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 **.

 

COLLABORATION
AND LICENSE AGREEMENT

This COLLABORATION AND LICENSE AGREEMENT
(the “Agreement”), effective as of May 18th, 2006 (the “Effective Date”), is made by and between
Pharmacopeia Drug Discovery, Inc., a Delaware corporation, having a principal
place of business at 3000 Eastpark Boulevard, Cranbury, New Jersey 08512 (“Pharmacopeia”),
and Cephalon, Inc., a Delaware corporation, having a principal place of
business at 41 Moores Road, Frazer, PA 19355 (“Cephalon”).

BACKGROUND

WHEREAS, Pharmacopeia has
expertise in the optimization of pharmaceutical compounds;

WHEREAS, Cephalon has expertise
in the research, development and commercialization of pharmaceutical compounds;

WHEREAS, Cephalon
and Pharmacopeia wish to enter into a collaboration employing Pharmacopeia’s medicinal chemistry, analytical chemistry and
primary biology capabilities and Cephalon’s chemistry, in vitro biology, and in vivo biology capabilities, in order to
develop and commercialize pharmaceutical compounds subject to and in accordance
with the terms and conditions of this Agreement (the “Collaboration”).

NOW THEREFORE, in consideration
of the mutual covenants and conditions hereinafter set forth in this Agreement,
the Parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

As used herein,
the following terms shall have the meanings set forth below:

1.1           “Affiliate”
shall mean any Person controlled by, controlling, or under common control with
a Party.  For the purpose of this Section
1.1 only, “control” shall refer to (a) the possession, directly or indirectly,
of the power to direct the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise, or (b) the
ownership, directly or indirectly, of more than fifty percent (50%) of the
voting securities or other ownership interest of a Person.

1.2           “Cephalon Compound” shall mean any
compound **, which is ** at or after the **, and which is **.

1.3           “Cephalon Field” shall mean, with respect to each
Collaboration Compound, ** by such Collaboration Compound.

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1.4           “Cephalon IP” shall mean Cephalon Patents and
Cephalon Know-how.

1.5           “Cephalon
Patents”
shall mean all **, or **; in each case,
**.

1.6           “Collaboration” shall have the
meaning ascribed to such term in the Preamble.

1.7           “Collaboration Compound” shall mean a ** or a **, or a **; in each case,
that **.  A compound shall be deemed to
have been ** in category (i), (ii) or (iii) above.  A compound shall be
deemed to have been ** (i) through (iv) above. 
For purposes of clarity, any compound **.

1.8           “Collaboration IP” shall mean
Collaboration Patents and Collaboration Know-how.  Collaboration IP shall not include
Pharmacopeia IP or Cephalon IP.

1.8.1
       “Collaboration Patents”
shall mean (i) all **; and (ii) any ** in (i) above, and any ** of
any of the foregoing, in each case, which is **; provided, however,
that Collaboration Patents shall not include any Cephalon Patents or
Pharmacopeia Patents.

1.8.2
       “Collaboration Know-how”
shall mean **; provided, however, that Collaboration Know-How
shall not include Collaboration Patents, Cephalon IP or Pharmacopeia IP.

1.9           “Collaboration Product” shall mean a pharmaceutical product
containing a **.  It is understood that,
in the event any Collaboration Compound is sold for therapeutic purposes, such
Collaboration Compound shall be deemed a Collaboration Product and shall be
subject to milestones and royalties as set forth in this Agreement.

1.10         “Collaboration Target” shall mean a Target ** pursuant to Section
2.2.

1.11         “Collaboration Term” shall mean the
Initial Term plus any extension pursuant to Section 15.2.

1.12         “Combination Product” shall mean
a **.

1.13         “Commercializing
Party” shall have the meaning set forth in Section 5.7(a).

1.14         “Confidential
Information” as to each Party, shall mean such Party’s confidential
information, trade secrets, Patents and Know-how, all the data and materials of
that Party relating to the Collaboration, the Targets, Cephalon Compounds,
Pharmacopeia Compounds, Collaboration Compounds, or Collaboration Products, and
including, without limitation, all research, technical, clinical development,
manufacturing, marketing, financial, personnel, and other business information
and plans of such Party.

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1.15         “Controls” or “Controlled”
shall mean possession of the ability to grant licenses or sublicenses pursuant
to this Agreement without violating the terms of any agreement or other
arrangement with, or the rights of, any Third Party.

1.16         “Development Compound” shall mean any **.  Any Collaboration Compound **.

1.17         “Executive Officers” shall mean
the Executive Vice
President of Research and Development of Cephalon, and the Chief Executive
Officer of Pharmacopeia or such other executive officer of a Party as may be
substituted from time to time upon the giving of written notice to the other
Party.

1.18         “Exclusivity Period” shall have
the meaning set forth in Section 4.1.

1.19         “Fair Market Value” shall mean
the cash consideration, which a willing seller would realize from an unrelated
willing buyer in an arm’s length sale of an identical item sold in the same
quantity and at the same time and place of the transaction.

1.20         “FDA” shall mean the U.S. Food
and Drug Administration, any successor thereto, or any corresponding foreign
registration or regulatory authority.

1.21         “First Commercial Sale” shall
mean, with respect to a Collaboration Product in any country, the first sale
for use or consumption by the general public of such Collaboration Product in
such country after all Regulatory Approvals have been obtained in such country.

1.22         “IND” shall mean an
Investigational New Drug Application, as defined in the U.S. Food, Drug and
Cosmetic Act and the regulations promulgated thereunder for initiating clinical
trials in the United States, or any corresponding foreign application,
registration or certification.

1.23         “Initial Term” shall mean the
period commencing on the earlier of (i) approval by the JRC of the first
Research Plan pursuant to Section 2.1 or (ii) June 1, 2006, and ending three
(3) years thereafter.

1.24         “Joint Research Committee” or “JRC”
shall mean the entity organized to manage the scientific implementation of the
Collaboration and acting pursuant to Article 3.

1.25         “Know-how” shall mean any and
all proprietary ideas, inventions, data, know-how, instructions, processes,
formulas, materials, expert opinion, technology or other information
discovered, developed, conceived or reduced to practice by or for a Party as of
the Effective Date, or by one or both Parties during and in the course of the Collaboration,
whether or not patentable, constituting materials, methods, processes,
techniques or data, necessary for the development, manufacture or use of a
Collaboration Compound, or for the manufacture, use or sale of a Collaboration
Product.

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1.26         “Management Steering Committee”
or “MSC” shall mean the entity organized to oversee the entire
Collaboration and acting pursuant to Article 3.

1.27         “NDA” shall mean a New Drug
Application, as defined in the U.S. Food, Drug and Cosmetic Act and the
regulations promulgated thereunder, or any corresponding foreign application,
registration or certification.

1.28         “Net Sales” shall mean the **:

(i)
**,

(ii)
**,

(iii)
**,

(iv)
**, and

(v)
**.

A “sale” shall include **, and Net Sales shall include
**.

The
** of Net Sales. All sales of **.

To calculate the value of
**.

1.29         “Non-Exclusive Compound” shall mean any compound brought to the **.

1.30         “Party” shall mean Pharmacopeia
or Cephalon.  Pharmacopeia and Cephalon
shall be collectively referred to as the Parties.

1.31         “Patent Committee” shall mean
that committee to be formed pursuant to Section 3.5.

1.32         “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, including provisional applications, 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.

1.33         “Patent
Owner” shall have the meaning set forth in Section 10.4.2.

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1.34         “Person”
shall mean any natural person, corporation, firm, business trust, joint
venture, association, organization, company, partnership or other business
entity, or any government or agency or political subdivision thereof.

1.35         “Pharmacopeia Compound” shall mean any compound **, which is ** at or
after the **, and which is **.

1.36         “Pharmacopeia Field” shall mean, with respect to each
Collaboration Compound **.

1.37         “Pharmacopeia IP” shall mean
Pharmacopeia Patents and Pharmacopeia Know-how. 
Pharmacopeia IP shall not include **.

1.38         “Pharmacopeia
Patents” shall mean all **, or **; in each case, **.

1.39         “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.

1.40         “Pursuing Party” shall have the meaning set forth in
Section 10.4.1.

1.41         “Regulatory Agency” shall mean
the FDA or the applicable department, bureau or other governmental regulatory
authority in each country in the Territory involved in the granting of
Regulatory Approvals.

1.42         “Regulatory Approval” shall mean
any and all approvals (including price reimbursement approvals), licenses,
registrations, or authorizations of any Regulatory Agency, necessary for the
manufacture, use, storage, import, export, transport or sale of a Collaboration
Product.

1.43         “Relevant
Third Party Patent Right” shall mean a Patent owned or controlled by a Third Party which claims ** where such
Collaboration Compound (in each case) is being used as an active ingredient in
a Collaboration Product.

1.44         “Research Plan” shall mean, on a
Collaboration Target-by-Collaboration Target basis, a description of the
Parties’ respective activities and objectives with respect to a Collaboration
Target.   Minutes of JRC meetings, if
signed by a JRC representative of each Party, shall be deemed included within
the Research Plan.

1.45         “Significant
Activity” shall mean any of the following in relation to a
Collaboration Compound or Collaboration Product:

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(a) **;

(b) **;

(c) **;

(d) **;

(e) **;

(f) **;

(g) **;

(h) **;

(i) **.

Notwithstanding
the foregoing, any **.  Further, if **.

1.46         “Sublicensee” shall mean, as to
each Party, a Person other than an Affiliate of the Party, to whom has been
granted sublicense rights under the license granted to such Party hereunder,
which rights include at least the right to sell a Collaboration Product.  As used in this Agreement, “Sublicensee”
shall also include a Third Party to whom a Party has granted a sublicense under
this Agreement to distribute such Collaboration Product, provided that such
Third Party has the primary responsibility for marketing and promotion, at its
expense, of such Collaboration Product within countries in the Territory for
which such distribution rights are granted, which marketing and promotional
activities are not subsidized directly or indirectly by that Party, such as,
without limitation, through a specific allowance or a guaranteed selling margin
for such Third Party meant to cover its expenses.  Third Parties that are permitted to
manufacture or finish Collaboration Products for supply to a Party, its
Affiliates or Sublicensees are not “Sublicensees.”

1.47         “Substantial Generic Competition”
shall have the meaning set forth in Section 5.7(c).

1.48         “Target”
shall mean a **.

1.49         “Term” shall have the meaning
set forth in Section 15.1.

1.50         “Territory” shall mean **.

1.51         “Third Party” shall mean any
Person other than Cephalon, Pharmacopeia, or their respective Affiliates or
Sublicensees.

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1.52         “Unrelated Target” shall have
the meaning set forth in Section 4.1.3.

1.53         “Valid Claim” shall mean a claim of an issued patent
which has not lapsed or become abandoned, been held permanently revoked,
unenforceable or invalid by a decision of a court or other governmental agency
of competent jurisdiction, unappealable or un-appealed within the time allowed
for appeal, and which has not been admitted to be invalid or unenforceable
through reissue or disclaimer or otherwise.

ARTICLE 2

PERFORMANCE OF THE COLLABORATION

2.1           Goals of the Collaboration.

2.1.1        General. Each Party shall:

(i) undertake an
interactive, cooperative role in the Collaboration with the other Party as set
forth in the applicable Research Plan, and such other activities which, from
time to time, the JRC decides are necessary for the continuing success of the
Collaboration, with the objective of identifying Development Compounds with respect
to the Collaboration Targets;

(ii) use **; and

(iii) conduct the
Collaboration in good scientific manner, and in compliance in all material
respects with all requirements of applicable laws, rules and regulations, and
all other requirements of any good laboratory practices to attempt to achieve
its objectives efficiently and expeditiously.

2.1.2        Activities of Pharmacopeia.   During the Collaboration Term:

(a) Pharmacopeia shall provide medicinal
chemistry efforts as defined in the applicable Research Plan.  In addition, the applicable Research Plan may specify that Pharmacopeia
will provide reasonable primary biology support, including running a primary
assay in vitro on a Collaboration
Target — by — Collaboration Target
basis.  **.

(b) The JRC also may request that
Pharmacopeia **.

(c) Pharmacopeia shall provide Cephalon
with all feedback in a timely manner on the progress of its efforts under the
Collaboration necessary to enable Cephalon to provide Pharmacopeia the support
that it requires to conduct its activities hereunder.

2.1.3        Activities of Cephalon.  During the Collaboration Term, as directed by
the JRC, Cephalon
shall provide in vivo and in vitro biology as necessary to 

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support
the Collaboration.  Cephalon further
shall provide to the Collaboration various Cephalon Compounds and Non-Exclusive
Compounds having demonstrated activity against ** and such other Targets
accepted into the Collaboration as Collaboration Targets, in order to support
the Collaboration with respect to such Collaboration Targets.

2.2           Selection of Collaboration Targets.  The first ** Collaboration Targets will be
**.  At the first JRC meeting the JRC
will: (i) ** and (ii) **. ** by Cephalon, which shall **.  Pharmacopeia, ** pursuant to this Section
2.2.

2.3           Third Party Licenses.  With respect to a particular Collaboration
Target, to the extent that either Party identifies the existence of Third Party
patent rights covering such Target, **. 
The JRC shall **.  The **.

2.4           Records and Reports.  Each Party shall maintain records in
sufficient detail and in good scientific manner appropriate for patent and FDA
purposes and so as to properly reflect all work done and results achieved in
the performance of this Agreement (including all data in the form required
under any applicable governmental regulations and as directed by the JRC).  Such records shall include applicable books,
records, reports, research notes, charts, graphs, comments, computations,
analyses, recordings, photographs, computer programs and documentation thereof,
samples of materials and other graphic or written data generated in connection
with the Collaboration, including any data required to be maintained pursuant
to applicable governmental regulations. 
During the Term, each Party shall respond to reasonable requests from
the other for information based on such records.

ARTICLE 3

GOVERNANCE OF THE COLLABORATION

3.1           Joint Research Committee.  Within thirty (30) days after the Effective
Date, Cephalon and Pharmacopeia shall establish a Joint Research Committee, comprised of Pharmacopeia and Cephalon
scientists, to manage the scientific implementation of the Collaboration.  The responsibilities of the JRC shall
include: (i) monitoring and reporting the progress of the Collaboration and
ensuring open and frequent exchange between the Parties; (ii) establishing
criteria for the selection of Collaboration Compounds for each Collaboration
Target; (iii) identifying and resolving any scientific or technical conflicts
between the Parties; (iv) approving and overseeing
the implementation of a Research Plan for each Collaboration Target and its associated program undertaken in
the Collaboration; (v) determining if and when a Development Compound
has been identified with respect to each Collaboration Target; and (vi) coordinating
with the Patent Committee all patent activities as they relate to the results
of the Collaboration, and in keeping with the overall patent strategy
delineated by the Patent Committee.

3.2           Membership.  The JRC shall include three (3) named
representatives of each of the Parties, and each Party’s representatives shall
be selected by that Party.  Each Party
may replace its representatives at any time, upon written notice to the other
Party.

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From time to time, the JRC may establish
subcommittees, to oversee particular projects or activities, and to manage the more frequent interactions
between the Parties’ scientists with respect to individual research projects.  Such subcommittees will be constituted as the
JRC determines, in its sole discretion.

3.3           Meetings and Minutes.  During the Collaboration Term, unless
otherwise agreed to by the Parties, the JRC shall meet at least **, or more
frequently as agreed by the Parties, at such locations or by such
teleconferencing means as the Parties may determine from time to time.  In addition to regularly scheduled meetings,
the JRC representatives will communicate regularly by telephone, electronic
mail, facsimile and/or videoconference. 
Other representatives of Pharmacopeia or Cephalon may attend JRC
meetings as nonvoting observers.  Each
Party shall be responsible for all of its expenses associated with attending
the JRC meetings.  The Parties shall
alternate preparing agendas for each JRC meeting and written minutes of each
JRC meeting and shall prepare a written record of all JRC voting and decisions,
whether made at a JRC meeting or otherwise. A copy of the Research Plan for
each Collaboration Target shall be signed and appended to the minutes of the
JRC meeting at which such Research Plan is approved.  The written minutes of each JRC meeting and
the written record of all JRC voting and decisions shall be written and
disseminated to the JRC members for review within ten (10) business days of the
JRC meeting, and upon signature by Pharmacopeia and Cephalon, shall become
final.

3.4           Decision-Making.  Decisions of the JRC shall be made by **. The JRC will report to a Management Steering
Committee (“MSC”), which shall be comprised of three (3) senior members of the
management teams (comprising two (2) individuals from science and one (1) from
a business department) of each Party, who shall oversee the overall
implementation of the Collaboration.  In
the event that, with respect to **.  Decisions
of the MSC shall be made by **.  In the
event that **.  The MSC shall meet
at least **, or more frequently as agreed by the Parties, at such locations or
by such teleconferencing means as the Parties may determine from time to time.

3.5           Patent
Committee.  Upon recommendation of
the JRC, the Parties shall form a patent committee (the “Patent Committee”) to
be in existence as long as Patents within the Collaboration IP are being filed
and/or prosecuted.  Each Party shall
designate at least one (1) chemist and one (1) patent attorney or equally
qualified legally trained personnel, as its representatives on the Patent
Committee. The Patent Committee shall be responsible for recommending patent
filings and coordinating patent-related matters, including, but not limited to,
the determination of inventorship according to U.S. Patent Laws, the
preparation, filing and prosecution of patent applications, and the performance
of other duties as set forth in Section 10.2.3(c).  Any disputes of the Patent Committee during
the Collaboration Term shall be handled pursuant to Section 3.4.  Any disputes of the Patent Committee after
the end of the Collaboration Term shall be referred to the Executive Officers, who shall
promptly meet and endeavor to reach consensus in a timely manner.  If such individuals cannot resolve such
dispute, then such dispute shall be handled pursuant to Section 16.19.  Unless otherwise agreed by the Parties, the
Patent Committee shall meet at least **. 
Such meetings shall be held at mutually agreed times and locations.  It is recognized and understood that the
Patent Committee will 

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communicate on a more frequent basis as necessary, whether in writing,
by telephone, in person or otherwise, to ensure compliance with relevant patent
filing and prosecution timetables and deadlines.  Each Party shall bear its own expenses associated
with such meetings and the activities of the Patent Committee; provided,
however, that each Party shall bear the expense of providing the other
Party with copies of all Patents filed pursuant to this Agreement including all
substantive correspondence with U.S. and foreign patent offices.

ARTICLE 4

EXCLUSIVITY

4.1           Collaboration Targets.

4.1.1        Subject to Section 4.1.4, **.

4.1.2        Notwithstanding Section 4.1.1, it is understood that (i) **;
and (ii) with respect to **.

4.1.3        Notwithstanding Sections 4.1.1 and 4.1.2,
if, in the course of a **.

4.1.4        It is understood that as of the Effective
Date, **.  Notwithstanding the **.

4.1.5        Cephalon hereby
agrees to **, as evidenced by contemporaneous records.

4.2           Pharmacopeia Development.  In the event Pharmacopeia desires to develop and commercialize a
Collaboration Compound in the Pharmacopeia Field (subject, in each case, to the
milestone and royalty obligations set forth in Sections 7.1.2 and 8.2.2),
Pharmacopeia shall **.

ARTICLE 5

LICENSES 

5.1           Ownership of Intellectual Property.  All Cephalon IP shall be the sole property of Cephalon.  All Pharmacopeia IP shall be the sole
property of Pharmacopeia.  All
Collaboration IP  shall be the sole or
joint property, as the case may be, of the Party or Parties inventing or
generating the same.

5.2.          Licenses to Cephalon. 

5.2.1        License to Commercialize
Collaboration Compounds.  With respect to all Collaboration Compounds
active against a Collaboration Target, except for those Collaboration Compounds
for which Pharmacopeia has

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**, Pharmacopeia grants to Cephalon a worldwide, exclusive license,
with the right to sublicense, under the Pharmacopeia IP and Pharmacopeia’s
interest in the Collaboration IP, to make, have made, use, sell, offer
to sell and import Collaboration Compounds, and/or Collaboration Products based
on such Collaboration Compounds, for any and all uses and indications in the
Cephalon Field.

5.2.2        License to Compounds (Other than
Collaboration Compounds) Derived from Cephalon Compounds.  Pharmacopeia grants to Cephalon a worldwide, ** license, with the right
to sublicense, under Pharmacopeia’s interest in the Collaboration IP, to
exploit for any and all purposes all compounds (other than Collaboration
Compounds) derived, directly or indirectly, from Cephalon Compounds.

5.3                                 Licenses
to Pharmacopeia.

5.3.1              License to Commercialize
Collaboration Compounds.  With respect to all Collaboration Compounds
for which Pharmacopeia has **, Cephalon grants to Pharmacopeia a worldwide,
exclusive license, with the right to sublicense, under the Cephalon IP and
Cephalon’s interest in the Collaboration IP, to make, have made, use,
sell, offer to sell and import Collaboration Compounds, and/or Collaboration
Products based on such Collaboration Compounds, for any and all uses and
indications in the Pharmacopeia Field.

5.3.2              License to Compounds (Other
than Collaboration Compounds) Derived from Pharmacopeia Compounds.  Cephalon grants to Pharmacopeia a worldwide, ** license, with the right
to sublicense, under Cephalon’s interest in the Collaboration IP, to exploit
for any and all purposes all compounds (other than Collaboration Compounds)
derived, directly or indirectly, from Pharmacopeia Compounds.

5.4           Research Licenses.  Notwithstanding Sections 5.2 and 5.3, Pharmacopeia and Cephalon hereby
grant each other non-exclusive, worldwide, royalty-free research licenses,
without the right to sublicense, under their respective interests in the
Pharmacopeia IP, Cephalon IP and Collaboration IP, in order for each Party to
perform its research obligations pursuant to Research Plans during the
Collaboration Term.

5.5           Limited Licenses to **.  Notwithstanding Sections 5.2, 5.3 and 5.4, Pharmacopeia and Cephalon
hereby grant each other ** licenses under their respective interests in the
Collaboration IP, to **.  However, in the
event that, **.

5.6           Restrictions on Sublicenses.  Subject to the terms and conditions of this
Agreement and except as set forth herein, each Party shall have the right to
sublicense the rights granted to it in Section 5.2.1 or 5.3.1 as the case may
be, provided that such Party 

 

 11
 

 

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
Product and of the rights granted to the Sublicensee; and (iii) the territory
in which the Collaboration Product will be sold.  Each such sublicense shall be consistent with
all the terms and conditions of this Agreement. 
The sublicensing Party shall remain primarily liable to the other Party
for all of each such Sublicensee’s applicable financial and other obligations
under the sublicense.  No sublicense
granted by a Party may be assigned, transferred or further sublicensed to any
Third Party without the prior written consent of the other Party, which consent
shall not unreasonably be withheld.

5.7           Third
Party Royalties and Royalty Reductions.

(a)           The
Party that is developing and commercializing a particular Collaboration
Compound pursuant to this Agreement (“Commercializing Party”) shall be
responsible for procuring such licenses ** appropriate for the manufacture,
use, marketing, sale or distribution of a corresponding Collaboration Product
by such Party, its Affiliates or Sublicensees. 
In the event that the Commercializing Party is required (as provided in
Clause 5.7(b) below) to pay royalties to a Third Party in respect of Relevant
Third Party Patent Rights, then the **.

(b)           For purposes of Clause 5.7(a), whether a Party is “required”
to enter a license shall be determined as follows:

(i) a Party shall be required to
enter a license if so ordered by a court of competent jurisdiction, or if a
court of competent jurisdiction has found Pharmacopeia and/or Cephalon liable
for infringing Relevant Third Party Patent Rights, or

(ii) each Party shall bring to the
attention of the other Party, in writing, any relevant Third Party Patent
Rights.  The Parties agree to meet,
within thirty (30) days after such written notification, along with their
patent counsel under the appropriate confidentiality obligations, including if
necessary the execution of a joint defense agreement to discuss in good faith
the basis of the determination that such a license is required.  During such meeting the Parties agree to
discuss such facts, findings, conclusions, opinions and other information as
the Parties deem relevant.  If at the end
of such discussions Cephalon and Pharmacopeia are unable to reach agreement,
then the matter shall be
referred to the Executive Officers, who shall promptly meet and endeavor
to reach consensus in a timely manner. **

(c)           In respect of any **.

5.8           Development and Commercialization
Status.  During the period from the
end of the Collaboration Term to the First Commercial Sale of a Collaboration
Product, Cephalon or Pharmacopeia, as the case may be, shall keep the other
Party informed of its 

 12
 

 

development activities
with respect to such Collaboration Product, including without limitation, the
achievement of the milestones set forth in Section 7.1 and the
commercialization of such Collaboration Product, by ** providing the other
Party with a written report stating the status of development of each such
Collaboration Product.

5.9           No Implied Licenses.  Only the licenses granted pursuant to the
express terms of this Agreement shall be of any legal force or effect.  No other license rights shall be created by
implication, estoppel or otherwise.

5.10         Pharmacopeia Option to Negotiate
Co-Development.  Each time Cephalon elects to begin
pre-clinical development studies on a Development Compound, Pharmacopeia will
have the option to ** pursuant to the terms of this Agreement.

ARTICLE 6

FUNDING

6.1           Program Access Fee.  In
partial consideration
for the licenses granted in Section 5, and access to Pharmacopeia IP
during the Collaboration Term, Cephalon agrees to pay Pharmacopeia the nonrefundable
amount of fifteen million U.S. dollars (US$15,000,000), due within thirty (30)
days after the Effective Date.  Other
than the milestone and royalty payments set forth in Articles 7 and 8, no
further payments shall be due to Pharmacopeia from Cephalon, unless the Parties
mutually agree to change the Collaboration or to extend the Collaboration Term
pursuant to Section 15.2.

6.2           No Withholding.  The amount paid to Pharmacopeia pursuant to
Section 6.1 shall be made without withholding for taxes or other charges.

ARTICLE 7

MILESTONE PAYMENTS

7.1           Milestone Payments.

7.1.1        Milestone Payments by Cephalon.

Cephalon shall pay to
Pharmacopeia the following nonrefundable amounts within thirty (30) days
following the first achievement by Cephalon, its Affiliates, Sublicensees or
other designees, as the case may be, of each of the following milestones with
respect to any Collaboration Compound (and each corresponding Collaboration
Product) for which Cephalon is responsible for development and commercialization
pursuant to the terms of this Agreement:

 

 13

 

	
  Milestone

  	
  Amount (US$)

  
	
  **

  	
  **

  
	
  **

  	
  **

  
	
  **

  	
  **

  
	
  **

  	
  **

  
	
  **

  	
  **

  
	
  **

  	
  **

  

 

7.1.2     Milestone
Payments by Pharmacopeia.

Pharmacopeia shall pay to
Cephalon the following nonrefundable amounts within thirty (30) days following
the first achievement by Pharmacopeia, its Affiliates, Sublicensees or other
designees, as the case may be, of each of the following milestones with respect
to any Collaboration Compound (and each corresponding Collaboration Product)
for which Pharmacopeia is responsible for development and commercialization
pursuant to the terms of this Agreement:

	
  Milestone

  	
  Amount (US$)

  
	
  **

  	
  **

  
	
  **

  	
  **

  
	
  **

  	
  **

  
	
  **

  	
  **

  
	
  **

  	
  **

  
	
  **

  	
  **

  

 

7.1.3     It is understood
and agreed that **.

7.1.4     No
Withholding.  All amounts paid pursuant
to this Section 7.1 shall be made without withholding for taxes or other
charges.

 14
 

 

7.2           **.  For each Collaboration Compound and
corresponding Collaboration Product for which a Party is responsible for
development and commercialization pursuant to the terms of this Agreement, such
**.

7.3           Reversion of Rights.  Following the end of the Collaboration Term,
in the event that a Party:

(i)         fails to exercise
diligence as required pursuant to Section 7.2. and does not remedy such failure
in accordance with the provisions of Section 7.4 below, or

(ii)        discontinues
development of all Collaboration Products and Collaboration Compounds active
with respect to a particular Collaboration Target,

then
the other Party shall have the right to terminate all licenses granted to such
Party pursuant to Section 5.2.1 or Section 5.3.1 as the case may be, pertaining
to such Collaboration Products and to all Collaboration Compounds from which
such Collaboration Products were developed.

7.4           If
at any time during the course of the development of a Collaboration Product
there has been **, then:

(a)        the **; or

(b)        if the **.

7.5           Invoices. Unless otherwise
specified in writing, all payments required according to this Article 7 shall
be made by transfer to the bank account nominated by the receiving Party upon
timely receipt of an invoice.

If invoice to Cephalon:                                               Cephalon,
Inc.

41 Moores Road

Frazer, PA 19355

Attention: Accounts Payable

Telephone: **

Telecopy:   **

If invoice to
Pharmacopeia:                        Pharm acopeia Drug Discovery, Inc.

3000 Eastpark Blvd.
Cranbury, NJ  08512

Attention: Chief Financial
Officer

Telephone: **

Telecopy:   **

 15
 

 

ARTICLE 8

ROYALTY PAYMENTS

 

8.1           Royalty Term.

8.1.1     Royalty
Term for Cephalon.  Cephalon shall
pay Pharmacopeia **.

8.1.2     Royalty Term for Pharmacopeia.  Pharmacopeia shall pay Cephalon **.

8.1.3     Paid-Up
License. If the licenses granted to either Party pursuant to Section 5.2.1
or Section 5.3.1, as the case may be, are still in force with respect to a
particular Collaboration Compound at the end of the period for which royalties
on the corresponding Collaboration Product are due pursuant to this Agreement,
such license shall be converted to a ** license, with the right to sublicense,
under any Collaboration IP, Pharmacopeia IP or Cephalon IP, as the case may be,
necessary to make, have made, use, sell, offer to sell, and  import the applicable Collaboration Product
on a country-by-country and Collaboration Product-by-Collaboration Product
basis.

8.2           Royalty Rate.

8.2.1     Royalties
on Cephalon Collaboration Products. 
Cephalon shall pay to Pharmacopeia royalties on **, according to the
following schedule:

(a)       **.

(b)       **.

(c)       **.

(d)       **.

8.2.2     Royalties
on Pharmacopeia Collaboration Products. 
Pharmacopeia shall pay to Cephalon royalties on **:

(a)       **.

(b)       **.

(c)       **.

(d)       **.

 16
 

 

8.3           Payment of Royalties.

8.3.1     Royalty
Report.  After the First Commercial
Sale of a Collaboration Product for which royalties are due and payable by
either Party, its Affiliates or
Sublicensees hereunder, the paying Party shall provide the other Party with a
good-faith estimate of sales within two (2) weeks of the end of each calendar
quarter. In addition, the paying Party shall provide the other Party with a
royalty report on a quarterly calendar basis within ninety (90) days after the
end of the calendar quarter to which such royalty report applies. Each such
report shall state, separately for the paying Party, and each Affiliate and
Sublicensee, the number, description, and aggregate Net Sales, on a country-by-country
basis, and product-by-product basis during the calendar quarter during which a
royalty is payable. Contemporaneously with the submission of the royalty
reports, the paying Party shall pay to the other Party all royalties due.

8.3.2     Records
Retention.  Each Party shall keep,
and require its Affiliates and Sublicensees to keep, for a period of not less
than seven (7) years, complete and accurate records of all Net Sales. Each
Party shall have the right, **.  Such person appointed shall act on the
following basis:

(i)          such person shall act as an expert and not as an
arbitrator;

(ii)         such person’s terms of reference shall be to determine the
matters in dispute within twenty (20) days of his appointment;

(iii)        the Parties shall each provide such person with all
information relating to the items in dispute which such person reasonably
requires and such person shall be entitled (to the extent he considers
appropriate) to base his determination on such information;

(iv)        the decision of such person is, in the absence of fraud or
manifest error, final and binding on the Parties; and

(v)         such person’s costs shall be paid by
the Parties as such person may determine.

Where the paying Party agrees that it has or
is found to have underpaid royalties, the paying Party shall promptly pay such
royalties together with interest at the prime rate as stated in the Wall
Street Journal Europe under “Money Rates” plus two percent (2%) (“Prime
Plus 2”) applied to the amount unpaid from the date due to the date paid.  If the paying Party has overpaid royalties,
the paying Party may credit such overpayments against future royalties owed to
the other Party. The interest available to each Party pursuant to this Section
shall in no way limit any other remedies available to each Party.

8.3.3     Tax
on Royalties.  Any tax paid or
required to be withheld by a Party for the benefit of the other Party on
account of royalties payable under this Agreement shall be deducted from the
amount of royalties otherwise due. Each Party shall secure and send to the
other Party proof of any such taxes withheld and paid for its benefit of and
shall, at the request of the other Party, provide reasonable assistance to
other Party in recovering said taxes.

8.3.4     Form
of Payment.  All payments required
according to this Article 8 shall be made in U.S. dollars, for  the payee’s 
account, by wire transfer to a bank in the

 17
 

 

United States designated in writing by the payee; provided,
however, that where payments in respect
of Net Sales are based on Net Sales in non-U.S. currencies, the amount of Net
Sales and any deductions used to calculate Net Sales, if any, shall be
converted by the payor, based on the average of the “bid” and “asked” exchange
rate provided by the Wall Street Journal Europe, for the last business
day of each calendar quarter, into U.S. dollars.  Any payments that are not paid on the date
such payments are due under this Agreement shall bear interest to the extent
permitted by applicable law at the prime rate as reported by the Chase Manhattan
Bank, New York, New York, on the date such payment is due, plus an additional
two percent (2%) calculated on the number of days such payment is delinquent.
The interest available to each Party pursuant to this Section shall in no way
limit any other remedies available.

ARTICLE 9

REPORTS, BOOKS AND TAX MATTERS

9.1           Examination of Books.  Each of the Parties shall keep and maintain
complete and accurate books in respect of its activities during the Term, and
with respect to books and records for which payment may be required, in
accordance with applicable accounting principles consistently applied and in
accordance with local law.  Each Party
shall provide the other the right to inspect such financial records, and shall
provide copies of all requested records, to the extent reasonably related to
the performance of the other Party’s obligations under this Agreement.  The Parties shall retain such records for so
long as the Parties shall mutually determine.

9.2           Tax Matters.  Each Party agrees that the other Party is
entitled to all tax benefits, including in particular, tax credits and/or tax
deductions attributable to amounts the other Party has paid hereunder.  Each Party shall file its federal, state, and
local tax returns on a basis consistent with this Agreement, and shall not take
any action inconsistent with the other Party’s entitlement to such tax
benefits. In the event that a Party, in its judgment, determines that it must
obtain information and verification regarding the use or application of such
expenditures in order to prepare its tax returns or to respond to an inquiry
during a tax audit or any other inquiry relating to such treatment of its tax
return, or to defend its tax position in any proceeding including litigation,
the Parties shall reasonably cooperate with each other and provide such
information as the other Party may reasonably require at the request and
expense of the requesting Party.

ARTICLE 10

PATENTS

10.1         Disclosure by Employees, Agents or
Independent Contractors.  Cephalon
and Pharmacopeia agree that as to any employees, agents, or independent
contractors of Cephalon and Pharmacopeia presently in their employ or who are
hired or retained by Cephalon or Pharmacopeia to perform, manage performance
of, or participate in the research done pursuant to this Agreement, Cephalon
and Pharmacopeia will ensure that such employees, agents, or inde­pendent
contractors will promptly disclose and assign or

 18
 

 

exclusively
license to the Party engaging them any and all rights to inventions,
developments, or improvements, (whether patentable or not) conceived and/or
reduced to practice during the course of their duties.  Each Party will notify the other Party
promptly of any sole or joint inventions within the Collaboration IP.

10.2         Patent Prosecution and Related
Activities.

10.2.1   Pharmacopeia
IP.  Pharmacopeia shall be
responsible, at its sole discretion and expense, for preparing, filing,
prosecuting and maintaining in such countries it deems appropriate, by itself
or with Third Parties, Patents within the Pharmacopeia IP and conducting any
interferences, re-examinations, reissues and oppositions relating to such
Patents.

10.2.2   Cephalon
IP.  Cephalon shall be responsible,
at its sole discretion and expense, for preparing, filing, prosecuting and
maintaining in such countries it deems appropriate, by itself or with Third
Parties, Patents within the Cephalon IP and conducting any interferences,
re-examinations, reissues and oppositions relating to such Patents.

10.2.3   Collaboration
IP.

(a)       Prosecution
by Cephalon.  Cephalon shall have the
right to prepare, file, prosecute and maintain in such countries as it deems
appropriate in its discretion and at its sole expense, and upon appropriate
consultation with Pharmacopeia and/or the Patent Committee pursuant to Section
10.2.3(c), Patents within the Collaboration IP 
directed to all compounds to which Cephalon has a license in
force pursuant to Section 5.2, and for conducting any interferences,
re-examinations, reissues, oppositions or requests for patent term extension or
governmental equivalents relating to such Patents within the Collaboration IP,
and Pharmacopeia shall give reasonable cooperation in connection therewith, at
Cephalon’s request.

(b)       Prosecution
by Pharmacopeia.  Pharmacopeia shall
have the right to prepare, file, prosecute and maintain in such countries as it
deems appropriate in its discretion and at its sole expense, and upon
appropriate consultation with Cephalon and/or the Patent Committee pursuant to
Section 10.2.3(c), Patents within the Collaboration IP directed to all
inventions other than compounds to which Cephalon has a license in force
pursuant to Section 5.2, and for conducting any interferences, re-examinations,
reissues, oppositions or requests for patent term extension or governmental
equivalents relating to such Patents within the Collaboration IP, and Cephalon
shall give reasonable cooperation in connection therewith, at Pharmacopeia’s
request.

(c)       Cooperation;
Request to Responsible Party.  Each
of Cephalon and Pharmacopeia shall keep the other fully informed as to the
status of patent matters described in this Section 10.2.3 relating to
Collaboration Compounds, including, without limitation, by providing the Patent
Committee the opportunity to fully review and comment on any invention
disclosures, as well as any documents which will be filed in any patent office
as far in advance of filing dates as feasible, and providing the other

 19
 

 

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.  With respect to each Patent governed by this
Section 10.2.3, the Patent Committee shall decide whether such Patent falls
within Section 10.2.3(a) or 10.2.3(b). 
In the event of any overlap or conflict between subject matter that is
claimed (or could be claimed) in a Patent for which Cephalon is responsible
pursuant to Section 10.2.3(a) and subject matter that is claimed (or could be
claimed) in a Patent for which Pharmacopeia is responsible pursuant to Section
10.2.3(b), the Patent Committee shall determine which Patent should claim such
subject matter pursuant to the terms of this Agreement.  Where practicable and where appropriate under
the terms of this Agreement, the Patent Committee shall endeavor to adjust the
scope of the claims of either such Patent or both such Patents, or to propose
the filing of appropriate divisional applications, in order to avoid or
minimize such overlap or conflict. 
Cephalon 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.  Reasonable
cooperation shall include, without limitation, providing the requesting Party
with necessary or useful data and information relating to the Collaboration IP
and reasonable access to the inventors of said inventions, as well as causing
the execution of required patent assignments and/or other documents.  Either
Party may request the other Party, at the other Party’s discretion, to file a
patent application claiming any invention within the Collaboration IP for which
the other Party has responsibility as set forth in Sections 10.2.3(a) or
10.2.3(b).  It is understood and agreed
that a Party shall not have any liability to the other Party with respect to
such Party’s preparation or prosecution of any Patent pursuant to this Section
10.2.3, as long as (i) such Party has complied with this Section 10.2.3(c) with
respect to such Patent and (ii) such Party has not been negligent in conducting
any such activities with respect to such Patent.

(d)       Procedure
on Uncertainty to Prosecute.  In
cases where the prosecution of Collaboration IP is not clearly addressed by the
provisions of Sections 10.2.3(a) and 10.2.3(b), the Patent Committee shall
promptly hold discussions to determine how best to proceed and how costs should
be apportioned between the Parties and shall make a recommendation to the JRC,
which shall make a decision on the matter.

10.2.4   Inventorship.   Inventorship of all Patents shall be
determined based upon U.S. Patent Laws.

10.2.5   Election
Not to Prosecute.  Upon ninety (90)
days written notice to the other Party, the responsible Party, on a
country-by-country basis, may elect to discontinue the prosecution of any
patent applications filed pursuant to Sections 10.2.3(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 or elects not to file or, having filed, elects not
to further prosecute or maintain any Patents filed pursuant to this Agreement
which relate to the Collaboration IP, or to conduct any interferences,
re-examinations, reissues, oppositions or requests for patent term extension or governmental equivalents with
respect thereto, the other Party shall have the right, at its discretion, and
at its sole expense, to prepare, file, prosecute and maintain such Patents in
such countries

 20
 

 

as
it deems appropriate, and conduct any interferences, re-examinations, reissues,
oppositions or requests
for patent term extension or governmental equivalents with respect
thereto at its sole expense.  The
responsible Party agrees to cooperate in any manner reasonably requested in
connection with any such actions by the other Party, at the expense of the
other Party, and shall assign, provided the Patents are freely assignable and
not subject to a terminal disclaimer or other encumbrance, all right, title and
interest in and to such Patents to the Party continuing such activities.  If the responsible Party does not receive
written notice within the ninety (90) days written notice to the other Party of
the responsible Party’s election not to prosecute that the other Party exercises
its right to prepare, file, prosecute and maintain such Patents in such
countries as it deems appropriate, then the responsible Party shall be free to
abandon such Patents at its sole discretion without any legal recourse by the
other Party.

10.3         Permitted Disclosures.  Following a written notice from the other
Party hereto, the Parties shall in good faith grant each other permission in
writing, 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, Cephalon IP, or Collaboration IP necessary to support and
enable claims in such patent applications.

10.4         Third Party Infringement.

10.4.1   Collaboration
IP.  Cephalon and Pharmacopeia shall
have the right to initiate legal action to enforce the Patents within the
Collaboration IP against infringement or misappropriation by Third Parties or
to defend any declaratory judgment action relating thereto.  A Party shall have the initial right, but not
the obligation, to initiate and conduct legal proceedings to enforce against
any infringement of, or defend any declaratory judgment action involving, a
Patent within the Collaboration IP for which such Party is responsible for
prosecution and maintenance pursuant to Section 10.2.3(a) or (b) as the case
may be, at its sole expense. Cephalon or Pharmacopeia (as the case may be)
shall notify the other Party of its decision to bring proceedings or not within
sixty (60) days of the date that the infringement has come to its
knowledge.  If the actual or threatened
infringement relates to the manufacture, use or sale of a product or material
which is a competing product to a Collaboration Product and the Party
conducting the proceedings (“the Pursuing Party”) is not the Commercializing
Party with regard to the applicable Collaboration Product, then the
Commercializing Party shall have the right at its option, to join with the
Pursuing Party in the suit and participate in all meetings, negotiations,
discussions and proceedings in respect of issues which relate to the
infringement of the Patent(s) by such competing product. Where the conduct of
the action relates to matters relevant only to issues of infringement by the
competing product and not the scope or validity of the Pursuing Party’s
Patents, the Pursuing Party shall follow the Commercializing Party’s reasonable
directions in the conduct of that part of the proceedings.  In respect of other parts of the proceedings,
the Pursuing Party agrees to take into account the Commercializing Party’s
reasonable views and comments.   Subject
to Section 10.4.8, in the circumstances outlined in this Section 10.4.1 where
the Commercializing Party exercises its right to participate in the suit, the
Commercializing Party shall bear fifty percent (50%) of the costs of such
proceedings.

 21
 

 

10.4.2   Failure
to Enforce Collaboration IP.  If,
within sixty (60) days of the date that the infringement or misappropriation of
Collaboration IP comes to its knowledge (or written notice of a declaratory
judgment action alleging invalidity or unenforceability of such Collaboration
IP), the Party with the initial right to bring proceedings (“Patent Owner”)
under Section 10.4.1 above  fails to take
action to halt such alleged infringe­ment or misappropriation or defend such a
declaratory judgment action, the other Party may, at its expense, take such
legal action as it deems appropriate, in its own name (or to the extent
necessary the Patent Owner’s name), to halt such an alleged infringement or
misappropriation or defend such a declaratory judgment action.  The other Party shall notify the Patent Owner
of its decision to do so.  Where, in
accordance with the procedure set out in this Section, the other Party
commences the proceedings, the Patent Owner may, at its option, join with the
other Party in the suit and the Patent Owner shall have the right to
participate in all meetings, discussions and proceedings in respect of issues
regarding the validity and/or revocation of the relevant Patent(s).  In those circumstances, the other Party
(i.e., the Pursuing Party) agrees to take into account the Patent Owner’s
reasonable views and comments in the conduct of the proceedings and, subject to
Section 10.4.8, the Patent Owner shall bear fifty percent (50%) of the costs of
such proceedings.  The Patent Owner
agrees to render such reasonable assistance as the Pursuing Party may request.

10.4.3   Pharmacopeia
IP or Cephalon IP.  In the event that
either Party becomes aware that any Patent within the Pharmacopeia IP or Cephalon
IP is being infringed or misappropriated by a Third Party, or is subject to a
declaratory judgment action arising from such infringement or misappropriation,
such Party shall promptly notify the other Party.  It is understood and agreed that Pharmacopeia
shall have the initial right, but not the obligation, to initiate and conduct
legal proceedings to enforce the Pharmacopeia IP against any infringement or
misappropriation or defend any declaratory judgment action relating thereto, at
its sole expense, and that Cephalon shall have the initial right, but not the
obligation, to initiate and conduct legal proceedings to enforce the Cephalon
IP against any infringement or misappropriation or defend any declaratory
judgment action relating thereto, at its sole expense.  Cephalon or Pharmacopeia (as the case may be)
shall notify the other Party of its decision to bring proceedings or not within
sixty (60) days of the date that the infringement has come to its knowledge.  If the actual or threatened infringement
relates to the manufacture, use or sale of a product or material which is a
competing product to a Collaboration Product and the Pursuing Party is not the
Commercializing Party with regard to the applicable Collaboration Product, then
the Commercializing Party shall have the right at its option, to join with the
Pursuing Party in the suit and participate in all meetings, negotiations,
discussions and proceedings in respect of issues which relate to the
infringement of the Patent(s) by such competing product. Where the conduct of
the action relates to matters relevant only to issues of infringement by the
competing product and not the scope or validity of the Pursuing Party’s
Patents, the Pursuing Party shall follow the Commercializing Party’s reasonable
directions in the conduct of that part of the proceedings.  In respect of other parts of the proceedings,
the Pursuing Party agrees to take into account the Commercializing Party’s
reasonable views and comments.   Subject
to Section 10.4.8, in the circumstances outlined in this Section 10.4.3 where
the Commercializing Party exercises its right to

 22
 

 

participate in the suit, the Commercializing Party
shall bear fifty percent (50%) of the costs of such proceedings.

10.4.4   Failure
to Enforce Pharmacopeia or Cephalon Patent Rights.   If, within sixty (60) days of the date that
the infringement or misappropriation comes to its knowledge (or written notice
of a declaratory judgment action alleging invalidity or unenforceability of
such Pharmacopeia or Cephalon IP, as the case may be), the Patent Owner fails
to take action to halt such alleged infringe­ment or misappropriation or defend
such a declaratory judgment action under Section 10.4.3 above, the other Party
may, if it has been granted a license under such Pharmacopeia or Cephalon IP
(as the case may be), at its expense, take such legal action as it deems
appropriate, in its own name (or to the extent necessary the Patent Owner’s
name), to halt such an alleged infringement or misappropriation or defend such
a declaratory judgment action.  The other
Party shall notify the Patent Owner of its decision to do so.  Where, in accordance with the procedure set
out in this Section, the other Party commences the proceedings, the Patent
Owner may, at its option, join with the other Party in the suit and the Patent
Owner shall have the right to participate in all meetings, discussions and
proceedings in respect of issues regarding the validity and/or revocation of
the relevant Patent(s).  In those
circumstances, the other Party (i.e., the Pursuing Party) agrees to take into
account the Patent Owner’s reasonable views and comments in the conduct of the
proceedings and, subject to Section 10.4.8, the Patent Owner shall bear fifty
percent (50%) of the costs of such proceedings. 
The Patent Owner agrees to render such reasonable assistance as the
Pursuing Party may request.

10.4.5     Limitation
on Timing to Bring Suit.   The
Parties acknowledge that there may exist in certain countries in the Territory
statutory limitations on the period during which suit may be filed or other
enforcement actions initiated against a Third Party’s infringement of the
Patents (for example, the forty-five (45) day period for responding to a Third
Party certification in the United States under 21 USC Sections 355(b)(2)(A)(iv)
and 355(j)(2)(a)(vii), or any amendment or successor statute thereto, claiming
that Patents covering a Collaboration Compound or Collaboration Product are
invalid or that infringement will not arise from the manufacture, use or sale
of a product equivalent to the Licensed Compound or Product by such Third
Party).  In such event:

(a)       Pharmacopeia
and Cephalon each shall immediately give written notice to the other of any
potential infringement action against such Third Party infringer of which they
become aware; and

(b)       the relevant Party shall have the right but
not the obligation to bring suit, and the provisions of this Section 10.4 shall
apply save that such Party shall be required to obtain a discontinuance or
elect to bring suit at least fourteen (14) business days prior to the expiry of
the relevant statutory period.  If such
Party elects to bring suit within such period, the provisions of this Section
10.4 shall apply; or

 23
 

 

(c)       if the
relevant Party elects not to, or has failed to, bring an infringement action
against such Third Party infringer in such country(ies) within the time period
provided in this Section 10.4.5, then the other Party  shall have the right but not the obligation,
to bring suit against such infringer under this Section 10.4 prior to the
expiration of the statutory period.  In
the event that such other Party elects to bring suit, the provisions of this
Section 10.4 shall apply.

10.4.6   No
Settlement Without Consent.  Neither
Party shall enter into any settlement of any claim, suit or proceeding under
this Section 10.4 which admits or concedes that any Collaboration Patent or any
Patent licensed from the other Party is invalid or unenforceable without the
prior written consent of such other Party.

10.4.7   Cooperation.  Each Party shall keep the other reasonably
informed of the progress of any claim, suit or proceeding subject to this
Section 10.4 and cooperate reasonably in connection with such activities at the
request and expense of the Party involved in such claim, suit or proceeding.

10.4.8   Division
of Recoveries.  Any recovery received
in connection with a suit brought by a Party pursuant to Section 10.4.1,
10.4.2, 10.4.3 or 10.4.4 shall be retained by the Party initiating such suit,
provided the Commercializing Party was not a Party to the suit.  If the Commercializing Party was a Party to
the suit, then any recovery received in connection with a suit brought pursuant
to Section 10.4.1, 10.4.2, 10.4.3 or 10.4.4 shall be used first to reimburse
each Party pro rata for expenses (including attorneys’, professional and expert
fees) incurred in such suit, and any balance shall be retained by the
Commercializing Party subject to a payment to the other Party of such other
Party’s lost royalties.

10.5         Infringement Claims by Third Parties.  If the manufacture, sale or use of any
Collaboration Product pursuant to this Agreement results in any claim, suit or
proceeding alleging patent infringement against a Commercializing Party (or its
Sublicensees), such Commercializing Party shall promptly notify the other Party
in writing setting forth the facts of such claim in reasonable detail. The
Commercializing 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 Collaboration Patent
or any Patent licensed from the other Party is invalid, unenforceable or not
infringed, without the prior written consent of the other Party. The
Commercializing Party shall keep the other Party reasonably informed of all
material developments in connection with any such claim, suit or proceeding,
and the other 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 Commercializing Party on the defense of such claim, suit or
proceeding.

10.6         Patent Term Restoration. 
The Parties hereto shall give reasonable cooperation to each other in obtaining
patent term restoration or supplemental protection

 24
 

 

certificates or their
equivalents in any country in the Territory where applicable to the
Collaboration IP.

ARTICLE
11

CONFIDENTIALITY

11.1         Confidentiality.

11.1.1.  Term
of Confidentiality.  Except as
otherwise provided in this Section 11.1, the Party receiving Confidential
Information (the “Receiving Party”) shall keep all Confidential Information
disclosed to it by the disclosing Party (the “Disclosing Party”) confidential
for the Collaboration Term and ten (10) years thereafter.  Without the prior written consent of the
Disclosing Party, the Receiving Party shall not disclose any Confidential
Information to any Third Party, except to the officers, employees, agents, or
representatives of the Receiving Party or the Receiving Party’s Affiliates
(collectively the “Representatives”), who, in each case, have a need to know
any such Confidential Information for purposes of the implementation and
performance by the Receiving Party of its obligations pursuant to this
Agreement, and will use the Confidential Information provided by the Disclosing
Party only for such limited purposes.

11.1.2.  Warranty
of Obligation.  Each Party warrants
that each of its Representatives to whom any Confidential Information is
disclosed shall previously have been informed of the confidential nature of the
Confidential Information and shall have agreed to be bound by terms and
conditions equivalent to those set forth in this Agreement.  The Receiving Party shall ensure that the
Confidential Information provided by the Disclosing Party shall not be used or
disclosed by such Representatives except as permitted by this Agreement.  The Receiving Party shall stand responsible
for any breach by its Representatives of the confidentiality provisions set
forth in this Agreement.

11.1.3.  Ownership
of Confidential Information. Except as provided herein with respect to the
ownership of Collaboration IP, all Confidential Information disclosed by the
Disclosing Party shall remain the property of the Disclosing Party.  Upon the written request of the Disclosing
Party (i) all tangible Confidential Information provided by the Disclosing
Party (including, but not limited to all copies thereof and all unused samples of
materials provided by the Disclosing Party) except for Confidential Information
consisting of analyses, studies and other documents prepared by or for the
benefit of the Receiving Party, shall be promptly returned to the Disclosing
Party, and (ii) all portions of such analyses, studies and other documents
prepared by or for the benefit of the Receiving Party (including all copies
thereof) which are within the definition of Confidential Information shall be
destroyed, and the Receiving Party shall certify such destruction in writing to
the Disclosing Party.

11.1.4.  Permitted
Disclosures.  The obligations of
confidentiality and non-use set forth in this Agreement shall not apply to any
portion of the Confidential Information which:

 25
 

 

(a)       is or
becomes public or available to the general public otherwise than through the
wrongful act or default of the Receiving Party or its representatives; or

(b)       is
obtained by the Receiving Party from a Third Party who is lawfully in
possession of such Confidential Information and is not subject to an obligation
of confidentiality or non-use owed to the Disclosing Party; or

(c)       is
previously known to the Receiving Party prior to disclosure by the Disclosing
Party, as shown by written evidence, and is not obtained or derived directly or
indirectly from the Disclosing Party; or

(d)       is
independently developed by the Receiving Party without the use of or reliance
on any Confidential Information provided by the Disclosing Party hereunder, as
shown by contemporaneous written evidence.

11.1.5.  Legal
Disclosure. The Receiving Party may disclose the Confidential Information
of the Disclosing Party to the extent reasonably necessary in prosecuting or
defending litigation, complying with applicable laws, governmental regulations
or court order, or otherwise submitting required information to tax or other
governmental authorities.  If the
Receiving Party intends to so disclose any such Confidential Information, the
Receiving Party shall provide the Disclosing Party prompt prior notice of such
fact so that the Disclosing Party may seek to obtain a protective order or
other appropriate remedy concerning any disclosure of such Confidential
Information.  The Receiving Party will
reasonably cooperate with the Disclosing Party in connection with the
Disclosing Party’s efforts to obtain any such order or other remedy.  If any such order or other remedy does not
fully preclude the disclosure of such Confidential Information, the Receiving
Party will make such disclosure only to the extent that such disclosure is
legally required and will use its reasonable efforts to have confidential
treatment accorded to the disclosed Confidential Information.

11.1.6.  No
Warranty As To Reliability.  Each of
the Parties acknowledges that neither Party makes any representation or
warranty as to the reliability, accuracy or completeness of any of the
Confidential Information disclosed hereunder, except for any specific
representation or warranty made in other sections of this Agreement.  The Receiving Party agrees that neither the
Disclosing Party nor any of the Disclosing Party’s Representatives shall have
any liability to the Receiving Party arising from the disclosure of
Confidential Information by the Disclosing Party except as otherwise provided
herein.

11.1.7.  No Implied
License.  Except as otherwise
expressly set forth in this Agreement, nothing herein shall be construed as
giving the Receiving Party any right, title and interest in and to the
Confidential Information of the Disclosing Party.

11.1.8.  Public
Domain.  For the purpose of this
Agreement, specific information disclosed as part of the Confidential
Information shall not be deemed to be in the public domain or in the prior
possession of the Receiving Party merely because it is

 26
 

 

embraced by more general information in the public
domain or by more general information in the prior possession of the Receiving
Party.

11.2         Publications.  A Party
desiring to submit a publication or presentation related to the Collaboration
shall not do so without the prior written consent of the other Party, which
consent shall not be unreasonably withheld. 
Each Party shall submit for the other Party’s review any proposed
publication or presentation containing any information generated by either
Party (or by both Parties) hereunder during the Collaboration Term, or
containing any Confidential Information of the other Party, at least forty-five
(45) days in advance of such proposed publication or presentation.  The reviewing Party shall promptly review
such proposed publication and respond in any event within forty-five (45) days
after receipt, and shall 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 provided always that a Party shall
not be compelled to agree to the disclosure of its Confidential Information and
if following such discussions the Party still objects to the inclusion of such
Confidential Information it shall be removed. Notwithstanding the preceding
sentences, either Party may submit for the other Party’s approval a summary of
Collaboration 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 Collaboration data may be
used again in subsequent presentations of an equivalent nature 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 the MSC shall attempt to resolve the matter, but if it is
unable to do so, such matter shall not be subject to the dispute resolution
provisions of Sections 3.4 and 16.19. 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 (not less than sixty (60) days) to secure patent protection for
any material in such publication or presentation that it believes to be
patentable.

ARTICLE 12

REPRESENTATIONS AND WARRANTIES OF PHARMACOPEIA

12.1         Pharmacopeia represents and warrants to
Cephalon as follows:

12.1.1   Organization.  It is a corporation validly existing and in
good standing under the laws of the State of Delaware.

12.1.2   Authority.  It has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.  All corporate acts
and other proceedings required to authorize such execution, delivery, and
consummation have been duly and properly taken and obtained.

 27

 

12.1.3      Enforceability.  This Agreement has been duly executed and
delivered by Pharmacopeia and constitutes legal, valid, and binding obligations
of Pharmacopeia enforceable against Pharmacopeia in accordance with its terms.

12.1.4      Approvals
and Consents.  No approval,
authorization, consent, or other order or action of or filing with any court,
administrative agency or other governmental authority is required for the
execution and delivery by Pharmacopeia of this Agreement or the consummation by
Pharmacopeia of the transaction contemplated hereby (other than contemplated
Collaboration Product Regulatory Approvals).

12.1.5      No
Conflicts.  None of the execution,
delivery, or performance of this Agreement by Pharmacopeia (i) conflicts with
or results in a breach under the charter documents or any material contractual
undertaking of Pharmacopeia, or its Affiliates or (ii) conflicts with or
results in a violation of any of the laws of the jurisdiction of incorporation
of Pharmacopeia.  Pharmacopeia has not,
to the best of its knowledge entered into, nor will Pharmacopeia, after the
Effective Date, knowingly enter into any written or oral agreement that is or
would be inconsistent with its obligations under this Agreement or deprives or
would deprive Cephalon of the benefits of this Agreement.

12.1.6      Title.  As of the Effective Date, it has good title
to or valid leases or licenses for all its properties, rights, and assets
necessary for the fulfillment of its obligations and responsibilities under
this Agreement.

12.1.7      Disclaimer.  Except as provided herein, Pharmacopeia
specifically disclaims any guarantee that the Collaboration will be successful,
in whole or in part.  The failure of
Pharmacopeia to successfully identify Development Compounds will not, of
itself, constitute a breach of any representation or warranty or other
obligation under this Agreement. 
Pharmacopeia does not make any representation or warranty or guaranty
that the Collaboration will be sufficient for the successful completion of the
research contemplated thereby.  EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH HEREIN, PHARMACOPEIA MAKES NO REPRESENTATIONS AND
EXTENDS NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED,
WITH RESPECT TO THE COLLABORATION IP, COLLABORATION COMPOUNDS OR PHARMACOPEIA
COMPOUNDS INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, VALIDITY OF PHARMACOPEIA IP OR COLLABORATION IP,
PATENTED OR UNPATENTED, OR NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS
OF THIRD PARTIES.

12.1.8        Sufficient Rights. As of the
Effective Date, it owns or Controls its Patents necessary to conduct the
Collaboration and to grant the rights and licenses to Cephalon, and to fulfill
its duties and obligations pursuant to this Agreement.  To the knowledge of Pharmacopeia, as of the
Effective Date, the practice of the Pharmacopeia IP does not violate the valid
patent rights of any Third Party.

12.1.9        No Prior Grant or Patents.  As of the Effective Date, Pharmacopeia has
not (i) knowingly granted any licenses to Third Parties, or (ii)

 

 28
 

 

 

knowingly
filed any patent application, in either case inconsistent with the licenses
granted or to be granted to Cephalon hereunder.

ARTICLE 13

REPRESENTATIONS AND WARRANTIES OF CEPHALON

13.1         Cephalon
represents and warrants to Pharmacopeia as follows:

13.1.1      Organization.  It is a corporation validly existing and in
good standing under the laws of Delaware.

13.1.2      Authority.  It has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.  All corporate acts
and other proceedings required to authorize such execution, delivery, and
consummation have been duly and properly taken and obtained.

13.1.3      Enforceability.  This Agreement has been duly executed and
delivered by Cephalon and constitutes the legal, valid, and binding obligations
of Cephalon enforceable against Cephalon in accordance with its terms.

13.1.4      Approvals
and Consents.  No approval,
authorization, consent, or other order or action of or filing with any court,
administrative agency or other governmental authority is required for the
execution and delivery by Cephalon of this Agreement or the consummation by
Cephalon of the transaction contemplated hereby (other than contemplated Collaboration
Product Regulatory Approvals).

13.1.5      No
Conflicts.  None of the execution,
delivery, or performance of this Agreement by Cephalon (i) conflicts with or
results in a breach under the charter documents or any material contractual
undertaking of Cephalon, or its Affiliates or (ii) conflicts with or results in
a violation of any of the laws of the jurisdiction of incorporation of
Cephalon.  Cephalon has not, to the best
of its knowledge entered into, nor will Cephalon, after the Effective Date, knowingly
enter into any written or oral agreement that is or would be inconsistent with
its obligations under this Agreement or deprives or would deprive Pharmacopeia
of the benefits of this Agreement.

13.1.6      Title.  As of the Effective Date, it has good title
to or valid leases or licenses for all its properties, rights, and assets
necessary for the fulfillment of its obligations and responsibilities under
this Agreement.

13.1.7      Disclaimer.  Except as provided herein, Cephalon
specifically disclaims any guarantee that the Collaboration will be successful,
in whole or in part.  The failure of
Cephalon to successfully identify Development Compounds will not, of itself,
constitute a breach of any representation or warranty or other obligation under
this Agreement.  Cephalon does not make
any representation or warranty or guaranty that the Collaboration will be
sufficient for the successful completion of the research contemplated
thereby.  EXCEPT AS OTHERWISE EXPRESSLY
SET FORTH HEREIN, CEPHALON MAKES NO REPRESENTATIONS AND EXTENDS NO

 29
 

 

 

WARRANTIES OR CONDITIONS OF ANY KIND, EITHER
EXPRESS OR IMPLIED, WITH RESPECT TO THE COLLABORATION IP, COLLABORATION
COMPOUNDS OR CEPHALON COMPOUNDS INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF CEPHALON IP OR
COLLABORATION IP, PATENTED OR UNPATENTED, OR NON-INFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

13.1.8        Sufficient Rights. As of the
Effective Date, it owns or Controls its Patents necessary to conduct the
Collaboration and to grant the rights and licenses to Pharmacopeia, and to
fulfill its duties and obligations pursuant to this Agreement.  To the knowledge of Cephalon, as of the
Effective Date, the practice of the Cephalon IP does not violate the valid
patent rights of any Third Party.

13.1.9        No Prior Grant or Patents.  As of the Effective Date, Cephalon has not
(i) knowingly granted any licenses to Third Parties, or (ii) knowingly filed
any patent application, in either case inconsistent with the licenses granted
or to be granted to Pharmacopeia hereunder.

ARTICLE 14

SURVIVAL AND INDEMNIFICATION

14.1         Survival
of Representations, Warranties, Covenants, and Agreement.  The representations, warranties, covenants,
and agreements contained in this Agreement shall **.  Except as expressly provided herein, the
Parties confirm that they have not relied upon any other representations,
warranties, covenants, and agreements as an inducement to enter into this
Agreement or the other agreements and instruments to be executed and delivered
by the Parties pursuant to this Agreement.

14.2         Indemnification
by Pharmacopeia.  Pharmacopeia hereby
agrees to indemnify and hold Cephalon, its Affiliates and their respective
officers, directors, stockholders, employees, agents, and representatives
(collectively, the “Cephalon Indemnitees”) harmless from and against any and
all claims, liabilities, losses, damages, costs and expenses in respect of
claims against the Cephalon Indemnitees by Third Parties other than the Cephalon
Indemnitees, including reasonable fees and disbursements of counsel and
expenses of reasonable investigation (collectively, “Cephalon Losses”), arising
out of, based upon or caused by: **.

14.3         Indemnification
by Cephalon.  Cephalon hereby agrees
to indemnify and hold Pharmacopeia, its Affiliates, subcontractors and their
respective officers, directors, stockholders, employees, agents, and
representatives (collectively, the “Pharmacopeia, Indemnitees”) harmless from
and against any and all claims, liabilities, losses, damages, costs and
expenses in respect of claims against the Pharmacopeia Indemnitees by Third
Parties other than the Pharmacopeia Indemnitees, including reasonable fees and

 30
 

 

 

disbursements
of counsel and expenses of reasonable investigation (collectively, “Pharmacopeia
Losses”), arising out of, based upon or caused by: **.

14.4         Notices.  Each indemnified Party agrees to give the
indemnifying Party prompt written notice of any action, claim, demand,
discovery of fact, proceeding or suit (collectively, “Claims”) for which such
indemnified Party intends to assert a right to indemnification under this
Agreement; provided  however, that failure to give such
notification shall not affect the indemnified Party’s entitlement to
indemnification hereunder except to the extent that the indemnifying Party
shall have been prejudiced as a result of such failure.  The indemnifying Party shall have the **;
provided however that if the indemnifying Party **.  If the indemnifying Party fails to **,
subject to the applicable provisions of Sections 14.2 and 14.3 above.

ARTICLE 15

TERM, TERMINATION, AND EXPIRATION

15.1.        Term
of Agreement.  The term of this
Agreement (the “Term”) shall commence on the Effective Date and shall continue
in full force and effect on a country-by-country and Collaboration
Product-by-Collaboration Product basis until both Parties and their respective
Sublicensees have no remaining royalty obligations in a country, unless
terminated earlier as provided in this Article 15.

15.2         Collaboration
Term. The Collaboration shall commence on the Effective Date and terminate
on the last day of the Initial Term, unless extended by mutual agreement of the
Parties.  In the event that Cephalon
desires to extend the Collaboration Term, it shall so inform Pharmacopeia of
such desire not less than ** before the last day of the Initial Term or
then-current Collaboration Term, in which case the Parties shall negotiate
additional consideration to Pharmacopeia for any such proposed extension.  If not further extended in the manner set
forth in the preceding sentence, the Collaboration shall terminate on the last
day of such extension.

15.3         Termination.

15.3.1      **.  If either Party **:

(a) If the **.

(b)  If the **.

Any **.

15.3.2      Bankruptcy.
Either Party may, subject to the provisions herein, terminate the Collaboration
and this Agreement if, at any time, the other Party shall file in any court
pursuant to any statute, a petition in bankruptcy or insolvency or for

 31
 

 

 

reorganization
in bankruptcy or for an arrangement or for the appointment of a receiver or
trustee of such Party or of its assets, or if such Party proposes a written
agreement of composition or extension of its debts, or if such Party shall be
served with an involuntary petition against it, filed in any insolvency
proceeding, and such petition shall not be dismissed within sixty (60) days
after the filing thereof, or if such Party shall propose or be a party to any
dissolution, or if such Party shall make an assignment for the benefit of
creditors.

15.3.3      **.  **
this Agreement **.  As of the ** pursuant to this Agreement.

15.3.4      Rights
in Law or Equity.  Except as
otherwise expressly provided herein, termination by either Party pursuant to
this Section 15.3 shall not prejudice any other remedy that a Party might have
in law or equity, except that neither Party may claim compensation for lost
opportunity or like consequential damages arising out of the fact of such
termination.

15.4         Effect of Breach or Termination.

15.4.1      Accrued
Obligations.  Termination of this
Agreement for any reason shall not release any Party hereto from any liability
which, at the time of such termination, has already accrued to the other Party
or which is attributable to a period prior to such termination.

15.4.2      Return
of Materials.  Upon any termination
of this Agreement, Cephalon and Pharmacopeia shall promptly (i) return to the
other Party all Confidential Information received from the other Party (except
one copy of which may be retained for archival purposes) and (ii) destroy any
analyses, studies or other documents, prepared by or for the benefit of
Cephalon or Pharmacopeia as the case may be, relating to such other Party’s
Confidential Information.

15.4.3      Effect
of Termination of Collaboration.  In
the event of any termination of the Collaboration, Pharmacopeia shall have no
further obligation to conduct research activities pursuant to any Research Plan
after the effective date of such termination.

15.4.4      Licenses.

(a)           Termination
by Pharmacopeia With Respect to **. 
**, subject to the terms and conditions of this Agreement applicable
thereto.  Furthermore, such **.

(b)           Termination
by Cephalon With Respect to a **. 
**, subject to the terms and conditions of this Agreement applicable
thereto.  Furthermore, such **.

(c)           Termination
by Pharmacopeia of the **.     In the
event of termination by Pharmacopeia of the ** pursuant to:

 32
 

 

 

(i) **, or

(ii) **,

where the **. 
Furthermore, such **.

(d)           Termination
by Cephalon of the **.  In the event
of termination by Cephalon of the ** pursuant to:

(i) **, or

(ii) **,

where the **. 
Furthermore, such **.

(e)           Termination
by Pharmacopeia of the **.

(I)  In
the event of termination by Pharmacopeia of the ** pursuant to:

(i) **,

(ii) **,

where the **,

or

(iii) **,

**.

(II) 
In the event of termination by Pharmacopeia of the **.

(f)            Termination
by Cephalon of the **.

(I)  In
the event of termination by Cephalon of the ** pursuant to:

(i) **,

(ii) **,

where the **,

or

(iii) **,

**.

 33
 

 

 

(II)  In the event of termination by Cephalon of
the **.

(g)            
Termination by Cephalon of the ** Pursuant to Section **.  In
the event of termination of the ** by Cephalon pursuant to Section **.

15.5         Survival.  The provisions of Articles 7, 8, 9, 10, 11,
12, 13, 14, 16 and Sections 4.1.4, 4.1.5, 15.4 and 15.5 shall survive the
expiration or termination of this Agreement.

ARTICLE 16

MISCELLANEOUS

16.1         Notices.  Any notice or other communication required or
permitted to be given by either Party under this Agreement shall be effective
when delivered, if delivered by hand or by electronic facsimile or five (5)
days after mailing if mailed by registered or certified mail, postage prepaid
and return receipt requested, and shall be addressed to each Party at the
following addresses or such other address an may be designated by notice
pursuant to this Section:

 

	
  If to Pharmacopeia:

  	
   

  	
  If to Cephalon:

  
	
   

  	
   

  	
   

  
	
  Pharmacopeia
  Drug Discovery, Inc.

  	
   

  	
  Cephalon, Inc.

  
	
  3000 Eastpark
  Boulevard

  	
   

  	
  41 Moores Road

  
	
  Cranbury, NJ
  08512

  	
   

  	
  Frazer, PA 19355

  
	
  Attn: Chief
  Executive Officer

  	
   

  	
  Attn: Executive Vice President, Research &
  Development

  
	
  Fax: **

  	
   

  	
  Fax: **

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  With a copy to:

  
	
   

  	
   

  	
   

  
	
  Pharmacopeia
  Drug Discovery, Inc.

  	
   

  	
  Cephalon, Inc.

  
	
  3000 Eastpark
  Boulevard

  	
   

  	
  41 Moores Road

  
	
  Cranbury, NJ
  08512

  	
   

  	
  Frazer, PA 19355

  
	
  Attn: General
  Counsel

  	
   

  	
  Attn: General Counsel

  
	
  Fax: **

  	
   

  	
  Fax: **

  

 

16.2         Amendments.  No amendment, modification or addition hereto
shall be effective or binding on either Party unless set forth in writing and
executed by duly authorized representatives of both Parties.

16.3         Waiver.  No waiver of any rights under this Agreement
shall be deemed effective unless contained in writing signed by the Party
charged with such waiver, and

 34
 

 

 

no waiver of any breach or failure to perform shall be
deemed a waiver of any future breach or failure to perform or any other right
arising under this Agreement.

16.4         Headings.  The section headings contained in this
Agreement are included for convenience only and form no part of the agreement
between the Parties.

16.5         Applicable
Law.  This Agreement shall be
governed by, subject to and construed in accordance with the laws of the State
of Delaware and the Parties consent to the jurisdiction of the State and
Federal Courts of Delaware.

16.6         Severability.  If any provision of this Agreement is held to
be invalid, void or unenforceable for any reason, it shall be adjusted, if
possible, rather than voided in order to achieve the intent of the Parties to
the maximal extent possible.  In any
event, all other provisions of this Agreement shall be deemed valid and
enforceable to the fullest extent possible.

16.7         Assignment:
Binding Effect.  Neither this
Agreement, nor any obligations or rights hereunder, shall be assignable by any
Party hereto without the prior written consent of the other Party; provided
however, that either Party may assign this Agreement without the consent
of the other Party to its Affiliates, if the assigning Party guarantees the
full performance of its Affiliates’ obligations hereunder, or in connection
with the sale or transfer of all or substantially all of its assets relating to
this Agreement, whether by merger, sale of stock, operation of law or
otherwise.  Any purported assignment in
contravention of this Section shall, at the option of the non-assigning
Party, be null and void and of no effect.

16.8         No
Implied licenses.  Only the licenses
granted expressly herein shall be of legal force and effect.  No license rights shall be created hereunder
by implication, estoppel or otherwise.

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

16.10       Force
Majeure.  No Party shall be liable
for any failure or delay in performance under this Agreement to the extent such
failure or delay arises from Force Majeure. 
A Force Majeure is fire, explosion, earthquake, storm, flood, strike,
labor difficulties, war, insurrection, riot, act of God or the public enemy, or
any law, act, order, export or import control regulations, proclamation,
decree, regulation, ordinance, or instructions of local, state, federal or
foreign governmental or other public authorities, or judgment or decree of a
court of competent jurisdiction (but excluding a court injunction against a
Party’s performance) and not otherwise arising out of breach by such Party of
this Agreement.  In the event of the
occurrence of such an event, the Party so affected shall give prompt written
notice to the other Party, stating the period of time the occurrence is
expected to continue and shall use best efforts to end the failure or delay and
ensure that the effects of such Force Majeure are minimized.

 35
 

 

 

16.11       Negation
of Agency.  Nothing herein contained
shall be deemed to create an agency, joint venture, amalgamation, partnership,
or similar relationship between Cephalon and Pharmacopeia.  The relationship between the Parties
established by this Agreement is that of independent contractors.

16.12       Publicity.  Promptly after the Effective Date, Pharmacopeia and Cephalon shall
issue a joint press release regarding this Agreement, in a form agreed to by
the parties prior to the Effective Date. 
No other public announcement concerning the existence or the terms
of this Agreement shall be made, either directly or indirectly, by Pharmacopeia
or Cephalon, except as may be legally required by applicable laws, regulations,
or judicial order, without first obtaining the approval of the other Party and
agreement upon the nature, text, and timing of such announcement, which
approval and agreement shall not be unreasonably withheld.  The Party desiring to make any such public
announcement shall provide the other Party with a written copy of the proposed
announcement in sufficient time prior to public release to allow such other
Party to comment upon such announcement, prior to public release.  Neither Party shall issue any press release
or make any public announcement, which includes or otherwise uses the name of
the other Party in any public statement or document except with the prior
written consent of such Party. 
Notwithstanding the preceding sentence, Pharmacopeia and Cephalon shall issue joint press releases in a timely
manner announcing the achievement of significant events related to or arising
from the Collaboration.  Such events
include, by way of example, the achievement of milestone events and the payment
of milestone payments, IND or NDA filings, and the commencement of specific
clinical trials.

16.13       Registration
and Filing of the Agreement.  To
the extent, if any, that a Party concludes in good faith that it is required to
file or register this Agreement, a summary of the terms of this Agreement, or a
notification thereof with any governmental authority, including without
limitation the U.S. Securities and Exchange Commission and the Competition
Directorate of the Commission of the European Communities, in accordance with
applicable laws and regulations, such Party may do so, and the other Party
shall cooperate in such filing or notification and shall execute all documents
reasonably required in connection therewith at the, expense of the requesting
Party.  The Parties shall promptly inform
each other as to the activities or inquiries of any such governmental authority
relating to this Agreement, and shall cooperate, to respond to any request for
further information therefrom at the expense of the requesting Party.

16.14       Entire
Agreement.  This Agreement contains
the entire agreement between the Parties with respect to the subject matter
hereof.  Any prior agreement, arrangement
or undertaking, whether oral or in writing is hereby superseded.

16.15       Beneficiaries.  No person, other than Cephalon or
Pharmacopeia and their permitted assignees hereunder, shall be deemed an
intended beneficiary hereunder or have any right to enforce any obligation of
this Agreement.

 36
 

 

 

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

16.17       Compliance
with Laws.  In exercising their
rights under this Agreement, the Parties shall fully comply with the
requirements of any and all applicable laws, regulations, rules and orders of
any governmental body having jurisdiction over the exercise of rights under
this Agreement.

16.18       Patent
Marking.  Each Party agrees to mark
and have its Affiliates and Sublicensees mark all Collaboration Products sold
pursuant to this Agreement in accordance with the applicable statute or
regulations relating to patent marking in the country or countries of
manufacture and sale thereof.

16.19       Dispute
Resolution.

(a)           Attempt
to Settle.  The Parties agree to take
all reasonable efforts to resolve any and all disputes between them concerning
diligence obligations and/or questions of material breach and default in
connection with this Agreement in an amicable manner.

(b)           Binding
Arbitration.  Except in the event of
alleged breach, default or lack of diligence by a bankrupt or insolvent Party,
the Parties agree that any such dispute that arises in connection with this
Agreement and which cannot be amicably resolved by the Parties shall be
resolved by binding arbitration as set forth in this Section, conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (AAA) by three (3) arbitrators.

(c)           Written
Notice.  If a Party intends to begin
an arbitration to resolve a dispute, such Party shall provide written notice to
the other Party informing the other Party of such intention and the issues to
be resolved.  Within twenty (20) business
days after its receipt of such notice, the other Party may, by written notice
to the Party initiating arbitration, add additional issues to be resolved.

 37
 

 

 

(d)           Selection
of Arbitrators.  Within forty-five
(45) days following the receipt of the notice of arbitration, the Parties shall
agree on the arbitrators, or if the Parties are unable to agree the arbitrators
shall be selected as provided in the AAA Commercial Arbitration Rules.  The arbitrators shall not be employees,
directors or shareholders of either Party or of an Affiliate and shall be
selected in accordance with AAA rules. 
Where applicable, the arbitrators shall be independent experts in
pharmaceutical product development (including clinical development and
regulatory affairs) in the U.S., Japan and Europe.

(e)           Hearings.  The arbitrators shall conduct one or more
hearings to allow the parties to present their positions regarding the dispute.

(i)            Discovery.  The arbitrators shall determine what
discovery will be permitted, consistent with the goal of limiting the cost and
time that the Parties must expend for discovery; provided the arbitrators shall
permit such discovery as they deem necessary to permit an equitable resolution
of the dispute.  Any written evidence
originally in a language other than English shall be submitted in English
translation accompanied by the original or a true copy thereof.  The arbitrators shall have sole discretion
with regard to the admissibility of any evidence.

(ii)           Proposed
Ruling.  At least ten (10) business
days prior to a hearing, each Party must submit to the arbitrators and serve on
the other Party a proposed ruling on each issue to be resolved.  Such writings shall be limited to not more
than fifty (50) pages.

(iii)          Time;
Testimony.  Each Party shall be
entitled to no more than five (5) days of hearing to present testimony or
documentary evidence.  Such time
limitation shall include any direct, cross or rebuttal testimony, but such time
limitation shall only be charged against the Party conducting such direct,
cross or rebuttal testimony.  It shall be
the responsibility of the arbitrators to determine whether the Parties have had
the five (5) days to which each is entitled.

(iv)          Representation
by an Attorney.  Each Party shall
have the right to be represented by counsel.

(v)           Location.  The arbitration shall take place in
Philadelphia, Pennsylvania.

(f)            Costs.  The costs of the arbitration, including
administrative and arbitrator fees, shall be shared equally by the
Parties.  Each Party shall bear its own
costs and attorney and witness fees.

(g)           Written
Decision.  The arbitrators shall
render a written decision with their resolution of the dispute.  The decision of the arbitrators shall be
final and not subject to appeal and binding on the Parties hereto.

 38
 

 

 

(h)           Remedy.  A disputed performance or suspended
performances pending the resolution of the arbitration must be completed within
thirty (30) days following the final decision of the arbitrators or such other
reasonable period as the arbitrators determine in a written opinion.

(i)            Final
Decision Within Six Months.  Any
arbitration subject to this Section 16.19 shall be completed within six (6)
months from the filing of notice of a request for such arbitration.

16.20       No
Trademark Rights.  Except as provided
herein, no right, express or implied, is granted by this Agreement to use in
any manner the name “Pharmacopeia”, “Cephalon” or any other trade name or
trademark of the other Party or its Affiliates in connection with performance
of this Agreement.

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

	
  CEPHALON, INC.

  	
   

  	
   

  	
   

  	
  PHARMACOPEIA DRUG

  	
   

  	
   

  
	
   

  	
   

  	
  DISCOVERY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Frank Baldino, Jr.

  	
   

  	
   

  	
  By:

  	
  /s/ Leslie J. Browne

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Frank Baldino, Jr., Ph.D.

  	
   

  	
  Name:

  	
   

  	
  Leslie J. Browne, Ph.D.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Chairman & CEO

  	
   

  	
  Title:

  	
   

  	
  President & Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
  May 18, 2006

  
														

 

 39Exhibit
10.2

 

 

August
3, 2006

Leslie
J. Browne, Ph.D.

	
  Re:

  	
   

  	
  Amendment to Employment Agreement amended and
  restated as of February 27, 2006 

  between Pharmacopeia Drug Discovery, Inc. (“Pharmacopeia”) and Leslie
  Johnston Browne, Ph.D. 

  (the “Agreement”)

  

Dear Dr. Browne:

Reference
is made to the Agreement.

In
consideration of your continued employment by Pharmacopeia, Pharmacopeia and
you hereby agree to amend and restate Section 4(j) (Termination;
Resignation; Permanent Disability; Death—Certain Additional Payments) of the
Agreement as follows:

Section 4(j)

Pharmacopeia and you agree to add the
following paragraph as a new third paragraph in Section 4(j):

“Notwithstanding anything herein to the
contrary, if any payments due under this Agreement would subject Dr. Browne to
any tax imposed under Section 409A of the Internal Revenue Code if such
payments were made at the time otherwise provided herein, then the payments
that cause such taxation shall be payable in a single lump sum on the first day
which is at least six months after the date of Dr. Browne’s “separation of
service” as set forth in Section 409A of the Internal Revenue Code and the
regulations issued thereunder.”

[The remainder of this page intentionally left blank.]

 

 

If
you are in agreement with the terms of this letter agreement please sign below
and return one copy to my attention.

	
  Very truly yours,

  	
   

  
	
   

  	
   

  
	
  /s/ Joseph A. Mollica, Ph.D.

  	
   

  
	
   

  	
   

  
	
  Joseph A. Mollica, Ph.D.

  	
   

  
	
  Chairman

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACKNOWLEDGED, AGREED AND

  	
   

  
	
  ACCEPTED THIS 3RD DAY OF

  	
   

  
	
  AUGUST, 2006

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Leslie J. Browne, Ph.D.

  	
   

  
	
  Leslie J. Browne, Ph.D.

  	
   

  
	
  President and Chief Executive Officer

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