 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 SCHERING, AT PHARMACOPEIA'S EXPENSE,
TO HAVE ACCESS DURING NORMAL BUSINESS HOURS TO EXAMINE PERTINENT BOOKS AND
RECORDS OF SCHERING 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 SCHERING OF FIVE PERCENT (5)% OR
MORE OF THE AMOUNT ACTUALLY DUE FOR THE PERIOD COVERED BY THE INSPECTION,
SCHERING 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 SCHERING DISCOVERED THROUGH SUCH
AUDIT SHALL BE FULLY CREDITABLE AGAINST ROYALTIES SUBSEQUENTLY DUE HEREUNDER.
SCHERING 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 SCHERING AS A CONDITION PRECEDENT TO
THEIR INSPECTION.
SCHERING SHALL INCLUDE IN EACH SUBLICENSE GRANTED BY IT
PURSUANT TO THIS AGREEMENT A PROVISION REQUIRING THE SUBLICENSEE TO MAKE REPORTS
TO SCHERING, TO KEEP AND MAINTAIN
21
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
SCHERING