UNDER THIS AGREEMENT.
UPON EXPIRATION OF THE THIRTY-SIX (36) MONTH
PERIOD IMMEDIATELY FOLLOWING THE RECEIPT BY PHARMACOPEIA OF SCHERING'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 SCHERING, 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 OTHER
INTENTIONAL MISCONDUCT BY SCHERING.
5.8
COORDINATION WITH PAYMENTS UNDER
INTERNATIONAL AGREEMENT.
THE MILESTONES AND ROYALTIES PAYABLE BY SCHERING UNDER
SECTIONS 5.3, 5.4 AND 5.5 ARE IN CONSIDERATION FOR THE RIGHTS AND LICENSES
GRANTED TO SCHERING UNDER THIS AGREEMENT AND ARE IN ADDITION TO ANY AMOUNTS
PAYABLE TO PHARMACOPEIA UNDER THE INTERNATIONAL AGREEMENT.
IT IS UNDERSTOOD AND
AGREED THAT, WITH RESPECT TO THE SPECIFIC MILESTONES PAYABLE UNDER SECTIONS
5.4.1(A)(I)-(III) AND 5.4.1(B)(I)-(III), THE OCCURRENCE OF THE SAME MILESTONE
EVENT WILL RESULT IN MILESTONE PAYMENT OBLIGATIONS UNDER BOTH THIS AGREEMENT AND
THE CORRESPONDING PROVISIONS OF THE INTERNATIONAL AGREEMENT.
HOWEVER, THE
SPECIFIC MILESTONES PAYABLE UNDER SECTIONS 5.4.1(A)(IV) AND (V) AND SECTIONS
5.4.1(B)(IV) AND (V) UNDER THIS AGREEMENT AND THE ANALOGOUS MILESTONES UNDER THE
INTERNATIONAL AGREEMENT SHALL BE PAID, RESPECTIVELY, UPON OCCURRENCE OF THE
RELEVANT MILESTONE EVENT SPECIFIED IN THIS AGREEMENT OR THE INTERNATIONAL
AGREEMENT.
5.9
TAX MATTERS.
5.9.1
WITHHOLDING TAXES.
ALL ROYALTY AMOUNTS REQUIRED TO
BE PAID TO PHARMACOPEIA PURSUANT TO THIS AGREEMENT SHALL BE PAID WITH DEDUCTION
FOR WITHHOLDING FOR OR ON ACCOUNT OF ANY TAXES (OTHER THAN TAXES IMPOSED ON OR
MEASURED BY NET INCOME) OR SIMILAR GOVERNMENTAL CHARGE IMPOSED BY A JURISDICTION
OTHER THAN THE UNITED STATES ("WITHHOLDING TAXES") TO THE EXTENT PHARMACOPEIA
AND/OR ITS AFFILIATES OR THEIR SUCCESSORS HAS THE LAWFUL RIGHTS TO UTILIZE THE
WITHHOLDING TAXES PAID BY SCHERING AS A CREDIT AGAINST PHARMACOPEIA'S AND/OR ITS
AFFILIATES REGULAR U.S. TAX LIABILITY.
SCHERING SHALL PROVIDE PHARMACOPEIA
DOCUMENTATION EVIDENCING PAYMENT OF ANY WITHHOLDING TAXES HEREUNDER IN A MANNER
THAT IS SATISFACTORY FOR PURPOSES OF THE U.S. INTERNAL REVENUE SERVICE.
ANY
WITHHOLDING TAXES PAID WHEN DUE HEREUNDER SHALL BE FOR THE ACCOUNT OF
PHARMACOPEIA AND SHALL NOT BE INCLUDED IN THE CALCULATION OF NET SALES.
PAYMENTS OF WITHHOLDING TAXES MADE BY SCHERING PURSUANT TO THIS SECTION 5.9.1
SHALL BE MADE BASED UPON FINANCIAL INFORMATION PROVIDED TO SCHERING BY
PHARMACOPEIA, AND TO THE EXTENT THAT SUCH INFORMATION IS INCORRECT PHARMACOPEIA
SHALL BE LIABLE FOR ANY DEFICIENCY, AND ANY FINE, ASSESSMENT OR PENALTY IMPOSED
BY ANY TAXING AUTHORITY IN THE TERRITORY FOR ANY DEFICIENCY IN THE AMOUNT OF ANY
SUCH WITHHOLDING TAXES, OR THE FAILURE TO MAKE PAYMENT OF WITHHOLDING TAXES,
BASED UPON SUCH INCORRECT INFORMATION.
IF SCHERING IS REQUIRED TO PAY ANY SUCH
DEFICIENCY, OR ANY FINE, ASSESSMENT OR PENALTY FOR ANY SUCH DEFICIENCY BASED
UPON SUCH INCORRECT INFORMATION (EXCEPT TO THE EXTENT CAUSED BY SCHERING'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT), PHARMACOPEIA SHALL PROMPTLY REIMBURSE
SCHERING FOR SUCH PAYMENTS, WHICH SHALL NOT BE INCLUDED IN THE CALCULATION OF
NET SALES.
5.10
PRODUCT DEVELOPMENT COSTS.