Document:

EXHIBIT
10.1

 

Director Compensation Summary

 

Non-management
directors receive an annual retainer of $150,000 per year, $60,000 of which
will be paid in cash and $90,000 of which is paid in stock units or restricted
stock (as described below), though a director may elect to receive up to 100
percent his annual retainer in stock units or restricted stock. The Chairman of
the Board receives an additional $100,000 annual retainer, the Chairman of the
Audit Committee receives an additional $20,000 annual retainer and the Chairman
of each of the Compensation Committee, the Nominating and Governance Committee,
the Finance Committee and the Risk Oversight Committee receives an additional
$10,000 annual retainer. Members of the Audit Committee receive an additional $10,000
annual retainer and members of each of the Compensation Committee, the
Nominating and Governance Committee, the Finance Committee and the Risk
Oversight Committee receive an additional $5,000 annual retainer. The Company
will generally not pay a fee for attendance at board or committee meetings,
though the Chief Executive Officer has the discretion to pay attendance fees of
$2,000 for extraordinary or special meetings.

 

An initial
(one-time) grant of restricted shares with a value of $100,000 was awarded to
each non-management director upon his initial election upon closing of the IPO.
These restricted shares will vest on the day immediately prior to the third
annual shareholders meeting at which directors are elected following the grant
of the shares.

 

Retainer
equity awards were granted upon completion of the IPO and will be granted
annually thereafter (usually on the date of the Company’s annual shareholders’
meeting) in the form of stock units until the share ownership guidelines set
forth in the next paragraph have been met. The first 10,000 stock units awarded
to each director will become non-forfeitable on the day immediately prior to
the first annual shareholders meeting at which directors are elected following
the grant of the units. The issuance of Common Shares for these units will be
mandatorily deferred until six months after termination of the director’s
service on the Board of Directors. After the share ownership guidelines
discussed below are met, directors may elect to receive their annual retainer
equity award in the form of either restricted shares that vest on the day
immediately prior to the first annual shareholders meeting at which directors
are elected following the grant of the shares, or stock units that become
non-forfeitable on the day immediately prior to the first annual shareholders
meeting at which directors are elected following the grant of the units, with
the issuance of Common Shares deferred to a later date chosen by the director.
Stock units cannot be sold or transferred until the Common Shares are issued.
Dividend equivalents will be credited to stock units and reinvested as
additional stock units.

 

The Board of
Directors has recommended that each director own at least 10,000 Common Shares
within three years after joining the board. Common Shares represented by stock
units will count toward that guideline, though restricted shares awarded upon a
director’s initial election will not.Exhibit 10.1

 

Confidential treatment
has been requested for portions of this exhibit. The copy filed herewith omits
the information subject to the confidentiality request. Omissions are
designated as **. A complete version of this exhibit has been filed separately
with the Securities and Exchange Commission.

 

LICENSE
AGREEMENT

 

THIS LICENSE AGREEMENT (“Agreement”), originally entered into as of July 16,
1993, (the “Original Effective Date”), as amended and restated effective as of October 6,
1995 (the “First Amendment Date”), and as further amended and restated
effective as of July 1, 2003 (the “Second Amendment Date”), among THE
TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK, a New York Corporation
(“Columbia”), and COLD SPRING HARBOR LABORATORY, a New York corporation (“Cold
Spring”) (hereinafter collectively referred to as “Licensor”), and PHARMACOPEIA DRUG DISCOVERY, INC., a Delaware corporation
that is the successor to the rights and obligations hereunder of PHARMACOPEIA, INC. (the “Company”).

 

RECITALS

 

1.                                       The Company has been formed for the purposes
of developing combinatorial chemical libraries for the development of human
pharmaceutical products and methods of preparing and using such libraries to
discover, develop and sell products.

 

2.                                       Licensor is the owner of certain technology,
materials, patents and patent applications relating to combinatorial chemical
libraries and methods of preparing and using the same, and Columbia and Cold
Spring are, respectively, the employers of Dr. W. Clark Still (“Dr. Still”)
and Dr. Michael H. Wigler (“Dr. Wigler”), each of whom is a named inventor on such patents
and patent applications.

 

3.                                       The Company desires to obtain, and Licensor
desires to grant to the Company, a license under the technology, materials, patents
and patent applications of Licensor relating to combinatorial chemical
libraries and methods of preparing and using the same.

 

4.                                       Licensor and the Company have previously
executed and delivered the following prior versions of, and additions and amendments
to, this Agreement: (a) the original Agreement effective July 16,
1993; (b) a letter agreement dated December 12, 1994 (the “December 1994
Amendment”); (c) a letter agreement dated January 23, 1995 (the “January 1995
Amendment”); (d) the amended and restated License Agreement effective October 6,
1995; and (e) the Tolling Agreement effective on or about October 7,
2004, as amended. The documents referred to in this paragraph 4 are attached
hereto as Exhibit A.

 

5.                                       The parties have executed this Agreement as
of May 23, 2005, to be retroactive to the Second Amendment Date.  Thus, from and after the Second Amendment
Date, this Agreement shall amend and supersede in full all prior versions,
additions and amendments (a) through (e) identified in paragraph 4
above, and this Agreement shall be applicable to all matters and actions
occurring on or after the Second Amendment Date.

 

 

Now, Licensor and the Company agree as follows:

 

1.                                       Definitions.

 

a.                                       “Affiliate” shall mean any corporation or
other business entity that directly or indirectly controls, is controlled by,
or is under common control with, the Company. Control means ownership or other
beneficial interest in 50% or more of the voting stock or other voting interest
of a corporation or other business entity.

 

b.                                      “ECLiPS” is an
acronym for “encoded combinatorial libraries on polymeric support,” and is
meant to refer to any chemical compound prepared by, or on behalf of, the Company
using any Licensed Subject Matter and/or any research programs carried out and involving
any use of Licensed Subject Matter.

 

c.                                       “ECLiPS-enabled
Revenues” shall have the meaning set forth in Section 3.a.(iii) below.

 

d.                                      “Field” shall mean combinatorial chemical
libraries encoded by detachable electrophoric tags
and methods of preparing and using the same.

 

e.                                       “Geographic Area” shall mean all countries
and other territories in the world.

 

f.                                         “ITD Costs” means
internal technology development costs.  “Corporate
ITD Costs” and “Pro Rata ITD
Costs” are defined in Section 3.a.(iii) below.

 

g.                                      “Licensed Patents” shall mean the patents and
patent applications, including any division, continuation, continuation in
part, substitute, renewal, reissue, extension, confirmation, reexamination or
registration and any patent issuing thereon, for which the Company was granted
a license as of the Original Effective Date pursuant to the original Agreement
effective July 16, 1993. A list of Licensed Patents as of May 5, 2005
is attached as Exhibit B.

 

h.                                      “Licensed Products” shall mean any product or
service incorporating, or discovered utilizing, Licensed Subject Matter.

 

i.                                          “Licensed Materials” shall mean materials
provided by Licensor to the Company relating to the Field, including any
chemical compound or substance.

 

j.                                           “Licensed Subject Matter” shall mean the
Licensed Patents, Licensed Materials and Licensed Technology.

 

k.                                       “Licensed Technology” shall mean any
technology communicated by Licensor to the Company relating to the Field and
not covered by a claim of a Licensed Patent.

 

1.                                       “Net Sales” shall mean all ** charged by the
Company or an Affiliate for the **, **

 

[**]=Certain information
on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

2

 

**.
In the case of ** by an Affiliate, Net Sales shall be based upon the greater of
the ** or ** by the Company to a Third Party and the ** or ** by the Company to
the Affiliate.

 

m.                                    “R&D Costs” (“research and development
costs”) are defined in Section 3.a.(iii) below.

 

n.                                      “Sublicensees”
shall mean Third Parties to whom the Company has granted sublicenses under the
Licensed Subject Matter.

 

o.                                      “Third Party” shall mean any party other than
(i) Licensor or (ii) the Company.

 

2.                                       License Grant.

 

a.                                       Licensor grants to the Company and its
Affiliates, subject to all the terms and conditions of this Agreement, an
exclusive, worldwide license under the Licensed Subject Matter, with the right
to sublicense, to develop, manufacture, have made, use, sell, rent, or lease Licensed
Products for the term of this Agreement, provided that any Sublicensee
agrees to comply with terms and provisions of this Agreement, where applicable,
and that the Company takes all reasonable steps to safeguard the proprietary
nature of the Licensed Technology in connection with any such sublicense. No Sublicensee shall have any right to further grant sublicenses.
With respect to any such sublicense: (i) Company
shall continue to be responsible to Licensor for any obligations of Company
under this Agreement; (ii) Licensor shall have no responsibility to any
such Sublicensee; and (iii) Company shall be
responsible for enforcing compliance by Sublicensees
with applicable provisions of Section 10.

 

b.                                      All rights granted by Licensor to the Company
under this Section 2 and under this Agreement are subject to the
requirements of 35 U.S.C. §200 et seq. and
implementing regulations.

 

3.                                       Royalties and Payments.

 

a.                                       In consideration of the license granted under
Section 2(a) of this Agreement, the Company shall pay to Licensor:

 

(i)                                    non-refundable annual license fees which
shall be payable in accordance with the following schedule:

 

(a)                                 One-hundred thousand dollars ($100,000.00),
in four equal installments of twenty-five thousand dollars ($25,000) each,
during the third and each subsequent year of this Agreement after the Original
Effective Date, payable at the end of each three (3) month period of each
such year. Such annual non-refundable license fees shall be creditable in full
against royalty payments due Licensor from the Company pursuant to Section 3(a)(ii) and, against payments due Licensor from the
Company pursuant to Section 3(a)(iii) hereof, in each case for the
year in which such annual fee is

 

[**]=Certain information
on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

3

 

paid. To the extent any portion of such annual fee has not been so
credited, fifty percent (50%) of the remaining uncredited
portion amount shall be creditable against royalty payments due Licensor from
the Company after such year. For purposes of this Agreement, a “year” means the
period from July 1 of a calendar year through June 30 of the
following calendar year.

 

(b)  Licensor and the Company confirm that all the
annual license fees set forth in sub-sections 3.a.(i)(a) through
(c) of the version of this Agreement that was amended and restated
effective as of October 6, 1995 have been paid by Company in their
entirety.

 

(ii)                                  a “Direct Payment,” equal to ** percent (**%)
of all Net Sales made by the Company and its Affiliates of Licensed Products
manufactured, used, or sold by the Company and its Affiliates for use by
consumers as a pharmaceutical product or for manufacture into a pharmaceutical
product for use by consumers.

 

(iii)                               a “Pass-Through Payment,” equal to ** percent
(**%) of all ECLiPS-enabled Revenues received by the
Company and its Affiliates, net of certain costs, as represented by the
following formula, and as further defined below:

 

Pass-Through Payment = ** * {**},

 

where “*” means “multiplied by.”

 

“ECLiPS-enabled Revenues” means any payments,
royalties, milestones, or other consideration of any kind (collectively, “revenues”),
recognized by the Company and its Affiliates, from a Third Party with respect
to any ** by, or on behalf of, the Company **. If the Company recognizes
non-cash ECLiPS-enabled Revenues, at the Company’s
option, but such option to be available only if such non-cash ECLiPS-enabled Revenues have been recognized pursuant to a
bona fide transaction negotiated at arm’s length, the Company may **. “ECLiPS-enabled Revenues” also means any revenues recognized
by the Company and its Affiliates with respect to the **. For example, but
without limitation, the following would constitute categories of ECLiPS-enabled Revenues: (I) revenues resulting from **
using Licensed Subject Matter; (II) subject to the immediately following
paragraph, revenues associated with any ** involved the use of Licensed Subject
Matter; (III) revenues resulting from the ** using Licensed Subject

 

[**]=Certain information
on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

4

 

Matter; or (IV) revenues resulting from the Company’s
**. “ECLiPS-enabled Revenues” shall exclude payments to **,
except (a) to the extent that such ** and (b) to the extent, if any,
by which the **.

 

For purposes of explanation and clarification of the definition of “ECLiPS-enabled Revenues,” when the Company enters into a
collaborative agreement with a Third Party involving the use of both (i) Licensed Subject Matter and (ii) any other
technology, ** of such collaborative agreement. Notwithstanding the preceding
sentence, in the event that an **. For purposes of the preceding sentence, to
enable the Licensor to verify non-use of Licensed Subject Matter, the Company
shall allow the Licensor to conduct appropriate personnel interviews and
provide to the Licensor the Company’s written records, including without
limitation laboratory notebooks, publications and presentations and other
relevant materials, as provided under Section 4(e).

 

“Corporate R&D Costs” and “Corporate ITD
Costs” mean (I) the Company’s **; and (II) other ** the Company’s drug
discovery, drug optimization and drug development business. The distinction
between “Corporate R&D Costs” and “Corporate ITD
Costs” is that the former are attributable to a ** or program, while the latter
are **. Categories of Corporate R&D Costs and Corporate ITD
Costs include, but are not limited to, **

 

[**]=Certain information
on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

5

 

**
Corporate R&D Costs and Corporate ITD Costs do
not include any ** costs accounted for as such in the Company’s financial
statements.

 

“Collaboration R&D Costs” are those Corporate R&D Costs charged
directly or apportioned (for example, **) to **. Such “Collaboration R&D
Costs” shall include those expenses normally included as ** for the time period
in which the applicable ECLiPS-enabled Revenues were
recognized. “Collaboration R&D Costs” may also include amounts which were
included as ** for a time period during which, or before, the applicable ECLiPS-enabled Revenues were recognized.

 

In the event that certain Corporate R&D Costs are apportioned to a
research program of the Company that is not currently generating ECLiPS-enabled Revenues, such R&D Costs may be ** and
shall not **. For example, if the Company identifies an active compound during
the course of a research program that is conducted without sponsorship by a
Third Party, the Corporate R&D Costs apportioned to such program ** in the
above formula unless and until the Company has ** pursuant to the above
formula. Whenever any such accrued Corporate R&D Costs become Collaboration
R&D Costs, in no event shall such Collaboration R&D Costs be applied
retroactively to reduce prior ECLIPS-enabled
Revenues.

 

“Pro Rata ITD Costs” are those Corporate ITD Costs apportioned to **. The aggregate percentage of
Corporate ITD Costs apportioned to such
collaborations, products or programs shall be equal to the percentage of **. In
the event that certain Corporate ITD Costs are
apportioned to a collaboration, product or program of the Company that is not
currently generating ECLiPS-enabled Revenues, such ITD Costs may be ** pursuant to the above formula. Whenever
any such accrued ITD Costs become Pro Rata ITD Costs, in no event shall such Pro Rata ITD Costs be applied **. The Company’s internal accounting
system will track and measure Corporate ITD Costs and
Pro Rata ITD Costs. For the avoidance of doubt, Pro
Rata ITD Costs shall not include any ITD Costs related to Company **; provided, however, that in
the

 

[**]=Certain information
on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

6

 

event that any such Company research and development program or project
reaches the ** pursuant to the above formula.

 

For the avoidance of doubt, neither Collaboration R&D Costs nor Pro
Rata ITD Costs shall include any ** accounted for as
such in the Company’s financial statements. Further, neither Collaboration
R&D Costs nor Pro Rata ITD costs shall include
any costs or expenses of any kind incurred by the Company in connection with
any **.

 

Each Payment Report pursuant to Section 4 below shall specify the
amounts of ECLiPS-enabled Revenues recognized by the
Company and its Affiliates during the applicable period, along with the amounts
of Collaboration R&D Costs and Pro Rata ITD
Costs, and shall be certified by an officer of the Company, and the calculation
thereof shall be subject to the review contemplated by Section 4d. Each
Payment Report shall specify the total amount of ECLiPS-enabled
Revenues recognized by the Company and its Affiliates during the applicable
period, along with the total amounts of Collaboration R&D Costs and Pro
Rata ITD Costs. Further, each Payment Report shall
specify the amount of ECLiPS-enabled Revenues,
Collaboration R&D Costs and Pro Rata ITD Costs
recognized or incurred (as the case may be) by the Company with respect to each
pertinent Third Party.

 

(iv)                              Company shall be obligated upon the terms and
conditions specified to make either a Direct Payment (Section 3(a)(ii)) or a Pass-Through Payment (Section 3(a)(iii)),
as the case may be, with respect to all transactions involving Licensed Subject
Matter as contemplated by Sections 3(a)(ii) and (iii), but not both a
Direct Payment and a Pass-Through Payment. If it is not clear whether a Direct
Payment or a Pass-Through Payment is appropriate in a particular circumstance,
the parties shall negotiate in good faith to resolve the matter.

 

(v)                                 In order to resolve any disagreement among
the parties concerning the amounts of the royalties and/or payments owed by the
Company to the Licensor pursuant to Sections 3 and 4 for the period from the
Original Effective Date until the Second Amendment Date, the Company agrees to
pay the Licensor the amount of one million dollars ($1,000,000) (the “Additional
Payment”). The Additional Payment shall be paid in two installments: a first
installment of five-hundred thousand dollars ($500,000) payable by June 15,
2005, and a second installment of five-hundred thousand dollars ($500,000)
payable by June 15, 2006. The parties agree that the Additional Payment,
in view of the payments already made by the Company under this Agreement, fully
satisfies any and all amounts owed by the Company to the Licensor under this
Agreement for the period from the Original Effective Date until the Second
Amendment Date. In addition, in consideration of the Additional Payment and
other good and valuable consideration, receipt of which is hereby acknowledged,
each of Columbia and Cold Spring, for itself and for its affiliates and
successors, hereby releases, quitclaims, and forever discharges the Company,
its Affiliates and successors (collectively, the “Company Released Parties”),
from any and all claims, losses, demands, or causes of action of any type or
nature whatsoever, known or unknown, suspected or unsuspected, and whether or
not heretofore asserted which either Columbia or Cold Spring ever had, now has
or may hereafter have against the Company

 

[**]=Certain information
on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

7

 

Released Parties or any of them with respect to this
Agreement for the period from the Original Effective Date until the Second
Amendment Date.
The parties agree that the payment by the Company of the Additional Payment
does not constitute an admission or acknowledgement by the Company of any
incorrect conduct or practice by the Company with respect to this Agreement.
Further, in consideration of the release provided to the Company Released
Parties by Columbia and Cold Spring, and other good and valuable consideration,
receipt of which is hereby acknowledged, each of the Company Released Parties,
for itself and for its affiliates and successors, hereby releases, quitclaims,
and forever discharges Columbia, Cold Spring and the Affiliates and successors
of each of them (collectively, the “Licensor Released Parties”), from any and
all claims, losses, demands, or causes of action of any type or nature
whatsoever, known or unknown, suspected or unsuspected, and whether or not
heretofore asserted which any Company Released Party ever had, now has or may
hereafter have against the Licensor Released Parties or any of them with
respect to this Agreement for the period from the Original Effective Date until
the Second Amendment Date.

 

b.                                      Company shall provide to Licensor copies of
any (i) sublicenses hereunder and (ii) documents
defining or governing Third Party relationships that are expected to or do
generate ECLiPS-enabled Revenues, in conjunction with
the Payment Report referred to in Section 4 below. Licensor shall hold
such copies in strict confidence and use them solely to ensure compliance by
Company with the terms of this Agreement.

 

4.                                       Reports and Payments.

 

a.                                       On or before the last business day of
February, May, August, and November of each year of this Agreement, the
Company shall submit to Licensor a written report with respect to the preceding
calendar quarter (the “Payment Report”) stating:

 

(i)                                     Net Sales made by the Company and any
Affiliate during such quarter for Licensed Products;

 

(ii)                                  In the case of transfers or sales of Licensed
Products by the Company to an Affiliate for sale by the Affiliate, Net Sales
made by the Company from the Affiliate and by the Affiliate from its customers
during such quarter;

 

(iii)                               Amounts accruing to the Company from its Sublicensees during such quarter;

 

(iv)                              Net sales made by
Sublicensees during such quarter; and

 

(v)                                A calculation under Section 3 of the
amounts due to Licensor, making reference to each subsection.

 

b.                                      Simultaneously with the submission of each
Payment Report, the Company shall make payments to Licensor of the amounts due
for the calendar quarter covered by the Payment Report; provided, however, that
any amount due to the Licensor from the Company under this Agreement for the
period beginning on July 2, 2003 and ending on December 31, 2004, and
not

 

8

 

yet paid, shall be paid by the Company to the Licensor no later than ten
days after execution of this Agreement by the Licensor.

 

c.                                       Within sixty (60) days following June 30
of each year of this Agreement, the Company shall submit to the Licensor a
written report with respect to the preceding year under this Agreement (the “Reconciliation
Report”) detailing: (i) the expenditures by the
Company during such year in connection with the development and
commercialization of the Licensed Subject Matter; (ii) the Company’s
activities during such year and the progress toward commercialization of the
Licensed Subject Matter and (iii) a reconciliation of the (1) revenues,
(2) collaborative research and development costs and (3) ITD Costs set forth in the Payment Reports to the
corresponding data set forth in the Company’s financial statements included in
its reports filed with the U.S. Securities and Exchange Commission.  The Company and Licensor will schedule an
annual meeting to be held among them within thirty (30) days following the above-mentioned
sixty (60) day period to discuss the Reconciliation Report.

 

d.                                      Annual Reconciliation.  After
the conclusion of each year of this Agreement, the Company shall, acting
reasonably and in good faith, determine whether it has made any overpayment or
underpayment of amounts due under Section 3 during the course of such
year. Within sixty (60) days after conclusion of such year, the Company shall
notify Licensor accordingly, and, subject to prior verification by the Licensor
of the claimed overpayment or underpayment (the Company to cooperate reasonably
with the Licensor in making such prior verification), shall add the applicable
amount to, or deduct the applicable amount from, any payment due with a Payment
Report during the following calendar quarter. 
If the amount of such an overpayment exceeds the amount owed by the
Company during the following calendar quarter (such excess, the “Excess Amount”),
the Company shall credit this unapplied overpayment, plus interest as provided
below, against future royalty payments until such time as the total overpayment
has been applied.

 

e.                                       The Company shall maintain usual books of account
and records and other relevant materials (including, without limitation,
laboratory notebooks, publications, and presentations) showing its actions
under this Agreement, such as the Company’s use or non-use of Licensed Subject
Matter. Once per calendar year, upon reasonable notice, such books, records and
materials shall be open to inspection and copying, along with access to
supervisory and/or other knowledgeable personnel, during usual business hours,
by an independent certified public accountant to whom the Company has no
reasonable objection, for two years after the calendar quarter to which they
pertain, for purposes of verifying the accuracy of the amounts paid to Licensor
by the Company under this Agreement. The accounting firm shall report to Licensor
only whether there is an error with regard to the royalty payments made by the
Company hereunder and, if so, the amount thereof.

 

f.                                         Notwithstanding anything to the contrary in
this Agreement, and without limiting any of the Company’s or the Licensor’s
rights and remedies hereunder, any payment required hereunder that is made late
(including unpaid portions of amounts due) shall bear simple interest at the
rate of prime plus one percent (1%) per annum, as the prime rate is reported in
The Wall Street Journal from time to time.  Any interest charged or paid in excess of the
maximum rate permitted by applicable law shall be deemed the result of a
mistake, and interest paid in excess of

 

9

 

the maximum rate shall be credited or refunded (at the payor’s
option) to the Company or the Licensor, as applicable.

 

g.                                      All reports and payments provided pursuant to
this Section 4 shall be kept in confidence by Licensor except for
disclosures required by law and made after notice to the other party and after
requesting confidential treatment and a protective order, if available.

 

5.                                       Use for Research Purpose of Licensed Subject
Matter.  Licensor reserves the right to use the
Licensed Subject Matter for non-commercial research purposes and to permit
other entities or individuals to use same for non-commercial research purposes.
Licensor shall obtain from all such entities or individuals an agreement in
writing not to use the Licensed Subject Matter for any commercial purposes and
shall inform the Company of the identity of all such entities or individuals
and the manner of their use of the Licensed Subject Matter.

 

6.                                       Due Diligence.

 

Licensor and the Company confirm that all the due diligence
requirements of Section 6 of the prior versions of this Agreement have
been fulfilled in their entirety.

 

7.                                       Infringement.

 

a.                                       Licensor will protect Licensed Patents from
infringement and prosecute infringers at its own expense when in its sole
judgment such action may be reasonably necessary, proper and justified.

 

b.                                      If the Company shall have supplied Licensor
with written evidence demonstrating prima facie infringement of a claim of a
Licensed Patent, the Company may by notice request Licensor to take steps to
protect the Licensed Patent. Unless Licensor shall within three months of the
receipt of such notice either (i) cause
such infringement to terminate or (ii) initiate legal proceedings against
the infringer, the Company may upon notice to Licensor initiate legal proceedings
against the infringer at the Company’s expense. 
In such event the Company may deduct from payments due hereunder to
Licensor its reasonable costs and expenses, including without limitation legal
and experts fees incurred to conduct such proceedings, but in no event shall
any such payments be reduced by more than ** percent of the amount otherwise
due to Licensor hereunder. Any recovery by the Company in such proceedings
shall first be used to reimburse the Company for its reasonable costs and
expenses incurred to conduct such proceedings and next to pay any amounts
withheld from Licensor by the Company under this Section 7 during the pendency of the proceedings. Any remaining balance shall be
**. Any other provision of this Agreement notwithstanding, other than as
provided in this Section 7b, no amounts payable by the Company pursuant to
this Section 7b shall be recoverable by the Company from the Licensor.

 

c.                                       In the event the Licensor or the Company
shall initiate or carry on legal proceedings to enforce any Licensed Patent
against an alleged infringer, the other parties to this Agreement shall use
their best efforts to cooperate fully with and shall supply all assistance reasonably
requested by the party initiating or carrying on such proceedings.  The party that

 

[**]=Certain information
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Confidential treatment has been requested with respect to the omitted portions.

 

10

 

institutes any proceeding to protect or enforce a
Licensed Patent shall have sole control of that proceeding and shall bear the
reasonable expenses incurred by said other parties in providing such assistance
and cooperation as is requested pursuant to this paragraph.

 

8.                                       Patents.

 

a.                                       Licensor will be responsible for preparing,
filing, prosecution and maintaining all Licensed Patents and shall use patent
counsel acceptable to the Company.  All
reasonable expenses relating to the preparation, filing, prosecution and
maintenance of Licensed Patents will be paid by the Company except that the
Company may upon sixty (60) days advance written notice advise Licensor that it
no longer wishes to pay such expenses, whereupon the Licensed Patents for which
the Company has given Licensor such notice shall no longer be Licensed Patents
within the scope of this Agreement and Licensor at its option may either pay
such expenses or permit such Licensed Patents to become abandoned or lapse. Any
other provision of this Agreement notwithstanding, no amounts payable by the
Company pursuant to this Section 8a shall be recoverable by the Company
from the Licensor.

 

b.                                      Licensor shall consult with the Company
regarding all activities with respect to prosecution and maintenance of
Licensed Patents, shall provide the Company copies of any documents relating to
the Licensed Patents which will be filed in any patent office for review and comment
at least thirty (30) days prior to the filing of such documents, shall obtain
the Company’s approval with respect to any action concerning the Licensed
Patents, which approval shall not unreasonably be withheld, and shall provide
to the company copies of all office actions and other communications concerning
the Licensed Patents within three (3) weeks after receipt thereof.

 

c.                                       The Company will provide all reasonable
cooperation required by Licensor in the preparation, prosecution and
maintenance of Licensed Patents.

 

d.                                      Licensor shall file patent applications
corresponding to Licensed Patents, or covering subsequent inventions which
became part of the Licensed Subject Matter, in such countries as the Company in
its sole discretion shall select. Should the Company expressly decline to have
patent applications filed in any country, Licensor, at its discretion and
expense may file, prosecute and maintain such patent applications in such
country, which patent application, or patent resulting therefrom,
shall not be a Licensed Patent within the scope of this Agreement but shall be
the subject of a separately negotiated License Agreement should the Company
desire rights thereunder.

 

e.                                       In partial consideration for the Additional
Payment set forth in Section 3.a.(v), Licensor agrees to provide the
Company, on or before June 15, 2005, with a list of all patent applications
currently being prosecuted by Licensor pursuant to sub-section 8(d),
above. Licensor further agrees to provide written notice to the Company within
thirty (30) days after the issuance of any patent prosecuted by Licensor
pursuant to sub-section 8(d), above. In the event Licensor believes that
the Company requires a license under any such issued patent in order to carry
out its business activities, Licensor’s notice to the Company shall state such
belief and the reasons therefor.  Such notice further shall contain an offer to
negotiate a License Agreement

 

11

 

with the Company with respect to the applicable patent.

 

9.                                       Prohibition Against
Use of Name.  The Company will not use the name, insignia, or
symbols of Licensor, their faculties or departments, or any variation or
combination thereof, or the name of any trustee, faculty member, other
employee, or student of Licensor for any purpose whatsoever without Licensor’s
prior written consent.

 

10.                                 Compliance with Governmental Obligation.

 

a.                                       Notwithstanding any provisions in this
Agreement,  Licensor
disclaims any obligations or liabilities arising under the license provisions
of this Agreement if the Company is charged in a governmental action for not
complying with or fails to comply with governmental regulations in the course
of developing any Licensed Product.

 

b.                                      The Company shall comply, upon reasonable
notice from Licensor, in all material respects with all governmental requests
directed to either Licensor or the Company and provide all information and
assistance necessary to comply with the governmental requests; provided, however,
that the Company shall have the right to contest or defend itself by all lawful
means from compliance with any governmental request which it in good faith
believes is overbroad, improper or injurious to the Company or its business.

 

c.                                       The Company shall insure that research,
development, and marketing under this Agreement will comply in all material
respects with all government regulations in force and effect including, but not
limited to, federal, state, and municipal legislation; provided, however, that
the Company shall have the right to contest or defend itself by all lawful
means from compliance with any governmental request which it in good faith
believes is overbroad, improper or injurious to the Company or its business.

 

11.                                 Indemnity and Insurance.

 

a.                                       The Company will indemnify and hold Licensor
harmless against any and all actions, suits, claims, demands, prosecutions,
liabilities, costs, and expenses (including reasonable attorneys’ fees) based
on or arising out of this Agreement, other than those relating to a breach of
this Agreement by Licensor, including, without limitation, the manufacture, packaging,
use, sale, rental, or lease of Licensed Products, even if altered for use for a
purpose not intended, or use of Licensed Subject Matter by the Company, its
Affiliates, its Sublicensees or its (or their)
customers and any representation made or warranty given by the Company, its Affiliates
or Sublicensees with respect to Licensed Products or
Licensed Subject Matter. Licensor shall consult with the Company respecting the
conduct of the defense and/or any proposed settlement of any such action, suit,
claim, demand, prosecution, liability, cost, and expense (including reasonable
attorneys’ fees).

 

b.                                      The Company shall maintain, during the term
of this agreement, comprehensive general liability insurance, including
products liability insurance, with reputable and financially secure insurance
carriers reasonably acceptable to Licensor to cover the activities of the Company,
its Affiliates and its Sublicensees, for minimum
limits of $** combined single

 

[**]=Certain information
on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

12

 

limit for bodily injury and property damage per occurrence and in the
aggregate. Such insurance shall **. The Company shall furnish a certificate of
insurance evidencing such coverage, with thirty days written notice to Licensor
of cancellation or material change.

 

The Company’s insurance shall be primary coverage; any insurance
Licensor may purchase shall be excess and noncontributory. Such insurance shall
be written to cover claims incurred, discovered, manifested, or made during or
after the expiration of this Agreement.

 

The Company shall at all times comply with all statutory workers’
compensation and employers’ liability requirements covering its employees with
respect to activities performed under this Agreement.

 

12.                                 Marking.  Prior to the issuance of
patents, the Company and its Affiliates will mark Licensed Products made, sold,
or otherwise disposed of by any of them under the license granted in this
Agreement with the words “Patent Pending”, and following the issuance of one or
more patents, with the numbers of such patents. Company shall use reasonable
business efforts to require that its Sublicensees similarly
mark their Licensed Products.

 

13.                                 Representations and Warranties.

 

a.                                       Licensor Warranties.  Licensor,
the Trustees of Columbia University of the City of New York and Cold Spring
Harbor Laboratory jointly and severally represent and warrant that to the best
of their knowledge, (i) they have the full
right, power and authority to grant to Company the license granted in the
License Agreement, (ii) they have not previously granted and shall not grant
to any Third Party any rights which are inconsistent with the rights granted to
Company herein or in the License Agreement, (iii) they have full power to
enter into this Agreement, to carry out their obligations under this Agreement,
and to grant the rights granted to Company herein and in the License Agreement;
and (iv) they have fully complied with all requirements of 35 U.S.C. §200 et seq. and all implementing regulations
necessary to perfect title to the rights and License granted to the Company
herein.

 

b.                                      Company Warranties.  Company
warrants that it has full power to enter into this Agreement and to carry out
its obligations under this Agreement.

 

c.                                       Limited Warranty.  Nothing
in this Agreement shall be construed as a warranty or representation by any
party as to the validity of any Licensed Patent. Nothing in this Agreement shall
be construed as a warranty or representation by any party that anything made,
used, sold, or otherwise disposed of under any license granted under this
Agreement is or will be free from infringement of domestic or foreign patents
of Third Parties.

 

14.                                 Breach and Cure.

 

a.                                       The Company shall be considered to be in
material breach of this Agreement for (i) failure
to pay fully and promptly amounts due pursuant to Section 3 and payable
pursuant to Section 4 which are material to the transactions and payments
contemplated by this Agreement

 

[**]=Certain information
on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

13

 

taken as a whole; or (ii) failure of similar materiality to comply with
governmental requests, subject to Section 10(b).

 

b.                                      Either party shall have the right to cure its
material breach. The cure shall be effected within a reasonable period of time
but in no event later than ninety (90) days after notice of any breach given by
the non-breaching party, unless such default is of such nature that it cannot
reasonably be completely cured within ninety (90) days, in which case Company
shall have the right to cure such default within one hundred eighty (180) days,
provided that Company commences work to cure such default within the ninety
(90) days and thereafter proceeds with reasonable diligence and in good faith
to cure such default. If there exists a good faith dispute as to whether a
material breach has occurred and/or whether a cure has been effected,
the parties shall negotiate in good faith to resolve the dispute promptly. The
right to terminate shall be stayed for up to ninety (90) days while the parties
negotiate to resolve the dispute.

 

15.                               Term of Agreement.

 

a.                                       This Agreement shall be effective as of the
Original Effective Date and shall continue in full force and effect, unless
terminated in accordance with this Section 15, for the later of twenty
(20) years from the Original Effective Date or the expiration of the last to
expire of the Licensed Patents. Thereafter, the Company shall have a paid-up
license under Licensed Technology and Licensed Materials.

 

b.                                      The license granted under this Agreement may
be terminated by Licensor (i) upon thirty (30)
days written notice to the Company for the Company’s material breach of the Agreement
and the Company’s failure to cure such material breach in accordance with Section 14(b),
or (ii) should the Company commit any act of bankruptcy, become insolvent,
file a petition under any bankruptcy or insolvency act or have any such
petition filed against it which is not dismissed within sixty (60) days.

 

c.                                       Upon any termination of this Agreement
pursuant to Section 15(b), all sublicenses granted by the Company under it
shall be assigned to Licensor.

 

16.                               Notices.  Any notice required or
permitted to be given under this Agreement shall be sufficient if sent by
certified mail (return receipt requested), postage pre-paid, if
to Licensor, to:

 

	
   

  	
   

  	
  Columbia
  University Science and Technology Ventures

  
	
   

  	
   

  	
  80
  Claremont Ave. #4F (at 120th St.), Mail Code 9606

  
	
   

  	
   

  	
  New
  York, New York 10027

  
	
   

  	
   

  	
  Attention:
  Executive Director

  
	
   

  	
   

  	
   

  
	
  copy
  to:

  	
   

  	
  Office
  of the General Counsel

  
	
   

  	
   

  	
  Columbia
  University

  
	
   

  	
   

  	
  412
  Low Memorial Library

  
	
   

  	
   

  	
  Mail
  Code 4308

  
	
   

  	
   

  	
  535
  West 116th Street

  

 

14

 

	
   

  	
   

  	
  New
  York, New York 10027

  
	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cold
  Spring Harbor Laboratory

  
	
   

  	
   

  	
  P.O. Box
  100

  
	
   

  	
   

  	
  Cold
  Spring Harbor, New York 11724

  
	
   

  	
   

  	
  Attention:
  Director, Office of Technology Transfer

  
	
   

  	
   

  	
   

  
	
  if
  to the Company, to:

  	
   

  	
  Pharmacopeia Drug Discovery, Inc.

  
	
   

  	
   

  	
  P.O. Box
  5350

  
	
   

  	
   

  	
  Princeton,
  NJ 08543-5350

  
	
   

  	
   

  	
  Attention:
  Leslie J. Browne, Ph.D.

  
	
   

  	
   

  	
   

  
	
  copy
  to:

  	
   

  	
  James
  J. Marino, Esq.

  
	
   

  	
   

  	
  Dechert LLP

  
	
   

  	
   

  	
  Princeton
  Pike Corporate Center

  
	
   

  	
   

  	
  P.O. Box
  5218

  
	
   

  	
   

  	
  Princeton,
  NJ 08543-5218

  

 

or to such other address as a party may specify by notice hereunder.
Notices shall be deemed to have been served when delivered.

 

17.                                 Assignment.  This Agreement may not be
assigned without the written consent of the other parties except the Company
may assign this Agreement to a successor in business of all or substantially
all of its assets without the consent of Licensor.

 

18.                                 Governing Law.  This
Agreement shall be governed by New York law applicable to agreements made and
to be performed in New York.

 

19.                                 Severability.  If
any provision of this Agreement shall be found or be held invalid or
unenforceable by any court of competent jurisdiction in any jurisdiction in
which this Agreement is being performed, the remainder of this Agreement shall
be valid and enforceable, and the parties shall negotiate, in good faith, a
substitute, valid and enforceable provision which most nearly effects the
parties’ intent in entering into this Agreement.

 

20.                                 Waiver.  The failure of any party to
enforce at any time the provisions of this Agreement shall in no way be
constituted to be a present or future waiver of such provisions, nor in any way
affect the right of any party to enforce each and every such provision
thereafter.

 

21.                                 Counterparts.  This
Agreement may be executed in two or more counterparts, all of which together
shall be regarded as one instrument.

 

22.                                 Entire Agreement.  The
terms and conditions contained herein constitute the entire agreement between
the parties and supersede all previous agreements and understandings, whether
oral or written, between the parties hereto with respect to the subject matter
hereof. No

 

15

 

change, modification, termination or waiver of this Agreement or any or its
provisions shall be valid unless made in writing and signed by a duly
authorized representative of each party.

 

IN WITNESS THEREOF, Licensor and the Company have caused this Agreement
to be executed by their duly authorized representatives as of the day and year
set forth in Recital 5 above.

 

	
   

  	
  THE
  TRUSTEES OF COLUMBIA UNIVERSITY

  IN THE CITY OF NEW YORK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Scot G. Hamilton

  
	
   

  	
   

  	
  Scot G. Hamilton

  
	
   

  	
   

  	
  Senior Director

  
	
   

  	
   

  	
  Science &
  Technology Ventures

  
	
   

  	
   

  	
  Columbia
  University Science & Technology Ventures

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COLD
  SPRING HARBOR LABORATORY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ John Maroney

  
	
   

  	
   

  	
  John
  Maroney

  
	
   

  	
   

  	
  Director,
  Office of Technology Transfer

  
	
   

  	
   

  	
  Legal
  Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PHARMACOPEIA DRUG DISCOVERY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Brian M. Posner

  
	
   

  	
   

  	
  Brian
  M. Posner

  
	
   

  	
   

  	
  Vice-President,
  Finance

  

 

16

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