Document:

EXHIBIT 10.1

 

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

 

PRODUCT DEVELOPMENT AND

COMMERCIALIZATION AGREEMENT

 

AMONG

 

SMITHKLINE BEECHAM CORPORATION

DOING BUSINESS AS GLAXOSMITHKLINE,

 

GLAXO GROUP LIMITED

 

AND

 

PHARMACOPEIA DRUG DISCOVERY, INC.

 

DATED AS OF

MARCH
24, 2006

 

 

PRODUCT DEVELOPMENT AND

COMMERCIALIZATION AGREEMENT

 

THIS PRODUCT DEVELOPMENT AND
COMMERCIALIZATION AGREEMENT is made as of the 24th day of March, 2006 (the “EFFECTIVE
DATE”) by and between SmithKline Beecham Corporation, doing business as
GlaxoSmithKline, a Pennsylvania corporation having a principal place of
business at One Franklin Plaza, 200 N 16th Street, Philadelphia, PA
19102 (“SB Corp”), and Glaxo Group Limited, a company existing under the laws
of England and Wales, having its registered office at Glaxo Wellcome House,
Berkeley Avenue, Greenford, Middlesex, UB6 0NN, England (“GGL”), SB Corp and
GGL being collectively referred to hereinafter as “GSK”; and Pharmacopeia Drug
Discovery, Inc., a Delaware corporation having a principal place of business at
3000 Eastpark Boulevard, Cranbury, New Jersey 08512 (“Pharmacopeia”). Pharmacopeia and GSK are
each referred to herein by name or as a “Party” or, collectively, as the “Parties.”

 

RECITALS

 

A.     Pharmacopeia has developed certain capabilities for the discovery and
development of pharmaceutical products for the treatment of human diseases or
conditions.

 

B.      GSK
possesses research, development, manufacturing and commercialization expertise
for the development and commercialization of pharmaceutical products for the
treatment of human diseases or conditions.

 

C.      GSK, through its Center of Excellence for External Drug
Discovery (“CEEDD”),

 

desires to engage in a collaborative effort
with Pharmacopeia, pursuant to which Pharmacopeia shall engage in research and development
programs to discover and develop compounds with demonstrated efficacy in humans
that will be available for commercialization by one of the Parties.

 

D.      PHARMACOPEIA desires to engage in a collaborative effort with GSK
whereby GSK will, pursuant to the Options granted to GSK by this Agreement,
have exclusive worldwide rights to complete the development and
commercialization of certain compounds discovered and developed by
Pharmacopeia.

 

E.      The Parties acknowledge that any rights GSK acquires under this
Agreement, as defined below, will be held by GSK in accordance with GSK’s and
its group’s inter-company agreements, as in effect from time to time.

 

F.      Contemporaneously with the execution of this Agreement, Pharmacopeia shall issue to GSK a Warrant to
Purchase Common Stock substantially in the form attached hereto as Exhibit A
(the “Warrant”), which will permit GSK to purchase shares of common stock of
Pharmacopeia upon the fulfillment of the terms and conditions set forth in the
Warrant and this Agreement.

 

Now, therefore, in consideration of the
premises and mutual covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Parties agree as follows:

 

 

ARTICLE 1

 

DEFINITIONS

 

As used in this Agreement, the following
terms shall have the meanings set forth in this Article unless context dictates
otherwise:

 

1.1 “AFFILIATE” shall mean any Person,
whether de jure or de facto, which directly or indirectly through one (1) or
more intermediaries controls, is controlled by, or is under common control
with, a Party to this Agreement. A Person shall be deemed to “control” another
Person if it (i) owns, directly or indirectly, beneficially or legally, at
least fifty percent (50%) of the outstanding voting securities or capital stock
(or such lesser percentage which is the maximum allowed to be owned by a Person
in a particular jurisdiction) of such other Person, or has other comparable
ownership interest with respect to any Person other than a corporation; or (ii)
has the power, whether pursuant to contract, ownership of securities or
otherwise, to direct the management and policies of the Person.

 

1.2 “AGREEMENT” shall mean this Product
Development and Commercialization Agreement together with the recitals and all
exhibits, schedules and attachments hereto.

 

1.3 “BACK-UP COMPOUND” shall mean a
compound whose principal mechanism of action is to modulate a Target in the
manner determined by the JSC for such Target, that meets the Candidate
Selection Criteria with respect to such Target and, with the JSC’s approval, is
intended to supplant a particular Pharmacopeia Development Compound or GSK
Development Compound if such Pharmacopeia Development Compound or GSK
Development Compound is removed from development. A Back-Up Compound may also be intended to supplant another
Back-Up Compound if such other Back-Up Compound is removed from development.

 

1.4 “BANKRUPTCY CODE” shall have the meaning
assigned to such term in Section 12.3.2.

 

1.5 “BREACHING PARTY” shall have the meaning
assigned to such term in Section 12.2.1.

 

1.6 “CALENDAR QUARTER” shall mean a period of
three (3) consecutive months ending at midnight, Eastern Time on the last day
of March, June, September, or December, respectively.

 

1.7 “CANDIDATE SELECTION
COMPOUND” shall mean a compound resulting from a Program that the JSC
determines meets all of the Candidate Selection Criteria as established by the
JSC.

 

1.8 “CANDIDATE SELECTION
CRITERIA” shall mean criteria established by the JSC for advancement of a Lead
into pre-clinical development, based on the Target Product Profile ** and **. If
a compound is advanced by either Party pursuant to the Agreement into
pre-clinical development (i.e., beyond the stage of candidate selection), and
if the **, then the compound will be deemed to have met the Candidate Selection
Criteria irrespective of the actual attainment of all of the defined criteria.

 

1.9 “cGMP” shall mean current Good
Manufacturing Practices as defined in Parts 210 and 211 of Title 21 of the U.S.
Code of Federal Regulations, as may be amended from time to time, or any
successor thereto.

 

Execution Version

 

3

 

1.10 “CEDD” shall mean one or
more of GSK’s “Centers of Excellence for Drug Discovery”; i.e., an
organizational structure that oversees drug discovery and development being
conducted internally at GSK. CEDD shall include any successor organizational
structures to CEDD, whether or not possessing the same name, that is responsible
for internal drug discovery and development at GSK.

 

1.11 “CEEDD” shall mean GSK’s “Center
of Excellence for External Drug Discovery”; i.e., an organizational structure
within GSK used by GSK to manage external drug discovery and development collaborations. 
The term “CEEDD” when used herein shall also include any organizational
structure within GSK whose functions are broadly similar to the CEEDD, to which
management of the Programs under this Agreement may be subsequently assigned.

 

1.12 “CEEDD LEADERSHIP TEAM” shall mean
the most senior member and head of the CEEDD, plus the CEEDD heads of biology,
chemistry, pharmacology, operations management, business development,
preclinical development, clinical development, commercial, legal, finance, and the
CEEDD employee(s) assigned by the CEEDD to manage the collaboration with
Pharmacopeia.

 

1.13 “COLLABORATION COMPOUND” shall mean a Tractable
Hit, Lead, Candidate Selection Compound, Proof-of-Concept Compound, GSK
Development Compound, Pharmacopeia Development Compound, Back-up Compound, or
any compound derived from any of the foregoing. As used herein, a compound
shall be deemed to have been “derived” from another compound if it (i) is the **,
(ii) is otherwise **, (iii) is **, or (iv) is ** in category (i), (ii) or (iii)
above. As used herein,
a compound also shall be deemed to have been “derived” from another compound if
it is the **. It is understood that this definition of “Collaboration Compound”
shall **, in each case as evidenced by contemporaneous documentation.

 

1.14 “COMBINATION PRODUCT” shall mean a
Product incorporating two (2) or more therapeutically active ingredients, at
least one of which is a Collaboration Compound. Notwithstanding the foregoing,
ingredients or components other than active ingredients, including without
limitation drug delivery vehicles, adjuvants, and excipients, shall not be
deemed to be “therapeutically active ingredients,” and their presence shall not
be deemed to create a Combination Product.

 

1.15 “CONFIDENTIAL INFORMATION” shall have
the meaning assigned to such term in Section 9.1.

 

1.16 “CONTRACT YEAR” shall mean a year of 365
days (or 366 days in a leap year) beginning on the Effective Date and ending
one (1) year thereafter and so on, year-by-year during the Term. “CONTRACT YEAR
ONE” shall mean the first such year; “CONTRACT YEAR TWO” shall mean the second
such year, and so on, year-by-year.

 

1.17 “CONTROL,” “CONTROLS,” “CONTROLLED” OR “CONTROLLING”
shall mean possession by the granting Party of the ability to grant the
licenses or sublicenses to the other Party, as provided in this Agreement,
without violating the terms of any agreement or other arrangement with any
Third Party.

 

1.18 “DISCLOSING PARTY” shall have the
meaning assigned to such term in Section 9.1.

 

1.19 “DRAFTING PARTY” shall have the meaning
assigned to such term in Section 2.2.4(a).

 

1.20 “EFFECTIVE DATE” shall have the meaning
assigned to such term in the Preamble.

 

4

 

1.21 “EMEA” shall mean the European Medicines
Evaluation Agency and any successor entity thereto.

 

1.22 “ENABLING STUDIES” shall have the
meaning assigned to such term in Section 3.9.

 

1.23 “EXECUTIVE OFFICERS” shall have the
meaning assigned to such term in Section 2.2.5.

 

1.24 “FDA” shall mean the U.S. Food and Drug
Administration, or any successor entity thereto.

 

1.25 “FIELD” shall mean the treatment,
prevention or diagnosis of any disease or condition adverse to human or animal
health.

 

1.26 “FIRST COMMERCIAL SALE” shall mean, with
respect to each Product, the first sale for which payment has been received for
use or consumption by the general public of such Product in any country in the
Territory after all required Marketing Approvals have been granted, or such
sale is otherwise permitted, by the Regulatory Authority in such country,
excluding registration samples, compassionate use sales, inter-company
transfers to Affiliates of a Party and the like.

 

1.27 “GSK” shall have the meaning assigned to
such term in the Preamble.

 

1.28 “GSK DEVELOPMENT COMPOUND”
shall mean a Candidate Selection Compound or Proof-of-Concept Compound that is
selected by GSK for further development and commercialization by GSK and
exclusively licensed to GSK pursuant to any one of the Options defined in Article
4 of this Agreement. A “GSK Development Compound” shall be **.

 

1.29 “GSK PATENTS” shall mean all Patents in
the **. For the avoidance of doubt, no Patent shall be deemed to
be a GSK Patent until the **.

 

1.30 “GSK TARGET” shall mean a
protein target, and the related assay and and/or reagents, if any, provided to
Pharmacopeia by GSK, and accepted by the JSC for Pharmacopeia to use pursuant
to Programs hereunder.

 

1.31 “GSK TARGET IP” shall mean
all Patents, Know-how, proprietary materials and other related intellectual
property rights Controlled by GSK and covering a given GSK Target.

 

1.32 “GSK IP” shall mean Know-How controlled
by GSK and any GSK Patents. “GSK IP” shall include, without limitation, any GSK
Target IP.

 

1.33 “HSR ACT” shall have the meaning
assigned to such term in Section 14.6.1.

 

1.34 “IND” shall mean any investigational new
drug application filed with the FDA pursuant to Part 312 of Title 21 of the
U.S. Code of Federal Regulations, including any amendments thereto. References
herein to IND shall include, to the extent applicable, any comparable filing(s)
outside the U.S. (such as a CTA in the European Union).

 

1.35 “INDEMNITEE” shall have the meaning
assigned to such term in Section 11.3.

 

1.36 “INFORMATION” shall mean information and
materials within the Control of GSK or its Affiliates or Pharmacopeia or its
Affiliates, in either case that (i) is necessary for the
discovery, development, manufacture or use of Collaboration Compounds and/or
the development, manufacture, use, sale or commercialization of corresponding
Products, and (ii) exists as
of the Effective Date or is discovered, developed or acquired during the Term,
and including, without limitation: (A) techniques and data, including, but not
limited to, screens, models, inventions, methods, test data including, but 

 

5

 

not limited to, pharmacological,
toxicological and clinical test data, analytical and quality control data,
marketing, pricing, distribution, costs, and sales data, manufacturing
information (including any relevant Third Party manufacturing information to
the extent Controlled by, and in the possession of, GSK or its Affiliates or
Pharmacopeia or its Affiliates), and patent and legal data or descriptions (to
the extent that disclosure thereof would not result in loss or waiver of
privilege or similar protection); and (B) compositions of matter, including but
not limited to compounds, biological materials, vectors and assays. As used
herein, “CLINICAL TEST DATA” shall be deemed to include all information related
to the clinical or preclinical testing of a Collaboration Compound or
corresponding Product, including without limitation, patient report forms,
investigators’ reports, biostatistical, pharmaco-economic and other related
analyses, regulatory filings and communications, and the like.

 

1.37 “INITIAL SCREENING TERM”
shall mean the period of time from the Effective Date until completion of
screening by Pharmacopeia of the Initial Targets.

 

1.38 “INITIAL TARGETS” shall mean
** for Pharmacopeia to use pursuant to Programs hereunder. The first ** shall
be agreed upon in writing by the Parties, together with the Tractable Hit
Criteria, Lead Declaration Criteria and the Candidate Selection Criteria for
each of such Targets, **, for use by Pharmacopeia pursuant to Programs
hereunder.

 

1.39 “INITIAL TARGET PROPOSAL
SCHEDULE” is as set forth in Section 3.2.1.

 

1.40  “JOINT
IP” shall mean Know-How Controlled jointly by the Parties and any Joint
Patents.

 

1.41 “JOINT PATENTS” shall mean all Patents in the **.

 

1.42 “JOINT STEERING COMMITTEE”
or “JSC” shall have the meaning ascribed to such term in Section 2.2.

 

1.43 “KNOW-HOW” shall mean all Information, technical
information, techniques, data, inventions, practices, methods, knowledge,
skill, experience, test data or information necessary for the discovery, development, manufacture or use of
one or more Collaboration Compounds and/or the development, manufacture, use,
sale or commercialization of corresponding Products, which (a) is **, or (b) is **.

 

1.44  “LEAD” shall mean a compound that meets all of
the Lead Declaration Criteria as determined by the JSC.

 

1.45 “LEAD DECLARATION CRITERIA”
shall mean criteria established by the JSC for advancing a Lead into a Lead
Optimization Program. A compound that is advanced into a Lead Optimization
Program pursuant to the Agreement will be deemed to have met all of the Lead
Declaration Criteria irrespective of the actual attainment of all Lead
Declaration Criteria, if the JSC unanimously approves such action in advance.

 

1.46 “LEAD GENERATION PROGRAM”
shall mean a chemical synthesis program conducted by Pharmacopeia to generate
analogs of a Tractable Hit, designed to result in a Lead.

 

1.47 “LEAD OPTIMIZATION PROGRAM”
shall mean a medicinal chemistry optimization effort conducted by Pharmacopeia
with respect to a Lead, designed to result in a Candidate Selection Compound.

 

1.48 “LOSSES” shall have the meaning assigned
to such term in Section 11.1.

 

6

 

1.49 “MAJOR MARKET” shall mean the United
States, Japan, and the European Union.

 

1.50 “MARKETING APPROVAL” shall mean all
approvals, licenses, registrations or authorizations of any federal, state or
local regulatory agency, department, bureau or other governmental entity,
necessary for the manufacturing, use, storage, import, transport and sale of a
Product in a regulatory jurisdiction. “Marketing Approval” shall be deemed to
occur upon first receipt of notice from a Regulatory Authority that a Product
has been approved for commercial sale. For countries where governmental
approval is required for pricing or for the Product to be reimbursed by
national health insurance (i.e., other than the United States), “Marketing
Approval” shall not be deemed to occur until such pricing or reimbursement
approval is obtained. Marketing Approval shall be deemed to have occurred in
such a country where government approval of pricing or reimbursement has not
been obtained if, at any time, the Party begins the commercial sale of such
Product in the country without obtaining pricing approval or reimbursement,
with the date of such Marketing Approval to be deemed to occur on the date of
the First Commercial Sale of the Product in the country.

 

1.51 “MARKETING APPROVAL APPLICATION” OR “MAA”
shall mean a New Drug Application (as defined in Title 21 of the U.S. Code of
Federal Regulations, Section 314.50, et. seq.), or a comparable filing for
Marketing Approval (not including pricing or reimbursement approval) in a
country, in each case with respect to a Product in the Territory.

 

1.52 “MATERIAL BREACH” shall have the meaning
assigned to such term in Section 12.2.1.

 

1.53 “NDA” shall mean a New
Drug Application (as defined
in Title 21 of the U.S. Code of Federal Regulations, Section 314.50, et. seq.).

 

1.54 “NET SALES” shall mean the
**. For purposes of this
Section, **.

 

1.55 “NON-BREACHING PARTY” shall have the
meaning assigned to such term in Section 12.2.1.

 

1.56 “OPTIONS” shall mean GSK’s
rights under and subject to all the applicable provisions of this Agreement to
elect to exclusively develop and commercialize any GSK Development Compound
resulting from a given Program under the Candidate Selection Option or the PoC
Option, as applicable, and as more fully set forth in Article 4.

 

1.57 [Intentionally left blank]

 

1.58 “PARTY” OR “PARTIES” shall have the
meaning assigned to such term in the Preamble, or where the context requires,
shall mean GSK and its Affiliates and/or Pharmacopeia and its Affiliates.

 

1.59 “PATENT” shall mean: (i) issued and
unexpired letters patent, including any extension, registration, confirmation,
reissue, continuation, supplementary protection certificate, divisional,
continuation-in-part, re-examination or renewal thereof, (ii) pending
applications for letters patent, and (iii) foreign counterparts of any of the
foregoing; in each case to the extent the same has not been held, by a court,
administrative body or governmental agency of competent jurisdiction, to be
invalid or unenforceable in a decision from which no appeal can be taken or
from which no appeal was taken within the time permitted for appeal.

 

1.60 “PATENT SUBCOMMITTEE” shall have the
meaning assigned to such term in Section 2.2.6.

 

1.61 “PAYEE” shall have the meaning assigned
to such term in Section 6.6.1.

 

7

 

1.62 “PAYOR” shall have the meaning assigned
to such term in Section 6.6.1.

 

1.63 “PERSON” shall mean any corporation,
firm, partnership or other entity.

 

1.64 “PHARMACOPEIA” shall have the meaning
assigned to such term in the Preamble.

 

1.65 “PHARMACOPEIA DEVELOPMENT
COMPOUND” shall mean a Tractable Hit, Lead, Candidate Selection Compound or
Proof-of-Concept Compound for which Pharmacopeia retains the right to continue
to research, develop or commercialize hereunder, and which Pharmacopeia elects
to further progress, subject to GSK’s rights, as applicable. Any Pharmacopeia
Development Compound shall **.

 

1.66  “PHARMACOPEIA IP” shall mean Know-How Controlled by Pharmacopeia and any
Pharmacopeia Patents. “Pharmacopeia IP” shall include, without limitation, any
Pharmacopeia Target IP.

 

1.67 “PHARMACOPEIA PATENTS” shall mean all Patents in the **. For
the avoidance of doubt, no Patent shall be deemed to be a Pharmacopeia Patent
until the **.

 

1.68 “PHARMACOPEIA TARGET”
shall mean a protein target, and the related assay and reagents, if any,
provided by Pharmacopeia and accepted by the JSC for Pharmacopeia to use
pursuant to Programs hereunder.

 

1.69 “PHARMACOPEIA TARGET IP”
shall mean all Patents, Know-How, proprietary materials and other related
intellectual property rights Controlled by Pharmacopeia and covering a given
Pharmacopeia Target.

 

1.70 “PHASE I,” “PHASE II” and “PHASE III” shall mean Phase I (or Phase I/II),
Phase II (or Phase II/III) and Phase III clinical trials, respectively, in each
case as prescribed by applicable FDA IND Regulations, or any corresponding
foreign statutes, rules or regulations.

 

1.71 “PRODUCT” shall mean any product
for the therapeutic or prophylactic treatment or prevention of any disease or
condition in human beings, which contains a Collaboration Compound.

 

1.72 “PoC STUDIES” shall mean
the particular clinical trials that will be employed with respect to a
Candidate Selection Compound, GSK Development Compound or Pharmacopeia
Development Compound to demonstrate the achievement of the Proof-of-Concept
Compound Criteria.

 

1.73 “PROOF-OF-CONCEPT COMPOUND”
shall mean a compound resulting from the PoC Studies that has demonstrated that
it satisfies all of the Proof-of-Concept Compound Criteria.

 

1.74 “PROOF-OF-CONCEPT COMPOUND CRITERIA” shall mean
criteria ** (at or about the time of first-time-in-humans (“FTIH”) testing
(i.e., at Phase I clinical trials) to determine if a Candidate Selection
Compound, GSK Development Compound or Pharmacopeia Development Compound under
study demonstrates a clinically meaningful benefit-to-risk profile in treating
the applicable disorder. This shall include a ** hereunder. Any Candidate
Selection Compound, GSK Development Compound or Pharmacopeia Development
Compound advanced by GSK into Phase III clinical trials will be deemed to have
met all of the Proof-of-Concept Compound Criteria and to be a Proof-of-Concept
Compound.

 

8

 

1.75 “PROGRAM” shall mean any
activities pursuant to one or more Work Plans that are approved hereunder by
the JSC for a given Target, including for example, Screening Programs, Lead
Generation Programs and/or Lead Optimization Programs.

 

1.76 “PROGRAM TERM” shall mean
the period of time commencing with the approval by the JSC of a Screening
Program with respect to a particular Target, and continuing until no further
activity pursuant to this Agreement is being pursued by either Party with
respect to the Program applicable to that particular Target.

 

1.77 “RECEIVING PARTY” shall have the meaning
assigned to such term in Section 9.1.

 

1.78 “REGULATORY AUTHORITY” OR “REGULATORY
AUTHORITIES” shall mean the FDA in the U.S., and any health regulatory
authority(ies) in any country in the Territory that is a counterpart to the FDA
and holds responsibility for granting regulatory marketing approval for a
Product in such country, and any successor(s) thereto.

 

1.79 “RESEARCH TERM” shall mean
the period of time that is ** (**) ** from the Effective Date, unless extended
or earlier terminated by the mutual written agreement of the Parties.

 

1.80 “SCREENING PROGRAM” shall
mean a Program for the screening by Pharmacopeia of Targets with the goal of
generating Tractable Hits.

 

1.81 “SUBCOMMITTEE” shall have the meaning
assigned to such term in Section 2.2.6.

 

1.82 “ SUBLICENSEE” shall mean, with respect
to a particular Collaboration Compound or Product, a Third Party to whom GSK or
Pharmacopeia, as applicable, has granted a sublicense under any intellectual
property licensed to such Party pursuant to this Agreement.

 

1.83 “TARGET” shall mean a GSK
Target or a Pharmacopeia Target.

 

1.84 “TARGET PRODUCT PROFILE”
shall mean the projected product
profile ** for adoption by the JOINT STEERING COMMITTEE that shall provide,
with respect to each Target, a description of the commercially relevant range
of acceptable product performance of a PROOF-OF-CONCEPT COMPOUND against key
product characteristics, and which shall be used by Pharmacopeia and GSK to
guide and shape the progression of and development decisions for such
PROOF-OF-CONCEPT COMPOUND.

 

1.85 “TERM” shall have the meaning assigned
to such term in Section 12.1.2.

 

1.86 “TERRITORY” shall mean anywhere in the
world.

 

1.87 “THIRD PARTY” shall mean any entity
other than Pharmacopeia, GSK or an Affiliate of Pharmacopeia or GSK.

 

1.88 “TRACTABLE HIT” shall mean a compound identified by Pharmacopeia and considered by the JSC to be
active against a Target and meeting the Tractable Hit Criteria.

 

1.89 “TRACTABLE HIT CRITERIA” shall mean criteria set by the JSC for selecting
hits that are amenable to chemistry optimization. Any compound advanced into a
Lead Generation Program pursuant to the Agreement will be deemed to have met
the Tractable Hit Criteria irrespective of the actual attainment of all
Tractable Hit Criteria, if the JSC unanimously approves such action in advance.

 

9

 

1.90 “UNITED STATES” OR “U.S.” shall mean the
United States of America.

 

1.91 “VALID CLAIM” means a claim within an issued United States or foreign
patent that has not expired, lapsed, or been cancelled or abandoned, and that
has not been dedicated to the public, disclaimed, or held unenforceable,
invalid, or cancelled by a court or administrative agency of competent
jurisdiction in an order or decision from which no appeal can be taken or was
timely taken, including without limitation, through opposition, re-examination,
reissue or disclaimer.

 

1.92 “WORK PLAN” shall have the meaning
assigned to such term in Section 2.2.2(g).

 

1.93 “WRITTEN DISCLOSURE” shall have the
meaning assigned to such term in Section 14.1.

 

ARTICLE 2

 

OVERSIGHT OF THE COLLABORATION

 

2.1    IN GENERAL. Subject to all the provisions of
this Agreement, Pharmacopeia shall have principal responsibility for all
research, discovery and development activities with respect to Pharmacopeia
Development Compounds prior to exercise by GSK of one of its Options with
respect to such Program and Pharmacopeia Development Compounds, and GSK shall
have principal responsibility for all research, development and
commercialization activities with respect to GSK Development Compounds, unless
and until any such GSK Development Compound reverts to Pharmacopeia pursuant to
the applicable provisions of the Agreement for any such reversion.

 

2.2     THE JSC. As soon as practicable after the
Effective Date, the Parties shall establish a Joint Steering Committee (the “JSC”).
The JSC shall have review and oversight responsibilities for all research and
development activities performed under this Agreement during the Research Term,
as more specifically provided herein; provided, however, that the JSC shall
have no authority to amend this Agreement. Each Party agrees to keep the JSC
reasonably informed of its progress and activities during the Research Term. If
GSK elects to exercise one of its Options pursuant to Article 4 with respect to
a Pharmacopeia Development Compound, the JSC (and any applicable Subcommittee
including, but not limited to, the Patent Subcommittee) shall continue as a
vehicle to maintain information flow between GSK and Pharmacopeia regarding the
progression of such compound as a GSK Development Compound, including by
administering Patent matters pursuant to Article 8. Notwithstanding the above,
all decisions with respect to the development, progression or commercialization
of any such GSK Development Compound after GSK has exercised one of its Options
with respect to such compound shall be at the sole discretion of GSK as the
Party responsible under this Agreement for developing such compound, subject to
GSK’s obligations of diligence as set forth in this Agreement.

 

2.2.1  Membership. The JSC shall be comprised of an
equal number of representatives from each of GSK and Pharmacopeia. The exact
number of such representatives shall be three for each of GSK and Pharmacopeia,
or such other number as the Parties may agree. Each Party shall provide the
other with a list of its initial members of the JSC. Each Party may replace any
or all of its representatives on the JSC at any time upon written notice to the
other Party in 

 

10

 

accordance with Section 14.8 of this Agreement.
Such representatives shall include individuals within the senior management of
Pharmacopeia and the CEEDD, and those representatives of each Party shall,
individually or collectively, have expertise in business, pharmaceutical drug
discovery, development and commercialization. Any member of the JSC may
designate a substitute to attend and perform the functions of that member at
any meeting of the JSC. Each Party may, in its reasonable discretion, invite
non-member representatives of such Party to attend meetings of the JSC. If the
JSC chooses to designate a chairperson, such chairperson shall be appointed for
a one (1) year term and the right to name the chairperson shall alternate
between the Parties.

 

2.2.2        Responsibilities. The JSC shall be responsible
for overseeing each Program performed pursuant to this Agreement unless and
until GSK exercises one of its Options to a given Program, or unless and until
Pharmacopeia acquires the right hereunder to independently progress and
commercialize Products under a given Program. For avoidance of doubt, whenever
any matter is presented to the JSC or to either Party for decision under
Articles 2, 3 or 4 of this Agreement, such decision shall be communicated
through the JSC within no more than thirty (30) days, unless a different time
period is specifically stated in this Agreement or is otherwise mutually agreed
in writing by the Parties with respect to such matter. Failure by either Party
to communicate any such decision within the applicable thirty (30) day or other
specific time period shall be deemed a positive decision and thus an approval
by such Party with respect to such matter. Without limiting the foregoing, the
JSC shall perform the following functions, some or all of which may be
addressed directly at any given meeting of the JSC

 

(a)     determine the ** (other than the **, which shall
be determined prior to the Effective Date pursuant to Section 3.2.1) which
shall be pursued via Programs pursuant to this Agreement;

 

(b)     establish a Screening Program for each Initial
Target;

 

(c)     establish the schedule under which GSK shall
provide Pharmacopeia reagents and assays for each Initial Target, subject to
Section 3.2.3;

 

(d)     approve all Programs under this Agreement and
establish the Tractable Hit Criteria, the Lead Declaration Criteria and the
Candidate Selection Criteria (collectively “Criteria”) applicable for each
Program with respect to a given Target before the applicable Program is
commenced by Pharmacopeia, it being understood that all such Criteria may be
amended by the JSC;

 

(e)     determine when the Tractable Hit Criteria, the
Lead Declaration Criteria, the Candidate Selection Criteria and the
Proof-of-Concept Compound Criteria have been met for a Target;

 

(f)      establish Subcommittees as appropriate;

 

(g)     review and coordinate all of the Parties’
activities under this Agreement, including establishing an annual “Work Plan”
for the Parties’ activities in each Program. The Work Plan shall describe the activities to be
carried out by each Party; provided, however, that (i) the ** and (ii) each
Party shall have the right to 

 

11

 

determine
and implement, in its sole discretion, **. It is further understood that if **;

 

(h)     assign relative priorities to the Programs; and

 

(i)      such other responsibilities as may be assigned
to the JSC pursuant to this Agreement or as may be mutually agreed upon by the
Parties in writing from time to time.

 

2.2.3        Meetings. The JSC shall meet during each
Calendar Quarter during the Research Term, and more frequently as the Parties
deem appropriate, on such dates, and at such places and times, as provided
herein or as the Parties shall agree. Thereafter, the JSC shall meet, in person
or otherwise, at least twice per Contract Year to provide Pharmacopeia an
update regarding GSK’s progress in commercializing each Collaboration Compound
and otherwise to perform the responsibilities assigned to it under this
Agreement. Meetings of the JSC that are held in person shall alternate between
the offices of the Parties, or such other place as the Parties may agree. The
members of the JSC also may convene or be polled or consulted from time to time
by means of telecommunications, video conferences, electronic mail or
correspondence, as deemed necessary or appropriate.

 

2.2.4        Minutes. Minutes of JSC meetings shall be effective
only after approved by both Parties. With the sole exception of specific items
of the meeting minutes to which the members cannot agree and which are
escalated to the Executive Officers as provided in Section 2.2.4(d) below,
definitive minutes of all JSC meetings shall be finalized no later than thirty
(30) days after the meeting to which the minutes pertain, as follows:

 

(a)     Within ten (10) days after each JSC meeting, the
Party responsible for preparing the minutes (the “DRAFTING PARTY”) shall prepare
and distribute to all members of the JSC draft minutes of the meeting.

 

(b)     The non-Drafting Party shall then have ten (10)
days after receiving such draft minutes to collect comments thereon from its
members of the JSC and provide these to the Drafting Party.

 

(c)     Upon the expiration of such ten-day comment
period, the Parties shall have ten (10) days to discuss each other’s comments
and finalize the minutes. A member of the JSC from each Party shall sign and
date the final minutes. The signature of each Party’s JSC member upon the final
minutes shall indicate such Party’s assent to the minutes.

 

(d)     If at any time during the preparation and
finalization of the JSC minutes, the Parties do not agree on any issue with
respect to the minutes, such issue shall be resolved by the escalation process
as provided in Section 2.2.5. The decision resulting from the escalation
process shall be promptly recorded by the Drafting Party in amended finalized
minutes for said meeting.

 

2.2.5        Governance. Except as otherwise provided herein,
decisions of the JSC shall by made by **, and **. In the event that a **, then
either Party may, by written notice to the other, have such issue referred to
the Chief Executive Officer of Pharmacopeia, or such other person holding a
similar 

 

12

 

position
designated by Pharmacopeia from time to time, and the Senior Vice President for
External Drug Discovery of GSK, or such other person holding a similar position
designated by GSK from time to time (collectively, the “EXECUTIVE OFFICERS”),
for resolution. The Executive Officers shall meet promptly to discuss the
matter submitted and to determine a resolution. If the Executive Officers are
unable to determine a resolution in a timely manner, which shall in no case be
more than sixty (60) days after the matter was referred to them, the issue
shall be resolved as follows below. For clarity it is understood and agreed by
the Parties that any final decision on any matter subject to the authority of the
JSC and the dispute resolution and escalation process described in this Article
2 shall not be subject to further dispute resolution under Article 14 of this
Agreement.

 

(a)   General. In the event that, after **, then the ** as set forth above. In the
event that the **, then the **. Pharmacopeia and GSK shall **.
If Pharmacopeia and GSK ** who shall be **. Subject always to the ** below, the
**, and the **.

 

(b)   Determination by the Expert.

 

(1)   Tractable Hit Declaration; Lead Declaration. With respect to the Tractable Hit
Criteria or the Lead Declaration Criteria, the Expert will be asked to decide
whether any proposed further studies are meaningful and necessary and/or if the
Criteria have been achieved, or may reasonably be deemed to have been achieved based
on the overall properties of the applicable Collaboration Compounds.

 

(2)   **. With respect to the **, and will only have
the ** (i) **, or (ii) **. In ** for the applicable Program.

 

(c)     Establishment of Proof-of-Concept Compound
Criteria. ** or ** of such Criteria. If ** to such proposed Criteria in writing
within such thirty-day period, such failure to respond shall automatically be
deemed an acceptance of such Criteria.

 

(d)     Achievement of Proof-of-Concept Compound
Criteria. In the event that a unanimous vote is not obtained by the JSC
regarding the achievement of Proof-of-Concept Compound Criteria, and the
Executive Officers fail to resolve such disagreement between Pharmacopeia and
GSK as provided above, then **.

 

(e) ** by **.

 

(1)   In the event that ** or to **
shall not be **. However, in such a case, ** under this Agreement. It is
further understood that, in any case where ** that have been **. In such case,
such **.

 

(2)   (i)  In the event that, for a period of one (1)
year after receiving the Expert’s written decision with respect to necessary
studies in a Program in the case of Tractable Hit Criteria or Lead Declaration
Criteria, and with respect to **, then Pharmacopeia shall ** , or any such
longer period as **. In the event that ** under this Agreement.

 

(ii)  In the event that the **.

 

13

 

(3)   Subject to subparagraph (1)
above, in the event **, and shall **. If the **, then such ** ; provided,
however, that in no event shall **.

 

(4)   In the event **, then **. If **.
If **. If ** under this Agreement.

 

(5)   In the event **, or **. If **. If
**. If ** under this Agreement.

 

(6)   With respect to **. Pharmacopeia
shall have the **. If **, it shall **. If **. At the conclusion of **. If **,
under this Agreement.

 

2.2.6 Subcommittee(s). From time to time, the
JSC may establish subcommittees to oversee particular projects or activities,
as it deems necessary or advisable (each, a “Subcommittee”). GSK and
Pharmacopeia shall each have one (1) vote on each Subcommittee. Each
Subcommittee shall consist of such number of members of each Party as the JSC
determines is appropriate from time to time. Such members shall be individuals
with expertise and responsibilities in the areas of preclinical development,
clinical development, intellectual property, process sciences, manufacturing,
regulatory affairs, product development and/or product commercialization, as
applicable to the stage of development of the project or activity. One such
Subcommittee (the “Patent Subcommittee”) shall be responsible for overseeing
and recommending the strategy for patent filings and coordinating
patent-related matters including, but not limited to, the determination of
inventorship according to U.S. Patent Law (for Joint IP), the preparation,
filing and prosecution of all patent applications covered under this Agreement,
and the decision as to the countries where each such patent application will be
filed and prosecuted. Each Subcommittee shall meet with such frequency as the
JSC shall determine.

 

Each Subcommittee shall operate by unanimous
vote in all decisions. If, with respect to a matter that is subject to a
Subcommittee’s decision-making authority, the Subcommittee cannot reach
unanimity, the matter shall be referred to the JSC, which shall resolve such
matter in accordance with Section 2.2.5.

 

2.2.7 Expenses. Each Party shall bear its own
travel-related expenses and other costs with respect to its activities relating
to membership on the JSC or any Subcommittee.

 

2.2.8 The Joint Program Committee. In the event
that GSK has not exercised its Candidate Selection Option with respect to a
particular Target, but has preserved its PoC Option with respect to the
applicable Collaboration Compounds under a Program active against such Target by
making the requisite milestone payments pursuant to Section 6.2.1, due upon
achievement of the applicable Candidate Selection Criteria, then, after the
first dosing in the first FTIH study, but no later than forty-five (45) days
after such first dosing, ** shall present to ** the proposed Proof-of-Concept
Compound Criteria with respect to such Collaboration Compound. Within
forty-five (45) days after the completion of the first FTIH study, the JSC
shall establish a Joint Program Committee (the “Joint Program Committee”) for
such Pharmacopeia Development Compound, with equal representation and input
from both GSK 

 

14

 

and Pharmacopeia, for the purpose of developing
and agreeing upon the applicable PoC Studies in accordance with Section 2.2.9
with respect to such Proof-of-Concept Compound Criteria.

 

2.2.9 PoC Studies. GSK shall have the right to
participate equally with Pharmacopeia in the design and planning of the PoC
Studies via the Joint Program Committee. In the event that the JSC fails to
approve the PoC Studies as submitted by the Joint Program Committee within
forty-five (45) days, then the Chief Executive Officer of Pharmacopeia and the
Senior Vice President of External Drug Discovery of GSK shall meet to resolve
such matter within thirty (30) days. Notwithstanding the above, ** shall have
the **.

 

ARTICLE 3

 

DEVELOPMENT PROGRAM

 

3.1 INITIAL SCREENING TERM.

 

3.1.1        Screening.
During the Initial Screening Term, Pharmacopeia will screen each of the Initial
Targets against that portion of Pharmacopeia’s compound library as established
under a Work Plan pursuant to a Screening Program approved by the JSC for each
Target.

 

3.1.2        Development.
During the relevant Screening Program, Pharmacopeia will conduct activities as
described in the Work Plan for the relevant Program with the objective being to
identify Tractable Hits and develop Leads from such Tractable Hits. Pharmacopeia
will then conduct activities as described in the Work Plan for the relevant
Program, with the objective being to develop such Leads into Candidate
Selection Compounds and then clinical Proof-of-Concept Compounds, subject to
GSK’s Options.

 

3.2 SELECTION OF INITIAL TARGETS.

 

3.2.1        Initial Target Proposal
Schedule. The first ** shall be ** and **. The Parties shall agree in writing,
on or before the Effective Date, upon the Tractable Hit Criteria, Lead
Declaration Criteria and provisional Candidate Selection Criteria applicable
for the **. The ** shall be ** and accepted through the JSC within **. The **
shall be ** and accepted through the JSC within **. The ** shall be ** and
accepted through the JSC within **. The ** shall be ** and accepted through the
JSC within not more than **, upon a reasonable schedule agreed by the JSC such
that there is a continuous flow of Targets into Programs. Notwithstanding the
foregoing, if Pharmacopeia cannot, or does not, in its reasonable discretion **,
GSK shall **.

 

3.2.2        In the event either Party
identifies any issued patent **, the **. The **. The **. If **, (i) ** or (ii)
**. Notwithstanding the **. If **.

 

15

 

3.2.3        Provision of Reagents and
Assays. The reagents and assays for screening of the Initial Targets shall be
provided by ** on a reasonable schedule to be established by the JSC, **. **
after the Effective Date. In the event **.

 

3.3 RESTRICTION ON TARGETS / NONCOMPETE.

 

3.3.1  General Restrictions. Subject to all
applicable other provisions of this Agreement, Pharmacopeia shall not use GSK
Target IP or any Information developed or provided by GSK hereunder for any
purpose other than fulfillment of Pharmacopeia’s rights and responsibilities
with respect to Collaboration Compounds and Products under this Agreement. Subject
to all applicable other provisions of this Agreement, GSK shall not use
Pharmacopeia Target IP or any Information developed or provided by Pharmacopeia
hereunder during Pharmacopeia’s performance of a Program for any purpose other
than fulfillment of GSK’s rights and responsibilities with respect to
Collaboration Compounds and Products under this Agreement.

 

3.3.2   Basic Research Use of Targets. Subject to
Section 3.3.1, both GSK and Pharmacopeia shall be free to use any Target at any
time for basic research purposes (e.g., basic biological research, target
validation studies, target mechanism studies, performance of selectivity
screens, counterscreens, secondary or confirmatory screens, and the like)
outside the scope of this Agreement, either independently or with/for a Third
Party, provided that such use does not materially impair the commercial or
research value of any Program conducted pursuant to this Agreement.

 

3.3.3   Restrictions During **. Subject to Section
3.3.2, during any Screening Program with respect to a particular Target, **.

 

3.3.4 Failure to Attain Tractable Hit. Subject
to Section 3.3.1, GSK shall be free immediately to use independently or
with/for any Third Party an Initial Target for any purpose whatsoever, without
any obligation or payment of any kind to Pharmacopeia if, after a period of one
(1) year from the commencement by Pharmacopeia of actual screening of its
compound library against such Initial Target (or such extended time as may be
determined and agreed in writing by the JSC, it being understood by both
Parties that approval to such extension shall not be unreasonably withheld in
the event of reasonable progress resulting in substantial completion by
Pharmacopeia of the applicable Screening Program), Pharmacopeia has not
succeeded in attaining a Tractable Hit against such Initial Target. In such
case, the JSC shall have the right to immediately terminate the applicable
Screening Program; Pharmacopeia shall not be required to undertake any further
work with respect to such Target pursuant to this Agreement; and Pharmacopeia
shall promptly return to GSK all applicable GSK Know-How and GSK Information
and all remaining reagents and assays relating thereto provided by GSK under
this Agreement. In addition, in such case, all licenses under Section 5.1.1(a)
or Section 5.2.1(a), as the case may be, pertaining thereto shall terminate. Further,
during the ** (**) ** immediately following the JSC’s termination (if any) as
described above of the applicable Screening Program, Pharmacopeia shall **. Subject
to (i) any GSK IP, (ii) the obligation to return all GSK Know-How, GSK
Information, assays and reagents, and (iii) the ** (**) ** ** described in this
Section 3.3.4, Pharmacopeia will have no other obligations whatsoever to GSK
with respect to such Target.

 

16

 

3.3.5 Attainment of Tractable Hit. If
Pharmacopeia succeeds in attaining a Tractable Hit under a Screening Program
for an Initial Target during the first one (1) year period from the
commencement by Pharmacopeia of actual screening of its compound library
against such Initial Target (or such extended time period as may be determined
and agreed in writing by the JSC), then, subject to Article 9 and Section
3.3.1, **. Beyond such **. The scope of any such continued period of
exclusivity (i.e. beyond the ** described above) between the Parties shall be
expressly limited to apply only to **. As used herein, the **. Notwithstanding
the foregoing and subject to Section 3.3.1 and Article 9, it is understood
that, after the expiration of the ** (if applicable as described above in this
Section 3.3.5), (i) **, and (ii) **.

 

3.4 RESTRICTION
ON COMPOUNDS. Any compounds in **.

 

3.5 PHARMACOPEIA PROGRAM EXCLUSIVITY. Subject to all the other
provisions of this Agreement, Pharmacopeia shall have the exclusive right to
undertake the activities of each Program, including all scientific, legal and
regulatory activities, until such time, if ever, as GSK exercises an Option
with respect to such Program.

 

3.6 SUBCONTRACTING.
Pharmacopeia may engage Third Party subcontractors (including contract research
organizations) to perform certain of its obligations under this Agreement. Any
Third Party subcontractor to be engaged by Pharmacopeia to perform Pharmacopeia’s
obligations set forth in this Agreement shall meet the qualifications typically
required by Pharmacopeia for the performance of work similar in scope and
complexity to the subcontracted activity. The activities of any such
Third Party contractors shall be considered activities of Pharmacopeia under
this Agreement. Pharmacopeia shall be responsible for ensuring compliance by
any such Third Party contractors with the terms of this Agreement. In any case
in which Pharmacopeia engages a Third Party subcontractor, Pharmacopeia shall
obtain sole ownership of all inventions, data, Information and related
intellectual property rights made or developed by such Third Party
subcontractor involving the manufacture or use of any Target or Pharmacopeia
Development Compound or other Collaboration Compound.

 

3.7 REPORTS; PUBLICATION OF CLINICAL TRIALS RESULTS.

 

3.7.1 Reports. During the Research Term and for such time thereafter
that any Collaboration Compound is being actively researched or developed by
either Party or its Sublicensee(s), Pharmacopeia and GSK shall provide to the
JSC each Calendar Quarter written progress reports on the status of the
Programs, data associated with the Parties’ respective research and development
efforts, as applicable, and the likelihood of and timetable for completion of
the respective Programs or development activities and advancement of compounds
to the next phase of research or development, as applicable.

 

3.7.2 Publication of Clinical Trials Results. Each of GSK and
Pharmacopeia shall have the right to publish summaries of results from any
human clinical trials conducted by such Party or conducted by the other Party
under this Agreement, without requiring the consent of the other Party. The
Parties shall discuss and reasonably cooperate in order to facilitate the process
to be employed in order to ensure the publication of any such summaries as
required on the clinical trial registry of each respective Party, and shall
provide the other Party via submission to the Patent Subcommittee established
under Section 2.2.6, at least thirty (30) days prior notice to review the
clinical trials results to be published for the purposes of preparing any
necessary Patent filings.

 

17

 

3.8 GSK GUIDANCE. During the Lead Generation Program and the Lead
Optimization Program, GSK, through the JSC, may provide Pharmacopeia with
reasonable guidance and consultation in the conduct of such Programs if the
Parties so desire. If Pharmacopeia develops a compound as a Pharmacopeia
Development Compound, GSK shall provide, through the JSC, in vivo preclinical
and toxicology guidance to Pharmacopeia to assist Pharmacopeia in developing
its own clinical trials. In addition, GSK shall grant Pharmacopeia access to
GSK’s annual clinical updates for all Candidate Selection Compounds which GSK
elects to develop as GSK Development Compounds pursuant to the Candidate
Selection Option.

 

3.9 ENABLING STUDIES. GSK shall have the right at all times during the
Research Term, at its own expense, to conduct enabling activities (“Enabling
Studies”) which the JSC deems necessary or useful for the purpose of
pre-clinical and clinical activities relating to the Pharmacopeia Development
Compounds. Pharmacopeia shall offer GSK reasonable cooperation in relation to
such enabling activities including, subject to availability, the transfer of
quantities of compounds, if necessary.

 

3.10 PHARMACOPEIA DILIGENCE. Pharmacopeia shall, and shall ensure that
its Sublicensees, Affiliates and subcontractors, if any, ** in an effort to meet
Pharmacopeia’s commitments with respect to such Programs and any development
activities as established by the JSC. With respect to any Program, the Parties
understand and agree that, so long as Pharmacopeia has satisfied its
responsibilities under the applicable Work Plan with respect to such Program,
then Pharmacopeia shall be deemed to have been diligent in its performance of
such Program, regardless of the final result of such Program. For example, if
Pharmacopeia has performed a Screening Program as specified by the JSC,
Pharmacopeia shall be deemed to have been diligent in its performance of such
Screening Program, whether or not Pharmacopeia succeeded in attaining a
Tractable Hit. It is further understood and agreed that, in the event the
Parties are unable to agree on the content of a particular Work Plan, such
failure to agree shall not be deemed a lack of diligence on the part of either
Party under this Agreement.

 

ARTICLE 4

 

GSK’S OPTIONS

 

4.1     (a)  For the avoidance of doubt,
the Parties understand and agree that GSK’s Option rights, as described more
fully below and subject to the terms of Section 4.2, shall be exclusive Options
over the Programs hereunder, and unless and until the earliest of such time (if
any) as (i) GSK fails to maintain its Option rights under a given Program, or
(ii) GSK declines to exercise all its outstanding Options with respect to any
such Program, or (iii) the Program Term ends, Pharmacopeia shall not have the
right to offer or negotiate with any Third Party with respect to the grant to
such Third Party of any right or license or other encumbrance of any kind in or
to any Collaboration Compound or any related Pharmacopeia IP or Joint IP under
such Program.

 

(b) 
CANDIDATE SELECTION OPTION. On a Target–by-Target basis,
if GSK has timely paid the milestone payment(s) pursuant to Section 6.2.1 due
upon achievement of the applicable Lead Declaration Criteria, Pharmacopeia
shall notify the JSC when it believes it has successfully developed a compound
that meets the Candidate Selection Criteria. If the JSC agrees that such 

 

18

 

compound is a Candidate Selection Compound, subject to Section 4.2, GSK
shall have the exclusive option (“Candidate Selection Option”), exercisable in
its sole discretion within sixty (60) days after the written declaration by the
JSC that the compound is a Candidate Selection Compound, to select and progress
such Candidate Selection Compound (and, at GSK’s sole discretion, any
corresponding Back-up Compounds) for all further development and
commercialization, subject to the requirements that GSK use commercially
reasonable diligence efforts as set forth for GSK in this Agreement, and
subject to GSK’s obligation to pay the milestone payments set forth in Sections
6.2.1(b) and 6.2.2.

 

4.2     DEVELOPMENT BY PHARMACOPEIA. Each time that GSK has progressed **
as a result of its exercise of the Candidate Selection Option, Pharmacopeia
shall have **, subject to GSK’s PoC Option below and GSK’s obligation to pay
the milestone payments set forth in Sections 6.2.1(b)(2), 6.2.1(c) and 6.2.3;
provided that the JSC agrees that Pharmacopeia has the capacity on its own (or
through the use of a contract research organization) to complete development
activities until the Proof-of-Concept Compound Criteria have been met for such
Candidate Selection Compound.

 

4.3     PoC
OPTION. In the event that GSK elects not to exercise its Candidate Selection
Option when triggered for a given Pharmacopeia Development Compound, or if
Pharmacopeia is progressing a Candidate Selection Compound pursuant to Section
4.2, Pharmacopeia may, at its sole discretion, continue to progress, up to the
completion of the PoC Studies, the development of such Pharmacopeia Development
Compound or Candidate Selection Compound in order to satisfy the
Proof-of-Concept Compound Criteria. If GSK has timely paid all of the milestone
payments pursuant to Sections 6.2.1 and 6.2.3, due upon (i) **, (ii) **, (iii) **,
and (iv) ** then, once the compound has been demonstrated to satisfy the
Proof-of-Concept Compound Criteria **, GSK shall have the exclusive option (“PoC
Option”), exercisable in its sole discretion within sixty (60) days after such
compound has been demonstrated to so satisfy the Proof-of-Concept Compound
Criteria, to progress the development of such Proof-of-Concept Compound (and,
at GSK’s sole discretion, any corresponding Back-up Compounds) from Phase III
(post-proof of concept) through to completion, ** in this Agreement, and
subject to GSK’s obligation to pay the remaining milestone payments set forth
in Section 6.2.3. If GSK declines to exercise the PoC Option within such
sixty-day period, Pharmacopeia may, at its sole discretion, independently
pursue development of such Pharmacopeia Development Compound subject to its
obligations of Right of First Negotiation and milestone and royalty payments to
GSK under this Agreement.

 

4.4     GSK RIGHTS AND OBLIGATIONS
UPON EXERCISE OF AN OPTION.

 

4.4.1        License. If GSK exercises any of its Options
for a given Pharmacopeia Development Compound, GSK shall have the exclusive,
fully sublicensable, worldwide right and license to further research, develop
and commercialize such compound (as a GSK Development Compound) together with,
at GSK’s sole discretion, any corresponding Back-up Compounds, and shall make
payments, as applicable, to Pharmacopeia as provided in this Agreement.

 

4.4.2        GSK Diligence. Upon GSK’s
exercise of the Candidate Selection Option or PoC Option, as applicable, GSK
shall use, and shall ensure that its Affiliates, Sublicensees and
subcontractors use, ** consistent with the manner in which GSK would develop
one of its own products having a similar technical and scientific profile, 

 

19

 

level of development complexity and potential commercial or strategic
value, in developing and commercializing the GSK Development Compound.

 

4.4.3  Right to Additional
Collaboration Compounds. In the event that GSK is unable to successfully
develop the particular GSK Development Compound and Back-up Compounds, if any,
licensed pursuant to Section 4.4.1 based on GSK’s exercise of an Option, GSK
shall so notify Pharmacopeia in writing. Within sixty (60) days after providing
such notice to Pharmacopeia, subject to Section 6.2, GSK shall have the right
to include, under the already-exercised Option, additional Collaboration
Compounds with respect to the same Target, and such additional Collaboration
Compounds (i) shall be deemed GSK Development Compounds and included within the
license pursuant to Section 4.4.1, **.

 

4.4.4  ** of **.

 

(a) 
If, at any time during ** then, **. In the event that **, then the
provisions of **. However, in the event that **.

 

(b) 
If, as a result of such **, then **. However, if such ** then, **. For
the avoidance of doubt, this Section **.

 

4.4.5  GSK Cessation of
Development. After GSK’s selection of a compound as a GSK Development Compound
pursuant to any of the Options, GSK may, at its sole discretion and without any
penalty or liability of any kind, discontinue its development or
commercialization of such GSK Development Compound at any time, for any reason
or for no reason at all. In such event, GSK will promptly inform Pharmacopeia
in writing of such termination, and all licenses to GSK under the Pharmacopeia
IP relating to the applicable GSK Development Compound and any corresponding
Product shall revert back to Pharmacopeia. GSK shall grant to Pharmacopeia the
license set forth in Section 5.1.1(b). In such case, GSK shall promptly provide
Pharmacopeia with any Information, materials and data resulting from the
Program that is reasonably necessary or important for Pharmacopeia to continue
the development or commercialization of the applicable compound, and GSK shall
cooperate with Pharmacopeia to provide a smooth transfer of such Information,
materials and data as soon as reasonably practicable.

 

4.5 
PHARMACOPEIA TRANSFER COOPERATION. Upon GSK’s exercise of an
Option, Pharmacopeia shall provide GSK with any Information, materials and data
that is reasonably necessary or important for GSK to continue the development
or commercialization of the applicable compound(s), and Pharmacopeia shall
cooperate with GSK to provide a smooth transfer of such Information, materials
and data as soon as reasonably practicable after the Option is exercised.

 

4.6  TERMINATION
OF PHARMACOPEIA LICENSE. Upon the exercise by GSK of any of its Options for a
given Pharmacopeia Development Compound active against a particular Target,
Pharmacopeia’s research license under the GSK Target IP and other relevant GSK
IP and GSK Information pursuant to Section 5.1.1(a) shall terminate with
respect to the applicable Target and all reagents, assays and other subject
matter provided by GSK.

 

20

 

4.7  RIGHT
OF FIRST NEGOTIATION. In the event that GSK has made all of the payments
required to sustain its Options hereunder with respect to a particular
Target/Program (as provided in Sections 4.1 and 4.3, as the case may be), but
declines to exercise all such Options, and Pharmacopeia seeks to either (i) **,
or (ii) **, ** shall notify ** in writing, and ** shall have an exclusive
option for a right of first negotiation (the “Right of First Negotiation”) to
enter into an agreement with ** for such development and/or commercialization
or outlicense of such Pharmacopeia Development Compound on **. GSK shall
provide written notice to Pharmacopeia of GSK’s decisions to exercise or
decline the Right of First Negotiation within ** after Pharmacopeia has
provided such written notice. If the Parties are unable to agree on such terms
within a period of ** after Pharmacopeia has provided the written notice set
forth above (or within any extended period that is mutually agreed in writing
by the Parties), then **. In such case, or if **. For the avoidance of doubt,
the **.

 

4.8  MILESTONE
PAYMENTS. As described in this Article 4, GSK’s Option rights are conditioned
on the payment of all applicable milestones. It is understood that each
milestone payment set forth in Section 6.2 is payable upon achievement of the
applicable milestone event or criteria. It is not intended that any language in
this Article 4 be interpreted to the contrary.

 

21

 

ARTICLE 5

 

GRANT OF RIGHTS

 

5.1     LICENSE GRANTS.

 

5.1.1  License
Grants to Pharmacopeia.

 

(a) Subject to the terms and conditions of this Agreement, GSK hereby
grants to Pharmacopeia a non-exclusive, royalty-free license, without the right
to sublicense (except to a Pharmacopeia Affiliate), under all its rights in the
GSK IP and the Information generated by GSK to the extent necessary for
Pharmacopeia to carry out its obligations under the Programs during the
Research Term.

 

(b)   Subject to the terms and
conditions of this Agreement, in the event that (i) GSK discontinues its
development or commercialization of any GSK Development Compound at any time
pursuant to Section 4.4.5, or (ii) Pharmacopeia acquires the right pursuant to
the provisions of Article 2 to independently progress the final development and
commercialization of any Collaboration Compound, or (iii) GSK declines to
exercise all of its outstanding Options to a given Program, then all applicable
licenses granted to GSK by Pharmacopeia with respect to the Pharmacopeia IP or
the Joint IP (as applicable) shall terminate immediately, and GSK hereby grants
to Pharmacopeia, and Pharmacopeia shall have, an exclusive, worldwide license,
with the right to sublicense, under the relevant GSK IP and GSK’s interest in
the Joint IP, to make, have made and use such GSK Development Compound (and any
corresponding Back-Up Compounds) as a Pharmacopeia Development Compound, and to
make, have made, use, sell, offer to sell and import Products based upon or
incorporating such Pharmacopeia Development Compound (or any corresponding
Back-Up Compounds), for any and all indications in the Field. For the avoidance
of doubt, any license granted under this Section 5.1.1(b) shall apply solely to
such GSK Development Compound and any corresponding Back-Up Compounds or Product.
In any such event, Pharmacopeia shall be obligated to make the applicable
milestone and royalty payments to GSK provided for in this Agreement.

 

5.1.2  License
Grants to GSK.

 

(a)  Subject to the terms and
conditions of this Agreement, Pharmacopeia hereby grants to GSK a
non-exclusive, royalty-free license, without the right to sublicense (except to
a GSK Affiliate), under all its rights in the Pharmacopeia IP and the
Information generated by Pharmacopeia to the extent necessary for GSK to carry out
its obligations under the Programs during the Research Term.

 

(b)   Subject to the terms and
conditions of this Agreement, upon exercise of an Option by GSK with respect to
a Collaboration Compound active against a particular Target in a particular
Program, Pharmacopeia hereby grants to GSK, and GSK shall have, an exclusive,
worldwide, license, with the right to sublicense, under the relevant
Pharmacopeia IP and Pharmacopeia’s interest in the Joint IP, to make, have made
and use 

 

22

 

such Collaboration Compound (and any corresponding Back-up Compounds)
as a GSK Development Compound, and to make, have made, use, sell, offer to sell
and import Products based upon or incorporating such GSK Development Compound
(or any corresponding Back-up Compounds), for any and all uses and indications
in the Field. For the avoidance of doubt, any license granted under this
Section 5.1.2(b) shall apply solely to such Collaboration Compound and any
corresponding Back-Up Compounds or Product. In any such event, GSK shall be
obligated to make the applicable milestone and royalty payments to Pharmacopeia
provided for in this Agreement.

 

(c)   If **, and if **, then **.

 

5.2  SUBLICENSES. Subject to the
terms and conditions of this Agreement, the Parties shall have the right to
sublicense the rights granted to them, respectively in Sections 5.1.1(b) and 5.1.2(b)
and (c), provided that the sublicensing Party shall provide the other Party
with at least the following information with respect to each Sublicensee: (i)
the identity of the Sublicensee; (ii) a description of the Collaboration
Compound or Product, and the rights granted to the Sublicensee; and (iii) the
territory in which the Product will be sold. Each such sublicense shall be consistent
with all the terms and conditions of this Agreement, and shall be **. The
sublicensing Party shall **. No sublicense **.

 

5.3  ** ACTIVITIES. It is
understood that **, and that **. Notwithstanding the **. Accordingly, ** (i) **,
or (ii) **.

 

ARTICLE 6

 

EQUITY INVESTMENT; MILESTONES AND ROYALTIES;
PAYMENTS

 

6.1     PAYMENTS AND INVESTMENTS BY GSK.

 

6.1.1        EQUITY INVESTMENT. GSK may purchase, from Pharmacopeia, Common Stock on
the terms set forth in the Warrant.

 

6.1.2        CASH PAYMENTS TO PHARMACOPEIA. GSK agrees to pay Pharmacopeia the sum
of US Fifteen Million Dollars ($15,000,000) cash, payable **, non-refundable
except as set forth in Section 12.2.5, at the times and upon the fulfillment of
the conditions set forth in the following paragraphs (a) through (c):

 

(a) 
First Tranche of Cash:  Pharmacopeia will submit an invoice to GSK on
or about the Effective Date in the amount of US Five Million Dollars
($5,000,000), and GSK will pay such amount to Pharmacopeia within thirty (30)
days of receipt of such invoice.

 

(b)  **:   Within thirty (30) days of receipt by GSK of
a report of results which clearly verifies that **.

 

(c)  **:   Within thirty (30) days of receipt by GSK of
a report of results which clearly verifies that **.

 

23

 

6.2  MILESTONE
PAYMENTS TO PHARMACOPEIA. Each Party shall be responsible for funding its own
research, development and commercialization activities hereunder. In
consideration for GSK’s Option rights hereunder, GSK shall pay to Pharmacopeia
the following non-refundable milestone payments upon the occurrence of each
event set forth below:

 

6.2.1        (a) **.
GSK shall pay to Pharmacopeia, on a Target-by-Target basis, ** upon each of (i)
**, and (ii) **.

 

(b)  **. GSK shall pay to Pharmacopeia, on a
Target-by-Target basis, one or the other of the following milestone payments
upon each of (i) **, and (ii) **:

 

(1)   **, or

 

(2)   **.

 

(c)  **. In the event that **.

 

6.2.2        **

 

GSK shall pay to Pharmacopeia the following
further milestone payments **:

 

 

	
  Milestone
  Event

  	
   

  	
  Milestone Payment

  (U.S. Dollars)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  

 

6.2.3        **. GSK
shall pay to Pharmacopeia the following further milestone payments **:

 

	
  Milestone
  Event

  	
   

  	
  Milestone Payment (U.S. Dollars)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  

 

24

 

6.2.4  **.
GSK shall pay to Pharmacopeia an **. Such payment shall be made **.

 

6.2.5  No
Withholding. All payments to Pharmacopeia pursuant to Sections 6.1 and 6.2
shall be made without withholding for taxes or other charges.

 

6.3                 ROYALTY PAYMENTS TO PHARMACOPEIA. Subject to
Section 6.3.1(c), 6.3.2 and 6.4, GSK shall pay to Pharmacopeia royalties as
follows:

 

6.3.1  Royalty
Payments.

 

(a)  Royalties
based on **. Subject to the provisions of Sections 6.3.1(c), 6.3.2, and 6.4,
GSK shall pay Pharmacopeia a royalty on the annual Net Sales of each Product by
GSK, its Affiliates or Sublicensees in the Territory according to the following
schedule:

 

(i)        **;

 

(ii)       **;

 

(iii)      **;

 

(iv)      **.

 

(b)  **.
 Subject to the provisions of Sections
6.3.1(c), 6.3.2 and 6.4, GSK shall pay Pharmacopeia a royalty on annual Net
Sales of each Product by GSK, its Affiliates or Sublicensees in the Territory
according to the following schedule:

 

(i)        **;

 

(ii)       **;

 

(iii)      **;

 

(iv)      **;

 

(c) **.

 

(i) **

 

A.            **; or

 

B.            **. For purposes of this
Section 6.3.1, **. As used herein, the **. It is understood that **.

 

(ii)  Subject always to Section 6.3.1(c)(i) and to
Section 6.4, the **. However, notwithstanding the preceding sentence, it is
understood and agreed that the royalties shown in Section 6.3.1(a) and (b)
shall ** as set forth below, and shall be fully payable, for any country of
sale in which **.

 

A.            **.

 

25

 

B.            **.

 

C.            **.

 

D.            **. Notwithstanding
the preceding sentence, in the case where there is, **. Within ** from such **.

 

As used in
this Section 6.3, a claim covering an ** shall mean a **.

 

6.3.2  Period
of Royalty Obligation. Subject always to Section 6.3.1(c)(i) and
Section 6.4, for each Product, GSK
shall be required to pay royalties under Section 6.3.1, on a country-by-country
basis, for a period beginning on the ** until the date that is the **.

 

6.4  **.

 

6.4.1 Subject to the final sentence of this Section 6.4.1, **.
In no event shall the royalty due Pharmacopeia for any calendar quarter, with
respect to any such Product, be **.

 

6.4.2 If Pharmacopeia and GSK
do not agree pursuant to Section 6.4.1 that a Third Party license is necessary
for GSK, the Parties shall ** for a **. If the **. If the **.

 

6.5  MILESTONE
AND ROYALTY PAYMENTS TO GSK

 

6.5.1.       General. In (i) **,
Pharmacopeia shall pay to GSK milestones and royalty payments as set forth in
this Section 6.5, as applicable below, worldwide:

 

6.5.2.       Milestones
shall be payable by Pharmacopeia to GSK in the event that Pharmacopeia assumes
responsibility for development pursuant to any of the scenarios described above
in Section 6.5.1(i), (ii) or (iii), and in accordance with the following:

 

(i) If Pharmacopeia **.

 

(ii) If Pharmacopeia **.

 

(iii) If Pharmacopeia **.

 

(iv) The milestones payable under this Section 6.5.2 **.

 

6.5.3.       Royalties
shall be payable by Pharmacopeia to GSK in the event that Pharmacopeia assumes
responsibility for development pursuant to any of the scenarios described above
in Section 6.5.1(i), (ii) or (iii), and in accordance with the following:

 

(i) If Pharmacopeia **.

 

(ii)  If Pharmacopeia **.

 

26

 

(iii)  If Pharmacopeia **.

 

(iv)  If Pharmacopeia **.

 

(v)  The royalties set forth in
subparagraphs (i) – (iv) of this Section 6.5.3 shall be **.

 

(vi)  The royalties set forth in
subparagraphs (i) – (iv) of this Section 6.5.3 shall be subject, **.

 

6.6  PAYMENTS.

 

6.6.1        Commencement.
Beginning with the Calendar Quarter in which the First Commercial Sale for an applicable
Product is made and for each Calendar Quarter thereafter, royalty payments owed
to a Party pursuant to Section 6.3 or 6.5.3 (in each case, the “PAYEE”) shall
be paid within forty-five (45) calendar days following the end of each such
Calendar Quarter. Each royalty payment shall be accompanied by a report,
summarizing the total Net Sales for the applicable Product during the relevant
Calendar Quarter and the calculation of royalties, if any, due thereon. In the
event that no royalties are payable in respect of a given Calendar Quarter, the
Party making the payments (the “PAYOR”) shall submit a royalty report so
indicating.

 

6.6.2        Mode of
Payment. All payments due under this Agreement shall be payable, in full, in
U.S. dollars, regardless of the country(ies) in which sales are made or in
which payments are originated. For the purposes of computing Net Sales of
Products sold in a currency other than U.S. dollars, if GSK is the Payor, such
currency shall be converted into U.S. dollars using the average exchange rates
as calculated and utilized by GSK’s group reporting system and published
accounts for the pertinent quarter or year to date. If Pharmacopeia is the
Payor, such currency shall be converted into U.S. dollars as calculated at the
actual average rates of exchange for the pertinent quarter or year to date, as
used by Pharmacopeia in producing its quarterly and annual accounts, as
confirmed by Pharmacopeia’s auditors. Subject to Sections 6.4 and 6.8, such
payments shall be without deduction of exchange, collection or other charges.

 

6.6.3        Records
Retention. Commencing with the First Commercial Sale of a Product, the Payor
shall keep complete and accurate records pertaining to the sale of such
Products, for a period of ** (**) ** after the year in which such sales
occurred, and in sufficient detail to permit the Payee to confirm the accuracy
of the royalties paid by the Payor hereunder.

 

6.6.4        Expatriated
Payments. If by law, regulation, or fiscal policy of a particular country,
conversion into United States dollars or transfer of funds of a convertible
currency to the United States is restricted or forbidden, the Payor shall give
the Payee prompt written notice of such restriction, which notice shall satisfy
the payment deadlines in this Agreement. The Payor shall pay any amounts due to
the Payee through whatever lawful method it chooses, including without
limitation making such payments in the local currency of such country,

 

27

 

provided such choice is
consistent with seeking to make the payment in the most expeditious manner
possible.

 

6.7  AUDITS.
During the term of this Agreement and for a period of ** (**) ** thereafter, at
the request and expense of the Payee, the Payor shall permit an independent,
certified public accountant of nationally recognized standing appointed by the
Payee, and reasonably acceptable to the Payor, at reasonable times and upon
reasonable notice, but in no case no more than once per calendar year
thereafter, to examine such records as may be necessary for the sole purpose of
verifying the calculation and reporting of Net Sales and the correctness of any
royalty payment made under this Agreement for any period within the preceding
** (**) years. Results of any such examination shall be made available to both
Payor and Payee. The independent, certified public accountant shall disclose to
the Payee only the royalty amounts which the independent auditor believes to be
due and payable hereunder to the Payee, and shall disclose no other information
revealed in such audit. Any and all records examined by such independent
accountant shall be deemed the Payor’s Confidential Information which may not
be disclosed by said independent, certified public accountant to any Third
Party. If, as a result of any inspection of the books and records of the Payor,
it is shown that a Payee’s payments under this Agreement were less than the
amount which should have been paid, then the Payor shall make all payments
required to be made to eliminate any discrepancy revealed by said inspection
within sixty (60) days. The Payee shall pay the reasonable costs of the audit.

 

6.8  TAXES.

 

6.8.1  Sales
or Other Transfers. The recipient of any transfer or license under this
Agreement of Pharmacopeia IP, GSK IP, Joint IP, Information, Collaboration
Compounds or Products, as the case may be, shall be solely responsible for any
sales, use, value added, excise or other non-income taxes applicable to such
transfer.

 

6.8.2  Withholding.
In the event that the Payor, or any of its Affiliates or Sublicensees is
required to withhold any tax to the tax or revenue authorities in any country
regarding any payment to the Payee due to the laws of such country: (A) such
amount shall be promptly paid by the Payor or its Affiliate or Sublicensee for
and on behalf of the Payee to the appropriate governmental authority; (B) such
amount shall be deducted from the payment to be made by the Payor; and (C) the
Payor shall promptly notify the Payee of such withholding and, within a
reasonable amount of time after making such deduction, furnish the Payee with
proof of payment of such tax together with copies of any tax certificate or
other documentation evidencing such withholding sufficient to enable the Payee
to support a claim, if permissible, for income tax credit in respect of any
amount so withheld. Each of Payor and Payee agrees to cooperate with the other
in claiming exemptions from such deductions or withholdings under any agreement
or treaty from time to time in effect. However, any such deduction or
withholding shall be an expense of and borne solely by the Payee.

 

6.9  THIRD
PARTY LICENSES NEEDED BY PHARMACOPEIA. Pharmacopeia shall **. Such payments
shall ** directly to the relevant Third Party in accordance with the provisions
of the applicable Third Party license agreement. Pharmacopeia shall **. Except
as may arise under Section 3.2.2, the preceding sentence shall not apply to any
licenses or other rights specifically relating to any Target.

 

28

 

6.10  COMPULSORY
LICENSES. In the event that a governmental agency in any country in the
Territory grants, or compels GSK to grant a license to any Third Party for a
Product, other than to an Affiliate or Sublicensee of GSK, GSK shall be permitted
to do so.

 

6.11 
PAYMENTS BY AFFILIATES AND SUBLICENSEES. In each instance wherein “GSK”
or “Pharmacopeia” is responsible for making a payment pursuant to this
Agreement, such responsibility also shall extend to such Party’s Affiliates and
Sublicensees, as applicable.

 

 

ARTICLE 7

[INTENTIONALLY OMITTED]

 

 

ARTICLE 8

 

INTELLECTUAL PROPERTY AND PATENT RIGHTS

 

8.1  PATENT
PROSECUTION AND RELATED ACTIVITIES.

 

8.1.1  PHARMACOPEIA PATENTS. Subject to
Sections 2.2.6 and 8.1.3, Pharmacopeia shall be responsible for preparing,
filing, prosecuting and maintaining, by itself or with Third Parties, the
Pharmacopeia Patents and conducting any interferences, re-examinations,
reissues and oppositions relating to such Patents.

 

8.1.2  GSK PATENTS. Subject to Sections 2.2.6
and 8.1.3, GSK shall be responsible, at its sole expense, for preparing,
filing, prosecuting and maintaining, by itself or with Third Parties, the GSK
Patents and conducting any interferences, re-examinations, reissues and
oppositions relating to such Patents.

 

8.1.3  JOINT PATENTS AND PHARMACOPEIA PATENTS
LICENSED TO GSK.

 

(a)           Prosecution by GSK. Subject to Sections 2.2.6 and 8.1.3(c), upon
exercise of an Option with respect to any Collaboration Compound, GSK shall
become responsible, at its sole expense, for preparing, filing, prosecuting and
maintaining (i) any Joint Patent claiming Collaboration Compounds active
against the same Target as such Collaboration Compound, or methods of making or
using the same, and (ii) any Pharmacopeia Patent filed after the Effective Date
pursuant to this Agreement and claiming the composition of matter of such
Collaboration Compounds, or methods of making or using such compounds, and for
conducting any interferences, re-examinations, reissues and oppositions
relating to such Patents identified in (i) and (ii). It is understood that
category (ii) in the preceding sentence is intended to include only those
Pharmacopeia Patents directly applicable to such Collaboration Compounds, and
does not include any Pharmacopeia Patent that also is applicable to other

 

29

 

activities of Pharmacopeia
outside the relevant Program, unless the Patent Subcommittee decides that it is
practicable to file a corresponding divisional application.

 

(b)           Prosecution
by Pharmacopeia. Except as otherwise provided in Section 8.1.3(a), Pharmacopeia
shall be responsible for preparing, filing, prosecuting and maintaining Joint
Patents and conducting any interferences, re-examinations, reissues and
oppositions relating to such Joint Patents. ** 
In addition, subject to Section 8.1.3(c), with respect to each
Collaboration Compound licensed to Pharmacopeia pursuant to Section 5.1.1(b),
Pharmacopeia shall become responsible, at its sole expense and discretion, for preparing,
filing, prosecuting and maintaining in such countries as it deems appropriate,
(i) any Joint Patent claiming Collaboration Compounds active against the same
Target as such Collaboration Compound, or methods of making or using the same,
and (ii) any GSK Patent filed after the Effective Date pursuant to this
Agreement and claiming the composition of matter of such Collaboration
Compounds, or methods of making or using such compounds (unless, pursuant to
this Agreement, GSK is developing or commercializing another Collaboration
Compound within the scope of the claims of the same GSK Patent, in which case
GSK will remain responsible pursuant to Section 8.1.2), and for conducting any
interferences, re-examinations, reissues and oppositions relating to such
Patents identified in (i) and (ii). It is understood that category (ii) in the
preceding sentence is intended to include only those GSK Patents directly
applicable to such Collaboration Compounds, and does not include any GSK Patent
that also is applicable to other activities of GSK outside the relevant
Program, unless the Patent Subcommittee decides that it is practicable to file
a corresponding divisional application.

 

(c)           Cooperation;
Request to Responsible Party. Each of GSK and Pharmacopeia shall keep the other
fully informed as to the status of patent matters described in this Section
8.1.3 including, without limitation, by providing the Patent Subcommittee the
opportunity to fully review and comment on any substantive documents within the
(i) GSK Patents filed after the Effective Date pursuant to this Agreement and
claiming a Collaboration Compound, or methods of making or using such a
compound, (ii) Joint Patents or (iii) Pharmacopeia Patents filed after the
Effective Date pursuant to this Agreement and claiming a Collaboration
Compound, or methods of making or using such a compound, being prosecuted
pursuant to Sections 8.1.1, 8.1.2 and 8.1.3 as the case may be, which will be
filed in any patent office as far in advance of filing dates as feasible, and
providing to the other copies of any substantive documents that such Party
receives from such patent offices promptly after receipt, including notice of
all interferences, reissues, re-examinations, oppositions or requests for
patent term extensions. GSK and Pharmacopeia shall each reasonably cooperate
with and assist the other at its own expense in connection with such
activities, at the other Party’s request. Either Party may request the other
Party to file a patent application claiming any invention within the Joint IP
for which the other Party has responsibility as set forth in Section 8.1.3(a)
and (b). For clarity, it is understood and agreed by the Parties that each
Party shall have the right to provide timely review, comment and input to the
other Party on the content of all such substantive correspondence to be filed
in any patent office or with any Third Party with

 

30

 

respect to any Pharmacopeia Patent, GSK Patent or Joint Patent, and
that the other Party shall reasonably take into account such comments and input
in preparing any such filings or correspondence.

 

8.1.4  Ownership.
Ownership of Patents shall be determined based upon US Patent Laws.

 

8.1.5  Election Not to Prosecute. Upon
ninety (90) days written notice to the other Party, the responsible Party may elect to discontinue the
prosecution of any patent applications filed pursuant to Sections 8.1.3(a) or
(b) and/or not to file or conduct any further activities with respect to the Patents described in such Sections. In
the event the responsible Party declines to file or, having filed, fails to
further prosecute or maintain any Patents filed pursuant to this Agreement, or
to conduct any interferences, re-examinations, reissues, oppositions with
respect thereto, the other Party shall have the right to prepare, file,
prosecute and maintain such Patents in such countries as it deem appropriate,
and conduct any interferences, re-examinations, reissues or oppositions at its
sole expense. The other Party agrees to cooperate in any manner reasonably
requested in connection with any such actions by such Party, at the expense of
the requesting Party.

 

8.2  PERMITTED
DISCLOSURES. Following a written notice from the other Party hereto, the
Parties shall in good faith grant each other permission, not to be unreasonably
withheld, to disclose in the specification of a patent application filed by the
other Party pursuant to this Agreement, any Pharmacopeia IP, GSK IP, or Joint
IP necessary to support and enable claims in such patent applications.

 

8.3      THIRD
PARTY INFRINGEMENT.

 

8.3.1  Licensed Patents.

 

(a)  A Party shall have the first
right, but not the obligation, to initiate legal action to enforce all Patents
licensed to such Party pursuant to Section 5.1.1(b) or 5.1.2(b), as the case
may be, against infringement or misappropriation by Third Parties or defend any
declaratory judgment action relating thereto at its sole expense.

 

(b)  Notwithstanding Section
8.3.1(a), for infringement under 35 USC 271 (e)(2) where GSK has exercised its
Option under Article 4 of this Agreement and where GSK is the holder of the
applicable NDA, GSK has the sole right to initiate legal action to enforce all
Patents licensed to it pursuant to Section 5.1.2(b), against infringement or
misappropriation by Third Parties or defend any declaratory judgment action
relating thereto at its sole expense. For infringement under 35 USC 271 (e)(2)
where Pharmacopeia has assumed responsibility for development pursuant to any
of the scenarios described above in Section 6.5.1(i), (ii) or (iii), and where
Pharmacopeia is the holder of the applicable NDA, Pharmacopeia has the sole
right to initiate legal action to enforce all Patents licensed to it pursuant
to Section 5.1.1(b), against

 

31

 

infringement or misappropriation by Third Parties or defend any
declaratory judgment action relating thereto at its sole expense.

 

8.3.2  Failure to Enforce. Except as stated
under Section 8.3.1(b), if, within thirty (30) days following receipt of
written notice of an infringement or misappropriation of a Patent which a Party
has the right to enforce pursuant to Section 8.3.1 above (or written notice of
a declaratory judgment action alleging invalidity or unenforceability of such
Patent), such Party fails to take action to halt such alleged infringement or
misappropriation or defend such a declaratory judgment action, then the other
Party may, at its expense, take such legal action as it deems appropriate, in
its own name, to halt such an alleged infringement or misappropriation or
defend such a declaratory judgment action. If GSK fails to enforce such a
Patent within such thirty (30) day period in any country pursuant to this
Section 8.3.2, then Section 6.3.1(c)(i)(B) shall not apply in such country.

 

8.3.3  No
Settlement Without Consent. Neither Party shall enter into any settlement of
any claim, suit or proceeding under Section 8.3.1 that admits or concedes that
any aspect of the Pharmacopeia IP, GSK IP or Joint IP licensed from the other
Party is invalid or unenforceable without the prior written consent of such
other Party.

 

8.3.4  Cooperation.
Each Party shall keep the other reasonably informed of the progress of any
claim, suit or proceeding subject to this Section 8.3 and cooperate reasonably
in connection with such activities at the request and expense of the Party
involved in such claim, suit or proceeding.

 

8.3.5  Division of
Recoveries. Any recovery received in connection with a suit brought by a Party
pursuant to Section 8.3.1 shall be distributed in the following order: (1) to
reimburse such Party for expenses (including attorneys, professional and expert
fees) incurred in such suit; (2) to the extent that any recovery remains after
such reimbursement for expenses, to pay the other Party the full royalty that
would have been due pursuant to Section 6.3 or 6.5.3 on any Net Sales that were
lost as the result of such patent infringement; and (3) to the extent that any
recovery remains after the distributions pursuant to (1) and (2), the remainder
may be kept by the Party involved in such suit.

 

8.4   INFRINGEMENT
CLAIMS BY THIRD PARTIES. If the manufacture, sale or use of any Product
pursuant to this Agreement results in any claim, suit or proceeding alleging
patent infringement against a first Party (or its Sublicensees), such first
Party shall promptly notify the other Party in writing setting forth the facts
of such claim in reasonable detail. The first Party shall have the exclusive
right to defend and control the defense of any such claim, suit or proceeding,
at its own expense, using counsel of its own choice; provided, however, it
shall not enter into any agreement or settlement which admits or concedes that
any aspect of the Joint IP, the Pharmacopeia IP or the GSK IP is invalid,
unenforceable or not infringed, without the prior written consent of the other
Party. The first Party shall keep the other Party reasonably informed of all
material developments in connection with any such claim, suit or proceeding, and
the other

 

32

 

Party shall have the right (but not the obligation) to be separately
represented, at its expense, by counsel of its own choice and to advise the
first Party on the defense of such claim, suit or proceeding.

 

8.5   Regulatory Data Protection

 

8.5.1        To the extent required by law or permitted by
law, each Party will use commercially reasonable efforts to promptly,
accurately and completely list, with the applicable regulatory authorities
during the term of this Agreement, all applicable Patents for any Product that
such Party intends to, or has begun to commercialize, and that have become the
subject of a marketing application submitted to FDA, such listings to include
all so called “Orange Book” listings required under the Hatch-Waxman Act and
all so called “Patent Register” listings as required in Canada.

 

8.5.2        Prior to such listings,
the Parties will meet to evaluate and identify all applicable Patents. Notwithstanding
the preceding sentence, the Party responsible for marketing the applicable
Product will retain final decision making authority as to the listing of all
applicable Patents for such Product, regardless of which Party owns such
Patent.

 

ARTICLE 9

 

CONFIDENTIALITY

 

9.1      CONFIDENTIALITY; EXCEPTIONS. Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing, the Parties agree that the
receiving Party (the “RECEIVING PARTY”) shall keep confidential and shall not
publish or otherwise disclose or use for any purpose other than as provided for
in this Agreement any Information or other confidential and proprietary
information and materials patentable or otherwise, in any form (written, oral,
photographic, electronic, magnetic, or otherwise) which is disclosed to it by
the other Party (the “DISCLOSING PARTY”) or otherwise received or accessed by a
Receiving Party in the course of performing its obligations under this
Agreement including, but not limited to trade secrets, Know-How, proprietary
information, formulae, processes, techniques and information relating to a
Party’s past, present and future marketing, financial, and research and
development activities of any product of the Disclosing Party and the pricing
thereof (collectively, “CONFIDENTIAL INFORMATION”), except to the extent that
it can be established by the Receiving Party that such Confidential
Information:

 

9.1.1  was
in the lawful knowledge and possession of the Receiving Party prior to the time
it was disclosed to, or learned by, the Receiving Party, or was otherwise
developed independently by the Receiving Party, as evidenced by written records
kept in the ordinary course of business, or other documentary proof of actual
use by the Receiving Party;

 

33

 

9.1.2  was
generally available to the public or otherwise part of the public domain at the
time of its disclosure to the Receiving Party;

 

9.1.3  became
generally available to the public or otherwise part of the public domain after
its disclosure and other than through any act or omission of the Receiving
Party in breach of this Agreement; or

 

9.1.4  was
disclosed to the Receiving Party, other than under an obligation of
confidentiality, by a Third Party who had no obligation to the Disclosing Party
not to disclose such information to others. Notwithstanding any disclosure of
Confidential Information of the Disclosing Party to the Receiving Party, no
ownership of such Confidential Information shall be transferred as a result of
such disclosure.

 

9.2      AUTHORIZED DISCLOSURE. Except as expressly provided otherwise in this
Agreement, a Receiving Party may use and disclose Confidential Information of
the Disclosing Party as follows: (i) under appropriate confidentiality
provisions substantially equivalent to those in this Agreement, in connection
with the performance of its obligations or exercise of rights granted or
reserved in this Agreement through an Affiliate or any Third Party (including
the rights to commercialize Products and to grant licenses and sublicenses
hereunder); or (ii) to the extent such disclosure is reasonably necessary for
complying with section 3.7.2 or for filing or prosecuting patent, copyright and
trademark applications, prosecuting or defending litigation, complying with
applicable governmental regulations, obtaining regulatory approval, conducting
preclinical activities or clinical trials, marketing Products, or otherwise
required by law; provided, however, that if a Receiving Party is required by
law or regulation to make any such disclosure of a Disclosing Party’s
Confidential Information it will, except where impracticable for necessary
disclosures (for example, in the event of medical emergency), give reasonable
advance notice to the Disclosing Party of such disclosure requirement and, except
to the extent inappropriate in the case of patent applications, will use its
reasonable efforts to secure confidential treatment of such Confidential
Information required to be disclosed; or (iii) in communication with investors,
consultants, advisors or others on a need to know basis, in each case under
appropriate confidentiality provisions substantially equivalent to those of
this Agreement; or (iv) to the extent mutually agreed to in writing by the
Parties.

 

9.3      GSK INTERNAL CONTROL OF
INFORMATION. GSK shall limit the internal disclosure of all structural,
chemical synthesis or structure-activity relationship Information received from
Pharmacopeia hereunder prior to the exercise by GSK of any Option, on a “need-to-know”
basis **. In addition, **. The ** under this Agreement. Pharmacopeia **.

 

9.4      REMEDIES. Each Party shall be entitled, in addition to any other right or
remedy it may have, at law or in equity, to seek an injunction, without the
posting of any bond or other security, enjoining or restraining the other Party
from any violation or threatened violation of this Article 9.

 

9.5      PUBLICATIONS. Each Party shall submit to the other Party any proposed
publication or presentation containing any Information generated by either
Party (or by both Parties) hereunder during the Research Term or any
Confidential Information of the other Party at least thirty (30) days in
advance to allow that Party to review and approve such planned public
disclosure or press release or any other public update, including without
limitation, any update on the progress of any research and development
activities pursuant to a Program hereunder to academia, to industry, or to the
investment community. The reviewing Party will promptly review such proposed
publication and

 

34

 

respond in any event within thirty (30) days
after receipt and make any objections that it may have to the publication of
any such Information, or of any Confidential Information of the reviewing Party
contained therein. Should the reviewing Party make an objection to the
publication of any such Information or Confidential Information, then the
Parties shall discuss the advantages and disadvantages of publishing such
Information and/or Confidential Information. Notwithstanding the
preceding sentences, either Party may submit for the other Party’s approval a
summary of Program data or Information to be used in confidential and/or
non-confidential corporate presentations and, once the other Party’s written
approval has been received, the same summary of the Program data may be used
again in subsequent presentations without further approval by the other Party. If the Parties are unable to agree on whether
particular subject matter may be published or presented, then subject to
Section 14.1, the JSC shall attempt to resolve the matter, but if it is unable
to do so, such matter shall be resolved in accordance with the dispute
resolution provisions of Section 14.2. Notwithstanding the foregoing, upon the
reviewing Party’s request, the other Party shall not submit any such
publication or presentation until the reviewing Party is given a reasonable
period of time (no less than thirty (30) days) to secure patent protection for
any material in such publication or presentation that it believes to be
patentable.

 

ARTICLE
10

 

REPRESENTATIONS; WARRANTIES AND COVENANTS

 

10.1    REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES. Each Party represents and
warrants to the other Party, as of the Effective Date, that:

 

10.1.1 
such Party is duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has full corporate
power and authority to enter into this Agreement and to carry out the
provisions hereof;

 

10.1.2  such Party has taken all necessary corporate
action on its part to authorize the execution and delivery of this Agreement
and the performance of its obligations hereunder;

 

10.1.3  this Agreement has been duly executed and
delivered on behalf of such Party, and constitutes a legal, valid and binding
obligation, enforceable against it in accordance with the terms hereof, subject
to (i) the effect of applicable bankruptcy, insolvency, reorganization,
moratorium or other similar Federal or state laws affecting the rights of creditors
and (ii) the effect or availability of rules of law governing specific
performance, injunctive relief or other equitable remedies (regardless of
whether any such remedy is considered in a proceeding at law or in equity);

 

10.1.4  the execution and delivery of this Agreement
by such Party do not, and the performance of this Agreement by such Party,
including without limitation the grant of rights to the other Party pursuant to
this Agreement, will not: (A) conflict with, or result in any violation of or
default under, any agreement, instrument or understanding, oral or written, to
which it or any Affiliate is a party or by which it or any Affiliate is bound;
(B) conflict with any rights granted by such Party to any other Third Party or
breach any obligation that such

 

35

 

Party has to any Third Party; or (C) violate
any provision of law, statute, rule or regulation, or any ruling, right,
injunction, order, judgment or decree of any court, administrative agency or
other governmental body having jurisdiction over such Party; and

 

10.1.5  no government authorization, consent,
approval, license, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, under any applicable laws, rules or regulations currently
in effect is necessary for, or in connection with, the transaction contemplated
by this Agreement or any other agreement or instrument executed in connection herewith,
or for the performance by it of its obligations under this Agreement and such
other agreements except as may be required under the Stock Purchase Agreement.

 

10.2    REPRESENTATIONS AND WARRANTIES OF PHARMACOPEIA. Pharmacopeia represents
and warrants to GSK, as of the Effective Date, that:

 

10.2.1  to the best of its knowledge and belief,
Pharmacopeia Controls all rights to the Pharmacopeia IP;

 

10.2.2  to the best of its knowledge and belief: (A)
Pharmacopeia is not aware of any notice from any Third Party asserting any
ownership rights to any Know-How Controlled by Pharmacopeia; and (B)
Pharmacopeia is not aware of any pending or threatened action, suit, proceeding
or claim by a Third Party asserting that Pharmacopeia is infringing or has
misappropriated or otherwise is violating any patent, trade secret or other
proprietary right of any Third Party as would reasonably be expected to result
in a material adverse effect upon the ability of Pharmacopeia to fulfill any of
its obligations under this Agreement;

 

10.2.3  to the best of its knowledge and belief,
Pharmacopeia has not granted any right or license or other encumbrance of any
kind to any Third Party relating to the Pharmacopeia IP that conflicts with any
of the rights or licenses granted to GSK hereunder;

 

10.2.4  Pharmacopeia has all right, power and
authority to conduct the activities to be conducted by Pharmacopeia under this
Agreement and to fulfill its obligations under this Agreement; and

 

10.2.5  other than as described in the reports Pharmacopeia has filed with the U.S.
Securities and Exchange Commission under the Securities Exchange Act of 1934,
as amended, there are no claims,
actions, or proceedings pending or, to Pharmacopeia’s knowledge, threatened;
nor are there any formal inquiries or notices that may lead to the institution
of any such legal proceedings, against Pharmacopeia or its properties, assets
or business, which if adversely decided, would, individually or in the
aggregate, have a material adverse effect on, or prevent Pharmacopeia’s ability
to conduct any Programs or to grant the licenses or rights to be granted to GSK
upon the exercise of GSK’s Options.

 

10.3    COVENANTS OF PHARMACOPEIA. Pharmacopeia covenants and agrees, from and
after the Effective Date and during the Term, that:

 

10.3.1  Pharmacopeia shall provide access to
Confidential Information of GSK only to Pharmacopeia’s employees, consultants
and independent contractors who, in each case, need such access (including,
without limitation, access on any database that is owned or controlled

 

36

 

by Pharmacopeia or its Affiliates to Know-How
Controlled by GSK), to perform services or activities in any Program and who,
prior to such access, have executed appropriate confidentiality and invention
assignment agreements to protect the Confidential Information of GSK and to
retain or obtain ownership of all Pharmacopeia IP;

 

10.3.2  Pharmacopeia shall not enter into any
agreement with any Third Party that Pharmacopeia reasonably believes would
materially adversely affect (i) Pharmacopeia’s ability to successfully conduct
Programs hereunder or (ii) any Pharmacopeia IP or Joint IP existing at the time
of entering into such an agreement or (iii) any GSK IP about which Pharmacopeia
has actual knowledge at the time of entering into such an agreement or (iv) any
intellectual property relating to any Collaboration Compound that is subject to
Section 3.4;

 

10.3.3  all employees, agents, consultants or
subcontractors (with respect to subcontractors, subject to Section 3.6)
providing services to Pharmacopeia or its Affiliates pursuant to this
Agreement  shall be under the obligation
to assign all right, title and interest in and to their inventions, if any, to
Pharmacopeia as the sole owner thereof;

 

10.3.4  Pharmacopeia shall not employ (or, to the best
of its knowledge without further duty of inquiry, shall not use any contractor
or consultant that employs) any individual or entity debarred by the FDA (or
subject to a similar sanction of EMEA), or, to the best of its knowledge
without further duty of inquiry, any individual who or entity which is the
subject of an FDA debarment investigation or proceeding (or similar proceeding
of EMEA), in the conduct of the preclinical or clinical studies of Collaboration
Compounds and its activities under any Program; and

 

10.3.5  Pharmacopeia shall perform its activities
pursuant to this Agreement in compliance with good laboratory and clinical
practices and cGMP, in each case as applicable under the laws and regulations
of the country and the state and local government wherein such activities are
conducted, and with respect to the care, handling and use in research and
development activities hereunder of any non-human animals by or on behalf of
Pharmacopeia, shall at all times comply with all applicable federal, state and
local laws, regulations and ordinances, and also with the most current best
practices in the industry for the proper care, handling and use of animals in
pharmaceutical research and development activities, subject to GSK’s reasonable
right of inspection.

 

10.3.6 
Pharmacopeia shall notify GSK in writing promptly in the event that it
has actual knowledge of the material breach of any covenant of Pharmacopeia
under Section 10.3 or the material breach of any representation or warranty
provided by Pharmacopeia under Section 10.2.

 

10.4    REPRESENTATIONS AND WARRANTIES OF GSK. GSK represents and warrants to
Pharmacopeia, as of the Effective Date, that :

 

10.4.1  to the best of its knowledge and belief, GSK
Controls all rights to the GSK IP;

 

10.4.2  to the best of its knowledge and belief: (A)
GSK is not aware of any notice from any Third Party asserting any ownership
rights to any Know-How Controlled by GSK; and (B)

 

37

 

GSK is not aware of any pending or threatened
action, suit, proceeding or claim by a Third Party asserting that GSK is
infringing or has misappropriated or otherwise is violating any patent, trade
secret or other proprietary right of any Third Party as would reasonably be
expected to result in a material adverse effect upon the ability of GSK to
fulfill any of its obligations under this Agreement;

 

10.4.3  to the best of its knowledge and belief, GSK
has not granted any right or license or other encumbrance of any kind to any
Third Party relating to the GSK IP that conflicts with any of the rights
granted to Pharmacopeia hereunder;

 

10.4.4 GSK has all right, power and authority
to conduct the activities to be conducted by GSK under this Agreement and to
fulfill its obligations under this Agreement; and

 

10.4.5 there are no claims, actions, or
proceedings pending or, to GSK’s knowledge, threatened; nor are there any
formal inquiries or notices that may lead to the institution of such legal proceedings,
against GSK or its properties, assets or business, which if adversely decided,
would, individually or in the aggregate, have a material adverse effect on, or
prevent GSK’s ability to collaborate with Pharmacopeia or to grant the licenses
to Pharmacopeia contemplated hereunder.

 

10.5    COVENANTS OF GSK. GSK covenants and agrees, from and after the Effective
Date and during the Term, that:

 

10.5.1 
GSK shall provide access to Confidential Information of Pharmacopeia
only to GSK’s employees, consultants and independent contractors who, in each
case, need such access (including, without limitation, access on any database
that is owned or controlled by GSK or its Affiliates to Know-How Controlled by
Pharmacopeia) to perform services or development activities under this
Agreement, and who, **;

 

10.5.2  GSK shall not enter into any agreement with
any Third Party that GSK reasonably believes would materially adversely affect
(i) GSK’s ability to fulfill its obligations hereunder or (ii) any GSK IP or
Joint IP existing at the time of entering into such an agreement or (iii) any
Pharmacopeia IP about which GSK has actual knowledge at the time of entering
into such an agreement or (iv) any intellectual property relating to any
Collaboration Compound that is subject to Section 3.4;

 

10.5.3  all employees, agents, consultants or
subcontractors providing services to GSK or its Affiliates pursuant to this
Agreement shall be under the obligation to assign all right, title and interest
in and to their inventions, if any, to GSK as the sole owner thereof;

 

10.5.4  it shall not employ (or, to the best of its
knowledge without further duty of inquiry, shall not use any contractor or
consultant that employs) any individual or entity debarred by the FDA (or
subject to a similar sanction of EMEA), or, to the best of its knowledge
without further duty of inquiry, any individual who or entity which is the
subject of an FDA debarment investigation or proceeding (or similar proceeding
of EMEA), in the conduct of the preclinical or clinical studies of
Collaboration Compounds and its development activities; and

 

10.5.5  GSK shall perform its development activities
in compliance with good laboratory and clinical practices and cGMP, in each
case as applicable under the laws and regulations of the

 

38

 

country and of the state and local government
wherein such activities are conducted, and with respect to the care, handling
and use in research and development activities hereunder of any non-human
animals by or on behalf of GSK, shall at all times comply with all applicable
federal, state and local laws, regulations and ordinances, and also with the
most current best practices in the industry for the proper care, handling and
use of animals in pharmaceutical research and development activities, subject
to Pharmacopeia’s reasonable right of inspection.

 

10.5.6 
GSK shall notify Pharmacopeia in writing promptly in the event that it
has actual knowledge of the material breach of any covenant of GSK under
Section 10.5 or the material breach of any representation or warranty provided
by GSK under Section 10.4.

 

10.6    DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF
ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY
WARRANTY THAT ANY PATENTS ARE VALID OR ENFORCEABLE OR THAT THEIR EXERCISE DOES
NOT INFRINGE ANY PATENT RIGHTS OF THIRD PARTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

 

ARTICLE 11

 

INDEMNIFICATION; INSURANCE

 

11.1    INDEMNIFICATION BY GSK. GSK shall indemnify, defend and hold harmless
Pharmacopeia, and its Affiliates, and their respective directors, officers,
employees and agents, from and against any and all liabilities, damages,
losses, claims, costs and expenses including, but not limited to, the
reasonable fees of attorneys and other professionals (collectively “LOSSES”),
arising out of or resulting from any and all Third Party suits, claims actions,
proceedings or demands based upon:

 

11.1.1 
the negligent or reckless acts or omissions or the willful misconduct of
GSK or its Affiliates and its or their respective directors, officers,
employees and agents, in connection with GSK’s performance of its obligations
or exercise of its rights under this Agreement;

 

11.1.2  any breach of any representation, warranty or
covenant made by GSK under Article 10; or

 

11.1.3  the research, development, manufacture, use,
handling, storage, commercialization, sale or other disposition of any
Collaboration Compounds or Products or other chemical agents by GSK, its
Affiliates, agents or Sublicensees, for which GSK, its Affiliates, agents or
Sublicensees have responsibility for specific activities pursuant to this
Agreement, and which is not attributable merely to GSK’s participation in the
JSC;

 

except, in each case above, to the extent any
such claim arose out of or resulted from or is attributable to the ** negligent
or reckless acts or omissions or the willful misconduct of Pharmacopeia or its

 

39

 

Affiliates, and their respective directors,
officers, employees and agents (including their Sublicensees and
subcontractors).

 

11.2    INDEMNIFICATION BY PHARMACOPEIA. Pharmacopeia shall indemnify, defend and
hold harmless GSK and its Affiliates, and their respective directors, officers,
employees and agents, from and against any and all Losses, arising out of or
resulting from any and all Third Party suits, claims, actions, proceedings or
demands based upon:

 

11.2.1  the negligent or reckless acts or omissions or
the willful misconduct of Pharmacopeia or its Affiliates and its or their
respective directors, officers, employees and agents, in connection with Pharmacopeia’s
performance of its obligations or exercise of its rights under this Agreement;

 

11.2.2  any breach of any representation, warranty or
covenant made by Pharmacopeia under Article 10; or

 

11.2.3  the research, development, manufacture, use,
handling, storage, commercialization, sale or other disposition of any
Collaboration Compounds or Products or other chemical agents by Pharmacopeia,
its Affiliates, agents or Sublicensees, for which Pharmacopeia, its Affiliates,
agents or Sublicensees have responsibility for specific activities pursuant to
this Agreement, and which is not 
attributable merely to Pharmacopeia’s participation in the JSC.

 

except, in each case above, to the extent any
such claim arose out of or resulted from or is attributable to the ** negligent
or reckless acts or omissions or the willful misconduct of GSK or its
Affiliates, and their respective directors, officers, employees and agents
(including their Sublicensees and subcontractors).

 

11.3    PROCEDURE. In the event that any person (an “INDEMNITEE”) entitled to
indemnification under Section 11.1 or Section 11.2 is seeking such
indemnification, such Indemnitee shall: (i) inform, in writing, the
indemnifying Party of the claim as soon as reasonably practicable after such
Indemnitee receives notice of such claim; (ii) permit the indemnifying Party to
assume direction and control of the defense of the claim (including the sole
right to settle it at the sole discretion of the indemnifying Party; provided
that such settlement does not impose any obligation on, or otherwise adversely
affect, the Indemnitee or other Party); (iii) cooperate as requested (at the
expense of the indemnifying Party) in the defense of the claim; and (iv)
undertake all reasonable steps to mitigate any loss, damage or expense with
respect to the claim(s). Notwithstanding the foregoing, the Indemnitee may
retain separate co-counsel reasonably acceptable to the indemnifying Party at
its sole cost and expense and participate in the defense of the applicable
claim for which the indemnifying Party has assumed control.

 

11.4    INSURANCE.

 

11.4.1 
Pharmacopeia’s Insurance Obligations. Pharmacopeia shall maintain, at
its cost, with effect from prior to the date of first administration of any
Collaboration Compound or Product for testing in humans hereunder and during
the Term thereafter, adequate insurance against liability and other risks
associated with its activities contemplated by this Agreement, including but
not limited to its clinical trials and its indemnification obligations herein,
in

 

40

 

such amounts and on such terms as are
customary for prudent practices in the pharmaceutical industry for the
activities to be conducted by it under this Agreement. At a minimum, Pharmacopeia
shall maintain, in force from prior to the date of first testing in humans and
thereafter during the Term, at its cost, a ** policy providing coverage of at
least ** Dollars ($**) **, provided that such coverage is increased to at least (i) ** Dollars
($**) ** and (ii) ** Dollars ($**) before **. Pharmacopeia shall furnish to GSK evidence of such insurance, upon
request.

 

11.4.2 
GSK’s Insurance Obligations. GSK hereby represents and warrants to
Pharmacopeia that it is self-insured against liability and other risks
associated with its activities and obligations under this Agreement in such
amounts and on such terms as are customary for prudent practices for large
pharma in the pharmaceutical industry for the activities to be conducted by it
under this Agreement. GSK shall furnish to Pharmacopeia evidence of such
self-insurance, upon request.

 

ARTICLE 12

 

TERM AND TERMINATION

 

12.1    TERM; EXPIRATION. This Agreement shall become effective as of the
Effective Date and, unless earlier terminated pursuant to the other provisions
of this Article 12, shall expire as follows:

 

12.1.1 
on a Product-by-Product, and country-by-country, basis until the
expiration of all payment obligations under this Agreement with respect to such
Product in such country; and

 

12.1.2 
in its entirety upon the expiration of all payment obligations under
this Agreement with respect to the last Product in all countries in the
Territory pursuant to Section 12.1.1. The period from the Effective Date to the
expiration of the entire Agreement pursuant to this Section 12.1.2 shall be the
“TERM.”

 

12.2    TERMINATION. Notwithstanding anything in this Agreement or
elsewhere to the contrary, this Agreement may be terminated in its entirety or
in part as follows:

 

12.2.1 
**. Either Party (the “NON-BREACHING PARTY”) may, without prejudice to
any other remedies available to it at law or in equity, terminate this
Agreement in its entirety in the event the other Party (the “BREACHING PARTY”)
shall have **, after written notice thereof was provided to the Breaching Party
by the Non-Breaching Party. Any such termination shall become effective at the
end of such ** period (or, in the case of a failure to make a payment, at the
end of such ** period), unless the **, as the case may be. The right of either Party
to terminate this Agreement as provided in this Section 12.2.1 shall not be
affected in any way by such Party’s waiver or failure to take action with
respect to any previous default. A “MATERIAL BREACH” shall mean a default in
the performance of or failure to be in compliance with any material term of
this Agreement, including any payment obligation. Notwithstanding
anything in this Section 12.2.1 to the contrary, a Party that is in Material
Breach under this Agreement shall not have the right to terminate this
Agreement pursuant to this Section 12.2.1.

 

41

 

12.2.2      [intentionally
omitted]

 

12.2.3      Mutual Consent. This Agreement may be terminated
by the mutual written consent of the Parties.

 

12.2.4      **.

 

(a) **

 

(b) **

 

(c) **

 

12.2.5      Discretionary.
** shall have the **, as set forth in the **. Notwithstanding the ** pursuant
to this Section, **. It is understood that **.

 

12.2.6      Program-by-Program.
So long as none of Sections 12.2.1, 12.2.4 or 12.3 is applicable, ** other than
that which is **.

 

12.3    TERMINATION FOR INSOLVENCY.

 

12.3.1 
Insolvency. Either Party may terminate this Agreement if, at any time,
the other Party shall file in any court or agency pursuant to any statute or
regulation of any state or country, a petition in bankruptcy or insolvency or
for reorganization or for an arrangement or for the appointment of a receiver
or trustee of the Party or of substantially all of its assets, or if the other
Party proposes a written agreement of composition or extension of substantially
all of its debts, or if the other Party shall be served with an involuntary
petition against it, filed in any insolvency proceeding, and such petition
shall not be dismissed within ninety (90) days after the filing thereof, or if
the other Party shall propose or be a party to any dissolution or liquidation,
or if the other Party shall make an assignment of substantially all of its
assets for the benefit of creditors.

 

12.3.2 
Bankruptcy Code Section 365(n). All rights and licenses granted under or
pursuant to any section of this Agreement are and shall otherwise be deemed to
be for purposes of Section 365(n) of Title 11, United States Code (the “BANKRUPTCY
CODE”) licenses of rights to “intellectual property” as defined in Section
101(56) of the Bankruptcy Code. The Parties shall retain and may fully exercise
all of their respective rights and elections under the Bankruptcy Code. Upon
the bankruptcy of any Party, the non-bankrupt Party shall further be entitled
to a complete duplicate of, or complete access to, any such intellectual
property, and such, if not already in its possession, shall be promptly
delivered to the non-bankrupt Party, unless the bankrupt Party elects to
continue, and continues, to perform all of its obligations under this
Agreement.

 

12.4    EFFECT OF TERMINATION.

 

12.4.1      Upon
Expiration of the Term.

 

(a) Following the expiration of the Term with
respect to a Product sold by GSK in a country pursuant to Section 12.1.1,
subject to the terms and conditions of this Agreement, GSK shall have an
exclusive, fully-paid and royalty free, right and license, with the right to
grant sublicenses, under the Pharmacopeia IP and under

 

42

 

Pharmacopeia’s rights in the Joint IP licensed
hereunder, solely to continue to make, have made, use, sell, offer for sale and
import the applicable Product in such country, for so long as it continues to
do so. Following the expiration of the Term with respect to any Product sold by
Pharmacopeia in a country pursuant to Section 12.1.1, subject to the terms and
conditions of this Agreement, Pharmacopeia shall have an exclusive, fully-paid
and royalty free, right and license, with the right to grant sublicenses, under
the GSK IP and under GSK’s rights in the Joint IP licensed hereunder solely to
continue to make, have made, use, sell, offer for sale and import the
applicable Product in such country, for so long as it continues to do so.

 

(b) Following expiration of the Term in its
entirety pursuant to Section 12.1.2, subject to the terms and conditions of
this Agreement, GSK shall have an exclusive, fully-paid and royalty-free, right
and license, with the right to grant sublicenses, under the Pharmacopeia IP and
under Pharmacopeia’s rights in the Joint IP licensed hereunder solely to
continue to make, have made, use, sell, offer for sale and import Products in
the Territory, for so long as it continues to do so. Following the expiration
of the Term in its entirety pursuant to Section 12.1.2, subject to the terms
and conditions of this Agreement, Pharmacopeia shall have an exclusive,
fully-paid and royalty-free, right and license, with the right to grant
sublicenses, under the GSK IP and under GSK’s rights in the Joint IP licensed
hereunder solely to continue to make, have made, use, sell, offer for sale and
import Products in the Territory, for so long as it continues to do so.

 

12.4.2      Upon Termination **.

 

(a) In the
case of a termination by GSK pursuant to Section 12.2.4(a), Pharmacopeia shall
have no further rights to (A) GSK IP and the Information generated or provided
by GSK associated with such terminated Program, or (B) the related assay and
reagents provided by GSK. Pharmacopeia also shall return to GSK all Know-How
Controlled by GSK and related to any applicable GSK Target. Further, upon any
such termination under Section 12.2.4(a), Pharmacopeia shall promptly provide
to GSK all Information and data resulting from the specific Program being
terminated that is reasonably necessary or important for GSK to continue the
Program. GSK shall automatically have a fully-paid and royalty-free, worldwide,
sublicensable, exclusive license to use all such information, data and relevant
Pharmacopeia IP and Joint IP as necessary to make, have made, use, sell, offer
to sell and import products which incorporate any Collaboration Compound
arising from such terminated Program.

 

(b) In the
case of a termination by GSK pursuant to Section 12.2.4(b), Pharmacopeia shall
have no further rights to (A) GSK IP and the Information generated or provided
by GSK associated with all such terminated Programs, or (B) the related assay
and reagents provided by GSK. Pharmacopeia also shall return to GSK all
Know-How Controlled by GSK and related to any applicable GSK Target for each of
the terminated Programs. It is understood that any such termination will not
apply to any Programs which, prior to such termination, have been optioned by
GSK under the GSK Options, which shall continue always subject to the
milestone, royalty and diligence obligations of GSK to Pharmacopeia. Further,
upon any such termination

 

43

 

under Section
12.2.4(b), Pharmacopeia shall promptly provide to GSK all information and data
resulting from the Programs being terminated that is reasonably necessary or
important for GSK to continue the Programs. GSK shall automatically have a
fully-paid and royalty-free, worldwide, sublicensable, exclusive license to use
all such information, data and relevant Pharmacopeia IP and Joint IP as
reasonably necessary or important to make, have made, use, sell, offer to sell
and import products which incorporate any Collaboration Compound arising from
such terminated Programs.

 

(c) In the case of a termination by Pharmacopeia pursuant to Section
12.2.4(c), all licenses to GSK under the Pharmacopeia IP or Joint IP relating
to such GSK Development Compound and/or Program shall terminate. Upon such
termination, GSK shall immediately provide to Pharmacopeia all information and
data resulting from the specific development activities being terminated that
is reasonably necessary or important for Pharmacopeia to continue such
development activities. Pharmacopeia shall automatically have a worldwide,
sublicensable, exclusive license, subject to Pharmacopeia’s milestone and
royalty obligations to GSK as set forth in this Agreement, to use all such
information, data and relevant GSK IP and Joint IP as reasonably necessary or
important to make, have made, use, sell, offer to sell and import products which
incorporate any GSK Development Compounds or other Collaboration Compounds
arising from the terminated development activities.

 

12.4.3      Discretionary
Termination.

 

(a)  In
the event of a termination of this Agreement by **. ** of this
Agreement **. In the event of a
termination of this Agreement by ** of this Agreement **.

 

(b)  In
the event of a termination of this Agreement by **. For the avoidance of doubt,
**.

 

(c)           In
the event of a termination of this Agreement by **.

 

(i)     In the event that
a **.

 

(ii)     In the event
that a **.  If **.

 

(iii)     In the event
that **.  If **. For the avoidance of doubt, **.

 

12.4.4      Termination
by GSK Due to Pharmacopeia’s Breach or Insolvency.

 

In the event of termination by GSK pursuant to Section 12.2.1 or 12.3, all rights and
licenses granted to Pharmacopeia hereunder shall terminate, and any licenses
granted by Pharmacopeia to GSK hereunder shall remain in effect, subject to the
terms and conditions of this Agreement applicable thereto, including the applicable
provisions for payment of milestones and royalties to Pharmacopeia, in addition
to the provisions that survive under Section 12.5(b).

 

44

 

12.4.5      Termination
by Pharmacopeia Due to GSK’s Breach or Insolvency.

 

In the event of termination by Pharmacopeia pursuant to Section 12.2.1 or 12.3, all rights and
licenses granted to GSK hereunder shall terminate, and any licenses granted by
GSK to Pharmacopeia hereunder shall remain in effect, subject to the terms and
conditions of this Agreement applicable thereto, including the applicable
provisions for payment of milestones and royalties to GSK, in addition to the
provisions that survive under Section 12.5(b).

 

12.5    ACCRUED RIGHTS; SURVIVING OBLIGATIONS.

 

(a)  Termination, relinquishment or
expiration of this Agreement for any reason shall be without prejudice to any
rights that shall have accrued to the benefit of any Party prior to such
termination, relinquishment or expiration including, without limitation, the
payment obligations under Article 6 hereof and any and all damages arising from
any breach hereunder. Such termination, relinquishment or expiration shall not
relieve any Party from obligations which are expressly indicated under this
Section 12.5 to survive termination or expiration of this Agreement.

 

(b)  Survival.  The
provisions of Articles 6, 8, 9, 10, 11 and 14, and Sections 12.4 and 12.5 shall
survive the expiration or termination of this Agreement for any reason, in
accordance with their respective terms and conditions, and for the respective
duration stated therein, and where no duration is stated, shall survive
indefinitely.

 

ARTICLE 13

[INTENTIONALLY OMITTED]

 

ARTICLE 14

 

MISCELLANEOUS

 

14.1    PUBLICITY. Neither Party shall originate any written publicity,
news release or other announcement or statement relating to the announcement or
terms of this Agreement (collectively, a “WRITTEN DISCLOSURE”), without the
prompt prior review and written approval of the other Party, which approval
shall not be unreasonably withheld or delayed. Notwithstanding the foregoing,
either Party may make any public Written Disclosure it believes in good faith
based upon the advice of counsel is required by applicable law, rule or
regulation or any listing or trading agreement concerning its or its Affiliates’
publicly traded securities; provided, however, that such Written Disclosure
shall minimize to the extent possible the financial information disclosed, and
that prior to making such Written Disclosure, the disclosing Party shall
provide to the other Party a copy of the materials proposed to be disclosed and
provide the receiving Party with an opportunity to promptly review the Written
Disclosure and provide comments within two (2) business days of the proposed
drafts of the Written Disclosure. Notwithstanding the foregoing, the Parties
shall agree upon a press release to announce the execution of this Agreement,
together with a corresponding question & answer outline for use in
responding to inquiries about the Agreement; thereafter, GSK and

 

45

 

Pharmacopeia may each disclose to Third
Parties the information contained in such press release and question &
answer outline without the need for further approval by the other.

 

14.2 
DISPUTE RESOLUTION.   The
Parties will try to settle their differences amicably between themselves.
 In the event of any controversy or claim arising out of or relating to
any provision of this Agreement or the performance or alleged non-performance of
a Party of its obligations under this Agreement (a “Dispute”), a Party may
notify the other Party in writing of such Dispute.  If the Parties are
unable to resolve the Dispute within 30 days of receipt of the written notice
by the other Party, such dispute will be referred to the Chief Executive
Officer of Pharmacopeia, or such other person holding a similar position
designated by Pharmacopeia from time to time, and the Senior Vice President for
External Drug Discovery of GSK, or such other person holding a similar position
designated by GSK from time to time, who will use their good faith efforts to
resolve the Dispute within 15 days after it was referred to them.

 

Any Dispute that is not resolved as provided
in this Section, whether before or after termination of this Agreement, will be
resolved by final and binding arbitration.  Such Disputes will be finally
settled under the Commercial Arbitration Rules of the American Arbitration
Association (the “Rules”) or such other arbitration rules as the Parties may
agree upon.  Arbitration proceedings will be held in Princeton, New Jersey
or in a place which is mutually agreeable to the parties.  The arbitration
will be conducted by one arbitrator knowledgeable in the subject matter that is
at issue in the Dispute and who is selected by mutual agreement of the Parties
or, failing such agreement, will be selected according to the Rules.

 

The decision by the arbitrator will be
binding and conclusive upon the Parties, their successors and assigns, and the
Parties will comply with such decision in good faith. Each Party hereby submits
itself to the jurisdiction of the courts of the place where the arbitration is
held, but only for the entry of judgment with respect to the decision of the
arbitrator hereunder. Notwithstanding the foregoing, judgment upon the award
may be entered in any court in the country where the arbitration takes place,
or any court having jurisdiction over the Parties. The Parties agree that any
damages awarded pursuant to any dispute submitted to arbitration hereunder will
be limited to compensatory damages and that the arbitrator will in no event
have authority to award any special, incidental, consequential or punitive
damages. The arbitrator may award reasonable attorneys’ fees. Whether a claim, dispute
or other matter in question would be barred by the applicable statute of
limitations, which statute of limitations will apply to any claim or dispute
will also be determined by binding arbitration pursuant to this Section.

 

14.3 
GOVERNING LAW. This Agreement and any dispute arising from the
performance or breach hereof shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, U.S.A., without reference to
conflicts of laws principles.

 

14.4 
ASSIGNMENT. This Agreement shall not be assignable by either Party to
any Third Party hereto without the written consent of the other Party hereto.
Notwithstanding the foregoing, either Party may assign this Agreement, without
the consent of the other Party, to an Affiliate or to an entity that acquires
all or substantially all of the business or assets of such Party to which this
Agreement pertains (whether by merger, reorganization, acquisition, sale or
otherwise), and agrees in writing to be bound by the terms and conditions of
this Agreement.

 

46

 

14.5 
BINDING AGREEMENT. This Agreement, and the terms and conditions hereof, shall be binding
upon and shall inure to the benefit of the Parties and their respective
successors, heirs, administrators and permitted assigns.

 

14.6 
REGULATORY REVIEW.

 

14.6.1 
Tolling of Payment Obligations. If the exercise by GSK of any Option
under Article 4 requires the making of filings under the Hart-Scott-Rodino
Antitrust Improvements Act (the “HSR ACT”), or under any similar premerger
notification provision in the European Union or any other jurisdiction, then
all rights and obligations related to the exercise of such Option shall be
tolled until the applicable waiting period has expired or been terminated or
until approval or clearance from the reviewing authority has been received, and
each Party agrees to diligently make any such filings and respond to any
request for information to expedite review of such transaction.

 

14.6.2 
Resolution of Regulatory Authority Opposition. If the antitrust
enforcement authorities in the U.S. make a second request under the HSR Act, or
any antitrust enforcement authority in another jurisdiction commences an
investigation into the exercise by GSK of an Option, then the Parties shall, in
good faith, cooperate with each other and take reasonable actions to attempt
to: (A) resolve all enforcement agency concerns about the transaction under
investigation; and (B) diligently oppose any enforcement agency opposition to
such transaction. In the event the enforcement agency files a formal action to
oppose the transaction, the Parties shall confer in good faith to determine the
appropriate strategy for resolving the enforcement agency opposition, including
without limitation, and where appropriate, the renegotiation of their
obligations under this Agreement with respect to that Option, with the
objective of placing each Party, to the maximum extent possible, in the same
economic position that each Party would have occupied if GSK had been permitted
to exercise such Option. Notwithstanding the foregoing, nothing in this Section
14.6 shall require either Party to divest any assets.

 

14.7 
FORCE MAJEURE. No Party shall be held liable or responsible to the other
Party nor be deemed to be in default under, or in breach of any provision of,
this Agreement for failure or delay in fulfilling or performing any obligation
of this Agreement when such failure or delay is due to force majeure, and
without the fault or negligence of the Party so failing or delaying. For
purposes of this Agreement, “force majeure” is defined as causes beyond the
control of the Party, including, without limitation, acts of God; acts,
regulations, or laws of any government; war; civil commotion; destruction of
production facilities or materials by fire, flood, earthquake, explosion or
storm; labor disturbances; epidemic; and failure of public utilities or common
carriers. In the event of force majeure, Pharmacopeia or GSK, as the case may
be, shall immediately notify the other Party of such inability and of the
period for which such inability is expected to continue. The Party giving such
notice shall thereupon be excused from such of its obligations under this
Agreement as it is thereby disabled from performing for so long as such Party
is so disabled, up to a maximum of ninety (90) days, after which time the Party
not affected by the force majeure may terminate this Agreement. To the extent
possible, each Party shall use reasonable efforts to minimize the duration of
any force majeure.

 

47

 

14.8 
NOTICES. Any notice or request required or permitted to be given under
or in connection with this Agreement shall be deemed to have been sufficiently
given if in writing and personally delivered or sent by certified mail (return
receipt requested), facsimile transmission (receipt verified), or overnight
express courier service (signature required), prepaid, to the Party for which
such notice is intended, at the address set forth for such Party below:

 

If to Pharmacopeia,

 

	
  Addressed to:

  	
   

  	
  Pharmacopeia Drug Discovery,
  Inc.

  
	
   

  	
   

  	
  3000 Eastpark Blvd.

  
	
   

  	
   

  	
  Cranbury, NJ 08512

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Chief Executive
  Officer

  
	
   

  	
   

  	
  Telephone: **

  
	
   

  	
   

  	
  Telecopy: **

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Pharmacopeia Drug Discovery,
  Inc.

  
	
   

  	
   

  	
  3000 Eastpark Blvd.

  
	
   

  	
   

  	
  Cranbury, NJ 08512

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
  Telephone: **

  
	
   

  	
   

  	
  Telecopy: **

  
	
   

  	
   

  	
   

  
	
  If to GSK,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Addressed to:

  	
   

  	
  GlaxoSmithKline

  
	
   

  	
   

  	
  2301
  Renaissance Boulevard

  
	
   

  	
   

  	
  Mail
  Code RN0210

  
	
   

  	
   

  	
  King
  of Prussia, PA  19406

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Vice President, Business Development

  
	
   

  	
   

  	
  Center
  of Excellence for External Drug Discovery

  
	
   

  	
   

  	
  Telephone:
  **

  
	
   

  	
   

  	
  Telecopy:
  **

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  GlaxoSmithKline

  
	
   

  	
   

  	
  2301 Renaissance Boulevard

  
	
   

  	
   

  	
  Mail Code RN0220

  
	
   

  	
   

  	
  King of Prussia, PA  19406

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Vice President and Associate General
  Counsel

  
	
   

  	
   

  	
  Telecopy:
  **

  

 

48

 

or to such other address for such Party as it
shall have specified by like notice to the other Parties, provided that notices
of a change of address shall be effective only upon receipt thereof. If
delivered personally or by facsimile transmission, the date of delivery shall
be deemed to be the date on which such notice or request was given. If sent by
overnight express courier service, the date of delivery shall be deemed to be
the next business day after such notice or request was deposited with such
service. If sent by certified mail, the date of delivery shall be deemed to be
the third business day after such notice or request was deposited with the U.S.
Postal Service.

 

14.9  
[Intentionally left blank]

 

14.10 EXPORT CLAUSE. Each Party acknowledges
that the laws and regulations of the United States restrict the export and
re-export of certain commodities and technical data of United States origin.
Each Party agrees that it will not export or re-export any restricted
commodities or any restricted technical data of the other Party in any form
without any necessary United States and foreign government licenses.

 

14.11 
WAIVER. Neither Party may waive or release any of its rights or
interests in this Agreement except in writing. The failure of either Party to
assert a right hereunder or to insist upon compliance with any term or
condition of this Agreement shall not constitute a waiver of that right or
excuse a similar subsequent failure to perform any such term or condition. No
waiver by either Party of any condition or term in any one or more instances
shall be construed as a continuing waiver of such condition or term or of
another condition or term.

 

14.12 
SEVERABILITY. If any provision hereof should be held invalid, illegal or
unenforceable in any jurisdiction, the Parties shall negotiate in good faith a
valid, legal and enforceable substitute provision that most nearly reflects the
original intent of the Parties and all other provisions hereof shall remain in
full force and effect in such jurisdiction and shall be liberally construed in
order to carry out the intentions of the Parties hereto as nearly as may be
possible. Such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.

 

14.13 
ENTIRE AGREEMENT. This Agreement, including the schedules and exhibits
hereto, together with the Warrant to Purchase Common Stock, sets forth all the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto and supersedes and terminates all
prior agreements and understandings between the Parties. There are no
covenants, promises, agreements, warranties, representations, conditions or
understandings, either oral or written, between the Parties other than as set
forth herein and therein. No subsequent alteration, amendment, change or
addition to this Agreement shall be binding upon the Parties hereto unless
reduced to writing and signed by the respective authorized officers of the
Parties.

 

14.14 
INDEPENDENT CONTRACTORS. Nothing herein shall be construed to create any
relationship of employer and employee, agent and principal, partnership or
joint venture between the Parties. Each Party is an independent contractor.
Neither Party shall assume, either directly or indirectly, any liability of or
for the other Party. Neither Party shall have the authority to bind or obligate
the other Party and neither Party shall represent that it has such authority.

 

14.15 
HEADINGS. Headings used herein are for convenience only and shall not in
any way affect the construction of or be taken into consideration in
interpreting this Agreement.

 

49

 

14.16 
USE OF NAME. Except as otherwise provided herein, no Party shall have
any right, express or implied, to use in any manner the name or other
designation of the other Parties or any other trade name, trademark or logos of
the other Parties for any purpose in connection with the performance of this
Agreement.

 

14.17 
BOOKS AND RECORDS. Any books and records to be maintained under this
Agreement by a Party or its Affiliates or Sublicensees shall be maintained in
accordance with U.S. generally accepted accounting principles, consistently
applied, except that the same need not be audited.

 

14.18 
FURTHER ACTIONS. Each Party shall execute, acknowledge and deliver such
further instruments, and do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.

 

14.19 
PARTIES IN INTEREST. All of the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the
Parties hereto and their respective permitted successors and assigns.

 

14.20 
CONSTRUCTION OF AGREEMENT. The terms and provisions of this Agreement
represent the results of negotiations between the Parties and their
representatives, each of which has been represented by counsel of its own
choosing, and neither of which has acted under duress or compulsion, whether
legal, economic or otherwise. Accordingly, the terms and provisions of this
Agreement shall be interpreted and construed in accordance with their usual and
customary meanings, and each of the Parties hereto hereby waives the
application in connection with the interpretation and construction of this
Agreement of any rule of law to the effect that ambiguous or conflicting terms
or provisions contained in this Agreement shall be interpreted or construed
against the Party whose attorney prepared the executed draft or any earlier
draft of this Agreement.

 

14.21 
COUNTERPARTS. This Agreement may be signed in counterparts, each and
every one of which shall be deemed an original, notwithstanding variations in
format or file designation which may result from the electronic transmission,
storage and printing of copies of this Agreement from separate computers or printers.
Facsimile signatures shall be treated as original signatures.

 

[signature page follows; remainder of this
page intentionally left blank]

 

50

 

* - * - * - *

 

IN WITNESS WHEREOF, the Parties have caused
this Agreement to be executed by their duly authorized representatives as of
the Effective Date.

 

 

PHARMACOPEIA DRUG DISCOVERY, INC.

 

 

	
  BY:

  	
   /s/ Leslie J. Browne

  	
   

  

 

Name: Leslie J. Browne,
Ph.D.

 

Title: President and Chief Executive
Officer

 

 

SMITHKLINE BEECHAM CORPORATION, d/b/a
GLAXOSMITHKLINE

 

 

	
  BY:

  	
   /s/ Donald F. Parman

  	
   

  

 

Name: Donald F. Parman

 

Title: Vice President & Secretary

 

 

GLAXO GROUP LIMITED

 

 

	
  BY:

  	
   /s/ Paul Williamson

  	
   

  

 

Name: Paul Williamson, for
and on behalf of Edinburgh Pharmaceutical Industries Limited

 

Title: Corporate Director

 

51

 

EXHIBIT A

 

[Warrant to Purchase Common
Stock]

 

52EXHIBIT 10.2

Execution Copy

 

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

 

 

 

LICENSE AGREEMENT

 

between

 

PHARMACOPEIA DRUG DISCOVERY INC.

 

and

 

BRISTOL-MYERS SQUIBB COMPANY

 

 

 

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT (this
“Agreement”) is made and entered into as of March 27, 2006 (the “Effective
Date”), by and between Bristol-Myers
Squibb Company, a Delaware corporation headquartered at 345 Park
Avenue, New York, New York 10154 (“BMS”), and Pharmacopeia Drug Discovery Inc., a Delaware corporation,
having its principal office at 3000 Eastpark Boulevard, Cranbury, New Jersey
08512 (“Pharmacopeia”).  BMS and
Pharmacopeia are sometimes referred to herein individually as a “Party”
and collectively as the “Parties.”

RECITALS

 

WHEREAS, BMS Controls (as
defined below) certain patent rights and know-how rights with respect to the
Licensed Compounds (as defined below); and

 

WHEREAS, Pharmacopeia
desires to obtain from BMS the licenses set forth herein, and BMS desires to
grant such licenses to Pharmacopeia, all on the terms and conditions set forth
in this Agreement;

 

NOW, THEREFORE in
consideration of the foregoing and the mutual agreements set forth below, the
Parties agree as follows.

 

ARTICLE 1

DEFINITIONS

 

The terms in this Agreement
with initial letters capitalized, whether used in the singular or the plural,
shall have the meaning set forth below or, if not listed below, the meaning
designated in places throughout this Agreement.

 

1.1           “AAA” has the meaning set forth in
Section 14.2.

 

1.2           “Act” means the United States Food,
Drug and Cosmetic Act, as amended.

 

1.3           “Active Compound” has the meaning set
forth in Appendix 2 hereto.

 

1.4           “Affiliate” of a Person means any
other Person which (directly or indirectly) is controlled by, controls or is
under common control with such Person.  For
the purposes of this definition, the term “control” (including, with
correlative meanings, the terms “controlled by” and “under common control
with”) as used with respect to a Person means (i) in the case of a corporate
entity, direct or indirect ownership of voting securities entitled to cast at
least fifty percent (50%) of the votes in the election of directors or (ii) in
the case of a non-corporate entity, direct or indirect ownership of at least
fifty percent (50%) of the voting securities with the power to direct the
management and policies of such entity.

 

 

1.5           “Agreement” means this Agreement,
together with all Appendices attached hereto, as the same may be amended or
supplemented from time to time.

 

1.6           “Approval” means, with respect to any
Licensed Product in any regulatory jurisdiction, approval from the applicable
Regulatory Authority sufficient for the manufacture, distribution, use and sale
of the Licensed Product in such jurisdiction in accordance with applicable
Laws.

 

1.7           “BMS Core Patent Rights” means the
patents and patent applications that are listed in Appendix 1 hereto,
and (a) **that ** listed in Appendix 1 hereto (**), and ** thereof (but
in each case, only with respect to ** listed in Appendix 1 hereto), and
(b) all ** on any of the foregoing **, together with all ** thereof, and **
thereof (but in each case, only with respect to ** listed in Appendix 1
hereto).

 

1.8           “BMS Know-How” means **.  BMS Know-How shall also include the **.  BMS Know-How shall not include **.

 

1.9           “BMS Other Patent Rights” means (i) **
(a) ** or (b) ** and (ii) **.

 

1.10         “BMS Patent Rights” means the BMS Core
Patent Rights and the BMS Other Patent Rights.

 

1.11         “Board” means Pharmacopeia’s
then-current Board of Directors.

 

1.12         “Business Day” or “business day”
means a day other than Saturday, Sunday or any day on which commercial banks
located in New York, New York are authorized or obligated by applicable Laws to
close.

 

1.13         “Calendar Quarter” means the
respective periods of three consecutive calendar months ending on March 31,
June 30, September 30 and December 31.

 

1.14         “Calendar Year” means each successive
period of 12 months commencing on January 1 and ending on December 31.

 

1.15         “Combination Product” means a **.

 

1.16         “Commercialization” or “Commercialize”
means activities directed to commercially manufacturing, obtaining pricing and
reimbursement approvals, carrying out Phase 4 Trials for, marketing, promoting,
distributing, importing or selling a pharmaceutical product.

 

1.17         “Commercially Reasonable Efforts”
means, with respect to Licensed Compounds and Licensed Products, the carrying
out of Development or Commercialization activities in a **.  Without limiting the foregoing, Commercially
Reasonable Efforts requires that a Party: (i) **, (ii) **, (iii) **, (iv) **,
and (v) **.

 

2

 

1.18         “Competitive Compound” means any **
that is not a **, unless BMS has **.  BMS
shall not **.

 

1.19         “Compound Library Services” means the
services to be performed by Pharmacopeia for BMS as set forth in Appendix 5
and Appendix 6 hereto, for the design, synthesis and delivery to BMS of
the Libraries.

 

1.20         “Confidential Information” means all
trade secrets, processes, formulae, data, know-how, improvements, inventions,
chemical or biological materials, assays, techniques, marketing plans,
strategies, customer lists, or other information that has been created,
discovered, or developed by a Party, or has otherwise become known to a Party,
or to which rights have been assigned to a Party, as well as any other
information and materials that are deemed confidential or proprietary to or by
a Party (including, without limitation, all information and materials of a
Party’s customers and any other Third Party and their consultants), in each
case that are disclosed by such Party to the other Party, regardless of whether
any of the foregoing are marked “confidential” or “proprietary” or communicated
to the other by the disclosing Party in oral, written, graphic, or electronic
form.

 

1.21         “Controlled” or “Controls”,
when used in reference to intellectual property, means the legal authority or
right of a Party hereto (or any of its Affiliates) to grant a license or
sublicense of intellectual property rights to another Party, or to otherwise
disclose proprietary or trade secret information to such other Party, without
breaching the terms of any agreement with a Third Party, or misappropriating
the proprietary or trade secret information of a Third Party.

 

1.22         “Cover,” “Covered” or “Covering”
means, with respect to patent rights, that the making, using, importation,
offer for sale or sale of an invention claimed in such patent rights or the
conducting of an activity that, in the absence of a license under such patent
rights, would infringe at least one Valid Claim of such patent rights whether
present in an issued patent or in a patent application if it issued as a patent
containing such claim.

 

1.23         “DARA” means dual acting antagonists
of the angiotensin-II receptor (AT1 receptor) and the endothelin-1 (ETA)
receptor.

 

1.24         “Development” means non-clinical and
clinical drug development activities reasonably related to the development and
submission of information to a Regulatory Authority, including, without
limitation, toxicology, pharmacology and other discovery and pre-clinical
efforts, test method development and stability testing, manufacturing process
development, formulation development, delivery system development, quality
assurance and quality control development, statistical analysis, clinical
studies (including, without limitation, pre- and post-approval studies and
specifically excluding regulatory activities directed to obtaining pricing and
reimbursement approvals).  When used as a
verb, “Develop” means to engage in Development.

 

1.25         “Development Plan” means, with respect
to any Licensed Product, a comprehensive, multi-year plan specifying the
anticipated timing and technical details of Development activities for such
Licensed Product, including without limitation the indications to

 

3

 

be targeted, line of therapy,
timelines for completing key activities, phasing of development, primary
endpoints, criteria for continuing activities, study size, comparator drugs,
combination drugs, timelines for data preparation and filing of regulatory
submissions, toxicology and pharmacology studies and manufacturing process
development and scale up.  An outline of
the initial Development Plan as of the Effective Date is attached hereto as Appendix
3.

 

1.26         “Dollar” or “$” means the
lawful currency of the United States.

 

1.27         “Effective Date” means the date
specified in the initial paragraph of this Agreement.

 

1.28         “EMEA” means the European Agency for
the Evaluation of Medicinal Products, or any successor agency thereto.

 

1.29         “EU” means the European Union, as its
membership may be altered from time to time, and any successor thereto, and
which, as of the Effective Date, consists of Austria, Belgium, Czech Republic,
Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy,
Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal,
Slovakia, Slovenia, Spain, Sweden and the United Kingdom, and that certain
portion of Cyprus included in such organization.

 

1.30         “Europe” means the countries
comprising the European Union as it may be constituted from time to time,
together with those additional countries included in the European Economic Area
as it may be constituted from time to time (which as of the Effective Date
includes Iceland, Liechtenstein and Norway), Albania, Andorra, Belarus, Bosnia
and Herzegovina, Bulgaria, Croatia, Holy See (Vatican), Macedonia, Moldova,
Monaco, Poland, Romania, Russian Federation, San Marino, Serbia and Montenegro,
Switzerland, Turkey, Ukraine, other central and eastern European markets
including former Soviet block and USSR countries, and any successors to, or new
countries created from, any of the foregoing.

 

1.31         “FDA” means the U.S. Food and Drug
Administration, or any successor agency thereto.

 

1.32         “Field” means the diagnosis,
prevention, treatment or control of any human or animal disease, disorder or
condition.

 

1.33         “First Commercial Sale” means, with
respect to any Licensed Product, the first sale for use or consumption by the
general public of such Licensed Product in any country in the Territory after
Approval of such Licensed Product has been granted, or such marketing and sale
is otherwise permitted, by the Regulatory Authority of such country.

 

1.34         “GAAP” means generally accepted accounting
principles in the United States.

 

1.35         “IND” means an Investigational New
Drug Application, as defined in the Act, filed with the FDA or its foreign
counterparts.

 

4

 

1.36         “Indemnification Claim” has the
meaning set forth in Section 12.3.

 

1.37         “Indemnitee” has the meaning set forth
in Section 12.3.

 

1.38         “Indemnitor” has the meaning set forth
in Section 12.3.

 

1.39         “Independent Evaluator” means an
independent certified public accounting firm, a consulting firm in the
biotechnology and/or pharmaceutical sectors or investment bank, in each case of
recognized standing within such sectors, which is not at the time of the
evaluation contemplated in Section 3.1 providing auditing or consulting
services to either Party, and which is selected by Pharmacopeia.

 

1.40         “JNDA” means a New Drug Application
filed with the Koseisho required for marketing approval for the applicable
Licensed Product in Japan.

 

1.41         “JNDA Approval” means the approval of
a JNDA by the Koseisho for the applicable Licensed Product in Japan.

 

1.42         “JNDA Filing” means the acceptance by
the Koseisho of the filing of a JNDA for the applicable Licensed Product in
Japan.

 

1.43         “Koseisho” means the Japanese Ministry
of Health and Welfare, or any successor agency thereto.

 

1.44         “Laws” means all laws, statutes,
rules, regulations, ordinances and other pronouncements having the effect of
law of any federal, national, multinational, state, provincial, county, city or
other political subdivision, agency or other body, domestic or foreign.

 

1.45         “Library” and “Libraries” have
the meaning set forth in Appendix 5.

 

1.46         “License” means any agreement
transferring rights with respect to any Licensed Compound or any Licensed
Product by Pharmacopeia (or an Affiliate of Pharmacopeia) to any Third Party
licensee, including without limitation any license, sublicense, co-development,
co-promotion, distribution, joint venture, development and commercialization
collaboration or similar transaction involving a transfer of rights with
respect to a Licensed Compound or Licensed Product.  “License” shall also include any
further transfer of such rights by a Third Party licensee to any other Third
Party.  “License” also refers to
the corresponding arrangement for the grant by Pharmacopeia of rights back to
BMS with respect to one or more Licensed Compound(s) and Licensed Product(s)
pursuant to Section 3.1.

 

1.47         “Licensed Compounds” means:

 

(a)           the **;

 

(b)           any **;

 

5

 

(c)           any **; and

 

(d)           any **.

 

1.48         “Licensed Product” means any
pharmaceutical product containing a Licensed Compound (alone or with other
active ingredients), in all forms, presentations, formulations and dosage
forms.

 

1.49         “List A Countries” means **.

 

1.50         “Listed Compounds” means those
compounds identified in Appendix 4.

 

1.51         “Losses and Claims” has the meaning
set forth in Section 12.1.

 

1.52         “MAA Approval” means approval by the
EMEA of a marketing authorization application (“MAA”) filed with the EMEA for
the applicable Licensed Product under the centralized European procedure.  If the centralized EMEA filing procedure is
not used, MAA Approval shall be achieved upon the first Approval for the
applicable Licensed Product in any two of the following countries:  France, Germany, Italy, Spain or the United
Kingdom.

 

1.53         “MAA Filing” means filing with the
EMEA of a marketing authorization application (“MAA”) for the applicable
Licensed Product under the centralized European procedure.  If the centralized EMEA filing procedure is
not used, MAA Filing shall be achieved upon the first filing of a marketing
authorization application for the applicable Licensed Product in any two of the
following countries:  France, Germany,
Italy, Spain or the United Kingdom.

 

1.54         “Major Market Countries” means the
**.  “Major Market Country” means
one of these countries.

 

1.55         “**” has the meaning set forth in **.

 

1.56         “NDA” means a New Drug Application
filed with the FDA required for marketing approval for the applicable Licensed
Product in the U.S.

 

1.57         “NDA Approval” means the approval of
an NDA by the FDA for the applicable Licensed Product in the U.S.

 

1.58         “NDA Filing” means the acceptance by
the FDA of the filing of an NDA for the applicable Licensed Product.

 

1.59         “Negotiation Period” has the meaning
set forth in Article 3.

 

1.60         “Net Sales” means, with respect to any
**:

 

(a)           **; provided,
however, that where any such **;

 

6

 

(b)           **;

 

(c)           **; and

 

(d)           **.

 

Net Sales shall be determined
**.  In the case of any Combination
Product sold in the Territory, Net Sales for such Combination Product shall be
calculated by **.

 

Net Sales shall not include
any **.

 

1.61         “Notice” has the meaning set forth in
Section 3.1.1(a).

 

1.62         “Person” means any individual, firm,
corporation, partnership, limited liability company, trust, business trust,
joint venture company, governmental authority, association or other entity.

 

1.63         “Phase 1 Trial” means a human clinical
trial of a Licensed Product, the principal purpose of which is a preliminary
determination of safety in healthy individuals or patients, as described in 21
C.F.R. 312.21(a), or a similar clinical study prescribed by the Regulatory
Authorities in a foreign country.

 

1.64         “Phase 1b Study” means a Phase 1 Trial
based upon and conducted subsequent to filing an IND in the U.S. for the
Licensed Product and **.  The plan for
such clinical trial for a Licensed Compound (including the clinical end points
for the trial) shall be described in the then-applicable Development Plan.  As used herein, “completion of a Phase 1b
Study” shall mean completion of the applicable clinical trial and the
submission to the FDA (or equivalent Regulatory Authority in the country in
which the Phase 1b Study is carried out) of the preliminary clinical studies
report plus the clinical data and tables in anticipation of post-trial meeting
with the relevant Regulatory Authority for such clinical trial.  If the Phase 1b Study described above is not
approved by the relevant Regulatory Authority, then “Phase 1b Study” shall mean
that study that is carried out that most closely approximates the study
described above.

 

1.65         “Phase 2 Trial” means a human clinical
trial of a Licensed Product, the principal purpose of which is a determination
of safety and efficacy in the target patient population, as described in 21
C.F.R. 312.21(b), or a similar clinical study prescribed by the Regulatory
Authorities in a foreign country.

 

1.66         “Phase 2b Trial” means a means a Phase
2 Trial of a Licensed Product, the principal purpose of which is a further
determination of efficacy and safety, in the target population, at the intended
clinical dose or doses or range of doses, on a sufficient number of subjects
and for a sufficient period of time to confirm the optimal manner of use of the
Product (dose and dose regimen) to support the initiation, without any further
Phase 2 Trial, of a pivotal Phase 3 Trial (such Phase 3 Trial may be a
continuation/extension of such Phase 2 Trial).

 

7

 

1.67         “Phase 3 Trial” means a human clinical
trial of a Licensed Product on a sufficient number of subjects that is designed
to establish that a pharmaceutical product is safe and efficacious for its
intended use, and to determine warnings, precautions, and adverse reactions
that are associated with such pharmaceutical product in the dosage range to be
prescribed, which trial is intended to support Approval of a Licensed Product,
as described in 21 C.F.R. 312.21(c), or a similar clinical study prescribed by
the Regulatory Authorities in a foreign country.  For purposes of this Agreement, “start of
Phase 3 Trial” for a Licensed Product means the first dosing of such Licensed
Product in a human patient in a Phase 3 Trial.

 

1.68         “Phase 4 Trial” means a human clinical
trial for a Licensed Product commenced after receipt of Approval in the country
for which such trial is being conducted and that is conducted within the
parameters of the Approval for the Licensed Product.  Phase 4 Trials may include, without
limitation, epidemiological studies, modeling and pharmacoeconomic studies,
investigator sponsored clinical trials of the Licensed Product and
post-marketing surveillance studies.

 

1.69         “Proprietary Compound of BMS” means
any compound or other agent being developed or sold, as of the Effective Date
or at any time thereafter, by BMS or its Affiliates or their contractors or
collaborators.

 

1.70         Regulatory Authority” means any national or supranational
governmental authority, including, without limitation, the FDA, EMEA or
Koseisho (i.e., the Japanese Ministry of Health and Welfare, or any successor
agency thereto), that has responsibility in countries in the Territory over the
Development and/or Commercialization of Licensed Compounds and Licensed
Products.

 

1.71         “Sublicensee” means any Third Party to
whom rights are transferred with respect to any Licensed Compound or Licensed
Product, including through any license, sublicense, co-development, co
discovery, co-promotion, distribution, joint venture, Development and
Commercialization collaboration or similar transaction between a Party (or an
Affiliate of a Party) and a Third Party. 
“Sublicensee” shall also include any Third Party to whom such
rights are transferred through further sublicense by a Sublicensee.  “Sublicensee” shall include any Third
Party that is a party to a License agreement.

 

1.72         “Territory” means any country in the
world.

 

1.73         “Third Party” means any Person other
than Pharmacopeia, BMS and their respective Affiliates.

 

1.74         “Third Party Term Sheet” has the
meaning set forth in Section 3.1.2(b).

 

1.75         “Title 11” has the meaning set forth
in Section 13.8.

 

1.76         “United States” or “U.S.” means
the United States of America and its territories and possessions (including,
without limitation, Puerto Rico).

 

8

 

1.77         “Valid Claim” means a claim of (i) an
issued and unexpired patent or a supplementary protection certificate, which
claim has not been held invalid or unenforceable by a court or other government
agency of competent jurisdiction from which no appeal can be or has been taken
and has not been held or admitted to be invalid or unenforceable through
re-examination or disclaimer, opposition procedure, nullity suit or otherwise,
or (ii) a pending patent application; provided,
however, that if a claim of a pending patent application shall not
have issued within five (5) years (or in Japan, seven (7) years) after the
earliest filing date from which such claim takes priority, such claim shall not
constitute a Valid Claim for the purposes of this Agreement unless and until a
patent issues with such claim.

 

ARTICLE 2

LICENSE GRANTS

 

2.1           BMS Patent Rights and BMS Know-How.

 

2.1.1.             BMS Core Patent Rights and BMS Know-How. 
Subject to the terms and conditions set forth in this Agreement
(including, without limitation, the reservation of rights in Section 2.5), BMS
hereby grants to Pharmacopeia a non-transferable (except in accordance with
Section 15.4), exclusive license, with the right to sublicense in accordance
with Section 2.2, under the BMS Core Patent Rights and BMS Know-How to the
extent reasonably necessary to, make, use (including in activities directed at
the research and Development of Licensed Compounds), have made, sell, have
sold, offer to sell, export, import and otherwise exploit or Commercialize
Licensed Compounds and Licensed Products in the Field in the Territory.

 

2.1.2.             BMS Other Patent Rights. 
Subject to the terms and conditions set forth in this Agreement (including,
without limitation, the reservation of rights in Section 2.5), BMS hereby
grants to Pharmacopeia a non-transferable (except in accordance with Section
15.4), non-exclusive (subject to conversion to exclusivity pursuant to Section
2.6 below) license, with the right to sublicense in accordance with Section
2.2, under the BMS Other Patent Rights solely to the extent reasonably
necessary or useful to make, use (including in activities directed at the
research and Development of Licensed Compounds), have made, sell, offer to
sell, export and import and otherwise exploit or Commercialize Licensed
Compounds and Licensed Products in the Field in the Territory, provided, however, that no rights are
granted under this Section 2.1.2 (or otherwise under this Agreement) with
respect to any Proprietary Compound of BMS. 
For clarification, no rights are granted under this Section 2.1.2 (or
otherwise under this Agreement) to co-formulate or use in combination a
Licensed Compound with any Proprietary Compound of BMS.  The rights granted by BMS to Pharmacopeia
under this Section 2.1.2 include the right to make, have made, use (including
in activities directed at the research and Development of Licensed Compounds),
export and import intermediates and starting materials reasonably necessary for
the manufacture of Licensed Compounds, and to practice methods reasonably
necessary for the manufacture of Licensed Compounds, and to practice methods
reasonably necessary for manufacturing such intermediates and starting
materials, but only for the purposes of manufacturing, using, importing or
exporting Licensed Compounds in the Field in the

 

9

 

Territory.  For clarification, no rights are granted to
sell or offer to sell any such intermediates or starting materials, or use such
intermediates or starting materials for any purpose other than for the purposes
of manufacturing Licensed Compounds.

 

2.2           Sublicenses.  Pharmacopeia shall have the
right to grant sublicenses with respect to the rights licensed to Pharmacopeia
under Sections 2.1.1 and 2.1.2 to any Affiliate of Pharmacopeia for so long as
such Affiliate remains an Affiliate of Pharmacopeia, provided that (i) such Affiliate shall agree in writing to
be bound by and subject to the terms and conditions of this Agreement in the
same manner and to the same extent as Pharmacopeia, and (ii) Pharmacopeia shall
remain responsible for the performance of this Agreement and shall cause such
Affiliate to comply with the terms and conditions of this Agreement.  In addition, Pharmacopeia shall have the
right to grant sublicenses with respect to the rights licensed to Pharmacopeia
under Sections 2.1.1 and 2.1.2 to Third Parties.

 

(a)           Other than a permitted assignment of this
Agreement in accordance with Section 15.4.1, ** then only in accordance with
this Section 2.2 and Article 3.  The
foregoing ** shall not limit Pharmacopeia’s ability to engage Third Party
contractors in the Development, manufacture and/or shipping/warehousing of any
Licensed Compound or any Licensed Product, provided
that such engagement is essentially a fee-for-service or similar purchase
arrangement and does not grant the Third Party contractor the right to sell or
promote such Licensed Compound or Licensed Product.

 

(b)           **, Pharmacopeia shall have the right to enter
into a License agreement with a Third Party, provided
that, to the extent any such License agreement grants rights with respect to
any Licensed Compound:

 

(i)            such License agreement shall be consistent
with the terms and conditions of this Agreement, and shall not limit (A)
Pharmacopeia’s ability to perform its obligations under this Agreement or (B)
BMS’ rights under this Agreement;

 

(ii)           in such License agreement, the Sublicensee
shall agree in writing to be bound to Pharmacopeia by terms and conditions that
are substantially similar to, or less favorable to the Sublicensee than, or
otherwise allow Pharmacopeia to fully perform the corresponding terms and
conditions of this Agreement, provided
that Section 3.1.2 of Section 3.1 shall not apply to a Sublicensee;

 

(iii)          promptly after the execution of such License
agreement, Pharmacopeia shall provide a copy of such License agreement to BMS,
with financial and other confidential or proprietary commercial terms redacted
consistent with the public filing of such license agreement with the Securities
and Exchange Commission (“SEC”), or, if not filed with the SEC, then with
financial and other confidential or proprietary commercial terms redacted (to
the extent that such other commercial terms are not reasonably necessary for
BMS to determine Pharmacopeia’s compliance with this Agreement);

 

10

 

(iv)          Pharmacopeia shall remain responsible for the
performance of this Agreement (including, without limitation, its obligations
under Sections 5.1(a) and 6.1), the payment of all payments due, and making
reports and keeping books and records, and shall use commercially reasonable
efforts to monitor such Sublicensee’s compliance with the terms of such
License;

 

(v)           any sublicense rights granted by Pharmacopeia
in a License (to the extent such sublicensed rights are granted to Pharmacopeia
in this Agreement) shall terminate on a country-by-country and Licensed
Product-by-Licensed Product basis effective upon the termination under Section
13.2 of the license from BMS to Pharmacopeia with respect to such sublicensed
rights, provided that such
sublicensed rights shall not terminate if, as of the effective date of such
termination by BMS under Section 13.2, the Sublicensee is not in material
breach of its obligations to Pharmacopeia under its License agreement, and
within sixty (60) days of such termination the Sublicensee agrees in writing to
be bound directly to BMS under a license agreement substantially similar to
this Agreement with respect to the rights sublicensed hereunder, substituting
such Sublicensee (a “Surviving Sublicensee”) for Pharmacopeia; and

 

(vii)         such Sublicensees shall have the right to
grant further sublicenses with respect to the Development or Commercialization
of Licensed Products, provided
that such further sublicenses shall be in accordance with and subject to all of
the terms and conditions of this Section 2.2.

 

For purposes of
clarification, the preceding provisions of this Section 2.2(b) shall not apply
to Licensed Compounds with respect to which Pharmacopeia grants BMS a License.

 

(c)           In accordance with the foregoing, unless BMS
agrees otherwise in writing, any License shall **.

 

(d)           For clarity, where provisions of this
Agreement provide that Pharmacopeia shall be “solely” responsible or the like
with respect to a matter (for example, Sections 5.4, 5.5, or 7.1), it is
understood that such responsibilities may be carried out or borne on
Pharmacopeia’s behalf by a Pharmacopeia Affiliate, permitted Sublicensee or
contractor of Pharmacopeia.

 

(e)           It shall be a **.

 

2.3           No Trademark License.  No
right or license, express or implied, is granted to Pharmacopeia to use any
trademark, trade name, trade dress or service mark owned or Controlled by BMS
or any of its Affiliates.  Pharmacopeia,
at its sole cost and expense, shall be responsible for the selection,
registration and maintenance of all trademarks which it employs in connection
with its activities conducted pursuant to this Agreement, if any, and shall own
and control such trademarks.

 

2.4           No Implied Licenses.  No
license or other right is or shall be created or granted hereunder by
implication, estoppel or otherwise.  All
such licenses and rights are or shall be granted only as expressly provided in
this Agreement.

 

11

 

2.5           Retained Rights.

 

2.5.1.             All rights not expressly granted under
Section 2.1 are reserved by BMS and may be used by BMS for any purpose.  Without limiting the foregoing, BMS retains
any and all rights under the BMS Patent Rights and BMS Know-How to make, have
made, use, sell, have sold, export or import any compounds, provided that such compounds are not
Licensed Compounds or products containing any Licensed Compounds.  For clarification, BMS retains the exclusive
right under the BMS Patent Rights to develop and commercialize compounds within
the BMS Patent Rights which are not Licensed Compounds.  BMS also expressly reserves and retains the
right (i) to make, have made and use Licensed Compounds for any internal
research purposes (including but not limited to for purposes of screening in
support of BMS’ internal research programs), (ii) to support the filing and
prosecution of patent applications, and (iii) to make, have made and use any
Licensed Compound solely for use as an intermediate or starting material in the
manufacture of any compound which is not a Licensed Compound.

 

2.5.2.             Subject to the exclusive rights granted to
Pharmacopeia under this Article 2 and subject to the restrictions on use of
Pharmacopeia’s Confidential Information under Article 11, **.  For clarification, the foregoing restriction
on BMS shall not apply to any Active Compound that is acquired from or through
a Third Party after the Effective Date, for example, through in-license,
acquisition or merger.  For purposes of
clarity, nothing in the foregoing shall be construed to reserve to BMS the
right to engage in the discovery, Development and/or Commercialization of
Active Compounds Covered by the BMS Core Patent Rights exclusively licensed to
Pharmacopeia hereunder.

 

2.6           Conversion to Exclusive License.  BMS
shall have the right at its sole discretion to convert the license granted to
Pharmacopeia under Section 2.1.2 to be an exclusive license upon notice to
Pharmacopeia specifying the patents to be so converted.  The BMS patent rights so exclusively licensed
to Pharmacopeia pursuant to this Section 2.6 shall thereafter be deemed to be
BMS Core Patent Rights.

 

ARTICLE 3

BMS RIGHT OF FIRST NEGOTIATION

 

3.1           BMS Right of First Negotiation.

 

3.1.1.             BMS shall have a limited right of first
negotiation with respect to Licensed Compounds as follows (the “Right of
First Negotiation”).

 

(a)           In the event that Pharmacopeia desires to
enter into a License arrangement with respect to any Licensed Compound, before
entering into negotiations with any Third Party with respect to such License,
Pharmacopeia will notify BMS of its desire and provide BMS with information in
Pharmacopeia’s possession and control that is reasonably necessary for BMS to
perform its due diligence with respect to such Licensed Compound (including but
not limited to information from or relating to clinical studies, correspondence
with FDA, information regarding

 

12

 

Third Party patents, and
information regarding the manufacture, sourcing and cost of goods for the
Licensed Compound) (the “Notice”). 
Pharmacopeia shall provide to BMS a proposal of terms and conditions
with respect to such a License at the time of such Notice.  If BMS notifies Pharmacopeia in writing of
its election to pursue a License for such Licensed Compound within ** (**) days
after BMS’ receipt of such Notice, Pharmacopeia shall enter into good faith
negotiations with BMS with respect to such License for a period of ** (**) days
(the “Negotiation Period”) following receipt of such election from
BMS.  **.

 

(b)           During the Negotiation Period, Pharmacopeia
will provide BMS with an opportunity to make a written proposal of terms and
conditions with respect to such a License and Pharmacopeia will either accept
the proposal or provide a counter offer to BMS (i.e., in addition to the
proposal provided to BMS at the time of the Notice).  If BMS has not provided Pharmacopeia with such
a written proposal regarding all principal financial terms of such a License
within the first ** (**) days of the Negotiation Period, the Negotiation Period
will terminate.  If Pharmacopeia and BMS
are able to conclude an agreement in principle within the Negotiation Period as
set forth in a mutually satisfactory term sheet with respect to such License
(being demonstrated by BMS obtaining internal BMS Executive Committee, and
Pharmacopeia obtaining Board approval, to proceed with completing a definitive
agreement based on such term sheet), the Parties shall negotiate a definitive
agreement in good faith with the goal of executing such agreement within **
(**) days thereafter.

 

(c)           If BMS does not elect through the written
notification described above to pursue a License with respect to such Licensed
Compounds within the ** (**) day period set forth above, Pharmacopeia will then
be free to enter into negotiations with any Third Party regarding a License for
such Licensed Compounds and free to enter into any such License, but only
subject to the provisions set forth in this Article 3 below.

 

(d)           Following Notice, if BMS does so elect to
pursue a License with respect to the Licensed Compounds within the ** (**) day
period set forth above, but Pharmacopeia and BMS do not conclude an agreement
in principle (being demonstrated by BMS obtaining internal BMS Executive
Committee, and Pharmacopeia obtaining Board approval, to proceed with
completing a definitive agreement based on such term sheet) with respect to such
License within the Negotiation Period as described above, Pharmacopeia will
then be free to enter into negotiations with any Third Party regarding a
License for such Licensed Compounds, and free to enter into any such License,
subject to the provisions set forth in Article 3 below.

 

3.1.2.             Pharmacopeia shall not enter into an
agreement with any Third Party with respect to such License for a Licensed
Compound except in accordance with the provisions of this Article 3, including
the provisions set forth below.

 

(a)           In the event that Pharmacopeia intends to
enter into a License agreement with a Third Party (based on bona fide arm’s-length negotiations with
an unaffiliated Third Party) after following the procedure set forth in this
Article 3, **.

 

13

 

(b)           **. 
For this purpose, ** at that time. 
Such determination by the **.  **
will consider **.  Such determination by
the Board shall be **.

 

(c)           If the **.

 

(d)           If the **. 
In the event that Pharmacopeia makes **. 
If Pharmacopeia offers **.  **.

 

3.1.3.             **.

 

3.1.4.             Upon the initiation of any such Negotiation
Period, Pharmacopeia shall **.

 

3.1.5.             Any License agreement entered into by
Pharmacopeia with a Third Party in accordance with the foregoing procedure shall
be consistent with the terms and conditions of this Agreement and shall fully
enable Pharmacopeia to fully perform all of its obligations under the Agreement
which will continue in effect.  As set
forth in Section 2.2, any Sublicensee shall be bound by the terms and
conditions of this Agreement in the same manner as Pharmacopeia, provided that Section 3.1.2 of Section 3.1
shall not apply to a Sublicensee.

 

3.1.6.             Certain Definitions.  For
the purposes of this Article 3, the following capitalized terms shall have the
following meanings:

 

(a)           “**” means, with respect to a **,
compared to a ** under the terms and conditions set forth in the **, that the
**, based on the **, including without limitation, **.

 

(b)           “**” means any **.

 

ARTICLE 4

TRANSFER OF KNOW-HOW

 

4.1           Documentation. 
Prior to the Effective Date BMS shall provide to Pharmacopeia one (1)
electronic or paper copy of all documents, data or other information Controlled
by BMS as of the Effective Date to the extent that such documents, data and
information are (i) reasonably necessary for the manufacture, Development or
Commercialization of the Listed Compounds (including SAR information) and
subject to the BMS Know-How license under Section 2.1, and (ii) are reasonably
available to BMS without undue searching; provided
however, that subject to the last
sentence of this Section 4.1, the foregoing shall in no event require BMS to
provide copies of manufacturing run records or laboratory notebook
records.  Such documentation is
Confidential Information of BMS (subject to Article 11) and shall not be used
by Pharmacopeia for any purpose other than Development, manufacture or
Commercialization of Licensed Compounds and Licensed Products in accordance
with this Agreement.  Pharmacopeia
acknowledges that it has received from BMS such documents, data and information
prior to the Effective Date.  BMS shall
be responsible for the cost of providing

 

14

 

one (1) set of copies
only.  BMS shall have no obligation to reformat
or otherwise alter or modify any such materials, or to create materials in
electronic form, in order to provide them to Pharmacopeia.  Any and all such materials delivered to
Pharmacopeia pursuant to this Section 4.1 are and shall remain the sole property
of BMS.  Notwithstanding the foregoing,
if at any time during the term of this Agreement Pharmacopeia identifies
particular documents, data or information (including laboratory notebook
records) that are within the BMS Know-How, but were not previously delivered to
Pharmacopeia, and that are reasonably necessary for the continued manufacture,
Development or Commercialization of a Licensed Compound or Licensed Product
(including without limitation materials requested in connection with an audit
or other inquiry by a Regulatory Authority), or are reasonably necessary to
support the filing and/or prosecution of patent rights Covering the Licensed
Compounds or Licensed Products, BMS shall promptly provide such material to
Pharmacopeia upon request to the extent that such items are in BMS’ possession
and are available without undue searching.

 

4.2           Technical Assistance. 
During the ** (**) day period following the Effective Date, BMS shall
provide Pharmacopeia with reasonable access by teleconference or in-person at
BMS’ facilities (subject to BMS’ customary rules and restrictions with respect
to site visits by non-BMS personnel) to BMS personnel reasonably knowledgeable
in the research and development of the Licensed Compounds and Licensed Products
for up to ** hours of consulting advice with respect to the Licensed Compounds
and Licensed Products, provided
that (i) such access shall be requested and coordinated through a single BMS
contact person reasonably knowledgeable with respect to the BMS DARA program,
with such person to be designated by BMS, (ii) BMS makes no warranty, express
or implied, that Pharmacopeia shall be able to successfully implement and use
the BMS Know-How, (iii) BMS shall not be obligated to provide more than ** (**)
hours of consulting advice in such period, and (iv) BMS will use reasonable
efforts to provide such consulting advice promptly.  If Pharmacopeia requests further consulting
advice related to Licensed Compounds and Licensed Products in excess of the **
(**) hour amount referenced above, BMS may at its sole discretion provide such
consulting advice and, if BMS elects to provide such consulting advice,
Pharmacopeia shall reimburse BMS for its time incurred in connection therewith
at a rate of $** per hour, plus any reasonable out-of-pocket expenses incurred
by BMS in providing such consulting advice requested by Pharmacopeia.  Such reimbursement shall be made to BMS
within thirty (30) days after receipt by Pharmacopeia of a BMS invoice reasonably
detailing BMS’ time expended, together with documentation substantiating any
out-of-pocket expenses incurred.

 

4.3           Materials.  BMS shall have no obligation
to provide Pharmacopeia with samples of any compounds or other materials (other
than the information provided under Section 4.1) under this Agreement, provided that upon written request by
Pharmacopeia, BMS will authorize in writing the transfer to Pharmacopeia of the
compound ** for BMS.  Pharmacopeia shall
be responsible for any and all fees charged by **.  Any such compounds or other materials
(including **) that may be provided by or for BMS to Pharmacopeia pursuant to
this Agreement (the “Transferred Materials”) are provided “AS IS”.  Pharmacopeia shall be fully responsible for
its and its Affiliates’, Sublicensees’ and contractors’ use, storage, handling
and disposition of the Transferred Materials. 
Under no circumstances shall BMS be liable or responsible for

 

15

 

Pharmacopeia’s or its
Affiliates’, Sublicensees’ and contractors’ use, storage, handling or
disposition of the Transferred Materials, and Pharmacopeia assumes sole
responsibility for any claims, liabilities, damages and losses that might arise
as a result of Pharmacopeia’s and its Affiliates’, Sublicensees’ and
contractors’ use, storage, handling or disposition of any Transferred Material.
Pharmacopeia shall indemnify, defend and hold harmless BMS and its Affiliates,
and their respective officers, directors, employees, agents, licensors, and
their respective successors, heirs and assigns and representatives, from and
against any and all damages, liabilities, losses, costs and expenses
(including, without limitation, reasonable legal expenses, costs of litigation
and reasonable attorney’s fees) arising in connection with any claims, suits,
proceedings, whether for money damages or equitable relief, of any kind,
arising out of or relating, directly or indirectly, to Pharmacopeia’s, or any
of its Affiliates’, Sublicensees’ or contractors’ use, storage, handling or
disposition of any Transferred Material. 
Transferred Materials may only be provided to Pharmacopeia, its
Affiliates, Sublicensees and contractors. 
The Transferred Materials shall be used by Pharmacopeia solely for
purposes of supporting the Development of the Licensed Compounds and Licensed
Products.

 

ARTICLE 5

DEVELOPMENT

 

5.1           Development and Development Plan.

 

(a)           Commercially Reasonable Efforts. 
Pharmacopeia (or its Sublicensees, as applicable) shall use sustained
Commercially Reasonable Efforts to Develop at least one Licensed Compound and
Licensed Product, including but not limited to using Commercially Reasonable
Efforts to expeditiously carry out the pre-clinical and clinical development
for the Licensed Compounds and Licensed Products (including expeditiously pursuing
regulatory filings and Approvals and marketing authorizations for at least one
Licensed Compound and Licensed Product) in accordance with the Development
Plan.

 

(b)           Development Plan.  An
outline of the initial Development Plan is attached hereto as Appendix 3
to the Agreement.  The complete initial
Development Plan through Phase I Trials will be provided to BMS by Pharmacopeia
within ** (**) days after the Effective Date.

 

5.2           Development Reports. 
Pharmacopeia will provide BMS with ** written development reports within
thirty (30) days following ** presenting a summary of the Development
activities accomplished by Pharmacopeia during the just ended ** (**) months,
including as applicable updates to the Development Plan, and significant
results, information and data generated with respect to Licensed Compounds and
Licensed Products.  Upon reasonable
request by BMS, Pharmacopeia shall also meet in-person with BMS to review
Pharmacopeia’s Development activities for the Licensed Compounds and Licensed
Products.  In addition, prior to
Pharmacopeia entering into a License agreement with a Third Party, upon
reasonable request by BMS, but no more than once per Calendar Year,
Pharmacopeia shall present to BMS, at Pharmacopeia’s facilities, summaries of
(and, at the request of BMS, with copies of) clinical protocols, investigator
brochures, regulatory submissions and correspondence from regulatory

 

16

 

agencies with respect to
Licensed Compound and Licensed Product that have been prepared or received by
Pharmacopeia as of the date of such request by BMS.

 

5.3           Records.  Pharmacopeia shall maintain
complete and accurate records of all work conducted in furtherance of the
Development and Commercialization of the Licensed Compounds and Licensed
Products and all material results, data and developments made in conducting
such activities.  Such records shall be
maintained sufficient detail and in good scientific manner appropriate for patent
and regulatory purposes.  If BMS believes
in good faith that Pharmacopeia may not be complying with its obligations under
this Section 5.3, BMS shall provide written notice thereof to Pharmacopeia
identifying the basis for BMS’ good faith belief, and Pharmacopeia shall allow
an independent Third Party as to which Pharmacopeia has no reasonable objection
to review such records on behalf of BMS to verify that Pharmacopeia is
complying with this Section 5.3.  Such
review shall be conducted no more frequently than once per year, at BMS’ cost, and
upon reasonable advance notice at mutually agreed upon times during normal
business hours.

 

5.4           Development Responsibilities and Costs. 
Pharmacopeia shall have sole responsibility for, and shall bear the cost
of conducting, all Development with respect to the Licensed Compounds and
Licensed Products.

 

5.5           Regulatory Responsibilities and Costs. 
Pharmacopeia shall have sole responsibility for, and shall bear the cost
of preparing, all regulatory filings and related submissions with respect to
the Licensed Compounds and Licensed Products. 
Pharmacopeia shall be responsible for meeting the requirements of all
pre-approval inspections required by any Regulatory Authorities.  Except as set forth in Section 13.4,
Pharmacopeia or its Affiliate or Sublicensee shall own all INDs, NDAs,
Approvals and submissions in connection therewith and all Approvals shall be
obtained by and in the name of Pharmacopeia or its Affiliate or Sublicensee.

 

5.6           Subcontracting. 
Subject to and without limiting Section 2.2, Pharmacopeia may perform
any activities in support of its Development or Commercialization of Licensed
Compounds and Licensed Products through subcontracting to a Third Party
contractor or contract service organization, provided
that: (a) Pharmacopeia shall enter into an appropriate written agreement with
any such Third Party subcontractor such that the subcontractor shall be bound
by all applicable provisions of this Agreement to the same extent as
Pharmacopeia and such that BMS’ rights under this Agreement are not adversely
effected; (b) any such Third Party subcontractor to whom Pharmacopeia discloses
Confidential Information of BMS shall enter into an appropriate written
agreement obligating such Third Party to be bound by obligations of
confidentiality and restrictions on use of such BMS Confidential Information
that are no less restrictive than the obligations in this Agreement; (c)
Pharmacopeia will obligate such Third Party to agree in writing to assign or
license (with the right to grant sublicenses) to Pharmacopeia any inventions
(and any patent rights covering such inventions) made by such Third Party in
performing such services for Pharmacopeia; and (d) Pharmacopeia shall at all
times be responsible for the performance of such subcontractor.

 

17

 

ARTICLE 6

COMMERCIALIZATION

 

6.1           Pharmacopeia Obligations. 
Pharmacopeia (or its Sublicensees, as applicable) shall use sustained
Commercially Reasonable Efforts to Commercialize at least one (1) Licensed
Product in the Territory, including but not limited to the Major Market
Countries.  Without limiting the
foregoing, Pharmacopeia shall use Commercially Reasonable Efforts to obtain
Approvals in such countries with respect to at least one (1) Licensed Product
and to effect the First Commercial Sale thereof in such countries as soon as
reasonably practicable after receipt of such Approvals.

 

6.2           Continued Availability. 
Following the First Commercial Sale of a Licensed Product in a Major
Market Country in the Territory and until the expiration or termination of this
Agreement, Pharmacopeia shall use Commercially Reasonable Efforts to supply and
keep such Licensed Product reasonably available to the public in such country.

 

6.3           Marking.  Each Licensed Product
Commercialized by Pharmacopeia under this Agreement shall be marked (to the
extent not prohibited by applicable Laws): (i) with a notice that such Licensed
Product is sold under a license from BMS and (ii) with applicable patent and
other intellectual property notices relating to the BMS Core Patent Rights in
such a manner as may be required by applicable Law.

 

6.4           Reports.  Pharmacopeia shall provide BMS
with ** written reports within ** (**) days following the end of ** summarizing
significant commercial activities and events with respect to Licensed Products
during the just ended ** period.

 

ARTICLE 7

MANUFACTURE AND SUPPLY

 

7.1           Manufacture and Supply. 
Pharmacopeia shall be solely responsible at its expense for making or
having made all of its requirements of the Licensed Compounds and Licensed
Products.

 

ARTICLE 8

FINANCIAL TERMS

 

8.1           In partial consideration of the rights
granted by BMS to Pharmacopeia pursuant to this Agreement, Pharmacopeia shall
make the payments to BMS as provided for in this Article 8.

 

8.2           Development Milestone Payments.

 

18

 

8.2.1.             Development Milestone Payments. 
Pharmacopeia shall make milestone payments to BMS upon achievement of
each of the milestones events in the amounts as set forth below in Table
1.  Subject to Section 8.2.2, the
milestone payments set forth below will be payable by Pharmacopeia to BMS
within ten (10) days of the achievement of the specified milestone event with
respect to each Licensed Compound.  Such
milestone payment shall not be refundable or returnable in any event, nor shall
it be creditable against royalties or other payments.

Table
1

 

	
  Milestone Event

  	
   

  	
  Milestone Payment

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  
	
  **

  	
   

  	
  $

  	
  **

  	
   

  

 

In the event that a
milestone event is achieved that triggers a development milestone payment as
set forth above, if the **.  For example,
**.

 

8.2.2.             Milestone Payments for Follow-on Compounds.  Only
**.  Each such milestone payment shall be
**.

 

8.3           Royalty Payments.

 

8.3.1.             Pharmacopeia shall pay to BMS in cash the
following royalty payments on the total aggregate annual Net Sales in the
Territory of all Licensed Products in a particular Calendar Year by
Pharmacopeia, its Affiliates, and Sublicensees in the Territory:

 

	
  Aggregate
  Annual Worldwide Net Sales of All

  Licensed Products in a Calendar Year

  	
   

  	
  Royalty Rate

  	
   

  
	
  **

  	
   

  	
  **

  	
  %

  
	
  **

  	
   

  	
  **

  	
  %

  

 

19

 

By way of example, in a
given Calendar Year, if the aggregate annual worldwide Net Sales for all
Licensed Products is $**, the following royalty payment would be payable under
this Section 8.3.1: **.

 

8.3.2.             Royalty Term. 
Royalties shall be payable on a **of (i) ** or (ii)  the** or (iii) thef**.

 

8.3.3.             **.  If Pharmacopeia or its
Sublicensee, **.  Prior to Pharmacopeia
or its Sublicensee exercising its ** under this Section 8.3.3, Pharmacopeia
shall provide BMS with **.  The Parties
shall discuss the best course of action to resolve such potential **, provided that such discussions shall not
limit or delay Pharmacopeia’s or its Sublicensee’s right to **.

 

Except as set forth
above,**.

 

8.3.4.             Royalty Conditions.  The
royalties under Section 8.3.1 shall be subject to the following conditions:

 

(a)           that only one royalty shall be due with
respect to the same unit of Licensed Product;

 

(b)           that no royalties shall be due upon the sale
or other transfer among Pharmacopeia, its Affiliates, or Sublicensees, but in
such cases the royalty shall be due and calculated upon Pharmacopeia’s or its
Affiliate’s or Sublicensee’s Net Sales of Licensed Product to the first
independent Third Party; and

 

(c)           no royalties shall accrue on the disposition
of Licensed Product in reasonable quantities by Pharmacopeia, its Affiliates or
Sublicensees as part of an expanded access program, as bona fide samples, as part of Phase 4
Trials or as donations to non-profit institutions or government agencies for
non-commercial purposes, provided,
in each case, that neither Pharmacopeia, its Affiliate or Sublicensees receives
any payment for such Licensed Product.

 

8.4           Manner of Payment.  All
payments to be made by Pharmacopeia hereunder shall be made in Dollars by wire
transfer of immediately available funds to such United States bank account as
shall be designated by BMS.  Late
payments shall bear interest at the rate provided in Section 8.9.

 

8.5           Sales Reports and Royalty Payments. 
After the First Commercial Sale of a Licensed Product and during the
term of this Agreement, Pharmacopeia shall furnish to BMS a written report,
within ** (**) days after the end of each ** (or portion thereof, if this
Agreement terminates during a **), showing the amount of royalty due for such
** (or portion thereof).  Royalty payments
for each ** shall be due at the same time as such written report for the
**.  With each ** payment, Pharmacopeia
shall deliver to BMS a full and accurate accounting to include at least the
following information:

 

20

 

(a)           the quantity of each Licensed Product sold
(by country) by Pharmacopeia, its Affiliates, and Sublicensees;

 

(b)           the calculation of Net Sales from such gross
sales (by country);

 

(c)           the royalties payable in Dollars which shall
have accrued hereunder in respect of such Net Sales;

 

(d)           withholding taxes, if any, required by
applicable Law to be deducted in respect of such royalties; and

 

(e)           the dates of the First Commercial Sales of
Licensed Products in any country during the reporting period.

 

If no royalty or payment is
due for any royalty period hereunder, Pharmacopeia shall so report.

 

8.6           Sales Record Audit. 
Pharmacopeia shall keep, and shall cause each of its Affiliates, and
Sublicensees, if any, to keep, full and accurate books of accounting in
accordance with GAAP as may be reasonably necessary for the purpose of
calculating the royalties payable to BMS. 
Such books of accounting (including, without limitation, those of
Pharmacopeia’s Affiliates, and Sublicensees, if any) shall be kept at their
principal place of business and, with all necessary supporting data, shall
during all reasonable times for the ** (**) years next following the end of the
Calendar Year to which each shall pertain, be open for inspection at reasonable
times upon written notice by BMS and at BMS’ sole cost, no more than once per
year, by an independent certified accountant selected by BMS as to which
Pharmacopeia has no reasonable objection, for the purpose of verifying royalty
statements for compliance with this Agreement. 
Such accountant must have agreed in writing to maintain all information
learned in confidence, except as necessary to disclose to BMS such compliance
or noncompliance by Pharmacopeia.  The
results of each inspection, if any, shall be**. 
BMS shall pay for such inspections, except that in the event there
is**.  Any underpayments shall be paid by
Pharmacopeia within ten (10) Business Days of notification of the results of
such inspection.  Any overpayments shall
be fully creditable against amounts payable in subsequent payment periods or,
if no such amounts become payable within ninety (90) days after notification of
such results, shall be refunded.

 

8.7           Currency Exchange. With respect to Net Sales invoiced in
Dollars, the Net Sales and the amounts due to BMS hereunder shall be expressed
in Dollars.  With respect to Net Sales
invoiced in a currency other than Dollars, the Net Sales shall be expressed in
the domestic currency of the entity making the sale, together with the Dollar
equivalent, calculated using the arithmetic average of the spot rates on the
close of business on the last Business Day of each month of the Calendar
Quarter in which the Net Sales were made. 
The “closing mid-point rates” found in the “dollar spot forward against
the dollar” table published by The Financial Times or any other publication as
agreed to by the Parties shall be used as the source of spot rates to calculate
the average as defined in the preceding sentence.  All payments shall be made in Dollars.

 

21

 

8.8           Tax Withholding.  In
the event that any withholding taxes or similar charges are levied or assessed
by any taxing authority in the Territory with respect to payments made by
Pharmacopeia to BMS under this Agreement, Pharmacopeia shall pay such taxes or
similar charges to the proper taxing authority. 
Pharmacopeia may deduct the amount of such taxes or similar charges paid
by Pharmacopeia to such taxing authority from the applicable royalties or other
payment otherwise payable to BMS, subject to the following.  Pharmacopeia shall promptly provide BMS with
evidence of such tax payment obligation together with an original receipt for
such tax payments (or a certified copy, if the original is not available) and
other documentation as BMS reasonably determines is required for the purpose of
BMS’ tax returns.  Pharmacopeia, its
Affiliates and Sublicensees shall cooperate with BMS to enable the claiming of
a reduction or exemption from withholding taxes on payments under any
applicable convention on the avoidance of double taxation or similar agreement
in force and shall provide to BMS proper evidence of payments of withholding
tax and assist BMS by obtaining or providing in as far as possible the required
documentation for the purpose of BMS’ tax returns.  Pharmacopeia’s obligation vis-à-vis the tax
authorities shall remain unaffected by the provisions of this Section.

 

8.9           Interest Due. 
Without limiting any other rights or remedies available to BMS,
Pharmacopeia shall pay BMS interest on any payments that are not paid on or
before the date thirty (30) days after the date such payments are due under
this Agreement at a rate of one and one-half percent (1.5%) per month or the
maximum applicable legal rate, if less, calculated on the total number of days
payment is delinquent.

 

8.10         **.  In addition to the above
milestone and royalty payments, Pharmacopeia shall pay to BMS the following **:

 

(a)           **; or

 

(b)           **.

 

Such**.  Such ** to BMS shall be due within thirty
(30) days following **.

 

For purposes of this Section
8.10, “**” means **, but does not include (i) **, (ii)**, or (iii) **.

 

ARTICLE 9

REPRESENTATIONS AND WARRANTIES; DISCLAIMER;

LIMITATION OF LIABILITY

 

9.1           Mutual Representations and Warranties.  Each
Party represents and warrants to the other Party that (i) it has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations under this Agreement, (ii) execution of this Agreement and the
performance by such Party of its obligations hereunder have been duly authorized,
(iii) this Agreement is legally binding and enforceable on such Party in
accordance with its terms,

 

22

 

and (iv) the performance of
this Agreement by it does not create a material breach or material default
under any other agreement to which it is a Party.

 

9.2           Representations and Warranties of BMS.

 

9.2.1.             BMS represents and warrants to Pharmacopeia
that as of the Effective Date, to the actual knowledge of BMS: (i) there is no
pending litigation which alleges, or any written communication alleging, that
BMS’ activities with respect to the BMS Core Patent Rights or the Licensed
Compounds have infringed or misappropriated any of the intellectual property
rights of any Third Party, and (ii) all fees (including legal fees) required to
be paid by BMS in order to maintain the BMS Core Patent Rights have been paid
to date.

 

9.2.2.             BMS represents and warrants that it has not
previously assigned, transferred, conveyed or licensed (or granted an option to
assign, transfer, convey or license) its right, title and interest in the BMS
Core Patent Rights or the BMS Know-How.

 

9.2.3.                       BMS represents and warrants to Pharmacopeia
that as of the Effective Date, it has discontinued its internal drug discovery
and development programs for DARA compounds and that it has no active internal
programs for the discovery or development of DARA compounds as of the Effective
Date.

 

9.2.4.             BMS represents and warrants to Pharmacopeia
that as of the Effective Date, to the actual knowledge of its in-house patent
counsel, other than the BMS Core Patent Rights, BMS does not Control any
patent(s) or patent application(s) that is reasonably necessary for the
Development or Commercialization of any Listed Compound and that claims the
composition of matter of any Listed Compound or a method of manufacture or use
of any Listed Compound.

 

9.3           Representations and Warranties of
Pharmacopeia.  Pharmacopeia represents, warrants and
covenants that (i) all of its activities related to its use of the BMS Patent
Rights and BMS Know-How, and the Development and Commercialization of the
Licensed Compounds and Licensed Products, pursuant to this Agreement shall
comply with all applicable legal and regulatory requirements and (ii) it shall
not knowingly engage in any activities (A) that use the BMS Patent Rights
and/or BMS Know-How in a manner that is outside the scope of the license rights
granted to it hereunder or (B) that infringe the intellectual property rights
of any Third Party.

 

9.4           Disclaimer.  EXCEPT AS EXPRESSLY SET FORTH
IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY
KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY PATENT
RIGHTS, CONFIDENTIAL INFORMATION OR KNOW-HOW OF SUCH PARTY OR ANY LICENSE
GRANTED BY SUCH PARTY HEREUNDER, OR WITH RESPECT TO ANY COMPOUNDS, INCLUDING
BUT NOT LIMITED TO THE TRANSFERRED MATERIALS, OR PRODUCTS.  FURTHERMORE,

 

23

 

EXCEPT AS EXPRESSLY SET FORTH
IN THIS AGREEMENT, NEITHER MAKES ANY REPRESENTATIONS OR WARRANTIES THAT ANY
PATENT, PATENT APPLICATION, OR OTHER PROPRIETARY RIGHTS INCLUDED IN PATENT
RIGHTS, CONFIDENTIAL INFORMATION OR KNOW-HOW LICENSED BY SUCH PARTY TO THE
OTHER PARTY HEREUNDER ARE VALID OR ENFORCEABLE OR THAT USE OF SUCH PATENT
RIGHTS, CONFIDENTIAL INFORMATION OR KNOW-HOW CONTEMPLATED HEREUNDER DOES NOT
INFRINGE ANY PATENT RIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD
PARTY.

 

9.5           Limitation of Liability. 
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY
SHALL BE LIABLE TO THE OTHER WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT, WHETHER UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER
LEGAL OR EQUITABLE THEORY, FOR ANY INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY,
PUNITIVE, MULTIPLE, OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION,
CONSEQUENTIAL DAMAGES CONSISTING OF LOST PROFITS, LOSS OF USE, DAMAGE TO
GOODWILL, OR LOSS OF BUSINESS) AND, IN ANY CASE, BMS SHALL NOT BE LIABLE IN AN
AMOUNT GREATER THAN THE AMOUNTS PAID BY PHARMACOPEIA TO BMS UNDER ARTICLE 8 OF
THIS AGREEMENT; PROVIDED, HOWEVER,
THAT THE FOREGOING SHALL NOT APPLY TO ANY BREACH BY PHARMACOPEIA OF THE
LICENSES GRANTED TO IT UNDER THIS AGREEMENT THAT IS AN INFRINGEMENT OF BMS
PATENT RIGHTS NOT INCLUDED IN THE PATENT RIGHTS LICENSED TO PHARMACOPEIA
HEREUNDER, OR ANY BREACH BY EITHER PARTY OF ARTICLE 11 HEREOF.

 

ARTICLE 10

PATENT MAINTENANCE; INFRINGEMENT; EXTENSIONS

 

10.1         Ownership of Inventions. 
Inventorship of inventions conceived or reduced to practice in the
course of activities performed under or contemplated by this Agreement shall be
determined by application of United States patent Laws pertaining to
inventorship.  If such inventions are
jointly invented by one or more employees, consultants or contractors of each
Party, such inventions shall be jointly owned (“Joint Invention”), and
if one or more claims included in an issued patent or pending patent
application which is filed in a patent office in the Territory claim such Joint
Invention, such claims shall be jointly owned (“Joint Patent Rights”).  If such an invention is solely invented by an
employee, consultant or contractor of a Party, such invention shall be owned by
such Party, and any patent filed claiming such solely owned invention shall
also be owned by such Party.  Subject to
Section 5.6 with respect to contractors, each Party shall enter into binding
agreements obligating all employees, consultants and contractors performing
activities under or contemplated by this Agreement, including activities
related to the BMS Patent Rights, Licensed Compounds or Licensed Products, to
assign his/her interest in any invention conceived or reduced to practice in
the course of such activities to the Party for which such employee, consultant
or contractor is providing its services. This

 

24

 

Agreement shall be understood
to be a joint research agreement in accordance with 35 U.S.C. § 103(c)(3) to
develop the Licensed Compounds and Licensed Products, as well as to perform the
Compound Library Services in accordance with Section 15.17.  The filing, prosecution, maintenance and
enforcement of Joint Patent Rights which are BMS Core Patent Rights shall be
handled in accordance with this Article 10.

 

10.2         Filing, Prosecution and Maintenance of BMS
Core Patent Rights.  Pharmacopeia shall be responsible, using
outside patent counsel selected by Pharmacopeia and acceptable to BMS, such acceptance
not to be unreasonably withheld, for the preparation, prosecution (including,
without limitation, any interferences, reissue proceedings and reexaminations)
and maintenance of BMS Core Patent Rights. 
Promptly following the Effective Date, the Parties shall cooperate to
expeditiously transfer such responsibility for the further preparation,
prosecution and maintenance of BMS Core Patent Rights to such outside patent
counsel.  Pharmacopeia shall be
responsible for all costs incurred by Pharmacopeia with respect to such
preparation, prosecution and maintenance of BMS Core Patent Rights so long as
Pharmacopeia remains responsible for such preparation, prosecution and
maintenance.  Upon request by BMS,
Pharmacopeia (or its patent counsel) shall provide BMS with an update of the
filing, prosecution and maintenance status for each of the BMS Core Patent
Rights.  Each Party shall reasonably
consult with and cooperate with the other Party with respect to the preparation,
prosecution and maintenance of the BMS Core Patent Rights reasonably prior to
any deadline or action with the U.S. Patent & Trademark Office or any
foreign patent office, and Pharmacopeia (or its patent counsel) shall furnish
to BMS copies of all relevant documents reasonably in advance of such
consultation.  Pharmacopeia (or its
patent counsel) shall provide to BMS copies of any papers relating to the
filing, prosecution or maintenance of the BMS Core Patent Rights promptly upon
their being filed or received. 
Pharmacopeia shall not knowingly take any action during prosecution and
maintenance of the BMS Core Patent Rights that would materially adversely
affect them (including any reduction in claim scope), without BMS’ prior
consent, such consent not to be unreasonably withheld, conditioned or delayed.

 

10.3         Patent Abandonment.

 

10.3.1.           Generally.  In no event will Pharmacopeia
knowingly permit any of the BMS Core Patent Rights to be abandoned in any
country in the Territory, or elect not to file a new patent application
claiming priority to a patent application within the BMS Core Patent Rights
either before such patent application’s issuance or within the time period
required for the filing of an international (i.e., Patent Cooperation Treaty),
regional (including European Patent Office) or national application, without
BMS first being given an opportunity to assume full responsibility for the
continued prosecution and maintenance of such BMS Core Patent Rights, or the
filing of such new patent application. 
Accordingly, Pharmacopeia (or its patent counsel) shall provide BMS with
notice of the allowance and expected issuance date of any patent within the BMS
Core Patent Rights, or any of the aforementioned filing deadlines, and BMS
shall provide Pharmacopeia with prompt notice as to whether BMS desires
Pharmacopeia to file such new patent application.  In the event that Pharmacopeia decides either
(i) not to continue the prosecution or maintenance of a patent application or
patent within BMS Core Patent Rights in

 

25

 

any country or (ii) not to file
such new patent application requested to be filed by BMS, Pharmacopeia shall
provide BMS with notice of this decision at least sixty (60) days prior to any
pending lapse or abandonment thereof.

 

10.3.2.           BMS Option to Assume Responsibility.  BMS
shall thereupon have the right, but not the obligation, to assume
responsibility for all reasonably documented external costs (subject to Section
10.3.3) thereafter incurred associated with the filing and/or further prosecution
and maintenance of such patents and patent applications, on a patent-by-patent
and country-by-country basis.  The
outside patent counsel selected by Pharmacopeia shall proceed with such filing
and/or further prosecution and maintenance promptly upon receipt of written
notice from BMS of its election to assume such responsibility, with such filing
to occur prior to the issuance of the patent to which the application claims
priority or expiration of the applicable filing deadline, as set forth above.  In the event that BMS assumes such
responsibility for such filing, prosecution and maintenance costs (subject to
Section 10.3.3), upon the reasonable request by BMS, Pharmacopeia shall
transfer the responsibility for such filing, prosecution and maintenance of
such patent applications and patents to BMS’ in-house patent counsel or outside
patent counsel selected by BMS, provided
that Pharmacopeia shall (i) provide sufficient written notice to BMS of any
such election such that the relevant transfer shall not prejudice the filing,
prosecution and/or maintenance of patent rights (where possible, such notice
shall be provided at least sixty (60) days prior to any pending lapse or
abandonment thereof); (ii) transfer or cause to be transferred to BMS or its patent
counsel the complete prosecution file for the relevant patents and patent
applications, including all correspondence and filings with patent authorities
with respect thereto; and (iii) at the reasonable request of BMS and without
demanding any further consideration therefore, do all things necessary, proper
or advisable, including without limitation the execution, acknowledgment and
recordation of specific assignments, oaths, declarations and other documents on
a country-by-country basis, to assist BMS in obtaining, perfecting, sustaining
and/or enforcing such patent(s).  Such
patent applications and patents shall otherwise continue to be subject to all
of the terms and conditions of the Agreement in the same way as the other BMS
Core Patent Rights, as applicable.

 

10.3.3.           Pharmacopeia Responsibility for Patent Costs.

 

(a)             Notwithstanding anything to the contrary
under this Section 10.2 or Section 10.3, unless the Parties otherwise agree in
writing, Pharmacopeia shall remain responsible for all costs incurred after the
Effective Date with respect to preparation, prosecution and maintenance of the
BMS Core Patent Rights covering Licensed Compounds in the List A Countries.

 

(b)             Pharmacopeia shall reimburse BMS for the
documented external costs incurred by BMS in prosecuting and maintaining the
BMS Core Patent Rights, as requested by Pharmacopeia during the time period
from December 1, 2005 to the Effective Date, which reimbursement will become
payable and due within five (5) business days following Pharmacopeia’s receipt
of an invoice from BMS for such external costs.

 

26

 

10.4         Enforcement of BMS Core Patent Rights Against
Infringers.

 

10.4.1.           Enforcement by Pharmacopeia.

 

(a)             In the event that BMS or Pharmacopeia becomes
aware of a suspected infringement of any BMS Core Patent Right exclusively
licensed to Pharmacopeia under this Agreement, such Party shall notify the
other Party promptly, and following such notification, the Parties shall
confer.  Pharmacopeia shall have the
right, but shall not be obligated, to bring an infringement action with respect
to such infringement at its own expense, in its own name and entirely under its
own direction and control, subject to the following.  BMS shall reasonably assist Pharmacopeia (at
Pharmacopeia’s expense) in any action or proceeding being prosecuted if so
requested, and shall lend its name to and join as a nominal party in such
actions or proceedings if reasonably requested by Pharmacopeia or required by
applicable Laws.  BMS shall have the
right to participate and be represented in any such suit by its own counsel at
its own expense.  No settlement of any
such action or proceeding which restricts the scope, or adversely affects the
enforceability, of a BMS Core Patent Right may be entered into by Pharmacopeia
without the prior written consent of BMS, which consent shall not be
unreasonably withheld, delayed or conditioned.

 

(b)             BMS shall have the right at its discretion to
grant to Pharmacopeia such rights (including assignment of the applicable BMS
Core Patent Rights) as may be necessary for Pharmacopeia to exercise its rights
under this Section 10.4 (including defending or enforcing any BMS Core Patent
Rights) without BMS’ involvement.  In the
event of such grant of rights (including assignment) with respect to any BMS
Core Patent Rights, such BMS Core Patent Rights shall continue to be treated as
BMS Core Patent Rights and shall otherwise continue to be subject to all of the
terms and conditions of the Agreement in the same way as the other applicable
BMS Core Patent Rights.  For purposes of
clarity, election or non-election by BMS to grant or assign rights to
Pharmacopeia under this Section 10.4.1(b) shall not limit BMS’ obligations
under Section 10.4.1(a) to reasonably assist Pharmacopeia in any action or
proceeding, or to join in such action or proceeding upon request by
Pharmacopeia if such joinder is necessary under applicable Laws for
Pharmacopeia to exercise its rights under this Section 10.4.

 

10.4.2.           Enforcement by BMS.  If
Pharmacopeia elects not to bring any action for infringement described in
Section 10.4.1 and so notifies BMS, then BMS may bring such action at its own
expense, in its own name and entirely under its own direction and control,
subject to the following.  Pharmacopeia
shall reasonably assist BMS (at BMS’ expense) in any action or proceeding being
prosecuted if so requested, and shall lend its name to such actions or
proceedings if requested by BMS or required by applicable Laws.  Pharmacopeia shall have the right to
participate and be represented in any such suit by its own counsel at its own
expense.  No settlement of any such
action or proceeding which restricts the scope, or adversely affects the enforceability,
of a BMS Core Patent Right may be entered into by BMS without the prior written
consent of Pharmacopeia, which consent shall not be unreasonably withheld,
delayed or conditioned.

 

27

 

10.4.3.           Withdrawal.  If either Party brings an
action or proceeding under this Section 10.4 and subsequently ceases to pursue
or withdraws from such action or proceeding, it shall promptly notify the other
Party and the other Party may substitute itself for the withdrawing Party under
the terms of this Section 10.4.

 

10.4.4.           Damages.  In the event that either Party
exercises the rights conferred in this Section 10.4 and recovers any damages or
other sums in such action, suit or proceeding or in settlement thereof, such
damages or other sums recovered shall **. 
If such recovery is insufficient to **. 
If after such ** any funds shall remain from such damages or other sums
recovered, such funds shall be ** under this Section 10.4; provided, however, that if **.

 

10.5         Patent Term Extension.  BMS
and Pharmacopeia shall each cooperate with one another and shall use
commercially reasonable efforts in obtaining patent term extension (including
without limitation, any pediatric exclusivity extensions as may be available)
or supplemental protection certificates or their equivalents in any country
with respect to patent rights covering the Licensed Products.  If elections with respect to obtaining such
patent term extensions are to be made, Pharmacopeia shall have the right to
make the election to seek patent term extension or supplemental protection, provided that such election will be made
so as to maximize the period of marketing exclusivity for the Licensed
Product.  For such purpose, for all
Approvals Pharmacopeia shall provide BMS with written notice of any expected
Approval at least thirty (30) days prior to the expected date of Approval, as
well as notice within five (5) business days of receiving each Approval
confirming the date of such Approval. 
Notification of the receipt of an Approval shall be in accordance with
Section 15.2 except that the notification shall be sent to:

 

Bristol-Myers Squibb Company

**

 

10.6         Data Exclusivity and Orange Book Listings.

 

10.6.1.           With respect to data exclusivity periods
(such as those periods listed in the FDA’s Orange Book (including without
limitation any available pediatric extensions) or periods under national
implementations of Article 10.1(a)(iii) of Directive 2001/EC/83, and all
international equivalents), Pharmacopeia shall use commercially reasonable
efforts consistent with its obligations under applicable Law to seek, maintain
and enforce all such data exclusivity periods available for the Licensed
Products.  With respect to filings in the
FDA Orange Book (and foreign equivalents) for issued patents for a Licensed
Product, Pharmacopeia shall, consistent with its obligations under applicable
Law, list in a timely manner and maintain all applicable BMS Core Patent Rights
and other patents Controlled by Pharmacopeia required to be filed by it, or
that it is permitted to file, under applicable Law.  At least ** (**) days prior to an anticipated
deadline for the filing of patent listing information for BMS Core Patent
Rights, Pharmacopeia will consult with BMS regarding the content of such
filing.  In the event of a dispute
between the Parties as to whether a BMS Core Patent Right can be filed and/or
the content of such filing, the Parties will take expedited steps to resolve
the dispute as promptly as 

 

28

 

possible, including seeking
advice of an independent legal counsel to guide their decision.  BMS shall use commercially reasonable efforts
consistent with its obligations under applicable Law to provide reasonable cooperation
to Pharmacopeia in filing and maintaining such Orange Book (and foreign
equivalent) listings.

 

10.6.2.           Without limiting the foregoing, BMS shall
have the right at its discretion to grant to Pharmacopeia such rights
(including assignment of the applicable BMS Core Patent Rights) as may be
necessary for Pharmacopeia to exercise its rights under this Section 10.6
(including seeking, maintaining and enforcing all data exclusivity periods)
without BMS’ involvement.  In the event
of such grant of rights (including assignment) with respect to any BMS Core
Patent Rights, such BMS Core Patent Rights shall continue to be treated as BMS
Core Patent Rights and shall otherwise continue to be subject to all of the
terms and conditions of the Agreement in the same way as the other applicable
BMS Core Patent Rights.  For purposes of
clarity, election by BMS to grant or assign rights to Pharmacopeia under this
Section 10.6.2 shall not limit BMS’ obligation under Section 10.6.1 to provide
reasonable cooperation to Pharmacopeia to the extent such cooperation is
reasonably necessary for Pharmacopeia in filing and maintaining such Orange
Book (and foreign equivalent) listings.

 

10.7         Notification of Patent Certification.  Each
Party shall notify and provide the other Party with copies of any allegations
of alleged patent invalidity, unenforceability or non-infringement of a BMS
Core Patent Right pursuant to a Paragraph IV Patent Certification by a Third
Party filing an Abbreviated New Drug Application, an application under §505(b)(2)
or other similar patent certification by a Third Party, and any foreign
equivalent thereof.  Such notification
and copies shall be provided to the other Party within ** (**) days after such
Party receives such certification, and shall be sent to the address set forth
in Section 10.5 in the case of notifications to BMS or the address set forth in
Section 15.2 in the case of notifications to Pharmacopeia.  In addition, upon request by BMS,
Pharmacopeia shall provide reasonable assistance and cooperation (including,
without limitation, making available to BMS documents possessed by Pharmacopeia
that are reasonably required by BMS and making available personnel for
interviews and testimony) in any actions reasonably undertaken by BMS to
contest any such patent certification.

 

10.8         Limitation on Patent Actions. 
Neither Party shall be required to take any action pursuant to Sections
10.4, 10.5, 10.6 or 10.7 that such Party reasonably determines in its sole
judgment and discretion conflicts with or violates any court or government
order or decree that such Party is then subject to or otherwise may create
legal liability on the part of such Party.

 

ARTICLE 11

NONDISCLOSURE OF CONFIDENTIAL INFORMATION

 

11.1         Nondisclosure.  Each
Party agrees that, for so long as this Agreement is in effect and for a period
of ** (**) years thereafter, a Party (the “Receiving Party”) receiving
or possessing Confidential Information of the other Party (the “Disclosing
Party”) (or that has received any such Confidential Information from the
other Party prior to the Effective Date) shall

 

29

 

(i) maintain in confidence such
Confidential Information using not less than the efforts such Receiving Party
uses to maintain in confidence its own proprietary industrial information of
similar kind and value, (ii) not disclose such Confidential Information to any
Third Party without the prior written consent of the Disclosing Party, except
for disclosures expressly permitted below, and (iii) not use such Confidential
Information for any purpose except those permitted by this Agreement (it being
understood that this clause (iii) shall not create or imply any rights or
licenses not expressly granted under Article 2 hereof).

 

11.1.1.           Confidentiality of BMS Know-How for
Disclosure Purposes.  During such time as the license to the BMS
Know-How granted under Section 2.1.1 is in effect, solely for disclosure
purposes to Third Parties, the BMS Know-How shall be deemed to be Confidential
Information of both BMS and Pharmacopeia under Article 11, both BMS and
Pharmacopeia shall be deemed to be a Disclosing Party of the BMS Know-How under
Article 11, and BMS and its Affiliates shall be deemed not to have known such
BMS Know-How prior to disclosure for the purposes of Section 11.1.2(b).  Other than for disclosure purposes to Third
Parties, the BMS Know-How shall solely be the Confidential Information of BMS.

 

11.1.2.           Exceptions.  The obligations in Section
11.1 shall not apply with respect to any portion of the Confidential
Information that the Receiving Party can show by competent proof:

 

(a)             is publicly disclosed by the Disclosing
Party, either before or after it is disclosed to the Receiving Party hereunder;
or

 

(b)             was known to the Receiving Party or any of its
Affiliates, without any obligation to keep it confidential or any restriction
on its use, prior to disclosure by the Disclosing Party; or

 

(c)             is subsequently disclosed to the Receiving
Party or any of its Affiliates by a Third Party lawfully in possession thereof
and without any obligation to keep it confidential or any restriction on its
use; or

 

(d)             is published by a Third Party or otherwise
becomes publicly available or enters the public domain, either before or after
it is disclosed to the Receiving Party; or

 

(e)             has been independently developed after
disclosure by the Disclosing Party by employees or contractors of the Receiving
Party or any of its Affiliates without the aid, application or use of
Confidential Information of the Disclosing Party.

 

11.2         Authorized Disclosure.  The
Receiving Party may disclose Confidential Information belonging to the
Disclosing Party to the extent (and only to the extent) such disclosure is
reasonably necessary in the following instances:

 

(a)           filing or prosecuting patents;

 

30

 

(b)           regulatory filings;

 

(c)           prosecuting or defending litigation;

 

(d)           subject to Section 11.4, complying with
applicable governmental Laws and regulations (including, without limitation,
the rules and regulations of the Securities and Exchange Commission or any
national securities exchange) and with judicial process, if in the reasonable
opinion of the Receiving Party’s counsel, such disclosure is necessary for such
compliance; and

 

(e)           disclosure (i) in connection with the
performance of this Agreement and solely on a “need to know basis”, to
Affiliates; potential or actual collaborators (including potential
Sublicensees); or employees, contractors, or agents; or (ii) solely on a “need
to know basis” to potential or actual investment bankers, investors, lenders,
or acquirers; each of whom in the case of clause (i) or (ii) prior to
disclosure must be bound by written obligations of confidentiality and non-use
no less restrictive than the obligations set forth in this Article 11; provided, however, that the Receiving
Party shall remain responsible for any failure by any Person who receives
Confidential Information pursuant to this Article 11 to treat such Confidential
Information as required under this Article 11. 
Notwithstanding anything in this Agreement to the contrary, Pharmacopeia
may, in its sole discretion, disclose summaries of data or Confidential
Information generated by Pharmacopeia in connection with the performance of
this Agreement in non-confidential corporate presentations.

 

If and whenever any
Confidential Information is disclosed in accordance with this Section 11.2,
such disclosure shall not cause any such information to cease to be
Confidential Information except to the extent that such disclosure results in a
public disclosure of such information (otherwise than by breach of this
Agreement).  Where reasonably possible
and subject to Section 11.4, the Receiving Party shall notify the Disclosing
Party of the Receiving Party’s intent to make such disclosure pursuant to
paragraphs (a) through (d) of this Section 11.2 sufficiently prior to making
such disclosure so as to allow the Disclosing Party adequate time to take
whatever action it may deem appropriate to protect the confidentiality of the
information.

 

11.3         Terms of this Agreement.  The
Parties acknowledge that the terms of this Agreement shall be treated as
Confidential Information of both Parties.

 

11.4         Securities Filings.  In
the event either Party proposes to file with the Securities and Exchange
Commission or the securities regulators of any state or other jurisdiction a
registration statement or any other disclosure document which describes or
refers to this Agreement under the Securities Act of 1933, as amended, the
Securities Exchange Act, of 1934, as amended, or any other applicable Laws, the
Party shall notify the other Party of such intention and shall provide such
other Party with a copy of relevant portions of the proposed filing not less
than ** (**) business days prior to such filing (and any revisions to such
portions of the proposed filing a reasonable time prior to the filing thereof),
including any exhibits thereto relating to this Agreement, and shall use
reasonable efforts to obtain confidential treatment of any information
concerning this Agreement that such other Party requests be kept confidential,

 

31

 

and shall only disclose
Confidential Information which it is advised by counsel is legally required to
be disclosed.  No such notice shall be
required under this Section 11.4 if the substance of the description of or
reference to this Agreement contained in the proposed filing has been included
in any previous filing made by the other Party hereunder or otherwise approved
by the other Party.

 

11.5         Publication.

 

11.5.1.           Publication by BMS.  BMS
may publish or present data and/or results relating to a Licensed Compound or
Licensed Product in scientific journals and/or at scientific conferences,
subject to the prior review and comment by Pharmacopeia as follows.  BMS shall provide Pharmacopeia with the
opportunity to review any proposed abstract, manuscript or presentation which
discloses information relating to a Licensed Compound or Licensed Product by
delivering a copy thereof to Pharmacopeia no less than ** (**) days before its
intended submission for publication or presentation.  Pharmacopeia shall have ** (**) days from its
receipt of any such abstract, manuscript or presentation in which to notify BMS
in writing of any specific objections to the disclosure.  In the event Pharmacopeia objects to the
disclosure in writing within such ** (**) day period, BMS agrees not to submit
the publication or abstract or make the presentation containing the objected-to
information until the Parties have agreed to the content of the proposed
disclosure, and BMS shall delete from the proposed disclosure any Pharmacopeia
Confidential Information or BMS Know-How or the identity of any Licensed
Compound or Licensed Product, upon reasonable request by Pharmacopeia.  Once any such abstract or manuscript is
accepted for publication, BMS will provide Pharmacopeia with a copy of the
final version of the manuscript or abstract. 
For clarification, this Section 11.5.1 shall not limit or restrict BMS’
ability to publish or present publicly information on compounds which are not
Licensed Compounds or Licensed Products, provided
such publication or presentation does not contain Pharmacopeia Confidential
Information (including BMS Know-How) or identify any Licensed Compound or
Licensed Product.  Notwithstanding the
foregoing or any other provision of this Agreement (including but not limited
to Article 11), BMS shall have the right at its sole discretion to publish or
otherwise publicly disclose any licensed BMS Know-How at any time after the
second anniversary of the Effective Date.

 

11.5.2.           Publication by Pharmacopeia. 
Pharmacopeia may publish or present data and/or results relating to a
Licensed Compound or Licensed Product in scientific journals and/or at
scientific conferences, subject to the prior review and comment by BMS as
follows.  Pharmacopeia shall provide BMS
with the opportunity to review any proposed abstract, manuscript or
presentation which discloses information relating to a Licensed Compound or
Licensed Product by delivering a copy thereof to BMS no less than ** (**) days
before its intended submission for publication or presentation.  BMS shall have ** (**) days from its receipt
of any such abstract, manuscript or presentation in which to notify
Pharmacopeia in writing of any specific objections to the disclosure, such
objections to be limited to matters involving the disclosure of BMS
Confidential Information, or a good faith and documented concern by BMS that
such publication would otherwise result in material commercial harm to
BMS.  In the event BMS objects to the
disclosure in writing within such ** (**) day period,

 

32

 

Pharmacopeia agrees not to
submit the publication or abstract or make the presentation containing the
objected-to information until the Parties have agreed to the content of the
proposed disclosure, and Pharmacopeia shall delete from the proposed disclosure
any BMS Confidential Information upon the reasonable request by BMS.  The Parties agree to take all reasonable
steps to address and resolve a notice of objection by BMS within ** (**) days
of receipt of such notice.  Once any such
abstract or manuscript is accepted for publication, Pharmacopeia will provide
BMS with a copy of the final version of the manuscript or abstract.

 

ARTICLE 12

INDEMNITY

 

12.1         Pharmacopeia Indemnity. 
Pharmacopeia shall indemnify, defend and hold harmless BMS and its
Affiliates, and their respective officers, directors, employees, agents, licensors,
and their respective successors, heirs and assigns and representatives, from
and against any and all claims, damages, losses, suits, proceedings,
liabilities, costs (including, without limitation, reasonable legal expenses,
costs of litigation and reasonable attorney’s fees) or judgments, whether for
money or equitable relief, of any kind, arising out of any claim, action,
lawsuit or other proceeding brought by a Third Party (“Losses and Claims”)
arising out of or relating, directly or indirectly, (i) to the research,
Development, Commercialization (including, without limitation, promotion,
advertising, offering for sale, sale or other disposition), transfer,
importation or exportation, manufacture, labeling, handling or storage, or use
of, or exposure to, any Licensed Compound and/or any Licensed Product by or for
Pharmacopeia or any of its Affiliates, Sublicensees, agents and/or contractors,
(ii) to Pharmacopeia’s (or its Affiliates’ and/or Sublicensees’) use and
practice otherwise of the BMS Patent Rights and/or BMS Know How, including,
without limitation, claims based on (A) product liability, bodily injury, risk
of bodily injury, death or property damage, (B) infringement or
misappropriation of Third Party patents, copyrights, trademarks or other intellectual
property rights, or (C) the failure to comply with applicable Laws related to
the matters referred to in the foregoing clauses (i) and (ii) with respect to
any Licensed Compound and/or any Licensed Product, or (iii) Pharmacopeia’s
gross negligence, recklessness or willful misconduct or Pharmacopeia’s material
breach of any representation or warranty set forth in this Agreement; except in any such case for Losses and
Claims to the extent reasonably attributable to BMS having committed an act or acts
of gross negligence, recklessness or willful misconduct or having materially
breached any representation or warranty set forth in this Agreement.

 

12.2         BMS Indemnity.  BMS
shall indemnify, defend and hold harmless Pharmacopeia and its Affiliates, and their
respective officers, directors, employees, agents, licensors, and their
respective successors, heirs and assigns and representatives, from and against
any and all Losses and Claims arising out of or relating, directly or
indirectly to (i) BMS’ gross negligence, recklessness or willful misconduct or
(ii) BMS’ material breach of any representation or warranty set forth in this
Agreement; except in any such case for Losses and Claims to the extent
reasonably attributable to Pharmacopeia having committed an act or acts of
gross negligence, 

 

33

 

recklessness or willful
misconduct or having materially breached any representation or warranty set
forth in this Agreement.

 

12.3         Indemnification Procedure.  A
claim to which indemnification applies under Section 12.1 or Section 12.2 shall
be referred to herein as an “Indemnification Claim”.  If any Person or Persons (collectively, the “Indemnitee”)
intends to claim indemnification under this Article 12, the Indemnitee shall
notify the other Party (the “Indemnitor”) in writing promptly upon
becoming aware of any claim that may be an Indemnification Claim (it being
understood and agreed, however, that the failure by an Indemnitee to give such
notice shall not relieve the Indemnitor of its indemnification obligation under
this Agreement except and only to the extent that the Indemnitor is actually
prejudiced as a result of such failure to give notice).  The Indemnitor shall have the right to assume
and control the defense of the Indemnification Claim at its own expense with
counsel selected by the Indemnitor and reasonably acceptable to the Indemnitee,
provided, however, that an
Indemnitee shall have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitee, if representation of such Indemnitee by
the counsel retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between such Indemnitee and any other party
represented by such counsel in such proceedings.  If the Indemnitor does not assume the defense
of the Indemnification Claim as aforesaid, the Indemnitee may defend the
Indemnification Claim but shall have no obligation to do so.  The Indemnitee shall not settle or compromise
the Indemnification Claim without the prior written consent of the Indemnitor,
and the Indemnitor shall not settle or compromise the Indemnification Claim in
any manner which would have an adverse effect on the Indemnitee’s interests
(including without limitation any rights under this Agreement or the scope or
enforceability of the BMS Patents Rights or BMS Know-How), without the prior
written consent of the Indemnitee, which consent, in each case, shall not be
unreasonably withheld or delayed.  The
Indemnitee shall reasonably cooperate with the Indemnitor at the Indemnitor’s
expense and shall make available to the Indemnitor all pertinent information
under the control of the Indemnitee, which information shall be subject to
Article 11.

 

12.4         Insurance.  Pharmacopeia shall, beginning
with the initiation of the first clinical trial for a Licensed Product,
maintain at all times thereafter during the term of the Agreement, and until
the later of (i) ** (**) years **or (ii) the date that**, comprehensive general
liability insurance from a recognized, creditworthy insurance company, on a
claims-made basis, with endorsements for contractual liability and product
liability, and with coverage limits of not less than **, and which shall
**.  The minimum level of insurance set
forth herein shall not be construed to create a limit on Pharmacopeia’s
liability hereunder.  Within ten (10)
days following written request from BMS, Pharmacopeia shall furnish to BMS a
certificate of insurance evidencing such coverage as of the date.  Pharmacopeia shall use commercially
reasonable efforts to cause such certificate of insurance, as well as any
certificates evidencing new coverages of Pharmacopeia, to include a provision
whereby thirty (30) days’ written notice shall be received by BMS prior to
coverage cancellation by either Pharmacopeia or the insurer and of any new
coverage.  In the case of a cancellation
of such coverage, Pharmacopeia shall promptly provide BMS with a new
certificate of insurance evidencing that Pharmacopeia’s coverage meets the requirements
in the first sentence of this Section.

 

34

 

ARTICLE 13

TERM AND TERMINATION

 

13.1         Term.  This Agreement shall commence
as of the Effective Date and, unless sooner terminated in accordance with the terms
hereof or by mutual written consent, shall continue until neither Party has any
obligation under this Agreement to make payments to the other Party.

 

13.2         Termination By BMS.

 

13.2.1.           Insolvency.  BMS shall have the right to
terminate this Agreement with respect to any or all licenses granted to
Pharmacopeia pursuant to Article 2 of this Agreement, at BMS’ sole discretion,
upon delivery of written notice to Pharmacopeia upon the filing by Pharmacopeia
in any court or agency pursuant to any statute or regulation of the United
States or any other jurisdiction a petition in bankruptcy or insolvency or for
reorganization or similar arrangement for the benefit of creditors or for the
appointment of a receiver or trustee of Pharmacopeia or its assets, or if Pharmacopeia
is served with an involuntary petition against it in any insolvency proceeding,
upon the ninety-first (91st) day after such service if such involuntary
petition has not previously been stayed or dismissed, or upon the making by
Pharmacopeia of an assignment of substantially all of its assets for the
benefit of its creditors.

 

13.2.2.           **.

 

(a)             Subject to Section 13.2.5 below, BMS shall
have the right to terminate this Agreement with respect to any or all licenses
granted to Pharmacopeia pursuant to Article 2 of this Agreement, **, upon
delivery of written notice to Pharmacopeia in the event of any **, provided that such ** has not been cured
within sixty (60) days after written notice thereof is given by BMS to
Pharmacopeia specifying the nature of the **, provided,
however, that to the extent such ** involves the **, such ** must be
cured within thirty (30) days after written notice thereof is given by BMS to
Pharmacopeia.

 

(b)             BMS may terminate the Agreement based on a
material breach of Pharmacopeia’s obligations to provide BMS with ** in
accordance with Section 15.17 and Appendix 5, provided that Pharmacopeia may cure such breach by payment
to BMS of a ** (for example, if Pharmacopeia has provided BMS with **).

 

13.2.3.           Failure to **. 
Subject to Section 13.2.5 below, BMS shall have the right to terminate
this Agreement with respect to any or all licenses granted to Pharmacopeia
pursuant to Article 2 of this Agreement on a country-by-country basis (except
as otherwise set forth in this Section 13.2.3), **, in the event that
Pharmacopeia **, provided that
Pharmacopeia has not **.

 

(a)             Termination under this Section 13.2.3 shall
**, provided however, that (i)
**, and (ii)  if the **.

 

35

 

(b)             For clarity, it is understood and
acknowledged that to the extent**.  For
further clarity, it is understood and acknowledged that **.

 

13.2.4.           Disputed Breach.  If
Pharmacopeia disputes in good faith the existence or materiality of a **
specified in a notice provided by BMS pursuant to Section 13.2.2, or a **
specified in a notice provided by BMS pursuant to Section 13.2.3, and
Pharmacopeia provides notice to BMS of such dispute within the applicable
thirty (30) day or ninety (90) day period, BMS shall not have the right to
terminate this Agreement unless and until the existence of such ** by
Pharmacopeia has been determined in accordance with Section 14.2 and
Pharmacopeia fails to cure such breach within ninety (90) days following such
determination (except to the extent such breach involves the **, which breach
must be cured within ten (10) days following such determination).  It is understood and acknowledged that during
the pendency of such a dispute, all of the terms and conditions of this
Agreement shall remain in effect and the Parties shall continue to perform all
of their respective obligations hereunder. 
The Parties further agree that any payments that are made by one Party
to the other Party pursuant to this Agreement pending resolution of the dispute
shall be promptly refunded if an arbitrator or court determines pursuant to
Section 14.2 that such payments are to be refunded by one Party to the other
Party.

 

13.2.5.           Termination for **. 
Subject to the terms of this Section 13.2.5, BMS shall have the right to
terminate this Agreement (on a country-by-country
or worldwide basis, as BMS may elect), **, in the event that (a) **
or (b) **.  BMS shall not have the
foregoing right to terminate in the case where a Sublicensee is fully
performing all of Pharmacopeia’s obligations under this Agreement with respect
to the Licensed Compounds and Licensed Products, provided that, unless otherwise agreed by BMS in writing as
set forth in Section 2.2(c), BMS may so terminate where (x) ** or (y) **.  In the event the Parties are unable to reach
agreement regarding whether or not a compound is a **, and the Parties have not
resolved such dispute through good faith discussions, such dispute will be
resolved through **.  The findings of such
**.

 

13.2.6.           BMS’ right to terminate the Agreement under
this Section 13.2 shall be subject to Section 2.2(b)(vi).

 

13.3         Termination by Pharmacopeia.

 

13.3.1.           Termination Without Cause.  At
Pharmacopeia’s discretion, on a country-by-country and product-by-product basis
(including, for example, all Licensed Compounds within specified BMS Core
Patent Rights), effective upon ** (**) months prior written notice in the case
where Approval has not been obtained for the applicable Licensed Product or
upon ** (**) months prior written notice in the case where Approval has been
obtained for the applicable Licensed Product, Pharmacopeia may terminate this
Agreement for any reason; provided, however,
that (i) ** and (ii) **.

 

13.3.2.           Termination For Breach.  In
addition, Pharmacopeia may terminate this Agreement in the event of material
breach by BMS, provided that such
breach has not been cured within sixty (60) days after written notice thereof
is given by Pharmacopeia to BMS.

 

36

 

Notwithstanding the foregoing,
if BMS disputes in good faith the existence or materiality of such breach and
provides notice to Pharmacopeia of such dispute within such sixty (60) day
period, Pharmacopeia shall not have the right to terminate this Agreement in
accordance with this Section 13.3.2 unless and until it has been determined in
accordance with Section 14.2 that this Agreement was materially breached by BMS
and BMS fails to cure such breach within sixty (60) days following such
determination.  It is understood and
acknowledged that during the pendency of such a dispute, all of the terms and
conditions of this Agreement shall remain in effect and the Parties shall
continue to perform all of their respective obligations hereunder.  The Parties further agree that any payments that
are made by one Party to the other Party pursuant to this Agreement pending
resolution of the dispute shall be promptly refunded if an arbitrator or court
determines pursuant to Section 14.2 that such payments are to be refunded by
one Party to the other Party.

 

13.4         Effect of Termination.  Upon
termination of this Agreement or any right or license pursuant to Section
13.2.1, 13.2.2, 13.2.3 or 13.2.5, the rights and obligations of the Parties
shall be as set forth in this Section 13.4.

 

13.4.1.           Upon termination of this Agreement, either in
its entirety or with respect to one or more applicable countries (each, a “Terminated
Country”) pursuant to Section 13.2.1, 13.2.2, 13.2.4 or 13.2.5 hereof (the
rights and obligations of the Parties as to the remaining countries of the
Territory in which termination under Section 13.2.3 or 13.2.5 has not occurred,
being unaffected by such termination), the following shall apply:

 

(a)             **.

 

(b)             **.

 

(c)             All amounts due or payable to ** additional
amounts shall be payable.

 

(d)             Should Pharmacopeia have **, Pharmacopeia
shall **.

 

(e)             Should Pharmacopeia have **.

 

(f)              Pharmacopeia shall **.

 

(g)             If Pharmacopeia has the **.

 

(h)             Pharmacopeia shall **.

 

(i)              Pharmacopeia shall **.

 

(j)              Pharmacopeia hereby **.

 

(k)             Neither Party shall be relieved of any
obligation that accrued prior to the effective date of such termination or
expiration.

 

37

 

(l)              Each Party shall have the right to retain all
amounts previously paid to it by the other Party, subject to any applicable
determination of an arbitrator or court pursuant to Section 14.2.

 

(m)            It is understood and agreed that BMS shall be
entitled to ** as a remedy to enforce the provisions of this Section 13.4, **.

 

13.5         Scope of Termination. 
Except as otherwise expressly provided herein, termination of this
Agreement shall be as to all countries in the Territory and all Licensed
Compounds and Licensed Products.

 

13.6         Survival.  The following provisions shall
survive termination or expiration of this Agreement, as well as any other
provision which by its terms or by the context thereof, is intended to survive
such termination: Article 1 (as applicable), Section 2.2(b)(vi), Article 5
(with respect to obligations arising prior to expiration or termination of this
Agreement), Article 8 (with respect to obligations arising prior to expiration
or termination of this Agreement), Section 9.4, Section 9.5, Section 10.1,
Section 10.4.4 (with respect to an action, suit or proceeding commenced prior to
termination), Section 10.7, Article 11, Article 12 (with respect to Losses and
Claims arising from activities and breaches that take place prior to expiration
or termination of this Agreement), this Section 13.6, Section 13.7, Article 14
and Article 15.  Termination or
expiration of this Agreement shall not relieve the Parties of any liability or
obligation which accrued hereunder prior to the effective date of such
termination or expiration nor preclude either Party from pursuing all rights
and remedies it may have hereunder or at law or in equity, subject to Section
14.2, with respect to any breach of this Agreement nor prejudice either Party’s
right to obtain performance of any obligation. 
All other obligations shall terminate upon expiration of this Agreement.

 

13.7         Bankruptcy.  The Parties agree that in the
event a Party becomes a debtor under Title 11 of the U.S. Code (“Title 11”),
this Agreement shall be deemed to be, for purposes of Section 365(n) of Title
11, a license to rights to “intellectual property” as defined therein.  Each Party as a licensee hereunder shall have
the rights and elections as specified in Title 11.  Any agreements supplemental hereto shall be
deemed to be “agreements supplementary to” this Agreement for purposes of
Section 365(n) of Title 11.

 

ARTICLE 14

DISPUTE RESOLUTION; ARBITRATION

 

14.1         Resolution by Senior Executives. 
Other than (i) determinations made by **, respectively; (ii) pursuit of
equitable relief as provided in Section 14.2(g); and (iii) a dispute governed
by expedited arbitration in accordance with Section 14.3 below, in the event of
any dispute between the Parties in connection with this Agreement, the
construction hereof, or the rights, duties or liabilities of either Party
hereunder, the Parties shall first attempt in good faith to resolve such
dispute by negotiation and consultation between themselves.  In the event that such dispute is not
resolved on an informal basis within ** (**) Business Days, either Party may, by

 

38

 

written notice to the other
Party, refer the dispute to the ** and the ** or other designated officer of **
for attempted resolution by good faith negotiation within ** (**) days after
such notice is received.

 

14.2         Arbitration.  Other than (i) determinations
made by **, respectively; (ii) pursuit of equitable relief as provided in
Section 14.2(g); (iii) disputes regarding the validity, scope or enforceability
of intellectual property rights or regarding confidentiality obligations and
(iv) expedited arbitration in accordance with Section 14.3 below, if any
dispute between the Parties relating to or arising out this Agreement cannot be
resolved in accordance with Section 14.1, either Party may submit such dispute
for resolution through binding arbitration as follows:

 

(a)           A Party may submit such dispute to
arbitration by notifying the other Party, in writing, of such dispute.  Within thirty (30) days after receipt of such
notice, the Parties shall designate in writing a single arbitrator to resolve
the dispute; provided, however,
that if the Parties cannot agree on an arbitrator within such thirty (30) day
period, the arbitrator shall be selected by the New York, NY office of the
American Arbitration Association (the “AAA”) or, if such office does not
exist or is unable to make a selection, by the office of the AAA nearest to New
York City.  The arbitrator for any
disputed breach under Section 13.2.5 related to an alleged failure to use
Commercially Reasonable Efforts as described in Section 13.2.3 or under Section
13.3.4 related to an alleged failure to use Commercially Reasonable Efforts as
described in Section 13.3.3 shall be an individual with experience and
expertise in the worldwide Development and Commercialization of pharmaceuticals
and the business, legal and scientific considerations related thereto.  Otherwise, the arbitrator shall be a lawyer
knowledgeable and experienced in the applicable Laws concerning the subject
matter of the dispute.  In any case the
arbitrator shall not be an Affiliate, employee, consultant, officer, director
or stockholder of either Party, or otherwise have any current or previous
relationship with either Party or their respective Affiliates.  The governing law in Section 15.7 shall
govern any such proceedings.  The
language of the arbitration shall be English.

 

(b)           Within thirty (30) days after the designation
of the arbitrator, the arbitrator and the Parties shall meet, and each Party
shall provide to the arbitrator a written summary of all disputed issues, such
Party’s position on such disputed issues and such Party’s proposed ruling on
the merits of each such issue.

 

(c)           The arbitrator shall set a date for a
hearing, which shall be no later than thirty (30) days after the submission of
written proposals pursuant to Section 14.2(b), for the presentation of evidence
and legal argument concerning each of the issues identified by the
Parties.  The Parties shall have the
right to be represented by counsel. 
Except as provided herein, the arbitration shall be governed by the
Commercial Arbitration Rules of the AAA applicable at the time of the notice of
arbitration pursuant to Section 14.2(a); provided,
however, that the Federal Rules of Evidence shall apply with regard
to the admissibility of evidence in such hearing.

 

(d)           The arbitrator shall use his or her best
efforts to rule on each disputed issue within thirty (30) days after completion
of the hearing described in Section 14.2(c). 
The

 

39

 

determination of the arbitrator
as to the resolution of any dispute shall be binding and conclusive upon all
Parties.  All rulings of the arbitrator
shall be in writing and shall be delivered to the Parties except to the extent
that the Commercial Arbitration Rules of the AAA provide otherwise.  Nothing contained herein shall be construed
to permit the arbitrator to award punitive, exemplary or any similar damages.

 

(e)           The (i) attorneys’ fees of the Parties in any
arbitration, (ii) fees of the arbitrator and (iii) costs and expenses of the
arbitration shall be borne by the Parties in a proportion determined by the
arbitrator.

 

(f)            Any arbitration pursuant to this Section 14.2
shall be conducted in Princeton, New Jersey. 
Any arbitration award may be entered in and enforced by a court in
accordance with Section 15.8.

 

(g)           Notwithstanding anything in this Article 14,
each Party shall have the right to seek injunctive or other equitable relief
from a court of competent jurisdiction pursuant to Section 15.8 that may be
necessary to avoid irreparable harm, maintain the status quo or preserve the
subject matter of the arbitration, including any breach or threatened breach of
Section 11.1 or 13.4.

 

14.3         Expedited Arbitration.  The
Parties agree that it is important to be able to clarify any disputes regarding
** quickly.  Accordingly, if:

 

(i)            BMS **;

 

(ii)           **; or

 

(iii)          **; or

then
the Parties shall resolve such dispute in accordance with this Section 14.3.

Arbitration
under this Section 14.3 shall be conducted in the same manner and subject to
the same terms and conditions as arbitration under Section 14.2, provided that:

 

(a)           the Parties shall designate in writing a
single arbitrator within fifteen (15) days of written notice of the dispute;

 

(b)           the arbitrator and the Parties shall meet,
and each Party shall provide to the arbitrator a written summary of all
disputed issues, such Party’s position on such disputed issues and such Party’s
proposed ruling on the merits of each such issue within fifteen (15) days after
the designation of the arbitrator;

 

(c)           the arbitrator shall use his or her best
efforts to rule on each disputed issue within fifteen (15) days after
completion of the hearing described in Section 14.2(c);

 

40

 

(d)           the arbitrator shall select one of the
requested positions as his decision, and shall not have the authority to render
any substantive decision other than to so select the position of either BMS or
Pharmacopeia; and

 

(e)           the Parties shall use good faith efforts to
complete arbitration under this Section 14.3 within sixty (60) days following a
request by any Party for such arbitration.

 

14.4         In an arbitration procedure under Section
14.3, in the event that the arbitrator determines that BMS has failed to act in
good faith with respect to its performance under Section 3.1, the following
shall apply:  (a) the provisions of
Section 3.1 shall terminate and (b) all other provisions of this Agreement
shall remain in full force and effect. 
For purposes of clarity, the foregoing shall be in addition to and shall
in no way limit any ruling of the arbitrator in accordance with Section 14.3.

 

ARTICLE 15

MISCELLANEOUS

 

15.1         Severability.  If
any one or more of the provisions of this Agreement is held to be invalid or
unenforceable, the provision shall be considered severed from this Agreement
and shall not serve to invalidate any remaining provisions hereof.  The Parties shall make a good faith effort to
replace any invalid or unenforceable provision with a valid and enforceable one
such that the objectives contemplated by the Parties when entering this
Agreement may be realized.

 

15.2         Notices.  Any notice required or
permitted to be given by this Agreement shall be in writing and shall be
delivered by hand or overnight courier with tracking capabilities or mailed
postage prepaid by first class, registered or certified mail addressed as set
forth below unless changed by notice so given:

 

If to Pharmacopeia:

 

Pharmacopeia Drug Discovery
Inc.

3000 Eastpark Boulevard

Cranbury, New Jersey 08512

Attention:  Chief Executive Officer

Telephone:  **

Facsimile:  **

 

With a copy to:

 

Pharmacopeia Drug Discovery
Inc.

3000 Eastpark Boulevard

Cranbury, New Jersey 08512

 

41

 

Attention:  Executive Vice President and General Counsel

Telephone:  **

Facsimile:  **

 

If to BMS:

 

Bristol-Myers Squibb Company

P.O. Box 4000

Route 206 & Province
Line Road

Princeton, New Jersey
08543-4000

Attention:  Senior Vice President, Corporate and Business
Development

Telephone:  **

Facsimile:  **

 

With a copy to:

Bristol-Myers Squibb Company

P.O. Box 4000

Route 206 & Province
Line Road

Princeton, New Jersey
08543-4000

Attention:  Vice President & Senior Counsel,
Corporate and Business Development

Telephone:  **

Facsimile:  **

 

Any such notice shall be
deemed given on the date received.  A
Party may add, delete, or change the person or address to whom notices should
be sent at any time upon written notice delivered to the Party’s notices in
accordance with this Section 15.2.

 

15.3         Force Majeure. 
Neither Party shall be liable for delay or failure in the performance of
any of its obligations hereunder if such delay or failure is due to causes
beyond its reasonable control, including, without limitation, acts of God,
fires, earthquakes, strikes and labor disputes, acts of war, terrorism, civil
unrest or intervention of any governmental authority (“Force Majeure”); provided, however, that the affected Party
promptly notifies the other Party and further
provided that the affected Party shall use its commercially
reasonable efforts to avoid or remove such causes of non-performance and to
mitigate the effect of such occurrence, and shall continue performance with the
utmost dispatch whenever such causes are removed.  When such circumstances arise, the Parties
shall negotiate in good faith any modifications of the terms of this Agreement
that may be necessary or appropriate in order to arrive at an equitable
solution.

 

15.4         Assignment.

 

15.4.1.           BMS may, without Pharmacopeia’s consent,
assign or transfer all of its rights and obligations hereunder, in connection
with any transfer of all of the BMS Patent Rights

 

42

 

and BMS Know How, to any
Affiliate of BMS or to any Third Party (including, without limitation, a
successor in interest); provided, however,
that such assignee or transferee agrees in writing to be bound by the terms of
this Agreement.

 

15.4.2.           Upon thirty (30) days advance written notice
to BMS and subject to BMS’ approval, such approval not to be unreasonably
withheld, delayed or conditioned, Pharmacopeia may assign or transfer all of
its rights and obligations hereunder to any Third Party, provided, however, that, (i)
Pharmacopeia’s rights and obligations under this Agreement shall be assumed by
the Third Party assignee, (ii) such assignment includes, without limitation,
all Approvals and all rights and obligations under this Agreement, (iii) such
Third Party shall have agreed prior to such assignment or transfer to be bound
by the terms of this Agreement in 
writing, and (iv) Pharmacopeia remains responsible for the performance
of this Agreement.

 

15.4.3.           Notwithstanding the provisions of Section
15.4.2 above, Pharmacopeia may assign or transfer all of its rights and
obligations hereunder without such consent to an Affiliate of Pharmacopeia or
to a successor in interest by reason of merger, consolidation or sale of all or
substantially all of the assets of Pharmacopeia, provided, however, that (i) Pharmacopeia’s rights and
obligations under this Agreement shall be assumed by its successor in interest
and shall not be transferred separate from all or substantially all of its
other business assets, (ii) such assignment includes, without limitation, all
Approvals and all rights and obligations under this Agreement, (iii) such
successor in interest or Affiliate shall have agreed prior to such assignment
or transfer to be bound by the terms of this Agreement in writing, and (iv)
where this Agreement is assigned or transferred to an Affiliate, Pharmacopeia
remains responsible for the performance of this Agreement.

 

15.4.4.           Subject to the foregoing, this Agreement
shall inure to the benefit of and be binding on the Parties’ successors and
assigns.  Any assignment or transfer in
violation of the foregoing shall be null and void and wholly invalid, the
assignee or transferee in any such assignment or transfer shall acquire no
rights whatsoever, and the non-assigning non-transferring Party shall not
recognize, nor shall it be required to recognize, such assignment or transfer.

 

15.5         Further Assurances.  Each
Party agrees to do and perform all such further acts and things and shall
execute and deliver such other agreements, certificates, instruments and
documents necessary or that the other Party may deem advisable in order to
carry out the intent and accomplish the purposes of this Agreement and to
evidence, perfect or otherwise confirm its rights hereunder.

 

15.6         Waivers and Modifications.  The
failure of any Party to insist on the performance of any obligation hereunder
shall not be deemed to be a waiver of such obligation.  Waiver of any breach of any provision hereof
shall not be deemed to be a waiver of any other breach of such provision or any
other provision on such occasion or any succeeding occasion.  No waiver, modification, release or amendment
of any obligation under or provision of this Agreement shall be valid or
effective unless in writing and signed by all Parties hereto.

 

43

 

15.7         Choice of Law.  This
Agreement shall be governed by, enforced, and shall be construed in accordance
with the laws of the State of Delaware without regard to its conflicts of law
provisions.

 

15.8         Jurisdiction.

 

15.8.1.           Any suit, action or other proceeding relating
to a dispute regarding the validity, scope or enforceability of intellectual
property rights or regarding confidentiality obligations shall not be subject
to the provisions of this Section 15.8.1 and Section 15.8.2.  Unless the Parties otherwise agree in
writing, each Party, for the purpose of enforcing an award under Section 14.2
or for seeking injunctive or other equitable relief as permitted under Section
14.2(g), hereby irrevocably submits to the exclusive jurisdiction of (i) the
Supreme Court of the State of New York, New York County or the Supreme Court or
Chancery Court of the State of Delaware (each a “State Court”), and (ii)
the United States District Court for the Southern District of New York or the
U.S. District Court for the District of Delaware (each a “District Court”),
for the purposes of any suit, action or other proceeding arising out of this
Agreement or out of any transaction contemplated hereby.  Each Party agrees to commence any such
action, suit or proceeding either in a District Court or if such suit, action
or other proceeding may not be brought in such court for jurisdictional
reasons, in a State Court.

 

Each Party further agrees
that service of any process, summons, notice or document by personal delivery,
by registered mail, or by a recognized international express delivery service
to such Party’s respective address set forth above shall be effective service
of process for any action, suit or proceeding in the applicable District Court
or State Court with respect to any matters to which it has submitted to
jurisdiction in this Section.  Each Party
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the applicable District Court or State Court, and hereby
and thereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.

 

15.8.2.           Each Party hereto hereby waives to the
fullest extent permitted by applicable Laws, any right it may have to a trial
by jury in respect to any litigation directly or indirectly arising out of,
under or in connection with this Agreement. 
Each Party hereto (i) certifies that no representative, agent or
attorney of the other Party has represented, expressly or otherwise, that such
other Party would not, in the event of litigation, seek to enforce that
foregoing waiver and (ii) acknowledges that it and the other Party hereto have
been induced to enter into this Agreement, as applicable, by, among other
things, the mutual waivers and certifications in this Section 15.8.

 

15.9         Publicity.  Pharmacopeia shall have the
right to issue a press release, and BMS will have the right to make a separate
public disclosure, regarding the execution of this Agreement in substantially
the form of the press release agreed to in writing by the Parties prior to the
Effective Date.  Subject to the
provisions of Sections 11.2 and 11.5, each Party agrees not to issue any other
press release or public statement disclosing the existence of this Agreement or

 

44

 

any other information relating
to this Agreement, the other Party, or the transactions contemplated hereby
without the prior written consent of the other Party, provided, however, that any disclosure
which is required by applicable Laws or the rules of a securities exchange, as
reasonably advised by the disclosing Party’s counsel, may be made subject to
the following.  The Parties agree that
any such required disclosure will not contain confidential business or
technical information and, if disclosure of confidential business or technical
information is required by applicable Laws, the Parties will use appropriate
diligent efforts to minimize such disclosure and obtain confidential treatment
for any such information which is disclosed to a governmental agency.  Each Party agrees to provide to the other
Party a copy of any public announcement regarding this Agreement or the subject
matter thereof as soon as reasonably practicable under the circumstances prior
to its scheduled release.  Except under
extraordinary circumstances, or as otherwise required under applicable Laws or
the rules of a securities exchange, each Party shall provide the other with an
advance copy of any such announcement at least five (5) business days prior to
its scheduled release.  Each Party shall
have the right to expeditiously review and recommend changes to any such
announcement and, except as otherwise required by applicable Laws or the rules
of a securities exchange, the Party whose announcement has been reviewed shall
remove any Confidential Information of the reviewing Party that the reviewing
Party reasonably deems to be inappropriate for disclosure.  The contents of any announcement or similar
publicity which has been reviewed and approved by the reviewing Party can be
re-released by either Party without a requirement for re-approval.  Nothing in this Section 15.9 shall be
construed to prohibit Pharmacopeia or its Affiliates or Sublicensees from
making a public announcement or disclosure regarding the stage of development
of Licensed Products in Pharmacopeia’s (or its Affiliates’ or Sublicensees’)
product pipeline or disclosing clinical trial results regarding such License
Products, as may be required by applicable Laws or the rules of a securities
exchange, as reasonably advised by Pharmacopeia’s (or its Affiliates’ or
Sublicensees’) counsel.

 

15.10       Relationship of the Parties.  Each
Party is an independent contractor under this Agreement.  Nothing contained herein is intended or is to
be construed so as to constitute BMS and Pharmacopeia as partners, agents or
joint venturers.  Neither Party shall
have any express or implied right or authority to assume or create any
obligations on behalf of or in the name of the other Party or to bind the other
Party to any contract, agreement or undertaking with any Third Party.

 

15.11       Headings.  Headings and captions are for
convenience only and are not be used in the interpretation of this Agreement.

 

15.12       Entire Agreement.  This
Agreement (including all Appendices attached hereto, which are incorporated
herein by reference) (i) sets forth all of the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties
hereto, (ii) constitutes and contains the complete, final and exclusive
understanding and agreement of the Parties with respect to the subject matter
herein and (iii) cancels, supersedes and terminates all prior agreements and
understanding between the Parties with respect to the subject matter
hereof.  For the avoidance of doubt, the
confidentiality agreements entered into by

 

45

 

BMS and Pharmacopeia on
February 18, 2005 and February 12, 2006 (the “Confidentiality Agreements”)
shall remain in effect with respect to all Confidential Information (as that
term is defined in the Confidentiality Agreements) disclosed by the Parties
that does not pertain to the subject matter of this Agreement.  All Confidential Information (as that term is
defined in the Confidentiality Agreements) pertaining to the subject matter of
this Agreement disclosed to BMS by Pharmacopeia under the Confidentiality
Agreements shall be considered Confidential Information (as that term is
defined in this Agreement) of Pharmacopeia disclosed under this Agreement and
shall be subject to the terms and conditions of this Agreement; and all
Confidential Information (as that term is defined in the Confidentiality
Agreements) pertaining to the subject matter of this Agreement disclosed to
Pharmacopeia by BMS under the Confidentiality Agreements shall be considered
Confidential Information (as that term is defined in this Agreement) of BMS
disclosed under this Agreement and shall be subject to the terms and conditions
of this Agreement.  There are no
covenants, promises, agreements, warranties, representations, conditions or
understandings, whether oral or written, between the Parties other than as set
forth herein.  No subsequent alteration,
amendment, change or addition to this Agreement shall be binding upon the
Parties hereto unless reduced to writing and signed by the respective authorized
officers of the Parties.

 

15.13       Counterparts.  This
Agreement may be executed in counter-parts with the same effect as if both
Parties had signed the same document. 
All such counterparts shall be deemed an original, shall be construed
together and shall constitute one and the same instrument.

 

15.14       Nonsolicitation. 
During the ** (**) ** following the Effective Date, each Party agrees
that neither it nor any of its Affiliates shall knowingly recruit, solicit or
induce, directly or indirectly, any employee of the other Party or any of its
Affiliates directly involved in the research or Development activities with
respect to Licensed Compounds to terminate his or her employment with the other
Party or such Affiliate and become employed by or consult for such Party or any
of its Affiliates.  For purposes of the
foregoing, “recruit”, “solicit” or “induce” shall not be deemed to mean (i)
circumstances where an employee of a Party or any of its Affiliates initiates
contact with the other Party or any of its Affiliates with regard to possible
employment, or (ii) general solicitations of employment not specifically
targeted at employees of the other Party or any of its Affiliates, including
responses to general advertisements.

 

15.15       Exports.  Pharmacopeia agrees not to
export or re-export, directly or indirectly, any information, technical data,
the direct product of such data, samples or equipment received or generated
under this Agreement in violation of any applicable export control Laws.

 

15.16       Amendment to 1997 Agreement.  In
partial consideration of the license rights granted by BMS to Pharmacopeia
under this Agreement, the Parties agree to amend the Collaboration and License
Agreement between the Parties dated November 26, 1997 (as previously amended
under Amendment Nos. 1, 2 and 3; collectively the “1997 Agreement”).  Such amendment shall be entered into
concurrently with this Agreement.

 

15.17       Compound Library Services to be Performed by
Pharmacopeia.  In partial consideration of the license
rights granted by BMS to Pharmacopeia under this Agreement,

 

46

 

Pharmacopeia shall perform for
BMS the Compound Library Services as set forth in Appendix 5
hereto.  The obligations of Pharmacopeia
to perform the Compound Library Services under this Section 15.17 shall survive
any termination of this Agreement.

 

15.18       Interpretation.

 

15.18.1.         Each of the Parties acknowledges and agrees
that this Agreement has been diligently reviewed by and negotiated by and
between them, that in such negotiations each of them has been represented by
competent counsel and that the final agreement contained herein, including the
language whereby it has been expressed, represents the joint efforts of the
Parties hereto and their counsel.  Accordingly,
in interpreting this Agreement or any provision hereof, no presumption shall
apply against any Party hereto as being responsible for the wording or drafting
of this Agreement or any such provision, and ambiguities, if any, in this
Agreement shall not be construed against any Party, irrespective of which Party
may be deemed to have authored the ambiguous provision.

 

15.18.2.         The definitions of the terms herein shall
apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have
the same meaning and effect as the word “shall”.  The word “any” shall mean “any and all”
unless otherwise clearly indicated by context.

 

15.18.3.         Unless the context requires otherwise, (a)
any definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein or therein), (b) any reference to any Laws herein shall be
construed as referring to such Laws as from time to time enacted, repealed or
amended, (c) any reference herein to any person shall be construed to include
the person’s successors and assigns, (d) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, and (e)
all references herein to Articles, Sections or Appendices, unless otherwise
specifically provided, shall be construed to refer to Articles, Sections and
Appendices of this Agreement.

 

*
* *

[signature
page follows]

 

47

 

IN WITNESS WHEREOF, the
Parties have caused this Agreement to be executed by their respective duly
authorized officers.

 

	
   

  	
  PHARMACOPEIA
  DRUG DISCOVERY INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Leslie J. Browne

  
	
   

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Leslie J. Browne, Ph.D.

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President and Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BRISTOL-MYERS
  SQUIBB COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tamar Howson

  
	
   

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Tamar Howson

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Senior VP, Corporate &
  Business Development

  

 

48

 

Appendix
1

 

BMS
Core Patent Rights

 

	
  Dkt. No.

  	
   

  	
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  **

  

 

49

 

Appendix
2

 

Active
Compound

 

“Active Compound”
means a compound that **.

 

“**” means the **.

 

“**” means the **.

 

50

 

Appendix
3

 

Outline
of Development Plan as of Effective Date

 

Clinical Development Outline

 

**

 

51

 

Appendix
4

 

Listed
Compounds

 

The Listed Compounds are
listed by BMS compound code below:

 

**

 

52

 

Appendix
5

 

Compound
Library Services

 

Overview.  As
partial consideration for the exclusive license Pharmacopeia will work
collaboratively with BMS to perform Compound Library Services for BMS as
outlined below.  Such Compound Library
Services will be performed by Pharmacopeia for BMS **.  The performance of the Compound Library
Services will be subject to Section 15.17 and 13.2.2(b), and shall be subject
to the terms and conditions of Appendix 6 solely to the extent that such
terms do not conflict with or in any way limit the obligations of Pharmacopeia
under this Appendix 5 and/or any other applicable provisions of the
Agreement.

 

Libraries.  As
described further below, Pharmacopeia will provide services for BMS for the
synthesis and delivery of ** (each such compound library being a “Library”, and
such compound libraries being individually and collectively the “Libraries”).  The design and synthesis of the Libraries
will be carried out as described further below.

 

JRC.  For
purposes of the Compound Library Services, the Parties will form a joint
research committee (the “JRC”).  The JRC
shall be formed within thirty (30) days of the Effective Date as the body
responsible for communication between BMS and Pharmacopeia for all matters
related to the design and synthesis of the Libraries.  The JRC shall be responsible for establishing
the design (including the structural scope) of the Libraries.  Each company will have equal representation
on the JRC with all decisions made by unanimous vote.  In the event of a disputed decision, the
decision shall be escalated to each company’s senior management who shall
attempt to resolve the dispute through considered discussion and judgment.  In the event that any such disputed decision
is not resolved by senior management within ** (**) days, **.  BMS shall **.

 

Definitions

 

“General Library Design”
means the definition of library design that includes the common chemical motif
of a chemical Library, the scaffolds and their synthesis (if applicable), the
key chemical reactions to assemble the Library, the approximate number of
reagents at each combinatorial position and a sample of reagents at each
position.

 

“Detailed Library Design”
means the design of a Library that specifies all of the reagents and compounds
that will be attempted to be made.

 

Initial Library Design

 

As of the Effective Date,
BMS will have proposed and the Parties will have agreed upon the General
Library Design for ** (**) Libraries. 
The Parties shall agree to an additional ** (**) Libraries within **
(**) days of the Effective Date.

 

53

 

Before the **, BMS will propose
to Pharmacopeia the General Library Design for at least ** and before the **,
BMS will propose the General Library Design for at least **.

 

In submitting the General
Library Design, BMS will use commercially reasonable efforts to propose a
design of reasonable complexity and cost. 
For purposes of this Appendix 5 “reasonable complexity” shall
include: (a)  **, and (b) **.

 

Upon the receipt of a
General Library Design for a Library from BMS, Pharmacopeia will have ** (**)
** to (1) designate the General Library Design as acceptable or not acceptable,
(2) notify BMS whether structurally similar compounds are in Pharmacopeia’s
collection and (3) if acceptable, reach agreement with BMS regarding the
personnel who will be responsible for preparing the proposed Detailed Library
Design for the Library.  If the General
Library Design is considered by Pharmacopeia not to be acceptable, Pharmacopeia
shall also provide a detailed explanation as to why the design is considered not
to be acceptable.

 

Within ** (**) ** after
receiving notice from Pharmacopeia that a General Library Design for a Library
is not acceptable, BMS will either submit another General Library Design or
refer the matter to senior management representatives of the R&D
organizations designated by BMS and Pharmacopeia to resolve such matter (the
“Management Representatives”).  Such
Management Representatives will have ** (**) ** to resolve the matter, and if
the resolution results in rejection of the General Library Design, BMS will
have ** (**) ** following such resolution to propose another General Library
Design.

 

Within ** (**) **after
receiving notice that a proposed General Library Design for a Library is
structurally similar to compounds present in Pharmacopeia’s collection, BMS
will either notify Pharmacopeia to continue with the design or that it wishes
to abandon that design.  If a design is
abandoned, BMS will have ** (**) ** to submit another General Library Design.

 

Library Feasibility Study

 

Within ** after synthetic
studies have commenced based on a General Library Design for a Library approved
as set forth above, Pharmacopeia will **.

 

If the Library is determined
not to be chemically feasible (i.e., the chemistry cannot deliver the
compounds), BMS will propose another General Library Design within ** (**) **
following such determination.

 

In addition, within ** (**)
** after communication by Pharmacopeia to BMS of the results of the feasibility
study, BMS and/or Pharmacopeia (as decided by BMS) shall complete a Detailed
Library Design.  Final review and
acceptance of all proposed Detailed Library Designs will be made by the
JRC.  The Detailed Library Design will
contain **:

 

(1)**; (2) **; and (3) **.

 

54

 

Upon receipt of the final
design, Pharmacopeia will have ** (**) ** to accept or reject the Detailed
Library Design.  If the design is
rejected, BMS will have ** (**) ** to amend and resubmit the design or refer
the matter to Management Representatives of each Party for resolution.  The Management Representatives will have **
(**) ** to resolve the matter.

 

Library Production

 

Once the Detailed Library
Design is accepted as set forth above, Pharmacopeia will have ** (**) ** to
deliver at least ** that meet the following specifications:

 

•      **.

 

•      **.

 

•      **.

 

Deadline for Delivery of
Libraries to BMS.  Pharmacopeia will use commercially reasonable
efforts to deliver the ** no later than the **, the ** no later than ** and the
** no later than the **.  Without
limiting Pharmacopeia’s obligations and BMS’ rights under this Agreement with
respect to the Compound Library Services, the Parties agree and acknowledge
that the following occurrences shall be considered a **.

 

Ownership; Intellectual
Property Rights.  Physical ownership of the Libraries will be
transferred to BMS and the Libraries shall be provided to BMS on a fully
paid-up basis.  Pharmacopeia shall assign
to BMS ownership of any patent rights claiming inventions that are conceived
and/or reduced to practice in performing the Compound Library Services that
cover the compounds (specifically and/or generically) in the Libraries.  Pharmacopeia will make no guarantees with
respect to intellectual property exclusivity with respect to the Libraries.

 

Confidentiality;
Restrictions on Use.  The chemical structural information disclosed
by BMS with respect to the Libraries will be BMS Confidential Information and
shall be disclosed and made accessible only to Pharmacopeia personnel (and
Pharmacopeia’s subcontractor’s personnel, as applicable) having a need-to-know
for the purpose of performing the synthesis of the Libraries and in no event
will be used by Pharmacopeia in support of or in connection with Pharmacopeia’s
independent research programs. 
Pharmacopeia will not provide the same Libraries to Third Parties nor
utilize the same Libraries in Pharmacopeia internal drug discovery efforts.

 

Subcontracting of Work by
Pharmacopeia.  Pharmacopeia may subcontract to a
subcontractor the synthesis of the Libraries, provided
that (i) such subcontractor is bound in writing by appropriate confidentiality
and other relevant provisions to Pharmacopeia such that the subcontractor shall
be bound by all applicable provisions of this Agreement to the same extent as
Pharmacopeia and (ii) prior to using such subcontractor, Pharmacopeia will
provide BMS with notice identifying the subcontractor and informing BMS that it
will use such subcontractor.

 

55

 

Breach. 
Breaches of Pharmacopeia’s obligations to perform the Compound Library
Services in accordance with this Appendix 5 will be subject to Section
13.2.2(b).

 

56

 

Appendix
6

 

Terms
and Conditions for Compound Library Services

 

The Compound Library
Services shall be performed as set forth in Appendix 5 and shall be
subject to the terms and conditions set forth below in this Appendix 6, provided that in the event of any conflict
between the terms and conditions set forth in this Appendix 6 and the
terms and conditions of Appendix 5 and any other applicable provision of
the Agreement (including but not limited to Section 15.17 and 13.2.2(b)), the
terms and conditions of Appendix 5 and any other applicable provision of
the Agreement (including but not limited to Section 15.17 and 13.2.2(b)) shall
govern.

 

Terms and Conditions

 

Subject to the other terms
and conditions of the Agreement, these Terms and Conditions (the “Terms and
Conditions”), shall govern Pharmacopeia’s provision of Libraries to Bristol
Myers Squibb Company (“Company”).

 

1.             General.  For purposes hereof:

 

“Company” is defined above.

“Libraries” has the meaning set forth in Appendix 5.

 

2.             Obligations of Pharmacopeia. 
Pharmacopeia and Company will design the Libraries, and Pharmacopeia
will manufacture or have manufactured, and control the quality of the Libraries
and deliver the same to Company, subject to these Terms and Conditions and the
other terms and conditions as set forth in Appendix 5 and elsewhere in
the Agreement.  Pharmacopeia shall
supply, at Pharmacopeia’s sole expense, all equipment, tools, materials, and/or
supplies, including solvents, inorganic chemicals and hazardous waste disposal
necessary to accomplish its work under these Terms and Conditions.

 

3.             Delivery and Shipping. 
Pharmacopeia will select the method of shipment and will ship the
Libraries to Company’s facility in Lawrenceville, New Jersey.  Libraries will be packaged and shipped in
accordance with the specifications set forth in Appendix 5.  Pharmacopeia will use commercially reasonable
endeavors to avoid delay in delivery of the Libraries in accordance with
delivery schedule set forth in Appendix 5.  Subject to Section 13.2.2(b) Pharmacopeia be
liable for any direct, indirect, consequential or economic loss due to delay in
delivery.

 

4.             Inspection and Acceptance. 
Company is responsible for inspecting all Libraries prior to
acceptance.  If Company does not give
Pharmacopeia written notice of rejection within thirty (30) days following
receipt of Libraries by Company, the Libraries will be deemed accepted by
Company, provided that the Libraries conform to the specifications as set forth
in Appendix 5.

 

57

 

5.             Limited Warranty.  
With respect to Libraries, Pharmacopeia warrants that Libraries conform
to the specifications as set forth in Appendix 5 at the point of
distribution.  This warranty applies only
to Company and not to any third parties, including any affiliate or subsidiary
of Company.  This warranty does not apply
to deviations from the specifications; use of Libraries for a purpose or in a
manner other than that for which they were designed; any defect caused by
failure to provide suitable storage, use or operating environment; use of
non-recommended reagents or methods; or any other abuse, misuse or neglect of
Libraries.  Company’s exclusive remedy
under Pharmacopeia’s warranty is replacement of the Library that failed to
conform to Pharmacopeia’s warranty or payment by Pharmacopeia to BMS in accordance
with Section 13.2.2(b).

 

PHARMACOPEIA AND ITS
SUPPLIERS DISCLAIM ALL OTHER WARRANTIES, WHETHER EXPRESSED OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, TITLE, AND NON-INFRINGEMENT.  IN NO EVENT WILL PHARMACOPEIA OR ITS
SUPPLIERS BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL OR INDIRECT
DAMAGES, INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS, BUSINESS
INTERRUPTION, LOSS OF BUSINESS INFORMATION OR PROPERTY DAMAGE SUSTAINED BY
CUSTOMER FROM THE USE OF, OR THE INABILITY TO USE, THE LIBRARIES, EVEN IF
PHARMACOPEIA HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  AS TO ANY PHARMACOPEIA LIABILITY NOT LEGALLY
SUBJECT TO THE FOREGOING, PHARMACOPEIA’S MAXIMUM LIABILITY WILL NOT EXCEED AN
AGGREGATE ** ($**) DOLLARS.

 

6.             Intellectual Property. 
Company represents that to the best of its knowledge any information,
technology, supplies, specifications, designs and materials it supplies to
Pharmacopeia to enable Pharmacopeia to design and manufacture any Libraries on
Company’s behalf will not infringe the intellectual property rights of any
third parties.  The acceptance and use of
Libraries by the Company does not include or carry any right to any
Pharmacopeia technology or intellectual property, except and solely to the
extent as set forth in Appendix 5. 
Pharmacopeia shall have no rights to any of Company’s results, data,
inventions, or know-how, resulting from Company’s use of any Libraries.  Pharmacopeia will not make use of the
Libraries in its internal drug discovery efforts or in collaboration with any
third party.

 

7.             Indemnity. 
Except where a claim, loss or liability (collectively, “Losses”)
arises as a result of the gross negligence or willful misconduct of
Pharmacopeia, Company agrees to indemnify Pharmacopeia, its agents, employees,
directors, affiliates and representatives (each an “Indemnified Party”)
from and against any Losses that may be incurred by an Indemnified Party as a
result of (i) Company’s use of any Library, (ii) Company’s manufacture, use, or
sale of any derivative of any Library, (iii) any alleged infringement of the
proprietary rights of a third party resulting from Company’s use of any
Library, or (iv) any alleged infringement of the proprietary rights of a third
party resulting from Company’s manufacture, use, or sale of any derivative of
any Library.

 

58

 

8.             Force Majeure.  If
the performance of any obligation under these Terms and Conditions, other than
the payment of money, is prevented, restricted or interfered with by any cause
not within the control of the prevented party, and that could not by reasonable
diligence have been avoided by the prevented party, the prevented party, upon
giving prompt notice to the other party as to the nature and probable duration
of the cause, is excused from its performance to the extent and for the
duration of the cause, provided
the prevented party uses reasonable commercial efforts to avoid or remove the
cause and continues performance under these Terms and Conditions once the cause
is removed.  Without limitation, the
following are not within the control of a party: acts of God; compliance with,
or acts or omissions of a governmental agency or body; power failures or
fluctuations; flood; storm; earthquake; fire; war; insurrection; riot;
accidents; quarantine restrictions; labor disputes; embargoes; delays or
failures in transportation; and acts of a similar nature.

 

9.             Modifications, Waiver,
Termination.  These Terms and Conditions may be modified,
and any breach thereunder may be waived, only by a writing signed by both
parties.  If any term or provision of
these Terms and Conditions or the application thereof shall be invalid or
unenforceable, the remainder of these Terms and Conditions shall be unaffected
thereby and each remaining term or provision of these Terms and Conditions
shall be valid and be enforceable to the fullest extent permitted by law.

 

10.          Governing Law.  This
contract is governed by and construed in accordance with the laws of the State
of Delaware, without regard to its conflict of laws provisions.

 

11.          Assignment. 
Except in the case of assignment or transfer to a successor in interest
by reason of merger, consolidation or sale of all or substantially all of the
assets of Company, Company may not assign these Terms and Conditions or any of
its rights to the Libraries hereunder without the prior, express written
consent of Pharmacopeia.  Except in the
case of assignment or transfer to a successor in interest by reason of merger,
consolidation or sale of all or substantially all of the assets of
Pharmacopeia, Pharmacopeia may not assign these Terms and Conditions or any of
its obligations with respect to the performance of the Compound Library
Services without the prior, express written consent of BMS.  Any assignment in violation hereof is
void.  Pharmacopeia may subcontract
certain of its obligations with respect to the chemical synthesis of the
Libraries to WuXi Pharmatech Company, Ltd. or other third party subcontractor
in accordance with Appendix 5, which subcontractor shall agree in
writing by prior separate agreement with Pharmacopeia to be bound by all the
applicable terms and conditions of the Agreement (including but not limited to
these Terms and Conditions) to the same extent as Pharmacopeia.

 

12.          Relationship. 
Nothing herein contained shall be deemed to create an agency, joint
venture, amalgamation, partnership, or similar relationship between
Pharmacopeia and Company.  The relationship
between the parties established by these Terms and Conditions is that of
independent contractors.

 

59

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